Totango | Interview with its Co-founder & CEO – Guy Nirpaz
In Palo Alto, we meet co-founder and CEO of Totango, Guy Nirpaz. He shares his story how he co-founded this startup and how the current business model works, as well as what the current plans for near future, and some advice for young entrepreneurs.
The transcript of the interview is provided below.
Martin: Hi, today we are in Palo Alto with Totango. Guy, who are you and what do you do?
Guy: I am Guy Nirpaz the Co Founder and CEO of Totango. We started the company a few years ago in Israel, Tel Aviv and then I moved over here when we opened the US office here. Totango is Data driven, customer success platform.
Martin: What did you do before you started this company?
Guy: So I’ve been in Startups for many years, not as a founder but I work as a VP of engineering and products at the big data company called GigaSpaces, we mainly distributed computing. I’ve worked at Mercury for a few years, I’ve worked at IBM and some other start-ups in Israel before.
Martin: And how did you come up with the idea of Totango and what made you change from being a VP, like an employee to becoming your own entrepreneur?
Guy: So my career is a little bit different. I mean in Israel you have to go to the army and I spent 6 years in the army. I was an officer, so I’ve kind of volunteered to lead and to have relatively a lot of responsibility over people and then I wanted to, for a few years just be very professional about what I do. So before even taking on a VP role I had a lot of individual contributor positions where I kind of learned the ins and out of this business. I’ve always been technological but I was technological in sales and engineering and products and then a VP but I always had this kind of… I usually describe it as, I was really motivated by mountains that people put in front of me, saying, ‘Okay, nobody can get to the top of this mountain, do you think you can do it?’ I’ll say ‘Okay, fine, I am coming with you, I am going do it’. And then I realized that these are not my mountains, so I decided to define my own mountain and go in and climb it.
BUSINESS MODEL OF TOTANGO
Martin: Let’s talk about the business model. How is Totango working right now and have there been any major changes in the business model?
Guy: So Totango is a SaaS business, it’s a subscription business. We provide customer success solutions, it basically enables other subscription businesses to drive retention and growth within their customer base. It’s a data heavy solution, it looks at how people are actually using the product and other dimensions of the customer base and creates actionable insights, health scores, so companies can get ahead of the curve, identify which customer needs attention and provide them the required attention.
So we provide subscription business to SaaS business model, we sell both inbound and outbound, so we outreach to our potential market and we also get a lot of inbound enquires and we show them the product. In many cases we showcase it which means that there is early PO (purchase order) that the companies can actually drive for other home customer base and then we support them and grow them further more.
Martin: When you started, how did you acquire the first customers and was it that easy?
Guy: In retrospect it was relative easy but nothing is very easy in startups. We started the company, me and Omer Gotlieb, but then Oren Raboy joined us as the founding team of Totango. And I think the first customers were local customers, so a company that Clarizen that were operating out of Israel and was—I would say the most dominant SaaS company is where we went and talked to their management team to learn about their requirements. Later on, Omer really pushed hard on LinkedIn and was able to get some meetings with executives at Zendesk and Keynote Systems and other very early customers of ours. I found that people receive very well new ideas if they make sense and they are willing to experiment and these are classical early adopters and we operate in early adopter market, so that’s how we acquired the first few customers. We’ve worked with them to develop the product. So we kind of thought of ourselves as a lean startup in a way that we developed an MVP, and released it and tried it with the customers and get some feedback and iterated ever since and so that’s all we keep on doing. I mean we try to identify a problem a customer has, we try to come up with an innovative solution for it, we build an MVP, we release it, we get the feedback and we do the other adaptations to meet the customers’ requires.
Martin: Okay, when you say that you are trying to help your customers in terms of customer success, what are the major criteria for identifying a potential customer that needs more attention and are you also providing some kind of specific actions that your customers should do?
Guy: Yeah, That’s a very good question. I think it all starts with, really being able to know more about your customers, right? What are they trying to accomplish and are they actually accomplishing it? There are multiple metrics, one of them which is critical is the level of adoption and usage of a product, because everyone is busy and if they are not using your product probably they have other priorities meaning that your product is not really delivering to their satisfaction. So the first challenge is, to get the right sensors into your customer and it’s what they do with your product and how often, what is the breath of usage and also other dimensions of customer information for example support tickets, CRM information, billing information, marketing information, and so forth. So aggregating all this data and turning that into real asset that can be managed, right? So it needs to mean actionable, it needs to meaningful, it needs to be relevant, it needs to be accurate.
We call this part the early warning system part which help you identify which customer needs your attention at the right point in time that you can actually make an impact. And then of course it’s taking the action and making the required changes. If there is a customer that is struggling to onboard, help them out and remove friction, help them to kind of get into a happy place. If it is a customer that experienced a positive scenario where they are exceeding the expectation, talk to them about the next step, get them to the next level of adoption, and so forth. So it’s a combination of the early warning system that let’s you know which customer needs your attention and why, and then a set of operational capabilities to actually take the next step and take the action.
Martin: And the data, is it very unique for each and every customer, do you have to set up all your database and analytics etc. for each specific client or is the client making the connection between his database and you’re kind of algorithm, or how does it work?
Guy: So we think about this as a network of sensors right? So the first sensor considers how people use your product, and we use technologies that are common like java scripts or SDKs within the mobile tool kit’s. They are integrated with how people are actually using your product and sending this information to Totango. We also have a very wide set of connectors to other customer systems that captures more information we’ve just kind of introduced last week, a universal integration hub, which makes it very easy to integrate more data sources into Totango.
The question that you asked is how unique is the data. So I would say the classes of data are not unique. I mean usage data, support data, CRM data, marketing data. These are the classes. The specifics are different and every business is different, and that’s kind of one of the key elements of Totango is that we help customers take those classes of data and turn it into information that makes sense for their own business. So in one product, it’s about how many projects you’ve created. And in another product it’s about how much time you spend on the system and who do you integrate with or who do you interact with, so that’s how it works.
Martin: Let’s talk about corporate strategies, Guy. Your value proposition is clearly understood, so you’re helping your customers understand their customers better, so that they can manage them better or the customer life cycle. But what is your differentiator over competitors who do similar things?
Guy: The core of Totango – it all started under the assumption that every user and every customer goes through a very individual journey. And the objective today of companies is to make sure that the journey of every user and every customer is successful; everyone starts and then at some point needs to get very quickly to a point of value, and then there needs to be competitive value, and then over time the value needs to grow. And that’s kind of unique to every user and it’s unique for every business. This is the approach we’re taking and the product actually models exactly that which helps you, know exactly which user and which account needs your attention, and specifically where they are and what needs to be done in order to drive them further. Of course, there are commonalities, there are rules that you can apply to segments of customers and so forth. But looking at that from an individual experience is what’s unique about Totango.
So we’ve spend the first few years of the product as really being able to build a very accurate mapping of every user and every customer journey, so now it’s much easier to take the next action. And we feel it’s like in other parts of life, if you really know what’s going on, then the actions that you are taking are more obvious. If you don’t know, then you’re guessing and your kind of shooting at a very wide range and you may hit or you may miss. And that’s the kind of very unique approach that we’ve taken from day one. And I think also these days everyone talks about big data, analytics, and so forth. But basically what it means is that if you take the right set of data set at the right sampling rate, I mean the sensor needs to be relevant, if it samples every day or every hour or every minute, and you turn this into something that any human being can understand. So it was very important for us from the get go to make sure that Totango is going to be used by the front office team; by the customer success managers, by the VPs, by the executive teams, by the product team and not just by the analysts. And I think that is very unique. So taking kind of very fine grade level of data and transforming that into information that end users that are business users can consume, that’s our strategy.
Martin: So that means that in comparison to your competitors you are using individual data sets and understand the individual life cycle and the others don’t.
Guy: I think there are multiple different approaches that we are seeing in the market, one approach is saying something like, ‘This could be overwhelming, it’s too complex, we should work with aggregated data only, because we cannot transform that into information that is relevant for people’. And some people find this approach very appealing, the problem with that is on the surface it looks good, right? But what happens if your customers are being colored as green and they cancel 2 weeks later or what happens if you don’t have the fidelity of the changes within the customer base in a way that you can actually make an impact, there is a big difference if a customer got into a problematic situation and you are responding within 4 weeks or 6 weeks or 8 weeks, it becomes almost irrelevant. If the customer had a negative situation, let’s say a very bad experience, you had a glitch in your product and someone was trying to use your product for two consecutive days and had some very negative experience. If you identified that and you practically reached out, and you tried to kind of apologize, and tried to kind of fix the bad experience you are going to get a much higher reward than responding that 8 weeks later and the customer believe that you are only calling them because they’re one month’s pre-renewal or something like that.
Martin: And you matching your kind of actionable insights with your CRM system so that automatically some messages are going out?
Martin: —based on some kind of results or so?
Guy: Yeah so I think the early warning system needs to be thought as—the first is identifying which customer needs your attention and now they engagement model #1: engagement model is we tap people on their shoulders. There’s alerts and then they take actions, individual actions, our human driven actions and some of that can be triggered and funneled all the way through to automated work flow, creating automated support ticket, or send an email, or in application communication. And it pretty much depends on how much do you want to codify your engagement with customers and how much of that you still want the person to be a part of the experience.
Martin: Okay. How did you come up with the name Totango?
Guy: So the source of the name, ‘It takes two to tango’ which kind of goes to show that even from the get go we were really thinking about this kind of relationship between the customer and the vendor. And that this relationship requires a little bit more delicate understanding and synchronization between how customers are and businesses are working. The days in which you could throw products off the fence or get the commission on the sales and now go to celebrate in the club, these days are gone. And customers have much higher expectations, they have a choice. That’s a good thing, it’s good for everyone, it’s also good for the vendors, it keeps everyone on their toes to make sure that we focus on creating value to customers every day. And that means that the products that we develop, the services that we create are actually being consumed and are actually meaning and helpful for other companies or other people, so I think this is all good.
Martin: Let’s talk about the market development, so how do you perceive the market development maybe in SaaS or in customer success in general?
Guy: So I think the first market for customer success, and that’s only the first one is SaaS companies and the reason is that these companies usually sells subscription businesses, relatively a very low switching cost and also early adopters. So these are the companies that from the get go wire themselves into, ‘we need to acquire customers but at the same time we need to retain and grow the customer base, so that’s the first market for customer success and we’re actually seeing this happening today. But I think this is just the early wins of the market, it’s going to grow way beyond just the sales market for various reasons;
- One is: subscription general is being adopted as a more subscription repeat buy. Focus on the maximas of customers’ lifetime value seems to be the trend that a lot of other businesses are going with.
- Secondly, software is taking the world. Internet of things, whatever trend you want call it, we know more about our customers, everything is either fully virtualized like music or is virtually enabled. So there are some sensors that are connected to how people are actually consuming products.
So without it, it means two things: one is that businesses have to focus on retaining customers and maximizing lifetime value. The second thing, there are huge opportunities to know so much more about your customers and my underlying believe is that businesses that will know more about their customers and will care about their customers will actually deliver a higher value and results for their customers. So that is just from the trend that we are seeing coming up in other markets as well.
Martin: And from my understanding, e-commerce might be the next logical step. For example, if I know I delivered a package 2 days later, I could automatically send some kind of discount voucher or whatever or try to contact the people and mitigate this kind of problem.
Guy: So yes, I agree with you. I am not sure if e-commerce necessarily is the immediate next one. But obviously, we’re seeing for example Amazon implementing some sort of services like do that already. And one of the experiences that I am really kind of a fan of is that if you are an Amazon prime subscriber and you’ve been trying to watch—I was amazed by that, I was watching an HD movie on Amazon prime and the next day I got an email from Amazon saying ‘You’re refunded for the movie because you didn’t experience 100% HD’. So think about it right, they know what was the experience that I was expecting, I was even unaware of the fact that there was like 2 minutes on the movie that wasn’t full HD but they have identified this though their operating system and this is the sensor, they sensed that and then they’ve created an automated action that turned the experience into a very positive experience because now I know this company cares about my experience, so I am probably going to watch another movie with Amazon while I have so many other options in front of me.
I think this is just the beginning of revolution and we’re seeing pockets of it across the industry but it’s going to go way beyond that. And when we think about it, I don’t know if you are aware of that, but if you look at some kind of metrics in the market, if you look at the LinkedIn groups of customer success, we’re seeing 100 people joining customer success groups every week for the past 2 years, over 100 people. It’s unbelievably amazing the number of people. So yes, I know some of them are people that are transitioning from more traditional customer service functions like support folks or professional services. But a lot of the others are coming to them from a completely different angle, ‘How can I create more value to my customers, I have an option to do this in a very scalable way as being the head of products or being a part of the product team but I can also do this as part of the customer success team’ which is the same concept.
ADVICE TO ENTREPRENEURS FROM GUY NIRPAZ
Martin: Let’s talk about your advice to first time entrepreneurs. I know you have a very entrepreneurial daughter. Can you tell us a little bit about what she did and what advice would you give her when she starts her company?
Guy: I have two kids that right now you can actually have adult conversations with. My older son is more of a marketing person and the questions that he asked me are, ‘So what’s your real differentiator, I mean why would customer select you and not your competitor?’ And interestingly enough, my daughter came to me last week and asked me, ‘How did you start Totango, what do I need to do to start a company like that?’ And that’s really kind of a interesting question and I like the fact that they are growing here in Silicon Valley and actually being exposed to entrepreneurs spirit. Israel was the same but here the magnitude is even higher. So my advice is just agree within yourself that this is what you want to do and just do it. And no inhibitions, meaning that, ‘I first need to get my salary or I first…‘ If you wanna do it just do it and then figure out everything else. I remember when I and Omer just started we deliberately first quit our jobs and then we sit down to say, ‘Okay what are we gonna do next’, because I wanted to have this experience of ‘Back against the wall’ to come up with something. I don’t know it works for everyone but for me it worked great.
Martin: And what have been your major mistakes or something that you said, ‘Okay, this was totally wrong, I would have done this different today’.
Guy: I think the biggest mistake that you could have is not willing to face the truth. And not willing to face the truth is to ask for money on the first day that you sell the product or something like that because the only time… This is just one example. It’s those things which are concrete that face you with the cruel world of, ‘I want $50,000 for this product’, ‘I am not gonna pay you more than 500’, Okay where is the gap? and if you go and do that you are able to identify the gap of what’s missing in my product, what are the features that are missing, where is the market and so forth and they just comes from sales. Where I feel like I have improved in entrepreneur is really being able to grow thick skin, face the truth and then work on it versus kind of sliding away the facts that you don’t really like and trying to come up with a different explanation that in many cases just kind of delays the evidence. And instead of taking the action immediately you take the action a little bit longer down the road and just a waste of opportunities. So my advice, just face the truth everyday and take action in accordance.
Martin: Great, thank you very much Guy for your time! And next time you are dancing with your partner maybe in a tango, thinks of Totango.
Guy: Thank you very much.
In this article, we will deep dive into the topic of Market Research Techniques. We will start …
In this article, we look at 1) what is the GE McKinsey Matrix, 2) understanding the matrix, …