Omer (00:09.760)
Welcome to another episode of the SaaS Podcast.
I'm your host, Omer Khan and this is the show where I interview proven founders and industry experts who share their stories, strategies and insights to help you build, launch and grow your SaaS business.
In this episode, I talk to Nabeel Al Azam, the founder and CEO of Forma AI, a sales compensation platform driven by collective Data models and AI.
In 2014, Nabeel was working as a consultant with Fortune 500 companies helping to set up and implement sales compensation plans.
He saw firsthand how manual the implementation was and once live, any changes to compensation would often take six to eight months to implement.
It was this experience that sparked the idea for Forma.
Two years later, after he'd moved on to another job, an old client contacted Nabil needing help updating their system.
He seized this chance to pitch his vision for a software product that didn't exist yet.
The client told him that they would give it a shot if he could get a working product to them within eight months.
This was the opportunity he had been waiting for.
Nabil left his job and incorporated forma in 2016.
With no funding yet, he used his savings to hire a small team and build the initial product out of his dining room.
Today, forma is an 8 figure ARR SaaS business that has raised $58 million and grown to a team of over 125 people.
In this episode you'll learn how Nabeel's deep understanding of his clients pains helped him to identify a significant gap in the sales compensation market.
Why Nabil's laser focus on delivering value for those critical first customers was so crucial.
In hindsight, we also talk about how educating enterprise buyers on Former's AI paradigm shift was crucial to overcoming their fears.
How Nabil analyzed a prospect's data over a weekend and identified issues and gaps that helped him close a major deal.
And the difficulties Nabil had fundraising initially and the lessons he learned from that experience.
So I hope you enjoy it.
Nabeel, welcome to the show.
Nabeil Alazzam (02:23.590)
Omar, great to have.
Great to be on and thank you for having me on.
Omer (02:26.870)
My pleasure.
Do you have a favorite quote, Something that inspires or motivates you that you can share with us?
Nabeil Alazzam (02:31.670)
Success comes when chance means preparedness.
I think there's a lot of luck in a lot of things that we do, but if you're not prepared to capture those opportunities, love it.
Omer (02:41.110)
Okay, so tell us about Forma AI or Forma AI.
What does the product do, who's it for, and what's the main problem you're helping to solve.
Nabeil Alazzam (02:50.910)
So forma unifies the design execution and the change orchestration of sales compensation.
And we do so to better mobilize sales teams and ultimately increase go to market effectiveness for our customers.
And so enabling every decision that's made in sales comp to be backed by data.
We're actually enabling organizations to make decisions that are financially sound and ultimately incentivize the individual seller to achieve the business outcomes.
All that being said, at the end of the day, sales compensation for those that you know, especially at the enterprise level, you are putting the incentive and connecting it to a behavior that you want to see from your, from your sales team.
And in Today's world, there's $1.2 trillion spent in sales comp in the US alone.
And for most organizations it's today driven through a manual process that's disjointed, sits across multiple teams and ultimately is something that the average Fortune 500 takes six to eight months to make a change and ultimately is the exact opposite of agility within an organization.
Omer (04:00.780)
Okay, great.
So for people who are listening to this, who don't know anything about sales compensation, just give us a, a dummy's guide to, you know what, what does that actually mean?
Nabeil Alazzam (04:14.930)
So for the majority of sales reps, the 15 million sales professionals in the US they are on a incentive compensation plan or a variable compensation plan.
These compensation plans are commission structures or incentives for financial reward if they hit certain objectives and metrics.
And today those incentive plans are designed to without a truly data driven approach and really biased based on the past experience of sales leaders and the business themselves based off of what they've seen in the past.
And that's what we're disrupting here at Forma.
Omer (04:47.660)
Okay, great.
So the business was founded in 2016.
I think from what I understand you came up with the idea a couple of years before that when you were working as a management consultant.
So why don't we go back to 2014.
Tell us what you were doing at the time and how did you come up with the idea for this product and business?
Nabeil Alazzam (05:11.040)
Yeah, so I was working at a manager consulting firm helping Fortune 500s design these incentive structures and ultimately implement them into their systems.
And one of the things that I saw was the time span it took to execute.
So like I said earlier, six to eight months was the average time to deploy a comp structure within these Fortune 500 organizations.
And so one of the things that I saw as a massive pain point was the limitation of the platforms to enable these organizations to move quick, quickly.
The data that they used and the ultimately the amount of resources required to execute on sales comp led to this, you know, this very rigid process.
And so I had seen the pain points in 2014, 2015 and I always thought it was broken and it needed to be radically rethought.
Instead of the once every few years, let's redesign the incentives to create the desired outcome from the sales team and let's bring these consultants in to come up with that.
My view of what the future of sales should be is a seller wakes up, they look at their phone and they're told in real time, if you close this opportunity in the next two weeks, you're going to get double the amount of commissions.
If you don't close it in two weeks, you're going to get a fraction 25% of your commissions.
Why?
Because we have enough data, whether it's recordings of sales calls, to activity data, to intent data from the customer to actually tell us that if this deal doesn't close in the next two weeks, the likelihood of it closing afterwards is almost negligible.
And to me, the way to enable that type of agility and that individualized type of incentive structure, you had to rethink the entire structure and process of how comp was managed within these Fortune 500s.
And so I had left, actually I had left consulting and went to a tech company.
And while I was there I got reached out to by a customer that I had worked with in my consulting days at zs.
And that customer, Stryker, had worked with us to help them revamp their sales comp process and implement them on one of the incumbents in the space.
Exactly.
And so we stood up and I implemented with a team at zs, implemented the sales comp process and shortly after leaving zs I got reached out to by Stryker because they needed support in reconfiguring this tool.
And it was one of those things where being brought in to reconfigure the platform and recognizing that if every time you needed to make a change, you needed four to six months heads up and professional help where with individuals that have experience and expertise in a specific tool set and the architecture of these platforms, it meant that there's no way we were going to get to that vision of the future of tailored individualized incentives that drove to business outcomes faster than we do today.
And that was how I came up with the idea.
And it was only a year, it was a year later from that first outreach from Stryker to me personally, where I had the full vision of what we wanted to build and format and ultimately led to us pitching Stryker on a completely revamped and different approach to sales compensation.
Omer (08:39.050)
Okay, so you worked with this company Stryker in Canada to help them implement sales compensation software.
Soon realized that every time they wanted to make a change, there was a whole bunch of work involved that took months to implement.
And that got you thinking about there has to be a better way.
Maybe there's software that I could go and build and solve this problem better.
And so the company who you just installed this software for, you pitch them on some other software that you are going to go and build.
So how did that go down?
Nabeil Alazzam (09:18.300)
Yeah, I mean if you think about the time span, right we the original implementation of the software happened years ago.
So it was two years later that I pitched Forma.
And I think if you think about the way that most organizations buy software today, typically they're buying and implementing software and especially so in sales compensation they're buying and implementing software for day one when really a lot of these enterprise applications are actually solving a day two and on problem.
And if you think about in sales comp specifically, every time you have a go to market change, every time you acquire a business, every time you change your hierarchy or territories, you hire new reps, new reps leave the organization, all of these things are changes that ultimately need to be managed from a sales compensation perspective.
And so one of the things that, you know, the solution that we stood up with them solved the problems on day one.
Now I left Z, something changed.
All of a sudden the solution no longer works and they need to go back to the professional services firm that implemented it.
I was no longer at zs.
I was the one who knew that instance.
And ultimately was the reason why they reached out to me directly.
And because I even that time I even mentioned, I was like, I'm not, I'm no longer in that world.
And I didn't leave Zs to take business away from zs.
I'm working in tech.
You should reach back up to Zs.
And the answer was ZS doesn't know our instance.
You're the one who set it up.
You know it.
We want to, you know, we need, we need your help.
And I think that was the root cause that I was aiming to solve.
Because the moment that you need a specialized set of skills to manage the kind of the configuration of comp processes within an organization is the moment that now you're bottlenecked.
And anytime you need to make a change, you need to spend months revamping this, you know, the infrastructure of these systems.
Omer (11:08.450)
Okay, great.
So there's already sales compensation software out there but you can see from your experience that it's not meeting the needs of these customers and potentially creating a lot more work for them than they want or need to have.
And so you've sort of figured out, okay, if I build a product, this is how I would differentiate.
This is the, this is where this product could fit into the market and solve a very specific problem or situation.
So that's great.
But where was this coming from?
Had you started a startup before?
Did you kind of have a tech background?
What was your experience in kind of building this type of product and company?
Nabeil Alazzam (11:57.420)
I was entrepreneurial by, you know, from a background perspective and actually had a business with one of business partners, Max Bailey, who was the co founder of Spoonity, the tech company that I joined.
So Max and I ran a custom software dev shop and in Kingston, Ontario, the town that we went to school at, Queen's University.
And so we had built a small business experience that and my background is engineering and so I was technical by nature.
I had seen this problem but it was certainly the scale and the vision that we had, you know, that I had with Forma and ultimately that we have of addressing this problem in sales comp is certainly much bigger than anything I tackled before.
To me it was, it was a, you know, I said that quote earlier.
Success comes when chance meets preparedness.
And by no means do I think, you know, I think success is a relative term and constantly moving target of what you want to achieve.
But I do think there is an element of in that moment I saw a customer that I had, you know, had I deeply cared about.
I had, you know, worked with these individuals and solving their problems for years in my past life as a consultant and I saw the pain points that they were going through and I did want to solve that problem because I had felt it personally.
I had worked in sales comp for, you know, many years at ZS and touched many different organizations and I saw the same thing happening over and over again.
And so did I have the vision of solving this problem in a radically different approach and aiming to the North Star that we're aiming to today.
Yes, but in that moment it was what do I need to do to tackle the required solution to help this customer and help these individuals solve the problem that they were experiencing and that I had experienced firsthand.
And so the North Star was the same.
I think in those moments had I known all the things that had to be done and solved to get us from where we were, where we were as a company back then, to here.
I probably would have been afraid and actually not done it.
Especially given the fact that I used my own money to kind of start the company.
I think it would have potentially changed my willingness to do that.
But in that moment I had a lot of conviction and confidence that we were going to be able to go from the promises that we made to Stryker to delivering on those promises when we had to.
And I think that was ultimately the conviction that I needed to get going.
Omer (14:30.340)
Okay, great.
So I want to dig into how you got started and you know, went from zero to one here.
Before we do that, just give us a sense of the size of the business.
Like where are you today in terms of revenue, size of team?
Nabeil Alazzam (14:46.200)
We are a series B backed business.
We've raised nearly 60 million, so 58 million approximately USD to date.
We're an eight figure business with 125 team members across the globe.
So we're headquartered of Toronto with an office in Pune, India as well to give us global coverage for our enterprise customers.
To give you a scale on the sales compensation side, you, we have Fortune 500s that are leveraging the platform to execute on every aspect of sales compensation, which means that we're processing billions of dollars of payouts for single customers alone, let alone across the collective.
And this is on an annual basis.
Omer (15:29.810)
So in the last almost seven years you've gone from zero to eight figures in ARR, raised $58 million.
And so let's talk about the first, well, let's talk about the first customer.
So you pitch Stryker, they're interested in this product that doesn't exist yet.
And didn't they give you a certain amount of time as a deadline to have the product ready for them to consider it?
Nabeil Alazzam (15:57.780)
Yeah.
So basically they had a contract with an existing vendor and that contract expired but eight months after we started the, the official build of Forma.
And so, you know, I kicked off the business in September 2016, hired a dev team and we had an eight month line of sight to we have to get the product fully launched by April 2017 otherwise they would have to continue using the existing vendor and we would not have a customer.
And so, and this is what I mean by the conviction at that point it was very clear to me what needed to be built and I had a lot of confidence and in our ability to do it because I knew the customer, I knew their data, I knew what was required and I had experience across quite a Few other large enterprises of that scale from a sales compensation perspective.
But by no means was it an easy feat.
I think for those first eight months there were periods where 60 days straight of doing nothing but working.
And part of the story is we founded the company out of my house.
So it started around, you know, small team working in my, my dining room.
And then it was always, okay, do we add more, you know, a few more team members or do we get an office?
Do we make this investment or do we get, you know, do we, do we get an office?
And.
And we ended up scaling to, you know, to around 23 people at the peak, working out of, out of my house.
My house is no longer houses, more so an office.
But it was very much, you know, the mentality of kind of do, do whatever it takes to build the, the infrastructure and deliver value to our customers.
Funny enough, forma AI.
I started the company as a numbered corporation.
And it was only, you know, three months in when someone was like, we're not able to recruit any more, any more people as a numbered corporation.
We're gonna have to come up with a name pretty soon that we even prioritize that.
Because at that point it was, it didn't matter.
What mattered was getting to that eight month milestone and delivering what was required to the customer.
Omer (18:00.980)
Yeah.
So during those eight months, did you raise any money or this was just all funded through your savings?
Nabeil Alazzam (18:08.100)
Yeah.
So we were effectively bootstrapped from day one.
Our first institutional investment was in February of 2020.
We raised our seed round.
Omer (18:19.070)
Wow.
Okay, so almost four years, you were bootstrapping the business.
Nabeil Alazzam (18:22.550)
Yeah.
Omer (18:23.710)
So you spend the next eight months building the product.
You've got all these people living in your dining room.
Nabeil Alazzam (18:32.590)
Yeah, living.
Because, yeah, we were working so hard that it was effectively living at the office.
You're right.
But I look back super fondly at those times and I think you need to have fun while you're doing this.
And I think, I look back and despite all the challenges and hard work, we had a great deal of fun building the business where it is today.
Omer (18:54.670)
So finally the product is ready.
You go back to Stryker.
What happened next?
Was it a smooth implementation?
They loved the product.
What happened?
Nabeil Alazzam (19:06.430)
So it was, I think again, if you think about anything where you're making a massive change in a larger enterprise, the change management aspect is always difficult.
But I will use a quote from Stryker and specifically the silence was deafening because sales comp is one of those things where it's a thankless.
It's a thankless role.
Like Think about the last time you told, you know, you emailed your HR team and said, thank you for getting my payroll right.
If it's not right, it's a very bad problem.
And no one likes talking about compensation.
It's one of those things that's a kind of a, it's an awkward thing to discuss if there's a problem.
And so, so it makes a lot of noise if it's not done right, but if it's done right, you don't hear anything.
And I think, you know, Suzanne Chadget, CFO Striker Canada articulated it, I think the best possible way.
The silence was deafening.
And when we went live in April, it had just resolved all these issues that they had prior to.
Omer (20:02.870)
Okay, great.
So success with the first customer, you obviously had credibility there.
You had helped them implement, you know, the previous sales comp software.
They'd called you back to help them when they needed to make changes.
So, you know, in many ways you were a known and trusted quantity with this company.
How did you persuade the next nine customers, you know, to get to those first 10 customers to buy your product and you know, who was going out and selling and how were you finding these customers?
Nabeil Alazzam (20:39.220)
So that was the hard part because after we launched Stryker and got the platform to a place where we were ready to take on more customers, it was then a completely outbound effort.
At that point we knew that we wanted to stay in stealth mode.
And given the unique approach we're taking to sales comp, where you imagine organizations that are used to doing everything manually, designing based off of gut feeling.
So all of a sudden they have an AI powered platform that automates the configuration and the design and supports the design of incentives.
This radical shift in how they manage it all of a sudden becomes, who are you?
What credibility do you have?
Why would I trust one of the most sensitive things, the thing that incentivizes and motivates the revenue engine within my organization to a small startup.
And so for us, those next, I mean, even the next two, I would say the next two to three customers was among the toughest because in every one of those cases, we are selling cold with very little credibility.
And so as you do in those early days, you tap into your network, you get introduced, you talk to people in your, in your immediate vicinity.
And I would say there's, you know, there's a lot of great individuals that helped us in the early days.
There's a relatively robust and thriving tech ecosystem here in Toronto and through different incubators like, you know, dmz, Community tech or Mars.
You know, we got some of that assistance early on.
But what I would say is selling to large enterprise is different because you can get introduced to someone and there are one decision maker amongst many decision makers that needs to buy one, you know, some, something like a mission critical software like compensation and sales comp.
And so it always led to, you know, how do we demonstrate credibility and get over that fear of working with a small unknown entity and startup.
And for us it was about demonstrating value throughout the sales process.
So our second customer, we jumped on a call and our very first call, we enticed this prospect.
We had outbound emailed different stakeholders in the organization.
We jumped on a call with the head of sales at the time and we pitched Forma and he was intrigued and he was willing to take another call.
And at the very, at the end of the next call, once we dove into the details, we understood that there was a, there was a problem in the design of incentives and the structure of incentives.
And it was one of those things where there's a very clear reason to move forward with Forma.
But his question was, well, how, you know, how do I take such a sensitive and critical thing and trust it with a small company like Forma?
What credibility do you have?
What use cases, what case studies can you share?
And what we said was, look, why don't you see our results firsthand?
And we actually asked to, let's sign the NDAs, give us your data, we'll stand up a POC and we'll demonstrate the analytics outputs from the data models that we have and show you what Forma is capable of.
And this is an organization where they accepted that.
They actually sent us the data on.
It was like 5pm on a Friday and the meeting was scheduled to review the results on Monday.
And so it was basically 48 hours of just standing up an instance, running the data models and then taking all the outputs and packaging it into a set of five, six slides that we can walk through in a single 45 minute meeting.
And it's funny because I look back and I get little goosebumps because we've obviously seen the other side.
We worked with the customer, we won that deal and they're one of our oldest customers on the platform.
And I look back and I think knowing what I know about the customer now, the amount of insight and value that we drove from that six slide presentation, it was very clear that okay, if this organization can pull this off in 48 hours over a weekend, yes, they're small but they're hungry and they're willing to do what it takes to help me get there.
And I think as a champion, as a kind of a visionary buyer at these large enterprises, you are naturally going to take a risk by going with an unknown entity versus going with an IBM.
No one gets fired for choosing IBM, as they say, but you are naturally taking a risk.
And I think what you want to do is you want to mitigate that risk for that buyer.
You want to mitigate that risk for your champion and give them the confidence that you are going to do whatever it takes to get them to the desired outcome.
And I think that was the same case for the next few customers.
And it wasn't until we had a solid three, four customers that we could then lean on customer reference calls to, to say.
So I would say from that customer 5 to 10, there was still this hesitation, but we were able to lean on the referenceability of our existing customer base.
And it helps when it's not just one or two customers saying these positive things, but when you can present four or five customer references and they're all speaking positively in the outcomes they're seeing.
And the fact that it's not just the commitment, the making of promises, but keeping of promises through, you know, through the sales process to the actual execution.
And I think those early customers are so critical to, you know, to demonstrating that credibility.
Otherwise you won't get the right to actually, especially when going after large enterprises, you know, selling to smaller organizations, you know, they can take on different types of risks, they can move quicker, there's less decision makers.
So it's a different ballpark when you're selling directly to large enterprises from day one.
Omer (26:35.540)
So the credibility piece, I think, you know, obviously once you get to four or five customers that you can refer to, it doesn't get easy.
It gets a little easier to, to sell to more customers.
But I'm curious about that, that example of, of taking their data and, you know, processing it over 48 hours and going back to them without getting too deep into sales, you know, compensation.
Can you just help us understand, like, what did you do with that data?
And specifically what was the customer looking for?
Or what were the data points of the metrics that you were able to show them which convinced them that Forma was a better product.
Nabeil Alazzam (27:17.370)
So if you think about what incentives for sales teams are ultimately designed to do, they're designed to drive a specific behavior, and you hope that that behavior is what is required to capture the potential that exists within that rep's territory or the customers that they're selling into.
And so what we are able to do is run it through our data models and produce a result that showed the customer that the behaviors they were driving and the outcomes were not necessarily the things that their incentive plan was actually originally designed or the objective of what it was designed to do.
And so, you know, one of the things that, that we ended up highlighting was not only was there a gap in terms of, you know, the design of that, that incentive comp plan, but that the way it was structured was going to result in potentially what would be a significant overage in their budget to sales compensation.
Omer (28:23.990)
Okay, so it's kind of clearer now that what you were basically showing them was like, look, based on the data that you gave us, this is where we understand you want to get to in terms of outcomes and how you want to incentivize your people.
And the reality is that this is what's actually going on and this is what the gap is.
And then secondly, this thing that you're trying to achieve, you're going to end up spending a lot more money than you need to to get there.
Nabeil Alazzam (28:54.090)
Yeah.
And the second part, I think just to kind of provide a little context, a really good comp structure for a sales team is going to overpay significantly for top performance.
So you want to Pay your top 10, 15% of sales reps two to three times the average earner, and you want to pay your bottom performers a third or less.
And so it's a very steep pay curve.
So if you design your incentive structure poorly, if you set your targets without a data driven approach, what could happen is you could have half your sales team significantly overperform and half your sales team significantly underperform, and you end up getting to a point where you're actually paying 30 to 40% more than what you budgeted, even though you actually don't overperform on your business target as a company.
And in those situations, sales comp is the second largest cost center for a lot of these organizations.
It's a meaningful variance.
You know, to be 30 or 40% over budget against your payroll target is a massive miss as an organization.
And so there is a real financial impact of not doing it right.
And that's, you know, these are the kind of things that become very easily visible when you take a very structured framework of reviewing the data.
And so ultimately, what we did in that 48 hours was demonstrate that not only, you know, not only was there a gap and a value in supporting a specific organization, but that we had the credibility to be able to take their data, process it and generate these results, you know, leveraging our platform.
And I think that kind of unlocked this.
Okay, well, imagine what they could do with a data driven approach to the rest of the sales computer.
Omer (30:37.020)
So that eventually gets you to the first 10 customers.
And as we said, the more customers you sign up, the easier it's becoming to try and, you know, demonstrate your credibility.
And then also having this approach in terms of being able to take a customer's data and, you know, show them the gaps, the opportunities, you know, the problems is great.
But when you and I were talking earlier, you know, kind of going beyond 10 customers before they'll even have a serious conversation with you about this, there's this kind of education that needs to go on.
Maybe they already have sales compensation software, right?
Probably they do, right?
Why do they need to use your product?
Why is a data driven approach a better way to go about it?
So can you tell me a little bit about what was that, that kind of education challenge that you were experiencing?
Like when you're going out and talking to customers before they even kind of take you seriously and want to have a more serious conversation or talk about a POC or whatever.
What were some of the objections you were hearing that you kind of help?
You realize, look, we need to do a better job at educating these customers, these potential customers.
Nabeil Alazzam (31:51.820)
It's a great question.
And I think for us, we are selling into large enterprises, companies with hundreds, thousands of sales reps.
They have had to solve this problem.
It's not like you can't run a sales organization that large and not be paying your sales reps accurately.
And so there's teams and tools that are configured and set up and processing in place to calculate sales compensation.
So the education for us was to say, today you think about the design and strategy of sales comp in a totally separate world than the execution.
And I design based off of gut feel, right?
The lack of data driven approach and ultimately I pass it over to the fence to my operations team and that might take six to eight months to deploy any change or meaningful change in comp.
And so today the Fortune 500 CRO is acutely aware that, okay, I have 5,000 sellers across the US and I want to change a behavior.
The fastest way to change a behavior in the sales team is to put an incentive in place to drive a new behavior.
But they're also aware that it takes them six months to re change or deploy a new incentive plan or make a meaningful shift in their incentive structure.
And so for us it's about educating the buyer to say you don't have to be bottlenecked just because you have been in the past.
There is a different approach to solving this problem.
And I'll set up an, I'll explain with analogy and then provide an example here.
So everyone has historically been used to buying a car.
If I equate the legacy sales comp solutions to a car, I buy that car based off of that.
I want to go from point A to point B.
Do I expect to have a bunch of boulders along the way?
Okay, well then I'm going to buy a off roading vehicle, but it's not going to be the fastest vehicle or do I expect very little boulders and obstacles along the way and it's a clean road.
And so I'm going to buy the race car and all of a sudden something changes.
And what happens is I either, you know, I now need the race car or I now need the 4x4 vehicle.
And now changing that midway is a serious problem.
And we're coming in and saying, look, you want to go from point A to point B, you want to do it faster and you want to make sure that you're taking the most optimal route.
As a platform.
We are selling the autonomous drone and we're leveraging AI to enable you to model, iterate design and actually configure and deploy comp plans to sellers faster than anything else.
There's two things that you have to educate the buyer on.
One is that you no longer have to think about sales computation as a retroactive thing.
You can be proactive by leveraging data.
Two, you no longer need to think about the driving the car and how you, you know, what gear you're in and the gas pedal and the brakes and the roads.
You just need to think about where you want to go and monitor and oversee it.
And so, you know, from day one, we were an AI company.
You know, we like, I think from the, the early days of Forma it was very, very clear that there is an opportunity to solve sales compensation across every single customer by leveraging all the data that exists within every organization.
And the toughest thing in this educational process is, is, and especially I would say going back a few years when you're talking to stakeholders, large enterprises and you're talking about leveraging AI, it's, it seemed like a black box, like what exactly are you doing, how are you leveraging AI and where in the platform are you doing that?
How are you going to take and you know, natural language input and convert it into an actual configured comp plan within the system.
I think over the last few, even few months to, in the last eight, eight months or so, the consumer awareness of the power of AI and what it's going to mean to the shift of how enterprises engage with software is now actually making it easier for us to describe and showcase the power of Forma and how it's changing the way organizations engage with software like Forma and others in the AI space.
Omer (36:09.260)
Yeah, I think unless you've been living under a rock, you've heard of ChatGPT, you've kind of started to get more familiar with what AI actually means and the reality of how we can use that type of technology, at least today.
But back six, seven years ago, I don't think most people kind of understood AI at all.
Nabeil Alazzam (36:36.820)
Right.
Omer (36:37.100)
Unless you were working in the space.
It was just like this science fiction kind of thing that would take over your job and kind of get rid of you.
And I think definitely there has to be some level of fear in terms of relying on a technology like that.
But also, as you said, it's a black box, right?
It's just like, what am I, you know, it's one thing to rely on a startup to run my sales, you know, comp plans and everything, but then on top of that there's this black box in there with this AI, whatever.
What the hell is that actually doing?
And what does that mean to the reality of what's going to happen to my business?
Like, could that completely get screwed up?
Because, you know, my, my kind of salesforce is in chaos because the sales compensation plan is just, you know, a total mess.
So like, was, was that like a common thing you were dealing with at the time?
That kind of fear or, or concern from potential customers?
Nabeil Alazzam (37:41.290)
Yeah, 100%.
I think there's an element of, I think once the customers were educated and, and how we were using AI and how ultimately, and if you think about it, if you step back, AI functions when you have data in a consistent, you know, in a structured format that you can actually use to train a model and getting a customer educated, you know, and a customer that's not necessarily, or a buyer that is not necessarily in the space of AI to your point, you know, back in 2016, 2017, 2018, unless you were in that space and eagerly, you know, working on the tools and resources available within the AI domain, you weren't aware of the power and what it actually meant.
That it wasn't necessarily sci fi, that you could actually use it to solve real problems.
And, you know, if you think about our buyers being larger enterprises, this is not something they're aware of.
And so as a part of the sales process, you're educating the buyer to what it means to you today and over time, and how a system will become more and more tailored to you and your organization over time by leveraging, you know, a consistent data model and all the AI toolkits and models available to us.
And I think in, you know, again, obviously in the last eight months or so, it's, the awareness has definitely shifted.
But one of the things that, you know that I think even today there's this, you know, this fear that is potentially a little bit overblown.
I think AI is going to augment and enable the end user to do more, not necessarily automate the entire job of, you know, perhaps maybe some very finite type of task work is going to be automated fully.
But at the end of the day, it's also the difficulty in understanding, okay, well, what does my job look like if I'm just, you know, sitting and flying in an autonomous drone?
Back to kind of that, that example and that analogy.
And so during the sales process, we have to educate and provide the clarity of, okay, well, can you imagine what it would look like if you had the time and the data available to you to understand how every seller in your organization is being motivated and to be able to tailor short term incentives like Spiffs to individual sellers and territories and actually drive a meaningful shift in behavior to get to that business outcome when today 95% of your work is stuck there doing the manual data calculation and data polls and sitting in Excel and configuring these tools.
And so I think even that element of what does the day in the life look like when you're leveraging a platform that's powered by AI versus what I'm doing today.
And I think the more and more that the consumer and the enterprise is aware of, this is not something to be afraid of, but actually something to recognize that it's going to elevate humans to do what they do best, which is decision making and ultimately steering and navigating the direction that we want to go in, not the day to day execution of the same task work that we do day in, day out.
Omer (40:46.740)
So in 2016, when you started building this product and started using your savings and hiring people, did you have any sense of the size of the business that you were building?
I mean, you know, in the last six, seven years, you've crossed, you know, eight figures in ARR raised 58 million as we talked about.
And I think in many ways if we kind of asked you, you'd say, well, we're still just getting started.
There's still this massive opportunity ahead of us, right?
What were you thinking at the time when you built the product?
What was your hope back then in terms of how big the business might become?
Nabeil Alazzam (41:32.320)
So again, I was very laser focused on solving the problem at hand.
But I actually remember a slide.
When I first started the company.
I spoke with a few investors, local investors, to get a sense of, okay, how much effort was it going to be to raise capital versus how much effort was it going to require to get to the April launch?
And even at that time, you know, the metric that I used in terms of Tam analysis.
So $1.2 trillion is spent on sales comp.
If you think about the average enterprise organization spends anywhere between 1%, upwards of 8% on kind of the smaller and less efficient organizations of the comp spent on, on administering said comp.
So if $1.2 trillion is spent every year on variable compensation, at a minimum, $12 billion was being spent to administer that process.
And that's a combination of people, tools, technology, external consultants, et cetera.
So in my mind, this was like a massive greenfield opportunity, massive tam.
And the reason why is because the largest incumbents in the space had barely crossed, I would say, 100 million in recurring revenue.
And the reason why, in my opinion, is that no one had actually solved the right problem.
They had tackled part of the problem, which is, here's a calculator that you can configure your logic.
But the real spend was what's the right incentive structure?
How do I use data to model what if scenarios?
If I roll out this comp plan, what's my financial impact?
And so to me, the real, real upside was actually addressing the crux of what is the second largest cost center.
And if you think about, you know, analogous, you know, similar style types of businesses, the payroll market was orders of magnitude large, larger, and yet the cost center, you know, and from a sales perspective was a meaningful portion of that.
And so we know why was there a discrepancy in the value of the business?
So I always thought, there's a massive business in the making here.
But again, it was focus on solving the product, solving the right problem, build the product to be able to scale and that will naturally kind of lead to where we are.
But yeah, definitely early days focus was very much on kind of getting to that initial success.
Criteria and then the next one and the next one.
And as I said, it's a moving target.
So now we have our next set of targets and where we want to go.
Omer (44:10.260)
I'm always kind of a big fan of the expression like, think big, act small, like you can have these big visions, but at the end of the day, it comes down to what's the next thing I need to get done?
And the fact that you were very laser focused on just saying right now we need to build a product for Stryker and then we'll figure out the next and the next, as opposed to how do I build, you know, the $100 million business product today and what are all the things that it should be doing and so on.
So it's a, it's a, it's a fascinating business and opportunity here.
Like again, like, you know, if you said, if someone had said to me sales compensation, I'd be like, yeah, I can see, you know, the opportunity there in terms of software.
But when you describe, you know, the TAM and how big it truly is, it, it's like pretty mind blowing.
It's kind of surprising that there aren't more players and more competition.
Well, maybe there is.
I don't know.
Nabeil Alazzam (45:09.450)
Yeah, I would say there are.
In the software space, there's actually quite a few organizations that are attempting to solve this problem.
But like I said, I think what's the root cause or the root cause that they believe is the biggest pain point that they're going after?
I think that's where differentiated, we're targeting a different problem and actually kind of stepping back.
I think the saying is always like, the hardest part is uncovering the problem that you're actually trying to fix the solution.
And execution of that is actually much easier once you've diagnosed the right problem.
And I think that everyone has gone about building a toolkit for an end customer to use to configure their plans, when I think the real problem is it's $1.2 trillion spent every year on variable compensation.
And most organizations could not meaningfully tell you what the ROI of every dollar that they spend on that one of the largest cost centers in their business.
And so by targeting the right problem set, which is how do you actually build a platform to help you design incentive plans and, and then using the same platform to execute and calculate the payouts on an ongoing basis for the rep, by solving that problem first, you, you solve the second problem, which is what everyone else is focused on.
And so we're turning this into, you know, I Think historically, sales comp has been a back office and operations problem.
And what you're starting to see more and more is that it's becoming a seat at the table.
It's a, you know, it's at the revenue and go to market organization.
Businesses are recognizing that the incentives are ultimately the most impactful lever for us.
And so we want to have that more strategic lens.
And I think this is kind of where by solving that problem on the design and strategy side, we're actually addressing the root cause.
Because the tam.
Right.
I said, you know, 1% from an administration perspective.
But if you think about it as if you increase revenue by 1% of that $1.2 trillion that it's driving.
That $1.2 trillion is driving on average $10 trillion of revenue.
Right.
Given the average commission rate is about 8 to 9%.
So you're talking about 10 trillion.
If you improve it by 1%, what is the value there that you're creating and unlocking for businesses?
And I think that's where it kind of sets the, the size and magnitude of the problem in a much bigger lens.
Omer (47:43.080)
We'll have to get you back in a few years and find out how far you take this business.
All right, we should wrap up.
Let's get onto the lightning round.
I've got seven quick fire questions for you.
Just try to answer them as quickly as you can.
What's one of the best pieces of business advice you've ever received?
Nabeil Alazzam (48:02.760)
It's not what you do, it's how you do it.
Omer (48:05.530)
What book would you recommend to our audience and why?
Nabeil Alazzam (48:07.690)
Thinking in Bets is a book I read recently, but I think it's a great book and a great approach to take.
Omer (48:15.130)
What's one attribute or characteristic in your mind of a successful founder?
Nabeil Alazzam (48:20.170)
Relentless perseverance.
I think it's never an easy thing and you just have to have the drive to get to the outcome.
Omer (48:30.660)
What's your favorite personal productivity tool or habit?
Nabeil Alazzam (48:33.860)
Looking at the things that worked well, the things that need to be improved and the things that need to be stopped and effectively reassessing every week to make.
Every week, every day to make it better than the day before.
Omer (48:50.180)
What's a new or crazy business idea you'd love to pursue if you had the time?
Nabeil Alazzam (48:54.500)
I think the way that organizations buy and sell to each other like business to business, exchanges of value and goods, needs a radical transformation.
And I don't necessarily have the exact solution, otherwise it would be a multibillion dollar idea.
But I think there's a moment of we have enough data and a radical shift that's happened in the way that we engage and work together that's happened the last three years.
And I think the sales model needs to be radically changed as well.
Omer (49:33.470)
What's an interesting or fun fact about you that most people don't know?
Nabeil Alazzam (49:36.830)
I'm a big car guy.
I worked on rebuilding car engines in the past, actually helped a close friend of mine rebuild his 1980s 911 and an old classic.
And I would definitely spend way more time if I had the time on cars.
Omer (49:55.820)
And finally, what's one of your most important passions outside of your work?
Nabeil Alazzam (49:58.620)
I love running Big Runner, and I feel like it's the thing that enables me to kind of de stress and let it all go away as I kind of get into the mode and the Zen of running.
Omer (50:13.580)
Awesome.
So, Nabeel, thank you so much for joining me, sharing your story and some of the lessons and things you've learned along the way.
If people want to check out Forma, they can go to Forma AI.
And if folks want to get in touch with you, what's the best way for them to do that?
Nabeil Alazzam (50:33.080)
I would say reach out to me on LinkedIn or connect with me by email at formula there.
All right.
Omer (50:40.850)
We'll include a link to your LinkedIn profile in the show notes as well.
Awesome, man.
Thank you so much for joining me.
It's been a pleasure and good luck to you and the team as you strive to take over the world of sales compensation, and we'd love to get you back in a few years and see what the business is doing then.
Nabeil Alazzam (51:01.410)
Absolutely.
Thank you, Omario.
It's a pleasure to be on and really enjoy the conversation.
Omer (51:05.890)
Yeah, my pleasure.
Cheers.
