For the second part of the 'Software, At Your Service' CEO interview series, I reached out to Daniel Chait, the founder and CEO of Greenhouse.io. Greenhouse is leading the charge in bringing to life a modern recruiting platform that enables companies to not just source better talent, but also rethink their entire recruiting experience from a candidate point of view. I've gotten to know Daniel well over the last couple of years, and have been very impressed with his vision for the recruiting market, and Greenhouse' ability to consistently rise above the noise in a crowded space. But more than that, I've always enjoyed my conversations with Daniel - he's a keen observer of product-market trends in his space, is thoughtful and articulate about his vision, and has remained unassuming despite the success Greenhouse has enjoyed over the last couple of years. Daniel's story is also particularly interesting for other SaaS founders for a couple of reasons: (1) Daniel spent more than a decade in the professional services world (as a software consultant) prior to founding Greenhouse. There was a ton he had to learn and unlearn to adjust his mindset to run a software product business; (2) Recruiting software is a very crowded market with lots of point solutions, but he and his team have managed to carve out a leadership position for themselves. I believe they've been able to do that because of a very keen understanding of their customer's pain points, and how to position Greenhouse as the central platform from where customers run all recruiting initiatives.
I hope you enjoy the chat below, as much as I've enjoyed my conversations with Daniel. Here goes:
Prior to founding Greenhouse, you spent a decade as a software consultant. How was the transition from building a services organization to a product organization? What did you have to learn and unlearn?
The entire business model being different required a big adjustment. I remember sitting down to do our first pro-forma P&L projections and thinking, 'Okay, how many billable staff do we have, what's our utilization, what's our bill rate.... wait a second! This isn't right at all'. Fortunately, I was able to dig up a ton of resources about the SaaS business model from blogs like those of Jason Lemkin, Tom Tunguz, David Skok and others.
My consulting business served big financial institutions, so the other big adjustment for me personally was moving from a Wall St. culture back to a tech company culture. I had to shed a lot of the armor you build up dealing with the dog-eat-dog world of big finance and reconnect with the openness and sense of purpose that comes with being more of a startup, and a people-oriented business. Luckily, that's in my nature. So it was a pretty easy thing, once I recognized the need to do it.
Lastly, Greenhouse is just a way, way faster growth business than consulting can be. So even though I've participated in building a large organization before, this time feels like playing the movie in fast-forward. A lot of the lessons I learned over the years about culture, communication, recruiting, and management, I've had the chance to apply here at Greenhouse - just much faster!
Recruiting software is a crowded landscape with large incumbents as well many modern startups attacking the space. What gap did you see in the market that led you to found Greenhouse?
Before Greenhouse, recruiting software was largely set up to solve the "applicant tracking" problem. Legacy systems saw recruiting primarily as a paperwork and compliance problem, so the tools had the objective of making the process simple, reducing paperwork headaches, and keeping compliance. Meanwhile, the business landscape had undergone this radical transformation, where organizational success had become primarily driven by the value companies were able to get out of their people. Furthermore, with the transparency and mobility brought about by the information revolution, talented people were no longer tethered to a single employer for their entire career. Hence, you have this new world where companies need the best people more than ever, yet those same people have tons of power, and thus, need your company *less* than ever!
Greenhouse was built to address this new kind of problem, where a company needs to bring its A-game to bear in recruiting. Companies need to improve how they plan, execute, and optimize their recruiting approach in order to compete and win for top talent. We at Greenhouse saw that and imagined a new kind of software tool that would address that new and critical set of problems better than anything before.
What advice would you give to first time SaaS founders about thinking through product-market fit, and how to position their product in a competitive market?
For product/market fit, the way we approach that type of thing at Greenhouse is, first of all, understand what phase you're in and optimize for that phase. That is, before we had product/market fit, we knew that we were going for that and so didn't worry about stuff that didn't matter (yet) for us like revenue, CAC, etc. We just wanted to understand whether we had a product anyone wanted, then how to sell it to them, and only then we started worrying about the next set of questions like scaling the sales process, optimizing pricing, and so on. So you're just optimizing for learning, which means almost trying not to scale - do things yourself, be very hands on, and introspect a lot on each experience. Going too fast or hiring too soon at this stage can be a barrier to the sort of learning that's critical to getting to the next stage.
As to positioning, and my experience is limited mostly to B2B, enterprise-y sort of stuff, basically always, always go for high value. Identify the biggest problem, the most value you can deliver, and position there. If you are playing in a small pond (say, we can make your paperwork process slightly more efficient) then you'll never be able to support a differentiated and sustainable competitive position. It's all commodity. By contrast, Greenhouse is going after a huge pool of value (helping people build more effective companies), so we have lots of ways to differentiate and really drive lots of value for each customer.
Does fundraising become any easier once you have some traction behind you? How did the fund raising experience differ for you from when you were raising your Series A vs. Series C round?
Yes and no. It gets easier in the sense that there's no check scarier for an investor to write than the first check in. So the further along you are (in rounds, or even within a round), the more other investors feel safe "going along with the crowd."
On the other hand, I feel like each time I go to raise money the whole process is different than the previous round, so you do start over from square one in some sense each time. Series A investors are interested in very different questions than B, C etc. You learn really quickly that going to raise a B round with an A story just doesn't work. They have all sorts of new questions, you need to present the data differently, and so on. For the most part, the investors themselves are also a different set. Few investors write $3M checks and also $30M checks. So the people you pitched & the relationships you built in your A round aren't very relevant in your C round. You have to start all over again at the next tier up.
How do you think of cash burn vs. growth for an enterprise software startup in the current environment?
Great question. Investors have been in this mode of rewarding growth rate above nearly everything else, so it's tempting to just put both feet on the gas pedal, take your hands off the steering wheel, and just try to grow as fast as you possibly can, come hell or high water. At Greenhouse, we have tried to be a bit more balanced. We're building a long-term sustainable company which means being thoughtful in how we balance growth vs cash burn, but also the other elements of sustainable business success. For example, we've probably invested way more in service reliability (security, stability and performance) than others. If all we care about is this year's ARR, there's no reason to do that.
Any avoidable mistakes you’ve made as a first time SaaS founder and CEO over the last 3 years, that you can share?
Be more thoughtful about communication. So, it turns out that, being CEO, people will try to do what they think I want. Weird, I know! I've learned that if I just say every idea that I have, unfiltered, it leads people down a ton of blind alleys. I've gotten much more thoughtful at communications, understanding that as a leader, the things you say are listened to very carefully so you need to be just as careful in what you say, and how you say it.
I intend to continue this interview series through November and December with SaaS founders and CEOs whom I've gotten to know well. Would love to hear of questions that are top of mind for current and prospective SaaS founders in the comments section, and I'll incorporate them in future interviews.