He grew to $5M ARR in 18 months—by fighting with his co-founders on purpose. | Ross McNairn, Co-Founder of Wordsmith AI.

Ross McNairn (00:00:00):
I think a lot of the problem for AI right now is actually understanding that they can use it. It kind of makes more sense to do market education rather than demand capture. So instead of just paying performance ads, we were actually just explaining how you would use it. Founding a business is not economically rational. Because the risk profile on the return, it makes zero sense really. If you're making any normal bet, it's like playing roulette with 350 options rather than 36. It's an idiot's game. Which to me was the most important thing with co-founders is, if you assume conflict is a healthy and necessary, and evergreen thing. Check that you can do it good in many different situations. So I constructed situations to fight early on with these folks to work out. Could we do it in a good way? And could we fight as peers? For all the science that you might think exists in this space. People will tell you that they're the smartest operator in the world and they came up with a plan. When the reality is that ninety percent of this stuff. Ninety-nine, is people driving off their gut, chasing the things that they have that are slightly more advantageous to them, and then if it works. They just tell you that they were super smart and they had a plan from the beginning.

Previous Guests (00:01:04):
That's product market fit. Product market fit. Product market fit. I called it the product market fit question. Product market fit. Product market fit. Product market fit. Product market fit. I mean, the name of the show is product market fit.

Pablo Srugo (00:01:16):
Do you think the product market fit show, has product market fit? Because if you do, then there's something you just have to do. You have to take out your phone. You have to leave the show five stars. It lets us reach more founders and it lets us get better guests. Thank you. Ross, welcome to the show, dude.

Ross McNairn (00:01:31):
Thank you very much for having me, sir. Very, very nice to be here.

Pablo Srugo (00:01:34):
I'm looking forward to it, man. You have one of these, you know, lately, we're seeing this more and more with AI. There's just so much value, I think, that can be generated. You have one of these crazy stories. Started two years ago, raised $5 million, seed round a year in.  Just raised a $25 million Series A last month. So clearly you're doing something right, and I think founders will have a lot to learn from your journey. Maybe give us a little background, right? Before you started in 2023, kind of what was going on? What were you doing? How and why do you start Wordsmith AI?

Ross McNairn (00:02:04):
Cool, so I qualified as a lawyer 12 years ago, something like that. I was not an engineer. I left, became an engineer, sort of self-taught. I started a company that I sold to Skyscanner. Which is like the kayak of Europe. After about a year, and then I was with them for a while. Ran a bunch of their product teams, then moved over. Did a few exec jobs, became the CTO at a few companies, and ended up at TravelPerk. Which is a big unicorn in Europe, where I was their CPTO for about five years. I left when we were about 1,600 people doing about $200 million revenue, and I joined that when we were about 20 people. 

Pablo Srugo (00:02:44):
Oh, wow. Okay.

Ross McNairn (00:03:45):
I've been through the curve a few times, and then, yeah. 18 months ago we started Wordsmith, raised $5 million, and then, yeah. A month ago we have PMF, you know, the rest is history. Well, we'll see.

Pablo Srugo (00:03:01):
That's right, that's right.

Ross McNairn (00:03:02):
It's still a long, long, long way to go.

Pablo Srugo (00:03:03):
Beginning of the journey.

Ross McNairn (00:03:03):
It's kind of like comparing the color of our shoes at the beginning of a marathon, you know?

Pablo Srugo (00:03:07):
I mean, tell me a bit. So, you see that other kind of company grow. But then what's happening late 22, early 23. That makes you decide to start this?

Ross McNairn (00:03:16):
Well, we did a bunch of kind of early release work at TravelPerk with OpenAI. Looking just before GPT 3.5 came out and it was awesome. So playing with that and sort of rolling it out in some really basic use cases just ignited me. I was just so pumped by it.

Pablo Srugo (00:03:36):
So you were deep on the product side, in AI before the ChatGPT moment.

Ross McNairn (00:03:39):
Well, I wouldn't say I was deep, but I had my amuse-bouche and I was excited by it. It got me going, and I think the use case was so. It had a lot of potential, but it was so brittle and so painful. I was like, this is just the right time to do this because, it seems obvious to me that there's going to be a world where you've got AI companies and then non-AI companies. And that's just going to be a.

Pablo Srugo (00:04:04):
Bifurcation of sorts. 

Ross McNairn (00:04:05):
A split that grows now. Yeah, exactly. It's so structurally different how this stuff works, and it's just so early.  Which is a great time, I want to do that, I want to go back to something in the legal space, and I didn't want to be sitting behind 600 engineers. Missing the ride in that, kind of, the gallery. I wanted to be on the coalface beating my head against my desk, with no idea what was going on for the first 18 months.

Pablo Srugo (00:04:28):
Just want to go through the pain. Well, walk me through how? Because this is interesting, right? You kind of started with this idea that AI is going to be big, and you want to do something in AI. How do you go from there to the product, like even to the problem? What steps do you take?

Ross McNairn (00:04:43):
Yeah, so I specifically. As I'm a lawyer, and I've worked on both sides of private practice, and in-house, as an exec. Consuming legal services, I knew the space quite well, and I'm a massive believer. And even if you don't have the exact concept or the mechanism down. You need some kind of unfair advantage. So for me, having access to good talent. Because I've been working as a CTO for ages, and B, being in a domain. Where a lot of other people wouldn't have had the same. Just general knowledge level that I had of that space felt, like, a really good starting point. So I felt like before I even moved in, I had good founder market fit, and I packed myself with one co-founder. Who was way deeper than me on the legal side and another one who was way deeper than me on the technical side. So I just took those two bits that I had and then went, doubled down on those strengths.

Pablo Srugo (00:05:35):
And did you just tell them like high-level, hey, I want to do something with AI legal? Or did you go with something more specific? When you got him on board?

Ross McNairn (00:05:41):
Yeah, really good question. So the legal one, actually, he wanted to do something in travel and go down that route. So I had to convince him that actually this was a way better avenue.

Pablo Srugo (00:05:50):
He's like, I want to go where you are. He's like, I want to go. 

Ross McNairn (00:05:53):
Yeah, exactly! He's like, I want to go over there. You got greener fields. I was like, dude, no.

Pablo Srugo (00:05:57):
Trust me, it's garbage.

Ross McNairn (00:05:59):
I was like, trust me. We have to go and do something that we have an advantage in. So you can bet it, and then the engineer was like, I just want to build cool shit. 

Pablo Srugo (00:06:07):
Right.

Ross McNairn (00:06:08):
So basically I spent my evenings with Giggs for about three months. Just building stuff on the side. Mainly just to see, do we have a vibe, and we were building total junk. Because I wanted to see, could we fight? Which to me was the most important thing. With co-founders is like, if you assume conflict is a healthy and necessary, and evergreen thing. Check that you can do it good. In many different situations. So I constructed situations to fight early on with these folks. To work out, could we do it in a good way? And could we fight as peers?

Pablo Srugo (00:06:41):
What were some of those? Yeah, do you remember any of those?

Ross McNairn (00:06:44):
Yeah, I was intentionally highly provocative of things that. So we would code something and I'd be like, dude, really? And it was quite a reasonable thing he'd done, and yeah. To both of their credit, they're exemplary of conflict management and they're not afraid of it in a really healthy way. So there was, that was, I kind of knew they were technically good. But I wanted to check, because I've seen so many founding teams explode. From sitting behind the scenes. I remember sitting in various different companies, watching the founders literally go off to a room and watching the wall shake. While they would fight. So I was like, we need to be good at that.

Pablo Srugo (00:07:19):
So you would literally be like, yo, this is shit. Knowing that it would start something and just see what happens.

Ross McNairn (00:07:24):
Exactly, I teed them up. I had a couple of fury battles with them, and then once I sort of agreed that we could fight good. I got them to fight each other and check out. Everything was good there, and then once everybody had a Royal Rumble. Then we all went, I remember vividly. I took the ads to the Camino de Santiago in the north of Spain. This historic pilgrimage, and we did a four-day hike with nothing. Just in the middle of nowhere, just to properly spend some time off the goal, and it was hissing with rain, and we had no plan. And it was the middle of the night where we were over. It was just an awful situation by any normal measure, and my thinking was. If I can construct a few uncomfortable things and the guys enjoy it. Then we'll be a good founding team, and we had a great time. We got pissed at a bar, dealt with it, made it through the next day. Gig's actually, you know, good hitchhiker. Great.

Pablo Srugo (00:08:20):
This is very deliberate. I mean, people know in general that founding teams are important. That co-founders break up, but they rarely go through all these steps. There's something that happened, maybe more specifically. That led you to be like, I'm going to. Because it's real, it's not just. Like, real pain you got to go through.

Ross McNairn (00:08:33):
It's intentional.

Pablo Srugo (00:08:34):
Real time you got to invest. Very intentional.

Ross McNairn (00:08:36):
Well, look, if I'm going to. A, quit an awesome pre-IPO company with an incredible exec job. A, I wanted the business to be right, but B, I'm taking a big risk, and there was no bit of my mind that I didn't want Wordsmith to be absolutely massive. So I was trying to be very deliberate about getting the key bits in place. And, I've founded before and it was tough with my co-founder and I.  He was a brilliant, a brilliant guy, and conflict there was. We were young, I was like 25, it was hard, and it's taken a lot of getting. I mean, I might look blonde, but actually I'm super gray in certain places now, and it took a lot of those hairs being earned in situations. Where you sort of realized that you need to be able to have healthy comfort with people. So yeah, I went through it a couple of times and learned this was the most important thing I needed to be able to do with my founders.

Pablo Srugo (00:09:28):
And how did you know these two guys?

Ross McNairn (00:09:30):
One I went to law school with. We actually used to sell door-to-door up in Fraserburgh in the Northeast of Scotland. Which is this kind of fishing town and, we would go and sell stuff and just get systematically rejected for pennies on the weekend. Which is a good learning path.

Pablo Srugo (00:09:45):
That's also a very good kind of learning path. Yeah, exactly.

Ross McNairn (00:09:49):
Yeah, you do that. You pay cash in hand, you get absolutely hammered at the end of it. So yeah, he was a great lawyer then, and we worked together a bit over the years. And then Giggs, when I was at Letgo, the job before. A bunch of my team moved over to Meta afterwards. The AI team there, so I called them when I was thinking about doing this and said, hey, who's the best dude around? And I think I spoke to a half a dozen, and four of them said his name. So I was like, right. I will go and get that guy, and then I went romancing.

Pablo Srugo (00:10:22):
Wooing.

Ross McNairn (00:10:23):
For a few months. Yeah, I went wooing. I mean, you know, I think you have to be deliberate. Very deliberate, if you really want excellent people and Giggs was a very deliberate poach.

Pablo Srugo (00:10:32):
What do you think? Well let me ask you that for Giggs. I mean the other guy you knew, it's easier when you know someone for a long time. To get them excited, they want to work with you, you want to work with them. What got Giggs over the line?

Ross McNairn (00:10:41):
So I think he had been there for a while. Most people in big tech are thinking about maybe at some point. I was very worried about taking somebody that had not spent a lot of time in early stage. Because it is very different, where you don't have the infrastructure around you. So I really wanted to hack with him and see how he could think on his feet, if he was outside the machine. But I think from his perspective, he was at Meta for 10 years. So, it was probably, there were other motivators than just, Hey, I need you to jump into this, and I think for him. It was working out what he wanted, and just checking that it was on the same page. So, and thankfully, actually me and Giggs, I would say are more tightly aligned. On what we want from, from Wordsmith than just about anybody in the business. Because we're both builders, and we both just absolutely get off on making stuff. So once, I found that his intrinsic motivation was sort of as a furniture artisan, just like me. It became extremely easy for us to relate to each other, and to this day, we actually have an unbelievably good relationship. Because, when you know, you just have to work out what they want. Robbie wants to make an absolutely massive business and quibble jillions of dollars. And that's awesome, he's super vocal about that and you need someone like that. And he loves the law, and he thinks he's an artisan. Who deeply intrinsically wants to craft stuff and getting that was a very important bit of getting over the line.

Pablo Srugo (00:12:08):
Is that one of the things that, you think gets. Because there's always a big question, right? It's, how do you get the best engineers on board? How do you get the best co-founders? And a lot of them sometimes they're at these late stage companies. You know, very hard to compete on like Cobb on price. Even if you imagine, an outside scenario, a billion dollar exit. Sometimes you do the math and you're like, it still doesn't necessarily add up in what some of these guys are making. You think a big part of the thing is just this idea that you can build zero to one. You can take ownership of the whole product. Because that gets a lot of people kind of over the line.

Ross McNairn (00:12:37):
Well, look, founding a business is not economically rational. Because the risk profile on the return, it makes zero sense, really.

Pablo Srugo (00:12:45):
A hundred percent.

Ross McNairn (00:12:45):
If you're making any normal bet. It's like playing roulette with 350 options rather than 36. It's an idiot's game, to go in there and just start betting seven years of your life on a 360 person. When you say it in those terms, it's like, well, obviously, that's stupid. Yeah, that's what people do, right? Obviously, you make a massive windfall if you do it, but it's unlikely. The most effective way if you want to make comp is somebody coming out of big tech. That wants to try and bet on one of these businesses is to hit series A to C. Before the valuation gets too high, take a percent and then just ride it. So you need another set of motivators. I think, if you're going to recruit people from that tier, and, not all of them have the same drivers. So, I think, yeah, you need to find what they want, and, I think that often there are true intrusive motivators that are not usually that help. Like, that I was trying to avoid. So, I was trying to avoid people that were going for titan inflation. Who literally just with thought misinterpreted that if you would call yourself a CTO at a seven person company. Suddenly you were like anywhere closer to the actual CTO at Meta.

Pablo Srugo (00:13:54):
They're not the same jobs, yeah.

Ross McNairn (00:13:57):
Yeah, completely incomparable, dude. So debugging that early on was important. Yeah, and I think also debugging the comp myths and some of the other stuff. So I think we fought about these things early on in the sense that I tried to bring that potential conflict out early and try to get a very direct steer on things. So that we could get to the brass tacks of, why are you here? And actually, when we do onboardings with the team. We have a really candid talk where the three of us stand up and explain precisely why we're here. And I think, first of all, people need to know that. And second of all, you need to talk about it quite a lot.

Pablo Srugo (00:14:34):
And so, going back to the story. You're doing this for the first few months on the side, right? You still have your full-time job and you're kind of building things with these guys on the side in evenings?

Ross McNairn (00:14:42):
Yeah, so we weren't actually building Wordsmith at that point. We were building random hack things. 

Pablo Srugo (00:14:46):
Yeah, right. 

Ross McNairn (00:14:47):
Me and Giggs on the side. I knew I wanted to do something with Robbie. He was busy with other stuff. Mean Giggs were hacking around in the background, and then at the end of the job. I sort of set a date to go walking in the hills. We went walking and then we were like, right, we're going to found a business. You're the team, let's go. Just prior to that, a couple of weeks before, I pinged. One of the partners at Index, just to catch up and be like, hey man, I'm thinking of doing something. What do you think about it? And just to basically riff off the domain and ask who is good in the area. And who I should be looking at, and really just pre-idea. I had money to seed us, so I was kind of thinking of just bootstrapping initially, and then he got back to me a couple of days later. And said, hey, if you're super serious, why don't you and the guys come in and have a chat? And he said, bring a deck, which I didn't have. So instead of taking a deck, we made an MVP. A real quick one, and then kind of stuck that in a really bad deck. And Index were epic, they were just like. Because at that point, team bet really was out of nowhere. Let's just take a punt on you. They seeded the thing and then word sort of got around the VC community, Which in hindsight was probably the best possible raise that we could have done. Because by getting a big name early on to take an early bit of signal and no one's heard of it. Then it's just.

Pablo Srugo (00:16:12):
It's the hottest FOMO shit. Yeah, man.

Ross McNairn (00:16:15):
I totally didn't plan to do it that way at all. I was thinking of bootstrapping. I completely by accidented and everybody went wild. My inbox went completely nuts. I had everybody in VC try and get in touch. I just didn't respond to anybody, which was step two of the master plan that wasn't planned.

Pablo Srugo (00:16:30):
Incredible.

Ross McNairn (00:16:30):
Everybody was like, this dude is the hardest guy to get hold of, he's just. And then I ended up doing a bunch of side deals with people that I thought would be cool to bring on the round and got some great. Honestly, I wish I could pretend there was some grand strategy, but I, yeah. I just backed myself and stumbled into a very good raise at that point. What I did do, actually, which was superb. I called my mate who I went to school with, who's actually now a partner at Excel. Once this was sort of, and I was like, you know, Matt. What should I be thinking in terms of reasonable market calibrations and sizing's, and stuff like this? Because I didn't want to get overhyped, I didn't want to get myself out of banding, I didn't want to underhyped. I just wanted to price it like Goldilocks perfect and not be greedy. And just try, and get clean signal. So I did think that having systematic clean consistency to the business was a good idea. So, right investors, right in incorporation based, right valuations, right cap table and some of the hygiene factors. I did do a bit of shopping in the background to just make sure I got those things right, and that made a huge difference to the A. Not being out of market, not being any of this stuff.

Pablo Srugo (00:17:49):
And just in terms of timeline, when do you leave your job then? How does that go? When do you take that decision?

Ross McNairn (00:17:55):
I knew I was going to leave, I told them basically almost nearly a year before. Because it was an exec role. So I did an eight month hand hoover at my job. Which was excruciating, watching all these businesses getting seeded left, right and center. And then having to sit there every day being like, I sort of wait and then I put my time in, and put my time. So I did a really long handover mainly just to try and do right by the company. I only had a 60 day notice period. But my hope was that that would be paid back and in goodwill. And so yeah, I did a long handover, and then at the end of that. Then I started things and then we went from there.

Pablo Srugo (00:18:33):
When you went to index for that meeting. What was the MVP that you built? How do you scope that out?

Ross McNairn (00:18:38):
I sat down and did my product development methodology. My old boss for years at Skyscanner, when I was there was one of the directors of engineering from S3 at Amazon, and I think the school that you get taught ends up sort of being burnt into your brain. A lot of the way that I build product, I think, actually is quite now consistent with the Amazon approach. Because that's what he told me to do and made me. So I do a lot of press release, working backwards, metrics, things like that. So I actually just sat up with a press release and I just described what would be a killer product, or what I thought would be killer. Which was, send in an email with a document on it, and then it just does it. And sends it back fully marked up, and reviewed. So we made a really simple version of that. But I kept it on one simple story that was kind of, well, and I think the point that I was trying to make there is we're legit as engineers. We can pick something clean and simple. That's a one sentence to explain, and once you understand the baseline, like hook. Then I have a narrative file. This could be a deck of corn, maybe, in the future. Because I think what they're looking for at that stage is these people have some empathy with something that's actually painful. Two, they have some vague ability to hustle together good people, and three, they're capable of executing.

Pablo Srugo (00:19:59):
But your wedge was reviewing docs, internal legal teams reviewing contracts and things like that.

Ross McNairn (00:20:05):
Send it in actually the first version I said hey we're going to put a lawyer in the loop and charge them like 10% of what they currently get. And we'll offer them this lawyer verified loop, where they can send anything in. Our legal team would take a look at it and instead of paying $200 bucks for an agreement we'll do it with an SLA of an hour up for $20 bucks. And then this is the technology simulation that we'll do in the background. So we bootstrapped that service pretty quickly and then dumped it into a couple of people. And very, very quickly, but we actually went pre-product for the discussion. And then we were at market with a basic proposition within six weeks. So live in customers, throwing agreements through, testing it out.

Pablo Srugo (00:20:44):
Within six weeks of that seed round?

Ross McNairn (00:20:47):
Within six weeks of the MVP. So I was obsessive about like getting it out, and I think the getting it out was A. Because not like a public release in the sense where everybody can sign up. Because I think that's distracting for other purposes. Because there's all sorts of other stuff you're worried about that. But getting it into the hands of people that can tell you that it sucks, or you can understand what the true depth of the problem is. So we did that very quickly and then realized very quickly that there was a few issues with that business model. That people just weren't that bothered. They weren't really calling us back. It was the main thing and just operationally doing it in a timeframe that people liked was annoying. So then we sort of migrated over and changed the proposition about four or five times actually over that year. Because also I think that the way that you start. Your first iteration is super important. Because it's a good heuristic for iteration two, three, four, five, and I don't know many businesses that take 12 months to get to V1. And then do V2, three, four a week or two after that. Whereas I know loads of businesses that get to market in six weeks and then they do version two within four weeks, version three within two weeks. So getting something out fast is a mantra, but at least for me. I definitely was obsessive about it.

Pablo Srugo (00:21:59):
Maybe just your view one, was it just like you take that doc, you send it to what? Do you just send it to like GPT? Like, GPT wrapper style or did you do a bunch of stuff kind of behind it?

Ross McNairn (00:22:09):
We had retool in the background, which Robbie sat at. We had send an email in, automated response with some basic cleanup. Robbie with some tooling sat there and did a bit of additional markup on top. Approved like four variations and then the fully marked up thing was back within. During the investor call, like seven minutes or something. But then in normal early clients, it did have been in 24 hours. So Robbie had an alarm bell next to his bed and whenever it went off. Like a Vietnamese prison camp, wait or actually sorry. More easily like having a kid. You'd sort of wake up at two in the morning and be drilling out this contract review for a business that now doesn't exist today.

Pablo Srugo (00:22:49):
But that markup that was the automated part of it. Was just like a prompt you would send to some other LLM that would just review a document and mark it up?

Ross McNairn (00:22:57):
Well, we did like quietly, yeah. We kind of made it very specific. So we'd go through specific checks and there was like. We did a bit of extra structure around it, but roughly speaking. It got probably seventy percent of the way there, and then the rest of it was Robbie tidying it up in Markdown.

Pablo Srugo (00:23:10):
What did you learn after that? Because that's the key, right? You said you did four or five iterations. I'm curious to through them and what you learned at each one until you got the true PMF. This first one with Robbie, what was the big learning?

Ross McNairn (00:23:20):
The biggest learnings were that people were not that bothered. The sales bit that I, so I'm naturally an engineer, but I had to learn to sell. So my biggest learning actually, and I've said the biggest thing with all of this is you are. You have got to sell somebody, and the idea of being the salesman or not is rubbish. It's actually even better if it's a product person or an engineering person that learns that talent. Because that's where you get everything early on, is if you can't get it in there and people don't have an appetite for it. You feel, it's just swimming uphill in a way where. When you're close, but you're not quite there, and I had that for months. So the biggest learnings were that we needed to find something that had more of the moment in it. That there was more appetite for people. Two, had actual genuine retained usage.

Pablo Srugo (00:24:11):
Cause you, what? The first one was kind of nice to have-ish. You'd go to these people and say, hey, like you can just send it. It's cheaper, and they're like, cool. But they don't just, they don't need it, they don't like.

Ross McNairn (00:24:20):
They just, they weren't hungry, man. There was like the person, and actually it's not that the service wasn't all right. It was way better than they were doing. But if you're the contract dude, in company X and somebody comes to you. And says, I'm going to literally do your job. Because you're the buyer, and you're going to send me your job. It's going to take you three days to onboard me, and then I'm going to do your job each time in an hour. Then you send it out, and I'm a, I'm 10% of the cost of your day. It's not that surprising why Bob is like, you can get the out of my. Like they were not interested

Pablo Srugo (00:24:53):
Right, yeah.

Ross McNairn (00:24:54):
In that proposition, and in a nutshell. You know, objectively as an engineer, you're like, wow, faster, better API for you. But then the sales cycle, so maybe we weren't hitting the right person. Maybe the market timing wasn't wrong. There could have been a myriad of factors, but the cocktail didn't strike. So what we then did, is we had a look around. That was close and we were like, well, what are our customers buying that's nascent to this point? What is the demand? And so we then flipped it, and went more to sort of look at their procurement lens. And started scanning, and then we looked at a bunch of the

Pablo Srugo (00:25:27):
You're saying, what do legal teams buy already? That's where you're looking?

Ross McNairn (00:25:33):
What are they thinking about and where are they beginning to? So we started to look at what was getting through the procurement net with them, and what problem that was starting to solve. And then from that.

Pablo Srugo (00:25:43):
And what was it? What did you see there?

Ross McNairn (00:25:45):
Well, we saw that more their concern was not so much actually responding to doing the whole review. But it was all the kind of getting of information and the backwards and forwards, before they got to the review. So they were looking at trying to stitch together things that could actually be interacted with by the rest of the business. So they were less interested in just a co-pilot for them and they wanted more something that could take the noise away from everybody else. And give them good content so that they could then do their job very well. And that was the thing that annoyed them was having to field a hundred individual questions. And do the stuff they actually hated doing, not what they felt was their core job. So the insight that we missed was that attacking their core job was not that exciting for them. But getting rid of the tangential bits of their job that were irritating. That was in a bit that was kind of forgotten by the other legal tech players, was an excellent wedge. So we went super deep on Slack.

Pablo Srugo (00:26:39):
And what was happening there? Just give me an example. What's happening in these guys' daily jobs? What are the parts they hate?

Ross McNairn (00:26:45):
Well, the sales team are hammering them all day every day saying, where's my bloody contract? Can I make this revision? Can I do this? And they didn't like the existing solutions that were out there. Glean or products like that because they automatically responded a lot of the time, and lawyers very specifically like control, more than anyone else. So we built a version of Glean or one of these Slack things. That had a bunch of controls in that the lawyers could dead man switch it, and put Lawyer in the loop in Slack. And then they could approve it and upgrade it, et cetera. Which meant that that existing PMF that Glean had found. We built the Lawyer flavor off that, and that sold really well. We got that into tons of companies, and then from that. We then started expanding and then adding all the other stuff off the back of that. This whole additional suite of products then got built that expanded from that hook, and to this day, we win. If ever they have Slack, we win literally every deal.

Pablo Srugo (00:27:37):
Because what's happening, the before and after is what? Before people are just pinging lawyers on everything. Like, can I change this in this contract to get this customer over the line? Whatever, and now it's in one single. But everybody's hitting these legal teams all the time. Now it's in this one single place and they could just approve or reject or whatever, like each.

Ross McNairn (00:27:54):
Yeah, so now they can deploy. What we let them do is deploy a simple agent that did Q and A for them. Into certain places, and then what we started doing was expanding the capabilities of those agents. To not just do Q and A, but also do a review of contracts or do a draft, or give more complex advice, or trigger a workflow, or whatever these things might be. But, where we differ from a lot of the other legal tech co-pilots is they all sort of only work in the background with the lawyer doing the stuff. Which for us, we work sort of as the interaction, the contract between the lawyer and other people. And then that informs the tool that they then use, and they can then accelerate their workflow. And so from that, we not only found a better or a good hook or entry into this market. But we found what has now become a positioning that's very different, to other legal tech players, Because the other big ones that came before us are like, we're going to be a copilot for lawyers, and by taking this natural following of the pain. We're actually very in-house specific, very focused on the interaction between to the procurement or the sales team and legal. And then the co-pilot that we've built is now turbocharged by all these extra things. Which means we're not so good for law firms, but we're really, really, really good for in-house teams. Which is now our entire market.

Pablo Srugo (00:29:12):
You love this show. You don't want to miss the next episode. Why would you? So hit that follow button. Trust me, it's in your own best interest. Yeah, walk me through that nuance. Why the difference between legal teams internal versus law firms?

Ross McNairn (00:29:26):
Well, so let's say you've got a law firm with a thousand people. All those lawyers, like, you should build a product. That A, does quite complicated legal work. So it's good at research and stuff like that, but it's designed to make the individual lawyer more productive. That's the number one purpose, but if you're in a company of 2,000 people. There are probably 10 lawyers in there. Their biggest pain is not working out novel legal issues. It's dealing with the 2,000 people in the company screaming at them. Who want stuff, and the type of work they're doing is totally different. So we help them with the interactions there, and then we help them with a totally different type of legal work. Which is much more repetitive, much more sort of routine based. Whereas these guys deal with maybe more nuanced types of things.

Pablo Srugo (00:30:12):
Is that like a general learning you think that applies elsewhere? Which is kind of like AI to like, whatever your ICP is. You find the annoying parts, and you automate. I think a lot of times you want to just replace the thing. But then it's, hard because who do you sell to? You can't sell to that person, you got to go above them, they got to lay it off. It's actually much more complicated than if you just find what are the frustrating, annoying pieces that you don't want to do, and you just, you know, replace those.

Ross McNairn (00:30:38):
I think that is a good way to think about it. I'd say there are two models that I would take if I was to do this again. So one, specifically with AI. I think that a lot of the early players have made really broad products for very big ICPs because they were first. So yeah, why not do law and tax, and all of this? So just because it looks like there's a category wave breaking does not mean that there isn't going to be further division of that, and there are subcategories of users that are going to be way more distinct. So I'd say even if it looks like image generation, whatever it might be. There will be a subset category that's huge, that has nuanced requirements. So finding that clustering is one very effective way of doing it. Yeah, and I think the other thing very specifically with AI is that one way to help work out what that clustering could be is to look at what products. What clustering there was pre-AI. So in our space, there used to be a big split in technologies between in-house and law firms, right? So that was two years ago. You had the CLMs, the DMSs, and that's because, guess what? Even pre-AI, they have hugely different requirements. So you probably could have

Pablo Srugo (00:31:48):
The jobs are different. Yeah, the jobs be done.

Ross McNairn (00:31:50):
Exactly, so if you look at the pre-AI breakdown of stack, and then you see a new thing come through. And you're like, wow, that's super broad. And the categorization, and the segments just look like all of a sudden one product's going to win the world. That's a good time to ask some questions and double click on the subdivisions. And see what did it look like pre-wave.

Pablo Srugo (00:32:11):
So you've got this, you're going through the iterations on the product. In that time frame, how do you structure it? Like is it 10 design partners and you just working with them throughout or what's kind of that side of it?

Ross McNairn (00:32:22):
We had about six or seven that we go really deep with. Yeah, we just went right into the weeds. The trickiest thing, we got rid of a lot of them early on and said no to some of our earliest design partners. Because the clustering wasn't right. Because I was very aware about making sure that they were all in the right bucket where I could see commonality. And there's a big difference between a single legal counsel, and one that's in a team of fifty or a thousand. So we tried to get a group of companies that were in that group.

Pablo Srugo (00:32:55):
What was the group specifically? Five to ten legal teams,  a thousand people companies? What was the?

Ross McNairn (00:33:00):
It's about ten to twenty-five lawyers, that sort of bucket, and I guess part of that was not really intentional. But it was the only group that we had an advantage in, which is I was an exec in European tech companies. So I could call up any CTO at these companies and be like, hey, do you remember when we were getting drunk at X. Could you please introduce me to Y? So, that got me my first ten. Which got me my clustering, which then got me my commonality. So, with all of these things, you can post-rationalize genius, or you can just accept that there's an element of. 

Pablo Srugo (00:33:31):
Using the opportunities in front of you, a hundred percent. 

Ross McNairn (00:33:34):
That's a lot of it, dude. And I think one thing I definitely would look back on is for all the science that you might think exists in this space. People will tell you that they're the smartest operator in the world and they came up with a plan. When the reality is that ninety percent of this stuff, ninety-nine, is people driving off their gut. Chasing the things that they have that are slightly more advantageous to them. And then if it works, they just tell you that they were super smart and they had a plan from the beginning.

Pablo Srugo (00:33:58):
Well, a hundred percent, this is what I keep coming back to. It's, you know, startups are an action business. All the theorizing and the thinking really only gets you so far. At the end of the day, you have to take shots and the speed of the taking of the shots is probably more important than the accuracy of any given one. Cause there's so many unknowns and then you just act on it like, oh, this kind of works. Then you take 10 more shots in that direction, right? And kind of hopefully you strike it.

Ross McNairn (00:34:21):
Yeah, I mean, that's exactly it and also just be. You have to just accept that. You're not going to have any idea. You have to get really comfortable with the fact that you don't have a genius plan that's being executed again. Just because you don't. That was disorientating.

Pablo Srugo (00:34:36):
When do you feel like with these six or seven design partners you've gone really deep on. That you've kind of got the thing? When do you start expanding and selling and truly selling, truly going to market?

Ross McNairn (00:34:45):
After about 10 months or so building with them. We launched a web assistant, usage tripled overnight with those users.

Pablo Srugo (00:34:56):
What did that do?

Ross McNairn (00:34:57):
It basically, it took our product from being just Slack. To also allowing the legal team to interact with it themselves. So not just for the rest of the business in Slack, but also like a whole web suite.

Pablo Srugo (00:35:08):
Oh, there was no like view before. It was literally just within Slack for the first 10 months?

Ross McNairn (00:35:12):
Full native, like instant IO type thing fully native Slack. We were like right in, our Slack product is deep. We were at nine months of just every single, like it's, yeah. Which actually now is, sometimes people try and add a Slack integration. It's pretty unbeatable in that sense. So it's been a nice mode there.

Pablo Srugo (00:35:35):
How far can you go with Slack? What were some of the things that you were doing in Slack that are so deep?

Ross McNairn (00:35:40):
You go so deep, not just like all of the native, workflows and allowing you to branch discussions. And create additional threads, and approve all your actions through that. Doing signups, having all your permission management through certain channels, allowing for file ingestion, upload of assistants, all of that. Smart routing, so when you message the Wordsmith bot, it then determines which of the agents to go through. Man, like, if you want to go deep into our Slack world. It's just, it's a whole new company.

Pablo Srugo (00:36:08):
That's wild. That's wild.

Ross McNairn (00:36:10):
But again, I think what was quite nice about that is. We did it quickly, we went deep, and now for the companies that have that. It's a huge hook. So the moment that we knew we have much more of a bite that we launched the web and we started driving our productivity tools. For the individuals in the legal team and then we started seeing adoption get even higher. Because we went for having one or two people in legal manage this product, and the rest of the business into writing, to being the whole legal team. So we got twenty times the surface across these legal teams, and that had a very big impact on word of mouth, on general adoption. Because what we found was about. Ten percent of the team would be hyper advocates, twenty percent of them would be kind of up for it, and then it sort of tailed off in the early days. Now it's, you know, maybe ninety percent love it, and there's ten percent who are on the fence. But you could just see it, you know, word of mouth. We started getting inbound, from people talking about us. We started, you know, you could just see the numbers. Everything changed at that point.

Pablo Srugo (00:37:10):
I know it's daily usage. I assume, that you get from the majority of each team?

Ross McNairn (00:37:14):
Yeah, I'd say the average lawyer. I think the average usage per day is in like the tens of queries, that sort of thing. So we're quite a high frequency product. When somebody buys it, they use it all the time across all the surfaces we now support, yeah.

Pablo Srugo (00:37:29):
So you start getting inbounds, inbound I should say, and you lean into that. Then what's the motion after? Do you, is it just like you start calling up companies that are above X? Do you just drive email marketing campaign? What's the kind of go-to-market they use?

Ross McNairn (00:37:42):
So for us, it was event, a lot of word of mouth stuff, running webinars were our kind of early thing. Which cost us five grand to sign up to a sponsored webinar, and then we got to demo the thing to 200 lawyers. And then we would get 20 demos at the back of it. Maybe like five clients, happy days. So we did a bunch of events. I very specifically actually hired a lady who was kind of a legal influencer, on the marketing side. So she just posted a lot and was teaching people in this space. So I thought, well, actually, given that I think a lot of the problem for AI right now is actually understanding that they can use it. It kind of makes more sense to do market education rather than demand capture. So instead of just paying performance ads. We were actually just explaining how you would use it, hired her and used it. With her, we bought 15,000 followers that were highly engaged, and she was posting all the time about how to use it and how to do that. And that became a really good channel for us for the first six to nine months. And then we then started expanding, obviously, now we're doing multiple different disciplines and channels. And we've got a bunch of account executives, and various different things and dozens of events. The whole go to markets exploded now. But back then, the early stages were a combination of me out bounding. Laura doing some sort of market education and teaching people. And posting Maven courses, and explaining that there was this thing. And then we sort of got to critical mass where our market then started referring us. These are the go to markets came alive.

Pablo Srugo (00:39:16):
By the way, the other thing is you started your three co-founders. Raised $5 million, over those first 10 months when you're just building with this few select clients. What do you do with your team? How big do you grow your team to?

Ross McNairn (00:39:24):
I kept it to eight, until we did the round.

Pablo Srugo (00:39:28):
Until this Tuesday, last month?

Ross McNairn (00:39:29):
Yeah, two months ago. No, I mean, now we're at nearly 40. So now I've gone gangbusters, but I preferred keeping it small. Scaling isn't the bit that I'm worried about because I've done it before. So I kind of have people that are waiting to work with us again and things like this. But I intentionally did not want a big team, because I didn't want to debate. I just didn't, like, when you're in that moment. Having to convince a product manager that putting the button to the left, like, no, just get on with it. So optimizing for just making really fast decisions was my preference and not having egos, and talks, and stuff in a way. So I kept it very tiny on purpose.

Pablo Srugo (00:40:09):
I think that's, I mean, when you're building. You really don't need that many people to find product market fit. You need a lot of people to scale really fast once you have product market fit. By the beginning, it's almost a disservice and your advantage is the fact that you're small. You're nimble, you can move fast, you have no overhead, communication and alignment just don't exist.

Ross McNairn (00:40:26):
Honestly, hiring a bunch of people that you then have to get up to speed, explain to them, worrying about their burn, worrying about their personal problems. There's a time and place for that, and it's not when you are pre a million revenue. You know, you want people that can, deal with being on the Camino in the middle of the night and are not going to whine about anything, and are just going to get stuff done. Because you don't have time for complaints or issues. You just need a bunch of like Delta Force operators that are going to beat down the door of whatever problem is in front of you, and then you can worry about the people stuff after that. But it is not a good thing.

Pablo Srugo (00:41:05):
By the way, how do you price this? Because you're, I mean, you only have 10 or 20 seats in these thousand people like companies. Is it a price per seat or is it something else you've chosen?

Ross McNairn (00:41:13):
Combo of that and then some integrations, and usage. So you buy seats and then you sort of get a buffet of all the other upgrades that you want. You can sort of pick and choose. But yeah, with that gets the ACV like $60k now. $50/$60, somewhere on that. It's kind of the average deals coming in now. We have a lot of smaller ones and bigger ones like with. I don't know, maybe a bit under that, but it's gone up a lot. The first 12 months, they were all on $12K a year. Very, just please pay us and don't turn us off. I was quite insistent about not doing it for free. Because I felt the process of getting an order form in place and making people pay you money was part of the pain. And also part of us learning how to sell. And I think it was so easy to just give stuff away for free. And then also people waste your time. Because they're like, you know, they don't engage with it. So the rule was they have to pay. They can have a few months for free. But there needs to be an ARR number that they'll commit to, or like a monthly revenue, or something, and it can't be zero, or you know.

Pablo Srugo (00:42:18):
How fast do you grow? You go public, what, end of 2024 or so? Let's call it nine months ago. How fast do you grow in those nine months or so?

Ross McNairn (00:42:26):
Fast, yeah. It's been quite quick. We're already like, I don't know, from the beginning of the year. Like four or five X, maybe something like that, and then hopefully we'll do another two, three this year. We'll see.

Pablo Srugo (00:42:39):
And you're what? Mid single millions ARR sort of thing?

Ross McNairn (00:42:42):
Yeah, around that. Exactly, so I think we're doing fine. I'm super happy with the progress for the age and stage of the business. I think the thing I would say, dude, is there is a huge amount of disadvantage you can do to yourself on the benchmarks. Because, when I spend my time thinking about the equivalent stage of the previous cohorts of companies. What they were worried about, where they were at revenue, I just got myself so negative and thinking like, oh God, we're sucking, et cetera. And then when you then step out and you see the whole world, you're like, oh, actually. But I'd say highly competitive people who are focused on whoever the category leaders are. Are by definition setting themselves up for a very depressing ride if you obsess about what your competitors' revenue numbers are in the wrong way. And so I definitely have found that step off, have a chat to some VCs or somebody that you know. Ask them what reasonable multiples and comparables are, and then focus on your company. And don't get too worried about what the other people in your category are doing on ARR numbers.

Pablo Srugo (00:43:44):
I think it's totally true, and it's funny. I spoke, one of the latest podcasts I had was Rick, founder of Persona. A couple billion dollars today, and he's like, dude, when I started this business. I just told myself it was gonna, like, he left Stripe to do it, and he's like, I just told myself it was gonna fail. I just felt like it's just not gonna work. But somehow that attitude helped him because it was, and I'm not saying everybody should have that. But it was almost like this soldier that goes to war and assumes like they're not coming back home. And that just almost frees them to just kind of go forward. Versus you kind of can't do anything about what the other companies are doing, how much they're raising, and it's just not going to necessarily. I don't see how it's going to help you, to be honest.

Ross McNairn (00:44:18):
Also, it's not always the best thing, right? I mean, one of the businesses I was in. We raised $800 million and the enterprise value was less than that or close to that, right? Other businesses, Skyscanner did about $4 million of primary and got to a nearly $2 billion exit. Your capital is helpful, but it is definitely not the primary dictator of your success, right? And, I do agree with the free yourself type mentality, this kind of make trade. We actually talked about it a lot as a team. Even if it goes wrong, you found a company, you make an AI thing, you do some venture. Do you have any idea of the number of opportunities that are open to you after that? It's all good, dude, just chill and get on with building your company. I promise you, if the worst thing happens. You'll go to bed, your wife will give you a cup of hot chocolate, you'll feel like shit for about two days, and then your phone will go absolutely nuts. And you'll have to start telling people you need a holiday before you get back to the next thing. And when you realize that, it's literally not having a billion dollar company is the ultimate in tiny violin first world problem. And when you can get your head around that. It does free you up to just start making way more rational decisions.

Pablo Srugo (00:45:30):
By the way, I got it.  Just a couple more questions, but there's a bunch of background noise. Somebody else talking. 

Ross McNairn (00:45:33):
It's a sales dude. 

Pablo Srugo (00:45:35):
Yeah, yeah.

Ross McNairn (00:45:35):
Selling. 

Pablo Srugo (00:45:36):
That's important. That's important.

Ross McNairn (00:45:39):
That's the drone of ARR, my friend.

Pablo Srugo (00:45:43):
When was the moment, that you felt you had true product market fit?

Ross McNairn (00:45:48):
It's a bit of a boiling frog. It's definitely not an overnight thing. But I remember going to my wife and I stopped having sleepless nights about it. At this moment where I think it's when the ARR started to roll. You just stop being stressed about that initial bit. You're like, wow, actually, people are fully willing to commit to $80 grand, $100 grand contracts on this thing, and I think we signed two or three of those in the space of about two weeks. And I could see the pipeline filling up with lots more companies like that. And I was like, you know what, this actually legitimately. At the end of the day, numbers talk, like ARR is the metric, or if you've got to beat CPRI. It's like mega usage, but that. When we started getting real commit on revenue. Then I knew that this is, this has the potential to be a very large business one day if we pull it off.

Pablo Srugo (00:46:34):
Let me ask this is actually not the last question, so I lied. But you mentioned, you're married, you're obviously not a 20 year old founder, you come from a world where you were an exec, and, I'm sure it's hard work. But things are more controllable, more controlled. How do you how do you structure? Is there work, like balance the wrong word? But is there any sort of balancing act here? Are you just seven days a week? How do you structure the kind of time, the hours of of a startup relative to what you're doing before?

Ross McNairn (00:47:00):
You know what's even more mental, mate? Is, I don't know if you can see that, but.

Pablo Srugo (00:47:04):
Okay, yes. that will do it.

Ross McNairn (00:47:04):
I had that pop into my life 10 months ago. That little sucker.

Pablo Srugo (00:47:08):
Little kid, yeah.

Ross McNairn (00:47:09):
Yeah, Hamish McNairn turned up on the scenes. He actually had his first day at nursery this week 

Pablo Srugo (00:47:14):
Awe, nice.

Ross McNairn (00:47:15):
And got sent home for biting people. 

Pablo Srugo (00:47:16):
Oh God.

Ross McNairn (00:47:17):
We're dealing with that. But yes, I had a kid, I've got a 10 month old as well. Which has made this a little more spicy, and both my co-founders have had kids. Giggs is at his fourth three weeks ago. 

Pablo Srugo (00:47:28):
Wow, holy.

Ross McNairn (00:47:31):
So I don't know, you just man up and just bite through it really. At the end of the day, so how do I structure my day exactly? I get up, I get up about five, usually do some Hamish stuff. Usually there's a nappy in there, we hang out, I try and squeeze a 20-minute bike ride in if I can. If not, I help my wife out doing stuff I leave about. I try and do some emails in the gaps, do a bit of work early on. If I can, I'll leave at about 8:30. Get into the office, just work the full day, try and get home for. Try and leave at sort of 5:30, do bedtime, do bath time, do a couple more hours work, and then try, and get myself to bed at a reasonable time. And rinse and repeat, right? So.

Pablo Srugo (00:48:12):
Weekends off or weekends on? What's your weekend life?

Ross McNairn (00:48:15):
I try and usually put, I kind of battle with Aaron on it. But I'll either do a day or, three or four hours one day. Usually a Sunday evening I'll try and get a full clean block. Where I get no interruption and I can just sit down and focus. I would say a kid gives you an incredible ability to get stuff done. What I do with an hour now is order of magnitude more impactful than what I did with an hour five years ago. And I used to think not having kids was a competitive advantage as an exec, because I just work like crazy. But honestly, having some degree of constraint has forced me to become, especially with AI, right? I just need to get it done, and I don't miss bath time. I really like being home to see the wee man. I like giving him his final feed of the day. I don't want to compromise on that, you know? And if I can do both, yeah, I think you can, right?

Pablo Srugo (00:49:14):
Love that, man. Love that, cool, you know what? Let's end it there, man. That's a good note. Screw my last question, cool, man. Well, dude, thanks so much for jumping on the show, man. It's been great having you. You're on a crazy journey. I'm really excited to see where it goes.

Ross McNairn (00:49:25):
Awesome, cool. Thanks for having us.

Pablo Srugo (00:49:28):
So guess what? I met this founder who listened to every single episode of the Product Market Fit Show. He just called me and he sold his company for over a billion dollars. That's right. If you listen to every episode of the Product Market Fit Show. That's what's going to happen. You know, I can't say it's guaranteed, but it's what I've seen. It's just, it's what I've seen in the past, but you won't know for sure unless you, you know, try it out for yourself. So go back cause there's over a hundred episodes of the product market fit show and you haven't listened to most of them. Check them out.