3 Lessons that SaaS Founders Should Learn from David Cancel

Hiten Shah and David Cancel

In 2010, David Cancel and I were friends. When he pivoted his company Performable into web analytics, Performable went head-to-head against my company KISSmetrics.

We became direct competitors.

I learned a number of valuable lessons from watching David operate in the same space for a year, before he sold the company to HubSpot in mid-2011. Most recently, David’s started a new company called Drift.

David has become nothing less than one of the very best product CEOs in SaaS. Every SaaS founder can learn these key lessons from David on how to build a great product and business.

Learn the Ultimate Truth

Competing against David is incredibly frustrating, but not for the reason that you might think.

  • He won’t offer a 50% discount to take your customers away.
  • He won’t trash you and your product behind your back.

He will go out and build a better product. And you better watch out over time because chances are that he’s going to service the customer better than you.

Performable started as a way to create landing pages to drive conversions. Their tool included a way to measure conversions in a person-centric way. Rather than just showing you aggregate data on the number of visitors to your site, Performable showed you person-by-person who the person was and what pages they visited.

After doing deep customer development, they decided to focus their entire product on the measurement and people-tracking part of their product.

screen-shot-2016-09-19-at-10-12-44-am

That exposed a big gap that we had in KISSmetrics. Even though we had gone to market first with people-based analytics, they took it and ran with it. We had bits and pieces of people analytics in our product, but they doubled down hard on it and ended up serving that need best.

When you’re in a competitive situation, every entrepreneur worth her salt is driven by the will to win. David just approaches it differently from most.

David never thinks about it in terms of taking market share from the competition or screwing them over. David focuses on building what the customer needs. His attitude is, “I’m going to service the customer better than anyone else in the market.” And isn’t that the ultimate truth anyways?

Key Takeaway

You’ll win every market if you can reach your customer and service them better. It’s easier than ever to acquire customers for your SaaS business. That’s why:

Servicing your customer better than anyone in the market is how you win.

And no other way.

How to Be a Benevolent Dictator

David can’t get enough credit for turning around the HubSpot product. David became Chief Product Officer of HubSpot after they acquired Performable. I like to call him The Benevolent Dictator, because that’s the type of person it took to rebuild HubSpot’s product and engineering teams.

With David, it’s going to be his way or the highway. He has a strong will and product intuition, especially having been in SaaS for so long. He didn’t care about pivoting his company into a market to compete directly against a friend. But his intentions are always good for his team, for the market and for the customer.

Going into 2011, HubSpot’s churn was too high and its growth decelerated. David turned over the engineering team, restructured it and rebuilt the product. That was not an easy job to do at HubSpot’s scale, having pulled in $15M+ in 2010.

hubspot-ltv11

(via SaaS Metrics 2.0 – A Guide to Measuring and Improving what Matters)

In 2012, HubSpot rebounded under David’s product leadership. They cut churn in half and more than doubled their LTV:CAC ratio. From there, as Jason Lemkin observed, “they accelerated faster than the average SaaS company to IPO.”

David’s attitude is that “I’m going to succeed.” It scares his competition and it’s magnetic to the people around him.

What makes it work is his rapid execution and learning behind the scenes to build up conviction on his decision-making. When he finds what he’s looking for, he doubles down hard and fast on the decision. Once his mind is made up, his business is operating that way, his company is operating that way, and his team is operating that way.

Key Takeaway

Dictatorial conviction and benevolence come from the same place: deep customer development and focus.

  • Inform your vision with data and rapid execution.
  • Get your team on the same page by focusing on the customer.
  • Iterate internally on product before fully releasing and committing to anything.
  • Commit hard when you find product-market fit.

Otherwise,

Dictator CEOs flame out when their team burns out.

Without caring for your team and your customers, you’ll have no loyalty and you’ll lose both your team and your customers.

Iterate on Your Self-Awareness

“If you intend to found a tech startup I believe that an MBA is a complete waste of money.” – David Cancel (2013)

“I’m hiring an MBA to join my team at Drift.” – David Cancel (2016)

David has been in the startup game since 1996 and he has multiple exits under his belt, but he takes absolutely nothing for granted. David grew up in Queens, New York, to immigrant parents who became entrepreneurs out of necessity, not because it was hip and cool.

That drives him to be self-aware and borderline paranoid. He’s constantly gathering information on himself and his business.

A few years ago, David wrote a blog post about how MBAs are dumb and he wouldn’t want an MBA in his startup. Now he’s doing the opposite. He’s going out and hiring an MBA to join Drift.

MBAs have been around as long as David has, so you’d think he would have an etched-in-stone opinion on them. At worst, you’d think that David is just flip flopping or changing his mind.

What he’s doing is more subtle than that.

David is iterating on his skills as a business person. He’s aware that he lacks a skill set that you acquire in business school, so he’s augmenting on his team structure to include an MBA grad as an Operator in Residence. He’s constructed a deliberate experiment to learn from and improve as an operator and CEO.

How you iterate and learn with your product, David does with all aspects of himself and his business.

Key Takeaway

Reflect on your insecurities with yourself and your business, and use them to drive you to be more self-aware. To learn more about your blindspots, consider the opposite of some of your firmly held beliefs.

For example:

  • If you believe an MBA is worthless, ask yourself, “What might I learn from adding an MBA to my team?”
  • If you believe that you should never copy a competitor, ask yourself, “What might I learn from copying a competitor’s feature?”

Don’t stop with the thought experiment. Next, run an actual experiment to learn and grow in your self-awareness.

Learn More from David

To learn from David straight from the source, check out the following resources.

David

Drift