Summaries Business and Entrepreneurship Building Lob: Prioritizing Customer Needs for B2B SAS Success (feat. Harry Zhang & Kevin Hale)

This is a summary of a YouTube video "Harry Zhang with Kevin Hale on Building Lob to Automate the Offline World" by Y Combinator!

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The key idea of the video is that prioritizing customer needs, focusing on solving real problems, and understanding the value of the product are crucial for the success of a B2B SAS business.

• 💡
  00:00

  Focus on the core problem when starting a company, appreciate simplicity of API interfaces, prioritize good documentation, and have confidence in solving real problems.
• 💡
  04:52

  A 16-year-old customer found a solution to delivering purchased items through a personalized cold email, leading to successful outcomes with top-tier clients.
• 🔍
  08:44

  Finding customers who align with your vision is crucial for B2B SAS businesses to scale, and mapping out key stakeholders' motivations through coal outreach is important before approaching them.
• 💰
  13:34

  Lob's pricing model shift from selling a set number of letters to a platform fee helped them focus on the value of their technology and adapt to customer expectations in a commodity market.
• 💡
  20:27

  Prioritizing customer needs and understanding the value of their product helps the company make trade-offs, while focusing on non-sexy but profitable users may give them an advantage in recruiting top engineers.
• 💰
  24:04

  RSUs are a better equity compensation option for employees as they provide actual value without requiring upfront payment or risking money on options.
• 🚀
  28:10

  Building a fully functioning mugs API product without paperwork helped close a big customer, while upfront honesty and setting expectations is key to successful partnerships.
• 📠
  33:37

  Lob chooses not to vertically integrate and own printing facilities, relying instead on a network of specialized printers for flexibility and efficiency.

Detailed summary

• 💡
  00:00

  Focus on the core problem when starting a company, appreciate simplicity of API interfaces, prioritize good documentation, and have confidence in solving real problems.

  • Lob co-founder Harry Zhang discusses the importance of focusing on the core problem when starting a company, even if the exact product is not yet developed.
  • The speaker discusses their experience building an API company and their appreciation for the simplicity and purity of API interfaces.
  • Good documentation is crucial for any API-based product, and Stripe is a great example of this.
  • The speaker initially didn't expect to work on a direct mail campaign at Microsoft, but it ended up being one of the most effective things they've done to date.
  • The speaker and their team faced challenges in the early days of their startup, including printing and stuffing letters themselves, but had confidence in the real problem they were solving.
• 💡
  04:52

  A 16-year-old customer found a solution to delivering purchased items through a personalized cold email, leading to successful outcomes with top-tier clients.

  • A 16-year-old customer named William with a large online store selling digital items contacted the speaker after finding their product on Hacker News, seeking a solution to the problem of delivering purchased items to customers.
  • The speaker faced a high rate of fraud due to lack of proof of delivery, leading him to send physical letters as proof, and found his first top-tier client through an API for sending letters.
  • A tech-savvy insurance company in New York became a major customer after seeking help with compliance and security issues surrounding their printing processes.
  • The personalized and concise cold email highlighted the company's unique offerings and potential solutions to the recipient's current problem, ultimately leading to a successful outcome.
• 🔍
  08:44

  Finding customers who align with your vision is crucial for B2B SAS businesses to scale, and mapping out key stakeholders' motivations through coal outreach is important before approaching them.

  • Finding customers who believe in the methodology and vision of the product is crucial for a B2B SAS business to scale and aligning with a technology-forward company helped to expand their top tier clients.
  • Getting a lighthouse customer is the hardest part, but once you understand your problem space and successfully solve it for a customer, it becomes easier to take the same story to similar customers and understand their language and key problems.
  • Before approaching a company for business, it is important to map out the organization, identify key stakeholders, and understand their motivations through coal outreach.
  • The service combines various marketing tactics to locate and contact potential clients, including email and in-person interactions.
  • Your job is to work through the grind of figuring out who counts and what resonates with people to understand their motivations and care, as the person you thought would make the decision might be someone totally different.
  • Around 15% of the revenue of the API service comes from self-service customers, but the focus shifted to enterprise due to the evaluation of the market and the realization that an API can provide the same capabilities to smaller customers.
• 💰
  13:34

  Lob's pricing model shift from selling a set number of letters to a platform fee helped them focus on the value of their technology and adapt to customer expectations in a commodity market.

  • The speaker's startup took six years to sign their first enterprise accounts and had to make pricing mistakes before changing their model.
  • Lob changed their pricing model from selling a set number of letters to a platform fee, which helped shift conversations with larger customers to focus on the value of their technology rather than just the cost of a mail piece.
  • It's important to differentiate the value customers see in your technology with what they pay for, and feedback from customers helped shift to a pricing model that better reflects this.
  • The speaker discusses the challenge of pricing in a commodity market and the importance of adapting to customer expectations while providing value.
  • Lob offers cost-competitive mail services with access to their entire API and platform, differentiated by the value of their software and specific features such as HIPAA compliance.
  • Companies charge more for customers who require a HIPAA compliant offering due to the high cost and limited availability of such offerings, as secure management of sensitive customer information is highly valued.
• 💡
  20:27

  Prioritizing customer needs and understanding the value of their product helps the company make trade-offs, while focusing on non-sexy but profitable users may give them an advantage in recruiting top engineers.

  • Identifying and prioritizing features based on customer willingness to pay has helped the company understand the value of their product and make trade-offs in fulfilling enterprise customer desires.
  • The speaker discusses the challenges of recruiting top engineers for their API company and how their focus on non-sexy but profitable users may give them an advantage.
  • Understand the motivations of potential hires to identify those who are a good fit for the company's strengths.
  • The company focuses on its culture and values to attract and retain employees, and uses various methods such as blogs and on-site visits to showcase its culture.
• 💰
  24:04

  RSUs are a better equity compensation option for employees as they provide actual value without requiring upfront payment or risking money on options.

  • RSUs and options are different forms of equity compensation offered by companies, with the main difference being that options require employees to purchase shares at a particular price point, which can be a significant amount of money.
  • RS use is a stock grant that provides actual value to artists without paying for the right, and LOB has created a unique RSU instrument to motivate investment in the company.
  • Design equity compensation that doesn't feel like a risk to employees, allowing them to have a share in the company's upside without having to spend an enormous amount of money upfront.
  • RSUs are a more attractive option for employees as they don't have to consider buying options or exercising them, and they only get taxed when there's a liquidity event.
  • The speaker discusses the importance of giving employees equity in the company and shares a lesson learned about getting alignment with customers during the early YC days.
• 🚀
  28:10

  Building a fully functioning mugs API product without paperwork helped close a big customer, while upfront honesty and setting expectations is key to successful partnerships.

  • The company built a fully functioning mugs API product for a customer's use case without signing any paperwork, spending two weeks of valuable engineering time.
  • Selling a little bit ahead of where you are and aligning with the customer's needs helped the speaker's company close one of their biggest customers, Booking.com, who reevaluated their vendors for GDPR compliance.
  • Negotiations with a global company in Europe required aligning on a timeline and plan to support Europe and eventually Asia, including originating mail offerings in Europe and learning valuable lessons about not scrambling to build all of Europe at once.
  • Be upfront and honest with customers about your capabilities and set the right expectations to create a partnership and achieve desired results.
  • The service is constantly evaluating mail formats and has a list of companies that they would potentially consider, but they don't want to start with a small volume customer due to operational difficulties.
  • Certified mail was launched without tracking because the customer didn't need it, but now they have added it due to customer demand.
• 📠
  33:37

  Lob chooses not to vertically integrate and own printing facilities, relying instead on a network of specialized printers for flexibility and efficiency.

  • Lob, a technology layer that connects to a network of printers worldwide, currently has no plans to vertically integrate and own printing facilities despite the potential benefits, as they see mail as a somewhat commoditized product.
  • Lob, a printing service, relies on a network of specialized printers for flexibility and efficiency rather than investing in all necessary hardware.
  • Founders meet with a potential supplier at Starbucks, negotiate to buy a printer outright instead of leasing.
  • The speaker questions when a company should start owning and building their own technology instead of relying on partners, using Amazon's decision to build their own warehouses as an example.
  • The speaker discussed the potential competitive advantage of owning the print infrastructure and offering unique printing capabilities, but acknowledged the complexity and difficulty of competing with established companies in the industry.
  • As a founder, you have to be comfortable with the fact that your role will constantly change and that you should be involved in every aspect of the business, including sales and talking to customers.