David Cummings built six startups, each of which quickly grew to $1 million in annual recurring revenue (ARR). The shining jewel in David's crown as startup king is his unicorn, Pardot, which sold to ExactTarget for $95 million in 2012. Eight months later, Salesforce acquired ExactTarget for $2.5 billion. This is a huge accomplishment because 94% of companies never hit $1 million in revenue in a calendar year, according to Verne Harnish in his book Scaling Up (Rockefeller Habits 2.0).
The ExactTarget/Pardot deal is the second-largest Salesforce acquisition to date -- and the largest until 2016 when Salesforce acquired DemandWare. Full disclosure: I was Head of Marketing at Pardot at this time, so I saw it all firsthand.
When Marc Benioff acquired ExactTarget, he tweeted:
What was the secret to success for Pardot and ExactTarget to make these companies so appealing to Salesforce? Scott Dorsey, the co-founder and CEO of ExactTarget, said in an interview with Inc: "When we started the company we hoped to build a software product that added enough real value that customers would want to use it, and in the process to try to build a business."
Getting acquired by Salesforce was a game-changer for ExactTarget, for Pardot, and for my career as an entrepreneur. Working with the founding team of Cummings and his COO and co-founder, Adam Blitzer (who is now the EVP & GM of the Salesforce Sales Cloud) was a once in a lifetime opportunity.
After the dust settled from the merger, the startup bug bit me hard, and I was ready to leave Salesforce Pardot to start my next big adventure.
Here are a few lessons I learned from that process that can help any entrepreneur.
1. Think about how to 10X everything
The 10X mindset originally came from Grant Cardone in his book The 10X Rule: The Only Difference Between Success and Failure. It provides an awesome blueprint for how leaders can rise above to take "massive action" instead of behaving like everybody else and settling for average results. Cummings, Blitzer, and the entire founding team at Pardot recognized this early on. From a marketing perspective, this meant Pardot needed to go big at events like Salesforce's annual Dreamforce conference. That investment truly paid off.
2. Don't raise a ton of money
There's a misnomer in today's SaaS-y world that to build a successful growth company you need venture capital or angel investors. Sure, it makes a big PR splash when your company raises millions of dollars in a strategic round of funding, but what is that capital worth if your startup isn't able to generate revenue? Less than 20 in 1,000 companies that raise venture capital sell for $100M or more.
3. Find your product-market fit
When Pardot launched in 2007, there weren't any other marketing automation platform (MAP) for SMBs. The idea of product-market fit is one of the main reasons why Pardot was acquired so quickly. Pardot had roughly $13 million in revenue in 2012 when it was purchased by ExactTarget, and it was truly the potential for the MAP to conquer the SMB world that made it so appealing.
4. Put your customers first
Customer success is more important than just customer acquisition. The cost of customer acquisition is a key make-or-break metric for your startup: you're investing time, energy, and resources to bring on these new customers (i.e., new revenue) so having a delighted customer base is essential. I recall Blitzer saying that you can't control the world, elections, or economic conditions that might change on moment's notice; however, what you can control is how you treat your customers.
5. Recognize your potential
Gartner predicts that by 2017, CMOs will outspend CIOs on the technology needed to support the marketing department's infrastructure and initiatives. Back in 2013, Salesforce already had a sizeable market share in the B2B vertical, whereas ExactTarget was focused on B2C.
The acquisition was groundbreaking for Salesforce because this meant that through ExactTarget and Pardot the company would be positioned to better serve the marketing industry, regardless if buyers were B2B or B2C, positioning Salesforce to become the next $10B company.
6. Keep your core values simple
Pardot as a company was only five years old when it was acquired by ExactTarget, and then a year later by Salesforce. The original core values for Pardot were simple: Positive, Supportive. Self-Starting. What else do you need?
7. Invest in culture
Cummings and Blitzer bootstrapped this company but they never let the culture suffer. The founding team made a huge investment in culture. Perks at Pardot were top notch, like having an in-house massage therapist and sending housekeepers to clean employees' homes! These perks were so important because they engendered love and loyalty among Pardot's employees.
Watching Salesforce Pardot grow into a $100 million+ business has been exciting, and there are still many lessons to be learned. What happens next in the world of marketing technology and startups will only continue to be more awesome.