AI is rewriting how software gets built, bought, priced and grown, with companies now reaching a hundred million in revenue in a year and a fraction of the headcount. It's enough to leave any growth leader oscillating between wired and weary, chasing every new tactic while the ground keeps shifting under their feet.
Andrew Davies, CMO of Paddle, argues the antidote is to stop asking only what's changing and borrow Jeff Bezos's better question: what will stay the same? Using the Playing to Win cascade of choices and the explore-versus-exploit tension, he shows how to hold a fixed winning aspiration steady while deliberately experimenting on markets, capabilities and support systems. He makes the case for an uncomfortably narrow market, for teams who don't just know their customer but are their customer, and for the return of brand and courageous execution, all anchored in two questions that never go out of date: do you deeply understand your customer, and do you have a message that matters?
Auto-generated transcript - may contain errors.
Tap a timestamp to jump the video.
Fun, cool, well, it's really good to be at Turing Fest. It's my first time here, we've been here many times as paddle before, but it's been my first time to get up, so I am really glad to be with you on this lovely sunny Thursday, and that was a very optimistic intro that is definitely going to be interesting, we'll have to see about that.
Wonderful, well GTM, go to market strategy when everything is changing this fast. I think things are changing fast, think as you said there Hilda, is objectively true. The stuff around us is fast. So I want to quickly go through what this means for us as individuals, growth leaders, business leaders, and then what it means for our go to market strategies.
When I was at university I started my first businesses, all that ended up in some degree of failure through the course of those three years. The first one in court, the second one having lost a bit of money, the third one lost a bit more money.
And then by the time I graduated, we started building a proper software company. We raised some money, we grew it, we launched across into America and finally sold it ten years later. Through that ten year journey, it felt like we were going at breakneck speed.
Everything was happening so fast around us. The platforms we were building on were changing. And now I look back, and it feels slowing in comparison to where we are right now. We exited that business in twenty nineteen, became part of a much larger roll up where I ended up running global marketing for what became Optimizely a testing and personalization tool, and we grew from four hundred people to sixteen hundred people in two years through COVID.
Again, it felt frantic, huge amount of change going on. We put together six businesses over the course of that two years, acquired and merged businesses together. It felt like there was a huge amount of flux of change. And then following that, I was planning to go and cofound another business again, and my seed investor in my original startup was Paddle Seed Investor, and so I knew some of the board there, and started doing some contract work for them, and ended up joining them as CMO.
And this last three years, again, I felt frantic. The surface area of the business is huge. We serve six thousand software companies globally, processing about managing about one point four billion dollars in payments as they sell around the world. We manage all of their sales tax compliance and fraud and currency management, and so it's really complicated.
It feels like we've got to constantly be working in this massively accelerating world, the companies we serve are software businesses. And with the impact of AI on that space, it feels like there's another one popping up every minute of the day. So how do we build this go to market strategy when everything is changing so fast?
So let's just stop for a second and think about some of the fundamentals that are genuinely changing in the markets that we serve and the markets in which we operate. The way we build is changing. I find this mind blowing. Twenty five percent of all Y Combinator startups in the last cohort had ninety five percent AI generated code bases.
Google, twenty five percent of the new code at Google is now AI generated, of new code in the last quarter. The tools we use have changed. I love every year, I'll make sure I go and click on Scott Brinker's tech landscape, his Martech landscape.
It's grown a huge amount over the course of the last eleven or twelve years, the proliferation of tools. How have priced has changed? Because now we're able to roll out AgenTik AI in all these different ways. We've got to price it in a different model.
So my good friend Kyle is often tracking the different ways we price. So it's not easy even to think about the monetization of what we're doing. The way we buy has changed. We have the privilege of seeing the financial data of about six thousand companies, as I mentioned, and it's fascinating to me how much we're getting confused right now between trying and buying.
Because I don't know about your behavior, but my behavior is that if there's a new tool I want to look at, I'll probably go and engage with four or five or six different vendors. I'll often buy multiple of them at one point in time because it's so easy to get started on a free trial, freemium or an easy plan and what that shows up to them is a new customer acquisition from a business that looks like it's growing and got some capital.
And yet what we see in many categories across our base of users is these spurts of growth. And then in any individual company, churn drops as people have just chosen their single vendor. There's a big confusion of what is trying or what is buying, and that's a problem if we're relying on our old CAC and LTV numbers and benchmarks.
The way our businesses operate. This might sound like a pricing comment from Sam and OpenAI, but SaaS is reliant, is built on the fundamental thesis of an eighty percent margin. And got lots of businesses that we serve that are now introducing AI into their capability set, and power users are eroding their margins, going from eighty percent to seventy percent, sixty percent if they don't get the monetization correctly.
Because suddenly the huge compute costs that sit under their books is very different in a margin profile to what they had previously. The expectations of growth have shifted radically. Isn't it amazing? Cursor grew to one hundred million revenue in twelve months. Anyone in marketing or growth here this afternoon yet?
It sets a bit of a hard benchmark, doesn't it? Then you look at the other side of the graph and it's even worse because every category, every shift we see, it also becomes more efficient. So not only did they do it in twelve months, they did it with a fraction of the team that any previous company had.
If we go back ten years ago, was normal to probably need four hundred to six hundred people in order to get to that revenue benchmark, and now they're doing it with thirty or forty. So in this room, certainly in the companies that I serve, in paddle I often find people fall into one of those two camps.
You might even be getting a text message like this from someone you work with falling into a camp of wired, we've just got to go, go, go and run after it all weary. It's all happening a bit too fast. And I do wonder whether there's a better approach, a different approach than falling into that false dichotomy.
Because asking what's changing, what's changed, what's going to change next, is an interesting question. It is interesting, and we can debate that until the end of this evening when we all have to run home and the conversation would not be over. But what's really useful is asking what will stay the same.
About fifteen years ago Jeff Bezos was asked in one of his earnings calls that question, what is going to change in the next ten years? You've got this innovation budget that's the size of a small country's GDP. What is going to change? What's happening in the market? What are you investing in?
What's the future you're going to go and build? And his answer was that I get this very common and interesting question of what's going to change. But actually, the more practically useful, the more important question is what's going to stay the same? What things are not going to change?
And in his answer to that question he articulated the three things that underpins all of Amazon's strategy, which is that consumers want more choice, a huge variety, They want it as cheap as possible, and they want it delivered as fast as possible. And that business has bet every single year on innovating on those three things.
He could not perceive, he could not conceive a future where a consumer would say, actually, I want less choice, and I prefer it gets delivered in a week rather than tomorrow. And as a result of breaking through the noise of all the potential change and innovation of flux that was going on in the market, they found the fundamental truth that enabled them, whether you like all of their practices and all the rest of it, enabled them to build an extremely powerful model and business.
So I hope today, over the next twenty minutes or so, we'll have a chance just to think and reflect on not what's changing, but also what's staying the same. Let's step back for a second and make this personal. When I was chatting to Brian about what might be useful to talk about here, said, so many people are feeling overwhelmed, overburdened, weary.
Why don't we talk about how do you make sense of that and build strategy in a world where everything's changing fast and we're overburdened? So I think that's a personal question first. Before we jump to what can we do to our companies, let's think about what it means for us.
And this saying was first inscribed in ancient Greece on the, temple of Apollo in Delphi, know thyself. I think sometimes it's good just to step back and realize that self awareness is a core pillar of growth and of wisdom. I remember my very first lecturer.
Actually, I don't remember any of my university. I was at Warwick Business School in the Midlands, and I didn't remember much of it. I was busy trying to start start ups every time that I wasn't doing studies. But I do remember one lecture, which was the very, very first lecture we had where the head of year stood up and said, before we get into the curriculum, before we get into all of the stuff you're gonna be learning for the next three years, we're gonna talk about how do you learn.
Because learning how you learn is the ultimate meta skill. It's the skill by which you acquire every other skill. So this first bit of reflection that I often find in moments of chaos and busyness is important to go back to as reminding myself how I've learned in the past, how I've acquired skills in the past.
And there's lots of academic debate about the different categories of learning, but broadly they fall into a few styles. Many of us gravitate towards reading and writing, consuming knowledge through other people's articles and then reflecting on it. Some people want to go beneath that learning by rote and understand the logic, the reasoning, and they wrestle through the substantiveness that sits behind what they're reading.
Some people love to listen and discuss. This is my mode of learning. I go out and talk to people. I find the people who are way smarter than me in the areas which I want to learn, and I talk with them. That exchange of ideas verbally is how my brain learns and processes, and then there's a whole bunch of people who learn by doing kinesthetic learning.
They learn by experimenting. So the first bit of reflection in this huge amount of change that we're going through is to step back and think, how do you and your teams learn and make sure you've got those built in to the rhythm of your day?
Secondly, a conversation I have with my kids on an almost weekly basis is the circles of control. In a world where we're completely overwhelmed, let's just remember that we can focus on the things we can control, know what we can influence, and leave what we cannot.
And we'll go through some things today that are very much in the cannot or in the mere influence column, yet we become so overwhelmed when we don't start separating out the things in our world so we can actually touch and control versus leave alone.
And finally, as a one more bit of reflection before we dive into the actual topic of go to market strategy in this world of flux, in the realm of machine learning, I think it's in the the subset of reinforcement learning, there's this interesting framework, the balance, the tension of exploit and explore.
Exploit is with the known options in front of you, how do you choose the best choice for the best outcome, and explore is how do you find a new option to add in the mix, suffering the consequences of not choosing the best efficient option right now in order to find something potentially new to add.
And all of us in our teams will have a balance of exploit and explore. I know I sit very strongly on the explore side. I get really bored when I'm just in exploit mode. When there's a known system that needs optimizing, there's a known set of choices that needs I can see a few people nodding, cool.
You're probably on the explore side as well. But when I'm in exploration mode, it's talking to the market, it's learning what's happening, it's adding new options to the menu, and some of my colleagues hate that. Right? They just want the three options to choose.
But I want to be out there finding the new options to add in, even if it's got a longer term payback, even if the risk tolerance has to be much higher. So in our teams and in our in our own sense of how we are seeing the world, have a think about your balance of exploit and explore, and we'll come back to this in a minute.
Right. So pardon me for reflecting personally first before we go to go to market, because of us have got a target on our heads and have got to grow pipeline by thirty percent this quarter. So let's get to the meat of this. What does it mean for your org?
So when change is fast and options are endless, choices are more important than ever. I've been involved in strategy setting in multiple different contexts inside the workplace, in charity sector, in my home, in my family. What are we doing for summer vacation this year?
It's a very important choice, high impact choice, certainly if you ask my kids. Choices are the essence of strategy. One of the favorite books I ever read about strategy is Playing to Win. I really encourage you to go and read it if you haven't.
It's when you're grappling with a changing market at a company you're trying to build. It's a good framework that we're going to quickly walk through. Really it reduces setting your strategy down to these five cascading set of choices. You've got to choose what is your winning aspiration.
You've got to choose where you play. What's the market you're going to define? You've got to choose and define your value proposition, your set of capabilities and benefits such that you have a right to win. You've got to choose what are the required capabilities, the principles, the resources, the people, the processes in order to deliver that right to win in that playing field, order to achieve that winning aspiration.
And finally, you've got to make sure you understand and choose the right support systems. These will be the measurements, the cadences, the ways you meet, the systems and processes that sit underneath all of this. And it's a simple way of reducing what's often a complex question and a complex conversation in a company down to this integrated cascade of choices.
But if we then place over the top of this in today's market this tension of exploit versus explore in my environment, in our environment, and we'll unpack it a little bit more now, and also in many of the boards I'm helping or companies I'm advising, I find this as well, it's interesting to start thinking about in those five boxes, those five cascading set of choices, which bias more towards explore versus exploit?
In an environment we're in, the winning aspiration is absolutely in exploit mode. We have decided it. It's going to be there until the end of the company. Our mission, our purpose, what we're going after, our North Star, we're not in explore mode at all.
Our business is about three hundred people. We serve thousands of customers. We're in the mode now where we should have really figured that out. Right? And so now we're in exploit mode. We know what we're going after, why we're there to exist. But the next three absolutely have got a tension between explore and exploit.
And right now, honestly, in a couple of the companies I'm working with, including Paddle, the support systems are in total explore mode. There's loads of stuff in our metrics, in our cadences that just don't make sense anymore. A three year business plan doesn't make much sense when our market is changing, our fundamental market is changing on a month by month or a quarter by quarter basis.
The way we manage and measure pipeline and sales is different when a company you can win now can grow to one hundred million revenue in twelve months rather than take twelve years to get there. The payoff to us as a company that sits as part of their payments infrastructure is radically different.
The ways we measure them are just different. So let's just step through this. This is how we define our winning aspiration. We help digital product companies operate and grow automatically from zero to IPO. We have a lot of ways of unpacking this, but this is the thing that hasn't changed, doesn't change.
We've set this years and years ago, we keep coming back to it every six months or so in our management off-site, but it doesn't change. There's lots we do that all ladders up to the fact that we're helping digital product companies, self serve software companies who want to go global.
We help them do it automatically. But then the tension starts coming in when it gets to our playing field. I'm a massive believer that it's incumbent on all of us to choose an uncomfortably narrow market. I'd much rather have a difficult conversation with a board about a serviceable addressable market that feels too tiny, but we know it intimately that a billion dollar market or a multibillion dollar market that we can't really grok.
So we've got uncomfortably narrow. We're really disconcertingly specific about the market we serve. Sometimes I have people tell me, oh, you've just got a massive market under a paddle. It's a huge global market.' It's not, because we've defined it to be this really small mode of operating so that we can know intimately all the people that are sitting in that space and then help them win, build product for them, engage with the communities they're in.
But if you do that, you've got to have a thesis on where to go next. Another book recommendation is the old classic Jeffrey Moore's Crossing the Chasm. It was massively instrumental to me in my start up journey. It was the thing that helped us build into some growth that allowed us to exit after six years of being a solution in search of a problem and wandering around the market, finding categories of companies, then churning them a couple of years later.
It was Jeffrey Moore's framework of market entry that really helped us win. And so when you're following that, you can get uncomfortably narrow, but you then got to choose where you go next. So we're in this world where there's lots that's very true and is merely an exploit mode about our market, but there's three things that are happening that are forcing us to explore.
Firstly, the tools that we can now use are allowing us to engage with much earlier companies in their life cycle because we can find them earlier, we can build agents that are analyzing the data sets that allow us to see them before they start spiking, before they start growing in revenue.
Secondly, MCP. We're not going to stop on this, but this is the way of allowing agents and APIs to actually build on top of our entire payments infrastructure without a human doing it. So there's suddenly this market. There's not even a human buyer that we're talking to that's really interesting.
And then thirdly, Apple. Last week, there's a big ruling in the US that means that the App Store in the US for US consumers now has to allow other alternative payment methods. Now we've been waiting for this for four years, but ignoring it because we knew we couldn't do anything until it came live.
But suddenly there's a hundred billion dollars of volume that's walked in our door, and we've got to work out how we make sure we build some product so that we can go and capture that market. So there's a bit of exploit in the playing field, but there's a huge amount of explore as we find out how we address these new markets.
Right to win. Let's keep going. What is our right to win in this space? So let's go back to that mission, that winning aspiration to help digital product companies operate and grow automatically. So we split all of our capabilities into those two words, operate and grow, and operate is is very much an exploit mode.
That's how we make sure we have lots of payment methods around the world for different regions, how we deal with lots of currencies, how we're a very resilient merchant of record that is able to stop fraud and chargebacks. We do lots of things in the operate space. It's exploit.
But in the grow automatically space, we sit on this huge data set. Through our metrics product, we see thirty billion dollars of ARR flow through from nineteen thousand customers. There's a great data set there to build recommendations, to build advisory tools, to custom create growth plans for the companies we serve.
And so we've got to get in Explore mode, which is a very different mode, a Tiger team that are building new ways of building recommendation engines on top of what we've built. So we're seeing both of those. Now if we go to required capabilities, there are some principles here that absolutely endured.
I'll stop on two of them, and I would love to be able to show you kind of the five enduring priorities that sit behind our mission. It probably would be opening the kimono too much, but they haven't changed for two and a half years.
They're exactly the same. People get bored of them. Every company, all hands. Our five enduring priorities are still enduring. Shows that they are standing the test of time. Our company values, we define them as this really simply. We paddle for others, we paddle together, and we paddle simply.
Now there's a huge amount of stuff we can unpick underneath that, but there are tools in our arsenal that we use on a day to day basis, holding people to account, holding ourselves to account. And there are also things that wrap up our product proposition.
I won't bore you with the detail here, but it stands the test of time. It's part of the exploit architecture, not the explore architecture. I like new. I like innovating. And so I found I was boring myself when every year I'd hold the marketing all hands at the start of the year and lay out what our three priorities for the year, and every year I found it was the same thing.
Ever since I've joined Paddle, we want to be seamless to join so we can serve small businesses completely seamlessly through a great developer experience. We want to go surgically upmarket to identify with real precision the companies that we can really help, and we want to create a two horse race.
There's this market, there's this positioning exercise where you can get a PSP like a Stripe and then build all of this stuff over time, and it costs a bunch and you've got to be responsible for it, or you can choose someone like Paddle as a merchant of record.
It's not a competition versus one vendor, but there's a a mindset shift. There's a fork in the road that every software founder comes to. And so I found every year I was rolling out the same three priorities, and I felt that was a bad thing, but it's a good thing because there's something there that's not changing in the market that we can build strategy around whilst exploring on a whole bunch of other things, like our tactics and our people and our tools and our training, the stuff that's subject to change.
Finally, our support systems. Right now, as I mentioned at the top, pretty much all of these are subject to change right now. We're holding daily stand ups on multiple projects, not because we want to bore everyone senseless with what's going on, but because there's such urgency about what's happening that different tiger teams are working on different things and it feels really chaotic.
We're cuddling with the chaos all over the business, and there's a time frame imperative on a whole bunch of work we've done that has never felt as fast as it is right now. I mentioned benchmarks there because I think it's really dangerous in today's market if you're in a company that's operating like this to rely on yesterday's benchmarks.
So let's bring this into land. What does this mean if you go to market? Well, I have the absolute privilege of flying all around the world, speaking to communities of software founders and growth leaders. In the last month or two alone, it's been Singapore and Chennai.
It's been over in Istanbul, over in Croatia, over in the US. And these are a whole bunch of the questions I've been asked in forums, small and big, over the last couple of months. And it often starts with the tools and tactics, the growth hacks.
What's working right now? What are you seeing that's working right now? And paying homage back to that Bezos quote, I try and reduce it all very simply down to two things that continue to remain true. Do you deeply understand your customer, and do you have a message that matters?
If we go to that question on tools and tactics, it might be overly simplistic, but the experience I've had in a variety of different companies is that everything works if you can answer these two questions well. Steak dinners work, Facebook advertising works, running dinners somewhere around the world works, doing billboard advertising works.
Whatever your tactic of choice is, it can work if you deeply understand these two, the answers to these two questions. And yet, if you don't understand the answers to these two questions, nothing works. Again, rather than looking at the change, what's going on, the latest question, let's reduce ourselves to the fundamentals.
Let's focus on the things that don't change. And in this regard, I constantly have the advice of my old chairman ringing in my ears from the business we grew, IDEO. He used to tell us every six months, your responsibility as an executive in this company is to walk out of the room and then walk back in seeing the company almost as if you're an external consultant.
The relationships, the people you've hired that might be working out or not working out, the processes you designed last week or last year that you thought were fantastic, but now are a bit creaking, every six months, walk out of the room and walk back in again.
There's a whole bunch of teams I'm helping do this, and I'm doing this with my own team right now. Walking out the room and then walking in with fresh eyes. Sometimes I physically do it, and I'm very simple like that. Walk back in, And with my team, I'm finding and I'm seeing in a whole bunch of companies that we're helping grow, there being three modes that we're building our team around.
So as we talk about go to market, I'll just mention these three. The first one, we've always had this truism, this constant narrative of know your customer. But something's interesting happening right now where the companies that can operate with real speed, they're not actually knowing their customer, they usually are their customer.
One of the reasons I joined Paddle was I'd been a software entrepreneur and I was really intrigued by the thought of leading the go to market of a company that sold to software entrepreneurs, that helped software entrepreneurs. I was my ideal customer. It's interesting because I look across at other companies that friends are running.
There's a friend of mine who runs a large cyber security business, and their most recent hire that's been successful in the last year has been a CISO. They brought in one of their target persona and brought them into their marketing function as their product marketing leader, and it's just transformed how resonant they are, because they've got someone internally who can speak really authentically, has relationships with their market.
We've done this at Paddle, last two or three of my hires have been former founders, people who didn't see a massive success with something they tried, but want a job, but they've got that founder spirit and they can talk with real residents, they know the communities, they know the relationships, they know how it feels to be the customer that we serve.
Runner is a great example, a London based startup that got acquired two weeks ago by Strava, we process all of their web volume outside the App Store, they're a partner of ours, we've been working with them for a little while now. They're all runners.
It makes it really simple for them to ship product, because the two founders are avid runners. Most of their team are avid runners, and as a result, their iteration speed is fast, because it's not just that they know their customer, they are their customer.
It also enables you you know, very authentically create ambassadors and incentivize influencers. So that's the first piece. The second piece is something that is a bit newer. Many people are seeing this rise of the GTM engineer, the go to market engineer. We always have to come up with a new phrase in marketing.
It's kind of part of the job. ABM this. Go to market engineering, something that if we really are our customer, then we've got the right to speak, the message to build a whole bunch of really interesting automation around. I was just pulling together last night all of the different tools that I've been experimenting with, we've been experimenting with, or one of my very close friends has been using.
Just stacking these into four simple columns, and I've missed out loads. Right? And there might be some dupes here, so this is not a perfect view of the market. But strategy inputs, vendors on every single one of those that are building approaches to input into your go to market strategy.
Production outputs, execution activities. The apps as lead magnets is really cool. I'm playing around with that lots right now. Used to be the case that, you know, you'd build a bit of content as a lead magnet to try and engage and help your audience.
And I know lots of people, and ourselves included, who are building now apps, valuable apps as those points of engagement for your market, something that's genuinely helpful, not just a white paper that you put up put behind a gate and force someone to give you an email.
And then ways of working. And then finally, execute with courage. It's really interesting to me that the rise of brand is coming back on the lips of b to b marketers. People are recognizing how early we have to invest in brand. There's no brand and demand dichotomy.
Every single interaction we have with the customer is an opportunity to gain awareness and affinity, to change minds, brand, as well as to change actions, demand. And so we're building teams around these three pods, people who are the customer, so they know what resonates, people who can build automations and agents, and creative teams and event teams that can do things that stop the scroll or an event that people want to stop their day to come to because they're executing with real courage.
I put this up here because a friend of mine, Udi, who's CMO of Gong, he's just written this book, Courageous Marketing. If you wanna dive into this piece of it, I'd strongly recommend you grab it. He dives into concepts like risky is the sorry, as don't play safe because it's the riskiest proposition you can do.
I truly believe that in today's market, mediocre is very, very competitive. We've got to find ways of being courageous and jumping beyond that, building brand at scale early. Maybe in the circle afterwards, we can dive into that. So we see this huge amount of data.
I haven't bored you with lots of data today, but when we separate out the different cohorts, the different years and the different years and the different revenue stages of companies, what we're seeing now is really interesting, which is that early stage companies are growing faster than ever before.
And these are just the averages. Right? They grow faster than ever before. So one of my projects over the next little while is to dive into what are the characteristics of those outliers. They launch a minimum remarkable product, not just an MVP. They stand out from day one.
They bake go to market inside their product. They build agent first, so they have extreme efficiency, very little headcount. They experiment on their ideal customer. They experiment on their go to market. They see speed as a competitive advantage. There's something really interesting that I'm seeing.
They grow, or they iterate, or they reincarnate on a really rapid basis. Many founders out there launching two or three propositions side by side, not really minding if one works and one doesn't, They're in this process of iterating on the very fundamental proposition they're solving.
So as we go back to our day jobs, let's have that press reset mindset. Let's walk out of the room, walk back in, and look at what is not going to change in order to build our strategy on it. And we have this power of choice.
Choice is the essence of strategy, any strategy, including go to market strategy. So let's use it wisely. Thank you so much.
