Acting and adapting quickly with CaptivateIQ’s Mark Schopmeyer
Acting and adapting quickly with CaptivateIQ’s Mark Schopmeyer
Mark Schopmeyer (00:01):
We were pretty disciplined around two dimensions that we thought were really important as a framework. One, will this help us acquire more customers or will this help us build product faster? If it doesn't hit on these two things directly, we do not pay attention and we do not care.
Peep Laja (00:18):
I'm Peep Laja. I don't do fluff. I don't do filler. I don't do emojis. What I do study winners in B2B Sass, because I want to know how much is strategy, how much is luck? How do they win? This week, Mark Schopmeyer, co-founder and co CEO of CaptivateIQ. The commission management platform built to help revenue team's power during incentive programs. CaptivateIQ has grown to over 250 employees since their founding in 2017. They've just closed their series C funding at 100 million, raised with evaluation of one point 25 billion. In this episode, we discuss how CaptivateIQ maintains an edge on the competition and their commitment to innovation in order to stay ahead of where the market is going. Let's get into it.
Mark Schopmeyer (01:02):
When we were in the beginning, we knew the problem pretty well, because our background between Conway, myself, and Huber, we used to manage commissions in a prior life. One of the things that was very important to us was, we wanted to build a solution that we would've used. If you take us back to that journey, we didn't have this vision of we're going to build this multi-billion dollar company and sell products all around the world. We had this very simple goal, and it might be laughable now, but it's just like, let's just get one customer. If we can get them happy, we feel like we would've achieved our objective on something that was really important for us.
Mark Schopmeyer (01:44):
That was the start of CaptivateIQ. Now, I think the fun thing that we could probably share a little bit more in our conversation is, that first iteration is not the product that we currently have today, even though we come from the problem, which was very helpful, I think there's an important lesson of continue to be iterative, continue to be dynamic. Today we are on version three of that product vision, which I think is pretty talented, how we had to challenge ourselves to be responsive to what we've been learning when we interact with customers.
Peep Laja (02:19):
What was the version one? Then walk us through the version two and three and what type of signals and data and whatever went into the decision making, did you use to come to those?
Mark Schopmeyer (02:33):
Yeah. Version one was based on this concept of sequel and the vision we had was, everyone has a data science team. One of the challenges was for commission's platform to be dynamic enough to serve any type of commission's plan that you see at a company, how do you respond to that with your platform to enable people to do that easily and allow it to be flexible, to be as accommodating? We believe at the time Sequel was super ubiquitous and it would enable companies to be that dynamic. You could leverage an in-house framework, aka like a lot of data science engineering teams would know Sequel, so that you wouldn't have this heavy lift of learning the product or learning a coding language. The challenge that we had at the time was obviously that's very isolated to tech.
Mark Schopmeyer (03:25):
If we believe we wanted to go after a much bigger opportunity, we need to make this more dynamic. We shifted to version two. That was when we start our Y Combinator journey, with this notion of what if we could build building block. If you believe commission plans are really a construct of a series of building blocks that you can stitch together and then maybe leverage. If you had a library building blocks, every company can take these building blocks and reassemble their commission plan.
Mark Schopmeyer (03:52):
That worked out really great up until it didn't. One of the challenges that we learned, was that these building blocks, they're highly custom, oftentimes so custom to the company itself, and you require engineering resources in the backend to be able to assemble these building blocks for these companies. Think of it as for every onboarding, we would have a business analyst and we'd have an engineer, which is not really scalable from a unit economic perspective. We challenged ourselves once more, which was, what is the problem that we're trying to face here?
Mark Schopmeyer (04:25):
Why do we have engineering resources to begin with? The key thing that we learned was that data doesn't come in the form that you need it in, it's a classic problem within companies. We had this vision, going back to our roots when we were managing this stuff and spreadsheets, which was, we would get data out of the data system and then we'd transform it. So what if we could take that and build on that? In the business user context, we're just doing transformations to get the data into the form that we needed in. That became the basis and the baseline for version three of our product, which is what we have today.
Peep Laja (05:03):
Were these changes in the evolution driven by the market and customer feedback?
Mark Schopmeyer (05:09):
Yeah, to be honest, I think a lot of it was us challenging ourselves, maybe as a quick background, Conway and I, in particular, we have much more of a finance background. By default, we have this knack for extrapolating. What does this look like at scale? What does this look like with 10, 100, 200, 1000 customers? YC teaches you to, or Y Combinator, teaches you to do things that don't scale. That's very true to kind of learn everything, but eventually you need to do things that do scale. While some of it was driven by the market, like for example, it has to be easy to use, it has to be very flexible and those are table stakes, you can't have a commission's platform if one year it works and then they updated commission plans and it doesn't work in your... The software can accommodate it.
Mark Schopmeyer (05:55):
That's silly, right? There's feedback like that, I think we took to heart. At the end of the day, I think we knew that we need to build a business. We need to build an enduring company. We needed to do build something that would scale. I think the one key lesson that we had, sometimes you'll hit a fork in the road and it's a really tough decision. For us, version two was that fork in the road. We asked ourselves like, it is fact, if we continue with version two, we will not be a company. Sure we'll have investor money. We just closed a seed round, but fast forward a year, we're going to burn all this money and we not going to have scalable in economics. No one's going to want to invest or be support of this company. It's just not going to exist. You look at that and you're like, how do we make the hard decision? What is the right decision there? The right decision was to figure out a way to make this more scalable.
Peep Laja (06:54):
If you're not embarrassed by the first version of your product, you've launched two late. That's a quote by Reed Hoffman that I've thought about often, especially when I'm on the verge of launching a new product or company. When I was bringing winter out of private beta, I was like, this is not ready. There are so many issues, but we have been building already for quite some time. I knew that speeding up customer feedback loops is going to be massive. I knew the impact real customer feedback is going to have on the team. We launched. Of course we weren't ready. It wasn't an instant success, but we learned so much. In fact, we learned that some of our major hypothesis, like who's the customer going to be, was dead wrong. Five months later, we changed direction. We focused on B2B, changed a bunch of things about the product and the business took off. Once you got your first customer, obviously it wasn't game over. What did you do marketing sales wise to get your first million?
Mark Schopmeyer (07:52):
Our investors, who might be listening to this, might chuckle. We had a very weird problem. We did not do a lot on the marketing side in the early days, probably to a fault. In the early days, there was one point in time where I remember our VP of sales, Christian Borrelli, and I were, were chatting about, at the time you're doing founder selling, and then you have another colleague that's selling with you. At the time you're doing full cycle sales, everyone is selling. For us, the funny joke internally was that we were full cycle sales and we are implementing our own products. We are actually taking on quite a bit of work ourselves. It's important to do that, because you need to get familiar with the motions. You need to get familiar with what's working in and adjust, but also just internalize a lot of the things that are going on within the company, the product, how people are responding, messaging, et cetera.
Mark Schopmeyer (08:50):
When you have a foundation of that, it doesn't mean it needs to be perfect, then you start to pull apart this, look at it and say like, what can we operationalize or start operationalizing? Christian and I had this long debate, like, hey, I think it's time to bring in BDR's. When you're early as to start, you're like, oh man, we need to invest more people. Are we ready? We looked at the math and you're like, yeah, it makes sense. It's a no regret. Move to start investing BDR's to take apart one part of our sales cycle and operationalize it, get people who are better at it to improve that process, streamline it, and really drive that.
Mark Schopmeyer (09:27):
The BDR motion was where we started first. It worked out very well. Inbound versus outbound. It was the line share how we drove the business earlier on and from our investors, who saw their portfolio companies draw a lot more inbound versus outbound, we were doing the opposite and we just kept doubling down. Today, it's still a very important part of our motion. It's very successful. We are now continuing to do a little bit more broadly on the marketing side, but I think the lesson here is, if you find something that's working, it's very important to double down on it.
Peep Laja (10:01):
To double down on something, you often need to bring on more people. You as a founder don't scale, plus you're only good at so many things and you can't get far with mediocrity. So bringing in people that are smarter and better than you in specific areas, is the way to go. Sell the company to top talent. They'll outperform you in their area of expertise. They'll also raise the bar for performance standards across the company. Here's Jack Ma, co-founder and former executive chairman of Alibaba, explaining why he always tries to hire people who know more than him and how he sees his role as their manager.
Jack Ma (10:36):
I know nothing about technology. I know that nothing about management, I know nothing about, but the only thing is that you don't have to know a lot of things. You have to find the people who are smarter you are. My first way is always find people who knowledge on computer, smart than I am. Accounting, smarter. For so many years, I always try to find the people smart than I am. When you find so many smart people, my job is to making sure that smart people can work it together. Then if smart people can work it together, it's easier. The vision, they'll believe.
Peep Laja (11:14):
How big of a part of your revenue today is outbound versus inbound?
Mark Schopmeyer (11:20):
It's historically, if you look the last two years, it used to be about 70/30. In the last year, I think it was about getting up to 60/40. This year we're targeting to be more 50/50. I think over time, we'll see marketing shift to be much more of a heavier mix of that, just because by design, a lot of stuff is more organic. There should be much more reach, more broadly, especially from verticals or segmentations or geographically. Today it is still heavier outbound with a path towards getting more half, half.
Peep Laja (11:55):
On the inbound front, what are you guys doing?
Mark Schopmeyer (11:58):
We started building our marketing team, probably the last 18 months or so, maybe two years at this point. I think what we've started on, is just getting the awareness out, the brand. We started on software review sites like G2, Capterra. My understandings is we're number one on a number of those like Gartner's Peer Insights, is a new one that came out that we've been focusing on. I think number one on that one. Besides that, Organic, Google Traffic has been a big focus for us as well as Paid. Our focus over this coming year is how do we build more organic through content, through providing really unique insights around webinars, what are we learning, what are we seeing? Driving conversations there.
Peep Laja (12:42):
G2, Capterra and others like that, are increasingly unhelpful when it comes to comparing tools. Most everyone has fantastic reviews, because they're solicited from happy customers. If you have a below 4.0 rating on those platforms, you must be objectively terrible. Companies need to look for other ways to differentiate and building up brand through organic marketing and content, is a popular choice. These days, most successful B2B companies are all in with their content marketing across a variety of mediums, blog, podcast, video, organic social events, and so on. They use the content as a brand mode, as well as to build mental availability, but keep in mind, everyone is doing content way better today than they did 10 years ago. You need to be better than ever as well. How do you think about differentiation and winning business? How do you stay competitive?
Mark Schopmeyer (13:36):
We just go back to our core roots. We come from this problem and to be honest, I don't know how many vendors out there that can really say that. In fact, a stat that we share internally, is about 40% of our employee base comes from the problem. We all kind of internalize the same goal. One of the unique ways that we're tackling the problem, is that a lot of the vendors out there take much more of an object oriented approach. If you're familiar with Salesforce, Salesforce is object oriented, right? What was really important for us was again, being flexible, accommodating commission plan, but also that ease of use. Roughly 70, 80% of the market comes from spreadsheets. Why is that and why is that still a very popular solution, because it's super flexible and because what people know how to use it, you probably know how to use it.
Mark Schopmeyer (14:27):
I know how to use it. A lot of people in our company knows how to use it. What's wrong with it? Just doesn't scale very well. That's why we had this problem in beginning. Spreadsheets does not scale when you have a 100, 200, a 1000, 10,000 reps. We've taken these elements and we've built what we believe is more like a modeling solution. We believe commission's a modeling exercise. In our opinion, we don't believe any other vendor has philosophically or built their product in the same way as that. In itself, there's an inherent differentiation around how we've gone to market. We are kind of that lone wolf, trying to approach that in that methodology. This is where coming from the problem helps a lot. If you have a lot of conviction around what you're doing and you're taking a different path, the only way you're uncomfortable with it is that, hey, I've done this before.
Mark Schopmeyer (15:18):
I know going back to my old role or to all of our old roles, we feel like this is how we would've wanted to do this versus the alternative. I think that's probably the most fundamental piece around the differentiation for us. Part of it is we're still improving our storytelling on our website, product marketing and messaging around that. Once you go into that first demo, you see our product, your first reaction, and I would say it's very noticeable. It does elicit this reaction. It's like, oh wow, I get what you guys mean. It has a spreadsheet like interface in key parts. There is this modeling aspect. It brings in this cell like syntax. It is something that is very noticeable when you go into a product about how it works and it's fundamentally, it looked different and feel different than any other product.
Peep Laja (16:11):
Today in tech, there's a common belief that products are pretty easy to copy. How are you thinking about five, 10 years into the future? Are you building any modes or what are your thoughts?
Mark Schopmeyer (16:25):
You're right. Products are easy to copy. You've seen this. Even the big scale features between like an iPhone and an Android phone. One starting point is, I do think it does come down to the leadership team and the company philosophies and what drives them. I say that, because there is an element of culture around vision that will always, hopefully give you that edge. You can't predict copying. You can only copy what's known, which takes time to assess and then assign a team to go, literally copy. So you're always going to be factually behind. If you really play that out, if done well, a company that is a category leader, or that is super innovative and has a culture around being innovative, they should by design always be ahead of the pack. Our hope is that as a product focus and product led company, we can continue to have that key part of our DNA.
Mark Schopmeyer (17:24):
Beyond that, you do have to keep thinking about the market and where is the market going, listening to your customers. It's very rare that a customer will say, you've got the best product, please don't do anything more. There's always better things to do. There's always evolving things in the market. More importantly, there's things that even customers don't see and don't know about that you will have to see and take pattern recognition. Hey, here's where I think the industry is going in three to five years. We can make this even better by maybe going into this adjacent market and providing a little bit broader of a platform. Or we believe how people are going to operate is going to be changing in three years. We're going to start building something around this that positions us in a way that is going to make our customers even more successful. I think you keep thinking about those things. I think you inherently have a competitive advantage.
Peep Laja (18:18):
Bet on things far into the future. It'll arrive sooner than you expect. The future is an unknown, but you can be prepared. When enough evidence surfaces, you can pounce. Create as many future scenarios as possible. Disprove them as soon as possible. Hold strong opinions weekly. Innovation can be a huge growth driver, but not without direction. The other way to say plan for the future is to say, build and execute a strategy. The innovations aren't your strategy, but rather how you adapt your core strategy and react to shifts in the market landscape. Harvard professor and author, David Collins explains.
David Collins (19:01):
The practice of strategy in most companies is there is an existing strategy. It might be poorly articulated and communicated, but most companies have a strategy. The practice of strategy, the way you experience it as a manager, is there is some shift in the external environment or what I call the opportunity set. You then have to adapt what goes on inside your company to take advantage of that. You don't change the strategy, but you change important aspects of the act activities of the firm. The classic one for me here would be like Burger King adopting mobile ordering technology. Burger King is not going to change its strategy. They're not going to go away from low cost hamburgers, targeted at high volume consuming males, age 18, whatever it is. The decision to add in mobile ordering has strategic implication. That requires continuous adaptation.
Peep Laja (19:59):
What are you guys doing specifically to ensure that you guys are innovative and then you move fast that you don't get stuck in bureaucracies and SOP's slowing you down? That happens to a lot of companies.
Mark Schopmeyer (20:13):
I do think it's really important to evangelize, one, the mission and have a mission. I think that's a starting point, because that gets people bought into the bigger problem. Why are we doing what we're doing and where do we want to go with this? I think the second step is to continue to iterate on where you think the company is going and where do you think the industry is heading into? Those two things I think are going to be the biggest drivers in terms of staying innovative, staying ahead of the problem and bringing it back to the company and laying out the trajectory of how you want to get there. Beyond that, just continue to build out the teams and continue to accelerate on a broader vision.
Peep Laja (20:54):
There are a bunch of players in your space. Why have you guys succeeded where some others haven't done?
Mark Schopmeyer (21:02):
I look back at the space and the space isn't older space. In one of the older software spaces. In my opinion, it started back in the 90's with trilogy software. There's kind of been this long lineage. You can almost tie it back to one company through a series of companies. Beyond that, there's been a longer tail, just smaller startups. I think the challenge has been people, bluntly put, are kind naive to the complexity of the problem. What ends up happening a lot of times that people want to tackle this problem. They try to tackle this with a standard approach that they think is going to solve a lot of the commission plans. It becomes a rude awakening. Wow. This is a really hard problem. This next customer we signed, is doing this really differently than the previous customer. Everything about our product needs to be kind of thought differently to accommodate this other customer.
Mark Schopmeyer (21:55):
That's part one. Then the part two is okay, what if you took it and just made it really custom? Well then no one knows how to use it. I think that's where the industry has come from, where the other players came from. It's top end in the market serving, top fortune 100's, 250's et cetera. Exactly the first customer earliest customer of Salesforce and just grew with that. That's continue to be one of their largest customers. If you think about what that means, commission plans don't change as often as a smaller start that's trying to be nimble. You can lean on big SI's like a sensor deloitte to make these changes at scale, because you have a budget for it.
Mark Schopmeyer (22:34):
You probably have a little bit longer of a cycle to roll these changes out. Maybe it's once a year, maybe it's once every two years. The type of product that's needed is different. Where we have come into play, and I think where the industry's heading, is look mid market's much more dynamic. There's a lot of unique requirements. I think the product we've had is this right balance of ease of use as well as super flexible. In my opinion, that's the keys to the game around this stuff.
Peep Laja (23:04):
If you don't think about sales compensation, but building a B2B of SAS company, what are some pieces of advice you would have for fellow founders? What pieces of wisdom would you pass on?
Mark Schopmeyer (23:17):
One, starting out, I think it's always a thoughtful approach to being open-minded problems. In particular, I mentioned it earlier about how Y Commoner, one of their core tenants do things that don't scale. It really helps. It helps you think about let's just get to this motion so we can fully understand the problem. How to get things going, and then starting to operationalize those pieces. Earlier on, we were very disciplined in a couple of ways. I parted some advice around that. In the early days of a start, it's very easy to see the shiny objects in the room around you. Maybe Salesforce reaches out to you and they want to talk about a BD relationship. That could be interesting, but that's another meeting. That's another time commitment they get to take. We are pretty disciplined around two dimensions that we thought were really important as a framework.
Mark Schopmeyer (24:11):
One, will this help us acquire more customers or will this help us build product faster? If it doesn't hit on these two things directly, we did not pay attention and we did not care. I think that allowed us to be very focused and nimble. I think the third dimension that really helped, and this is something that I think plays into our backgrounds between Elise Conway and myself. We were very fortunate to have a finance or FP and a background. I say that, because even before we create the company, we had a budget, we've had a budget every year. We budget actually twice a year, as insane as it sounds. If you think about a startup, how do you make decisions? How do you know whether to do something or not? How do you know whether to invest or build out a new program?
Mark Schopmeyer (24:57):
It's so much easier if you can have a model in front of you to look at the numbers and say like, look, yeah, the ROI, it's a no regret move. That's one of our favorite things to think. We've always tried to build that philosophy into a lot of things that we do. We have this belief that a lot of strategy can be solved by numbers, planning out like, hey, what do we need to believe for this to be true? Or how do these things affect our unit economics and our storytelling? It sounds like that's something that you'd expect as a leader Sage company, but as crazy as it sounds, we started doing all of that in the early days, which made decision making a lot more black and white. I think the last thing I can impart, I think is there's a notion in product management called being first principles.
Mark Schopmeyer (25:44):
For us, we try to be first principle, have a first principal's mindset around a lot of the, how we operate, how we make decisions. I think it's easy for companies or leaders, especially when you bring in outside leaders to be assumptive. Oh, I did this at another company. It should be true here. That's very dangerous. It's really good to be first principal's mindset or have a first principal's mindset. Look at the problem, break it down to its basic building blocks and really tackle what you believe. Get alignment, but really tackle on what you believe are the core problems and not core problems. It makes things a lot more black and white and much more clear when it comes to making the right decision at the end of the day.
Peep Laja (26:34):
What are three key strategies Captivate IQ has found success with? One, they launch quickly with a version of the product that worked, but continue to invest in a scalable version that could take them into the future.
Mark Schopmeyer (26:45):
We asked ourselves, it is fact if we continue with version two, we will not be a company and no one's going to want to invest or be support of this company. It's just not going to exist. You look at that and you're like, how do we make the hard decision? What is the right decision there? The right decision was to figure out a way to make this more scalable.
Peep Laja (27:03):
Two, they aligned as a company through a deep shared understanding of the problem they're addressing for their customers.
Mark Schopmeyer (27:10):
We just go back to our core roots. We come from this problem. To be honest, I don't know how many vendors out there that can really say that. In fact, 40% of our employee base comes from the problem, which is massive. We all kind of internalize the same goal.
Peep Laja (27:27):
Three. They made an early bet on investing in outbound sales, that paid off.
Mark Schopmeyer (27:32):
Christian and I had this long debate, hey, I think it's time to bring in BDR's. When you're early as a start, we're like, oh man, we need to invest more people. Are we ready? We looked at the map and you're like, yeah, makes sense. It's no regret move. It worked out very well. Inbound versus outbound. It was the line share how we drove the business earlier on.
Peep Laja (27:53):
One last takeaway from Mark.
Mark Schopmeyer (27:55):
I think there, even though we come from the problem, which was very helpful, I think there's an important lesson of continue to be iterative, continue to be dynamic. Today we are on version three of that product vision, which I think is pretty talented, how to challenge ourselves to be responsive to what we've been learning when you interact with customers.
Peep Laja (28:16):
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.
