Elizabeth Yin is an ex-Googler, a former entrepreneur and now a startup investor with 500 Startups. Elizabeth joined me on The SaaS Revolution Show to discuss her entrepreneurial journey from failed side projects, to her Startup LaunchBit which had a successful exit 3 years after inception. Through to becoming a VC at 500 Startups and working with great B2B SaaS Companies and putting them through Hell (week).
Alex Theuma: It’s a real pleasure to have you on the show today Elizabeth. As a first question, I like to ask the guests to provide a little bit of introduction to themselves. So who is Elizabeth Yin?
Elizabeth Yin: Well, I hail from the Bay area, the Silicon Valley. I actually grew up during the dotcom boom. I got interested in running my own startup when my best friend from high school actually asked me if I wanted to help out her cousin over winter break with his startup. It turned out that that experience was amazing. I was just blown away by how fun it was. Here was this guy working with all of his friends, and I knew from that moment on I wanted to build a startup someday.
It actually turned out that guy was Tony Hsieh who runs Zappos.
AT: You’ve always wanted to build a startup, then you did build a startup. That startup was LaunchBit. Right?
EY: That’s right.
AT: Was that your first startup?
EY: No. I mean, I’ve had a lot of failed side projects and meanderings.
AT: I think every entrepreneur has. But let’s talk about LaunchBit, the one that wasn’t a failed side project. What was LaunchBit?
EY: Just very simply, LaunchBit was an ad network for B2B SaaS companies. I think initially, my co-founder, Jennifer, who is also the same best friend from the story who kind of introduced me to startups, she was my co-founder and we were trying to help marketers get new customers because this was a problem for us.
That’s actually sort of how we meandered into an ad network. It’s not like you wake up one day and you’re like, “I want to start an ad network.” A lot of people don’t do that, but that’s what ended up happening.
AT: And you grew LaunchBit for 3 years before it was acquired?
EY: That’s right. Yeah. We went through the 500 Startups accelerator program actually, which I’m now running. But this was a few years ago and we were the second batch.
AT: Let’s talk a little bit about then. How from origin or from inception, LaunchBit was acquired within 3 years. If you can share some insights into that journey with the audience?
EY: There were a few critical points in our journey. Actually, when we got to 500 Startups with LaunchBit, we decided to completely pivot. And I mean like throw everything out. So we were basically starting from anew. And we were halfway through the program when we had nothing. This is a really tough position to be in when you’re in an accelerator because Demo Day was coming up in 2 months and we had nothing to show.
And what I realised was, okay, working backwards, what is it that we really needed to show at Demo Day? Well, we needed to show some traction. And we didn’t have any traction, we didn’t have a product. We didn’t have anything.
But turns out you can get traction actually without a product. We decided to cut to the meat of what we needed, which was traction, and I started just pre-selling ads, which was the crux of the business, without a product. And marketers sent me money to my personal PayPal account, which is kind of weird and sketchy but it worked. Marketers did it.
Obviously, not everybody bought but there were several marketers who did so I was able to generate thousands of dollars of revenue prior to demo day just from doing this.
AT: When you did Demo Day, at that point you had a product?
EY: Still not really. Actually, the second pivotal point was we realised that the most important thing that technology needed to achieve was to remove bottlenecks. That was actually not a way I had thought about things before. I’m an engineer by background so the natural inclination is to just run and build cool things. But when you’re running a business, the number one priority is ‘the business’, like sales.
The very first step that we built actually was just rudimentary pixel tracking to track the performance of the ads because that’s what our marketers were asking for. We slowly built the product over time based on what marketers really wanted in order for them to continue buying ads from us. I mean, I think even one story is much later, several months later, we actually decided to build out our own ad auction, a cost-per-click kind of model much like how Google has or Facebook has when you buy ads.
It’s not a trivial thing to build, building your own ad server and ad auction and so the way we decided to concierge test this was in our interface on the web, you could bid but when you submitted your bid for how much you wanted to pay on a cost-per-click basis for your ads, the bid actually was just sent by email to us. And we hand-calculated how many impressions each of our advertisers should get based on that bid. It was like literally manually concierging this. It was super annoying when some of our early customers would change their bids like every 15 minutes because we were the monkeys in the back. We were counting how many ad impressions everybody had.
But this is how we built every single component of LaunchBit. We concierge test it first in order to determine whether there is demand and then built it.
AT: You mentioned there were kind of like three critical points. What was the third one?
EY: Yeah, the third one was, and this is what actually led to our acquisition. Initially, our ad network was just focused on email newsletter inventory. There are a lot of professional email newsletters that we were working with to essentially do these ad placements. But at some point, we realised actually it was really difficult to get more of that email ad inventory. We actually had expanded out.
And one way that we expanded out was through partnerships. We formed a partnership with a company called BuySellAds. That was a monetary partnership where we essentially bought their extra ad inventory and sold it out on cost-per-click basis. So we wrote them a check every time we did that. They got to know us as a team. They got to know our product. They got to know how much money they could make. That’s eventually what ended up leading to the acquisition with them.
BuySellAds now runs LaunchBit. You can still use LaunchBit today and they run it as one of their ad properties.
AT: Why did you sell when you did? Why did you sell after only 3 years? Did they make you an offer you couldn’t refuse?
EY: There were a lot of reasons. I think a big learning from being in the ad business is it’s very much, I don’t know if dog-eat-dog world is the right phrase but there’s a lot of consolidation. Either you are the company who is buying everybody or you get bought. That’s basically how things go and I could see that writing on the wall.
It was basically a matter of coming to the right terms. Like we pretty much knew that, at some point, we would be in one of the two categories.
Secondly, if we were going to be in the category where we were buying everybody, that’s a really long haul to play. Like you’re in that business for decades. Todd, the CEO of BuySellAds, he’s been running BuySellAds for over a decade now. You’re in it for the long haul if you’re going to be the one eating everybody.
And I just philosophically, and I think personally, after a while like the ads industry is not very personally fulfilling. I personally would probably never do an ads business again.
AT: Was that your uber learning from the experience? Not to be in the Ad business again?
EY: Well, here’s something that I think a lot about very deeply. When you’re starting your business and you’re very focused on trying to make it work, you don’t always think about the long-term effects. Like what am I going to be doing 10 years from now? But the reality is when you’re running your own business, like you could be running your own business 10 years from now, assuming that things go well and you continue with it. You’ve got to really be bought in philosophically.
And like I said, it’s not like we started out trying to be an ad business. We just kind of followed the money, if you will, and that’s where we ended up. The question is do you as an entrepreneur set out a vision of like, “This is what I’m going to do.” And if it’s a slow crawl like you keep doing it or do you kind of pivot into something that is much more lucrative such as an ads business, which kind of how we ended up doing that.
There’s a ton of money in the ads business and it was not difficult at all to get customers. You make the business work really well but then maybe that’s not what you set out to do. And I don’t have a great answer for that but that is something I think about a lot today.
AT: Now switching gears a little bit, I think this is a topic close to your heart according to my research. What is your view on the importance of hustle for founders and how can you learn hustle if that’s not a natural skill?
EY: Oh, yeah, for sure. Like I said, I’m an engineer by training and at heart, so actually the early days of LaunchBit were quite painful because, between my co-founder and myself, we’re both engineers and neither of us had a sales background. But I think I’m definitely the more extroverted one and I was the CEO. That meant that my role, in order to make LaunchBit a business, was to sell ads and this was very uncomfortable for me. I didn’t know how to sell anything really.
You pick up the phone and call random people you don’t know and ask them for money is a very difficult thing and we don’t learn this in school. I think it is really important for founders to be able to do that cut themselves out of their comfort zone.
As sort of an aside, actually, recently I launched the new side project that I call Hustleathon, which is very small and just in the Bay area right now. But it’s to try to help people do these challenges that make them feel uncomfortable, like asking people for say 10% off their coffee. Just simple things like that that make them feel really uncomfortable. But by doing that over and over, you actually improve your sales skills.
I really think that for me, at LaunchBit, I was able to improve my sales skills by doing it for years. But what I wish I had done was I wish I had kind of honed these skills earlier in my career. Like really just putting myself out there, whether it’s doing something like Hustleathon, there’s also like rejection therapy online, or even just kind of making up your own little challenges like just asking for things that make you slightly uncomfortable. I think that that’s a great way to practice.
AT: I think Hustleathon sounds like a great initiative and event. I think you’re absolutely right. It seems that topics like marketing and other things, they’re taught at school then they’re taught at business school but sales isn’t taught and the art of hustle isn’t taught. It’s just something that you’re just kind of expected to do. If there is more initiatives like Hustleathon or places where you can actually learn to sell if that’s not a natural skill set, that’s a really great thing.
Moving from the Hustleathon into you now being Partner at 500 Startups. Why the move into VC land or why 500 Startups? I kind of guess that as you’ve gone through that program, you’ve had those relationships. But why didn’t you do another startup?
EY: That’s a good question. Actually I never have had any aspirations to be in VC. The way that happened was after I left LaunchBit, we had transitioned everything over to BuySellAds, I was trying to figure out what to do next. Actually, 500 Startups had an open position for EIR role and so that’s actually what I had accepted initially to mentor some startups. I felt like I could especially help on the B2B side of things.
And 500 Startups traditionally has been known more for their consumer investments but actually, in practice, they have tons of B2B investments that are doing quite well including Intercom out of Dublin and Talkdesk. In any event, I was helping mentor some companies here at 500 Startups. Then one thing led to the next, I kind of just got sucked in and ended up becoming an investor here.
And I think one of the reasons why it’s actually pretty unique at 500 Startups, like 500 startups is a very different kind of organization. Yes, we are investors but we’re also trying to do good for the startup ecosystems worldwide. We’re trying to teach entrepreneurs customer acquisition. We do a lot around marketing and sales education. So that really resonated with me, along the same lines of how I ended up learning my own sales skills along the way.
AT: From the B2B SaaS companies that you’ve worked with, what did the best ones do differently than the rest, in your opinion?
EY: Well, that’s a long answer. But I mean I actually think that the number one metric that early-stage startups should at least be concerned with, early stage B2B SaaS companies should be concerned with is churn. I think there are a lot of bloggers online who have kind of graphed out the effects of high versus low churn because obviously, in SaaS, recurring revenue compounds so it can make a huge difference down the road even just like 2 or 3 years. That’s probably the one that most founders actually don’t look at the most.
A lot of people obviously are very revenue-centric but fixing churn is a big one, obviously. There isn’t any single answer as to how you fix churn because that very much is company dependent. But I’d say that what I coach most on here at the accelerator is around customer acquisition, sort of ironically. As I mentioned, you should look at churn before really trying to expand out revenue. But I coach mostly on customer acquisition here and it obviously really depends on the company.
For an enterprise company and for us at LaunchBit, we did a lot of outbound sales. For all of your listeners who have read Predictable Revenue, or if you haven’t read that book, I would highly recommend it. It’s basically how do you build a process around selling where people have specialised roles at each step of the way, whether it’s lead generation, doing cold emailing, setting up demos, or whatever. That’s something that I do a lot of coaching on having learned that at LaunchBit.
And then for some SMB SaaS companies, this is where actually I’ve learned more from my customers who are B2B SaaS companies, like a lot of techniques around list building, like doing it across promotional partnerships for webinars or content. That’s something that we do a lot of coaching on here.
AT: One of the things that 500 Startups does that looks and sounds pretty awesome. I don’t know if it’s awesome by the end of the week, but it’s called Marketing Hell Week. What is Marketing Hell Week and how does it help your startups and your cohorts?
EY: Marketing Hell Week is really hellish. It’s basically back-to-back content. We bring in speakers from various companies, so not just the 500 staff but from, I guess, ‘growth hackers’ if you will, growth hackers from notable companies who come in and talk about everything.
We start with the basics. A lot of founders already know the basics but there’s some who don’t and have actually achieved a high level without knowing, for example, how to use analytics. We go through everything. Everything from the basics to much more advanced topics around like building processes around your marketing or using, for example, outsourcing effectively. And we cover a lot of consumer topics like customer acquisition for consumer businesses, a lot of ads channel to cover including newer ones like how to navigate influencer marketing on YouTube or even how to use Pinterest or Instagram effectively.
And then I think after the week is over, since we’re packed in so much back-to-back content, we actually have a specialised B2B set of tracks around sales education. Obviously, consumer companies can sit in on that if they want but we do go through a lot of sales techniques, everything from calling as well as to cold emailing and what not.
AT: What is the one thing from Marketing Hell Week that those that are not in the 500 Startups Program should be doing for their SaaS startup today?
EY: Oh, God, that’s tough. If I had to pick one thing, I would say you should read Predictable Revenue. And then if you want to expand out from there… actually, 500 Startups we now created a website for Marketing Hell Week that is open to the public. Everybody can access our content whether or not you are part of the 500 family.
AT: You’re coming to Dublin in September speaking at SaaStock. Super excited about that. And obviously, as 500 Startups’ B2B SaaS expert, we’re expecting huge things as well. What can the attendees of SaaStock expect to hear from Elizabeth Yin?
EY: First off, I’m excited about SaaStock. It will be awesome. And I like that it’s a very specialised conference on B2B SaaS.
I’ll be moderating the panel called the Data-Driven Marketing Playbook. There will be a lot of great speakers on that panel from companies that have gone to actually quite a high level.
Again, I think one of the things that’s kind of lost on a lot of entrepreneurs is that, especially for B2B, like B2B customer acquisition is not rocket science. It’s very process-driven and also very data-driven. I’m excited about the panel because basically the discussion will be about like how you put a process around something that is working. I think a lot of founders get to the stage of, okay, I have some information about how I’ve gotten some of my customers, but they’re not really sure how to scale that up and that really is all about creating a playbook. I’m excited to be moderating that panel.