Forma.ai: From Client Pains to an 8-Figure ARR SaaS Company – with Nabeil Alazzam [362]

This is a machine-generated transcript.

[00:00:00] Omer: Welcome to another episode of the SaaS podcast. I'm your host, Omer Khan, and this is a 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 took to Nabeil Alazzam, the founder and CEO of Forma.ai, a sales compensation platform driven by collective data models and AI.

In 2014, Nabeil 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 former two years later after he'd moved on to another job, an old client contact hitting the bill, needing help updating their system.

He sees 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. Nabeil 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 eight 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 Nabeil's deep understanding of his client's pains helped him to identify a significant gap in the sales compensation market.

Why Nabeil'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 Forma's AI paradigm shift was crucial to overcoming their fears. How Nabeil analyzed a prospect's data over a weekend and identified issues and gaps that helped him close a major deal and the difficulties Nabeil had fundraising initially, and the lessons he learned from that experience.

So hope you enjoy it. Nabeil, welcome to the show.

[00:02:23] Nabeil: Omer great to have, great to be on and thank you for having me on.

[00:02:26] Omer: My pleasure. Do you have a favorite quote, something that inspires or motivates you that you can share with us?

[00:02:31] Nabeil: Success comes when chance meets 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.

[00:02:39] Omer: Love it.

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?

[00:02:49] Nabeil: 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 into behavior that you wanna 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.

[00:03:58] Omer: Okay, great. So for, for people who are listening to this who don't know anything about sales compensation, just give us a, a dummies guide to, you know, what, what does that actually mean?

[00:04:12] Nabeil: So, for the majority of sales reps, the 50 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. Without a truly data-driven approach and really bias 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.

[00:04:45] Omer: Okay, great. So the, the business is founded in 2016. I think the, from what I understand, the, 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?

[00:05:08] Nabeil: Yeah, so I was working in a manager consulting firm, helping Fortune 500 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, you know, like I said earlier, 6-8 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, 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, You know, I had seen the pain points in, in, in the, in 20 14, 20 15, and I always thought it was broken, and it needed to, you know, to be radically rethought. You know, instead of the once a, you know, once every few years, let's redesign the incentives to, to create, you know, the desired outcome from the sales team and let's bring these consultants in to kind of 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 gonna get double the amount of commissions. If you don't close it in two weeks, you're gonna get a fraction 25% of your commissions.

Why? Because we have enough data, whether it's, you know, 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, you know, 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 a tech company and while I was there, I got reached out to by a customer that I had worked with and my, 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 large, you know, the, 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 were, they needed support in reconfiguring this, this tool. And it was one of those things where, you know, being brought in to reconfigure the, the, the platform and recognizing that if every time you needed to make a change, you needed four to six months heads up and pro, you know, professional help where, you know, with, 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 gonna 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, the full vision of, of what we wanted to build and format and, and ultimately led to us pitching Stryker on a completely revamped and, and different approach to sales compensation.

[00:08:34] Omer: Okay, so you, 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, to implement. And that got you thinking about, you know, there has to be a better way.

Maybe there's software that, you know, I could go and build and, and solve this problem better. And so, the company that who you just installed this software for you pitch them on some other software that you are gonna go and build. So how did that go down?

[00:09:13] Nabeil: 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 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 solve the problems on day one. Now I left ZS, 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 is, and I, because I even, you know, that, 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. Like I'm, I'm, I'm working in tech. You should reach back out to ZS. And the, the answer was, ZS doesn't know our instance. You are the one who set it up. You know, it, we wanna, you know, we, 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, that is the moment that now you're bottlenecked. And, and anytime you need to make a change, you need to spend months revamping this, you know, the, the infrastructure of these systems.

[00:11:03] Omer: Okay, great. So there's already sales compensation software out there, but you, 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 they want or need to have. And so you've, 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, and solve a very specific problem or situation. So that's, that's great. But like, where was this coming from? Had, had you started a startup before, you know, were you, did you kinda have a tech background? What, what was your experience in kind of building this type of product and, and company.

[00:11:52] Nabeil: I had, I was entrepreneurial by, you know, from a background perspective. And I, and I 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, the town that we went to school at Queens University.

And so we had built a, a small business experienced. 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, that I had with forma and ultimately that we have of addressing this problem in sales comp is certainly much bigger than anything I'd tackled before.

To me it was, it was a, you know, I, I said that quote earlier, success comes in chance meets preparedness. And, and by no means do I think, you know, I think success is a relative term and it's 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, I deeply cared about, I had, you know, worked with these individuals and, and, 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 wanna solve that problem. I, 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, you know, solving this problem in a, in a radically different approach and, and, and, you know, 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, you know, this customer and help, you know, 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, like where we were as a company back then to here. I probably would've been afraid and actually not done it. You know, especially given the fact that I, I used my own money to kind of start the company.

I think it would've potentially changed the, my, my willingness to do that. But in that moment, I had a lot, I had a lot of conviction and confidence that we were gonna 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, to, to get going.

[00:14:24] Omer: Okay, great. So I wanna dig into how you got started and, 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.

[00:14:37] Nabeil: We are a series B backed business. We've raised on 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 customer compensation. To give you an scale to the sales competition side, we have a, you know, we have Fortune 500s that are leveraging the platform to execute on every aspect of sales competition, which means that we're processing billions of dollars of payouts for single customers alone, let alone across the collective. And so and this is in an annual basis,

[00:15:19] Omer: so in the last almost seven years, you've gone from zero to eight figures in ARR. Raised $58 million. And so let's, let's talk about the first, well, let's talk about the first customer. So you, you pitch Stryker, they, 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?

[00:15:47] Nabeil: Yeah. So basically they had a contract with an existing vendor. And, and that contract expired, but eight months after we started the, the official build of Forma. And so, you know, I kicked off a 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 in, 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, you know, quite a few other large enterprises of that, you know, that scale from a sales compensation perspective. But by no means was it an easy feat. You know, I think for those first eight months, There were periods where, you know, 60 days straight of doing nothing but working.

And, you know, part of the story is we founded the company out of my house. So it started around you know, small team working outta 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 an, you know, do we, do we get an office?

And, and we ended up scaling to, you know, to around 23 people at a, at the peak working out of out of my house. My house was no longer, house, was 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's a number corporation and it was only, you know, three months in. When someone was like, we're not gonna able to recruit anymore, any more people as a number corporation, we're gonna have to come up with a name pretty soon that we even prioritize that 'cause at that point it was, it didn't matter what mattered was getting, you know, getting to that eight month milestone and, and delivering what was required to the customer.

[00:17:48] Omer: Yeah. So, so during those eight months, did, did you raise any money or this was just all funded through your savings?

[00:17:56] Nabeil: So it was, I mean, it was, we were effectively bootstrapped from, from day one.

Our first institutional investment was in February of 2020. We raised our seed round.

[00:18:05] Omer: Wow, okay. So almost four years. You, you were bootstrapping the business. Yeah. So you, you spend the next eight months building the product. You've got all of these people living in your dining room.

[00:18:19] Nabeil: 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 like at those times, and I think the, you know, the, you need to have fun while you're, while you're, while you're doing this. And I think I look back and, and, and despite all the challenges and the hard work you know, we had a, a great deal of fun building.

Building the business to where it's today.

[00:18:39] Omer: So finally the product is ready. You go back to Stryker, what happened next? Was it a smooth implementation? They loved the product, like what happened?

[00:18:51] Nabeil: So it was, I think again, you know, if you think about anything where you're making a massive change and in a larger enterprise, the change management aspect is always difficult.

But I'll, I, I will use a quote from, from Stryker and, and specifically the silence was deafening. Because sales comp wa 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, 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 a, it's an awkward thing to discuss if there's a problem. And 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 Shadgett, CFO,at Stryker Canada.

I think, you know, the best possible way the silence was deafening and when, when we went live in in April, it had just resolved all these issues that they had prior to.

[00:19:47] Omer: 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, you, you know, you are a known and trusted quantity with, with this company.

How did you persuade the next nine customers, you know, to get to those first 10 customers, to, to buy your product and, and you know, who was going out and selling and, and how were you finding these customers?

[00:20:23] Nabeil: So that was the hard part because after we launched, you know, Stryker and, and, and got the platform to place where we were ready to take on more customers.

It was then a completely outbound effort, right? 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 know, you imagine organizations that are used to doing everything manually designing based off of gut feel, it's 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 rep, you know, the, the thing that incentivizes and motivates the revenue engine for my, within my organization to a small startup. And so for, you know, for us, those, 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, you know, as you do in those early days, you tap into your network, you get introduced, you, you know, You, you talk to, you know, people in your, in your immediate, you know, 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, you know, a, 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, 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, that the 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, you know, we jumped on a call and our very first call, we, you know, we got, we enticed this, you know, 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 form 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, and critical thing and, and trust it with a small company like Forma?

Like how, you know, 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, you know, let's sign the NDAs. Give us your data. We'll stand up a POC and we'll demonstrate the analytic out, like the analytics outputs from the data models that we have, and show you, you know, what Forma's capable of.

And this is an organization where, you know, they, they accepted that they actually sent us the data. On it was like 5:00 PM on a Friday and we had, the meeting was scheduled for, 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, you know, a set of five, six slides that we can walk through in a single 45 minute meeting.

And you know, it's funny 'cause I look back and I get little goosebumps because, We've obviously seen the other side. We, we worked with the customer, we won that deal and you know, they're one of our oldest US customers on the platform. And I look back and I think, you know, knowing what I know about the customer now, you know, the amount of insight and value that we drove from that six slide presentation, it was very clear that, okay, if this organization could pull this off in 48 hours over a weekend, yes, they're small, but they're hungry and they're gonna 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 a, these large enterprises, you are naturally gonna take a risk by going with an unknown entity versus going with an IBM. You know, no one gets fired for choosing I BM as they say, but like, you are naturally taking a a risk.

And I think what you wanna do is you wanna mitigate that risk for that buyer. You wanna mitigate that risk for your champion and give them the confidence that you are gonna do whatever it takes to get them to the desired outcome. And I think, you know, that was the same case for the next few customers.

And it wasn't until we had, you know, a solid three, four customers that we could then lean on customer reference calls to, to say, you know, so that, I would say from that, you know, customer five to 10. You know, there was still this hesitation, but you, we were able to lean on the referenceability of our existing customer base.

And, you know, it helps when it's not just one, you know, one or two customers saying these positive things, but when you can, you know, present four or five customer references and they're all speaking positively in the outcomes that they're seeing and, and the fact that, you know, it's not just the, you know, the commitment, the, the making of promises, but keeping of promises through, you know, through the process to the actual execution. And I think those early customers are so critical to, you know, to demonstrating that credibility. Otherwise you, 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.

[00:26:17] Omer: So the, the credibility piece, I think, you know, obviously once you get to four, 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, were the, the data points and the metrics that you were able to show them, which convinced them that Forma was a better product?

[00:27:00] Nabeil: So if you think about what incentives for sell sales teams are, are ultimately designed to do, they're designed to drive aspecific behavior, you hope 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're able to do is run it through, you know, our data models and, and, 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 wa would be a significant overage in their budget to sales competition.

[00:28:06] Omer: Okay, so it, it's kind of clearer now that what, what you were basically showing them was like, look, based on, you know, the data that, that you gave us, this is where we understand you want to get to in terms of outcomes and, and how you wanna incentivize your people. And the reality is that this is what's actually going on, and this is what you know, the gap is. And then secondly, this thing that you're trying to achieve, you're gonna end up spending a lot more money than you need to to get there.

[00:28:36] Nabeil: Yeah. On the second part, I think just to kind of provide a little bit of 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, you know, 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, you know, 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 to 40% over budget against your payroll target is a massive miss as an organization.

There is a real fi financial impact of not doing it right. And, 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 this specific organization, but that we have the credibility to be able to take their data, process it, and generate these results.

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 comp.

[00:30:19] Omer: So that eventually gets you to the first 10 customers. And as we said, the more customers you sign up the, 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. It 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, can you tell me a little bit about, you know, 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 wanna have a. A more serious conversation or talk about POC or whatever. What were some of the, the objections you were hearing that you kind of helped you realize, look, we, we need to do a better job at educating these, these customers, these potential customers.

[00:31:34] Nabeil: It's a great question and I think, you know, 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, you know, 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 of and strategy of sales comp in a totally separate world than the execution. And I designed based off of gut feel, right? No, no, the, the, the lack of data driven approach. And ultimately I passed 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, in comp. And so, you know, 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 'em six to months to rechange or deploy a new incentive plan or make a meaningful shift in, in their incentive structure.

And so for us it's about educating the buyer to say, you, you're, 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. I'll set up an, you know, I'll explain it with an analogy and then provide an example here. So, everyone has historically been used to buying a car.

If I equate the, the legacy sales comp solutions to a car, I buy that car based off of the, you know, I wanna go from point A to point B. Do I expect to have a bunch of, you know, boulders along the way? Okay, well then I'm gonna buy a off-roading vehicle, but it's not gonna 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 gonna 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 the four by four vehicle. And now changing that midway is a serious problem. And we're coming in and saying, look, you wanna go from point A to point B, you wanna do it faster, and you wanna make sure that you're, you're taking the most optimal route.

As, as a platform, we are selling the autonomous drone and we're leveraging AI to enable you to, you know, 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 bel like, I think from the, the early days of a format, 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 of 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 gonna take and, you know, natural language input and convert it into an actual configured comp plan within the system? And I think over the last, you know, few, even few months to, in the last, you know, eight, eight months or so, the consumer awareness of the power of AI and what it's gonna mean to the shift of how enterprises engage with software is now actually making it easier for us to describe and share and showcase the power of form and how it's changing the way organizations, you know, engage with software like form and others in the AI

[00:35:50] Omer: space.

I, I think unless you've been living under a rock, you, you've, you've heard of Chat GPT, you, you've kind of started to get more familiar with what AI actually means and the reality of, of how we can use that type of technology, at least today. But back, you know, six, seven years ago, I don't think most people kind of understood AI.

At all. Right. Unless you were working in the space, it was just like this science fiction kind of thing that would, you know, take over your job and, and kind of, you know, get rid of you. And I think definitely like, you know, there has to be like, you know, some level of fear in terms of, you know, 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, there's, it's one thing to rely on a, 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 gonna 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, w w was, was that like a common thing you were dealing with at the time, that kind of fear or, or concern from potential customers?

[00:37:23] Nabeil: 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 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 are in that space and eagerly, you know, working on, on, on the tools and, and resources available within, 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. It's you ha 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, and models available to us.

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 gonna 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, 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, you know, 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, you know, 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 doing the manual data calculations and data polls and, and sitting in Excel and configuring these tools. And so I think even that element of what does, you know, the day in the life look like when you're leveraging a PA 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, you know, 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, you know, 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.

[00:40:28] Omer: So in 2016, when you started building this product, And, you know, 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, you've, you've crossed, you know, eight figures in ARR raise, 58 million as we talked about.

I think in many ways if we kind of asked you, you'd say, well, we're still just getting started. There's still, you know, this massive opportunity ahead of us. Right. What were you thinking at the time when you built the product? Like what was your hope back then like on, in terms of how big the business might become?

[00:41:13] Nabeil: So, again, I, you know, 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, like local investors to get a sense of, okay, how much effort was it gonna be to raise capital versus how much effort was it gonna require to get to the April launch?

And even at that time, you know, the, the metric that I used and, and 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, you know, kind of the smaller and less efficient organizations of the comp spent 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 is like a massive greenfield opportunity, massive tam. And the reason why is because the largest incumbents in the space had barely crossed, you know, I would say a hundred million in recurring revenue.

And the reason why in, in, in my opinion, is that no one had actually solved the right problem. You know, they had tackled the 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, the real, the 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 comp perspective was a meaningful portion of, of, of that.

And so we know why was there a discrepancy in, in, in the, 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, on solving the products. Solving the right problem, build the product to be able to scale. And that will naturally kinda lead to, to, to, to where we are.

But yeah, definitely early days focus was very much on you know, and 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, you know, set of targets.

[00:43:48] Omer: I'm, I'm always a, a kind of a big fan of the, the, the kinda the expression like think big, act small.

Like you, you can have these big visions, but at the end of the day it comes down to what's the next thing I. 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, you know, the next and the next as opposed to, you know, how do I build the, you know, the, the a hundred million dollars business product today and, and what, what are all the things that it should be doing and, and so on.

So it's a, it's a, it is a fascinating business and opportunity here. Like, again, like, you know, if you'd said, if someone had said to me, Sales compensation, I'd be like, yeah, I, I, I can see, you know, the opportunity there in terms of software, but when you describe, you know, the TAM and, and how big it truly is, it's like pretty mind blowing.

You know, it's, it's kind of surprising that there aren't more players and more competition. Well, maybe there is. I don't know.

[00:44:48] Nabeil: Yeah, I, I would say, I would say there are, in the software space, there's actually quite a few, you know, organizations that are attempting to solve this problem. But like I said, I think, what's the root cause?

Or the, the root cause that they believe is the, is is the biggest pain point that they're going after. And I think that's where we diff where we differentiated, right? We're, we're targeting a different problem. And actually, you know, 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 you know, everyone has gone about, you know, 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 r o I of every dollar that they spend on that. On that one, you know, one of the largest cost centers in their business. And so by targeting the, the right problem set, which is how do you actually build a platform to help you design incentive plans, 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, a, a, a back office and operations problem. And what you're starting to see more and more is that it's becoming a, a seat at the table.

It's a, you know, it's at the revenue and go-to-market organization businesses are, are, are recognizing that the incentives are ultimately the, the most impactful lever for us. And so we wanna have that more strategic lens and I. This is kind of where by solving that problem on the design and strategy side, we're actually addressing the, the, 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, that's driving that $1.2 trillion is driving on average $10 trillion of revenue. Right, given the, the average commission rate is about eight to eight to 9%, so you're talking about 10 trillion.

If you improve it by 1%, what is the value there that you're creating in unlocking for businesses? And I think that's where it kind of sets the, the, the size and magnitude of the problem in an much bigger. Much bigger lights.

[00:47:20] Omer: We'll have to get you back in a, in a few years and, and find out, you know, 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 'em as quickly as you can. What's one of the best pieces of business advice you've ever received?

[00:47:38] Nabeil: It's not what you do, it's how you do it.

[00:47:41] Omer: What book would you recommend to our audience and why?

[00:47:43] Nabeil: Thinking in Bets is a book I read recently, but I think it's it's, yeah, it's a great book and a great, a great approach to take.

[00:47:50] Omer: What's one attribute or characteristic in your mind of a successful founder?

[00:47:55] Nabeil: Relentless perseverance. I think it's, it's never an easy thing and you just have to have the, the drive to get to the outcome.

[00:48:05] Omer: What's your favorite personal productivity tool or habit?

[00:48:08] Nabeil: Looking at the things that worked well, the things that need, you know, need to be improved and the things that need to be stopped and, and, and effectively reassessing every week to make every week, every day to make it better than the day before.

[00:48:24] Omer: What's a, a new or crazy business idea you'd love to pursue if you had the time?

[00:48:28] Nabeil: 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 multi-billionaire idea.

But I think there's an element of we have enough data and, and, and a radical shift that's happened in the way that we engage and, and work together. That's happened in the last three, three years, and I think that the sales model needs to be you know, radically changed as well.

[00:49:05] Omer: What's an interesting or fun fact about you that most people don't know?

[00:49:09] Nabeil: I'm a big car guy. I. I've worked on, on rebuilding car engines in the past. I 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, on, on cars.

[00:49:26] Omer: And finally, what's one of your most important passions outside of your work?

[00:49:29] Nabeil: I love I love running Big runner, and I feel like it's the thing that enables me to kind of de-stress and, and let it all That'll, you know, go away as I kind of get into the, the mode and the zen of, of running.

[00:49:42] Omer: Awesome. So, Nabeil, thank you so much for joining me, sharing your story and, and some of the, the, the lessons and, and you know, things you've learned along the way.

If people want to check out Forma, they can go to forma.ai and if folks wanna get in touch with you, what's the best way for them to do that?

[00:49:59] Nabeil: I would say reach out to me on LinkedIn or by my email

[00:50:04] Omer: down. Alright. We'll include a, 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 know, you and the team as you, as you strive to take over the world of sales compensation and we'd love to get you back in a few years and, and see what the business is doing then.

[00:50:24] Nabeil: Absolutely. Thank you Omer Omer, it's pleasure to be on and, and I enjoyed the conversation.

[00:50:28] Omer: Yeah, my pleasure. Cheers.