Phil Carr on Second Ventures & Smart Pivots

Speaker A: You're listening to the Uncharted podcast. This is Poya. This week's guest is Phil Carr. Phil's someone I've known over the last couple of years and one of the things I've admired about him is his self awareness of where he wants to go. And he recently, about two years ago made a pivot, moving from a retention product to loyalty and moved away from serving B2B SaaS companies and serving e commerce. So we talk about the journey, the ups and downs, the lessons. I hope you enjoy this week's episode. Phil Carr, welcome. Um, how are we?

Speaker B: I'm very well, thank you. I think last time we, we caught up was in the San Francisco Californian sun and now it's in the deep depths of the, uh, UK winter. So it's a slight, slightly different, but it's great to reconnect again.

Speaker A: Uh, yeah, my, my wife keeps saying she wants to do Christmas in London. I'm like, are you crazy?

Speaker B: She's crazy.

Speaker A: Like you want to go into the cold? We like it where we are. But for everybody that doesn't know you, Phil, give a really quick business personal bio. Just give everybody some context on who you are.

Speaker B: I think it's fair to say that I'm a self confessed tech geek at heart. So I built my first website when I was at the age of 15 and I knew pretty early on that I didn't want to build websites for other people. I knew that I wanted to be able to build them for myself. Always had a passion for taking things apart, putting them back together and realizing how the hell do they break in the first place? And I think I got that from my uncle because he used to be the sound director for the BBC over here in the uk. I definitely think that element has come through to me. But it was in 2015 that I founded my first SaaS business as a company called My Pthub. And over the course of a five and a half year period we actually grew that to being the biggest fitness application for. So we had about, about 4 million monthly active users and we were getting a new user every 30 seconds. We scaled that from my late grandmother's spare bedroom, which was above the garage in here in sunny London, should I say. And then we exited from that to Providence Equity and Silverlake Partners, but one of their companies that they owned, which was called ever commerce in 2020. So we definitely rode that SaaS exit wave in 2020. It was testament to the five years of graphs that we'd put in previously to that to be able to scale and grow. And what was really great about that, we were purely inbound. We didn't have a single outbound sales team at all. So everything was completely automated from the ground upwards. And I'm now um, involved in many different businesses, are predominantly still very much in the SaaS arena.

Speaker A: Yeah, that's awesome. This is your second SaaS type startup. The one question I love to ask, I've learned uh, from folks what gets easier, which is basically everything to some extent the second time around. What gets harder from your experience the second time around.

Speaker B: What I would say is that ignorance is bliss. The higher you go, the harder the bumper. And you are fully aware of that the second time round. A friend really interestingly put this to me about two years ago of where he said, phil, you released the Thriller album, what's next? And that in itself comes with pressures. It's almost like this, uh, oh, if you've done it once, therefore it's a foregone conclusion that you're going to do it again. So whilst there are a lot of learnings that you take from your previous business, it's, it's not true that all of those will remain a, uh, constant throughout the second venture. There are macroeconomic things that take place. The, the market is, is completely different, that the buying behaviors are, are very different. There are times of where you second guess yourself more because you said, hold on a second, uh, four years ago I did this and it wasn't like this, am I doing something wrong? So I would say that there have been a lot more, should I say, quote unquote lonely periods of where you second guess yourself a lot. I guess ignorance is bliss. And in some ways there are things that I just wish I wasn't overanalyzing. Should I say, because you've been there before.

Speaker A: Some of the most successful companies I've ever seen that come out of people's 20s, it's because they just go for it. We don't know what the other side was pushed through.

Speaker B: It's like a five year old jumping off of, off of the sofa onto the tiles. They don't know. That's going to really hurt, huh? Yeah, but the first time that you do it, you're kind of, oh, it's all right. Uh, it's probably a slightly more hardcore extreme version of what it is that I'm trying to say. But you know, you're in your 30s. I'm not going to do that because I probably am not going to walk for six weeks if I try one

Speaker A: of the reasons I was really excited to have you is when I met you a couple of years ago, Upsello's value prop was something completely different than it is today. You've used basically the same foundation for, for a different use case, different industry, different end user. Talk to me a little bit about why and then that journey.

Speaker B: Great question. Funny enough, somebody asked me this exactly the same question the other day. Um, I try and articulate it as best way as I possibly can. So if I take a quick step back a second and analyze what it is that we did before so, and what I say, what we did before the previous businesses that we exited from, so we were a B2B to C play, right? And uh, we were providing software to personal trainers, nutritionists in the fitness industry. But we were making sure that the end experience was great for the client who was working with that trainer. So if the experience was great for them, it was good for the trainer. And therefore it was great for US as a SaaS business because it kept our uh, products sticky and people wanted to stay around to be able to use it. Now that's not the be all and end all, but when I left that company In 2020, our churn rate was 1.45%. It was really, really low in comparison to, let's say industry average SaaS. It wasn't just the user experience that we spent. We uh, spent a lot of time making sure that we got right because I know a lot of people do do that. But it was all of the retention tactics that we put into play, uh, throughout the entire customer lifecycle, both for the, for our subscribers and the end customer. When we left that business, we said to ourselves, we want to build a retention os, right? We want to be able to provide other uh, SaaS businesses with the uh, the tools that we built in house at the time to analyze, you know, what's a green customer, what's a red customer, what's an amber customer, if you want to look at it as a, in a real simplistic view. And the first iteration of, of uh, what we introduced was providing retention tactics for customers that are canceling or churning. And so this is the classic I go to cancel my subscription with something. It's incredibly difficult to be able to do. And as a result I am faced with either having to pick up the phone, call, pick up the phone, speak to somebody and wait four days for something to be able to cancel, or if I'm a consumer, I'm going onto my online banking or my mobile app and I'm canceling or uh, blocking your transaction for me to take place. So we're really looking at the voluntary and involuntary churn that that takes place when it comes to subscription services that are built through credit and debit card. We launched that particular product and we were finding it quite difficult to be able to either a convince a SaaS business that they should spend money on retention when they're more interested in the vanity stat of acquisition. Right. And we used to use the analogy of it's great putting water in your bucket, but if you've got a giant hole in the bottom of it, what are you doing? Building technology for back office rather than building technology for front office became incredibly difficult to be able to do. And what we also uh, well what I also noticed was the market was beginning to shift in the subscription world and I uh, think as a founder of a business you've always got to have one eye on where are things going over the course of the next two to three years. And it was pretty evident that uh, a lot of the billing and subscription management platforms out there were looking at ways of being able to diversify their, their portfolio or their, their feature sets. Would you like inside their product offering? Because billing and invoicing, it's, the box has been ticked now how many more features do you want to add just to billing? So what they were looking is, was adding additional service and retention was a big part of that. As a result we found ourselves in a position whereby our product would only work if it was connected to the subscription management platform so that we could do the automation bits at uh, the cancellation point. You're in this position of where customers are saying oh uh, there's a, there's a basic version of what you do, but I can already do that in stripe, I can already do that in charge. B, why am I going to pay extra for you to do it? If that moat is starting to evaporate and starting to go, your defense system around side, around your castle is slowly starting to diminish. I felt that happening of where I said to myself hold about we, I think we're going to find ourselves in a position over the course of the next 12 to 18 months where businesses are just not going use our product on, they're not going to find the benefit in it unless we pivot, unless we move. And I would rather do that now when the alarm bells are not ringing rather than in a position where you've got two months worth of Runway left, you've self funded things off of your Previous exit and you're panicking, it's far easier to do things from a slightly more relaxed position. So we moved into the customer loyalty space mainly because a lot of the retention tactics that we had before still applied in loyalty. But you're moving something from a back office to front office, you're now incentivizing people to be able to come back and do repeat purchase. And as a result, it was one of the best things it is that we did. Within the first three months of us going live, we overtook the revenue that we had done from two years prior in our previous business. And again, we've adopted this inbound style approach to what it is that we had before. The search volume for people looking for loyalty is much higher than they are looking for SaaS. Retention tools as an individual feel more comfortable because I sit here and think I can deploy the tactics that I've learned over the course of the last 10 years here and push the boundaries from a product perspective because we are tech geeks at heart and we go, instead of looking at this through a purely transactional play, let's introduce new cool products that work well for consumers. So here we are again going, if loyalty works well for consumers, it works well for the merchant. If it works well for the merchant, it works well for upsello. That kind of explains the pivot really of where I felt that we were being sidetracked. We were being pushed into a position that we were unable to be able to control. And it's far better to take a step back, recalibrate where are we going to be, and then, uh, move into a different industry that we know where we can deploy things that we've already learned. But the upside is much greater.

Speaker A: Looking back, what was the hardest part

Speaker B: instead of looking at it from the hardest part, I think it was I've always been wedded to the business model itself of providing a low, low Barry low barrier or entries into using our product, I. E. It's only $200 a month to be able to use our basic version of our subscription platform, less the we were in the SaaS retention space before and we've moved into loyalty. I'd actually say I'm more wedded to the business model that sits behind the scenes of how you automate that process. I'm pleased to, uh, have taken that weight off of my, instead of banging my head against the wall going, why is this not working? And blaming myself for that and thinking it's exciting and look at the opportunity of work where this is moving. And I Think the fact that the team that I have that work with me, we have been together through previous businesses, it made that conversation so much easier because it wasn't just me that was making that decision, it was a collective team of where we all said, yeah, this just doesn't feel quite right.

Speaker A: Last couple of years I've invested in early stage companies and one of the reasons they like having me on their cap table is um, I'm almost mini therapist where they lean on me versus someone that has more skin in the game. And over the last couple of weeks, months I've chatted with some, decided to shut down, some are like in that middle phase of where do we pivot to, where do we go and what I want to basically asked from you and it's a nuances, right? Obviously like every company is a little different, there's too many variables. But if someone's thinking about like a pivot, shutting down, moving on, like all those, what advice do you have?

Speaker B: I remember a friend's dad saying to me years and years ago about knowing your lane. When I think of the businesses that I think that I can provide the most amount of upside to, right? And uh, so whether that's businesses that I am running and I am invested because ultimately I still need to be able to provide a service, service to those businesses, whether I'm invested in them as an equity cash partner or somebody who's doing sweat because I founded it. Uh, I think the thing when I look at it, it's firstly, what do you want out of this? What? I had this same conversation with another business that I invested in and it's what do you want? Are you looking to build something that you want to try and exit from? Are you trying to build something which is providing you with a decent source of income? Are you looking to be able to build something which can outlive you as an individual? So when I come back to the statement of staying within your lane, I know what my answer to that is. And my answer to that is that the higher risk businesses that I want to exit from because I know in my heart of hearts I'm a zero to seven year old guy. And when I get to that seven year point, it has been a trait of my entire life that I do something, I feel like I master it and then I move on. Whether that's learning to play an instrument, whether that's getting my pilot's license, whatever that is, I feel like I've ticked that box and I've moved on. So I know in myself that I'm somebody that wants to devote to that finite amount of period of time. In addition to that, do you want to move into a market of where you, you are the first mover and you are looking to take on the stresses, the capital, all of the other elements that come with founding a business writer of educating a market around something new, or do you want to enter into a market and be player number three or four where other people have invested in educating into a market? Now that comes back to the overarching question of what is it that you want? If you're looking to build something that uh, scales and grows and is still there in 30, 40, 50 years time, maybe you look at it in a different way. You're not looking to raise millions and millions of dollars worth of capital now because you're playing the long game, or are you looking to get in and get out relatively quickly? That's the case. Then maybe look at uh, industries where there's already three or four providers in it. The traction in the market has already been proven. The classic Apple kind of approach towards things. Not being the first person to, to release an MP3 player, the not personal, not the first person to release a smartphone, not the first person to be able to release a smartwatch. But they came in, they watched, and they did it in their own Apple way. And I have learned in my heart, I have learned over the course of the last three or four years that I wasn't the person that wanted to be able to build something from scratch and do something different to what everybody else was doing, because that would require me to go against who I am as a person and what I like to do, which is I like to be that entrepreneurial figure at the beginning which provides that momentum. But I get, I hit a point of where I feel like I've ticked the box. So when someone's asking the question, should I pivot? It's well, what do you want out of it? And are you aligned with your other shareholders with what they want out of it? In addition to that, what's the proof that the market, are there people in it already and are they doing something in a different way? It comes back to those core elements because if any of those conflict against who you are as an individual, you might be looking for a result, but ultimately you're going against who you are as a person, which is going to make it feel like you're pushing even more water up a hill than you already are.

Speaker A: I'm reflecting on what's the lessons in there. I Think you have to be really self aware about what takes you about yourself. That's like a skill. I speak for myself. I learned way too late and sometimes you only learn by doing different things and finding out what you like and what you don't like. So I think it's okay for people to go through that journey but check in and reflect.

Speaker B: I see so many people that found businesses and they, they sit there and they go oh, uh, I want to do this because they think it's a get rich quick scheme. It's not, it's really not there. It believe me, there's a ton of other ways to get wealthier quicker.

Speaker A: Yeah.

Speaker B: Than is to do it. I think it's the classic things that Steve Jobs always used to say, wasn't it? If it was any rational person, they'd give up. My wife often says that to me. I don't know why you're doing it. To be honest with you. I'm probably now unemployable because I've been doing it for 10 years.

Speaker A: It's funny how that works. Sometimes when you aim for these things it becomes like you almost have no other option. Because even for myself when I've tried going for full time, Jobs are like, oh, you're too high risk. The only other thing I wanted to ask you just because you brought up the fact that if you do want to make a pivot and whatnot, like making sure that you're aligned with your shareholders. And unfortunately what I've learned in SaaS is the last couple of years because of the market dynamics, the incentives have flip flopped between the investors and the founders. How do you handle those situations?

Speaker B: Well, first things first. What was agreed up front, have the objectives of the business shifted and changed. Right. And I think what we've seen over the course of the last three or four years in that space is founders expectations do not align with shareholder uh, market expectations. We see this from when we were in a double digit exit world. I have been very fortunate that I have never taken on any venture capital cash any way, shape or form. I've been in uh, deep conversations with them about it. I've always taken the approach that uh, money is never free and that uh, for every dollar that you invest there is a string attached to it. However, I am also sympathetic to the individuals that do take on capital and the market conditions change and individuals are almost forced into this position of having to make decisions with inside their organization, outside of their, what they originally thought was the goalposts that were set by that so to counter that, I think with any of these situations is you have to take yourself back to a position of what is matter of fact with it. If the numbers with inside your market have changed and they've gone down, then present those numbers and say they have gone down. What do you possibly expect me to do about a situation in the market that has forced my position or force the business to be or the enterprise value of the company to have gone down? In addition to that, anybody listening to this on the other side of the situation that is looking to raise capital, one thing I would say in my experience is raising little and often is bigger than raising big numbers with it. I have found that has worked better because some of the best decisions that I've made in a business sense have been when I've been backed into a corner with no money. And sometimes when people see millions of dollars sitting in a bank account and then it's a classic occasion of having a million dollars in your bank account and then suddenly go down to 999,000, you think to yourself, I've lost the comma. I would raise little and often is how I would approach towards doing that because it forces you as a founder to keep yourself grounded with it. Maybe that's more of a British approach towards it because raising capital in the UK is a lot harder. You've got, I think you've got more risk capital available in the US than we do in the uk. When you're in a meeting with other shareholders and you don't necessarily align on the facts, these are the numbers. This is what's coming in through the door. This is, this is the situation it is that we're in and go and take the emotion out of it for one second and really deal with it, because nobody can argue with the facts and take the steps that you need to do from there. I for one totally understand the emotional attachment that it has when it's your baby and it's your business that's trying to get off the ground. But if it's not gone the right way and because you're in the situation

Speaker A: that you're in and you got to control your destiny. Um, my last question, but I'm just curious. There's been a lot of conversation lately about how AI is going to replace a lot of these SaaS companies, right? And these SaaS infrastructures and these agents and SAS as we know, is maybe dead. What's your take on, uh, on all of that?

Speaker B: I think it's in addition to. I think that whenever something New comes along and people don't quite understand, puts people on edge with it. Much like how we went from web one to web two and now moving to web three. You end up with this kind of Wild west moment beforehand of where nobody quite understands what the level playing field is with it. I think that the era that we are in now where we're moving into an AI world, if the loaded question is something along the lines of does that mean that people are going to be put out of jobs or does that mean to say that certain skill sets are uh, no. Are now redundant? Sure, I think that is going to happen. Uh, and I think it is already happening in some degree. Does AI open the doors for a whole new range of skill sets that are required? Absolutely it does. And it is down to the innovative individuals, the people that understand product and go, how can AI benefit my product for consumers? Rather than what's this going to do and how is this going to replace me? Because for the last 10, 15 years we've been used to building products in PHP and, or using it in Python or whatever it is that we're doing with it, sticking it on aws up into the cloud and going, you've got a login and you've got to log out. Well, the game's now changing, right? And we're moving into a new era of where things are different and are you a half empty or are you a half full kind of individual? I'm a half full kind of guy and I look at it and think to myself, are, uh, things going to change? Yes. How are they going to change? Don't know. It's really interesting we're in a wild wild west kind of moment at the moment, but am I being open minded towards it? Of course I am. And that's the way I think it is that uh, that we should look at this. But one thing is for certain, the best AI SaaS platforms out there will be the ones that can really understand how to productize it to better the customer experience. This is not a replacement for it, this is an addition to and when you reframe it in that way, I think it, it becomes a very interesting topic.

Speaker A: 100%. Look, this has been fantastic. Thanks for coming on, thanks for paying it forward. I appreciate your advice and your lessons and just sharing with us the good and the bad. For everybody listening, I will put Phil's info and whatnot in the show notes, reach out, thank him for coming on. Until next time, be well, be safe and we'll catch you on the next episode of the Uncharted podcast.