Omer (00:11.840)
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.
This Week's interview is a story about a serial entrepreneur in Sao Paulo, Brazil.
He quit a successful consulting career to build his own startup, and like most entrepreneurs, he had a roller coaster of a ride.
He had tough moments, such as having to put his mother's apartment up as collateral for a business loan.
And he had highs, such as successfully building and selling a business.
He started his latest company about four and a half years ago, and he's taken it from zero to over $2 million in annual recurring revenue with over 65 employees and 1,000 customers.
In this episode, he shares his story and how he's built several successful businesses.
We talk in some detail about how to find the right business mod model for your SaaS business.
We talk about how a freemium model turned out to be a bad decision for my guest, and we discussed the mistakes that he's made along the way and the critical lessons that he's learned about pricing, revenue, and profitability.
It's a great conversation and I'm sure you're going to get a lot out of it.
All right, today's guest is the co founder and CEO of Run Run It, a SaaS product that helps teams to manage tasks, projects, performance, and corporate communication.
The company was founded in 2012, is based in Sao Paulo, Brazil, and to date has raised $4.4 million in funding.
So today I'd like to welcome Antonio Carlos Suarez.
Antonio, welcome to the show.
Antonio Carlos Soares (02:19.190)
My pleasure, Amir.
Omer (02:21.030)
Now, let's start by talking about what.
What drives you, what motivates you.
So is.
Is there a.
Is there a quote that maybe you can share with us which is kind of will get us a little bit of an insight in terms of how you think as an entrepreneur?
Antonio Carlos Soares (02:37.630)
Yeah.
There's a friend of mine who happens to be, I think, an intellectual, one of the most intelligent guys in Brazil.
He's called Ricardo Guimarens.
And once he said to me, well, you know, succeeding in the wrong thing is just like failing.
And that's something that really struck me as lightning.
And I have been thinking about a lot, and I think that's kind of what have been happening through my whole life, especially in the two.
My previous two companies, they were very successful, but in fields that were probably not that great.
So I'm trying to make it better this time.
Omer (03:17.880)
Awesome.
Yeah.
I'd love to talk about those because this is your Run Run it is your third company.
And I want to sort of start from kind of earlier than that.
But before we do that, let's just kind of set the context a little bit and help the listeners to get a better understanding of Run Run it.
So in your own words, can you, can you share with the audience what the product does and how it's different to maybe other offerings on the market?
Antonio Carlos Soares (03:50.740)
Yeah, yeah.
You can think of Run Run it as a manager's best friend.
So what we're trying to do, of course we are in the work collaboration, enterprise, work collaboration space, so to say.
So we are basically trying to help managers to get more productivity out of their teams by dealing with time, task and performance management.
So the way it differs from competition is that it has a broader scope than most of the products.
And mixing time priorities, time management, performance management, time management into a single application seems to be far more natural and allows for deeper insights.
And the other thing is just by having that focus on the manager and that's cultural thing that some of the companies in the US don't get is that not every market is as horizontal as not every company is as horizontal as companies are in California in special, but in the US in a whole or even in Europe.
So companies in Brazil run in a different way and that is also true for company in very different markets.
So in whole Latin America, in China, in Russia, in India.
So there are very important cultural aspects that need to be taken into account.
And when it was built for companies that are slightly more hierarchical and that manage things in a different way.
So that's why the product exists.
Omer (05:43.080)
Got it.
So when you talk about horizontal, you're talking about kind of organization structure.
Antonio Carlos Soares (05:50.200)
Yeah, I'm talking about a mindset.
The way I think about most of the products that I see in the US in this specific industry is that they have a self managed and share mindset.
So most of the people are very motivated and very intelligent and if you get them to know what other people are doing, they will kind of arrange themselves and arrange their work and the company will perform better.
So that's what I call self management and share mindset.
And what we have here in Brazil and in most of the emerging market world is a mindset that is more about assigning and controlling.
So you definitely have a huge productivity gap.
So just to give you a hard figure, the productivity of the Brazilian worker is one fourth of that of the US and that's true for most of other Emerging markets.
Brazilian is not even, Brazil is not even the worst.
And we also have a very, the number of years of schooling is dramatically different.
So it's 7 in Brazil, it's 13 in the US so companies evolve in a different manner to cope with those challenges and also with cultural traits that are very different.
Therefore the mindset that you need for company to perform in those conditions is different.
Omer (07:32.630)
Yeah, I think those are really good points.
And I spent many years when I was at Microsoft working on global products.
And one of the things that you learn very quickly is if you try to build a product for the US and then just expect that by localizing it into different languages, you can go and succeed in any market outside of the US you fail very quickly because there are so many other aspects to each market.
And understanding as you're sort of describing the, the cultural, the, you know, the social, the social, there's so many different aspects that you need to understand to be, to be successful.
And I've seen that with lots of examples of companies that have done well in maybe in an international market and then tried to go into a neighboring market and even then had difficulties.
So it's not just a US thing.
I think just, even, even just people just need to kind of understand that there's, you know, really understand your market before you go into it.
Antonio Carlos Soares (08:47.419)
Yeah, you, you know, you got a very interesting point actually.
There's a.
If, if anyone in the audience wants to go deeper into that issue, there is a guy called Gerd Hofsted, which is a scholar, he's a social, social psychologist who actually he was hired by IBM in the 80s to understand why the organization, IBM as an organization would work perfectly in some countries and would be a completely mess in other countries.
And there was odd because they were using the same processes and the same systems and the same everything.
And he was hired at the time and they end up dedicating his whole life to study how people behave in corporate structures in different cultures.
And he has many articles and many books dedicated to that.
And there is one thing that I would like to mention that is he has something that is called Power Distance Index, which tells how comfortable someone is in a hierarchical organization.
And that's a number that he gets from his studies.
And he hangs countries in this scale and in the very low scale you have countries like Northern Europe where if you are not a part of the decision making process, you feel that as not legitim and that's not something that you should implement.
And in the other end of the spectrum you have countries like Brazil, India, China and many others where people feel comfortable in organizations because they know what to expect from people and, and what is expected from them.
And that happens for reasons that are so different.
But by the end of the day, people either feel comfortable or uncomfortable in hierarchies, and that makes a huge difference.
And that's the whole mindset behind the product.
Omer (10:54.600)
Yeah.
Fascinating.
It's a great conversation.
Okay, let's start by going back to what you were doing before you founded Run Run It.
So tell us a little bit about kind of your entrepreneurial journey that got you to this business.
Antonio Carlos Soares (11:16.290)
Yeah, I started my.
I started my.
My career as a management consulting at Monitor in, in Cambridge, close to Boston.
And I worked there for a while and I got on that track of getting an mba and I actually entered Columbia Business School.
But then I realized that it was totally not what I wanted to do in my life and I dropped and I actually, I didn't drop because I didn't start it from the beginning.
I decided that a couple of months before I started, I should have started and I came back to Brazil and I decided that I want to be an entrepreneur.
And the first thing I did was actually did a small consulting firm that lasted for a few months because as we started getting customers in, one of the customers was a publishing house that needed to be to have a turnaround.
And we raised money for that publishing house.
And the guy, the investor, demanded that both me and my partner join the company as managers in order for him because he sees there was a lot of secret creative talent, but no management talent in the company.
So actually joined the company and I became there was a very aggressive stock option plan.
So I joined the company and the company grew a lot in a space that was very difficult.
And that's why I mentioned that quote in the beginning.
Because making a company in the Brazilian publishing market to grow by 12 times in seven years was probably very successful, but still something not very intelligent to do.
But by the end of the day, the company became very profitable and it's a market leader and it's still around still as a market leader in this industry just happens to be an industry that is not that good.
And while I was running this company, I get really excited about digital content and especially by mobile content.
So in 2007 I decided to leave the company and I sold my shares back to the company.
The company was very profitable.
So it ended up buying me, buying my shares back in 18 months or so.
And I started the company to do initially Mobile content.
That was 2007.
And in Brazil we didn't even have smartphones nor 3G networks.
That happened in 2008.
But when we started that, we started, one of the things that we started doing was actually building apps.
And that company became the largest Brazilian enterprise mobile app developer.
We grew from zero to over 120 employees in four years or less.
And we had 75 enterprise customers and 250 apps published for those companies.
And the company was, we actually acquired Aqua, hired two companies in the way, two smaller competitors in the way.
And by the end of the day, while we were trying to raise, we bootstrapped from the beginning.
Not because we wanted to, but because we were trying to raise money in 2008.
And that was crazy because yeah, you had the whole banking crisis and we just got the doors on our face so nobody wanted to talk to us.
So we struggled through that.
And that was actually a lot of struggling, to be honest.
I not only put all my money in the company, but I put the money of everybody I knew in the company and I stopped paying taxes and I get loans from anyone I could, including, I mean everyone.
Not only banks, but people who lend money for high risk businesses.
And we also, I mean we did anything that was.
Actually had my mother's apartment as a collateral for Lewins that we took to have working capital for the company because the company was growing a lot.
So in the way we were struggling so much, but in the other way the company was growing and we simply didn't have the correct capital structure for the company.
But by the end of the day, the company was doing good.
Omer (16:39.620)
So this was more of solving a cash flow issue.
Right, because you said it's, it's not like the business wasn't doing well and you were running out of money and you needed more, but it was like you were growing, but you just didn't have the cash flow and you needed to find additional funds.
Is that a kind of a way to characterize that?
Antonio Carlos Soares (16:59.680)
Sort of, yeah.
But first because we did a lot of wrong things in the beginning.
So in the beginning I would, I would say that we were, we probably spent more money in projects that didn't perform at all.
So we had to lose money on lots of initiatives.
But even for that initiative that was doing very good, we had a licensing model.
So we were receiving small monthly fees for our customers from our customers.
And that takes a while for you to be able to cover all your fixed costs and all your company costs on that.
So even if the business is Growing, you still need a lot of money to cover for your fixed costs while you are getting that fees in.
So yeah, in the end it was more a capital flow issue.
But in the beginning we simply didn't have the correct capital structure to build a product, to build a.
To build this company.
And we learned it the hard way.
Omer (18:15.710)
And I assume your mother's apartment is safe now.
Antonio Carlos Soares (18:19.550)
Now it is.
Now it is.
And she's very happy.
But it took a while and while we were trying to raise a Series B in terms of size, it would have been a Series B.
Then we got an offer, a bid from a company that had been acquiring companies in our space and that we have known for quite a while.
And we have tried to make partnerships or try to, or run into RFPs.
And I mean we have been greeting each other in the market for a while.
And this company ended up, it's a very large Brazilian media conglomerate.
It ended up making a bid for the company that was very aggressive.
So we actually sold our company to that media conglomerate which later, one or two years later, actually sold the company that bought our company to Dentsu, to the Dentsu Wages Network Group.
So they also had a successful exit based on that company.
So it seemed to be kind of a solid business.
But it didn't grow as fast as we wanted.
It was growing like 70% per year.
And it was a profitable business.
It was doing like 35% EBITDA margins, which is great.
But if you ask, I can tell you the exact number because of confidentiality issues.
But it was in the range of $20 million.
ARR.
And if you asked me if we could have made the company 40 or 50 million, probably.
But if you asked me if this company could ever be a 100 or 200 or 1 billion doll, definitely say that.
I wouldn't believe that in that.
That's why, that's why we decided to sell the company and started all over again.
Omer (20:31.210)
So where did you come up with the idea for Run Run It?
Antonio Carlos Soares (20:34.810)
Yeah, it came up from the challenges we had as managers of that company.
So that company was basically licensing a platform but also doing a lot of service on top of it for those enterprise customers.
And we at any point with like 25 or 30 different projects at the same time, and the customers were very big, so they basically changed the scope and due dates for projects the way they wanted.
And we just had to accept it if much to discuss price.
So it was a company that was very difficult to manage because there were lots of moving parts everywhere and a Lot of people involved and we were trying to use the products that were available, products that have that mindset that we mentioned before and it was actually not working.
So we were very pragmatic about what we needed and we started building that.
And at the time it was just an internal hack.
And we never wanted it to be a software company.
We never thought about making that into a product and even less into a company.
And actually when we sold our company, this product was, didn't come, was not included in the deal almost by accident, basically because nobody was interested, nor the buyer, nor ourselves, nor the guy who actually built it as a pet project, who legally probably would have been the owner of the software, but not even him was interested at the time.
And it took a while to realize that it could be a product and a company.
Omer (22:36.730)
So that's really interesting because this, this tool that you created to solve your own problem has grown into a sizable business.
I mean, can you, can you kind of share with the audience in terms of like just kind of revenue or some, any kind of numbers to help them understand like where you are with Run Run it right now?
Antonio Carlos Soares (22:58.540)
Yeah, sure.
We have 1,000 pain companies right now.
We are grossing $2 million in ARR.
And we have 65 employees right now.
Omer (23:11.990)
Yeah, I mean that's awesome.
And congratulations on hitting those milestones.
1,000 paying customers, $2 million in annual recurring revenue is awesome.
And I think that it's easy because maybe if the tool had just been included as part of the deal through the acquisition, maybe it would have just sat there for years and nobody would have done anything with it.
Antonio Carlos Soares (23:36.120)
I'm 100% sure it would have died.
Omer (23:38.760)
Yeah.
And so, I mean, it's not just about the idea, it's also about the execution.
And I think that you guys took the idea and kind of grew it in something.
One thing I'm curious about is your co founders at Run Run it are Franklin and Patrick.
Antonio Carlos Soares (23:58.480)
Yes.
Omer (23:59.200)
Were they the same guys who were working with you on your previous company?
Antonio Carlos Soares (24:04.880)
In my previous company, to be honest, Patrick has been working with me since Monitor.
To be honest, I hired him there and Franklin, while I was at the, at the publishing house, I was a supplier for Franklin.
He was the value added services for Telemig, which is a Brazilian telecom carrier.
And I was, and I was supplying content for him to deliver as SMS ringtones, wallpapers and the things that existed back in 2004 or 2006.
So we have known each other for quite a while.
Omer (24:43.760)
Wow.
Wow.
Okay, so let's say you're you guys decide you're going to turn this, this tool of yours into a product and a software business?
When you, since you had the history and you'd been working together and you had kind of gone through the process of having successes and failures and having made some mistakes along the way, what, what was that initial conversation like?
Like when you guys got together, what did you decide that you were going to do differently with Run.
Run it?
Antonio Carlos Soares (25:22.180)
Yeah.
Actually, I know that one of the things that your audience is particularly interested is on validation, right?
As the whole process of getting from an idea to a business.
And I would say that the first thing was just being aware of the challenges that we were facing as managers and that we, we were not being able to solve them using the products that were available.
So that was probably.
A first spark.
Then when Franklin started building it and he started just mentioning it to people and he got a few companies to start using it even before Aorta started using it.
Then he came to Aorta and said, he came to me and said, hey, I think I got something that will be able to, that will help me manage you.
Because I was the CEO and I was responsible for the sales department and be sure that the sales department was from where most of the company problems were coming in.
We were the ones saying yes to customers and bringing problems to the IT and to the development team.
So he was so being able to see that the software actually solved the problems that we had.
There was a second layer of validation.
And then after we sold the company, that's the funny thing, when we sold the company, Patrick and I especially because Franklin, he lived in another city.
He lived in Belo di Sanche and I lived in Sao Paulo and Alarta had offices in both places.
So I was not with Franklin all the time, but I was with Patrick a lot.
So we were discussing what problem would be be big enough for solution to be available.
And I started to get very excited about what at the time was called social business software space.
There was.
McKinsey issued a white paper saying that there was a $1 trillion of value to be released from companies by using social collaboration software.
And Yammer was acquired by Microsoft for $1.4 billion or something.
And Jive made an IPO that was like a billion dollar IPO.
And I was very excited about this space.
And I went to talk to Franklin and said, hey Franklin, look at everything that is happening in this space.
And he just mentioned to me, he just said to me, well, Antonio, but you know, you know, we already do that.
Don't you?
I said no, actually, I don't know.
How come?
And he said do you remember when run it?
And actually I didn't, I didn't know what it was.
And said no, that thing we use to manage projects to have the timesheets to set priority.
Ah yes, I do.
I remember.
I said no, there are 60 companies using it.
I said, how is that possible?
How 60 companies use this has internal rack.
And he was like, yeah, sort of.
But do you remember the guy that came to make our end of the year video?
He started asking people what was that thing on their screen?
And they explained it to him and he said that he would like to use it.
And then the girl that was our customer manager, she left the company and she called in saying that she came to a company that is a mess and it's just like Aorta was before.
Started using Vulnerable Energy and then he started telling stories about things.
I said, well, there are 60 companies that are using this software that at the time was really difficult to use.
The UX was really bad.
But if we didn't find a solution and those companies are saying that they are not finding a solution, maybe there is an opportunity there.
So having those 60 free users was probably a third layer of validation that we had.
Omer (29:52.800)
So wait, let me just clarify one thing.
So before you had even launched Run Run it, the product that became Run Run it was this kind of like this internal tool and you had already got 60 companies using it before you launched the business.
So it was a free tool and people would just hear about it and then say, oh my God, I'm having those problems.
Can I use it too?
Antonio Carlos Soares (30:21.780)
Yes.
And then one thing that is probably interesting for the audience is to know that when we just set a page on the web where you could create your account and we would say, hey, that's free up to five users.
And then you need to pay, but you.
But we are not charging for it, but we will at some point.
So if you want more than five users, just let us know and we will open it for free to you and we'll let you know in advance when that day comes.
And that started building the expectation that the larger customers would be charged at some point and they in since they would have to ask for us to have more seats, then we would at least get one contact point with them that we could return to later.
So that was probably a good thing.
So the fourth layer of validation that we went through was trying to get investors in.
And to be honest, we had sold the Our previous company, we had soda, so actually had the money to make us a seed round.
But we decided from the beginning and that was a lesson that we learned on our previous company.
And there are actually two important lessons here.
One is that.
If you don't have the correct capital structure, the company will gravitate to the capital structure that you have.
So AORT I started wanted to be a product company.
We had something that was that companies like Sherman or Titanium, it was supposed to be mobile app development framework and we started licensing that.
But as we didn't have the money to sustain that business model that was based on low, on very low monthly fees, we end up adding a lot of service on top of that.
And the company became a service company that had product that would help it to have higher margins and.
Better execution so it could build apps faster and in a way that was more reliable.
But by the end of the day, when sold the company, it was almost a service company and it was not a product company anymore.
And at that time we front run it.
We wanted to build a product company and we want to stick with that.
So we need to have the right capital structure from the beginning.
And although we did have the money to seed the company, we decided to bring investors in both for validation, but also, and that's the second lesson because there was a window of opportunity.
Opportunity, especially in emerging markets, if you don't get the window right, You're screwed.
And what I mean by that is that if you remember in 2010 or 2011, probably 2011, Brazil was in the COVID of the Economist and you have the Christian as a rocket.
And Brazil was about to go big, big time.
It's a huge economy, it's growing fast, it's democratic and everything is right.
So everybody was pulling money in Brazil and that happens.
And that started in 2010, that goes through 2011 and probably 2012.
And then things started changing.
And in 2013 we were again in the coverage of the Economist, but for the wrong reasons.
We were there because Brazil had blown it.
And then right now we are in third year of recession.
We have impeached our former president, we had the largest corruption scandal probably in the history of humankind.
So the window for Brazil, I think things are changing.
And that window might be opening next year, but it was totally closed last year or this year.
And that was the same kind of thing that we faced in 2008 while we were trying to raise money for Alerta.
So there the window was closed.
So there was the banking crisis, the US banking crisis.
And we couldn't raise money at the time.
So we knew that although we were in a very good moment and everybody was really excited about Brazil, we should be raising money at that point because that might not last.
And actually that was, that proved to be almost prophetic because it didn't last.
And then right now if we didn't have the correct capital structure, we would have been, we would have a very hard time raising money.
We would probably not be able to do it and we would again be struggling with the idea of selling service on top of our product.
And then we would go the alert way again, which is not a bad way by any means, but it's not the way to build 100 or a million dollar turnover company or a billion dollar company.
It definitely, I don't believe it would be, it would be possible.
So, so that, that is something that is very important.
Omer (36:36.620)
Yeah, I think that, I mean, I don't think there's anything wrong with building a services company.
And I think there are plenty of examples of SaaS founders who have had some kind of services business as a way to help them fund their, their SaaS business when they weren't able or didn't want to raise money.
But I think the point you're making is that it becomes an issue when you don't have the funds and you go down the route of building services as part of your offering and it fundamentally changes the sort of the, the vision and the strategy of what your business is about.
Antonio Carlos Soares (37:27.890)
Yes.
And you can certainly go back to it.
And that was what, that was what we were trying to do at Aorta when we started that series B raising, but it just went another way.
So I think there's nothing bad and I think you can, even if you go that a long way, you can still get it back.
But that's, that adds a lot of complexity and that makes you lose focus and you lose market timing and you, and you have to really understand that there is a trade off and the trade off that we, that, that I, that I'm doing in Run Run, it is having, is being more diluted than, than I, I probably could, but trying to keep focus and to build the product, the company and the product that I really, that is our vision.
Omer (38:31.110)
Let's talk about how you went from 60 users using the free product to a thousand paying customers.
What was one of the kind of the instrumental strategies that you used to get the word out about Run Run in.
Antonio Carlos Soares (38:56.120)
Yeah, I think there were two moments that were very different and we might be getting to A third moment now.
So the first moment was, as I mentioned before, so the product was there in the web, it was free.
And probably without thinking too much about it, we decided that it would be a freemium product in choosing that.
So when the product actually became good and we had a better UX and everything was kind of in place, we started doing both PR and paid media, performance media.
And we already had that base of users.
I think at that point we had 600 free companies using.
Even before we started advertising the product with paid media, just with PR, I think we got close to, to 600 companies using it.
So we had some companies that I would say had been acquired before the product was actually launched.
So from that beginning, from that moment, the freemium strategy, and I would definitely call it a marketing strategy, not a business model, was very successful.
So we get a lot of word of mouth.
So having that freemium version and getting it publicized and doing PR and doing everything that we could in terms of marketing effort to get the word in the market, it made the product spread really quickly.
So the freemium strategy was very important and was very successful in the begin beginning.
Omer (41:00.950)
So many, many people would kind of look at the, the freemium model and say it's not just marketing, it is a business model as well.
But that wasn't the case for you guys, right?
Antonio Carlos Soares (41:13.670)
Yeah, and I'll make that, that differentiation now, which is I really, of course at the time we thought it was a business model.
And of course the way the product works makes a lot of sense for people to add more users on top of it as time goes by.
I mean, if you are not in a very small company and it made sense and we made money, the price point was very low, so that was another thing.
So the price point was very low and that you could use it for free for up to five users.
And people were talking a lot about it and everybody was happy because it was just so cheap and etc.
And the product went, I wouldn't call it went viral, but it had a lot of success in terms of people getting to know it.
Omer (42:15.570)
How much did you start charging for people who had more than five users?
Antonio Carlos Soares (42:20.470)
Yes, it was 20 reais, which in dollar terms it was like 6.$5 per month.
So it was very cheap.
And that for 10 seat account, so that was very cheap and that was why the product spread a lot.
But then we started to realize that the unit economics were not good and that we actually need to raise prices.
And to be honest, at some point I was talking To a guy in San Francisco and he was saying, did you realize that you actually need like at our arpu at the time was probably like $20 or so.
And he was saying, did you realize that you actually need like 200,000 customers to have 100 million turnover company?
And he was absolutely right.
And there's something that really get into our mind and we started thinking that of course that's doable.
There are many companies that have far larger user bases.
But that's something very difficult.
So we also started thinking that the whole thing was wrong.
Like having a very low price point for a freemium model for a product that adds as much value as Run Run it does simply doesn't make much sense.
And the fact that it has this broader scope make it more difficult for people to understand.
So just waiting for free users to become paying users and using the product in all its depth in a completely self service base was probably not right.
So we started adding inside sales teams on top of it and started reaching customers and started seeing better conversion rates.
And we were just seeing that the price point was just so wrong.
And we actually rose it like four or five times in terms of, in dollar terms it was like a 12x price increase.
And then I'd like to get back to that in a moment, but.
So we started raising prices, we started adding inside sales, we started touching customers, and by the end of the day we started changing our freemium model into a trial model.
And that's basically for two reasons.
One is that saying someone that something is free is just so powerful that it's so difficult to get the guy to pay and to pay a lot after he had that initial mindset, it just adds so much friction to the relationship that it's probably not worth it.
And on the other hand, you also, in terms of your sales team management not having a date in which the customer needs to decide so bad, because reps would have literally hundreds of customers that they have reached and that the customers said that they were very happy with the product and that they would buy the product, but probably not today.
And so they had those very close, very close to closing accounts.
And in such a large number that was just unmanageable and it was just a mess.
So the second moment, I would say that, so the first moment, freemium was very important.
We get lots of customers and lots of users and that was great, but not as much from unit economics point of view.
And then when we started raising prices and we move into inside sales and we change it from freemium to trial.
Then we started to be able to manage our unit economics better and to make the numbers really far better and to build revenue on top of those customers.
And so there would be a second, a second moment.
And I think those were very different and very important.
Omer (47:31.700)
Okay, so now instead of a freemium model, you give people a 14 day trial and then after that, if they want to start with the, the lowest plan monthly, it works out to about $12 per user.
Now so somebody who was using a 5 user plan would pay, if they were paying monthly, they would be paying $60 a month.
Now how did that work?
I mean you, you, you, I know you said that you were telling people the 5 user plan is free now, but at some point we're going to start charging.
When you actually did start charging for that, what was the reaction and was it difficult to make that transition?
Antonio Carlos Soares (48:23.200)
So in the very beginning, when we were literally from zero to close to zero, I would say that the friction was very low.
People felt that they were getting a lot of value.
And honestly it was not a big deal.
It was really cheap.
But as the product probably started, the, probably started to cost more.
And especially when we started to raise prices because there was two different things.
One was raising prices for new customers and that was actually not difficult to do.
We would see a drop in sales for probably 15 days or so and then we would get back to our conversion rates.
So that, that's, and that we have done a number of times.
So probably four or five times.
And we saw basically the same pattern.
So, so it says that people were actually getting value out of it.
So it was just more difficult for people who first, who had their first contact with a price point and then when they came back to buy there was a different price point.
So for those people, so that it was more difficult.
And for those people we would probably issue coupons and do discounts to get them in the price that they saw for the first time.
So that was how we handle that transition from raising prices from one point to the other.
But then there is, and you know, there is one very interesting thing that happens when you are rising prices is that you, and that's very interesting, you get negative net revenue churn.
And that happens because not immediately, but as you are raising prices after you start passing through the lifetime of say a significant part of your portfolio, then you actually start having people who are upselling on the new price and you are losing customers on the old price.
So we are losing like those 20 highs accounts and customers are upselling from those say that they were on a 50 plan and they are upselling to an 80 plan.
So you get a lot of revenue coming from upselling and not that much being actually lost from churned customers.
I mean, of course your logo churn, your churn in terms of number of customers is what it is.
But your revenue net churn.
When you account both for upselling and cancelling revenues, it's very easy to get that number negative.
And that's probably something that might be beneficial at some point either during you can actually plan for that in a fundraising process to have those metrics.
And I mean the most experienced people will notice what is happening in terms of dynamics, but it's a beautiful number to show.
But then there's another thing, the other thing is when you change prices for existing customers.
And that's something that we have given a lot of thought into it, whether we should do it or not.
And for most of our mentors and advisors, including the ones in the valley, they said that we should.
I actually learned a new expression that is grandfathering.
I didn't know that word.
So they were saying that we should stop grandfathering our customers and that they should pay the correct value for the product, whatever it is.
And we did that with advance, we did discounts, we manage a lot.
But still it was very important in terms of revenue.
You can get like six month growth or a year growth just by adjusting prices on your portfolio.
But at the same time you face a lot of churn.
And so that will offset part of it.
But still it's probably very beneficial in terms of exclusively of, of recurring revenue.
But it's also very, it's also bad for the brand.
So it was the first time we had people saying bad things about our company in our life.
We used to be loved by everybody, especially from the, from the memories, even from the memories of those free period or the freemium period or the very low price point period.
But when people started paying value, that was probably right in terms of the benefit that they are getting from the product, some of those customers felt that they probably deserved better treatment because they believed in us from the beginning.
And I think they are right to some extent.
And we managed that as much as we could with discounts and with other things.
But that has a cost, so that has a benefit that is very significant.
You can add a lot of revenue, you will face churn.
And that from a purely mathematical point of view, that makes a lot of sense.
But there is one thing that is on the soft size and very Subjective it is how much of a damage you do to your brand and how do you handle that emotionally?
Because as a founder, you want people to love your product and you don't.
What people?
You're not probably not prepared for people to say bad things about, about your company.
And that happens to a certain extent.
And that's the,
Omer (55:30.930)
that's a tough place to be because if you, if you start out and you're charging a very low price for your product and then you think to yourself, I'm gonna, I'm gonna grandfather these people, these early adopters into this price because, you know, they believed in us.
They, they kind of, you know, started paying for this thing before anyone else kind of really kind of, you know, believed in what we were doing.
The, the economics of your business might not work, as you found out, but then the other side of it is, well, if you then don't grandfather those people and so start charging them more, then you potentially get backlash and, and a lot of negative PR from, from doing that.
So if you were doing this again, going through this process again from the beginning, what would you have done?
Or would you have still taken the same approach as you did?
Antonio Carlos Soares (56:36.920)
If you ask me what, what actually happened if we decided we had to do that again in another company, I'm 100.
Even if you ask right now what the 3 of founders think about it, we will discuss the same way we did before doing it.
Honestly, I don't think like Patrick, he's very pragmatic.
He's 100% comfortable with what happened and said, hey, we are in.
We got our unit economics right, we got growth.
Right now this bad PR stuff is behind us and people are new, customers are saying wonderful things about the product and everything.
So I'm totally comfortable with that.
That's Patrick's voice.
If you ask Franklin, he would say, I would not do it again.
I feel that we have betrayed people.
And so that's really, really difficult.
It's a trade off.
And the one thing that I would have done differently, I would probably have had extended deeper discounts for larger periods.
So I would still do the price change in the portfolio and I would.
And I would probably be softer on the way it was implemented, though it can turn back to you very easily because people talk to each other immensely, more than we believe.
And once I started being soft, everybody would know it was just a matter of asking that they would get it and they would ask and the effect would be far less significant, at least for a year or so.
Yeah, that's that's a tough movement.
But, but, but, but I, I have been.
We have and I think that most of the audience have probably suffered that as consumers of SaaS.
I just mentioned one company that, that raised prices a number of times and that probably lots of us use them, which is Intercom.
So we were probably one of the first users of Intercom.
We started paying like, I think our first bills were probably like $70 or something and then at some point we were paying $1,000 and we had been through a number of at least two price changes and that's life.
So probably for us who are entrepreneurs in the software business, we probably understand that what unit economics are and the value that we are backing, getting from those products.
And I think they are charging totally right.
But for people in other segments.
So people, so we serve people in like a digital marketing agencies, professional services companies, IT services companies.
So some of those segments understand that better than others and some company sizes understand are more or less sensitive than others.
So I think you really need to look at your user base and see what do you think are the most sensitive pockets there and segments there and decide that.
But honestly from a purely mathematical point of view, purely economic point of view, it probably makes a lot of sense because Most of the SaaS companies started charging too little because the product's not that deep.
And then the product starts to get really good and deliver a lot of value and they are probably charging not as much as they should.
Omer (1:00:46.920)
Yeah, okay.
I want to get.
We're almost out of time, so I want to get onto the lightning round.
But before we do that, quickly when we started talking about this, you talked about those two moments.
But then you said there, there might also be a third moment in terms of your growth.
Antonio Carlos Soares (1:01:06.680)
Yes, that is something that, that is a work in process and I'll be very candid about it and say that I'm not sure.
That's why I'm saying that it might be a third moment because we are seeing some very large customers using our product in a way with value propositions that were different from the one that we started the product with.
So some companies are using it for like managing CapEx versus OpEx allocation decisions on very large companies.
And the way we sell the product to those companies using our basically inbound marketing and inside sales is totally out of touch with the way those larger companies buy this kind of product.
So we are starting to explore the idea of using channels, especially value added resellers.
And that's something very new, something that we have Been testing for like a couple of months with a very limited number of partners, but that if that proves to be successful, it would give access to a market that is different from the one we started and that demands both in terms of marketing and sales, completely different process.
So there might be a third moment coming in.
But, but, but I'm not, not 100% sure about it yet.
Omer (1:02:56.910)
That's very interesting.
I'll have to follow up with you sometime and find out whether it turned out to be the case or not.
Antonio Carlos Soares (1:03:03.510)
Hopefully there is totally happy story to tell.
Omer (1:03:07.110)
Okay, let's get on to the lightning round.
So I'm going to ask you a series of questions.
Just try to answer them as quickly as you can.
You ready?
Antonio Carlos Soares (1:03:14.470)
Yeah.
Omer (1:03:15.030)
All right.
What's the best piece of business advice that you ever received?
Antonio Carlos Soares (1:03:20.860)
It get to be that thing about succeeding in the wrong thing is failing.
Omer (1:03:26.060)
What book would you recommend to our audience and why?
Antonio Carlos Soares (1:03:31.500)
It will sound strange, but there's a.
There's a book called the Diamond Cutter that is actually written by a Buddhist monk and it's very interesting and I'm not gonna tell you much about what it is.
It's.
It's not a big book, so go read it.
It's very interesting.
The Diamond Cutter Interesting by Geshe Michael Roach and Lema Christie McNally.
Omer (1:04:02.250)
All right, we'll include that in the show.
Notes.
What's one attribute or characteristic in your mind of a successful entrepreneur?
Antonio Carlos Soares (1:04:10.330)
I believe it's endurance is being able to handle frustration for a long time because sometimes things get longer to happen than you expect.
What's your.
Doesn't mean that it will not happen.
Omer (1:04:27.220)
Yes.
Right.
Antonio Carlos Soares (1:04:28.420)
Yeah.
Omer (1:04:29.540)
What's your favorite personal productivity tool or habit?
Antonio Carlos Soares (1:04:34.260)
I would not say that it's my favorite productivity tool because nobody will believe it, though it is.
So I'm going to say a habit that I think is very interesting, which is every time I go on a business trip, and usually when I go, I end up talking to a lot of people.
Like, I have been to China just a few weeks ago and talk to companies, investors and people in the startup scene and everything.
And so every night I write something that I call News from the Front, which is kind of a journal, and it's mix hard data with very emotional information or feelings that I'm having while getting through that experience.
And I write about every encounter that I had, every interesting conversation that I had, and I send it to my partners just to have it recorded somewhere and to read it later, like six months later or years later.
It's just so interesting.
So I think that's an.
And it helps you to sleep.
And that's very, very important because you get so excited because you talk to so many people and you just before going to bed, you open your laptop, write that thing down, download it from your mind, relieve all the things, and then you are completely empty.
Empty and ready to sleep.
So it's.
So.
It's great.
Omer (1:06:08.940)
That's a great idea.
What's a new or crazy business idea you'd love to pursue if you had the extra time?
Antonio Carlos Soares (1:06:16.780)
I would actually.
I would love to deal with health insurance and health plans because they seem so abusive all over the world.
In Brazil, it's absolutely ridiculous.
And I'm seeing all this thing about Obamacare and about health insurance in the US and in China.
I got amazed by how it works.
And I think it's so wrong everywhere.
It really deserves thinking because it changed people's lives and there's.
The opportunity is just so huge.
Omer (1:06:47.220)
Yeah.
I think there are probably millions of people who would love to have a better alternative with that.
Just, just in the US Alone, but.
Antonio Carlos Soares (1:06:54.580)
Well, yeah.
Omer (1:06:56.420)
All right, so what's an interesting or fun fact about you that most people don't know?
Antonio Carlos Soares (1:07:03.520)
Even the people here in the company, I don't think they know that I have been the first Brazilian to climb Aconcagua during the winter.
I was a high altitude mountaineer for like 10 years or so in my life.
I climbed probably 20 or 30 mountains above 7,000 meters.
Omer (1:07:21.920)
Wow.
Antonio Carlos Soares (1:07:22.880)
And that ascent was never repeated.
So it was really, really, really tough.
And it was something that I started doing.
So I don't think people actually even know that I did it at some point.
Wow.
Omer (1:07:36.660)
That's pretty impressive.
And finally, what is one of your most important passions outside of your work?
Antonio Carlos Soares (1:07:44.220)
I think it's endurance sports.
So now I do road cycling and I take it very seriously.
So endurance is part.
Endurance is of.
Part.
Is such a big part of my life.
Omer (1:07:56.470)
Antonio, thank you for joining me today.
I really enjoyed this conversation.
It's been fun.
Antonio Carlos Soares (1:08:01.270)
It was awesome.
It was so good to speak to you, Amir.
I hope the audience likes it.
Omer (1:08:06.630)
Yeah, no, definitely.
I think there's, there's a ton of value and, and the lessons that you share there.
I think that's, that's great.
Great insights and, and just valuable advice, I think, for so many SaaS entrepreneurs.
Now if people want to find out more about run run it, they can go to run run.it don't go to run runit.com because I tried that and it took me to some dodgy site that I think tried to install something on my computer.
So, yeah, run run.it and if they want to get in touch with you, what's the best way for them to do that?
Antonio Carlos Soares (1:08:47.099)
Just write me an email.
Acsorisunrun.
It will be my pleasure.
Cool.
Omer (1:08:55.459)
So that is a c S O A R e Srunrun it.
Antonio Carlos Soares (1:09:02.779)
Yes.
Omer (1:09:03.419)
Cool.
Antonio, thanks again.
It's been a pleasure.
I wish you all the best.
Antonio Carlos Soares (1:09:07.419)
My pleasure.
Omer (1:09:08.619)
Cheers.
