Brian Balfour CEO and Founder of Reforge

(Joel Beasley at 00:00:00) Today, we are talking to Brian Balfour, the CEO and co-founder of Reforge, and we discuss what it means to develop a frontier skill set, how positive customer feedback fuels our fire, and what not to do when growing a business. All of this right here, right now on the Modern CTO podcast.

(Brian Balfour at 00:00:21) Here we go.

(Joel Beasley at 00:00:22) This is the Modern CTO podcast. Oh, man. So what are you doing now? I was reading you got this thing called Reforge going on. You're teaching people how to grow based on all the experience you have.

(Brian Balfour at 00:00:43) Yeah. So, basically, I think we're entering a world where, especially in the technology space, but I think this is actually proliferating to any industry that you work in, where at some point, everything is going to be what we call a frontier skill set. It's going to be a new topic or something that has emerged in the last few years, and the challenge with that, right? And that's going to just accelerate. That change is accelerating, which means we as professionals need to be constantly reinventing ourselves over and over and over again. And, you know, our education systems are just not built for that, nor have a lot of us really been trained on that mindset, you know, coming through that education system. And so as part of that, Reforge, what we really focus on is what we call master classes around these frontier skill sets. So they're for people who are three or more years into their career. They're taught by leading practitioners rather than tenured professors. You do them alongside your actual job and career versus taking full time off. Most companies kind of support them and expense them versus you going into debt out of pocket. You get to meet all these other really high quality practitioners as part of the program, not just consume and learn a lot of things. And so, you know, we're basically just, we're looking at, we're thinking about, well, what is that next version of, you know, graduate level, professional education look like? And, obviously, we're starting very small in our, you know, in my domain of growth and customer acquisition. And we've been doing that for a couple years and have about a thousand, a little over a thousand alumni now. But, you know, slowly expanding, being patient, making—a big thing about education is you've got to get the quality right. So it's definitely a slower build versus some of my other companies.

(Joel Beasley at 00:02:47) Yeah. I like this frontier skill set. I haven't heard that before, but when you describe it, I'm fully on board 100%. What you're mentioning about school is it's extraordinarily backwards with the twelve years of being taught repetition and these basic math and sort of language skills are the most important things to prepare you for the world, while they are absolutely not, right? And then it's so backwards because they're having them teach from these books and this information is becoming commoditized. You can just instantly pull it up, right? So the art of being able to remember large sums of information and spit them back that you don't care about is kind of not that great of an art. And at the same time, the most difficult things that exist in our society are taught through doing. My brother and stepmom are both doctors. And at the med schools, you're essentially half of your four years in med school is just in the office with another doctor actually performing surgeries and learning and stuff hands on. So that's sort of like, why don't we apply that to all the trades? Why don't we apply that to learning everything? We'll just put the people with the experts and let them, you know, monkey see, monkey do.

(Brian Balfour at 00:04:04) Yeah. I mean, I think certainly among, you know, developers and software engineers, I actually think out of all of the different skill sets and professions, probably that category has done the best job of embracing the mindset of just constantly learning through doing, you know, to stay relevant and stay up to date. You know, it's just interesting that some of the other, I think, kind of skill sets and categories are now catching up to a similar pace of change that, you know, I think developers see in all of the new emerging technologies that just crop up all over the place.

(Joel Beasley at 00:04:41) Yeah. And growing up, it was taught to me that you go and you get a job and you do this one thing for thirty years and then you get to retire. You go and you learn one skill and you do that one thing for thirty. I've had to learn six to eight different very different skills, job sets in going through the progression of my career so far, and I'm 30.

(Brian Balfour at 00:05:02) Yeah. No. I mean, look, I grew up a half hour outside of Detroit, you know? So when I grew up, the plan was, you know, you got good grades in high school, got to a good in-state college, you got an engineering degree, and you worked for one of the big three car companies for forty years and retired with an amazing pension, right? That was the plan. That's kind of what all of our parents had done. You know? There was a big portion of my family that had done that. And for some reason, luckily, I think I'm very lucky in this sense that something about that just never really stuck with me. And so I never really pursued that path, and I was always kind of learning new things. But similar, I started off actually as a software engineer from the first couple years of my career. I was a pretty terrible one. And then I switched, and then, you know, I worked more on the product side for probably about four or five years. And then through one of my first startups in the social gaming space when, you know, Zynga and the Facebook platform emerged, that's really kind of where I started to get into this very quantitative focused customer acquisition. And then kind of coming out of that, just having had all three of those experiences, I started just blending them all three together, you know, towards this purpose of helping startups grow. And, obviously, the term growth kind of got slapped on top of that as part of that process, and it's now a little bit more of a known thing. But similar thing, gone through multiple reinventions, and it's been, I feel almost lucky that I have done that because for some reason, it's become very natural to me.

(Joel Beasley at 00:06:49) So when you founded this Reforge, were you just hanging out with Andrew, having a beer, and you're like, you know, this is how people actually learn. Let's make a school that teaches how people actually learn.

(Brian Balfour at 00:07:04) No. It actually came from a totally different place. So, you know, my time at HubSpot, it was—I learned so much in my time at HubSpot, but one of the things that I experienced there was I would sit in these one on ones with different members of my team every single week. And it was inevitable. Somebody, at least one person on my team every single week would, you know, come in with a question to one of those one on ones of how they could continually develop professionally. And as we dug in, what I found was that they weren't seeing much out there that really appealed to them because there's a ton of new great companies that have cropped up with helping people get jobs in their space as an outcome. And then, you know, on the other end of the spectrum, you've got these $20,000 per weekend executive education courses offered by Stanford and HBS and stuff. And, you know, to be honest, those are really more of just, you know, getting the stamp on your LinkedIn profile. But kind of sitting in this middle, there's this huge void of those, once again, those practitioners that have a few years of experience that just want to continue moving forward, accelerating, and kind of reaching their goals. There wasn't anything that kind of really fit their lifestyle. And so, out of all those conversations with my team members, I mean, the flip side of it is I didn't actually know what to recommend them either, so I felt like a terrible manager. And so I decided that I was going to create something on my own as an MVP. And as I was talking about it with a friend of mine who ended up being a mutual friend of myself and Andrew, he was like, oh, Andrew's actually thinking about and experimenting with some very similar things. And so I had known Andrew from kind of the social gaming days, and so we kind of reconnected. And as we started talking, we were like, you know what? Let's do this. Let's try this together and kind of put the two brains together on this. And so we kind of ran a couple MVP versions of it together. And believe me, when people talk about embarrassing MVPs, oh my god. I was embarrassed on those first programs. But, you know, look, people had some amazing things to say about it and how they got so much value out of it and the impact it had on them either personally, professionally, or for their product and company. And so that was just kind of like, I looked at that, and I was like, wow. I was like, if this terrible little version of it can have this type of impact, I think if we actually spend some time on this and invest in it, just, you know, where's the ceiling at? And I kind of wanted to figure that out, and that's kind of how it all came together.

(Joel Beasley at 00:09:54) It is. It's like fuel when people reach out to you and say thank you or they share a little bit. Oh, I was having some trouble, and I came across your content. And it really helped me, and I tried it at work, and it was awesome. Or, that helped me. Yeah. Thank you so much. And when I get those, I collect them. I've actually got a folder on my phone called Positive, and I screenshot it when it comes through.

(Brian Balfour at 00:10:15) Oh, that's such a good idea. I should totally do that. Thank you for giving me that idea.

(Joel Beasley at 00:10:21) You are more than welcome. And whenever I get a little down, because, you know, we all—I'm pretty good about being up, you know. I've kind of honed my inner voice, right? So I'm positive and encourage myself and things like that. But, you know, everyone gets down, right? We're human. And when I do...

(Brian Balfour at 00:10:37) Absolutely.

(Joel Beasley at 00:10:37) I just flip open that Positive folder and I start scanning through it. I'm like, this is why I do it. This is why I do it. And I just scroll through it.

(Brian Balfour at 00:10:49) That's a great idea. Yeah. Because I'm probably—it's interesting to hear that—I'm probably a little bit more neutral. My inner mind is a little bit more neutral or skews a little bit more to the skeptic, and it's something that I've worked on over the years. And I still have, look, I still have my days, one or two days a week where I just, I wake up, and I'm like, man, why did I do this again? Right? Those types of days. And you're right. Those emails definitely are a great reminder. So, yes, I'm going to steal that idea the second we get off this call.

(Joel Beasley at 00:11:27) Oh, yeah. And there's some on the About page too on the website moderncto.io/about. I just post them randomly. I take down old ones, put up new ones, and just kind of keep them there so you can see what happens, how it looks for me. So you've had four companies past ten years. Two VC backed, angel backed, bootstrap, two acquired, one shutdown, one to be determined. I'm most interested in the shutdown one.

(Brian Balfour at 00:11:54) You know, the real shutdown story was the one that I started in college, and this was pre-Facebook. It was basically a college specific social network. And I think the lessons from that were just a lot of the lessons that are now very commonly known in the entrepreneurial scene of just having the right founder set to cover sort of the key areas of the business, being in an environment that, you know, supports entrepreneurship, getting the right advisors on board, not doing too many things, right? Really focusing. Those are really kind of the key lessons I learned on that one that really kind of that led to that failure. And I think people forget that. I mean, this was, oh, man. I'm going to age myself here, at least sixteen years ago now. And, oh god, that's embarrassing to say. Maybe a little less than that. Maybe fourteen, fifteen years ago now. And but look, back then, all these amazing blog posts and stuff from really amazing experienced people weren't necessarily out there. And so, you know, talk about learning the hard way, man. I learned that one the hard way. I think that, you know, Viximo, the first company in the social gaming space, you know, that ended up getting acquired by Tapjoy, it was an okay outcome. Boundless was a different scenario, you know? Boundless was an education company. And just to give people a quick background on it, we were targeting more of the traditional university system here in the US. And our entry point was that we wanted to create completely free alternatives to a student's textbook. So no matter what this, no matter what the professor assigned, they could come to Boundless, enter their class, and we would give them exactly the material they needed, um, knowing kind of what textbook that class was using, for completely free. And so we utilized all these things called open educational resources. We had kind of this, quote unquote, big secret that Peter Thiel talks about. And we went—I'm a very hypothesis driven person. And, you know, we really went in with a few different hypotheses. And we got two really right, and we got one really wrong. And so, you know, we went—the three hypotheses were, you know, can we create a production process that equals the quality or exceeds the quality of the textbook publishers at 100x the efficiency? And we actually proved that out. We figured out how to do that. You know, we could take something that a textbook publisher would do in two years and a couple million bucks, and we could do it in thirty to sixty days with about $10 to $15,000 of capital. It was pretty amazing. And then the second thing that we tried to prove out was, you know, can we market these things directly to students? You know, that was a really big—now a lot of people in the education space have been very successful in creating businesses by marketing something directly to the students. Most of them go through these terrible processes of selling to professors or the education system that's particularly corrupt in the textbook space. I won't get into any diatribes there. But we actually figured out how to do that too. But then the third thing was, okay. Well, the whole business model was premised on this. The value prop was free, and we thought that we could parlay that into more of a freemium type of experience and get them to upgrade into, basically, paid features and more of the Spotify model or something similar to that. And it was amazing. The value prop was an amazing acquisition hook, an amazing acquisition hook.

(Brian Balfour at 00:15:33) But what ended up happening was that we were able to acquire all these users, but a couple weeks into their course, none of them would continue using the product. And as we really dug into the data, what we found was that they loved us. So this is weird. This is where you've got a bunch of users saying, "Hey, I love you," but there's something clearly not working about the business.

(Brian Balfour at 00:16:03) Right?

(Joel Beasley at 00:16:04) Those are really

(Brian Balfour at 00:16:04) difficult things because I think people look at that and they just gloss over the problem. But as we dug into that, what we found was they loved us because they didn't end up buying the textbook, so they saved a bunch of money. But once they got into the course, what they realized is all they needed were the notes for the course, and the textbook was more of a safety blanket. And the problem with that is that just didn't work as a freemium style business. And so the business model was completely—our hypothesis about that was completely debunked.

(Brian Balfour at 00:16:39) But at the end of the day, this is the game that we play when we do these VC-backed startups. We're taking these bets, these really big swings on these hypotheses, and a lot has to go right in order to get the stars to align. And so that was a case where we built some amazing things, but not all the stars aligned to equal a $100 million-plus business. And so the end of that was it ended up actually getting kind of bought or acqui-hired by a competitor named Chegg, which then got bought by a publishing company. But yeah, that was kind of the story of that. Happy to tell you any more about it.

(Joel Beasley at 00:17:17) Acqui-hired. I love that term. I've never heard it before, and I'm writing it down. Actually, there's a chapter in my book called "Build, Buy, or Hire Your Competitor."

(Joel Beasley at 00:17:32) And, man, I wish I could sneak that term in there before it prints next week.

(Brian Balfour at 00:17:36) Yeah. Don't credit it to me. It's been around a little bit.

(Joel Beasley at 00:17:42) So I'm kind of curious. I've been talking a lot about education, and I'd say one of the messages I get very frequently is from CS students sending me a message saying, "Hey, what do I do? I'm not learning anything in school. I'm a year and a half in. Do I just go get an internship at a software company? Do I keep going into debt? What should I do?" And the first time I got it, I was like, "Woah." And then the other times I got it, I'm like, "Oh, man, this is an actual problem." So what's gonna happen with education? Do you think the colleges are riding on their brand, and the people cosigning loans wanting them to have the brand. But I would say in my everyday life—I'm a big fan of looking at my everyday life and engaging with people—and more and more and more, I'm seeing the 40-to-50-somethings say, "Education sucks. Didn't teach you anything. My kids don't know anything. They're in debt." Everyone's like—I think the market's gonna turn on the colleges. I just don't know if it's a decade, two decades, three decades, or how they're going to adapt. What do you think is gonna happen?

(Brian Balfour at 00:18:53) It's really hard to say. I think you really gotta look—I mean, so look, there's what's gonna happen in the market and then there's what you control yourself. And that's what I think people should really be focusing on. But I have maybe somewhat of a controversial view on this. I think, actually, the current system—if you tear back the pieces—systems' outcomes are really created based on how people are incentivized. And at the end of the day, what's happened is that in the US, at least in our traditional education system, we've had this cycle going on where, basically, the colleges have sold this dream for many years of, "Well, all you have to do is come here, get any degree whatsoever, and you'll get a job." And because of that, all of the students will be able to get it financed by a low-interest loan from the government, which doesn't really incentivize—which incentivizes the university to basically just build the most enticing type of environments, but not necessarily the best educational environments or the type of educational environments that lead to the type of outcomes.

(Brian Balfour at 00:20:15) And so there's all of these perverse incentives going on where the universities are selling this dream that the students don't really understand might not actually be delivered on until four-plus years later, until the point is too late. And so not only are the incentives wrong, these feedback cycles aren't very quick. And so that's why you kind of get this ballooning effect of costs without necessarily the outcomes. And so how that comes all apart, I don't know, but I think we have to take a really hard look at the underlying incentives to this all. And unfortunately, I don't think anybody in government is going to take the stance that maybe we shouldn't be giving out these really easy, low-interest loans to students that help fund these universities building these amazing buildings and not actually tying it to outcomes.

(Brian Balfour at 00:21:22) So what you can control, though, is—and what I would say to any one of those people is—at the end of the day—and this isn't from me. I think Naval from AngelList said this—the thing about education is that it's not the content or the technology that's missing. It's always the desire. The desire is the biggest thing that determines the effectiveness of education. And so if I could go back to my first couple years in college, what I would probably really tell myself is to really just start kind of exploring a ton of different things to see what interest me most. And the problem is that we haven't created these environments that help students really figure out the things that lead to that intrinsic desire, those things that really start to align. I found that out maybe my senior year as I was starting this company, and I was like, "Holy crap, tech—this technology entrepreneurship is the thing that I really wanna be into."

(Brian Balfour at 00:22:27) And by that point, it was obviously too late to go back and major in software engineering, so I self-taught myself. But because I had that desire, I probably learned 100x more through that and through teaching myself than I did through my four years of education at a great university. So it's more about if you find that thing that aligns with the desire, then so many other pieces fall into place. And those other pieces might be a traditional university. It might be some of these alternatives that are popping up. It might be dropping out and just paving your own path and getting an internship. That really depends. But I think you gotta start with the seed of it all.

(Joel Beasley at 00:23:03) Yeah. Desire plays a massive role. If I look back on my experience—because that's the thing I have the most of—and I taught my, or my dad kind of pointed me in the right direction teaching me about this amazing screen that was in front of me. And I thought it was very cool that I could write a piece of code and it would speak back to me. I could build a function and do something. I was like, "Oh, this is really neat." So that got me excited, and I wanted to do more and more and more and more. And what I guess I learned is a principle that I could teach myself things that I wanted to know if the curiosity was there.

(Brian Balfour at 00:23:45) Right.

(Joel Beasley at 00:23:46) And so that has—I mean, at 30, I have fundamentals in the most ridiculous categories from real estate law to insurance. I have several professional licenses for building software. So I built insurance software, so I went and got an insurance license because I wanted to go through the class, learn how insurance works. Then I actually got a job in an insurance agency while building insurance software because I wanted to understand exactly how it worked. And so that to me is not a sad thing. What a sad thing was was tenth grade being forced to go to algebra when I had no interest in algebra. That sucked. And then being forced to repeat it and do this work and do all this repetition, hours a day, on something I didn't care about. But what I would do is I'd leave school and then I would go at home and I'd be programming and learning and stuff. And I don't know, there's a lot of negative attached to education. And then what I find is when people get out of the forced habit of it, they won't want to learn. They look at it as something they avoid. "Oh, I don't wanna learn that" or "Oh, I don't wanna learn that." It's just like they have this whole negativity towards learning.

(Brian Balfour at 00:25:04) Yeah. Well, yeah, that's built up over time by the constant cycle of not aligning the education to the curiosity piece of it. So, yeah, that's no surprise. I mean, I was lucky. Both of my parents were teachers, and so, obviously, education was really sort of pounded into me from a young child and its importance. And so despite my apathetic approach to most of my classes, I still found a way to get good grades. But at the end of the day, like I said, if I had found that thing, that nugget around that curiosity, that desire piece—that is really what unlocks it. That is what unlocks so much learning. And so it's just spend as much time as you can finding that nugget because once you do, it's the key to everything.

(Joel Beasley at 00:26:02) So you advise some—you're an adviser to some of these startups, like Blue Bottle Coffee, Namo Media, Gametime.

(Brian Balfour at 00:26:11) Mhmm.

(Joel Beasley at 00:26:11) Right? And I'm curious, what does it look like as far as your actual advising? Is it kind of an as-needed basis? Do you have structured meetings quarterly where you meet them? Or is it—what's the relationship like from you being an adviser to them? I'm curious how it looks.

(Brian Balfour at 00:26:29) Yeah. It really depends. It's something that I've been paring back lately as Reforge has been growing and the demands grow there as well. But what I typically like to do is—so I think 99.9% of the equity that startups give to advisers is a complete waste because not only do most founders not really know how to take advantage and get the value out of an adviser, the adviser is also not really incentivized to continue to reach out to the entrepreneur and be like, "Book more of my time. Book more of my time." Right?

(Joel Beasley at 00:27:09) Right.

(Brian Balfour at 00:27:09) So it actually—I just see so many—a lot of the companies I invest in, they give equity to advisers, and then two years later, they totally regret it. So for the founders sitting out there, I would just be very, very careful and have a very, very high bar for that type of equity. The way that I like to structure to make sure that the founder gets maximum value out of it is, first, obviously, there needs to be somewhat of a fit with the problems and stage that they're at and that they're facing with what I think I can really add value to in an advisor type of relationship and framework. And so then what I typically do—and what I prefer to do—is for the first probably four to six weeks, there's kind of an intense period where we meet every single week for two hours. We diagnose the biggest thing that we need to work on. I teach them some of the frameworks that I would be thinking through to solve that problem, help guide them through those frameworks kind of on their own, and have them come to an answer. After that, it tends to be a lot lighter, maybe once a month or something like that. So a lot of the advising that I have done has been more at the beginning stages of when they're really trying to start to formalize their growth strategy and trying to build a more repeatable and predictable machine, teaching them the growth mindset, the process, how to build a system around it, training them on that. And so my advising—what I really try to focus on—is kind of the whole teaching them to fish approach of just giving them the tools and frameworks that they can really operate on their own.

(Brian Balfour at 00:28:55) And so I tend to go in with this very structured framework of, like, first intense and then kind of pulling back over time. I think the other thing about advisor things, and something I've been seeing that's become much, much more popular, is it used to be that the typical used to be two years with monthly vesting. And I see a lot more companies doing much shorter time frameworks, maybe three months, six months, something like that. And that's because if you actually do go through a pretty significant growth curve, you basically end up actually getting into a stage of the company where the initial adviser that you hired probably can't help with the problems that you're solving. So Gametime, for example, is now—I started advising them when they were maybe four or five people, and I think they're over a couple hundred now or 150, something like that. The types of problems that they're facing right now are just so different than when I started that, you know, they're just in the stage of the business facing certain types of things that I might not be able to—I self-admit, I might not be able to add the most value versus other people at different stages. So that's how I tend to approach it. That's how I tend to approach advisers. But, once again, if I was on the founder's seat on the flip side, it's just not only have a very high bar, but make sure that the adviser has done it before and has a very structured and thoughtful approach to it, and it's not just these ad hoc hour meetings. And then last but not least, the founder has to put the time into it as well, so they better prep. I have all my founders prep. They send me notes before. I have a few days to think about it, and then I can come with very prepared thoughts. So that's the other piece that makes those relationships really valuable. Oh, and last but not least, don't work with an adviser if you're not gonna take their advice.

(Brian Balfour at 00:30:47) I've worked with some companies before where I spend all this time with them, and they're like, "Yep, yep, yep, this is great." You know, I get equity out of the deal, but then they don't go and implement anything. And so what that does for me is—why do I wanna spend my time with a company that doesn't feel very coachable? And why are you giving me equity if you're not gonna even listen to me? So—you'd be surprised at how often that occurs.

(Joel Beasley at 00:31:14) Oh, I'm not surprised at all. I've been paid to put together plans, and people are like, "This is brilliant." And I come back and they're like, "How's it going?" And they're like, "Oh, that's right. We're supposed to—we had a—you did a plan. We're supposed to do—that's right." And they're off doing something else. And then they're wondering why they are failing. Execute the plan, man.

(Brian Balfour at 00:31:37) And look, maybe my advice isn't the totally right advice, but then tell me why. Like, why do you think that? Because that's gonna end up in a much better conversation and potentially a much more productive conversation than just basically ignoring. And so, but at the end of the day, it's just like any professional sport where they talk a lot about, like, well, what is the coachability of the players? I think that also applies to founders and, actually, professionals in general.

(Joel Beasley at 00:32:09) Yeah. I mean, I've had conversations with people developing products before, and they're not involving their customer in the product development cycle at all. They're just developing blindly. And I'm like, hey, you should involve your customers so you know that you're building what they want, and you should go be actively participating and find some core people to continuously engage with and build relationships with your various types of users that, you know, represent a large range of users.

(Joel Beasley at 00:32:37) And you should always keep it really tight to the product. And no, no, we know what's best. We read a paper. We know what's—and then no one likes their product, and they don't bring value to the market. And then it just goes by.

(Brian Balfour at 00:32:50) Yeah.

(Joel Beasley at 00:32:50) So I've been there. Let's bring up a positive note. Do you know Elias Torres?

(Brian Balfour at 00:32:55) Of Drift? Yeah. Yes, of course.

(Joel Beasley at 00:32:58) Oh, nice. Yeah. I saw you guys are both at HubSpot. I was hanging out with him about ten days ago in Tampa, Florida.

(Brian Balfour at 00:33:04) Okay, Tampa. Okay. That's a random place.

(Joel Beasley at 00:33:06) That's where he went to school.

(Brian Balfour at 00:33:08) Oh, I did not know that. Okay.

(Joel Beasley at 00:33:10) Yeah. He did engineering at USF, University of South Florida.

(Brian Balfour at 00:33:14) Yeah. He's probably one of the best recruiters I've ever seen in action.

(Joel Beasley at 00:33:19) Is he a great personality, right?

(Brian Balfour at 00:33:21) Oh, yes. Yes. He is full of life.

(Joel Beasley at 00:33:24) Oh, yeah. So we were talking about the different books that we read, and we were talking about his cofounder, and we were in, like, this back top area, like, a speaker's only area for this talk he was giving and just kinda hanging out because I live an hour away from that, and the person putting on the event listens to the show. So they texted me to say, hey, we have him coming. And I was like, oh, I know Drift. Drift is really cool. Like, you wanna come hang out with him before the thing? I'm like, yeah, sure. So I went up there, and I was like, man, I like this guy. And he's got the CTO role, so that's cool.

(Brian Balfour at 00:33:57) Yeah. Yeah. I had the luxury and advantage of and great benefit of working with him and Dave Cancel as cofounders for a little bit at HubSpot.

(Joel Beasley at 00:34:07) Yeah. And then they went off and did Drift, and now things are growing rapidly too.

(Brian Balfour at 00:34:11) Yeah. They're doing an amazing, amazing job, and I think they're kind of one of the few bright stars in the SaaS space right now of companies that are in that, like, Series B type of place that I think are gonna be huge companies. So they're doing a good job.

(Joel Beasley at 00:34:30) Yeah. So Intercom did the chat revolution. As far in my mind, that was the first time I saw it go real big. And then I saw a ton of companies crop up with variances and how they approach it. And I've—if I had to bet money, I would bet money on Elias of Drift winning when things need to get lean. Right? Like, when the market hits and, let's say, money becomes harder to get or you have to rely on your cash flow or things of that nature, just by their management style and interacting with them and hearing their stories and talking about going from 20 to 100 and all that stuff, I would bet on them to be the ones that emerge victorious from that.

(Brian Balfour at 00:35:09) Yeah. Well, I think, like, I think what an important thing, you know, any kind of technology company for people to think about is just a lot of what we do is just a momentum game from not just from a growth standpoint, but from a hiring standpoint, like an ecosystem standpoint of, you know, building that energy around your company. And that's something that I think Drift has really done well, and I think a key part of that, creating that momentum, is not only the just the grit and willpower of those two plus David Gerhardt, their director of marketing, and some others there. But they're one of the few that has really focused and invested in storytelling and category creation. So really, really telling that overall overarching story about, like, what's changing in our world and how Drift fits into that equation.

(Brian Balfour at 00:36:06) Kind of starting to coin this term called conversational marketing, and it was a playbook that HubSpot did very well with with inbound marketing. Right? And I saw the power of that internally is just like, no matter what happens in the macro market when you're kind of creating this momentum behind this story and this mission—we always talk about our mission internally, but it's really about, you know, are you creating the momentum around that mission externally? That's kind of like the powering force, the wind at your back, that kind of carries you through and separates you from the rest.

(Joel Beasley at 00:36:44) Yeah. Your ability to share those moments that you have as a company, growing those amazing high energy moments. If someone comes to your website and sees nothing, right? And they're just like, sign up. You know? Like, if you're not able to transfer your internal energy or put a megaphone on your internal energy and show it off to the world, this is who we are, this is what we're doing. And then, you know, obviously, the whole centerpiece is the value you bring to the market. Right? If you're able to tell your story, bring value to the market, and amplify that message with really good people, then you win.

(Brian Balfour at 00:37:22) Yeah. Absolutely.

(Joel Beasley at 00:37:23) So you're—in my mind, I'm just gonna call you Mister Growth. Right?

(Brian Balfour at 00:37:28) Yeah. Alright.

(Joel Beasley at 00:37:29) We'll put your hashtag as, like, HGH. No, I'm kidding. So, so for the part of our audience that's, like, really lean CTO, cofounder, just trying to get something off the ground, getting their MVP out. Let's say that I'm gonna give you a hypothetical. Let's say you've got these two individuals, and they've just finished their MVP, and they've worked super hard and scraped together $10 for growth. What sort of advice would you give them on how to spend that $10, those limited resources?

(Brian Balfour at 00:38:01) Like, they just built an MVP?

(Joel Beasley at 00:38:03) Yeah. So they've got an MVP.

(Brian Balfour at 00:38:05) Mhmm.

(Joel Beasley at 00:38:06) And they have $10.

(Brian Balfour at 00:38:09) Yep. Yeah. It's really—I mean, at that stage, it's really about... Okay. Well, here's what I see. Let me first tell you what I see a lot of people doing and why it's wrong.

(Joel Beasley at 00:38:20) Okay.

(Brian Balfour at 00:38:20) And then what I would probably do differently. Does that sound good?

(Joel Beasley at 00:38:25) That's amazing. Yes.

(Brian Balfour at 00:38:26) Okay. So here's what people do with that $10. They take that $10, and maybe they start to hire somebody or something like that, but they probably plan this big launch about, I'm gonna put this thing on—I'm gonna get this thing on Product Hunt and get all my friends to upvote it. I'm gonna write this Medium post and maybe get it upvoted to Hacker News and write—like, they invest all in this launch. And that has so many problems with it.

(Brian Balfour at 00:38:57) And the reason it has problems with it is because, basically, what you're going to get with that type of initiative is just an incredibly broad set of tire kickers and potential people. And maybe a small percentage of that is the actual target audience that you've built this product for. But what's gonna happen is a couple things. Internally, it's gonna be incredibly hard to find the signal through the noise in terms of customer feedback or even data about what's working well and what's not working well. Because all of a sudden, you basically polluted this pool with a ton of people that have nothing to do with the initial target audience that you built for.

(Brian Balfour at 00:39:44) Even worse is what happens is you create a negative word-of-mouth cycle. So what happens is you attract all this huge massive broad spectrum of people. 90% plus of them aren't actually the target audience, but they don't really know that. So they come in, they play around with the product, and they're like, oh, this thing sucks. And so then whenever your product name comes up, now you have—now you have nine—for every one person that might be saying good things about the product, you have nine people saying bad things about the product of, oh, like, that's, you know, like, that thing sucks or I tried it or something like that.

(Brian Balfour at 00:40:24) And so this negative word-of-mouth is outweighing any positive word-of-mouth you possibly have. And so what is really hard to actually think for a lot of founders too—because they spend all this time, this energy in building this thing and they're just like, oh, man, I just wanna, like, announce it to the world—is that you need to take a much more targeted approach and you need to be very picky about your initial customers. And so you have to think about, okay, my hypothesis is I built this for this type of person and this type of audience.

(Brian Balfour at 00:40:57) And then I would go spend that $10 probably in very inefficient ways, non-ROI positive ways to go get that exact audience to, you know, play with the product. And so that does a couple things. One is that it doesn't pollute the pool of data. Right? So you're gonna get much clearer feedback and data about, if that target—like, that MVP, like, what—whether or not that thing is resonating with that target audience.

(Brian Balfour at 00:41:29) And if it doesn't resonate, you haven't created a ton of negative word-of-mouth. You've just disproven this hypothesis, and you can move on to your next target audience hypothesis and kind of do a similar thing with them, kind of recruit a small pool of people, see if you really have that product market fit. And if you do prove the hypothesis true, all of a sudden you start to create this positive word-of-mouth cycle because much larger percentage of the people that have tried out the product have good things to say about it. Right? And so that positive outweighs the negative, and that cycle really starts to feed on itself. Not until the point where that positive word-of-mouth cycle has enough momentum on its own should you think about a broad launch.

(Brian Balfour at 00:42:18) Right? So that the broad launch, no matter whatever, if you get a bunch of, like, tire kickers not in the target audience—they're, you know, that positive word-of-mouth that you've built is still going to outweigh that negative word-of-mouth. And so, like, once again, like, the biggest mistake I see is not being selective, and you should be using that first $10 to figure out very selective ways to bring in this pool of very focused target audience and test through these hypotheses.

(Joel Beasley at 00:42:47) Brian, that's why I have you on the show, man. Like, come on.

(Brian Balfour at 00:42:51) Get you the nugget that you're looking for?

(Joel Beasley at 00:42:53) You got me the nugget because here's why you're an expert. I'm gonna tell you why you're an expert. You're an expert because—and why I liked your answer so much—was because one of my favorite things that I go to when learning what to do is learning what not to do. And everyone I've asked the question so far has given me a strategy for how they would spend the 10, and I was like, cool. You know, that's awesome. The fact that you gave us the what not to do—oh, bring in the value, Brian.

(Brian Balfour at 00:43:23) Yeah. Well, I'm also very careful not to prescribe strategies. And because whenever you hear somebody prescribe a strategy without actually the full context, what you're actually hearing is just a bias of their own experience, not necessarily the right answer for your situation. And so this is something I've obviously learned, you know, through Reforge and helping teach, you know, people in hundreds of different companies. Right? And so when you're hearing advice from people, you really need to take a step back and say, okay, does this person actually understand the full context of my situation, the product, the target audience? If not, then you put on your filter and say, well, I know what I'm hearing from this person is based on their prior experiences. Do their prior experiences actually fit with my situation? Yes or no?

(Brian Balfour at 00:44:08) And then you can figure out what to take out of it. So it's—but I think, you know, I love all of the content and going back to a very early conversation about how all of this knowledge never really existed in my first company. We're almost, like, in a world where there's, like, so much knowledge out there. I see a lot of founders, like, reading something and being like, oh, well, so and so really popular person said we should do this. And not really, like, placing those filters. And so I think I love hearing about different strategies, but I always try to be very careful of prescribing anything because I know so little about their exact situation.

(Joel Beasley at 00:44:51) Yeah. And that's when we were doing the show, at first, I was sharing some recordings before before it became a podcast. I was sharing recordings about conversations I was having with other CTOs around the book, and then I was sharing them with my friends. And they said, oh, man, there's so much value in that just listening to that conversation. I'm like, really? We're just kinda talking about what we do and our experiences. And so it was a very interesting thing to me because what this whole conversation allows is for someone to have to learn about you and to have more context of where you're coming from versus, like, an Instagram quote about what you should be doing. Right?

(Joel Beasley at 00:45:28) Or like a two minute, you know, clip of something out of context. Now one thing I'm just curious as what you think about this. I always like to look for universal truths, like first principles.

(Brian Balfour at 00:45:41) Mhmm.

(Joel Beasley at 00:45:41) And so one of the things that I've kind of identified as, like, universal truths with this whole business or technology startup thing is to build relevant relationships.

(Brian Balfour at 00:45:53) Sure.

(Joel Beasley at 00:45:54) So when I talk to a lot of people, like, alright, I'll—a specific example. Somebody had an application and they were like, oh, if I could—I'm gonna get the downloads and it's gonna be, you know, $12 to download and I'm gonna get so many and they, you know, started running through that whole pitch. There's 100,000 people. Why don't I want 1%? You know what I'm talking about. Right?

(Brian Balfour at 00:46:13) Yep. Yep.

(Joel Beasley at 00:46:13) So they went down that path and they're like, we're gonna—we're gonna spend all of our money, like, just to push that real hard and we're basically gonna run out of money by doing that. We're gonna push all of our money and then it's gonna convert and it's gonna be great. Great. And I'm like, how many people do you know in this space? And they're like, what do you mean? I'm like, like, how many relationships do you have—

(Brian Balfour at 00:46:33) Yeah.

(Joel Beasley at 00:46:33) —that with users or with companies that have users or just general pillars in your space? Like, and they look at me. They're like, well, I mean, we kinda talked to this one person. I'm like, look. I'm like, don't run the ads. Please. Like, just don't. You're gonna run them. You'll get some conversion, but you'll get a couple—maybe a thousand dollars. You're not gonna get enough to survive. Right?

(Brian Balfour at 00:46:54) Well, you won't even know what ads to run unless you—

(Joel Beasley at 00:46:57) Oh, come on.

(Brian Balfour at 00:46:58) First. So.

(Joel Beasley at 00:46:59) Exactly. And you don't have a big enough budget to test it without talking to, you know, right?

(Brian Balfour at 00:47:04) Right.

(Joel Beasley at 00:47:04) So I was like, go develop... I was like, take that $10, like go develop some relationships, man. Like just go talk to people. And I find that it's really interesting. One of the pieces of advice that I tend to be giving people, which I firmly believe is good advice, is they seem to not have a problem going and sitting in front of 20 different investors back to back to back to back to back to pitch them, to get them to give them their money, right? To get money from them. But they seem to have a real problem going to 20 companies in their space and asking them for advice and help and feedback just because. It blows my mind.

(Brian Balfour at 00:47:46) Yeah. I think it stems from a lot of different places, but certainly most is, even now for Reforge, right? Every time we get a negative piece of feedback, it just, like, you know, it's like a stab to the stomach and twisting the knife, right? Like that's how it feels. I can shake off, you know, comments from an investor because I'm like, oh, like, what do they know, right? But, man, when it comes from the target audience, oh God, it just goes straight to the core. And but that's, you know, I think as somebody working in the early stages, you gotta really figure out how to embrace that and do something productive with it. And obviously that's much easier said than done. But, you know, for any of those that haven't read Ray Dalio from Bridgewater's recent book called Principles, I thought it's very good, and he has this whole framework, which is pain plus reflection equals progress. And I thought that was a very elegant way to put it. So, but yeah, believe me, I understand the pain avoidance of that negative feedback. But at the end of the day, that's what's gonna drive you forward to improve.

(Joel Beasley at 00:49:08) Yeah. And it's like, so the pain happens, and then you kind of have to, like, you got that choice of holding onto it or instead training yourself to go into, alright, I felt the pain. Here's the pain. What do I learn from that? Take note of that, right? Take stock of that. Alright. Now. And then I instantly shift my mind back to how can I bring value? Like, where I say, okay, I understand. There's the pain. There's negative. Got it. Good. Make a note of it. Then I instantly shift my focus right back onto here's the tribe that we're bringing value to, and let's continue on our path of improving and bringing value to them. And then what will happen is the pains that are the most important will come up the most often, and then I can realize, alright, well, we've had this happen two or three times. This has to be addressed now.

(Brian Balfour at 00:50:02) Yeah. Well, I think that last point's actually important, which is that when you do get, when you do experience this pain or negative feedback, our reaction should actually be to go find more of it or to attempt to go find more of it, right? Because the biggest thing you wanna know is, well, is this ping common in your target audience, right? If yes, you've got a huge signal on something you need to fix or a direction that you need to go. But I think our more human instinct is when we experience pain is to run away from it, not towards it. So that's this weird flip you guys gotta switch. And I wish I had exact advice on how to do that, but I almost think it's probably just conditioning over time.

(Joel Beasley at 00:50:54) Yeah. We'll send them off to a Tony Robbins course. When you're encountering, when the things get too human, we'll send you to human experts, right? We will deal with the company stuff and the stuff that is company and slightly human. But when you get really, really human, I find a lot of interesting information over in those spaces. So, yeah. Dude, you are awesome, Brian. I like the way you process data.

(Brian Balfour at 00:51:23) Uh, thank you. No, I appreciate you. I appreciate you having me on, and it was a fun conversation.

(Joel Beasley at 00:51:33) Thank you so much for listening to the Modern CTO podcast. Share this. Get the word out. Thank you guys so much. I couldn't do it without you. I appreciate it. You guys are the absolute best.