Planning for growth: the discipline that led Hotjar to $10 million ARR in 2.5 years14 min read

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David Darmanin was always an avid reader. But up until the birth of Hotjar, not many business books graced this Maltese founder’s bedside table. As he attempted to kickstart a third startup after two failed ones, he made it a priority to read all the books he could to build the company right. “There is no point in winging it when you can read in-depth how others have achieved what you are trying to achieve.”

David always had the habit of asking people he admired about books they would recommend.

That habit led him to reads like The Personal MBA, Built to Sell and The E-Myth Revisited. The more he read, the more he saw a consistent theme – investing in documented processes, manuals, and training materials was the backbone for building and growing a successful business.

David has since created a public library on Trello.

And Hotjar has since reached $10 million ARR, bootstrapping the entire way. David has remained focused all along, engineering his calendar and the initiatives the company runs wisely, spending time in a controlled manner. He even has time in his calendar reserved for firefighting, “because the reality of running a SaaS company is such that they are inevitable.”

To get to $10 million he has had to engineer a launch with a bang and follow it with a company-wide steadfast focus on product and customers. Read on to find out some of the ideas he took from books and refined for his journey to stay focused and disciplined.

Start with what you know

Hotjar’s story began with a simple idea that had been maturing for years in David’s head. As a 10+ years marketer, he had been frustrated by the need to use multiple existing tools to optimise websites and website experience. They were expensive, complicated and disjointed. Could there be a way to connect all the dots in the optimization universe, democratise the technology, and put the user in the center? David focused on that before there were co-founders, a company name or legal entity to distract him.

I have seen so many entrepreneurs fail because they started working on something they didn’t know inside out.

The tool wouldn’t be able to compete with existing ones in the optimisation space from a power perspective, so the innovation and attraction had to come from someplace else. David’s vision was a free tool that brought web analytics and feedback together and which users would access in minutes without the need to speak to a sales team. David started with that point of view, which advised everything that followed.

David had to make sure the idea was viable. To do that he needed the right people to built it with, as doing it alone would be impossible. He sketched the sort of people he would do it with – big thinkers comfortable with scrappy ways. He spoke with people he had worked through the years that he could foresee as co-founders. To incentivise them to give their opinion whether the idea made sense, David offered his own consultancy advice in return.

A large part of why David’s previous startups had failed was because he had wasted time building a product for months before taking it to market and starting to ‘sell’ it at scale. This third attempt would be different.

Build the right product in the right way

As David found four interested partners in crime to attempt to do this he wanted to test drive the “team.” The five of them spend a couple of weeks building a little tool for prioritization. “This ‘test run’ allowed us to identify how we worked together and whether we needed to make any changes in the way we worked.”

David and his four co-founders then wrote Hotjar’s strategic document. It defined the vision they had, their values, what is the big hairy audacious goal they worked towards, what the brand promise was, what sandbox they were in. All these elements of the strategic document were the restrictions not to get haywire. In anything they did, they would have to pertain to them, starting with building the product itself. They outlined what the core technology to test the idea was.

We had to kill a lot of ideas by labeling them as good for an upgrade but not essential for the start.

They took the next three weeks to build what they had outlined.

It was barebones, not even a mockup or a prototype. It was an experiment to see if what they had in mind was even possible. When they saw it was feasible, they set up a quick scrappy site to see if people would sign up. “It was only at this point that we chose the product and company name purchased a domain and set up a legal entity.” The next thing he did was to hire his four co-founders full time and get them on the payroll. Hotjar wouldn’t succeed if everyone did it on a part-time basis. The only one doing consulting on the side to fund the business was David.

Get users interested

David knew it would take weeks and months to build and perfect Hotjar. However, he wanted to involve users early on to get feedback and spread the word.

So they decided to create an early access ‘waiting list.’ As soon as someone requested access to Hotjar (entering an email on the site) they put them in the last position in the list. If someone wanted to skip the queue and move up the list, they had to refer people to Hotjar.

With potentially thousands of users joining Hotjar they needed a very organized way of talking to them to make them feel welcome and get valuable feedback on whether the product addressed their needs. In preparation, they wrote an internal document of how to communicate with users. It outlined the tools Hotjar used, the type of messages that would be coming in, with simple guidelines how to respond to each, a flowchart of how they should move around from the team and an ethos how to speak to customers.

All that came under the umbrella of “our customers are our Gods.”

The ethos included 10 points like always thanking users, promising pm but delivering am, always assuming it is Hotjar’s fault if something goes wrong, sweating the small stuff and more. The ethos ended with a recommendation to read Selling the Invisible by Harry Beckwith.

Complementing those guidelines was a streamlined process:

  1. Upon sign up, everyone would get a short survey asking them questions like How likely they were to recommend Hotjar to friends or colleagues, What’s the one thing they found missing, and What was the one big question they had for Hotjar.
  2. To be able to then carry on the conversation within the tool, they set up Intercom chat.
  3. To give them a separate space to discuss ideas, collect feedback and empower the user to share their experience, they set up a forum.
  4. To get their feedback for future product development, they set up a public roadmapof what they were planning to work on next, which exists to this day.

To get people signing up, David and the other co-founders posted the website on their personal social media channels. Since this couldn’t in itself produce the sort of viral effect they were looking for, they doubled down on the marketing technique they knew best – Facebook paid ads. That combined with topping Product Hunt, and being featured on different marketing communities, beta testing websites and relevant news outlets created the wave of users Hotjar needed in those early days.

After six months they had gathered 60,000 emails and had 17,000 beta users.

Respect your users

As the beta was reaching an end, they had to figure out how to get people paying. At the time Hotjar had $100,000 in the bank. However, David was determined that the focus still had to be predominantly on treating the beta users well rather than shifting only to the future paying customers. Hotjar emailed users every week, mentioning the end of the beta deadline and visually showing what would happen next.

We made the smallest of changes to the homepage and released a super-simple pricing page where our users could signup for the paid Hotjar PRO.

All beta users would get a month free on the new paid tier. Still, David had a nagging feeling whether it was right to ask the people that had signed up so early on and had believed in Hotjar unconditionally to pay for it. That led him to create a tier of the product, which would be forever free.

David and the team analyzed usage patterns during the beta to determine the timing and frequency of emails they would need to send for onboarding new users. He wrote out an ‘action plan’ of how teams could get the most value out of Hotjar. That Action Plan was sequenced into nine emails, sent out roughly every three days over a period of three weeks. While this sounds intense, they knew they had to get new users engaged with Hotjar very quickly for them to become active users.

Similarly to the beta stage, they created a referral program which awarded users who recommended Hotjar to friends and colleagues.

Beyond rewarding behavior like that, the best way to take care of customers was through taking the time to understand their challenges and how Hotjar could best help. Every Wednesday afternoon David meets customers at their workplace to understand their context better and listen to what they have to say.

How does he select who he meets?

“I talk to our ideal customers, the ones that are sticking around.”

According to David, you shouldn’t be tempted to talk to the ones you are losing. Instead, speak with the engaged ones to see what it is you are doing right so you can keep doing that. It’s much easier to replicate that, then to change things for the ones going away.

Once you are speaking to the right person, ask the right questions. “You need to guide them to imagine a scenario, rather than asking them blind questions.”

Don’t talk about the product, rather ask about the challenges they face on a daily basis, jump into their mindset. What is the environment around the use case for your product, what are they afraid of? Getting to these requires a lot of empathy.

David has a set of favorite questions to ask:

  • If you could no longer use the product tomorrow, what would you do instead?
  • If you had a magic wand and you could do anything, what would the product be able to do? How would you change the product?
  • If you were running Hotjar, what would you do to wow the customers?

One thing people have said would wow them is if Hotjar could tell them what they should be looking at.

Such ideas are undoubtedly useful. David, however, is always careful about managing finite resources and making sure everything Hotjar puts out is helpful to as many users as possible.

As the founder, I have about 5000 ideas what to do with Hotjar. I know each will work, but I need to restrain myself.

David has made it a rule not to experiment with ideas, instead work on the challenges that the company has as a way to keep the focus. But even challenges have to be stack ranked ruthlessly. “We have stack ranked things wrong a million times,” which is why David has established a tried and tested method to avoid that.

Every quarter the leadership team comes together and starts by questioning all the things that are in the strategic document. Based on what they are trying to achieve for the year, they define the priorities. Every quarter they have top 5 initiatives for the next year.

To define what those initiatives are, everyone in the company does a brain dump on a Trello board. After the brain dump, leaders pitch the things they believe in to the rest of the leadership team. After that, each idea goes to a silent vote. However, David reserves the right to intervene throughout the process.

I am the CEO, and it’s my role to guide.

Figuring out the fine line between being an empathetic leader while putting his foot down is something he has learned in Radical Candour by Kim Scott.

He may say yes to initiatives that the others have declined, or in turn may choose to veto ideas that other leaders have said yes to. The discussions about the initiatives and the process of stack ranking them are recorded so everyone on the team can listen in – nothing is hidden everything is transparent.

Keeping your people focused

That kind of transparency is at the center of how employees are treated in Hotjar. The book that has influenced his thinking on this is Delivering Happiness by Zappos founder Tony Hsieh. One key idea in the book is that building a great team starts with hiring for fit.

One hour of David’s day is reserved for screening candidates who have passed all previous rounds of interviewing.

“We have put in more process in our hiring process than most companies put in their sales.” David’s goal was to find similar-minded individuals that would aspire to the laid out values. Self-driven enough to work remotely without being managed, willing to learn, move fast, possessing great work ethic and humbleness were part of those.

To find the right fit though, he first needed to put down how Hotjar worked. “In preparation for hiring new team members, we had created a Team Manual. This document still exists today and covers everything from the tools we use to how to book time off and how the average Hotjar week is structured. The Hotjar Team Manual will always be ‘in progress’ – it’s an ever-changing document that evolves as the organization does.”

The process of hiring itself begins with a survey to determine the fit or lack thereof. If the candidate passes that, they spend a few days working on a task they have been given. It is a performance-based evaluation, which David learned from the PersonalMBA book.

All along everyone involved in the hiring has to answer one very important question about the candidate – If I am going for a coffee break with somebody, would I want it to be with this person? Or would it feel awkward or unpleasant?

The moment someone starts at Hotjar, they are treated better than if they were in an office. In the spirit of learning, one of the things they get is a Kindle with an unlimited budget to buy books.

To stay on track, an array of meetings brings the fully remote team together. Having a regimented set of meetings is an advice David picked up from Mastering the Rockefeller Habits by Verne Harnish.

The week starts with a Planning meeting on Monday, it continues with a Daily Stand Upevery day, and a Demo/Retrospective at the end of the week where the entire Hotjar team has the opportunity to present everything that has been shipped or released in that week—from a change in product functionality, to a team manual update. “This allows us to all stay in sync, as well as end the week on a positive note.”

Everyone in the company works with a backlog and pulls items from it. Everyone has a mentor who helps with priority and guidance on what to work next.

In this manner, David Darmanin has managed to build a company of over 50 remote employees, spread on three continents. He has scaled internal feedback by using 15five as a tool and has borrowed the model from The 1-Minute Manager book by Kenneth Blanchard. “The idea is that as soon as you see a good or bad behaviour from a leader, you do a redirect. If they did something bad, you give immediate feedback and say how it could have been better. When something is done well, you recognise that quickly and commend it out loud. The reward is in the outspoken recognition.” The model has worked really well for Hotjar.

Reading books and steadfastly focusing on product, customers, and employees through a set of processes has gotten Hotjar to $10 million ARR. The next goal for Hotjar surely is $100 million ARR. Keep an eye on this Maltese founder.

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