Diving deep into B2B SaaS metrics with Frank Bien, former President and CEO at Looker

Episode Description

In this episode of Diving Deep, we’re joined by the brilliant Frank Bien, former President and CEO of Looker.

Frank led the team at Looker all the way from raising a Series A, to getting acquired by Google for $2.6 billion.

Watch this episode to learn from Frank as he dives deep into B2B SaaS metrics and discusses:

Concrete advice (based on experience) for how to operate in an economic downturn
Why you need to understand your SaaS metrics at an atomic level
What in the world is a “data brawl”? And, what can you do to avoid it?
And more!

Show Notes

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Follow Frank: https://www.linkedin.com/in/frankbien/

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About Diving Deep with Subscript

Diving Deep with Subscript is a video series where we dive deep and explore SaaS metrics with leading investors, CEOs, and finance leaders.

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Episode Transcript

Sidharth Kakkar
You were at Looker from the beginning, from Series A all the way through a big acquisition by Google. It's an amazing runs. You've seen it all. And with that in mind, the first question I wanted to ask you is what are like the B2B subscription metrics that you think are most important for a Series B or Series C company to obsess over that fuels that sort of incredible growth?

Frank Bien
Yeah, I appreciate the recognition for Looker, it was a great run, and I would say that success sometimes is not the best place to look at what the best metrics are. I've been in a lot of other software companies. I might have learned a lot more about what to be watching when things were going south in some ways. Right. But either way, I think that the core metrics are the core metrics. People talk about the top five and all that kind of stuff. Bessemer was writing about these things in 2010 or 2012 and whatnot, and I think it's still the core stuff. One is you have to understand how much it costs to get customers. We call that CAC or whatever. There's many different metrics you might look at, but some form of customer acquisition costs, and you just have to understand very early in the company how much it's going to cost to find customers, bring them through the sales cycle and close them and make them be long term successful entities with your organization. CAC is really important. I think you really then have to be looking at stuff around your revenue.

Frank Bien
And is your revenue growing? I mean, the subscription world is awesome. We look at it monthly or annually, and that's always going to be monthly recurring revenue or annual recurring revenue. Or some people are looking at ACV annual contract value. I think those get a little bit complex sometimes. I think it's better just to break it down to what your product revenue is. That subscription that's going to renew if the customer is successful. And once you have CAC and you have some view of how you're going to look at price and run revenue, that's really the core. And then as you grow, you have to be looking at how successful the customers are. And I think this is the most healthy thing that happened when the model in the world changed to SaaS instead of perpetual license, we suddenly had to start caring if customers were successful or not. In the perpetual world, it was 30ft or 30 days or whatever they used to call, and you didn't really know if your customers were successful. But in a subscription model, they have to keep paying, so they absolutely have to be successful. And that's really healthy, right, and you have to understand that.

Frank Bien
And I would say in an earlier stage and throughout the whole life cycle, you have to understand these numbers both at a gross and a net perspective. So people talk about net dollar retention of a customer, that's important, but that can hide your logo churn and your gross churn. But anyway, you really have to understand that. I think there's other stuff that I think maybe the investors talk about a lot, but you're going to be watching anyway, clearly on an ongoing basis, and that's going to be just your cash flow, like what you burned. You're always going to want to understand that. But if you're doing those first three properly, that's a trailing indicator in a lot of ways, right? You just have to be careful that if you have a CAC model that works, if there's some payback in time and your customers are happy and they're using the software and then you priced it right, so you priced it for the type of model that you're going to have, then you're going to see that for sure. And then you really have to start looking at this notion of lifetime value. And lifetime value is hard when it's young, because you just don't know when you think your customers will be around forever.

Frank Bien
You don't know what the will they get to a certain size and then need to move to a different type of product. Who knows? But lifetime value is put in a lot of the more complex calculations later as you start looking at payback periods and all that kind of stuff. And you need to start grappling with it and understanding what the lifetime value is going to look like. And those are sort of the big key ones that everyone would talk about. But really understanding those, like understanding the atomic components of those is what is going to make you successful and make you really have some kind of command over the business. But then I think there's other stuff too. And they may not be core SaaS metrics, but you need to build metrics around how people are actually engaging in using your product. So if you want to affect things like net dollar retention or you want to really understand how long someone's going to be using your product, you have to understand how they're using the product. So I think the next kind of layer of metrics that you have to get are really your internal metrics of how people are engaging with your product.

Frank Bien
When do they stop using it, what features are they using so that you continue to build products that people will use and will get benefit out of.

Sidharth Kakkar
That's such good points. One thing I wanted to go one level deeper on is you talked about customer sort of happiness. I don't know how much you can talk about Looker here, generally the question I have for you is what are the most impressive ways that you've seen that folks measure how happy their customers are, how engaged their customers are? Because to your point, it's so much more important in the SaaS world than the on prem world. So what is it sort of exemplaries in your mind?

Frank Bien
That's a tricky one because if you can't give me a five on my scale of one to five, please tell me now kind of responses which I don't think are work that well or that healthy. But clearly we looked at Net Promoter Score and we looked at those kind of surveys and things like that. But I think it goes back to sort of this idea of monitoring and building metrics into your product itself on how people are using it. If you can see that people stay engaged in your product 30 minutes one month and then 60 minutes the next month and then more and more or, in our world, like the amount of data that they were analyzing or the number of queries they were running or were they running against more and more data sets. These are things that showed whether the adoption was expanding or it was contracting. And I like to look at those hard metrics of how people are actually using it, how we can build that into the product so we understand it better and then we can focus that on our customer success programs and training and all the content stuff that we were putting out to customers.

Frank Bien
But really getting beyond like the simple surveys and Net Promoter and all that kind of stuff into how people are actually using it is really important.

Sidharth Kakkar
Such a good point. When you were running your sort of leadership team meetings at Looker, what did you look at there generally? How did you run those? Can you tell us more about those?

Frank Bien
Yeah, no, for sure. So we ran the leadership meeting, which was a weekly meeting. Half of it was geared towards the standard operating objectives. So every week every department would have these metrics and they'd be reporting out on what was happening. Usually it was like, hey, we're on target or if there's an issue it's yellow and then we would talk about it. Right? So we'd do about half of our meeting on what we would just determine to be standard operating objectives and then the other half of the meeting was on the strategic stuff. What are we working on that's important this week? What's the stuff that needs the attention of the cross functional team? I think that communication is really key, but I think sometimes you get so ingrained in the strategic conversations that you forget to talk about where revenue is looking and things like that. So you really have to have to bifurcate it and in my mind have a real strong part of the meeting that's just looking at the operating objectives. That could even be a separate meeting in some companies. But I really felt it was important to keep meetings to a minimum and when you're bringing together this team, they really had to get the overview of the business and go away knowing if we were doing well or if there were areas that needed focus on.

Sidharth Kakkar
What would you describe as the main purpose or what is the success criteria for that meeting? What was the goal in this high level way?

Frank Bien
Yeah, there was an idea that we got on early in the company, which is the leadership team meeting, meaning that the VPs that reported to me, that ran the big areas of the business, that team was the number one team. And I think what you have to have is you have to have your VP of Marketing, VP of Engineering, and VP of Sales all knowing that they're working for the accomplishment and the success of the overall company. The team among themselves, the team among themselves was really the number one team. And then they had to go and lead their team underneath that. Right, but they really had to be working as a team cohesively for the whole company. And I think I had been in a lot of venture backed software companies and a lot of those places suck to work in. There wasn't a lot of clarity, omission, there was a lot of ego, there was a lot of infighting. And I think if you look at a lot of these companies, one of the number one reasons that they were failing was that infighting they were unhealthy organizations. What we really focused on at Looker was the health of the organization and the organization being that leadership team as the number one team working together, as opposed to kind of fifedoms and separating.

Sidharth Kakkar
Yeah, you alluded in the beginning of like you learn more from when things aren't going well. And we're sort of like, we have a little bit of this period where some people are calling the SaaSacre in the market. And I'm curious, how would you think about both metrics as well as operating for companies who are not, obviously for public companies, but who are earlier stage maybe series A, B or C and looking ahead to their next round or their eventual feeling a little bit like, hey, what do I do differently now?

Frank Bien
No, it's interesting and I guess a lot of people have been saying waiting for something to happen like this. I mean, I was around in 01 and 02 when the whole thing blew up and then again after the financial crisis in 08. So it's been 15 plus years since anything like this happened in any major way. I think the same thing will happen now as it happened later. Suddenly it's not all about growth at any cost and it's going to be more about do you have a model that can get to profitability or are you always going to have to be raising money? I mean, the fundamental idea now is free money is going to probably dry up. Right? I mean this idea that I can raise an A and B round at some giant valuation that isn't even related to what sort of ARR I'm driving. I think those days are kind of ending and I think people have to be more efficient with cash. So at the end of the day, knowing these metrics, you can't be sloppy anymore. I mean. If you have not built your core operating model. Understanding what your CAC is and understanding what it's going to cost to get a customer and retain a customer.

Frank Bien
Or how you're going to approach customer success in a profitable way so that we can drive customers to expand and be happy with the product and continue to use it. But do that in a way that's efficient. You know you're not going to succeed. The same thing will happen now that happened then, it's going to be we need to have more efficiency in our model. We might grow a little bit slower, but we're going to build towards really understanding some payback on the capital that we're putting into the business. It seems like common sense and it's crazy that we get away from this so much, but the last few years have been about growth at any cost.

Sidharth Kakkar
Yeah, I really like that way of thinking about it. Like what are the things that had an implicit assumption of free and infinite capital and then now let's remove that assumption. What are the things you have to start caring about a little bit more as a result?

Frank Bien
Yeah, if you think about it, you have these levers. You have these levers on a SaaS company that you didn't have in the perpetual world, right? I mean, the old days you did deals, they were really large, hopefully they happen. If they didn't, you were sucking. Right? But I think in the SaaS world you do have this ability on this backlog revenue because you've closed all these customers, you've put all that really CAC and all the acquisition cost into the front end. And if you keep them happy, it's the gift that keeps on giving, right. And you're building off of this base that continues to grow. So you'll have levers now that you could slow down new customer acquisition and really piling on dozens of salespeople at a time and you could allow the business to grow a little more slowly but still be very successful. But to do that, you have to understand these core metrics. If you don't really understand how efficient your sales team is and how long it takes them to close a deal and what your average selling price is and how that's growing or shrinking, you will lose control of the business.

Frank Bien
So the other key element now is things would start to downturn a little bit is you have to have the levers and understanding on the business to know if you're pulling something, if the right thing is happening or if you're spinning out of control.

Sidharth Kakkar
This is where we think about a lot. Like the level of instrumentation matters a lot because otherwise you're just not going to know, and I'm sure you thought about that so much over the years.

Frank Bien
Yeah, it's like flying a plane without instruments. I mean, it's not something that I'd want to do.

Sidharth Kakkar
As part of your journey with Looker, you raised like $280,000,000, I think, from investors. What advice do you have for companies who are raising some of those slightly later stage, like Series D type of rounds that get a little bigger? General business advice as well as sort of the metrics types of advice?

Frank Bien
Yeah, I think the metric stuff we've been talking about is really key. And I think at an early stage company you have to have an operating model that works. And it surprises me since I've been consulting with smaller companies, Seed and A round and even B round, the organizations that don't really have a command of the model. And to have a command of the model, you have to understand these metrics that we're talking about. Can I be successful and be driving 100 million in subscription revenue years in the future as I'm young? Right? Can I do that with 1000 customers, 2000 customers? Or am I going to need 100,000 customers? And that is a whole different model. And you'll see things kind of fall apart where I'm building a model that I need 100,000 customers to ever get to 100 or 200 million in revenue. But there's just no way, given the heavy lift of implementing the product as an example I could ever get that I'm going to be tapped out at 1000 or the total addressable market, the TAM, isn't big enough to support hundreds of thousands of customers, so maybe more of a niche product.

Frank Bien
So at the core, you have to understand your model and you really have to understand, okay, I'm going to have customers are going to have to charge somewhere around 20 or 30 or 40 k a year recurring. And with that I might only need 1000 or 2000 customers to be really successful. That's one kind of model where 100,000 customers at $100 or $1,000 or whatever, it's totally different. So you have to understand that. But to do that, you have to understand these metrics. Right? So you have to understand the metrics. But I think even more important than that, we can't lose sight of the reality of building a business. Whether it's going great and the economy is expanding or contracting, you have to build a great organization and the organizational health has to be real and authentic. And as I look at what helps and what doesn't help, at Looker communication help, do you build a mission that people can get behind? And does everybody in the organization understand the mission? And how do I articulate that? We used to say if you didn't say something seven times, you didn't say it at all. So you have to have this health and this clarity and you really have to drive an organization that people want to work at.

Frank Bien
And especially when things were expanding, people could go work anywhere. Right. So it was really important to have a place that people wanted to work. So I would say the number one thing if you're building a business is build a healthy business. You have to build I'm going to assume you have product and I'm going to assume you have some product market fit by the time you're at your B round. But you absolutely have to build a culture that is healthy.

Sidharth Kakkar
Yeah, it's funny, the repetition point really stands out with me in particular because my last company was my first time ever managing people and we ended up going to like 70 some people. And the main lesson that I was so shocked by is that most leadership just seems to be repeating yourself over and over again and having a few simple things that you just say a lot.

Frank Bien
Absolutely. I think that clarity of mission is really important. There's management skills and there's leadership skills and I think you have to orient towards leadership skills. And I think communication is just a core part of leadership. If you want people to follow and follow in this mission and join together and go in a certain direction, you have to say what that direction is going to be.

Sidharth Kakkar
Yeah, a lot of our audience is like Series B, Series C CFOs, and other finance leaders. And I'm curious, as a CEO, how did you work with your finance team? What worked really well about it and then any advice you have for both CEOs and finance leaders in that sort of stages?

Frank Bien
Yeah, have a CFO that you like because you're going to spend a lot of time with the person. I think I was really fortunate to have a CFO that I had worked with in the past and I knew well and it had really seen a lot of the stuff that I've seen over the years. And I think when you're young, the CFO is really has to be a person who understands what the business does, what the product does, how customers are going to use it. I mean, they have to have a real understanding of the business. And then as you grow and then you're starting to raise rounds and you're starting to even talk to the street and think about public filing and whatnot the CFO is really going to be driving that for you. I think through the whole tenure of a company, the CFO and the CEO are going to be this partnership that just has to work together to be successful.

Sidharth Kakkar
Yeah. This is sort of changing tracks a little bit to more data oriented question. When you were in addition to being CEO of Looker, you also co authored a book called Winning with Data. So clearly you're passionate about data. What are some ways that data can be a competitive advantage for a company?

Frank Bien
Yeah, people talk about competitive advantage and things like that. Data now is so core it's whether you're going to survive or not. Really. I think in the past, if I didn't understand where my customers or if I understood where my customers were coming from a little better than the next person, that was competitive advantage, right. That's not competitive advantage anymore. That's like going out of business. Right. So I think you have to build a strong underpinning of monitoring your business and instrumenting your business so that you understand what's going on and that's like minimum so that you can be a healthy organization. I think where people are really looking at sort of competitive advantage more is in what I was talking about. And some of these other metrics like how do I instrument how people are actually using my product and are they being successful, how do I instrument when I'm turning a lever over here on selling price? What's going to happen over there? And like really understanding it not at the big metric like average selling price, but all these subatomic components that go into that, that's really where the competitive advantage comes from.

Frank Bien
So I think getting the basics down when you're young is really important because you're not going to have time to go back and figure that out later. You're going to have to be looking for these areas that you can get more competitive advantage through instrumentation and more complex stuff.

Sidharth Kakkar
Yeah. Especially with finance teams we see that they have a lot of data, but it's all coming from different sources and it can't always be trusted because it doesn't always agree. So they spend a lot of time doing like crunching in spreadsheets and cleaning data rather than actually uncovering insights. Is this something you've seen too? And do you have recommendations to make data more useful and actionable?

Frank Bien
Yeah, I think as people in the data world understand, this is the core problem. And there was such a focus over the last ten or 15 years on big data and people thought all these problems were solved, but the reality is that they weren't solved. And in many ways, we just created a mess. We used to have a term at Looker called Data Brawls and we would go into a customer or a prospect meeting and we would have the VP of marketing and maybe the VP of sales and the CFO in the room. And we'd say, like, how many customers do you have? And the number would be different. It would be like we have 908 or we have 1002. And then one person forgot to take out certain kinds of churn or other people forgot to take out maybe some trial customers that were never really paying and these numbers are different. And then we would see these fights break out that we would call Data Brawls and they would argue that we just sit back and the product would sell itself. So I think this is the core issue. We thought all these problems and even what you would think is base like SaaS company.

Frank Bien
Do I understand LTV and net dollar retention? I think I would have to. But the reality is that people don't, and they may have a number that they're presenting, but that number may not be right. It might be changing all the time and they're reporting on it and then they're getting into issues. And I think that we still need to focus on building the infrastructure to answer these questions, not just to answer them, but to answer them correctly and to really have this idea of a common vocabulary of data in an organization. So yeah, I think that this idea of data brawls and this Tower of Babel where everyone's speaking different languages around data has to end. And we really need to build the overall environments and what I would call a data supply chain that makes sure there's integrity, this data that goes through and is then presented out to the CFO and the CEO and investors. Really?

Sidharth Kakkar
Yeah. How early is too early to start investing in this stuff?

Frank Bien
I think you have to invest in it from the very beginning, like from before the companies formulated, because I've been talking a lot about model. You have to understand the model. Now, you're obviously not going to know what your customer acquisition cost is, but you're going to know the components of building a business that are going to result in something later. Like, am I building a product that is going to require a lot of presales kind of support, or am I building a product that won't really lend to maybe people coming in and subscribing on their own, but we're going to have to go out and find them? And how expensive is that? These are the components of CAC. But if I'm not really thinking through that as I actually build the model and start to price the product or start to look at what the TAM is and understand that I may be building a business that's completely unsustainable. And it's happened. I mean, it's happened to companies that have gotten to B and C rounds. So I think that you really have to start with these ideas as the foundation of the company.

Frank Bien
We don't look at these and say they're important later because we just want to monitor the business. They are the business.

Sidharth Kakkar
Yeah, that's so true. Because you can just drive yourself into like a dead end and very easily just fool yourself and a lot of other people along the way that it's not a dead end. But if you're just doing the math.

Frank Bien
Yeah, I mean, I run into people all the time who say, okay, getting customers will be easier later when we have a name for ourselves and maybe the product still requires a lot of heavy lifting to get it connected up to all the infrastructure and that may never go away. And I think people end up lying to themselves on how easy it's going to be later. What you build the company on tends to be the company. You're going to tune it, you're going to make it better, the product will get better. You'll address certain things, but the company is the company. You have to grow the tree that you have.

Frank Bien
You can't just suddenly say you have a different tree. I really think understanding this stuff and building the core operating model around it is fundamental to the success of the company long term.

Sidharth Kakkar
I really like that analogy. You can't just swap out the tree because I don't know, it has the DNA that it has and that's what it is, and it's got to grow in that way.

Frank Bien
Yeah, true for when you're a parent also.

Sidharth Kakkar
I have a three year old and a one year old. It is generally a terrifying prospect.

Frank Bien
Exactly.

Sidharth Kakkar
Having seen everything you have over your career, what is one or two pieces of advice for a Series B leader whether it's someone in the leadership team or CEO, what is one piece of advice you would give them?

Frank Bien
Be a leader. I think above all, leaders need to be leaders. They can't be managers. They can't be operating in one area and not the other areas. You have to have a broad understanding of your business. You have to put employees first. You're building, especially in this type of a software company, it's a creative enterprise. The business is the employees. And if you don't build a company that people want to be at and lead it in a way that people want to be there, you're probably not going to be successful long term. First and foremost, back to what I said before. You have to build a healthy organization, and a healthy organization takes leadership.

Sidharth Kakkar
Yeah, that's great. Those are all the questions I had. So this is awesome. I don't know if there's anything that you feel like I should have tried to cover, but I didn't.