14. Lessons from a rocketship
Hi! It’s been forever. I’ll be writing more soon.
I’ve been slow to write as I’ve been on a wild ride since we last spoke. Like I mentioned, I joined Checkr about a year ago. Though it’s only been 12 months the amount of learning packed into that timeframe is… crazy.
On B2B product-market fit
Checkr has enjoyed awesome product-market fit from the start. Our founders Daniel and Jonathan discovered a need and developed a product that so firmly addressed that need that the market has, and continues to, pull the company forward. It’s not by chance that Checkr cornered the trust & safety market in on-demand and is making headway in traditional enterprise; the desire for a better background check and candidate experience was so unfulfilled that the market snapped it up immediately. This is the kind of product-market fit where you see hockey stick growth, clients flock to you, and everything just clicks.
In contrast, breaking into new spaces like the traditional enterprise can be hard. It’s not always because of competition, or pricing, or unfulfilled requirements. Among the biggest blockers to adopting new technology is inertia. This quote from Ben Horowitz’s ~Hard Thing about Hard Things~ sums it up pretty well:
The primary thing that any technology startup must do is build a product that’s at least 10 times better at doing something than the current prevailing way of doing that thing. Two or three times better will not be good enough to get people to switch to the new thing fast enough or in large enough volume to matter.
At the end of the day a business has to maximize revenue and minimize cost. A drastic impact on either or both levers is required to warrant switching costs. That’s simple and intuitive to grasp, but can get lost in the minutiae of day-to-day delivery. It’s important to have this “10x North Star” drive everything from product development to sales pitches to account management.
Inertia is amplified in an existing category. (Example: Background checks have been around for a long time; traditional enterprises have a very set way of doing them.) Product users commonly object that a new offering doesn’t do something (their team has “always done that thing!”). Some companies might wring their hands and build a better way for doing it. Better teams understand what precisely about that thing is so important, how it connects to some value, and build towards that underlying value. The best teams shift a user and buyer’s mindset away from the thing towards its value, increasing adoption and better steering towards that 10x.
This is hard, and it involves understanding, from first principles, how a business operates and how a product impacts that business. Navigating this and a technical sale defines much of an enterprise SaaS solutions or services offering (love this post on the topic) and I’ve seen it work really well.
On software in the physical world
There is something satisfyingly tangible about delivering a background check. It is a record, of a moment in time, that may have involved an individual entering a court, requesting a file, and retrieving a document. A background check is real, and companies pay a meaningful sum for it. Not many software companies can say their products orchestrate physical world events at large scale, but the ones who do (eg, Amazon, Uber) are well-compensated for it.
Yet this tangibility means Checkr’s software must tame a clunky, physical, legacy world prone to human error, sub-optimal data, and even natural disaster. Tens of millions of checks a year requires physical fulfillment of millions of searches across hundreds of courts across the country. Use case permutations multiply quickly and edge cases become material problems at scale. Building for this world requires learning about some pretty arcane laws and organizations, working in some less-than-glamorous industries, but ultimately drives to that satisfaction of knowing one’s delivered a physical, tangible thing. It’s like you’ve unlocked a secret about how a corner of the world works.
Things of such complexity and difficulty and tedium, but for which there’s great demand, are massive arbitrage opportunities for companies willing to grind out a solution. Background checks are a pain for practically everyone who does them, but few entrepreneurs think to address the issue. I always think back to this blog post from Paul Graham on schlep blindness:
There are great startup ideas lying around unexploited right under our noses. One reason we don’t see them is a phenomenon I call schlep blindness. […]
There was a point in 1995 when I was still trying to convince myself I could start a company by just writing code. But I soon learned from experience that schleps are not merely inevitable, but pretty much what business consists of. A company is defined by the schleps it will undertake. And schleps should be dealt with the same way you’d deal with a cold swimming pool: just jump in.
B2B is companies outsourcing schleps to one another. If you’ll grant me the nerd-talk, it’s what economist Ronald Coase alluded to in saying a point must be reached where the costs of organizing an extra transaction within the firm are equal to the costs […] of organizing by another entrepreneur.
Meaningful, common schleps are great businesses. The question for founders is, what schleps are best to own and how might they suck less? Stated differently, which difficult tasks are most painful, complex, and commonly shared across large groups of similar customers? Each question impacts go-to-market and product strategy. Checkr adds incredible value in the ordering, reading, interpretation, and actioning of background checks, but there’s only so much one can do at the individual courthouse level. Picking the right schlep is key.
On startup careers
I had little idea what I’d be doing when I joined Checkr a year ago. I remember sitting in a conference room, looking at my interview panel, and seeing the role “Solutions Engineer.” I thought to myself, “I have no idea what that is.” I just knew I wanted to join this company and work with these people.
To be fair, I’m still not totally clear on the role: it changes week to week and I often focus on the highest-leverage projects that need momentum, whether that’s helping a large client start running checks, defining how they’ll use Checkr, making the case for a new offering, or diving deep into our product to surface issues and solutions. The ambiguity and the problems are the best part.
What is clear to me is the importance of gap-filling and ownership. Startups are messy, and what needs to be done or who’s responsible for it isn’t always clear, meaning there’s a lot of value in someone who can see a problem and figure it out, regardless of it being above or below someone’s “pay grade”. Those are the people you want on your team. (I’m still figuring out how to test for that in interviews. Let me know if you’ve figured it out.)
Unrelatedly, it’s unfortunate to me that consulting- and MBA-types don’t more often consider B2B sales in their startup job search. “Sales” often feels like a dirty word in ivory towers across the country, but its importance can’t be overstated: it’s strategic, it’s the spearhead of a startup into a company and market, it generates money, and it continually defines a customer’s need (and what might need to be built). For a startup with no sales engine, go-to-market problems can sink a compelling product. (I highly recommend this post from Martin Casado on many common startup sales myths.)
So, Business Schools of America: teach your students sales, for everyone’s benefit. And new grads or those breaking into startups: consider sales as an entry point because you’ll learn, a lot, and fast.
More to come soon.
Shout out to Kyle Mack, Mike Johnson, Jack Altman, and Jacob Loewenstein for their feedback on drafts of this post.