Startup Foundations: Interview with Luke Deka

Luke Deka is the CEO and co-founder of Growbots, a Polish startup building an all-in-one outbound sales platform to streamline the way companies can reach their potential customers.

Luke talks to us about the in’s and out’s of Growbots product, and how their software is helping companies automate and scale their sales efforts. We also discuss the origin story of Growbots, and how it evolved over the years, trying out different strategies for customer acquisition, fundraising and the product development.

Luke and Greg also talk about the art of pricing your product the right way, and Luke shares the pricing changes they went through as a company and what eventually helped them bring their bottom line in shape.

We also delve deeper into the startup ecosystem in Poland, and how the landscape for startups has evolved over the years. We cover the challenges of running an European startup in the US, and discuss interesting startups coming out of Poland.

🎧 You can listen to the entire conversation here. 🎧

Greg: Tell us what you're working on with Growbots

Luke: Yeah, that's pretty simple. I guess that we are solving one of the most obvious problems of them all. We are trying to solve the lead generation problem for SMBs. Growbots is all-in-one outbound sales platform, that is not only allowing you to find your next customers to contact them, but also on the top of that, we have a group of experts that can actually help you out executing this process.

G: So how long have you been working on the idea and have you gone through any pivots? Is this what the product you originally started out with or was the MVP very different?

L: That's actually a very funny story because we started in 2014. And the start, you may call it Concierge MVP. So we found out this problem, mostly in the US market of hiring your first SDR, trying to get some outbound leads to your CRM. And essentially, a lot of people started outsourcing it and me and my co- founder, we decided, ''Hey, let's do it out from Poland. It'll be cheaper. We can charge just for performance.'' So in 2014 we decided, ''Hey, we will be delivering outbound leads, but we will be doing it manually.'' Simply we started as an agency.

Very quickly, we decided that a lot of this work is super repetitive and manual and we can build software ourselves. And in 2015, we were accepted to 500 Startups in San Francisco. So we've gone through acceleration there. Obviously we built a product. And the product was at the very beginning, very hassle type pitch, AI for sales. We will replace sales people with software, and we were trying to automate as much as we can, but then it turns out that the product that is fully automated is not really getting to customers that we were trying to get. We were trying obviously to go to this mid-market to enterprise customers at the very beginning.

Then in 2020, we've done another pivot to go to SMBs where we changed our pricing structure. We started to position our product as this so-called affordable luxury, where you can start on 49 bucks to start your outbound sales with our product. And right now we decided to add this service layer, or at some point marketplace of experts, where as a small business, you can hire on-demand concierge as DR. And what's funny is that it's a big circle, where we are getting back to this concierge model. A little bit different, from different learnings and with more scalable model for sure, but it's so funny how things are sometimes evergreen.

G: It's always interesting to see the evolution of a product and seeing a change over time. Pricing is one that I think a lot of SaaS companies get wrong, especially if they're capable of getting sales at a higher price. That's not necessarily a scalable pricing model that gives you the maximum amount of revenue.

And a lot of SaaS companies do freemium for that reason, or something where the initial pricing is highly accessible, but it scales with a large team, so that you're capable of charging more over time.

L: Yeah. 100%, we've done it in end of 2019. We started talking to our customers to see where is this exact kind of value, what's the willingness to pay? So we do not have this traditional POG model, as yet we are sales-led organization. This is where our roots are, but I'm huge believer of value-based pricing. So trying to nail down the actual value that you are delivering and then willingness to pay for that value. And yeah, like this change in 2020 was quite crucial for us. We've been declining in revenues exactly because of the reason what you are explaining. So we were charging more, our customers were buying this vision, but we're barely able to prove the ROI. So this pricing change was quite significant and it helped us to reverse the trend of declining revenue.

G: So you were based in Warsaw. How have you seen the startup ecosystem change since when you were starting out in 2014?

C: That was interesting. In 2014, before the Growbot's idea happened, it was me and Greg, when we were trying this growth consulting company, let's say boutique, and we were talking to small startups and essentially you needed to read three books, Lean Startup, Startup Manual. I don't know which one was the third one actually.

G: Venture Deals, maybe.

L: Yeah. Maybe not even Venture Deals. They were not looking for VC money. VC deals in Poland back then were crazy. They were trying to get 40% of your company in seed-stage or something like this, so it was definitely interesting. But essentially we were able to help those businesses.

And at the very beginning... Poland is really strong in tech, so we were having great products, great tech people, but they were always saying that, ''My product is so good it'll fill itself.'' Now I think that the evolution of this market is that you need to go out there and hustle. This is also something that we not only we've learned from 500 Startups, but I think that it's more obvious now on the market that this building, marketing, customer acquisition machine is very, very important. And ecosystem of investors is growing, ecosystem of startups is growing. So we are in a good place. Almost 40 million people living in Poland, great engineers. I think that we are just to see what can happen in the future with polished products. We still have just one unicorn so far. And I think there are some new that will be popping up soon.

G: Yeah. I met Stefan Batory from Booksy here, and there's a few other interesting products that have had good exits, like for example UXPin.

L: Yeah. UXPin was company we were, at the very beginning we were talking to, being out of Poland, trying to set up company incorporated in the US. It wasn't so obvious back then, so we were asking for some advice. And I guess that this is why you are doing what you are doing, is that it's not so obvious after all still, for founders all around the globe to set up in that way.

G: What is the norm in Poland? Do Polish startup founders typically incorporate in Poland to start out with and raise their first capital there? Or do they start out incorporating in the US or the UK?

L: I don't know the exact statistics, but I can tell you what I'm seeing, or I believe that should be a trend. We have a Polish entity, Polish subsidiary that we started with. It's much easier for us to hire people, to manage Polish law on the employment side. And on the top of that, we have this US entity that is 100% owner of this subsidiary. So this setup works perfectly for us because we can use ESOP easily, we can use convertible notes, or all of the pros of having the company incorporated into the US. And at the same time, I think it's easier, being in some country, to deal with employment laws of this country. So it was a bit easier for us to do this structure. And I feel like most of those companies that are looking for capital in the US are going to look for the capital in the US. They will go this path. As far as I remember, 500 Startups was requiring us to have company incorporated in the US before we joined.

G: Most startup investors are not comfortable dealing with civil law jurisdictions in Continental Europe. A lot of them have been deeply scarred by dealing with German startups. I don't know if you realize that they don't accept the eSignatures. And there is this process wherein the investor, or someone who has been appointed power of attorney, must go to German court and they speed read the contract aloud.

L: Someone told me that it's quite crazy, but I've never heard the exact process. So yeah, I totally get that. With Poland and European Union, a lot of money is still coming from the EU. So a lot of VC funds are not only private money, but public investments. I know that for some of those VCs, they need to invest capital and companies incorporated in EU. So sometimes this is becoming a problem. When early on you take on some capital, that was coming from some EU funds, and then you need to restructure your company to then find new capital in the US for example.

G: From my understanding of what happened in Poland, is the State Finance Ministry runs a VC fund of funds, the fund that invests in VC funds, in Poland. And they give money on really generous terms to investors who want to set up a seed-stage fund, but the money comes with strings attached as you mentioned. And so it's a bit challenging, because often the state, the money that they're putting in will allow the creation of early-stage funding like seed-stage funding. But if the company actually grows and requires additional capitalization, they have to move overseas.

L: And it's not so easy then, because those strings sometimes... I guess that also VC mark is changing. You mentioned Venture Deals, which is showing all of the mechanisms that can be used. And what I've heard, where Silicon Valley is changing or Tiger Global is changing the VC game, where they are very quick to invest. And I was talking to some investors right now, and I know that the process of raising seed-stage, they're willing to push it in one, two months to finish all the paperwork. They are themselves saying that you are raising money for acceleration, not for slow down. And there's completely opposite spectrum. What we've seen in the past with some Polish VCs where due diligence were like six months long, with early-stage startups. So I guess it'll be going into this direction of easier terms for founders, where they are not worried to take a risk and then go big. They still don't work in this classic VC thinking where you need just one unicorn to pay off the others. They're trying to get at least something from every company, which probably is not that productive.

G: Doing an extensive amount of diligence is effectively being done to de-risk the investment. However, it's largely impossible, or next to impossible, to get any real information at the pre-seeds-stage to de-risk the investment. You're making a bet on the team. And so if you don't have faith in the team, or you think they're going to defraud you or something, then you shouldn't be making the investment. But looking for a business plan or tangible growth numbers when there's a prototype of a product, is kind of pointless. So in Poland, do you see any interesting startups that have emerged in the last few years in Warsaw or other cities?

L: Oh yeah. There is a bunch of them. Lately we have a really solid Series B Round from Packhelp. And they're creating custom packaging. I love the company. Really good culture inside, really smart young founders. So I think they're definitely worth mentioning. They've raised 49/50 mil Series B. That's quite significant for Polish, and even European, startup standards, but they are Series B stage now. For Series A/seeds, you have Vue Storefront that has gone through Y Combinator lately and also raised, I think it was Series A, they had Headless CMS for eCommerce as far as I'm concerned. Spacelift, tool for DevOps. Yeah, I think that the market is emerging. Uncapped, non-equity financing, something pretty hot lately as well, it's Polish/UK startup. So there are definitely some solid candidates for future unicorns.

G: So how did you get your first customers for Growbots? Did you use your own tool to do outbound sales?

L: Yeah, so right now obviously we are doing the lot, we are outbound heavy company obviously. If I recall correctly, like for this concierge product, it was a little bit more of growth hacking and trying to get to some influencers with some piece of content. So there was a little bit of everything. It was a little bit of social selling, content marketing. As far I remember it was Lincoln Murphy, one of the SaaS gurus, he loves churn. Everyone in SaaS businesses reading his article there on his blog. I remember that we were trying to get with some article in front of him, so we were able to have a guest post on his blog. And this is how we got first US customers, as far as I'm concerned. We needed some credibility. So it wasn't just enough for us to go out there and send a bunch of emails. Probably it would work, if we start with outbound only, but I guess this was how we first got some customers.

G: Yeah. It's usually doing one piece of marketing activity in isolation isn't very useful, because if you do activity on social, then people go to your website and there's no useful content there, it's not very great. And then getting running paid ad campaigns, it's much more effective if you can look at behavior onyour website to figure out who is high-intent. And also if you capture their email, then you can do email marketing for qualified leads, as opposed to just pure outbound.

L: Yeah. It's something that definitely is lessons learned for us, because we were not heavily investing in, you might call, marketing activities, so in content marketing and brand or paid ads. And right now we are seeing that it's very hard to move that SEO machine to start positioning yourself. And for a company that is around for seven years or so, we had four years literally zero marketing. We were doing outbound, just word of mouth referrals.

G: How did you end up deciding to apply to 500 Startups? And what was your experience like? This was when they did in-person cohorts, right?

L: Oh yeah. It was Batch 12, like 2015. Yeah we were just a bunch of hustlers. We thought that this is the way to go. We are based out of Poland, we want to conquer US market, we had US customers. We need to go and apply for top accelerators. We also applied for YC. We were even invited for in-person interview there in 2014, but we were declined. The reason was that they said that we are too early. For us it was quite odd, because we always thought that startup accelerators are actually we are coming with some idea, and there's a few inspired with this ideas founders, and then they will go through this accelerator and then we'll have the product. It was actually an incubator that we were talking about before. So us, without the product, it was too early for us to go to Y Combinator, at least this was the reason that they mentioned.

And then the another on the list was 500 Startups. So we've gone there. We wanted to really conquer the US market. So it was actually a really good icebreaker at the very beginning when we moved to San Francisco. We weren't so confident about mentioning that we are from Poland. Obviously after a few years, it turns out that whenever I'm saying that I'm from Poland, everyone is having some Polish relatives. So it was actually another good icebreaker in the US. But for us, it was really good start of a conversation with, not only even investors in the US, but also investors back in Poland.

Angel investors were looking at us differently, because we were those guys that were accepted to 500 Startups. So we were on this right path, you might call it that way. It was a great experience, especially with in-person cohort where you have 35, 30 something companies, in one open space that are working together, partying together, talking about their challenges. Someone said that startup accelerators are the new MBAs. And I feel like this might be true, because I've met so many successful founders that I can now reach out to for some learnings or some advice. It's a great experience.

G: I think it's especially valuable if you don't have a network here, it's huge signaling to investors, partners, customers. Even think about an enterprise deal that you want to score with a big company. If your product's not going to be around a year from now, they don't really want to pay you $50,000 for a large enterprise deal.

L: Yep.

G: Did you end up raising at demo day at the end of the accelerator program?

L: Our strategy was a little bit different back then. I'm not sure if it was the correct path, but I can refer to that after explaining how we've done it. We were always raising on convertible notes only the amount of money that we think that we might need now, because we were growing so fast. So we didn't want to commit to some valuation. We wanted to raise small tickets from investors, but do not dilute ourselves too much. So from this perspective it was smart, because we didn't give away a lot of equity. However, raising significant amount of money is also eyeopening for strategies or investing long-term in things like content marketing. When you raise 200K and you are trying to get your expenses for the next three or four months, you would never think about hiring top Head of Marketing or VP of Marketing that will run this entire process or strategy long-term. You'll always be thinking more short term. That's what I think that this situation taught me.

And then in 2017, we raised like two mil at once and it was a little bit different then. We were thinking in different way how to spend that money. So I think that from the delusion perspective, we did the right thing, but actually it could put us on the better path if you were to take one big round, a demo day, or a couple of months after a demo day, even if we give away a bit more equity.

G: Yeah. I think the first time you're building a company, you often underestimate how much capital is actually required to build a scalable sales revenue generating machine, because there's many, many parts involved.

L: Yes, 100%. We were having this really strong outbound machine built out of Poland here, so it was quite capital effective for us to run it. So sales was never a problem. We were profitable from pretty much day one of hiring first Account Executive. I remember when we hired the first Account Executive, eventually he became our head of sales, and the last step of our interview was actually him coming with us to startup conference. And me and Greg and him, we were on this conference and we decided to hire him because during that conference. He literally knew something obviously about the company, something about the mission and the product, but he was so confident in this conference that we were actually pushing customers that were talking to us about our product to him, so he can present what we are doing. So we knew that he is a great choice for us. So actually we were very lucky with sales hires.

G: What are some things you wish you know when you were first starting out, that you know now seven years into the journey of being a startup founder?

L: I think that might be a few. One of the things that I think that we failed really badly, because we used to have a team in the US, it was around 30 people in the US. Right now we are 100% here in Poland. And back then we never had this US co-founder, so someone that was co-founder level, engagement and motivation in the US. So I think that was one of the reasons why our US journey and from this operational standpoint, or building the company out there, failed, because we've never had someone that truly understood the culture. Really stood out for those people there, so this one of the biggest learnings of those years.

G: What would you have done differently? Hire a general manager for the US?

L: Yeah, or bringing the co-CEO, or some kind of co-founder. I think that really important... General manager is, that could be someone, but it's usually general manager is this employee. And we were trying to build the company here in Poland, with all of this product and technological background here, and sales and marketing organization in the US. So I think it's even co-CEO or CMO level of the person that also oversees the culture there. But I don't think it was not supposed to be US office. We were thinking about it as a whole company. So with this, I think it wasn't so obvious after all. Maybe it would be easier right now and everyone is used to remote working and we could be more proficient with it here from Poland. But I guess being there full time was absolutely crucial for those people as well.

G: Cool. Well thanks for joining us on the show !

L: Thanks for having me.