Scaling Membership for the Long Game with Pavilion Founder Sam Jacobs

Podcast, Season 5

 

Subscriptions require playing the long game, something Sam Jacobs, founder of Pavilion, understands. With 10,000 paying members, Pavilion was designed to attract and engage entrepreneurs and revenue officers, some of the busiest and most fickle of people. Sam believes kindness and generosity have contributed greatly to his success and his well-being. In this episode, we delve into how he does it.

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Listen to the podcast here

 

Scaling Membership for the Long Game with Pavilion Founder Sam Jacobs

 

Kind Folks Finish First. This is an adage I sincerely hope is true. It’s also the title of entrepreneur Sam Jacobs’ book, as well as how he leads his organization. An experienced revenue leader, Sam has come to believe that the best way to grow a business is by playing the long game, not by optimizing for short-term gains. This approach aligns well with what I’ve seen work at the best subscription-based businesses. It also lets us sleep well at night. Sam created Pavilion as a membership organization that educates and inspires sales and marketing leaders, as well as entrepreneurs, on how to build sustainable growth. Today over 10,000 people are paid subscribers to the Pavilion community.

In our wide-ranging conversation, Sam and I talk about why it pays to focus on the long-term, even though most revenue leaders are compensated on short-term goals; when to go with your gut and when to use data to make key decisions; and how a global organization can build local community.

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Sam Jacobs: Thank you, Robbie. I’m excited to be here.

Robbie Kellman Baxter: So you wrote Kind Folks Finish First. And it really describes a different way of doing business. It’s about relationships, not transactions, giving, before you ask, and not trying to chisel out the last pennies. It’s really about the long game. So it resonated a lot with me. And I’m curious, where were you in your entrepreneurial journey when you wrote “Kind Folks”, and what prompted you to write it?

Kind Folks Finish First by Sam Jacobs

Sam Jacobs: Well, I wrote it over the course of this summer of 2021. And where I was was, you know, the book starts in 2017, on Friday the 13th. But my background is as a sales leader and a revenue leader in high-growth companies in New York City for the last 20 years. And from one perspective and one lens, the first 15 years before I started my current company were in some ways sort of rife with failure and disappointment in the sense that I hadn’t achieved the things that I’d hoped to achieve. And I didn’t feel like I was professionally successful. And things started to take a turn really about six years ago when I began and launched a consulting business when I was fired from my second, last full-time job. And when I really began to work on Pavilion, which is the company that I run full-time, and more intensively.

The book is really about a series of, you can call them epiphanies or realizations, but it’s really the codification of a series of principles that began, they were sort of inside of me the whole time. But I began to articulate them more eloquently over the course of beginning in 2017. And over COVID, there’s probably a second edition that updates it for the economic downturn in the tech recession that we’re in right now. But over COVID, the company that I was running, which was Pavilion, grew very significantly, it became quite successful and we raised $25 million. And I have a coach who said, “There’s a lot of people that were successful in COVID. And there are a lot of people that struggled with great difficulty. And maybe this is a story about how employing some of the principles that you articulate can be inspirational to other people so that people know that there are alternative paths.”

The point of my book is, as you said, in the intro, that there’s a different way to do business. The point of my book is not that that’s the only way to do business. And it’s also not that that’s the only way to be, quote-unquote, successful or to generate wealth. My point is simply to offer an alternative path. And to let people know that there are more than one ways to play this game that we’re all involved in which you can call capitalism or however you want to describe it. So that’s a very long-winded answer to your question. But the fundamental sort of essence of it is that I learned to believe in these ideas over the course of achieving success with my own company, over the last couple of years, and I wanted to share them with other people because I feel like the point of the phrase, and the play on the phrase that there’s a belief sometimes that you have to be ruthless in order to be successful. And I think you have to be disciplined in order to be successful, but that’s not quite the same thing as being ruthless. And I wanted to let people know that there’s a different way to do business that can still get them the things that they profess to want. Like wealth, impact, long-lasting relationships with friends, security, and all those good things.

Robbie Kellman Baxter: Yeah, I love that. And I love the alignment of doing the right thing, focusing on the long term with discipline, as a path to financial and professional success. So it’s not like there are two paths, and one leads you to be able to sleep at night. And the other one leads you to wealth and glory. But rather, there’s a way to integrate the two. And it really aligns with a lot of what I’ve seen in the world of subscriptions and membership models because those models are explicitly designed to depend on loyalty to depend on someone staying with you. And as a result of that, you have to play the long game if you want to succeed with those kinds of models.

 

Subscriptions and membership models: They are explicitly designed to depend on loyalty to depend on someone staying with you. And as a result of that, you have to play the long game if you want to succeed with those kinds of models.

 

Sam Jacobs: Absolutely. And that’s why I believe fundamentally both capitalism, this is a more political comment than sometimes people expect me to make, but I do think that regulated capitalism is still the most humane economic system that’s been created, because in the same way that subscriptions and recurring revenue businesses and membership organizations are humane, because it’s the only way to get rich and cap and regulated capitalism, right, and monopolies and rigged systems, obviously, it’s different, but unregulated capitalism, fundamentally, the reason that Jeff Bezos is so wealthy is because he created a service that provides benefit to millions and millions of people. And similarly, with a membership business, which is the business that I run Pavilion, the only way that I can grow perpetually is to continue to find a way to deliver ongoing and meaningful value to my customers, who are members of my community. And this is as we talked about in the prep for the show, it’s probably something more about me, to be honest, but I’m perfectly aligned with my customers in that regard. If I continue to provide value, and if I am searching for value, one of the ways that I sometimes refer to myself in the company is as a truffle pig. And delight truffles are–I just have to stay alive long enough–I have to make sure I don’t run out of money before I discover the formulas that keep people engaged, and loyal, and retain them as customers for a long time. And that’s a good incentive.

 

Membership business: The only way that you can grow perpetually is to continue to find a way to deliver ongoing and meaningful value to your customers, who are members of your community.

 

Robbie Kellman Baxter: Tell us a little bit about Pavilion, what your mission is there, and what the value is that you’re providing for those members.

Sam Jacobs: Yeah, sure. I think that it helps to set the stage a little bit. So not surprising to anybody that’s listening, we live in a world of increasing uncertainty, where not only is there very little job security relative to the past. And in startup land, if you’re not a member, some of the stats are particularly anxiety-inducing, you know, the average tenure of a growth executive, meaning somebody leading sales and marketing, at a high growth company, meaning venture capital-backed startup, is 17 months, on average. People are lasting about a year and a half and a job, maybe they leave, often they get fired, maybe something happens with the company, maybe they get layered, and they get a boss on top of them. But it’s a very short duration.

And at the same time, again, not a surprise to anybody. The world itself is changing every day. We are recording this in July of 2023, chatGPT, and generative AI as we’ve all adopted it and no, it is still less than a year old. And yet it’s completely up-ended so many industries. And we’re in this massive hype cycle. And we didn’t even know that it existed prior to November of 2022. So my point is that, and that’s just the most recent example, if we think back over COVID, over interest rate volatility over all of the changes in technology, the point is that we exist in an increasingly dynamic system, where the way to do your job, the tools, the skills, the resources that you need are not readily available, because they’re being created and updated on a daily, often by the hour or minute basis. So you’re a professional that exists in that world, in which the only fundamental stability is instability. The only constant is inconsistency, and where you don’t have job security.

So in that world, what do you do? And where do you go to make sure that there’s a possibility to build a meaningful and ongoing career that over 20 years, you have confidence that you’re not continually stepping in the quicksand and that you’re not on a merry-go-round that continually ends up back where you started, and that you’re actually making progress towards a predefined goal? And that goal, of course, being like I said, all the things that we want some level of security, peace at night when we go to bed. So that is not all preamble that is what Pavilion is intended to provide. We are a paid membership organization for go-to-market executives. And we exist to help people build and navigate their careers more effectively and more successfully. And so what does that mean? What does that actually mean? That means that sales leaders, marketing leaders, CEOs and founders, Customer Success leaders, people that are working on revenue generation making companies money, they join, they pay a membership fee, and they get a bunch of stuff in return. The through line is the community, the through line is human connection, connecting to other peers that have been there done that, are in the same state of challenge or crisis, and are facing the same obstacles. And the ability to connect with those people in person and virtually. And then, of course, it’s all of the other stuff that you build as services.

Once you have that community in place, the main thing that we built is learning. We built an online learning platform called Pavilion University, the purpose of which is to help train people in the very skills that we think are important where we’re regularly updating the course content, or updating the curriculum and bringing in new instructors. But there’s also job placement, there’s also access to a vendor marketplace, there’s access to all kinds of services for people that are in career transition. The bottom line is a long-winded answer. But again, just sort of setting the stage, Pavilion is a paid membership community for revenue executives, that connects human connection with perpetual continuous learning.

Robbie Kellman Baxter: Got it! And how long? You know, we spent some time on the show with other guests talking about membership organizations, and why people come, why they stay, why they leave, what have you learned about taking a step back and saying, you run this very meaningful community for people that are living in this volatile world, leading volatile teams, in the most volatile companies, and giving them the sense of community and breaking education, emerging education, just in time education. What have you learned about how long people stay? Or what brings them to you? How is the model evolved over time?

Sam Jacobs: I learned something every day. And I think this is again, it’s something that you probably know, perhaps even more about, one of them is that why do they come, they come at inflection points, oftentimes, there are specific spikes in their life, maybe they get fired, maybe they’re interviewing for a new job, there’s something when the armor comes off, and the vulnerability rises, and they feel like they’re finally ready to ask for help. That’s why they come. And that can mean a variety of different reasons. And the tip of the spear oftentimes is learning content, they might come because they want to, quote-unquote, take CRO school (Chief Revenue Officer School), which is a 10-week program that we’ve designed to help prepare people to take on that job. So they come for an acute need, and then they stay. They stay because they feel a sense of connection, affinity and perhaps even status that is connected to the community. And so in that way, the euphemism comes for the learning. LinkedIn always was come for the tool stay for the network. And for us, it’s come for the learning, stay for the community, and stay for the human connection.

And when they don’t stay, because they don’t always stay, it’s because we were not able to deliver that sense of human connection in a meaningful or substantial enough way, that they felt like it was a need that was perpetual. So again, sometimes people come in because they want to take a specific learning program, and then their expectation is, I will immediately cancel my membership. And our job is to debate that internally, to be honest, and figure out if we want those customers in the first place. Do we want to reframe them and tell them not to sign up until they’re ready to be customers for life? Or do we want to take those people that are thinking about the membership experience more transactionally and see if we can do a bit of jujitsu if we can flip their orientation and educate them that there is a need for ongoing community? That’s kind of how I think about it a little bit.

Sometimes people subscribed because they want to take a specific learning program, and then their expectation is, I will immediately cancel my membership. And our job is to debate that internally and figure out if we want those… Click To Tweet

Robbie Kellman Baxter: I find that really helpful- the idea of people coming for one thing, but staying for another, and this idea of what are the acquisition benefits. I’m here to get another job. And I need to brush up on my tools. But once I’m here, I can be more vulnerable, and I can talk to people and really learn. And find people that are like me.

What do you think about balancing the investment? I’m sure you talked about new courses, new instructors. And there’s also, as we both know, there’s a lot of effort and work that goes into community, you don’t just open up the platform, and people show up and have meaningful engagement and organize important and meaningful events.

Sam Jacobs: A ton of work. I would be dishonest if I acted like this has been a perfect journey up into the right for our organization. So I’ll tell you that we’ve made a big mistake over the last nine months that we are undoing, and it’s because we underappreciated the investment in community relative to the investment in learning. And so one of the keys to our success early on was that we were pretty generous with revenue shares. In some ways, Pavilion is like a multilevel marketing organization. Because we take local advocates, and we take representatives and leaders within specific cities, and we turn them into, we called them chapter heads. And we were very generous with the share of revenue that we shared with them as they grew their chapters. And what happened last year was that our growth was slowing down. And our member satisfaction was nominally declining, not significantly declining, but it wasn’t where I used to be when we were young, an upstart organization, and we were paying millions of dollars to those chapter heads. And so and this was a huge mistake.

So for anybody out there listening, always remember the lessons of community and what actually creates a sense of personal loyalty, a sense of commitment. But the point was that I thought that people didn’t need these chapter leaders to the extent that they needed them. I thought that we could do better if we did more central planning. And it was really more of a learning-based platform, people didn’t really need a weekly newsletter from their local Boston representative, we could do anything that they needed, and we would create a different structure that would create still a sense of community, but in a cheaper, more efficient way.

And you may think that a line that’s going slightly down is a bad line until you see a line that’s going steeply down. And so we kind of botched this transition, and we got away from our roots. And we’re realizing now that it was a big mistake, and we’re bringing chapters back. And we’re trying to do it in such a way that we can balance the investment.

So I guess the point is, which is a long way, I think calling it investment is one thing, I think it’s really about incentive alignment. And that’s where I’ve got a call tomorrow morning to talk. It’s not that we were paying them, quote-unquote, too much money, it was that we were paying too much for gross margin and not enough for acquisition. And too much for retention. And I don’t mind paying a lot of money if they’re growing the business. And so the realization that I’ve come to is, first again, we need to invest in community.

The other thing I would say is beside the key point, the incentives need to be aligned. But the second point is, I made too many investments in one-to-one interactions between people that work directly for me at Pavilion, and connections with members all over the world. And the better way to think about it, if I could go back in time over the last couple of years is instead of investing in too many people that took calls from members all over the world, we took that money and invested it in systems infrastructure, operational support to give us better data and reporting that we could then share with our local representatives who you might think of them as franchisees, we call them chapter heads. But it would have been better to invest in empowerment and enablement of the local community than trying to build a centrally planned top-down organization.

I think one of the ideas that I’ve really come to believe over the last couple of months is that community, there’s a certain amount that needs to feel consistent. But there’s a certain level of inconsistency that is a feature, not a bug of having this federated network of people that everybody’s going to feel free to innovate and create new kinds of events and new kinds of experiences. And that shouldn’t be discouraged, that should be encouraged. And so we’re bringing back chapters, and we’re not just thinking about more growth incentives, but we’re thinking about all kinds of things that we might be willing to let them do that previously, we didn’t want to let them do, like, accept money for selling sponsorships so that they could pay for stuff or create local, just more of a local franchise. So long answer to your question, but that’s sort of those are some of the learnings over the last couple of months and years.

Robbie Kellman Baxter: It’s fascinating. And I know it’s a constant battle, the centralization versus decentralization and consistency, versus quirkiness, intimacy, it’s hard to have intimacy with consistency.

Sam Jacobs: Exactly. We did this roadshow last year where we did all this and we went to nine different cities and did these big events. And in doing so, one of the moments I’m like, we gotta get rid of these chapter heads because I went to a bunch of cities where I’m like, this person is not a good representative of my community, how did this person get into a leadership position, but then I would go to other cities, and the people would be amazingly representative of the best that’s possible from Pavilion. And I thought that inconsistency needed to be stamped out and we needed to be much more machine-like and how we sort of the point like, it would have been better, instead of throwing out the entire structure and saying, we need to run this, from a top-down perspective, what I should have done is said, it’s okay to replace the person, let’s go replace the person in that particular city, as opposed to throwing out the entire structure.

Robbie Kellman Baxter: Really interesting. It’s hard to know when to throw it away and start over. And when you can tinker with what you have. When the core is basically good and there’s room for improvement versus kind of a rip-and-replace situation.

Sam Jacobs: Yeah, and it’s a big learning. I tell this to CEOs and founders that are my peers, and they say, yeah, you are on the journey, you’re not going to be perfect, you’re gonna make mistakes, and the whole is to try and not make existential mistakes. And, again, I think one of the key learnings that’s not specific to a subscription business, but just specific to my journey as a CEO, is, sometimes you need to go fast to go slow, slow down to speed up, like, if you want to change something, let’s have a program where we test the change as opposed to but I have this great sense of abiding and patience, and I just want to rip everything out and start over because I can’t wait to get to this vision that I have in my head. And what I’ve had to learn this year is things are going to take a long time and it’s better to slow down and be deliberate as opposed to being rash and foolhardy.

You are on the journey, you're not going to be perfect, you're gonna make mistakes, and the whole is to try and not make existential mistakes. Things are going to take a long time and it's better to slow down and be deliberate as… Click To Tweet

Robbie Kellman Baxter: Yeah, but I will say that there’s a book by Marshall Goldsmith great book, but an even greater title, which is What Got You Here Won’t Get You There, which I think is often the challenge that the things, the speed and the willingness to go fast and to throw stuff away and try again is great in the entrepreneurial phase. But as you’re scaling, maybe you’re a little more deliberate, a little more careful about what you’re doing, slow down to go fast.

I think people struggle with these issues all the time. And I’m very grateful that you’re sharing a couple of your experiences in the trenches because I know, it’ll be helpful, since learning the hard way, the whole point of this show, and I think maybe to some extent, the reason for Pavilion is to help people coming behind us avoid the bumps in the road that we experienced.

You’ve grown quite a bit and you just talked about your impatience and your ability to go fast. And I’ve heard you speak before about how early on you went with your gut. And as you scaled, you realize that conviction isn’t always enough. And you’ve moved to go slow to go fast kind of approach more data driven? I think people know that they should be moving slower and going with data. Sometimes you don’t want to just go with your gut. But how do you decide this time I’m going with my gut and this time, I’m going back and looking at the data.

Sam Jacobs: First of all, is there data? So that’s like one of the first vectors of decision, right? And then some notion of whether is this a creative decision. Or is this a more process or systematic decision, pricing and packaging, that’s not a gut-based decision. Now, at the very, very beginning, maybe it can be, but we kept making decisions based on price. And we’re at a point where it’s something that you need to test. So we finally did run a bunch of tests, because we have members paying a bunch of different price points. And we saw that there are very different retention characteristics based on how much they pay.

And so over time, now, there’s a question still about if you’re charging more than you think is optimal for the current economic environment, which I will admit, I think we’re a little expensive right now, how do you get to the right price point without offending the existing customer base.

And that’s, again, a thing that you plan, that’s not a thing that you just have intuition about. That’s the thing that you can research and you can talk to people. They’re pricing experts out there, you’re not the first company in the world that ever thought we need to figure out a way to lower our average price without throwing away millions of dollars of revenue. On the other hand, there are taste-based decisions like the name of the company, we were called something else at the beginning. And I changed the name to Brazilian. And that wasn’t something that I hired a marketing agency to help me review five different options.

I thought, our old name was Revenue Collective, there are lots of people that still love that name. But I found it to be too inward-looking to us versus them. And I wanted Pavilion, at least to have the chance to be a much bigger idea. I think it’s fundamentally about the ideas in the book, more than really anything else. And so I was on a run, I knew that we needed a new name. Or at least I thought that we need a new name. And I saw that name in my head. And I saw the color palette, which is similar to your Forever transaction books, and your color palette is a red-based color palette. And I saw the ticker dollar sign PVLN in my head. And so I came back. And that was an intuitive decision, that was not a database decision.

So the answer to your question is if it’s truly creative, and what are the things that you’re particularly good at? Do you know, your superpowers? I have a podcast with my friends, AJ and Asad and we were trying to think of a name. And we use chatGPT and a bunch of other stuff. And nothing, I didn’t think anything was particularly inspiring. And then, I said, “Oh, I think the name should be “Topline” because it’s a reference to revenue.” And I just think it’s a catchy name. And I think I was right about that.

So there are creative decisions and there are also decisions that were down to your strengths. And then there are decisions where you have lots of data, where there’s potentially a big impact, where that’s something that you should be more deliberate about.

Robbie Kellman Baxter: I think people struggle with that. And my favorite part of your answer was, first, you have to have data because you’re right, that is like the first break in the decision trees- do I have a choice? Or because early on, I think for a lot of people listening, they’re thinking, “I don’t have a lot of data. And to some extent, I have to go with my gut.” But your point is that when it’s a decision like pricing or packaging, that’s well-worn territory, there are a lot of people who’ve made those decisions before you and thought about them harder than you ever have. It’s worthwhile to see what they’ve done before you make a decision.

And I think people also feel sometimes like their business is completely unique. And one of the reasons why on this show we have guests from different kinds of business models, professional communities, software, streaming, heavy equipment, whatever it is, is to see that even different kinds of companies have the same issue, right? How do we lower our prices without throwing away millions of dollars of revenue, how many tiers do we need, or what’s the right relationship to have with our local franchise owners or chapter heads? Those are questions that it’s not the first time.

Sam Jacobs: 100%. I mean, I realized that when we’re doing our prep call, because you’ve studied so many of these businesses, and like you said, we’re not that unique. People have been coming together in communities and seeking human connection for 10,000 years, 100,000 years, you know, animals have done it. So sometimes we think our problems are very, very special and specific. And lo and behold, they’re not.

Robbie Kellman Baxter: What do you think is harder acquisition or retention?

Sam Jacobs: I found retention to be harder. In a membership organization, retention is acquisition. That’s sort of one of the keys. We were bringing back chapters to help with churn and then I realized, well, the only way to grow a community if you don’t have any of the other stuff, like learning or specific courses, or certifications, the only way to grow is through word of mouth because articulating the value proposition and a kind of demand generation capacity is very hard.

In a membership organization, retention is acquisition. Click To Tweet

It’s pretty amorphous–join this club. It’s like, “Okay, well, I’m going to click on an ad when I have like an acute need probably, and I don’t know when I’m ever going to really need to sort of join a club ambiguously, maybe it’s brand advertising, maybe it creates awareness.”

But what we realize is, when you focus on retention, which is you make your members happy, they tell their friends because they’re proud. And I think one of the things that you’ve said in the past, which I just wish we could lean into as an organization even more is you want to find ways of celebrating your members and bestowing status upon them and giving them recognition.

What is the perfect example of that, you know, our earliest growth strategy was really simple. We had everybody put the fact that they were members of Pavilion on their LinkedIn profile. And now we have 60 to 63% of our total membership, listing the fact that they’re in Pavilion on their LinkedIn profile, which is effectively a source of our brand strength. That was our demand generation strategy- a bunch of people saying I’m part of this club. And when other people saw it on their page, and they felt like they wanted to be part of that club, too, then they signed up and joined. So that’s part of how we thought about growth. The point is, if I want people to join, then I need people to stay. And the more people leave, the less people are going to “Well, first I’m going to need more people to join to just stay where I am.” The thing that accelerates growth is having happy members and word of mouth, especially in a thing like community.

 

Retention in Subscription: In a membership, organization retention is acquisition. When you focus on retention, which is you make your members happy, they tell their friends because they’re proud. If you don’t have any of the other stuff, like learning or specific courses, or certifications, the only way to grow your community is through word of mouth because articulating the value proposition and a kind of demand generation capacity is very hard.

 

Robbie Kellman Baxter: Yeah, that’s a good answer and follow-up question from that. Have you identified any tactics? You mentioned having people post that they’re members on LinkedIn. Any other techniques that help accelerate or strengthen the impact of your members. Some organizations, for example, have referral programs, sometimes with a prize or reward, other times just a status, or other times with nothing, or other ways of creating impetus for people to either make referrals or bring in their friends in some way.

Sam Jacobs: We have a referral program and we haven’t weaponized it enough is the honest truth. It’s sort of it’s adjacent, it’s not core to what we’re doing. And that’s actually something that we’re thinking about and working on quite a bit. So yeah, again, making referrals seamless and easy, is big. I think taking, not just like having people post, but giving people a podium, and creating some kind of natural evolution where you join as a novice or a student, and eventually you become a teacher. And then the reason that you stay is to continue to give back and to teach and to have some kind of like I said, podium, someplace where you can project your expertise and your stewardship of the brand and your service to others.

So of course, that means teaching at Pavilion University. And it means celebrating our instructors and giving them speaking opportunities at our events, but all of it creates this virtuous cycle. Frankly, sometimes we lose track of it, because we’re a small organization, there are only so many things we can focus on. But yeah, for me, it comes back to like, how do you take people that are ready to lean in, that are ready to give back? And how do you raise them up, so that they feel like their efforts were rewarded, and they can serve as role models to other members to say, when you want to create a name for yourself, you can do so within this community, and the rewards were down to your benefit.

Robbie Kellman Baxter: It’s so important in a membership organization, the things that you’re doing make sense to me to recognize people. I always say that you want to be like cheers bar the first time, give them a sense of belonging, being recognized, getting what they need, being welcomed, and made to feel at home. And then the next thing on Maslow’s hierarchy is this status, which is either being recognized for your accomplishments or being recognized for your contributions. And they’re both really important in a community and it also gives people a place to stay, right? Because the reason to stay is because we love to be helped. But even more, we love to help, it makes us feel really good to like I find out if you’ve ever had the experience of calling someone and asking them for help. And saying, I just need 15 minutes. I just want to pick your brain on this one thing, and then they end up being the one who stays longer because it’s so fun to be helpful.

Sam Jacobs: That’s the whole point of my book. The point is not only is it fun, but it’s a strategy to achieve success. People love. It’s powerful. I’m not being Machiavellian, but you create a sense of obligation. And then when you don’t do anything about it, it’s even more powerful. You know, when you don’t immediately cash it in when you’re not transactional when they say how can I ever repay you? And you say, you don’t need to repay me just think of me.

Well, when you’re out there in the world, you know, that’s the whole sort of essence of the book.

Robbie Kellman Baxter: Yeah, I think that’s powerful. Life’s a long time. You mentioned that a couple of years ago, you took a big growth round. Can you talk to me about, as a membership organization, why you chose to bootstrap first, and also why you decided to take a big round, and all of the stress and challenges that those expectations bring?

Sam Jacobs: Well, I bootstrap. I don’t really have an option. So I didn’t feel like it was a particularly investable business, these businesses are very, very hard to get to even the scale that we’re at. And they’re even harder in our price points to get to 100 million in revenue or beyond, although I do think it’s possible.

So, bootstrapping was a necessity. I just wanted to make enough money, you know, that I couldn’t get fired, and I could support myself and my family. It became more successful than I anticipated, by a lot. And then somebody came and said, “We want to invest $25 million.” And the market back then. So again, yes, like the funny joke of kind folks finish first in a 0% interest rate environment. But the market back then was such that $25 million did not go mostly to the company, it went partially, to me and partially to the company, because we were profitable, and we didn’t need the money, necessarily.

So that was an offer, as the mafia would say, “Too good to refuse”. So, and it was also because I felt like the valuation was full, but not wildly excessive, our investors were in it, you know, around 100 million, we were only doing 4 million in revenue, then. So that was crazy. But we’re gonna do close to 20 now, and a five times multiple on that is not out of the realm of possibility.

I think it’s a function of the markets that were four times bigger than when they invest in or probably worth, about the same as they paid. But I can’t control valuation. I can only control what I can control. But that’s why I decided to take the money because it was a wealth creation event. For me, I still retain control of the company, it was a great deal.

And then the second part of your question is what are the drawbacks? And I can say it with fuller awareness. Two years down the road. Yeah, there are significant drawbacks. It heightened my ambition, which caused a diffusion of focus as we tried to do too many things. And that’s part of what got us into trouble. We tried to be a community for more people than executives, we had the notion that we were going to start a People Pavilion, an HR Pavilion, and a Legal Pavilion, and we’re going to create communities, and all of these other areas where I had no particular subject matter knowledge or expertise. That was a mistake. That was an error, we should have just stayed focused on exactly who we had grown up serving because there were still so many more people that weren’t members. And so the natural thing to do would have been to just keep focusing on the people that we were originally forced to serve. But again, you know, these are all growing pains, and it’s all lessons learned. And sometimes all of it is about getting back to the essence of why you started this thing in the first place and making sure that you could stay
true to it.

Robbie Kellman Baxter: I’m wondering, do you have time for a speed round?

Sam Jacobs: Yeah, of course.

Robbie Kellman Baxter: First subscription you ever had?

Sam Jacobs: Netflix, maybe cable? The electric bill.

Robbie Kellman Baxter: Favorite subscription that you’re using today?

Sam Jacobs: That’s interesting. I do like Strava. So Strava is it’s just a fitness app that I record all my runs on. And there’s a community and you get likes from other people. And there’s a social component to it. But for me, it’s just the easiest way to archive all of my exercises. So that’s the first one that comes to mind.

Robbie Kellman Baxter: Awesome. So that tells me a lot about you. So I’m an advisor to Strava. And we had a huge fan and had their chief revenue officer as a guest on the podcast last season. Talking about similar topics, scaling.

Sam Jacobs: They can do a lot more with their analytics. Their analytics are pretty frustrating. But again, it’s just the easiest way for me to just record without having a separate app for where I ran, and what I did.

Robbie Kellman Baxter: Slight digression, do you use it to stay connected to people a little bit or support your fellow runners or your riders?

Sam Jacobs: I was but I felt like it was a little unhealthy and I felt like I was living for other people. Like there’s a part of when you’re running on Strava that you’re afraid to go slow because other people will see your time and I’ve become slower in my old age. And now I log in less, to be honest, but I use it because I like drawing shapes with my running. So I’m like, “Look that looks like some kind of stick figure.”

Robbie Kellman Baxter: That’s funny. Do you have any pet subscriptions for your dogs?

Sam Jacobs: No.

Robbie Kellman Baxter: Favorite business book that you didn’t write?

Sam Jacobs: There are two books. First, just the core business book is High Output Management by Andrew Grove, which is sort of like one of the Bibles of Silicon Valley. And then Disney War by James Stewart and it’s about the history of the Eisner CEO tenure at Walt Disney Corporation. And I just really love that book.

Robbie Kellman Baxter: And a single tip for founders trying to scale in this pretty difficult environment.

Sam Jacobs: Stay lean and stay extremely focused on your core customer. And don’t assume you need to build new products or services until you’re really near $20 million in revenue. Stay focused on your core customer. Keep doing what you’re doing. If you’re the kind of person that gets bored, find other things to divert you, but seek the boredom of repetition.

Robbie Kellman Baxter: Sam Jacobs, thank you so much for being a guest on subscription stories. It was a pleasure to talk to you.

Sam Jacobs: Thanks for having me.

—

That was Sam Jacobs, author of Kind Folks Finish Founder & CEO of Pavilion. For more about Sam Jacobs and Pavilion, go to www.joinpavilion.com. Also, I have a favor to ask. If you like what you read, please take a minute to go over to Apple Podcasts or Apple iTunes and leave a review. Mention Sam Jacobs and this episode if you especially enjoyed it. Reviews are how audiences find our show, and we appreciate each one. Thanks for your support.

 

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About Sam Jacobs

Sam Jacobs is the Founder & CEO of Pavilion. He launched Pavilion as Revenue Collective in 2016 and bootstrapped the company to $10M in ARR before taking on a $25M growth financing round in early 2021, led by Elephant Ventures and GTM Fund. Prior to Pavilion, Sam spent 15 years as a senior revenue leader at VC-backed companies in the New York area including Gerson Lehrman Group, Axial, Livestream/Vimeo, The Muse, and Behavox. He lives in the West Village of Manhattan with his wife and two dogs, William and Oswald, and mourns the passing of his beloved Walter in the Summer of 2022.

 

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