Making the jump to a 'professional CEO' with Maxio's Randy Wootton
Making the jump to a 'professional CEO' with Maxio's Randy Wootton
Randy Wootton:
So the theory to win is we're going to make a CFO's job easier and they're going to be more efficient and they're going to be more effective. And if you can solve that pain in terms of how do CFOs close their books, there's a willingness to pay.
Peep Laja:
I'm Peep Laja. I don't do fluff. I don't do filler. I don't do emerges. What I do is study winners in B2B SaaS because I want to know how much your strategy, how much is luck and how do they win. This week, Randy Wootton, CEO of Maxio, a platform offering subscription and revenue management solutions for SaaS companies founded in 2022. Maxio is made up of two companies, SaaSOptics and Chargify brought together by a private equity investment firm, Battery Ventures. After the merger, Maxio has now over 500 employees.
In this episode, we discussed the challenging transition to a CEO who isn't the founder, how assessing your business honestly is essential. And the idea of competing against non-consumption. Let's get into it.
Randy Wootton:
Maxio is the combination of two companies. One was called SaaSOptics, and the other one was Chargify. SaasOptics was about subscription management revenue, recognition, and helps you build reports. So you could better understand the business that you're running, what's happening in terms of your customer cohorts, and where you want to go in terms of monetization strategy.
Chargify was primarily focused on the usage billing model and option, and would be used by primarily smaller companies as they were going with a PLG motion, or they were starting to think about how to monetize their platform they embedded in the website, and they get the billing and invoicing capability as part of their broader solution they're offering their customers. And what was neat about it was both companies were moving into the direction that the other was in. And so by bringing them together, you have this unified financial operations platform.
Peep Laja:
So tell me about good reasons to merge, bad reasons to merge. And anything else you want to say about this particular deal.
Randy Wootton:
One thing I would say, just data point when Battery Ventures looked at SaasOptics and they looked at why people weren't buying SaasOptics. There were 4,000 prospects that they had to say no to because they didn't have a billing solution. So having Chargify all of a sudden allows you to have a broader set of capabilities in the market and allows you to have a broader Tam. So I think one of the first things you think about M&A is how big is your Tam, your targeted addressable market, and are there adjacencies that are logical based on the feedback you're getting from prospects, customers, analysts that if you added on you would have a bigger Tam and you'd be stickier. So for your customers, you want to sell in additional products and services and grow your net retention, which is one of those key SaaS metrics that everyone cares about and M&A can get you there.
So I think about growth levers along really three dimensions. You have regional expansion. So if you're not in Europe, can you go buy someone that is going to broaden your footprint and have done a lot of hard work. Number two is segment expansion. If you're an SMB and you want to go mid-market or you want to go med market to enterprise, is there capability you could buy? And then number three, is this target adjacency and category that's going to give you a broader set of capabilities.
Clearly getting inorganic growth. So having an additional ARR helps. And I think another component to really think about is the cultural fit. And if you look at the research, 80% of M&A is not successful, meaning that they have not returned value three X of what the investment was, and that often comes down to a cultural misalignment. So I think one of the things people really want to think about during the courting phase is are these two companies going to match?
Peep Laja:
How do you know that? What do you look for?
Randy Wootton:
So I was not part of this, but I think part of it is gut getting time to spend with people and understand how they think about problems and how they think about how they work together. I think even at the level of articulated values. So is it a company that has an articulated value? It's more implicit versus explicit? The way people work together. Do they have scorecards. Are they more like, "Hey, we shoot from the hip." I think power structure. You start to understand how people treat each other in meetings, the way they treat customers. Are they willing to invest in customer success or do they see customer success as a cost center?
I think the other key thing for me Peep was go to market alignment. Can you take your product if you're the acquirer and attach it in a way that your go to market team is going to be easily able to sell it to either new prospects, as part of a bundle or to current customers as an upsell. I think if you haven't done the work to really align along the ICP who the target buyer is and who the target user is, so that it's complimentary to that whole process, your go to market process, M&A can really struggle.
Peep Laja:
Is cost savings a good reason to acquire somebody or merge and what other reasons might be good ones?
Randy Wootton:
I think there's different types of M&A. And I think they're PE companies that are focused on leveraging debt and driving EBITDA. The world that I've grown up in which it's growth SaaS, I don't think you really look for cost synergies as the reason to do M&A. I think you try to realize it in terms of... Especially around the GNA teams and maybe there's some synergies on hosting that you can get as you start to consolidate. When you're a company and you're kind of under 10 million, you got one product, one segment, and you're growing like crazy. And you're trying to invest in your go to market and you hit this expansion growth phase. When you're at series B or series C, you're taking a whole bunch of money from new investors and they want to see growth. And there's a certain amount of organic growth that you can get, but then you need to get to this other dimension of different growth vectors.
And as I was mentioning before, is it a new region, is it new segment, is it new capabilities? And M&A becomes much more viable part of that strategy. You will realize some cost efficiencies, but really what you're trying to do is scale. And so how do you put the systems to processes in that is going to drive efficiencies across those two companies? And if anything, what happens I think is for the first year, 18 months, you're operating two systems. You're effectively operating two companies. And so you've ingested this big pig through the Python, and you got to be super deliberate about driving to consistency and efficiency versus realized cost savings
Peep Laja:
M&A can be a shortcut to growth, but that growth often comes with growing pains. As Seismic's Doug Winter reminded us on the previous episode of How to Win, it's important to remember that every merger is unique, presenting both opportunities and challenges.
Doug Winter:
I think one of the tougher challenges that a lot of companies face, especially as they grow to get to a bigger scale is one of acquisitions. The biggest bet we ever made, I would say without doubt was when we did acquire our largest competitor, SAVO. Really did a lot of hand-wringing about that decision because I kept picturing myself walking in that first day and going, "Hey, I know you hate us. I know that because of us, probably your best friend got laid off. We've been stealing your customers and making your life miserable. And now your stock's not worth what it would've been, et cetera, et cetera. But I swear we're going to be a great team together." And so going into an acquisition at that point in time, it was a huge bet for us.
Peep Laja:
So you're a new CEO at this company. You've been at the job for four months now. You're not a founder. Lot of SaaS companies are thinking, when is a good time to bring in a "Professional CEO." What's your take on this?
Randy Wootton:
I think it's at that inflection point of series C, where you're trying to think about expansion growth, and you're starting to think about these, go to market strategies. And I would say that a lot of SaaS founders tend to be technical and they want to stay focused on the product. And if they recognize that's their area of expertise and they're spending a bunch of time doing things they don't like doing, which is go to market or managing large organizations, that's the opportunity to bring in either a COO, a president, or a CEO.
I think it really requires a good interview cycle because that transition, and I've done this twice now at companies where I've come in as the next phase CEO and had to work with founding teams and what that means in terms of roles, responsibilities, and how you move that forward. It can be tricky. And so I think spending the time during the interview process to date and get to know each other and recognize what you're trying to achieve together for the company and for the investors is really important. But I do think specifically it's the expansion growth stage.
Peep Laja:
SaaS founders don't always have the experience necessary to be a CEO. It makes sense, right? The so-called professional CEO has management skills developed over thousands of hours on the job. These skills can be learned.
But as Randy says, it's sometimes hard for founders to let go of their product and delegate. I've been a freelancer. I've built three companies plus failed at one. And a key lesson learned, a rake I've stepped on again and again, is that a founder CEO needs to spend less time fixing things themselves and spend more time recruiting senior folks that can own it and handle it.
Each startup relies on figuring out a bunch of stuff, hard problems, and your business success will largely depend on your ability to hire people that can figure those things out. Founder alone can only do so much. But it's not like Jeff Bezos ever ran a company this big either. It's all in who you hire.
Now, CEO owns the strategy of the company. You come in, obviously day one. You're just getting to know what's going on. What have you been looking at? How are you now going about setting strategy for Maxio?
Randy Wootton:
Peep, this is my third time as CEO. And most of my experience and background for the last 20 years has been in a go to market. And so I was deliberate about moving into the office of the CFO because I wanted to learn a new space and see if the skills I had learned as the CEO would apply horizontally into a new vertical.
And so I came in with a just stated point that I need to go meet customers, I need to talk to analysts, I need to talk to people on the front lines. What's working, what's not, where do we sit, where's the competition. So I've spent an enormous amount of time with, again, customers, prospects, and analysts, because analysts are the ones who really define your category. And so they've already done the deep dive in terms of the product capabilities to tell you where you're good, where you're bad and where the competitors are going.
And then the other thing I did was because we were an M&A, bringing two companies together, trying to charge and chart this one next year. So what is one Maxio? What does Maxio look like going forward? And so we picked an event faster and we created it as a lightning strike. And so our new UI and UX is going to come out at faster. The single sign on is coming out, our new website's being launched. So you have this unifying experience for everyone across the previous legacy companies to focus on bringing birth to the new company.
And so in parallel, I think the thing we really focused on out of the gate was what I call a strategic narrative, which is you get super clear on where you are in the market, the problem you're solving and what is the capabilities that you're bringing that are differentiated, that translates into your positioning and messaging. And that translates into your go to market motions.
So if we could get everyone literally on the same page, in terms of the positioning and messaging in the sales cycle, the go to market team is humming. And that's what we're launching at SaaS in a week or so.
In parallel, though, you have to have this broader strategy process. I used the book Playing to Win. It was a great strategic process. I've used it at several different companies. I was introduced by a mentor at Salesforce, and it is a deliberate strategic planning process. And we're going to have a meeting on September 26th, where we present our initial strategy to the board. And this strategy is meant to be where we want to go over the next three to five years. I know it's wrong. We will not have gotten everything right. But I think bringing a point of view to the board with a set of assumptions with data to inform it by set of questions you want to get addressed. You start to bring the board and management team together in terms of how they're envisioning the future and what it's going to take in terms of capabilities to go after it. And that will cycle. It will spend the next three months kind of cycling on it.
But by the beginning of the fiscal year, the strategies should be locked, translate into an operating plan that everyone's executing them against. And then next September when we come back we'll say, "Hey, we're updating the strategy. We shouldn't be changing the strategy, but we should be updating it a little bit based on what's happened over the last three to six months since we last finalized it." And you, of course, correct.
Peep Laja:
If you truly are trying to win, you've got to have a strategy. The key components of it are the winning aspiration. What are you trying to build? A crisp vision of where you're going as a company. Next, got to choose which customer segments to go after, and what's our theory of advantage there. How are we going to win?
Strategy's not a set of company values or lofty goals. Here's Roger Martin author of Playing to Win: How Strategy Really Works, on the two choices that leaders often make in the wrong order.
Roger Martin:
They say, well, I'm trying to do Playing to Win. And we got the winning aspiration all set, and then we got where to play all set, and now we're stuck on how to win. And I have to tell them the reason you're stuck on how to win is because you've got where to play already design. So the minute you lock and load on where to play, it restricts the ways you can potentially win. You've got to have the two of them kind of work back and forth until you settle on both.
Peep Laja:
The strategy. What does that look like? If you go by Roger Martin's playbook, do you have 20 pages of what would have to be true? And then argument and discussion. And is there also like a TLDR version, like a one pager that you evangelize?
Randy Wootton:
There's five questions that you're trying to answer. What is our aspiration? Meaning what does success look like for you over the next 24, 36 months. Where do you want to play? Which is basically your category and your ICP, where do you want to play? How are we going to win? So what's the differentiated capability that you offer compared to the other competitors in the market space.
Number four is what are the capabilities we need to build? So you have to have a realistic assessment of what you do well today. What's your core DNA, which going back to our earlier conversation may lead you to go buy someone else. If you don't have a full differentiated capability, you need to go build it or buy it.
And then the fifth piece is really around what are the systems and processes you have to put in place. And so if your entire company is oriented around, winning in the mid-market space and financial operations platform, what does that mean in terms of the people that you hire? What does that mean in terms of the partnerships you develop? At the end of the day, you take those things and you put it on one page and you say, this is our strategy. And there's a whole bunch of backup in terms of data analysis that goes into that.
I take that strategy and I convert it into an iteration of what Marc Benioff uses as the V2MOM. The vision, the values, the methods, the obstacles, and the... Whatever his one is. I have a slightly different version of it. But I literally think you print that out as one page, you put it on everybody's desk and you say, "This is where we're going." And then everyone knows our vision is X, our mission over the next 18 months is why, here are the objectives and the work that they do each day, they try to align with it.
And I think the last piece of that is you really want to be sensitive to the stage of the company. Like what worked for Microsoft and Salesforce, where I used to work isn't going to work for a $50 million, 300 person company. So you got as a CEO, be sensitive to how do you bring in the appropriate stage appropriate processes for doing strategic planning, organizational alignment, systems of accountability, et cetera.
Peep Laja:
V2MOM stands for vision, values, methods, obstacles, and measures. Salesforce's Marc Benioff thinks it's the foundation of any successful business. It's a strategic TLDR that you share with your board, your leadership team and your employees. They take it and adapt it to their role and efficiency grows. Vision is critical important, and allows you to lay the groundwork for your V2MOM.
Every time you invest in your vision, you become more committed to it. Mediocrity happens when you let go of your vision. Here's Marc Benioff on the vision that guided Salesforce to success.
Marc Benioff:
We always had a vision that was really three things. One we wanted to build a new technology model. Now we call it the cloud. Two, we have a new business model, which is subscription or really an orientation around the customer. That was very different two decades ago. And three, we had an idea that we could integrate a set of values into our business, that our values would create value. And it's really was a segue into a different type of business for us that at that point where you realized that our business was really more than just about a shareholder return, that our business was becoming about a stakeholder return.
Peep Laja:
What can you tell us about Maxio's strategy? Why are you going to win?
Randy Wootton:
So the theory to win is we're going to make a CFO's job easier and they're going to be more efficient and they're going to be more effective. And if you can solve that pain in terms of how do CFOs close their books, there's a willingness to pay.
The thing that's interesting for me, Peep is as a CEO, the thing that I'm really focused on is managing the business and managing the board and managing investors. So every 18 months you're going out... Well, every 12 months, you're going out to raise more money so that you can get to the next 18 month milestone. Today you're hearing in the marketplace people need to make their cash work for the next two and a half years. The way you create stories about your success and where you're going to go on the market is using the type of analysis that our system provides.
So customer cohort analysis, ARR waterfall, go to market strategy. What we call monetization, what pricing's working with different segments. So all those core business questions that you want to address around operating metrics, our system enables, and it changes the game.
We can go from closing the books, meaning not just the financial statements, but also all the operating metrics that you would produce for a board meeting or end a month. People take 15, 18 days. We can have that done in three days. And so your ability to be able to have access to information, accurate information, because we're the system of record for invoicing and billing. So you have accurate information that you can take action on in the first week after a month closes is invaluable.
Peep Laja:
So this sounds a lot like classic Clayton Christensen says competing against non-consumption.
Clayton Christensen:
If there's a need in the market, there are actually a lot of people who don't take advantage of that offering because they don't have the money. And when somebody makes it affordable and accessible, then you compete against non-consumption. And in almost every case non-consumption offers the greatest opportunity to grow, but you don't see it the way you keep the books don't cause you to look for non-consumption.
Peep Laja:
Currently they're not using a solution, you have a new thing.
Randy Wootton:
I think there are two components to it. One yes, but then they can also say, "Hey, this is easier in a recession for me to use this, to use Excel because it's the way I've done it." So I think there are different inflection points. And that's the thing we try to talk about with our prospects is where are you on your growth stage? Are you series A, series B, C or C? What are you confronting in terms of the challenges to reach that next stage of growth?
Everyone wants to grow. Right now they talk about discipline growth versus growth at all costs. So you actually need more insight into your business. You need more insight into your LTB to pack ratios. You need more insight into your magic numbers. You need more insight into your rule of 40.
So these set of things that you may have just been focused on booking's growth and AR growth. Now you have to have this broader understanding of the business. That's something that's super hard to do with Excel when you start to have a bunch of customers. And so at each stage of your growth, you have a different set of questions you're focused on. You have a different set of jobs to be done in your finance organization and your willingness and appreciation for bringing in purpose built solutions increases.
Peep Laja:
Curious to hear the way you discuss the business, you're not talking about payments at all. So subscription billing management, is that table stakes?
Randy Wootton:
Absolutely. The invoicing and billing data one... So I've been through due diligence a bunch of times. And if you don't have this data ready to go for people to go poke at it for either raising money or if they're going to acquire your company, it's hundreds of hours of work with your CFO and you're going back and you're trying to find contracts and you're trying to find, "Okay, wait, when did they sign, what was the agreement?" And you're trying to consolidate that into a way to represent your different customer cohorts. It's wicked hard. And so I think that the key is having a system. Usually people start with QuickBooks or they start with zero as their general ledger when they're getting started. They need a system of insight, which is tied to the way that they're running their business to compliment that.
At some point they will probably go to NetSuite or they'll probably go to Intact because there's more controls and it's like, if you're going to go IPO, you need to be on one of those guys. But if you can have a system that's helping you through all those stages up until you go to NetSuite, you can actually delay the need to purchase a NetSuite or an Intact. Because you've got all the data and all the reporting you need to manage investment cycle or deduct diligence cycle, or just literally as we look at our business and we look at churn and we try to pivot by segment, by product, by region, what's going on? Where are we losing customers? What can we go do about it as an executive team? We just had an offsite last week and we focused on that specific question.
Here's the red spot. What are we going to go do? Most companies it's super hard to do that is you move from a series A company where you're focused on one product, one customer, one region to now introducing this level of complexity. You need something to help you sort through the enormous amount of data to find out where the problem is and what you can do about it.
Peep Laja:
So do I understand correctly that you identified an underserved market segment before they're ready for NetSuite, then that's where you come in. Who is the competitor in that space right now?
Randy Wootton:
There are competitors for the different components. So Chargify for billing solution, you would hear a lot about ChargeBee. And so there are customers that are in there and they're doing the SMB. You also hear to your point Stripe. And they're challenges with each of those solutions. Stripes requires a lot of development. It's not user friendly. So on that side, on the more of the subscription management revenue recognition, you'll see Recurly in the low end. At the high end, you see Zora. So Zora is a 300 million dollar company, but they only have a thousand customers. The other competitors are starting to offer some other capabilities around revenue recognition, subscription management. So I do think this idea of building a financial operations platform that sits within the monetization ecosystem that allows you to do things like subscription management, revenue recognition, billing payments, AR management from one system will be the future.
Peep Laja:
You have to know what your core focus is and what you're really competing on. All too many companies have unclear and unproductive positioning because they lack the discipline to say no to attractive looking revenues that don't fit.
If you go after the dollars in a market, that's not your core focus. In the end, you will lose to highly focus competitors. When a company has a narrow focus, it increases its ability to take ahead. The more focused you are on any one thing, the bigger attack on that one thing you can take and remain standing.
Organizations also need resilience. The ability to stand up when you have fallen down and overly narrow focus can even eliminate that capability. Surprises will inevitably come along that teach you so hard that they challenge the strategy at its very core. Only a matter of time.
To go for this market opportunity. You're making some sort of strategic trade offs. So what are you choosing not to invest in as much?
Randy Wootton:
At this stage we're not interested in the super high end enterprise customers because the level of sophistication that they need is beyond what we currently offer. We are very interested in the high end mid market. And so we've offered new capabilities around multi entity, for example.
I would say the other area that we are not focused on is the very, very small SMBs because our system is some flexibility. It requires service implementation to get up and running. And the cost to do the customization outweighs the proportion you'd want to spend on technology. So I would say we're a solid mid-market play if you're making more than a million bucks, but under a hundred million dollars, we can help you be successful. The other thing I would say is we're primarily focused on B2B. We do these set of things well. And so we aren't spending time on the B2C core use cases.
Peep Laja:
What would be your three pieces of advice to fellow SaaS CEOs?
Randy Wootton:
Number one, cash is king. You've got to understand what's happening with cash every day. What your zero cash date is, especially for VC backed. What are the decisions you're making that are consuming or generating cash.
Number two is I think a lot of founder CEOs take money from VCs and PEs and almost resent it because they feel like they've sacrificed control. They have almost an acrimonious relationship with their investors. As you described professional CEO or the one that's being called in I think I have real clarity that my boss is either the VC or the PE firm. And so I view them not as threatening, but as partners. They had a specific idea about what this space was going to do, they made a thesis, they invested a bunch of money. And so then my job is how do I manage the board in a way where I'm answering their questions and we're participating on legitimate issues and I'm coming forward and saying, "Look, I don't understand this or this doesn't seem to make sense. Can you help me understand?" And it's like, you get them on your side of the table versus feeling like they're always on the other side of the table.
Number three, I think is it's nothing new. But it's focusing on your executive team because your executive team as Lencioni talks about is your first team and that's the team that's going to help you solve business problems. And if you're an early stage founder CEO, you've probably hired your friends. You guys have been through war together. You're never going to part. But if you're a CEO, you always have to be evaluating the talent around the table and can they scale? Are they able to do things differently? So at a hundred million dollars, the types of problems you're working through, the types of solutions you have to create are really different than if you're 10 million.
And again, if you want to scale as a CEO, I think the opportunity is support people you got, when you have an opportunity, bring in someone that's going to help you get to the next stage. And then how do you raise the game for the whole objective team?
Peep Laja:
So what are three things serving Maxio well? One, they understood the benefits of mergers to create a better product.
Randy Wootton:
So for your customers, you want to sell in additional products and services and grow your net retention and M&A can get you there.
Peep Laja:
Two, they have a very clear strategy.
Randy Wootton:
The thing we really focused on out of the gate was what I call a strategic narrative, which is you get super clear on where you are in the market, the problem you're solving and what is the capabilities that you're bringing that differentiated. That translates into your positioning and messaging, and that translates into your go to market motion.
Peep Laja:
Three, Maxio is trying to better understand their customers. And they're just what they're doing.
Randy Wootton:
We try to pivot by segment, by product, by region, what's going on? Where are we losing customers? What can we go do about it as an executive team?
Peep Laja:
One last takeaway from Randy.
Randy Wootton:
A lot of SaaS founders tend to be technical and they want to stay focused on the product and that they recognize that's their area of expertise. That's the opportunity to bring in either a COO, a president or a CEO.
Peep Laja:
And 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.
