Using Customer Feedback to Drive Product-Market Fit & Growth

Intro 00:01
Welcome to Startup Success, the podcast for startup founders and investors. Here, you’ll find stories of success from others in the trenches as they work to scale some of the fastest growing startups in the world, stories that will help you in your own journey. Startup Success starts now.

Kate 00:18
Welcome to Startup Success today. We are joined with Eli Portnoy, who is the founder and CEO of BackEngine.ai. Welcome Eli.

Eli Portnoy 00:30
Thank you so much for having me. Really excited to be here.

Kate 00:33
I’m excited to be here because I want to share with the listeners – you are a seasoned founder. This is not your first rodeo. You’ve had 66 million, if I’m correct, in exits already under your belt. (That’s right.) That’s impressive. There’s a lot of people listening today who are looking for that. If you wouldn’t mind, I want to get into BackEngine.ai, because I think what you’re doing will be of huge interest to our listeners who want to stay connected to customers. But if you wouldn’t just mind walking us through your background a little bit some of those other exits, if you could just touch on them to kind of set the stage, then we can lead into what spurred the founding of BackEngine.

Eli Portnoy 01:14
Absolutely. A question I get asked a lot is, why do I keep starting businesses, because this is effectively my fourth one and the truth is, I don’t have a good answer, other than there is this gravitational pull that I feel to building things. I feel like we live in this unprecedented moment in human history where there’s so much technology and infrastructure and just building blocks that are there for us, that we have an opportunity to go out a small little team and build something special and do something that my grandparents would have thought was impossible, and my parents probably still think is impossible. So I’ve just constantly felt this gravitational pull, and I started my career right after school, I went and I did some strategy consulting. And really found it very, very, very, I don’t know what the right word is – boring. (I was not expecting that.) No, it wasn’t. It wasn’t awesome, because I was spending all day long, basically just moving boxes around on a slide. And I, like, while I was doing that, I just kept thinking, like, I just like, I want to go build something. I want to try. I feel like I can do it. And at some point there was one night, it was, like 10:30 at night. I was still, like, in the office working on these slides and feeling like I don’t even know why I’m doing this, because there’s no value I’m adding. I’m not doing any thinking. I’m not helping in any way. I’m not really learning other than how to be really, really good at lining up boxes on PowerPoint. And I just decided to go for it. And I remember I had the beginning of an idea, but it really wasn’t so fleshed out, and I was on the subway, I lived in New York City at the time and I’m going back to my apartment, and I’m thinking, I’m thinking, I’m like, trying to refine the idea, and I’m like, wow, I am not going to figure this out on a subway trip. But basically, over the next couple of months, I kind of, like, morphed the idea and I launched it, and had some traction with it, but ultimately, I was not ready in my career to start something. And so I went to business school, and I got a little bit more formal education, and then I went to Amazon, and I thought, Well, I kind of learned the language of business at business school. Now let me go to Amazon and try to learn how to build an actual tech product. Spent a couple years there, but the entire time, I was just like itching to go back and try again. And basically, at some point, about two years into my Amazon journey, I finally had what I thought was a good enough idea and the blessing of my wife, to go and try and do this. And went out and started the company, and I ended up building a company called Thinknear, where we can go as deep as you want, but we had, like, a bunch of false starts, and then eventually figured it out. But we hit on massive, massive tailwinds, and within 18 months of starting that business, we were acquired by a company called Telenav. And that gave me both the gravitational pull that I always felt to start companies, but then also the false sense of hubris that I could do it again and again and again, it would be easy. And so I had to spend two years at the acquiring company, which were fantastic, by the way, but then the day that my two years were up, I left, and I started my next company, ense 360 and this time didn’t quite hit the same level of tailwinds and had to really grind out for six years, but was fortunate enough that after six years, we were acquired by a company called Medallia. Spent two years again there. Maybe there’s a pattern, I don’t know. And then basically decided to start BackEngine. And so this is my fourth company, and that’s been the topsy turvy journey to get here.

Kate 04:38
Thank you for walking us through that. I like how you shared too, that that first attempt didn’t make it, because I, you know, I talked to so many successful founders, and more times than not, that’s the case. They have had one where you kind of learn all the pieces. And then I like how you got some experience at Amazon. I’m sure, like you said, you were itching to get out. But I sometimes think learning some of those fundamentals is important.

Eli Portnoy 05:05
It’s hard to know what good looks like until you’ve been a part of good so knowing, like, what is a good manager, what is a good organizational system, how do you recruit? Like, there’s just a lot of things that you can kind of get there. But if you’ve, if you’ve seen it done at a tier one level, there’s just a lot of learnings from it. I don’t think I would have been able to do Thinknear or Sense360 or BackEngine now, if I hadn’t gone through that Amazon experience.

Kate 05:31
That’s super interesting. I feel the same on my career. So let’s change track and talk about BackEngine.AI, because I really want to delve into what you’re doing now. It interests me a lot. Maybe, if you could set this stage on what it is the company does, and then why you, you know, pursued founding it.

Eli Portnoy 05:50
Yeah, so, so the basic idea around BackEngine is that we connect to all of the different tools that companies use to talk to their customers. So think like video calls, email, support tickets, and we use AI to analyze all of the different customer interactions and to help unify the voice of the customer. Help make it really, really crystal clear for every person at the company, what do customers like? What are they not like? What are they asking for? Where are the issues? And the reason why we’ve been building this is because across my journey of starting these different companies, I found that the experience is almost always the same. When we’re a tiny little team of two, three people just starting out, I’m the founder, and I’m building product and talking to customers and doing sales, and so I have the superpower as a founder, where I know exactly what our customers want, and I can make sure that the product fully encompasses that, and that our service and support fully encompasses that, and that we as a company are completely aligned. And then, as the company starts to grow, and we bring on more and more customers, and we have to bring on different teams to support those customers and different people and different systems, and all of a sudden, as a founder, I have felt very disconnected from that customer, and I’ve started to see all these like, bad behavior start to creep up, Where all of a sudden, like, the salesperson is trying to sell a deal, and the customer is, like, very adamant about a feature, and then the salesperson is very loud about making sure that we all know this feature is needed. And so we go build that feature, but it turns out they’re the only customer that ever wanted it, and it’s not strategic, and I’m disconnected. I don’t really know, the product people don’t really know, the customer support people don’t know and like, you end up doing what the squeaky wheel ends up wanting. But that’s one example of, like, hundreds of different ways that in an organization where there’s all these layers between the customer and all the people who need to take action on it, how you can get disintermediated in a way that is really painful and makes it much, much harder to build a world class organization where everyone is aligned. And so what we’ve been building a BackEngine is basically a a solution for that problem that I have personally experienced so many times, in a way for me at BackEngine as customer number one, to be able to really understand what our customers need and want, and be able to make sure that we deliver that for them. And so it’s been a little bit meta to be building a product to help listen to customers, to help them listen to their customers. But it’s been really fun.

Kate 08:21
Okay, I have to just double down on this, because we’ve been doing this show for three years, and every successful founder on here, and I want everyone to take note of this, they say the same thing. In the early days, they’re doing all the calls, you know, they’re getting that customer feedback firsthand, you’re talking to the big logos. It’s great, and then you start to scale, and the founder has other things to do, and that’s where you can go one way or another. And all the ones that you know have had the big exits or the big raises, they all say we doubled down on a customer feedback loop so that we were still constantly and they made pivots and iterations, but not just around one, like you said, around aggregate feedback that they were able to see across channels. And so the reason why I think what you’re doing is so great is nowadays there’s so many touch points, like you were saying, there’s sometimes text, Slack, email, old fashioned phone calls. It’s hard to keep it all tracked, and then you’re scaling. It’s really challenging. So that’s what your solution is around?

Eli Portnoy 09:33
Exactly. That’s exactly it. And it is, it’s really tough, like as someone who’s been privileged enough to do this multiple times, I know the difference between success and failure really comes down to whether you can listen to your customers, and my only alternative before was to just spend a huge amount of time trying to do it and trying to, like, piece it together in this way that was felt systematic at the time, but really wasn’t. Were, like, every customer success person after their call, they would try to, like, write down the feedback and put it into a CRM, and every time a sales person or and like, it really just it wasn’t working for us. And so the idea is, how do we simplify this systemic collection of all of these things that customers are saying, and how do we automate the dissemination of this information to all the people that need to see it. And it’s actually quite magical when it works, and it works automatically, and then it’s not just a founder who’s hearing it, but it’s everyone on the team who is hearing it.

Kate 10:33
I want to get to when it works before we get there. I’ve done some reading, listening to podcasts of yours, you talked about four stages of customer feedback, I think it would be helpful, if you wouldn’t mind going through that for these listeners, just to kind of hone in on what we’re talking about, and then I want to get to what you’re seeing at BackEngine when it all works.

Eli Portnoy 10:57
Yeah, no, this is, this is, this is something I’m very passionate about. So we did this research study where we basically collected data from 150 B2B businesses, and we collected two types of two sets of data from them. The first was, how do they currently collect feedback? Are they running NPS surveys? Are they running CSAT surveys? How often is the CEO talking to customers? How often is the product person talking to customers, and so on and so forth. So just a lot of different data points to try and understand how mature are they at collecting customer feedback. And then the second set of data that we collected was performance data. So how are you doing? How are you growing? Are you retaining customers? Are you winning against competitors? Are you winning sales deals and so on and so forth. And what we did is we ran all this data, and basically found that there were four stages of maturity where you looked at all of the ways that they were collecting customer feedback and what they were doing with it, you could basically bucket every company to one of four stages, basically from beginner all the way to expert level. And the second thing we did is we then tried to look at what performance looked like at these different buckets. And what we found was that there was a clear and direct correlation between how mature a company was at their collection of feedback and how they performed. And it wasn’t just that it was one metric. It was every metric, from net revenue retention to growth to competitive win rates to product success and product launch successes. So just across the board, companies where there was an investment in figuring out how to make sure that the company was hearing customers outperform companies where they were less mature at it. And we also looked to see, is this just a function of size? Is it just that bigger companies tend to be more mature? And it turns out that, no, that is not the case. You have very mature companies at the startup level and very immature companies at the sort of like IPO level. And there was no correlation between size and these metrics. So it was actually really fascinating. The other metric that was astounding to me was we looked at how often a CEO met with customers, and what we found was that CEOs that met with customers on a weekly basis or more frequently significantly outperform companies where the CEO was meeting with customers less frequently. So to me, what that tells me is building a mature feedback collection system takes time, but it doesn’t take time to get the CEO to start meeting with customers on a weekly basis. And so anyone who’s not doing that right now should start basically today. Just make sure every single week you are talking to a customer.

Kate 13:36
So interesting that you didn’t see a correlation between, like, you know, maturity of the company, right? That’s fascinating. So if you’re a founder, listening and you’re just kind of getting started, how do you go about it? Like, you know, where do you start?

Eli Portnoy 13:56
The first thing I would do is just every CEO, no matter what size the company gets, just talk to customers. Make it a religious part of your day to talk to customers and to be involved. And that means joining sales calls, joining prospect calls with customers, it means when there’s a QBR, just join, just make it like a part of the DNA that you get invited into these calls. And also maybe have a couple of customers that you actually own. I like to do this, I like to be the primary CSM on at least a couple of customers, because you learn so much by not just dropping in and having, like, the CEO level conversation, where everyone’s a little bit more stiff and like the conversation ends up being a little bit more high level. And just like having a couple of customers where you are hearing the day to day pain of what they’re going through and what they’re trying to solve for. That’s the first thing. The second thing I would do is I would make sure that there is someone at the company that owns customer feedback. We saw this way too often at companies where, like, there’s no designated owner of customer feedback. There’s an owner of customer success. There’s an owner of product. There’s an owner of marketing. No one owns customer feedback. And that doesn’t mean you have to have a dedicated person whose job is to be like the voice of the customer, but you do need to make sure that you’re assigning it to someone and everyone in the organization knows whose job it is, and that that person has the resources and the time to actually make it a meaningful part of their of their like day to day. Because one of the things that we also asked these companies was, who owns customer feedback? And 25% of companies said no one, which was shocking to me. 53% said it was customer success. But when we dug in, turns out that they don’t really own customer feedback. They happen to be the ones that talk to customers most often, and so people think of them as the owners, but it’s not what they were hired for. It’s not part of their job mandate. It’s not something that they’re goaled on. It’s not something that they’re measured on. It’s a de facto responsibility that they kind of do sometimes. And that’s not ownership to me. To me, ownership is as the CEO, as the founder. I’m going to appoint someone and tell them, this matters to me. This matters for the organization. You need to do this, and I’m going to give you the resources, the sponsorship, the mandate to go do this.If you do those two things, make sure that as a CEO, you’re talking to customers, and you’ve assigned someone the responsibility to make sure that they are collecting feedback and disseminating that alone will transform your business. Beyond that, there’s a whole bunch of tooling and systems and processes, but I would start with those two things.

Kate 16:21
I like that because, you know, thinking about the companies I’ve worked for, no one’s really owned customer feedback. You’re right. That’s such a good call out. And that’s something like you said, you can do early days, and then, you know that can scale with you. So as a company is scaled, we have a lot of startup founders who listen that are in those challenging stages right now of huge growth. And so they’re not able to use the phone as much to get customer feedback. They have to start relying on like NPS or things like that. Is there a way? First of all, let me ask you, how do you feel about NPS?

Eli Portnoy 17:00
So I mentioned that my last company was acquired by Medallia. Medallia is one of the leaders in customer feedback and voice of the customer and NPS. And I think it’s a really, really important tool. The problem in B2B, because I think it’s actually very different in B2C versus B2B. In B2C you have so many customers that you can go and send out a survey, and even if you get a 5% response rate, you’re still going to be swimming in data, and you’re going to be able to cut in and slice it and get a sense for how your business is doing, and figure out the themes and all of that. In a B2B business, where you’re basically like a very large company, may have 1000 customers. If you get 5% response rate, you’re talking about 50 surveys a quarter, and every business is so different that you’re really not going to have a good sense for whether customers are happy, what the pain points are, what the issues are. And you end up with this like false sense of security, where you think you’re collecting feedback, but you’re not really collecting feedback. I think in a B2B business, it’s not the right place to start. There are a lot of things that should be done before surveys are the way you collect feedback. And I think once you’ve got a really mature system, then sure it’s another good thing that you can do that’s pretty painless. But I definitely wouldn’t start there.

Kate 18:16
That makes sense. And if there is a channel like whether it’s you know, you’re at the point where you’re surveying, or you’re seeing, you know, poor feedback on customer forum boards or whatnot, any kind of negative feedback do you really double down on and take seriously? Because I see a lot of founders, they don’t want to hear it, right? They’ve got their vision, so they ignore it. They say, Oh, that NPS is inaccurate. Oh, that customer forum, those developers skew negative. I mean, I feel like if you’re seeing negativity, that should be a big red flag.

Eli Portnoy 18:54
I’ll tell you a story. So when I was running Sense360, our business was basically data dashboard that we sold to big restaurant chains, so we had something like 30 of the top 50 restaurant chains using it to understand who their customers were and all sorts of stuff. And when COVID hit in March 2020, we started to get calls from these customers who were on at least a year, if not a multi year contract with us, basically telling us, Hey, our business is shut down. Like there is no one coming into our business. And so we can play it two ways. You can keep charging us for your product, and we’re not going to pay you, and we’ll never work with you again. Or you can not charge us, give us a little bit of relief, and then as soon as we open, hopefully we can work together again. And I remember this happened in five calls from five of our top customers in the first week, and when I heard that feedback, I was incredibly distraught. That was a hard thing to hear, that they don’t want to pay us, that we were a startup, like there was no way that this was not going to create a lot of pain for us. And I think we could have handled it two different ways. I think one could have been like, they don’t get it, or they’re missing the point. We could have justified it, and I could have gone back to investors, and I could have said, like, Hey, like, they’re saying this, but like, it’s purely the macro stuff. There are just a lot of different ways. Instead, what we did was, and this was team wide, like, we all got together and we sat down in a room and we said, what they’re telling us is they do not find value in our product right now, or enough value to pay for it, because they’re not canceling all their contracts. They’re not canceling DoorDash, for instance, that was a huge channel for them in the first few weeks, they’re not canceling all this stuff. They’re not firing 100% of their people. What they’re telling us is, your product right now is not valuable, and I need to cut costs where I can, and so I’m cutting you. And so what we did with that is we said, how do we make our products super valuable, where we will not be cut. And we realized that in a world where restaurants were closed, they still needed to understand their consumers. Maybe they needed to understand them even more, but they needed to understand them less about foot traffic and brand reputation and more around where are these people now eating, and how do we reach them? Is it in supermarkets? Is it delivery? But basically being open to hearing very, very hurtful feedback that they did not appreciate our product and value it in this time, we leaned into and said, what are they really telling us, even if it’s really painful. And that led us go and basically rethink our business, and I truly believe that’s the only reason we survived. And not only did we survive, we started growing in April of 2020. Restaurants were closed, and we started to sign up new customers, which was unheard of. And two and a half months later is when Medallia reached out and said, Let’s do something strategic. let’s acquire you. So I think it’s the more negative the feedback, as much as it hurts, the more you need to lean into it, and you need to understand it. I’ll just share one other thought, which is, I’m not advocating that CEOs and companies listen to all feedback and say the customer is always right. I actually don’t believe the customer is always right, but I do believe the customer is always insightful, and I think it’s important to listen to everything the customers say, and then you have to use your judgment and understand, like, why are they telling me this? What does it mean? Does it align with my vision? Does it not? What else have I heard? How do I contextualize it? But you have to listen to every piece of feedback. You don’t have to go down that path and say they’re right, but you do have to recognize the value and insightfulness of everything that a customer says.

Kate 22:15
Yeah, I think you’re spot on, and I love the story you shared, because so many people would probably like you said, well, the restaurants don’t get it, and the fact that you leaned into it, and then you had all this success later, that’s a pretty powerful story. So BackEngine, then you can listen across all these channels, are you seeing like, pretty powerful case studies with your customers when they have this ability that could you share, like an example, you don’t have to use names, but I just think the fact that you can see so much from so many different touch points, that’s got to be pretty impactful.

Eli Portnoy 22:53
It is. It is. So a couple of really cool things. So the first one is, one of the things that surprised us most was that we usually start with like the head of revenue or the head of CS, or maybe the product person, but as soon as we get into an organization, we start getting bombarded with requests to add more people into the system. And it turns out that there’s a team-wide hunger to hear the customer voice. Marketing wants to know if there’s like testimonials or people who are primed to be like advocates, and the CEO wants to know if their customers, who are considering competitors and product wants to know about feature requests, and everyone is hungry for it. And so the first thing that we’ve seen is, as soon as we land in an organization, all of a sudden we go from three or four users to 50,60. On average, our customers have over 50 people logging into our system and using it to get access to that voice of the customer we did not anticipate. In terms of like, the outcomes that they’re having, we’re seeing a few different things happen. So one is there’s alignment internally. The company gets aligned, and they start moving faster, because now there’s not all these conversations around, I heard this from a customer, and I heard this other thing, and I think we should build this. There’s clarity around this is what matters. This is where we need to go. And the organization starts moving faster. They also start to identify revenue opportunities. They start to find, Oh, we have this little feature that we did as like a throwaway. This came up in a call a few months ago that a customer was telling us they had built this little feature, was a throwaway. They didn’t think anything of it. They started to see the data in BackEngine that basically told them this was actually a much more powerful feature than they thought. They spent a little bit more time on it and became a very significant part of their revenue because it was something that customers cared about, that they just didn’t think mattered, and it did. We’ve also seen on the flip side of it, churn prevention, where a CS leader sees something in BackEngine, concerns them, tries to figure out what’s going on, and recognizes there’s a coaching opportunity or there’s an issue with an account, and that speed to awareness just drives revenue, like churn prevention. We’re also seeing all sorts of case studies. We’re a good example of this. We have, yesterday, a CEO of one of our customers sent me a referral for another company, basically saying, We love this product. You need to work with it. And that went straight to our marketing team. We’re going to reach out and do a case study and all of that. We constantly get those referrals. We get these marketing opportunities. We have a ton of case studies because of it. And so, yeah, there’s just a lot of outcomes when you can listen to your customers.

Kate 25:24
What I like about that answer is it’s touching so many places: Revenue products churn. All these areas that I don’t think founders connect with customer feedback. But yet, when you talk to the ones who’ve made it, they always say the same thing. I hate to say this, we’re coming up on time. I want to ask you, where can listeners find more information about BackEngine.ai?

Eli Portnoy 25:51
Our website is backengine.ai they can also email me at eli@backengine.ai. We’re on LinkedIn. Those are probably the best ways to find us.

Kate 25:59
After you make it with this company, because I know you will, you really should get on the speaking circuit and talk to founders about what you’ve learned around feedback. You have so much to share. You really brought a lot to this episode. I appreciate it a lot. I think you put a new light on customer feedback that founders need to be aware of. So thank you for being here.

Eli Portnoy 26:22
Thank you. I really appreciate it. Thank you.

Intro 26:24
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