Why Most SaaS Companies Fail to Scale in the AI Era

Jeff McQueen: Do not make your business identity your personal identity. This business is very important and it is your passion, but also it's not you the human being. There's more to you than just this business. As big as it feels right now and as all consuming as it feels right now.

Aaron Marchbanks: Welcome to SaaS that app building B2B web applications, the podcast where we share real world stories, practical advice and tech insights for those building or thinking about starting a tech enabled business. I am your co host Aaron Marchbanks and I'm Justin.

Justin: Each week we bring you the stories, strategies and insights you need to build your SaaS or tech enabled business smarter, not harder. Let's dive right in.

Aaron Marchbanks: Hello all and welcome back to SaaS that app with me as always in his awesome new polo from our trip to microconf is my partner in crime here. Justin. How's it going man?

Justin: Hey, Doing pretty well. We continue the trend of you commenting on my shirt at the start of every episode.

Aaron Marchbanks: It's awesome. I love it. I never know what to expect, but I do dig the Delta shout out.

Justin: This is my first actual Delta piece of garb despite several years of being a Delta guy. So should go to more conferences more often, right?

Aaron Marchbanks: We can use that as the leverage. I need some Delta swag. It's time for a conference. Also today we are joined by Jeff McQueen who is a four time founder with over two decades in the trenches of building, scaling and exiting SaaS companies. Probably best known as the co founder and longtime CEO of Accelo, which grew into a leading platform for professional service teams. And now he is building and working on worksites AI, which is an AI native platform focused primarily on continuing continuous performance intelligence for modern leaders. Jeff's journey spans kind of the full arc, solo agency scaling, SaaS, successful exits. And he's seen firsthand what building companies is all about. How it is rarely clean, alpha, messy and we're going to get into all that stuff today. Jeff, welcome to the pod.

Jeff McQueen: Thank you. Great to be here. Aaron and Justin.

Aaron Marchbanks: So I got to ask you my most challenging question, but you have a really interesting one. You have got to tell me how you made the journey from milk boy and barista, uh, to like CEO and founder of SaaS businesses.

Justin: Yeah, yeah.

Jeff McQueen: Well, like a lot of folks, early years were sort of school based stuff, right? Who's going to hire a school kid? Turns out, uh, there are people, it's generally cash in hand and it's generally really freaking hard work. And so yeah, it was the early years back when I was growing up In Australia, it was still a thing to have a truck come around. More like a little van, frankly. It would bring milk and drop it off to your house. Usually started off in the afternoons and then it moved to the morning shift. So I would set the alarm for 3am as a teenager. Do not recommend it as a joyful thing, but as a character building thing it was great. Especially in Australia where you run down darkened passageways beside people's homes to drop milk at their front door. And if you know a thing or two about Aussie animals, you'll know the spiders are no joke. And so when you're the one finding those spider webs at three something in the morning with, I don't know, probably six kilos in each hand, 20 pounds in each hand of milk, that's not to be underestimated as a character building experience. But I did, you know, sort of a bunch of IT and computer and it pivoted into software stuff through university and I decided I wanted to really be much more entrepreneurial. And so I actually dropped out of university and started my first business, which was, uh, what you would think of as a software forward digital agency in the early 2000s and built that up and learned a lot of lessons the hard way and then pivoted that into creating software for those kinds of people, primarily with Accelo, which is really an operating system for professional service firms.

Aaron Marchbanks: Fantastic. Yes. And I have been to Australia, my wife has been many times as part of her work. And one of the reasons that I always gave for not going with her more often was because it seems that everything in Australia wants to kill you, whether it can or not. And I am definitely afraid of spiders. And so I get, of course my feeds are always just chock a block full of, look, here's a spider, like eating a small rodent. Like, yeah, no, I'm done.

Jeff McQueen: I'm actually flying back there tomorrow evening for first, uh, time in a while and I'm doing a talk at a Probably the leading SaaS and software conference for startups there and looking forward to that. And part of my talk is exactly that point, Aaron. Like when you're in a barren or difficult environment, turns out there's a lot of pressure to perform or you, your genes don't make it. And so yeah, Australia's got something like seven of the ten most venomous snakes. And it's just because you know what, if you've only got one chance at dinner in your life, you're not going to miss. So yeah, it's an interesting evolutionary Pressure, that's to be sure.

Aaron Marchbanks: No doubt. So talk to me a little bit about how you kind of made this jump from early on being in services to something that was more product based or product oriented.

Jeff McQueen: Yeah, it's a great question. I think everybody who runs a service business dreams of running a product business. And everybody who's running an early stage product business dreams of services revenue because it's real revenue. It's just the nature of these things.

Justin: That's 100% true.

Jeff McQueen: Yeah. I think the challenge for a lot of us who cut our teeth in services is we end up building up a set of competencies. And if you're in technology, you can actually start to put into code and libraries and workflows and playbooks, your IP that you develop by delivering services. And it feels like it's just right there, you know, just in front of you is truly the opportunity to productize this thing you've been doing as a service for a while. And I did that. But I would not recommend it to most folks because it turns out that you end up trading off at least two, sometimes four orders of magnitude. And what I mean by that is think about the Moon Buggy. When they built that in the 60s, I think they made three of them. And I think in inflation adjusted terms, they were worth like 300 million bucks each or something like that. Like a lot of money because they had to be electric motors and that wasn't a thing and all this sort of stuff. Right. So very expensive to build three units, but it made sense. That was a classic services play. Like you need a thing that's, you know, there is no market for this thing. And of course they didn't have abs, they didn't have airbags, they didn't have power windows or any windows. And so, you know, you sort of like think about what that that vehicle had for that price point. And to me, that is the archetype or the pointiest end of services. And so you get great revenue, but low volume. And then on the flip side, think about someone like Kia, they sell cars at volume and they're relatively low price when you think about what you get, because they come with abs and, you know, all of those things that I said the Moon Buggy doesn't have. And those cars go for four orders of magnitude less money. So you've got to make up a lot of volume to offset the fact that you're having to lower your prices because the customer's expectations go up massively, like one, two, maybe three orders of magnitude. Expectations of what the product can do when it's a product as opposed to a service. And conversely their willingness to pay goes down one to maybe three orders of altitude. So that offset is not for the faint of heart. And that was my experience of doing it. Got lucky, worked really hard, had started some great insights into the customer. That's one thing service people have. You're in the trenches, you're with the customer, uh, you're feeling their pain and you're solving their problem and you're getting that incredibly tight feedback loop. So you've got real assets and opportunities from that insight that are uh, really, really valuable. But converting that into a product is still really not for the faint of heart.

Justin: Did you use partners and contacts you had from your service business to help you with product design and testing and bidding and all that? Did you have people you were able to bring with you or was it mostly just your hard won experience?

Jeff McQueen: Yeah, it's a great question. So a uh, little bit of yes and a little bit of no. It was primarily like the core team from my services business that had the true kind of software and UX kind of DNA, if you know what I mean. And so those folks became my co founders in the product software company. But it wasn't so much a case of like partners or resources or services because one of the things when in my case built a successful services business, won business of the year awards, had customers from small operations up to Department of Prime Minister and Cabinet back in Australia, that was great, generated revenue and effectively I took those retained earnings and plow them into the software company because it uh, is, it's very expensive to create a product based company realistically and because of those order of magnitude factors the customer's not willing to pay as much and their expectations were a lot higher. So yeah, we did a bit of that but it wasn't really a case of doing a whole lot of engaging folks external because we just didn't have the cash to survive doing that kind of thing.

Justin: Yeah, I love the economy of laid out there, which is that service companies are extremely easy to start, extremely easy to start, extremely hard to scale, and product companies are hard, expensive to start and then very easy to scale once you get that product market fit. Were you a bootstrapped founder, then you just took your retained earnings from company one and plowed it into company two, made the investment based off of services. I love that. That's so cool.

Jeff McQueen: Yeah. But then there's also a limit. Like SaaS is one of these things where the recurring Revenue is great, but that's because you're looking at it as a forward looking DCF over a five year time period. But in month one and month two, you've still got food on the table, so it's really hard. Like in some respects I'm a bit jealous of, you know, friends of mine like Mike and Scott from Atlassian because their journey started out with buying licensed software for a particular version. So that was, you know, earning two and a half to five grand a throw for each company that put early versions of Jira in. So they got that cash upfront and nowadays customers are unwilling to do cash upfront and until recently the market has rewarded recurring revenue way more than cash up front. But it doesn't solve for the problem that bootstrapping that kind of a business is incredibly hard because if you've got a customer lifetime value, we had a customer lifetime value that was approaching six figures but you know, that customer lifetime was multiple, multiple, multiple years. And so you've got to front load your investment in people and marketing and capability development to have that product where you can start to earn the mri. But it's a very slow drip, drip, drip in the beginning. So yeah, not for the faint of heart. We ended up raising, initially bootstrapped for three years, then raised 2mil of venture which at the time was, I'd refer to it as like a seed round. Nowadays 2 mil isn't even a seed round. I think they call that like an angel or a super seed or a pre seed or something. It's funny how that times changed in 2014-2026.

Justin: Friends and family, depending on your pedigree.

Jeff McQueen: Yeah, yeah, yeah. And then we raised more, a bit more institutional to scale. But yeah, the first survival phase was absolutely grinding it out hand to hand combat and taking returned earnings and plowing it into the software company.

Justin: Real quick, this episode is brought to you by Delta Systems, which is what Aaron and I do when we're not talking through microphones to you, the people of the Internet. We've got a really, really great software team here and we love to work with cool people on cool projects. So if that sounds like you and you've got a problem or you're in some kind of a jam, go to Deltasystems.com, grab a time with us, we can beat up on your problem together and if there's a fit there, amazing, we'll help you out. So Deltasystems.com, grab an appointment and hey, maybe we can work together.

Aaron Marchbanks: So you've mentioned several Times that it was not for the faint of heart or something. That's very challenging. I'm curious, what made you take the leap then? I mean, had you gotten an exit that you were really happy with and were just looking for something else to do and wanted to do that, or was that actually the goal was to get out of this and into that?

Jeff McQueen: Yeah, I wish it was a former, but no, there was no exit. There was no money. Like still just dirt poor man, just dirt poor. Like won a contract, tried to deliver it profitably, take the results. It's that classic play. There was a couple of reasons. We're uh, all driven by emotion. So my emotional reason was to see if I could do it realistically. And it wasn't like the big angry chip on my shoulder. It wasn't like someone said I couldn't and screw you, I'm going to do it anyway. It was more that in 2006, so quite a few years, like five years before I ended up moving to the States with Accelo when it was still called Affinity Live. It had a different name, it was earlier and in a free beta period. Five years before that I was in Silicon Valley with a, uh, company I co founded with a friend that was a very short side quest and we basically built Dropbox before Dropbox. It's the only thing I've done that was B2C. It didn't last long. It was really short, exciting, had some traction, got some recognition. And it was in the early days of that web 2.0 boom. And we got written up really favorably by Mike Arrington from TechCrunch at the end of 05. And uh, we then got lit up by venture capitalists all up at down Sand Hill Road who at the time were using TechCrunch as a source of deal flow because this is still in the early days of blogging. And so I found myself in Silicon Valley in January of 06. I basically couch surfed at Mike Arrington's house and hung out in the Valley up and down, you know, Palo Alto, Sandhill Road, Menlo park, all of those places for about three months on and off. And then eventually I was like, actually I need to get back to my sort of agency business that was in some ways bootstrapping what we were doing with the storage product. And that business didn't work out like it was one of those ones where it was close. But you know, if you're catching m your wave and you've missed your wave swimming, harder to try and catch the wave, that's gone by is just going to leave you tired and not catching that wave. And so I went back to Oz and spent the next five years but I couldn't kind of unlearn what I'd learned. That being in the middle of Silicon Valley and connected to that scene and having the conversations and the challenges, I realized as someone from the far side of the world that I would have considered performing and uh, succeeding in Silicon Valley to be, you know, 10 to 100 times outside of my competency. Instead I was like actually this is doable, it's really hard and there's no guarantee of success in anything in life. But this particularly is going to be long odds. But it's not out of reach, it's not ridiculous. And so I sort of emotionally resolved to go back when I had something worth going back for, which is what led part of the emotion that led to doing something that's not for the faint of heart. Creating a software company out of a services business starting point. But I think the other part, also emotional was I frankly was a bit pissed off. And the reason I say that is I'd spend on it, I call it 7ish years building this professional services business. And a lot of people I knew ran professional service businesses and I had had a number of commercial near death experiences and I talked to other people in the same roughly line of work. Maybe they were an msp, maybe they were an architect, maybe they were an accountant. Probably less than accountants, but you know what I mean? Like people who are doing different types of proserve and they agree, they're like, yeah, this sucks. It's feast and famine and you have a project go sideways and you don't realize it's going sideways soon enough to try and get it back on track. So then you're desperately trying to deliver this thing with the minimum amount of damage to the business and the relationship and the reputation. And I got pissed off that the big end of town could go and buy things like ERP software that could give you visibility. You know, when you order something online and you can track it with UPS and you can see which truck scanned it and when that happened. And meanwhile inside my own business as a proserve firm, I um, couldn't tell you what happened the day before unless I stopped what I was doing and went and had a bunch of meetings and investigations. I was like this is pissing me off. Like this feels like it should be solved. But the big inner town didn't care about SMBs. They were just like deal with it Build your own nonsense with Access or FileMaker Pro, or stitch it together from six or seven different SAS tools that don't talk to each other. Good luck, mate. I hope you don't fall through that manhole that we've left over there. So I was a bit, sort of, as I said, a bit pissed off. And so those two emotions of proving I could because I felt like it was plausible and then wanting to solve a problem for people that I genuinely cared about. People who were, uh, accidental business owners that were great at doing what they did, but didn't really kind of know from a starting point how to run a great company, they were learning by trial and error, which is very expensive. When you put your house on the line and when you get a whole team who look to you and say, it's going to be all right, isn't it? Like, believe that it is, even though you don't know what the heck you're doing. Those people, I was like, let's give them visibility. Let's give them a, uh, fighting chance here. Because these are our neighbors. These are the people that, you know, our, uh, kids go to school with. That's their parents, that's our cousins or our aunties or an uncles. Like this is normal Main Street. And this is also where all the job growth comes from, where the innovation comes from. It doesn't come from the Fortune 500. They're not really worried about disruption, or maybe they are sometimes, but they're not really trying to make operations better. They're just trying to make sure they don't get fired. If you're an individual kind of worker bee inside those big company. So anyway, that was my passion. So those two factors combined to make the irrational still a decision to make, even though it still is and was completely irrational.

Aaron Marchbanks: I, uh, love that you're probably the first person who's actually listed being pissed off as one of the reasons for switching. But I so appreciate that.

Jeff McQueen: You gotta be motivated because it's super irrational. It's gotta be deep seated.

Aaron Marchbanks: I know Justin does. I know Justin appreciates that perspective too.

Justin: No, I think a lot of people are pissed off and most people mince words and aren't quite as forthright about that. Uh, because it's also one of my stories. I have a company that we started because we were pissed off. So glad that we're not the only ones and literally all honest enough to say it. So, yeah, my ears kind of pricked up when you were talking about having a team full of people who are looking at you as the leader and the risk taker, and you sitting there being like, oh, yeah, I don't have this all figured out, where you guys are actually along for the ride. You're just not aware of the situation that you're in, I guess. Do you have any wisdom or anything that came from that to have the confidence to lead people, or how far back do you pull the curtain to let people know kind of what's going on?

Jeff McQueen: Yeah, it's a great question, trying to think about specifics. I think the general sense is to be a successful entrepreneur, I think you need to have enough genuine and justified confidence. Not false, but, uh, genuine confidence that you can work out the best way to navigate whatever situation comes your way. And it's that capacity to do that that matters a lot more than having all the answers. And I think that's what you need to share and show with your team. I don't think you lie to them, but I also don't think you tell them you're quietly shitting yourself and you haven't had a good night of sleep in a month. Because that doesn't help. Right? Like, imagine you're a captain of a ship at sea and everyone's getting a bit hungry and you're like, uh, I think we might have a problem if we're not lost, we're not far from lost, and I've got to try, and we've been becalmed, or if it's the old sailing days, you know, um, it's going to be a struggle to get there. But there's importance in your crew believing they can rely on each other and rely on you to work out a path through a difficult situation. Because once hope is lost, you got nothing. And any of us in business when we're dealing with challenges, I think it's worth thinking about folks that have come before us. I love the story of Shackleton, from his incredible attempt to cross Antarctica. And they got into trouble and got stuck in ice before they even got to Antarctica. And he managed to save every single member of that crew by them coming together or working together. And they managed to get from Antarctica over to the tip of South America via, I think it's Georgia, one of the islands in the deep south kind of south ocean there. And they did some crazy stuff like sailed effectively, a raft that they fashioned for something like a thousand nautical miles. So, I mean, the odds are long, but you got hope, and it's not unreasonable because you've got genuine confidence in the competence and the character of the people that you're working with and being led by then, it's not unreasonable to

Aaron Marchbanks: have that hope once you get everybody kind of rolling in the same direction. We'll stay with the ship analogy, I guess, or the ocean analogy there. Talk to me a little bit then about you gotten traction, you got the team, you're putting things together and it's kind of taking shape and it's forming up. So talk to me a little bit about the scaling process. I mean specifically with Accelo, but just in a general sense, team product features, dealing with customers. I mean, all of those things, I'm assuming, have to grow and change over time. And we see it a lot of different ways. So talk to me about that scaling process once you've kind of made ground.

Jeff McQueen: So in our case, we didn't go kind of hypergrowth or hyperscaling. We were doing a bit over 100% a year growth and then that pulled down to like 70s sort of. As you scale, a lot of big numbers kicks in. So in our experience, in my experience, it was having an eye to the future and a plan, but also recognizing that there's some quote about, you know, we make plans and God laughs. So being pretty realistic that a lot of entrepreneurial journeys, uh, feeling your way through a darkened room and not getting too caught up or wound up about the fact that you made plans of what you were going to do six quarters from now because you had to put in a spreadsheet for investors and they're not planning out, panning out the way that you anticipated because reality is almost certainly never going to turn out the way you anticipated. Hopefully it's that rare case where you really catch fire and it's fantastic and things are growing faster and you're dealing with that hyper growth. But it's not often the case that that happens. And even in those cases, those moments of hypergrowth, stress and drama are often transitory. And then you've got to do some repair work and try and get the things in order. So I think generally speaking it's about thinking a quarter or two ahead, executing a month or two ahead, and being very honest about where you actually are every day and week. Because the times where I think I made the biggest mistakes is where I was overconfidently projecting the current pattern of success of, ah, a channel, for example, of lead generation or a conversion rate of a sales process and thinking, great, we can just do 10x more of that and we'll get the 10x outcome. And it's very rare for that to be the Case for most entrepreneurs, they'll recognize that if you tell, um, the team internally that you're going to 10x something and you've told investors because you've raised capital, you're going to TEDx something that becomes a big flashing light to everybody within any line of sight that there's some money to be made here by getting you to spend it as the entrepreneur. Uh, so your sales leadership will say, well, in that case, we need to hire these people, we need to hire that. And they build themselves an empire of 20something people before you could blink and did stupid things like said, oh, we need to be able to hit an extra 5 mil of top line and each AE can carry a quota of 750. And realistically we think that there's going to be some that don't hit quota. So let's try and pull that back to six. And so therefore we're going to go out and hire x Number of AES to be able to hit our quota. And I've never seen a business where hiring AES leads to revenue. You think salespeople means revenue? No, no, no. It's just a piece of the revenue puzzle. Admittedly the most overpaid piece, but it's just a piece. You've got to have the demand share and you've got to have the conversion rate, you've got to have the retention like it's a whole thing. This is a system. And so when you say, oh, I'm going to scale this thing and I've got the capital to scale this thing, every recruiter says, oh, here we go. Every leader goes, oh, here's an opportunity to have a bigger empire that I can put on my resume and convince them I should have a title uplift. And you see the story time and time again. So I think being very honest, ruthless, ruthless about the reality and correcting for mistakes as opposed to the old Austin Powers line of just, well, we'll just close the roller door here. And of course, you know, just assume everything went according to plan is never the way to play it.

Aaron Marchbanks: Love that analogy too. I want to shift just a hair further down the road then and talk a little bit about Exit, because we've had a few people on the show where, you know, earlier on in the process, exit kind of becomes the goal. But more often than not, I find that it's somebody who feels passionately about the idea, the solution that they're trying to put out there to their clients. They don't necessarily have that as an aim, but an opportunity presents itself and it begins to become a reality. And then that whole process kind of takes over. I mean, it's got legs and there's so much that goes into it. So talk to me a little bit about what was your vision? Was that a goal or did it just happen to be an opportunity? And then how did you approach that?

Jeff McQueen: Great question. So I think the first thing to say is if you're raising capital, you are committed to an exit. It's that simple. And a lot of people don't realize that the kind of venture capital media industry that's Silicon Valley centric has, I think, done a great job of convincing earlier entrepreneurs in their journey to say that the goal is to raise capital. You know, if I can raise capital, then I'm minted, I'm successful, I'm, um, ordained. It's going to be great. And to be sure, if the thing holding you back from scaling and realizing your dreams is capital, then raising capital is a very important part of your journey and a critical gate to get through successfully. But once you get to the other side of that, you've actually got to execute. And so once you've raised capital, you commit into an exit. And even if you don't know it because you were so focused on the fact that I just need capital to make my dreams come true for product X in market Y. But once you do, once you've done it, you've done it and you're. You're now that's it, you're on an exit train. And the exit pathways, if you succeed, are. You can list them on a hand, and you probably don't. You probably can list them on Homer Simpson's hand, like there's not that many fingers required to count them out. It's basically some form of M and A exit. There is IPO and on fewer occasions, but I know a few of them, they actually defer the exit by buying out early shareholders because they've been able to generate good earnings where they can effectively buy back the shares of the earlier folks who wanted to have their exit and needed to have their exit for their own reasons. So that's kind of the landscape.

Justin: There's also a big sore, swollen thumb hanging off the side of that, which is failure.

Jeff McQueen: Absolutely, yeah. I think of exit as the success exit. Everyone can fail at every point, including before raising capital and after and everything in between. So, yeah, failure is by far your most high probability outcome. So I think, in my case, raising capital, I knew an exit was what I needed to do, what the business needed to do what my investors needed to do and also personally what I needed to do. When you start a company poor, you plow every dollar from the first business you make into starting your next business. There's the opposite of portfolio theory. Incredibly concentrated personal balance sheet that at some point you want to realize and crystallize. It's very natural and normal and sensible to do so. Yeah, I think then it becomes what's the right stage for an exit? What's the right acquirer? If it's an acquisition, is that acquirer a financial acquire? There's up until recently been a very active world of, uh, private equity type investors who buy companies and stitch them together with other companies and then sell them down the line to the next guy until eventually somebody buys them or takes them public. So yeah, I mean that's a pretty common path. Acquisition by a big dog who needs you strategically is a path and of course IPO is a path. So it's going to vary depending on the nature of the business and where you're at. And I saw a great piece just the other day, is like a lot of companies and in this case the advice was all companies with I guess the tiniest set of exceptions have a 12 month period where they are at uh, their hottest and their most valuable. And after that it's actually diminishing returns, which also comes with more of the cost from a time value of money, not to mention the time and trips around the sun of the life of the entrepreneurs and the leaders around diminishing returns. So of course time in the market's pretty hard. Otherwise I want to do it. But it is, I think also worth being really clear eyed about when I'm advising entrepreneurs. I think I've mentored, advised and invested in over 200 now, depending on how you measure it. One of the common things that I've been saying to folks is do not make your business identity, your personal identity. Like this business is very important and it is your passion and for this phase of your life's work. And I'm not discouraging you from having that level of drive, focus and commitment. But also it's not you, the human being. There's more to you than just this business. As big as it feels right now and as all consuming as it feels right now. And I say that partly for their own sanity because most of the time these things fail. You want to maintain a growth mindset and not the fixed mindset. And the fixed mindset says, well this business is me and it failed, so therefore I fail or I'm a failure. That's not true. And also because you want to be able to imagine a time where you do exit the business as a thriving, going concern and move on with your next professional and personal chapter.

Justin: Yeah, we're just back from microconf in Portland. We saw an amazing presentation by someone there who's talking about getting exit ready and all that. And he talked about folks he's worked with where they just wanted to get to the next revenue number because it moved them into a different multiple and all that. But as they were pushing and waiting to get to that next revenue number, their growth tapered off. And it's like, well, you actually missed the right window to sell your company because you're not growing as fast as you were. And that was the biggest driver of your valuation, not this revenue number you wanted to cross.

Jeff McQueen: And also just macro sentiment you can't control. Like when interest rates went up in 2022, the oxygen left the room and you could have printed a number that was twice as good on revenue and twice as good on some form of capital efficiency, and you would get offered half as much as a price than you did six months earlier. Just because of the fact that the people doing these sorts of deals needed to plug a number into their spreadsheet for an IRR hurdle rate. Because all of a sudden now you can make 5% risk free and before you can make 0% risk free. Turns out that makes a real difference to how much people are prepared to spend on something.

Justin: Yeah, absolutely. So I know that you had the services company, you kind of pivoted into product. Were you continually involved in both while that was going on, or did you have kind of a clean break?

Jeff McQueen: I held onto the services role longer than I should have and was trying to run the services company from the states, which is very unwise. So I would highly recommend not doing that. And with this kind of exit mentality and framework, if you are planning to do a transition from services to product, I would recommend that you don't try and put your feet in two canoes at the same time. You tend to get wet. And so I would suggest that folks don't do what I did and instead, once they've got enough validation from an MVP point of view, that the product thing has potential and they're emotionally motivated to it, whether it's they want to prove it to themselves or, uh, you know, they're pissed off or they're excited and can't sleep because they're just excited about this side of things. That's okay, but I think then they should frankly spend a quarter or two getting their services business ready to sell and sell it, because that way you're not going to find yourself with a foot in two canoes. And the reality is, when you're an entrepreneur and you put in place managers for a services business, sometimes it can work out well, but most of the time it doesn't because there is that entrepreneurial X factor. And once you withdraw your focus and once you withdraw that entrepreneurial X factor that you bring or your co founders bring and focus on the new thing, then that business is very unlikely to do as well, no matter, uh, what you've got or who you've got in places as managers. I think the one exception is maybe if the services business is a true partnership and your partner is willing and able to truly keep running the thing. But you have to have, uh, spent a lot of time with them as partners and they have to be really willing to take over all of that entrepreneurial effort in your absence. Because you can't build a product business without being 110% focused on that product business. The odds are just too long, it's too hard, it's too expensive, there's too many traps.

Justin: I think you just said a lot with that. That's, I think, really sound advice. And talk to people on this podcast also mimics my personal story, which is that I wouldn't have able to start Company two without the exit from Company one. And like, we'll see what happens. For me, Company two is number two. So we'll see, we'll see how Company two goes. But having some money in the bank, some chips off the table, to your earlier point, it really does free you up both in terms of your ability to take on risk, but also in your freedom from distraction to focus on the next thing.

Jeff McQueen: The focus is your operational cryptono. Having the financial cushion to take bigger risks or at very least feel like you're not. One mistake away from destitution is another part too. I feel like the focus piece is 10 times more important because frankly, no matter how many chips you took off the table, the new thing is still pretty darn high risk.

Justin: Sorry, Aaron, I jumped over you earlier. I didn't mean to do that.

Aaron Marchbanks: No, not at all. You said actually several things I was going to. So I'll go ahead and move us on to Ascendius, uh, now. So what brought you into this and worksites, AI in particular, and this idea of continuous intelligence and performance based on that and away from Traditional reporting, which is something that's near and dear to me because I spend a whole lot of time doing reporting.

Jeff McQueen: I love it. Dashboards were always my friend. Unfortunately they were a little bit of a deceptive, uh, lover, but you know, we'll get to that. So, yeah, look, backstory is Sol Accelo too young to retire and also too high energy to think that that was a good move for mental health or for my family's benefit either. So this is now a bit over a year ago. AI is obviously everywhere all at once. And I was wanting to separate out, uh, with my own degree of confidence what the truth versus fiction was in terms of what AI could really do. I've got sort of an engineering background, partly self taught because I dropped out of uni before I finished getting my degree in telecommunications engineering, but still, like, I love nerding out. And so I just jumped into the AI stuff. But I didn't want to just build hello world applications or end up vibe coding another Tetris clone on lovable that didn't feel useful. Right. And I thought the best way to do this would be to build a real product that existed in the world based on my own experience of running Accelo. And so I set out to build a product that helped leaders to have better visibility of what was going on in terms of the work and activities of their team members, but without being spyware. Because when I was running my last company, we had situations where some remote folks were pretending to work from home, fake work from home, and that was causing some issues around culture. And it's really actually quite a corrosive spiral because when your A players see that your C players aren't performing, um, or even trying, and when they see that they're not immediately being fired or having consequences, then it can be really culturally corrosive because you end up with your A players that deciding, well, why am I working so hard or why do I care? Or you know, like, is the joke on me? And so you can end up with this really bad spiral. And so I created a product that was just a, uh, it was actually kind of impressive. But I realized even though using AI to build it was fantastic and exciting and truly like how fast you can build now, it was mind blowing. I also realized that product was kind of fighting the last war. You know, like anyone who really cared about this would have gone out and bought some of that crappy spyware that I refused to buy for moral and kind of values based reasons. But if you're in enough pain and you're looking for a painkiller, not a vitamin. You know what? You'll buy something that maybe you don't like. And so I realized what I'd been building was cool and satisfied my desire to really see what AI could do. But it wasn't going to find product market fit, at least not in a world that I wanted to focus on. I didn't want to get into that buying on people, narky nastiness. And so I sort of reflected over January, okay, which way do I want to go here? It's a nice thing to solve a problem, but it doesn't feel like a great business, or at least not one I want to drive. And it was about the same time OpenCore was going bonkers. And I realized that one of the big problems that a lot of us running companies have with AI is the models are incredible, but they are the classic garbage in, garbage out situation. And putting good context into the models is way more important than, than writing a great prompt. Everyone's talking about prompt engineering. I'm like, well, that's great, but what if you actually give them grounded information about your business or the challenge you're trying to solve? Your prompt might be terribly short and even have typos, but you're going to get a better outcome. And so I realized that there was this need to have AI serve the business as a thing, not just a user in a professional role feeding the AI bits of context, but actually having the business as a whole and its context and memory and understanding of what's happening in the business day to day. The qualitative stuff, not just the quantitative of our dashboards and your reports of love and experience, Aaron, but that kind of qualitative stuff. I was like, actually what OpenClaw has done for individuals, putting to one side the security stuff and the kind of going rogue and deleting your inbox kind of a bit too aggressively type stuff. But at the core of that mentality of claws, which is they're always running, they have memory that they build upon, they have souls, which is very high for Luton, but basically describing a really important input, context and then being able to message them. Um, or the thing I thought that was the coolest about openclaw was it would message you when it saw something because it was always running in the background. I was like, this is a thing that should be available for running a company and for leaders of a company, not just as an individual personal system, but tell them who their meetings are with that day. That's more like a party trick frankly, but actually something that is running constantly, that is almost like a team of McKinsey intelligence advisors but for less than the cost of a single intern who can read everything that's going on in the company through public Slack channels and calendars and Google Drive Activities or Microsoft 365 Teams meetings. And it can read all of that and understand it and then create memory from it. So then agents can run across that and tell leaders, hey, you got something that you didn't know about that you might want to pay attention to. And so that's what I built with Worksites AI. So I think of it as the open claw that you use as a person but instead it's built for the company using company wide visibility that doesn't require everybody to get on board and do all the setup, none of that friction. You turn it on three clicks and then it starts to ingest. It'll pull in the last 30 days of information so you actually have value like from day one and nobody has to change a single thing about what they're doing. Because in my last company Accelera, our big challenge, we could make the business way more productive and profitable and successful and take away a lot of those near death experiences. But it did require everybody to get on board and everybody to change their work patterns. And frankly I didn't want to do that again. That was really hard. And so this time the worksites AI product connects to your cloud systems and ingests them automatically and gives you the value from day one without having to change any behaviors at all. And heck, if you connect it to Slack, it'll just tell you when it sees things and you don't even have to learn another user interface if you don't want to. So that's the idea. It's giving that full AI experience that we got as individuals if we were brave enough to install OpenClaw. And it made it available to the whole business and particularly to the leaders who frankly can only see what's in front of them. I uh, don't know if they can see 40 degrees, there's another 320 degrees that they are blind to and AI can solve for that because it doesn't need to sleep. And with a million context window today and it's only going to get better, it can read and frankly make sense of everything that's going on in a company and then distill those down into memory so you can ask questions about it later.

Aaron Marchbanks: That's amazing. I have like a million more questions now because that's super fascinating. And things that we're getting into ourselves, Justin and I, uh, on the client side, work on the services side, in addition to, you know, internal rollouts of certain things. So it's incredible. And I am with you. I love the notion of this automated digital assistant and you can get minutes back in your day and maybe sometimes hours back, but the real bang for your buck is days, months, insights, you know, that level of thing and being able to see across those boundaries is so cool. And I see a lot of juice there, so I'm keeping an eye on time. Sadly, we're kind of at it, but I'm going to give Justin our last question here.

Justin: Last question here is usually the same, almost always the same, which is, what did we miss? What was one thing we should have asked you about that we didn't?

Jeff McQueen: That's a good question, I think, given the title of this podcast and the saspocalypse kind of narrative that's out there and whatever. I think now is the best time in history to be building software. And I wrote a blog post about it just the other day if you guys want to link to it in the show notes, out of curiosity. But I think it really is the best time and I think commercially it is in some respects the most challenging because of competitive forces and the fact that the barrier to entry went down, which means there's more entrants and actors and the audience still only has the attention they had before. And the gatekeepers of the duopoly of Google and Meta are still charging obscene, uh, rents to get to them. It's still hard. It's not that kind of golden age. But I think the ability to move fast and focus on the user and focus on solving real problems outweighs those negatives. I mean, with worksites AI, over the course of a month, we're able to go from conceptual prototype to everything I just described and more working live. It's just incredible how fast you can iterate and solve for real problems, for real people. And I love that. I do think there are unfortunately a bunch of folks who are going to have some really hard times and they're the focus of the sasspocalypse. There are companies that have raised capital with valuations expecting a 10 times forward ARR, uh, multiple of their valuation. And those have come back to threes. Now, should they be at threes? I don't know. I'm not the crystal ball finance guy. But I do know that if they've set up their cap table that way and their Employee share option plans that way and their investor expectations that way, that's going to hurt, uh, and a lot of them aren't going to make it. Additionally, the investment people who would buy the companies at 10 times ARR and stitch them together and as you said Justin, reach another revenue where they get multiple expansion, that's not looking healthy either. For quite a while. It feels like that playbook maybe not done forever, but certainly the ratios that people used to work at are gone. And so the buyers from an exit point of view are uh, hurting a lot as well. But one thing I don't think is going to happen is I don't think we're going to see people building their own software at ah, much greater ratios of percentage of people building software versus not than we saw before. AI the analogy I think of is gardening. I love having a nice garden and I have zero interest in gardening. And I think a lot of us who love tech, we unfortunately assume everyone likes to build software. Everyone loves to tinker the same way that people who love gardening assume that everyone loves gardening as well. Because they do. Why wouldn't you? And all they need is knowledge and some land and they'll be happy gardeners too. And I can tell you I've got some knowledge and I've got land and I still have zero interest in gardening and I never will. And it's just a preference. This is how I'm built, right? And I think software is the same. So a lot of us in kind of love to tinker and build with software think that. Well now everyone can, everyone's gonna. I don't buy that for a minute. The cost of maintaining this stuff, the cost of like, sure, the joy of vibe coding something into existence that didn't exist before is intoxicating, but the hangover of maintaining it is going to bring reality back into place. So I actually think the saspocalypse that thinks everyone's going to DIY it is completely wrong. But I think the saspocalypse of a lot more competition coming in from people who really can and want to do things and are frankly going to go out, uh, and destroy a bunch of these private equity owned dinosaurs, it's going to be nasty because a lot of them were built on the basis of we'll pay X, we'll buy three of them in the market, we'll force them together even though they don't integrate, then we'll triple the price because the customers won't have anywhere to go, we'll eliminate support, we'll eliminate R and D and we'll effectively treat this like Stockholm syndrome, that all these guys love the abuse and they'll never leave. And sure, that was realistic if it cost you five or ten million dollars to get a product to a beta, but now it costs you, I don't know, $50,000 in tokens if you know what you're doing. And that change, I think, is what's the real justified part of saspocalypse. But I don't think it's the companies are going to roll their own.

Justin: That's going to mean that people have to have better, more humanitarian, more moral business models. And it means that there's more competition. It means that people are going to write better software, and crappy software is not going to stand anymore. These are all good things for the consumer. These are all good things for people who are entering the space. And right now, we're at peak uncertainty. Things are more uncertain now than they've been forever because no one knows what they're doing right now. It's a crazy time. And, uh, man, Aaron, why did we ask a damn question? We should have just let Jeff talk for the entire podcast. That was amazing, man. Thank you.

Jeff McQueen: Glad you liked it.

Aaron Marchbanks: Fantastic.

Justin: Oh, uh, so good.

Jeff McQueen: Happy to help, guys. And hopefully it's helpful for your audience, too.

Aaron Marchbanks: Absolutely. There's so much in here, there's so many takeaways, and we'd love to have you back on at some point if you're game.

Jeff McQueen: Yeah, sure thing.

Aaron Marchbanks: Well, appreciate that we are at time. I, uh, will bid us adieu and hold us. Adjourned, everybody. We've been talking with Jeff McQueen, currently founder and CEO of Essendius. Jeff, thank you again so much for your time and your talents and your insights.

Jeff McQueen: You're most welcome. Take care.

Aaron Marchbanks: All right, thanks all. If you like what you're hearing, hit that subscribe button, come back and see us, send us some comments, and we'll catch you next time on Sas that App. Thanks for cruising along with us on Sas that App. We hope you grabbed some insights that were inspiring, actionable, or at least entertaining.

Justin: If you enjoyed the show, don't forget to subscribe and leave a review until next time.

Aaron Marchbanks: Keep building, keep growing, and keep those apps sassy.