Winning in a large target market with Cognism's James Isilay
Winning in a large target market with Cognism's James Isilay
James Isilay: Stay focused. I've seen founders go all over the place and try and basically build a Bloomberg or a Salesforce as their startup, right? And do too much with too tiny resources and get nowhere.
VO: I'm Peep Laja. I don't do fluff. I don't do filler. I don't do emojis. What I do is study winners in B2B SaaS, because I want to know: how much is strategy? How much is luck? And how do they win? This week, James Isilay, co-founder and CEO of Cognism, a sales intelligence and data platform. Cognism was founded in 2015 and has seen a ton of growth going from $13.6 million in revenue to over $31 million in revenue just in the last year, with over 320 employees. In this episode, we discuss the advantages of choosing a large target market with an essential product, and how Cognism is sticking to a focused brand narrative to target their ideal customer. Let's get into it.
James Isilay: When we very first started Cognism, the idea was really a FinTech idea. I came from a trading background and I was an algorithmic trader and I was really heavily involved in using NLP technologies to trade. And so the idea was really to use that technology base and try and apply it to build a company. Like it was really as simple as that. The first contract I ever had was with The Financial Times, and they had an in-house, custom project to work on. That project was very custom and they had a team in the Philippines that was reading the newspapers to look at who was speaking in the articles and then to reach out to them and sell them the rights to that article. And they wanted to automate that process. And that's really how we began. So, at the time I was a trader and the FT approached me about using that new API for trading, and then I took that access to that API and then started to look at it for business ideas. And that's really how we began. We originally joined a program in Boston called FinTech Sandbox that was focused on building FinTechs. And then we came up with the idea of actually, eventually using that to help hedge funds find new sources of funds. And we eventually found that that wasn't a great market. It wasn't a great buyer, and so we pivoted into the sales and marketing space with the same concept.
Peep Laja: Tell me more about that pivot to sales intelligence. How did that come about? How soon did you find success in it?
James Isilay: So in 2016 I pretty much left my job to go full-time working on Cognism, trying to find a product-market fit for the business. I was on the FinTech sandbox first, and then I was on a program called Winton Labs in London and on Winton we really focused on that use case for hedge funds. They were hedge fund. What we found out at the end of the program is that even if we managed to sell into them, they didn't have the IT teams to integrate the tech that we had proposed. And so we were stuck on like a six month wait list. And so it would just be an incredibly slow sales cycle and then an incredibly slow implementation cycle. So we looked around at the market, and looked at the asset we had, and then decided to pivot into the sales and marketing space where there just seemed to be a lot more activity. At the time I didn't at all understand that market or understand the buyer. I'd met a couple of salespeople and they had helped to identify that that would be our best opportunity. And so we rebuilt the entire product around that idea. We had had a couple of customers on contracts who were buying our data asset, and that helped to really raise a seed round and then to build out the prototype. And then to really begin the journey in the right direction.
VO: An early pivot in product or target market is not unusual in the first five years of a startup. In fact, you can almost expect them and you should think about how to be prepared to pivot. Wynter launched targeting consumer companies like e-commerce. After four or five months, we were sure that this is actually not the right customer for us and we refocused on B2B companies based on market size. Here's Eric Ries, author of Lean Startup, describing several famous examples of successful pivots.
Eric Ries: I wrote a blog post: "Pivot, don't jump to a new vision." Now I'm good at encapsulating it crisply. A pivot is a change in strategy without a change in vision. Startups that succeed all do that really well. They start out with an idea that sounds good, but turns out to be terrible. YouTube started out as dating site. And only after people were starting to upload all kinds of video did they make the pivot to a video site. Flickr was an online video game. One of the things you could do in the online game was upload photos, and since that's the only thing players actually did, they said, hey, why don't we make it? We call it a zoom in pivot where you take one part of the product, and you make the whole product, shrink it down to just that one thing. You make the world's best photo uploading service, even though you meant to make an online game. Groupon started out as a business called The Point, which was designed to help people do petitions. They got no traction and all, it was a disaster, didn't work. So they're like, "Okay, we're going to try something new." They decided to try the social commerce thing. Social commerce is about creating coupons where we all get a discount if we all buy at the same time. I think it was two for one pizza in the pizza restaurant in the lobby of their building. Okay. That was the breakthrough technology. 20 people redeemed it. Most of us, let's be honest, we would not have known. 23 pizzas? Whatever. The reason the Groupon founders understood the power of selling 23 pizzas is that they had failed for a year to get anybody to buy anything at all. That actually made them excited enough to try the next experiment and the next and the next and the next. That's what a pivot is. It is redeeming the failure because we learned so much about what's possible.
Peep Laja: So, if you were new to the space, were you also naive in places? Sometimes they say that naiveté serves you well. You don't know that what you're trying to do is impossible.
James Isilay: Yeah, definitely I'm happy I was naive. If I had understood the space better, I probably would have seen a lot more competition than I initially saw. I don't know if that would have put me off. Also, just like the lack of knowledge I had. I didn't know how little I knew. I really knew zero at the time, and when we made some terrible mistakes at the beginning. But, I think not knowing and just solving a problem at the time, like what was the 10 things I had to do that day to edge the business forward and just checking them off on a list? That approach has helped us to get to where we are today. At the end of the day, there's a lot of competition in the space. And there has been a lot of companies that have come and gone. But it's such a huge market. Like the TAM is incredibly large. You have people switching providers all the time for a variety of reasons. So there's plenty of opportunity. The biggest thing has always been the internal structure of the company. If we can grow the actual organization, the market's there fo us. It's literally been a case of just making sure the sales hires get done, making sure that the product, the tech gets built. It's always internal problems. It's not the market that has been the limit on our growth. Globally, this market is untouched. The US market is very competitive, but globally, it's really a very young blue ocean market. And not only that, it's a market that's been getting more sophisticated. Even in the US there's plenty of opportunities in terms of just the evolution, even in the US market. Never mind bringing that evolution into the rest of the world.
VO: It might feel like all the world-class companies come from Silicon Valley, but there are benefits to getting your start and building your business muscles outside of the oversaturated and highly competitive US market. Take it from Jean-René Boidron, President and CEO of Kameleoon and my guest on a previous episode of How to Win.
Jean-René Boidron: One thing to keep in mind is that we started over in one European country, so France. On the one hand, there was little competition there. On the other end there was another tool or even two other tools which were really competing in the biggest market. So, I guess that we managed to exist because France was not in the middle of the concerns, at the time. So we didn't see that much competition in the beginning. And it was suddenly in 2018 and 2019 that we are extended into the UK, and then the US. Our product was getting better and better and we thought that in 2018, we had some stuff that other players didn't have. And the second reason we got there is that aside from the solution, there is also market strategy. And the market strategy of the year in the US was to go really in the high-end bracket, high-end enterprises. That, to a certain extent, left an open space in the small to mid enterprise market. And that's how we got introduced, in the UK, in the US.
Peep Laja: Let's take a few steps back. So, going from zero to 1 million in revenue, how did you find your first customers? What worked back then?
James Isilay: I had an incredibly amazing set of angel investors. We had one angel investor called Tom James who helped to really introduce some key relationships, like friendly, warm relationships that really helped us to have that kind of patient earlier customer that would let us make mistakes and we'd still be a customer. I think that those early adopter customers, friendly customers, are just so key in that seed, pre-seed stage. They really helped us to build out the products, to learn. There was also just grinding, right? Like as a founder, you need to grind. On the accelerator there was an amazing founder called Manal. She was an inspiration in that she spent the whole morning just prospecting. Just sitting down and just dialing herself. I was the same, just hitting every connection I had, getting our early contracts. So, it was a mix of grinding and then the early investor. And then, I followed that advice of hiring in twos for our salespeople. We had one work out, one didn't work out. They were also there and they helped to build funnel. So it was a mix of all those things that really helped us to get traction in our early customer base.
VO: Seth Godin was asked, "When is the best time to start marketing a new book?" His response? The best time to start promoting your book is three years before it comes out. Three years to build a reputation, build a permission asset, build a blog, build a following, build credibility, build the connections you'll need later. That's exactly the playbook I used with Wynter. When we launched, the first 1000 users came from my social following on LinkedIn and Twitter. I know this because those were the only channels I used to talk about Wynter. As soon as we started building Wynter, I started talking about the problems we solve on social, and setting the context around the product. Of course, before even doing that, I had been putting myself out there for 10 years. 10 years of blogging, social media, speaking at events, building relationships. I launched my first SaaS company back in 2009, only to sunset it two years later. And the key reason was, I had no audience and no money to buy the audience. And now, 10 years later, launching Wynter was so much easier because I had an audience to sell it to.
Peep Laja: So back then, I'm guessing ZoomInfo was already around and Apollo was getting started, and you know, all these other providers--
James Isilay: Yeah, we didn't really count to them in the UK market. So, the good thing is that UK market, at the time, was really under developed. It wasn't really being heavily targeted by these US companies. They were really focused on the US market. So we didn't really see that competition.There was a company in Europe called Robots. They were our main competitor in the early days, but they had then decided to not enter the European market and just focus on the US market, which again was great for us.
Peep Laja: Was that a good thing for you? So you could kind of operate under the radar without too much fierce competition?
James Isilay: I think the lack of competition helped. If you look at the space, you'll see a lot of companies that are at a million ARR. I think the space is big enough that you could start a company today in the US and get to a million ARR and you might tap out. It's just such a vast market, people changing providers all the time, people testing new providers all the time. The space is so deep. You could build a company anywhere to a million ARR. And then the question is, okay, scaling beyond a million ARR. That again is not a function of the market or the competition. It's the function of can you scale your internal organization? Can you manage sales hires, teams of a biggest size? Can you build the product features that you need for mid-market enterprise? There's a different dynamic that stalls a lot of companies at a million ARR in this market.
VO: There are SaaS companies with mediocre marketing, completely undifferentiated "me too" products, yet, have managed to get to a significant size, making a ton of money. Without fail, they're all in large markets with huge demand, like marketing automation. Go where the money is and find strong product-market fit. To explain more about product-market fit. here's the man who coined the term, co-founder and executive chairman of Wealthfront, Andy Rachleff
Andy Rachleff: I think that the single most important issue for an entrepreneur to succeed is to find product-market fit. To me, product-market fit trumps execution. You might execute really well, but if the dogs don't want eat the dog food, you're going to fail. Conversely, you might be terrible at execution, but if the customers want to buy your product, you'll be a great success. And customer development helps you figure out what the dogs want to eat.
Peep Laja: Tell me more. How did you figure out the internal stuff?
James Isilay: I think great mentors is the number one thing. Just making sure that you've got mentors or people that are more experienced than you, that can tell you, you know, just not making key mistakes. And just also for your own sanity. It's great to just to have an experienced person to bounce problems off. One of our competitors went into the US market too early and blew up all their money. They raised a Series A and spent it on the US market and pretty much wiped themselves out. If you're scaling and you raise a round, you can't blow it, really. There's no room for a second mistake in the startup world that I've seen. If you burn out a round and you haven't grown, usually you will not get funded again. So, you can't make mistakes. And I had a great board and great advisers that told us to stay focused on our home market and turn to the US market when it's the right time. And now we're in the US market, we've got a growing business there. And so, it's just doing the right things at the right stages. Good mentorship is super important as a CEO for that.
VO: "I need a mentor..." Well, we all do. There are people that have seen far more stuff than you, and that experience is worth so much. It saves you years of trial and error. Yes, years. You could literally skip years and jump ahead, but the best people are also the busiest. However, you can have access to the best minds through their content. One: pick a teacher. Someone who's got a lot of experience in something you want to learn. Someone who is sharing a lot about it. Two: read everything they've written multiple times, revisit their content occasionally, read their social media posts. Three, put the learning into practice. At the very least write your own summaries of what you've learned. There's a lot of clarity of thought that comes from writing. Four: once you've learned most everything this teacher has to teach you, move on to the next one. You will eventually instill the lessons, outgrow your teachers, or at least pick up the lessons you need and are ready for a new teacher. Over the years, I have had many mentors in different areas, and still do, but none of the relationships have been formal mentor-mentee relationships. But, if you do want an actual mentor, then don't make it weird by asking someone to become your mentor. It's a huge ask. It's a pretty much guaranteed "no" if it's a cold email. Don't put a label on it. Don't ask for a formal relationship. That makes it weird. Instead, just ask questions. Healthy mentor-mentee relationships are mentee driven. Highly specific question. Generic questions is a no, it needs to be ungoogleable. Show you put in a lot of thought and effort. If you get a reply, you can continue the conversation and ask again later when you have a real need. This is a relationship. If there's a great vibe, it might evolve into a mentorship and you can meet regularly. Just don't email strangers, "Could you be my mentor?"
Peep Laja: What were the specific things on both sales/marketing as well as product side that you got done going from 1 million to 10 million in ARR?
James Isilay: From 1 to 10, I would say, it was really scaling. I had a model from the early days about how many salespeople we needed each month to hit certain revenue targets. And it was really always the same for us. It was always, if we had the people hired, then we could make revenue. All of our reps always hit quota, that was just a part of our journey. We have a product that's a need-to-have product, data is just a need-to-have for salespeople. And so,the mistakes I've seen other companies make is just not make the sales hire. So, just adding sales capacity consistently, was so fundamental from 1 to 10 million. We went heavy on customer success, and won a couple of awards for it. Even though I'd say the product was weak. There is that Y Combinator saying of, "do things that don't scale."
Paul Graham: I discovered that a lot of these things that we teach startups at Y Combinator are things that I hit myself and didn't realize that they were actually common startup lessons. So one of them is doing things very manually for your early customers. And what "do things that don't scale" means is, do those things early on anyway, because if you don't do them, you'll never be big anyway. So, you've got nothing to lose. It's so important to get early customers that if you have to do a ton of manual stuff, that's okay. You'll learn a lot from it.
VO: That was Y Combinator's Paul Graham.
James Isilay: So, we were heavy in customer success, which again helps us with battling the issues around product as the product matured. So, heavy in customer success. And then just having a model for sales capacity and ensuring that we made the hires that we needed to make every month. That was critical.
Peep Laja: In 2018, GDPR came along and you guys adapted to it. What kind of a role did that play in your success?
James Isilay: I think it helps our story. I mean, we were very focused on GDPR and ensuring that our narrative was right around it. Ensuring that we were compliant. GDPR, it was definitely part of our story. You've seen over companies grow without that part of their story. Again, it's a need-to-have, to have the data. It just helped our story and it helped our competitive positioning. Everybody's kind of caught up now, like everybody has fairly the same story. I mean, that's just what happens in competition. So, it's less an advantage now than it was two years ago, but definitely it gave us an edge for awhile. As a business, you just need to keep looking for your edge against the competition, and then ensure that your messaging and your demos are built around that edge.
VO: There are a few products that are objectively, clearly better than the competition. Maybe Tesla has better batteries and tech compared to other electric cars. For now. But in SaaS, e-commerce or the agency world? Instead of competing to be better, which you likely can't win, compete to be unique. But how do you tell the story of your uniqueness, or your edge as James put it, effectively? There are a few stages with creating the strategy, where to play and how to win. Then, you create a narrative. What's happening in the external world? What is the change winners are adapting to and losers are ignoring? Then comes point of view, our opinion on what to do about the new reality. Then positioning, which problem are we solving, for whom, that cares a lot about it? Then, messaging. Key things we want to communicate to the target buyer. What do we want them to know about us? And finally, copywriting. How to actually say it. So, yes, you do need a great product, but to win, you need to kick ass on other things beyond the product. Narrative, positioning, messaging, and point of view marketing.
Peep Laja: So in B2B software, typically over time, all competitors start looking very similar. Everybody has every feature, they say pretty much the same things, and there's a lot of sameness. So, how are you currently thinking about your competitive edge?
James Isilay: So, our main competitor is ZoomInfo, right? And they're a fantastically run company, and they are a lot bigger than us, right? They're approaching a billion dollars in revenue. We're tiny compared to them. So, we have to focus on what's our differentiation to them? For us it's really contact data, right? We are a contact data provider. The great thing about selling data is that it's a content game, so we can have content difference if we collect differently to them. Then, in many cases, people buy multiple data providers. So, that's all kind of like an edge. And we need to make sure that we create ways of collecting data that gives us a content difference. There's a reason for people to buy us alongside ZoomInfo. So for that reason, we're aiming to going into countries where ZoomInfo has less sales capacity and to collect data in different methods to the way that ZoomInfo collects data. And that should give us an edge in terms of our data. And then in terms of our software offerings and products, it's very important to understand the narrative of you see your competitors, understand their approach to sales, and to, as much as possible, understand their sales materials, and then position against that. If you're not on top of where your competitors are, you should assume that they're on top of where you are and how you're messaging, and then they're designing their messaging to counter your arguments and to displace you.
Peep Laja: So, when you're looking at ZoomInfo for their narrative, their positioning, are you doing a specific counter positioning to be a "David and Goliath" story, or poking holes into their weaknesses? What are you doing specifically?
James Isilay: Right now, they're really messaging on this operating system. Like a sales operating system, a revenue operating system, a marketing operating system, and a recruitment operating system. Our messaging would really be saying, buy best in class of each solution versus buying an all-in-one solution. I think like as a sales intelligence platform, we can also go in that we just have a content difference. Why wouldn't you give your sales people the best, most accurate data? So, I think we can approach it from two angles, and then it just really depends on the customer. Where the customer is in terms of what they already have in house. Have they got nothing? Have they already got ZoomInfo? How do they feel about ZoomInfo? If they hate ZoomInfo already because of whatever reason, then that's a different approach to they were already using ZoomInfo and they're happy with the solution.
So, it's important for you to have that understanding of the customer and then to go in with the right messaging to tackle whatever their pain point is at the moment.
Peep Laja: How much attention are you paying to smaller competitors, maybe the same size as you, or even smaller?
James Isilay: I would say less. Of course we are monitoring them, but, on many of the metrics that in the sales process, it's really not too big a concern. We don't see them in too much of percentage of deals. They don't really compete with us. If we lose to a smaller competitor that's selling on a price-per-credit basis, then that customer was probably not a fit for us. Right? If somebody's not coming in to buy the highest quality, most accurate contact data, where we feel we are positioned, if they're just trying to get the lowest cost solution, they don't really care about quality, then that probably isn't a customer for us. We've just purchased a company called Casper, which is more in that PLG space for that lower ACV-type customer. At the moment, our focus is to play in that market on that different brand, but again, we're using that more as a motion to go into new countries and not really as a motion to go up against any sort of particular competitor.
Peep Laja: When you're thinking of the future, five years from now and beyond, are you more betting on winning on product? Or is it more like you're winning on positioning, brand messaging?
James Isilay: We are winning on content, actually, our quality of our data. I think that that is a huge edge. To collect compliantly high-quality data is a real moat. That's really difficult. So I think that's our focus for Cognism. In terms of the software, I think like the software is getting commoditized. How many companies have chat solutions? How many companies have engagement solutions? That is getting commoditized. Now, people focused on that are going to have the best tools, right? If you just do engagement software, you will have the best tool because all your engineers are focused on that problem. If you're doing conversation intelligence, all your engineers are on conversational intelligence, you'll have the best tool. We don't want to be that Jack of all trades, we want to be really, really known for having extremely high quality contact data and having data in regions and countries where nobody else has it. That's our focus, really.
Peep Laja: You've been growing very fast. 150% a year for many years in a row. Last year, a hundred percent year over year. Well, what is the source of growth?
James Isilay: I think one is that the market is growing, right? The TAM is growing. Companies are getting more sophisticated about sales. They'll keep getting more sophisticated about sales. If you think about it globally, the opportunity is gigantic and it's just going to get bigger and bigger. This market is lacking CRM adoption, and you can look at the CRM market as like, where this market should be. The go-to-market platform, sales intelligence market, should be so much bigger than even the CRM market because these services are far more valuable than just the place where you're placing the data. ZoomInfo's the company that is leading the way and showing how big a company this can be. Right? The space is to is going to be huge in the future, because, for me, the opportunity is really untouched. So, it's the size of the market, which right now is still tiny to where it will be. That's number one. Number two, I would say we've grown our sales capacity consistently, which is so important for a SaaS company to capture the opportunities as much as we can, right.? And I think that you can only organically grow at a certain pace through a direct sales approach, which is the approach we initially went with. And then, I've been able to raise the capital that we've needed to keep our growth. A founder that can raise capital and build good relationships and things like that is needed. And to make good hires. I think I've been developing as a CEO, and had the right mentors that have helped me to capture the opportunity that is there. That's been there.
Peep Laja: So, Cognism started in 2015, so seven years you've been at it, and you've learned some lessons along the way. If you had to pass on some wisdom to fellow B2B SaaS founders, what are some pieces of advice you would pass on?
James Isilay: Well for early stage, I'd say, because I'm mentoring group founders right now and I really enjoy that, one would be stay focused. I've seen founders go all over the place and try and basically build a Bloomberg or a Salesforce as their startup, right? And do too much with too tiny resources and get nowhere. I think that is one mistake, is to look at these platforms in the market and try and copy the platform versus a very, very good point solution that's better than something that Salesforce or Microsoft offers. So, just focus is really good. You know, you can only message so much, you can only sell so much, you can only build so much at an early stage because you only have so many resources. Planning. Just, again, having a plan about sales capacity development, good financial plans, is super important. I like the bits of advice that you get like, "hire in twos at the beginning so that you don't have reliance on a single individual." So many times that saved me, having two people coming at once. So there's a little bit of competitive. Also, if a person's bad, you can tell. As a first time founder, you have to recognize how clueless you are, right? You probably know very little about your market, very little about sales, very little about marketing. You have to recognize that you need to hire that expertise and you need to bring that expertise in as mentorship or advisory. You need to really recognize how little, you know, um, that's very helpful.
VO: So, what are the three key strategies that have brought Cognism success? One. They found their feet in the less saturated UK market before beginning to expand globally.
James Isilay: The good thing is that the UK market at the time was really underdeveloped. It wasn't really being heavily targeted by these US companies. They were really focused on the US market and so we didn't really see that competition.
VO: Two. They chose a market large enough to guarantee demand.
James Isilay: The space is so deep. You could build a company anywhere to a million ARR. And then the question is scaling beyond a million ARR.
VO: Three. They have stuck to their brand narrative and have not tried to cater to everyone.
James Isilay: If somebody's not coming in to buy the highest quality, most accurate contact data, where we feel we are positioned, if they just trying to get the lowest cost solution, they don't really care about quality, then that probably isn't a customer for us.
VO: One last takeaway from James.
James Isilay: I think not knowing and just solving one problem at the time, like what was the 10 things I had to do that day to edge the business forward? And just checking them off on a list. That approach has helped us to get to where we are today.
VO: That's how you win. I'm Peep Laja. For more tips on how to win, follow me on LinkedIn or Twitter. Thanks for listening.
