Jenny Bloom knows her way around startups. She worked as the CFO for both Mailchimp and Zapier (yes, it’s a hell of a resume), and she’s done lots of fractional CFO work with companies since.
Back in September, I chatted with Jenny on the Unlimited Partners podcast. I asked her a couple burning questions about startup tactics, finances, and pricing. In the short piece below, you’ll find my favorite ideas from that conversation—insights you can start applying to your startup today.
Choose a product-led model for quicker growth and better margins
In the early days, the Mailchimp team happened up on an exciting insight: If they could build a product that was so good it’d grow on its own, they could acquire customers at a rapid rate without having a massive sales team. Less sales comp and faster onboarding, free from bespoke deals with long onboarding times, meant big margins and fast growth—a win-win.
For one, Jenny & the Mailchimp team zeroed in on usage-based pricing as a valuable model. It worked because, by charging users based on their number of newsletter subscribers, they were effectively charging on use. The number of subscribers a company has is highly-correlated with value, which meant Mailchimp had an incredibly fair, transparent pricing model.
Mailchimp also offered integrations with big platforms—like Wordpress and Shopify—which made it a no-brainer for lots of brands. This, plus a user-friendly interface & a focus on their core product vision, helped Mailchimp grow without ever needing to hire an enterprise-level sales team.
Avoid overextending yourself to accommodate big customers
At Mailchimp, Jenny had the chance to have both Uber and Oprah as customers. Neither worked out. These were big checks, notable customers, the type of deals that most startups would consider no-brainers.
But they didn’t work out. Why?
Because Mailchimp wasn’t targeting these customers. They focused on a product-led, self-serve offering—something that was attractive for smaller to medium-size businesses. If they accommodated the demands of large enterprising clients, they’d be abandoning the millions of customers they built the platform for, optimizing for the short-term instead of the big picture.
Jenny’s advice? The quicker you learn to say no, the better. Don’t get wowed by big checks if the companies you’re bringing on don’t fit your vision for the product. It’s rarely a good thing to, if you’re interested in long-term success.
Be honest about your company’s features when selling
One frustration Jenny noted is startups’ tendency to overstate their current features—and lie about future features will arrive. This isn’t good for sales, as many people will be able to see through marketing nonsense. But it’s also not good for retention, because if the features you promised don’t arrive on time, you lose trust.
It’s tempting to be over-optimistic about your features. But when you’re talking to customers, stay conservative and play it safe. Only make promises you know you can keep.
Automate everything you can, as quick as you can
Every time you do something manually that could’ve been automated, you’re burning through your cash. At Zapier, Jenny’s accounting team was about half the headcount of other similarly-sized companies. That’s because they were able to automate better than almost anyone else.
Of course, it saves you lots of money: if you can have a team of 5 instead of 10, you could be saving upwards of $600k or $700k per year. But automation also means you can get things done faster—and there’s less margin for error. This is incredibly valuable as you scale.
Purchase software instead of building in-house solutions
Every minute you have your engineers building in-house solutions—for pricing, revenue recognition, or anything else—they’re losing time they could be spending on your actual product. This is especially harmful if you focus on product-led growth.
So, Jenny told me, startups should look to purchase already-existing software solutions when it’s possible. Odds are, something’s already been built to solve the problem you have. And it may even be better than what you’d put together in-house.
This isn’t the case every time, of course. At Zapier, Jenny said, they had to build an in-house system for revenue recognition. The options on the market weren’t nuanced enough to capture what Zapier was doing. But this is an edge case. More often than not, there’s a solution out there for you.
This resonated with me. It’s why I started Octane: We’re a usage-based billing platform. Instead of having your engineers spend months figuring out how to build a usage-based billing platform in-house, you get set up with Octane in just a couple of minutes. Head here if you’d like to learn more. Now, onto more of Jenny’s insights.
Implementing usage-based pricing? Don’t make your engineering team do it
This last one’s an insight from me: Your engineering team should probably (and would rather) work on the core competency of your product. Usage-based pricing is a serious lift to implement, and they shouldn’t have to do it. Which is why we built Octane, which lets you implement usage-based pricing in just a few clicks. No engineering resources required.
Book a short, free 1:1 and learn more about Octane.