Hey everyone! In today’s episode, I share the mic with Shan Sinha, founder and CEO of Highfive, a company that sells a video conferencing hardware/software bundle.
Tune in to hear Shan discuss his tech journey from Microsoft to Highfive, how much he sold his business DocVerse to Google for (who turned it into Google Drive), the difficulties of building a hardware/software company, and what they did to grow their YoY revenue by 170% from last year to this year.
Download podcast transcript [PDF] here: How Shan Sinha Is Tackling the Videoconferencing Space with His Hardware/Software Biz Highfive TRANSCRIPT
Time-Stamped Show Notes:
- [00:40]Before we begin, please leave a review and rating and subscribe to the Growth Everywhere Podcast!
- [01:33] Shan has been in tech startups for his entire career.
- [01:56] He left Microsoft to start DocVerse.
- [02:05] Google then acquired the company and it was turned into Google Drive.
- [02:28] He then worked for Google Enterprise Apps for a few years.
- [02:46] Then he stumbled upon the idea for Highfive, which Shan deemed a remarkable opportunity.
- [03:05] Highfive has been around for five years and is continuously growing (they now have 2,000 customers).
- [03:35] They grew by 170% over the last year.
- [03:45] They are a hardware/software company that operates like a SaaS-based business.
- [03:50] The company handles over 150,000 meetings per month.
- [04:33] The purchase price of DocVerse was around $25 million.
- [05:20] It’s easier to build a hardware company today than it was 10-15 years ago, but it is still incredibly hard.
- [05:46] When it comes to B2B SaaS, there aren’t too many examples to rely on.
- [06:28] Shan and his partners set out to solve a problem: getting people dialed in to a remote meeting.
- [07:01] When Shan and his team set out to solve the problem, they realized the normal meeting today required flexibility in the way everyone connected to a remote meeting.
- [07:28] Some people will be in a conference room, others will need to join via a laptop, others will need to dial in via mobile phone.
- [08:03] They realized the only way to solve the problem was to build purpose-filled hardware and software that people could use remotely.
- [08:16] It turns out this issue is happening in many other aspects of our daily lives (hardware and software working in conjunction).
- [08:48] Shan realized putting hardware and software together was the best course of action.
- [09:11] To start a hardware company, adopt the mindset that it will be a hard road.
- [09:30] Also, realize that you will need a lot of capital.
- [10:35] Surround yourself with people who have experience creating successful hardware companies.
- [11:04] Above all else, hire the “right” people.
- [11:55] This requires a lot of networking and word-of-mouth.
- [12:55] Shan had a contract manufacturing partner lined up, but they dropped out when Apple gave them a contract.
- [13:29] Within 24 hrs, they landed a contract with another manufacturing partner.
- [14:30] Shan thinks there is a difference between networking for networking’s sake and networking with an endgame.
- [15:22] The answers are never readily available, so you have to actively seek them out.
- [16:09] Figuring out the pricing structure was part of innovating the hardware/software.
- [16:27] Highfive spent two years in R&D.
- [16:50] The original plan was to sell the hardware in the typical way, but to sell the software on the basis of the number of users per number of months.
- [17:56] It took them a while to figure out their pricing structure.
- [18:01] They figured out a pricing model that bundled their hardware and software together; then they charge you based on a per room, per month basis (with that comes an unlimited software user license).
- [18:42] Highfive now has a few different packages that they offer that cater to a variety of offices.
- [19:13] Shan believes this makes conference calls truly collaborative.
- [19:43] Competitors like WebEx, GoToMeeting, or Zoom will have a free option with limited capabilities, a cost for each software user license, and a per month charge.
- [20:45] These competitors also charge for minutes used by people calling in.
- [21:10] Basically, the competitors are nickel-and-diming everyone.
- [21:47] When the iPod came out, Apple sold it based on how many songs you could store vs. the actual Megabytes, which was an effective marketing strategy.
- [23:04] Highfive’s biggest challenge has been figuring out solutions to completely new and untested problems.
- [23:33] There were very few examples of companies packaging hardware and software.
- [24:11] They have reached the point where they have figured out their product and their business model.
- [24:23] Now, they have to figure out how to take it to the next level and continue to grow their business.
- [25:34] The goal was to make Highfive easy to use, deploy, and sell.
- [26:01] Highfive tries to offer deals to gain new customers.
- [26:30] They are anchored in the thesis that the product should be the thing that drives customer reactions and responses.
- [26:43] All their marketing is done online and they try to take advantage of SEO.
- [27:32] Shan thinks it’s important to create a consistent picture that stitches all your variables together in a single model and then work with your team to determine which variables you are going to optimize.
- [29:24] The “tool” that has proven effective was simply paying attention to the payback on acquisition costs.
- [31:11] Shan believes the thing that measures a company’s efficacy is tied to the payback on costs.
- [32:11] Shan recommends Founders at Work and The Five Dysfunctions of a Team.
Resources From This Interview:
- Must-read books:
- Shan on LinkedIn
- Shan on Twitter
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Full Transcript of The Episode
Shan Sinha: It was in that ballpark, yeah, it depends on what you include, and count in there, but yeah, it was in that ballpark.
Eric Siu: Got it, okay, great. I think what many people are probably thinking, because there's a lot of SaaS entrepreneurs that are on this podcast, but we don't get many guys that talk about starting a hardware/software company, that seems like a huge undertaking, and seems really complex. At least I'm thinking, like, "Okay, well, there's a lot of competitors out there, they build the software, couldn't you just partner up with some hardware company, and get going?" Why build a hardware company?
Shan Sinha: Yeah, it's a great question, so I'd never done, me, or my cofounder, we'd never done anything that required hardware before, and so I think the way I would summarize it, is it is a lot easier to go build a hardware enabled, or a hardware anchored company today, then I was 10, 15, 20 years ago. There's a whole bunch of infrastructure scaffolding, all of that, in ways that it wouldn't have even been feasible 10, 15 years to do the kinds of things that we can do today. That said, it is incredibly hard.
Over the last five years, we've learned a whole bunch of things, and particularly when it comes to B2B SaaS, there aren't too many examples to rely on whenever you look around for people that have done the hardware/software thing before, so there's a lot you just have to figure out for the first time. It turns out it really is hard, so I think the assessment of how hardware, or incorporating hardware raises the difficulty associated with your startup company, it is absolutely true, and there's a whole bunch of things you have to think through, and figure out, that are not immediately obvious whenever you're thinking about creating a pure software company.
Now, what led us to creating hardware, was really about the insight that led to us solving a problem that we set out to solve. I think the problem that we set out to solve, is pretty familiar to anybody who's ever gone into an office before. Anybody who's ever been in an office, has spent the first 15 minutes of every meeting going through the chaos of trying to get everybody connected. You have to download apps, you have to get people dialed in, you have to get your screen share, you have to get your screen up onto the TV, you have to make sure that everybody has the right pin code, and pass code.
It's a range of problems that every single person who's ever worked in an office is familiar with, and has remarked that someone should go out, and fix this problem. When we set out to solve this problem, the big insight that we had, was that the way we meet today is fundamentally different than the way we used to meet 15, or 20 years ago. The core insight that we had, was that the normal meeting today required flexibility for people needing to join that conversation.
Imagine a typical four, or five person meeting today. Well, what you typically see, is a few people that are sitting in the office that meet in a conference room, and a few people that are working remotely, that might need to either join in off their laptop, or mobile devices, or they need to maybe dial-in while they're driving down the road, that's the normal meeting today. How do you create a product that lets a group of people, distributed people, connect to each other, and a core insight, was we had to solve that physical conference room problem right alongside with the mobile problem of somebody trying to join in off their laptop.
What that led us to, is recognizing that the only way to solve the problem, was to build purpose built hardware for the situation where you've got physical people sitting in the same room, and software that people use when they have their laptop, or mobile phones in front of them, and it turns out this pattern is showing up in all other aspects of our lives as well. If you think about what's happening at home, you've got Apple TV working with iTunes. You've got Google Home working with the Google Cloud services.
You've got Apple connecting to Apple music, so you've got this ecosystem of hardware, and software coming together, to solve problems, and the big recognition for us, was, "Well, we need to solve the problem, what's the best way to solve that problem?" We were almost forced into saying, "Well, the best way to solve that problem is to really work with, and build an experience that brings together hardware, and software."
Eric Siu: Got it, makes sense, so I think for those people that are wondering how to start a hardware company, what are some I guess ... What were you studying to, and learning from, who were you learning from to get going with this stuff, because you started from nothing, right?
Shan Sinha: Yeah, so I think there's a few different things that I would do. I think number one, is to adopt the mindset that it's going to be really, really hard, and that you don't really know what you're getting into, and so it's really important to start there, particularly for people that haven't done anything with hardware before like we were, like the situation we were in. Now, I think the second piece is to recognize that it's going to require capital, and I think if you're starting a pure hardware company, one that doesn't have a subscription component, that is a very different proposition, and I think in a lot of ways really hard, and may not even be totally practical these days.
You look at GoPro, you look at Fitbit, these are all companies that do need to evolve their service sides of their business. Jawbone was the ultimate example of a company that just couldn't quite make it work after 12, 13 years, and so I think you have to recognize that the business models associated with hardware are really hard, and then just building a consumer hardware company that's going to go compete in some space against Apple, that's going to be exceedingly challenging, maybe almost to the point of not even particularly practical these days.
I think you've got to start with mindset. I think if you get over that hurdle, and if you decide to ignore my advice, trying to dissuade you from doing hardware, then you've passed test number one, and recognize that, "Okay, I can't do this thing without building the hardware." Then, what you need to do is go surround yourself by people that have done it before. We were really lucky, and part of the fact that I've been doing startups for a while, meant that I was able to rely on a network of friends that had all created successful companies around building hardware.
We were lucky, we ended up getting some very reasonably high profile investors, advisors that had all done, and built hardware companies before, so that was really step number two. Then I think step number three, was well, you just have to hire the right people. Now, the reality, is in our company, we're predominantly a software company, we have essentially a couple of people that run our hardware program, but we work with a network of partners to go really produce our hardware.
You have to look at whether hardware is your true differentiator, or is it the end-to-end experience that's your differentiator, and allocate your resources, and hire accordingly. If hardware's going to be the real differentiator, where you're going to have to build chips, and custom hardware that really is going to make the difference in your company, that's a very different kind of company than the kind where you're going to take off the shelf parts, you're going to assemble them into a new type of product, and then get that out into market, those are two very different strategies, and you have to think about what ultimately is right for your company.
Eric Siu: Got it, and how did you find these hardware partners? Where can someone go?
Shan Sinha: Yeah, it's a lot of just networking, and word-of-mouth. It's amazing to me that it's not much more mature, or sophisticated than you might expect, but it's who should we talk to? How do we get connected to this person? We happened to meet one of our first partners at CES, we ended up making a list of CM partners Contract Manufacturing partners in Asia, and ended up just reaching out, and pitching them, much in the same way that you go, and pitch venture capitalists for invest money for them to take on your project.
There's a whole set of constraints for them to take on what is initially low volume products that come from startup companies, and so you have to go, and figure out how you're going to attract them to want to take your project at all. A lot of it is just pounding the pavement, going to Asia, going to conferences, going to CES, talking to other companies, figuring out who they worked with. Figuring out what the differences are between companies doing your diligence.
Just to give you a little bit of a harrowing story, we had a contract manufacturing partner that was lined up, and we had been talking about five different partners, and we had one that was lined up, ready to take our business. They didn't admit this to us, but apparently Apple was getting ready to roll out, at this time, I think it was some old, some previous version of an iPhone, and they ended up giving part of that project to them. All of a sudden they went radio silent on us right when we were getting ready to commit to going into development together, and we lost our partner, and so in 24 hours, I was talking to my head hardware, and in 24 hours, we jumped on a plane, went to Taiwan, went down the list of all the other partners we were talking with, and 36 hours later, came back with a contract with somebody else.
At the end of the day, it's a messy process, and you just have to realize that it's just like everything else, there's no exact formula, you just have to hit the pavement, and do the work to find the people that are going to make the difference for what you're trying to build.
Eric Siu: Yeah, totally I mean it's a grind, right? I think people aren't willing to ... Sometimes people want the easy way out, and the shortcuts, or the hacks, and when you talk about going to the conferences for example, people might think, "Oh, he's saying networking, like that's easier said than done." At the end of the day, the people that I see that do the best with these building relationships, networking, whatever you want to call it, these are the people that are at CES that stay all the way to the very end.
They go to all the parties, they hammer down until 2, or 3 AM, because they know, the people that make it to 2, or 3 AM, you might just get that one relationship, right? It sounds like you're that kinda guy.
Shan Sinha: I think that's right, I think there's a difference between going out, and building relationships, and building your address book, versus having a directed motivation behind what you are trying to achieve. To give you an idea, if you're looking for a partner to go build out some part of your hardware-based product that you're trying to do, go find other companies that are doing anything remotely similar. Who do they work with? Who do they talk to? Would it make sense for you? Go do that 10 times, 15 times, 20 times, and then all of a sudden you're going to start to see patterns, and that's how you can start to at least make some decisions, and not to say that it will be the right decision, but having some directed focus around what you are trying to achieve, is oftentimes an asset, but there's no substitute for just getting out there, and starting to ask questions, and coming from an informed place.
No, absolutely, I mean you just have to get out, and do the work, the answers aren't necessarily readily available. Now, what I'll say, is there has been a lot of progress in the last five years since even we started the company around organizations that can help you short-circuit a lot of the learning curve. You have incubators that are focused on hardware, you've got venture capital firms that think more explicitly about hardware enabled ecosystems that can short-circuit a lot of that these days, but at the end of the day, it's still so I think ... We still haven't reached the level of maturity where you say, here's a product spec, somebody will pick that up, and go off, and build it. We haven't quite gotten there yet.
Eric Siu: Got it, great, and one thing we didn't touch on really quick, how do you guys make money? How does pricing work?
Shan Sinha: Yeah, so that was a big area of innovation for us, and so what we landed on in hindsight seems really simple, and obvious, but it's interesting that the journey for us to figure that out took some time, it took some iteration to work out, and that was not without pain. We started the company, we spent the first two and a half years really in R&D, we ended up spending a lot of time during this phase also reaching out to customers, testing value props, and trying to understand how we were going to position ourselves in the market.
Eventually we got into market, and we spent the first year really iterating on figuring out the business model. Now, we knew that we had this hardware component, and we had this software component, and the original plan was to sell the hardware the way that customers typically buy hardware, and to sell the software on a per user, per month basis, the way that people are accustomed to buying software. That was part of the plan the whole time, the thing that was interesting, was in this category, which is not a new category, there's a whole bunch of incumbent companies, customers were used to buying that way, but they would piece together their solutions from multiple vendors.
They would go to their hardware guys, and they would buy hardware with them the way that you normally buy hardware.
Eric Siu: Yeah.
Shan Sinha: You would go to the software guys, and you would buy software from them the way that you'd normally buy software, but the value prop that we offered, was the integration of the two. We had hardware that was not quite as feature-rich as all the things that you could get from a pure hardware vendor. We had software that didn't have all the features that you would get from some of the other software providers that you might go to in this category, whether it was WebEx, or GoToMeeting, or any of those tools that we're all familiar with.
The value prop that we were offering, was the integration of the two, so it took us a while to really understand, "Well, how do we get our pricing model to line up with that value prop?" What we landed on, was essentially a pricing model that bundled all of our hardware, and software together. We end up selling today on a per room, per month basis, so you figure out how many rooms inside your company you want to deploy Highfive in, and with that, you get an unlimited user license to use the software across every single person in your company, no additional charges.
As part of that single subscription price, you get hardware included with no upfront cost, you get unlimited, this unlimited user license, and you get unlimited minutes, so you're not charged on a per minute basis, so there's no nickel, and diming. The way we sell today, is we have four different packages of products that we sell, they range anywhere from $99 per room, per month, up to $329 per room, per month. They vary in different hardware configurations, and different service configurations, and it's like getting bronze, silver, gold, platinum pricing, depending on what set of functionality you need for your organization.
That model has been working incredibly well. It's easy, it's simple, it's transparent, and it actually lets conferencing turn into a true collaboration product that you can deploy across your entire organization, and it's something that nobody has really done before, and figuring that out actually was a process for us, but since we've figured that out, growth has just been on a tear, and over the last two years, we're among the fastest companies to grow in scale, or revenues by most SaaS metrics, and we've been very pleased with the results.
Eric Siu: How do your competitors charge on a per seat basis just an example?
Shan Sinha: Yeah, so what you tend to find, if you look at companies like WebEx, or GoToMeeting, or even more recently, companies like Zoom, what they will do, is they'll have a free version of your product that is severely limited. You can't have meetings that are more than 30 minutes long, or 40 minutes long. If you go long, a credit card notification will pop up, and say, "Hey, pop in your credit card, so you can keep having your meeting." Then you decide how many users you're going to buy a user license for.
"Well, I've got 100 person company. Or I've got a 500 person company. Well, if I have to buy a license for every single user, then it's gonna cost me anywhere from $20-$40 per user, per month." Then I decide to do that, and I decide, "Well, I've got all these people that are power users, I'll buy licenses for them. For all the people that are not power users, I'm not going to buy licenses for them." When they need to use the system, then they end up sharing a license with somebody else, and that creates this whole administration headache.
Then on top of that, it's, "Oh, I need people to be able to dial-in, okay, so let me buy a package of audio minutes on top of that. I'll buy a package of a thousand minutes, and then if I go over that, now I have to pay an additional five cents per minute after that." If I want to buy a recording, well, I have to pay for how much storage that I'm going to use as part of my recording. If I'm going to buy some improved administration features, well, I gotta go pay for that. You get this nickel, and diming invoice thing, and all of a sudden, before you know it, you don't know exactly what you're getting charged for, you don't know exactly how many people are licensed, or should be licensed.
Whenever you buy a piece of software, you end up in this complicated billing relationship, that turns into a whole process in, and of itself, and from our perspective, we just do away with all that.
Eric Siu: Yeah, it just makes life a lot easier, because you guys are working together, and collaborating, instead of again, yeah, we're in the same exact boat, right? We are using one of those tools, and it's like, "Should we get this? Should we not?" You guys are aligned, right?
Shan Sinha: When the iPod came out, one of the things that Apple did really brilliantly, was they didn't say, "Hey, here's an iPod, and here's the version that has 128 GB. Here's a version that has 256 GB, here's a version that has 512 GB." What they said was, "Okay, use your iPod however you want, don't worry about the storage, just tell us, do you want to buy the version that can support 500 songs at a time, 1000 songs at a time, or 5000 songs at a time?" These days, Google talks about phones that support an infinite number of photos on your device, so the value prop is tied to the thing that you're using it for, and in our particular case, we just say, "Hey, look, how many rooms do you want Highfive in?" Deploy the software to everybody in your organization, whether they're a power user, or not, and that way, you don't have to worry about whether the tool is going to be something that is licensed appropriately, or not, just use it as much as you can, and all of our interests are aligned with a successful deployment inside your company.
Eric Siu: Love it, that's great. Yeah, so switching gears here, what do you think is the biggest struggle you'll face while growing this particular business?
Shan Sinha: I think for us, the biggest challenge for us has been the process associated with figuring out things that hadn't been figured out before. I think from the get go, one of the things that we knew very well, very early on, was product definition. I think we got the product definition, the product spec, I think we got that right, and it took us a few years to really build up to that maturity, so there was a big R&D curve associated with that. Then, there were very few examples to point to, that had brought together hardware, and software to solve a particular problem, and so that translated to a process associated with having to iterate on our business model.
That took a significant amount of time, and so I think figuring out how to answer not only the product side of it, but the business model side of it, and getting all of that to work together in harmony, I think that was the biggest challenge, because that shows up in all kinds of weird ways in your company when you're trying to figure out what you scale, when you scale, how you scale, and we've now reached a point, where we said, "Hey, look, we've gotten to a point now, products figured out, or at least product has reached a very healthy level of maturity, I think we've got the best product in the category now. Business model is now figured out, there's no risk around that."
Now we got to go hit the gas, and figure out how we continue to grow in scale, and keep growing by 100% a year year-over-year, or more. I think getting to that point where we said, where we had the confidence both in the product, and the business model, and how we get our product out to market, I think that was the biggest challenge, and that required a lot of cultural impact, team learning, how do you manage through that kind of uncertainty, which is a different kind of uncertainty that you face when you're trying to scale.
Really getting all those variables matched up, and lined up internally, and I think I'd characterize that as our largest challenge.
Eric Siu: My God, a lot of moving parts.
Shan Sinha: A lot of moving parts, hardware, software, enterprise, SaaS, customer success, sales, marketing, turns out, we just have a lot of variables that need to come together to make our engine working, to make our engine work, and I think really that's probably the best description of the biggest challenge that we've had to solve.
Eric Siu: Speaking of, and there's a couple of things I want to touch upon here, but talking about marketing a little bit, what's working, or even just customer acquisition, what's one effective thing that's working well for you right now?
Shan Sinha: Well, the biggest effective thing, is rooted in the thesis behind Highfive, which is this technology, this product should be easy to try, it should be easy to use, it should be easy to deploy, and it should be easy to buy, across all those spectrums. There's not a single product in this category that really checks the box on all of those different dimensions, and so from a marketing perspective, I think the thing that works really well, is we let the product lead the way toward all of our sales.
Our goal is to just identify customers in the market, our prospective customers in the market, and just get product in front of them. We'll do 30 day free trials, we'll do 30 day money back guarantees. We'll ship product out, if you like it, great, keep it, buy more. If you don't like it, send it back to us, and we want to understand why you send it back to us, so that we can keep getting better, but I think the core of what makes our marketing function very well, is that we're anchored in this thesis that the product should be the thing that drives customer reactions, and customer responses, and we hold true to that.
All of our marketing is done online, we are taking advantage of SEO, and online content. We do some amount of paid advertising as well, but all of that is just geared toward getting people into the free trial process. A lot of our marketing is just driven by direct traffic to our website, we're not doing much more beyond that. People are finding us, and as a result, we let the product lead the way toward sales, and I think just holding true to those core values around how this product should be bought, and sold, is paying dividends for us.
Eric Siu: Love it, okay the next thing I wanted to touch upon, is around, you talked about, we just agreed on multiple moving parts, right? There's the entrepreneurial ADD, so how do you deal with that? How do you stay focused, because there's just so much stuff you have to deal with?
Shan Sinha: I think the most important thing that you can do when you're thinking about all of the different moving parts, is to create a consistent picture that stitches all of those variables together, in a single model, and then you work with your team to figure out which variables you're going to optimize. In our particular case, just to layout some of the different variables that we had to stitch together. On the product side, we think about usage, engagement, we think about what are customer reactions like? What do all those data points tell us?
Now, how does that relate to the business side? Well, on the business side, we think about the entire funnel, front to back, which is how do you go from lead, to a sales opportunity, to a customer win. Then you don't want to stop there, so how do you go from a customer win, to a customer that expands, and buys more? Then how do you go from there, to a customer that uses more, uses their system more, even if they're not expanding? Then you go from there, and you say, "Well, all right, those should be good leading indicators for customers that renew."
What you want to do, is instrument every single step of that process, and then you want to figure out, "Well, what's being driven by the product side? What's being driven by the sales, and marketing side? Which variable makes sense?" What you want to do, is construct a model that covers all of your spend associated with sales, marketing, support, etc. You want to construct a model that covers what you are getting from your customers on a new sale basis, on an expansion basis, on a renewal basis, and you want to track all that in one place, and the tool that's been most effective for us, is to just pay attention to the payback on your acquisition cost.
You figure out what your acquisition costs are, figure out what your payback looks like over a period of 12, 24 months, and go figure out how to optimize that down, and I think using a tool like that requires you to connect all those variables together, including, in the case of a hardware/software company, things like gross margin, because one of the things we have to think about, that software companies don't have to think about, is the cost of hardware parts. You construct a single model that stitches all that together, make that something that's well understood by your entire senior executive team, talk about it, reinforce it, and then you regularly get together, and figure out, "Well, what's going to be the priority? Which variable are we going to optimize?"
You focus on solving each variable almost one at a time, or maybe at most, two at a time, and you just make progress towards all of that, and everything else becomes a proxy for one of those variables that you're trying optimize, whether you're focused on customer success today, you're focused on sales tomorrow, you're focused on marketing next quarter, or you're focused on product satisfaction this quarter, because that's going to lift all other boats.
I think it's really important to construct that single model, and let that be the tool that stitches together your entire organization, and that's led to a huge amount of success, and progress for us, particularly over the last couple of years.
Eric Siu: I think you touched upon a really important point I think, especially for subscription, or SaaS companies listening, it's a lot of times people are talking about CAC:LTV, but payback period is something that ... That's something that can help guide you ... The CAC:LTV stuff, you might not even figure it out for maybe even two, three years, or so, depending on where you're at. The payback period stuff, that can be a leading thing, and that tends to work for you guys, right?
Shan Sinha: I think that's exactly right, and in fact, I think by solving the payback challenge first, and by really ruthlessly prioritizing that, I think the LTV side, while it's a useful, and important investor metric over time, from a business perspective, from an operational perspective, the thing that really measures your effectiveness of a company, the effectiveness of the product, and the effectiveness of the sales, and marketing engine, it's really all buried inside that payback metric, and you need to do that on a gross margin basis.
If you can drive that down over time, and just be super successful on that, you know you're building something that can grow in scale, and I think it's the best measure for how all the different variables in your company come together to deliver a product, or service into the market. I think it's the best measure, or it's the best indicator that can suggest to you, "Hey, we're ready to grow, and scale this."
Eric Siu: Great, all right, so let's work towards wrapping up here. What's one must read book you'd recommend to everyone?
Shan Sinha: I'm going to give you two Eric. If you're an early-stage founder, I think one of the best books that I read was, "Founders At Work," by Jessica Livingston. It might be known to your audience.
Eric Siu: Great book.
Shan Sinha: The thing I love about that book, is it tells you the real stories behind how some of these companies got going, and it's never as clean, and never as shiny as sometimes it might've seemed from the outside, or sometimes PR might make it. For those of your listeners that might be in more of a growth, and scale mode, where you're focused on team building, I just read a book recently that completely, and dramatically changed my entire outlook on the how I think about the team. It was a book called, "The Five Dysfunctions of a Team."
Eric Siu: I just got that, wow.
Shan Sinha: It's amazing. The book is remarkable, and there's all kinds of things that you can recognize yourselves, recognize in yourselves, and I've started to make a mandatory reading among my senior team.
Eric Siu: That's so interesting, I forgot who recommended it, but I ended up buying two copies, and I'm about to take off to the airport in a little bit, I guess I'm going to slot that book in. Yeah, you just changed the trajectory of my day.
Shan Sinha: That's great, yeah, the book was fantastic. I listened to the audio version of it on a bike ride the other day, and it's life-changing.
Eric Siu: Cool, awesome man, well, Shan this has been fantastic. What's the best way for people to find you online?
Shan Sinha: I'm on LinkedIn, you can obviously see me, I tend to be out and about here and there, but certainly you can find my LinkedIn profile. I am often, I'm becoming a Twitter user here and there, so you can find me there as well.
Eric Siu: Great, Shan, thanks so much for doing this.
Shan Sinha: Hey Eric, thanks a lot, it was a lot of fun.
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