Web Masters Episode #59: David Cummings



Pardot - Crunchbase Company Profile & Funding

David Cummings:

It did not IPO. The big lesson learned was one of those first time entrepreneur focused on a scalable product. And I believed in the field of dreams, I believed if we just built a cool product that worked well, people would beat a path to our door. And so it was a really hard lesson learned around the importance of sales and marketing, the importance of go-to-market and getting products into the hands of customers.

Aaron Dinin:

Ah, yes, the old field of dreams approach to entrepreneurship. If you build it, they will come except there’s one tiny little catch, that’s not at all how customer acquisition works. You can build the greatest product in the world, but if nobody knows about it, nobody will ever use it and your company will fail. That’s why you just heard this episode’s guest talking about the importance of having great sales and marketing and having a go-to-market strategy to compliment your amazing product. And well, he would know, he is David Cummings, founder of Pardot, the pioneering B2B marketing automation system, now being used by thousands of companies around the world as part of Salesforce. Are you ready to hear the story? Let’s get dialed in.

[OUTRO]

Aaron Dinin:

Welcome. Welcome. Welcome to Web Masters. I am your host, Aaron Dinin. I’m a serial entrepreneur. I teach entrepreneurship at Duke University and this is the podcast where we teach you about entrepreneurship through conversations with some of the Internet’s most impactful and successful innovators. The focus of this episode is customer acquisition. Customer acquisition, it is the number one most critical aspect of any business. If you don’t have customers, you don’t have a business.

However, in my experience, lots of entrepreneurs seem to ignore this important little fact. And instead, they focus only on building their products. And yeah, products are cool and all they, they’re definitely important, but your business needs customers in order to be successful. That’s why I’ve got a guest for you on this episode who can speak to that point perhaps better than anyone else in the world. He is David Cummings, the man responsible for Pardot, which completely changed the way companies manage customer acquisition. That story is coming up right after I tell you about another company that also understands the value of businesses with established customer acquisition.

Web Masters is being brought to you with help and support from Latona’s. Latona’s is a boutique mergers and acquisitions broker. They help people buy and sell cashflow positive internet businesses and digital assets. In other words, they helped sell internet businesses, everything from SaaS apps to e-commerce stores that already have valuable customer acquisition processes in place. And that’s critical because that’s the hard part of building a business, customer acquisition. Imagine being able to buy a business that already has customers, lots of them and a process for getting more. That’s exactly what you can do by heading over to the Latona’s website, where you’ll find listings for all the established profitable companies Latona’s is currently helping to sell.

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If you’re not a business to business SaaS sales and marketing automation junkie like me, you might not be super familiar with Pardot. So first of all, well, why aren’t you obsessed with sales and marketing automation? Like I already told you, customer acquisition is critical to entrepreneurial success. And sales and marketing automation softwares are like superchargers for your customer acquisition process. You should be learning everything you can about them and how to leverage them for your business. However, in case this episode of Web Masters is the first time you’re dipping your toe into the world of B2B SaaS automation tools, let me explain what Pardot is. Actually, I’ll have this episodes guest and Pardot founder, David Cummings, explain since he’s probably got a lot more experience describing it.

David Cummings:

Pardot is the system of record for business marketing departments. When you think of categories of software, if you think of accounting, in the accounting world, QuickBooks is the most popular accounting product in the world. When you think of marketing software, at the time, there was no defacto standard. There was no, hey, I’m a business marketer, I need a product to run my department, to run my function. There was no product to do it. There was a bunch of disjointed products that were focused on consumer marketers, but not business marketers. And so Pardot is the platform of record that helps business marketers do email marketing, landing pages, forms, automation rules, lead scoring, lead nurturing, and then does it all from one universal first-party cookie, which nowadays is incredibly important.

Aaron Dinin:

Let’s be honest, none of that probably sounded very exciting or interesting. After all, David basically described Pardot as a marketer’s version of QuickBooks. And when was the last time you got excited about accounting software? But hear me out, I actually think marketing automation software can be pretty exciting when you put the right frame on it. In a way, marketing automation software is kind of like a tool that lets you build a real life video game for your potential customers on the internet. It’s about creating a pathway, a level of sorts all the way from how they first discover your company to when they finally reach the end goal of buying your product. So it shouldn’t surprise us that one of the pioneers of marketing automation got his first introduction to computers by playing and then eventually building video games.

David Cummings:

As a little kid, my dad brought home an old PC from his office. And so I have three brothers and semi brothers and I started tinkering around with it. It was primarily Sierra online games. So think of King’s Quest and Quest for Glory and Space Quest and all those types of games. And so that was my real foray into the computer world. Like any nerdy elementary school kid, it went from playing the video games to wanting to understand how the games were made, how to write the code, how to make the computer do what you wanted it to do. And so having that opportunity to play with an old IBM XT at home back in the ’80s made all the difference.

Aaron Dinin:

That’s interesting. I feel like a lot of the entrepreneurs I talk with here on Web Masters got their start in technology by building their own video games. I wonder why that is.

David Cummings:

Sort of like the digital Legos, right? People love Legos. They’ve loved them for decades. And video games as the thing you play with, you follow the instructions, which is like playing the game by the rules. And then you want to make your own thing, which is make your own game. So I think there’s something with that building and that idea of creating from scratch as a native human desire.

Aaron Dinin:

And for you, how did that desire to tinker and build video games evolve into building companies?

David Cummings:

Growing up, my dad was a small business owner, so he worked for himself. He had a team of seven people, a small office. I did a bunch of yard work at his office, mowing the grass in North Florida. And so seeing him be his own boss, I’m sure was a major inspiration for me wanting to go out on my own as well. And then from a entrepreneurship as it progressed over time, a lot of it came through working with other entrepreneurs and the Entrepreneurs’ Organization, EO, as well as the Young Presidents’ Organization, YPO. And so most of my mentors have really been just putting myself as best I can around other active entrepreneurs and learning from my peers. And so that’s one of the best moves I ever made on the learning front.

Aaron Dinin:

How did mowing lawns turn into entrepreneurship work on the web?

David Cummings:

The web was coming on strong when I was in high school, call it the mid to late ’90s. And so I had built software, different shareware apps for a few years selling them on America Online, Prodigy, CompuServe. The original apps that I built, one was called Statbook. So it was for baseball and softball coaches to keep track of all their stats of the players and calculate averages. And then another one was called the OnStartup series, similar to the little calendars you might have on a desk where you flip the calendar page over each day of the year for a new quote or a new SAT word or a new Spanish word or French word. And so we had this OnStartup series of the variety of content topics.

And back then, you would turn your computer off every day. And then when you went to use it, you’d turn it back on. And so when you turned your computer back on, it would pop up a little box and it would have the famous quote of the day. That was an example app that I built in 1997 and sold it online. And back then, they weren’t called apps. They were called shareware.

Aaron Dinin:

So you were already selling apps online in the ’90s as a high schooler. That’s kind of crazy. That’s really early to be selling things online, both in terms of the history of the internet and to be a high schooler doing it. How’d you realize you could even do that?

David Cummings:

There was nothing stopping me. It was amazing to be a high schooler in the mid to late ’90s in North Florida, small town, Tallahassee, and I would write these apps, put them online. And then back then, there was no PayPal, there was no way to pay. People would literally write a check out by hand for $12.95, put it in an envelope, mail the envelope to the residential address in Tallahassee. And then every day after school, I’d go check the mail and I would take checks out of the envelopes. And then I would see the person’s email address on the check and I would email them a serial code that would unlock more content.

So it was a typical, hey, here’s 14 days for free of the word of the day or of the Spanish word of the day or the famous quote. And then if you wanted more than 14 days, you sent in the check and then I emailed you a code and you type that code in. And that code unlocked 365 days of content. And it actually worked. People would send me checks from all over the United States and even a few international checks from France and other places to myself sitting at home in high school in Florida.

Aaron Dinin:

I can’t believe people were just mailing you checks.

David Cummings:

Right. And think of how bad people must’ve wanted the content. I think it was more the novelty of seeing like, hey, if I send this check for $12.95 off into the ether, will it actually get cashed? Will I actually get an email? Will I actually unlock more content in this app? And sure enough, it worked. And it was a very formidable part of my entrepreneurial experience.

Aaron Dinin:

Yeah. I bet imagine having that kind of friction in your sales funnel now. These days, I’m not sure you could sell anything online by asking someone to mail you a check.

David Cummings:

Right. Talk about authentic demand and customer discovery and is their true pain in the market for them to go through that friction to solve that problem? And if they do, wow, you’re onto something strong, something really good.

Aaron Dinin:

I’m sharing these early business anecdotes from David, because what we’re learning about here is how he began to develop an appreciation for customer acquisition. Those little shareware apps he was building were basically revenue lead gen, he post a free for 14 days software online, people would download it. And then that software needed what were essentially marketing automation tools built into it in order to get people wanting more. Then when some percentage of users did want more, they had to pay. So David also had to construct the process by which they could send him money and he in turn could provide the full product.

As you heard, the process he built was clunky to say the least. After all, it required sending a physical check in the mail, but it worked. The video game like customer acquisition funnel was effectively attracting new players for David and pushing some small portion of them all the way through to the end of his game. The big difference, of course, is that video game creators add lots of monsters and obstacles to prevent characters from reaching the end while your goal as the entrepreneur is to make reaching the end as easy as possible. So you try to eliminate the obstacles. And that’s kind of what a software like Pardot is meant to do, it’s designed to smooth out the process of customer acquisition and make it as easy, repeatable and scalable as possible.

David is someone who learned to understand and appreciate the importance of easy, repeatable, scalable customer acquisition, which is what eventually inspired him to build Pardot. But it was a lesson he had to learn through lots of entrepreneurial trial and error. Most of that education came while he was in college. He actually went to the same school as me and even around the same time, though we didn’t know each other.

David Cummings:

When I was at Duke, I launched several little businesses. One was in my freshman year with my college roommate, Jeremy, we did a textbook marketplace exchange. So we put together a web app and people could go on there and say, hey, I’ve got my calc book and I’ll sell it for 50 bucks, whereas you could go to the bookstore and it would cost $90 used. So we put a marketplace for textbook exchange. It was textbooks.ml.org. Ml.org back then was sort of like a DynDNS, D-Y-N-DNS, where you could have a vanity domain and point it to an IP. And so it literally just pointed to the IP address of the dorm room. And we had our Linux box that was running Perl with my SQL powering this textbook exchange site. We went around to all the dorm rooms on campus and slipped a piece of paper, a flyer under the door. And so we passed out thousands of flyers that said, go to textbooks.ml.org and you can buy and sell used textbooks directly from other students and bypass the Duke bookstore.

And so you can imagine what happened. The Duke bookstore got upset. And then I got a tour of the Duke bookstore from the bookstore manager and why it was so important for them to buy back used books and sell them for what they did and the reasons why they marked them up so much. And after those explanations, nothing happened, just kept the website up, kept it going. There was nothing they could do. And so that was one of my first on campus ventures back in the late ’90s.

Aaron Dinin:

I think I might’ve actually used that as a student. That’s a little weird. And what other entrepreneurial ventures did you experiment with?

David Cummings:

So we did a textbooks exchange on campus. We did another service called devillaundry.com on campus. So we’ve partnered with White Star Cleaners off of 9th Street. We put flyers under all the dorm rooms and we built a web app and a database and anybody could go online and schedule to have their dry cleaning or their laundry picked up, cleaned, and then put back outside of their door. And that one actually had credit card processing on the website Authorize.Net. So I set up devillaundry.com and then I set up a Duke deliver site. It was basically a site that you could go online and order food and have it delivered, but Alpine would do it and two other campus eateries. And so we did the first online food delivery site for Duke. And again, it was just a small business that didn’t make much money, but it was fun to scratch the itch. And now 20 plus years later, it’s awesome to see DoorDash and Uber Eats and everybody else do it at scale when we were doing it on the small community in Durham.

Aaron Dinin:

Okay. So you’re experimenting with early web-based delivery services in college, which is actually kind of visionary in retrospect, but what are you learning from all this? How does that lead you down the path of eventually Pardot?

David Cummings:

So after trying these different businesses, laundry business, textbooks business, food delivery business, all the while doing the consulting, building the websites, I came up with the idea for a content management system. And so somebody would pay me a 1000 bucks and I’d make the website. And the first question I would get after making the website was, now how do I update it? Now how do I change it? Now how do I add new content to it?

And so I built a few dozen websites at that point and the proverbial light bulb went off, let me build a system that if the user has the skills to do email in their browser, back then there was no Gmail, but there was Hotmail. So if you had the ability to do Hotmail in your browser, you should be able to update and maintain your website yourself. And so this before Wix, before Squarespace, well before WordPress. And there were a handful of content management systems, they were all very high-end. At the time, it was companies like FileNet and Vignette and Stellant and Documentum and Red Dot and others. And so I built one of the first small business content management systems.

Aaron Dinin:

A content management system, that’s interesting. So that was your first foray into B2B SaaS apps, I’m guessing, a CMS. What’s the story of that business if you don’t mind me asking?

David Cummings:

Not being a marketing major, the name of the product was Super Update. So it was superupdate.com. You would log into the web app. In the web app, you would type in your FTP credentials, username, password, FTP server, a few other settings. And then our server would download all of the files on your FTP server locally to our server. Then our app would expose what looks like a Windows Explorer, and you could double click on a file, and then you could edit the HTML in the browser. And if you followed like the Dreamweaver template comments, the HTML comment tags, or the front page tags in terms of editable regions, our system would pick up on those. And so you could edit the main region or edit the header or edit the template for the site.

And so Super Update was a SaaS system that cost $30 a month that would FTP your site down to our server, you would edit in the browser on our server. And then when you hit save and publish, behind the scenes, it would FTP the files back to your server. And you were none the wiser that a bunch of files got transferred because your website looked great and you were able to update and create new content right inside the browser without the involvement of a technical person. So that was Super Update 2001.

Aaron Dinin:

So you’re what? A 20-ish year old college student launching a SaaS CMS in 2001, which is roughly right after the dotcom crash. So how’d that work out?

David Cummings:

It did not IPO. The big lesson learned from Super Update, it was one of those first time entrepreneur focused on a scalable product. And I believed in the field of dreams. I believed if we just built a cool product that worked well, people would beat a path to our door. And so it was a really hard lesson learned around the importance of sales and marketing, the importance of go-to-market and getting products into the hands of customers. I was working full time on the startup, had my friends that were interns. And then I took a leave of absence for the first semester of my senior year to work full-time on the startup. So building the software, not making any progress.

Back then, there was a large trade show called Internet World. And Internet World was the biggest in the industry. And Internet World was scheduled to have their trade show September 13th, 2001. So September 11th hit, trade show was canceled and then ultimately rescheduled for the second week of December in New York City at the Javits Center. And because of September 11th and because it was pushed back, my friends at Duke were able to finish their finals for the semester and then fly up to New York. I packed up my brother’s car with large CRT monitors and drove by myself from Durham up to New York City to put all this equipment at the trade show booth. My buddies finished their finals, they flew up to New York. And so there I was with some buddies work in the first trade show booth that I’d ever even been to.

And by amazing luck and circumstance, there was a company three aisles over called Globalscape. And at the time, Globalscape had the most popular FTP client in the world. And it was called CuteFTP. They had 1.2 million paying customers of CuteFTP. And they were looking for a content management system with which to upsell and cross-sell their existing customer base. And so we bumped into them at the trade show because we both had booths. And we started a conversation around what would it look like for them to license the Super Update software and sell it under their own brand? The conversations kept going after the trade show.

And by spring break of my senior year, I had gone back to school part-time and I spent my entire spring break in San Antonio, Texas, which is where Globalscape is headquartered, training their team on Super Update, on the code, on building the product. And they released it as PureCMS. And in exchange for licensing it to them, they paid us $200,000 in prepaid royalties upfront. And then they paid us 15% of sales after that. It was essentially a fork of the code base. It was a pseudo intellectual property licensing. So they had the code, they called it a PureCMS. They put their own brand on it. They sold it as their own product. And it was a fork of the Super Update code base. And it was ultimately a failure for them. But for us, we got the $200,000 right up front.

And so I thought I was king of the world, 22 years old, $200,000 in the bank. And so I promptly scrapped that first product and started building a new content management system from the ground up to better serve the different use cases and needs that I had seen that the architecture of the Super Update product was never going to support. And so that is the current Hannon Hill product today. And today that product has sold tens of millions of dollars worth of revenue.

Aaron Dinin:

How about that? Before Pardot, David actually launched Hannon Hill software and their enterprise content management platform Cascade CMS. It’s a tool thousands of companies are still using today. And building that company taught David the critical lessons he’d need in order to create Pardot. First of all, because he had experience at building content management systems, David knew and understood the importance of providing users with easy to use, no code required ways of launching simple websites and landing pages. That was a necessary feature of Pardot as it looked to empower marketing teams. Remember he was targeting marketers who wanted to be easily changing their messaging, not waiting on developers to update the code base.

The second thing David learned while building Hannon Hill was the importance of focusing on customer acquisition. Because like I said at the beginning of the episode, entrepreneurship isn’t field of dreams. And just because you build something, even if it’s awesome, that’s no guarantee anyone will come to use it.

David Cummings:

They won’t come at all. You got to figure out how to sell and market. So we got lucky on the distribution for the first product, Super Update. And then took the money from the licensing of Super Update, built the next product, Cascade Server. And then once we had a working version of that product, still had the same challenge of how to sell it, but at that point, I became enamored by sales and marketing. I personally got really involved in sales and marketing. And so at the time, I could buy Google AdWords ads for the term content management for a dollar a click. Now it’s 20, 30, $40 for a single click, but back then, Google was still getting going. And so I figured out that I could buy Google AdWords for a reasonable amount of money, generate leads online and then go through a traditional enterprise sales process over the web. So back then, it was all WebEx, GoToMeeting and lots of phone calls. And so we did that from a go-to-market point of view.

The first five customers that we signed up for Cascade Server, two of the five were colleges. One was Yavapai College in Arizona, and one was a small college in Central Florida. And so we just started focusing on colleges. So I got one of those giant books, that’s the 4,160 2 year, four year public private colleges in the United States, hired two interns from Emory in Atlanta. And literally just started cold calling every college and university for years and years, webmasters, VPs of communications, anybody that might be involved in managing the campus, the official website. And so just started selling more and more content management software to the universities. And that was really what made Hannon Hill successful.

Aaron Dinin:

I’m going to guess then that it was all the work figuring out customer acquisition for Hannon Hill that led you to the idea for Pardot. Is that right?

David Cummings:

So by 2007, so I’ve been doing Hannon Hill for six years. At the time, we had 2 million of revenue and it was full on the rise of WordPress and open source. So it was clear to me that content management at some level was going to be driven a lot more by open source products. Drupal was really popular back then and there was a handful of others. And so since I had become enamored by sales and marketing for that second product, Cascade Server, it really led to me thinking about how I could apply some of the technology that I had learned to do a better job of acquiring customers.

And so the very first idea for Pardot was all this money that Hannon Hill is spending on Legion on Google AdWords ads, let’s take that experience and let’s build a new company and a new product that just specializes in buying AdWords ads and generating leads. And so we started doing that and we started to test it out with some different customers. And we realized that we really needed to encapsulate all of the critical marketing functions into one platform. So we needed a way to build forms easily and embed them on a website and then capture the Forbes contents and route it to the CRM, route it to the sales rep. We needed to do email marketing natively inside the product as opposed to relying on Constant Contact or MailChimp or another product.

We needed to make it easy to build landing pages. And landing pages were essentially one page websites. So we had a background in doing content management and so we needed landing pages. And then we needed rules to tie all the different workflows together. So, and if this or that for marketing function. So if a lead comes in and they’re from Atlanta, route them to the sales rep that owns Georgia, and do that all automatically inside the software.

Aaron Dinin:

And that’s kind of a crazy idea at the time, right? I mean, most companies weren’t doing those kinds of things, they didn’t even realize they could do them. So how did you acquire customers for your own customer acquisition software business?

David Cummings:

So we did the same thing that we did with Hannon Hill. We started cold calling. It took us a while to figure out the right mix. But we figured out that companies who had sales people listed inside of LinkedIn, which we could search, companies that had an email newsletter signup box on their website, which we could tell by going to their website and clicking around, and companies that bought Google AdWords ads, which we could tell by going to Google and Googling the category of product or the name of their product specifically, companies that did all three of those things were a complete slam dunk for buying Pardot.

So we wrote a little bit of code to start scraping some websites and automating some of those pieces so we can generate our own lists, sort of like a built with nowadays. And so we were doing that by hand back then. And we would generate and figure out what companies to call on based on those three factors, sales reps and LinkedIn, email newsletter on the site, and Google AdWords ads on google.com. And then we hired salespeople to cold call all the marketing managers and VPs of marketing that met those criteria. And we were just off to the races.

Aaron Dinin:

How did you think about positioning Pardot in the market?

David Cummings:

I was at a trade show, the big Salesforce.com Dreamforce show and randomly bumped into the founder and CEO of Eloqua, Mark Organ.

Aaron Dinin:

Don’t forget we spoke with Mark Organ about his pioneering marketing automation platform, Eloqua, right here on Web Masters back in episode number 51. Be sure you check that out too, particularly if you’re interested in learning more about the emergence of the marketing automation industry.

David Cummings:

We sat down and started talking. He was like, “Oh, I love what you guys are doing at Pardot.” Eloqua is super high-end enterprise sale, really expensive product, expensive sales customer acquisition process. And so I talked a little bit about how we focused on this $1000 a month price point, and we could sell over the web and marketers could put it on a credit card such that his or her finance director didn’t have to sign off on it and really targeting that high, small business or that low bid market segment. And Mark was like, “Oh, that’s just like what Toyota did when they created the first Hybrid.” And so the idea for the first Hybrid car was something that had a $24,000 price point that the average American family could afford. And so that $24,000 car constraint drove everything that Toyota did to bring their first Hybrid to market. And obviously it was wildly successful.

And so thinking about that example, that $1000 a month price point as the upper limit that we could charge a mid-level marketing manager and how that was our overarching constraint. We had to deliver support in an amazing way that still fit that model, customer onboarding delivered over the web, customer support, our inside sales process of acquiring customers, so our CAC to LTV, our cost of customer acquisition to the lifetime value had to fit in with it. And so having that $1000 a month price point so that he or she could put it on a credit card as a constraint and everything else had to be as eloquent as possible within that constraint. And so that conversation with Mark talking about the Toyota Hybrid really drove that home. So a random aside from a fellow marketing automation founder that helped clarify my own thinking about how we were positioning our competing company to his, and the rest is history.

Aaron Dinin:

And what was it about that positioning that resonated so well with potential customers? Why was the company able to grow so quickly?

David Cummings:

We were doing an outbound sales process for a marketing automation platform at a time when nobody used marketing automation. And once they started using it, it was so powerful for their business that they were never going back, the ROI was off the charts. So the Hannon Hill experience of going through the desert, not knowing how to acquire customers and then having a product that had a market where marketers were spending tons of money on online marketing, but didn’t have a good system to run it, they didn’t have a campaign execution tool. They had Google Analytics for some data. They could see what leads came in from like a form to email type script. And they could do email marketing and see that, but they were all disjointed. All the tools at the time were built for the consumer online marketer. The tools at the time were not built for the online business marketer.

And so we really captured that along with the wave of the shift of business marketing dollars going from offline to online. So dollars spent on trade shows and magazine ads and direct mail pieces, all that money shifting online. And so we rode that wave at the right place at the right time.

Aaron Dinin:

Here, David is alluding to an important part of entrepreneurship in customer acquisition that needs to be explicitly highlighted. So I’ll go ahead and do that. Here’s what you need to know, timing is critical. Your venture doesn’t exist in some sort of temporal vacuum. You’ve got to market a product in the context of bigger trends. Your product will tap into those trends while your customer acquisition strategy will leverage the demand created by a shifting technological landscape. That’s a huge part of what made Pardot so successful. It wasn’t just about having a great product or just about having a great customer acquisition strategy. It was how those two things aligned.

David Cummings:

If you’re a business marketer and you were going to run an online marketing program or a campaign, you would start in Pardot. Prior to Pardot, you would cobble together different tools and the campaign would live in lots of different places. And it would be very difficult to show the return on investment from those dollars spent. With Pardot, it all becomes easy, automated, way more scalable. The technology enables you to do things that you can never do by hand.

Aaron Dinin:

Notice how David highlights the fact that without Pardot, it was difficult for companies to understand what kind of return on investment they were getting for their marketing dollars. That’s another key part of a customer acquisition strategy. And by the way, a customer retention strategy too, you have to show clear and significant ROI.

David Cummings:

I’ve learned that lesson the hard way, lots of other startups have been tried and failed and investments that have tried and failed. The most successful ones that I’ve seen by far and been part of are ones where the product is in the path of revenue or the product is mission critical workflow. And again, this is in the business to business context. So in the path of revenue is exactly that it is a product that unequivocally makes you money. So you put a dollar into the machine and it spits out $3. And there’s no doubt in your mind, no doubt in the boss’s mind that this product makes us money.

And then the other category is mission critical workflow systems. And so the best analogy there, ask yourself this question, ask your customers this question. If they run out of money, do they stop paying their electricity bill first or do they stop paying for your software first? If they stop paying for their lights in their office before they had stopped paying for your software, you know it’s mission critical.

Aaron Dinin:

And when did you figure out you’d finally created something mission critical with Pardot?

David Cummings:

Sure. So we started in March of 2007 and really had our first meaningful product out at the end of 2007, lots of iterations, lots of interns from Georgia Tech working on it to build the application. And then it was the typical product market fit refinement, lots of features, lots of polishing edges. And it was really when a customer of ours said, “David, I love Pardot, I love what it does for my business, for my marketing department.” And then he said something that I’ll never forget, “I don’t know how I would ever do my job without it.” This idea that it truly fit into his business in a way that he could never go back without it.

So in the entrepreneurial world, one of the most common reasons I see an entrepreneur fails, doesn’t make it, has to shut it down is that they build a product that’s just incrementally better than what’s on the market. It’s just 10% better evolutionary. The ones that really succeed in a meaningful way, they’re revolutionary products, they’re 10 times better than what’s on the market. And so I didn’t really appreciate that until this small business owner described to me how he could never turn Pardot off because it was that valuable to his business. So I encourage entrepreneurs to think about, is it 10% better and evolutionary, or is it 10 times better and revolutionary compared to how they did things before?

And so from a Pardot point of view, the business grew nicely, not much revenue in year one because we were building the product. Year two was 300,000 in revenue. Year three was 1.2 million in revenue. Year four was 3.4 million in revenue. Year five was almost 8 million in revenue. And in year six, we sold the business. We were five and a half years old. We had 13 and a half million of recurring revenue. So we were doubling year over year, bootstrapped inside sales model, no VCs. And we sold it to ExactTarget, at the time, a publicly traded software company out of Indianapolis. And so we sold it for almost a $100 million, cold start to exit in five and a half years. And that was the sale in October of 2012.

Aaron Dinin:

But now Pardot is part of Salesforce, right? How did that happen?

David Cummings:

Yeah. Seven months later, Salesforce buys ExactTarget, their largest acquisition ever at the time.

Aaron Dinin:

What’s it like seeing Pardot as this big piece of Salesforce, which in itself is of course this massive global industry-defining behemoth of a B2B SaaS company?

David Cummings:

Oh, it’s amazing. So again, in 2012, we sold the business. It had 13 and a half million of recurring revenue. Today as part of Salesforce.com, it has over 500 million in recurring revenue. So today as a standalone business, Pardot is worth $10 billion in the public markets. And so the great part about that is Salesforce.com has really rolled it out, introduced it to hundreds of thousands of companies. And so this idea of building a piece of software that becomes one of the 10 most widely used B2B MarTech products in the world is amazing. And that legacy, that distribution, that scale is really because of Salesforce.com and the amazing business that they have.

Aaron Dinin:

Not to suggest Pardot was the only reason Salesforce acquired ExactTarget, but seems like it played an important part. Any regrets or thoughts that maybe there was a bigger play with Pardot that you could have hung on for?

David Cummings:

No, not at all. I think going from Pardot, two months later buying the Atlanta Tech Village. A couple of months after that, helping start the reboot of Salesloft, we started Salesloft 1.0 inside the Pardot office. We did the reboot of Salesloft in the Atlanta Tech Village. Because of the Tech Village, I had the opportunity to be introduced to Tope, the founder of Calendly. And so was the sole seed stage investor in Calendly back in 2014. And earlier this year, Calendly raised around at a $3 billion valuation, one of the most amazing businesses I’ve ever seen, had the opportunity to start several more companies, opportunity to create the Studio, where we start two companies a year on a repeatable, scalable manner. And so getting that first win, getting that Pardot win, buying the Tech Village, really working to grow the community and get an opportunity to meet a bunch more entrepreneurs has just been an amazing experience post sale of the business. So no regrets.

Aaron Dinin:

That’s right. Pardot wasn’t the end of David’s impact on the B2B SaaS marketing automation world. In fact, it was probably the beginning. He has his hands in a company called Salesloft, which is another customer acquisition platform that’s well on its way to a bigger exit than Pardot, and Calendly, the near ubiquitous calendar automation app. Not to mention he started something you heard him reference called the Atlanta Tech Village, which is the largest hub of startups in the Southeastern United States. So yeah, David has been busy since selling Pardot and successful. And it’s all because he learned that successful entrepreneurs don’t just figure out how to build great products, they also figure out how to effectively market them.

David Cummings:

My main piece of advice is to become really good at experimenting. The startups that do work, it’s not just one thing that made it work. It’s lots and lots of sales and marketing experiments, it’s lots of trial and error. And once in a while something does work and you go deep on it and you mine that vein of gold and then it runs out or it dries up and then you got to have more veins of gold ready to go. And so really developing this feedback loop, this trial and error, this mindset of lots of experiments, and then just get really good at it.

Aaron Dinin:

Couldn’t have said it better myself. In order to build a successful company, you have to get really good at running sales and marketing experiments. And I suppose it doesn’t hurt to run those experiments with the help of a powerful marketing automation platform like Pardot. All right. That about wraps things up for this episode.

I’d like to thank David Cummings for taking the time to share his story and the story of building among other things Pardot. If you’d like to see all the cool things he’s working on these days, be sure to find him on Twitter. He’s @davidcummings. He’s also got a great blog with all sorts of advice for entrepreneurs that I enjoy reading on his website, which is davidcummings.org. Speaking of which I’ve got something similar over at aarondinin.com. Be sure to check it out or follow me on Twitter @AaronDinin. That’s A-A-R-O-N D-I-N-I-N. You should follow Web Masters on Twitter too. We are @WebMastersPod. Feel free to share any thoughts or feedback you have about the episode. Of course, if they’re positive thoughts and feedback, don’t just tweet them, put it in a review and post it to your favorite podcast app. We really appreciate those five star rankings.

This episode of Web Masters was produced with the help of our audio engineer, Ryan Higgs, and it was created with the support of our sponsor Latona’s. Remember, if you’re interested in buying or selling an internet business, be sure to check out latonas.com. Also, be sure you’re subscribed to Web Masters wherever you listen to podcasts so you’re sure to get the next episode as soon as it’s released. We’ll have that out for you very soon. But for now, it’s time again for me to sign off.

[OUTRO]

Aaron Dinin:

I usually like to ask, especially for companies like this with somewhat odd names, where did the name Pardot come from?

David Cummings:

So in 2006, when I was looking for a name, it was marketing software. And so I went on Dictionary.com and I typed in marketing. And back then, they would show the dictionary definition and then they would share the translation of the word at 29 languages. It was a way to fill the page with more content. So I typed in marketing and it gave a definition of marketing in English. And then below that, it said in Latvian, the tiny country of Latvia, the word Pardot means to market or to sell. And so Pardot being a six letter domain name, I could go to GoDaddy and pay $8 back then and register a six letter domain name, a six letter.com that you could actually pronounce. And so it was from a Dictionary.com search and trying to find something short and pronounceable related to marketing.

Aaron Dinin:

I’m pretty sure I’ve used that exact same process to name a company. I wonder how many companies actually owe their names to basically searching the dictionary. That would be an interesting stat to figure out.

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