Building a customer driven startup: With David Cancel, CEO of Driftt

Share this post

Culture is a funny thing that we as startups, although big companies do too, like to talk about. But very few people and very few companies that I meet actually believe their culture. And to me, believing your culture… everyone can create some cultural values. Here’s what we want to do. Here’s our mission-vision. All this kind of stuff. It’s nice but it comes down to the bottom line. The bottom line is you can hire based on culture but unless you’re willing to fire based on culture it’s all bullshit.

Everyone can put up their cultural values but are you willing to fire someone on your team who’s not meeting your cultural values even though they may be productive? And the answer for most companies is no. So their cultural values don’t mean anything.

We live and die by our cultural values and at the top of that list is being customer-driven.

David Cancel has co-founded five startups no less. These include Compete, Ghostery and Performable which was acquired by HubSpot in 2011. Following the acquisition, David became HubSpot’s Chief Product Officer and set about completely rebuilding the HubSpot platform. In 2014 David’s obsessions with building customer driven startups resulted in the creation of Driftt and securing $15 Million Series A round from 6 investors including Brian Halligan and Dharmesh Shah, Co-Founders of HubSpot.

I wanted to know more about Driftt, about David and why he is obsessed with building customer driven startups/companies. So I invited him to join as a guest on The SaaS Revolution show podcast.

You can listen to the full podcast below, alternatively subscribe on iTunes or Stitcher and never miss an episode.

Building a customer driven startup, with David Cancel, CEO of Drifft by The SaaS Revolution Show

David Cancel, CEO of Drifft, his 5th startup, is obsessed with building customer driven startups/companies. In this episode of The SaaS Revolution Show, we find out why David is and if your building a SaaS Startup, why you should be too.

Hi David, How’s things with Driftt? It’s at an early stage at the moment right?

Super early stage. Here in the U.S. we’re kind of a day before Thanksgiving and I’m just sitting back thinking about how grateful I am to be working with this amazing team. We’ve been at it for a little over a year now, a year and a month. And we’re working with just some phenomenal customers and just kind of having the time of our life. Like Warren Buffett says, I tap dance to work each day.

In your blog you recently wrote that you went back to the future. Referring to your time with Performable, working on your obsession with building customer-driven companies and the output of that is Driftt. Can you tell us more about the company. Why you built it? 

Sure. So Driftt is early stage, like I mentioned before. We just started about a year ago. We’re working with our first 30-some odd customers. And what we’re focused on is helping companies delight their customers and work better with their customers.

A few years ago, before coming to HubSpot, I started a company called Performable. We were focused on what we called Life-Cycle Marketing, which is marketing from everyone from the typical anonymous user trying to convert them into a customer and then continuously marketing to them ideally until you make them a super-happy customer who’s advocating your product and referring new customers to you. That was the goal.

We went to HubSpot. We started to focus in on and narrow that focus back down to helping businesses convert users into leads and then leads into customers and then that’s where the HubSpot story ended. We didn’t do anything for businesses once they became a customer. You were off on your own.

And so we came out of HubSpot and looked around and noticed that no one is really focused on this important part even though most businesses, especially SaaS businesses, are driving the lion’s share, or at least half of their revenue from their install-base through retaining their customers and through ideally growing that relationship over time. No one was really focused on helping businesses with that piece. What we want to do at Driftt is focus on that 50%, that how do you take someone who just became a new customer, make them a successful customer and ideally grow that relationship over time.

And you’re at Closed Beta at the moment. Why would a SaaS startup do Closed Beta as opposed to an open one?

Good question. Really it comes down to focus. And our team is a small team and we want to kind of work closely with those first few customers to really get it right. We have the luxury at Driftt having resources, a.k.a. money. So we can take our time more than other businesses could if they were a bootstrapped company.

I think it’s $15 million, right? 

Yes. We raised a $15 million Series A. We’ve been very thrifty and have not spent much money. We want to spend our time trying to get this right with customers, try to build the best product possible. We are a largely, except for myself and two other people, the entire team is engineers and designers. We’re super product-focused culture and really want to work with those early customers to get it right. Then we’ll open it up to an Open Beta and open it up to other customers.

So it’s just a matter of how do we go to market. Do we go out there with an open beta or do we work, spend some time with early customers to make sure we’re getting things right?

Is Driftt a customer-driven company?

Absolutely. Driftt is. For the last decade, I’ve been obsessed with this idea of building customer-driven companies. Driftt is a customer-driven company and it is a company whose mission it is to help transform other companies into customer-driven companies. I think the big shift that happened or the big change that happened when I started building software, I was building desktop software and server-based software and we all did the old-school Waterfall approach. Then we started to adopt the Agile methodology. So we went to sprints and we went to user stories in order to ship software faster.

But what happened was every business became internet-enabled. Every piece of software that you write, whether it’s desktop, server, mobile, whatever, is internet-enabled by default. That is the big change that has happened in our lifetime. What that means is every business now has the opportunity to build software alongside their customers. No longer do we have these gatekeepers that we have to go through, where we have to build software, wait a long time. It ships, but now you are separated from the customer.

And we’re seeing this even in devices now. You look at the internet of things, as we call it, every device is becoming internet-enabled. What that means is for the first time you have the ability to build and iterate that software alongside your customers. That is the big transformation that’s happened in my lifetime and that is the reason that customer-driven companies can exist now. And why I think the Agile methodology and other kind of planning processes are totally ass-backwards.

Do you think all SaaS companies should be customer-driven rather than product-driven companies?

Absolutely. Peter Drucker tells us the sole purpose of business is to satisfy its customers. That is why every business exists. That is why we are here. We are here to delight and satisfy our customers. So, yes, every company, I believe, needs to make this transformation, needs to become a customer-driven company because if they don’t, someone will and they will be disrupted.

Both Zuora and Gainsight have talked about customer outcomes being at the core of every company. Not every SaaS company but every company. Is it easy for a company to be focusing on customer outcomes?

I totally agree with everything that those two companies have said in this area, and I believe this to my core. Is it easy? It is absolutely not easy. Nothing is easy. Nothing that is worth doing is easy even for a startup like ours.

But do I think it creates the best results? Absolutely 100% believe it down to my bones.

Do I think it’s the best thing for customers? Absolutely.

Do I think it’s the best thing for the people within the company, the actual team members? I’ve seen it over and over. Absolutely.

Can SaaS companies be successful if they’re not focusing on customer outcomes?

We all hear make-believe stories and leprechauns and overnight success stories, so I’m sure one of those… I think people can get lucky and they can back into it. I think every once in a while, we see a genius appear from, or someone that appears to be a genius appear from nowhere.

Am I a genius? No. Are most people that I meet geniuses? Absolutely not. And so we need a methodology that can help us build incredible products for our customers and I believe this is the one.

What role will culture play at Driftt in succeeding in being a customer-driven company?

The two are inseparable in my mind. Being customer-driven and having a great culture, they’re the same. Because our culture is to be customer-driven and the very people that we need to bring on to the team and need to make successful in our team are people who are customer-driven.

Culture is a funny thing that we as startups, although big companies do too, like to talk about. But very few people and very few companies that I meet actually believe their culture. And to me, believing your culture… everyone can create some cultural values. Here’s what we want to do. Here’s our mission-vision. All these kind of stuff and it’s nice but it comes down to the bottom line. The bottom line is you can hire based on culture but unless you’re willing to fire based on culture it’s all bullshit.

Everyone can put up their cultural values but are you willing to fire someone on your team who’s not meeting your cultural values even though they may be productive? And the answer for most companies is no. So their cultural values don’t mean anything.

We live and die by our cultural values and at the top of that list is being customer-driven.

Can you share any of the cultural values of Driftt?

Oh, absolutely. It’s stuff that I talk about all the time. But for us, customer-driven is Number 1. It’s this kind of scrappiness that someone has to be scrappy and resourceful. Cheap, you may call it. That’s kind of us. We’re super scrappy. We believe in the underdog.

And one of the things that I’m most proud of throughout all the companies that I’ve been associated with is that every star player that I’ve been able to work with throughout these companies has always been an underdog. I’ve been able to look at them and say whatever other company, whatever big company they may go to, whatever company may look at them, I would know for a fact that those companies would not hire that person because something did not… they didn’t check the boxes for that company.

For us, it’s always a bet on someone who has that chip on their shoulder, has something to prove, is scrappy, believes in being customer-driven and delivering customer value and is someone that we want to be around and that makes us smile each day.

How do you test that? Let’s say you’re interviewing somebody and they’re ticking the boxes on scrappiness and they’re making you smile, how do you test that this is a customer-driven person?

I get in trouble for all my little tricks that I have when I talk about them. But I’ll talk about a couple of them.

One is, especially in an early-stage startup, it’s important to be around people who care about what they’re doing and they care about being part of the team and pitching in. So during an interview process, one thing that I look for at the end of the interview process is something that I call the water test. And what I’m looking for is, at the end of the interview, and this is a face-to-face interview, you may have eaten lunch together, you may have offered a glass of water, you may have given them something. Does that person, when they get up to leave, do they reach to clean up after themselves? And I’ve tested this now it must be thousands of times at this point and this tells you something. This is like a tell in poker.

Because this, the interview process, is the dating stage. In some ways, this is as good as it’s going to get. There’s no pressure now. Everyone’s on best behavior. Is their behavior that they’ll go up and clean after themselves or do they expect someone else to do that for them? Obviously, you know, we look for people who are cleaning up after themselves because that shows to us that they care.

Another simple test that I do is all of us can get wrapped up in the interview process and may like someone socially and it may seem like a great interview, but I do the Day-After test. Again, this is like dating again. So the next day when that person reaches out, sends an email or calls, what is your immediate, split-second gut tell you? Do you want to pick up the phone? Do you want to click on that email? Or do you want to wait a few minutes to get back to them or say, “Oh, I’ll get back to them later”?

Unless you’re reaching, jumping from your seat to answer that phone call or click on that email when you see it the next day, you should pass. If it was someone that you really wanted to be around and be happy, you would jump at it.

But most of the time our gut says, “Oh, I’ll get to it later.” But then our brain tries to convince ourselves like, “Hey, we need an engineer. They were good enough. They were fun to talk to.” And then convinces ourselves to try to hire that person.

We’re talking about customer-driven culture, customer obsession and we’re talking about it being a positive thing for SaaS companies. But on a perhaps a slight contrarian view, I’ve read an article in Fast Company recently Why Customer-Driven Culture Will Stall Your Company’s Growth. What’s your take on the argument that the author is making there?

I’ve heard similar arguments about customer-driven cultures but I think that people, when they hear customer-driven, especially the engineers amongst us and I was an engineer at one point, a long time ago, you take that to an extreme and take that to mean that the customer is going to basically tell you what to build, tell you what to do. And that the company cannot have a vision that is outside or larger than what you’re hearing from customers. That is not the definition of customer-driven to me.

Most customers cannot build a device, most customers cannot build an app, most customers cannot build the service that you are building, the solution that you’re building, and most customers cannot see how your product today is going to evolve down the road. They cannot build your product for you. What you can do and what customer-driven means to us is that we can observe a customer and understand their problems.

Most of what we learn from a customer comes through observation. It’s all the small things that, especially in the B2B context that… although it should be in B2C, that they do each day that are either annoying or painful but are almost always too boring for them to tell you. If you were to ask them about what features you want built, what pains they have, most of the important things would be too boring for them to ever tell you. Those are the things you have to discover through observing them and spending a lot of time around your customers and understanding how things are dealt with from their companies.

When you were in HubSpot you stopped making your roadmaps publicly available. Why was that? 

Absolutely. I’m not a fan of roadmaps especially public roadmaps. Once you have customers, once you have a critical mass of customers you see less and less value over time for public roadmaps. That’s because public roadmaps are usually things that we, or I, create. They are not things that are customer problems nor are they prioritized by customer demand usually. So we’re always trying to replace the words “I” or “We” internally with “The Customer.”

The roadmap is usually something that helps your management team, especially your CEO. But your management team feel comfortable with the investments that they’re making on the product side or on the product and engineering side. And that product roadmap solve for the company and solve for feeling good about themselves but really don’t map one-to-one with solving customer problems.

For us, what we did at HubSpot was to align every team to make each team focus on a single problem or a single product and let that team have full autonomy over what they were building, how they prioritized bugs versus new features, how they improved their service. It was totally up to the team to define that and define whatever roadmaps that they wanted to. And the way that we made sure that we were market making progress was that each team was measured on a long list of metrics that were proxies and kind of guardrails, as we called them, for customer happiness.

The common ones are uptime and usage frequency, although we would use a frequency of a product by cohort, by plan size. And look at that over time and make sure that was improving. We would look at were support drivers and call drivers to that product going down over time. And most of those call drivers are usually user-experience issues and not bugs. And there was a long list of these metrics that we were looking at, we could look at and see new customers were getting happier over time.

And of course we were asking customers, we were looking at their NPS and we were looking at qualitative feedback that they were giving for the product. That lead us to pull back from having a roadmap and let the teams run as fast as possible delighting their customers.

When you were rebuilding the product team as Chief Product Officer there, you reduced the size of the product teams. Why did you do that? And what was the impact that that had on HubSpot and the customers of HubSpot?

When we got to HubSpot, we had to do two things: rebuild the entire product… 100% of the entire product had to be rebuilt. Nothing was left over post-rebuild. And then we had to not only rebuild but we had to expand our product into new markets and also into totally new capabilities. We started to build sales software alongside marketing software.

The second thing that we had to do was we had to rebuild the entire engineering product and design team. A daunting task while growing customers. And we went from my 2,500 customers to around 15,000 customers in this time. And from a team of let’s say 50-some odd people and products, to close to 200 people.

The thing that we did was, and this was something that we had been doing at performable and we did well at a smaller scale was this idea of this customer-driven organization. Luckily HubSpot is a platform that is made up of many products. Like email marketing might be a product. Analytics is another product. Reporting and blogging are different products, etc.

I decided to have these small teams that would own an entire product. A small team for us was a 3-person engineering team. The 3-person engineering team would own all of blogging, let’s say. Like the whole thing. Everything from like building/rebuilding the entire platform, dealing with uptime, migrating old customers from the old platform to the new platform, every new feature you could think about. User testing, etc., etc.

And we never let the teams get beyond the size of three. The reason that we chose three was I made three up. It was totally arbitrary. I said the teams are going to be three. And if three doesn’t work then we’ll change the number.

But three worked. And three worked because it was big enough that they could support a product but small enough that their lead, the tech lead as we called him, which was the lead engineer on the 3-person team could manage the other two folks on the team but still can be a core contributor 90% of their time plus.

We didn’t do what most companies did which was try to turn our best engineers into managers. We kept them focused on what they did best which was coding and mentoring. Those 3-person teams worked with a product manager and worked with a dedicated designer to build their product. And what they decided on what they would work on and prioritization and all that project management stuff the engineering team owned and not the product manager. They worked with customers doing user testing, handling support issues, and just constantly being in connection with their customers and building the software that solved that customer’s problems.

As you build out the team at Driftt, you’re going to stick to the number three if it continues to work?

Exactly. The magic number three. That’s always a fun thing to explain to like new engineers in both HubSpot and Driftt today, which is why three.

It’s just made up.

Nothing an engineer hates worse than something arbitrary.

What are David Cancel’s lessons to becoming a customer-driven company. What are your top tips for the other SaaS startups that are listening?

Don’t have any roadmaps anymore. Really, all joking aside, that’s something that you can lean into once you have customers. You need some level of roadmap obviously before you have customers because you don’t have input into the system.

But really, spend your time trying to build small teams that are in connection with the customer from Day 1. That will affect your culture and the people you bring onto your team because you will meet with its engineers, with designers or what have you, people along the way who may be great fits, who do not want to talk to customers and you need to weed those people out in order to have a customer-driven company.

You really need to bring in people who are going to be okay with talking to customers and trying to solve their problems and kind of have that as their mission over just trying to invent something that would make themselves happy. And I think that’s the trap that most innovators and entrepreneurs and creators try to fall in and they fall into which is I just want to build something because it’s my idea.

Nobody gives a shit about your idea except you and maybe your mom and your family care about your idea. What people care about is something that helps them. Something that selfishly helps them, makes them feel better, and that is what you’re trying to build. Maybe that will do that for you, yourself and it will also do it for other people.

Really build a team around that core value. I’d say make sure to bring people onto the team who have something to prove, are constantly learning.

For myself, I’m obsessed with constant learning. I do a ton of reading, I’m always watching videos, I’m always trying to improve myself in something. It doesn’t have to deal with just work or what craft you’re into. It has to do with anything that you’re interested in. Be around interesting people and try to recruit people who are interesting.

And a test that I have for people is that no matter if they’re an intern or they’re a very senior person or someone in between, everyone that joins the team has to I have to feel like they can teach me something. That’s my kind of, selfishly, I need that. I need to be around people who are passionate about what they do and I feel like they can teach me something whether it’s teaching me something about rock climbing or paddle boarding or coding or designing or what have you. They need to be passionate about something, ideally lots of things, and bring that passion to the workplace.

I mentioned in the beginning you’re on your 5th startup. Does it get easier each time?

Some things get easier. Like I alluded to in the beginning, for me, raising money. If you happen to do that, and you don’t need to do that to start a company but I did in this company, it certainly gets easier. So that got easier.

Hiring gets a little easier. It’s still hard. But I feel like, and this is true for Elias who’s my co-founder too, our CTO, we have this thing inside of us that we want to constantly prove ourselves. We’re proving ourselves all over again in starting Driftt and proving that we can do it again.

For me, I’m fascinated by people who can continuously do something awesome. Whether that’s like a football player or baseball player or a businessman or what have you, I want to talk to someone who has done it repeatedly. I’m not so interested in talking to someone who’s been massively successful once. I’m interested in the learning, in the feedback and I’m also interested in that person and the humility that they had in order to be able to continuously learn.

Someone like Michael Jordan fascinates me not only because he was able to repeatedly win but because he was continuously learning and improving his craft. To me that is amazing.

And so that part never gets easy. We’re used to it and so there are things that get easier but I’d say most of it’s still hard. You still have the anxiety that all of us have in starting a company that never goes away. And the fear never goes away even though you may have, on paper, you look like you have a lot less to lose. Actually, I become more fearful, not less fearful, over time.

Is your surname a bit unfortunate for a man who’s obsessed about keeping customers? I’m sure you’ve heard that before. But can we just change your name to David Retention or something like that?

Retention yes, you should change that. I would say that my name, I’m Hispanic so my name is actually “Kan-sel”. That’s the proper way to say it. But yes, we all call it Cancel. I’ll go and change it. I will be David Retain-For-Life.

Never miss an episode. Subscribe to The SaaS revolution show podcast for more insights, inspiration and actionable learnings for SaaS Startups.

In this article