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Contactually: The Intelligent CRM with Tony Cappaert

Our guest is Tony Cappaert, who is the COO and Co-Founder of Contactually. Contactually is a relationship marketing platform and a contact manager that helps professionals and companies generate more referrals and direct customers from their existing network. It is currently used by tens of thousands of realtors, small business owners and freelancers as well as my team and more. Before starting Contactually, Tony worked as an investment analyst for Grassroots Business Fund and prior to that, he worked at Microsoft as a program manager. Tony, welcome to the show.

Thanks for having me. I appreciate it.

I’m looking forward to learning more about the role you’re playing, how you got there and any of the lessons you can share for us as well. Maybe give us a little bit of background as to how you ended up where you are now.

I started my career in a little bit more of a technical role as a product manager at Microsoft building and designing features and ad center on the Bing website. We’re competing head-to-head with Google and then eventually found me in DC. I moved here with my girlfriend at the time, now my wife and wanted to start a potential company. I met with a few different folks who I thought would be kicking ideas around together. Eventually, I met my co-founder Zvi and we realize two things right away. One, we got along well and complemented each other well. Two, we had a bunch of ideas that were buzzing around and we were passionate about starting something. Contactually was born out of that initial energy and excitement. That’s the quick summary of how we got together and how things took off.

I didn’t know you’re from DC but that was where I first learned about Contactually. I was at an event there that one of my former clients was running. He runs a group called CADRE. Do you know Derek Coburn at all?

Derek’s a customer. He’s an affiliate partner. My co-founder is part of CADRE.

I was at an event there. I was speaking at it a few years ago. I was buzzing about some other company called SweetProcess and the whole room started laughing. I’m like, “What’s funny?” All of a sudden, the CEO stands up. He goes, “Hi, I’m Owen. I started SweetProcess.” I’m like, “This is bad.” That was when I learned about Contactually as well.

People think of DC as the hub of government which makes sense but there are a burgeoning tech community and tech scene here from the AOL days in the ‘90s that was based in DC. The bigger companies like LivingSocial, Opower, and companies like Contactually have grown here. It’s an exciting time to be in DC for sure.

I don’t even know if it’s so much that we have tech hubs anymore as opposed to we have businesses because if you’re not leveraging technology, you’re dead.

Your point that it doesn’t matter all that much which city you’re in, you can communicate with people wherever there is a strong talent in most large cities. We haven’t felt the strong need to move to a tech hub like the Valley or even New York. We’ve been able to grow rapidly and find the right talent right here. It’s worked out.

Are you seeing people bail out of the Bay Area because it’s hard to keep talent? The companies are even pulling out of that market and moving to other centers.

I’ve read those articles and stories. All of my friends and peers who have built companies there have not moved. That may be a little overhyped. For every person I have heard that has left the Valley because of the housing prices and cost of living, I’ve got two friends who are moving there. I don’t know. There’s something about the Bay Area that is attractive to a lot of people, myself included to some degree. It’s not going to go away anytime soon.

How did you guys start Contactually? What are the two roles you play? What are the roles that your co-founder and CEO role play?

I’ll give you a little bit of story on how we got together. It was random. We had not worked together before. We weren’t friends before. I literally met Zvi through a cold email through Quora, the Q&A site. He had posted about some DC tech events and I was getting plugged into the DC tech community. I reached out and grabbed a coffee. That’s how we got connected and in terms of Contactually, Zvi and I had a couple of ideas. Like a lot of folks, you have your own notebook of ideas that you’re always brewing and thinking about. One of the ideas that he had originally thought about was he was an independent freelancer building websites and apps for folks. His thought was, “I know I should use something to organize my potential client and current clients, some CRM system.” Whenever he tried to use something like Salesforce.com or others, he found it to be over burdensome for himself. That was the initial nugget of an idea.

Could you build a simple CRM? Could you do something that was connected to your email such that whenever you messaged a client, all that information would be in the CRM automatically? That was the initial nugget of an idea and that eventually morphed over time into, “Why do people even need to have a CRM? What’s the real root? Why does Zvi want a CRM?” The answers we started to get from people when we’re digging into that question was, “The reason I want to put people in the CRM is so I have all this information about them and I remember to do something with them. I remember to follow-up with them.” People are slipping through the cracks and we thought, “Maybe we could solve that problem not by necessarily building a better CRM but by building a product that would help you nurture the relationships you already have in a much more effective and personal way.” That’s what became Contactually.

Almost more of a reminder system than a sit-down and keep taking notes system?

That’s what the messaging described. We hesitated for a long time to call us as a CRM. We call ourselves a virtual assistant. We called ourselves a relationship marketing platform. A reminder system is as simple as we are. We call ourselves an intelligent CRM and we think we’re the next evolution of what a CRM should be. It’s not the database that you have to take notes into. It’s a system that should be proactively doing things on your behalf in an increasingly intelligent and automated way and that’s what we do.

It’s funny because I told one of my clients who’s been struggling for about a year with consultants to use Salesforce. They have ten more months in their three-year term. I told him, “Abandon it and walk away.” I said to walk from it, put Contactually in place and I said, “Hire a couple more salespeople that either know how to use Contactually or have at least bought something on Amazon because it’s simple enough they’ll be able to figure it out.” I love that about your model. You’ve kept it simple enough that it is easy to understand. It’s not like Infusionsoft where people have to hire consultants to learn something or they spend $2 million integrating Salesforce when it’s a contact manager. It’s supposed to help you. It’s not supposed to drive us crazy.

I haven’t looked at the stat. A couple of years ago, there were 400 CRMs in the world you could purchase. There are many of them and Salesforce is a great product. I wouldn’t disparage the product. It’s great for certain types of companies and certain types of businesses. Salesforce has not done particularly well in the professional services markets and in the real estate market in particular. I can go into the nuances of it. That market has different needs. In particular, your typical realtor gets the majority of their business from their personal network, people they know from referrals from past clients or from other realtors and other markets.

A realtor is a contractor. It isn’t an employee. There is no sales manager who’s going to force the realtor to update reports much as you might do in a traditional sales organization. Our product fits the bill. We’re helping a realtor engage their network much more regularly, much more personal and in doing so they end up with a lot more referral business. They get more leads from cold prospects or people that are maybe be kicking the tires and buying a home. This is a different need.

You’re focusing on the core need as well, which most companies miss. If you help the employees make more money, if you help the salespeople make more money, they’re going to go through brick walls for you to help you build your company. If we give them tools to help them make more money, they’re going to do better in their job. If we give them tools to manage them, to hold them accountable, to oversee them, then they don’t feel the buy-in at all.

The world of CRM came about because sales managers or VPs of sales needed a way to report on and drive activity from their teams. Not a means of necessarily helping their teams be as effective as possible or make their jobs a little easier but to manage them and drive reporting more effectively. That’s a little backward when you think about it. Reporting is certainly important, but it shouldn’t be the prime purpose you’re probably rolling out a CRM.

Do you take that same mentality into the business? Do you work with your employees on helping them be successful versus managing them and holding them accountable?

I’m a first-time founder and that was one of the lessons I developed over the years as I got a different way of operating and working. A lot of first-time founders or young managers go into thinking the best way to get results is to be prescriptive or to show or tell people how to do something. Most people reading may laugh at and say it’s certainly not a way to motivate and probably not the best way to get results from the folks that are on your team. My management philosophy has evolved significantly since then and I try to surround myself with people who are smarter than me, much more talented and experienced in this specific functional area which we hired them into. My job isn’t to prescribe what to do at all but to maybe be a sounding board and help brainstorm as needed about a given problem. Support them with the resources they need to accomplish their jobs effectively and it’s more of a mentor and coach than anything else.

You’re surrounding yourself with people and learning from them. How many employees do you have now in your company?

It’s about 70 people overall.

Growing the business from 0 to 70 and you’re a first-time founder, where did you learn how to scale and how to grow it?

In the early days, what’s nice about being a first-time founder and building a product in an industry that you know nothing about is we were humble and ignorant to find, “The best way to do something.” We would go up to anybody who seemed they knew what they were talking about either in the real estate industry or functional expertise like a head of sales or head of marketing. We would talk to them about best practices. We would talk about our problems. We were an open book. I found that people were open and receptive to helping. Rarely have I had people shut down a conversation or somehow be agitated by me asking these questions.

By being open in that way, I felt we learned a lot of the tactical skills that were necessary. How do you hire your first salesperson? How do you grow a customer success team? Over time, my questions and where I needed to learn, I filled out the tactical experience and I needed to hone and develop my people leadership skills. That was much more looking to mentors and external coaches that I’ve worked with over the years to help shape it. That’s way more nuanced and not something you can learn over a phone call but a lifelong learning process.

What leadership skills have you been working on? What insights have you had growing in your role as a COO?

This might be a good segue into how Zvi and I differ and how our roles differ. Zvi and I have a unique CEO/COO relationship. Zvi was a freelance developer. He’s a strong technical founder who is also a strong people person, a strong people leader. What he brings to the company is a lot around relationship building externally in terms of bringing in good talent, bringing in investors, working with our customers. He was and still is strong technically. He initially worked closely with our product engineering organizations. Whereas my biggest asset I bring to the table is process-driven and analytical. A lot of the commercial elements of the team, our sales marketing and customer success support, those were the elements I initially drove on.

Over time, those roles have shifted slightly. Given the core strength of mind around the analysis and being good at problem-solving, that’s where I leaned in and drove improvements. Where I wasn’t as experienced is on the softer skills of people leadership and helping to drive decision making. My natural default was to drive decisions via a consensus versus having to make the hard calls and so I would delay on those. My initial gut inclination was how do I prescribe things for my team versus how do I break down problems together and tee them up to be successful in solving problems versus picking up. Those are some of the areas I’ve largely addressed. My bigger growth areas are around empowering and motivating the teams and trying to make those tough decisions as quickly as I can in making the right decisions given the data I have. It sounds abstract, nuanced and fluffy but at this stage, that’s what my job is all about. It’s making the tough calls as needed and trying to empower the teams.

How many direct reports do you have? How many does Zvi have?

We shifted our roles. Zvi is exclusively externally focused and I’m exclusively internally focused. With that split, there have been a lot of good benefits to that. One of it is that all of the teams report to me and as a result, the functional areas mesh well together. My direct reports, there are six direct reports and they’re the functional heads of sales, marketing, customer success, support, HR/people and finance. That has worked for us. We used to split it between product, first of all reporting to Zvi, and the commercial teams are reporting to me. That worked for a while. Where it started to fall apart was in what we were building and what we were selling. The marketing started to become separated. I don’t think we were a joint go-to-market force. There is the product team and this is everybody else and it was not quite aligned. People felt the company was split between two bosses and we fixed that about a couple of years ago and the company is much better off for it.

Harvard wrote an article, it was several years ago. It was called The Misunderstood Role of the COO and they identified there were seven distinct types of second in commands.

I read that too.

It sounds like you guys are coming to grips with what yours is and it will probably change again in a few years. That’s what’s hard for people to understand. What is a second command? What is a COO? A lot of times people get over titled quickly. Your company is the right size and the right scope to have a COO title, but I was talking to someone the other day who’s hoping to do $500,000 in revenue and he said, “I just hired a COO.” I’m like, “No you didn’t. You hired a project manager and you give a big title.” He goes, “I didn’t care what titles he had.” I’m like, “It’s going to affect you because he’s going to start thinking he’s the COO.” The guy calls me back. He’s like, “The guy wants to take over strategy and take over the planning. I just need him to do stuff.” I’m like, “Welcome to titles.” How do you guys wrap your head around titles with people inside the organization?

I would say culturally, we’re an egalitarian and flat organization, meaning we want people to feel it’s a flat and open office. There are no separate spots and we want people to feel comfortable providing upward feedback and pushing back when they feel we’re not doing something that’s appropriate. I share that because our titles reflect that. Zvi and I are CxOs. We’re the C level titles. All the rest of our functional leads, although all of them have more experience than us, are all VPs. We’ve made the decision consciously not to have a senior VP and we’ve tried to keep that flat. There are pros and cons to doing that.

We do have other director-level folks who report to those VPs, senior managers and managers. The high-level thesis has been keeping things largely flat and don’t focus too much on the title. Where we’ve gotten in trouble in the past is we’ve hired smart people. They come into one role and then we find they have interests beyond that role. We try to make up roles and titles based on their interests and a lot of those times those didn’t match with their skills. We got into trouble years ago with that and unfortunately ended up having to let go of good people because we put them in roles they were not suited for.

When you’re recruiting, where are you finding talent? Are you all in one office or do you have remote teams as well?

We’re primarily based in DC. There are 50 of us here in DC. We don’t have another office. We do have some remote people. We’ve got a developer in Arizona, a developer in Portland, Oregon and our support team is based in the Philippines. It isn’t a Filipino office. They are all working from their homes in the Philippines. We have a strong remote culture in that team and a strong remote culture in engineering as a result because they’ve got a few folks remote and the other teams are all in DC. As for recruiting, we’ve got a head of people and she’s largely responsible for that effort and we’ve had a lot of success initially. We source people on AngelList largely because people who are looking to join startups early stage are looking on AngelList and you can find a lot of good generalists.

Over time, that’s been less successful for us and we found we had a lot of success with LinkedIn paid ads and driving good inbound that way. The best source for the most difficult hires, like the senior executive we’re trying to bring on, a lot of them are our own personal networks. That’s where Contactually often comes into play. We’re nurturing our respective networks with people. Whenever I meet someone who is talented, they go in a bucket in Contactually and I make sure I stay in touch with that person even if I know we wouldn’t be able to hire them for a couple of years. I’m still trying to nurture them for that event in the future.

How do you and Zvi get aligned in terms of vision? Does he create a vision and then you execute? Do you both create the vision together?

It’s one of those things that are probably more art than science, to tell you the truth. Zvi and I both have strong thoughts around what we want for this company, what we perceive the needs to be in what we’re trying to build. Ultimately, our objective has always been to build a company and build a product that helps people build these much stronger, authentic relationships across any industry. It just happens we focus on a handful, including real estate initially. To answer your question, it’s not just Zvi. It’s not just me. We’re collaboratively doing that. We have regular one-on-ones a couple of times a week and as needed. We have exec team off-sites monthly and then he and I also meet up as needed when we feel something is not quite right and in focus, and we’ll talk. As an example of that, we’ve been focused on the real estate market but historically we’ve sold to lots of individuals and small teams.

We had a few inbound large brokerages coming our way who wanted to buy hundreds or thousands of licenses and we saw that as a peripheral thing. We ultimately made the call that we’re going to primarily focus on seeing if we can move upmarket and sell to brokerages. That’s a big strategic decision that we made and he and I both were grappling with pros and cons, how we make that call. There needs to be one decision maker. When it comes to internal operations, I do make those calls. Certainly, I take Zvi’s perspective and advice seriously and if he strongly disagreed, we wouldn’t do it. We’ve agreed together that ultimately, I’m making the call on these things and it takes a decent amount of humility on his part for to be comfortable doing that but it’s an arrangement that’s worked well for us.

There are these different personality styles. Often, entrepreneurs or CEOs are quick starts. They will fire, ready, aim. They’re often accused of shooting from the hip and making it up as they go entrepreneurial. Often the second in command or the COO tends to use much more processes and systems. Maybe they’ll ask more questions before they start things. Do you guys have that in terms of any style differences at all or are you similar?

I would think if you asked our team, they would say we’re different. I’m thinking through on the fly here on what specifically makes us different. I’m not sure it’s the dimensions you talked about if someone is entrepreneurial or shooting from the hip or not and someone who’s more methodical or careful. The idea of being analytical and process-driven, Zvi self-admitted that’s not his strength. As a result, how we problem-solve is different. At the same time, Zvi is effusive, warm and great at making people feel cared for and motivating in that way. People would say that they feel I care about them but I’m direct and I get to the point. Those are maybe the most obvious ways in which we are different. We’ve been fortunate. If you were friends with us outside of our professional setting, we act differently.

When it comes to the core values, who we are as people and those values we’ve tried to build into the company. We’re similar in that regard. We have this idea of being pragmatic and egalitarian in how we build the company. We’re transparent. Everyone knows the financials. Anyone can talk to us about anything, but those values were critical in hindsight to the success of the business that we happen to be similar in that regard. Our style differences complement each other versus being destructive to each other.

I’d love to know a little bit about the open book management and also about the value. Tell me first about the core values of the company. How many do you have? What are they if you know them off the top of your head? How do you guys live them? Do you tie them into your recruiting at all?

Initially and being the analytical process guy, the non-touchy feely guy I was like, “Why do we need to write down values? That feels like something a big corporate person would do.” Over time, what I came to realize especially as you grow more and more, the things we took for granted are things that we cared about and we expect others would care about. You can’t take them for granted because if you’re not screening for it, you might bring in people who have different values and that could derail the culture we strive hard to build. Our values have evolved slightly over time but there’s a couple that stands out to me. They are the ones I particularly screen for or look for and try to champion in the company.

The idea of taking ownership is one of our values. We want people to feel like everyone is an owner because there are equity holders in the company, but beyond that if you see something that’s broken, fix it down to if you see a dirty dish in the sink, clean it. If you see a marketing message that is messed up on the website, let someone in marketing know so they can address it. If you see a bug, report it to engineering. This idea that you want what’s best for the company is something we try to empower. I mentioned transparency. I’ve given a lot of thought to this value. It’s not so much transparency for its own sake.

When I say transparency, people know how much cash is in the bank. They know the revenue numbers we walk through every month, hiring, when a major deal is coming through, we share the details. Around financing, all the terms, we share everything. The thinking behind that is not so much everyone needs to know everything. The pragmatic part of me and with Zvi is if you want people to feel ownership of things and you want people to make the best decisions in the company possible, you need to make sure they have all the information at their fingertips. You need to trust them as adults to make the right decisions. That’s where that comes from, this idea of pragmatism.

The third value for me at least that stands out is be excellent with each other. The first two are clearly professionally-focused but this last idea of being excellent with each other is we want people to feel Contactually not only is a place where they’re going to do their best work. They’re going to grow and they’re going to learn a lot, but they’re going to have a great time doing it. They’ll make some close friendships here as well. The phrase people often use when they first join our company is, “Everyone’s nice here.” I take a lot of pride in that. We have a no jerks policy and we have let go of people who were brilliant but were jerks. Those are the three I care about personally.

With the open book management, you said you opened the financials to all the employees? How do you train employees on understanding them? I’ve often heard that it’s hard or they don’t care. I disagree. It’s great and they do care but walk me through how you guys train them on that stuff.

There are two things. One, I think in terms of drivers and levers. Whenever I’m thinking about a decision in a company, I’m thinking about how do we move this lever? Lever meaning like a sales conversion or churn. What are the things we can do to move our major goals in the company around revenue growth? If those are the levers, I take a lot of effort to think through those and to put that into language, into slides that I could educate anyone or I hope to try to educate everyone and anyone about. That’s maybe a little obtuse. Every month, for example, I do a teardown of ten slides in about half-an-hour walking through how the month went and talking about, “These were our goals. This is how we hit the goals,” and the nuances around why did we miss or hit this goal?

That’s taking elements from the different commercial teams and product as well. That gives people a holistic understanding of how I’m trying to manage and run the business which a lot of those are financial levers. The other, we do lunch and learn across various disciplines in the team. Our VP of finance, Rob, has done much more detailed walkthroughs around how to read a balance sheet, how to read the income statement, that stuff. That helps people. That’s even more detailed but probably for most people, there’s the end of month updates.

You’re doing the whole what does it all mean? You’re explaining it to them so they get it, which is huge. One of the books I wrote was called Meetings Suck and I wrote it because people were complaining about meetings and saying they were terrible. I said, “It’s not the meeting suck. It’s that we suck at running them. We’ve never trained anybody on how to run meetings.” Do you guys have any tips or any secrets on how you run effective meetings inside your organization?

I’m a believer of Patrick Lencioni, the person who wrote The Five Dysfunctions of a Team and Death By Meeting. His structure is one we have naturally evolved to over time. For those who aren’t familiar with the structure, there are two big elements and then four types of meetings. The two elements are ensuring you have the right meeting for the right purpose. Ensure that meetings are interesting by ensuring that there’s conflict in the meeting. Those are two principles that we try to bring to bear.

For that first point around make sure you have the right meeting for the right purpose, in that book he recommends these four types of meetings. Daily standups are where you quickly sync at every morning and talk to what everyone needs to know or the burning issues that are happening. A weekly tactical meeting is we sit down for an hour and we review like, “These are the major goals. How are we tracking?” It’s tactical stuff that we may need to adjust according to the given month’s goals. A monthly strategic offsite is a chance for the exec team to get away for a couple of hours and talk through one or two major strategic issues. Quarterly retreats/offsite are where we are getting away for a couple of days and digging in through even bigger mid-year strategic things. We do the first three naturally we’ve evolved to and that has worked well for us. We make sure we’re getting the right level of fidelity in those meetings and people aren’t feeling we’re missing the big strategic things in the month, in the weekly conversations and vice versa.

We haven’t been great at doing the longer off sites. We make a big retreat every year for the company and the exec team. We haven’t been doing those quarterly but that structure has worked well for us. They have conflict. At that second point, I try hard. The author’s point in that book is rather than have people draw on and on about a topic, try to bring the topic up and draw out where the disagreements are. Where’s the conflict? People truly debate the issues. We try to hire smart people. Those smart people often have a lot of opinions about things and I want to make sure people are getting those opinions out while also knowing that ultimately is a decision maker. That decision maker is clear. Oftentimes, it may be near or one of the functional heads. Once we feel we have all this stuff on the table, we make the call. I try to live by those principles.

It’s similar to what you were talking about which is you want all the employees to point out things they see. The good healthy conflict is they’re arguing for the sake of the company. They’re not arguing to be right and not in conflict to be right. It’s more to be engaging in conflict to make sure all of the opinions are heard, all the counter-arguments are heard. The data’s looked at so the best decision can be made. One of the things I’ve learned over the years is we have to give the quieter, more analytical, amiable people a little bit of a chance to talk because the dominant expressive often trample over them. We need to give them a bit of a chance to shine.

The one thing we’re still trying to work on with respect to at least our executive meetings is you’re bringing in oftentimes people with big personalities and sometimes big egos in the room. Make sure that everyone feels comfortable putting out their opinions and putting out things. Sometimes you’re going to be critical of someone else’s turf, someone else’s part of the business. Make sure people feel comfortable being vulnerable and sharing honestly and openly. When we have made exec retreats, that’s always been a focus where we do a 360 ahead of time, people sharing feedback with each other. It’s been awesome to see how candid and how seriously people take that feedback and how much better our meetings are as a result when that gets diffused.

It’s huge and it does start to build up. Each meeting that you have and each day and quarter that goes by, the employees learn to trust that it’s all okay to do that as well. You’re creating that good environment. Even if you create a no-blame environment, it helps as well. Can you leave us with one parting tip for second in commands that are either starting in their career or even doing well in their career now as a second in command? What advice would you give to them, the one big lesson you always carry with you?

Zvi and I worked together now for a few years. We’ve been building this company. You made this point that the relationship between the CEO and COO or co-founders in general shifts over time. As our skills and interests change, as the company evolves and that’s certainly been true with us. if there’s one takeaway from my experience as a COO, it’s that to be as explicit as possible about what that delineation between our responsibilities are and to regularly revisit it at points. When Zvi and I have had the most conflict, it’s when we felt we were stepping on each other’s toes and we didn’t have clear delineation in our roles. Having that dialogue was helpful. That’s often maybe hard to do with he and I. We were fortunate to identify a strong and helpful mentor and advisor. Patrick has been critical for helping us come to those decisions where maybe we wouldn’t have come as readily to it ourselves. Those are the one-two punch of a related point.

Tony, thank you so much for being with us and for sharing your experience with all of our readers. I appreciate all the time. Thanks for all the time and all the insights you gave us.

Anytime, and thanks so much for having me.

Take care. Good luck and have fun with all your growth.

Thanks.

Important Links:

• Contactually
• Grassroots Business Fund
• CADRE
• SweetProcess
• LivingSocial
• Opower
• Quora
• Salesforce.com
• AngelList
• Meetings Suck
• The Five Dysfunctions of a Team
• Death By Meeting

About Tony Cappaert

Tony Cappaert is the Co-Founder and COO at Contactually, a CRM for real estate brokers and agents, and others who generate business from their personal network. At Contactually, Tony oversees all the internal efforts, including marketing, sales, customer success, and product/engineering. He was previously a product manager on the Bing adCenter team at Microsoft and an investment analyst for a social VC firm. Tony is a Washingtonian Tech Titan, has spoken on numerous podcasts and conferences, and has been featured in Slate, Crain’s, The Washingtonian, TechCrunch, and others. He is an MIT alum with a B.S. in Management Science. He loves hiking, camping, and drinking great beer (his current favorite is Pliny the Elder) and currently lives in Washington, DC with his wife and two children.