In 2017, Ironclad founder and CEO Jason Boehmig was looking to raise a Series A. As a former lawyer, Boehmig had a specific process for fundraising and an ultimate goal of finding the right investors for his company.
Part of Boehmig’s process was to ask people in the San Francisco Bay Area about their favorite place to work. Many praised RelateIQ, a company founded by Steve Loughlin who had sold it to Salesforce for $390 million and was brand new to venture at the time.
“I wanted to meet Steve and had kind of put two and two together,” said Boehmig. “I was like, ‘There’s this founder I’ve been meaning to connect with anyways, just to pick his brain, about how to build a great company, and he also just became an investor.'”
On this week’s Extra Crunch Live, the duo discussed how the Ironclad pitch excited Loughlin about leading the round. (So excited, in fact, he signed paperwork in the hospital on the same day his child was born.) They also discussed how they’ve managed to build trust by working through disagreements and the challenges of pricing and packaging enterprise products.
As with every episode of Extra Crunch Live, they also gave feedback on pitch decks submitted by the audience. (If you’d like to see your deck featured on a future episode, send it to us using this form.)
We record Extra Crunch Live every Wednesday at 12 p.m. PST/3 p.m. EST/8 p.m. GMT. You can see our past episodes here and check out the March slate right here.
Episode breakdown:
- The pitch — 2:30
- How they operate — 23:00
- The problem of pricing — 29:00
- Pitch deck teardown — 35:00
The pitch
When Boehmig came in to pitch Accel, Loughlin remembers feeling ambivalent. He had heard about the company and knew a former lawyer was coming in to pitch a legal tech company. He also trusted the reference who had introduced him to Boehmig, and thought, “I’ll take the meeting.”
Then, Boehmig dove into the pitch. The company had about a dozen customers that were excited about the product, and a few who were expanding use of the product across the organization, but it wasn’t until the ultimate vision of Ironclad was teased that Loughlin perked up.
Loughlin realized that the contract can be seen as a core object that could be used to collaborate horizontally across the enterprise.
“That was when the lightbulb went off and I realized this is actually much bigger,” said Loughlin. “This is not a legal tech company. This is core horizontal enterprise collaboration in one of the areas that has not been solved yet, where there is no great software yet for legal departments to collaborate with their counterparts.”
He listed all the software that those same counterparts had to let them collaborate: Salesforce, Marketo, Zendesk. Any investor would be excited to hear that a potential portfolio company could match the likes of those behemoths. Loughlin was hooked.
“There was a slide that I’m guessing Jason didn’t think much of, as it was just the data around the business, but I got pretty excited about it,” said Loughlin. “It said, for every legal user Ironclad added, they added nine other users from departments like sales, marketing, customer service, etc. It was evidence that this theory of collaboration could be true at scale.”
For Boehmig’s part, he has very clear beliefs on what the fundraising process should look and feel like for the entrepreneur. It’s all about identifying people that believe and are ready to get to work.
“The job of the founder isn’t to convince investors to invest,” Boehmig said. “It’s to run a process that identifies true believers.”
He said one sign of that, which he saw with Loughlin very quickly, is whether an investor starts brainstorming about the future with you. And, importantly, whether that brainstorming session results in both parties feeling like they “mind meld” and are on the same page.
Another factor that showed Loughlin’s conviction was his willingness to move on the deal.
“If you played it out another week, you could probably expect that we would be getting more term sheets,” said Boehmig.
In fact, Loughlin felt that, which is why he closed the deal and signed paperwork from the hospital as his child was being born.
How they operate
It’s been nearly four years since Loughlin and Boehmig signed the paperwork, which injected the now near unicorn with $8 million in Series A funding and made Loughlin a part of the board.
Over time, their operational relationship has evolved, but both agree that the work they put in up front had paid off.
Boehmig said it is important, before the paperwork is even signed, to establish what the dynamic between the board and the founder is going to be.
“We’ve always been up front about the fact that we consider the board a part of the company,” said Boehmig. “There is a social contract that means the board is going to know everything that’s going on, and also understand that things are going to be worked through together, through conversation.”
He said that he likes to get input on things that aren’t necessarily board-level items and work through them as a team, having conversations that don’t necessarily reflect any particular reporting structure.
Loughlin said that early planning allowed the duo to work together in a way that is both productive and builds trust over the long term.
They spent a lot of time early on plotting out the plan around mission, vision and values of the company, what the role of the founders should be, and where they wanted to be in a year from now in terms of team size and composition.
“I want to know what you want the company to look like so that I can push you and we can have constructive conversations around the plan,” said Loughlin. “That way, I’m not getting a phone call about whether or not they should hire a head of customer success without any context or a true north in mind.”
He said that exercise takes a lot of work on both sides but it sets the tone for the relationship.
They also set a cadence for their conversations. They set a standing meeting once every week that Boehmig had the option to cancel within a minute of the meeting start time. Essentially, if Boehmig had issues he wanted to work through he had time set aside with Loughlin.
They said that they took advantage of that time more often than not, and eventually moved to one meeting every two weeks as the company grew, and now to something a bit more asynchronous, where they can text or call each other on the fly and respond when available.
Essentially, talking through things more than may have seemed necessary built a level of trust, and a bit of a shorthand, to cut to the chase now.
“Because we’re in sync, I can respond kind of asynchronously,” said Loughlin of their relationship now. “He’ll say, ‘Hey, dude, we’re in this negotiation, do you think we should do this?’ and I’ll be like, ‘Yeah, my gut [sense] is we should do this,’ and he’s like ‘Yeah, me too.’ That used to take us probably 30 minutes on the phone. Now, we can do it in a much shorter period of time because we’ve invested in kind of understanding where the company is trying to go.”
The problem of pricing
Pricing continues to be a huge challenge for founders across all verticals, but particularly for enterprise startups. After all, packaging and pricing is the line in the sand where sometimes competing interests — those of the customer, of the unit economics of the business and the future trajectory of the company — must all be aligned.
“As I’ve gotten to know the pricing world a little bit better over the past 24 months, I’ve learned that literally no one has it figured out,” said Boehmig. “To me, the objective of pricing is to iteratively become less wrong over time. At the beginning of the company, you’re probably going to be giving away tons of extra value. And that’s probably good.”
He said that early on in Ironclad’s journey, a case study showed that the company was charging significantly less than the ROI it was providing to its customers. He said one client in particular was paying around $50,000 but generating millions in ROI.
“The goal over time is to more closely align the value you’re driving with the pricing,” said Boehmig. “We definitely have been on a multiyear journey and have, I’m sure, multiple years ahead of us on pricing. I do feel like we’re less wrong every turn that we do of it.”
“Pricing is a complex, hard topic,” said Loughlin. He warned that some early-stage companies jump into pricing before they fully and truly understand where the value creation is happening for their customer. “Being intellectually honest as a company about whether you’re creating value and where and how is the first step,” he said.
Founders then have to be able to communicate the return on using the product back to the customer, and then price the product below the value it’s producing. It may seem fairly obvious, but it’s an exercise that takes a lot of time and due diligence to do well.
We also talked with Boehmig and Loughlin about the timing of price changes. How long should a founder “set it and forget it” when it comes to the price of their product? Should it be a constant item on the list of things to think about, or should founders take a break from pricing adjustments? And if so, how long should those breaks be?
Loughlin explained that product development at these enterprise companies can move a mile a minute, and that is constantly changing the conversation around pricing. Founders have to think about whether a new feature should be included in the base price or cost more as an add on, meaning that the faster a company is rolling out new features the more frequently the issue of pricing will rear its head.
“Thinking about your pricing dynamically around product development and competition are probably the two biggest things you need to anchor yourself on,” said Loughlin. “The third piece is trying to figure out how pricing affects growing the business and meeting goals laid out in the plan.”
Pitch deck teardown
- Understanding the timeline of the company — past, present and future — is important to investors:
Finding a way upfront to set the time horizon on where the company is is very important. Did it just start? Is it five years old? Where are they in their journey? As an investor, you’re always trying to figure out, are they making good progress over time against what they’re trying to do? Giving us that context is is generally pretty helpful.
- An email from a developer or customer carries much more weight than positive chatter on social media by noncustomers:
I’d rather see something that is from the person that’s gonna have behavior change. I kind of discount it because it was LinkedIn or Twitter. Anyone can say anything on those platforms. If it was an email from a developer saying the product is so good or that they’re using this on 100% of projects in the future, it’s just a little bit more like grounded in the behavior change, as opposed to the market saying nice things.
- Be specific with the scribble slide:
Every entrepreneur has made this scribble slide before. The more you can show the actual problem, as opposed to just the scribble because, basically, everything is a mess, and our solution and software are going to make it better. How can we unpack that better? Is there a before and after that could viscerally put me in the shoes of the customer? If the customer is a developer, maybe you show how they used to have seven screens up and now it’s just a snippet of code. That would make it easier for me to understand that developers are definitely going to adopt this. That’s better than just saying things are a mess in a slide.
- Don’t get too text heavy:
I think, in terms of storytelling, keeping it interesting is important. I could maybe do two slides in a row that are just text. But if we’re going to three or four or five of just text, my brain just tunes out. So keeping it snappy and jumpy and visually differentiated.