This Week in Startups - E1154: Breaking the low-code stigma amongst developers & adjusting your market with Retool’s David Hsu | Rising Stars of SaaS 10

Episode Date: December 16, 2020

Check out Retool: https://retool.com FOLLOW David: https://twitter.com/dvdhsu FOLLOW Jason: https://linktr.ee/calacanis

Rising Stars of SaaS is brought to you by Pipe. SaaS companies, this is for you. Pipe helps you unlock your recurring revenue as upfront capital. No debt, no loans, no dilution. Sign up in minutes and start trading on Pipe free for 12 months at pipe.com slash twist. Odo is a fully customizable and fully integrated suite of software that lets you build and scale your stack as you build and scale your business. Your first app is free forever, and right now Odo is offering $1,000 off your first implementation pack at Odo.com slash twist. That's ODO.com

slash twist. And our crowd helps you invest early in pre-IPO companies alongside professional VCs. If you're interested in investing, you can join our crowd for free at O-U-R-C-R-O-R-W-D.com slash twist. Hey, everybody. Hey, everybody. Welcome to another episode of this week in startups. I'm super excited. We are rounding the corner here in our rising stars of SaaS.

What is SaaS? Software as a service. Charging people instead of for a box of 10 floppy disks in the 80s. or two CD-ROMs in the 90s or some giant download of Adobe's Creative Suite for $1,200. Nope, no more.

You pay as you go, you pay per month, and you pay a small amount of money. What does this do? Well, it gives those companies a bit of a sharper edge. Now, what is that sharper edge that you get when you charge a subscription? You are only as good as your last month.

If Netflix, as a consumer subscription, doesn't release any new content for two, three, four months, or if they were charging too much for their software, they find out about it. They have that feedback loop, which is magical. And that's what has revolutionized the software industry. You used to pay for Microsoft Office, $400 a year, you get the box, then they would come out with the next one,

and they would send more boxes. It's a pay in the neck. Then Microsoft just charges whatever it is, $20, 30 bucks a month for the office suite, and everybody finds it easy brief. But it adds up because if you have a five-year lifespan, that is five times 12 a 60, 60 times 20, $1,200. It turns out they're kind of drip, drip, drip, bleeding you for a bigger dollar number.

That's why Adobe's stock price has gone bonkers. They thought Adobe would crash because of SaaS pricing. It soared, as did Slack, which was bought last week for $27 billion. And we thought we would just dive into it. I'm really excited today to have David, from Retool on the podcast. David has been building Retool.com for a couple years now. I think 2017 is when he started. And he has the greatest investors in the history of Silicon Valley on his team. Sequoia. Sequoia Capital, the people who funded Google, YouTube, Apple, Cisco,

the list goes on and on. WhatsApp. I am lucky, as you know, to have been the first Sequoia Scout and the most successful of all time. So it's nice to see my squad over at Sequoia, Win big. And of course, I believe, correct me if I'm wrong, you also were a Y Combinator company, correct? We were. Winter 17. So welcome to the program. Congrats on almost $70 million in funding for going through Y Combinator, the best accelerator in the history of Silicon Valley. I guess we're, you know, close second along with tech stars to them and the great venture capital firm, Sequoia, of course. And welcome to the program. You heard my little intro there about the power of SaaS pricing.

When did you first become aware of this sort of revolution in software generally? And then how did it inform the creation of Retool? Yeah. So, SaaS, we probably first, I probably first became aware of as a sort of, you know, I'm let's say a cheap skate and I prefer to pay one time for software. You know, I don't want to sort of pay every month or something. And gradually, I think this must have been maybe 2014, 2015, 2015, 2016. Something like that.

All the software started going to subscription. You know, like you said, sort of office one subscription, a few others one subscription. And I was like, okay, you know, I guess I'm paying monthly now. But I think there are some pros for both, I think a lot of pros actually, for consumers especially. But actually some pros for the companies. Like you said, Adobe soft price is soaring. But those are kind of the obvious ones. I mean, for the consumers, you can try before you buy because a month is not that expensive

compared to, let's say, paying $300 for office in 2017 or whatever it is. So there's a few advantages there. But on the enterprise side or on the sort of business side, I think there are a lot of advantages because exactly to your point, now you have to fight for every customer. Sure, you can sign maybe like a prepaid annual subscription, but when they sign the prepaid annual for 2016, who knows what they'll pay you again in 2017. And so it really keeps companies, I think, on their toes to keep on innovating. And for us, in the early days, it allowed us actually to find product market fit very quickly

because everyone in the early days paid monthly. And so we had to be sort of very on our toes making sure they were happy customers because if they weren't happy customers, they weren't going to stay customers for very long. And so that was actually quite hopeful for us, actually, when we got started. So explain to people what Retool.com is and who were those first couple of customers

that you listened to and you obsessed over in order to get product market fit? Because I think that is something you have very sure. strong feelings on and that you've learned a lot on through mistakes and big victories. Yeah. So Retool is a new way of building software. The idea is today, both software today, you know, you build it by writing code in front of a computer and highly specialized people, engineers, write this code, and it's kind of

hard to understand, actually. And even for engineers, you know, engineers oftentimes don't enjoy writing this kind of stuff. It's especially for, today we're starting off building, Ritual starts off, letting you build internal applications very quickly, and no software engineer really is that excited about building internal tools. I'm sure you've worked with many software engineers. I've worked with many. I have a software engineer who gets excited about the prospect of having to build, you know, 30, 40, 50, and her own tools. And so anyhow,

Retool is a much higher level way of building software. So instead of actually writing code, we actually give you all the building blocks. So it's actually like Legos, basically. And we'll give you the Legos. and you piece them together into whatever you want. And you customize the last 20, 30, 40% with code instead of having to write the whole thing with code from scratch. So it's just a much faster way of building software, basically. And was your market developers or entrepreneurs and founders

who don't know how to code, didn't have the money to hire developers? Because the no code movement, which you timed perfectly, and we've had bubble and countless other folks on the podcast making no code solutions. And there seems to be, we had Webflow on, we had apps without code. We really have driven deep into this. But there seems to be that developers are anti-no-code. And I don't know exactly why.

I get the sense that it might be, they might be a little threatened, maybe their jobs are going to go away. or they fear the limitations that they're going to build on it and then never be able to change it. So who is the customer for it? And then if the customer is developers, what concerns do they have or do they have a bias against no code? Yeah, yeah. This is really interesting. So maybe two-part answer for you. When we started Retool, there was no such thing as a low or no-code space.

When we started it, we were just engineers and we were like, we're tired of building internal applications. Maybe we could try a fast way of building this stuff. It's been really interesting sort of seeing the no-code landscape develop in the past. I think really a year, maybe a year and a half or something. And we've ridden the wave, which has been very helpful for us. But when we started, there certainly was no wave to ride. Helpful how? When you have a wave like this that you came before and then all of a sudden the waves get really big on the beach and you're like, whoa, this beach has got a great surf break. How does it make your job easier? Yeah, so I think from a marketing perspective or from a customer interest perspective, there is a lot of customer interest now, especially from larger companies.

And so if you take the look at our website and look at our logos, we have some very large customers ranging from NBC to Warner Bros, to Jaguar Land Rover, to Mercedes-Benz, to the U.S. Army, you know, a lot of sort of very large companies. Some of them, I think maybe 10, 20, 30 percent of them came in because they were excited by. by, hey, is there a faster way of building software? Is there a new way of building software that we don't know much about yet? And so on the low and no code thing, or on the no code thing you asked about, I think what's interesting is we sell almost exclusively

to developers. And I would say retools more, I would say low code than it is no code. And I actually have a few sort of strong opinions here, which is I think no code is highly unlikely you can sort of build anything really meaningful in no-code. And the reason is, coding is actually pretty hard. If you're trying to build an application that's used by a lot of people,

it's actually pretty complex. There's a lot of complexity in it. And as it turns out, coding is a pretty good way of getting a computer to do something. If you sort of want to fully get rid of the code and have sort of a drag-and-drop GUI to do it, it's difficult if not impossible. And so what you see, as you see all these sort of no-code solutions, that can get you to something like 40% or 50% very quickly, but the last 50% when you want to do it,

you actually just can't do it. You hit a brick wall, basically. A good example here is, let's say, let's say you're using an air table, for example, right? Air table is really great if you just want a spreadsheet, you know, on steroids. But as soon as, let's say, you actually want to write data back to a database or data becomes, let's say, too big for air tables, you want to store it somewhere else,

air table stops working. You've got to start entirely from scratch. If, let's say you have a data type that air table doesn't support, you know, you're host. That's not that you can do. You've got to move off an air table, right? You're in trouble. And so that's why I think sort of for serious business applications,

no code is quite hard to actually make work. Okay, when we get back from this quick break, I want to know when does that transition occur from when you're using a what you can see is what you get with Zwig type interface. You're building this internal. app, when do you see that actual roadblock happen and then people have to go under the hood and look at the actual code and then maybe bring in a developer or start actually writing code as

opposed to the visual drag and drop kind of interface that most people associate with no code when we get back on this week at startups. SaaS company, software as a service are amazing to invest in. Why are they amazing to invest in? Because they have some level of predictability. The team at pipe.com came up with a great idea. What if we came up with a marketplace where investors on one side could look at private companies, startups essentially, they could look at their subscription revenue and say, I'll buy a year's worth of your subscriptions for your monthly subscriptions. Now think about that. Somebody's paying $10 a month for a product. They pay $120 a year. Somebody might want to buy that at a little bit of a discount, so they make a little bit of money.

and then that gives the startup the money to deploy to get more customers. That's known as the flywheel, you know, Jim Collins style. There's no debt. It's not a loan. It's not money from venture capitalists, so it's not taking equity from you and diluting previous shareholders. One of my portfolio company, Steezy, you probably know them, S-T-E-Z-Y. Ev, the founder, called me and Evan said, hey, listen, we are doing this thing with Pipe.com. I said, I know those guys.

They're on my podcast. He said, really? I said, yeah, he goes, that's where I heard of them. I said, oh, okay. Anyway, Steasy is a subscription dance app. They were able to get all of this money in advance. They're monthly subscribers. They were able to sell to investors on the marketplace, and now they can deploy that money.

They're so confident that you'll love trading your SaaS subscription, this is for you, the founders, that if you sign up for pipe.com slash twist, they'll eliminate all your trading fees for one full year. My God, I hope Steasy did that. Pipe.com slash twist, and they will eliminate all your trading fees for one full year. Let's get back to this amazing episode. All right, David She was with us. He is the founder, co-founder, I'm sorry, to his other founders and CEO of Retool.com. They are a no-code platform for developers who are building typically internal apps, at least according to the website. You'll correct me if I'm wrong if people

are using this for front-end, public-facing apps as well. There's this question in this opinion that is pervasive in the no-code space, which is developers saying, you're going to wind up coding anyway, why waste your time with these tools when you're going to have to get under the hood and write code anyway? How do you answer that? I think that's true, which is that if you look at, let's say, no code, it's just very hard to build very custom applications with no code, actually, literally no code whatsoever.

And so I think what's special about Retool, and to my understanding, or the only player in the space that does this, with Retool, what you do is you use a drag-and-drop interface to get to something like, you know, 50% of what you want, maybe 60% of what you want. But the last 30 or 40%, we actually want you to write code because we think that code is actually a very good way of getting a computer to do something. We don't sort of want to invent our own language and how do you sort of use it to grab it

or make it or make it to write JavaScript, go write SQL if you want. And so what's interesting about Retool is that you can get to, let's say, 56% quickly, but then customize the last 30 or 40% however you want with code. And so that, I think, is pretty different from, if you look at sort of most of the no-code players, let's say like an air table, like a bubble or anything like that. That's what's special about Retool. When you started looking at this opportunity, there were a group of people who were not developers who were using, I remember back in the day, things like Microsoft's Access, right? And then there was FileMaker. And I used to be part of this.

I used to make little database systems for medical offices when I was 15 years old using, I think, access. And there were some other database programs that let you build like little, you know, basically what Google does with forms or air table does with forms. And then maybe some conditions here or there. If this, then that's little bullions that, I guess, bullions would be the way to say it of, you know, choices that you have to make. And, you know, if a person is getting approval for something, do this and send it to that person. So you, when you were starting doing your product market research for this, were able to find some of those people. Talk about that product discovery step that a lot of people skip.

And what did you learn by infiltrating like the Microsoft Access file? Is it FileMaker or the other one that was its contemporary? FileMaker, yeah. Yeah. Yeah. Yeah, so we had a hack, which was that we're all engineers. And so we built for ourselves. And so that I think was quite helpful.

But that would make any money, right? Because we can't sell to ourselves if you count that as revenue. And so we had to go find people who would actually go, you know, actually try and use a retool. And during this process, we initially started, because we went through the accelerator or white combinator, we initially started by selling two other batch mates. And that was pretty effective. And so if you're thinking about doing the cellular, I think if your SaaS companies, this is one huge advantage is that you get sort of this ready and sort of willing audience

of other startups that think alike and are ready to purchase software because they don't want to be spending time building internal tools either. So that helped us a lot in the early days. Maybe your first two, three, four customers came from that. We learned quite a bit. A lot of hypotheses were proven correct, some were proven incorrect. So that was a lot of fun in the early days. but then eventually you have to start selling to people you don't know right uh we're selling selling a friend's family only goes so far and that's when it's also a negative signal right i mean i've i've talked to venture capitalists who discovered this sort of ycombinator playbook and i think tech stars was doing it as well which is you get on bookface which is like facebook's i'm sorry which

is ycombinators internal social network it's kind of their internal slack i guess and this became a playbook which was hey get the thousands of other folks hopefully you get three or four to use your product. Then when you present to investors, you have three or four customers, but they might have been, you know, doing you a favor by using it. And who knows if they stick with the products? So investors specifically started saying, hey, where did you acquire these first five to ten and invest the customers?

Yeah, yeah. You made from the joke, which is, you know, you can sell someone something to sell you something. They both have revenue. But in reality, no one's actually making any money, right? Right, yes. And there's certainly a lot of that, I think. A little round tripping, as we call it in the industry.

I'll pay you $10. you pay me $10, something like that. So, yeah, so I agree. And I think the benefit is that you get early users, but you shouldn't view that. You should view that as, you know, there's some signal there for sure, but it's not substantial signal, right? To really know whether you have product market fit, you have to sell to people you don't know at all.

They hopefully buy your product. And so for us, that's when we learned a lot about, you know, discovery, sales, product market fit, all that fun stuff. Because one pretty interesting, like you said, you know, Retool is conceptually similar to FileMaker or access and stuff. And so one day we were thinking, you know, how do we sell Retail? How do we find people that would use Retool? And I remember I just went on LinkedIn.

I searched up some FileMaker User Group. I found it. I requested to join. Two days later, I was approved and I infiltrated the FileMaker User Group. And then I took a look to see who was there. And there's a few hundred members. And take a look at the names, took a look. with companies, script some emails, and they started sending cold app out to these people, basically.

So you're basically find people who are using the competitor or the legacy product. Yeah. You go to their LinkedIn group, you infiltrate it, you look at their profiles, and you find the 100 of them, 200 of them, and you email them, and then some number respond. What percentage would respond out of 100 or 10? And what would they tell you? And then how do you parse that feedback? very little, very few respondents out of 300 or so, maybe three, maybe six, something like the responded.

One to two percent response rate. Yeah, yeah. And the really disappointing thing that was not the response rate, it was the responses. We got some really negative responses. I think out of six responses, probably five out of six told us this is a terrible idea, and we shouldn't go do anything. And one guy was like, this is a bad idea. I don't have the phone with you.

Tell you why it's a bad idea. Okay, that's slightly better. I don't want to date you. I think that you're not the proper mate for me, but I'd love to get on the phone with you and tell you exactly how bad of a mate I think you would be. It's basically what they're telling you. So what do they tell you when you got on the phone with them?

So what we discovered is I think FileMaker is quite legacy. I think FileMaker first came out maybe something like 20 years ago, right? And so the people using FileMaker were sort of pretty ossified in their ways. And they were using FileMaker 20 years later or even Farmerical. I don't think it's well supported today. I don't know, it's kind of like a shell of a company. I got by Apple, actually, maybe 10, 15 years ago. And there's really no innovation there.

So the fact that the user's philermakers should tell you something, which is they don't care about, you know, being on the bleeding edge or trying new things. And that's something we didn't realize. But anyways, what they told us basically was file maker serves my needs very well. Here are maybe three very specific filemaker things that, you know, kind of a enjoyable firemaker, but they were not generalizable. It was like this filemaker button instead of being here should be over here.

And what are we going to do with that feedback? It's not like a cloning filemaker, right? And so that was interesting because it was a total failure, basically, sort of trying to get into this file. Like user group trying to email number, it was total failure. No customers ever came out to that. In fact, we actually got more, we got less motivated because of, first of all, the lack of replies, but also the negative replies too.

And so, but what's interesting, though, is if you sort of look at the product today, our product today is actually not very different from the product. that would be emailed. I mean, of course, it's more advanced. There's so many ways. We have so many more features that we have sold your product lines now. But the fundamental product is actually pretty similar we had before. And I think this for us was a very interesting learning about product market fit, which is that when it comes to product market fit, there's both the product, but there's also the market. And most people just think, you know, hey, I emailed some people.

It didn't work. Let me go pick up my product a little bit. I email them again or something. As it turns out, we can also adjust the market. And so for us, we were like, okay, that formula thing didn't really work. Why don't we try finding more people who are similar to us, engineers? Developers who are building startups or working at big companies? At the beginning, it was startups because they were more likely to reply. Got it.

But I think this is a side, but a very interesting point about developers, is that developers are remarkably similar at a big company, at a mid-sized company, at a small company. So, you know, we have developers now, let's say, at NBC, see, it's actually pretty similar to a developer at, let's say, you know, a Allbirds, another customer, is pretty similar actually to a developer at Brex, let's say, to, you know, a developer at a small two-person YC company. And if you think about, you know, sort of frameworks that developers use, like React, for example, React is used to buy, large companies, small companies, you know, everything

in the middle. And so that I think is one big advantage of creating a developer for its product is that if, you, you know, let's say sell the salespeople or sell to operations, people, or support people, It's so different. NBC is so different for Brex, right? Whereas developers, a developer that gets a job of Brex could probably get a job at NBC could probably get a job of Bank of America. And so that helped us a lot in the early. So anyways, we pivoted our market a little bit and said, hey,

you know, if a market developers probably is not the market, let's actually go switch to just developers. And that... Now, what about this point around developers being anti-no-code is speak to that? because there's obviously some group of them who are embracing this. So what does that group understand about no code or whizzywig tools or whatever it is versus the developers who have a bias or their anti-retool or just anti-no-code in general? I think the key is actually low-code rather than no-code because when we sell to developers,

developers actually are generally pretty excited about retool. And the reason is so I think you had two hypotheses before. about why developers don't like no code. One, maybe they feel a bit threatened. Two, is maybe it's not flexible enough. In our experience, it's really the latter. To be fair, maybe they haven't confessed to the former to us, but I think it's most the latter,

which is that, actually, this is true for me too. I'm an engineer, and I hate using something like a, let's say, like a Weebly or a Webflow or any sort of whizzy-week tool, because I just feel like, you know, I can't express what I want to express. You know, I can't write code. I can't customize it.

And I'm just highly skeptical as an engineer that I could possibly use a Wizzy Wig tool and really customize things. So I think it's really mostly that. And for us, we don't have that problem because we say, hey, you know, the first 30, 40, 50% of, you know, laying out the application, which is not the stuff you want to be doing anyways, you can use a drag and drop tool for that. But the remaining stuff, you know, you're probably going to have to write code to customize it. You know, a good example is, let's say you're trying to write a switch statement in JavaScript. So switch statement basically says, hey, you know, if the number is one, do this, if it's two, do this,

if it's three, do this, it's four, do this, it's five, or more do this, let's say, right? Trying to do that in a Wizzewick editor is really painful. And you can imagine why. You basically have to draw a bunch of, you know, bubbles. You have to draw a bunch of arrows. You say, hey, you know, this variable is the bubble and the arrow, I'm going to draw one for one, draw another one for two, and then you've got to execute, you know, this other bubble. It gets really complicated, right?

Whereas in code, it's really simple. You say, you know, switch, you know, X, let's say, switching on. is like case one, case two, case three, case four. It's just much more concise. And so that, I think, is a good example where you lose a lot of flexibility when you try to re-implement coding in a non-textual format. And so I think developers are skeptical of no code, and I think rightfully so, because trying to use a Wizzy Wick editor

is just so much less powerful. And in most business applications that we've seen, power is critical. If you're building, let's say, you know, a simple app for, let's say, you to track, you know, playtime with your daughter, for example. You know, you probably don't anything that complex, right? If it doesn't fit your respect exactly, that's fine. You know, if you don't have the exact data type, you'll make due. But if you're a large company like NBC, let's just trying to predict or try to price, you know, ads for the Olympics next year, you know, that ad is. They're talking about hundreds of millions, billions of dollars in revenue, billions of dollars in expense.

if the boss, whatever she wants, she's going to get it. And yeah, are you drinking apple juice or a little bit of McAllen 18? Answer that question when we get back. I also want to know your thoughts on now. You just raised, I think, at $925 million. So you're just before becoming a unicorn, essentially probably a unicorn.

Your thoughts on the employees, I know you have some strong feelings on this, employees who are drawn to this sort of, you know, unicorn hunting and trying to be. get on that Unicorn Squad versus the right employees when we get back on this week in startups. As someone who's invested in over 200 amazing startups and advised countless others, I want to talk to you about a serious pain point I see all the time. People are spending a ton of money. They have massive burn and they don't have a lot of revenue. And what that leads to is a short

runway. What one of the big costs that people have, it's all of the time and money that they spend, on SaaS software that they've got to integrate together and they take all this time that should go towards their customers, right? Well, Odu is here to change that. Odoo is a fully customizable and fully integrated suite of software that allows you to build and scale your stack as you build and scale your business, right? That's the way it's supposed to work. It's really simple. It's modular so you can just plug in the different pieces and it's all open source so you can spend your capital on talent, people, resources, human capital, as opposed to having 50 different, 25 different expensive software products. So here is your call to action. Your first app is forever free.

That's right. Free forever. And right now, Odu is offering you a $1,000 credit on your first implementation pack. That's no joke. I'm not, I didn't say a hundee. I said 10 hundies. $1,000 right now, but you have to get it now. O-D-O-O-O-O-com slash twist. O-D-com slash twist. Get that $1,000 right now. All right, let's get back to this amazing episode. All right, David Shoe is here.

He is DVD-H-U on the Twitter, if you want to follow him. And he is the CEO of Retool.com, backed by Y Combinator and Sequoia. What a great group of backers. And actually, a shout out to Indie Hackers. He was on Cortland's podcast. as well. And Cortland was on our podcast, episode 1143. And you got Patrick from Stripe also as an investor.

That's fantastic. So I saw you just refilled that lowball looks like a scotch glass, but you're drinking that pretty fast and you're seeming pretty coherent. That's apple juice? or is that scotch? I do have a high tolerance, but I'm actually drinking tea right now. Okay, it's tea.

All right, good. I was looking at that. I was like, hmm, four o'clock taping during a pandemic, month of the pandemic. Everybody's at home. No judgments if you need a McAllen 18

to get through the pod. I understand. So some thoughts on, you know, going from a bootstrap company who, let's face it, you're pretty conservative in terms of raising money in the beginning and hiring. You took your time to get product market fit, but hey, here we are four or five years later.

I mean, less than five years later, four years later, now you get a billion dollar market cap. One, how did that happen? I mean, what was the uptick in this product in terms of revenue in order to get to that valuation? Because that would imply to me at least 25 million in revenue or something in that range, if it was 50 times revenue, which would be an incredible valuation, by the way. and what do your thoughts on building a team when you start getting to this unicorn level? Yeah. So we were actually always pretty quiet about Retool.

It turns out why we raised a Series A, something like, I don't know, 18, 19 months ago, or something a year and a half ago. We actually raised a $25 million series A as well. That's a big. It's more like a B, let's be honest. Yeah. Because they're probably buying 15% of the company at that point,

so it's probably $150 million valuation, something in that range. Something like that, yeah. And so what's interesting is on the sort of bootstrapping side of things, I think for a SaaS companies today, starting a SaaS company is so cheap, especially if you're a technical founder. You really just don't need that much money to keep going. And so for us, when we went through YC, you know, YC gave us 10020K, whatever it was. After that, we raised a small seed around, maybe around a million dollars at a time from Angels.

And once we did that, I think we'd be. burned maybe 100k of it, maybe 200k of it. And we, I think we're already in the maybe just hit a million or in revenue or something. We raised a series A. So you're basically dilute 7% with the accelerator deal, 6 or 7% common. And then if you raised a million out of 10 million or something like that, you know, you dilute 10%. So you still, you and your co-founders are in team on 83% of the company at that point. And then you really shouldn't even use the money for a couple a year. So that's in a way frustrating, but it's a nice insurance policy

to have all that cash in the bank. But then you went big, two years later, three years later. How do you make that decision to go big? Yeah. So I think we really made decision actually in the Series A, because I don't think we would have raised a Series A if we'd just want to

stay sort of small or bootstrap. Because look, at that point, our life was pretty good, right? I mean, at that point, the team was maybe three people, maybe four people, something like that. And we'll make a couple million revenues. Exactly. How much? Right. And so if we wanted to... What were you making at that point? I think just above one. Maybe one point one, two million dollars in revenue, something like that, right? And so if we wanted to, we could

have very easily moved to Hawaii and just, you know, a pretty happy life. And rather than that was growing, it wasn't stagnating it, right? It could have grown a bit more and, you know, we could easily make 500K a year, maybe a million dollars a person, we'd be pretty happy. But ultimately, our goal is not to just make a million dollars a year. Our goal is to change how software is built. And I think there's a real opportunity for us to do that today. I mean, if you sort of look at how software is built today, it's actually kind of ridiculous. How if you look at 10, 20, 30 years ago, the way we built software actually has not fundamentally changed at all.

It really is. You sit around a computer. You write code. It's a pretty esoteric looking code, if you're not an engineer, that is. And you get computers that do things for you. It's very low level. You know, you're saying, hey, if this, then that, you know, if this and that, oh, you're you know, it's very little level.

And so for us, when we first started out, you know, to be clear, that was not our vision. Our vision was not a sort of change, programming was done. Our vision was to, hey, you know, I think there could be a faster way of building those internal applications. But as we got deeper, deeper in and got more and more customers, we realized the kind of stuff that people are building a retool ranges so much. It's, you know, like previously mentioned, sort of a tool for, let's say, NBC to go manage pricing for ads for the Olympics all the way to, you know, you know, how Brex does like KYC and onboard customers, for example, all the way to, there's another startup that was actually in our batch. It was, you know, kind of like Uber for kids where, you know, you as a parent can sort of

send your kid on an Uber ride, basically. And they would manage somebody who you could trust and make sure you had security and safety and all, and they would manage all the rides via Retool. And, you know, that is how they looked up where the car was, where your kid was, right? And so all this stuff is being built a Retool. are like, wow, that's so, you know, that's so different, right? You know, Olympic ad forecasting tools so different from tracking your kid, right? And that's when we realize that, hey, you know, there is a potential here to really not just change how NBC does, you know, forecasting,

but really change how software itself is built. And once we realized that, I think it was clear to us that, you know, if there's an opportunity, if there's such a big opportunity, we've got to take it. And so that's how we ended up raising the Series A. And so we raised it, you know, it was what, just above a million revenue, something like four people, I believe. And even then, you know, we went pretty big. We raised $25 million for the Series A. And for a while, we weren't sure that we should do it.

It was as well. We weren't really sure because we just had to use the money from the seat. And so actually, in retrospect, when we raised the B, we had actually used maybe a few hundred K, maybe, you know, five, I think less than a million dollars from the series A. as well. So it was completely opportunistic. You didn't need to do it. You do these opportunistic raise. Now you put yourself in the driver's seat. You got a bunch of cash. What is the plan to deploy that cash? I understand why VCs want to put the money and they think you're going to win. They think they're going to get a return on investment. But because you're so capital efficient, because you're so frugal, because you're a developer-led CEO team, and you have product market

fit, obviously. So we know their goal. But then what do you decide to do with the the money. You have to think, hey, we want to change the world. Is it localizing it to other languages? Is it just hiring developer evangelists? Is it marketing? Is it building new product lines? How do you think about deploying that amount of capital in a company that's already profitable? Yeah, great question. So on our side today, I think there's a lot of building to be done. I mean, today, to give you a sense, Ritual is a 50-person company. It's not very big. Wow. But I mean, you did. That's a big change from a three-person company. You did that in two years.

You went from three to 50 in two years or so? Yeah, let's do the math. Yes, we did. So, yeah, two years ago. That's four people. Actually, it might have been two people, actually. I think we were two people two November's ago. Or December, but two December.

So you're adding a person every other week. It's pretty intense. Yeah, yeah. So on our side now, I mean, Reto is still pretty small of company. Like, a lot of things are not built out. I think a sales team, when we raised the B, I want to say was three people. people. It was small. Marketing team was two, three people at the series B. Support team was one person. Success team was like two people. So you got to add a zero to each of those. Exactly.

Given the way of product market fit and we have a lot of customers that are really demanding better support. They're, you know, wherever people, leads coming in every day who are demanding talking to salespeople or demanding the help that a salesperson can provide. And so we really just need to grow the team, really. That said, I think a interesting divide amongst sort of Silicon Valley companies is whether it to be, let's say, more sales-driven or more, let's say, engineering or product-driven. And you see a lot of companies who, you know, raise a large route is go hire a lot of salespeople. I really try to blow up, let's say, marketing, try to try it outbound, really hit the gas at the sales side.

I think sales is incredibly important to a SaaS company. It is critical to have a high-performing and eventually large sales team. That said, I don't think, you know, for our goal of becoming the way developers build internal software and eventually the way people just build software in general, you don't get there by sales. There are too many developers. Now, you've got to get the developers to buy in, right? If they don't buy in, it's over. But if you do get 100 of them who've bought in at a big company like Peloton or NBC,

Well, then somebody's got to go and sell in a $10 million a year. So I guess when we get back from this quick break, I want to know how do you do this bottom-up sales where people are paying $50 a month, $600 a year for a developer to use the platform to. What's the biggest customer you have in terms of seats, if you can say it, and if not, you can make a composite here. When we get back from the break, I want to understand how you make that shift like Slack struggle to do is the one thing that Stewart said maybe. And I think Sacks and Chimoth on the All In podcast, who were involved with the company said, you know, was the one maybe leak in their game, the one thing they could have done better self-admittedly across the team in an amazing outcome.

But they did say Slack was late to getting the million-dollar plus clients. I'm wondering if you've thought about that and how do you think about hitting those seven-figure, eight-figure clients when we get back on this week in startups. Do you wish you were in on some of these amazing IPOs in 2019 and now in 2020? Well, our crowd lets accredited investors invest directly and super easily and most importantly early in these type of private companies that then go public. That is the dream, right? And our crowd makes that dream a reality for investors who get to benefit from companies like Beyond Meek going public.

And what they do is they leverage their network, right? because it's all about your network and investing, and they review some of the most promising private companies and startups in the world, just like I do. They let you review those deals, and they give you access to our crowd's investor relations team. Their investment team has already invested hundreds of millions of dollars in over 200 companies with dozens of exits already under their belt.

Today, you can go in there and you can join a single deal for as little as 10K, or you can join one of their funds for as little as 50, So today you can join our crowd's investment in blue green water technology. This is a startup that's going to keep our water safe. Our global water supplies are under attack from toxic algae blooms. And that makes some water just unpotable. You can't drink it. Unpotable is like a fancy word for undrinkable.

And Blue Green's proprietary EPA-approved technology eliminates the toxic algae that's poisoning the world's water resources. And you can get in early on blue green and other unique opportunities at our crowd. slash twist. That's oh, you are, C-R-O-W-D dot com slash twist.

Thanks to our crowd for supporting independent media like this week and startups. Okay, let's get back to the show. Welcome back to this week

and startups. Our guest today is David Chu. Son of parents who immigrated to America, correct? Yes. We talked before. And in this day and age,

your parents probably would not have been allowed into the country. You ever think of it? about that? I do, yeah. It's crazy how much Silicon Valley is built by immigrants. If you look at the company started by immigrants and their children, it's, yeah, ridiculous. It's unbelievable. And you just think your parents would not have been allowed in if we continue this insane immigration policy. We need as many high-performing immigrants in this country as possible.

and it's a free resource and we're giving it away to other people, other countries, right? It's just amazing to think. And it's so often the sons of the immigrants or the daughters of the immigrant parents who then go out and have the outlier success, right? Because somebody struggled to get here and then those kids, I mean, you share a burden or did you feel a burden coming up that you needed to perform in a way to live up to the risk your parents took and the suffering they must have had in coming here from China. Yeah, I think to some extent, because like you said, it's a, it's not an easy journey

to move to another country where you don't know anyone at the age of, you know, 20 or 23 or 25 or whatever. So brave. So I'm incredibly grateful to the fact that they moved here because if they hadn't, you know, real, first of all, definitely wouldn't be a thing. But I would be totally different. I'd probably be doing something entirely different in China. So I'm closely grateful.

for that. It's just something I think everybody who listens to this podcast and we think about what we want from our representatives and from this country in the next decade, we really do need to really think about this incredible diamonds. We're basically being offered diamonds and platinum and rare earth minerals in the form of brains and raw talent. And we are stopping them at the border for some insane reason. When we went to break, we talked about Slack. They have 87 customers, I think, who spend over a million dollars a year. But for a company that's, you know, doing a billion dollars a year, it's an incredibly low number of people.

They added sales on the back end. Slack is run by a product design, you know, guru in Stewart. And, you know, it's truly talented. But he said himself, hey, we need to get more people in the sales team. So how do you think about that? Who's your big, who's your big, who's your biggest? customer and what does that footprint look like? And how do you think about those seven, eight-figure deals? Yeah. So we started doing sales very early, very, very early. And I think

sales oftentimes gets a bad rap. But sales is actually the way you learn about your customers and how you actually find product market fit because most SaaS companies don't start off with product market fit. You've got to iterate a little bit, you've got to tweak this, got to tweak that. And the only way you figure out what to tweak is by talking to customers. And the most concrete way that you know a customer actually likes their product is that they pay you money for it and keep on paying money for it. And they don't charge. Generally, customers don't give you their credit card if they don't want the product. Yeah.

And so for us, sales is always incredibly afforded. It's something we invested very early in. For me, I think probably something like 60, 70% of my time in the early days. was spent on sales. I mean, once we had any product... Really, you did it yourself. So you were doing the development of the product, hiring people to work at the company and doing the sales.

That must lead to a straight line to a deeper understanding because you were fearless in doing sales, which most developers, I think if you ask most developers to go on a sales call, that would be their worst nightmare. And if you ask most sales executives to go write some code, that would also be their worst nightmare. there, these two circles overlapping for you is probably a big reason of why you have such type product market fit, correct?

I think so. And it's, I think there is this image of sales that it's, you know, you go to like a steak dinner and kind of, you know, shove product, down someone else's throat that they don't actually want. That could not be further from the truth, at least, you know, for us today. Yeah, that was like the old Oracle days, like in the 90s. Yeah, yeah. The best, you know, for us.

us today, sales really is about delivering value to the customer. And if you figure out how to deliver value for the customer, the money will come. We're not worried about that. It really is how do we solve the customer's problem? And the only way to, for us to solve the customers, always by really writing code and working together very closely with them to understand sort of, okay, you're trying to build, let's say, the Olympic ad prediction tool. What does that require from us? You know, do you need to connect to this thing? Oh, we don't support that yet. Okay, let's come back tomorrow and we'll have support for it by that. And so really sales and And the early thing is just working very closely making sure you deliver value to customers.

And because of that, now we actually have quite a few fairly large deployments of Retail. And so if you look at the website itself, you'll see we have sort of wide variety of larger companies using Retail, ranging from, let's say, Media, Warner Bros., NBC, Peloton, arguably, all the way to a lot of banks using Retool, all the way to the U.S. What would be the biggest footprint in terms of, you know, just how many figures of sales year, and how many developers on the platform. Yeah. Where are you at? Today, our largest deployments have maybe around tens of thousands of people using

Retool. In an organization. In an organization. And so if you do the math, I think it probably figure out what that revenue actually looks like. Very few people with that many people. Yeah, yeah. The crazy thing is, I think we didn't realize this. And I think it's hard to grasp your head around in the early days of a company.

to us, even today, selling, let's say, you know, like getting any company to pay, let's say, millions of not tens of millions of dollars for software, it seems almost ridiculous. But then you think about the value that you are delivering. And the value that software delivers today to companies is remarkable. If you look at a company like Coca-Cola, for example, the cost of making Coca-Cola is actually not getting any cheaper. They can release new product lines, right? But the cost of manufacturing actually does not go down that much. Instead, what Coca-Cola nowadays is innovating on is software. Every business today is a software company and you're able to drive tremendous efficiency games. You're able to drive tremendously more revenue by having exactly the right

software. And so for us, that is why, that has the value we deliver. How do you run an organization that is servicing, you know, people walking up and buying, you know, or using the free version, buying single seat versions for startups? And then you also have an organization. organization where you have these whales that are going to spend seven or eight figures with you a year. And how do you convince people that the smaller up-and-coming accounts are even worth giving attention to? Because you have a limited amount of people. And if there are people who want to put a thousand or 10,000 people into the product, like how do they even waste their time? I'm using air quotes here. But how do you get them to not look at the five-person company as wasting

their time on just a management basis. Because, so from our goal is to not just make a lot of money. Our goal is to actually change the way developers build software. And to do that, it's not just, you know, investing very heavily in one or two or even three or five companies, you know, or investing in, let's say, a Fortune 10 or Fortune 5. That's not the goal. I mean, we'll do that too, obviously, because they will pay us a lot of money in order for the development product for the build the company.

but given that our goal really is to change how people build software, we have to be sort of very responsive to everyone who want to use a retool, whether that is a small two-person company, a mid-size, you know, 10,000 person company or the giant, you know, 500,000 person company. Because oftentimes many of the best ideas actually come from the smallest companies. And so a lot of our product roadmap actually comes from the smaller companies because they are the ones who are really on the forefront.

Yeah, they're risk- You know the tip of the spear. Yeah, if we were just building for, you know, Fortune 5 or Fortune 10 or something, you know, we would probably make very different product decisions and it would probably be a much shittier product, to be honest. Yeah. We'd probably index less on usability, index more power. Yeah. Do you also do the hosting?

So in a way, is this a front end and developer tool with a belt-in AWS cloud competitor on the back? Is that part of this? Or do people build with your tool, put it on-prem or put it, into the Amazon or Azure. You can either host your tool on-prem inside, let's say, AWS or whatever, it's stalker in it. So it's very easy.

Or you can use a cloud version or do all the hosting for you. So all you do is you build your app and you send some of the URL and you're done. And so we do both. What are most people choose to do? I'm curious. Most will choose the cloud by number 100%. You're a cloud or other people's cloud, you mean?

Sorry, our cloud. Yeah, because why would you go unbundle and break it apart and then put it somewhere else? So in that case, you are in a stealth way, a competitor to Amazon Web Services, and Amazon Web Services dipping their toe into no code, correct? They have some sort of offering now. Yeah. What's their offering, and is it even considered competitive to yours?

And how do you think about AWS as this giant competitor? Yeah. Their offer is actually honeycode is what it's called. Oh, right. Honeycode. Yeah. We're actually, Amazon's actually a customer balance, actually. And we were talking to

Or maybe a deconstructor of yours. Deconstructing and rebuilding it. Well, so we're actually now selling to another Amazon business unit. I think it's actually EWS, actually. And they are actually also using Reto. And we asked them sort of why don't use HoneyCode. And they're like, well, you know, it's not a developer first product. You know, everything I want to build.

I can't build as a HoneyCode actually. That makes sense. And so it's a slightly different product. And so I think what HoneyCode is particularly good at is if you are building an application and don't really have sort of, you're not a soft developer, you don't really understand how to write code or you don't write code. Honeycode is quite good for that, but it does also mean the apps you build are very difficult to customize.

They're conceptually much simpler, I would say. And you can imagine if AWS sort of builds applications, they're actually pretty complex applications, right? And in order to build such complex applications, it's not enough just to have a no-code tool. You actually have to write code. And so I think that's why retool is actually fairly differentiated from something like a honeycode.

I view Honeycote is, let's say, competitive with like a bubble or let's say a air table, something like that. What do you think of this movement of serverless computing where people fire up these little Kubernetes, I guess, and you know, you don't need to have this massive server infrastructure? What do you think of the serverless movement? Do you think about it a lot? Do you think it's the future, like a lot of people are saying? Yeah, I think this is quite an interesting. interesting because on the movement side, I thought a bit about this. Because serverless was quite big, actually.

I think maybe two, three years ago, maybe last year or two. But it really seems to have died down. And it's interesting to think about why that is. And I think it's actually service is a very good example, I think, of a trend that got hyped up, but never actually really went anywhere. And I think the reason is because it didn't actually deliver value to customers in the sense that serverless, it actually turns out, is actually harder to manage than just manage your own cloud servers or using other different cloud services.

But a massive cost savings, right? If you get a lot of traffic, it could be a massive cost savings. To some extent, yeah, I think if you look at the math, it's like, it's kind of tricky. It's like in some cases, cost savings, but they've used it a lot. It's actually not cost savings. It's tricky. I think the problem of serverless is that it never really delivered sort of valued customers. And that's one thing I think a lot about now because, you know, today we are writing this

wave called low or no code. And it's interesting think about it. Is this just a threat? Is it a fat? It's going to go in a year or two. If so, why? So why not? If not, why not?

And for us, I think there's a difference. But we will see how it plays out. I think low code really actually delivers substantial value to customers. Because now engineers are actually able to do things just substantially faster than before. Whereas server less, it kind of is repackaging it a little bit. It doesn't actually save you that much time. It doesn't actually sort of result to more revenue or drive cost savings. And so it's just to compare these sort of two movements.

What about this concept that people have had and started talking about where you're going to be able to just talk to an AI agent and it will build whatever you want so you and I could sit here and say, let's make an Uber Lyft competitor. That's for parents. And we wanted to have, you know, Apple and Google and Google. Google login and Facebook login, and we want it to have a checkout service, and we want it to support Stripe, and it just builds it for us as we're talking. Is that going to happen? And if so, when? It will take a while, but actually, we want to get there eventually. I think

the thing is today, the building blocks is so primitive. If you look at code today, right, the building blocks are, you know, very basic things. You know, if you look at a line of code, for example, it's very low level. And there's no way to say, I want to add Google login, you know, on my app. There's no way you can do that in five minutes. You've got to write a lot of code and do that.

And a large part of why retool is more efficient for developers is because it's a much higher level. And so, you know, we handle a lot of the stuff that you don't want to worry about. Let's say, like, you know, log in, authentication, authorization, audit logs, that kind of stuff. But then you can customize it also if you want and sort of get very deep in if you want.

And so eventually we actually want to do that, such that you can just say, hey, like you said, I want, let's say, a map right here. And maybe before you get to the map, you've got to log in by Google, you've got a login by Apple, whatever it may be. So you drag, let's say, a login component over here, and then it eventually goes here. But that's still very far away.

Because, and even if we were to do that, I think the customization is still key. Because what you just described, you know, could actually be one of, you know, there could be a million apps that fits your description. You know, there's sort of so many nuances that you have to sort of really, if you really want to tune the sort of last 20, 30%, that's actually where most of the work is.

We'll always support writing code, but this is our vision, is to eventually be. Wow. Are you working on that? Are you working on like a Siri-type interface where I could talk to it and have it do stuff? There's no talking yet, but there is dragging and dropping. Yeah. So, I mean, it's a, that sounds like two developers doing talking

could build that, two developers working on the audio, intelligence would be pretty easy to do as we wrap up here long term with the company. We're seeing companies with, you know, let's call it a $50 million footprint of revenue, get pulled into spectacular SPACs and getting pulled into the private market. I'm sure you've got people knocking on the door saying, hey, you're ready to SPAC, you want to go public. How do you think about this new world? because you have been innovating in the early stages of how to fund the company.

Now there's this new innovation that's been reborn, that Chimoth is kind of spearheaded here, of, hey, you know, maybe go public quicker based on the promise of and the early performance. Number one, are people knocking on the door? And then number two, how do you think about it? Because it does seem tempting. Yeah, we get a lot of interest.

I typically nor do the emails as archived them. I think there are a lot of pros and cons to just going public in general, you know, special back or not. And for us, I think one pro, for example, certainly is liquidity for everyone. Sure. Because we want to reward early employees who've been here for a long time. And I think that is something that is really a big pro of eventually getting liquidity for everyone. That said, there are a lot of cons in the sense that I think, you know, if we were to go public,

we would sort of be living, you know, quarter to quarter month to month. It'd be sort of much more short term. Whereas for us, if you look at Retool today, we are still so, so, so early. Yeah. If you look at, you know, the amount of software being built in Retail today, you know, if you look at software generally as a whole, even if you constrain it to just internal applications, probably something like 0.000, 0.001% of all internal apps today are being built at Retool. So we could grow something like 10,000, 100,000 times and still only be 1% of all software being built. And so for us, there's just so much opportunity ahead of us and so much growth left from the company that I don't think it makes sense now. That said, I do think that, you know, there are many pros to doing it, especially the liquidity with which I really think you want to. Yeah, the ability to acquire other companies and just this unique moment in time.

And it's going to be fantastic for the industry if certain people do choose to provide, you know, an opportunity that would only be available to private market investors to the public. But, you know, it's, we have to convince CEOs that it is actually worth it. And I think very reasonably you're like, yeah, too soon for us. And then there's a bunch of people who are at 200 million, 300 million in revenue. And they're like, it's too soon for us. And I'm like, are you sure it's too soon? Because two or 300 sounds like a good number to go publicly. It depends on the market size, I think.

Because if, for example, you're in a $500 million market, you've captured most of it, there's not much growth left. And at that point, I think you buy the product good to everyone. in our case, the market size is just so, so large or so far away from there today, that there's just so much growth left in the company. And so it's really very early days for us. It is, yeah. First company, you made it to unicorn status essentially.

Congratulations on that. Are you having a hard time staying focused? I mean, these are big numbers. You own the majority of the company. This is a big number to think about your net worth and then also come to work every day. son of immigrant parents. It's a little heavy, right? How do you stay personally focused

when you got this big net worth number out here that is completely illiquid? Since you're such an honest guy. So that's never been the motivation, right? Because honestly, in particular the series A and the series B, sure, your net worth goes up very much, but it doesn't matter whether you're worth, let's say, 20 million or 250 million.

It doesn't really make that big of terms of $2.5 billion. It doesn't really make that big difference. That's interesting. Most people don't realize that. Yeah. You don't realize that like there's an upper bound to how much you can spend on a hamburger or, you know, a vacation. And spending $50,000 going on vacation or $5,000 going on vacation is pretty much the same

experience. And $15 on a great hamburger and, you know, $50 hamburgers with a little foie gras on it, very little difference. Yeah. So for me, it's never been the motivation. I think for the team here, it's also not. I mean, of course, it's sort of nice cherry on top, you know. But that's not the primary motivation.

The primary motivation has always been. There is this opportunity for us to change how software is built. And how cool is that, right? That is, let's say, in 10 and 20 years, if all software is being built in a retool, we were the first 50, 100, 500 people at this company, that is going to be so cool. Awesome. All right. With that, I will let you get back to the grind, finish off that scotch.

I don't believe you that it's. I think that looks a lot like a McCallin 18 to me but that was a long poor so you held it together David if you're looking to work at Retool they're hiring looking for developers

I'm sure salespeople I'm sure we're specifically looking for a very interesting profile we're looking for former founders who like sales and who are somewhat technical because you can imagine for us

Sales is kind of tricky because you're a solid old developer, right? So you've got to be pretty technical. So there's any one like that out there. Evangelist technical sales process. Exactly. So if somebody's down for that, it's well-paying, it's nice. Please email me. Yeah, David at Retool.com.

Continued success, David. Thank you for taking the time. Thank you to our partners for the rising stars of SaaS series. This is our 10th episode of 10 episode. We had so many great people. Christian came on to talk about pitch.com, which was just tearing it up in a great product. Jason Lemkin, the investor behind Saster.

Maritas came on to talk about income sharing agreements. Linda came on to talk about dishcraft robotics. Just so many, Chris from Chow now comes to mind. What a great series we've had, thanks to the team, Nick and Matt, Marine and everybody for putting together a great first rising stars of SAS. We did for 2020, and we'll do it again in 2021. I think it's been a great, awesome series. David, continued success,

and we'll see you all next time on This Week in Startups.