Ep. 15: Investing in Digital Customer Acquisition with Owen Matthews
SaaS Marketing Insights Episode 15: Owen Matthews, Wesley Clover
Owen Matthews grew up around startups, started his first software business before leaving School, sold it and went on to join his family’s firm, Wesley Clover, investing in and growing tech companies. As an investor he has an informed opinion about SaaS marketing and digital customer acquisition based on more than 20 years’ experience in international markets.
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Episode 15 Transcript
Paul: On today’s show I have an interview with Owen Matthews, General Manager at Wesley Clover, hope you enjoy it.
So Owen, welcome to the show, great to have you here.
Owen: No problem, I always show up when you call.
Paul: This is gonna be fun I think.
Owen: It could be.
Paul: You might be a bit of trouble, okay so you are unique in that you’re the first person on this podcast/video show we have interviewed who invests in software companies. I’m really interested
in understanding the perspective that you have and how that differs from say what the CEO might think about marketing or what a marketer might think about marketing.
So first of all how did you get started on your journey to be an investor in software and other businesses?
Owen: Sure, my history as an investor hopefully like most good investors starts with understanding companies and having built companies so I started a company when I was supposed to be in school. I was in Computer Sciences and Psychology doing my degree and it was a very exciting time in technology companies, the late 90s. Being in school seemed a lot less exciting than putting up a PowerPoint presentation and having people throw money at you so I started up a technology company.
Lived through the massive downturn that happened in 2001, a difficult time but we survived through that.
Paul: So that was a kind of a dot-com hangover?
Owen: It was a little bit of a dot-com hangover but we did a few years later successfully sell the company to a public company and that brought me back into the family business. So investing in technology companies is a family business for me so when I sold my company I then you know looked at the portfolio of companies that were in our family investment firm and started helping out. That naturally grew into making investment decisions out of that.
So I started the company, grew it, sold it successfully and then started looking at and helping investments and then making investment decisions ultimately, which is what I do now.
Paul: Fantastic so that’s how you got started, so you started out in software, you had a business you built it up, you sold it so probably the best thing to have done. What was the first outside investment that you made in terms of a software company, can you remember?
Owen: Sure, absolutely so extending on a little bit of my history leading to answer to that question. I turned to the family investment firm where I was now working in the late 2000s and you know I said ok great so now I’m an investment professional, do I have a budget to make investments? No.
Ok well how about I proposed this particular investment that I think is a really great company, I think we should invest in that, can we make the investment decision? No.
Ok well it’s a bit awkward then being an investment professional when you don’t have a budget or any capital or can’t make investment decisions so I set about finding a way to create companies from scratch.
Because I had available budget to do that, I went to government agencies and said look, we’re experts at creating companies, we’ve been doing it for a long time. I also knew how important it was to create companies and at the time engineering students didn’t really have a path to entrepreneurship, it’s not like now where you’ve got a million incubators. You can now just put your hand up and develop a company based on some application, it was hard work and you really needed a path to show people.
That allowed me to build a year and a half or two years of credibility with a team and make them investable. Starting out with an idea or starting out with a team and saying ‘hey we should invest in this’ when they don’t necessarily have traction, they don’t necessarily have customers, was very difficult.
So what I did is I created the deal flow and brought it to Wesley Clover, the investment firm and that prompted the investment. It went like: yes they’ve got customers, yes they’ve got credibility, they’ve stuck together as a team so it’s worthy of an investment. You can evaluate it and it made sense to invest in it so I started out being an investment professional without budget and found a way to create companies and create value which is always the way, I mean the CEO should be thinking that way, lean startups and investors should be thinking that way as well. They shouldn’t be taking their investors money and spending it carelessly, you should be thinking hard and if there are ways to do it with less then fine, work hard to uncover those ways.
So I created a portfolio of technology companies without that early stage funding from private investors. I did it for the good of the country and to create a group of technology companies which is done really well. As well as obviously ran great programs and met all of the expectations of government for a number of jobs created and that kind of thing.
So my path was create a company myself, working hard, understanding budgets, building software, in the old days when you actually distributed software.
Paul: On CD’s?
Owen: Not quite that bad, it was digital distribution but it was definitely installed on a computer and you know to where we are today which is, maybe my view on SaaS is informed by that. I went through all the pain of those distributions and how awkward it is and you have to charge your customers to manage update cycles and you know, think, 20% of your purchase price is this ongoing maintenance. It was
not anywhere nearly as useful as SaaS offerings are today, so I come from a background that didn’t have that and I really understand the value of it. I think that informs how we invest now but that first
investment was always focused as SaaS maybe because I understood that pain and so the first company was a SaaS company.
I recognized SaaS as a growing market and I wanted that SaaS company to service SaaS companies because I felt it was a growing market and so my very first investment was very focused on both a SaaS offering as well as servicing the growing market of SaaS companies.
So my entire investment career has been in and around that as a market.
Paul: So given this experience that you’ve had investing in SaaS companies you must see marketing in particular from a slightly different prism from the way a CEO or marketer would see it. So over your time you must have seen some great successes with marketing, some great failures. I’m just keen to understand how you value marketing from an investor perspective and what you look for in a startup that would then lead you to believe that there is potential there?
Owen: Sure, so SaaS marketing to me is a very important issue when I evaluate a company I doubt I’m unique when it comes to my focus on SaaS marketing for companies. I refer to it a bit more broadly as digital customer acquisition because digital customer acquisition is not just SaaS focused and certainly it’s not just marketing. It’s all of the elements around building the funnel, acquiring the customer and in fact digital customer acquisition doesn’t really cover it because there’s the reactivation and the lifetime value. There’s all that other stuff which is equally important but none of that kicks in if you don’t have the customer acquisition in the first place so I hone in on that aspect of it.
For me I will not consider a company that does not have a sound digital customer acquisition strategy, so regardless of the technology, regardless of the market opportunity, regardless of any other element of the business. If you are not considering acquiring customers in a digital way which can scale, if you’re not thinking about digital customer acquisition as a machine that you tinker with and improve on a regular basis. Then I’m not interested in investing so for me that’s the one very clear a hard rule.
I will not consider a company that isn’t building a machine to acquire customers. That’s informed by some of the research that we’ve done, I looked at in the past ten years all the companies that became unicorns. Something like 90% of them are all acquiring customers in a digital way as their primary methodology and as a group they’re the fastest growing companies in the world and obviously are successful with high values.
It is a wave globally around the world that affects every industry and it’s not just industry, I mean the way that you acquire votes, sometimes not so legitimately but you know whether it’s votes, whether it’s government services, whatever it is you have to engage people. You have to engage them and get them to use those services and so all of the facets of educating your customer with content marketing and getting in front of them or building brand, the earlier on stuff all the way through to reactivation. They’re critical and to me that is a very strong correlation to success, if you’re good at acquiring customers you can tinker with the product, you can tinker, you can start moving the knobs around to create a more positive outcome.
You can do that kind of thing if you’re at least in the business of getting customers through the doors, you
can improve your lifetime value of the customer, you can improve the product. You can open up new products when you have them coming in the door and new services.
So for me that’s a critical component that is just absolutely necessary for me to consider with
respect to any investment. That is the lens at which I consider every company that walks in the door, the typical SaaS marketing toolkits. Now I say I’m not unique in that respect, I definitely speak about it overtly as a very important criteria. A lot of other investors are doing the same thing but they use different language, they’ll say things like ‘show me the lifetime value’ and ‘what’s your revenue’ and ‘what’s the recurring revenue model’ and they’re definitely considering the same things, they typically just don’t overtly say ‘hey it’s about customer acquisition’ it’s about digital customer acquisition.
It’s very important and I would also caution a little bit when I look at a company and they come in and they say ‘this is our customer acquisition playbook’. They start talking about, as happens with investors, we’ve done this before and we have this methodology and look at the experience of the team.
Making assumptions about your ability to acquire customers based on past experience doesn’t for me ring true because every product, every constituent audience is different. You can’t come in with your playbook and say ‘I know how this works and this is how it’s gonna happen’. You have to say, certainly to be credible to me, ‘we may have done this before, we have experience, this is our toolkit but we don’t know which part is gonna work. We still have come in with a experimental attitude and even if you are validating it and you’re showing you’ve got proof points you say ‘these are our proof points’ we’re still gonna be experimental. We’re still gonna try and optimize it, we’re still going to be turning the dials to make this better.
Coming in and saying ‘we’ve got the playbook we know how to do this’, it just doesn’t ring true to somebody like me because we know every constituent market and every audience is a little bit different and the PlayBook that worked in the previous market, even if they seem really similar, may not work.
So there’s cautionary tale about how important it is to me, with respect to digital customer acquisition.
SaaS marketing but also it’s important enough that we understand it enough to know that experience doesn’t necessarily play as well in other areas you know, compliance, CFO type stuff, experience really does matter. In digital customer acquisition, sure experience matters but you have to come in with that ‘but this market is different’ and we’re gonna test and try and if you’re not coming in with that attitude you can’t say we know we’re gonna generate X traffic and X returns because the people that are knowledgeable will pick that apart.
Paul: Absolutely, so from your experience or viewpoint do you see any particular channels being broadly better than others? Or is your view just 100% yeah you’ve got to try some different things and you’ve got to validate them. The word that you mentioned is playbook, I hate that word, it’s like a cookie cutter and it never is like that.
It never works and even if you were talking about the exact same market in the exact same company, what worked three months ago isn’t gonna work now so even within the company you must constantly think about the different ways in which you’re audience, customer, citizen is responding so you can’t come in with a playbook or a dogmatic mindset, it doesn’t work.
Owen: So for me the methods that tend to work typically surprised me, you can take broad assumptions like you know if it’s a B2B SaaS, you’re not advertising on Facebook, sure and yet at the same time you’d really be surprised about how often it works or how it works or what’s converting.
For example, I doubt you’d find a digital marketer that wasn’t on Facebook, well if they’re there they’re probably reading work stuff and have colleagues that are there. So I’m constantly surprised about what thread of digital marketing is working so it’d be difficult for me to say ‘you know I’m really surprised about this working’. We’ve seen companies where Quora is a massive converter, we’ve seen companies where email training is a massive converter. It’s so difficult because where is your audience or where is your customer base, where are they communicating, where can they be influenced, where can you create a brand experience that you didn’t expect.
It’s difficult, when we’re thinking about what’s working, we have a philosophy of go to where you think the target rich environment is and trying that first. Those are assumptions but that’s the beauty of digital marketing is it seems like a good idea if you don’t get results try something else and you keep at it and then once you’ve established something you still keep at it and you still experiment. back at the
Paul: So I know we’ve talked before and you have a view on this. Say you have a startup business and we’re here in Victoria, BC and I think we have the same issues here that a lot of other places have: San Francisco, Vancouver, Seattle. It’s actually one of the biggest bottlenecks is actually finding people that have the skills to actually do this marketing and deliver on it. I just wondered if you had any views on that in terms of what should change in the industry or why is it so difficult to find a good marketers?
Owen: So we’ve taken the approach that we just train them. There’s good news in that, in that when you think about an experimental attitude having someone that’s got 20 years of experience matters less because you have to test and measure and that kind of thing. It is trainable and it can be trainable fairly quickly.
Experience goes a long way when you think about test and measure and what you’ve seen work in the past but you certainly can’t come in assuming it’s going to work.
Paul: With your play book.
Owen: So you can’t come in with your playbook and say ‘I’ve done this before I know it’ll work’. The idea of broadly, try this channel, try that channel is good guidance but they are trainable skills so the nuts and bolts work of digital marketing is the kind of thing you can train. As an industry I think there should be a lot more training, I have not seen good programs, so much so that we think about doing that for our companies internally as a portfolio, how do we just train people to go into those companies because our portfolio is big enough that there’s an ongoing need for people with these skill sets. It’s not like brain surgery where you need 15 years of training right.
So it is trainable but there really is not enough people being trained in it and it’s a different type of training. It’s training, it could look like this but remember to not necessarily follow the PlayBook so the classical sort of training, here’s the textbook and here’s the methodology and and do this and you’ll be successful.
It doesn’t work in that kind of teaching environment it’s really has to be hands-on with a lot less dogma. So my view is much more training in the area would be important. My view is that we train people because there’s just a lack of them around that could come in and do those roles and that’s a risk and it takes time and it’s a challenge.
So as an industry I feel that there is constant demand for people in that field so definitely a good place to be, it’s hugely valuable. So you go back to marketing even 20 years ago when I started technology companies, marketing did a particular thing it’s like brand and supporting sales and stuff like that. Now marketing, certainly in the SaaS world, is sales, there’s a direct correlation between good marketing and good results.
Paul: It’s like 90% of the journey isn’t it, in terms of customers acquisition.
Owen: Yeah exactly and the conversion part, even if it’s you know phone call, it’s still done in like 15-minute increments, it’s not done over months of sales process in many cases.
So really the role has changed to being critically important and therefore lots and lots of opportunity so I think we definitely need more people. Constantly looking for good people and that’ll be true everywhere. Victoria happens to be pretty special in that for whatever reason, 15 years ago we put a lot of energy into digital customer acquisition, I think because we had less venture money, there are very few venture
capitalists based, I would argue it might be the only one.
Paul: Well that’s good for you.
Owen: Yeah there are some great angels and certainly other investors around but in terms of like an investment firm, we’re the only one.
So there wasn’t a lot of venture money around at all 20 years ago. Bright people want to build something for themselves, they have to find a way to do it and they find a way to do it in ways that immediately make money which is with digital customer acquisition. So we were really pioneers in Victoria in digital customer acquisition and as a result most of the companies that are successful in this town are somehow related digital customer acquisition.
I’m constantly surprised when I go to other places that are a bit more traditional, it’s so obvious that the path is, the right path for so many companies is SaaS marketing and digital customer acquisition and yet I
still bump up against this archaic salesperson. Sales channel kind of mentality but then again, I’m in a place that is, we’re really pioneers in that area. I’m pretty fortunate that way but we constantly need people, I think the need will continue to grow.
You can do it anywhere so customer acquisition, making companies successful, it doesn’t matter where you are and that means that the sort of the value of technology companies around the world can grow, they don’t have to be central, they’re not tied.
If you’re acquiring customers from around the world and you’ve got the right strategies and the right methodologies it’s not like they’re looking at where your headquarters are. They just like what you do and the on-ramp was easy and they tried it and it works for them and these great things happened, ok great we’re a customer now. All of those strategies and all those methodologies, you know your physical locations and distribution all really doesn’t matter, so you can do it from anywhere. I’m seeing growth around the world with respect to customer acquisition and technology companies and I think that’s a great thing. I think it creates opportunities around the world but it will be driven by the value of those digital marketers and there’s nowhere near enough. They’ll have a huge, growing value inside most technology companies and it colors the view of everything that we do.
Paul: So we talked a little bit there about Victoria but if I’m right Wesley clover actually invest internationally?
Owen: All over the world.
Paul: So you must see developments in different countries so for example, SaaS in China which is something I’m not familiar with, is it marketed the the same way? Is it following the patterns or are they developing their own techniques?
Owen: So we’ve seen that the techniques, with respect to digital customer acquisition in China and to answer your question specifically, you probably meant it more broadly but to answer your question specifically. I found the sophistication of the platforms that are used for ad buying and performance
marketing, they’re not quite as sophisticated as customers.
They’re not saying ‘it’s gonna make me $1.50 so I’m willing to pay $0.75 for you to bring me that customer’. It’s a little less, it’s still highly transactional being performance marketing but it’s a little less specifically performance to an outcome.
It’s like I need to buy traffic and I know that traffic will translate into improved customers or downloads or whatever but there’s not a sighted correlation like I’m not gonna pay you unless that turns into a customer. I’m gonna pay you for the traffic and the reference and the download.
Whereas I found in the North American performance markets they’re getting more and more targeted to that attribution all the way through. E.g. Yeah, I know that I make $0.75 cents for selling the hamburger, if you sell the ad for $0.50 cents and I make $0.75 great but I’m only gonna pay you the $0.50 if I actually sold the hamburger.
So that kind of really specific attribution has been more sophisticated in the North American market, in the Chinese market we haven’t seen that yet it’s still a lot of ad buying. It’s a lot lower conversion rates, less specific correlation to an outcome, I think it’s coming and I don’t think it’ll be long before it gets there but we’re seeing less of that. I still see a lot of sort of traditional sales force, fundamental technology as an approach in China.
We have an investment fund in India I still see that in India, very traditional, they all want to build applications and they all want to be involved in mobile because it’s cool and growing. However the larger companies are still very traditional in their approach and it’s a protected market so it’s not like Walmart is rolling in there with their e-commerce program, definitely a protected market so I think there’s plenty of room for opportunity there.
We also have an investment fund in Istanbul, Turkey and again very traditional market so bringing those methodologies we feel will have us stand out and be successful in those markets. Certainly in North America and Victoria in particular, highly sophisticated in respect to customer acquisition.
In Israel, we do a lot of interaction with performance marketers in Israel and they’re very sophisticated with respect to their performance marketing and I’m sure that correlates into all the other aspects of digital marketing.
Paul: So as an investment firm you’ve got real opportunity to take the best of what’s happening in terms of digital customer acquisition, SaaS marketing and actually then apply that and transfer that knowledge around your portfolio?
Owen: We use the investments in foreign countries as market intelligence. What’s happening in that market and does it make sense to take a piece of technology that was developed in North America and go after the market in Turkey, in India, in China or vice versa.
Do we see an opportunity in China that they are speaking to local companies and local customers. Finding out something and they can look at that and sort of collect information around our portfolio and say well that’s not really a global opportunity it’s just a local opportunity. Now China’s big enough that it wouldn’t matter anyway but take Turkey as an example. They might look at that and say it’s a local opportunity but it’s already solved in Europe or it’s already solved in North America and therefore the big machine that solved it is coming and you just don’t know it yet. Therefore it’s a really niche opportunity to Turkey. Or they might have developed something and we go look at the market here and say you know what that’s a global opportunity. Push that button hard because you’ve uncovered something which hasn’t been solved elsewhere and you can do it from Turkey and you can sell around the world.
When you use these methodologies, so yeah, we use it as market intelligence.
Paul: Cool, so you’re a really really busy guy.
Owen: Not for you.
Paul: You’re busier then I am, believe me you’re are.
So where do you find your inspiration because we’ve talked about different things and you always seem to have a view on anything.
Owen: Haha! Not necessarily and accurate view.
Paul: Well it’s an informed view, it’s an educated view so you obviously spend a lot of time reading and getting inspiration from somewhere that then informs the investment decisions that you make.
Owen: Well I’ll tell you the San Francisco answer: ‘you know I like to read 15 books a week, I do audiobooks, I bio-hack with micro dosing. I like to be creative and the world around me gives me billions of dollars to spend so every now and then I make a unicorn’.
No, i’m far less boring, I find reading a huge challenge, I’ve got a busy family life I’ve got three kids so you know all of the chaos that happens there. I’d love to read more and I do thoroughly enjoy it but don’t have a lot of time for it unfortunately and as much as I talk about the importance of digital customer acquisition and digital marketing, I come from the school of relationship selling. That’s how I was successful early in my career and it’s also how we all absorb information a little bit better as people so I really enjoy speaking to people and absorbing information.
I can have a conversation with someone and really get to understand quite quickly their view, their unique set of knowledge and I absorb it really really well so I spend a lot of time speaking to my colleagues around the world. Understanding what’s happening in their world.
I spent a lot of time speaking to other investors and I quit the internal monologue and in fact I coach my CEOs and management teams to do this. It’s less, at least the way in which I learned and I think most people learn, is I stop thinking about what I’m gonna say and I stop thinking about the importance of my internal monologue and I start paying really really close attention to the other person. The more I do that, the more I learn from them and the more I learn from them, the more those things ring true. I can test them in my companies, in my own life, I can go ‘I actually heard what you said, I understood it, it actually impacted me’, I don’t necessarily believe it but I might try it.
Then I’ll try those things or I’ll do certain things and I find that informs a lot of my worldview, taking those pieces of information from so many people and sometimes they’re very brief conversations but if you’re really tuned in to what people are saying you can absorb a huge amount of information. There’s this amazing view and people are phenomenally complicated and have such interesting experiences so as someone who is thinking about a machine, a bunch of software and a bunch of ad buying in a bunch of marketplaces and how incredibly important that is to the success of the company. Ultimately what fulfills me and you know I love my job and don’t feel like I need to seek solace from it. I’m very fortunate in that way and it’s all I’ve ever known. I grew up in start-up companies as a young kid, I really just didn’t know any other life but I really do love what I do.
That’s because of the exact opposite of what I encourage the companies to do, which is, it is highly interactive so as an investor I’m interacting with teams, I’m keeping them strong, I’m managing the culture. I’m listening really intently to what they’re experiencing and coaching them through it and learning from them throughout the process.
So I get exposed to full-time working with CEOs, understanding what strategies are working and that really fulfills me but not because I’m an investor advocating or not because I’m an investor dictating, those are typically pretty poor investors, they might be highly influential and controlling and can make their company successful by virtue of that but I like strong teams that are legitimately in control of their companies. I’m a guide and a mentor and yes an investor but at the same time I’m helping them be successful because of my really active involvement and I find that very fulfilling.
So for me, I would say the time that I find personally fulfilling and recharging is the time I spend speaking with people that might change my view or provide a surprise view to me. So meeting with people from different backgrounds and really legitimately paying attention to what they’re saying and how they’re
feeling and what their world view is. I find informs me on on subjects that would be pretty random and we have conversations pretty often and you might turn to me go ‘how on earth does he know that’. It’s probably because I took the time to speak to the cab driver or speak to the person beside me on the plane or whatever it is, it wasn’t passing politeness, legitimately I was interested in who they were and what they had to say and then I tested it. I’m like ‘okay great’ I’m gonna go read that news article, I’m gonna go do that thing that that they said worked.
That informs a huge amount so I’m the kind of person that will have a brief conversation and then go away and just can’t help myself at three o’clock in the morning and go and study it and the next day be like ‘did you know that’.
Paul: So you’re inspired by people and you’re a highly promiscuous Networker with people.
Owen: Yeah I love people, I love working with people, I love seeing people be successful so we’re very funny as an investment firm, spending an awful lot of time with people who are not our investments and helping them. Across the board we have done that for a long time and it’s very fulfilling and often people look at us and go our best investor was that guy and he didn’t even invest so it is funny but no I find that legitimately one of my great…
Paul: You get a kick out of genuinely helping people.
Owen: Yeah, well it’s the most rewarding thing you can do and setting up good cultures and helping people set up good cultures so they can carry that on. I think it’s probably my best work, independent of the money that we raised or the people that we hired or all of that kind of stuff really the lasting legacy is teaching the people to take the same approach that I take, to help for the sake of helping and that leads to success.
The minute you stop thinking about the number, the number becomes easy. Whether it’s the sales, whether it’s the investment, whether it’s the whatever.
Paul: Owen thank you very much, that was awesome, i’ve learnt a lot!
I hope you enjoyed my conversation with Owen, for more info on Wesley Clover please visit www.wesleyclover.com