Lessons - He Sold Grasshopper to Citrix and Says Most Founders Sacrifice the Wrong Things | David Hauser - Grasshopper Co-Founder

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In this lessons episode, discover how solving a problem firsthand can create a powerful foundation for product market fit.

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Understand why rapid growth can expose gaps in culture and systems.

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Explore which fundamentals founders should establish early.

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And uncover how strong values can guide better decisions as a company scales.

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How do you demand the authority to...

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to raise capital like last year of high school for right before you go to college.

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What, what was the strategy to get people to trust that you're going to not totally lose every single dollar they put into you?

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I mean, look, I had a Greek co-founding team, right?

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Yeah.

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Older than me, so I had experience on capital raising, had internet companies, right?

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So they brought me into that space, and I learned a lot.

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I love it.

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I was definitely not the core capital raiser, zero chance about that.

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But I learned a tremendous amount being in those rooms.

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And what I brought was I built the technology, and at that time, it was kind of cool and interesting for VC companies to say, this young kid is doing this, right?

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And that, I think, gave us an advantage in the capital raising more than a disadvantage, right?

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You were almost like a little bit of a child prodigy building out this piece of tech.

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I wasn't smart enough to be called that.

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I just happened to build technology that worked well.

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I love that.

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And when you started building out Grasshopper, what was the thesis behind that?

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It was actually quite simple.

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We were building it for ourselves.

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Me and my co-founder each had our own small little doing whatever.

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And we're like, what we want is a professional image, a phone number that's not our cell phone, not our house phone.

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Why is your mom picking up the phone?

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We knew the problem.

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And we said, this is solvable.

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There have been phone systems for 40 years.

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There just hasn't been a virtual one the way we want it, right?

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Like you have to buy hardware and install it and have it and all.

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Like we're like, no, we don't want any of that.

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We're in a dorm room.

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Like, so we built it for ourselves.

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And I think combined with a lucky timing, right?

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So one is we built the right thing.

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We understood the customer because it was us, but then it was also lucky timing that we could buy traffic and customers at a really low price.

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That dynamic doesn't exist today anymore, right?

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Like this was before AdWords.

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Yeah, that's bad.

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Omniture, like where you were paying quarters of a cent, right?

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Like very cheap.

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I love this.

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So, I mean, this is the, I'm sure this is what you now look for when you're investing in companies.

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Like founders that are solving their own problems or maybe founders that come from an industry that are solving problems.

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I think that massively increases.

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the chance of your success and when you're building a business, because it seems like this is what you've done repeatedly.

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You built Grasshopper for yourself.

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You built, uh, you built, uh, Chargify to solve a problem you had, and it was also successful.

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So this seems to be like the framework.

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When you're trying to find some semblance of product market fit, like just solve problems that are present in your own life, which seems like common sense, but we all know common sense isn't common.

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But, you know, you take Grasshopper to market.

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It's obviously you have paid ads.

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Customers are converting.

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How fast does Grasshopper start to grow?

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Very fast.

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And I think that we were lucky on the timing of the ability to purchase ads, but also the kind of change in the economy, right?

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Like 2004, 5, 6, 7, you know, it was a difficult time.

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But what came out of that is people were starting their own companies.

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Right?

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Like, as people were departing jobs, being fired, you know, things like that, downsized, they're like, you know what?

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I could be an independent consultant.

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I can do this on my own.

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So we had an uptick in new companies, right?

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And we relied on new companies for our customers, right?

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Like, it's hard to convert someone who's been around for a long time compared to someone who's starting a new company and a new phone number, right?

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Like, they just kind of mesh together.

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But from a growth standpoint, we are profitable in our second month.

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We...

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You know, we had a positive cash cycle, which allowed us to grow.

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We got to a million dollars far quicker than we ever imagined and started to have to hire employees and do things.

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It couldn't just be us anymore.

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Right.

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And that speed was not what we ever expected.

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And a lot of people can sort of fumble when they're growing at that pace because there's a lot of things that are all moving at the same time and it's just, it's stressful, it's difficult.

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You know, everybody who's listening to this is probably praying that they have a business that eventually grows at a pace that they can't keep up with.

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But I'm sure that it's happened to a few of them.

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What would be...

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like the best advice you have when you've nailed product market fit, nailed timing, your customers are like pouring in.

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How do you not screw that up?

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And I know it sounds silly, but I'm sure that you can screw it up quite easily if you don't pay attention to reducing churn, spinning up servers, customer uptime, especially for phone systems, which are kind of a mission critical thing for businesses.

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How do you not fumble that?

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I mean, we did fault, right?

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Like, we can make a lot of mistakes along the way.

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And the real danger is sales hide everything, right?

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So in a growing company, all sorts of things can be going wrong.

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Culture can be going wrong.

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People can be going wrong.

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Product can be going wrong.

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But if sales are growing at that pace, it's all hidden, right?

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Like, because no one's looking at anything else.

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Even if you're trying to, you're just not, right?

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Right.

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And I think that stepping back sometimes and understanding that it's okay to slow down sometimes to get the foundation right.

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We didn't have our core values specified and written out and communicated.

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Big mistake, right?

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We had to go back and redo that.

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And we weren't changing the values.

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What we were doing was...

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writing them down, saying them, and then putting them into systems and processes.

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Those types of things, when you're growing, just are hitting.

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It's almost like you were trying to keep up with the growth like you were a venture back, but actually you had the luxury of not taking on capital, so you didn't have investors that were needing X percent growth year over year.

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You actually could have chilled a little bit.

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Which is something that, I mean, this is like sort of a whole other conversation about taking on clean money.

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You know, it's where you can't, right?

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Like, really hard.

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Like, you see, come through with Pory and you're like, I'm not slowing down.

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I'm going faster, right?

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Which is why maybe at the beginning we should have been more conscious and, you know, intentional about some of these foundational activities that we didn't do.

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But we were bootstrapped.

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Like, I'm okay with how it went, right?

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Like, we did things we had to do to get there.

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Oh, yeah, no, I think it went, listen, it went fabulous.

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But all I'm pointing out is the things that if you did it again, what are the things that are different?

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And I guess it's really good to be clear on what are those foundational elements that you're building from scratch right now?

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What do you have to get dialed in as a new entrepreneur so that...

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You don't have to go back and revisit them, which just takes more mental bandwidth and it just creates stress and anxiety and probably takes some money to solve problems that could have been solved much earlier on.

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What are those core pieces for a startup that you'd recommend people actually dial in right away?

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I think that those are one core values and core purpose.

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Make sure that potential written and integrated right away.

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So hiring, firing, everything that's happening, right?

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Like this should be public on the website, it should be everywhere.

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Because these are coming from you as a founder anyway, right?

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So this isn't that much work early on.

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It becomes a lot more work later.

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That's the challenge.

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The other piece is start to think about where you can be most effective with systems and processes without overburdening the company.

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So I think about this a lot about communications.

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I'm a big believer in the daily, weekly, monthly meeting rhythm, huddle, whatever you want to call it, whatever process.

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There's lots of things you can do.

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If it's EOS, if it's Verna, it doesn't really matter.

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But like those things,

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integrated earlier and much easier to do than later and give you tremendous upside, right?

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So like we think about that much earlier, like in the very first days, how do we do these things now, right?

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And then the last piece is thinking about the environment that I want to build, right?

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Is that all remote?

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Is that all in the office?

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And I'm a big believer in one of the two, not a hybrid.

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So like, what is it that I want to build where I want to be?

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And I think if you can answer that question strongly, you're in a great path to success, but it needs to be intentional.

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I, you know, I was having a conversation yesterday with Chris Savage, who's the founder of Wistia, excuse me, I was mispronouncing.

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And he was talking about culture and what it is and what it isn't.

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And he actually went a step further, and I'm curious about your view on this.

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he said that culture actually informs how people within the company deal with problems.

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But what culture should also really do is say, for example, how, how somebody on the sales team responds to a customer inquiry.

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And I'm curious if you ever found that there was some semblance of that in Grasshopper or any of the other, any of the other companies, just an example of how like a good culture, a strong culture can actually, um,

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can actually help somebody make a decision that benefits the company so they understand the place where they're operating from versus just, you know, we're a great group, we're all ethical, whatever.

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Does that make sense?

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Yeah.

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So culture is how we do things, not what we do, right?

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Yeah.

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So I think that's a reasonable example, but let me take it one step further and how we thought about this, right?

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So we had a customer service group dealing with hundreds of thousands of customers, and there's all of these requests for credits and refunds, right, for all sorts of reasons.

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And we could have done what is typical, which is you create a playbook that says for this, you do this.

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You allow this much dollars to be done.

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You know, you create all these rules, right?

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We didn't do that at all.

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And we said, you know what?

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You can give any amount of credit or refund you think is reasonable if next to it, you select from the dropdown one of our core values and you write why it matches.

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Oh, I like that.

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I love that a lot.

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Okay.

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And so this was very intentional and specific.

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Our core purpose was empowering entrepreneurs to succeed, right?

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We would have a very typical thing happen, which is, hey, I signed up for Grasshopper.

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I printed my business card.

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I put the wrong phone number on there.

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Okay.

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We had requests for, can you get me that phone number?

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Obviously, we tried as best we could.

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Okay, you can't get me that phone number.

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I want a credit or refund for the amount of the printing of the cards.

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Wasn't our mistake.

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Regularly, we would give a refund larger than the amount they had paid us.

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Yeah.

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Because our core purpose was empowering our purpose to succeed.

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We don't want to kill them at the first step, right?

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Like if you're asking us for a $200 refund, that must be meaningful to you, right?

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At the beginning stages of your company.

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We're not going to stand in your way there, right?

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And that's a small example, but that's about how you connect the values with the actions that are being taken.

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How we do things compared to creating rules.

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Thanks for tuning in.

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