8 Startup Lessons from Constant Contact

I was fortunate to have the opportunity to interview Gail Goodman last week at the Momentum Summit at MIT Sloan. Gail is the CEO of Constant Contact, an email marketing company that was founded during the “boom days” of the Internet, made it through the post-bubble apocalypse, and is now a publicly traded company and a market leader.

I originally planned to ask Gail a bunch of standard interview questions but then I realized what a missed opportunity that would be. Instead I only asked her questions that I personally care about as a first-time startup CEO (at Performable).

From her answers to my questions, here are 8 startup lessons that I learned from Gail:

1. If an investor tells you that you can’t build a real business on $20/month, direct them to Constant Contact. Their average selling price is $37/month, they have 375k customers, they are on target to do $170 million+ in revenue this year, and they are a publicly traded company (AKA liquidity event).
2. SAAS (Software as a Service) startups need to focus on getting on past what Gail calls the slow ramp of death. When selling low-priced subscriptions you make your money in subsequent years —  not up front. The slow ramp of death is even harder to get past at an average selling price of $37/month; 1000 customers at that price brings in enough revenue to pay a small handful of employees.
3. The trick is to give experiments enough time to prove themselves. Too often a focus on failing fast leads to false positives. Three months is not enough time to figure out a sales model; you need to give it time.
4. Get a CEO peer group to bounce ideas off of as soon as possible. Gail learned from a fellow CEO that calling free trial-ers would lead to a doubling in their “trial-to-pay” conversion rates. Trying this was the difference between a model that she thought was failing miserably and one that has built Constant Contact into a publicly traded company (see #3 on giving experiments enough time).
5. If your product is strong enough, people do not need to be sold. Focus your sales teams on being coaches, not salespeople. This means focusing salespeople on making prospective customers successful, and not on near-term revenue maximization.
6. There are no silver bullets, just many “A-ha” moments. Success is driven by a million incremental improvements to your business model.
7. A startup CEO’s only important job is what Gail calls searching for the model. In the early days of your business it is all about experimenting in-order to find and perfect your business model.
8. Raising money from institutional investors is all about working the entire partnership, not just your single partner. Make sure you are in front of the entire partnership at least once a year.

Listen to my interview of Gail Goodman of Constant Contact:

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(interview starts at 7:00)

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