Jan-Erik Asplund
In January, HubSpot (NYSE: HUBS) announced that it was acquiring data enrichment platform Clearbit and its data on 20 million companies and 500 million people.
To learn more, we teamed up with Sandhill Markets to host a conversation with Clearbit CEO and co-founder Matt Sornson to talk about the journey from founding Clearbit to selling it nearly 8 years later.
Transcript below.
Adam: Give us a little intro background on yourself and what you're up to now. That I think will help shape and lead into this founding story segment.
Matt: Yeah, totally. I'm from Michigan. I grew up in the Midwest, didn't really know about tech until I was maybe 19 or 20. I taught myself how to program PHP, Perl when I was 13 or 14, started building websites. I don't know, it's a relatively common story. I find there's a lot of founders that were building websites when they were 13 or 14, at least in my cohort. But yeah, followed a girl to college, was more into real estate than anything when I was in college. Buying houses in Kalamazoo, Michigan.
Then fell into tech, found tech, went to a Startup Weekend pitch competition thing, won a couple at Startup Weekend, started working with a Google partner and just fell in love with tech. Fast forward a couple of years, I started a couple of companies in, first in Boulder, then in Boston, then out in San Francisco, was shutting down my last company, which was a freelance developer marketplace when I found Clearbit, specifically when I was introduced to Alex McCaw, who was the original founder of Clearbit in the spring of 2015.
Adam: Cool. So Alex had already got going, and then when you met him, where in the storyline is it? Had it launched yet?
Matt: So, I joined Clearbit as employee number one, two, and then we had two founders, and then I was upgraded to founder status at some point in the next year or two. But yeah, eventually we had a group at the beginning that were a combination of founders and early employees, but everyone served as founders for quite some time, and so we trued up the equity to reflect that a bit more as the company grew.
Adam: Take me a little bit through the financing story on this. You guys raised what Walter described as a pre-seed round with a lot of really cool, really great names in there. A lot of great, the type of investor list that feels like, "Oh, these guys were hot, what's happening?"
Who were these guys? What'd they do before? Because oftentimes there's two ways to have that round - the founder that did something before and everyone's like, "Holy shit, Matt's the best. Let's just whatever the new thing is, let's do it." Or, and this is how Walter described to me, you guys just had a lot of customers, it was just going really well. It wasn't like, "Oh, Matt and Alex are these well-known entities in the Valley." It was more that you guys had caught a wave a bit on the growth side.
Matt: Yeah, I think a bit of both. Alex was coming out of Twitter and Stripe, had a pretty big Twitter following and was pretty well-known in the developer tools community. He'd written some open source projects, so there was definitely a bit of known entity there. And Stripe was like everyone's favorite at that point. They became even more so over the years, but very hot and the story was Stripe for data products. So, it's like, "We're going to go API first and build these APIs on top of data products."
We did grow really fast in terms of customer count and revenue. We went from zero to $1 million in about a year, which in 2015 was pretty fast. And we were loud. So we did a product launch every month. We were on Twitter, we were on Hacker News, we were on Product Hunt when that was a really hot place to be. And our only marketing strategy was launch a new product every single month.
So I think some combination of that, we got some nice, some great angel checks from the community in San Francisco. A lot of friends, friends of friends. And then once First Round and Battery and some of the others came in, things went faster.
Adam: So, that's the pre-seed and relatively soon after founding. And then there's a decent whatever, at that sort of trajectory, I think at least in the current context, you think about rounds happening actually pretty quickly afterwards. You have a really strong pre-seed, you're growing really fast. You're going to throw a seed or an A on it within a year, or a year-and-a-half, whereas your guys' series A wasn't until 2019. Talk to me a little bit about that four-year period in between. Maybe some highlights or some top-line numbers of what that four-year period was. And maybe a decision to not raise in between or what that sort of looked like.
Matt: I mean, so first I would say pre-seed wasn't something that someone said back then. It felt like it was friends and family, then there was a seed round. Our seed round was $2 million. We only actually spent about $500,000 or $600,000 of it on the path to that series A. So we were cashflow positive by that next fall. By the fall of 2015, we were cashflow positive doing about $1 million. Then we stayed cashflow positive for the next three, four years. We really didn't dip into burning cash in any significant way until after the series A.
Adam: So interesting. And did you think about not raising a Series A? Or was it always, "We want to..." It's almost this weird, before your time, I feel like that's hot again and we'll talk about that at the end, these cash flowing tech businesses or whatever. And Sam Altman's been pushing this a lot, and the Zapier story is you raise the one round, you're cash flow positive, you just do it all on your own. Did you think about not raising? Or was it always the plan to raise?
Matt: Our plan was always to be on the trajectory that we wanted. And so our trajectory to $100 million in a six to seven-year time horizon was the goal. From the beginning that was what we were trying to achieve. So I don't know if you remember the triple, triple, double, double, double back of the napkin thing that everyone says. Triple your revenue twice, then double it three times. And so that's what we were running off of.
As long as we were on track for that, we didn't want to add additional capital. So, by the time we got to the series A, that really looked a lot more like a series B in terms of economics - well over $10 million in revenue and were cashflow positive, but wanted to invest in growth.
Adam: Cool. And so I'm going to skip over a lot there. Then in 2020, big management changes. You talked to me about 2020 right before, rather than me putting words in your mouth about the things that happened.
Matt: Yeah, I mean, startups are complicated and five years in, we'd just gone through COVID. The company was facing some relatively real headwinds, both internally created and externally. We'd gone through our first layoff, our first riff. And a lot of what got us there wasn't going to take us where we wanted to go next.
Alex, one of the more intellectually honest people I know raised his hand and said, "I don't know if I'm the right person to do this anymore or if I want to do this anymore." And I stepped in to help with that transition, stepped in as an interim CEO, candidly, considering is this the role for me? Should I step up into being the CEO? I wasn't an original co-founder. I had what I would say was junior co-founder ownership, and there was a lot of work left to do.
And so we spent about six months kind of getting through some of the harder parts of that. There were some other executive changes that had to happen across go-to-market and other parts of the business. We had the experience of having an outside board for the first time, which we hadn't had previously. And that came after the series A.
We've never had any of our investors on the cap table with the board members, which has been interesting. But yeah, so we went through that period, decided the right move to reach our ambitions of being a $100 million revenue company was to bring in a really solid go-to-market operator, because that wasn't Alex's skill set, that wasn't really my skill set. I was much more from a product side and a zero-to-one product guy.
So we brought in an outside CEO, who had managed an over $300 million ARR business, and I transitioned out as part of that process. That went really well for the first year or so. Company grew nicely, built a lot of operational rigor, and kind of grew up a little bit as a company, but our position in the market and our product didn't necessarily evolve or grow up in tandem with that.
Adam: So when you set up this outside board, was there a discussion of a transaction kind of on the horizon? When Alex was stepping back, you do the interim thing, kind of shepherd it through. New person, more like management, bigger management person comes in. Was there discussion of we're gearing up for a sale here, or were you still envisioning to try to keep Clearbit on that kind of classic venture-backed path that you described, like the triple, triple, double, double, double? Or was it still on that road to $100 million ARR?
Matt: Yeah, it was still very much that. Our ethos for the entire company has always been set yourself up for an IPO, and acquisitions are more likely to happen if you're on that track, especially if you can be capital efficient, and you don't have a crazy valuation that your talent drags along with you.
So bringing in our external CEO, that was not a, "Come and sell this company." That wasn't off the table. It was definitely something we considered and have fielded many offers for the company over the years. But the transition in that 2020 shake-up was more about it just that you weren't in the zero-to-one phase anymore. It felt like you had an established product, things had shifted, you're five years in. It was outside of the transaction conversation. It was purely kind of internal decisions, like everyone looking around the room, asking is this what I really want to be doing or what I think I'm best at, rather than some financial, "It's time to sell," or, "I want out or something like that."
Adam: And give me some numbers and milestones, whatever you're willing to share, because you're obviously scaling go-to-market. How far up had you moved? What are some of the things that you were talking about? We had gotten to X point, and then we were looking at how to get to the next milestone and that felt like a new skill set.
Matt: Yeah. I mean we had a 45, 50-person go-to-market team, and we knew that that needed to triple to hit our next revenue goals. A very sales-driven process. As much as we wanted to be self-serve, we were not a self-serve product in any real way at the time. So a lot of organizational growth, a lot of financial understanding, FP&A, like understanding the future. We had some relatively large experience and skill gaps there that we needed to fill.
Adam: So the transaction - tell me a little bit about how it actually went down, about how did it get approached? It sounds like HubSpot reached out to you. Give me a little bit of the lead up and timelines related to how it went down.
I think this is one learning is your job is not to do everything well from a product perspective or from a leadership perspective or from a founder's perspective. Your job is to figure out what you're better at than anyone else and then maximize that thing. That's true from product, true from go-to-market, it's true in leadership, and I do think that's one of the things that we ran into was, as leaders, trying to learn all these new skills or do everything, but also from a product and a strategic side, trying to do what others were doing is something that, or trying to do something that was different than what we had done originally with the product, is something that ended up eating a lot of resources, a lot of time for not that much gain.
Matt: Yeah, I mean it's a saying for a reason, but companies are bought, not sold. We were the least interested in selling the business maybe ever. And we were like heads down, we're doing this. I think I rescheduled or dodged calls from them a couple times in the summer, and I'm like, "They're just kicking the tires. This isn't serious. We have so much to do over here."
Adam: Got it, got it. And now the transaction, so we've set the stage here where there's an outside board, there's been this leadership transition, there's outside management now has come into that, there are an external CEO. Everyone's kind of off doing their own thing at this point, right? You're now on the board. Alex is on the board. Amit, I don't know if he's on the board or not, but he's running Earl Grey Capital.
But what we heard from them is, "Hey, we've decided we're moving into data. We've decided we're moving into this space and it's either a build or a buy decision for us." And what I know now is that multiple companies were considered, but really it was like, "We're either going to build this, which is what HubSpot historically has done." They've had a handful of acquisitions, but they've all been very small and mostly they've been like acquihires more than they've been trying to buy the products. And they came in and they're like, "We're doing this. We'd love to do it with you guys."
Matt: Yeah, exactly. Alex and I are on the board. There was a couple of our other founders, Andrew and Harlow were still operating the business on the product and engineering perspective for part of that time. Harlow's still there, and he's at HubSpot with me now. He's been our long-time CTO, and yeah, the company continued running. We had one really good year. Then some market dynamics shifted.
And I'm like, "We've always wanted to do it with someone like you." In terms of from the early days, Alex and I have always talked about HubSpot as being the best possible home. We like their product and their culture and their team more than some of the other folks in the CRM space. And the CRM is the most obvious home for a data company. It's been tried and failed a few times, which is why I'm pretty excited to be honest by doing it this time. But the combination of those two things is like the customer value is pretty obvious. The go-to market advantages are pretty obvious. It's an exciting combination.
Adam: And this is all during COVID stuff, right? This is during the, this is post-COVID into ZIRP kind of a period? I blacked out for that whole two-year stretch.
Adam: Was the HubSpot interest sparked by the AI moment? Because it's a long time coming, but then there's this AI moment that happened. Did that play in or was it totally separate?
Matt: Think ZIRP into the end of ZIRP, like that's ... As ZIRP disappeared was when we started to face some real headwinds. We had pricing competition, we had feature competition. A lot of our competitors had really caught up to some of our early innovations. But we were better at than anyone else in the early days of live scraping of the internet. We could do that faster at a scale than no one else could. That was our technical innovation that allowed us to differentiate, and folks caught up.
Matt: I don't think originally it had much to do with AI, more to do with the maturity of the market. So I think people buying data enrichment and sales intelligence, marketing intelligence type products has really matured over the last 10 years.
At the same time, our product had largely come into line with what others were offering on the market. The way we talked about it, features we had, what we were trying to build. We had built the data layer, and we were trying to work up into the application.
When we were starting out, sales teams were buying lists, marketing teams were occasionally buying conference lists and things like that, but inbound enrichment wasn't really a thing anyone talked about. You did database enrichment, but that was on a quarterly basis. I think one of our competitors would enrich your data once a month. And so there's just been a lot of advancement in that area and it's gone from early adopter to mass market. And so HubSpot saw that there's a huge opportunity here. We have 200,000 customers, a large percentage of them want a product like this.
So mix those ingredients together, shrinking budgets, shrinking sales teams and marketing teams, we started to face some real headwinds as a business on the retention side, on the new business side. And at the same time, I was investing at Earl Grey. ChatGPT was just starting to become a topic. We were going really deep in understanding AI, trying to understand LLMs. Who was going to win, where to invest from the perspective of Earl Grey? And I couldn't help every time I was looking at a company or building something with an LLM, I couldn't help but think of how it impacted Clearbit. And candidly, I was terrified, because LLMs made it possible to do what Clearbit had put a lot of engineering effort into doing. It was just so much easier.
The really nice add-on or bonus was, guess what, AI needs to be successful? Clear, standardized data that's available across everywhere. I think it definitely bolstered the story. Without a doubt the fact that our data had gotten so much better so fast made us a better bet to acquire. It's like, "Oh, these guys know what they're doing and this team can execute on this vision."
So one weekend, I sat down, and I essentially rebuilt one of our APIs in two days using LLMs, and it was only about 80% as good, but I am 10% as good an engineer as there are. And I was like, "Okay, this is an existential risk to the business."
Adam: Let's zoom out a little bit from the HubSpot transaction, which sounds pretty straightforward from their perspective. What were the conversations like with investors, your board, and co-founders? You're eight years into a business, part of the team, there's an external board, you've gone through some management stuff. What were their reactions?
Our slowing growth is one thing, but this technological shift is existential. And that's what drove me to go back to Clearbit was the only way out was through and to reinvent, and I saw an opportunity to reinvent what we had done from a data perspective, from data collection, data processing, and take it to a whole new level. LLMs not just made what was weighted in the past way easier, but opened up a bunch of new surface area and a bunch of new areas that we'd never gone down before.
Matt: I mean, honestly, it was kind of bittersweet across the board because we have some new momentum, we're cash flow positive, there's an exciting opportunity in front of us. On the other hand, we've been at this for eight years. A lot of our early investors are ready for liquidity.
And candidly, if we had seen a path to a reasonable transaction, we might have taken it without ... I might not have gone back.
At the same time, there's a lot of uncertainty. We're showing some early signs of progress that we've turned that ice cube into a cruise ship or something, I don't know how to use that metaphor, but something that floats. So I mean, it was bittersweet and honestly, the investor base was amazing. They were like, "Whatever you think is best, if you think this is the right opportunity, you should do it."
It was like the, I don't know, proverbial melting iceberg or melting ice cube. That was the metaphor that I was running on. It's like, "We have this thing. It has a ton of value and customers love it, but it is melting away in front of us, and the water's getting warmer." So that drove that, and there was no offers on the table. There wasn't a world where it was like we can have a good landing somewhere. And when I went back, I had signed up to come back for four-plus years. It was not a, "Come back, and sell the company," it was a, "Come back, and reinvent the company."
The early founders - Alex, Amit, and Andrew who were out of the business - all supportive of either path. I think we didn't end up selling the business for a crazy amount. It wasn't the perfect time to sell the business from a dollars perspective maybe, but just so much future risk. And then on the other side, a really cool opportunity to win.
Adam: And to harp on that a little bit more before we go into the transaction stuff, talk a little bit more about the product development. I think that transitions well into what it ultimately maybe is within HubSpot now, but you had, again, this technical innovation on the scraping side, you're doing it better than anyone else. People caught up, people were catching up before the AI moment, or did people catch up due to the AI moment? And then what was the move? What was the move that you made and then that transitions into the sale?
So I think the thing that we saw with HubSpot and why I'm still here and why Harlow is still here is there is a real opportunity to win. One thing I said earlier was we tried to move into the application layer. All these other data companies build out the application layer, and there's a reason for that in that that is what customers want. They don't want a separate data provider and CRM or a separate data provider and sales engagement. They want that all integrated. They want it all together. You want your data to live everywhere where you do work. And there's a really cool opportunity for us to do that here at HubSpot.
Matt: Totally. So we started out, Clearbit's legal name was APIHub. It was a hub of APIs. So we had three or four different data APIs, company data, person data, watch list data, so like OFAC watch list, risk data, and we built a bunch of these different data APIs. And we always talked about it as like the AWS for data products. It's like we're going to start with the primitives, storage and compute, and then see what people build, and we'll build out the stack. We did that, except one part of the market drew us way harder than anywhere else, and that was sales and marketing.
Adam: Were there any sticking points or friction in the transaction? It all sounds very positive.
We rode the wave of PLG and growth engineering and revenue operations and these new roles that were popping up that really needed this type of data, and that pulled us into building marketing tools. So integrations into Salesforce, into HubSpot. And we've had a HubSpot integration for I think since 2016 or 17, so a long time. Building, advertising, audience tools, website personalization, form shortening, all of the different places, we saw our users using that data. We started to build product surface area.
Matt: It was reasonably smooth. I think there might be a little bit of rose colored glasses already settling in. There was a few months of thrash, but I think the multiple and what we ended up selling the business for wasn't the number that many people had thought of in the past. There's been moments in the cycle where those valuations looked a lot larger, where exit multiples looked a lot larger.
But at the core of that, data was always the value. Activating that data, putting that data to work, yes, that mattered, but there was so much more competition in that space, to be honest. You had your 6senses, your Zooms, your Apollos, you have a lot of folks really focused on taking that data and turning it into action or activity. And the thing that we were always better at than anyone else was the data side. We were really, really, really good at data.
So it's really tough, really tough to do it in the time of the market that we're in right now where our biggest public comp was trading for 3 point something times revenue and that's what you could get pegged to. That's hard. Having the conversations with myself and my wife and my co-founders of these are what the numbers you've had in your head for the last couple of years. Is that still something we want to do? Hard conversations.
And as we got pulled more in that application layer, our products became more and more undifferentiated, more and more the same as our competitors, and it's hard to do both, it's very hard to do both with a small team. And you'll see it in our competitors as well, but as you start to work more and more on the application layer and you spend less and less resources on data, data quality gets worse. There's kind of this funny way of you'll see from us and our competitors of if you look at the reviews, it is a bunch of data quality feedback and then a bunch of application layer feedback going in a calendar cycle.
I'll give a lot of credit to everyone involved, especially everyone that had to exit the business where they're like, "This is your call." It would've been really easy for them to be like, "No, we're holding you. You keep working on it. It'll be great. Let's wait for the market to tick up." That sounds like the hardest part - not that the actual ticket size or sale price was less meaningful on an individual basis, but more the comparison to where it had just been or where you think it could go. And that's tough. That's the part that sounds hard.
So our competitors catching up had much less to do with AI than it did with just catching up on the data scraping side. We built a crazy microservice set up in the beginning where what we built was incredibly complex. We kind of engineered our own Heroku, and it was a really cool project that gave us a lot of power in the early days, but it wasn't long-term defensible. Like a lot of the things that we were doing other, people learned and became the norms.
Matt: Yeah, definitely. Very, very hard. I wouldn't discount that. Everyone was great. Some hard conversations along the way, but it wasn't as contentious. Didn't cost any friendships.
And when I came back with AI in mind, it was because I saw half of what we had built before as kind of being irrelevant now,. If you really break down a data company into it's core parts, we extract data and then we categorize data, so we put it into buckets, and LLMs are really, really good at both of those things, pulling attributes out of raw text and then deciding what bucket they go into.
Adam: Good, that's important. So it gets done, the right partner, someone you've thought about or known for a long time, the opportunity to chase and to win. Not just a soft landing or taking money off the table for the sake of it, but a real opportunity to do more within a larger organization.
I'll be super transparent. We had been dedicating engineering resources to the application layer, not the data. So the data had gotten worse and our efforts in the application layer hadn't paid off. We weren't differentiated. We hadn't built products that were uniquely valuable and we let the thing that was uniquely valuable wither a bit. So I came back with the express intention of we're going to have the best B2B data in the world and we're going to put all of our resources into making those data sets better than anyone else's, and we're going to use LLMs to do that.
You transitioned into HubSpot, and I joked at the beginning about your "GM and VP" title. I had to look up where Head of Private Markets was in the hierarchy when I gave myself that title at Sand Hill. So tell me a little bit about your position within HubSpot now, less about the titles and more about what's changed. Is it more of the same? How much of a separate unit is it? How integrated was the transition?
I think the thing we learned is what customers really care about is the data. That's the thing that they're buying from us when they're turning, that's why they're turning. All they care about is having accurate data that they can rely on to build their business. I put out a cringey TikTok style selfie video talking about we're going to be the best B2B data.
Matt: HubSpot operates on this triad model for business lines or product lines. You have a VP Product, your Technical triad, and your Designer/UX triad leader. Harlow and I are heading up this triad - I'm the VP of Product and the General Manager of this new product line that we're building out.
We went full out into rebuilding. We rebuilt our entire company data pipeline in about three or four months.
We are integrating as fast as we can, bringing a lot of the Clearbit products and turning them into native HubSpot products. We still have our relatively sizable business, not in comparison to HubSpot, but thousands of customers that we're continuing to support. We are selling the Clearbit product as-is to HubSpot customers for the rest of this year really until we launch those native products. My guess is it's a two to three year total integration timeline and we're just a few months into it. It's very fresh.
That took us to almost 100% coverage across the top five attributes that mattered to our customers. That had massive impacts on customer retention. We were in a pretty tough retention spot and three quarters later we were back to gross retention rates that we hadn't seen in three or four years.
Before we transition into looking back over the whole story, what have been the best parts? And I'll ask what the worst parts are too, depending on how transparent you can be. But give me some pros and cons, because having stalked you on LinkedIn, this is the biggest organization you've ever been a part of, right?
Adam: Wow, that's exciting. And we got the chance to talk to Wade from Zapier and Des from Intercom, and they talked about this AI moment of actually being pretty exciting where it was because they had this in a similar timeline for you. They'd been in for a really long time. It wasn't a new company, but then this AI moment came and there was some scariness to like, oh shit, we have to do something about this. But then within the business, a lot of new energy around the new tools. Was it scary or exciting or both? Because the way that you originally described it, it's like the melting ice cube. That doesn't sound very fun. That sounds very stressful. But the new AI tools like enabling these, again, just being better at the thing you were already good at and the retention numbers. Talk to me a little bit about what the feeling was like internally. Was it, oh my God, I hope we don't die. Or was it more excited?
Matt: Yes. I'm really excited about the scale and as much as I would like to pretend that I'm not sometimes, I'm a hyper-competitive person. There's an opportunity to be very competitive in our market and also against some of our past competitors, which is cool. These aren't new competitors - we've been going head-to-head with them and now it's like you plus HubSpot. Already a couple months in, I'm not thinking about that nearly as much as I am the bigger competitors and how we can go toe-to-toe with them.
Matt: Yeah, I mean both. I think I would not have gone back without the exciting upside. So it's super exciting to say that, oh, this thing that we spent all this time building, we can actually now rebuild and make way better in a short amount of time. Is that scary? Is the fact that retention rates are in a terrible place, is that stressful? Yes. And I won't hide or sugarcoat it. Part of me coming back with a pretty large riff to get us back to healthily cash flow positive and in a place where we had time to execute and reinvent ourselves. It was a stressful period of time, but it was really fun once we got into the swing of it.
The engineering velocity and product velocity at HubSpot is very good, way better than part of me feared going in. I think leadership is very solid. They're doing a really nice job of making some hard trade-offs.
Being able to improve the products that quickly, having customers feel it, watching those numbers come up way faster than we thought they would. Yeah, it was really fun. And taking us to the transaction slightly, not all that... When HubSpot first came in, we weren't like, oh my God, yes. It was, I don't think this is the right time.
What's hard is the n+1 of communication. I think that's always the problem in an org like HubSpot. My biggest learning curve is what to ignore or what not to pay attention to. I'm used to knowing everything about everything - reading every Slack channel and message, knowing what's happening, knowing the name of every customer. That's impossible now. I have to really put blinders on and focus on the one goal that I have in front of me. That's definitely my biggest struggle.
That was about six months later and taking a step back, we've known HubSpot forever. Brian came out to visit us in 2016. HubSpot has always wanted to do data inside the CRM, and it's just always been... It's been a when, not an if question I think. We've had an integration with them for many years. It has over 600 of our paying customers were using it. Thousands of free users had installed it. It was a big part of the business and we had a pretty good relationship there. HubSpot had also been a powered by Clearbit customer, meaning our data was being used inside of their products. So we had a pretty deep long-standing relationship there. So there've been lots of conversations over the years, multiple about is it the right time to look at a combination. But this was the first time that that had been serious.
Adam: We recently had an event with employees from Airtable, Intercom, Ramp and others who told similar stories of this transition from knowing everything in the business to going from 50 to 800 employees and having no idea what was happening in different parts. You're sectioned off, not necessarily on purpose, but because you couldn't possibly ingest all the information and do anything with it. It's just too much volume.
Matt: Yeah. And everything gets so interconnected too because complexity goes up as organizations get larger. There's a constant battle for simplicity that you just don't face as a small company.
Adam: So moving into the part where we look back on the whole experience - are there any big moments or decisions that you learned a lot from? This can go all the way back. I want to talk about the current fundraising and market environment around what actually ended up happening to Clearbit. But what are some big learnings that you find yourself coming back to, especially as you're dealing with founders in your investing and trying to help them accelerate in ways that maybe you didn't or opportunities that you didn't take. What comes to mind there?
Matt: I know we only have a couple minutes, so I'll try to be high calorie. Biggest learnings:
Pick a market, not a product. Deciding who you're building for versus what you're building. You have to build something first, something you know how to build. But once you have, everything should be about that market you're trying to serve. We served a bunch of different markets at once for a while and that created a swirl.
One thing at a time. Doing one thing fully before you do the next thing is magical. When you can do that, things go so fast. Momentum just feels good to check things off. Speed over everything. Doing one thing at a time is what gives you the ability to move fast.
The thing that startups can do that big companies can't is they don't have all the other stuff. They don't have all the communication and interconnectedness. They can move so much faster and you have to fully lean into that.
From a fundraising perspective, our investors were great. Did all of them add tons of value? No. Did any of them get in our way? No. And I think that is great. Picking an investor for your board that's going to be a ten-year partner, if I was doing it again, I would probably try to do that.
Otherwise, spend as little of your investor money as you can until you have a really good reason to spend it, like getting to cashflow positive. The way we were able to build the business and raise gave us so much more optionality than I see with many companies now that have raised a lot at a very large valuation, aren't at a large revenue number, and have fewer options for what they can do next. Part of your job as CEO is to preserve future optionality for the company. One of the ways you do that is with how you fundraise.
Adam: One question on fundraising as we wrap up - let's say you're an investor talking to seed stage Clearbit. You're revenue positive, have money in the bank already, don't need more working capital. Looking at today's market where exits and IPOs are uncertain and people stay private for so long - would you push Clearbit at that seed stage to stay on the venture path or think about the Zapier path of raising one round and staying cashflow positive? Clearbit seems almost like the Zapier that didn't Zapier. How would you advise post-seed Clearbit as an investor or close friend in the current market, which is very different now?
Matt: Focus on your milestones and what you need to achieve them. If you can achieve them without outside capital, fuck yeah. If you need outside capital to achieve them, then that's the business you're in. I don't pretend to know enough about other people's businesses to give them blanket advice.
Looking back at Clearbit, we were not going to be able to grow the following year at the rate that we wanted to without burning some capital. So I don't know if that would've changed that decision. It might've changed how we spent that capital and resourced the next few years. But I don't think there's any one best answer.
It is a really privileged position to be in where you don't need additional capital and can grow at rates that could set you up for an IPO. I don't think it's IPO or bust, but once you're on the venture train, you have made some commitments to folks about the type of business you're trying to build.
Adam: And I know we're at time and I promise to wrap up in the next couple minutes. Does AI change any of this? Obviously AI has changed how startups are built, how fast you were able to rebuild the Clearbit API. On the investing side, have you seen the dynamics change in terms of what people want to build, how much they want to raise? Or do you still think venture will continue to be a big part of building really ambitious businesses?
Matt: I don't know. I think venture will continue to be a big part of building ambitious businesses. I don't know if it will be as necessary in SaaS and software or if that will change, if the really ambitious businesses will be less software focused than they've been the last 15 years.
I think the SaaS business model is going to change. Usage-based and value-based pricing is becoming a big thing. I see AI as a technical unlock, just like cloud hosting, AWS and Heroku were, but it's a bigger shift than we've seen in a really long time. I don't think it breaks everything all at once. I think it's much more gradual.
