At SaaSOpen 2023, Gil Allouche, the founder and CEO at Metadata, candidly shares the strategies and decisions that propelled the company from a precarious position of near bankruptcy to an impressive $12M in Annual Recurring Revenue (ARR).
Gil shares his wisdom for bootstrapped B2B SaaS founders, offering a real-world blueprint on how to survive and thrive in an economic downturn. He walks you through how he thinks about making tough financial decisions to leveraging strategic moves like Product-Led Growth and acquisitions.
Below is a lightly edited transcript of his presentation at SaaSOpen. Watch the full presentation Gil gave live here.
How did you survive near bankruptcy and achieve 250% revenue growth?
This is how the revenue growth looks like. There’s a nice peak in the middle, that was our hyper growth mode 2021, 250%. It was amazing, but it didn’t start that way. In 2020, we finally hit product market fit. It took us three years to build a product, sell it, and figure out who do we sell it to successfully.
We were very happy about the product market fit, but we were not happy about the fact that I had about half a million dollars left, burning about $200,000 every month. We had about two months of life. I would not sleep well during that time.
A lot of heartbreak during that time. I remember at some point we had a bunch of term sheets from kind of shark VCs, completely changing the company diluting, but we didn’t do those. We wanted to make sure that we have enough runway to survive this time.
How can you navigate the survival phase and save your company by making tough financial decisions like a 20 % pay cut?
The first stage that I’m gonna talk about is that survival phase that I think every one of us here experiences at some point, whether the market is good or bad. In order to get through that first initial stage, we had to first and foremost remove a lot of burn. We had to cut our company significantly.
Right in there, we cut about a third of our employees. We also stopped paying every essential vendor. I know this is not very popular to say, but I went through each and every spend with my CFO, every spend from a consultant to any software vendor, really anything. And if I couldn’t afford it, or it was not critical we didn’t pay, which means a lot of people were pissed, especially American Express Credit Card and a bunch of other vendors.
But we had to do it. It was either paying it and being at cash zero or postponing it essentially. We eventually paid all of them but postponing it.
The entire management team took a 20% cut and all the salespeople converted their commissions to equity, and they wouldn’t have done it if you didn’t ask them to do it.
We said here’s an option. You’re going to get more options than this commission is worth. It’s going to get you closer, it’s going to get us closer because we are essentially investing in a company, and it saves us a lot of cash.
We had all of our salespeople and many of our VP of sales committing to doing that. I think I almost signed a 35% interest rate. I didn’t end up signing it eventually because I got a better one, but I was ready to do it. At that stage, you really wanna save your company.
What strategic moves did you make during the challenging period to turn the tide in your favor?
Now when you have a situation like that, you don’t only want to take defensive moves, you also want to take offensive moves because when everyone is panicking and hunkering down, it’s an opportunity for you to make bold moves.
First, we opened a convertible note. We couldn’t raise an equity round at that moment because we didn’t have enough time, and going into a VC when you’re cashless is a bad idea.
The first thing we did is to raise a convertible note for our tribe, and when I mean tribe, its customers, friends, existing investors, advisors and even employees, and we end up raising a nice convertible note. With that cash, we had much more confidence to go and raise an actual series A.
The second one is we invested in sales. We hired a sales team, four employees that already worked together with one another. We spiffed them on cash deals. Essentially, if they got paid upfront, boom they got an additional bonus. That’s what we optimized towards.
We found a piece in our product that was very well suited for a terrible time. It’s called MetaMask today. It has a free trial. You can go to our website and start it. But we found out that that piece of software is very relevant for recession. We made that a bigger deal, called every customer and offered them that deal.
What extreme measures did you take to ensure your company’s survival, including selling account receivables and maxing out credit cards while risking a bad credit score of 250?
I like to talk about drastic results because people sometimes don’t understand. On the left-hand side you see what convertible debt means or some of the venture debt. We essentially sold our account receivables.
We went and said, “Hey, look, we just closed $100,000 in MRR, give us that $100,000 because we’re only going to get it paid at the end of the year.” Any cash that I can take ahead of time, boom, a success.
Second one, I max out all of my credit cards. American Express would call me daily. I would pick up your phone and tell them I’m not paying you anything when I have money, you can keep calling me, not paying you any of that.
And third one, I would keep getting these notifications on my Mint because my credit score went from about 750 to about 250.A bunch of derogatory marks. I don’t care. My company survived, and I knew it’s going to thrive eventually.
What valuable lesson did you learn about the power of pivoting and overcoming limiting beliefs in business?
One of the lessons, that I had learned, and one of my advisors told me that because I was like, “Hey, I can’t make those changes.” We’re already going on this trajectory. He told me, you can change your entire business tomorrow.
There is nothing stopping you besides your own limiting thoughts. That’s something that I think is very important for us to remember, especially when we need to pivot.
How did you transition from survival mode to thriving mode (10x growth), where investment and exponential growth became your focus?
Survival is important, but this is not the reason we signed up for this role. Thrival is really what we’re here for. Growth and the victory. Moving from that stage of thrival was a very interesting experience. In 2021, we had money in the bank and I had to completely change the culture because if until then it was, we can’t spend anything on anything, now it’s, you have to invest.
You have to invest not only in the short term, you also have to invest in the long term. We really had to make a big shift. I can tell you something cool that happened.
We grew a lot more than we planned to. If in survival mode, we cut our goal by 33% or 40% in the thrival mode, I went back to my VPs, to my C levels, and we increased the goal three times that year.
We’re supposed to grow from two to five, then we said, “Hey, we’re doing well, let’s do it to seven and a half, then 10.4, then 12.5. And we ended up at 12.2. Pretty cool to be able to adapt both ways. When you’re doing well, you don’t know if it’s going to always continue, so max it, and when you’re not doing well, pull back.
How did you leverage adaptability and secure funding to fuel our growth, invest in various areas, and build a successful go-to-market motion?
Very important – adaptability. With the AEs, one of the things that we did is we actually split them this time for higher ACV and ARR. Cash was not a problem. We raised series B in a great market, great valuation, nothing is great as Chili Piper, but pretty good still.
We were able to use that money to invest in our growth in content in a conference with 8,000 registrants in a community, in a brand, in a bunch of things that we didn’t have money for before.
We made that transition, cultural shift from survival and PTSD to thrival and growth. It was a good time to trust ourselves and build the go-to-market motion, not being afraid of actually seeing what repeatability we have. We found out that we have pretty great repeatability.
What important lesson can you learn about decision-making during challenging times and how can you adapt from hypergrowth to the current market conditions?
One of the lessons that I learned in those times, and I had to shift the entire culture, is to not make the decision out of fear.
Every time I was panicking, I was having a hard time, we were struggling. I would not make a decision. I would take a break, I would go to the beach. I would take a walk in the Tenderloin. Whatever it is that I need to do to relax. When I’m in a relaxed mode, I make much better decision. Not to say that you have a week to wait, but figure out your psych and then fix it and then make a decision.
The most interesting part in this presentation, I think is how to adapt back from hyper growth to where we are today. Because right now the market is not the best, and you have to adapt to it. I don’t know if it’s affecting your business. It’s definitely affecting mine.
What actions did you take to adapt to the current recessionary environment, considering the disparity between your business trajectory and the market conditions?
What did we do to adapt to the recession that we are today? The situation arises that we thought everything is going to continue, that hyper growth in 2021 is just going to continue. It’s going to be amazing. We’re going to keep doubling, maybe even more every year. It did not happen. This is what happened in reality. Q1 was amazing. We grew exactly as we planned. Q2, we flattened. Then what do you do?
Investors actually called me. It was funny, Q1, my new investor called me and told me, Gil, between the spectrum of CEOs who spend too much and CEOs who spend too little, you’re definitely on the spend too little spectrum.
Fast-forward three weeks into that conversation, into that phone call, he told me, “Hey Gil, what’s your budget cut planned for the year?” Because Shopify by then went down, the crypto went down. Be cognizant of the advice you get, you’re going to get a lot of advice. You have to distill it on your own. What do you do when you have a reality check like that? When the situation outside in the market is crashing, there are wars.
This is more recent with Silicon Valley Bank. Our money was in Silicon Valley Bank. The stock market is going down and meanwhile, your business is exactly the opposite trajectory. Our number of employees was going up, the burn rate was going up and giving me a heartburn.
The most important thing is if you see something that is not working, just make sure not to repeat it many times. That’s it. You always have the opportunity to change.
How did you avoid falling into the “Series B Trap” and adapt your trajectory when you encountered a plateau in growth?
Although I didn’t fall completely and die into The Series B Trap, I definitely stumble upon it myself. And so after we raise a Series B, there is this story that you didn’t figure out everything about the business.
You keep investing and actually you don’t get the growth. If you fully fall into the trap, you run out of money, and then you have a fire sale. We found out about that very quickly. Okay, we’re flattening, let’s change trajectory.
What strategies did you implement to ensure a healthy runway and make timely cost-cutting decisions in order to maintain financial stability?
First thing, get a runway. We want to make sure at any point of time, we have at least one and a half years, maybe two years of runway and be on a trajectory to break even. It’s always important. Once you’re a master of your own domain, you can make good decisions. You have confidence, you can make good decisions. When you don’t need money, you can get money.
The second thing is cutting earlier. Every time you get lots of advice, you have to distill it as a CEO. As a founder, I got a lot of advice. Not to fire before the holidays, not to fire now, this is not a good time to do the layoffs. The truth is, it’s never a good time to do layoffs. No one ever wants to get that phone call, to get that Zoom, to get that meeting. But guess what, if I waited two months, like I was advised to by pretty much everyone, then I would’ve had to lay off eight more people, because that’s how the burn works, right?
You have two more people, you know you have to fire them, do it earlier. You know you have to cut costs, do it earlier because you’re going to have to do less if you save that time.
How did you prioritize optimization efforts and leverage external perspectives to identify and address inefficiencies, bottlenecks, and workflow challenges within your organization?
Another part that many people don’t put enough attention on is optimization. When you grow, you bring in inefficiencies, for sure. Every company that grows brings in B players, C players, workflows, inefficiency, bottlenecks, and you don’t get a chance to fix it until you have to or until you get acquired, and a PA makes you do that. If you can do those things earlier, the better.
It’s very hard to do it internally without help from external people because when someone builds a workflow, even if that workflow sucks, they are emotionally attached to it. And you have to bring in someone else who is not emotionally attached to it and can have a beginner’s mind and show you that you have a problem here.
That’s something we’re doing across the board, in marketing, in sales, in product, bringing in those outside people. They help us identify the bottlenecks, help us identify efficiencies. Because once you increase, for example, the marketing to SDR or SDR to sales handoff, 5%, $10 million pipeline just comes out of nowhere that you don’t have to buy.
How did you leverage your equity and valuation to make strategic moves, such as acquisitions, during a downturn in order to proactively improve your company’s position?
Finally, just like with every other defense offense, you have to make offensive moves. Downmarket, when people are panicking, is a great situation to make some bold moves. And we use the equity and the valuation that we benefited in a good market and use it to acquire a company and use it to make some strategic moves.
Don’t take all the runway that you’re saving just to kind of hide and wait for things to get better. No. Change your own situation. Make some strategic moves with the money that you now saved.
What important lessons did you learn about early cuts, optimizing marketing programs, and prioritizing culture and ROI to ensure long-term success?
The most important lesson here by far is to cut earlier. I learned that when you make that bold choice on your own, it’s never going to be popular. It’s always going to be the right thing. It’s better to let go of 10 people, 15 people, than the entire company. We definitely cut the ARR goal.
We shifted the HR from hiring to maintaining in culture and improvement of the culture. We cut every marketing program that didn’t have a positive ROI. By positive ROI, I mean revenues. Money in, money out, it’s profitable. And then, of course, optimizing the acquisition funnel.
Which strategic moves, such as acquisitions and Product-led Growth, have contributed to your company’s success?
We also made a few cool strategic bets. We made our first acquisition in October of last year, which already is panning out, which I’m very happy about. We hired a customer success and account management team for the first time, we had an account management team. We didn’t even think about that before. We launched a PLG motion, Product-led Growth motion, that is starting to pan out as an amazing bet.
Not all the bets we made panned out. I’m not showing you the seven, eight bets that were a shitshow. But I’m showing you the three that were very successful because that’s how it goes with bets. It was 100% a good idea to do those.
How did you strategically manage personnel and hiring to optimize financial stability and runway during challenging times?
A few hacks, just to show, it’s really not rocket science, but to show you examples. Just like with the reality check of a drastic move, what does it mean to do a budget cut?
We were supposed to grow to about 200 people, and we’re at about 110. And we really had to make hiring freeze completely. About 30 people that we’re about to hire, we’re not hired. We had to let go of a lot of people, some contractors, some full-time people.
I had a number because I knew how much runway I want. I was conservative, and it panned out to be a good idea. You don’t want to cut too much, and you don’t want to cut too many times. But most important is to make the right decision. Timing and popularity is secondary.
How did you optimize marketing, leverage Product-Led Growth, make strategic acquisitions, and raise $5 million in funds to drive growth and success?
In marketing programs, as you can see, everything that is revenue positive stays. Everything that is not revenue positive goes out the door. Product-Led Growth, this was expected to bring us about five to six trials. We’re already at about 100 after a month and a half. This is something that is revolutionary.
Without cash restrictions, without a market that is problematic, we wouldn’t make this move. And you can take challenges and convert them to opportunities. This, without getting into the details, is how we’re optimizing our workflow. You can see we’re really analyzing every area, from the website, from the chatbot, to the forms, to the SDR, all of those, and see where can we make efficiencies.
The final, but very happy move is to acquire a company. I didn’t realize we will be in a position, but when the market crashes and companies are struggling, there are opportunities to actually make strategic moves, strategic acquisitions. We made our first one, and we’re integrating it really nicely into the company, providing sticky value for the customer, and it’s just a nice win. Making bold moves in a tough market is highly encouraged. Most people don’t do it. You’ll be the 5% that is gaining market share in a tough market. Highly recommended.
And then the convertible notes. Just before the series B, in order to gain confidence, I raised 5 million. I planned to raise 2 million, ended up raising 5 million over a period of one month with convertible notes. It’s super, super easy, especially when the market is hot. But even when it’s not, super easy to raise on convertible note. I highly recommend it.