Ara Mahdessian: ServiceTitan CEO on Building a $7BN Company Without Raising VC Funding | E1175

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Ara Mahdessian: ServiceTitan CEO on Building a $7BN Company Without Raising VC Funding | E1175

Intro (00:00:00)

  • Great leadership involves delivering extraordinary outcomes.
  • Executing where to play successfully involves making hundreds of great decisions on execution.

Childhood Experiences (00:01:05)

  • Ara Mahdessian was born in Iraq during the Iran-Iraq war.
  • His mother shared stories of how she had to rush to the bomb shelter during labor.
  • His family immigrated to the United States shortly after his birth.
  • His parents faced challenges such as learning a new language, finding jobs, and making ends meet.
  • Ara feels a responsibility to be worthy of the sacrifices his parents made for him.

Meeting with Byron Deeter (00:04:12)

  • Ara Mahdessian, CEO of ServiceTitan, initially hesitated to accept venture capital due to concerns about potential changes to the company's mission and values.
  • After seeking advice from another founder who had raised institutional capital, Mahdessian decided against partnering with prominent investor Byron Deeter and ServiceTitan continued to grow successfully without venture capital.
  • At a conference, Mahdessian met Byron Deeter, who had previously offered him an investment.
  • A mutual friend highly recommended Deeter to Mahdessian, describing him as an exceptional investor and a great fit for Mahdessian's values and goals.
  • Mahdessian texted Deeter expressing his interest in partnering, and Deeter promptly sent an Uber to pick him up.
  • At Deeter's house, they celebrated and signed the term sheet, but Mahdessian insisted that Deeter and his team conduct thorough conversations and due diligence with Mahdessian's team before finalizing the partnership.
  • The partnership between Mahdessian and Deeter has been incredibly successful, exceeding even their wildest expectations.

The Power of Product-Market Fit (00:11:09)

  • ServiceTitan's success story took over a decade to develop, not an overnight achievement.
  • The company's first customer, John Aoyan, owner of a successful plumbing company, saw the potential in ServiceTitan's vision and partnered with them.
  • Ara Mahdessian and Vahe Kuzoyan worked tirelessly for 6 months to build and refine the software to meet John's needs.
  • John's patience and courage in sticking with ServiceTitan during its early challenges were crucial to the company's success.
  • Ara believes that founders or leaders with a maniacal focus and conviction in the product are essential for successfully entering new markets or customer segments.
  • Ara underwent a wisdom teeth extraction without anesthesia, demonstrating his resilience and determination.
  • ServiceTitan achieved its success without raising venture capital funding.
  • Ara emphasizes the importance of customer feedback and agility in product development.
  • ServiceTitan's customer-centric approach involves listening to customers' needs and incorporating their feedback into product improvements.
  • The company's focus on customer success has been a key driver of its growth and success.
  • Ara highlights the value of having a strong team and a shared vision in achieving business success.

Key Lessons for Going Upmarket (00:16:11)

  • To successfully move upmarket, appoint a dedicated leader, understand the unique needs of the new customer segment, and focus on demonstrating the product's ROI potential.
  • Lead with a compelling founding story, be transparent about pricing by linking it to the expected ROI and customer benefits, and collaborate with customers to ensure they achieve the desired ROI.
  • Moving upmarket is challenging, and few software companies have successfully made the transition.
  • ServiceTitan co-founders Ara Mahdessian and Vahe Kuzoyan, both engineers, quickly assess the feasibility and value of potential product features.
  • They prioritize solving high-value problems that can be built quickly rather than pursuing the perfect long-term solution.
  • ServiceTitan is a premium-priced option in the market, potentially three times more expensive than competitors, but they emphasize the value and quality of their product to justify the higher cost.

Building a Premium Brand (00:23:32)

  • ServiceTitan became the premium product by delivering valuable solutions and creating a strong brand recognition.
  • In the tight-knit contracting community, positive word-of-mouth quickly spreads about beneficial products, leading to lower customer acquisition costs and higher close rates.
  • Customer success is crucial to ServiceTitan's business model, as it not only drives financial growth but also aligns with the CEO's personal mission to help contractors succeed.
  • ServiceTitan's focus on customer success, combined with the product's ability to generate high ROI in the contracting industry, has contributed to its success.

Timing for Launching Second & Third Products (00:31:33)

  • Start building the next product when the current product has great product-market fit and high success with customers.
  • Don't wait until everything is perfect with the first product before starting the second.
  • Product-market fit means understanding the purchasing process, ROI, and building the right product to support it.
  • Good product-market fit correlates with good marketing and sales performance.

ServiceTitan's Delayed Product Release (00:34:01)

  • ServiceTitan delayed the launch of its payment and financial products despite the growing demand in the SaaS industry.
  • The company had good product-market fit but struggled to achieve 100% product-market fit across the entire spectrum of its wide and deep product.
  • ServiceTitan should have started developing the payment solution earlier.
  • Ara Mahdessian believes he can improve as a CEO by inspiring those around him to achieve greatness rather than just demanding results.

Inspiring Without Fear in a High-Demand Culture (00:36:37)

  • Ara Mahdessian discusses how to create a high-intensity, inspiring work environment without instilling fear in employees.
  • He shares an example of a recent meeting with his product team where he emphasized the importance of launching a new product on time with exceptional quality.
  • Instead of resorting to harsh words, he motivated the team by expressing his trust in their abilities and highlighting the significance of their contributions.
  • This approach resulted in positive reactions from the team, who felt inspired and committed to delivering a high-quality product on schedule.
  • Ara Mahdessian acknowledges that he is a perfectionist when it comes to product, metrics, and driving the business.
  • He also admits to being particular about fashion, certain aspects of soccer, and coaching his kids' soccer team.
  • Ara clarifies that micromanagement, in his view, refers to situations where the CEO makes all the decisions or fails to hire and develop a competent team.
  • He believes that good leaders engage with their teams, understand their priorities, and offer valuable insights to enhance outcomes.
  • Ara rejects both micromanagement, where leaders make all the decisions, and pass-through leadership, where leaders simply relay information without providing guidance.

The Core Pillars of Great Leadership (00:41:26)

  • Great leadership involves making one or two big decisions a year and many small decisions daily.
  • The goal is to generate extraordinary outcomes.
  • One big decision is choosing where to play, such as upmarket or downmarket, or building a specific product.
  • Successful execution of the chosen path requires hundreds of great decisions.
  • Waiting six years to start using video was a costly mistake.
  • ServiceTitan now has millions of subscribers on YouTube.
  • Hiring leaders based solely on experience can be risky.
  • Some leaders may not have the right DNA or be team players.
  • Doubts about an individual's fit have always been proven justified.
  • The challenge is acting quickly and not hesitating.
  • The philosophy now is that when there is doubt, there is enough conviction to make a decision.
  • It's difficult to cut someone, especially a key hire, after a short time, but it's important to act when there are doubts.

How Football Impacts Ara's Leadership Style (00:45:17)

  • Ara Mahdessian compares his leadership style to football.
  • He believes football is the most intellectually challenging sport, requiring technical and tactical knowledge.
  • Ara emphasizes the importance of tactics and rotations to create overloads and outnumber opponents.
  • He pursues both business and football with a similar goal of continuous improvement and achieving perfection.
  • While winning is important, Ara prioritizes playing beautifully and developing his team's skills.
  • Ara discusses the current popularity of Major League Soccer (MLS) due to Lionel Messi's arrival.
  • Despite the hype, he observes that true football fans in the US prefer watching European leagues and the Champions League.
  • Ara, his friends, coaches, and players do not watch MLS matches.
  • He suggests that viewership may decline after Messi's departure.

Quick-Fire Round (00:48:03)

  • Ara Mahdessian, CEO of ServiceTitan, stresses the significance of customer success and having experienced board members in vertical SaaS.
  • Mahdessian emphasizes the value of learning from seasoned founders and industry leaders.
  • Contrary to popular belief, he has had positive experiences with venture capital firms, finding them authentic and aligned with ServiceTitan's values.
  • Reflecting on his journey, Mahdessian expresses gratitude for not fully comprehending the challenges he would face, as it might have discouraged him from starting ServiceTitan.
  • He highlights the immense rewards of parenthood, despite its difficulties, and emphasizes the importance of work-life balance.
  • Mahdessian identifies improving his ability to assess potential hires accurately as an area he would like to enhance.
  • He encourages self-psychoanalysis to understand one's motivations and vulnerabilities.
  • Mahdessian reflects on his personal journey and the evolution of his goals, acknowledging that he feels worthy now compared to earlier in his career.

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