E28: Making tough decisions with Tomer Tagrin

Oh, it's actually a good story. I need to hang up. We used to, in our last fundraising, make fun with investors that despite our unicorn valuation, we're building a flamingo, like a real animal, a real business. So it started as a joke on humility and it became, the design studio did a bunch of stuff back then in NFTs, and it became the content framework for our culture if you want. And so we give it to people in the Orlands. We used to have a game that asks questions and you can win some of the posters of the flamingos. But yes, they are pretty cool.

Yeah, that was our internal joke on the apes.

Actually, nothing. Probably guess millions of dollars back then. Nothing.

Yes. You know what's funny? I'll share a really quick flamingo story also. Eli at one of the events you guys had a booth and they had a bunch of little toy flamingos. So I took a couple of them back home for my kids because my daughter's classroom was named the Flamingo classroom at the time. So it worked out super well.

Yes, I did a geek research. I think it's uber cool what you guys are doing and I'd be very happy to share thoughts, help, you name it. But yes, I think I have a general sense, but feel free to guide me as well.

Well, first I'll say that we weren't good enough. Meaning, I think the first sense was that we made a lot of progress specifically on SMS and email, they were starting to pick up, but we felt that you can't really build, or we at least won't be able to really build what we think is best-in-class software or innovate to the market. I think retrospectively our mistake was we didn't enter an existing market. We should have come with something more extreme or more different. Basically we were preparing to try to build some kind of what Klaviyo released recently, like the autonomous marketing, but we needed to get the foundation first and we just couldn't execute on everything in parallel. And then when you talk to customers, you just feel underwhelmed by their feedback. I also think SMS is becoming a different channel for brands. They are segmenting more, all the regulations, Verizon is increasing the prices soon, so the channel as a whole became less lucrative. And then okay, what do we want to do? And maybe with the recent announcement it became more evident, but for us, AI in e-commerce is something we really wanted to explore. I can tell you even for me, despite the fact that it's a big company, I always, when I interview executives, I tell them that despite my title, I'm not just the CEO, I'm much more the entrepreneur than the CEO. And so I much rather build in areas where I feel that we can innovate and bring something new to the market. In reviews, I really think the market is completely changing. You're going to see us continue releasing the way users write reviews, read reviews, the importance of reviews in an LLM-first world, all of that is completely changing. We also want to build a full-blown set of tools to help brands be more visible. That's an area that your boy is going to very much lean into. Loyalty, I think it's always an interesting category. Would Jeremiah have bought because of the loyalty program or regardless of the loyalty program? The incrementality is something that we really want to solve. And in general, I think another thing that a lot of people on social are missing is that a lot of customers are not just pure-play D2C. A lot of them are selling on retailers, a lot of them are offline and online, and there's a wide range of solutions that we need to do a better job at to really help them with their omnichannel needs. So we are working now with a few more retailers. I hope we can announce soon. We launched with Target, Walmart, and offline point of sale is becoming a very big deal for us. So we have a lot of stuff, and we thought reviews is changing and we want to lead that. Second, loyalty, we feel that we have a lot more to accomplish. And LLM discoverability, AI in e-commerce is an area that I'm personally very passionate about. I think it's going to be a big shift. I think it's a real deal, it's not like the apes. And we want to do some bets, and we just couldn't bet on too many things with our delivery, so we said okay, we want to focus. And just for everyone to understand, it was a massive change in Yotpo's mindset, because for us before the change, email and SMS were the growth engine. So now all of a sudden I need to do a very big mental shift and use a very different mental model for many of our leaders, of our employees. Even this is one of the reasons we want to change so deeply. Let's say now AI even inside Yotpo, aside from the product itself, Yotpo is in a tricky place. On one hand, we're exactly the company that is not AI-native. And on the other hand, we are big enough so we have millions of lines of code. So the transformation to really become a leaner, smaller company is a huge task. It comes from how do we change the finance team, how do we change the marketing organization, the CSMs, the sales. It's a big journey that we are really investing into. I think that you probably get once in a lifetime opportunity to really transform something that big. And as I told the investors, in a weird way, I find a lot of passion for it. I want to see what it means for Yotpo to really transform. And so that's our task that we signed up for now. But yeah, it was a massive mental change.

So my joke internally before we announced was I feel like we're invading Normandy. We have a list of a thousand action items: communication, how do you migrate customers, technical stuff, finding the right partner. So first, I think if you really do right by the customer, most of them, of course the ones that migrated a month before to our email wanted to kill me, and that's totally obvious and it makes perfect sense, and it's a very painful experience. But we really tried. We literally kept, still till today, keeping people on the payroll whose entire job is to make sure that migration is extremely smooth. When we look at all the partners we are working with, we need to make sure that it's going to feel like a very good process. And I think customers saw we really care, and partners saw that we really care, and we really try to be as authentic as possible. One thing that maybe surprised a few people, I don't know, was that many agencies, which are having a tough time, tried to say, 'Now we will help you with the migration,' and we tried to bring leads to them, which was a bit surprising to some of the people. But overall, it was actually better than planned. I don't know if you can call it that, but it was extremely well planned. I'm talking one of the biggest operations. Hundreds and hundreds of human hours went into that segment of customers and how to build behind the scenes the data migration. Customers wanted to do that, and BFCM is coming. So who needs to move before BFCM, who is after BFCM? It was a very big plan. So I can tell you, the only tip I can give you is that if you ever do that, invest a lot of time from a customer point of view to think about it, and that's probably the only important thing.

That's our new product. So how it fits, it fits in two ways. I'll give you the outward-facing way and the inward-facing way. First, as I mentioned, I'm the entrepreneur. So I drive everyone crazy, and I think we have too much innovation. We launched a new startup to allow brands to have two-day free shipping called Ocean Josh. We have that inside the products, and I'm driving people too crazy. We need more focus in general. So one of the things we did is I have a team of five or six engineers reporting to me so I won't drive everyone else crazy. So that's one internal reason. External reason is again, in AI e-commerce, I think Yotpo is a company that will continue building more and more products, and we try to help brands. But AI is going to dramatically change, and we wanted to create a different setup because in Yotpo we have sprints, we have OKRs, and we need something very different to go from zero to one. We needed a different operating environment if you want. And we did an acquire of a small team in the CDP world, and we took one of the founding team members there and gave him a lot of room to operate and a lot of budget to really build the team and to go and try to build a new product. Hopefully we're going to launch it in a month or a month and a half. It's very much AI, it's not an existing category, something that we think is going to be very important to the future. So the internal reason is a lot of it is a different operating model that I want to drive, but also for them to operate differently. I don't care about sprints, I don't care about OKRs and all of that, unlike products that have 50-plus million dollars in revenue that need a very different operating environment.

So in the management, we have five or six people that I usually consult with on pretty much everything. We have a very experienced CFO that's been through that a few times, we have a COO, CMO, head of engineering. So we have a few of those people. I also have a few other people outside. Some of our board members, like Adam from Bessemer, he's unbelievably forward-thinking. Also Shopify is a large investor in us, so in Shopify I have a probably better relationship with some of their executives. Their CFO Jeff is a great person. Another person, Glenn, who left but used to lead product, I used to talk with him a bit on product. Also Carl, who moved to design, I spend some time with him on Shopify's way. Who else? I have two bankers that I talk to surprisingly, who are not fit to be bankers but they are actually good. And in general, I think at least for me, it was the understanding that when you talk to customers and you understand that people became too big too fast, I'm not doing my job correctly. I'm not enough in the weeds. I became too much of a big manager, and Yotpo needs a cultural shift because all of a sudden, you talk to people or you ask... I also did a thing where I met 150 customers and I interviewed 70 of our employees across the company, and you see a lot of them are talking about mediocrity. And you say, 'Okay, I have to change it dramatically because I don't want to stay in that kind of a company.' And I think yes, the founder has a huge superpower. You have all the context. And probably the moment you understand that you have literally nothing to lose is a great moment. You're freeing yourself from a lot of chains that are not real. And of course you need to create alignment and you need to get people to rally behind. But for me, there are between five and 20 people in Yotpo that if it makes sense for them, it gives me a lot of confidence that this is probably the right thing to do. And these are people from a wide range of things. So I don't know, life is too short to not do that. So I'm always coming at it from that perspective. And I think yes, having a culture that is on one hand humble enough to say, 'Okay, you know what, we're actually not that great here, we have to change,' and the courage to actually change, that's a great combination.

So first, I'm not good at predictions. Prophecy is given for the fool. Many things that I thought were going to be right apparently got wrong and vice versa. But I think it really depends on what you optimize for. There's Frank Slootman, probably the best hired CEO in the world. If you haven't read his book, phenomenal. I recommend it to any operator. I actually bought it for all of our management. So I think it really depends. I think yes, if it's a VC-backed or investor-backed or public, it doesn't matter who your investors are, you need to make sure that your investors are with you. One of Yotpo's biggest strengths when we did a deep SWOT analysis is our investors and the board. They give us a lot of room to operate. Actually, I had a conversation yesterday or two days ago with one of the most famous Shopify SaaS company CEOs. He called me and asked a bunch of stuff on how to navigate that. Eventually, we just have a different ball dynamic. And I think you really need to get that really, really in order. And I think a hired CEO depends on what they're optimizing for. Maybe they're optimizing to finish in two or three years. I can tell you, one of our largest competitors has had many CEOs that got replaced, many, many, many. And I know a few of them throughout the years. They came for something different, they came to maybe try, and if it doesn't work, they're going to go to the next company. For me, besides my kids, this is probably my biggest life's project. So I don't know, I care deeply. I think I care more, and because I care more, you try to do the hard thing. The easy thing is not changing, continuing as is. So I think it's just a different persona. Maybe you should do an episode with a hired CEO. I wouldn't call you a hired CEO because you are a founder, but people that are doing that for a job, maybe they're coming at it from a different perspective. It's an interesting point also when should you hire a CEO at all, if ever. That's another great discussion I've participated in multiple times. But I think founder, yes, it's a very different mentality. So I don't know if I gave a good answer or not, but I don't know how to think about the psychology of CEOs.

I'm having the same thing at Yotpo, trust me, same thing.

Yeah, Tilmer.

So first, I think Shopify is probably one of the top five software companies of our generation, of the last decade. So I would never underestimate them in a very big way. Probably Tobi has a crystal ball somewhere, but it's extremely impressive the way they were able to execute. Therefore, it's discussed more because it's more interesting. Before I move to the social sphere, analysts wouldn't cover a selfless commerce club like they would cover the right or Adobe commerce club now going to B2B. That is much more interesting, much more innovating, growing. So I think it's definitely the ecosystem of the future. And I think specifically in the Shopify ecosystem, the buyer persona, the SaaS vendor, the agency, they are 25 to 45, they like to overreact on social a lot more. A lot of our customers are outside of the social sphere. They don't even know many things that everyone on D2C Twitter knows. So I think that's also important to say. It's other, I don't know if call it an ecosystem, but those buyers are all older, all different, and they just don't spend so much time on social. And I think social eventually is probably magnified like many things, but it's not the entire universe, not the entire ecosystem. I can't tell you how many times some of the best darlings of D2C Twitter came to us to acquire them and the business is doing horrible, horrible. And there are many companies, let's say one of my friends that probably no one is talking about enough globally, that went public. If you would look at D2C Twitter, you thought it was a $5 million company, not a $4 billion stock. So I think that's also really important to remind. But social does matter because on the Shopify ecosystem it matters a lot. And also Shopify is a big world. There's the higher end of the market, the lower end of the market, probably very different types of ecosystems. So I think that's the first thing. I think for us, no, I don't think Shopify will eat all of commerce. I think that will never happen. I think there are other opportunities. And also for SaaS founders that are hearing it that are building for commerce, it's really important to understand that Shopify is the larger town but the more competitive by nature. So it's a really good thing when you're thinking if you want to build where you want to build, because yes, maybe it's a smaller town but much less competitive, much pricing is very different. So there's a lot of other things you need to think of and take into consideration specifically as you scale. I may say the first $10 to $20 million is probably a mistake to go outside of Shopify, but after that, and also we have customers that have both, they have instances of Shopify but instances of outside of Shopify, so it can be both. Even for Yotpo, we have many customers that are migrating to Shopify that were previously Yotpo customers. You know how much they value that they can actually migrate. So it's a big thing. And again, it's a big ecosystem specifically when you look outside of the US. Despite the fact that Europe is the fastest growing region of Shopify, still Europe is very bifurcated. The East is very bifurcated. And yes, there are edge cases that are not even edge cases, there are cases that are different. Let me give you an example of a phenomenal customer I follow, one of the best-run companies, a public company, phenomenal brand. They're launching more and they have 150 engineers, they love it, they have a data science team. They will never be on Shopify, not because Shopify is good or bad, it's phenomenal, but that's how they operate their business. And I know many founders that they like to be closer, they like to develop more, and maybe they make a mistake, maybe not, but that's how they build their business. So specifically as you scale, I think it's uber important to be outside of Shopify. I think the margins are different, the go-to-market is different, and many companies that are not preparing for that day, let's say when you hit those dozens of millions of dollars, it will catch up to you at some point. Because on Shopify you will have competitors. I don't know any category that, and again let's put Klaviyo as truly an exception of the rule, really exception. Any other category you will have competitors, you will fight on price. D2C brands don't have a lot of loyalty to the vendor, it's more loyalty to price and their efficiencies. So you will have some kind of price deterioration. I don't know any category that doesn't have that. So one way to own your profit margin or your gross margin is to also go outside of Shopify.

So actually, transforming video reviews into ads is a project we have now, built with a few beta customers. It's one of the things we might release in our reviews product soon. Another thing is we already released a kind of smart prompts, an AI assistant that helps you write more quality content that we know will convert more and will be more discoverable in the LLMs. And soon you're going to see us releasing a Rufus-type of experience, if you're familiar with Amazon's Rufus, a reviews agent on the PDP page. It's not a sales agent, it's more about a reviews agent that you can just ask questions and based on the reviews it gives you answers. So that's another thing happening. And we also try to use GenAI in general for other capabilities like AI translations. I'll give you an example: IKEA is a customer. We deployed in around 49 countries, and how do you translate really well across AI summaries and stuff like that? Before GenAI, it was impossible to create driving insights alerts. Now GenAI can do that and go over the content much faster. We have a saying in Yotpo: 'No user ever read review number 127, but you know who does? ChatGPT.' So now that also becomes really important. And reviews that just say 'great product' or 'I hate it' are okay but not that valuable. So how do you go on quality, and what does quality even mean? So it's actually a big world. I really think in the review space, after many years of a bit of stagnation of innovation, it's now giving it a new dome.

Yes. I think it's massive. There is zero way we will build all of the things we want to build in the next five years. And I'm sure you feel the same way. All the things that have opened up with GenAI, there's so much capability and none of it's really been built yet to be honest. It's very early stages of what's possible. There is so much there. So yeah, it has been a very stagnant category from my perspective, but it feels like there's a lot that's going to open up here.

Yes, video is a big medium now for reviews, 100%.

So first, I'll just say to your previous comment, it was never easy. Not the zero to one, not the one to 10, not 10 to 100, not 100 plus. At least for me, for us, maybe because I'm a first-time founder, every stage was really tough. I'll give you an example. When we started, there were no competitors, Shopify was just starting. We had a free product, we didn't even know how to monetize. We didn't know what SaaS is. It was very difficult for us. And then from 1 to 10, we did so many mistakes. We said, 'Okay, churn is starting to happen at around $7 million. What do we do there? What's churn?' So for us, it was a learning experience every stage, and it was tough. I think today, in some ways, going from zero to one is easier because the market is bigger, the TAM is bigger. On the other end, I don't know how companies are doing distribution today. It's probably tougher than when I did the zero to 10. I think for us, $10 million started to feel like a grown-up company all of a sudden. I remember Yotpo never had a CHRO, and I was like, 'Why do I need a CHRO? If a manager is a good manager, why do I need a CHRO? Let the manager do that.' I remember we were probably 70, 60, 80 people. Someone told me, 'Man, you need to stop, we need a CHRO, it's too much of a mess.' So I learned that not everyone understands what's going on. I was like, 'What do you mean you don't understand? This is what happened this fine.' And we started getting a realization that okay, it's a company, it's people, blah blah blah. So for us, it was multiple cycles of replacement of management, of how to work. And to be honest, I think till today we could do a better job. I can tell you, part of the change we decided to go much deeper on OKRs. We'll see how that's going to go. But we went very deep this time on OKRs as a framework to really help us, and that's trickling down to the last person in Yotpo. I think we were always, that was also one of our problems back then. We were very good on go-to-market in the sense that the sales were, if you talk to customers, they tell you it was too aggressive because the sales were very good. CSM as well, it took us time, but we became like we fell in love with the mechanics of go-to-market if you want. And I think it's tough. I think I heard Tobi one time talk about it, that every stage of a company is like a kid in a dark room. You don't know how to get out, you want to get out, and then you find the doorknob, but you don't know how to open the door. And then you open the door, you move to the next room which is bigger, but then all of a sudden it's also dark, and now you need to find the doorknob again. So I just think it's an ever-ending thing. I can tell you, one of our board members was a CEO and CFO of a company. I'll describe the company metrics. Four years ago, they were doing $2 billion of ARR, they were doing 40% profit margin, and growing at 50%. That's heaven, right? That's how heaven for SaaS sounds like. And two years after, they were shrinking, burning money, all hell breaks loose. And it's like, what the hell? And the company goes and they feel like they're not successful. And he's talking to me and he's like, 'Yeah.' And I'm like, 'Man, what do you mean you're not successful? You got to heaven. You're the heaven of SaaS. You are successful.' And I think it just shows you that. And that's a very hard thing we do. What I try to do in meditating is try not to drive your happiness from outcomes, just fall in love with the process. It's such a tough thing to do, but I don't know, you just try to do that because it's a never-ending grind. Maybe the only thing I'll say is liquidity. I think that is something that does change, and it doesn't matter your form of liquidity. It can be an exit, it can be your profits, it can be a secondary. What about liquidity does change your life outside of work? But I can tell you, I know founders that are at such different scales, and I know it sounds crazy, but I don't know how many times founders talk to me like, 'I'm a success and I feel like the imposter syndrome because we had such a shitty quarter and I see the product and something is so off that I feel like such a failure.' So I just think it's a constant grind. Just take care of liquidity. Maybe that's the only thing I can tell you that really changes your life.

Not all of them can. I always say, because I'm not a great manager and I'm a first-time founder, I cannot mentor you. I just can't because I don't know how to do your job. So I can't help you. So you need to hire senior people and have people grow up in certain areas. I really try for each one of my leadership to have an advisor or a mentor that can compensate for that experience. I found that's been really helpful. And just to keep people with a growth mindset. When I mean growth mindset, always trying to improve. 'Okay, what did we learn? How can we get better?' And not to take it personal. Everyone messes up, everyone makes mistakes. If you build a culture that it's fine, and a culture that, and eventually what is culture? It's the people you hire and how you make decisions and what you tolerate. So you tolerate mistakes, but you don't tolerate people that are not growing, that keep making those mistakes. And just try to be as empathetic as you can and try to have fun. I think Yotpo is such a tough company. Every time someone, like today I had a meeting with someone who was with us for seven years and he decided to leave to open his startup. He's one of the most exceptional people we had. It hurts when he is leaving. He's super sharp, and my first thing is he needs time to decompress. It's so tough, it's so intense. It's not easy selling to commerce brands. It's so tough to get everything right together. And I think you need to help people as much as possible, understand that not all of them can see through it. It can't happen. And then try to hug them as much as you can and try to help them as much as you can. I can tell also because of my medical cancer stuff in my life, it gave me a very different perspective. It really changed what's important, what's not. No one is going to die here. That's why every time I see on Twitter people take commerce so seriously, I think to myself, 'And what a great thing, because this means these people didn't go through a big trauma in their life, so good for them. But God, I scared, don't take it that seriously. No one is the devil, no one is trying to do bad. People make mistakes. And thank God it's not cancer here, it's a different spectrum.' And I don't know, also to remind, perspective is important when we go through all of that. I don't know, that's it I think.

Easy. Easy for me. I have a scan every six months. So every six months I go to the same doctor, to the same room, to the same guy that sentenced me to death and he sentenced me to life. You know they teach you there's heaven and hell. For me, it's the same place: 73rd and First, Memorial Sloan Kettering. God and the devil, same person. His name is Andrew, my oncologist. So for me, every time I sit in those scans, my kids are the first thing. Because I was already in a place where I wrote letters to my kids, I started to prepare videos. It was very dark places. So for me, my kids are the most important thing, my wife, my health, mental and physical health. I'm a person now that exercises every day, ice bath, meditates. I have severe PTSD on that front. I don't eat barely anything. My wife hates going to restaurants with me because of that. But so, other things. And also on the Yotpo side, one is to really see people grow and build their career. I want the top people at Yotpo to be rich, to get liquidity for them. For me, that's really important because I think that changes life. What else? In Yotpo, we also try to be a platform to help back. Think about it, we have 150 to 200 people in Israel. I won't go into the entire Middle East messed up show, but we have employees that are doing reserve duty 200 days a year, 250 days a year. They're going through hell. So how do you help them? How do you help their wives? How do you help their kids? We have an organization that for the last six years has been donating. It's called Girls Inc. in the UK, for girls that were born to less lucky life than most of us. So I think those types of things I try to do and try to help. But first and foremost, my kids, my wife, my immediate body and mind are the most important thing. But I'll tell you a good story. When the cancer came back the second time, we were going public. We were already in the IPO process, we had bankers, I was pitching investors. And you can't go public with a sick CEO. So we stopped it. It was a huge thing, a huge disappointment. And I felt so guilty because everyone saw liquidity. You can think about it, people worked their asses off for years, and now we can't because Tom is sick. When I came back, the market crashed. Thank God we're not public. It was a completely different thing. And I remember we had a board meeting. My partner, my co-founder, says, 'This is a challenge again. Remember, market is crashing, it's the end of ecom, yada yada yada.' And I say, 'Why? It's an opportunity.' And he says, 'Challenge, opportunity.' So we finished the board meeting. One of the board members called me up saying, 'Man, how are you so optimistic? Everything is so bad. What's going on?' And I told them, 'Look, you're talking to a person that four weeks ago couldn't take a shower because he had a mainline connected here. I barely took a regular shower for... I didn't sleep on my stomach. I sleep like a baby. I still sleep on my stomach like a kid. I couldn't sleep on my stomach, and now I can. So what? Because the market is going bad and we have $100 million in the bank? We will figure it out. I don't know yet how, but that's not a bad thing. That's okay. Put it in the right frame.' So I think for me, getting perspective is much easier because of cancer. Now I actually use it a lot. I try to get back to those emotions of actually being scared of losing your life. It's a very different thing. I think for people that weren't in trauma, thank for them. Try to find what helps you with perspective. But I can tell you, with anyone in my senior leadership, I think at least 20% of my one-on-ones is about how they take care of themselves to make sure that they're not overwhelmed, because life is too short. Too short to take this stuff too seriously.

Yes, the moment I got this cancer, I can talk for hours, man. It's part of my PTSD as well.

Thank you, man. I really try that other people will learn from the trauma as well, because it profoundly changed my life. Really just profoundly changed who I am as a human being.

So I can tell you, finish with this because I need to go. Two years after we started Yotpo, I won't mention the name because maybe people will know, but one of our investors introduced me to a very successful ecom operator. He wasn't a SaaS, he was an ecom operator that was back then very successful, raised money, and he committed suicide. He left three kids alone. Why? Because on BFCM, all the money he raised he invested in ads, and basically on every dollar he spent, he made 0.6. And when he figured that out, he couldn't deal with it. And he literally... I met his wife and I met one of his kids. So no, I hope no one takes ecom, SaaS, ecom operators, no one takes it too seriously.

Thank you.

Bye.