PMF Convo #5 – Pulkit Agrawal - Co-founder & CEO, Chameleon

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I first heard of Chameleon, which helps SaaS companies improve their product adoption processes and practices, from Sheel Mohnot when I was interviewing him for our PMF Convo. In our convo, Sheel mentioned this company that took six years from their Seed to Series A raise. I was intrigued and asked Sheel for a connect to Pulkit Agrawal, the founder & CEO of Chameleon. I had a subsequent chat with Pulkit (1st December 2022), and he was kind enough to agree to release the transcript of our conversation (please scroll below).

Founders in the enterprise SaaS space, but even otherwise, will find this conversation relevant. The process to achieving PMF (product-market fit) was long – while there was some PPF or product to problem fit (the first phase of PMF in my framework) for Chameleon, the growth was not explosive. Sorting out the GTM (Go-to Market) to achieve MMF (Motion to Market Fit, and the second phase of PMF) took a fair bit of time. As Pulkit says: “We targeted a motion (product-led) that we were familiar with, but not what the market needed or was looking for (sales-assisted)”. 

The journey to MMF and then PMF saw them moving from the $200 per month self-serve segment to the $10-12k+ mid-market / enterprise segment, shifting their motion from self-serve to sales-assisted. The ICP, channel and message (the three components) of GTM had to change – and changing and re-aligning these took time. In the meantime as they realised that venture interest was likely to be low, they focused on getting profitable and living off their cash flows. The best funding, sometimes, is customer funding!

Pulkit says: “There’s so much hype around speed in the valley. Speed is important, but there is a natural time to things… things take time to mature, to marinate.” I thought this was a terrific point. Not all businesses have to be rocket launches, hitting PMF and capturing megabucks in funding. In certain sectors, segments, figuring out the solution space, figuring out the GTM takes time. It is important for founders to figure out what it is that they are really building, and if so make peace with the pace.

The other point I found particularly interesting in the convo, and wanted to stress is how they upped prices, relentlessly. Pulkit says: “Our sales coach helped encourage us to price higher and higher, you know, even pricing a $24,000-per-year deal. I couldn’t believe it. I was embarrassed in pitching this. It kind of started to work.” Clearly, don’t hesitate to increase your product pricing if you believe that the product is providing more and more value to users. Almost always, these pricing negotiations and conversations give you a sense of how the customer perceives your product and the value it is providing. 

Enjoy the convo!


Sajith: Just curious about your background…you were born in the UK?

Pulkit: Actually, I was born in Jaipur. My mom’s from Delhi and my dad’s from Rajasthan. I didn’t live there very long. I moved out when I was young – to Saudi, and then to the UK when I was five. So I grew up in the UK mostly. I had two stints of experience in India. One was after university, I did this social development program called IndiCorps. I stayed and worked in this village called Bagar in Jhunjhunu district in northern Rajasthan, working on trying to help with unemployment reduction efforts. So working with some youth to enable entrepreneurship and encourage better business practices. I learned a lot about rural India and village life. Then the second period was while I was working as a management consultant for a strategy consulting firm called Booz. I was working for a big Indian family office conglomerate in Navi Mumbai. I spent nine months based there in a very different environment, but fascinating working around a digital transformation for that large company.

Sajith: So I just wanted your view first on how Chameleon approached and managed PMF. You can talk through the history and don’t have to talk about PMF specifically, but I would love to understand this entire journey. Then why did the next round take so much time? Why did you have to pivot significantly?

Pulkit: My co-founder Brian and I started trying to be very lean. We had this idea, which we validated as a problem by speaking to a bunch of people, founders, and product people around user onboarding being painful to solve. We heard the same thing. We heard resonance in what we were saying, which is user onboarding was important, but it was difficult to resolve. It took a big cross-functional team effort. It was done in a once a year type of cadence. It wasn’t very iterative, but people knew they wanted a better version of that.

So we did a bunch of interviews and felt like, okay, we validated the problem. Then we said, okay, let’s try and validate the solution. So before we built anything, we reached out to a bunch of companies saying, Hey, look, we have this proposal. We will build your user onboarding for you. Are you willing to give us a shot? And we were just two folks, just like part-time. Eventually, through some hustle, we found a couple of companies that were like, okay, you can do this. One of them was a company in the YC batch. So it was great because we had the benefit of being able to leverage their traction. So they had end users, a live product, and we built our product while building it for them as an example. So we would go back and forth on Google Slides with screenshots, and they would tell us what they wanted to build and we would build that.

We worked there, worked with Amplitude, one of our early customers, and Mesosphere. Eventually, we’ve got some traction. So we were like, okay, great. We found something where someone who wants it pays us for it. We felt like we were building this in a very lean way. Initially, we tried to apply to an incubator, but we got rejected, and then we were kind of stuck. Then we found Auren Hoffman. He helped us raise our pre-seed, a couple million.

Then we said, okay, well, let’s go back to the drawing board. We packaged our solution together, and started from a fresh slate, hired a designer to make it look good. That was a big mistake. We shouldn’t have gone back to the drawing board and started afresh. Even though we’ve built this hacky solution together, we should have continued to iterate. We knew we should be iterative, but we didn’t want to get stuck in the wrong global maximum. We wanted to ensure that we were thinking about this the right way, but it set us back six to nine months.

During that time, we lost some customers because we stagnated while designing and rebuilding. So anyway, we worked on it. Then what we didn’t know was how to sell software. We’d never bought software as a large or medium-sized company. So we’d previously worked together at a small startup, and our experience had been buying software as individuals. So, by default, our motion had been focused on SMBs and self-service, but the idea was too new and required handholding. Like people didn’t know how to be successful with this because they’d never experienced this before. That’s another mistake, which is like, oh, we targeted a motion that we were familiar with, but not what the market needed or was looking for.

We thought we had good justifiable reasons. We said, we want a broad adoption of our software because a key part of our software is how it works in different applications. It was easy to build it for one application. It was very hard to make it work across the spectrum of applications. We had good justification, but the go-to-market motion wasn’t in line with what the market needed, but yes, we were product people. So we’d hire this small team. It was mainly engineers, one designer – it was just like we were building the product. At the time, it also felt like the product wasn’t good enough because, you know, when we were founding, we didn’t know of any companies, but you know, one or two years in, competitors started to emerge, the space started to mature. So we were facing competition and folks were ahead of us. We had to scramble to build features because people constantly asked, do you have this? We were like, no, not yet. So we focused a lot on the product, not enough on distribution. The result is that we had a middling business. There was some growth, there were some people who were liking the product, some successful people, but there wasn’t runaway growth. There wasn’t, like, we were winning a lot. It didn’t feel like things clicked.

I’d seen a video of product market fit (PMF) being defined by one of the Segment founders in a YC workshop. He said there are no metrics for it (PMF). You just know it. It’s like when everything clicks and you cannot control the growth and more people want your product than you can serve. We didn’t feel that way. It was like, okay, we tried many different things, but consistently we had issues around activation, churn, people not successfully installing or implementing or going live. We were running out of money. We had some in the bank, but we’re like, oh, we don’t think we’ll be able to survive or succeed with the amount of money in the bank.

So we went back to True Ventures (their pre-seed investor) and they gave us a couple of good bits of advice. They said, look, your revenue isn’t high quality revenue. You have a lot of small companies who are going through it, but you don’t have a lot of companies who are paying you a lot and companies that are going to stick around. So you need to improve the quality of the revenue. They said, secondly, we’ll give you money, but we’d like you to find some additional investment from another investor. We felt like, oh, well, we’re not quite ready to go to the broader investor market and present ourselves. We didn’t feel super confident. We thought we’d end up raising from a defensive perspective. So we said, okay, you know what, screw this. Let’s just make sure we’re profitable and make sure we’re alive and figure it out ourselves. And so then we got into this motion where we cut some costs. I focused more on sales and we tried to, like, sell, you know, bigger priced contracts because everyone was, like, pivot to sales led. And we’re like, we can’t get behind that. We’re product people. We believed in product-led. Nevertheless, I tried to do some more sales-focused work.

Then we started to see the beginnings of some traction where the people that were successful with the product were more of the mid-market size that could pay us $10-12K a year, which we thought was a lot at that time. Our sales coach helped encourage us to price higher and higher, you know, even pricing a $24,000-per-year deal. I couldn’t believe it. I was embarrassed in pitching this. It kind of started to work. It wasn’t an immediate overnight thing, but over the year, let’s say we found that actually, we were able to win deals and that people were suddenly starting to like the product and we just felt like things were working a bit more. We were only hiring very slowly based on the revenue that we grew. But over time, that felt like things were moving faster and faster. We were able to build out a team. We also made an operational pivot, we started to hire outside of the US and we built an international team, which allowed us to grow a bit more quickly because wages were slightly lower in Europe. Many things came together, which allowed us to grow the team. We had a team of 20 people and things felt like they were working. We felt confident.

Paul Graham says, when you’re raising money, don’t try to convince investors. First convince yourself, and then just tell the investors. I think that’s the mode that we were in. We felt convinced that things were working. We believe in this. We’ve seen examples of success and that’s when we decided to go and test the market. We were still a bit nervous because we hadn’t raised for a long time. We’d been out in the market and were like, we need to figure out what metrics we need. I wonder if this is great and True Ventures were encouraging…They said, the only way to test it is to go and raise money. They told us to raise more than we were thinking. They’re like, you know, try to raise 8 to 10 million. Then we went out to the market and raised more than that and met fantastic investors in Ilya Sukhar and Matrix.

Sajith: Who’s the sales coach, if you could share?

Pulkit: This guy called Mitch Morando. He was introduced to us by one of the Amplitude founders, Spenser Skates. He helped coach Amplitude, Segment and a bunch of great companies. His focus was on working with technical founders and how to make sales. He taught me a lot. He taught me a lot about the psychology of sales and how to have confidence, but also this methodology, which is getting to product fit before getting to commercial fit, which I think is still something we operate with today is to push commercial discussions down the track until you get a real strong alignment that your product is the product choice by the prospect. So you focus the initial phase of the sale all around, wait, are we the best fit for you, like if everything worked out well, if we could land on commercials, would you choose us? Getting a very clear, yes, like you are the best solution. Then, okay, let’s figure out commercials and we’ll make it work with you.

Sajith: Do you have a definition of PMF? Many founders don’t have a definition of PMF. For them, PMF is an outcome of growth and retention. So A, do you have a definition of PMF? And B, in Chameleon, did you consciously think about, oh, we need to get to PMF.

Pulkit: PMF is something that every founder thinks about. I think I ended up having much more of a touchy-feely definition of PMF than a robust scientific definition, which is like, do I feel it? I think it’s a combination of, like, are we winning, are customers happy using the product? Is the system working for us to take the product to market? I think we have it in some regard, but we don’t have it 100%. Like we’re still figuring out our channel strategy and figuring out how we position and how we message and how we differentiate.

I think it’s an evolution and you may have product market fit at one point, but you may fall out of it if you stay stagnant or make the wrong bets. So I think of it less of okay, you have to hit this metric, but it’s like, consistently, are you able to deliver outsized returns? Because what you’re offering resonates with the market.

And your second part of the question was, were we cognizant of it? I think we were cognizant of it in the ways that helped us identify, like did our product fit the market, which is looking at NPS scores, looking at churn and retention, looking at how many good reviews we got, looking at which customers found us and how they found us. I think we were cognizant of the building blocks of product market fit, which is what we felt we didn’t have, even though we had revenue and we had, like, hundred-plus customers. At that point, we looked to raise a bridge round. We didn’t feel like, we were winning.

Sajith: You used a specific term, which I found intriguing – building blocks of PMF. Do you want to think aloud on that? What are these building blocks?

Pulkit: I think there are probably at least two major aspects. One is, does the product resonate with the market? So when someone finds your product, do they think it will fulfill the promise? Are people able to find value in it? Are they able to get ROI from it? Do they love it? Do they stick around? Does the product resonate with the market?

Then I think the second part is, does the market find the product? So, how do you end up getting your product to the market? For example, for us, we weren’t able to get the go-to-market right. So the market wasn’t effectively finding our product; the mid-market companies we target now weren’t coming to us. We didn’t know how to sell to them or how to go to them.

So I think those are these two pieces of it. There are things like NPS and all of that help measure the first part, which is like, is the product resonating with the market? Then I think the traction around fast growth helps measure the second part of that, which is like, have you figured out how to take your product to market?

Sajith: Do you have a specific GTM now that’s working for you well to reach out and acquire these mid-market customers? Have you identified that? And what is working for you? I know content-led GTM has worked well for you.

Pulkit: Let’s break this down. I think some parts are working and I think some parts still need to work more effectively. Maybe there are a few founders who were like, yes, my go-to market is nailed, but I’m sure it’s an evolution for most folks. But I think the sales-assisted motion is working well for us, in that, we have very smart product-savvy, technical salespeople; when a prospect comes into our buying process and it goes into a trial, it works well. We’re able to coach them on their questions and provide value. We get our CSMs (Customer Success Managers) involved early. We have a good process and a good win rate when that happens. In terms of getting people into the pipeline, and generating demand, it’s a work in progress. We’ve invested heavily in content. I think we’re now getting to a point where that’s working well. We’re winning awards for content and we’re getting strong organic growth. That’s where most of our focus has been. We’re trying to layer on more traditional demand-gen techniques over performance and advertising, events, webinars, and partnerships. So those are other kinds of channels and strategies that are still working. But I don’t think we’re doing anything particularly innovative in this sector. I think there is a playbook and we’re still getting to the best in class in that playbook. I feel like we’re okay with it. There’s probably a lot of growth still to happen.

Sajith: So on metrics and PMF which I like to think of as a combination of PPF (Product to Problem Fit) and MMF (Motion to Market Fit), for the first part, which is PPF, you’ve suggested NPS as a good metric to track. On the second, on traction, do you look at any specific number like NRR (Net Revenue Retention)?

Pulkit: I’d say NRR is probably more for the former, the PPF because that shows if people are resonating once they’ve found your product and are upselling. So I think NPS is a decent lagging indicator. NRR is a decent lagging indicator. Those are good and decent indicators. The win rate is a good one for the first one as well. That’s more of a leading indicator than a lagging one.

I think for the second one, I think it has to be around growth in ARR, growth in the pipeline, growth in traffic, or anything that helps you think about generating demand and the growth around that. There are the VC ideal scaling factors, triple, triple, triple, double, double, which is like going from 1 million to 3 to 9 to 27 to 54 to 108 as the traditional path towards a billion-dollar business. As close as you can go on this track would be great.

Sajith: What advice would you give to younger founders who reach out to you for advice?

Pulkit: I think one of our qualities, I’d say, is resilience, and just pushing through. I think it’s like, you know, if you can, don’t give up. It’s like there’s consistent and constant problem-solving throughout. I think even in the times of high, there’s been problems to solve and in the times of low, there are problems to solve. So I think, you know, continuing to push is a good one. Continuing to experiment. I think some things take their natural time as well. There’s so much hype around speed in the valley. Speed is important, but there is a natural time to things. I think understanding that, you know, things take time to mature, to marinate. It depends on what you’re looking for. But we’re trying to build a business over a long time and trying to build a big business. So having some patience with it is important too.

Sajith: I want to question you around pivots, because there’s a chapter I will write on pivots. So specifically, I would like to discuss the pivot you undertook during the six years between your fundraises. From what I understand, you decided to focus on a specific customer segment, which was mid-market. Was there any other pivot during those six years? Was that the only pivot?

Pulkit: I think the pivot was the motion to be more sales assisted. So it’s a go-to-market pivot, essentially. So more sales assisted, focusing on deals that were $10k to 50k in ACV paid upfront, bought by a mid-market company. That was different from the self-service, 200-300 bucks a month, month-to-month credit card deal oriented to startups. I think there was an evolution in the product. I think one thing that we looked for is like, how can we give people a quicker ROI, faster ROI? We realized that many companies ended up wanting to build user onboarding, and weren’t sure what to build. Then it took some time to figure out what was successful.

For this, we launched an offering around ‘microsurveys’, which are like one-question surveys in the product, again, targeted to the right user at the right time. That was much quicker for companies to get returns on, because they all had questions they wanted to ask their users. Then it was much easier to figure out what to build and deploy. They immediately started getting results because they got responses. They were like, wow, our response rates are 60 or 70%. When we asked questions by email, our open rate was 1% and our clickthrough was 25% and our completion was 10%. So it’s a minuscule percentage of how many people we get. With this, it’s massive. So that helped also drive value quickly. But then also, we just fixed a lot of stuff. It’s just a lot of fixes and improvements and polish. So that also takes time for a product to mature.

Sajith: One query on this, when you decided to pick mid-market, what was the intuition? Was that the single best segment that was doing well and easiest to manage and was growing?

Pulkit: I think it was that we found that we looked at which customers were most successful and happy and they were the ones that we were able to coach and spend time on. They had time to spend and invest in the product. Those customers were just bigger businesses where somebody was dedicated to drive adoption, engagement, conversion, etc. And where we could invest time. And if we were investing time, it cost us more and therefore, we had to charge more. But there were also a few companies who were willing to pay a bit more. So that’s kind of how we saw like, oh, we have a stronger fit here. Now, I know there’s like, I wonder if you have read the article from Rahul Vohra of Superhuman. They did a much more systematic, and they’re B2C and have more scale, but they have a much more systematic way to assess product market fit within certain groups of users. But I think it was something similar that we figured out intuitively and anecdotally.

Sajith: What’s your ACV now and what was it then? When you started the journey, how much was it? Has the ACV increased or is it still like $10-12K now? 

Pulkit: So ACV, yeah. I think our ACV is in the $10-25k range. It’s going up. Before our focus on sales-assisted (motion), I think our ACV was much lower than $12k because most of our deals were like these startup plans that were like 200 bucks a month, which had a $2.5k ACV. So, you know, that was the majority of the business. Now, most of our revenue comes from the sales-assisted motion

Sajith: Do you have any resources that you want to recommend around PMF?

Pulkit: Let me think. On PMF specifically, I don’t know, but I’ve learned a lot from Jason Lemkin at SaaStr and I follow him on LinkedIn and I think his content is great. I think I always learn every time he posts something and it’s oriented around go-to-market pieces. Many founders will figure out the product, the PPF bit of it, because that’s core to who they are. But I think the MMF part of it is harder, but I would recommend following Jason Lemkin.

Sajith: Thank Pulkit. This was great.