Feb. 19, 2023

10 lessons on bootstrapping a $200m business | Patrick Campbell (ProfitWell)

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Patrick Campbell is the founder and CEO of ProfitWell, which he bootstrapped and sold for over $200 million. In this special episode, we explore 10 big ideas from Patrick, including tips for hiring employees who align with your company values, creating winning pricing and retention strategies, determining the right time to raise money, and more. Whether you’re just starting out or looking to scale your SaaS business, this must-listen episode offers practical and actionable advice that will help you avoid missteps and think differently.


Where to find Patrick Campbell:

• Twitter: https://twitter.com/Patticus

• LinkedIn: https://www.linkedin.com/in/patrickccampbell/

• Email: pc@patticus.com


Where to find Lenny:

• Newsletter: https://www.lennysnewsletter.com

• Twitter: https://twitter.com/lennysan

• LinkedIn: https://www.linkedin.com/in/lennyrachitsky/



• Douglas Atkin on LinkedIn: https://www.linkedin.com/in/doatkin/

• Patrick Campbell’s guest post on Lenny’s Newsletter: https://www.lennysnewsletter.com/p/saas-pricing-strategy/comments

• ProfitWell: https://www.profitwell.com/

• The Cadence: How to Operate a SaaS Startup: https://medium.com/craft-ventures/the-cadence-how-to-operate-a-saas-startup-436aa8099e8

• Edward Snowden on Twitter: https://twitter.com/Snowden

• The Flywheel: https://www.hubspot.com/flywheel

High Output Management: https://www.amazon.com/High-Output-Management-Andrew-Grove/dp/0679762884

Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts: https://www.amazon.com/Thinking-Bets-Making-Smarter-Decisions/dp/0735216355

Powerful: https://www.amazon.com/Powerful/dp/1939714206/r

The West Wing on HBOMax: https://www.hbomax.com/series/urn:hbo:series:GX5nwgQDNJZ6aoQEAAAHJ

• Notion: https://www.notion.so/

• Descript: https://www.descript.com/

• Coda: https://coda.io/

• KTool: https://ktool.io/

• Tweet Hunter: https://tweethunter.io/

• Apple Watch Ultra: https://www.apple.com/apple-watch-ultra/

• Loom: https://www.loom.com/


In this episode, we cover:

(00:00) Patrick’s background

(05:12) Building a team

(07:38) How ProfitWell handled a conflict using their guiding principle, the most charitable interpretation

(10:41) Why new hires need to fit in with the company culture

(12:19) The bootstrapping vs. funding debate

(13:38) When founders should think about raising funds 

(18:08) When and how companies should make pricing changes to their products or services

(23:46) Strategic retention and tactical retention, and why the latter is often missed 

(28:48) Why people don’t want to pay for a SaaS analytics tool

(29:56) The importance of mission metrics for shipping

(34:42) First-principle thinking, the “5 whys,” and Patrick’s alternative approach

(40:21) The importance of frequent customer research

(43:15) Simple strategies for doing customer research

(46:13) Understanding your competitors

(51:06) Why veterans make great hires 

(54:08) Why local strategies are more effective for some companies

(59:21) Why the middle of the funnel is the biggest opportunity 

(1:04:54) Lightning round


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Patrick Campbell (00:00:00):

The bratty thing here is that real professional ship. At the end of the day, real... I don't care if you're a marketer or a product person, engineer, ops person, people ops, real professional ship, and they ship at a pretty high frequency for whatever they're doing. In my opinion, your tempo framework is more important than your org design. And so if you've ever had a team that seems really, really smart, but they're always planning or they don't really ship a lot, or you've had trouble where everyone kind of gets it at the leadership level, but then the team below them and below them seems to be kind of going in a different direction, you probably don't have enough alignment and you don't have enough alignment on what good looks like in terms of tempo.

Audio (00:00:45):

Welcome to Lenny's Podcast where I interview world-class product leaders and growth experts to learn from their hard-won experiences building and growing today's most successful products. Today my guest is Patrick Campbell. Patrick is the founder and CEO of ProfitWell, which he bootstrapped and sold without any funding for over $200 million. I've been a big fan of ProfitWell and of Patrick for many years. He's one of the most insightful and smartest people that I know, constantly sharing wisdom on Twitter and in his newsletter, primarily on pricing and retention and team building and all of the elements of building a successful SaaS business.


I've been excited to get Patrick on the podcast since I launched it, and I think this may be the most action-packed signal-to-noise episode yet. We cover 10 topics in an hour, including hot takes on team building, bootstrapping, shipping, competitive analysis, user research, and of course, pricing and retention. Do not miss this episode, it is one of my new favorites. With that, I bring you Patrick Campbell, after a short word from our wonderful sponsors.


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Lenny (00:03:31):

Patrick, welcome to the podcast.

Patrick Campbell (00:03:33):

Thanks for having me, man. Good to finally... we've been texting, chatting for years now and I just realized we've never had an actual conversation, so this is where the relationship and the friendship ends because we realize how awkward we are together, I guess.

Lenny (00:03:48):

I highly doubt it. I hope that doesn't happen. I've wanted to get you on this podcast ever since I started this podcast. It's always been on my list. You're just generally one of the smartest humans and most amazing humans I know, and so thank you for joining me on this podcast.

Patrick Campbell (00:04:02):

We've got to introduce you to more people, but I appreciate that. I appreciate that.

Lenny (00:04:07):

You're a humble, humble man. So usually what I do with these podcasts is I have this one main topic that I focus on, but I feel like you're such a renaissance man of a brain that I thought would be more fun to go through 10 different topics and power through them and see your perspective. I feel like you have all these contrarian takes on things and these interesting insights. And so what I want to do is just go through 10 topics and just get a sense of what's a big mistake founders companies make in this area, what's maybe a big opportunity they miss, or just like what's a hot take on this topic. How's that sound?

Patrick Campbell (00:04:43):

Yeah, 100%. Let's do it. I'm going to change my Twitter bio to that, renaissance of a brain. That's [inaudible 00:04:50] for me. Yeah, I appreciate that.

Lenny (00:04:52):

Yeah, just renaissance [inaudible 00:04:55] that quote. That'd be hilarious. People will be like, "What the hell's he..." Anyway, let's just jump right in. First topic is building your team as a founder or just a leader of any kind. So here's the question, just what are the biggest mistakes people make building their team? What are the biggest opportunities people miss when they're building their team? Or just generally what's like your take on how to best approach building your team as a founder or just a leader of people?

Patrick Campbell (00:05:23):

You always have to start answers with cliches, and I think the biggest cliche with building a team is, team is everything, right? If you're listening, you've heard that, you've probably said that to somebody or gotten mentored on that. And I was told that in the early days of building, and I actually thought it was terrible advice. I thought it was going to be the product or marketing or something that was going to hold us back. But I think that although team is everything, and I truly believe that, if you look at most data or most behaviors that most companies make, this isn't actually how we think or what we do.


Let me give you two fundamental issues. I think the first one is we confuse team by being everything to all people to accommodating to every single person, and especially in tech the last couple of years, maybe that's going to change a little bit now, but it was always like, "Oh, everyone needs to be happy." And I think that's a really, really big misconception because you're not there to make everyone happy. You're there for some sort of mission and some sort of goal and you want to set up the culture and the team in a way that gets to that particular goal.


And I think the little bit more actionable way to look at this is, I don't think we actually focus on our team. The average tenure of a manager in tech right now is about 15.7 months. I actually went and looked into this mainly because we got into hyperdrive about team a couple of years ago. The average time a report has the same manager in corporate tech is only about 10.8 months, so just under 11 months. And there's no way that team is everything, or at least we actually believe that when the purveyors of your team, your management only lasts that long, it's just impossible.


And I think for the most part, people ops is an afterthought. And even if you get into the history of HR, which we should not do because that's an entire podcast, it's all about reacting. It came out of the labor movement in the mid 1900s, and it was all about, "Hey, how do we CYA?" rather than, "How do we push our team forward?" And I think in tech we had the opportunity to do that, but we haven't really focused on our team as much. So I don't know if I answered your question, but that's the scope of that problem I think, is we don't actually focus on our team, we don't actually focus on our team in the context of the mission. We just hire people, hope they're really happy. And obviously I'm generalizing, but if you look at the stats and you look at what's happening, that's how it shakes out.

Lenny (00:07:38):

Is there something you've done in building your company that has been counter to that, something you've learned about? Because I totally agree, people always talk about team, team, team and then that's often really sucky to work at a lot of companies and clearly they don't care that much about your experience.

Patrick Campbell (00:07:52):

So super actionable things that we've done. I think, one, it comes back to the baseline feedback or advice you've probably received, or if you're listening to this before, which is you can't be everything to all people, so who are you for? Who are you for and who are you not for? I think really defining that in your values, and values aren't values unless there's an actual trade-off. And so we had things like optimize for the long-term. There's a clear trade-off when we optimize for the long-term, you probably give up short-term revenue.


You also have different types of people that do better at the particular company than not. One of the more controversial things we did is we talked a lot about behaviors and the one thing that we had is this concept known as the most charitable interpretation. It's not something we made up, but there's this idea that basically when there's conflict or when there's some sort of confrontation, the way that you handle that confrontation was really, really important to us. And the way that we wanted our teams or the people that we wanted to hire for basically would take the most charitable interpretation of that confrontation.


So Lenny, if you were like, "Hey, Patrick, I like your shirt," and I just didn't like when people commented on my shirt, instead of getting pissed off, going to HR, or getting mad at you, what we would do is we'd say, "Hey, the right way at ProfitWell wall to handle that was be like, 'He didn't know, so I'm not going to bring it up,' or 'Hey, Lenny. You probably didn't know, but I don't really like when people comment on my shirt.'"


It seems super trivial, but when you have over 20 people, all of a sudden these things start to come up. And I think most of the time we infantilize our teams where we let them run to HR, we have different policies or all of these different things, when at the end of the day you're paying an exorbitant amount of money for very smart human beings to basically do stuff and you want them basically working together and not having to go in this runaround with policies and people to push things forward.

Lenny (00:09:41):

I love that. It reminds me of something at Airbnb where our head of product was always encouraging us to assume good intent from the other person that just like, "What is the good version of what they're trying to achieve? It's unlikely they're trying to cause harm."

Patrick Campbell (00:09:54):

But the important part is, and this is where you really care about your team, is if you believe that, and it's okay to have a culture that doesn't believe that, it's not a culture for me, and that's okay, that's the entire point, but if you believe that, then people who have trouble assuming positive intent or who have trouble taking the most charitable interpretation, they can't be at your company, and they have to go and you have to find... And we would have people, and we didn't always defend this and when we started defending it, everything got better. But all of a sudden we would say, "Hey, it seems like this is really tough. This is how we think about things. This is how we handle this type of behavior here. If that's hard for you, let's find you another job." And thankfully we're not digging ditches here, we're all working in tech. And so it's "easy", quote-unquote, enough to find another gig even in economies like now.

Lenny (00:10:41):

That reminds me of there's this guy Douglas Atkin, who I worked with for a while who helped us craft the core values at Airbnb, and he made this point that your values need to be clear, exactly like you said, who doesn't fit, who doesn't belong. Because if it's everybody, it's worthless. Integrity, trust, everyone wants that and it fits into that, but it's only valuable if it's clear who's not a fit, exactly how you're saying it.

Patrick Campbell (00:11:07):

Well, we get this fear of that accommodation culture, again, where it starts even in the interview process, we're like, "Oh my god, we need these hires, we need these salespeople, we need these engineers." So we don't end up being upfront with these values and these trade-offs in the interview process. And then all of a sudden you spend a lot of time and a lot of money hiring someone who just doesn't fit. And I think that's really, really bad for them, it's really bad for you. And so that was the other thing is we would pull all of this forward into the interview process and talk about it and basically say like, "Hey, if this is not how you think, that's okay. We're not better than you, you're not better than us, it's just this is how we do things here."


And I think a lot of times we're scared to do that because we have that founder, that exact fear of, "Hey, we have to get this thing done and the only way to do that is to do X, Y or Z Z when in reality that's actually going to make your deadline go out further than actually focusing on alignment as much as humanly possible.

Lenny (00:12:00):

Next topic, bootstrapping. I feel like you're probably in the bootstrap hall of fame. You built a company-

Patrick Campbell (00:12:06):

Here we go. That's all I've ever wanted.

Lenny (00:12:09):

I think you're in there. So you tell me if I'm missing anything, but basically you bootstrapped a company, sold it for 200 million. I don't know if I've heard of anything like that. So what's your hot take? What are mistakes people make around bootstrapping?

Patrick Campbell (00:12:22):

The basic idea is bootstrapping is for lifestyle businesses that want to cash flow. Funding is for companies trying to create a billion dollars in annual revenue. And that answer offends everybody. That answer offends the indie friends I have, they're going to be like, "Oh, what about Basecamp [inaudible 00:12:43], ProfitWell?" And I'll tell you, ProfitWell, this was a big mistake. Yes, it was a great exit, we sold for over $200 million, et cetera, but we probably, if we had taken money, we could have had a billion-dollar exit or we could have kept going.


And we should have taken money earlier in our life cycle. This was actually a big mistake because we got hooked on the efficiency and that was great, but we could have moved even quicker than we were. And hindsight is 20/20, and I'm obviously not crying over this, but it's one of those things that I think that you have to know who you are and you have to know what your goals are for a company. And our biggest thing was we wanted to build a big company and we were going after that, but we weren't doing the things in order to actually make that happen, which is i.e. getting funded. So yeah, that's my hot take and hopefully I offend everyone. But it's also just the end of the Twitter argument where it's like, "Yeah, it depends," but that's the thing to think about.

Lenny (00:13:38):

It's interesting because usually you hear from the other end, someone that raised VC money is like, "I shouldn't have raised money, I should have bootstrapped this thing longer." It's cool to hear from the other side someone that did that like, "No, we maybe should have raised the VC money along the way."

Patrick Campbell (00:13:50):

Well, I think there's a lot of ideas that should not raise money. There's a lot of ideas that should just be great cash flowing and they can be large businesses. There's large businesses cash flowing tens of millions of dollars without funding. And I think it's just one of those things that you need your goals, your model, and ultimately your funding situation all to match. And I think a lot of folks, they go in the opposite direction where they're just like, "Oh, everything on TechCrunch, everything on Twitter is like, "Hey, I need to raise money, raise money, raise money." And they don't take a step back and go like, well that idea, it's just not a very good business to get money. And money is so plentiful even now still that it is, quote-unquote, "relatively easy" to raise money on, just not a great idea, and so that's obviously problematic.

Lenny (00:14:37):

I've been thinking about writing a post on that exact topic, something like, "Your startup probably is not venture scale," because a lot of people think they could raise money and build a huge business. What's a heuristic that maybe tells a founder that they shouldn't raise money, it's never going to be a billion-dollar company?

Patrick Campbell (00:14:53):

I used to look at it 10 years ago you'd say, "Is this a company that can get to 100 million in annual revenue?" And now those numbers are all changed because IPOs are happening closer to 200, 250 million and the markets are all over the place depending on the day. I look at this as if you are going to be that large company, you need to get to a billion in revenue per year. It doesn't have to be overnight, it can be over 20 years, it's not something that has to happen quickly, but that's how I think about it. And if I don't feel like there's a clear path to that, it doesn't mean I don't raise money. It just means that I take a step back and really think about that particular idea because when you get on that treadmill, there's plenty of ideas that will sell for 400 million, 500 million.


But then if you're on the funding treadmill and you look at how much money that founder that exec team ends up getting at the end of it's like you might have been better just building a 50 million cash flowing business that you're getting more money from that and you still have the choice to sell it.


So that's how I think about it. It's a spectrum and it's on the margins there. It's not a fixed rule. But the other thing I also think about when I think about building my next company, we're going to be bootstrapped for, I don't know what... It's not a timeline, but I had imagined probably the first 18 to 24 months because I don't want to give up that equity for that funding on figuring out the idea. Obviously, I had an exit so I'm able to afford that and I'm in a position where I don't have to worry about my own livelihood.


But I think it's one of those things if you can bootstrap, even if you're going after a funded idea, if you can bootstrap for the initial ideation and maybe even through product market fit, which is not an easy thing to do, but that's the ideal time then to raise because then you're just going and you're going for the fences at that point.

Lenny (00:16:37):

I really like that very concrete stat you shared and that's exactly how we think about it, that if you don't think you can get to a billion dollars in revenue a year eventually that it probably is not a venture-scale business. And I think that just boils down to how large is the market. If there's not enough people that are going to pay enough money to make this a billion dollar a year in revenue business, you probably shouldn't go down the VC treadmill.

Patrick Campbell (00:16:59):

And I think when you think about that, it opens up this world of options for you as someone listening to this. And so think of it this way, you don't have to have the pressure to create a billion dollars in revenue If you can take a step back and be like, "Okay, I can create a $10-million business." You're listening to this and probably you're like, "I don't know." But if you were a director level somewhere at a corporate company or you're leading product somewhere, you can go create a $10-million business. It might not happen overnight, it might take 10 years, all these other things. But that's amazing. That's insane.


Think of 20, 30, 40, 50 years ago, you'd have to have a corner store and you'd have to work 18 hours a day to build that type of ability or that wealth to then hopefully retire when you're 65 and sell the business for 1X. Now you can build a software company that's doing a million a year, have an amazing life, reduce the number of hours if you want, or go all in, make it into a 10 or $100-million company over time. And I think that's amazing and we should celebrate that rather than if it's not a billion, you're failing. But we should just know our limits. I think that's the thing a lot of people fail out with funding.

Lenny (00:18:09):

Next topic, pricing. You are probably the most... okay, you're in the top 1% smartest, most experienced people on pricing. We could have done a whole podcast on pricing, maybe we will in the future, but as maybe one of 10 topics, what comes to mind as maybe the biggest mistake people make in pricing, biggest opportunity they miss, biggest hot take?

Patrick Campbell (00:18:31):

It's super boring, but the biggest hot take is you just have to do something once a quarter. That's it. I've been trying to teach about pricing for a decade now. I've done a lot of different approaches on this, and I think the easiest thing is, listen, you have three growth levers. You have acquiring customers, monetizing them, and retaining them. You're spending a lot of time and money on acquisition. You're spending some time and money on retention. You're probably do nothing on pricing and monetization and it's because you think it's this nebulous thing and there are some nebulous aspects to it.


But to make it super concrete, it is the revenue per customer. Look at that number, that one KPI, and you want that number going up and to the right, it's obviously going to go to the right over time, but you want it to going up over time every single quarter, not as high as your sales volume or your lead volume or your revenue maybe. But you want that number gradually going up and just do one thing per quarter. The least sexy thing when it comes to pricing is have a pricing committee. If it's a two-person company, it's you and your co-founder. If it's a 100,000-person company, it might be 30 people, but really it's only eight people central to that particular product.


And then just realize there's a lot of things that influence that revenue per customer. There's the actual price, your packaging, your add-on strategy, your discount strategy, your price localization, freemium. There's a whole host of different things there, but just find one thing you're going to do every three months, put a calendar invite, let it renew every three months. You're going to snooze it a couple of times, I get it, I've seen this many, many times before. But just do something, even if it's super small. I guarantee you it's just like any other thing you measure, as soon as you start measuring and caring about it, you're going to start to do some stuff, some of it is going to go poorly, some of it is going to go great. Then you're going to do more stuff, and then just over time, all of a sudden that number's going to go up into the right. But just do something. That's the basic idea.

Lenny (00:20:24):

I love the simplicity of that. If I think about the pie chart of the things you will do and may change, you mentioned a few. One is raise prices. One may be lower prices. One's probably change your pricing model. There's a couple more. I guess, in your experience, where have you found the biggest opportunities end up being maybe early in the early phase of a startup in that pie chart?

Patrick Campbell (00:20:47):

The number one thing to figure out when you're thinking about the different pricing pieces, pound for pound, it's the pricing metric or the value metric. That's how you charge per user, per thousand visits, per thousand what's its, whatever it is. Consumer companies, it's a little bit harder. Physical good products, it's really hard obviously because you have that physical good, the physics you can't get over. But the reason this is so powerful is because if you get everything else in your pricing wrong or not great, but you get that right, you tend to be okay when it comes to monetization.


And the reason is because, first, from an acquisition standpoint like acquiring customers, you end up making sure that you get Disney coming into your product, they're paying Disney prices, and then you get Johnny or Jane's startup coming in and they're paying Johnny and Jane prices. You don't want them paying the same thing because obviously the value's different, even if they're consuming almost the same amount. So this allows you to figure that line out.


And then what's really beautiful about it is churn tends to be about 20 to 25% lower because people will downgrade, but they're using... you don't get this like, "I'm paying for so much and end up not using a lot of it." It's like, "Oh, I'm using eight seats this month, I'm going to downgrade," or it's just automatic. And then your expansion revenue's typically double when you're using a particular value metric because instead of me having to resell you and being like, "Hey, Lenny, there's this really cool feature in this upper tier, do you want this?" And you're like, "I already use the product, I don't really want this." Instead, I just go, "Hey, Lenny, congratulations. You now have 100 videos in your account. That's awesome. You guys must be growing. I'm just going to bump you up to the 100-video plan. Let me know if you have any questions." It's just a very, very implicit way to get expansion revenue. So that's the thing pound for pound that's the best.


And then I would say if you have a lot of politics internally, which everyone does with pricing because it sits in the center of so many different teams, I would actually start with a price increase. You should be increasing your overall price once per year if you're building. If you're not building and your support sucks and your NPS is low, then don't worry about it. But if your NPS is over 20, which is not a very high NPS, you should raise your prices once per year. The reason I suggest that is because it gets all of the BS and all the politics on the mat. You're going to have to collect some data, you're going to have to prove it to sales, you're going to have to make sure you have the enablement, you're going to have to make sure your messaging is...


But it's a tight enough non-nebulous thing that you're doing versus a value metric where you can have a bunch of debates about this metric or that metric, and should you give 10 away versus 100 away. It's a good way to rip the bandaid off. And most companies don't change their actual number that they're charging once per every three years. So if you haven't done it for three years, you're overdue for it. So it's a good one to kind of rip the bandaid off.

Lenny (00:23:30):

So this episode already pound for pound I think is up there. This is amazing. I'm excited to get to the next topic, but first I'll plug. You wrote a guest post in my newsletter about pricing and we'll link to that in the show notes, and that goes deeper into this value metric and how to think about pricing. So check that out.


Next topic, retention. So when I think Patrick Campbell, I think pricing and retention. So again, this could be its own podcast episode, but let's just pick one thing to talk about. What are the biggest mistakes people make, retention opportunities, or just hot take?

Patrick Campbell (00:24:00):

The reason I started writing about retention and publishing data on it is because I didn't want to be the pricing guy. I was trying to basically differentiate myself and then I was trying to be the SaaS guy, but that's too broad. But anyway, so retention, the hottest of hottest takes, and this is the one to offend 90% of the list... no, it's not going to offend, but this is a product podcast, that's how I think about it. Product homies. You fail at realizing most of the time that there are two types of retention. There is strategic retention and then there's tactical retention.


Strategic retention is all the stuff that you as a great product leader, a great product team are doing. Your ICPs, your time to value, road mapping, the right features, figuring out your mission metric, agonizing over every little thing, all the paper cuts of being a great product leader. But because you're so focused and so biased towards that, you miss out typically on this thing we call tactical retention, and these are things like payment failures, term optimization, cancellation flows, offboarding, et cetera. And if you're past product market fit this area, this tactical retention, it's typically about 25 to 40% of your churn problem, which is a significant amount, but you don't really look at it because again, you're like, "I've got to go focus on features, I've got to do this, and I'm going to go be this great product leader."


And so because product is so entrenched in that thinking that that problem can be solved with two months of work, it's not that much work putting in, basically, a marketing funnel when people's credit cards fail. Not that hard, not rocket science. Doing offboarding, being really smart with offboarding. And one little tidbit. I looked at two million cancellation flows. We built some products for this, that's why I have this data, just to be clear. But looked at two million cancellation flows and we found you have about 18 to 30 seconds when someone hits that cancel button, we found you should ask two questions. One, "Why are you leaving?" Multiple choice. Don't do the free response. You get one out of 100 great responses, and the 99 are not great.

[NEW_PARAGRAPH]And then the other question we found works really, really well is, "What did you like about the product?" And the reason that works so effectively is because that person's on a freight train to basically cancel. They're like, "I'm already done. Oh yeah, this is why I'm leaving." The minute you ask them what they like, you're basically tapping into this nostalgia effect and you're stopping that freight train. And then when I have that information, it's great for a product team, it's great to figure out, "What's working, what's not? What should we do more of? Was this a good customer?"


But then based on their engagement data, their plan, whatever, all their firmographics about them plus their answers, then I can offer up a salvage offer or a pause plan or a maintenance plan or these types of things. But all this type of stuff, this is really, really powerful. And I always suggest finance teams should just take this on because product teams are always going to be thinking so much more on the future rather than fixing this right now. But that's the hottest take I've got for retention.

Lenny (00:27:00):

That's a great, awesome take. And I want to plug ProfitWell right here, actually. I know you guys offer a product that does this and I've used it. So I don't know if that's still true, I know after an acquisition, things change. So I use ProfitWell for my newsletters. I just plug it into my Stripe account and it's the most amazing free product because it just tells me everything I want to know. And then it's got this cool feature, you just turn it on and it does these things for you like it tells people, "Your credit card is about to expire." Hey, this card failed, you should try putting in a new card." So that's a cool reason to check out ProfitWell.

Patrick Campbell (00:27:29):

Thanks, man. I appreciate that. And it's actually cool because I think for us, because the fact that product teams don't really think about this stuff, we stumbled into this whole thesis that could be a whole episode, which is all the product features are done for you. So what I mean by that is, you noticed this, but when you log in and set this up, you're not writing emails, you're not setting up the flows. And the reason is because we have all this data from $30 billion in ARR flowing through our metrics product that we can study and understand what works and what doesn't.


And that kind of stumbling that is useful for folks is what we discovered is this anti-active usage type product, it retains itself at a really, really high rate because people are just getting the value and they don't have to use it. And so what we found is a little bonus thing on retention. When we look at churn rates across different types of products, those products that are workflow products you use every single day or mostly every single day, or those products you don't have to log into but you still get the value, that's where the lowest churn rates are, the highest retention. Anything in the middle, it's like death. And this is why ProfitWell metrics ended up being free because we were just like, "It's terrible to build a metrics and analytics product. It's so hard because people just don't appreciate how much work goes into it, therefore they don't retain at a high rate, they're not willing to pay that much," et cetera.

Lenny (00:28:49):

I think that alone is a really interesting story, and I don't know if we should get too deep, but just to highlight what you just said, so many startups build an analytics product that it's just a better way to measure and track all the stuff that's going on. And what you've found is you won't make money doing that, people don't want to pay for a SaaS analytics tool.

Patrick Campbell (00:29:08):

You have two options. You go up market and you pretty much become a data product with a UI or you go super niche. And even super niche, it's super hard and it's just because, I don't know, everyone's trying to kill a spreadsheet, and it's like, "You're not going to kill a spreadsheet." All real analysts will do everything in a spreadsheet. So for us it was we want to give you a clean UI and then we want to help you get this data into spreadsheets or email or whatever you're using for your databases, things like that.

Lenny (00:29:38):

Yeah. I don't want to make this an ad for ProfitWell, but it's like founders come to me with pitches of, "Hey, we've built this sweet analytics." So I'm like, "Just look up what ProfitWell is giving away for free, that's going to be a high bar to exceed."

Patrick Campbell (00:29:49):

Yeah. Yeah. We were going to try to sell it. We were trying to sell it in the beginning, but what ended up happening is we ran into all this, that's why we didn't.

Lenny (00:29:56):

All right, back on track. Topic number five, shipping. What have you learned about shipping? What are mistakes people make when trying to ship faster, ship more efficiently?

Patrick Campbell (00:30:05):

Yeah. The bratty thing here is that real professional ship. At the end of the day, real... I don't care what if you're a marketer or product person, engineer, ops person, people ops, real professional ship, and they ship it a pretty high frequency for whatever they're doing. And so the thing that we thought a lot about is, in my opinion, your tempo framework, and I'll explain a little bit more of what that means in a second, is more important than your org design. And so if you've ever had a team that seems really, really smart, but they're always planning or they don't really ship a lot, or you've had trouble where everyone gets it at the leadership level, but then the team below them and below them seems to be kind of going in a different direction, you probably don't have enough alignment and you don't have enough alignment on what good looks like in terms of tempo.


And so the way we looked at this was we have to establish mission metric and guiding principles at the top so, what do we do? How are we measuring it? And how we're going to get there? So for us was we automate subscription growth. Our mission metric was the amount of revenue that was on ProfitWell because that was good from acquisition, but it also meant we were doing our jobs. Then how we're going to get there. We want to be the most helpful brand in SaaS. And then we also we're going to do it for you, this whole thing that I just talked about.


Then what we did is we established that at the leadership level, every org leader, so marketing, sales, et cetera, they need a framework that fits into that overall. So marketing at ProfitWell was this whole inbound media, so lots of podcast, video series, et cetera. And the most important part of that was they needed to determine what good looked like in terms of shipping. So if we're like, "Hey, we're doing sales," blah, blah, blah, blah, blah, or marketing in this case, "this many episodes per month, it's this many product launches per month, this many big product launches per quarter," whatever it is.


And then your leadership is basically a conversation of, "Great, that's what good looks like, we agree. How do we close that gap?" And then all of those conversations are like, "Okay, you only shipped one thing per quarter, we want to do one per month. Why?"

[NEW_PARAGRAPH]"Well, I don't have enough resources."


We solve that problem or we figure out how to get the more resources, then they're not doing it again. "Okay, why?"

[NEW_PARAGRAPH]"Well, there's this problem."


And then all of a sudden you start to create this very high output team across the board, and you also have this alignment so you don't wake up nine months into someone being at your company and being like, "Well, I think Tim sucks."


And it's like, "Well, why did you just all of a sudden wake up and think Tim sucks."

[NEW_PARAGRAPH]"Well, he's not shipping blah, blah, blah, blah."

[NEW_PARAGRAPH]"Well, it's probably an org problem rather than a Tim problem," because again, you vetted Tim. Tim was at this other company and apparently was a really great rockstar. So what's the difference here? You screwed up the hiring? Well, maybe because that is really, really hard, but most of the time you just haven't set an expectation of what good looks like in terms of tempo, and then you haven't had that constant conversation to make sure that Tim has what he needs in order to ship.

Lenny (00:33:00):

What was a big learning, I guess, in doing that? Is that just something you built up over time of we need to create this tempo at ProfitWell?

Patrick Campbell (00:33:05):

Yeah. Complete misalignment if you don't call it out on what good looks like, just complete misalignment. Like so-and-so is going and building, they think one product launch per quarter. Or I'm sitting there and I'm like, "Well, we should have a medium one per month and then we should have a big one per quarter." Complete misalignment. And if you don't have a way to talk about that, some sort of nexus to have that conversation, you end up not having it, and then you end up creating this friction and resentment on both sides because everyone thinks, again, "Tim isn't doing well." And it's like, "That's not what's happening. It's just the expectations aren't set."


And then what was really cool is that you start to find out that the why they aren't hitting what good looks like is all solvable, and most of the time it's this team isn't talking to this team. "Oh, great. Well, marketing wants to do these launches, product isn't providing them stuff. All right, let's get these two people together, have this conversation because we didn't have product marketing or official product marketing." They have this conversation and then all of a sudden it's like, "All right, Neil, you need to provide one thing a month. There's so much stuff we've built, a lot of it we haven't announced, you just need to provide one thing a month. Marketing will worry about how to position it in a way that isn't too far, isn't overselling it, but also gets us something per month, and you can approve that positioning." And then all of a sudden you start getting this tempo going, which obviously is the goal.

Lenny (00:34:27):

Reminds me, David Sacks has this awesome post called The Cadence around how marketing and product and sales should operate and create this kind of cadence. So being aligned but also offset schedule, which will link to them in the show notes if you haven't seen it.

Patrick Campbell (00:34:41):

Yeah, that's great.

Lenny (00:34:42):

Next topic. First principles thinking. As a renaissance man of a brain, I feel like you've spent a lot of time thinking about from first principles and in our conversations you always have really interesting approaches to things. What have you learned about actually implementing first principle thinking, which people are always talking about. How do I [inaudible 00:35:00] first principle?

Patrick Campbell (00:35:01):

Yeah, people always talk about it. And there are no good courses that I have found on first principles thinking. There are good blog posts, but the good blog posts kind of explain what it is, and then that's it. It's like, "This is what it is, and here's an example." And most of them quote Elon Musk about rockets and breaking down the different parts. So what I kind of found is there's the five whys, which I think someone's talked before or at least I've read it in the newsletter before, which is just you keep asking why. Kind of, "Well, this is this way."

[NEW_PARAGRAPH]"Well, why is that?"

[NEW_PARAGRAPH]"Well, this is this way."

[NEW_PARAGRAPH]"Why is that?"


I found the model that people who aren't great at first principal thinking or aren't great at talking about it that kind of helps them unlock is this thing called problem, cause, solution. So I learned this in debate in college and high school, and it basically is you have a problem that you're trying to solve. Well, you can't actually solve a problem. So if we talk about world hunger, you can't just solve world hunger because it's kind of the symptom, it's this problem that exists.


Well then I want to break down what are all the causes of world hunger? And it's a little more brainstormy when you have these conversations with folks, especially again when they struggle with this. And all of a sudden I could list out all the causes, irrigation crisis, aid not getting to where it needs to be, famines, drought, et cetera. And then what I can do is I can rank those causes in terms of magnitude. So if we're trying to solve world hunger, and for some reason we discovered irrigation was the biggest problem, if we solved irrigation, everything would be great, well then I'm going to align my solutions to all of those different causes. And you get this nice alignment between, well, I can solve a cause, and if I solve the cause that's big enough and proper enough, I'm going to eventually solve the actual problem or mitigate the problem, I should say.


So that's the framework that I found really, really useful. And also, it's great for using for presentations, it's great for a mission, it's great for all of these different things because it's a little bit more actionable than just the five whys, which is more of a way to have a conversation.

Lenny (00:37:06):

So the way you operationalize this, say problem, cause, solution. You're saying on strategy templates, you write out, "Here's the problem we're trying to solve, here's the source of the issue, and then here's how we're approaching it." Can you talk a bit more about how you implement this at your company and the people you work with?

Patrick Campbell (00:37:22):

Yeah, totally. So I'll say big, medium and small things, and I'll try to be really quick. So big things it's like, "What are we facing?"

[NEW_PARAGRAPH]"Oh, we're going to try to charge for this metrics product. Now there's a bunch of competitors. The customers don't really care about it."


So we have this problem and the problem is growth. How do we grow a product like this? How do we grow our company? And what's really interesting about a big problem or a nebulous problem like that is you end up having a lot of conversations about the problem, which I think is more useful sometimes about, "Well, what are we actually trying to do? Let's get alignment as much as possible." And then it's like, "Okay. Well, what are the causes of our growth problem?"

[NEW_PARAGRAPH]"Well, people aren't willing to pay for metrics. Getting accuracy is really, really hard. Actually, the market stance," all these other things.

[NEW_PARAGRAPH]"Well, what are some of the solutions?"

[NEW_PARAGRAPH]"Well, we could do this, could do this, could do this."


And normally what ends up happening is the solution ends up being kind of an approach. So our approach that mitigated or solved for some of these causes and mitigate the problem was freemium, and then these paid products that were all pay-for-performance because with pay-for-performance, you could charge a significant amount more in a market that only has 100,000 logos, which is a really small market. And so that kind of an example there.


Medium and small, let's talk about a support ticket. This person's pissed off. They're coming in, they're pissed off. What are the causes? Well, there's a lot of different causes that were probably like, "Oh, we didn't get back to them in time, and then we gave a crappy solution, we gave this..." It just kind of allows us to look at the problem. And so it's more of a way of thinking on that level. And it's not happening. We're not going to have an hour-long conversation about a support ticket. But the support folks that I've talked to about this, they go, "Okay, cool. Why is he upset?"

[NEW_PARAGRAPH]"Well, we didn't get the answer in time."


Okay, my first line is going to be, "I understand we didn't get you an answer quick enough. Apologies for that." It just allows them to have a little bit of an extra second to think through things and move forward with that.

Lenny (00:39:21):

I love that. I love that big example and a small example.

Audio (00:39:26):

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Lenny (00:40:19):

All right. Next topic, customer research. I feel like you have a pretty interesting perspective on custom research, so let's go into it.

Patrick Campbell (00:40:27):

I think I have the 85-year-old curmudgeonly man perspective on customer research. So here's the thing. Everything in your business, it does not matter what type of business you have, everything is used to drive someone to a point of conversion or justify the product or the price that you're offering up. That customer is a human being you're driving to that point of conversion and it's your job to understand how they perceive you, how they perceive their problem, how they perceive the world around them, around your products.


We all know this on a philosophical level, but here are some fun facts. So one, only one in five companies have buyer personas or ICPs, only one in five. So we talk about this all the time, we retweet the articles, we give the advice, so many of us give the advice. But then we look at our own companies, only one in five have some sort of segmentation ICPs. And then only one out of 10 companies actually do customer research or development on a quarterly basis. This should be a continuous thing, it should be a monthly, weekly type thing. Not saying you're sending up surveys or having all these conversations on a weekly basis, but only one out of 10 are doing quarterly. So that means the number they're doing monthly is even smaller than that. And I just think that's insane.


And when we look at all data, and we have a lot of data on this, and this is something where I've been talking about customer development for a long time. Everything is better. Everything is better. NPS is higher for organizations that have customer development functions or even just ICPs or buyer personas, depending on what framework you're using. Willingness to pay is typically higher. The funnel is more efficient. LTV to CAC is normally much, much higher. All those growth numbers, you're typically growing in a much higher rate, like a 15, 20%, not a small delta, 15-20% higher rate. Retention's better. All these things are better.


And the thing that, I think, 20 years ago or 10 years ago you didn't have to do customer development because, and this is where Keith [inaudible 00:42:30] is just like customer research is dumb or whatever his famous quote is, but you didn't have to do it because there just wasn't a lot of stuff out there and we all were riding the wave of the internet. But now the market's harder and harder. So what are you going to do? Are you just going to keep throwing stuff up against the wall or are you going to actually do the stuff that all of us talk about doing and actually do the research? And the research is hard. It's never going to be 100% accurate because you're going to have to use your judgment, but that's your job.


And so that's more of a rant, I guess, than a hot take. But I also think this is one of those things that AI starts solving, especially all this generative AI because now you can just throw all that stuff into a workload and then all of a sudden you'll get back a lot of the sentiment or all that kind stuff so you don't even to do the hard part anymore. Yeah, that's my rant.

Lenny (00:43:14):

Love the rant. Maybe one follow-up question. Why do you think it is that companies don't do this? I love the point you made of the retweeting, "Yeah, research is great." Writing blogs that research is use useful, "We've got to do research." Why do you think companies don't do it? And then what's one thing that maybe they could do tomorrow that'll bring them closer down that path?

Patrick Campbell (00:43:35):

The one thing you can do, put a number on a whiteboard. You're going to have 10 customer conversations a month, just 10 non-sales conversations. You're just going to talk to 10 people. Or you're going to send one survey. And people are terrible at sending surveys. Surveys are actually great. You just have to be good at sending them. And good, it's not a high bar, it just means that you have 30 to 45 seconds of someone's time unless you're compensating them. And don't send 45-question surveys by email where the first question is, "What's your email?" Don't do that. But just put a number on the board.


I think the reason we don't do it is because it was, quote-unquote, "easy" to get away with not doing it. If you really think about a funded environment... and some products are so paradigm-shifting that the biggest misconception about customer research is I have to listen to them. You don't have to listen to them at all, you just have to understand where they are, and then you're filtering all of that with all this other data and then you're making a decision and you're earning your paycheck as a product person. Typically, it's the product person, but also in marketing.


So I think it's just one of those things where you could get away with not doing it. Now though, the way the market's going, you're just starting to see this more and more, you're starting to see more tooling. The reason you're seeing more tooling is because they're starting to connect it to actually being useful rather than you having to set up your own customer development program. I think the other reason typically people haven't had to do this is because there's a lot of brute forcing that's done in startup land and it only lasts so long.


So all of these companies that raise a bunch of money, get the $100 million dollar exit, everyone's clapping because it's a big number, but cap table screwed, everything's bad. It's a win because it's a win, but all of those companies are ones who were able to brute force to a certain level and they never learned how to actually understand their market or their customer. And I think that that kind of story will continue to happen as long as we have a lot of capital flowing in the market. But I would rather not be that company. I would rather be the company that gets the $100 million, 200 million exit with bootstrapping, or builds the billion-dollar annual revenue company because I know my market, I know my customer so well.

Lenny (00:45:47):

Talking to customers is good, you should do it. Great reminder. People are going to listen to this like, "Yes, we should do this," and then we'll just move on. And then-

Patrick Campbell (00:45:55):

My joke when I give talks is, "Only 20% of you are going to do this when I give a talk on it, and so I'm not even going to talk deeply on it. You 20%, come talk to me, I've got a whole framework for you," that type of a thing because I think people just nod their heads and they tweet it, and they just don't end up doing it.

Lenny (00:46:10):

Status quo is hard to overcome sometimes. We're onto our eighth topic, we've got three to go, and it's on competitive intelligence. And this touches on a really interesting part of your background that I don't know a lot of people know.

Patrick Campbell (00:46:24):

Yeah. So my background, I started my career... I worked in US Intelligence, I worked for NSA. And I was just a entry level intel analyst, basically, I was only there for just over a year. And what was interesting is you get taught first principles thinking in so many different ways because you're solving essentially puzzles every day. Now those puzzles are finding a bad guy or a gal or finding this piece of information. Those are all the puzzles, but you have to think through how to figure this out. And a lot of those puzzles involve, "You have these number of entities, how are they going to react?" And you're trying to predict how they're going to react, and you're also trying to help figure out how you're going to react or act in the context of them, so like node analysis, basically.


And what's interesting from a startup or a business perspective is I think that don't focus on your competitors is terrible advice. It's amazing advice for product teams. When you have a competitive intelligence program or you have competitive intel, I try never to share that with product ever because products should just focus on the customer, they should not give two craps what's going on with competitor A or competitor B. But as an overall missive, don't focus on your competitors is terrible advice. And if I'm being charitable, it's just outdated because some fun facts, and I alluded to some of them before, over the past decade, if you're building in tech, particularly in SaaS or subscriptions, you now have 16 times the number of competitors if you started a business today, than if you did 10 years ago, and this is because everyone and their mother can spin up a website, a server, they can drive traffic to that site.


So there's just a bunch of stuff in the market. And then because of all that stuff, all these marketing channels are getting denser and denser. CAC and B2B is up about 110% over the past 10 years. Consumer, it's up 145%. If you're selling sales and marketing software, it's up 220% because there's just so much sales and marketing software doing sales and marketing things in the market. And so the other reason for this is we haven't had a brand new marketing channel since 2015, and that was Snapchat. We have TikTok, but TBD, depending on how you think about it. But we're going from brand new marketing and advertising innovation every quarter to basically every five years.


My point is, if you are not in a Blue Ocean, you're not in the Peter Teal, go to a market of one, you're not in those types of things, which is most of us, and even some of us who think we're in those things, we're actually not, you do have to focus on your competitors on some level. And the levels I particularly think are a bare minimum, just knowing who they are, having a strategy. So for ProfitWell we never had comparison pages because we very quickly went from a challenger in this very competitive market to the leader in the market. So all of a sudden we were going to be above the fray, that was the idea, that was the strategy that we had, which is, "We're going to have a lot of intel on what's going on with them, why people care about this product." We had white label NPS surveys and customer development surveys going to our competitors' customers. That's the level. And it was just automated. It wasn't like it was taking a lot of time, but we just wanted that intel.

Lenny (00:49:34):

When you say white labeled, that means you're emailing your competitor's customers to see what they think of your competitors, right?

Patrick Campbell (00:49:41):

Exactly. So we're basically, and we did it as a third party basically, which was, I think one of them was analyticssoftware.com, stuff like that. So it wasn't like we were spoofing as our competitor because I think that crosses a little bit of a line. But basically we would have this intel. There's a whole program here. Basically, I'd have sources... Basically, these customers I knew were always going to stay because they liked the founder or something like that. I would get on the phone with them every quarter or two just to be like, "Hey, what are you liking? Why haven't you switched yet?" these types of things, or I'd see them at conferences.


So there's a whole program there. And again, it's not like it's distracting anything, it's just I want the intel so I can predict what's going on, I can predict who to care about, who not to care about. But even then, if you're a challenger, competitor marketing pages are really powerful. And the thing is, your customers, especially in a denser market, they know your competitors exist or they're looking at them. Don't infantilize your customers, help them, "Hey, this is how we compare to X, Y, Z competitor," and be honest as much as possible. Well, we should always be honest, but be as upfront as possible, I should say, with where you're bad at and where you're great at, those types of things.


But long story short, having something awareness and then choosing a particular strategy, and then depending on your strategy, you might ramp up how much you actually do with the actual intelligence program.

Lenny (00:51:06):

This is amazing. Two questions. Should every startup have a former spy on their team to help them operationalize these ideas? And then two, is there anything else that you found super valuable that you did based on your training there?

Patrick Campbell (00:51:20):

We didn't have a formal program, but I love hiring veterans, either veterans of intelligence, so they're citizens, so they're not veterans from a military perspective, but people who had worked in Intel or people who were actual veterans of different military branches. There's a lot of reasons for this, but I think that the intelligence folks, it's a way of thinking. Now you ought to be careful, and this is just purely my opinion, because depending on how long they were in... the reason I left is because it's the government, it's super bureaucratic. It was one of the most fulfilling jobs I will ever have, and I was only there for a short amount of time. But it's just one of those things where it's just so bureaucratic.


So the 15-year person there is not thriving, they're not trying to change the world necessarily. They have a job. So you've got to be careful with that. But yeah, I think there's these really smart people that just think in a different way. And a broader point is I think it's just really, really good to go to different industries. All this customer development stuff, you go to any major retailer or any major e-commerce company, they have entire teams just dedicated to this stuff. Hallmark was one of our first pricing customers back in the day before we went subscription focused. They had 119 people in customer insights and research. And this was one of the reason we were like, "Well, you guys don't need our help, you've got enough people." But those are great people to hire, even though they don't necessarily have the actual industry knowledge, they have a lot of domain expertise.


In terms of things I learned, I'll put it this way, not to get political, if I was in charge of budget, I would give so much more money into the intel community. I saw conflicts or heard about conflicts being stopped just because of intelligence that didn't go hot in terms of war fighting. I think it's one of those things where I would put so much more money there than the actual other side of the defense budget.


And also everyone asks me about Snowden. So again, not to get political, it's a lot more complicated, I think, than a lot of people think. It's one of those things that the issues that were brought up, obviously they got really sensationalized, but they're really important conversations to have, but it's not as simple as, "Oh, stop doing this, start doing that."


You don't have to worry about the NSA, the NSA's all outward-looking. You should worry about the FBI. The FBI are the ones who get a little testy with certain things, and you're seeing that in the court cases and stuff like that. But just know there's a lot of really hardworking, very well-intentioned people who you might disagree in terms of trade-offs, in terms of safety and things like that. They're also some of the most privacy orientated people on the planet, so that's worth a whole conversation. So hopefully I didn't throw too many grenades in this part.

Lenny (00:54:02):

No, we need more grenades. That's the first time Snowden was brought up on this podcast, so that's cool. There you go. And this is actually a good segue to the next topic, which is around local strategies like FBI versus NSA. I think you have a strong perspective that local strategies are much more likely to [inaudible 00:54:19] so we'll just get into that one.

Patrick Campbell (00:54:21):

Yeah, yeah. Just to give you a tease, I'll tell you what I think of Snowden after the podcast. So the world doesn't get to know except that I'll tell you what my opinion is afterwards.

Lenny (00:54:30):

What a tease.

Patrick Campbell (00:54:31):

Local strategies. Local strategies, very basic. People like to buy from people, but we as operators get so excited about the scale of the internet that we forget the basics of humanity. Here's some fun data points, we did a bunch of studies on this. So prospects who meet you in person, and this is not just for profit, all the data I've shared, it's all global-level data or segmented depending on how we did it. It's not just our findings, it's like we looked at probably a minimum of 2,000 companies per factoid and most of the time much more. But prospects who meet you in person have 10 to 30% higher willingness to pay than those who didn't. Churn for those folks who you meet in person is typically 20% lower than those folks who have never met you. Expansion revenue is typically 15 to 20% higher.


And this is not only in hand-to-hand kind of sales, coffee meetings, lunches, lunch and learns this type of thing, but it's also in scaled products, so products that cost 20, 50 bucks per month. And so my suggestion is to you, especially in a post-COVID, I don't know if that's the right term, but in a world that hopefully does not see another pandemic in our lifetimes, knock on wood, do meetups, do lunches, go to conferences, unless you're Lenny who is not a big fan of conferences. But get out of the office. Make sure you get out of the office. And the budget doesn't have to be as big as you think. Breakfast and lunches are super cheap. We would push all of our P2 and P3s to a meetup, and all of our P1s, we would have one-on-one coffee dates. It's super cheap.

Lenny (00:56:08):

What do the Ps mean? Is that priority?

Patrick Campbell (00:56:10):

Priority 1, we want these people to convert, they're very good fits, all this other stuff. P2s are like, they're probably good fits, but they're just not as big. And then P3s are with a content play, they just love our content and stuff, but they're not necessarily good fits for us. And so people make the mistake, they push everyone to dinners and it's like, I don't want to spend all of my money on P2s and P3s.

[NEW_PARAGRAPH]And so breakfast and lunches are cheaper than dinners. Meetups can be extremely inexpensive, get creative. We like to do barbecue type stuff for, not dive bars, but the unique dive bar, I guess is the best way to put it. So it's not fancy. People just want to meet people, they want to talk to you, especially if you're doing content and things like that. The Lenny Newsletter, Lenny Empire Meetups, I see the pictures of those all the time. There's just an urge to learn from one another and hang out. So yeah, that's the biggest thing, get out of the office or get out of your desk at home.

Lenny (00:57:07):

Yeah, that's right. You're on Zoom. And you're saying it's not just the founders, it could be anyone on the team, salespeople, that all works.

Patrick Campbell (00:57:14):

Anyone. I led marketing as part of my role as CEO, and so I do a lot of this and I'm also the one doing a lot of the content and stuff like that, or the face of a lot of our content, so I did a lot of it. But your head of sales... and you just have to position this a little differently. If they're going to meet with a salesperson, it's the same thing as if they get a email from a BDR, they're like, "I'm not going to figure it out. I don't want to deal with this." But if it's like, "Hey, we're hosting..." We're doing these lunch and learns right now. I was in Paris, New York, and London last week, it's probably why I'm so sick this week, and all of a sudden we did these lunch and learns. People just want to hang out.


So we had 10 people, we had 20 people at one, 10 people, all priority 1 leads. And then we did these meetups with 100-plus people at each. Just think of that brand equity. And you just hang out. It wasn't just me at all of these things. I ran the content, but then all of our sales folks were hanging out and doing their thing. But it doesn't have to be super complicated. It's just those touchpoints that people want. And it's so high leverage because there are a lot of people who will not answer your email but will come to an event to meet you or meet someone from your team because it's something to do, especially if you're buying them breakfast or coffee or something like that. It doesn't have to be something that's extravagant.

Lenny (00:58:25):

I love this advice. Basically, it's like if your sales aren't where you want it to be, find a way to meet your potential leads or someone in your team meeting your leads. That's a very actionable thing you could do like, "We're not hitting our numbers, let's just go meet some people, find opportunities to hang out in real life."

Patrick Campbell (00:58:41):

Well, in the early days, pre-product market fit, this is all we would do too. I would stay at the worst hotels, I would stay at hostels, but just to get to, "Okay, I want to sell to these people." The best information I'm going to get isn't in a Zoom or I'm asking them questions, it's going to be like, "Hey." I gave a talk on pricing because that was a high leverage thing I could do because no one knows anything about pricing, but they know it's important, so a lot of people want to listen. But then afterwards it's like, "Oh yeah, how do you think about this? What are you doing for this? What are you doing for..." all of those fun producty questions. It's just really, really high leverage. And I think it's one of those things that... It depends on your role, it depends on your stage, but everyone can use something there.

Lenny (00:59:21):

Great segue to our final topic. A lot of people spend time on top of funnel driving visitors, driving traffic, getting the word out. A lot of people spend time at the end of the funnel, closing customers, increasing within an organization. You have this perspective that the middle of the funnel is maybe the biggest opportunity these days. Can you talk about that?

Patrick Campbell (00:59:40):

Pound for pound biggest opportunity. So take a quick step back. Demand generation exists for more than just supporting the sales team. We forget that. So sales and marketing, the past decade, it's all been the funnel, we're top of the funnel, middle of funnel, bottom of the funnel. HubSpot's trying to make it a flywheel, but marketers are still talking about funnels. And when you look at the data, it depends a little bit on the price point and a little bit on the vertical, but 80% of sales and marketing budgets tend to go to the top of the funnel and the bottom of the funnel. So sales folks and ad-type spend, field events, whatever it is, that's where it goes.


And the whole point is you're trying to move someone from a lack of awareness at the top of the funnel to being aware about you and then to a sales combo or a conversion point, if you're not doing sales. The problem is bottom of the funnel efficiency and top of the funnel efficiency has plummeted the past decade, just plummeted. And it's not only because of the factoids I was saying before about CAC and all these other things and so many competitors being in the market, it's just one of those things that the days of just hiring a bunch of BDRs, not training them, not having them in account-based marketing, not doing all these other things, those days are not here anymore. Those days are gone. Maybe in some specific verticals, in specific parts of the market.


But here's the other problem. Sales today is so much more about timing than it once was. Because there's so much stuff out there, it's one of those things where people are waiting until it's the right time. They're aware of you, but they're waiting. So the question we have to ask ourselves to not bury the lead any further is do we need to make this river of demand generation, basically what demand generation works? But that's table space.


If we want to be even increasingly more successful, that middle of the funnel needs to get bigger. That pool of users who is aware of you, interacting with you on a regular basis. What if you had leads basically hanging out there in the middle of the funnel, interacting with you on a regular basis before all of a sudden their timing was right and then all of a sudden they go to the bottom of the funnel, and even better they opt into them. You don't have to keep going after them and doing sales processes that are very kind of churn and burn. So that pool of leads.


And so the best way to create pools of leads, freemium. I'm a huge fan of freemium. I used to write articles about how freemium is terrible, so I'm a big convert. I wrote a book on freemium as well. The thing with freemium is CAC is still up over the past decade, but it's up a lot less than overall CAC. Customers who convert from freemium and become paid customers, their retention is typically about 10 to 20% higher than those who converted from a free trial or converted from a traditional sales process. And then on top of that, NPS or CSAT, we measured it through NPS, is typically about double because they're converting on their own timeline, not on some artificial timeline of a free trial or artificial timeline of sales.


You should still have those things, but I want this pool of people who are aware of me and are using something of my product because at the end of the day, what better content do you have than your actual product? Even if you're a big enterprise solution, give them something to interact with. And then the other way to fill that middle of the funnel is, I think inbound marketing is just becoming SEO and eBooks. Kieran from HubSpot gets offended when I say that, but I love you, buddy. It's okay. I'm still a huge fan. And this is just because CAC and inbound marketing has gone up and it's all about a lot of SEO and we'll see what AI does to that.


But this whole thing of inbound media, we got on this train about five years ago, and inbound media is just podcast video series. When we sold the company, we had eight different podcasts and video series, all very niche like Pricing Page Tear Down, which was a show about we collected data and tore down pricing pages, the good and the bad. We had Boxed Out, which was a retention focused show for the subscription e-commerce industry.


So all of that was to build this pool so that people were aware of us. And then over time, all of a sudden they're like, "Oh, we have a pricing problem, we should go talk to these guys. Oh, we have this content or this retention thing, we should go talk to these guys." But I think the pool is kind of the future and a lot of people are still treating it as just this gateway between the top and the bottom of the funnel.

Lenny (01:04:02):

Middle of the funnel is the new top of funnel. We need a bumper sticker.

Patrick Campbell (01:04:05):

There you go. I don't know if that's going to sell well, but I will buy one, so.

Lenny (01:04:09):

The most nerdiest of all bumper stickers. Patrick, we've gone through 10 topics. Is there anything else you want to touch on before we get to our very exciting lightning rounds?

Patrick Campbell (01:04:18):

I think what I will say is this is all still hard. So I'm giving some heuristics, I'm giving some benchmarks, but your mileage is going to vary. But again, that's your job, whether you're a founder, a product person, an exec, whatever you are, your job is to take in information, your job is to analyze the problem, and then ultimately come up with the best solution. And so I think it's one of those things that there's some hard truths I think we talked about, but then there's a lot of this that you have to evaluate it for yourself. So just a general, I may come off like a know-it-all, but I understand that mileage varies I guess is the best way...

Lenny (01:04:54):

Well, with that, we've reached our very exciting lightning round. I've got six questions for you. Are you ready?

Patrick Campbell (01:05:01):

I'm ready.

Lenny (01:05:02):


Patrick Campbell (01:05:03):

I feel like I need a buzzer.

Lenny (01:05:05):

I'm going to add a buzzer someday. Anyway, here we go. What are two or three books that you recommend most to other people?

Patrick Campbell (01:05:11):

I have read High Output Management probably 20 times in the past 10 years. I read it at least once a year now. I commissioned a bronze bust of Andy Grove, so that's being done. I'm a big Andy Grove fan.

Lenny (01:05:25):

Oh, it's in progress?

Patrick Campbell (01:05:26):

Yeah, yeah, yeah. It's in progress. It's not done. I'll send you a mockup after this. But yeah, High Output Management. Thinking in Bets, going to that first principles thinking. I find that a good book to share with people so that they can think about things and get on board with that.


And then Powerful by Patty McCord. Anything around HR to kind of break your brain a little bit about what you think about HR and people ops. That's the gateway drug. That was the one where I was like, "Oh, we can choose how to design our people ops teams."

Lenny (01:05:55):

Okay, next question. Favorite recent movie or TV show?

Patrick Campbell (01:05:58):

I don't have one that's recent, but I watch The West Wing at least once per week, so I've done that for a long time. I love Sorkin, I think the writing's just so good, so I'll just throw that out.

Lenny (01:06:10):

Great one. Someone was telling me there's a podcast to analyze each episode, which [inaudible 01:06:14].

Patrick Campbell (01:06:13):

It is a great podcast and I've listened to most of them, so yeah.

Lenny (01:06:18):

Okay, great. You're all over it. Favorite interview question that you like to ask because you're interviewing.

Patrick Campbell (01:06:22):

I have a controversial one. I'm not going to be able to go through the entire question in a lightning round. But what I do is I do a mini... I did all the final interviews at ProfitWell, and we did a very hard culture check in the final interview. There's a mini case study, it only lasts about a couple of minutes, I'm not going to go through it, but I asked them if someone in Slack responded to someone sharing something benign, like some report they found on the internet from McKinsey, they shared it in Slack, and then someone responded to that with something indirectly offensive.


So it's changed over the years, sometimes I say, "Oh, they called it the R word, they said it was stupid," something indirectly offensive. And I say, "What would you do, and what do you think the company should do?" And no matter what they say, I challenge them, and I always tell them, "I've never seen that at ProfitWell," which is always good just to make sure they don't have a bunch of fear in this position.


But it gave me a really, really good opportunity to talk through our culture, particularly the most charitable interpretation piece. And I would say there were about 10% of people who had a zero tolerance policy for whatever the situation was. And I would tell them, I would say, "Hey, listen. We have zero tolerance for the obvious things, we probably all agree on those." But for this type of situation, we would ask some questions, we'd want to figure it out, we want to see, there's probably some judgment around what happened, how long if they'd been doing this for a while, that type of thing. And then we would make a decision on what would happen. And a lot of times nothing would happen except, "Hey, don't be an idiot, you're smarter than that, use better words," or something like that. And so that was a good culture check to opt them in or out.

Lenny (01:08:05):

That is very cool. It circles back to the value of culture and values and being aligned within your company on culture and values. And it's interesting that that's the question you ask, and not something technical or skill-based.

Patrick Campbell (01:08:16):

Yeah. Well, I do all the final interviews. So they've already gone through a skill-based and they've done culture screen already and stuff like that. So this is more of the, here's why you should not work here, that type of conversation basically.

Lenny (01:08:30):

I love that. Next question, what are five SaaS products that you or your company uses that you love? And bonus points for ones maybe people haven't heard,

Patrick Campbell (01:08:39):

That's hard to answer too because at the end of the day, we'd all say Zoom, Google Workspace or whatever they're calling it these days because those are the things that are so central. I've got to give a shout-out to Notion, we use Notion for all of our documentation. I use Notion for my personal... all these things. I know Code is a sponsor, so I apologize but-

Lenny (01:08:59):

They're both sponsors, and so we're friends with everyone over here. Both are great-

Patrick Campbell (01:09:02):

Amazing. Lenny's Podcast, friends of all products. Descript. I use Descript quite a bit. I use Descript not only for... it's like a video recording and editing tool, or you can bring in video to edit. But it's got some cool features that... I use it more than Loom a lot of times because it just works in my workflow, not only for creating, but also for those quick conversations.


K-Tool. Here's a fun one. This is an indie product, K-Tool. There's probably other products that exist like this, but I actually really like the interface of it, it's super simple. Basically if I'm online or someone sends me a PDF or something like that, I can basically choose to send that to my Kindle. So if someone sends me something I could just choose to send and then I can batch all of those things into a weekly newsletter that I can curate. So my Sundays and my Monday morning are just spent reading. So I have this weekly newsletter of someone wants me to review this thing or someone wants me to read this article or something like that. So I batch that into a little newsletter and it's just a Chrome extension that works really well.


Tweet Hunter, I'm trying to be more on Twitter. I went through lulls, so now I'm trying to be consistent. So Tweet Hunter's pretty good. It's got some AI fun stuff into it to make discovery better. And then it's not a SaaS application, but the last one is this Apple Watch Ultra. So I don't carry my phone anymore. I just don't... I found myself being on a computer, walking away with my phone, going, doing stuff and then just never being off-screen. So I have this for when I'm not in front of my computer and I'm this close to also doing it when I travel to when I've been traveling, my phone will stay in my suitcase, but it connects if I need to make a phone call. It connects via Bluetooth, all that kind of stuff. But just trying to take my attention away from my phone basically, so that's, that's been the unlock.

Lenny (01:10:51):

Damn. What a list. That was incredible. I'm going to ask just one more question. What's favorite lesson from your NSA experience that helps you in life day to day?

Patrick Campbell (01:11:02):

I shouldn't say everything, but most things are more complicated than it seems. And that's not like a sinister thing, it just means when that person's coming at you and super angry about something, whether it's your fault or not, something's there, they're having a bad day, on top of it, you really messed up, you tapped into a particular emotion that you didn't realize you did. Or hey, there's even the story in the news about this politician's bad or something like that. Everything's a lot more complicated, and not in a it's too hard to understand way, it's just you should always caution yourself on believing the first reaction that you have.


And I developed that there because there's so many things where... And it was also my first job, so a lot of this stuff happens because it's your first job, many people may have this experience at a different place, but it was like, "Oh, this geopolitical thing that's happened. Oh, here's my first instinct, that means this is bad." They're like, "Well, actually, there's this other thing going on over here and this other thing going over there, and those are actually connected. That's why this is caused." So that's helped me, one, not get so pissed off at the news. That's also helped me, I think just as a human, along with most charitable interpretation, to just be like, "Okay, let me not overreact here. Let me seek to understand and then react or respond, versus react."

Lenny (01:12:23):

What a beautiful way to end it. Patrick Campbell, renaissance man of a brain. This may be the most action-packed episode we've had, and I'm not surprised. Two final questions where can folks find you online if they want to ask you questions, reach out, learn more about what you're up to? And how can listeners be useful to you?

Patrick Campbell (01:12:38):

Yeah, so I am on Twitter @patticus, childhood nickname, P-A-T-T-I-C-U-S. LinkedIn, Patrick Campbell. I don't check my LinkedIn messages, I'm going to get around to it, it's just there's so much spam in there. But yeah, you could find me there or just pc@patticus.com, that's my personal email. So yeah, if I can be helpful or you want to see more of the data or you have this question or that question, we've probably written or recorded something on some of the things we talked about today, so I'm happy to send it over and just obviously want to be helpful, so yeah, feel free to hit me up.

Lenny (01:13:08):

Amazing. Patrick, thank you again for being here.

Patrick Campbell (01:13:11):

Thanks for having me, man.

Lenny (01:13:12):

Bye, everyone.

Audio (01:13:14):

Thank you so much for listening. If you found this valuable, you can subscribe to the show on Apple Podcast, Spotify, or your favorite podcast app. Also, please consider giving us a rating or leaving a review as that really helps other listeners find the podcast. You can find all past episodes or learn more about the show at lennyspodcast.com. See you in the next episode.