After spending time at Shopify, Oracle, and Cisco, Chris Grouchy is now turning B2B commerce into an API with Convictional.
Davis Baer: What’s your background, and what are you working on?
Chris Grouchy: Thanks for having me, Davis.
My name is Chris Grouchy, and my background is in enterprise software. I’ve previously worked at Shopify, Oracle, and Cisco in enterprise sales and product marketing. My co-founder, Roger Kirkness, previously exited a food manufacturing ERP startup before getting hired by Shopify to work on product.
We met at Shopify and started thinking about how online retailers procure inventory and source products from their suppliers. We discovered that most B2B commerce happens through a technology that was invented in the 1960s called Electronic Data Interchange (EDI). It’s basically a pre-internet format for exchanging documents about a transaction, like purchase orders, invoices, and inventory updates. If you sell to Amazon or Nordstrom, you need EDI. But SMB retailer avoid EDI due to its cost and complexity, so suppliers have historically needed separate systems for transacting with them. A supplier’s IT environment gets messy very quickly.
Roger and I wondered why there wasn’t something as easy as Stripe for B2B commerce, so we decided to build it ourselves. A few months later, we launched Convictional.
Convictional is an API that lets suppliers sell inventory to any online retailer. Whether a supplier needs EDI or a way to handle inventory orders from smaller retailers, Convictional can make any B2B transaction possible.
We launched in February, 2018 and we are already processing over 1 billion API calls per month.
What motivated you to get started with Convictional?
Five years before meeting at Shopify, Roger led ecommerce at a major supplements retailer (instead of getting a university degree). There, he implemented a competitor’s system. It took months to roll out and he was on the phone with support constantly. I’d imagine that implementing outdated procurement software over a multi-month period would be a traumatic experience for an 18 year old.
Five years later, Roger and I met at Shopify. We were shocked to learn that the challenges of doing B2B commerce still exist today.
When we talked to suppliers, they said that they had three problems:
- EDI can only talk to other EDI systems. It’s only useful if you sell to large retailers. Yet, a supplier’s job-to-be-done is to reliably process orders from any trading partner, not just large retailers.
- Existing tools aren’t automated. Often, a supplier will have to spend a few hours every week manually typing in transaction data into their ERP system. A customer told us that across their team they were spending 40+ hours per week doing this manual work.
- Suppliers suffer from multi-month implementations. If an EDI API existed, then they could get up and running much faster.
Most of the new platforms being launched in B2B commerce today resemble portals — basically a password-protected catalogue for your business customers. But that’s not a great UX for a busy retail staff member. And good luck getting Walmart to log into your portal to buy what they want.
We ultimately decided that we couldn’t pass up on the opportunity to pursue Convictional. We felt that the bigger risk (or opportunity cost) would have been staying at our jobs and not pursuing our idea altogether.
We started writing code when we left our jobs. Roger and I had each saved up 2–3 years of personal savings, so we felt comfortable taking the leap and bootstrapping to revenue.
People compare cofounder relationships to marriage. You would probably want to date your future spouse for a while before getting into something serious. Roger and I tested our compatibility as cofounders while working full-time by hacking on a side project on evening and weekends. We built an SMS cart recovery app and learned a lot by working together on that project.
How did you decide to name your company Convictional?
Conviction is core to our company’s DNA. We build products that underpin the most critical parts of a supplier’s business — how they make money. We want our customers to have conviction in our ability to deliver on that promise.
It also takes a certain level of conviction to leave your job and start a company.
Roger Kirkness (Co-founder of Convictional) on the left.
What went into building the initial version of Convictional?
We started writing code after we left our full-time jobs in October/November of 2017 and we ran some initial pilots in December. We were deeply embarrassed by the first iteration of Convictional.
Launching quickly was arguably one of the smartest decisions we’ve made as a company.
We also knew we were taking a big risk by leaving our jobs behind without first validating the idea. This was deliberate. Constraints force you to be creative and to focus. In an industry that produces bloated software using infrastructure from the 1960s, we wanted zero waste in our product. This mentality forced us to be incredibly thoughtful about what features customers actually needed and what they didn’t.
We had to be efficient with our time and money. We did not want to cut corners by taking outside funding at this point and we believe in hiring slow. This certainly caused a lot of stress and suffering for my co-founder and I, especially in the beginning, but I think the learning and progress alone have been worth the pain.
On the product side, we decided to prioritize the integrations that are growing the fastest among retailers. This turned out to be Shopify and a couple of other systems. Today, our customers think of Convictional like Zapier for B2B commerce. You have all of these integrations that connect suppliers to their online retail partners to keep products, inventory, and orders in sync.
How have you attracted customers and grown your company?
We acquire customers primarily through direct sales. Our customers are large North American suppliers who sell to online retailers. We typically orchestrate personalized outbound cold email campaigns to key accounts and ask prospects if they are open to a conversation. We’ve built a lot of custom technology to identify whether a prospect is a good fit so we can reach out to them with context.
On the lead gen side, content has also worked well for us. We run a monthly newsletter called Convictional Concept where we discuss new features and ideas. Also, whenever we learn something new about the market or our customers, we publish a blog post about the lesson. Organic SEO takes time to build, but it’s worth it. My advice to other founders would be to take notes on your discovery calls and make a running list of topics you don’t immediately understand. Then, after those calls, write up a quick blog post and publish it to your site.
I suspect we’ll continue to execute on these two channels as they seem to be working. In the early days of running a B2B startups, there’s no better substitute for spending a significant amount of your time grinding on sales until you figure out if your product resonates with users. By putting in the work, you’ll learn to tell a better story and how to communicate the value that your product will bring to the customer.
What’s your business model, and how have you grown your revenue?
Convictional operates under a SaaS-based pricing model. We charge a few thousand per month for the product, depending on the integration requirements of the customer. We initially tested a commission-based pricing model, but suppliers hated it. When customers sign on with us, we introduce their team to the platform through an extensive onboarding and training program.
The SaaS model is quite revolutionary for the B2B commerce industry. Incumbents have archaic pricing structures. It’s not uncommon for a given legacy vendor to have 8–12 line items for their pricing. Their pricing sheets will typically include variables like documents sent per month, kilocharacter fees, and so on. Customers are usually thrilled to hear that, with Convictional, they will just have one predictable monthly price and unlimited transactions.
Pricing is hard. A lot has been written about SaaS pricing, but in general I strongly believe in value-based pricing. I’ve learned two lessons about how to run a value-based pricing conversations:
- Quantify your product’s value on the call. During the sales process, you should ask questions that uncover quantifiable value within a prospect’s organization. For Convictional, there’s value in net new revenue potential and in time savings through automation. You can really put things into perspective by doing the ROI math for a prospect during a call. I would also refrain from pricing based on what your competitors charge. You should price to the point where you, as a founder, feel slightly uneasy.
- Ideally, hold off on giving a price until you have uncovered all of the pain that exists, quantified the value, have complete details on the implementation, and are certain that you are speaking to the decision-maker.
So what do you do if a prospect asks for a price early on in the sales process?
Having done enterprise sales for multiple high-growth software companies, I have learned that pricing conversations are a bit of a dance. You should expect that a prospect will ask for pricing early on in the process, typically before you’ve checked all of those boxes I mentioned in point #2 of the previous question. If you were a software buyer, you’d probably want to know pricing almost immediately.
When prospects ask for pricing and you don’t have all of the necessary details in place yet, feel free to politely push back and state that it’s too premature to give a price because you still require information from them. Sure, communicate the broad strokes around how pricing will work (e.g. monthly payment on an annual agreement), but give an honest reason for why it’s premature timing. Often, stating that it’s too premature to give pricing is sufficient justification.
If the prospect continues to press you, don’t panic. Instead, calmly ask them if the question is due to an internal budgetary concern. That will usually reveal why they need the information right away and what kind of budget exists. This advice was given to us by our sales advisor. It’s worked beautifully for us so far.
What are your goals for the future?
We are default alive at this point with no outside funding. We are also fully distributed as a team.
In 2019, we are planning on expanding the team by bringing on a head of growth and another engineer. We are thinking about how we can hit 10x our MRR by the end of next year. Right now, the obvious bottleneck is sales. We believe we can achieve this goal by moving from an outbound-driven sales model to an inbound-driven sales model. There’s lots of interesting things we need to do on the growth front.
What was the biggest challenge you have faced?
The biggest challenge has been anticipating that many well-known platforms and systems that we integrate with struggle to provide reliable APIs. This is counterintuitive because you would naturally assume that large, well-funded companies would offer robust and reliable APIs.
We assumed that if an integration we built didn’t work, it would be because of something we did wrong. While this was the case in the very early days, the combination of writing an integration with a particular service and trying to maintain it as customers load it up with work is extremely challenging.
We have rewritten our integrations half a dozen times from top to bottom at this point as we have been scaling with our initial customers, and still we would have done several things differently if we had known. We had to learn what we could actually expect in terms of APIs we connect with, how to deal with sending and receiving tens of millions of requests a day when we hadn’t dealt with APIs before at all, and how to do this reliably without a big engineering team to diffuse the work.
It takes a day to build an integration that doesn’t work very well, and it takes a year to build an integration that works very well.
APIs are much harder than they seem.
Have you found anything particularly helpful or advantageous?
Most of the advice Roger and I would give isn’t necessarily revolutionary. On that front, a few boring but useful things to do frequently are:
- Write PRDs: On the product side, we’ve found the exercise of writing product requirements documents (PRDs) to be extremely useful. They force you to think about the problem from the customer’s eyes and ruthlessly prioritize features with the few resources you have.
- Raise prices: On the sales side, we’ve always found it beneficial to raise your price to the point of discomfort (that is, more than you personally think it’s worth). This will help you articulate the value of your product. Also, it’s useful to go out to the market to sell what you’re building before it’s ready. What are you waiting for?
- Watch finances carefully: At Convictional, we hold a mandatory end-of-month financial reconciliation meeting. This is the time where we discuss our intricate financial performance. In general, we use this time to reflect on how we are performing, how much revenue we will forecast for next month, what our cash flow position is, and discuss (or propose) any relatively large expenses we should account for next month. If you have revenue or funding, brainstorm how you can spend money to automate any manual work that you’re spending too much time on. It’s best to hire existing software products before hiring people.
- Kill chat when you’re not using it: Chat is like the proverbial office water cooler. You’d never spend all day standing at the water cooler. Yet, that’s effectively what people in large companies do — they leave their chat tab open and wait to be interrupted over non-urgent things. At Convictional, we close chat when we’re not using it and generally don’t expect teammates to respond immediately. Instead, encourage email communication and deep work.
Any book recommendations?
- Principles, Ray Dalio.
- Influence, Robert Cialdini.
- Skin in the Game, Nassim Nicholas Taleb.
- Meditations, Marcus Aurelius (Gregory Hays translation).
Also, Naval Ravikant has a really good tweetstorm on how to create wealth. You should read that, too.
Where can we go to learn more?
I recommend checking out Convictional’s website and browsing our blog.
Feel free to email me with any questions at [email protected] or hit me up on Twitter. Happy to answer any questions in the comments section.