Startups strive to reach mass amid economic, financial constraints

He was among three founders interviewed by The Wall Street Journal at the Collision Techniques conference in Toronto in June. AgentSync Inc., a manufacturer of insurance compliance management software. Mr. Solomon and Jane Knight, Co-Founders and Chief Technology Officers, spoke on a panel. A second panel included Mike Knoop, co-founder and president of Zapier Inc., a workflow automation platform.

All three companies are focused on the business-to-business market:

Salesroom, founded last year, said on June 22 that it raised $8.5 million in a seed round led by Kraft Ventures, Village Global, Seedcamp, WndrCo and Asymmetric Capital. It is based in Boston. Mr. Solomon previously founded Applause, a testing and digital-quality company acquired by Vista Equity Partners.

Denver-based AgentSync raised $75 million in a B round in December that raised its valuation to $1.2 billion. AgentSync said the round was led by Valor Equity Partners.

Zapier allows non-technical users to create “Zaps,” which connect apps and automate tasks. It was accepted into the Y Combinator Accelerator Program in 2012. According to Knoop, Sequoia Capital and Steadfast Financial acquired shares of Zapier in 2021, valued at about $5 billion.

Here are the edited highlights:

WSJ: How has a difficult economic and financial environment magnified the challenges of growing a startup?

Mr. Solomon: I think what has changed for startups is the assumption that you are going to raise money every 12 months like we did in the last three to five years. He’s gone. So building an operation that has a runway of more than 24-30 months, I think is a must in today’s environment.

And second, there’s a lot of thoughtfulness about efficiency, not growth at all costs as it was before this situation. So… thinking about hiring at the right time and not getting hired in advance, thinking about where to spend marketing dollars, how to reduce churn, and how to drive sustainable growth. I think that’s what many companies and management teams are talking about these days.

We’ve certainly expanded our runway, which means that on a monthly basis, we’re spending less money than we planned.

Ms. Knight: There is a model for us to think defensively. For every dollar that we retained, how would we keep it?

The world in which you can churn through customers and send them out the door and hope they come back or hope you find new ones has been over for some time. We are in a very niche market, so reputedly, we really need to retain our customers and create a great experience.

WSJ: Jen, you’ve talked about your philosophy of turning the company inside out. what does this mean?

Ms. Knight: We really think about what our customers’ needs are. We have very active feedback loops, very active dialogues. We did it (customer satisfaction team) before staffing, we staffed before sales, so the whole company knows from day one how important this is to us. The other thing we talk about, especially in this market, is the feedback loop, being able to prove value to customers and respond rapidly. If you haven’t funded the team that is sitting there every day with customers, understanding their risks, their suffering, they need data from you to justify their case for retaining you… Huge opportunities are missing. Going out for sale is going to be a tough market.

WSJ: What are the typical challenges of scalping in the business-to-business market?

Mr. Solomon: With B-to-B… a lot of it is driven by sales conversations, either inbound or outbound.

You have to establish yourself as a consultant, as a true expert in the market, whatever you are selling. And if the market will really appreciate your expertise they will come, they will accept your invitation for that consultation. it takes time. It takes few years.

You have to be very strategic. And now we are going through a period of change in mindset. There was a huge investment in marketing awareness, which we can’t really measure. The return on investment is unclear. And I think what we’re going to see now is more measurable means to acquire customers. I think we’ll see companies invest less in the breadth of channels and go deeper into the two, three that really work for them.

WSJ: Would it be fair to say that before the company could scale, the mission and product set had to scale?

Mr. switch: There is often a sense of efficiency in automation. Hey, it helps you save time. But it was really about competence.

When we started, it was just connecting one app to another (in two part integration.) Around 2015 we started seeing this trend. People were trying to create a QuickBooks invoice, and there was a quirk (which required three parts instead of two.) This observation was made by my co-founder, Brian Helmig. It does as much work to support three phases as it does to support n-phases. That’s why we designed the launch of multistep zaps in 2016. It’s one of the biggest product-development learnings I’ve done in the tool space. The common problem that many founders and developers have is that tools solve a problem in your head, not the user’s head. So we decided we were going to solve this QuickBooks problem and make sure people really like it. And we gave some more space for simplicity. We had no idea what people were going to use for those 10 other steps, for those 20 other steps. But we thought it was a good idea.

We launched it on Tuesday with a sanity cap with a 30-step range. By that Friday we had raised the maximum limit to 100. We had customers write that hey, I need more steps. It blew up our mental model of what we thought it might be.

write to Steven Rosenbush steven.rosenbush@wsj.com