Sam’s interview on Nathan Latka’s podcast

Sam’s interview on Nathan Latka’s podcast
By Pedals | On Nov 17, 2021
10 min read
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TestBox CEO and Co-Founder, Sam Senior, joined as a guest on Nathan Latka’s podcast. His show features CEOs, Founders, and StartUps all in SaaS.

They discussed:

  • The TestBox fundraising story
  • How we closed our first deal
  • How we make money while keeping our platform free
  • Sam’s focus on the importance of therapy

Sam Senior:

2024's pretty close. I've probably got 15 years of product in my head at the moment, but if we take the next three to four years, basically to be able to say, "Look, if you're trying to buy enterprise software, the first place you go to is TestBox.com." You say, "I'm looking for these three or four vendors. Let me get my hands on." And it shouldn't just be in customer support, but basically all of the sales ops tools, all the marketing tools, or whatever. Basically, come to TestBox and then you can make the best decision in a few weeks, rather than many months.

Nathan Latka:

You are listening to Conversations with Nathan Latka, where I sit down and interview the top SaaS founders, like Eric Yuan from Zoom. If you'd like to subscribe, go to getlatka.com. We've published thousands of these interviews. And if you want to sort through them quickly by revenue, or churn, CAC, valuation, or other metrics, the easiest way to do that is to go to getlatka.com and use our filtering tool. It's like a big Excel sheet for all of these podcast interviews. Check it out right now, at getlatka.com.

Nathan Latka:

Hey folks. My guest today is Sam Senior. He's the co-founder and CEO of TestBox. Originally from regional Australia, he studied software engineering and economics at university where he met his co-founder, Peter. He left Bain after six years as a senior manager in San Francisco to build the future of software buying. He now lives in Boulder, Colorado. Sam, you ready to take us to the top?

Sam Senior:

Yeah. Thanks so much for having me, Nathan.

Nathan Latka:

You bet, man. So what does this mean, the future of software buying?

Sam Senior:

Well, I think previously, everyone has talked about having an enterprise sales-led approach, now people are talking about a product-led approach to growth and selling software. I think the future is actually customer-led. So meeting the customer and how they want to buy software, the process they want take, and giving them a true hands-on experience. And so we've basically built an app that allows people to test and compare enterprise software before they buy without even talking to a salesperson, with hands-on experience, with real data in there and all the use case configured so they can do a side by side comparison within minutes, instead of doing a month long sales process.

Nathan Latka:

Sam, how's that work? It sounds too good to be true. Someone listening right now that wants to try Salesforce, Salesforce is not going to let you try it unless you go on a sales call and all this stuff. Have you pirated their software or something, and given everyone access? How do you do this?

Sam Senior:

So we've been very intentional in starting with just one software category to prove our values. So we've sat in a customer support/help desk space, and we've actually gone out and built partnerships with each of the major vendors. So we've got about six on the platform at the moment, three more in discussion, but we've got more than 50% of the market share of the top platforms already partnered and integrated with us.

Nathan Latka:

And how do you define market share? So otherwise you wouldn't know how, if you have-

Sam Senior:

In terms of revenue or users, really either is fine. I think if you take revenue, for example, Zendesk in help desk space has 20 plus percent of the market share. They're actually one of our partners that's integrated into TestBox.

Nathan Latka:

Okay. And what about Freshworks?

Sam Senior:

Yep, integrated.

Nathan Latka:

Okay.

Sam Senior:

And HubSpot Service Sub, and a few others as well.

Nathan Latka:

So what do you give Zendesk and Freshworks to let them do this? They want people going through their funnel, obviously.

Sam Senior:

So yes and no. I think they understand that people don't always want to go direct, and go through an AE/BDR process. Instead, they want to go self-serve and hands-on. We're basically taking that self-serve approach and super charging it in a way that no one else has been able to do by getting it more real life, like it's already been implemented for that end-user. So we're actually a new lead generation source for them.

Nathan Latka:

Interesting. Yeah. Well, it's actually funny, Dixa's interview is next week.

Sam Senior:

Nice.

Nathan Latka:

Girish came on before their IPO with Freshdesk, and Brian Halligan came on pre-IPO from HubSpot. So you also have Help Scout, Trengo, and that crew as well. So this is cool.

Sam Senior:

Yeah.

Nathan Latka:

So I love how you're going to sort of focus on a niche here, and dominate the niche. Why customer support software though? Why start there?

Sam Senior:

So my co-founder and I actually, about 10 or 11 years ago, worked as IT help desk agents. So we just understood this space really well, having used these types of software before and understand the use cases that really matter. But it all got kind of coalesced around this experience, actually, where someone close to me had previously bought help desk software and I watched how painful that experience was, and I basically interviewed her the entire time to understand what the major pain points were and how we could make it better. So those two experiences together said, "Let's start there." Plus, it's a hugely growing market that's like 10 and a half billion today, growing at 10 plus percent. And it's getting more and more important, so it's also a good niche for that reason.

Nathan Latka:

Tell me more about growth. So you've got going, you've just raised some capital. We'll come back to that in a second, but you're onboarding, there's this three step process. First, just introduce yourself: What are people mainly picking in the industry dropdown? Are you seeing concentration around B2C tech, or B2B technology, or something like that?

Sam Senior:

Yeah. So that's primarily where we're focused is B2B tech, and then eCommerce, then Fintech.

Nathan Latka:

Signups, what market are they in? Those three?

Sam Senior:

Yes.

Nathan Latka:

Oh, okay. Okay, got it. Cool. And then... I'm going through it now, I love asking these questions I write. So you're basically saying, "What products do you want to test?" I'm going to click HubSpot and Zendesk, looking for another solution. So you're basically doing user generated content here. If people start typing in something and it's a new customer support that's taking off, you should be aware of it because people will start typing it, right?

Sam Senior:

Exactly, right. And so we're basically trying to collate all that information, so that we can say, "Great, we've had this many more people asking for this platform. Let me go build that partnership and get them integrated."

Nathan Latka:

All right, talk money to me. When you give HubSpot a new customer, it's probably the hottest thing they possibly get. You must have some economic upside here.

Sam Senior:

Yeah, exactly. So with HubSpot, it's 20% of total contract value. So not just first year, but actually the entire contract value that we get paid.

Nathan Latka:

What if you help the customer sign up on HubSpot for a hundred bucks a month; HubSpot, the customer success managers work with them for 12 months and expand them to a thousand dollars a month? Do you get the expansion revenue too, 20% on that?

Sam Senior:

Yep.

Nathan Latka:

Okay. So you have to trust on HubSpot, and Zendesk, and Freshworks reporting back to you accurate expansion revenue on accounts that you helped them land?

Sam Senior:

Yeah, exactly. And that's part of the partnership terms, in terms of terms and conditions, legal, all that sort of goodness.

Nathan Latka:

Super interesting. Okay. So you're effectively a sales rep for them, but running a different motion?

Sam Senior:

Yes, but it's fully productized.

Nathan Latka:

Yeah, yeah. Interesting. Okay, so when did you guys launch the business? When did you write the first line of code?

Sam Senior:

The first line of code was written just over a year ago, but we launched in sort of a public beta in middle of June. So only a few months ago now.

Nathan Latka:

And what numbers do you care about right now? Wait list, size... Tell me what you care about.

Sam Senior:

I think there's two major things for us. Because we're essentially building a marketplace, we need to be building both sides of that. So the big one of just continuing to build partnerships really matters. So I'm trying to pick up a new partnership every month at the moment, so we have that supply side of the market.

Sam Senior:

And then on demand side, it really is just, "How many signups can we be generating on a weekly, monthly basis?" And then once they're in, "How quickly can we get them to a decision?" Is it going to take three months like it does today, or is it going to be like a recent converted customer where it took them two weeks? And that's a significantly better process than they go through at the moment.

Nathan Latka:

So we're not done with October yet, so I can't ask you for October numbers. But in September, how many total new signups?

Sam Senior:

So it's less than 10. I think we're at sort of eight, that sort of number. So it's still small, but it's continuing to grow every single month.

Nathan Latka:

Got it. And how many customers that are now paying on one of your six or nine partners?

Sam Senior:

Yep. So we've only closed one deal so far, but that's-

Nathan Latka:

How did that feel? That must have been amazing. How'd that feel?

Sam Senior:

Yeah, it felt pretty incredible. There was a lot of jumping up and down, but I think importantly, at the moment, it's not just a... We've had a 100 person company use our platform, but we've also had a 100,000 person company use our platform. So at the moment, there's a company that's a 100,000 sort of FTE's using TestBox to make a decision on a new platform. So we're in this interesting phase where we've just been trying to build awareness, and we're just starting to see real elevation on size of company, and number of people coming into TestBox.

Nathan Latka:

What prevents you from arbitraging, or basically taking up HubSpot top keyword tools, like you start basically paying for ad space or running SEO to get those leads before HubSpot does? I imagine there's something in the partnership agreement that prevents that.

Sam Senior:

There isn't actually. It's just incredibly expensive.

Nathan Latka:

Okay.

Sam Senior:

I think if you look at the cost for these sorts of ads, you're talking at least $120-$150 for some of these ads on those keywords. And then just conversion on that, when you think about the percentage that we're taking, it doesn't really work out economics-wise.

Nathan Latka:

What about a project SEO play though, right? HubSpot vs Zendesk.

Sam Senior:

Yep.

Nathan Latka:

HubSpot's number one, G2's number second, Stack Share's number three.

Sam Senior:

Yeah, that's exactly what we're doing at the moment.

Nathan Latka:

So does HubSpot like that? If you start out-ranking them, are they cool with that?

Sam Senior:

Yeah, that isn't a competitive term in our agreements with them.

Nathan Latka:

Interesting. Do you give them a row for in the partnership agreement, where if you ever want to sell or exit, they have right of first refusal on exit price?

Sam Senior:

Not at the moment. Well, we'll see how that goes in the future, but I think right now our focus really is just, "Let's keep being that amazing lead generation platform for them."

Nathan Latka:

Okay. Tell me more about economics. You're just getting going here, how much have you guys spent to date on getting the MVP live?

Sam Senior:

Yeah, so we've probably spent something like $700,000 to get the MVP live, and we raised $2.7. And that MVP live, so much of it is really deep infrastructure and orchestration of all these different services, and getting them to spin up really quickly. That's the more challenging piece. We haven't really spent any money on marketing yet, which is why the numbers are kind of on the lower side at the moment.

Nathan Latka:

The $2.7 was raised this year?

Sam Senior:

Yeah, at the start of the year.


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Nathan Latka:

There's two of you guys, right? Do you split equity 50-50?

Sam Senior:

No.

Nathan Latka:

It's okay, that's a tough conversation. Tell me about that. How'd you guys sort of work that out?

Sam Senior:

Yeah, I think... So my friend Peter and I have known each other for 11 years now. It was actually a relatively easy conversation for the two of us to go through. We realized that a lot of the drive behind TestBox was driven by me when it comes to the idea, and the plan is sort of... We talked about, "Is this the 10, 15, 20 year company for me? Yeah, it probably is." And for him, he's obviously committed for the next five years at least, but he was like, "I don't know if I want to do this for 20 years."

Sam Senior:

And he was like, "I don't think I'm going to be the one leading all of our really in depth engineering stuff, long term. I want to be more of the people managing piece." So as we thought about our roles in the company over time, we saw that they're going to change and develop, and realized that actually, initially anyway, we thought that my sort of level commitment and the inputs that I was adding into the business at the time were at that higher value.

Nathan Latka:

All right, come on. You've got to translate this into numbers. You're talking like... So you own 60%? 80%? How big is the difference?

Sam Senior:

It's sort of two thirds, one third.

Nathan Latka:

Okay, fair. Got it. So we've got it 66 to you, 33 to him, but now you're both diluted a little bit because you raised some pre-C. I imagine you did a SAFE?

Sam Senior:

Yes.

Nathan Latka:

Got it. Obviously at your stage, it's not a valuation multiple you're raising, it's really, "What story can you tell, and do people believe that you can execute on the story?"

Sam Senior:

Yeah.

Nathan Latka:

So you tell a great story, it makes clear sense to me here in just 13 minutes in. What cap were you able to raise at?

Sam Senior:

It's a post of 12.

Nathan Latka:

Okay. Did that feel fair to you?

Sam Senior:

Yeah, it felt reasonable. We could've probably pushed to get to 13, but I think at the time we had a very limited prototype and really great story and a few partnerships basically built out. And honestly, we had spent two months working on the product at that point, or the company, so it was so early in our journey that we were like, "Okay, that's fine. This is what we need just to move forward to the next stage."

Nathan Latka:

Is there a GPT-3 component of this?

Sam Senior:

Yes.

Nathan Latka:

Tell me about that.

Sam Senior:

So all of the data that we actually create for our end users, we customize for them. So if you say you're a B2B company, or you're an e-commerce or whatever, we'll put different data into the platform based on what you tell us about you. And so we use the GPT-3 engine to be able to customize that data.

Nathan Latka:

Interesting. Okay, SignalFire and firstminute capital were the main folks putting up the 2.7 million. How do you make sure they work their butt off for you? I'm sure you had a bunch of term sheets, you want to make sure they're value-add VCs. How do you make sure you activate them to really help you build the business?

Sam Senior:

Yeah. I have been incredibly impressed by SignalFire actually, and I would say 10/10 recommend to anyone who's interested in raising capital. They turn up whenever we ask them to, on absolutely anything. I could text Elaine, our board member, and she'll respond to me in minutes, jump on the phone whenever. And every time we've had a hurdle, they've gone and helped us figure it out. So I lean on them pretty aggressively. I think a big thing is that we're very transparent with them, and that has allowed us to build a really strong relationship, which I think has been phenomenal. And when it comes to firstminute, I reach out to them at least once a month, saying, "Here are the three things I need from you, go make that happen." And they've also been delivering, which has been pretty phenomenal.

Nathan Latka:

Tell me the last thing that SignalFire did for you, if you can be specific.

Sam Senior:

Yeah, so we were having some interesting challenges with the security protocols that Zendesk has on their platform. Basically, it was creating some bot detection issues. And so they actually went straight to the chief of security at Zendesk and helped us resolve that, and worked through their machine learning algorithm to basically approve everything we were doing.

Nathan Latka:

Unbelievable. There guys have it: SignalFire and Elaine, doing a nice job here for Sam, which we love hearing. Okay, cool. So now, let ask you a question. Is this sort of your first foray into startups? You came from Bain, or have you already sort of gone through the mill already?

Sam Senior:

No, this is the first full-on go. Peter and I dabbled a little bit about 10 years ago or so together, and made a little bit of money to pay rent, but nothing that was our serious full-time thing that we were tackling.

Nathan Latka:

I see. Okay, cool. Well, you've got your first customer landed. And which company did they end up buying from, out of your six partners?

Sam Senior:

So it was Zendesk, and it was a company called ProfitWell, who I think you've spoken to before on your podcast.

Nathan Latka:

Yeah, that's great. Okay, so ProfitWell bought Zendesk. And so what are they now paying Zendesk per month, and then break me down economics.

Sam Senior:

Yeah. So we got 15% to 20% of that deal, and they bought something like 10 licenses. So if you look at the Zendesk pricing online, that ranges somewhere between $50 to $80 per seat, per month.

Nathan Latka:

Okay, so let's just assume it's on the low end. So it's $500 per month, you're making 20% of that. So you get about a hundred bucks per month, as long as ProfitWell stays active?

Sam Senior:

Yeah, something in that range.

Nathan Latka:

Will Zendesk pay you upfront for the full year, so $1200, or do they pay you as ProfitWell pays them?

Sam Senior:

So they will pay us... With Zendesk, it is on annual contract value plus expansion. So we get the upfront annual contract value, then anything that increases we get payed later on.

Nathan Latka:

Very cool. Okay. So you basically got a check from around 1200 bucks from Zendesk, and then you can keep scaling.

Sam Senior:

Yep.

Nathan Latka:

Very interesting. Okay, cool. Yeah, big fans of PC, and ProfitWell, and everything they're building over there.

Sam Senior:

Yeah.

Nathan Latka:

So cool. Okay, got it. So you have your first 1200 bucks in ARR. You're going to keep scaling here. What's the thing you're actually building towards? This is a Trojan horse to what, in 2024?

Sam Senior:

2024's pretty close. I've probably got 15 years of product in my head at the moment, but if we take the next three to four years, basically to be able to say, "Look, if you're trying to buy enterprise software, the first place you go to is testbox.com." You say, "I'm looking for these three or four vendors. Let me get my hands on." And it shouldn't just be in customer support, but basically all of the sales ops tools, all the marketing tools, or whatever. Basically, come to TestBox and then you can make the best decision in a few weeks, rather than many months.

Nathan Latka:

Sam, you guys made your first hire yet, or just still you and Peter?

Sam Senior:

No, no. We're at 10 people already.

Nathan Latka:

Oh, wow. How many engineers?

Sam Senior:

It is five engineers.

Nathan Latka:

Okay, got it. So if I ask you all-in headcount expenses right now, how much are you spending just on headcount per month?

Sam Senior:

About 100k.

Nathan Latka:

Does that make you nervous, or you have plenty of runway, you're not worried?

Sam Senior:

Plenty of runway, not a problem.

Nathan Latka:

Yeah, interesting. Anything else that's taking up a bunch of money that wouldn't be obvious in a SaaS business, or it's pretty standard?

Sam Senior:

Pretty standard at the moment. As I said, we haven't really focused too much on the marketing piece, we're really... Importantly, we need to build the supply side of the market with the integrations before we become valuable for people, and so we've just been really focusing there with our dollars.

Nathan Latka:

Guys, crazy story. If you want to avoid all those marketing calls, sales reps, all that jazz, go to TestBox.com.

Nathan Latka:

Sam, before we wrap up here, let's jump into the famous five. Number one, what's your favorite business book?

Sam Senior:

Oh, I really like Radical Candor.

Nathan Latka:

Number two, is there a CEO you're following or studying?

Sam Senior:

I think Bill Halligan.

Nathan Latka:

Yep. Number three, what's your favorite online tool for building TestBox besides GPT-3, and besides any of the ones you're partnered with?

Sam Senior:

GPT-3 is the one that I wrote code for specifically, so... I think the team is loving AWS, and writing with chalice apps on AWS.

Nathan Latka:

Number four, how many hours of sleep do you get every night?

Sam Senior:

Eight.

Nathan Latka:

Eight? Okay, and situation? Married, single, kiddos?

Sam Senior:

Partnered, not married. No children yet.

Nathan Latka:

And how old are you Sam?

Sam Senior:

I'm 29.

Nathan Latka:

29. Last question: What's something you wish you knew when you were 20?

Sam Senior:

The value of therapy.

Nathan Latka:

Who are you using now? How did you find your therapist?

Sam Senior:

I connected with... So someone I was close to had a phenomenal therapist, and she basically helped me find five or six people to go and interview. And then I went through that process, and have a phenomenal therapist called Andrea Dindinger. She's in San Francisco. Phenomenal.

Nathan Latka:

How do you... A lot of founders, they hear that it's really valuable, but they don't even know how to use a therapist. Without revealing personal stuff, what is a conversation with your therapist sound like? What do you talk about?

Sam Senior:

Yeah. So we start really checking in with where I am at emotionally, and ensuring I use emotional feeling words rather than just thinking words, which I kind of do most of the time. And then use that to say, "Okay, what are the things that are really affecting me in some way?" And go deep on that. I think we try to get a balance between acute issues, so what's happening in the moment, and then also chronic issues, like what's been the stuff that I've been challenged on for the last 10, 15 years, "How do we continue to work on those on an ongoing basis?" I think, importantly, a really good therapist will help guide you and create some structure around this, rather than allowing you to just sort of flounder your way through.

Nathan Latka:

Guys, Sam Senior with TestBox. If you want to test customer support software without sitting on sales calls, test them out. They just landed their first customer, which means they helped someone buy customer service software, Zendesk specifically. They make 1200 bucks a year on that. They're off to the races, raised 2.7 million bucks at a 12 million cap as they get going here. Sam, with owning, caught two thirds of the equity because he sees really a long term play here into many other product lines. Team of 10 right now, five engineers, as he looks to scale the business. Sam, thanks for taking us to the top.

Sam Senior:

Thanks, Nathan.

Sam's Face
Pedals

Pedals is a beloved member of the TestBox team whose entire goal in life is to author amazingly helpful blog posts and to cameo on every piece of TestBox swag.

TestBox empowers you to have a self-serve, customer-led experience so you can buy new software and feel confident that you made the right choice. Currently focused on Customer Support, TestBox allows you to test out Zendesk, Freshdesk, HubSpot, Dixa, and other products side-by-side. It takes a matter of minutes to sign up and take these products for a test drive. Find out more at TestBox.com or follow on LinkedIn.

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