“You have to be able to show that your product fills a real need” Lessons I Can Share About My Series A Venture Financing Round

I had the pleasure of interviewing Ara Mahdessian and Vahe Kuzoyan, co-founders of ServiceTitan. ServiceTitan was built for tradespeople by the sons of tradespeople, and has grown into the most powerful software available for managing the operations and growing the revenues of HVAC, Plumbing, and Electrical businesses. Founded in 2011, ServiceTitan now has more than 400 employees and more than 2,000 client businesses throughout the USA and Canada. 2018 has already been a notable year for the company. In March, ServiceTitan announced it had secured $62 million Series C funding from a group of investors including Battery Ventures and HIVE Ventures. In addition, TechCrunch profiled the company, writing that ServiceTitan was “on its way to becoming Los Angeles’ next billion-dollar business.” Last year, the company was named among Forbes’ Next Billion-Dollar Startups of 2017.

Jean: Thank you so much for doing this with us! What is your “backstory” of how you become involved in the Startup space.

Ara (AM): To understand ServiceTitan, you have to understand Vahe and I and where we came from.

Vahe (VK): When I was six-years-old, my dad decided that we had a better chance at a good life if we moved to the U.S. — picked up the whole crew and just came over here. No job, no money. We didn’t speak the language at all. My dad worked a lot of odd jobs when we first got here, and ended up working as a plumber.

AM: So I came here when I was one-year-old. My father was a residential contractor. Growing up, we [Ara and Vahe] would watch our dads head out at the crack of dawn and go out there in the biting cold and scorching heat, every day, and break their backs to put food on the table. At some point, when Vahe and I grew up and graduated from USC and Stanford, our fathers asked us to find them some kind of software to help better manage their growing companies.

VK: I started looking around, and when I saw that there really wasn’t something worth recommending to my dad, I decided to build it myself. For the first five to six years, it was just me and Ara in a room programming away. ServiceTitan is meant to be a one stop shop for our customers, and a platform that is meant to run, from start to finish, the entire operations of a home service business.

Jean: What do you think makes your company stand out?

AM: ServiceTitan makes a significant professional and personal impact on very salt-of-the-earth, hard-working, blue-collar people. Our software helps them run a much better business — it helps them increase profits and sales, because it helps streamline their operations and helps them deliver a better experience to their customers.

There’s one guy who comes to mind. Andy Wyatt had a very small plumbing company in Ohio. When he first started using ServiceTitan, it was a really small company, doing about $500,000 in revenue every year. Nine months after he started using ServiceTitan, he gave me a call and told me they’d reached a milestone. “This is the first year where we reached $1 million in revenue, and I have you to thank for it,” he said. “Your software allows us to market ourselves better, sell better, provide better service to our customers, and run a tighter operation.”

The following year, he called again and said they’d broken $2 million. ServiceTitan made such an impact on this guy’s business, and ultimately his life, too. This is how they bring home bread to their families. This was the first time he’d been able to take his family on vacations, the first time he’d been able to get away from the office, because now he didn’t need to monitor everything — he can monitor it from his iPad while he’s on vacation.

And just this year, he sold his plumbing company and joined us at ServiceTitan. Now he works with us to help change the lives of all the other plumbers and air-conditioning contractors and electrical contractors out there in the country. So that’s an example of how we made a huge impact on a small company.

There are also examples where we had a huge impact on a large company. Here in Los Angeles, there’s John Akhoin from Rooter Hero Plumbing. When we started working with them, it was a sizable shop. They were making good money, about $9 million a year. With ServiceTitan that’s grown to $55 million. He’s expanded to 10 locations in 10 cities and hired hundreds of people.

We can’t take all the credit. But all these guys will tell you that ServiceTitan changed their lives. And these aren’t rare stories. Almost every customer goes through something like this.

VK: The genesis of ServiceTitan was a problem that my dad was having with his small plumbing business. So from the very beginning, it was all about solving problems for the contractor. But it’s always been, and continues to be, much more than just a customer-vendor relationship. We think of ourselves as being an integral part of their businesses, and that’s a pretty heavy responsibility that everyone at ServiceTitan is tuned into and takes very seriously.

Every day there’s somebody on the team who goes above and beyond just selling or implementing software, who goes that extra mile to figure out a way of solving whatever problem it is that our customers are having.

Jean: Are you working on any exciting projects now?

AM: There’s a lot going on today that’s exciting. As ServiceTitan becomes more and more successful, as more contractors use ServiceTitan, we get exposed to more and more opportunities.

One that I’m most excited about is our partnerships with companies like, Google. We’re figuring out how to connect our contractors with the homeowners who need their services, to enable things like online, real-time, instant booking. Say you need a plumber to come out and fix your toilet. But you’re at work, so you need them to come at 8 o’clock, when you get home. Instead of calling a list of plumbers to find out who’s available, through a Google search you could instantly find the ones who are available at 8 o’clock tonight and book somebody in a couple of clicks.

Similarly, we’re trying to find ways to help our contractors, our customers, better interact with their customers, the homeowners, in the ways their used to today such as booking appointments by text message and being able to track when a plumber is going to arrive.

VK: The most exciting thing is figuring out how we can provide more value to our customers. In the context of software, we’re about as unsexy as it gets. Making software for contractors is not necessarily the most exciting thing that is happening in tech. But if you look at the broader trends that are happening now, anyone and everyone is being able to leverage the new technologies around machine learning and artificial intelligence.

What we’re seeing, even in the old-school industry that we’re in, there are huge opportunities to leverage this technology to drive even more value. The most exciting aspect of what we’re working on would be the application of machine learning and artificial intelligence technologies to help contractors run a better business. Which is probably not what most people think of when they think of artificial intelligence. But that’s what we’re doing.

Some examples include doing emotional analysis on voice recordings to give a better read on how much stress the customer is having when they make a call. That’s to measure the performance of the CSR and to indicate what kind of mindset this customer’s going to have when they go in to help them.

Another really exciting example is using predictive models to essentially predict what the value of any given job is. You leverage that data to pick the best technician available for that particular customer, based on what that technician happens to be really good at, or not good at, or how big the opportunity is.

Another example is about figuring out, based on observations that are made in the field, what products and services the customer might be interested in buying. Most of the technicians in the field are generally more technically oriented vs. sales-oriented. They’re not necessarily thinking about whether a particular customer is interested in learning more about air quality instead of just getting the air conditioning fixed. Helping technicians better target recommendations for what any particular customer might be inclined to purchase is another area where we’re bringing machine learning to apply.

Jean: Do you have a favorite book that made a deep impact on your life?

AM: I read a lot of books. One that comes to mind is “The Success Principles” by Jack Canfield. My take away from that book was that any single one of us has to figure out how we want our lives to be defined and what’s important to us, and there then needs to be a very formal approach around that. You have to know what you want out of life and what your purpose is, why you are here, and then you have to carve out a path that maximizes your chance of achieving success as you define it.

VK: A book that I think has fallen out of favor recently but made an impact on me when I was in college is “Atlas Shrugged.” It probably was one of the most impactful books that I read. It’s all about the power of the individual and the ability of a small number of people to have a big impact. And the righteousness of capitalism, which is the underlying theme of the book.

Tactically speaking, the book that’s probably been most relevant to running a business has been “The Lean Startup” by Eric Ries. The big thing I took away from that is you should have a framework when approaching the question of what to do next. One of the things that we’ve done well is having a good nose for “What are the most painful areas for our customers, and how can we create the most value?” The book really lays out a powerful way of thinking that we apply at ServiceTitan every day, in almost every meeting: identifying the biggest risk areas, and prioritizing and auctioning to address those risks instead of just doing everything chronologically.

Jean: What are your “5 Lessons I Can Share About My Series A Venture Financing Round” and why?

AM: I think there’s something that you can’t get away from in Series A — you have to show traction. That’s the one thing you cannot get away from. You have to have built a good business by that point. You have to be able to show that your product fills a real need or meets some big challenge or opportunity. You have to show that your customers have bought into this that they’re paying something for it and you’re growing quickly. You have to be bringing on more and more customers very quickly, and you have to show that those customers are evangelical — that your product is life-changing and they rave about it or refer others. Those are things you just cannot get away from.

It also means the Series A playbook is less complex and easier to figure out than the one you need for seed funding. It’s not about how well you can tell a story. You have to show these things to really get attention. As competitive as it is, you can get money if you show traction.

VK: It makes a huge difference whether you’re the buyer or seller in that transaction. What I mean by that is, if you’re a startup and you’re essentially heading down a road where you’re going to run out of money, where you’re going to hit a wall, that’s a very different conversation with potential investors than saying, “We’re on this trajectory, but we could be going faster if we had more money. Even if we don’t get money, we’ll be okay — it’s not like we’re going to hit a wall.”

Being able to control your destiny and being able to walk away is incredibly important. Not a lot of companies are in a position to pick and choose. They’re thankful that they get any money. But if you can, if there’s a choice, go with someone who’s going to bring value over someone who’s willing to pay the highest price, generally speaking. In a startup context — when it’s probably going to either be a success or blow up, there’s no middle ground — what we’ve always done with investors is focus on who’s going to be the best partner for the business, who’s going to be the biggest long-term value add, on top of the capital, instead of just who’s going to pay the best price. Focus on the better long-term partner, not necessarily who’s willing to pay the highest price.

Jean: Some of the biggest names in Business, VC funding, Sports, and Entertainment read this column. Is there a person in the world, or in the US whom you would love to have a private breakfast or lunch with, and why? He or she might see this. :-)

AM: I’m not too politically involved, but I am Armenian, and what’s going on in Armenia right now is inspiring and incredible. Nikol Pashinyan has effectively led a revolution and change in government — peacefully, and without shedding any blood. They call it the Velvet Revolution because of how smoothly it’s been done.

The revolution isn’t political. It isn’t about conservative or liberal. It’s about one thing: eliminating corruption. He wants to give this next generation of Armenia a real chance at building a future and doing it in a fair way. They’re getting literally 10 percent of the country to come out and march in the streets with them.

Very recently, the prime minister they were protesting against actually stepped down and Nikol was elected prime minister of the country. Now there’s a resurgence of hope in Armenia, led by this one courageous man. And he did it peacefully, very much like Gandhi — he went out of his way to emphasize that no matter what happened, if the police force or military provoke you, you cannot respond violently. It has to be peaceful. And they did it. It’s great.

VK: Elon Musk. I’m sure it’s about the most cliché answer any tech startup founder could give. Easiest one to answer. Why? His level of balls is on such another level. To take on banking, and then space, and then electric cars, and now boring tunnels, saving humanity from evil AI. He’s not just better at doing things, he’s operating on a completely different stratosphere than anyone else. So I would love to just understand if there is something about the way he’s doing it, or if he’s just a super-genius and it’s just hardware. From my vantage point, he’s doing things that blow my mind.

This was very inspiring. Thank you so much for joining us!

— Published on June 6, 2018