Ara Mahdessian: ServiceTitan CEO on Building a $7BN Company Without Raising VC Funding | E1175
10 Jul 2024 (2 months ago)
Intro
- Great leadership involves delivering extraordinary outcomes.
- Executing where to play successfully involves making hundreds of great decisions on execution.
Childhood Experiences
- Ara Mahdessian was born in Iraq during the Iran-Iraq war.
- His mother shared stories of how she had to rush to the bomb shelter during labor.
- His family immigrated to the United States shortly after his birth.
- His parents faced challenges such as learning a new language, finding jobs, and making ends meet.
- Ara feels a responsibility to be worthy of the sacrifices his parents made for him.
Meeting with Byron Deeter
- Ara Mahdessian, CEO of ServiceTitan, initially hesitated to accept venture capital due to concerns about potential changes to the company's mission and values.
- After seeking advice from another founder who had raised institutional capital, Mahdessian decided against partnering with prominent investor Byron Deeter and ServiceTitan continued to grow successfully without venture capital.
- At a conference, Mahdessian met Byron Deeter, who had previously offered him an investment.
- A mutual friend highly recommended Deeter to Mahdessian, describing him as an exceptional investor and a great fit for Mahdessian's values and goals.
- Mahdessian texted Deeter expressing his interest in partnering, and Deeter promptly sent an Uber to pick him up.
- At Deeter's house, they celebrated and signed the term sheet, but Mahdessian insisted that Deeter and his team conduct thorough conversations and due diligence with Mahdessian's team before finalizing the partnership.
- The partnership between Mahdessian and Deeter has been incredibly successful, exceeding even their wildest expectations.
The Power of Product-Market Fit
- ServiceTitan's success story took over a decade to develop, not an overnight achievement.
- The company's first customer, John Aoyan, owner of a successful plumbing company, saw the potential in ServiceTitan's vision and partnered with them.
- Ara Mahdessian and Vahe Kuzoyan worked tirelessly for 6 months to build and refine the software to meet John's needs.
- John's patience and courage in sticking with ServiceTitan during its early challenges were crucial to the company's success.
- Ara believes that founders or leaders with a maniacal focus and conviction in the product are essential for successfully entering new markets or customer segments.
- Ara underwent a wisdom teeth extraction without anesthesia, demonstrating his resilience and determination.
- ServiceTitan achieved its success without raising venture capital funding.
- Ara emphasizes the importance of customer feedback and agility in product development.
- ServiceTitan's customer-centric approach involves listening to customers' needs and incorporating their feedback into product improvements.
- The company's focus on customer success has been a key driver of its growth and success.
- Ara highlights the value of having a strong team and a shared vision in achieving business success.
Key Lessons for Going Upmarket
- To successfully move upmarket, appoint a dedicated leader, understand the unique needs of the new customer segment, and focus on demonstrating the product's ROI potential.
- Lead with a compelling founding story, be transparent about pricing by linking it to the expected ROI and customer benefits, and collaborate with customers to ensure they achieve the desired ROI.
- Moving upmarket is challenging, and few software companies have successfully made the transition.
- ServiceTitan co-founders Ara Mahdessian and Vahe Kuzoyan, both engineers, quickly assess the feasibility and value of potential product features.
- They prioritize solving high-value problems that can be built quickly rather than pursuing the perfect long-term solution.
- ServiceTitan is a premium-priced option in the market, potentially three times more expensive than competitors, but they emphasize the value and quality of their product to justify the higher cost.
Building a Premium Brand
- ServiceTitan became the premium product by delivering valuable solutions and creating a strong brand recognition.
- In the tight-knit contracting community, positive word-of-mouth quickly spreads about beneficial products, leading to lower customer acquisition costs and higher close rates.
- Customer success is crucial to ServiceTitan's business model, as it not only drives financial growth but also aligns with the CEO's personal mission to help contractors succeed.
- ServiceTitan's focus on customer success, combined with the product's ability to generate high ROI in the contracting industry, has contributed to its success.
Timing for Launching Second & Third Products
- Start building the next product when the current product has great product-market fit and high success with customers.
- Don't wait until everything is perfect with the first product before starting the second.
- Product-market fit means understanding the purchasing process, ROI, and building the right product to support it.
- Good product-market fit correlates with good marketing and sales performance.
ServiceTitan's Delayed Product Release
- ServiceTitan delayed the launch of its payment and financial products despite the growing demand in the SaaS industry.
- The company had good product-market fit but struggled to achieve 100% product-market fit across the entire spectrum of its wide and deep product.
- ServiceTitan should have started developing the payment solution earlier.
- Ara Mahdessian believes he can improve as a CEO by inspiring those around him to achieve greatness rather than just demanding results.
Inspiring Without Fear in a High-Demand Culture
- Ara Mahdessian discusses how to create a high-intensity, inspiring work environment without instilling fear in employees.
- He shares an example of a recent meeting with his product team where he emphasized the importance of launching a new product on time with exceptional quality.
- Instead of resorting to harsh words, he motivated the team by expressing his trust in their abilities and highlighting the significance of their contributions.
- This approach resulted in positive reactions from the team, who felt inspired and committed to delivering a high-quality product on schedule.
- Ara Mahdessian acknowledges that he is a perfectionist when it comes to product, metrics, and driving the business.
- He also admits to being particular about fashion, certain aspects of soccer, and coaching his kids' soccer team.
- Ara clarifies that micromanagement, in his view, refers to situations where the CEO makes all the decisions or fails to hire and develop a competent team.
- He believes that good leaders engage with their teams, understand their priorities, and offer valuable insights to enhance outcomes.
- Ara rejects both micromanagement, where leaders make all the decisions, and pass-through leadership, where leaders simply relay information without providing guidance.
The Core Pillars of Great Leadership
- Great leadership involves making one or two big decisions a year and many small decisions daily.
- The goal is to generate extraordinary outcomes.
- One big decision is choosing where to play, such as upmarket or downmarket, or building a specific product.
- Successful execution of the chosen path requires hundreds of great decisions.
- Waiting six years to start using video was a costly mistake.
- ServiceTitan now has millions of subscribers on YouTube.
- Hiring leaders based solely on experience can be risky.
- Some leaders may not have the right DNA or be team players.
- Doubts about an individual's fit have always been proven justified.
- The challenge is acting quickly and not hesitating.
- The philosophy now is that when there is doubt, there is enough conviction to make a decision.
- It's difficult to cut someone, especially a key hire, after a short time, but it's important to act when there are doubts.
How Football Impacts Ara's Leadership Style
- Ara Mahdessian compares his leadership style to football.
- He believes football is the most intellectually challenging sport, requiring technical and tactical knowledge.
- Ara emphasizes the importance of tactics and rotations to create overloads and outnumber opponents.
- He pursues both business and football with a similar goal of continuous improvement and achieving perfection.
- While winning is important, Ara prioritizes playing beautifully and developing his team's skills.
- Ara discusses the current popularity of Major League Soccer (MLS) due to Lionel Messi's arrival.
- Despite the hype, he observes that true football fans in the US prefer watching European leagues and the Champions League.
- Ara, his friends, coaches, and players do not watch MLS matches.
- He suggests that viewership may decline after Messi's departure.
Quick-Fire Round
- Ara Mahdessian, CEO of ServiceTitan, stresses the significance of customer success and having experienced board members in vertical SaaS.
- Mahdessian emphasizes the value of learning from seasoned founders and industry leaders.
- Contrary to popular belief, he has had positive experiences with venture capital firms, finding them authentic and aligned with ServiceTitan's values.
- Reflecting on his journey, Mahdessian expresses gratitude for not fully comprehending the challenges he would face, as it might have discouraged him from starting ServiceTitan.
- He highlights the immense rewards of parenthood, despite its difficulties, and emphasizes the importance of work-life balance.
- Mahdessian identifies improving his ability to assess potential hires accurately as an area he would like to enhance.
- He encourages self-psychoanalysis to understand one's motivations and vulnerabilities.
- Mahdessian reflects on his personal journey and the evolution of his goals, acknowledging that he feels worthy now compared to earlier in his career.