https://www.linkedin.com/in/fredstevenssmith

Fred Stevens-Smith knows how to bring it to an interview. He tells you how it is, which makes it easy to learn and understand how Fred ticks. As CEO and co-Founder of Rainforest (a software quality assurance platform), he talks about starting Rainforest including the smart moves the mistakes made.

Rainforest has raised over $16 million from some of the most well known SaaS investors. He talks about the fundraising process but also about what’s critical early-on for a startup.

Here are some other things we talk about:

-Fred talks about his time in Berlin making good money but not fulfilling his dreams. And he had a very good reason for moving to Berlin:)
-Fred talks about the differences in startup mentality between Europe and the United States.
-Fred talks about being a part of Y Combinator and how it helped.
-Fred talks about what’s been the hardest part of rapidly growing.

Transcript

Dave Kruse: Hey everyone. Welcome to another episode of Flyover Labs and today we are lucky enough to have Fred Stevens-Smith with us and Fred is the CEO of Rainforest, which is all about helping companies with quality assurance and testing, which we’ll talk more about and Fred started Rainforest in 2012 and they are growing quite fast. They were part of the 2012 Y Combinator Class and recently they raised a Series A of $12 million, which was led by Bessemer Venture Partners; so $12 million bucks, they’ve got a little money to work with. So, we’re going to talk a little bit about Fred’s background and then a lot about Rainforest and what they are up to, so I’m pretty pumped. Fred, thanks for joining us today.

Fred Stevens-Smith: My pleasure Dave, nice to talk to you.

Dave Kruse: So let’s start off with your background and then we’ll get into Rainforest. So, can you just tell us a little bit about your background and where you came from?

Fred Stevens-Smith: Yeah absolutely. So, me and my co-founder is from England. We both have, I guess, you know, fairly typical backgrounds for start up founders. You know, the standard thing like, I had my first business when I was very young, doing like bullshit web designing and like my first customer was my dad and I did like a website for his like little, you know, company background. Everyone was like, oh! We need a website like with a contact pool and then basically through that I started doing websites for other people in his network and that ended up being like a little business, which kind of went quite nicely and that pretty much turned me on to the idea of like making money on the internet.

Dave Kruse: How old were you when you were kind of in the middle of that?

Fred Stevens-Smith: Like 14 is when I started it and I’m 28 now, so 14 years ago.

Dave Kruse: Half a life time ago…

Fred Stevens-Smith: Yeah it is and in fact in 2002 maybe, so yeah that’s kind of like what first turned me on to the idea of the internet and that you could make money on and then I guess fast forward a little bit, I studied economics at the university and when I graduated, rather than going and joining like a graduate scheme with investment banks, which was most of my friends did I basically, another friend of mine had just moved to Berlin, he called me and was like “dude, I just moved to Berlin, it’s super cheap and there’s loads of Swedish girls, you should come” and I was like yes, of course I’m going to come. So I booked a one way ticket there and we started like a design agency. I guess if I had a real job, I would be a designer probably and we had all these like lofty goals, and you know, like to build an amazing design agency and do like work for clients that we cared about and all that shit and in the end we became like a flash banner shop.

Dave Kruse: That’s great.

Fred Stevens-Smith: Yeah and what’s even worse was that, with flashback, like all of our customers were free to play and publish it and so like our briefs would be like make the sword bigger, make her cleavage deeper, you know, make the winks sparklier, so it was like real soul destroying crap, but we made a lot of money. We made a lot of money, we were very successful, we sold lots of advertising units essentially and at the same time, you know, I kind of grew up in England and I think it’s a bit less like this here in America, but probably is still to some extent. I grew up with just kind of like this thing being drilled into me that you basically choose kind of passion or potential wealth and those are two separate parts and like you do fashion, you know, you go and work for the UN or you become an artist where you work in a charity, like you are never getting rich and you choose money, you know, to go and sell your soul to Goldman Sachs and you’re never going to enjoy your work, but hey, you’ll make tons of money and so that kind of like dichotomy is what I grew up with and that’s kind of what I believed to be true and then while I was in Berlin, doing this kind of agency thing, I met some of the early SoundCloud engineers; the SoundCloud is based in Berlin.

Dave Kruse: Cool.

Fred Stevens-Smith: And SoundCloud was like the thing that turned me on to start-ups, that was like the first time I’d ever kind of known that start-ups were a thing right. This was like back in the day, I guess about you know eight years ago and so, you know, the global start-up phenomenon, the social network, all of that stuff, it wasn’t really in popular consciousness and so I met these SoundCloud guys and I was like, oh, wow! This is like a thing that you can maybe combine the two things right, you could combine passion with potential money and so that was like really kind of like , you know, the metaphorical light bulb moment for me and so I pretty quickly sold out my shares in the agency and moved back to London and my objective was to get into the startup scene in London because, you know, the Berlin startup scene at the time was kind of bullshit, I was like okay, I will move to London, ___7:58 ___ I can get to know people being into that stuff and so that’s what I did and so, you know, kind of fast forward a little bit of time, I was then turning it like a kind of seed stage venture pond and started working on the idea that became Rainforest with my co-founder in the evenings and weekends and the story somewhat concludes when I was kind of let go because I was a really terrible employee and it was a great decision and I still love and am friends with the people that I’ve worked for there, but you know, I’ve been fired from practically every job that I have had because I am just not very employable.

Dave Kruse: We have to hear about that, why is that?

Fred Stevens-Smith: Well, I don’t know, I think usually the traits that make you a good founder are also the traits that make you a horrible employee right, like you always speak your mind, you are never satisfied, you have very high standards, you are typically a bit like lazy and it’s like hard to motivate you unless you are kind of doing something to yourself type thing, I think all of those are traits that most founders have, and you know, all of those are traits that make you a horrible employee and so I go out from the job and they were like, it was kind of cool though because they would go like, look you are a shitty employee, you are fired, like paraphrasing of course and then, but hey, we heard that you and Russell are working on this thing, like we’d be interested in maybe funding you guys and so I being the idiot like young male asshole that I was, was like, screw you guys, like we don’t need your crappy money, like we are going to YC, we are going to Silicon Valley.

Dave Kruse: No Way.

Fred Stevens-Smith: We’re going to make it, we’re going to make it in America. I totally claimed it like 100% claim and we hadn’t even applied to YC at that time. We had not even started creating an application and to be honest I did crystallizing my mind, like when I said that to them. So basically, I made this outrageous claim.

Dave Kruse: At this point, what did you have as far as Rainforest and the technology? Had you built anything or was it still an idea?

Fred Stevens-Smith: Yeah, we built like, I mean, the first version of Rainforest was like, you know, like many people will probably be familiar with this, it was like the __10:20__ start-up, you know, it was like, if you take the application of _____, which was like, never talk to any users, never do any validation, and just build in like in a dark room in isolation for like, you know, six months that was what like Rainforest version one was. So it’s kind of funny, you know, you have to learn those, like I read the book and I was like okay, cool Eric, I’m into this and then the seeds to make all the idea, like all ___10:50___ that he’s trying to teach again over the next twelve months. So anyway that really, that kind of claim like lit a huge fire under our arses to get into YC and I think that’s a big part of how we managed to get in, you know, we were first time applicants, we got an interview, we were first time interviewees and we got offered a place and that was pretty rare, at least at the time, usually you had to go through a few cycles and at certain points in my life I have definitely kind of embraced the notion, like burn this shit, you know, like you know burn the shit you arrived on the beach with so like the only way of success basically, not that I would recommend that as a life strategy, but I’ve seem to have done that several times.

Dave Kruse: Sometimes that works and then you put a lot more focus on and then you also like, sometimes the world has strange ways of working when you really want something and so…

Fred Stevens-Smith: Exactly, exactly, yeah and when your back is against the wall sometimes that’s when you have your best ideas and when you do your most inspirational work I think and so then yeah, then we were in YC and …

Dave Kruse: And what’s YC?

Fred Stevens-Smith: Yeah, what’s YC? So, you mean not everyone ….

Dave Kruse: Yeah not everyone knows.

Fred Steven-Smith: So YC stands Y Combinator, Y Combinator is kind of the original and like completely un-controversially still the best kind of startup accelerator and startup accelerator is kind of weird nomenclature and what it actually means is it means like a kind of learning phase and kind of infrastructure for very early stage start-ups to go from kind of idea to minimum viable product and then to ideally your first kind of paying customers and so YC does have all of this kind of like this 3 months program and they have this very famous demo day at the end, which is like when all of the start-ups in the program present their product, they pitch them and the investors in the audience kind of throw money at them or at least that’s the kind of popular, you know, the popular idea about it, so that’s YC.

Dave Kruse: So how many companies graduated with you back in 2012?

Fred Stevens-Smith: It was like 83, we were the biggest batch ever and we refer to ourselves, so we were summer 2012 and we refer to ourselves as the batch that broke YC because they have been kind of scaling kind of quite lineally until us and then our batch represented like this big jump in a number of companies in the batch and the kind of support systems and infrastructure kind of broke down a bit because they weren’t prepared to handle that many people, you know, that many companies.

Dave Kruse: Yeah, that’s a lot.
Fred Stevens-Smith: And the key focus of YC is like this very hands-on like human mentorship model from the partners of YC who in most cases are former YC founders themselves. These companies went through YC and had to exit and now kind of like returning some of that knowledge back to the community so that’s the kind of style and its incredibly powerful because I think the big thing that differentiates them from a lot of the other kind of pretenders is that all of the partners, all of the people who were giving you advice throughout this program actually did this themselves right, they are not just like a VC who went to business school, they are not, you know, like a senior VP or something from a giant company that thinks they know what they are talking about, like they actually started a company and went through the grimes and the pain and emotional rollercoaster of, you know, being an early stage founder and so the advice they give you is absolutely invaluable and I think that’s probably why they still remain, you know, like the kind of foremost program.

Dave Kruse: Yeah between their advice and their network you can’t get any better.

Fred Stevens-Smith: Yeah, absolutely. That logo is pretty phenomenal, like having that logo, you know, against your company kind of like marks you out as being legit basically.

Dave Kruse: And how was it coming from London to the Bay area? How was the transition and were you glad you made it or was there some tough times?

Fred Stevens-Smith: It was pretty interesting. I mean, you know it’s not like a surprise or controversial statement, like in general the Americans, you guys are much more kind of Gung-ho, well at least especially here on the West Coast much more optimistic, you know, and sometimes like borderline level, like bordering on insanity I think, like for example, you know, when I was at the __15:55__ funding thing in London, you know, people _____like one building £10 million, you know, $15 million business over the next 5 years and that would be like this really ambitious thing and everyone would be like, wow! You’re amazing, that’s so badass. Like once I got to YC there was like an 18 year old pitching me on this like stupid idea and, you know, something like totally random things, like yeah, it’s going to be a $billion world changing business in 3 years and like with a total straight face, you know, and I was like laughing and then realized he’s not taking the piss, this is really what he believes and so I think the biggest impact it had on us personally was, you know, just kind of maybe moving the goal post, like oh, ok, this is the level of ambition and like, you know, kind of self confidence and self belief that is expected whereas in Europe it’s much more like you’re expected to be self deprecating and if you take yourself too seriously or you have too much self belief people are like “you’re kind of an asshole,” so that was the biggest adjustment to make I think and the really cool thing here, and again this is not like a new thing, but the really cool thing is that like people embrace risk, you know, and they embrace new ideas and I think we have a value inside Rainforest, which is embrace the new, that’s one of our values and basically the idea is that, like you know, people who are very wedded to their the kind of expert data, they basically get into this situation where they can’t really learn because they want to always be the expert and if you’re always the expert then you are never the new, you are never in the quest for knowledge, always like trying to prove to other people how much knowledge you have and I think that in general with the kind of society here and so in the Valley at least it’s really, really open to being the new, like being the one that doesn’t really know anything and just being like in learning mode rather than trying to look good and I think that basically creates this atmosphere here, where you can come up with these crazy stupid ideas and people are like “yeah, that actually might work, fuck it, here’s a few million dollars,” you know, I think most of the great companies and hopefully Rainforest will one day be counted amongst those, have started from ideas of being actually pretty stupid and the Rainforest is definitely one of those.

Dave Kruse: Yeah that climate in Silicon Valley is unique, I mean, I think that’s probably the case across the nation, but no one compares to Silicon Valley with that kind of open attitude to help each other and to embrace the crazy attitudes. I was curious, do you think…

Fred Stevens-Smith: Exactly.

Dave Kruse: You know, we’re very optimistic , do you think sometimes there should be almost a balance between how it is more in Europe versus the United States, or are you all in for the crazy optimism?

Fred Stevens-Smith: I have to say that, I think that you see the downside of this with like, you know, the 2008 bubble and things like that, like that’s the kind of like I guess you could say dark side, you know what I mean, like that’s the dark side of the…. the economist might say like irrational exuberance, you know, and I think its deeply tied into this notion of the American dream right, that anything is possible and that everyone in society, if they work hard enough and get a few breaks, could be Donald Trump, well God forbid, but you know what I mean, could make it to the top of American capitalistic society and so I personally, you know, like sociologically I find that notion quite damaging when you look at the reality for most people here, you know what I mean, it’s hard to really say that the American dream is that real anymore because it’s like the society is not that mobile socially speaking or economically and so I think that’s the kind of dark side right, but in the kind of context of Silicon Valley, I think it’s amazing, you know, and that’s why I firmly believe and obviously I voted with my feet, I firmly believe that there is no other Silicon Valleys being built, like this whole notion of like, oh, lets create a startup echo system, it’s total bullshit and I have witnessed it firsthand. You know, I lived in Paris, I lived in Berlin, I grew up in London and all of those are places which are theoretically, you know, start up hubs right, which are kind of building up and will eventually rival Silicon Valley maybe and the reality is that each of those places that people like me, people who come here they are like “I need to get to fucking Silicon Valley,” because that’s where the best investments are and that’s where the best eminent opportunities are, that’s where the best engineering talent is, and you know and so it’s kind of self selecting because the people who aren’t that ambitious, who aren’t like, okay, I really need to get there, they are the ones who stay in those local echo systems, so you have this kind of creaming off effect where basically the best start-ups in each echo system manage to get out of it and so it is just like self perpetuating thing of mediocrity because it’s like all the really amazing start-ups leave and so you are just left with the ones that aren’t really amazing and so, I mean, you know, obviously that’s a huge generalization like, you know, shout out to all the start-ups everywhere.

Dave Kruse: Right, of course.

Fred Stevens-Smith: What you’re you doing is crazy and like incredibly hard, but you know, as a general statement, I think…. sorry go ahead…

Dave Kruse: I think most people would agree with you even though we all live in the Silicon Valley we understand where you are coming from and …

Fred Stevens-Smith: Yeah, yeah, exactly and it’s too bad because I see a lot, I mean, you know I have several friends who were kind of plugging away in England and when I look at like the businesses they built, I mean, I’m the like, elf of those businesses, you know against the kind of valuations they are able to get, how much capital they are able to attract, it’s like absolutely night and day between here and there, you know, and I guess a lot of people who are listening to this who might be outside of Silicon Valley, you know, if you’re in the kind of Midwest or in the East Coast even, it’s kind of the same thing right. You take this big valuation here just by not being in this little weird like, you know, 20 square mile area and that’s definitely a strange phenomenon, but I think what it means is that people who are kind of rational, they try and do everything they can to move their companies here.

Dave Kruse: Yeah, you should be a pitch person for Silicon Valley. Actually, I think most people who live there are a pitch person, just everyone I talked to.

Fred Stevens-Smith: Yeah, yeah, it’s true, there is definitely a thing, it’s like the kind of California like hippie, yoga, like love the world type of shit as well. I mean, people are definitely like amazing Evangelists of the place just because once you move here, you are like wow! There is actually something quite infectious about that real optimism that is kind of super pervasive here. Although obviously, right now, we’re seeing like the dark side of all this in San Francisco, you know, with the rising property prices and the city is changing very quickly because only people working within technology can really afford to live here anymore and I don’t necessarily think that’s a good thing long term.
Dave Kruse: No and that’s a whole separate podcast we could get into, so you can come on in a couple of months…… and we’ll talk about Trump too….

Fred Stevens-Smith: So, housing politics, nice ……… Trump.

Dave Kruse: So we’ll get into Rainforest, but before we do just kind of lead up as to when you look back on your experiences for Rainforest, you know, was there any particular experience or thing that happened that helped you kind of start Rainforest or stuff that you didn’t want to redo because you did it in the past and didn’t work out or any lessons how to start?

Fred Stevens-Smith: Yeah, I think there was probably a few pivotal moments, the first is when I met the SoundCloud guy, and so kind of learned oh, start-ups are a thing and they have a very startupy startup, you know, I was in this like, beautiful big Berlin loft and __24:15___ beanie bags and they were like beautiful young people with tattoos and all that shit and so I was like this is the life for me and then I guess the other pivotal moment was the girl that I was dating for a while, her dad, was an MNA lawyer in like, big shot law firm in Germany actually and we were, you know, chit chatting and I was talking to him about like web stuff I was doing and all that stuff and I was still very much of the opinion like, oh, this is fun but like this isn’t really a thing and he was like, I still remember this, we were on like the subway in Paris actually and he was just like, you should do this as a career, like this is what you are supposed to do and I think it sounds kind of cheesy but it was like, I still remember that moment as being the moment when I was like oh! That’s true, like it is possible, maybe I can do this and someone giving you that kind of licence, like I think it’s probably a bit different now, you know, it’s more like duh, like everyone wants to be that person, but back then it was like web, like the idea of making a career with software was much more I think outlandish and that was like a super key moment for me, because you know that guy that I respected and was being very professionally successful was like you know this is where you should put your chips kind of thing.

Dave Kruse: Interesting. You got to like those pivotal moments in your life.

Fred Stevens-Smith: Yeah and they always come at such random points don’t they?

Dave Kruse: Yeah. What if he didn’t say that, what if he said you should go be, you know, go on to MNA instead?

Fred Stevens-Smith: Yeah, exactly, he could have very easily said like, fuck this internet stuff, it’s just a game, like you should go and be a lawyer, like have a real career you idiot.

Dave Kruse: You never know. I suppose also we also have selective hearing, so we kind of hear and pick up ……

Fred Stevens-Smith: Totally, yeah.

Dave Kruse: Alright. Well, let’s get into Rainforest a little bit and we only have some much time left, but so can you tell us about Rainforest and you know we talked a little bit about it, but how does it work and how did you come up with the idea?

Fred Stevens-Smith: Totally, yeah, so I was trying to avoid getting in pitch mode, actually I probably pitched it a hundred thousand times at this point, four years in, but yeah Rainforest is like, our aim is replace the QA team and you can kind of think of what our mission is as a company as becoming like the AWS to QA so just like AWS has all of these different components that can replace or provide the infrastructure that you would have to build internally before, we are kind of doing the same thing for QA and where we’ve started is specifically like regression and functional type thing, usually cross browser, so customers of ours kind of offload a lot of the, you know, real manual kind of laborious work that their internal QA teams are doing or they offload a bunch of what they would use in automation for or they, you know, kind of get rid of their off shore team and bring it in-house and have us run it and so that’s kind of what Rainforest does .

Dave Kruse: What’s QA?

Fred Stevens-Smith: Oh right, good question, so QA is the acronym for Quality Assurance and Quality Assurance is basically finding bugs and so it’s like when you build software you have like the unintended consequences where things don’t work the way they should. In the software industry, we call it bugs and about 30% of software budgets are spent just finding those bugs and that kind of sounds a bit outrageous, but it’s like if you imagine each piece of software is like an entire novel and that novel has, you know, 10 or 20 twenty people writing it in parallel, as you could imagine, there are some spelling mistakes there that make it through and so you know it’s a huge huge job to try and find these spelling mistakes before they get through to your reader right, before those bugs affect your customer and so what we do is we give customers a very very easy way to find those bugs without, you know, having to do the real labour of that, which is like hiring the team and you know managing and motivating them and all that kind of stuff.

Dave Kruse: And how did you kind of come up with that idea?

Fred Stevens-Smith: It’s actually a really dumb like uninspiring story, so we got into YC it was like a pretty different idea we started doing kind of spend analytics AWS and we pretty quickly realized/were told by YC like this was a stupid idea, like you should stop working on it, it’s not exciting and so we worked on a bunch of different ideas and most of them are related to development tooling and so the problem was that no one ever really wanted to pay for any of it and so there were like yeah this is cool, but like we pay like $10 a month or something and, you know, when you work out the economics of that and we were in Silicon Valley to build like a huge company it’s pretty hard to build a huge company with $10 a month and so in frustration we basically e-mailed everyone that we have been asking to try our stuff and try these little projects we were working on and just said, look, like what problem would you pay us $1000 a month to solve for you and most of the people that replied to us, which was surprisingly many, most of the people said QA and that’s how we got our first, well, you know, they didn’t say QA in so many words, they said testing or like, you know, help me find bugs that were released or even help, my co-founder spent less time checking the application before we released it, more time writing codes, but what it came down to was QA and so we got our first 9 paying customers from that e-mail and my co-founder and I became a QA team and so we had no real theories at the beginning of how to do this, we just figured like look, everyone hates this, it feels a bit like payments kind of pre-striped, you know, where everyone’s like this sucks, but I guess we’ll just have to do it, so maybe there is an opportunity, so we kind of dove head first into it and bear in mind, this is about a month before demo day, you know, this day which you have present everything to investors and so our first code, like our first __31:04___ for Rainforest was like July 30th or something and the pitch was like August 30th so we were kind of scrambling and at the time one of our friends in the batch, there was this guy called Sid and Sid had built one of the first scaled applications based on mechanical turk, and mechanical turk is one of Amazon’s web surf and basically it’s like a job board for hundreds of thousands of workers all over the world and you post a job with a certain dollar value attached to it and if one of the workers does the job successfully you pay them and you know it’s like many jobs boards I suppose, but the twist is that it’s mostly driven programmatically, so most of the work that’s been put on the job board is not created by like a human filling out a form it was created by a computer like spinning out that job and so he had just kind of sold that company to LinkedIn and so he was like in our YC batch working on something new and we were bitching at him saying like, oh dude, we are spending like 18 hours a day doing fucking QA for people and not like little, you know, mountain view single room, yeah, so sexy and he was oh! You guys should check out mechanical turk, you could totally get the mechanical turk workers to do the QA for you and so that was like really the genesis of Rainforest and you know 4 years later we are still pretty much doing the same thing, just much much better

Dave Kruse: And that’s the main difference here, you are essentially crowd sourcing the QA part whereas most companies have dedicated teams you help.

Fred Stevens-Smith: Exactly.

Dave Kruse: And will relieve some of that work if necessary, so who has the platform evolved since that first realization to use kind of mechanical turk method when you started to do that?

Fred Stevens-Smith: Yeah, that’s a good question, so I guess the things that are important to customers are quality obviously right, so if you are relying on us to tell you hey! Is my sign up working in all the browsers that I care about and we tell you yeah it does and you ship it and its broken and the users can’t sign up well you are probably not going to want to pay us much longer, you know, and so the most important thing is quality and the quality of the results we provide, so that’s a constant work in progress but we have made huge strides towards 100% correct results, so we are getting closer and closer to that, that’s what we spent a lot of time on and you know the short version of how we do that is like, you know, we have roughly 60,000 of these monthly active testers at this point so 60,000 humans around the world who at least once a month do some work for one of our customers and you can think of like our job as managing them just like you would any other team of humans, but we have another interesting constraint which is that we never know who they are beyond an anonymized ID and we never see them, we never sit them down, we never tell them like you know, buck your ideas up buddy, you are doing a bad job, like all of our interactions with them are programmatic and so essentially the key kind of technology and the key differentiator that we built is the ability to manage these people programmatically which is about figuring out, are they behaving in a trustworthy manner and do we think they are a high quality tester and so you know every single thing that anyone of these workers does in our system is being monitored and will then impact their whole and individual reputation which then impacts like where the customers will see their results that they are providing.

Dave Kruse: Are the testers scored or how do you rate them?

Fred Stevens-Smith: Exactly, so there is like a global ranking system and essentially you know based on various things that we observed, based on all kinds of interesting __35:23___ that get fed into our machine learning algos like for example what time of the day is it locally, and like what version of their browser they are on, right like if you’re many versions behind you know the current version of Chrome for example, we have seen that to be correlated with lower quality work and so there is all kinds of interesting things that impact a worker’s reputation core and every single job they do will impact that reputation score as well and so you know workers with high reputation get access to higher paid jobs and you know all of those kind of things. So the quality pieces is what we spend the majority of our effort on. The speed has also been hugely important for us so most of our customers of running Rainforest is part of what is called a continuous deployment cycle and so the idea here is just, traditionally you would update your web application, you know, maybe once every 6 months or once every month or every 2 weeks, but you would do on some arbitrary time cycle right and with continuous deployment which is kind of like this new idea really in the software industry with continuous deployment, people are like okay we are going to deploy ten times a day or you know once every ten seconds, like Amazon does and so what we do for those customers is Rainforest sit just before the deployment, so one of their developers says okay I think the changes I’ve made are ready to go live into production, I want to deploy them and we are like one of the automated steps in that process that basically says yes, everything works fine, you’re good to deploy and like all good… or like oh no, you broke something, there is a bug, you probably shouldn’t deploy until you’ve looked at that, so the speed is really really important and then I guess just in general just like, general becoming less shitty as a platform, you know, like when you start out you basically build like the most trivial simple stuff and then you are constantly learning from your users like oh, ok, this is really useful, this isn’t that useful, like these are the important things in the platform, these are things that we should spend more time on and of course as we are getting more mature as a company and as we are getting more and more customers, and those customers are moving upmarket, we are building more of like a kind of enterprising features so that’s kind of like, those are the three major things that have changed over the past 4 years.

Dave Kruse: Gotcha, and you guys are growing pretty fast, you know, what mistakes have you made or how are you learning how to grow rapidly?

Fred Stevens-Smith: We’ve made all the mistakes under the sun. I think at least from the perspective of like the CEO and the kind of the founding team the key like the really hard game, the key thing about building a company especially a software company is hiring and so, you know, we can’t talk about any of our growth really outside of, you know, in isolation from hiring and the hiring has been the thing that’s driven the growth right, so the right engineers in the early days, the right sales people, the right sales leaders, the right marching people, like all of these things like combined together to create a team that is able to deliver this kind of growth and to give you an idea, last year we went from kind of low 6 figures to low 7 figures in annual recovering revenue and we grew about 900% and this year we want to Forex our revenue so we got kind of pretty aggressive growth and it looks like we’re probably going to hit that.

Dave Kruse: Wow.

Fred Stevens-Smith: So, most of that has been about building an incredibly solid product that customers like with good churn numbers, you know, if too many of your customers are churning and cancelling their service you get in a situation where it’s very very hard to grow fast right because you’re just trying to replace existing customers and we have an amazing sales team, an awesome marketing team and basically at some point you kind of build this machine right where you have a very predictable kind of pipeline from someone comes to your website and you know 1% of those people will, you know, request a demo and of those people 20% will be worth selling to, you know, and then of those people 20% will actually buy, you know and so you kind of figure out, alright what revenue number do we want to hit and then you back work from there to okay, how many visitors need to get our website so it’s kind of, once you’ve done stats for a little while, the beauty of it is you get this really really predictable energy from generating revenue, you know, whereas in the early days if you are listing for this and you’re in like the first couple of years or whatever and you’re much before a million dollars of ARR, you know, it’s a very lengthy right, like you don’t really know how to sell, there probably isn’t really a process, you probably get lucky on some deals and unlucky on others and you don’t have that kind of expertise of running that like really hard core sales process where it’s all just like this very predictable numbers achieved and so that’s kind of what’s enabled us to get to where we are today.

Dave Kruse: Oh, that was a very well described kind of SAS model, I think Jason Lemkin would be pretty proud of….

Fred Stevens-Smith: I hope so.
Dave Kruse: It’s pretty impressive.

Fred Stevens-Smith: Jason is like my number one guy and that’s actually a great point as well because like, you know, really I can’t talk about how we were able to grow so fast without talking about our investors, you know, Jason Lemkin, and if you don’t know him and your interested in stats you should know him.

Dave Kruse: He’s the guy.

Fred Stevens-Smith: Yeah. He’s the guy, he’s like the kind of like Jesus of SaaS right, and so Jason although __41:42___, Jason has been incredibly influential and important for us, you know, as a kind of mentor for me and as a member of our board helping us make good decisions. He drove a lot of our strategy around kind of sales growth last year and very much helped with hiring and all of that kind of stuff and Jim Andelman, who was our other board member at the time and still is, but those were the two board guys outside of me and Russell. He has also been really really helpful with the early stage SaaS knowledge, so he has a whole bunch of companies which are, you know, in the first kind of couple of years of ramping their revenue and of course most of these people face similar problems, you know, so a really good investor could give you that patent matching and that mentorship to help you grow faster and so those guys were completely instrumental for us.

Dave Kruse: Interesting, we are almost out of time, I think. One more question for you, you mentioned hiring, who were some of your first like key hires? I think that’s always a big deal for start-ups and how did you even find them and how do you know that they were the right people?

Fred Stevens-Smith: Yeah, that is the key question right, absolutely the key question. I think the first key hire that we made was a guy called Steinman, he was our first engineer, he is an amazing, amazing engineer, a lovely guy and you know, I think that any software company that’s like running itself as startup, the early engineers that you hire really define a lot about the future of the company. What is the culture of the company, what’s the relationship between the people that work there and the founders and what’s the kind of, you know, what are the things that matter to you, how fast do you move, how quickly do you build products and so, you know, that first engineering hire is what I would spend a lot of time on, you know, we are still just founders and then outside of that I would say the other really big one is our VP of sales. We went through three ___44:00__ first sales guys until we found _____ and you know most of that was my incompetence, you know, those guys and gals have gone on to have great careers at other companies, not that they were no good, it’s just that we were like, we hired the wrong profile, or you know from the wrong industry or whatever, and so our VP sales, he is absolutely crucial to the success of the company, you know, if you look at the our revenue, if you look at our growth curve like before and after he came in there is an extremely clear reflection point when he joined, you know, like it goes from like very lumpy…

Dave Kruse: When did he join?

Fred Stevens-Smith: He joined in like April of last year and we were growing like on average like 3 or 4% every month and the first month he joined we grew 20% and we kept growing 20% from there until January of this year actually.

Dave Kruse: Wow!

Fred Stevens-Smith: So, he has delivered like amazing growth and the sales team that he brought out, you know, has been a huge part of our success. So those are the key hires, I would say, also the one other one is last year once our VP of sales had started performing well and I was kind of like okay, he’s got this, he doesn’t need me to be kind of like deeply involved, I can focus on some other problem, we started kind of understanding the role of customer success and the three customer success __45:32__ that we have right now are absolutely amazing, like without them, you know, we’d be nowhere really. And the role that those guys do in a SaaS business is they basically keep your customers really happy and excited and they provide a very, very, you know, high __45:50__ communication between your customers and your engineering team and they are the ones that are responsible for a lot of their experiences that our customers have, you know. So that’s definitely something that I’ve seen people be too slow to hire and we were probably too slow to hire and I would say, a really high quality experienced customer success person makes a huge, huge difference to your long term revenue growth, so those guys have been super for this company.

Dave Kruse: And what did the sales person, sounds like the impact was pretty immediate, what did he do that was different than what you were doing before?

Fred Stevens-Smith: Yeah. That’s a good question, I thought about that a lot myself, like l guess the short version is that he knew how to run a process and so sales is a process right? and you know a not bad conversion rate from leads that we talked to close deals is 10%, but as a founder, especially as one not coming from a sales background, only having 10% of the deals that you talk to actually workout and provide money, that feels like a terrible failure, you know, and so it’s really, really hard to stay motivated to keep selling when it feels like the sales just happen kind of randomly, you know what I mean, and so I think the key thing that he did was he was like “look, it’s a process, we’ll figure our conversion rate, we’ll sell a bunch, we’ll learn and we’ll go from there” and so you know, his kind of comfort with that process and his knowledge that like we have something we can probably sell here, like let’s just go and like run the process for a couple of months and see where we end up, that kind of patience is something that I do not have and so I think it was that and then it was just a combination of like that plus like, you know, lots of things came together right, the product was finally mature enough that the sharing rate went way down, our brand started going up a bit because you know, Jason invested and so people started hearing about us, so a lot of things kind of came together really.

Dave Kruse: Gotcha, okay. And what was your revenue level when you hired your first sales person?

Fred Stevens-Smith: The first sales person or the fourth first sales person?

Dave Kruse: That’s a good question, let’s go fourth.

Fred Stevens-Smith: So when we hired, we were about 400K ARR or something like that.

Dave Kruse: Okay, gotcha, that’s awful. Alright, well this has been awesome, wish we could talk all day, but we should probably end it at some point.

Fred Stevens-Smith: Right, definitely yeah.

Dave Kruse: This is very insightful and definitely appreciate your time and it’s a pleasure talking to you.

Fred Stevens-Smith: Yeah, my pleasure Dave, yeah likewise dude.

Dave Kruse: Thanks everyone for listening to Flyover Labs from Madison, Wisconsin and we’ll see you next time.