In addition to investing and growing the business, we actually invested a lot from the very beginning in retention, and that’s paid off. We’ve been able to sustain a 99% retention rate in our entire history. With that kind of retention you’re under less pressure to get the next client because you’re just not facing the kind of attrition others are facing.
Scott Burns is the Co-Founder and CEO of GovDelivery, a vertical SaaS company formed in 2000 out of a basement in Minnesota, US. Scott has grown the company to 200 people and around $30million ARR, last year hitting a major milestone of 100 million users of the GovDelivery platform.
Scott joined me on The SaaS Revolution Show podcast to provide some great insights into GovDelivery’s success and acquiring 100 million users. You can listen to the full podcast below and read the transcript. Subscribe on iTunes or Stitcher and never miss an episode
Alex Theuma: Super excited to be joined today by a CEO of a company based out of Minnesota in the U.S. that perhaps is not as heralded as some of the Silicon Valley peers but someone that’s reached real impressive milestones and has a great story to tell.
Welcome to the show, Scott Burns, CEO of GovDelivery.
Scott Burns: It’s great to be here, Alex. Thanks for having me.
Scott, for those that perhaps haven’t heard of GovDelivery, can you tell the audience the origin story and what GovDelivery does?
SB: Sure. If I start at the end and go back to the beginning, GovDelivery is the most widely-used communications platform, digital communications platform for the public sector basically serving governments of all sizes ranging from little parks to the largest public agencies both here and in the U.K. So we have a lot of clients in the U.K. and a few in mainland Europe. They’re using us basically to build audience and communicate with people.
The way we got into it was really going back all the way to 1996. I was on a college campus in New Hampshire and it was one of the very first connected campuses. We had this early version of email which was basically connecting all the students and we all used it to set up going out to lunch or grabbing some beers or whatever it was. It wasn’t even called email then. It was called BlitzMail.
It involved some organising of students. We would bring like political people onto campus for people to come and talk to or whatever. I was really frustrated at that time because we couldn’t get that many people to show up. There was a lot of apathy.
So we started using this technology which was really primarily being used for social purposes, maybe the occasional organisation of a study group, and we started using it to build up real audience for these events that we were holding. Then had sort of a funnel at the time where we would get students on this email list, we would get them learning about the events, we would get them to show up at the events, testing different things.
We found that pizza was the most effective way to get a college student to come to anything so we’d get that in the subject line. We’d get people to show up and then we would eventually get them to volunteer on campaigns and other things. I was interested in that.
Then I left college, went to work at McKinsey. I was the eighth employee in early SaaS business that helps screen renters for apartments and got really interested in this SaaS delivery model. I thought what if we took what we sort of learned about the way you could transform how communications worked and engaged the public, take what I learned about that in the ‘96 timeframe, and combine it with the SaaS model and bring it to governments. We got really lucky. We basically got the City of Saint Paul, which is where we’re located now, to agree to be our first client.
I would say the rest is history but what really happened is we got that first client, got them going using an early version of our platform to build up audience and tell people when there was a snow emergency or other things going on in the city. But instead of scaling rapidly and the rest is history, what really happened is we set out in a long slog because the dot-com things sort of fell apart right then and it took us a while to find scale. We had to pull a lot of levers to do that.
Actually, when we got into U.K. and Federal Government in 2003 that was a little bit of a turning point but essentially we feel like more of a high-growth startup today than we did in 2001, 2002 when we were in that early stage of a slog, maybe a little too early in the market.
It’s an origin story that’s almost ancient by technology terms but what’s neat is we stuck it out there in the market, made some adjustments and adaptations along the way. Now we’ve grown every year for 16 years but have been hanging in an average growth rate in the height between 25 and 30 % a year for the last 6 years which has been really exciting.
Talking of scale, I guess one of the reasons for this episode today was that last year, GovDelivery reached an impressive milestone of 100 million users. Today, I’d like to discuss some of the strategies behind acquiring 100 million users, scaling to where you are today. Does that sound good to you?
SB: Yeah. That sounds great. That is an incredible milestone when we look back after 4 or 5 years when we had maybe a couple million. So really it took a long time and so that milestone really speaks to the fact that we’re actually addressing this problem of government communicating with the public at a scale that really matters.
AT: Before we go into how you acquired 100 million users and breaking that down a little bit, can you just tell us a little about GovDelivery being a vertical-specific SaaS company?
SB: Anybody who’s listening probably is using some kind of marketing automation capability and that’s sort of the newer version of what used to be called email service provider. There’s everything from constant contact out there to Marketo and HubSpot and all these different types of things that private companies are using to manage their digital lists, track and communicate with people, to drive people through the pipeline.
Well, in government really those technologies don’t apply super well because a lot of the communications are things like your bus is late. But then there’s also communications trying to get people to show up an event or do something that maybe maps better to what a private company would want you to do. We are truly the most widely-used platform by public sector because we lead relatively unique leads in the public sector but we’ve also been able to learn and adapt things really well out of that marketing automation space.
Just like a private company, pays Marketo an annual fee or Oracle’s Eloqua or Marketing Cloud or whatever, our clients pay us a fee to get access to our platform but they also get access to this very unique approach we have to build in a user base.
AT: I’m assuming there is no freemium model here? They’re paying you a monthly fee or an annual contract?
SB: That’s right. Freemium has been tough for us. I love the freemium model in certain businesses. When you’re working in the public sector sometimes giving something away is as hard as selling it. We really feel like our clients need to have skin in the game and have an ability to use this to take on the service out of the gate.
Because our service is so proven in the marketplace, we’ve tested some freemium models, but at this point we really… if you want to try out the service as a citizen anyone can do that for free. Right? Go out to the U.K. Parliament or the Highways Agency’s website or the IRS here in The States and sign up and you could try it out and see how it works.
If you’re the actual organisation, we’ll let people take a look and try the service in a sandbox, but we don’t do any free meal.
AT: Let’s break down this journey to 100 million users. Can you talk about the growth strategies employed to get to your first million users?
SB: Sure. What was interesting when you go out, there’s actually still a little bit of the case that when you go out and talk to an organisation, particularly a public sector organisation, about communications they’re very focused on the functionality of whatever capability you’re bringing them. They’ll look at it and say how is this newsletter going to look? Or how is this text message going to look? How am I going to create the message? How am I going to send it out? How am I going to track it?
What we had to do early on with our first clients which were basically small, local, relatively small to mid-sized local governments is we had to re-orient their thinking to thinking about not just how they were going to send the message but how many people it was going to get to. The reason that mattered is that that user base that we have is really an extension of our client’s user base.
The City of Saint Paul had a certain number of people who visit its web and digital properties everyday but what they weren’t doing prior to GovDelivery is converting any of those users to be part of some kind of digital subscription. First we had to get our clients sort of converted in their thinking to appreciating the value of building a larger user base and then we started testing different tools that, I guess looking back all the way to 2000 probably seem pretty elementary in today’s terms. But we started testing different tools that would help our clients get more people to sign up for more things.
I’ll give you a simple example that people may find interesting for a local government. So local government likes to when they think about what they want to communicate with people, a lot of times it’s driven by the political leaders or other leaders in the city. They’ll think to themselves, “I really want to get the word out on this major initiative we have going on economic development,” or, “I really want to get the mayor’s newsletter out to more people.” Well, it turned out that the public doesn’t maybe care about those two things. But then when a snowstorm hits, the public really cares about when they need to move their car off the street, when the ploughs are coming, what the plan is for dealing with the potholes, whatever it is.
What we’ve done is basically, what we started testing early on is just making it really easy to get people to sign up first to what they were most interested in and then start to upsell people on other content, and really modelling that off of a retail model. Amazon doesn’t try to sell you necessarily everything out of the gate. You search in Google and you find something you want, and then after you’ve bought the remote-controlled car they try to sell you batteries. Or after you’ve bought one Adele album they try to sell you another one.
It’s taking that same kind of thinking in for our clients. We use the audience they already had and drive a lot more conversion using techniques like that and then it evolved over time to things like overlays and other extensions.
But I’ll only add that the most kind of interesting thing we found is the incredible power with our clients of cross-promotion. Whether it’s the mayor cross-promoting with the snow emergencies or the city cross-promoting with the state, or the Highways Agency in the U.K. cross-promoting with a local authority, we actually found that creating that network effect then investing in that not only got more people signed up, it made sure they all got signed up to more stuff.
AT: Then what changed then as you scaled to 50 million users? What were the kind of major differences within the company, I guess, from a sales and marketing perspective and from the platform perspective as well?
SB: There’s a lot of different components to that. To scale our user base, because our user base is an extension of our client’s user base, the first thing you have to do is just get more clients signed up. That is really a sales and marketing problem or challenge depending on the year.
We went through and we really had to look at why were people buying our service and what value were they getting out of it. Because what happened is when we first started selling, people had a lot of extra money in local government. They would basically be willing to invest in what in our style of communication is, We hadn’t actually stop doing any of the print, communications or anything else, they would just invest on what we were doing.
What happened is as budgets in government have gotten tighter and tighter and we’ve gone through a couple of different down cycles in the economy both here and in our other major market was the U.K., we found that we had to get much more detail about what the Return On Investment was and where our clients could drive real value.
They have these great terms and actually the clients we have in the U.K. I think measure and talk about this stuff better than the ones over here. They talk about like avoidable contact and driving additional transactions online, channel shift, these kinds of terms. What they mean is avoidable contact is just communicating with somebody so they don’t call the city with a question. Channel shift is getting somebody to do something online instead of do it by paper. We found to drive sales and marketing is basically getting more and more intimate with how our clients were driving real, measurable value out of our service. That was kind of the first shift that we had as we grew. I think that there’s a lot of lessons people can take from that as they’re trying to scale and actually getting intimate with the value your clients are getting really matters.
But the second interesting thing which applies in this relatively constrained market we’re in is our clients talk to each other a lot so you really have a lot less leeway in a vertical market on performance. You have to perform really well. It can be harder to acquire clients because you’re in a constrained market so you have to have a strategy for keeping them really well.
In addition to investing and growing the business, we actually invested a lot from the very beginning in retention, and that’s paid off. We’ve been able to sustain a 99% retention rate in our entire history. With that kind of retention you’re under less pressure to get the next client because you’re just not facing the kind of attrition others are facing. That was the second thing.
The third that really matters is going after bigger and bigger clients. If you’re here in the U.S., obviously the City of Saint Paul, Minnesota has 280,000 residents while Minneapolis, which is right nearby, has 350,000. The county has another couple million, the state has 5 million. Then by the time we started working with Federal Government here and Central Government in the U.K., you’re dealing with clients that just have these massive audiences and getting the courage of building the experience to get to larger and larger clients mattered a lot.
That was the sales and marketing approach. I could talk about the approach we took to helping… because the other lever then is helping our clients get more people signed up from their website. I talked a little bit about that before but we did some interesting things in that area going from this sort of 1 to 10 million range.
AT: Okay. I guess that would be interesting to hear. I think before we go into that, was there much difference between scaling to 50 million users to getting to 100 million or is it more of the same? Was it more going after the bigger and bigger clients?
SB: I think the most profound difference actually is in the type of team you need when you start reaching that scale. We actually found, as we’ve grown, we’ve had the actual operational scale of the business has really shifted from one where we have to keep some basic functionality up and running all day to one that is very data and transaction-intensive. I would say that what really changed here is essentially operational rigor.
I know that it’s hard for a business that’s just starting up, and I know this from experience, it’s hard to imagine how much operational rigor you’ll need when your service becomes mission critical for your clients. For me, it was really about finding the right balance from that sort of first hundred clients, first 5 million users, and as we’ve grown up to this much larger client base and much larger end-user base.
Finding the kinds of talent really to be leaders on our team to make sure we’re bringing real operational rigor in and constantly learning from our mistakes and even learning from mistakes we almost made in order to demonstrate to our clients that they can rely on us. For example, in emergency situations like this last weekend with the massive snowstorm on the East Coast. When you’re a little side note, a little web app, I think you take for granted that your service can be down for a little while or something could go wrong or you could test new functionality and have it not work. The fact is, for us as we scaled, the operational rigor and the criticality of our service just means that we don’t have that luxury anymore.
We actually had to design ways of testing things in stage, making it easier to beta test and other things in order to both innovate and have this operational rigor together. And I will say that wasn’t my skill sets so I had to go seek talent to bring that rigor into the business. If we couldn’t have done that the IRS wouldn’t have used our service.
We had to basically stop thinking you want to be sort of 50% lean startup and 50% the Bank of America. It’s tricky to both innovate and have that kind of rigor at the same time. That was really the big, big shift as the user base grew.
AT: I guess it sort of leads nicely to this kind of question that just popped into my mind in terms of as you’ve scaled to 100 million users and a company the size of 250 employees, how has your role as CEO and co-founder of GovDelivery changed from being this startup acquiring its first users to where you are today? What would have been the major shifts and major changes?
SB: I think the primary shift is that when I started, I was 24 and I’d just come out of McKinsey and a pretty good startup experience. So I naturally thought I was better at doing everything that anybody else could be because I had that incredible 2 years of experience or whatever it was at the time. I think hopefully your audience understands sarcasm.
AT: Yeah, I think so.
SB: But really I spent the first part of working on the business, we were very lean. We took a lot of risks, but we also relied heavily on just a couple of co-founders and their talents and energy to drive different things.
I think the most important shift that I went through as a leader is basically just relying more on my judgement than on my output as a leader and invest a lot more of my time in getting the right people doing the right things and making sure that the talent I was hiring was better at what I was asking them to do than I was. I can tell you it took a couple of different rounds and there’s been different iterations over the 16 years but that has been the biggest shift.
So now I’ve got really my investment of time is really three parts. It’s about 1/3 talent, just dealing with the people I have here, making sure they’re going in the right direction, they’re in the right role, they’re getting opportunities they need, finding new, amazing people to work with. We hired 70 people last year. You got to make all 70 of those moves count as much as possible.
Then the second-third is really working on product and strategic direction and being a contributor, being involved in that. I wrapped into that strategic direction product side of things all of the dealing with my board and owners and all that kind of stuff that you actually have to do as a CEO.
Then the other third, if I’m having a good year and this doesn’t work every year, but the other third is I try to get real intimacy with our clients. So I think last year I didn’t quite hit my mark but I tried to do 100 in-person meetings with existing clients and potential clients every year. It’s a little easier for me to do because my client base is pretty concentrated in places like London and state capitals and Washington D.C., but I need that kind of intimacy with the clients in order to lead the kind of team we have here.
I’ve shifted from making PowerPoints, building flowcharts, building use cases and other things to feed into the product and doing sales pitches and whatever, which is sort of that early stage of being an entrepreneur to this more stage where I’m trying to spend my time in I have the most leverage, which is really talent, strategic direction, and understanding the client base.
AT: What are the key takeaways from your journey to 100 million users last year for the B2B SaaS founders that are listening and especially the early-stage folks as well?
SB: You know, you’ve probably seen what I’ve seen over the last 5 years which is that there’s a lot of very technology-oriented, product-oriented founders, which I think is amazing. The product-first movement and technology is really exciting and it’s drawn technologists into founding companies in a way that’s really exciting.
Back in 2000 there were a lot of people like me who are just sort of business dudes doing the software and then we kind of hire out and find people to work on technology with us. I think in some cases these product-driven, technology-driven founders have over-invested in a sort of inside-out version of the world where they build their product. I think it’s great to build and put it out there and take the lean approach.
I think the thing they sometimes miss, and I heard this great quote the other day from a guy in Chicago, which is they sometimes miss that a good product is often just a shadow of a problem. Well, I’ve talked about how I’ve spent more time, this third of my time with clients now. I’ve always invested a lot of time just sitting with clients, looking at how they’re using our service. Not just asking them, not just giving them surveys or whatever, but sitting with them and seeing how they use it and really understanding it and we encourage all of our people to do the same thing. I think that really matters.
I actually think some of the best innovations doesn’t come by asking your clients what the next feature is they want but by trying to understand the real problems they face and what it’s like for them, what kind of pain it’s causing and then working to kind of engineer it against that versus just throw something out that you personally think is elegant and make it work.
Now, there’s a balance of the fact that people are building products they love to use themselves and all those things but, for us at least, that intimacy with the market has mattered and I’ve seen in the startups I’ve invested in and looked at, the ones that spend the most time talking to their clients at a more intimate level and watching how they’re using the service seem to do better.
AT: What’s next for GovDelivery this year? Have you set your sales guys the target? So okay, we’re at 100 million or we’ve passed that 100 million users, that is. Now we want 200 million or… How does it work?
SB: Because the user base tends to come off the client base, we’re very focused on just growing that client base of government clients so we get access to more users. The first thing we’ve done over the last couple of years is shift from talking about ourselves as a strictly communications platform. We’ve basically been investing in helping our clients on the full citizen experience just like you might talk about customer experience if you’re selling to private sector. We’re trying to do more broadly across the citizen experience.
And what does that mean? It means a reminder to show up to your medical appointment or reminder to get your car off the street or a personal reminder to pay your taxes or whatever it is. Getting more individualised and helping our clients deploy things that, look, maybe communications that look more like Uber and Amazon than you would typically expect from government. We’ve invested in some add-on capabilities, a lot of engineering around some uses from that, and even last year, we did a few acquisitions to build out functionality and data area, learning and all kinds of things. Basically more complete focusing into the citizen experience is one.
The second is I’m just growth-driven. I just feel like I would love to be part of a business that grow 50% or 100% a year. In our market we find that striving for 25% plus is a realistic goal for us but I think you’ve got to grow to be getting the best talent in technology and to be able to afford to innovate at the level you want.
A huge war for talent going on out there and the best people want to work at companies that are growing and innovating. When we talk to the sales team it’s not just about them hitting their revenue numbers, it’s about them. If they don’t hit their revenue numbers, I can’t get the talented engineers I want. We’re very focused on leveraging the success we’ve had building our big citizen user base to get more clients. Basically cater to a cycle, get more clients, get more users, help the clients share the users and sort of cross-promote. That virtue of cycle hopefully keeps us at 25% growth because if you’re not growing fast, you’re not going to make it to the next stage.
AT: Congratulations on the great growth. The 25% year-on-year and reaching that milestone of 100 million users is mighty impressive. You’re doing a great job there. Perhaps it’s not as heralded as maybe some of those in Silicon Valley but the story and what you’ve achieved is very impressive. Hopefully, there’s a lot of learnings there for the listeners at home.