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Podcast Notes

This week on the show, Aakash and Xand discuss Warmly [https://www.getwarmly.com/]. Warmly's product focuses on lead generation for oubound sales. They've taken a proven strategy, looking at your current customers' employees who have reached purchasing decisions, and they've turned it into a SaaS product. We think it's a brilliant idea, and we stan Warmly's offering. We talk about how Warmly can find buyers of their own product primarily through outbound sales. Warmly's pricing model also interests us, because it's always profitable to be where the money is made -- on the revenue side.

Autogenerated Transcript

 Aakash Shah: [00:00:00] Welcome to All Schemes Considered, the weekly podcast where we dive deep on a new startup and examine its viability as a venture backed business --  all in 20 minutes or less! Some people say that we're essentially the Harvard Business Review for early-stage startups. I'm your host Aakash Shah.  As usual, my cohost Xand is here too.  

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hello, again, I'm  Aakash {I'm Xand} and we're here to talk about warmly. Warmly is a Y Combinator, summer batch 2020 company that raised a seed round of $2.1 million before even demo day.

which is very impressive and I'm very happy for them.  you know, they did this entirely remote and that's tricky to do so. What does warmly exactly do according to their website, [00:01:00] www.getwarmly.com. They let you get warm, qualified leads every week. Warmly sends you a weekly list of warm leads by finding you users and prospects when they move to a new company.

So specifically they look at your  current customer set, and when your current customers move on or change companies, they probably discovered their email or some other way. And they send you a notification and say," Hey. These people changed jobs. You should prospect them. You should reach out to them. They already love you."  Something along those lines. So, you know, Xand, you've been in the B2B enterprise sales space for longer than I have. What do you think? 

Xand Lourenco: [00:01:36] So,  this is something that a lot of companies I think do manually and painfully right now.

I know I've worked with people who -- they're constantly scouring LinkedIn for current customers to see where their kind of champions are going to different places. And so it, it of course is a good warm lead, right? , if you have someone at a company that's using your product, they love your product.

They go to a new company. I mean, it's a no brainer to reach out to them and be like, [00:02:00] "Hey. You know, you loved us at company A, I think you'll love us at company B. Let's do it."  And I think a lot of people would pay probably a considerable monthly fee to just automate that process away.

If I have , like a BDR or, sales person doing this part time every month, maybe they slip through the cracks or they go on vacation. You know, it's, it's not a job that you're willing to hire someone to do, like for 30 grand a year, but it's certainly something you'd pay SaaS company to do for like a couple hundred bucks 

Aakash Shah: [00:02:25] a month.

Yeah. I actually think you brought up a very good point on how they can do their pricing and how they can justify this tool. Because I think a lot of people, when they look at this, they'd come at it from like almost a personal finance perspective. , 

"why do I need to pay for this? This doesn't really make sense.  It's something that's so easy to do.  I could just, you know, review my customer list on LinkedIn every week or every month or every quarter and see how it is. " 

Yes. But right. 

Really it's another task that you have to do. And if you're not the person doing it, you're automating it by paying [00:03:00] an intern by paying a BDR by paying someone to do it.

And it's possible that can work when you have a thousand customers it's possible that can even work when you have 10,000 customers. But after a while, that scale just obliterates your ability to actually execute on this. Right. You did say, it does make sense.

They're selling, they help you connect with people that were already using you, that you already have an established relationship with at new companies. And I think when they're at new companies is very interesting because a lot of times when people change positions and if they're a decision maker, and if they're a buyer, they're probably changing positions in a way where they're going to continue to have that budget.

You know, it's almost like when people move houses or have a major life event,  they're kind of like shopping around again for these tools or something. For these services. And so, it's good to get your foot in the door at that point. Right. so I think it's a very clear product proposition.

I think it's a very clear proposition [00:04:00] for the people they're selling to which is B2B sales teams. Right. And it makes sense to us. Now, the pricing you brought up is very interesting because their pricing probably depends. So right now they don't have no public pricing, which makes sense. They're a very small company.

A lot of times you don't want to pitch your public pricing upfront.  so they, you said, you specifically said like, if. It works. If they actually give us a warm lead it's worth paying for. Yeah. Do you think most sales teams know the value of  a warm lead? So let's say a post sales development representative, a post business development representative, you know, something that actually reaches the first sale stage.

Yeah. 

Xand Lourenco: [00:04:43] I 

Aakash Shah: [00:04:43] mean, 

Xand Lourenco: [00:04:44] I guess I never considered this on a broader scale, but most sales teams I've worked with at least understand the idea, at a basic level, understand that like an inbound  is better than a cold call, you know, , they kind of get the concept of warmth of lead.

So I think it wouldn't be too hard of a sell for normally , even for a sales [00:05:00] team that doesn't have maybe a ton of B2B experience or it doesn't. Yeah, it doesn't have like a tight like sales pipeline. Doesn't have a tight sales process where, where this kind of thing would be attributed and tracked.

I think it would be fairly easy to convince the sales team that, Hey,  these are definitely warm leads because they like you before. And a warm lead, definitely converts a higher percentage than, a cold lead or an outbound kind of thing. 

Aakash Shah: [00:05:24] Right? Right. So then the leading into that a little bit,  you're right.

Maybe they don't have a set sales process. Maybe they don't have like strict stages. So , , let's make it less formal. you know, a sales person knows how much money they can make from a sale. right. If they can say, if we have this  across their entire pipeline pipeline is the term of like, All of your current sales opportunities that are existing.

, they can generally say our average customer is worth $10,000. We're going to keep the numbers round here, $10,000. So that means when someone gets halfway through the sales process, [00:06:00] their current value, so to speak is $5,000. Right. . so the value between someone  that's never heard of a whatever we're selling is $0.

And someone that maybe reaches it to our third conversation with a sales person is worth $5,000 to us. Warmly moves up instead of having you cold call, like you said, warmly effectively brings people 25% of the way.  you skip the first call. So now you're immediately at, you know, they know about the product that you're selling, they know who you are, and,  you can skip past a lot of the sale and it's a very qualified lead in that sense.

So I actually think that,  At a sales team can look at this and say, yeah,  if the leads that come in through warmly are worth more than the leads that come in through our generic prospecting and on top of that, warmly is cheaper than the leads are worth. Then you have to pay for it.

It is foolish not to pay for it. because. [00:07:00] Literally warm leads making you money.   You have to make sure that this continues on through the pipeline and at the end of the day, the warm leads are actually paint you. But 

Xand Lourenco: [00:07:10] right. And I think that that's kind of the, the tricky part of what they're going to do.

So many sales teams I've worked with, they understand very much  the value of the deal they're getting because commission,  they tend to understand the kind of pre sales pipeline that's bringing them these leads and the quality, , even if you're not keeping formal,  

records of these things, many sales teams do have kind of an idea of, , what sources are working for them and what are Even with BDRs business development representatives. These are people that, that kind of prospect and give leads to  salespeople. Salespeople will have BDRs. They prefer they'll have sources. They prefer because they know certainly it's worked out better than others. But I think with Warmly, what their problem will be is to keep themselves top of mind and not get lost in that noise.

So while salespeople might tend to know what leads convert better,

unless [00:08:00] Warmly really stands out 

as a lead source. Warmly may not be their go to right. Like they might, they might. Say "Hey, is, is Warmly really getting us these prospects that are that warm, that they're skipping ahead to halfway through or three quarters through the sales pipeline?"

 I think part of Warmly's challenge and maybe not, I could be wrong depending on how intuitively salespeople know the quality of their lead sources, or if there's already a formal, sustainable process that scores them Warmly job is going to be.

Keeping keeping their clients cognizant of how good their leads are. So always keeping them top of mind, like, "Hey look, we brought in like these 15 leads and 75% of them converted, our pipeline is good." I think that's going to be the thing that they're going to have be on the ball with, 

Aakash Shah: [00:08:44] it's going to be how they prove their value effectively.

Xand Lourenco: [00:08:47] Right. 

Aakash Shah: [00:08:48] Exactly.  I think it's very interesting, they are only selling to people that have established customer basis. Right, right. , it's a very specific and niche product in the sense that right now [00:09:00] I'm sure Warmly has big dreams to become a customer success suite or a sales suite, but right now, Warmly is only a list of leads from your existing users ,  that have changed companies. So who does this work for? Really? It works for companies that have large customer bases or large user bases,  for B2B software. So, you know, a variety of , MarTech tools, a variety of sales-tech tools, maybe support tools, stuff along those lines. And I think if you think about who they're selling to, so they're selling to the sales leader at a B2B SaaS company.

 and we know that it's a larger company because of number of customers. It has, I think the safe assumption to say that there is some person who is running that analysis and who is thinking about sales strategy overall. it's not someone that's necessarily focused on tactics as much as overall strategy [00:10:00] because of the scale, because of the size of the operation that they're in, right?

This isn't for a sales team of three people. I mean, it can work for a sales team of three people, but because of the requirement of a large customer base, I think a large customer base generally means you have a lot of revenue, which generally means you probably have a larger sales team, maybe I'm wrong.

You know, there's a lot of assumptions that we're building in here, which is always dangerous, but we feel safe making these assumptions, I think would like to be easier to kind of justify because the person they'll be selling to is already looking for that justification and may already be running this analysis.

So Warmly doesn't have to teach them as much on like how to evaluate their product at the same time . You're right. Like warmly is going to have to do it's own customer success. Kind of like , , any external agency would do to say like, "Hey, this is what we're providing you on a quarterly basis on a annual basis."

But really, I think Warmly,  if I can [00:11:00] kind of shift the conversation a little bit Warmly provides an interesting outsourcing, not even outsourcing, but like a SaaSsourcing, so to speak of a business function that we've slowly been seeing across whole industries. Right. You don't need necessarily to have a BDR to do this, right?

You don't need to have a person to do this. Outsource it to Warmly and Warmly is much cheaper than labor. Just the fact that's how it works. Software. It's cheaper than human labor. right. Mostly because software doesn't require benefits and health insurance. And, and this is 

Xand Lourenco: [00:11:39] you raise a really good point, in terms of their customer base.

Again, taking the assumption that probably it's more established companies,  a good sales team and I can edit an established company will already be willing to pay for even mediocre leads. Right. Pretty often, If your sales team is good. If you have a really trained enterprise team that can sell into places effectively, [00:12:00] you can usually convert even to kind of mediocre or poor lead.

That's typically what you're good at. Right? So not only would like a team lead, be willing to pay for leads at a place with a large customer base, a lot of turnover in customers who are moving to different positions, . It might even be a no brainer for them to pay for something that's not, just a new lead source, but something that's more and doesn't require labor to your point.

So this is what these teams are, is all about cost cutting and all about increasing lead generation cheaply. So 

Aakash Shah: [00:12:29] really even if I -- I just to quickly interject, I wouldn't say it's about cost cutting, but it's about being more efficient. 

Xand Lourenco: [00:12:35] Optimizing, sorry. Yeah, that's a much better word efficiency optimizing, because  if you're a team lead and your, your ACV is 10,000 or 15,000, if you're paying Warmly even a thousand bucks a month, if you convert one or two leads from Warmly it was worth 

Aakash Shah: [00:12:48] it for the whole year.

Xand Lourenco: [00:12:51] Exactly. 

Aakash Shah: [00:12:51] If Warmly, if you're paying Warmly a thousand dollars a month and they give you five leads and only one of those converts that Warmly [00:13:00] has proved its value. Right. so that's incredible. I think this is before we even go into like the deeper go-to market and how they sell themselves and claim, right.

Get new customers. I think the pricing is very interesting for Warmly because generally speaking, they're probably going to be selling to enterprise sales customers and enterprise sales customers have high. Annual contract values, right? sometimes mid five figures, sometimes six figures. , if it's in the seven figures, I don't think the company is probably going to be relying on software to do the work for them.

at that point, the customer relationship is too valuable. so probably around five to six, low, mid five, maybe even low five to. Low six figures is where we see this annual contract value. And there are a lot of those, a lot of companies out there that make very good annual revenue with those annual contract values.

And if we know that, , Warmly could just say like, yeah, we cost a thousand, we cost $2,000 per month. And, you know, even [00:14:00] though that's expensive, even though you might think that $24,000 a year is expensive. We're going to make you a hundred thousand dollars, but why wouldn't you pay for us? and, and if the Warmly team is smart, they're not going to do any set pricing.

They're going to be very strategic about their pricing. Brian, identify them customers, pricing models as often as possible. and that might sound difficult.  how can you figure out what someone's enterprise pricing model is? You know, if you have a large enough network of software buyers of a certain cohort, generally this information leaks out.

It's a common knowledge that if you just tell your AWS sales rep that you're thinking about switching to GCP, Google cloud platform, they'll knock 20% off your bill. Like you just have to know to do that. and the way you learn that is by asking around your network, asking around to other buyers that are like you.

Right. So hopefully one, we wouldn't be able to discover that, you know, company that they're selling to has an [00:15:00] annual contract value of a hundred thousand dollars and then Warmly would say, well, I guess we're going to cost $5,000 a month for you. 

Xand Lourenco: [00:15:09] right. Cause really  all you need. If you're a Warmly, when you're pricing,  , your pricing is entirely dictated by the value of the client's ACV.

So if you know that these leads tend to have whatever. A 10% conversion rate and your client's contract value is a hundred thousand, you know, you could charge at most 10 grand a month. You know, if you know, you'll give them 10 or 12 leads that year, one of them will convert. It's paid for itself.

Obviously you that doesn't just kind of a maximum number, so to speak, but you could,  have some sort of calculation based on the client's ACV 

Aakash Shah: [00:15:37] Yeah, I think you're absolutely right. And no client is going to share those. No prospect is going to share those numbers, but there's ways to like find them.

Xand Lourenco: [00:15:46] You'd be surprised. I've been in a couple of calls where people are very free with their,  contract value and internal sales workings. You can get a lot of inside information about companies sometimes just by being friendly. 

Aakash Shah: [00:15:57] But when you were trying to price them off those [00:16:00] numbers, 

Xand Lourenco: [00:16:00] Oh, I guess that's fair.

That's a good point.  I don't know though. I think  a good  salesperson can pull a surprising amount of information from a client, even when it's against the client's best interests in negotiation. 

Aakash Shah: [00:16:10] That's true. That's true. 

Xand Lourenco: [00:16:11] Yeah. 

Aakash Shah: [00:16:11] Now, you know, I think we're pretty bullish on the concept because it already exists.

People are already doing this. we know it works because people are already doing this and we know it's annoying to do so. It makes sense that there is a tool out there to help.  I guess the next question is how do you get in front of sales operations people or marketing development lead. So you're looking for sales leads.

sales leads can have two terms. So you're looking for sales team like directors of sales. And you're looking for, directors of market development or something along those lines, people that have the cash to pay now, if we look at the general kind of what the market for how people acquire, we've talked a lot about SEO.

I don't think you buy this through SEO. I think SEO [00:17:00] and paid ads  they really increase your brand awareness. They really increase the number of people that discover you. But it's very hard to close a sale for thousands of dollars a year without having human contact in there.

And without having a little more personalization, 

Xand Lourenco: [00:17:16] right. I agree. And 

Aakash Shah: [00:17:18] maybe that purchase behavior is changing, but I don't think so. So I actually think we're Warmly would do better as like, yeah, they have a small blog, which is good, mostly as a way of proclaiming that they exist on the internet and they have a small website again, to proclaim that they exist on the internet and same things they'll do with their social media.

But I think where Warmly. We'll really find great success is in referrals.  If you can prove yourself to a customer, and then you tell that customer, "Hey, if you can refer me to another customer and they close, I'll give you a month free." You don't even have to do a month for it.

You can just say like," I'll give you a $500 Amazon gift card." Right.

 you get along a lot of faith and a lot of . Good relationship building going off of referrals and [00:18:00] then Warmly should probably use their own product, but ironically, their own product is bad for them because they don't have a large customer base. 

Xand Lourenco: [00:18:08] Right.

Exactly.

Aakash Shah: [00:18:10] And I don't know. What do you think is the value of direct outreach and cold outreach for Warmly?

Xand Lourenco: [00:18:14] I think it would work pretty. So I know everybody says that, you know, cold calling stuff doesn't work, but I, I I've found that sales teams are actually pretty receptive and marketing teams are pretty receptive to being sold to.

And I don't know if that's a function of them having to do it. So they recognize that there's actual value in it, but I don't think it would be too hard to get initial customers for warm leads, actually doing cold calling and outreach. I agree with you that social media is probably not the greatest way to go for them in terms of building a client base.

But I also think that,  , they could find some, especially initial success  doing  cold calling outreaching to companies they think might be good fits.  I don't think it would be a waste of time To me, I think  the kind of two ways that you scale.

So that's not [00:19:00] scalable right at the top on growth, but the scalable way to do it would also be to do a kind of content marketing, but circling around tools, these people are probably using. So you would kind of do in like a blog about Salesforce or HubSpot you would say, "how to drive, how to drive warm leads with Salesforce."

And, you know, you start getting yourself into that wider ecosystem of people attempting to use Salesforce and HubSpot. Or a CRM tools like this to solve a specific problem, like lead generation. So I think if you're looking at like scalable, sustainable inbounds, I think that's probably a solid way to go.

But I think certainly right now where they are, it would not be a waste of time to start doing a bit of like direct outreach or cold calling. 

Aakash Shah: [00:19:36] So I agree. That's a great way to get inbounds that those, yeah. What you just suggested would also be like, a good way for a sale, almost like a sales enablement tool.

Like, "Oh yeah, you're using HubSpot, but like, is it really that easily? Oh yeah, you're using this. Isn't really that easy." but I would want to challenge your, statement that outbound can't scale. Okay. If we define scale [00:20:00] as the ability to take money and make more money from it. Outbound can scale. 

Xand Lourenco: [00:20:05] Okay. That's yeah, but I guess when I consider scaling, I consider not adding head count. Sure. If, if you have a winning strategy, but with out bound, you do still need to add people cool to an app enterprise sales 

Aakash Shah: [00:20:17] team.

Right. But   if it's less cost to add someone, then your marginal gains. Then I think that counts for me, that counts as scaling. 

Xand Lourenco: [00:20:25] Yeah. I guess that's true. 

Aakash Shah: [00:20:26] it's like a positive feedback loop effectively to me. Right? Sure. Add head count. It makes you more money.

So you can add head count. As long as that holds true. It is riskier,   there's a constant longterm benefit to content, versus paid acquisition. Whether if he ads or through outbound Well, that's true. 

Xand Lourenco: [00:20:43] That is true. 

Aakash Shah: [00:20:44] I think we've said everything we can say. we feel pretty good.

Any last thoughts? Xand? 

Xand Lourenco: [00:20:49] I've actually been pretty. I feel like I've been pretty bullish on most of , the new crop of YC companies this year. I think there's definitely a sense that there's a lot of companies that are solving really specific needs [00:21:00] for specific companies.

And I think  we're kind of moving away. I don't think there's that many, people who want to be the next Uber or these kind of huge billion dollar unicorn companies. I think there's a pretty solid, grounded,  approach , to this YC crop as it were

Aakash Shah: [00:21:11] well, that could also just be the companies that I'm picking. That's also true. I don't know if in 2007 I could have really understood Uber's value proposition and we wouldn't, I wouldn't have been able to talk about it. but I do agree. I think, I think people are getting better at launching startups.

but, that's it for today. Oh, I guess we'll see you all tomorrow. Not tomorrow. Next week. See you guys 

Xand Lourenco: [00:21:38] later.

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Aakash Shah: [00:21:39] Thanks for listening to this episode of All Schemes Considered. It means a lot to Xand and I. If you enjoyed this episode, make sure to subscribe and check out a few of our older episodes. We're available on our website allschemesconsidered.com and every podcatcher under the sun. If you really want to [00:22:00] make our day, consider sharing it with a friend or coworker.

If you have a scheme, you'd like us to consider a guest you'd like us to have on. Maybe you just loved or hated this episode.  We want to know your thoughts. I'm on Twitter @aakashdotio. That's A A K A S H D O T I O. Or you can send an email to allschemesconsidered@aakash.io. Xand, you can't find online because he doesn't believe in the digital public forum. 

Thanks again and keep scheming. See y'all next week.