298: How to Keep SaaS Customers Longer - with Luke Diaz

EPISODE SUMMARY

In this episode of Scale Your SaaS, host and B2B SaaS Sales Coach Matt Wolach sits down with Luke Diaz, the founder of DBT Ventures. Luke is a seasoned expert in customer success and an investor with a passion for supporting underrepresented founders in the software space. 

In this episode, Luke shares valuable insights into building an exceptional customer experience, improving retention rates, and what investors like him look for in software startups.

PODCAST-AT-A-GLANCE

Podcast: Scale Your SaaS with Matt Wolach

Episode: Episode No. 298, “How to Keep SaaS Customers Longer - with Luke Diaz”

Host: Matt Wolach, a B2B SaaS Sales Coach, Entrepreneur, and Investor

TOP TIPS FROM THIS EPISODE

• Building a Resilient Foundation
• Onboarding for Success
• The Oxygen of Customer Feedback

EPISODE HIGHLIGHTS

• Customer Advisory Boards
• Understanding and Mitigating Churn
• Thinking Funnel, Not Fundraising

TOP QUOTES

Luke Diaz

[12:04] “30 to 40% of churn can be traced back to a failed onboarding”

[13:07] “The lack of a churn process or a lack of an exit interview process is one of the biggest mistakes I see some founders make early on.”

[16:38] “I make an investment decision based on the founder. And then I rationalize based on the product, traction and things that I learned after that.”

Matt Wolach

[8:11] “I think in the early days, we have to figure out what's best for the customer for the users. And sometimes we have to figure that out through things that don't scale. “

[19:40] “I have many of my clients who have taken my advice, and I say, “don't give up until you hear no”, and they are shocked that they get a deal on like the 21st touchpoint. And it's crazy how often that happens.”

LEARN MORE

To learn more about DBT Ventures, visit: https://www.dbtventures.com/#trail-guide

You can also find Luke Diaz on LinkedIn: https://www.linkedin.com/in/lukediaz/

For more about how Matt Wolach helps software companies achieve maximum growth, visit https://mattwolach.com.

Get even more tips by following Matt elsewhere:

• Sales Tips
• LinkedIn
• Twitter
• Instagram

Transcript

Matt Wolach: 0:10

Of course, if we're going to scale a SaaS, we need to have awesome customers and awesome customer adoption to the product. How do we get people to adopt once they start using it? And how do we keep them happy? And how do we keep them around for a long time making sure the renewal rates amazing, the retention rates awesome and churn is very low, lots of things that we need to figure out. Fortunately, Luke Diaz from DBT ventures came in, he has an amazing customer success background, he's encountered all these problems before and he knows exactly how to solve them. And now what he does is he also now helps invest in other startups to help them grow. So I even asked him about what he's looking for what types of companies he's looking forward to now also, how can you make sure your company looks amazing to an investor. So if you're an early stage startup, and you want to get in keep awesome customers, and you want to know how to build your company, so that people want to fund it? This is the episode for you check it out.

Intro/ Outro: 1:00

Welcome to Scale Your SaaS, the podcast that gives you proven techniques and formulas for boosting your revenue and achieving your dream exit brought to you by a guy who's done just that multiple times. Here's your host, Matt Wolach,

Matt Wolach: 1:17

and welcome to Scale Your SaaS Thank you very much for being here. By the way, our goal is to help you do exactly that. scale your SaaS by generating a whole bunch of leads, closing a lot of deals and understanding how to put the right processes in place so you can grow your company. And that's what we're here to do. So make sure if you're new, subscribe to the channel, hit that subscribe button. That way, you're gonna get all of the episodes, you're gonna be notified when we have amazing, awesome guests helping you understand how to better scale your SaaS guests like who I have with us today. Luke Diaz, Luke, how you doing?

Luke Diaz: 1:49

Doing well, huge fan of the show. Thanks for having me.

Matt Wolach: 1:51

Absolutely. So glad to have you. Thank you so much for coming on. Let me make sure everybody knows who you are Luke. So Luke, he's the founder at DBT ventures. DBT stands for do big things. And what he does he advises and invests in startups with a focus on supporting underrepresented founders building amazing software and consumer consumer products. Luke's passion is building and leading high performance customer success. orgs CSM Am sa support to drive three outcomes, accelerate product adoption, drive quantifiable business impact for customers, and achieve best in class gross and net retention. He is very skilled, very strong in what he does. And I'm so glad to have him here. Once again, Luke, thanks for coming on the show.

Luke Diaz: 2:31

Really appreciate it. Excited to chat with you.

Matt Wolach: 2:34

Yeah, likewise. So tell me what's been going on with you. And what do you have coming up?

Luke Diaz: 2:37

Yes. So as you mentioned, DBT ventures invests globally and software and consumer products. And we're really looking for underdogs. We found out that if you look at, say, female founders, for example, about 20% of female founders start companies of all the founders out there about 20% of female. And I was shocked to read that they only receive about 2% of the venture capital funding out there. So another way to think about that is if females received 10 times as much funding as they currently do, they would still be roughly underfunded, which is shocking to me. So sadly, a similar trend applies to people of color, and like typically non white background. So we're really looking for underdogs, people that may have missed the VC, access to that network, and trying to back founders who are underdogs, and hungry.

Matt Wolach: 3:35

Wow, what a cool mission. And what made you want to start this? Where did this all come from?

Luke Diaz: 3:39

you know, it happened somewhat organically, as you mentioned, my backgrounds in customer success. So I've built Customer Success teams five times, three times from the ground up and twice coming in to an existing team. And folks started reaching out to me and said, Hey, would love if we could get your thoughts we just started, you know, we we just hit half a million in revenue, start to think about customer success. Would you mind being an advisor, we'll you know, we'll give you some equity or whatever to make it worth your time. And so a handful of companies started doing that. And I just would advise them on hey, here's some things to think about here. Here's the mistakes I've made. Maybe they'll be useful to you. And then when you're working closely with founders, fundraising comes up naturally. So I had the opportunity to invest in a few seed early a rounds. And yeah, so it kind of it kind of was like grassroots just trying to help people and add some value, as they're building their dream of a scalable SaaS company.

Matt Wolach: 4:37

Very cool. I love it. Okay, so what are some of the most exciting trends that you're seeing within tech and within SaaS today? What are they doing? What are how is the industry changing? Because of that?

Luke Diaz: 4:47

I think one of the things to keep an eye on is we're all familiar with, with AI and more, more recently, large language models, and they're just becoming cheaper and cheaper. So one of the themes I'm really looking closely at is the commoditization of, of MLMs. As they continue to proliferate all different parts of the software ecosystem.The fact that they're getting cheaper as technology tends to be deflationary is really exciting for founders who can build in that ecosystem, and keep their costs down while they're trying to build apps, or tooling to serve this massively growing space. So that gets that trend is really exciting. And I think it's meaningful for new market entrants.

Matt Wolach: 5:33

Yeah, I would agree with that. Totally. There's a lot of exciting things happen in there. And it's crazy, it seems like every other day, there's some new piece of technology or growth that's happening there. It's just wild to see. And it's so cool that so many awesome smart leaders are taking advantage of it and finding new creative ways to innovate in that pretty amazing.

Luke Diaz: 5:52

It really is, we just wrote a check to a company called True foundry, that is making basically a software that allows you to manage, deploy, and fine tune large language models across all across different MLMs. And across cloud. So there's this, there's this really interesting space where it's kind of like the shovels to the gold miners, if you will, there, they're really making management of MLM 's at scale much easier. And cross cloud, which I think will be a growing need, as developers want the best model for the best use case. So you won't be confined to one, you can imagine a suite of 20 MLMs, across three different clouds. So I think there's a lot of value in that layer. To, for founders to think about as well.

Matt Wolach: 6:41

Yeah, I would agree with that. I want to touch on your have some awesome experience in customer success, as I mentioned earlier. So if you're a software leader, and you're you're starting to generate some interest or getting people into your system, how can a leader How can somebody make sure that those early customers adopt and start using the product?

Luke Diaz: 7:02

That's a great question, I think back to some of the best advice I've gotten on that topic that's really informed my approach basically came from from Y Combinator. And there's this concept of doing the unscalable things that allow you to figure out what you need to scale. So that's something I'll just throw out there. From Paul Graham, were one of the software advantages when you're a startup is you can do these unnatural, one off unscalable things to get your customer to value. And most of the startups I work with are doing this, it might be hopping on a plane to help them deploy the product. It might be spending two hours educating a new team on how this workflow impacts their tech stack, or maybe their their API workflow. So don't think scale too soon be confident to do those unscalable unnatural things to get them to value because then once you figure that out, you can figure out ways to use technology to actually scale that deliverable to hundreds of customers instead of dozens. So that's one thing that I try and anchor on early on.

Matt Wolach: 8:11

Yeah, I echo that advice as well. That's something that I've counseled my clients on as well, I think that there's so much talk about gotta make sure to scale, build for scale, get your foundation for scale, and all that stuff. And obviously, this show is also called Scale Your SaaS. And that's something everybody wants to do. But I think we get too hung up on that the early days. And we start to only do that. And you're absolutely right. I think in the early days, we have to figure out what's best for the customer for the users. And sometimes we have to figure that out through things that don't scale. And once you I love that you talked about how we'll figure out how to scale it, we'll figure out how to get those efficiencies. But right now we need to make sure we're doing things that don't scale. It's a great point. Great. So what strategies would you use? If now we've got them in there using the product? What do you think that some of the best companies are doing that's helping customers stay satisfied and stay loyal?

Luke Diaz: 9:05

I appreciate that question. I kind of think, like if you think of cash, like the only unforgivable sin in business is running out of cash. If you think of cash as like the lifeblood of a company, or a startup, I think of customer feedback as like the oxygen, if you will. So the theme here is making it as easy as possible for customers to constantly give you feedback because, you know, founders might not want to hear this. But the the a lot of the customers, they don't think about the software you're building all day, they usually use it for a point in time, and then they're off to the rest of their busy day. So when they're engaged. That's why I'm a huge fan of in product feedback tools, a quick email, even texting with your early customers just make it super easy. Remove all those barriers so that that feedback loop that oxygen is really is really flowing. So that's something that I find some time gets in the way of faster product development, is it there's not an easy way to share that feedback. It's reserved for QBRs or like big meetings, but it should be iterative and on the fly, if, you know, in the ideal sense, another thing that's really worked well was creating these customer advisory boards, or I've also heard them called customer advisory councils, we're talking five to 10 of your customers grabbing dinner once or twice a year, all together so that they can share their shared experiences with your product, you treat them like VIPs give them that, you know, inside baseball roadmap, like, here's what the product vision is looking like. And it's also a great forum for feedback. And so knock on wood of the hundreds of customers, I've had come through a customer advisory board or be part of it. None of them have ever churned. Because they felt like part of the core team, that true partnership. And again, it's an unscalable thing. It's harder to do at scale until you get into like event planning and conferences. But I think anyone can schedule a nice dinner and have a debrief with your your top roster, I think that can be really powerful for relationship building as well.

Matt Wolach: 11:07

Totally agree, I think that is super powerful. And I've done that more informally at conferences, like you said, at a conference will host a dinner of 5-10 customers. But you know, outside of that if you don't have a conference where everybody's coming together, figure it out, make it happen, because you're right, it's been so powerful, having those conversations and just connecting with them on a personal level. So from both the business side, the personal side, it's, it's amazing what you can do just having those types of relationships with your customers. That's fantastic.

Luke Diaz: 11:39

Yeah, it gets me fired up.

Matt Wolach: 11:40

I can see that. That's awesome. So now that we have talked about how do we make sure they adopt, how do we make sure that they're, they're happy? What What about renewals as a lot of companies are on annual renewal plans? What steps are some of your your best customers your best clients taking to to improve their renewal rates?

Luke Diaz: 12:00

That's, that's a great question. There's a lot of there's some nuance in in how I'm going to answer it, because I'll kind of invert the question and try and answer it from like, what are the main drivers of churn. So like, what's the headwind working against that renewal rate, depending on what data you look at, and the research I've done 30 to 40% of churn can be traced back to a failed onboarding. So if you're looking for and what I mean by that is, if they didn't really, if they didn't truly get in the workflow and adopt the product in a repeatable, habitual way, human nature tends to revert to the mean, and all of a sudden, you're coming up, you know, you're six, nine months into your first year. And usage is lackluster value is lackluster, and you're kind of setting the stage for a churn risk. So if you're looking for a great place to start, I like to interrogate the onboarding process, the rigor and the steps that are designed by the company to have this new customer go through. So that's one that's one kind of nugget I like to share with founders, just because it's such an outsized driver of churn, based on my research, and the second piece that I think of Matt is like, customers vote with their dollars. So if they do churn, the worst thing you can do is not learned from that. And it's hard, right? Like I've been there when a customer cancels, like it is heart wrenching. And it's a really bad feeling. And that bad feeling can sometimes lead us to be closed off less curious. Try and protect the ego, whatever you want to say, but it's a great time to listen. And so if you're in the unfortunate scenario, where you have lost a customer, having a process for how that exit interview happens, and the the questions that you're asking in a in a structured way, will be worth their weight in gold, to product development teams, as your as your company grows, you just have this treasure trove of learnings, their failures, but they're also learnings because, hey, we didn't, we didn't renew because of XYZ, like you just have this arsenal of knowledge to inform your go to market motion and in your product roadmap, frankly. So the lack of a churn process or a lack of an exit interview process is one of the biggest mistakes I see some founders make early on.

Matt Wolach: 14:28

Yeah, I totally agree. It's amazing how many companies don't have an exit interview process? Because you're absolutely right, you can learn so much. And in fact, I'm a huge advocate of having conversations with your prospects and customers all through the entire customer cycle all the way from the very beginning, all the way through when they're onboarding getting started. And as we talked about with the with the dinners and then at the end, and you can just learn so much from those conversations and not having that exit interview is a killer because you're right it does advise is on the product it advises on how you can work with them in the in the go to market as well as with them while you're having them as a customer. And it's just, it's super powerful. So that's awesome advice for sure. I want to I want to switch over to your investor brain here, because I've got I've got a question there and a lot of software companies, they're looking for funding. But from your perspective, what are investors like yourself looking for in a software company? What looks good? And makes you say, Yes,

Luke Diaz: 15:33

That's a great question that that I think the this is it? number one thing that I'm looking for when I'm talking to a founder is resilience. And what I mean by that is, if you scratch beneath the surface of resilience, there's usually some deep emotional need to see their vision fulfilled, maybe it's a chip on their shoulder, maybe it's growing up, kind of hard, having a lot of childhood struggles and like wanting to prove something to the world. Maybe it's just outright frustration and rage with the status quo. Or what Frank Slootman calls like a malcontent posture, like they're just pissed that the world works this way. I look for that, like, resilient chip on the shoulder. Because that tells me that when they do hit obstacles or setbacks, or something goes sideways, they can reach down they have a really deep well to draw from, to respond to that challenge creatively. All in. So that's the number one thing I look for. The product is really secondary, because I believe in backing great founders, I find like I make a decision based on the founder. And then I rationalize based on the product, traction and things that I learned after that. So double down on invest, like kind of that founder psychology, if you will.

Matt Wolach: 16:57

Yeah, that's great advice. And I love the chip on the shoulder thing. I've talked with lots of investors and people in funding, and I have not heard that one yet. But it makes a whole ton of sense. Because there's so much more motivation. When you feel like you've been slighted when you feel like people have kind of left you behind. And I'm a big sports guy. And in football, I love football players who have that chip on their shoulder felt like they were disrespected, they go out and prove themselves, they work hard. And they they make things happen. And so I think the same thing applies over here in startups. And I think that's, that's, that's a lot of fun to think about that way. So what I want to ask is, what advice would you have for startups, early stage companies, they're seeking investment, they're wanting to grow? They want to improve their organization? What advice would you share with them, Luke?

Luke Diaz: 17:41

I would say two things. Number one, don't be afraid to try unconventional methods. I think we've gotten a little stuck in like, X number of slides in a deck. And I feel like there's some constraints that have evolved. So what I mean by trying unconventional methods, my friend Darwish in 2017 raised almost a million dollars by sending a very well crafted email to his network, no pitch deck, just about 800 words of what they're building and exactly what they're requesting, and why they need that money. So that's unconventional, right? And, and that's something that I wish more founders did, and kind of tried to try new channels. And and just don't be afraid to put it out there. The second piece of advice that I found is more broadly applicable is to think funnel, not fundraising. And so this might, you know, your you have an amazing sales background in building go to market orgs. And as a founder, you know, that a lot of people are gonna say no, but if you invite them into your circle, and you can keep them updated on a monthly or quarterly basis, I found that a lot of those checks, even checks that I've written, I was initially a no, but then I, you know, you're you're building a funnel of fundraising, you're not just going for a yes and a check. So thinking funnel over fundraising, and taking that longer term approach of like, Hey, how can I really add value to these potential investors over the course of a year, not just trying to nail it on the first pitch when there might be a lot of unknowns? So that's something that I feel is like a, an approach that's, it really works well for me, and could give founders some leverage, as they almost think of it as like, the full funnel marketing and no, doesn't mean no, you know, three, six months from now, things could change.

Matt Wolach: 19:40

Totally true. And whether that's with an investor, whether that's with a prospect that you're working, I have many of my clients who have taken my advice, and I say, Hey, don't give up until you hear no, and they are shocked that they get a deal on like the 21st touchpoint. And it's crazy how often that happens. But the same thing with investing in I've seen that I've seen that happen in my startups as well. I think that that's fantastic advice. In fact, all of this has been amazing advice. Luke, I really appreciate you coming in sharing your experience sharing your expertise with us and our audience. I want to make sure everybody can learn more about you and DBT ventures. So what's the best way for them to do that?

Luke Diaz: 20:17

I'd say most of what I share is through LinkedIn, or email. So the best resources, LinkedIn, so just Luke R Diaz. My email is just Luke@DBTventures.com. And you can find a lot of founder tools, book summaries, all sorts of learning and engagement material at DBTventures.com.

Matt Wolach: 20:37

Love it. We'll post all that into the description. So if you're listening and go grab that right now go check it out. He is Luke Diaz, DBT ventures.com. Luke, thanks so much for coming on the show.

Luke Diaz: 20:47

Love the work you're doing, Matt. Thanks for having me.

Matt Wolach: 20:48

You're welcome. And thank you and everybody out there. Thanks for being here. Once again, make sure you're subscribed to the channel. You do not want to miss any of the upcoming guests. We have amazing people like Luke sharing their story and their experience with you so you can scale your sass. Thanks very much for being here and we will see you next time. Take care.

Intro/ Outro: 21:06

Thanks for listening to Scale Your SaaS. For more help on finding great leads and closing more deals. Go to Mattwolach.com