Very True by Verissimo

Alex (00:53)
Welcome back everybody to another episode of Very True by Verisimo. I'm Alex and we're back with my good and old friend, Matt, who is joining us from about five miles from my hometown. And we are going to chat about marketing, about running an agency, about startups and everything in between. Matt and I met each other at Stanford.

There's a little reference, you know, if anyone knows, you know, but we've stayed in touch since and Matt's an investor in Verismo and he's helped out a bunch of our companies and I'm excited to have him on today. So I'll hand that over to him to share a bit of his background and the trajectory of his career. And I think immediately everyone will see why his expertise is super, super valuable.

Matt Pru (01:16)
Hahaha

Thanks Alex, yeah, thanks for having me. Yeah, it's been good knowing you for all these years. I think it's 15 plus at this point. Like Alex, I thought I was gonna start my career in finance, but I didn't stick to it. I actually took the series 63 and 65, thinking this might be a good idea for some reason, but freshman year I got a internship at a startup and as they say, kind of the rest is history from there.

started shifting all my coursework that direction, all the books that I read, started taking internships during undergrad at a variety of startups out of like accelerators like StartX. And before I knew it, I was close to wrapping up my undergrad wondering what I wanted to do. And I figured why not start a startup right away.

⁓ so I'm working on my second startup now, but yeah, started one right out of undergrad. I was early at two startups, one called talent bin, which was quickly acquired by monster.com as a recruiting SaaS company. And then I was head of sales for, marketing sassing, consultancy company called mighty hive and mighty hive managed to grow from about a million dollars in revenue. I joined with founder led sales, a team of about 10.

to $150 million exit in three and a half years from there, where I did $20 million in sales for the company, including signing 12 Fortune 500s, like Symantec, Nationwide, Goldman Sachs Bank, and Fortune 500s, the other kind of brand names you've heard of. And we ⁓ ultimately signed Sprint, which was the sixth largest media budget in the world. And that was kind of the pinnacle of the company before the acquisition by S4 Capital.

⁓ Following that endeavor, I started what I work on now, which is called Stackmatics. And we started off as a traditional ad agency, but we always had this thesis. I have a fundraising deck we never used because we're bootstrapped that we would scale a company in three phases. Phase one would be globalization with the fact that there are marketers globally and you can leverage people for graphic design, analytics, and other things that are language agnostic.

kind of at scale to run 24 seven operations, leveraging automation, robotic process automation to start automating basic tasks, including making requests to these contractors and other things. And then phase three was AI and we didn't know exactly how and when AI would come around in this journey, but it came into our journey about four or five years into the process, about a few years ago. And obviously that's been very, very impactful.

We actually scaled the company up to about 10 people. then today we are actually in operation of just three people, or it's myself, one director of client services and one software engineer. And we're able to manage more revenue and grow each year with just this team of three compared to what we had with 10 years ago.

Alex (04:22)
Amazing, very cool. So I think that what would be most useful for us to cover today would be like the two main vectors of your career. One is the startup world as it relates to marketing and sales. And then the second is running an agency and going through the transition towards AI in terms of efficiency. I think let's start with the marketing piece.

The framework that I always use when I think about specific operational domains inside startups is this concept that I, you know, this term that I always use, which is it's all about everything. And, you know, every once in a while you have a founder who's a marketer, but more often than not, they're a engineer or product person or salesperson. Usually they're not a finance person. Usually they're not a lawyer. definitely like, well, sometimes they're an accountant if it's an accounting company.

It definitely happens, but usually these are the things that fall into the gaps that get forgotten where people have a habit of writing them off. so I think to start, it would be great to really do two things. The first is talk about the key pillars that a founder CEO, let's say, who's got a product or engineering background really needs to think about and understand from a marketing perspective. And then after that, we can go into some of the common mistakes that you see.

And then to tie the two things together, it could be great to hear about. Well, we'll wait till we get there. And by the way, obviously we'll cut this up. So it's fine. So.

Matt Pru (05:44)
That all sounds good. So the biggest thing that I've seen over my 15 year career is you need to split things up between B2B and B2C. And when I started my career in B2B, marketing was largely an afterthought. For a lot of B2B organizations, they could scale from C to series A to series B, frankly, even all the way to IPO, while largely ignoring marketing in a way.

And marketing typically, if it was done, was email marketing. Maybe you'd send a drip, you'd send some sort of sequence, you kind of pre-market to your audience. But B2B organizations could largely scale sales organizations with head count and send more and more emails and more and more phone calls and maybe do some like in-person field marketing events, types of things. And that's all they needed to do. And marketing was largely understood and undervalued.

And typically once a company raised, typically a series B, maybe they'd hire their first marketer and say, go make our marketing better. And maybe that would actually be focused on like improving the branding and the website, improving the drip emails. But you know, social media was not as big a factor as it is today. SEO has largely been misunderstood for a very long time by most people. And so really organizations.

grew as well as their sales excellence on average. In B2C, things have always been a little bit different because in B2C, you've never been able to scale the way you need to by cold calling. You've never been able to scale the way you need to by emailing. And so if you're a B2C organization, you've always had to have marketing as a core competency to get the business off the ground. And largely B2C companies are started by marketers on average, in my opinion, or you need to have one.

And the founding team are very early on and B2C has varied a lot over time. Like as a history lesson, we didn't have search, we didn't have social media, way back in the day, like things were TV, print, radio, billboard. And with that, you were able to do mass marketing. And as much as your B2C product was a mass market product.

It was more easy to find success because the chance of that TV ad resonating if you're selling toothpaste or that billboard resonating if you're selling a food item was much more likely and doing targeted advertising wasn't really a thing outside of maybe geolocation or maybe like a certain TV network skewing towards a particular demographic. What we see changing in B2C today with things like social media,

with targeted advertising, search, et cetera, is that you're able to do needle in the haystack marketing much more easily. And this happens to help for B2B, which often is more so needle in the haystack marketing for most business models. What we're seeing today, ⁓ regardless of the two, is organizations are growing faster than they ever have. And this isn't just because of AI. This is partly because of marketing.

It's partly because of the fact that you are able to do targeted advertising and much more efficient media management. You're able to scale search and these other channels in a way where companies can raise large amounts of money and reinvest that money very quickly with low payback periods into this engine that can scale a very small head count. And so you see that you see companies like lovable or others.

talk about how tiny their marketing teams are and they're able to achieve hundreds of millions of dollars in revenue in just a few amount of years. So it's bold. There's definitely a market pull. There's a lot of demand, but yes, also because of these channels, you're able to sort of, yeah, efficiently capture that demand and kind of reinvest money quickly in a way where you're not actually losing money. You're sort of just increasing the velocity at which you're deploying it and getting it back with a multiple.

Alex (09:36)
So one of the things that I've noticed in the last, I guess, 10 years was the accelerated rise of performance marketing online, like you were mentioning, the move to Facebook and Google where the whole idea of Google is explicit intent, Google's implicit, or sorry, sorry, with Google, it's explicit intent, with Facebook, it's implicit intent.

you learn about people, you build an algorithm, and then you can sell very, very specific niches. as they say, something that seems like a niche when you apply it to the internet of 4 billion people becomes not so niche. And so all of a sudden you can like hyper, hyper target. And it felt to me like over the last 10 years, if you're a smart marketer like you are,

you had like this crazy advantage where you could run Facebook and Google ads. remember, you know, our friend Nick Greenfield was running the Facebook ads for Lyft on his personal credit card at one point back in like 2013 and maybe 2012 already. And, ⁓ and he was just hyper-targeting certain demographics and locations and everything. And it was actually really efficient and cheap.

And what I've noticed is that that hyper niche targeting, a lot of it has been, I guess, superseded or taken over by brand marketing budgets where it's like, okay, we're Lyft, we're a tiny little startup in San Francisco that wants to target, you know, 18 to 35 year old tech forward people living in San Francisco with this income and da, da, da, da, da. And it's like, great, wow, you can buy that word. And then people who have

interest in travel or transportation or whatever, you can buy those words. can buy that demographic on Facebook. Now it's like, okay, yeah, Nike and Allstate and Toyota all bought that same demographic already and maybe even bought those same words. And it's become much, much harder to scale performance, hyper-targeted marketing in an efficient way than it was 10 years ago. And so I'd love to get your take on that transition and like,

Matt Pru (11:38)
Yeah.

Alex (11:40)
the new methods that companies are employing to deal with that who don't have multi-billion dollar marketing budgets.

Matt Pru (11:47)
Yeah, so it's definitely one of those it depends types of answers. It's a common thing in marketing that it follows basic supply and demand economics, which I think you can appreciate. And in the early days of meta, supply was growing at an incredible rate and the growth in demand was more nascent. And so when this happens, if you could be early to a platform where supply is escalating drastically,

And you have a market that you have a product that's fairly mass market. And in this case, I would say something like Lyft, like within a certain geo location is fairly mass market. Like most people in San Francisco when they launched could use this, especially if you targeted it to like a certain demographic working as professionals. There's a very low chance you miss and they were largely capitalizing as much because of that, just basic targeting location.

age and otherwise they were benefiting from the supply demand mismatch where otherwise as you're saying like a lot of this inventory is now getting filled and the markets are becoming more competitive. The second phase of Metta was that they offered very specific targeting to the point of almost an illegal degree and they pulled back on a lot of this targeting. They let you target based on things you're not supposed to legally be able to target on.

such as like ethnicity or religion or other things that they've taken out of the system for legal concerns. I don't know they actually got sued for these things, but they pulled back for a reason. So phase two of Metta was having hyper targeted audiences where you know that this audience performs very, very well for you and you can get an advantage there. But then that was kind of ripped out of the system. And again, it depends if this was valuable for you or not and like how much these audiences mattered.

Phase three was meta actually tanked because of iOS changes and privacy changes and tracking changes. Universally, people suffered on meta about a few years ago because all these changes affected the algorithm. And generally year over year, people scrambled because everyone was down on meta. And if you were dependent on it, you needed to find success elsewhere. And now the recent paradigm is actually that the audience targeting matters a lot less.

And it's actually a little bit less related to audience targeting at all. And it's actually become a little bit more like search over time. Because it's always been good about search is that you know, somebody is in the market and for any given product, maybe only 3 % of the people might be in market and given time. like everyone at some point might be in the market for a car, but right now, let's say like one to 3 % of people are actually looking for a car. way meta largely works today is that say you are selling, you know,

men's organic cotton t-shirts, like a company I advise, Opoch. What happens is that if people start clicking on content related to organic t-shirts, then Meta naturally shows those people Opoch ads now, because they know that these people have intent on this content. And so what matters is that your content is very clear in terms of who it's trying to reach and what it's about.

And you want to make that clear in the ad copy, for example. And if the topic's like AI coding, make sure you say AI coding right away. Or if it's for marketers, they like pay marketers because the nature of the creative is going to make it so when people start clicking content related to open claw, they start seeing more ads and more content related to open claw, whether that's organic or on the ads front. so yeah, clarity of creatives is the most important thing.

and trying to align the creatives with the other type of content that you think your target market would be clicking on today is what's most important for Meta. And I think we're starting to see the other platforms go more and more this direction. Like LinkedIn, for example, the algorithm was not super strong in my opinion, but I think you'll see now, especially organically, when it happens for ads too, this happens. If you engage on one open claw piece of content, one fundraising story, whatever it is, you're going to start seeing more of those.

very quickly, almost instantaneously. And so that's kind of the new paradigm. And then the last thing that I'll say is that timing matters a lot in startups. It always has. And this has never been more true today because what you can do today is you can grow super quickly because of these dynamics, but things also become very competitive, very fast. And that's why this concept of like

Blitz scaling, know, as one book coins it, can actually be very powerful because one company I've worked with is CodeRabbit, for example. And then a few years ago, one of the hottest startup markets was AI coding. So many companies raising a hundred million dollars plus for AI coding. And they raised the nominal seed round for, well, we're going to focus on AI code reviews.

And at the time, if you check, were a number of companies that tried doing AI code reviews or code reviews in general the years prior. And my initial thought was, I don't see, you know, why you're too much different from what has existed before. And what mattered was timing. That they started the, with the right team at the right time with the right technology. And while everyone was working on AI coding, they were working on AI code review and they were powering this with LLMs. And within two years, there were $500 million.

And, you know, soon that, that may be more. And so if you are able to do something like that, while everyone's bidding on AI code generation, related keywords on search, they were focusing on AI code reviews and they were able to gain a lead there. And gaining a lead can be very important because you can win on SEO. You can start saying things like we're used by a hundred thousand people. The other folks are not. And in this AI world, some of these systems.

when you can get an advantage can learn faster. And so their product can become better and better and better because they have more and more and more data to go off of. And really in a way, the users of the product help them to train the product itself, like data aside, because the users will get feedback into what they agree with or disagree with and what's working and what's not. And so getting ahead and staying ahead, like historically there's been a lot about like first mover advantage actually doesn't matter.

Like Facebook was not the first social network. Google was not the first search engine. Apple was not the first computer company. But in these AI wars, first mover advantage is actually extremely powerful because of the fact that you can scale so quickly and it can make your product better in a way that other people cannot catch up with because you have the user base to learn off of. And I think chat GPT is a perfect example of that where part of me didn't understand.

why they were so valuable or how they'd stay ahead or how this wasn't getting commoditized with things like deep seek, but having the user number advantage matters quite a bit to being able to iterate faster and stay ahead of the competition. And that's what makes companies very valuable is to get ahead and stay ahead in this new paradigm.

Alex (18:24)
Yeah, it seems like, you know, this day and age in the startup world, like there's a viral component and there's a network effect component to basically every single company. and as soon as you're training models that, you know, you just put the fuel on that fire even more. But going back to what you were saying, and it's something I resonate with a lot is that not that much has changed. It's just that people have gotten better at using tools. Like you said, everything is driven by supply and demand.

Matt Pru (18:32)
Yeah.

Alex (18:50)
And if you want to stay at the top of the curve, like you got to just be sharper. You have to get deeper. You have to be better at it. You can't just go wing it on stuff. Like you have to focus and learn. And then there's, there's another thing that you said there, which I, I find to be super interesting, which is I'm going to call it the marketers approach to starting a company. You know, a of people, they're like, I'll start a company doing this. I'll start a company doing that. First of all, the number of people who don't do a Google search to see if someone else is already doing what they're doing is

blows my mind every time. But there's the next level beyond just doing the Google search to see who else is doing it, which is like, what is the price of the AdWords? Right. And like, you talk, think about a target market or target, you know, for a target market, maybe you want to look on Facebook to see like what the price is to target that market. If you're a product, maybe you want to look on Google and figure out like, what are those AdWords cost? And that's going to be a really good proxy for how busy your market is.

Matt Pru (19:19)
same.

Alex (19:46)
Like if there's already a lot of supply there of people trying to sell into this market, pricing is not going to be in your favor. And that's like a global, like macro view on basic supply and demand of what you're trying to sell and who you're trying to sell it to. So I think more people should probably do that, which is like create a, create their Google and Facebook advertiser accounts and just go see what it's going to cost them to sell. So.

The next thing that I'd love to jump into is, and I'll let you define it because you're an expert and I'm not, which is kind of your pillars of go to market. If you're a startup CEO who's never led go to market and understand it all the different threads that you have to manage, what are the critical few things that you need to own and be aware of really from day one when you start your company?

Matt Pru (20:33)
Yeah, a hundred percent. So that's actually one of my like, uh, things that I talk about when I advise or work with clients or whatever it may be. But then I've covered on, on the three of them, but it is really, uh, as simple as to reduce it down to their sales, their search and their social. With search there's organic search, like traditional SEO. There's paid search, buying ads on Google. And now.

AEO, there's a big battle for the jargon is a GEO, AEO, AISO, et cetera. But it seems like AEO one answer engine optimization, which is brilliant for these LLMs because I joke that maybe it should be called BEO bullshit engine optimization, because they'll tell you whatever and it's your job to call bullshit or not. So to say that they provide answers, I think is interesting. But yeah, is a question of like, are these answers true?

Um, and so, uh, that's one bucket search, uh, bucket two is social. And with social, there are a number of different platforms and I would just look at size of platform and relevancy to your business. So you're a B2B, LinkedIn's pretty big and is B2B oriented. I would never count out Meta just because Meta has so many users, uh, billions globally. And the algorithm is very good at kind of skewing content to people who are interested in your type of stuff.

And then you always need to keep an eye out on the upcoming platforms like TikTok, for example, or YouTube has been growing a lot and so on. And the thing with new platforms is while there can be supply and demand mismatches that can be beneficial. One challenge with something like B2B is that the targeting and the algorithm may not be that good. And so you can try something like TikTok today, but it's going to work better for you. The more you have a mass market product where you can't miss on the targeting.

Cause we haven't seen from our tests at least that it's super easy to run ads and targeting the way you want to and to kind of find that groove into scale. But if you are a B2C mass market product, you should be on TikTok today, a hundred percent, just because there's probably a supply and demand mismatch. In fact, there is, see that like your CPCs are low, your CPMs are low, but that's meaningless if 99 % of your ads are hitting the wrong people. And the last bucket is sales and sales is...

kind of a bigger bucket in a way, just in that like sales can mean email, cold calling, going to events, but generally this is more just like what the sales team is working on, how do they reach out to people, whether that's in person or virtually. And that paradigm kind of always shifts, but the biggest thing we've seen is that emailing is harder today than it used to be. And ⁓ cold calling, I'd say,

varies in how well it works depending on who you're selling to. You can rip people's mobile numbers today from databases. That doesn't mean it's gonna go over well when you call an engineer out of the blue at 10 a.m. when they're working on something. That said, if you happen to be selling a vertical SaaS software to law firms, great, like call every single law firm and it's their job to pick up the phone, someone's job there.

So yeah, if you're doing any vertical SaaS selling into SMBs, you should be cold calling all day every day. And that's, that should be one of your number one channels to scale. So yeah, that's kind of how I look at the world and yeah, generally your Facebook and Google comments spot on just because some of the thesis like data points on which I started this business is 40 % of seed stage funding goes into Google and Meta and

That's a pretty crazy number, but the point is if-

Alex (24:03)
said that's

the hedge. Like if you put money into a venture capital fund, you should also be buying Google and Facebook stock.

Matt Pru (24:09)
Yeah, because the point of raising money is that you can use the money to raise more to make more money. yeah, eventually. Yeah. And the idea is like, yeah, typically, like, historically, that's been throwing headcount at B2B. I mean, there's many a private equity firm who have, you know, gotten involved in businesses just to go and scale up the sales headcount.

Alex (24:17)
raise more money. Yeah, that's the Ponzi scheme of venture capital right now.

Matt Pru (24:34)
But yeah, more and more today in this world where you can scale on these digital channels, your ability to scale Google and Meta is a good indicator of if you can use more capital to grow your business even more quickly. LinkedIn's becoming a much stronger contender in social media, especially with B2B. Historically, we've been in business for almost eight years. We have very little success on LinkedIn running ads. In the past couple of years, that's changed.

It's something that's becoming easier to run and to find success and to scale in similar ways for B2B companies. And anywho, I'll kind of cut it there, but that kind of at least the answer is like the pillar is sales search and social and yeah, there you go.

Alex (25:11)
Yeah, I got money.

Got my

Facebook hat. I worked on the Facebook IPO. It was in May of 2012, 14 years ago. And these were the hats we made.

Matt Pru (25:17)
There you go.

Very nice.

Yeah, I remember Facebook at one point people were scared they wouldn't make it or something. Their stock was trading at $17 and there was somebody I knew that just got into stock trading and I said, you should put all your money on Facebook. And if only I took the advice that I gave.

Alex (25:32)
Yeah.

Yeah, think at that point I still had inside

information. Hey, well, I'll tell you a quick funny story about the Facebook IPO, but, I think people forget that two, two fun facts about that IPO. The first is that they bought Instagram while they were on file and Facebook was already so big that it was deemed immaterial. It was a billion dollar acquisition. It's definitely one of the greatest acquisitions of all time. think Google, Google buying YouTube and

Facebook, my Instagram are two of the greatest of all time. Which one's better? Who cares? There are 5,000 Xs.

That's so that's a that was one kind of fun fact. The other one was I just graduated college like less than a year before. And so my Facebook profile was super active and engaged. And so the the S1 that we were putting together as the lead left banker was just full of my Facebook profile. And we were like showing how like it said like fraternity.

Matt Pru (26:31)
That's fine.

Alex (26:32)
And then it would give me like a Coors Lite ad right next to it. we like drew the arrows. It's like, yeah, see, look, the product works. And this sounds like so simplistic now, but it goes back to my comment earlier about things just getting deeper and more complicated and therefore people needing to be sharper. like, that was like a novel idea back then that they would imply and infer like, ⁓ this guy does this activity and therefore we're going to push in this ad. And it was real. We didn't manufacture it. We just took screenshots of my Facebook profile. And then at the, at the last minute,

We pulled my profile out of the Facebook S1, if you're wondering why I'm not in there. And it was replaced with one of the Facebook employees, a woman named Susan Lee, and it was her profile all over it. So one other thing that I'd love to touch on is, what's your advice for seed stage? Let's just focus, I guess, on that seed stage founder who's not a marketer by training or by nature.

but needs to understand this core competence of growing the business. I love the framework of search, social, and sales. I think that's fantastic and exactly what I hope people take away from this conversation. But in terms of insourcing, outsourcing, hiring a person, hiring an agency, what should founders be looking for? And what are the questions they should ask and how should they evaluate?

Matt Pru (27:49)
Yeah, so my general framework for this is that at the very earliest stage, if you don't have this competency, then your best bet is probably to bring on an equity advisor because you need this skillset in your team, but maybe it's not worth it to bring on a co-founder per se. But for something like one to 3%, you can find someone that's very, very, very good to give you this. And this could be for sales.

marketing or both. This could be one person, could be two people, like, potentially probably two people. Like if you're a two person technical co-founding team, maybe 1 % for a marketing advisor and 1 % for a sales advisor would help you a lot because you don't have the cash and you get long-term alignment here to have this, kind of strategic mindset brought to the table.

And in the earliest days, you're going to have to figure out how to be scrappy without cash to get these things off the ground. And there are definitely ways to do that. You're going to need somebody who has the experience to kind of do that quickly where it doesn't necessarily cost them a lot from a time basis. maybe they have systems or strategies or tactics or knowledge that are automated and they can empower you with that knowledge so that you can be more effective.

So I think that's kind of phase zero. Like you just launched what makes sense for you here. Already at the point that you raise some money, because some folks very quickly could raise 500k or a million dollars with nothing but an idea, it can already start to make sense to potentially outsource. And I think in the earliest days, outsourcing makes sense just because in-housing can be very expensive and very risky. I wouldn't be afraid.

to some small degree, like if you don't have the skillset to try running your own Google ads or meta ads, it's definitely been done before and it can work. And it's actually very, very interesting if you can quickly get it to work because you don't know what you're doing. And maybe it means you actually have product market fit because Google CPCs are very low for what you're doing and there is demand. And that's actually a really, really good sign because if you can de-risk these things yourself,

fast and I'll say fast because it matters. Like you don't have time to learn this stuff yourself and you shouldn't be managing the stuff yourself. But yeah, if you can throw something up in a week and it actually works, fantastic. Like maybe you should hire an agency because there's a high level of confidence or a contractor or somebody. It's a high level of confidence that they could do a better job and you can start making your money back. The risk is that you bring in somebody to do this full time.

And maybe these channels don't even work. like there's no guarantee that search is going to work for you. There's no guarantee social is going to work for you, or there's no guarantee that it's going to be easy at least. cause yeah, you do have these three buckets and it could be the case that one of these buckets, totally dominates for your business for some reason. And that's what you're trying to figure out. as you said, like everything, like all like, ideally you make all three of these work to some degree.

But yeah, the question is which one's gonna scale for you the fastest? And for some clients we see Google does that and for some clients we see it's social that does that. And yeah, we're not as focused on like taking care of the sales aspect, but yeah, for some businesses like they're able to make sales work and like these other channels struggle more so. But yeah, it's just with outsourcing typically.

It's a lot cheaper and it's a lot less risky. Like you can activate a contractor for, you know, let's say like starting at like 50 bucks an hour, like, and then agencies like two grand a month. it kind of depends on like what you're getting and like the quality and the scope of the service and so on. But generally these things are more month to month or even week to week for a contractor. And it gives you a little bit of firepower just to expedite learning on these things.

⁓ I mean, I'm very biased cause I run an agency, but generally I believe for like in-house marketing team, they should do the things an agency can't do. Like, yeah. And like, we're not going to run your conference, booth, you know, we're not going to work on your product marketing and your one-sheeters and your slide decks to investors.

And maybe you can get some operational support on these things, but it can help to have an executive marketer in-house. And this is what a lot of the VPs and marketing that we work with, that's what they look like. There's a lot of things to do, interfacing with the sales team, creating those email marketing campaigns and so on. But from the basis of running ads or SEO, again, I'm really biased, but like the whole point is like you shouldn't in-house like,

I always will make the economics better to work with me. And the thing is we, you're not just hiring a person because you're hiring a small team. Like I have folks who can help out on search, who can help out with social. I have graphic designers to tap. I have a software engineer that's been building automations and systems for years. And that can come in to help with tracking and other things as needed.

And so we can deliver value extremely quickly at a fraction of a cost working on a performance basis. And it's really hard to compete against. That said, there's a big, been a big trend towards in-house largely because, ⁓ well, we do a good job at this and we're cost efficient and so on. That's not to say every agency is, people have been, you know, brought into annual contracts to get no service at all.

and to feel like their hands are tied and that the agency doesn't have the best interests in mind and isn't aligned with them. And so yeah, I think when hiring an agency, the things that matter the most is minimum contract lock-in. Like you don't want to sign an annual contract right away. It's one of the worst things you could possibly do. Two is track record. If you can talk to one of their customers, that's ideal. I can provide you a reference to a lot of customers.

⁓ retention mechanics, like, I have month to month contracts, but I can. Intro you to, you know, over a dozen customers that have been working with me for over a year or two through seed through series a through series B where they could have gone with another agency. They could have in-house and you could talk to them about why they didn't. yeah. Track record. Like we put out minimal details about our tactics and strategy actually.

We used to do case studies. don't bother anymore. I don't, I'm not an influencer per se. I don't think like I have 18,000 followers on LinkedIn. I specifically don't share my best information. I only share information once I see other people sharing it openly online, because I believe that there are things that pop up that work disproportionately well, and they work that way until other people catch onto them.

Alex (34:14)
You

Matt Pru (34:27)
Once I see other people posting about them then I post and I don't bother necessarily giving credit because I don't think it's their own unique idea it's like we already have this in the bag and Now the cats out of the bag and so we'll share it, too Anyway, but yeah

Alex (34:40)
What's your ⁓

favorite horror story where someone's hired you after they have ⁓ hired someone else, either an individual or an agency, and you've had to come in and clean up?

Matt Pru (34:48)
Yeah.

I mean, sometimes you see series B companies where you view the ad account and you see they've spent hundreds of thousands of dollars with little success. And by little success, I mean, very, very little success. And yeah, you kind of scratch your head and think like, why was this okay for six months till a year and a half? Like, how did this even like survive a few months timeframe where people are like,

What are we doing here? Why have we spent $100,000 and not gotten any customers from this and seemingly have no chance to. So I mean, those are usually the worst is that like they did wait to tap marketing for a B2B company till a larger series, they are series B, then they go full throttle by my standards and they burn say a million dollars and maybe they get a cut.

couple customers from it that aren't worth that much. And you think, wow, like could have bought a house with a million dollars, like not just burned it on Google ads. So generally my philosophy is like, yeah, you definitely have this conundrum once you get to series A or series B. And that's why it's definitely better to start small sooner than that, because you want to know that you can put the capital in somewhere and you can do it efficiently. Cause what happens is you ratchet up your growth expectations a lot.

Alex (35:48)
Yeah

Matt Pru (36:09)
and you usually ratchet up your burn a lot at the same time. And you do have this conundrum of like, we raised the series B and we have tens of millions of dollars, but we're also burning like a million or $2 million a month. And we actually need to plow the money into marketing or sales quickly to start making the model look better and digging out of that hole. And it doesn't help when you start, you know, digging the hole a million dollars a month faster by just not knowing what you're doing.

And so I think the sooner you can invest even thousands of dollars a month, tens of thousands of dollars a month, just break even or even close to break even, just so you've gotten this ball rolling and you know where you can double down on your investments. That's going to help a lot. Cause the last thing you want to do is raise a series B and realize we don't actually know what to do with this money. We don't know where to put it to be efficient. And that could actually

crater your whole business in a way, at least from the expectation of like how much money everybody's gonna make now, 100%. Yeah, same unfortunately. And so that's really the challenge is like you wanna have a high level of confidence where you're gonna take that next step because maybe you should just sell your company at this stage if you can actually take it to that next level. And maybe you wanna verify you can take it to that next level before you make that next commitment. So anywho, yeah, start up saying easy. Like I'll say that, yeah.

Alex (37:02)
Sure, I've seen it.

Matt Pru (37:26)
I always say one of the only things that'll kill your business is raising too much money. Yeah, it's like the one thing, and by kill your business, mean like you spent five years on it and then you raise a series B that's much too large that you actually can't fill into. And now for the first time, like your chances of making the money that you wanted to have plummeted drastically when maybe you could have found an exit at that point.

Alex (37:49)
We've talked

about this on many very true episodes, this exact idea. guess one of the interesting things that I always say, and I think about this from a financial perspective, but the rubber really meets the road on the CAC side, which is there's a lot of times where, like you were saying, people are spending hundreds of thousands of dollars or even millions on marketing and they're growing. But the funnel and like how the sausage is made,

Matt Pru (37:52)
Yeah.

Alex (38:12)
are not connected to each other. So they're like lighting money over here on fire, and then they're growing over here organically. And there's actually no connective operation between the two. so if you just look at it at a high level on the financial side and board members and investors are surely guilty of this, but a lot of times CEOs are as well. And they go, well, if we put more fuel in, we'll go faster. And I'm like, maybe you were just going downhill and you've already reached terminal velocity and

Your jet packs don't work. Your engine isn't doing anything. Those are, again, I've seen those before. They're often a little scary and tenuous. But let's, the other thing that I think that I'm super interested in, and I think a lot of other people are too, is like you mentioned at the beginning, you went from 10 people down to three people. You're embracing AI from an operational perspective. I always say, I think I'm more excited about AI.

operations than I am about AI products. How have you made that transition to frankly being higher margin, I assume, agency than you were before using the power of AI? I guess you're highlight reel there.

Matt Pru (39:19)
Yeah. I mean, we did it fairly naturally. I'll say it's like typically when you hire people, they don't stay at your company forever. And, we kind of saw this trend coming and we kind of just stopped hiring and we retained the people we needed, especially by incentivizing them and so on. and so in some ways it wasn't very drastic. It's not like we cut the whole team overnight. It's like, you know, someone went and went in house at a marketing agency and someone went and started their own business and this happened over a year's timeframe.

And, you know.

Alex (39:48)
This is

actually part of a super important narrative right now, which is that, and Cal Newport's pointed this out astutely, which is, like, there's layoffs over here, and there's this other narrative of AI over here, so they must be connected. And the truth is that sometimes they're not. They just happen simultaneously.

Matt Pru (40:06)
Yeah. Yeah. So I'll say, yeah, we didn't do any like major layoff. Like we just knew this was sort of happening. And what I'll say is this again, the business was always predicated on globalization, automation, and AI. And all three of these things fit the same dynamics. It's very simply, we're just trying to do the work better, faster and cheaper. And certain things, you know, may give you one, two, or all three of these.

And the reason we still use contractors today is because they may be able to do things better, such as like creating video ads, then AI is capable of doing yet today. And we do them, we use contractors because it's also cheaper and faster than potentially a full-time hire. What I love about contractors is that

A lot of them work very hard and are always on and potentially in different time zones. And I could be wrapping up my day and put in some requests and they can be in different time zones. And I wake up and those are done in the morning at a very high quality and a very low cost. And so it's a very simple framework. This is all that we've ever thought about for the different things we do. And we do things like installing analytics, coming up with ad copy, graphic design, et cetera. And just if something is faster and cheaper, but it's not better.

It's largely not that interesting for marketing because marketing is a competitive endeavor. We're trying to get ahead of our competition and throwing out AI slop at rapid speeds actually is very costly because usually we're spending ad money on this and we have a brand reputation to uphold. And so I will say there's no, it's no silver bullet. Like largely is providing things that are faster and cheaper. But if you're very good at what you do.

Rarely is it better. If anything, it can be a good brainstorming engine, like brainstorming ad copy ideas, brainstorming taglines, brainstorming this, that, or the other. But you always have a human who needs to prompt. You always need a human that does the quality check. And this has been evident to us for a very long time. But we've always thought of it as ultimately will be kind of like a consulting firm like McKinsey.

But instead of having these like hordes of employees doing all the work, you know, maybe it's, yeah, agents and so on. But yeah, we're kind of the partners at the firm that are supposed to stamp things like agents go work on this. And then it comes to your desk and you say, yes, stamp of approval, or you say reject, go back, like improve this aspect of it. And so that's kind of the model is that you still need the strategic head because you still need to.

give direction to the AI, to the contractors, to the employees, you still need to do the quality verification and only the most strategic people are going to do the best job at that and understand if something's wrong or could be better and so on. So that's kind of the narrative you hear is like taste is what matters today. yeah, taste strategy, like critical thinking, like call it what you want to call it. But yeah, there's definitely some value to being really good at what you do still.

And then what's supposed to change here is that

Alex (43:07)
There's definitely

still value of being really good at what you do still. That's, there we go. There we go.

Matt Pru (43:12)
Yeah, yeah, like still still having a

brain and using it. But yeah, the idea is, in a world where things tend to move better, faster and cheaper, I as the strategic head should be able to push more work to more clients at costs that don't necessarily increase. I will say in a world where gas and everything else has gone up, you know, by large amounts and pricing.

We actually haven't changed our minimums as a business since the very, very early days. The very earliest clients we charged like a thousand dollars a month because it was a friend and like we were learning and they were going to give us testimonials and so on. And like we've increased our baseline minimums, like, but that was several years ago. And in a world where the work is better, faster, cheaper, I can actually keep my minimums the same because it's actually not more work to get you off the ground. If anything, it's less because we're so systematized and

Yeah, that's a great process. Otherwise though, we have a performance model because as someone who's done sales and marketing for a living, I can sell anything both ways. And you know, there've been points in time where I've said, you know, having a percentage of media as a business model is not good. Maybe you've heard this, like, aren't you incentivized to just spend more money? And the answer is no, because you control the budget and we look at the performance together.

And we only increase the budget if you say so, and you're only going to do that if the performance is good. And so therefore a percentage of media model puts us in alignment. I think it's the only thing for an ad agency that makes sense other than if you want to align on equity and in an ideal world, we would align on equity, but that's challenging as an agency because, just for like operational mechanics and so on, like we have costs, so we need to manage our costs and.

Uh, yeah, like paying out this equity is like a consideration and so on. And so I advise for equity for early stage companies where then paying cash doesn't make sense. But my goal is to graduate them to my agency where I can kind of put the full team and the full systems on it. And we align on media and especially in a world where you're a series A or series B company, um, they really start to see the value in this because they do want to scale quickly and it can actually be the riskiest thing is to not move fast.

Usually for a seed in series A, it's always about unit economics. And yeah, at series B, it certainly changes where it's like, yeah, unit economics are great, but reducing our burn is the most valuable thing we can do. And we need to do that as quickly as possible. And then last but not least is like, I'm always willing to renegotiate. Like, um, yeah, what's nice about working with someone like us is like, I've shown my commitment. Like I've been working on this for seven and a half years. I'll keep working on this. Like, uh,

I worked tirelessly. never give up. I'm very steady. Like, people know this and there's no chance I'm going to quit to join another company. Like, like I'm not going to leave you hanging and I'm not diluting your equity pool when you work with us on the agency side. And so you're in full control here. It's like, you know, I'm going to keep working for you. And so again, I can't speak for all agencies, but yeah, we know we provide a great model and that's why we do well and why our clients like working with us. And.

Alex (46:01)
Yeah.

Matt Pru (46:19)
Yeah, I'd say like the only catch is like,

It's not all totally automated. We can't handle an infinite amount of work. And like, we don't necessarily want to scale a pet account in a crazy way. And so yeah, generally our operation is one in which we're not a venture scale business. We don't want to be. And like, we're not pouring demand on our own model, at least today, because we think ads can be more automated and has become more automated. But I actually couldn't ingest 10 or 20 ads clients right now all at once. Like you can kind of do it more steadily.

SEO and AI SEO, they'll say like, that's where we're trying to take on clients as much as we can, because the mechanics are fundamentally different from a technology perspective. And there's a reason why there's so many AI, SEO or AEO companies and SEO companies right now is because it's very highly automatable. And, and I think a lot of people are seeing that.

Alex (47:06)
Amazing. Any closing thoughts? This has been super helpful, interesting on a bunch of different vectors.

Matt Pru (47:10)
Yeah.

Yeah. Yeah. I think you always just need to be thinking about what will work for you right now. Cause that's all that matters right now. And you need to be exploring what is the best opportunity and what can you game because you in a way should be trying to exploit channels. there again, I've always been those moments in time, like when power dialers first came out or you could automate email sequences within the same email thread or meta ads working in a very early stage.

And usually when this information is actually really good, some people are going to be doing it and not be sharing that. Once people do share it, then, you know, very quickly that strategy is going to get diluted. So by all means do kind of the brass tacks, like spend some time on SEO and so on, but you should put some investment into creativity as well and doing things.

because you used your brand and you're critically thinking that this might work and people aren't talking about this. Cause sometimes the conventional wisdom is only so good and can only make you go so fast. And if you have true product market fit and you're a first fall, like first mover, then the brass tacks might get the job done. But yeah, sometimes companies have grown because they're creative with their GTM strategy and do something that's a little bit new or different. And they take advantage of that window of opportunity while it's there. And that might.

be something that's kind of specific to your business and might not apply to everybody else. So keep that in mind. Yeah, with sales search and social, like always be open to the X factor kind of within these buckets or even if it seems a little bit off of this framework. Yeah, honestly, that's probably about it. It's like, yeah, it's just there's no silver bullet. And if you find one by all means, exploit, exploit, exploit, because yeah. ⁓

Alex (48:51)
Yeah.

Matt Pru (48:52)
It's otherwise a grind, like generally speaking, marketing is a lot like sales and sales. have like a monthly quota or quarterly quota, then you kind of start off at zero again. And marketing is a little bit different. So you kind of keep building and building and building, but all my clients care about is great. Like that's awesome. We hit these record highs. How do we grow another 20 % this month? And so you really keep competing with yourself and you keep grinding it out and it's perpetual. Like the, never really stops. So.

Just bear in mind, yeah, there is some creativity to it, but just like sales, have to grind and grind and grind. And all you're trying to do is score more and more wins as you go.

Alex (49:27)
Amazing. Thanks, man.