20Growth The Golden Rule to $100M in ARR, Why CAC to LTV is BS Early On, Why Your First Growth Hire Should Be a Former Founder & How Ramp Does 200 Growth Experiments Per Quarter with Guillaume Cabane

In the latest episode of "20 Growth" with host Harry Stebbings, Guillaume Cabane, a seasoned growth advisor for SaaS startups, delves into the intricacies of scaling growth through experiments and data-driven strategies. Cabane emphasizes the importance of focusing on value-driven KPIs over vanity metrics, advocating for a cost-effective approach to customer acquisition and the significance of personalized, human-centric marketing tactics. He shares insights from his experiences at Apple and various startups, highlighting innovative experiments like segment's hot coffee outreach and the necessity for growth teams to make bold, calculated bets. Moreover, Cabane discusses the challenges of hiring for growth roles, suggesting that former founders or individuals with a strong consulting background are ideal candidates. He also notes the resurgence of cold calling, thanks to advancements in AI, and the persistent effectiveness of email marketing. Throughout the conversation, the theme of leveraging creativity, risk assessment, and community-driven social proof emerges as key to driving sustainable growth in the competitive SaaS landscape.

• Guillaume Cabane emphasizes the importance of running multiple experiments to learn from mistakes and problems in the business.
• He suggests that revealing unknown problems to the audience can guarantee engagement.
• Vanity metrics are discouraged in favor of meaningful KPIs that truly reflect value.

"What I care about? How many experiments can I have running at the same time where I learn if you can drive value about mistakes, problems of the business you have discovered that your audience does not know. You will get engagement guaranteed. Reject any KPI that is vanity. You don't care about traffic. You don't care about any of those KPIs. The only thing you care about is."

This quote highlights the focus on learning from experiments and the importance of selecting KPIs that are not just vanity metrics but are indicative of real value to the business.

• Harry Stebbings introduces Guillaume Cabane, a growth advisor to high-growth SaaS startups.
• Cabane's experience includes VP of growth roles at Drift, Segment, and other startups, as well as six years at Apple.
• The introduction sets the stage for the actionable growth advice Guillaume is expected to share.

• Guillaume Cabane shares his journey into growth, starting in the early 2000s at Apple.
• He learned to run experiments without authorization, which was a workaround for the centralized control at Apple.
• Later, at an IT security consulting firm, he leveraged engineers to build demand for technical products.
• These experiences converged when he joined Mention and started using Segment, leading him into the growth field at the right time.

"One is I'm an old man now. I started in the early 2000 at Apple... Didn't need to ask for anyone... That's when I realized that leveraging engineers to build quasi products, to build demand and drive people to the product that is different... And at that time it just started to be called growth and I just landed in the right place at the right time."

The quote explains how Guillaume's background and experiences led him to a career in growth, highlighting the importance of experimentation and technical marketing.

• Guillaume discusses the effectiveness of using alternate tools, such as HubSpot's website grader, to drive demand for the core product.
• He notes that while this strategy used to be more effective, it has become harder due to market saturation and decreased quality.
• However, if a company can offer a truly amazing product, this approach can still be successful.

• Guillaume shares insights from his time at Segment, particularly about selling to engineers.
• He describes an attribution strategy that tracked engineers across jobs using their LinkedIn URLs.
• This strategy allowed Segment to realize the value of offering a free or startup plan, as engineers would bring the product to new companies they joined.

"Segment is a technical product targeting an engineering audience... We did a crazy attribution logic where we found engineers across jobs by keying not on the email... on the LinkedIn URL because unless you're a psychopath, you don't change your LinkedIn URL between jobs... And so we just took from collaborate all the LinkedIn URLs of all the people and we say, hey, has that person came three months ago, four, five months ago? And if yes, did they come through a startup plan?"

This quote outlines the innovative attribution logic used at Segment to track and capitalize on the movement of engineers between jobs, demonstrating the long-term value of a free or startup plan.

• Guillaume discusses the difficulty startups face when trying to balance product-led growth (PLG) and enterprise sales.
• He points out that it's rare for early-stage companies to excel at either PLG or enterprise sales, and they often end up trying both.
• The conversation touches on the misconception that having a free plan equates to PLG, which is not necessarily the case.

• Guillaume emphasizes the importance of focus for startup success.
• He argues that losing focus can cause competitors to grow faster, leading to a loss in the market.
• The discussion includes the natural progression of companies starting with SME markets and gradually moving to larger companies as they grow.

• Guillaume explains the typical growth trajectory for startups, which involves maxing out an early adopter market before expanding to new audiences.
• He outlines the common pattern of expanding across industries, company sizes, and geographies.
• The conversation also covers the "3322" growth framework, which is a benchmark for top-performing startups.

"For us, the golden rule. To be in the top decile of startups in terms of performance. Thus, in terms of valuation and funding and outcomes, you would have to grow past the first million, three x the first year, three x the second year, and then two x for every year for the next three years. So, 3322, all right? And if you do that, you end up at 100 million plus in revenue in five years."

This quote provides a clear explanation of the "3322" growth framework, which serves as a goal for startups aiming to reach the top decile in performance.

• Guillaume and Harry discuss the importance of low CAC, especially during economic downturns.
• Guillaume defines low CAC as spending a dollar to get a dollar of revenue for top quartile startups post $5 million in revenue.
• The conversation also touches on the risks of layering enterprise costs onto a PLG pricing model and the difficulties of transitioning from an enterprise-first model to a PLG model.

• CAC includes marketing spend, headcount, sales team, bonuses, etc., except product building costs.
• Marketing usually accounts for 30% of the total expenses.
• A payback time of twelve months is considered good, but four months is exceptional.
• A customer churning before four months is akin to an unpaid loan.

"Four months of payback time is really good. That's how you should think about it. Every time a customer churns before four months is a loan that has not been repaid, it's a default on your debt."

This quote highlights the significance of a short payback time, comparing customer churn before this period to a financial loss or an unpaid loan.

• LTV is more significant in companies with long-term customer retention, such as financial platforms.
• High LTV allows for longer payback times due to the extended customer lifespan.
• Startups' LTV predictions are often considered unreliable due to lack of historical data.
• Investor decisions in companies like Ramp and Brex are based on assumptions of long-term customer retention.

"I understand where you're coming from on financial products... It's unlikely that changes because the cost of switching is super high."

Guillaume Cabane explains why financial platforms often have a long customer retention time, which justifies higher LTV assumptions due to the high cost of switching platforms.

• A CAC to LTV ratio below 1:1 is considered good, with 3:1 being very good and 5:1 being great.
• Early-stage companies may not accurately calculate CAC to LTV due to lack of scale and diversity.
• As startups grow, it becomes increasingly difficult to maintain low CAC due to audience saturation and the need to reach less obvious prospects.

"Yeah, three to one is really good."

Guillaume Cabane states that a 3:1 ratio of LTV to CAC is a strong indicator of a company's health and efficiency in customer acquisition.

• Growth is defined as a risk-adjusted way of creating value with limited information.
• It involves making multiple bets with the hope that successful ones compensate for the failures.
• Growth is multidisciplinary and can involve pre-signup acquisition or post-signup product engagement.
• Companies often struggle to distinguish between failing experiments and those that need more time.

"Growth is a risk adjusted way of creating value."

This quote defines growth in the context of startups, emphasizing the importance of making educated bets based on limited information.

• Companies often fail to achieve statistical significance in their experiments due to small audience sizes.
• Successful experiments provide statistically significant deviations from the status quo.
• Some growth tactics can be toned down, losing their effectiveness.
• The biggest mistake in activation is not considering the human psychology of the recipient.

"A good learning is a statistically significant deviation from your status quo."

Guillaume Cabane explains that a successful experiment in growth marketing must show a clear and significant impact compared to existing metrics.

• In 2023, AI enables highly personalized content at scale, addressing specific customer problems.
• Horizontal SaaS products face challenges in crafting messages that resonate across diverse use cases.
• The key to successful communication is relevance, which creates reciprocity and prompts responses.

"Relevance creates reciprocity. Reciprocity gets you responses."

Guillaume Cabane breaks down the psychology behind effective communication, explaining that personalized messages that resonate with the recipient's situation are more likely to elicit a response.

• Identifying and scaling pockets of opportunity is a key challenge in growth.
• Providing true value in communication, such as helpful insights or solutions, guarantees engagement.
• The cost of scaling a successful growth tactic can be minimal once the initial investment is recouped.

"The acquisition cost of doing that is zero. If your competitors are not doing it, you have this green ocean in front of you with this. No competition, zero dollar CAC. That's competitive mode."

Guillaume Cabane discusses the advantage of a growth tactic that, once established, has no marginal cost and can provide a significant competitive edge.

• Companies often fail to consider the recipient's perspective and the psychological impact of their marketing efforts.
• The most effective marketing strategies involve understanding and addressing the customer's needs and challenges first.

"They don't think of the humans on the other side. They don't think of the psychology enough."

Guillaume Cabane criticizes companies for not putting enough effort into understanding the psychological drivers of their customers, which is crucial for effective marketing.

• The example of throwing away junk mail versus a personalized letter demonstrates the emotional impact of personalized communication.
• Personalization can create a sense of responsibility and make it difficult to dismiss the message without engagement.
• Guillaume Cabane highlights the importance of personal touch in communication, even in a digital context.

"Now, let's say you go through the junk mail as you throw it away. There's this one letter that's sealed letter that's obviously written by a human, obviously by an old person. And there's your name, Harry, on it. Harry Stemming is written on it, and there's the return address behind it. They even maybe like, lick the stamp and put it on the envelope. You're very convinced as a human. How like you are you, Harry, to dig that envelope and throw it in the trash without opening it? No way. Right? You would be a psychopath if you did that."

This quote exemplifies the power of personalization in communication, suggesting that a personalized approach can make the recipient feel obligated to respond or engage with the message.

• Guillaume Cabane discusses the challenge of engaging CFOs through email marketing.
• He describes a creative strategy that involves scraping LinkedIn profiles for education data and matching it with college sports games to create personalized betting propositions in emails.
• This strategy led to high response rates due to its personalized and human-feeling approach.

"So what we did is that we matched two data sets. The college where each CFO went and the upcoming games of that college against the opponent team. We then built a very simplified betting algorithm to see is the CFO's team likely to win or lose. And we send that in an email and say, hey, Harry, your team, the Sharks or whatever, is going against like the Bisons or whatever next week, and I'm ready to bet $50 that your team is about to lose if you went up on top, I'll give you $50, no question to ask if you lose. I'll just ask for a 20 minutes call."

The quote describes a specific example of how personalization and relevance can be used to capture the attention of a target audience that is typically difficult to engage, by leveraging their interests and offering a compelling proposition.

• Guillaume Cabane predicts that AI will lead to an increase in high-quality, personalized communication, making it difficult to differentiate between human and AI interactions.
• The saturation of AI-generated messages may lead to people ignoring real human communication due to the overwhelming volume.
• Guillaume suggests that the future of communication may focus more on social proof, community, and relationships.

"It's very likely that we'll start ignoring messages from real humans at a much higher rate because the quality of AI will be better than the quality of humans."

This quote highlights the potential challenge that AI poses to personal communication, suggesting that as AI improves, it may surpass human communication in quality, leading to a shift in how we engage with messages.

• Guillaume Cabane discusses the broader implications of AI on outbound communication, suggesting that it is not just cold outbound communication that is at risk, but personal communication as a whole.
• He proposes that the future may involve leveraging social proof and community to establish trust and validate information.

"It's not cold outbounds communications dying, personal communications dying. It's not just cold outbound. The same is true on phone calls. Phone calls, text calls, like blog posts, anything that is a human written content is soon likely to be better if done by an AI."

The quote indicates that AI's influence will extend beyond cold outreach to all forms of personal communication, necessitating new strategies to maintain genuine human connection.

• Guillaume Cabane challenges the notion that a single channel can drive significant revenue growth, such as reaching $50 million in ARR.
• He emphasizes the importance of testing the depth of various channels to understand their potential and to prepare for future scaling.

"I have never seen companies I've worked with neither at segment or at Drift Corgis and not in one of the companies I engage with. We were able to get to 50 million on one channel, not one."

This quote refutes the idea that a single channel can be solely responsible for reaching high revenue milestones, based on Guillaume's experience with multiple companies.

• Guillaume Cabane advises on the importance of testing the capacity of marketing channels before scaling or fundraising.
• He recommends a methodical approach to increasing budgets to identify the limits of channel effectiveness.

"I recommend companies to two x the budget every week until it sat lines. Just do it for like four weeks, six weeks. It's not going to burn your budget, your entire capital, but just two x on a week two, two x on week three, two x on week four."

The quote provides a practical strategy for businesses to test and understand the scalability of their marketing channels, ensuring that they can confidently invest in growth.

• Guillaume Cabane emphasizes the need to reject vanity metrics and focus on revenue-aligned KPIs.
• He advises converting all marketing engagements into weighted adjusted pipeline dollars to accurately measure marketing effectiveness.

"Reject any KPI that is vanity. You don't care about traffic, you don't care about any of those KPIs. The only thing you care about is weight adjusted pipeline dollars."

This quote stresses the significance of focusing on KPIs that directly correlate with revenue, dismissing metrics that do not contribute to the bottom line.

• Guillaume Cabane discusses the relationship between lead scoring and pipeline management.
• He advocates for using lead scoring to adjust the value of potential deals and to ensure high-quality leads.

"Let's say your acv is ten k and your lead score predicts a likelihood to close of 30%. So the value of that company or pipe is $3,000. It's not ten, it's three."

The quote explains how to use lead scoring to estimate the value of leads in the pipeline, which helps in making accurate revenue predictions and in strategic decision-making.

• Guillaume Cabane shares his perspective on where growth teams should be situated within a company.
• He suggests that growth teams are often integrated into either product or marketing departments and emphasizes the importance of hiring the right individuals for these teams.

"The elite score itself generally is within ops."

The quote indicates that the operational aspect of lead scoring, an important part of growth efforts, is typically managed within the operations department, reflecting the interdisciplinary nature of growth teams.

• The core team for growth includes a head of growth, an engineer, a marketer copywriter, and possibly a data analyst if the founder is capable of fulfilling that role.
• The head of growth often assumes the analyst role in early stages.
• This small team is responsible for driving the growth initiatives in the company.

But the head of golf is the analyst in the early days. So you have like head of growth engineer and one marketer copywriter. That's your team.

This quote outlines the essential roles within a growth team, emphasizing the importance of having a head of growth with analytical capabilities, an engineer, and a marketer copywriter.

• When hiring for growth, candidates should be given actual company data to work with as part of the hiring process.
• "Easter eggs" or anomalies should be included in the data to test if candidates can identify outliers and question the data set.
• The hiring process should evaluate the candidate's approach to risk, making bets, and their ability to win when faced with challenges.

You want to ensure that they can look at your data, which means you need to give them take home that has some of your data.

This quote highlights the importance of evaluating a candidate's ability to analyze real company data and identify irregularities as part of the hiring process for a growth role.

• Asking candidates about their video game or board game strategies can reveal their problem-solving skills and risk-taking tendencies.
• Understanding a candidate's approach to winning games can provide insights into their ability to understand rules, think creatively, and make valuable, risk-adjusted bets.

What's their approach to risk, to making bets and coming out on top? How do they win when they face interesting challenge.

This quote explains the rationale behind asking candidates about their gaming strategies to gauge their approach to challenges, risk-taking, and strategic thinking, which are crucial for growth roles.

• A bad hire in a growth role is usually apparent quickly based on their reluctance to try aggressive and creative strategies.
• Growth roles require a combination of scientific experimentation and aggressive creativity, which a bad hire is unlikely to exhibit.

It's fairly obvious pretty fast. They won't try aggressive things.

This quote suggests that a bad hire in growth can be identified by their lack of initiative in trying bold and innovative strategies.

• The main constraint in growth is not budget but rather the headcount and velocity of the team.
• The focus is on how many experiments the team can ship and optimizing for headcount and velocity rather than budget.

My constraint is headcount and velocity. That's why I optimize for those things. It's rarely budget because I'm not competing on budget.

This quote emphasizes that the limitation in growth is often the team's capacity to execute experiments, not the financial budget.

• Hiring overly senior individuals who claim they are willing to get their hands dirty but fail to do so is a common mistake.
• In marketing, unlike engineering, there is little respect for deep knowledge of one channel, which forces marketers to become managers quickly, making it challenging to find experienced hands-on marketers.

Not once have I hired a senior person in a position where there's no one else to empower them. And they told me they would get their hands dirty. Have they gotten their hands dirty? Not once they lost it.

This quote underscores the issue with hiring senior individuals for hands-on roles, as they often do not fulfill their promise of being actively involved in the groundwork.

• Marketing gets respect when campaigns are successful, but in engineering-focused companies, it can be harder for marketing to gain recognition.
• Companies like Apple, which are marketing-oriented, demonstrate the respect and impact that marketing can have.

Do people respect Apple's brand and marketing? Absolutely. But that's more like the exception than the rule.

This quote reflects on the varying levels of respect for marketing depending on the company's focus and the success of marketing campaigns.

• Full-time hires are always preferred if the right candidate is available.
• Advisors fill the gap when the desired experienced growth person is not willing to take the risk with a Series A company.
• The market for experienced growth professionals is tight, making it challenging for Series A or B companies to hire them.

You should always hire full time when you can.

This quote advises that full-time hires are preferable to advisors when the right candidate is available, but acknowledges the role of advisors when such hires are not feasible.

• There is a limited number of highly experienced growth professionals, making it difficult for Series A companies to hire them.
• Many experienced growth professionals are either semi-retired, in high-level roles, or involved in consultancy and advisory, and are not available for hire at Series A companies.

There's 120 people.

This quote indicates the scarcity of highly experienced growth professionals, highlighting the challenge for early-stage companies to attract such talent.

• The most impressive growth strategy admired by Speaker A is the typical virality seen in companies like Dropbox and Zapier.
• Email marketing remains strong despite predictions of its decline.
• Cold calling has made a comeback as a tactic.
• Building product bundles is generally a poor strategy as it narrows the audience.
• Growth should be an independent function to avoid conflicts and the eventual death of growth teams at late-stage companies.
• The worst growth experiment involved building bundles that did not resonate with a broad audience.
• New growth leaders should have strong connections to learn from others' successes, saving effort and capital.

The key to success and growth is testing and learning. And so if you can outsource the cost of learning to other teams, either through advisory like I did in the early days, or through good relationships, you are saving a ton of effort and capital, and you can deploy those learnings to your business and look like a fucking genius.

This quote suggests that learning from others through strong connections or advisory roles can significantly benefit new growth leaders by allowing them to apply successful strategies to their own businesses.