For SaaS companies, proper recruitment and organization building is essential for growth. In addition, the kinds of people a SaaS startup should employ differ from when just starting to when it starts to expand. Despite us knowing this, we don’t often get to hear about what should concrete constitute the hiring timeline nor the order in which companies should hire.
We’ve brought on Yasubumi Ihara (@ihaemon), founder and CEO of Yappli, a startup which provides a platform for clients to build Nocode apps, to talk about his experience. He will be explaining to us the path he took from starting the company to hiring his 100th employee and the lessons about team and organizational building that he took away. He will be also talking about the common pitfalls companies stumble into.
This article will provide some important insights to HRs and startup founders who are facing difficulties in building their teams.
This interview is being conducted by Hiro Maeda, Managing Partner of ALL STARS SAAS FUND.
Hiro: Yappli was founded in 2013 and went public on the TSE Mothers stock market in December 2020. From your experience listing your company, did anything change in the way you think?
Yasubumi: Oh I’ve learnt a lot from the experience. I think many companies, including us back then, would get excited just by talking about our next funding round or that we received support from external parties without actually taking a look at our revenue nor our growth numbers. Going public exposes all your numbers to the world and so we had to move away from this way of thinking - which only pre-IPO companies can really do anyway.
The number of stakeholders in our company also increased along with the number of shareholders. We also now have many overseas investors and it feels like we’re constantly getting report cards from around the world every single day. We now have to do stricter goal setting, and the way that we do our quarterly planning has also changed. We’re being stretched but in a good way and I’m definitely enjoying the process.
Hiro: Any advice for fellow entrepreneurs about a skill that they should develop before going public?
Yasubumi: I think that there are two extremely important factors which leaders must have - “repeatability” and “progress tracking”. Progress tracking here refers to checking how much we have advanced towards our goals - getting this wrong can be disastrous for companies. In order for this progress to occur, any company will need a repeatable, reproducible model from product development to actually getting sales. Business leadership needs to ensure that this model is built through all aspects of the company - through strengthening a product, doing proper marketing, increasing sales success rates and lowering employee churn etc.
Of course, getting this perfectly right is both a very tall order and not necessary for pre-IPO companies. But when a company starts to approach going public, I think it’s necessary for companies to build a robust structure that can withstand going to the next stage.
Hiro: Let’s take this opportunity to revise the order that a startup should hire. First, the zero to 10 person phase. You were of course the first in the company right?
Yasubumi: Yappli was co-founded by me, Masashi Sano who was CTO and Masumi Kuroda who was our designer. We therefore had an on-paper “order of joining” but it really was de facto the three of us joining at the same time. We soldiered on as just three people for a total of four and a half long years. Those were the two years between 2011 and 2013 where we were coding throughout the night before having formally founded the company and the period until end 2015 between when we formally started the company until when we closed our Series A funding round.
Hiro: The first person you hired outside the three of you was a Customer Success staff member - why so?
Yasubumi: We really wanted to increase our sales success rates so we actually brought demo apps to even our first sales meeting with potential clients. Of course, they would be shocked by how Yappli appeared to them with a functioning app. Naturally, they gained very good impressions of us.
We therefore needed to hire someone to cover the most tedious part of this sales strategy that we adopted - the actual making of the apps. So our fourth member of the team was simply the “app maker”. On that note, with my current understanding I can clearly see that they would fall under the very important category of onboarding under Customer Success but back then my understanding back then was immature - I didn’t even know what a “SaaS” was.
By the way, that person was somebody already part-timing from us from when Yappli only consisted of us three co-founders. Once we closed our Series A funding, we immediately approached them to join.
Hiro: Was there anything you paid particular attention to in your hiring up until the 10th person?
Yasubumi: It’s not as if we were well known nor did we have a company brand and neither were we really confident. Therefore we really had to work with the people we could hire. There wasn’t a defined strategy so more than half of our hires were people that we knew. We really looked at their character and their feel, but more than that we were always thinking about what we had to do to make them join.
In any case, at that time we were still housed out of an apartment in a housing block - not the most confidence-giving office to the people we already knew, let alone candidates who came after looking at a job post. We were so desperate to avoid candidates getting a bad impression that we even purposely placed the interior diagrams of our next office on the desk of the room where we did our interviews.
When Yappli was still operating out of an apartment (2015)
Hiro: Any advice for founders who are looking to hire up till their 10th member?
Yasubumi: It’s probably safe to say that at this stage, you’ll only be able to hire people you already know. It’s not something that changes overnight just because you raised money, and to a candidate, joining a company like yours is taking on huge risk. It’s only risk-takers who will join at this point and so, above just money and career progression, you really ought to only hire people with whom you share a mutual trust.
For example, our 6th team member was a person we hired for sales. He was actually someone who worked for one of our sales agents from when we were really a no-name company and was very passionate about pushing Yappli. In fact, he came multiple times to our “apartment” to talk about the future that he saw in our product and that was what drove us to formally invite him to join our team.
Hiro: What do you look for or pay attention to when hiring for your first sales member?
Yasubumi: Someone who bites the bullet. The first few salespeople in Yappli had to deal with only having very few existing leads and so were cold calling potential clients all the time. I really thought that they were real “sales animals” who walked their talk!
Hiro: Next up is the phase between employee number 11 to employee number 25. This is when your “Customer Success” teams divide into onboarding and Customer Success Management (CSM) and also when your marketing team grows.
Yasubumi: This was during 2016 when we went all out to grow our revenue. Back then we had a good product but very limited revenue so we hired a marketer to try to get out of the hole we were stuck in. That ended up being a key turning point for the better for Yappli.
We did hire after our Series A until we had a headcount of 10, but even after hiring, we were stuck in the doldrums in terms of sales for almost half a year. Well, actually we were kind of in purgatory because while we did have a small stream of sales, there wasn’t any big growth. On the other hand, it’s not like we were making huge losses either.
We even got into an argument with Minoru Imano from Globis Capital Partners, one of our investors, about our management. It’s not very common but we actually did a company leadership retreat with him attending too and while we were drinking at night, Minoru actually requested that I “go ahead and run a loss of 100k USD”.
Right now we do hear a lot of commentary about the need to “make big losses” but at that time I didn’t really understand what that meant. I mean, sure I could throw the money somewhere, but how should I really use it? But well I swallowed the advice and ended up hiring our first marketer just for the sake of reaching this “100k USD loss”.
Hiro: What kind of marketing did the marketer end up doing?
Yasubumi: The marketer was our 12th employee who joined us from one of the established EC firms in the market. The first suggestion that he gave us was adding a “Download Now” button (for explanatory materials about Yappli). At that time I was very hesitant and thought that that was really lame. We were already doing a Product Led Growth model of allowing potential customers to self-serve by signing up for a free trial, so to me it was like “so what’s the point of this?” But to my surprise, right from the very day we placed that “Download Now” button, that button ended up giving us more leads than our free trial.
In fact, free trials were often started by people in their companies’ systems or IT departments curious to try our product and didn’t really translate into sales. Who we really wanted to target were actually companies’ marketing departments and for them a document outlining our product beats free trials. The number of people who actually wanted to pore through written materials was shocking for me.
The other revolution that started from that employee’s suggestion was us displaying at offline exhibitions. This was another idea that felt simply “off” to me - would anyone really pay attention to such a small company like ours? But physically displaying actually led to us immediately clinching some very good clients to my utter and complete surprise.
Yappli’s booth at their first time physically exhibiting (2016)
Hiro: To summarize, a “Download Now” button and offline exhibitions were highly effective. Do you therefore think that you should have hired a marketer earlier then?
Yasubumi: Definitely - we really saw the difference that bringing in an experienced professional can bring.
Hiro: Any thoughts on what companies should look for in their first marketer?
Yasubumi: I’d say that you’d probably want someone who has all their base marketing skills covered and someone who knows how to do effective lead generation. Companies at this stage are still a bit wobbly so you’d also probably want someone with strong willpower. That marketer who proposed the idea to physically exhibit had the gall to keep yelling from our empty booth that “with Yappli you no longer need to program!”. No one knew of us and our small booth was poorly designed - it was pretty much a booth destined to get no visitors. But when I saw our marketer working so hard, I really felt that we had made a great hire.
Hiro: Did you feel that anything changed within yourself around this time?
Yasubumi: Before this phase, it was always me going to sales meetings but our 14th hire was the person who would become our current Head of Sales. This was therefore the stage where we concentrated on systemizing all the sales know-how we built up.
Until then it was me going to hundreds of potential clients each year we operated and so I knew what and how to say things to convince potential customers. I put this all into paper - including small details like how to make pitch deck cover slides, how to explain who we were and when exactly to proceed to the demo. I even wrote down how to present each individual functions Yappli’s product and set up all the Mac settings needed to ensure a smooth presentation - and this process of translating knowledge into words continues to stay with us since I started translating my own experience into a company-wide manual back then.
Hiro: Any other thoughts looking back at this phase?
Yasubumi: I think that our focus on hiring the people to push our revenue growth (over profits) was correct. I guess that if I had a chance to redo things, I’d probably want to hire our marketer along with an inside sales person at the same time. On the other hand, we didn’t have that many resources to put into hiring so things probably wouldn’t have been that smooth anyway.
Hiro: Next up is the 26 to 50 person stage. This is where your sales team really grew. It’s rather surprising that despite your marketing and customer success growing, you only continued with one CSM person.
Yasubumi: This would refer to 2017, when we were singularly focused on our top line. We even put our hiring for internal roles on the back burner and were just chasing growth.
This was when the term “SaaS” started becoming a buzzword. I also got to know about “inside sales” around this time and ended up hiring 2 inside sales people shortly after - which led to another big leap in company growth. There were only two of them in our 50-strong team but they were so busy calling potential customers that we had a huge leap in the number of sales appointments. The two of them were really the people who built our first inside sales structures.
Back then, “inside sales” to us was mainly them scooping up the leads generated by the marketing side. We're a SaaS company, but we really just were counting on our whiteboard the number of sales appointments each member secured. We’re no longer doing so but writing things down in such a very visible manner was what spurred competition and really worked for us.
The whiteboard showing the appointment count of the inside sales team
Hiro: That’s a good example of culture building. Any thoughts about how the company was running at that time?
Yasubumi: Our inside sales were paying dividends yes, but that was when we got increasingly into some very bad negative press incidents - pretty much one for every quarter of that year actually. Looking back it’s not surprising though. With only so few engineers, only one CSM, and a Customer Support hire only happening at our 41st member, we really weren’t equipped to properly retain our customers.
Our app was very buggy and each time we developed a new function something would crash, something which of course caused a lot of trouble to our clients. This was also the toughest time we experienced as a company. The fact is that this was when we really hit strong growth. Before this, the apps which Yappli used to make would only get say, a few tens of thousands of downloads. But now we had clients who had more than a million downloads on their Yappli-made apps.
As this user base grew, some bugs that people never took notice of became very noticeable. Our aggressive push for sales became our weakness as we couldn’t cover our bases. In fact, the speed of our growth surpassed our expectations which meant in turn that our product was lacking the infrastructure that could withstand the increased load.
Yappli managed to overcome the hurdles but there are probably many startups for whom this phase is the killing blow.
Hiro: Do you therefore think that you should have hired more technical support?
Yasubumi: Oh absolutely. One reason why things degenerated this way was that because we were so passionate to chase growth, the business side within our company really held the steering wheel. It was really a cycle of us hearing client needs and then rushing new versions out. We didn’t have a Quality Assurance person so it was just pushing changes out as fast as possible and then getting complaints when bugs occurred.
This was also when we had our highest resignation rate, given how negative the work experience that our engineers, salespeople and others had at this time. Even with 50 hires we still didn’t have a HR - but that’s expected given how poor our internal structures were I guess. I really felt bad while making this diagram really - yes, we were focusing on growth, but we really should have paid more attention to the other aspects of what makes a company function.
Hiro: Lastly, let’s look at the 51st member to the 100th and how you recovered from your previous stage. It looks like your numbers in both corporate and HR functions increased here didn’t they? How did you get over the slump of all the mishaps in your previous stage?
Yasubumi: I think the hiring of Quality Assurance was key. We really should have done it earlier, but this was when we really started to pay attention to our product quality.
It’s not just about playing offense to get new deals. Without playing proper defense you’ll just lose your clients’ trust. Once you get enterprise-scale clients or deal with B2B clients, trust is extremely important. Marc Benioff (Chairman and Co-founder of Salesforce) also states that trust is the most important thing to him after all. I only fully realized the importance of trust at this stage.
Around this time, we raised our Series B round and could see ourselves going public in the near future. This was also when I felt that our foundations were finally solid. This was also when key personnel which led the charge to IPO, including future CTO Sato, Customer Success Head Ichikawa and CMO Yamamoto, joined us. In other words, this was when we really could hire great talent with experience from other industry leading companies.
Hiro: Please tell us your tips when hiring for your C-Suite.
Yasubumi: At this stage, you’d be hiring people who can successfully manage big organizations. For example, Sato, our current CTO, was the infrastructure engineer in charge of large projects at DeNA (large Japanese tech firm) whereas Customer Success Head Ichikawa previously worked in Apple and Oracle. Many such people have worked in big companies already and now may take notice of your company as they want to try their hand at working at a startup.
Personally, I’d say that until this point of time, you really shouldn’t finalize your C-Suite. I get it that founders want to prioritize the team members who joined the company at an early stage. But they may not be fit to lead an organization bigger than 100 people and not being tied to them opens the possibility of hiring someone better suited to the role. If you are considering fixing your C-Suite at an early stage, do consider the very real possibility that you’d want to hire someone else after your company has grown.
Honestly, there’s no real correct answer to this - this is a question that is up to the founder’s creativity or discretion to resolve. But I personally think that waiting until this point (before deciding my C-Suite) was the correct decision.
Hiro: I do recall that Yappli had a very strong recruitment branding at this time. Did you change anything in pursuit of growing your company until your 100th hire?
Yasubumi: We hired an internal recruiter and professional HRs to strengthen our organization. As an organization grows, many things can go wrong and so this was when we finally started paying attention to and adequately investing in our internal operations.
We also hired general administrative staff which dramatically lightened my own burden. It used to be me having to handle our morning and evening meetings but having an admin person meant that I could pass on the role of very minute tasks such as ensuring that the projector was plugged in on Monday mornings. It was a rather heartfelt moment when I realized that these kinds of things really didn’t have to be handled by the CEO.
Honestly, up til then I really was on the fence about hiring back office staff. But not doing so led to a never ending stream of problems and resignations. As we started improving our back office operations and environment, our employee retention improved. In terms of our product development too, adding Quality Assurance and other support really did make our company feel more stable.
This was also when we renewed our dashboard. What we previously had was unmaintainable and the product team told us that continuing with it would severely hamper any further product development. We took their suggestion and stopped all new feature development for two years and entirely re-did the dashboard, including switching programming languages from PHP to Go.
It was a really tough process, but I think we made it through only because we fully established our own internal operations. For me, the key to making it across the 100th hire mark is not neglecting the “defense”, or internal workings, or your company.
Photo taken in January 2019, after reaching their 100th employee. Taken at Akasaka Hie shrine, where Yappli goes for their annual New Year's prayers.