Sam Devyver: Raising money can screw up your startup

Hey everyone,

I’ve received amazing feedback about our last edition with Caroline Clark from Arcade. Glad to see you enjoyed it! and please keep the feedback coming.

Sam is a Y Combinator alumn, he founded multiple startups. He started his last one EasyLlama 2 years ago and already reached 4,000 customers.

A few things we’ll talk about:

• How EasyLlama got their first 10 customers and scaled to 4,000
• A very interesting definition of Product Market Fit
• How to test your startup idea before building a product
• Why a startup doesn’t have to create a new market
• Why raising your money can screw your startup up

Questions are from me, quotes are answers from Sam, emphasis mine and the text below the quotes are additional comments from me.

What is EasyLlama?

EasyLlama is the modern way to train your team on workplace compliance (sexual harassment, HIPAA, DEI..)

Could you give an indication of your stage?

We are fully bootstrapped and have over 4,000 customers, ranging from SMB to Fortune 500 companies.

Can you describe how your customers get value out of your product?

Most employees have taken some sort of compliance training in the past and usually...it sucks! We are reinventing training for modern teams by offering bite-sized episodes that are engaging and that employees can get something out of it. For companies we make it easy to assign training (we integrate also with all LMS and HRIS tools) as well as track progress.

How do you define product market fit and do you have it?

We launched before the California deadline on sexual harassment training and that has allowed us to get many clients interested in a new and innovative solution to train their team, since then we have expanded in a variety of HR and compliance courses (from Cybersecurity to COVID-19 safety training) and have an NPS score that is over 80 (higher than Apple or Costco). I believe that customer satisfaction is the driver of success and we have listened to our client's needs since day 1 to build our training courses and our software based on their prior frustrations.

Net Promoter Score (NPS) is simple survey you send to your customers that lets you calculated a customer satisfaction score. A NPS of >80 is extremely good.

Would you then define Product Market Fit as a minimum number of customers and high NPS?

It really depends on the ACV (Annual Contract Value), we started with pay as you go model at $99 with no commitment and aggressively cut our prices versus the most expensive solutions (now we sell at same rate than them). Yes our NPS was high, above 70 I would say is PMF and with +20% conversion rates from lead to client from inbound traffic I would consider it as PMF.

So to summarize: PMF = +20% conversion rate from inbound lead to customer & NPS > 70

I like this definition, it’s not only about an absolute number but having a conversion funnel that works. The conversion part shows you that if you’re able to find qualified leads, you’ll be able to repeatedly convert them, and the NPS part shows that your customers are happy with your product which means you’ll have a low churn.

How did you get your first 10 users / customers?

We drive a lot of inbound traffic through Google Ads, SEO and referral websites, however word of mouth is also powerful as HR managers talk a lot between them and change jobs often as well and then try to use the tools they liked in their previous role.

Is there one channel in particular you started with that got you your first 10 customers or did you just do all of these things and they came at the same time?

Google ads is the easiest way to test the market - we started with a landing page before even building the product to see if there was demand and then built it, google ads really allows you to get your first leads almost instantly and that’s really powerful ! We still generate lots of leads through them but had to diversify our sources to grow.

This is a great tip. You can test the top of your funnel without having a product

• Are you able to get signups? at what cost?
• Are you able to get people on a call? at what rate?

When testing the idea with google ads, what metrics were you looking for to assess whether the opportunity was there?

It’s of course key to look at cost of acquisition (CPA) and conversion rates but what was the biggest indicator for us was the sheer number of leads we generated with simply a landing page and some of the leads were really high quality and large organizations, they were interested (high intent) in buying our (non existent) product almost straight away, and I believe this was because we also managed with a simple landing page to position our unique values versus existing solutions in the market and that’s what then allowed us to execute on it.

Is there one specific tactic that was very helpful to you, whether it's in finding users, building your product or fundraising that you'd like to share?

We had many ideas in the past years (including launching a US version of the food-waste app Too Good To Go) and wanted to make an impact through our startup, when we heard that after the #MeToo scandal California would pass a new law on sexual harassment training, we looked at what was out there and were shocked by the low quality of content in the market, we thought that the new generation of employees (Gen Z watching content on TikTok) would want training that was relatable, engaging and "mobile-first". That's when we knew we needed to create EasyLlama. My advice is to follow your instincts, and not always aim to be the first in a market or to become a unicorn, as it's hard to do and will most of the time deter you from even starting a project, but try to make something a little bit better than legacy competitors (which understandable is not always an easy task in some industries) and you will see that the market will follow your project - consumers and businesses are always looking for a better solution.

This is very interesting. We glorify a lot startups who create a new market: Uber, Airbnb, etc

The risk with these kind of startups is much higher. It is possible that the market is currently being created and will grow very fast (as was the case with Airbnb and Uber), but it’s also possible that there’s just no market or that it’ll stay too small.

Building a startup in a market that you know already exists makes things much easier. You still have to build a product that’s better than what exists for a specific segment of customers, but you know the market is there.

What's one thing you wish you had known when you started your company?

In my previous venture, we raised millions of dollars and went through Y Combinator, we thought that was enough to ensure success - we are so grateful that so many people believed in us but the market always dictates your success and product-market fit is key to execute on any idea and we had to pivot multiple times.

That's super interesting! Do you think having raised a sizable round made you blind to the lack of Product Market Fit? What do you think founders can do to avoid this trap? Bootstrap like you do?

Yes I really do, there are so many stories of failure (majority of startups), YC always says that you need to spend wisely until you find traction but it’s easy to invest a lot and be blind - or at least be profitable or grow at an exponential rate that justifies burning so much. Bootstrap is not easy and it’s because I created a few startups that we knew how to do a lot of things right - I would raise money any day if I was a solo founder or had an idea that was capital intensive, but yes as long as you don’t need money I wouldn’t raise too much - I like the Lemlist guys in France who managed to scale to 10m ARR in four years, but I of course also love billion dollar ideas, I guess it depends on each project and I would still be interested in raising a lot in my next ventures if I knew I had to win the whole market quickly, but not until I know for sure there is a TAM for it and that people like the product.

Lemlist is a cold emailing product. The company never raised money and reached 10m ARR. Here’s an article on their story. This is a good example by the way of a startup that tackles an existing and big market with lots of competitors.

I love that YC now is giving YC companies $500k. With that much, you can avoid raising money, really derisk your startup, figure out if you have product market fit and then raise at a much better valuation once you have product market fit.

What's a tool that makes you save time every week or every day?

I love Front (emailing app), Mathilde was an investor in my previous startup and I am hooked on her product, it allows for better communication in our team and with our clients and allows me to prioritize my day.

What's a favorite book and why? It could be business related but doesn't have to be.

One of the first book I read when moving to Silicon Valley was "the 4-hour workweek", today you can find thousands of people telling you how to make money passively on social medias, but at the time it was quite unique to automate work online, I still think that one day we will have a billion dollar company with a 1-person team thanks to how evolved internet has become (with no-code tools such as Actiondesk) and outsourcing platforms such as Fiverr that have helped tons of entrepreneurs grow their company.

I swear, I didn’t ask Sam to mention Actiondesk 😅.

I loved the 4-hour workweek. While it’s now a bit dated (especially the tools section), the principles stay very valid.

What's a favorite podcast episode you'd recommend me to listen to?

I must admit I just started listening to podcasts recently, I often listen to the morning news from my country of origin (Belgium) and love the All-In podcast (with Chamath Palihapitiya, Jason Calacanis, David Sacks & David Friedberg) that talks about economic, startups and politics.

I like the All-in podcast as well, great podcast.

If you were not working on Easy Llama, what product would you build?

Before building EasyLlama we thought we would build Faire for Europe, a B2B marketplace empowering local businesses to buy from local suppliers, I loved that idea since day 1 (Faire was in our YC batch) but living in the US made it difficult. I would buy local product from local suppliers anytime as a consumer and it's a huge trend in Europe and I am glad that in the US also people are starting (again) to shop local.

Maybe they should have built Faire for Europe 😂. Ankorstore is exactly this and reached a valuation of $2b in 2 years

On a lighter note, what's a movie / tv show / documentary you watched recently you'd recommend people to watch?

I loved a belgian TV show on Netflix called Undercover, we don't have almost any tv shows (nor movies) that are exported outside of our country - so I was really surprised to see this Netflix show that was suspenseful from beginning to end and really of high quality, I recommend it!

Lastly, where can people find you if they want to follow the rest of your adventures?

Definitely visit EasyLlama.com if you have a company (especially if you are located in CA,NY,IL or other states that mandate you to train your team on harassment prevention), otherwise add me on LinkedIn.

That’s a wrap. Did you enjoy this? Do Sam and I a favor and forward this to a friend who may enjoy this too.