It is I think important that we have laws that AI identify that it's AI. Now all of a sudden there's this outbound cold call and in the first 5 seconds you have to be like, by the way, before you want to press five immediately. Yeah. So how did you think through that?
Yeah. I think people are going to get used to it because they're going to have a better experience with the AI than they have with a human.
I have an amazing idea for a startup that goes to the mind of an entrepreneur. Step number one, raise venture capital to fund it. Wrong. People are shocked to hear that more wealth is created in non-venture-backed startups than in venture-backed startups. Shocking because they don't make the news. It's the VC-backed ones that make the front page of TechCrunch that make the Wall Street Journal.
Well, today we're going to unpack the blueprint to build an amazing company in a bootstrap format with my friend Henry Schuck, the CEO of ZoomInfo, because he did it and all the challenges of getting started and scaling. And we're not going to stop there. Henry knows arguably the most in the world on the field of prospecting. But how will AI reshape it? Will it all be done by agents? Will humans have any role? We're going to get his opinion on those riddles. I'm Mark Rober and this is the Science of Scaling. So Henry, great to see you. Welcome to the show.
I'm excited to be here. Good to see you, Mark.
Yeah, we're going to cover a lot of ground. This is going to be a great episode. So as always, we got to go back to the beginning and you were there from the beginning. Man number one, employee number one and it was actually DiscoverOrg. So I think you need a little bit of like a history and then you can take us back to those early days.
Yeah. So just the history, today our business is called ZoomInfo but the company that I founded is called DiscoverOrg. I founded the company and then years later we had the opportunity to acquire ZoomInfo which was like an adjacent competitor in the space. And DiscoverOrg was such a terrible name. And so when we made the ZoomInfo acquisition, it was like, okay, this is an opportunity to change the name to something that sounds a little bit more like what we do and is clear and had good brand equity. So we changed the name after we made the acquisition of ZoomInfo. But what we realized at the time, which was, you know, surprising when you're sitting outside of big companies, you kind of think like things are super buttoned up and they have access to like so many resources and so many things. How could they possibly need data on their customers and their potential customers? I just imagine that organically that lived inside of a company. And it turns out it didn't. And the demand for this product was incredibly high.
Hey folks, just Mark here. I did too. Like it's kind of intuitive. You think like these huge successful big-name companies worth billions of dollars. Like the type of challenges they're taking on must be so sophisticated. I'm like it's the exact opposite, you know. And I lived through this, you know. I had this stretch of time, a couple years where I would in one place sit on these startup boards and then I'd do work with Boston Consulting Group, BCG, with these huge businesses. In fact, in some cases, I almost had to like I had to excuse myself because I'm like I'm advising the incumbent, the large company on how to defend themselves against the attacker and then I'm sitting in the boardroom with the attacker and I'm telling you the grass is not greener on either side. It's just a battle. I was shocked going into these billion-dollar businesses. They do not have their stuff together at an extremely high level. In fact, you have to shrink the scope of the impact you're trying to make. Like, case in point, even something as simple as like call your leads faster, right? Like that's usually an easy opportunity to significantly impact the sales funnel. Like, tell me how fast you're calling your leads. Startup says two days. Okay, great. Make that two hours. Startup has it done next week, maybe tomorrow. You talk to a big company. How fast do you call your leads? First off, it takes them an entire quarter to get the data. This is a true story. One of whom came back to me and said 17 days. 17 days is the amount of time it takes from on average from a web inquiry coming in to someone calling them. And I'm like, if you turn that into a day, that's going to like significantly increase sales. They did it, but it took a year and a half. So, just case in point, and Henry sitting here is like, if you're going to go out and solve problems for big companies, don't be misled. The problems are trivial. They don't have their stuff together as much as you think. And the issue is actually getting the smallest thing, what you perceive as a small thing done in a massive organization. Let's get back to Henry.
Turned out most businesses don't have that data naturally sitting inside of their systems. And there was great product market fit for being able to give you at the beginning just data on companies you would be selling to and then the people at those companies that you should be selling to.
You had this hypothesis that big companies had their stuff together more so than was reality and thankfully they didn't because that opened up an easier opportunity for you. How did you validate and explore that?
This is 2007 and so I could get in front of a lot of buyers with just an easy outbound program. And so we went outbound right away and like the first set of emails that we sent and samples that we sent to potential customers like kind of flooded us with inbound requests for demos of the product. It's that kind of like that immediate connection that really, you know, I didn't know what product market fit. I didn't know that term in 2007, but I knew that there was going to be demand for the product that we were creating from those early conversations.
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So, unpack like what you perceived as product market fit, then when did you feel you had it? And even maybe looking back, you know, 20 years later, how might you iterate that a little bit? It's something we explore often on the show is like when are we ready to scale and almost everyone says product market fit but everyone has a different definition. So I think this would be an interesting data point.
We were building a niche solution. It was focused on gathering data on the technology decision makers at mid-market and enterprise companies and then selling that to a segment of the market that sold to those specific decision makers at mid-market and enterprise companies. And so it was like such a smaller niche that I was selling to that getting product market fit was a lot easier to get.
I mean, you keep saying like I knew I knew I knew they had it, but like how did you okay, because there's a whole bunch in there of like a hypothesis of like do I have enough data points? Am I reading the market right? Does the product actually deliver on it? Like is there a number?
It was just selling like we launched this we started building the data asset for six. We built it for six months. We went out to customers right after that six months and then there was immediate demand for the product and we sold the first deal kind of one month after that. So I you know wasn't scientific in that way. It was more like could we generate continuing demand to 3x the business each year and then we were able to do that. We knew the like inputs to generate the necessary demand and for like a long time really up until like 50 million of revenue the inputs would generate the outputs and we didn't have to actually change the inputs.
And all through this you people I don't think a lot of people know this but like you bootstrapped the business you this wasn't venture-backed it's now a huge public company I think forever in the ecosystem we need to study these more but today is even more so. Can you like tell us that because like a lot of founders like how can I bootstrap it? How could I even build a product? I'm not rich. I don't have like so can you just unlock like that zero to one.
My co-founder borrowed $25,000 from his grandfather. I had for some reason a credit card from Chase that had a $25,000 limit. And so I put $25,000 on my credit card. He put $25,000 in on the business and we like we worked in building the product together.
And so like I just want to like keep channeling this a little bit because now I'm like I'm hearing the founder like okay yeah but I don't have a grandfather with 25K and I'm not going to put 25K of my personal money on my credit card and like was that a prerequisite or like even looking back or even guiding today's founders like is that true?
I think you need some money to get things started. I mean, if I think about the risk that I took, right? Like I was by the time I graduated law school, I was $133,000 in debt. I had $25,000 on this credit card and I was making $2,000 a month. There was a monetary risk I think that you have to take in any way. And if you're not willing to take any monetary risk to do that, you know, you probably should you probably don't have enough conviction to start the business. But if you don't want to be on the rat race of like VC coming in constantly trying to disrupt your business and you have to like keep going fast and then you have to take money, then just build a business that has low equity value but high cash flow value. I think staffing firms are the greatest example of this. Like if you told me tomorrow to go build a 25 or $50 million staffing firm, I'm 100% sure that I could do it. And I'm pretty sure I could do it with a 40 to 50% EBITDA margin on it. And so or cash flow margin on it. So now I've got a $25 million business that's cash flowing $12 million a year and I don't have to worry about like a competitor disrupting me. I just got to build a really great business there. And I think at ZoomInfo, we're always a profitable company. Largely because once you were out of the bootstrap dollars, you were just out. It was that was it. And so you had to be really judicious with the way that you spent money.
These businesses like fly under the wire a little bit because like they're not attractive to VCs, but who cares that like a VC-backed business is not the only successful business and this just provides a completely different entrepreneur paradigm that has some advantages around lower competition etc. And then to your point too, I think you're kind of you did this is you also have the optionality to invest and convert over into a software business totally. And you're essentially being paid by your amazing cash flow business to retain all the ownership, which you did beautifully.
Our early customers would be like, 'Hey, we love the platform. We love the data, but it's just not broad enough. We have this other 10,000 companies that we're trying to go after that we don't have any information on.' And so I started taking services contracts. I'd go like, 'Okay, I'll just build those 10,000 companies for you. You pay me some money for every company. I'll give you exclusive rights to it for 6 months and then it'll go into the broader database for all of our customers.'
Hey folks, just Mark here. This is just an aspect of entrepreneurship we rarely talk about. Even at Harvard Business School, we don't even teach right now how to do this, at least in the core entrepreneur classes and that is starting with the services businesses turn software. And so what that means is you start the business as a consulting business or services business which is kind of what Henry did and you print money and you generate cash flow and then you use that cash flow to build the product to productize your service. It's such a cool model because you end up with enormous ownership like Henry did and you're basically getting paid big dollars for your market research for your customer interviews. I mean, you're going to build such a better product if you've done 30 client engagements and you start to see the patterns and you can build it in parallel with your services business and test test test and then over time convert. Just think about that. Think about the problem you're solving and you're perceiving that as like I need to go raise a seed and then build a product and then raise a series A and then scale and then raise the A B and scale even more. Can you just start off and do five services engagements and get paid and figure it out if it's real and then bootstrap it like Henry did? Just consider that. Let's get back to him.
