A Product-Led Approach to Product-Market Fit

with Sudhee Chilappagari,

Cloud VC, Battery Ventures

In this episode, Pete is joined by Sudhee Chilappagari, Cloud VC at Battery Ventures. Together they discuss how product-led growth is the key to revenue growth, what kind of startups a VC is looking to invest in, and what’s happening in the market today.
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Key topics in today’s conversation include:

  • Sudhee’s journey of a lifetime (0:52)
  • How PLG accelerates revenue growth (5:09)
  • The kinds of startups a VC invests in (13:30)
  • How startups can find product-market fit (21:52)
  • What’s going on in the market today (34:02)
  • Thanking you for the journey (39:41)


The SaaS(ramp) Podcast explores how tech leaders scale from product adoption to enterprise success. Learn more at www.saasrampmedia.com.


Pete Thornton 0:00
All right, welcome back ramping up to The SaaS(ramp) Podcast. I’m your host today, Podcast Pete. Amazing guest on today. We’re here with Sudhee Chilappagari, Cloud VC at Battery Ventures. Welcome to the show, Sudhee.

Sudhee Chilappagari 0:20
Hey, thanks, Pete. Thanks for having me. Hello, everyone.

Pete Thornton 0:23
Super excited to have you on today like really looking forward to your perspective as a VC. But first, I did some digging back on LinkedIn, and you once referred to your journey as like, journey of a lifetime. So totally loved to know, like, what personal professional experiences have led to the battery ventures opportunity you’re in today?

Sudhee Chilappagari 0:47
Yeah, sure. I have to share that I was born and raised in India, went to college in India. But I happened to be one of those kids who kind of discovered into it early and kind of grew up on the internet, if you will. So I discovered like Y Combinator and I’m calling Gregory who can you can say even like, as the father of software startups or Assassin genuinely, he’s the one who used to incubate companies, breeze mountain, you running an accelerator Y Combinator. So I stumbled across his blog when I was in my freshman year of college and kept reading more and more about startups. And I realized that this is my thing. I’m like a startup guy. And so that kind of led to me starting a company right out of college. So this was a company based in Bangalore, which I started as a bunch of friends at college and met with SaaS company ran it for four years, that had taken care of going despite there’s a ton of money for reasons though, but one of my biggest learnings that diversity of market that wins and companies are the consequences of the market and I wanted to be this guy a part of a large market at the right time at the right place. And that led me to move into Bay area. So I had to like move from Bangalore to San Francisco and spend to get this little company what segment back then segment was kinda like a hidden gem, but I was a user of segment for a long time. So that made me kind of like reach out to the founders and those kinds of people can open the door for me as an agent, as a product manager, they’ve spent like a little over three, three years there. Subsequently, that company got acquired by Twilio spent the year there and it was kind of like the team to go back to my entrepreneurial roots, start something or surround myself with founders and realized this whole venture capital thing and investing thing is something super interesting because it plays to my strengths. And I wanted to be in the intersection of people and products and markets I get fascinated learning about new markets you interact with new software and just slip hanging myself surrounding myself with like smart people. So I thought like, we see is like one job that kind of gives gets me to do all these three days it’s since my passion so spent like a year kind of getting to know the folks at Battery as you I always had, like a deep respect for them, given their credit portfolio and track record of investors and supporting founders. And the one year and the only increase my conviction a little actually towards that. Well, when they opened the doors for me I could have said also so that onto the shore was a founder first and then product guy in the Euro now into investing.

Pete Thornton 3:43
That is a journey of a lifetime. Like that’s interesting because it’s like it’s global in a few ways, just with the like, move from Bangalore to Bay Area. And then just just just in general, like with the internet, like, early to the internet, having that product knowledge kind of like being a subject matter expert in your space. You hear that from a lot of CEOs and VCs, they just had that very niche, that very deep understanding.

Sudhee Chilappagari 4:10
Totally. Just to piggyback on that, I have known Abby from college days who will run say Postman where you work these days, but no, ABBY No, actually, like stumbled across the idea for postman StackOverflow which happens to be like this online community for developers right so it’s kind of crazy. There are people are like spread out all over the world. But internet is how you kinda like discord just instead of a one thing led to another, if you will, a carrier group of cloud, right like that’s the you’re all beneficiaries of into the Cloud Admin raise.

Pete Thornton 4:42
Yeah, that’s amazing. Yeah, I love that. That’s a great backstory. I am not surprised at all. So more recently, I saw you gave a talk at pandemonium. It was about plg and then just in general, how it like accelerates revenue growth. So love to start off with that because I said integrates with so many ways to monetize a product offering, why product lead growth or PLG?

Sudhee Chilappagari 5:07
Yeah, totally. So I was like a user of Pendo for a long time, he also happens to be a battery portfolio company. So when they are putting together the pandemonium event, so I felt that I’d say it’s a place where we check, we should do surveys. So the talk was around product-led growth. And how, frankly, drones can accelerate product market fit and revenue growth. But there’s been a lot of chatter about this topic in the last few months, two years, Cytec, everyone is talking about product overload. But I want to start off by giving a caveat, caveat, if deck product good is not forever, froglet growth is the time to execute, buy leads, blindly trusted, and go ahead and submit for your software company. But it works out very well for specific kinds of software companies where the market is very large, where you don’t have like a finite time where it’s almost like expanding time or like I would say in finite but like a very large market opportunity, where you have a millions of potential users who you could tap into. And instead of taking this traditional top-down sales approach, where you build the product first. And you have like this ICP defined by your product and marketing and your sales is kinda like going and knocking the doors of people trying to give demos and POCs and stuff. But regular growth does is kind of inverse as that will be sent to a more bottoms-up way, right? Like where users discover and pull you versus you kind of tend to push your product to their right to their roots, right. So and they’re like many, many reasons why, I’d say like, try to go to the far turn. But if you fight fighter, like the top series is that the first one be when you’re a startup, or you’re building software, there are two phases, I kinda like define the first phase is more of an art. And the second phase is more of a science. It’s some call it zero to one today, some call it audit and sales. The other way to look at it is like pre-product market fit and post-product market lately, and pre-product market fit. When you’re analyzing a top-down approach, it’s easy to get fixated to the notion that you have a product-market fit because you have customers who are being let’s say, $10,000 each a significant sell, and you have undertake revenues while something is working. But when you take a profit growth approach, it’s not about revenue anymore. It’s about having meaningful use HR user base attraction in terms of whether people are signing up for your product organically. And those Signups are they actually like active users, and those active users actually become fake customers, and do some of them actually evangelizing your product. So you’re essentially like, at a harder thought towards getting to product market fit. And that only makes your company strong, right, like so. The number one reason, my opinion to take a product-led growth approach, when you have the characteristics of their business that way PLG works like market and stuff is to find the product market fit more organically and have it more stronger, because you’re putting your product out there on the internet. So you’re not like hiding anything, anyone can sign out. If someone signs up, and they see the post-experience, and they don’t like it, they’re not coming back to you anymore. So that way, you’re forcing yourself to build and design a great product, great user experience and show value instantly. And once they start finding value, they start using it without you having to do demos, and POCs and stuff. And then start recommending to people whether it’s internally or externally. So overall, the journey you’re taking is like much tougher than the top-down sales where maybe you’re selling to friends and family first or a bunch of design partners who are saying, Hey, if you build this, I’ll pay you and stuff. So you kind of like get tricked into the notion of having product market fit. So you could get $12 million dollars in revenue faster than you realize, wow, going from one to five is really hard. But it product market fit in case of PLG situation, you might not get to a million dollars of revenue for the first four years or maybe more. But once you get that first million dollars, maybe going one to five becomes easier because the foundation that the universe gives a five microcredit SEC faster. That’s like one main reason. And the other reason is the whole growth story becomes less about growing at the cost of sales and marketing expenses, but growing more efficiently and as you see, right now everyone wants to be more efficient. In public market investors are rewarding companies that are more efficient than financial aid that are burning a lot of money right? So as companies kinda like figured out, how can I play in a more sustainable way? How do I grow revenues and stuff like coin feels he is another candidate good reason, because a lot of these users are organically discovering you via marketplaces, SEO, SEM, or virality and stuff as opposed to you hiring a lot of STRS or AES and stuff. So you had this cost-efficient growth engine, on top of which you can layer people and stuff. So it’s like pouring gas on the fire. So the fire is under the lid up, and then you’re pouring gas and works. It’s like trying to pour gas was in type ignite later, right, like, so. Yeah, there are many benefits. But these are like the top two benefits, I would say, to take a PLG approach.

Pete Thornton 10:47
Okay, I feel those differences because I did the same role in two companies back to back one was top-down once bottoms-up. Second one, as is Postman and I have never seen anything take off so rapidly and quickly, like every challenge that we have had, in the last two years has been based purely on scale, because that foundation was laid so well, but to your point, it was laid over a long period of time. And that product organically found its way into that user base. And it wasn’t about like the product itself was educating the users. People were educating each other because they became kind of evangelists for it. As opposed to you hit the phones, and you tell people what it is that you have and why they might be interested, like there’s a completely different, there’s still a sales cycle that happens. But it’s such a pivot. So anybody who comes into a product, lead growth organization, from external because we have to think about it on the new hire side, when we’re going to ramp somebody, like what organization did you come from? Are you familiar with this motion, because it’s the difference between PC and Mac, it’s not something that you might have in your program to get somebody from day one to a fully ramped professional for your organization. But it’s going to make a massive difference in how fast you’re able to pick up what’s happening. So yes, it’s fascinating to me.

Sudhee Chilappagari 12:07
Just for our audience here, just for audience who are not fully familiar with Postman, like, Postman is basically building tools for developers with respect to API management, like all things API, basically create a publishing there and collaborating with other people monitoring and stuff. And that’s like a large market where you have 80 million or so developers and post married to BLC approves, and now we have like 20 million developers, or which like 5 million or something or active so that that felt and get it. And now they’re having like revenues probably close to 200 million or something. But the thing is, the first four years was about building a foundation and getting to 1 million developers and not focusing on revenue essentially. So they could have taken a totally different top-down approach. But that would not have resulted in the kind of growth they are having now. So that’s a good example of using Theologie to finally build a good product, get a lot of users get product market fit, and then monetize.

Pete Thornton 13:08
Yeah, yeah, that’s talking about if you have another journey of a lifetime right there. I didn’t know that you knew Arb and Arb back when as well. So you’re leading these simultaneous licenses? Very cool. So we are in a slightly different market right now. It’s just a little bit different. Like there had been so many ups and downs in the past two and a half years. So as a VC, you’ll meet hundreds of startups looking for money, and you selectively invest in one or two organizations per year as it seems to go. So what are the top reasons a VC like yourself might pass— Let’s take more like of the negative route. Why would you pass on the company?

Sudhee Chilappagari 13:48
Yeah, well, we only have so much money. So we have to pick and choose. But yeah, there are many reasons why we might pass a company, but if I could, if I could summarize top reasons, I would say and this might be like, different for different reasons, right? Like, there are VCs who are like, Oh, we are on our back, just great follow up, doesn’t matter what they’re building. Right? And there are with us for life, you’re gonna bid on markets and stuff, right? So, for me personally, the number one reason where I kind of like pass the company’s happens to be market. And I am a big believer that can founders and can companies create new markets? Yes, but there is always an external factor, some kind of like tailwind that action creates a market and you are kind of like taking your surfboard and reading for the Vive to catch and like Sir, right, it’s hard to like, create a surf because your ocean is like larger than new. It’s you can’t go and like try to and waiting for that wave to come is also kinda like sometimes a bad idea, right? Like you just need to be in the right place at the right time. So I kind of like end up like picking market over everything. So the first SOAP When we pass like it’s the postseason happens to be like, it’s a bad market. And what why do I say it’s a bad market? Right? Like, maybe the need is in pronounced enough, the problem of the market need, the need that founders are trying to solve, or the companies trying to solve is not like pronounced enough where the market is willing to pay a price for it. So that you can actually monetize and build a business out of it. Right? Because great idea, it’s not equals to great company and great business. Last year, we also learned that great business is not necessarily a great investment all the time, like the rent vendor, you partner with them. And at what stage do you partner at what value actually partner, what valuation potentially kind of like exited investment also determines whether it’s a good investment or not, right, like, but the first for the first one being basically, like, it’s a bad market, right? Like, it’s a buyer who does not have a budget, or it’s not number one priority, or number two priority for them, like filming video, or maybe it’s a small, very tiny market, maybe the problem is for now is data, but it’s like I already leash market that you can actually build a larger set. The second, and let’s say the market checks. The second reason is lack of product market fit, as I said, right, like so we see like, hundreds of companies, some of them might have big revenues, actually real revenues. If you’re getting reference back the plg presentation that I gave, kind of one year, I give like an example company that has grown from like a million to 7 million in revenue over the course of like three years. And if you look at their this graph, by all means, that’s like amazing revenue growth, right? Like, you almost grew like six times in three years, which is kind of nice growth. But when you slice and I use that number, and realize that where the growth is coming from, whether it’s like new revenue growth, or upsells, or and how’s your look at churn and retention by cohorts and stuff, you realize that, wow, this company does not have product market fit, it’s kind of like a leaky bucket where they’re calling it an expensive sales and marketing. So we’ve spent a ton of times trying to understand whether the company has product market fit or not, it’s kind of interesting, because product market fit is also not a one time thing. You’ve kind of find product market fit, and you have to sustain the product market fit. And a good example is like Facebook, you are all hooked up to the Facebook walls and posts and you’re chatting with friends reconnecting with our old friends and stuff. And now I don’t log into Facebook anymore. So you could say that you’re maybe the core product does not have broad market freedom. And that’s the reason why the gods Instagram and WhatsApp believe their product markets relevant Ben Stokes. So, the second part is basically like the past and if there is no product-market fit, and they were highly developed in steps and also like the nuances of like, slicing and dicing various qualitative and quantitative data to tell whether a company has problem or not, but those are like the topics and market lack of basically bad market and no product-market fit only for two big reasons. One, you pass a country.

Pete Thornton 18:16
Okay. Okay. Yeah, those completely make sense. Are there because you mentioned you mentioned like, almost like a gut feeling, but quantitative qualitative? Are there I know, there are boxes to check. But like, is there some form of just like heartbeat that you get when you get around something that is up fit? Like, does it intuitively make sense to you over time? Like, how much of that is art versus science? You mentioned that before, too.

Sudhee Chilappagari 18:41
Yeah, you’re like it depends on the stage of the investment right? Like when we are like needed we meet like companies where there’s like two founders with an idea mostly like per day but sometimes even not a prototype right? And in that case, you’re like underwriting the investment based on the TAM which is like the market like total addressable market and the tea quality of the tea. Why are these two people the most amazing people to build this company? Right because the other reason when we pass a company is like maybe the sandbox checks Product Market Fit box chips too. But this is number three or number four fear not the number one clear because we want to be far too large categories where their category winners and we are supporting them versus deep part of like the number three or number four story give us the equity value you create, people argue that SaaS is not a winner take all market but I still feel like the number one player creates like substantially more value maybe two to three times more value than the number two or number three player so interest is to sleep. That’s another reason to rebirth company, but going back like how much of investing judgment is art was a science really depends on the stage. When you’re investing in the early-stage startup, it’s more of an art where you’re kinda like, seeing the same vision that the founders are seeing. And you speak to a bunch of customers and customers resonate, that was with that vision. And then you say, okay, you know what? Maybe there’s a high chance that this company might fail. But if it works out, it’s going to be an incredibly large outcome for both the company founders and for others, so let’s partner together. But as we do late-stage rounds, where the company already has, let’s say, 20 $30 million in revenue, then it starts to become more of a science where there’s kind of like a playbook we have seen from a bunch of different companies. And we see, okay, we think that with a good amount of confidence within yourself that you can grow into from 2200 100 or $200 million in revenue, so that that becomes more of a science. But yeah, so it’s, it’s a mix of art and science. And that’s why we will say you’re, the more you are in the study your game for longer time, like you will develop all these estates and tigers that come and enjoy.

Pete Thornton 21:08
Yeah, it really is fascinating, because you’re hearing about all these things all the time and trying to like understand the market, the product market fit. And then a little bit maybe about the founder and the founder team. You mentioned that wasn’t the number one thing. Yep. Super, super interesting. Okay, maybe a double click on product-market fit then since that was such a big piece of, of what you’re looking for. And we’re trying to like you’re trying to make sure the audience listening, they’re like coming in, they want to speak to Sudhee of Battery Ventures/ Like, who is Sudhee? What is he looking for? So how does a startup find that product market fit? Or if you want to just dive into any of the more nuanced pieces. If you have any examples or anything like that be awesome, I’m sure.

Sudhee Chilappagari 21:50
Yeah, again, at product-market fit, again, is more of an art than a science. So the way I think to look at it is like, broadly in a study companies that have found product market fit and trying to understand the journey they took in order to get there, right, and then you start to see some patterns and you say, okay, or give you some inspiration for us to go find product market fit, if we could, we could either date the segment journey, or the postman journey, or maybe a totally different delivery of Microsoft or Facebook, or Amazon and stuff, right. So I think the classic way of many product market failures, late lot of heated trials, and then you stumbled across product market fit or rather, you say discovered Dr. Marquez, right, so probably exists somewhere. It’s hidden somewhere. And you’re trying to like, do a multiple iterations trying to build something, show it to customers, customers use a customer’s like one Feast, do not like another periods, you get to discover that by talking to them by watching them by reading the data and stuff and you constantly you’re like, in a mining for gold. And once you discover that Goldmine, you’re like, oh, shoot, now I need to start digging as fast as I can, so that I can exploit this Alfred. Right. Like, that’s like the classic way of discovery product market food, I think.

Pete Thornton 23:09
Do you have a name for that in particular? Like, even if it’s just your own categorization? Do you call that anything?

Sudhee Chilappagari 23:14
Yeah, I call them like, Discovery product market group. Sometimes it’s like the hunt for the gold or the hunt for the gold where you’re like, time delay, the score profile, probably there is some gold here, you have these macro indicators that say, it’s like a large market and people are willing to pay it or sell compatibles and stuff. New in case, of course, when you could you could argue that GitHub has built a great business, selling to developers. Atlassian kinda like built a great service to developers. So anything that helps developers do their jobs better and faster, and influence their workflow of software development. It’s a great market is something you’re in something around API’s because people are writing a lot of horrific a dozen lines of code. Now they’re lighting like, maybe you could say, 1,000 lines of code, and rest is right. So microservices and API’s and stuff. So there’s like this macro tale well, and I want to build something in this space. So I’d start by an API testing tool, and then it star API development collaborative, until you find like a spot where you say, Should I have like actually 100,000 developers who are using my tool like more than 70 minutes a day? I didn’t have product market say now it’s time for Star monetizing the kind of exploiting the opposite, right? It got to your course when we were fighting Product Market Fit segment to pledge similar approach, which is like, they build something internally to collect data and route it to bunch of different places. One of the founders was like, Hey, why don’t we open source is and the other founders, they I think, nobody, this is like a terrible idea I’ve heard in my life where I’m like, I don’t think like, this is gonna work and there’s nowhere to put it and see so they put it on Hacker News and see 100 people are poor today and the way Get up and make sure to it’s our people like this to let’s keep building until we find product market. So that’s the organic discovery for a lot of companies. That’s a lot of category creators, a lot of like innovators kinda like take. And there’s another and this is like more of, I don’t know what I’m gonna build, but I say kind of like building something and read signals from customers, qualitative, quantitative, and try to find product market fit. This is like one way, there’s a total different way of that, which is more of the Hollywood style of finding product market fit, which is, you have all these like directors who have like scripts, like Christopher Nolan probably has, like spent like a year thinking through inception. And then as like this big script, he’s not making any changes to the script on that role, because he kind of throws that script. And then assembles like an amazing crew. You have like actors, and you have a cameraman with Z share. It’s the whole crew that comes together, like you’re having your GDM Friday, your design, right? And then you spend like a year or two trying to kind of Forge product market fit what I follow as like forging, where do you go to like a raw material mechanical engineering, going to the workshop or a garage and trying to force something right, like cores or metal or something. So that’s a forging product market safe. And it’s some good examples there are like, if you look at Uber, or if you look at open door, they have like this big vision of the what if I get subsidized stuff, and it’ll get a bunch of DeMarre, riders on board, and incentivize drivers to come on platform and give them subsides a little bit to start a mat make me don’t be like the matchmaker, your old tie will build network efforts. And hopefully I can use crazy as an advantage to become profitable and stuff. Right. So that’s a generally accepted thesis, but it requires a lot of capital, a lot of patience. And a lot of ops work and grunt work, right. But if you can, kind of for jokin state, you become like a ubiquitous company, right, like, so. That’s how marketplace search and illiquid. Right? That’s like, the forging approach, I would say. So that’s cool opposite of this whole discovery approach, where the scoring approach is like more lean way of building stuff and trying to figure out like, what’s working, this forging is like to have this big Russia, and it big capital. And people do have to, like, spend the years.

Pete Thornton 27:32
Totally different ideas there. Does the Steve Jobs like story of like, of him coming up with the iPhone, essentially, and then pretty much being like, hey, leave it alone? He basically has this line that says, how are they going to know what they want, unless I show it to them? That feels like the Christopher Nolan like, they will love this movie, I just need to make it first like and all of their right but it’s a big debt on the front end with zero customer feedback until it’s on the shelf, so to speak.

Sudhee Chilappagari 28:08
Yeah, totally end up founder person and archetype you’re looking for on both sides is totally different, right at your unit, someone like abenaah Someone like Nikita Rheinberger was like scrappy learning machine was like constantly getting up in the morning pushing code and talking to customers pushing code onto customers, right? That’s like the giant, scrappy lean, we are discovering Frogmouth period. And the other hand, you read like an amazing visionary, who not only sees the world totally differently, and is also unreasonable to keep pushing the world to think think like, their philosophy. And then not only like a visionary in terms of my idea and vision, but also is a great leader, and recruit and start a movement with a bunch of people who are also as passionate about the idea as the leader is so yeah, I didn’t get it. We meet all kinds of company that’s upon quarter of the job. But yeah, so those are like, two main ways I’ve seen. But there are also like, Bucha other ways to find product market fit, right? So you don’t have to always innovate, you can actually be smart. And Steve Jobs was telling you, oh, good artists, kind of late steal, why trying to like build from scratch when you can steal or borrow, right, like so you can actually borrow product market fit. So that’s, that’s another way of doing it bear. Sometimes, I end up going back again, like the zero to one piece of a company and one to 10 phase of company, right? The other way to look at zero to one or two that is zero to one is innovation and one to 10 is like distribution or monetization. So if you look at Slack, Slack has discovered product market fit, right by doing all these like interesting stuff. And Microsoft Teams kind of bought or product market fit, if you will, from slack saying hey, I have a billion users are already using Outlook and Word and stuff, why don’t I just build a chat application for them? And why don’t I take some inspiration from slack? Right? So it took like less number of years for them to burn Microsoft Teams than it took slack for them to build slack. Because the journey of you noticed calling for awkward, longer than boring, Birdman could fade because you already know what’s working, what’s not working. And you can also build stuff that customers are requesting for and yelling it slack faster, because you have like, everything on your plate ready. And then you use distribution as an advantage. But do Microsoft Teams is another additional offering on top of your existing offerings and get to 2 billion users faster? Right. So that’s another way of doing it, which is borrowing product market fit? And yeah, I think there are many ways to find product market fit. And I only know like three or four ways, but maybe audiences might know more. But yeah.

Pete Thornton 30:58
Yeah, would love to gather that feedback, if anybody wants to add to sue these three major categories here would love to hear that. This last one that you mentioned, the borrowing Does that, does that hinge on having those distribution channels? Microsoft is such a behemoth, like, do you have to be that big, so that you can instantaneously offer it in a lot of cases for free? So you can just like almost, it’s almost like steroid use. It’s just like, we’re just going to push this out to everybody and hit him over the head with it.

Sudhee Chilappagari 31:30
Yeah, totally. I mean, like, in one case, it makes a lot of sense. If you already have a large distribution, and ineffective go-to-market strategy, then ultimately, software, at some point was starting to become a commodity, right? Like software used to be unconventional. Now it’s conventional wisdom, over time have been become a commodity, we’re very short for groceries doesn’t matter, you go to Botswana, you go to Costco, and then you go to Safeway, Wednesday night. So depending upon the buyer persona, and the problem that software is solving, you could argue that distribution is like, if you have distribution, then you can just borrow product market fit. The other reason about product market fit is if you want to actually subsidize, the products, right, like if you want to sell at a cheaper rate, and say, build your own distribution, and video distribution over time, basically, like, I would pick the category winner. And if the product is not rocket science, it’s less kinda like defensible IP, etc, that I would just like, bought a product from them, and sell it at a super low price point. And still make economics work by having a distributed team or being smart about like customer acquisition and stuff. So that’s another reason to Barbara McLaughlin, I’m sure like in every software category, large software carry like email marketing or CRM. While there is a sales force, while there is a kinda like Mail Chimp, or a Braves, you will always find another tool, which is support doing the job of the leader, but it’s four to five times cheaper. And there’s always like a customer segment, end up picking that one because it’s cost-effective and stuff. So it could work either ways. You can be a better mood and Barbara and work a fair you can be a tiny startup, also borrow product market pay, get inspired by the leader and use prizes, and I’d rampage to catch up customers and market.

Pete Thornton 33:25
Yeah, yeah. Makes sense. Yep. Interesting. Interesting. As, as always, I know, our audience will want to know, because of the timing, you came in to hear this term over and over macroeconomic headwinds? It makes me always feel a wind in my face. I’ve heard it over the past quarter, two quarters. So what are you seeing in the market today versus a historical trend over, say, a decade or so 10 years?

Sudhee Chilappagari 33:50
Yeah, it’s such a broad question. People have like Nonnberg to offer it serves the blood, like doing zoom golf. I mean, like, that, I think probably everyone knows, but specifically, you know, since I focus more on like Cloud software, your SAP b2b software companies and stuff, specific to SaaS. 10 years ago, people are still questioning Pendo late SaaS and cloud right late, you know, people were still buying on prem software and SaaS was kind of relatively new, this whole model of reading one setting, you know, launching it to every customer and periodic updates and charging not once but like you know, subscription-based every month and stuff. So it’s up in SaaS was kind of unconventional, but people liked it, because, you know, you can log it and you don’t need to download a file you can use your internet and your browser to kind of access software. Pricing became much more cheaper as a result of the market opposite is also cool because now more people can afford so net. It’s like your beneficiary for both the vendor and the customer. So SaaS is kind of unconventional and stuff. And over the last SR SaaS became conventional wisdom, white light, so everyone watt light SaaS, everyone wanted to build a SaaS company room, what do they invest in SaaS company because of the margins, the recurring revenue model, you know, they’re, the more you develop better to data mode or whether you like the IP mode, or whatever you call it. As it sir, there were a ton of new software categories. Like, you know, back in the day, they were like one or two categories of CRM as a category, maybe there was marketing automation as a category. And now you have 10 new categories inside CRM alone and 10 new categories inside marketing automation alone. And back in the day in each category had two or three vendors that Salesforce Siebel, maybe I said we kind of fake they had a CRM. And in marketing automation had ExactTarget Peridot. But now, each category subcategory each category is designed for 10 categories, and each subcategory has like five to 10 new renders. So overall SaaS became like a conventional wisdom that led to more competition that led to more companies that led to more capital infusion and distribute perspective for the kind of leaders 2010 to 2020. This is like the 10 years of decay, we had roughly 300 or 400, unicorns and unicorn being like a company valued at a billion dollar bow. And in the last 18 months, we have 1300 New unicorns. Wow. Right. So all this kind of like cascaded down to more venture capital going into software companies, I know almost like every company that is as little as like 10 million revenue, was able to raise a billion dollar valuation and start a public markets are showing a different story with the whole stimulus and recession and stuff, investors are scared and SaaS multiples, are kinda like at an all time low. Company, like Twilio is trading at four or 5x Multiple live with a billion dollars in revenue and growing like 60% or 50%. So the biggest thing I’m noticing right now is the two stories that are these overvalued software companies and private side, which have very little revenue relative to the valuation. And the challenge they face is how do I grow into that valuation and sustain that number, which means I need to cut cost, I need to probably layoff people, I need to probably adjust my go-to-market strategies and stuff, maybe I need to start building a PLC motion because it’s cost-effective than like a traditional bottoms-up motion. On the other hand, you have all these early-stage companies, which actually are at their advantage because they probably on the verge of finding product market fit or just for Brandman cafe. And now they can actually, you know, take kind of preventive measures or like take the right steps to where the company in more cost-efficient way and, and not raise it a crazy valuation and stuff. So there are these two tails, which you are noticing at a macro level. And if you’re a late stage company or not a category winner, then you know, you’ve got a late start worrying about a bunch of stuff. Otherwise, you’re an early-stage startup, then, you know, the kind of like, you know, you did the whole world is kind of in your favor in some, in some sense, because you haven’t made any mistakes and the overview, you’re just getting started and you have an opportunity to kind of like, think through and build stuff the right way.

Pete Thornton 38:26
That’s interesting. Yeah. So just that whole dynamic with that, like the number of unicorns like that tells I can see that graph in my mind’s eye, not just from your target Pendo thing. Yeah. And then just because it’s so dramatic, and then understanding it is a nice message for early-stage startups as well. Just understanding they can see maybe where, where it’s headed. And then and then build accordingly. Be a little bit more agile and lean and just make take those steps without being mired in like a former plan. So that’s, that’s nice for maybe some of the audience sitting in there at the precede or A, B, maybe even C series as a general milestones and where they’re building towards. So really, really interesting stuff. They appreciate you unpacking that for myself and the audience. And like, as always, with every interesting piece, I’m like, a minute, 25 minutes and we blow straight through. So I will wrap it up with this, you have had an interesting journey like this has been quite a stepping stone of a lifetime of just moving to even where you are today in this career. So can you think of two or three people that have been instrumental in that or people that you might want to thank for the career to date?

Sudhee Chilappagari 39:38
Yeah, I am a big kind of a believer in mentorship and stuff, we are all can relate standing on the shoulders of giants, right? Like, if I hadn’t been like 1% isn’t zero. It’s hard for people to remember two or three. You know, I want to thank this person at Google. This goes by Google on internet G Okay, UL You’re new, he has been like a huge heart and supporter and a source of encouragement for me, you know, I actually met him instead of funny, either to call me about square, which is now known as block and he used to be head of product at Square. And I remember going through six rounds of interviews and getting rejected the last round, and I was like, so firm, who are I stayed in touch with this guy group will, I know kept nurturing relationships. And he knew it actually, on hindsight, looking back, you know, joining segment was kinda like a blessing in disguise, because, you know, I could I got DiGiGrid squared, and I got I got into segment, I was so happy looking back, you know, I made kind of great friends and seven segment but, and stayed and nurtured relationships with Google. And for people who don’t a Google like he’s an operator, who, you know, work with three amazing founders in Silicon Valley directly reported to them post he reported to Larry and Sergey at Google and the Google Ads product. And then he was acquitted by Mark at Facebook to Will Facebook ads. And then he was like, poached by, you know, the founder of square Jack Dorsey tuber square and Kamyar. So as his good fortune of working with C, everything founders a, he’s like an investor and an angel. And like so many startups, and it still takes time and, you know, help smart people. And I was lucky to be one of the beneficiaries. And there are many moments where I resorted for advice and stuff, right? It was Cebu kind of like made the thought of badly and you know, it worked out very well for me, you know, I turn badly and so forth. I want to give a shout-out to him.

Pete Thornton 41:43
That is tremendous. What a story that is. You need to get into one of those dinner parties over there.

Sudhee Chilappagari 41:49
Yeah, just forgetting about the show’s over.

Pete Thornton 41:51
Yes. If I could use your help with that, that would be fantastic. That’s amazing. sooty. Okay, great, great. Shout out. I love that story, as well. Thank you so much for your time. Appreciate you on behalf of our audience. And thanks for talking to us today a little bit more about PLG product market fit, having some gratitude for the journey along the way, and sharing just all those interesting tidbits about what you’re doing in your career at Battery right now.

Sudhee Chilappagari 42:14
Yeah, it’s a pleasure. And thanks for having me.

Pete Thornton 42:18
When the market shifts in six months, I need you back. We need to figure out where we’re going next.

Sudhee Chilappagari 42:22
Totally. Yeah, that’s cool. All right. Bye, guys.

Pete Thornton 42:25
Thank you. Cheers.