There are many challenges startups face when they try to spin out of another
company, especially when they have a product that wasn’t initially built for
commercial use. However, it’s possible to find success in these kinds of
situations. Toronto-based startup Sensei Labs is a living example of that. They
offer an enterprise orchestration platform that spun out of a parent
organization called Klick Health and are finding success all on their own.
Sensei Labs co-founder and CEO Jay Goldman joined the Midstage Startup Momentum
Podcast with Roland Siebelink this week to talk about the challenges and
triumphs his company has experienced in this situation. Jay offered many key
learnings that can be applied to startups in all industries and all situations.
- How Sensei Labs was born out of a book - The Decoded Company
- The challenges that await when turning a proprietary software into a commercial product.
- The headwinds and tailwinds that become possible in a spin-out startup.
- Why Sensei Labs started its go-to-market with a partner channel.
- What startups should keep in mind when customers ask for exclusivity.
- What a carve-out startup should focus on during its first year after spinning out from its parent
Roland Siebelink:Hello and welcome to the Midstage Momentum Podcast. This
is Roland Siebelink and I am a scale-up ally and advisor to many of the fastest
growing startups in the world, one of which is in our studio today. It is Sensei
Labs, and we are so honored to have co-founder and CEO, Jay Goldman with us
today. Hello, Jay, how are you?
Jay Goldman:Hello, Roland. Pleasure to be here.
Roland Siebelink:Absolutely. Thank you for finding the time to talk to us.
Let's talk about Sensei Labs. What do you guys offer? Who do you target? And
what difference do you make for them in the world?
Jay Goldman:Sensei Labs makes an enterprise orchestration platform called
Conductor. It is sold into mid and large size enterprises globally to help them
orchestrate their most critical initiatives. That tends to be things like
transformations, acquisitions, post-merger integrations, supply chain and
procurement optimizations, ESG programs, technology delivery. The large programs
that can often run multiple years and have sometimes even hundreds of people
working on them and are responsible for delivering often hundreds of millions of
dollars in benefits to those organizations.
Conductor is what we call an orchestration platform. It is the combination of
project portfolio management and collaboration, KPI data, and benefits tracking,
and collaboration all in a single platform together. And we really help those
organizations to de-risk delivery of those critical initiatives and to reduce
the cost of delivering them as well so that they can accelerate benefits
Roland Siebelink:As a layman, my impression is it's project management
software on steroids. Is that my layman understanding in the right direction?
Jay Goldman:Yeah. That's definitely directionally correct. We think of it
as that, but really a lot of what we think of traditionally as project
management software - the kinds of tools that come to mind, Microsoft project,
for example, might be one of those examples - those were built for a different
kind of environment and a different scale of problem and challenge. When we
think of transformation, particularly - and really everything we do fits broadly
under the banner of transformation - that has traditionally for organizations
been a transformation project. We're going to define a scope and a scale, we're
going to deliver a two or three-year long program, it's going to generate $200
million in benefits, and then we'll be done. And that is the same kind of
thinking that tends toward traditional waterfall-driven project management
But we think of that as the business-as-usual state, and the way that the world
exists today is more business as unusual more than it is business as usual. As
we are in more and more of these unprecedented conditions, pandemics,
supply-chain crisis, conflicts, and inflation, and all of those things, they are
leading to an environment in which the tools and the ways of working and the
approaches that enterprises have traditionally taken are no longer sufficient
for them to keep up with that rate of change. We have to shift from this
mentality of transformation projects to this idea of a constant state of
evolution as a strategic advantage. That's what we really refer to as enterprise
orchestration. And the tools and technologies that built the environment that
we're in today can't therefore by definition be the ones that help to resolve
the challenge in the future. And Conductor is one of those next generation - if
not, maybe the only next generation - tools that are built for this new world we
Roland Siebelink:Okay, perfect. Is this an observation you've had and a
particular insight into how enterprises are changing and that they need to start
thinking of a different way of transforming their business that you then built a
tool for a trend that was already happening? Or does it feel more like you have
a way enterprises should be more effective in their transformations and you're
trying to sell both the methodology and the tool at the same time?
Jay Goldman:Yeah, a bit more of the latter. We have had the opportunity to
have a seat at the table to help orchestrate some really significant
transformations globally for Fortune 50 companies, Fortune 1,000 companies. As
we've run thousands of projects that fit under those transformation banners,
we've had a chance to see what works and what doesn't work. We've had a chance
to observe where the early warning detection points are in those
transformations, and that is now built into our platform as an intelligence
layer that helps people to look for those early warning signs that things might
not be going well and to correct for them so that they can get back on track.
This is the combination of technology and tools that help you to run those
transformations better and then also the methodology that fits around. And all
of that together is what we call enterprise orchestration.
Roland Siebelink:I'm curious how you got into this field. Did you have
functional expertise and experience in this field already? Or was it just like a
light bulb that went off one day? Can you talk a little bit about the history of
Jay Goldman:Yeah, absolutely. And it's a bit of an interesting origin
story. It's a bit different than I would say most startups. For your listeners
who come from a few team members who got together and started a company and have
built and scaled it, we are not that story. But there's definitely some
parallels that I think they might find interesting in terms of how you pivot
toward market fit and how do you think of that as a constant state. Rather than
a check mark that you have achieved product-market-fit, but rather the
understanding that over time you need to continue to iterate in a state of
If I go back to 2013, the founding members of Sensei Labs were part of the
senior leadership structure in a larger organization called Klick. Klick Health
today is the largest commercialization partner for life science companies in the
world. Think of it as a marketing agency, technology partner, commercialization
expert that works with biotech and pharma companies to bring life-saving
therapies to market. And we had built a platform for ourselves to use that was
part of what was powering Klick's ability to scale 30 to 40% year over year,
which it has consistently done since it was founded in 1997. We got asked about
how we were able to continue that rate of growth.
We decided that we would write a book that explained how we went about thinking
through building this talent-centric, data-driven organization using technology
and data as a significant underpinning, this platform that we had built
internally for ourselves called Genome that runs everything that happens at
Klick, and that we would tell some stories of other companies that were taking a
similar approach. We wrote a book called The Decoded Company. It came out in
The unexpected thing that happened is we happened to write a book at exactly the
right moment that was at the intersection of a trend around big data being a
topic that people were starting to talk about. And at a time where people were
really starting to dig in and talk about people-centric or talent-centric
cultures, and what it meant to build that hyper-growth environment. And so the
book did incredibly well, far better than we had expected. It became a New York
Times best seller and gave us a chance to speak around the world.
And everywhere we went, very consistently, when we came off stage, there was a
lineup of people who wanted to know where they could buy this software that we
were talking about at a hyper-growth organization. And they wanted to know how
they could build that same culture in that same environment. We are
entrepreneurs and we said very quickly, maybe we should really think about how
we can bring this to market as its own tool. It had never been built with that
intent, so there was a lot of thinking that we had to do around that. And we got
dragged into that market because at around the same time while we were out on
the speaking tour, we got contacted by a CEO of - today, they are actually the
second largest mortgage lender in the US, it's a company called UWM - he had
seen a demo of Genome on a tour of our office and he really wanted it for his
team. He basically said to us,"Look, you've given me a choice here. Either I can
build this thing for myself or I can buy it from you. But if I have to build it
for myself, then you can never call yourselves entrepreneurs again."
And I'm sure for all the entrepreneurs who are listening to this, that is the
ultimate threat to your self identity. We weren't gonna take that as a
challenge. We said, "Okay, we'll sell the platform to customer number one. But
we've never done this before. We have no idea if it's going to even work, so you
have to go into it with that same spirit of experimentation and we will try this
together." And we signed them up as a customer. They launched in June of 2015,
and we have just renewed into the eighth year of our subscription together.
Roland Siebelink:What were the particular challenges of turning a product
that has never been designed for external use, as you said, into something that
could be commercialized?
Jay Goldman:There are a few things that come up in there. Some of them are
just strictly from a technology perspective. When you build a platform for
internal use, you don't take into account a whole bunch of things that you would
if you were building this externally. There were some really funny ones that
came up. If Klick's chairman wasn't the top of your org chart, the whole
platform didn't work. And so, we can only sell it to companies that were willing
to take him on as the head of their org chart or we have to change the way that
that whole system worked.
But there is a bigger issue that comes up here. And I think it's probably
different if you were already a software company and then you have a new product
that you were maybe using internally and you decide to turn it into software.
Most of the time what happens when you are building a software platform inside
of something that's not a software company, there is a big cultural difference
between running a professional service organization and running a software
organization. And we were very fortunate that Klick's co-founders, who are also
co-authors of The Decoded Company, Leerom Segal and Aaron Goldstein, were both
very much on board with building the software company and understanding that we
were going to have to look at it differently. But I think that's a big challenge
that will come up for listeners who might be today part of a professional
service organization of building a platform.
Roland Siebelink:It's really about turning from an intra-preneur to an
Jay Goldman:Right. And getting even to the point where you're enabled to do
that is a bit of a challenge. When you look at it, for example - and I'll use
professional services and software because it illustrates the point -
professional services companies tend to be bootstrapped. You are from day one
selling your services and your services pay for themselves. And if you're able
to realize a decent margin on that, you have investment capital to spend on
growing the business. But you're never in a position where you are investing
more than the business is able to earn - generally speaking, that's not always
true. But you don't tend to go out and raise external investment into services
businesses. It's very difficult to do that anyway because the multiples just are
not there on scale.
However in a software world, that's not necessarily true. If you have a culture
that's been built up in services around that idea of bootstrapping and funding
yourselves, and then you decide to create software, you may be in a position
where you have to over-invest relative to culturally what the organization is
used to investing into future growth. That's one thing to keep in mind there.
The second is that just the structure of the organization may not lend itself
well to that. And by that I mean, literally at the level of something like the
structure of the general ledger from an accounting perspective tends to be built
around how do we track a professional services business and not built around how
do we track a SaaS platform. And if you're in the mode of, we sell contracts
which are hours against delivery, rather than we sell annual subscriptions to a
software platform, very different business model.
There are a whole bunch of roadblocks and obstacles. It can be an incredible
headwind or an incredible tailwind as a spin-out out of an organization. And
that's really just how you manage that process and how you learn from it as to
which one of those things it will be.
Roland Siebelink:Let's go back a little bit to the go-to-market. You said
that the origin story of Sensei Labs was that so many people are lining up to
try and buy your software, so I guess initially your go-to-market was not that
much of a challenge. But I am also guessing that that line dried up at some
point in time and you had to go and find proactively customers for yourself.
That's a big challenge for many of the listeners of this podcast as well. How
did you identify your ideal customer profile? How did you start reaching out to
them? Basically, what have you learned about your go-to market motion?
Jay Goldman:We go to market through two different channels. One is direct
to large enterprises and the other is through partners. For us, partners look
like large service delivery firms, often in management, consulting, systems,
integrators, that kind of thing. We actually started with the partner channel,
which is a rare thing. Most of the time you get to the partner channel later.
But we were very fortunate in that one of our early direct customers, some
partners from Kearney, the management consulting firm, were in there delivering
a pharma-related solution and they had a chance to see something that we had put
in place on our platform to manage a global product launch for a pharma company.
And they got very excited by what they saw, both as this should be the gold
standard for pharma launch but also as this is something that we could use
internally for Kearney. They have been looking for a platform for about two
years at that point. That brought together into a single platform both project
portfolio management and KPI benefits track in a single place.
They got quite excited and asked us if we were interested in together
customizing a solution for them on our platform that they could use as their
delivery platform or their orchestration platform on a global basis, which of
course we were very excited to do. We've now had a partnership in place for
Roland Siebelink:It's like a multi-level marketing game you're playing
here. Your customers are using it and then also are bringing in new customers
Jay Goldman:Exactly. That's why we really liked the partner side of our
business. We've got such a great case study there, and Kearney's been quite
happy for us to speak about that publicly, and that's been helpful in us scaling
that partner side. Sometimes, you luck out and you get an ideal customer profile
in a customer that you have. Then your job is to look for the lookalikes to that
ICP and find who are the - in this case, who are the other management consulting
firms that might look somewhat like Kearney, maybe on a different scale. Kearney
is in the top 10 from a global management consulting firm. There are obviously
only nine others in the top 10. Maybe you want to look into what does the top 50
look like? And maybe they're a little bit smaller, but they're aspirationally
trying to look like an existing customer that you have. And that makes it a
great case study that you can share.
Roland Siebelink:Okay. How do you feel about partnerships when partners ask
for certain exclusivity or being the only partner in their field? That's often a
barrier that I find many founders have to overcome. How do you feel about that?
Jay Goldman:Yeah, I don't think there's a black and white question. You can
just say never do exclusivity or always do exclusivity. It's not that simple.
There are definitely shades of gray between the two. And you need to think about
this as something that you are giving up in exchange for value. If you have a
potential partner and they insist on exclusivity and you're not getting anything
for it, then just say, no. There's no reason for you to give up that thing. This
is an exchange of value that you need to get out of having given up exclusivity
because it is something that you're giving up.
But you need to look at that exclusivity and make a decision around what you are
actually giving up. And that's a bit of an internal calculation. If you have an
extreme example and someone says, "You can't work with anybody else in our
industry," then you are giving up a very significant volume of business in
exchange for that. And often, you are the one taking on the risk. What they're
saying is "Look, we're not working together now or if we are, it's just a small
pilot amount of revenue, but we want to expand this significantly." And they
will say, "We're going to take a risk on picking this as the platform that we go
ahead with. And you're going to take a risk by not working with anyone else."
Those two things are not equal. Don't be deceived by that trade off in value.
You are taking on all of the opportunity costs of this being the only way that
The other way to think about exclusivity or a term like that is think about it
on a time-limited basis. If you have a partner that comes to you and wants
exclusivity, one of the ways to manage it is to look at it and say, "Okay, we're
comfortable with this on a 12-month basis. We agree for the next year that we
won't work with this exclusive list of people that you don't want us to work
with. And we will renew that exclusivity if the following conditions are met in
that 12-month period." How do we time box this in a way that's minimizing the
risk that we're going to take on and guarantee that for them to preserve that
exclusivity, they have to do some work to get there.
Sometimes for a partner - it depends on what you're selling and what they're
selling - just having that exclusivity is the thing that they care about. If
they're going to use you in their sales pitches - and we can use an example of
you're going to talk to a service company who wants to bring Conductor into
their sales pitches, it's going to help them sell more consulting services.
They're not really in the business of selling software. For them, they don't
necessarily care whether the software part of the deal closes. What they care
about is that they look great because they have a technology platform that they
brought into the pitch. They don't want to be pitching against someone else
who's using the same technology because then that advantage goes away. But
really all they care about is that they're the only ones coming into that pitch
with that technology. The exclusivity is worth it to them because they're going
to sell more consulting services, but you're never going to get subscription
revenue out of that deal. You want to time box that and say, "Let's try this
together for 12 months. And if at the end of this, we haven't closed at least
this volume of new revenue."
Roland Siebelink:Right, exactly. Make it conditional.
I do want to ask one specific question that I think is only applicable to you
folks, as people coming from a professional services company then turning into a
software company, how do you avoid spending too much time on selling services as
part of your software?
Jay Goldman:Yeah. It's a great question because you will get dragged into
services. And you will also get dragged into customization, and customization is
a dangerous word. Configuration is a great word. When we look across our
customer base, it is exactly the same code, same platform, everyone gets the
same release on the same release schedule. That is the only way you should be
thinking about building this if you want to look for scalability and you won't
raise money if you are really building a whole bunch of custom solutions that
happen to be sharing the same product name but aren't sharing the same code
What you don't want to do is get into the business of building custom features
that require custom code, then require customer leases and all of that stuff.
One of the dangers here is you end up in the field of professional services,
which is really just writing custom code. People are paying you an hourly rate
to build features on your platform. And it's a nightmare from a maintainability
perspective and a scale perspective. But early stage, it's attractive because
you're getting revenue in the door. That's the thing that you want to try to
stay away from.
The right way to think about it is if it will get us to the next stage of
growth, we should do it today. We will either figure out how to make it scale or
we'll stop doing it when we get to the next stage of growth. If you're an early
stage enterprise software company out there right now, and you're trying to keep
the lights on, and the only way for you to do that is to take some money for
building some custom features, build the custom features. That's the right thing
to do for where you are today. Just don't look at it as a scalable practice.
Cause it's going to break when you start to get to a higher level of scale.
Roland Siebelink:Jay, last question. How big has Sensei already become?
What kind of traction are you seeing? And how big could it become 10 years down
Jay Goldman:We grew about 40% year over year from last year, which is a
pretty solid enterprise. We would love the number to be higher and are aiming
for a significantly higher number this year. But last year was really our first
year of post carve-out. One of the things that is just a general expectation on
a carve-out - this should be something if you are a carve out and you want to
manage with your investors - you should think about that first year as a
foundational year. You can get lots of stuff done, but you're also going to have
to put a whole bunch of things in place that you didn't have as part of the
parent. That is rebuilding some of your fundamental systems.
Often as a carve out - and this was the case for us. We were using our parent
company's financial system up until that point. We had to set up our own
financial system. We didn't have a CRM in place. We had to put that in place. We
had relied on a whole bunch of roles and responsibilities in our parent company.
We had to hire for those same roles and build those teams. You lose about a year
there to a whole bunch of that foundational work. Really important, and in a way
nice because you're actually starting at a clean slate. We were able to put in
place the right systems and the right people, rather than having organically
built this thing over a period of years.
We're about four and a half million in ARR when we closed the round. And we're
about 6 million in ARR today. It's been a good, solid growth period for us, even
though we were doing all of this carve-out operation. But that was really a big
part of that year. We have now got all of that in place. And so, for the last
few months have really been in growth mode and focused on that scale.
In terms of total adjustable market for us, it was never really a conversation
that came up that much with investors because it has the potential to be almost
a virtually infinite market in the sense that we help organizations to
orchestrate human potential. That's the best way to think about what we do. And
so, today we're focused on the large enterprise end of that market. But there's
lots of potential there. Really, we work with companies who do things - is our
market. And then the market of companies who do things is pretty big. We're not
concerned that we're going to run out of market space for us. In all likelihood,
the most likely path we end up on is that we are disruptive enough in the
enterprise software business that one of the much larger players wants to
acquire us. And at some point, someone is likely to put an offer in front of us
that we can't say no to.
But we build our company from a culture perspective, from a systems perspective,
and especially from a people perspective with that long term in growth. We are
always building toward the state of we will continue to build and scale this
company forever. We will have an IPO at some point. We will continue to grow
past there. And that puts us in the right long-term mentality rather than a
short-term mentality, where we might make some bad trade-off decisions that
emphasize our quarterly results over what will be a long-term growth for us.
Roland Siebelink:A hundred percent agree. This is very inspiring. Really
appreciate it,Jay Goldman, co-founder CEO of Sensei Labs. Where can people go if
they want to hear or find out more about Sensei Labs and what should they
Jay Goldman:Yes, absolutely. You can buy a copy of The Decoded Company
anywhere where you can buy books. If you prefer audio books, there is an audio
recording on Audible and other places where you can buy audio books. I will warn
you in advance that if you're tired of the sound of my voice after this podcast,
don't buy the audiobook cause I did the audio book as well. If you'd like
Decoded, it's available in any of those places.
If you want to learn more about Sensei Labs and our conductor platform, you can
visit us at senseilabs.com. You can also find us on various social platforms. We
do post a lot of content on LinkedIn, for example. Find us on LinkedIn and
follow us there. And if you'd like to connect with me, I am Jay Goldman on
pretty much every platform out there. You can find me on whatever social network
you enjoy and reach out to me there.
Roland Siebelink:Thank you so much, Jay Goldman. Again, co-founder, CEO for
Sensei Labs. Thank you so much for your time and inspiring teachings, I really
And for the listeners, thank you again for listening, tuning in.
And we'll have a new episode for you next week.
Roland Siebelink talks all things tech startup and bring you interviews with tech cofounders across the