5 Things They Didn’t Teach You About Leading a SaaS Business with Mark Stouse of Proof

The real answer to both sides of this question, best and your worst, okay, is I think always about the people that you bring into the company. Nothing is more productive or more destructive than that. Welcome to SaaS Origin Stories. Tune in to hear authentic conversations with founders as they share stories from the earlier days of their SaaS startups. We'll cover painful challenges, early wins, and actionable takeaways.

You'll hear firsthand the do's and don'ts of building and growing a SaaS, as well as inspirational stories to fuel you on your own SaaS journey. Here is your host, Phil Alves. Today I have Mark Stuth from Proven Analytics. Welcome to the show, Mark. It's so great to be here. I really appreciate you having me on.

Mark, the first question I'd like to ask you is, tell us a little bit about your background.

My background is a long and winding road, right, that started in journalism and politics and took me into tech and ultimately into some of the most elevated roles in tech, not just marketing roles, but communications roles and ultimately commercial roles, right?

And all along that way, and now I'm obviously in the, I founded a SaaS company called Proven Analytics, but you know, it's just, you know, maybe the best way of summing it all up is that 25 years ago, I had no idea what I didn't know.

How did that background prepare you to start Proven Analytics?

Well, you know, I think that one of the things that it did for me was it, in the most constructive way, which doesn't mean it was not painful, okay, it beat the ego out of me, or at least a lot of it.

You know, I think that one of the biggest lessons that I've learned as a leader is that it's my job to ask really, really good questions and to not be the smartest person in the room.

In fact, to the extent, and this was true even when I was at Honeywell or VMC or HP or you know, whatever, right, to the extent that I was the smartest person in the room on a given topic, I had failed as a leader.

You know, my job was putting together a team that maybe couldn't do my unique roles as well as me, but in every other capacity, you know, my job was to have a phenomenal team that collectively made my role somewhat passe over time.

I mean, I actually, in two different situations, I found myself at a point where I had done that so selectively and successfully. I had done that so well that I realized that they didn't need me anymore, that the amount of value add that I was still bringing relative to the team was marginal.

And I, in both of those situations, I was in a different place within six months or so. And that is, that's not a fun decision.

Even though where I went in both cases was really cool, right?

I was having a blast and one could totally argue that if you're in that kind of position that you should kind of make the most of it. But I think that you always have to be aware of when it's time to go. And maybe that's the other big thing that I've learned is when it's time to go. For sure.

And talking about better opportunities, how did you come up with the idea for Proof Analytics and how was leaving from where you were to start this company?

I started as a marketing leader, right?

I started saying to myself about 15, 20 years ago, you know, I am sick and tired of not being able to answer what's my value to the business, right?

What am I, what business areas of business performance is marketing multiplying and making even more successful?

And so I just had it, right?

I was tired of all the negative meetings. I was tired of all the budget cuts. I was tired of all that stuff. And so I was kind of at this existential point where I was either going to solve the problem or I was going to stop being a marketing leader. It was one of those two things. And I decided not to curse the darkness anymore.

And so I plunged into what turned out to be, you know, a 15 to 20 year journey of learning the math and learning conceptually and architecturally how data science operates and how we could leverage it to solve this problem for marketing and salespeople. And I got to a fairly, my teams and I got to a fairly high degree of maturity on that whole thing. Enough to say two things.

One, we could do it. Everyone else agreed that we could do it and it was worth it.

But damn, it was hard and it was expensive. At Honeywell, I was spending six, seven, eight million dollars a year just on analytics. Let's dive deeper on the funding part.

How did you fund that?

Initially, it was me and just a few other people. And then we just kept. So we made a fundamental decision early on that we did not want venture money in the company, but it was we believed it was inherently distortive in terms of what was most important to be able to do and say from that point forward, five years. Right. So we went with family offices that were software specialists.

We had like five or six early on and we raised money from them based on performance gates. So we did it in tranches and that helped mitigate their risk. It also allowed us as we accomplished goals in the company, right. Revenue or product wise or whatever, the value of the company went up. And so stock became more expensive over time. And so each tranche would buy a little less stock. All right.

So it reduced the risk. It also reduced our dilution big time. And it gave us very stable funding partners who were not looking for an instant hockey stick and all that kind of stuff. They were looking for something that was more sustainable and that would ultimately get there.

But they were, I mean, so it's not about a lack of accountability, I assure you, but they just had a different timetable and a different set of standards around what they wanted out of it. So that's how we funded it. That's how we did it. That's a very uncommon strategy. I'm familiar with family offices and private equity funding like later stage company.

And like you say, most times this kind of entities, they're looking for companies that are making money. They're looking for growth, but not as much growth. And they're not the kind of partner that want you to make it or die. They are looking for a stable company. But I have never heard before of someone that fund a early stage startup with family offices.

So how long did it take you to build the first version of your product?

So in our particular case, a normal MVP approach just doesn't work. Because if you're building an analytics platform from the point of view of math and all the classic use cases, right, it's either complete or it's incomplete. And if it's incomplete, no one wants to talk to you. So we were very fortunate.

We had 14 original customers, mainly because of people we knew at different companies like Intel and Oracle, you know, different companies like that. And they didn't pay us a lot that they paid us really low amounts of money. But they gave us amazing product feedback. And so we effectively were not in the market with our product for the first three years.

We had paying customers, but we were not selling it actively, right?

We're improving your product, working with those big customers. And that's not a misconception. When you just look at the startup hype, we think that every product can be built in three months. That's not the reality. And even like their successful products that I look at, simple product like, hey, it's an email service they built for more than a year, and then they took it to market.

So there's more than one way of doing things.

So Mark, what's kind of like the first old shit moment that came to mind from the early days of your SaaS?

I would say that this was in the very first year.

So this is one of those development things, right?

We were trying to build a version, a first version of the product that was very compatible with where most teams, those marketing teams were in terms of their maturity about analytics, right?

And so the very first version was correlation only, no regression. We still use correlation, covariate analysis in the tool, but it's only part of the discovery process that actually leads you into a regression model. So what would happen was is we showed it to a couple of marketing teams who just were entranced, but they wanted to be sure that it was technically what they needed.

And so they involved their data science teams.

And this is a whole other story, right?

But data science teams are cults of precision. And businesses, business leaders, if they're a cult of anything, they're a cult of pragmatism. And so these two things clash. And so what happened was the data scientists looked at it and said, this is incomplete. There's no multivariable regression in it and all this kind of stuff and scared the living crap out of the marketing teams.

And so that didn't come to pass, right?

And so we had a major oh shit moment, right?

And had to come to grips with the fact that we had to complete the product fully instead of having an MVP. And that we had to find other ways to make it not simple, but far more approachable to non-data scientists.

And this is where we bifurcated the product, right?

We have kind of two ways into the product.

One is for analysts and the other is for everybody else, for the business guys and the marketing guys, right?

And so what we figured out was it is an utter fantasy. It's just a fantasy that in the next five to six, seven years, that the back end of that, meaning the actual mathematical modeling part of it, will ever be democratized. It's just most business people, both business teams of whatever type, don't have the skills to do that, to handle that.

What you can democratize is the conclusions, how to understand those, and how to help them make progressively better and better and better decisions using the analytic results, right?

You can totally democratize that.

And so we pivoted, because we had a lot of data scientists on our own team, right?

And they were kind of bringing that same cult of precision mentality and all that kind of stuff. So we pivoted and we brought in some UX designers and said, look, this is what normal data science output looks like. It's never going to be what business people need. It's going to be Greek to them.

We have to create a UX that is fundamentally different, but yet still grounded in data science and reality, right?

And so we were playing around with different ideas.

And then this is the serendipity piece is the part you don't control, right?

So we had a retail customer who was, the data was all API'd into proof, which five years ago was not an everyday occurrence in the marketplace. And because they were retail, the frequency of measurement in all these data sets was hourly. And so the way proof is set up is that every time new data is presented to a model, it automatically recalculates the model.

So if you are time frame in your business, that's really critical is hourly, then it's going to recalculate it every hour, right?

So this was actually really a breakthrough because it was recalculating the models so frequently that all of a sudden we saw something in the readouts that we had never seen before. And that is that effectively the tool was operating just like the GPS on your phone.

So it was forecasting and then immediately updating the forecast, right?

And so you were able to pick up the standard deviations, the deltas between forecast and reality, right?

You're able to pick them up really fast as opposed to the norm at that time and still is the norm today, right?

Is that it's every six to 12 months is when they recalculate the model. So we were able to create a business screen that was the representation of everything was a stylized version of the GPS, which actually was almost a perfect overlay for the normal outputs that you would get anyway. But it wasn't a graph. It wasn't the thing that makes everyone freeze up. It was something very approachable.

And then just like on your GPS on your phone, when all of a sudden it says, hey, man, this route is no longer working.

There's a wreck or the traffic is built up or whatever and we need to reroute you, proof does that too, right?

So a lot of things have now changed in the marketplace for whatever reason.

This, this and this no longer working. You need to war game and you do it right there on the screen with sliders on your investments or game or response.

What are you going to do to get back on track?

And when you see it all lined back up again, right, then you lock that in, right?

It precipitates out into like your ad buys or whatever and then it keeps on going. And so like a CMO at some point said to us, you know what I love about proof is that I'm never wrong anymore.

I kind of have to sit there and go, what do you mean by that?

And then it dawned on me, okay, that again, if we stick with the GPS analogy, right, you may have to get rerouted on your journey, but you are going to get to your destination. That's what he meant. You always know where you're going. Even if you know what's going on around how far away we have to react to. Yeah.

And like one of the things, so one of the things that the GPS industry did to inspire tremendous additional confidence in customers is it, this was kind of like, like 2005, 2006, it's introduced countdown to arrival.

So when you pull into the parking lot or whatever, right, and the number goes to zero, you know that the GPS really knew where you were and how to get you there, right?

So we do the same thing, right?

Because time lag, how long it takes for marketing investments to pay off is super key.

And it's the one thing that everyone agrees is real, but no one can say what the time lag is for this investment in this company, but we can, we can show them, right?

And so that is, that's been super, super key. But I think actually the biggest oh shit moment of all, right, was realizing that, like, I'll just say this for myself. My biggest oh shit moment was when it dawned on my, through my, got through my thick head, that I was not even remotely representative of our ICP.

And so a lot of the choices and the preferences and everything else that I was advocating for in the product and everything was actually part of the problem.

And so when we, so all of a sudden I just said, you know what, I'm pulling out of this part of the business and I want you guys to, don't listen to me, right?

Listen to the customers.

What do the customers say, right?

And that, that seems so basic, you know, it's so basic. It's sort of really embarrassed. It's not sort of, it is really embarrassing that it took me as long as it did to come to that.

I think that actually a lot of founders struggle with this because to found something, you have to have a very strong point of view, Steve Jobs, great example of this, right?

And then you also have to be willing to listen and modify your point of view based on what the market tells you. Otherwise you won't necessarily be all that successful. And I think that that's hard. I think that's just hard. It's humanly difficult. Yeah. I see that all the time. Like founders coming to the realization, I'm not an ICP and it's definitely hard to get there.

It sounds simpler, but it's easier said than done, right?

You are the founder, you are the visionary, you want things to go a certain way.

And there's like, you also don't want to like build by community, right?

You want to be the software to, because usually customers don't know the solution. They know the problem they have.

But it's, I see that once a founder realized that he's not building a product just for him or even for him anymore, it makes a huge difference. Yeah.

And about being smart, could you share like a very smart decision that you made in the early days or in this few years they have been running the business?

And I think you're ready for the follow up question. It's going to be a very big mistake you made. But let's just start with a very smart decision. I think we made a great acquisition from a product point of view that, you know, has, I think has been one of the smartest decisions that we made by far.

The real answer to both sides of this question, best and your worst, okay, is I think always about the people that you bring into the company.

Nothing is more productive or more destructive than that, you know?

And I have made, I've done both and have the scars, well, on the negative side anyway, have the scars for it, right?

And I think that that is, you know, because none of us are psychic. And if someone really wants to con you about who they really are, it's very, very difficult to defend against that.

And so, because it's not about ability, it's about their integrity, who they really are and what their real intentions are.

And that is, that's, and I think one of the hardest things about, there have been two situations where that's gone that way, proof, and you just, as the founder, as the CEO, as the person who, in both cases, brought them on, right?

Even though, you know, there was team interviews and all that kind of stuff, right?

I mean, I made the ultimate call to do it. It just makes you feel terrible. And in one particular case, the consequences were particularly severe, at least in one aspect of the business.

And so, it was just, you just sit there sometimes with your head in your hands and you're like, how in the hell did I make that mistake?

Right?

And so, and then you, you know, you are always, this is the thing that I was talking about earlier, you then have a choice. You can either learn from it and become a better person and do it better, to whatever degree, better the next time.

Or you can just beat yourself up and descend into some depressive state about it, right?

Yeah. I know exactly where you're coming from. Because as a founder and someone that has hired hundreds of people, I have been there myself. And you feel horrible.

You feel like, how could I?

You feel betrayed. And you feel like you've failed your people because there's a huge impact on everyone else. And it's like going from that depressive state that you're going to get, no matter what. But getting up from there to the next stage is what's very hard. And I think that's what you were getting into before I cut you off.

Yeah, no, you're absolutely right.

You know, and I think, you know, I'm certainly not even remotely the first person that's talked about this, but mental health with founders, but also startup teams in general is so important and such a challenge.

Like just speaking for as a founder, right?

So I'm in two groups. One doesn't meet anymore. It just never came back after COVID. But one now does again. It's all about mental health for founders. And it's a very confidential organization, obviously, but without getting into any specifics.

I think one of the things that I've seen and I've been guilty of it myself, right?

It's amazing how you can be sucked into all that stuff is I've seen really well known founders much more known than me. And they'll come into, you know, a lot of time when we were meeting together physically, we usually did it in New York. These guys come walking in and it was all swagger and high fives and killing it and all that kind of stuff.

And then 30 minutes later, they were essentially in a fetal position, you know, on a beanbag chair or something, because the reality that they were living was totally the opposite.

But they felt like that they couldn't be real about where they really were, because there would be so many consequences, right?

That is a deeply destructive thing.

And it is, you know, there's a lot of reasons for it. But certainly one of them, right, is the whole VC rooted, you got to get it all or get nothing. You got a hockey stick.

And if you're not hockey sticking within nine months of the founding of the company, something's wrong with you, right?

You got to always be going from victory to victory. And it's just not true. And so you're a lot of founders feel that they have to live a lie that a founder of a company, say a generation ago, would never have felt that kind of pressure. And the irony about that is that if he sees placing many bets, he's being wrong most of the time.

But he wants the founder to place one bet to go all in and to be always right.

So that's kind of like, what is the irony about that?

So if you could go back in time and meet yourself for an hour, like the day you decide to start this company, what do you tell yourself?

Oh, man, you know, I would tell myself that this is going to be the hardest thing you have ever done, that it's going to take a lot more time than the longest amount of time that you ever thought it would, that the amount that you will learn in a very compressed period, relatively speaking, right, is glorious in retrospect, but almost unbearable sometimes when you're actually going through it.

When I started Proof, man, I'd been a successful big company leader for so long, I just thought I had it wired, had it wired.

And if you want to be disabused, all that kind of stuff, start a company, right?

One of the things in a big company, particularly as a very senior leader, you lose sight of how much support you really have. And I don't mean just like your EA.

I mean, like, one of my marketing organizations had like 1200 people in it.

These were 1200 people that were to some degree or another, all working together to prove me right, in a sense, okay?

And I mean, how can you go wrong with that as long as you have a decent strategy, right?

I mean, that's an enormous amount of support and help and what you do not have in a startup.

I mean, unless you've got somebody that's willing to just say, hey, I'm going to stroke a check, I really believe in you, here's $100 million, go do your thing, right?

Or even half that amount, right?

That's obviously different. But that's not most companies, most realities. And so you rapidly get, you have to get really, really real.

You know, you have to, I mean, like, you know, I mean, seriously, if like, I'm trying to think of real life examples. I think of one of someone in a similar position to you. I know this guy and he was a merchant acquisition for a big public company. And he was the guy that made the final decision, buy, no buy. He used to joke, he was paid seven figures to say no.

So he left to start his own business. One day he showed up to his office and there is no power.

And then he's like, who didn't pay the bill?

Who's responsible to pay the bill?

And then he realized that now he's running a startup company and he is responsible for paying the bills. He doesn't have this huge team of analysts and everyone around him anymore.

It's like, it's really a lot smaller. It's very different. And I have heard the same thing that you say about other leaders that left big companies to start a startup company. You kind of lose sight of how much support you have in a big company. Yeah.

Like, I mean, you think about like Honeywell, okay.

I mean, I wasn't chasing invoices, right?

I mean, you know, there was somebody else that was their job, right?

And if the customer wasn't paying at the right frequency or whatever, that wasn't my deal. Right. It didn't create what I really mean by that is it didn't create a consequence that I had to grapple with or even that my team had grappled with. Today it does. It does.

So you just, you have to particularly, you know, I mean, the way it works in a SaaS startup is that you have a bunch of small customers and a few really big customers. And if one of those customers, one of those big customers doesn't pay you on time because it's a large number, it's inherently distorted on your cashflow. Right.

Did that happen at Honeywell?

Well, not to my knowledge.

Did that happen at HB or BMC?

No, not to my knowledge. That's the kind of thing where it's real life.

I mean, you are really getting exceptionally, you're living life in a startup. You're living life very close to the bone.

It's like, I think we were talking offline. Like you say, you're always one bad decision away from things going super bad because that's kind of like what it is in a startup.

You know, everyone counts. Like you can do, if you do one bad hire, like we discussed early, now you're going to affect the whole company. You do one bad hire and the organization is not the same. You know. And you know, what we were also talking about is the old saying that, you know, a startup is either in trouble or it's dead. Right. That's the reality.

And that's the reality that doesn't get a lot of press, but that's the reality. And so I just, I think that it's what I would ultimately tell myself 10 years ago, obviously way before I even had the idea of starting Groove. But if I kind of went back in time, I would have to say, win, lose or draw, it's going to be the best thing that you ever did for you personally.

Like the person that you will become, but it's probably going to be one of the least enjoyable experiences. It's sort of like combat. So combat is famously hours and hours and hours of boredom mixed with a few minutes of stark terror. It's sort of like that, except it's a really tough grind mixed with a few moments here and there of elation, just absolute elation. But otherwise it's a marathon. It's a grind.

It's a, you know, and you're either kind of wired that way.

So kind of like I was in an interesting conversation about, should everyone go to college?

I happen to believe that not everyone is supposed to go to college, right?

And that there's a lot of technical training and all that kind of stuff that's actually like my plumber is a friend of mine. The guy makes ungodly amounts of money. And so I think that not everyone is supposed to be an entrepreneur. And there's easier ways to make a lot of money. I would add that. Yeah. Yeah. Absolutely easier. Not necessarily less risky.

Yes, easier. So we're going to the end here. I have one final question to you.

What book do you recommend for every SaaS founder?

Hmm.

Well, I think I would have to go with the one I'm reading right now. So it's called The Misbehavior of Markets. And it's all about financial turbulence and dealing with that. And it's not exactly riveting reading. But one of the things that happened as I read through this is so relevant today. So relevant today. The volatility.

Because when it says markets, I mean, you obviously would immediately go to the stock market as the reference. But it really means it's a much broader statement, the misbehavior of the marketplace as well. And how things can go really sideways really fast, but non-uniformly. So high interest rates are going to be a headwind for probably most companies. It's going to be a tailwind for some companies.

And one of the things that they talk about here is that, at least in modern recorded history, when there's been major escalations in the interest rates, it's happened very precipitously. Nobody saw it coming. And then all of a sudden it happened. And how that can really, depending on your business and all that kind of stuff, it can really push you into a very difficult place.

And so even though it is very specific about financial turbulence, I think that if you read it in a broader context around turbulence in general, you'll learn a lot. That's a great recommendation. I definitely ordered mine today because it applies to the market where we are right now. And I think a lot of founders, they weren't around the last time we had things like this.

So how can we prepare?

Like 2008, I wasn't here running my business. That was the last time. So it's good to go and to learn, to understand, and to see how we can be very prepared for what's ahead.

Mark, thank you very much for your time today. And people want to follow you and keep listening to you.

What's the best way to do it?

So the best way to do it is I am very active, maybe too active on LinkedIn. So I'm happy to connect with anybody. And if you want to send me a PM through LinkedIn, I'm happy to answer it. Sounds great. I'll definitely follow you on LinkedIn too. Thank you again for coming to the show, Mark.

Hey, thanks so much. I really enjoyed it. SaaS Origin Stories is brought to you by DevSquad. To find out more about how we help entrepreneurs launch new products and help larger businesses plug in a ready to go development team, visit devsquad.com. Add us to your rotation by searching for SaaS Origin Stories in Apple Podcasts, Google Podcasts, Spotify, or anywhere else podcasts are found.

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