Funnel.io Revenue: An $8M Run Rate in 2019, Then a $47M Series B

Traditionally, companies stockpile their marketing data from advertising platforms and Google Analytics into unreadable spreadsheets. This leads to all kinds of inefficiencies.

Besides its obvious caveat, that not everybody can read spreadsheets, the traditional way of documenting data is dangerously inaccurate, a 2015 F1F9 research report based on a YouGov survey of British businesses says:

• 16% of large businesses have experienced inaccurate information in spreadsheets more than 10 times in the last year
• 1 in 25 large businesses (4%) have experienced inaccurate information in spreadsheets more than 30 times in the last 12 months
• 17% of large businesses have suffered financial loss due to poor spreadsheets

The same report’s Enron case study, drawn from Felienne Hermans’ analysis of 15,770 spreadsheets in the Enron email corpus, gives scary evidence of how far spreadsheet errors can spread:

• 24% of Enron spreadsheets with formulas contained errors
• 59% of unique formulas with errors had one or more dependent cells, which indicates that spreadsheet errors can have an impact in other areas of the spreadsheet
• The group of 158 Enron employees were emailing approximately 100 spreadsheets per day

Spreadsheets Are a Trillion-Pound Problem

The need to communicate marketing data across the organization is as strong as ever. A 2015 Geckoboard survey of 2,000 employees in the US and the UK, run with Censuswide, found that over four in five want management to share more information about business performance. Over half said there was a significant positive impact on their productivity when bosses share information openly.

Most employees in that survey only see company KPI data once a month, and over one in four see it less than every three months. When the information is shared, it goes out in face-to-face meetings (nearly half of companies), by email (nearly half) or in spreadsheets (over 20% of employees said so).

In the UK, spreadsheet-based financial decisions govern major market forces, the F1F9 report says:

• Spreadsheets are used in the preparation of British company accounts worth up to £1.9 trillion
• The UK manufacturing sector uses spreadsheets to make pricing decisions for up to £170 billion worth of business
• 78% of British businesses say that key financial decisions are supported by spreadsheets

Safe to say, Funnel.io has plenty of problems to solve.

Funnel.io Provides an Alternative to Spreadsheets

At its core, Funnel is an intermediary between marketing data sources and data outputs. The sources are your marketing platforms: Google, Facebook, Twitter, Yahoo and the rest. In January 2020 Funnel’s homepage advertised integrations with over 500 data sources. This means that wherever you’re advertising, you’ll probably be able to have Funnel read that data automatically.

The outputs are your ways of making sense of the data. Instead of just lumping everything into a spreadsheet and hoping the right eyes are trained in Excel detective work, Funnel offers three features that help spreadsheet readers gather the right insight:

• Custom dimensions. Regroup and restructure your data into readable groups, such as brand, market and media type.
• Custom metrics. Normalize metrics across data from different platforms, add fees and margins to your cost data and calculate ROAS/ROI.
• Currency conversion. Funnel’s in-house currency converter sets exchange rates automatically for multi-market data, with the option to customize them, so that you don’t have to do it yourself.

Funnel.io Average Customer Value More Than Doubles, Customers Pay Around $1,000 a Month

The last time Skantze came onto the show, in November 2017, the average customer paid around $450 a month. In the 2019 interview he said it was now “more than twice that.” Nathan offered “more than $900 a month”; Skantze’s own figure was “Around a thousand dollars.”

He did not credit an aggressive push into enterprise or a purge of small customers. “Not so much churning, but just focusing on when we were bringing in newer customers,” he said, and the shift was “partly driven by us and partly also driven by the market.”

“As we became more established in industry, as our product was more capable, larger and larger companies found us and wanted to do business with us, and then also having the capability of serving them, which has more requirements as you kind of move upmarket,” the CEO explains.

Funnel.io Targets Mid-Market Clients, 700 Total Customers

Back in November 2017, Funnel served about 340 customers, by Nathan’s count from that interview. By the 2019 interview it had 700. Skantze places Funnel as “sort of mid market ish or even at the lower end of mid market.”

Asked whether the sales flywheel had changed, the CEO said “A little bit.” Funnel now has “substantially more salespeople, so we have specialized the sales roles a little bit,” with some teams on smaller customers and some on larger ones. The US presence has grown quite a lot. “You know, we’re a European company,” he added.

Funnel has built out an office in Boston with about 30 people. The whole team is “just north of a 100” people, about 15 of them salespeople, and about 40 to 45 engineers build the product.

Funnel.io Sales Math: 12-Month Payback, 1,000 Prospect Conversations a Month

For a mid-market company, the CEO’s benchmark for a rep is this: “we think sort of $5,000 in new MRR per salesperson is pretty good. Per month.” With the full cost of winning a customer loaded in, he said, “that gives us sort of a payback time of twelve months.” In the real enterprise space, “you probably want more, but you’ll have a lot fewer deals and a lot of misses as well.”

Nathan turned that into a customer acquisition cost: a 12-month payback on about $1,000 a month means Funnel is happy to spend $12,000 to land a new customer, and Skantze said “Yeah.” Besides sales commission, the money goes “In lead generation. We do a lot of our lead generation online,” he said, with Funnel eating its own dog food on digital advertising.

Asked to pick one channel, he named search marketing: “So obvious one is search marketing.” An earlier version of this post said Funnel spends $100,000 a month there. The recording garbles the figure Nathan put to him, and Skantze only answered “Something like that,” so the number is out.

He explained the funnel math with a round example: “if I wanna close 40 customers, how many do I have to speak to? Well, you probably have to speak to 400 customers in a in a month.” Those are conversations, not trials (“maybe not trials, but at least dialogues with customers”), and he put conversion at about 10% “From the initial discussion.”

Across the company, “We have about a dialogue with about a thousand prospects every month,” the CEO says. Many “Just wanna talk. They’re not good fit,” and “it’s only, you know, say, a 100 that really is high value.”

Those 100 are high-value prospects, not new customers. Nathan’s arithmetic on the call, 10% of 1,000 conversations, would mean about 100 new customers a month. That does not square with the customer count, which grew by about 360 in a little over a year: a net gain of under 30 a month.

Funnel.io Competitors: Mostly Spreadsheets

In a September 2017 TechCrunch interview, Skantze said: “We speak to about 300 new prospective customers every month and 90 per cent of the time they use Google Sheets or Excel for this and no other competitor is involved.”

Funnel splits its sales by geography. A Boston team handles the US and South America, and a European team handles Europe and the Middle East. As for Asia, “we don’t have a big presence in Asia at the moment,” the CEO adds.

Funnel also splits leads by size, measured “Typically by revenue or number of employees.” If it’s a small lead, Skantze explains, you want fewer people touching it and the process more automated and faster. “But if it’s a larger deal, then you want a whole team on that leads,” from an SDR to an account executive and maybe a product specialist.

Funnel.io Gross Churn of 1.5% to 2% a Month, Net Churn Just Turned Negative

Back in 2017, Nathan recalled, Funnel’s annual gross revenue churn was about 35%. In the 2019 interview Skantze put gross churn “between one and a half and 2% a month,” which he called about half the earlier rate. Half of 35% is about 18% a year, which matches the low end of his range (1.5% × 12). Nathan’s ceiling, 2% a month, would be 24% a year.

Expansion now more than offsets that. “We have negative net churn now,” Skantze says. It has “just turned negative,” by “maybe half a percent negative” a month.

Nathan’s arithmetic put that at about 106% net revenue retention (0.5% × 12 months), against the 130% to 135% that Nathan considers best in class. Asked how Funnel could get there, Skantze pointed to bigger contracts: “I think you do it primarily by having a much higher annual contract value.” Dealing with larger customers, he said, you “typically have much higher net retention.”

Funnel does not have a CRM-style model where it sells mid-market companies more seats over time. “We have a model where we sell the platform the way it is,” Skantze says. Expansion comes from selling more features or more usage, and usage is priced on things like ad spend, data quantity and the number of data sources.

Funnel.io Raises $47 Million in January 2020, Not Ready to Sell

By November 2017, Funnel had raised $13 million: a $3 million seed from Industrifonden and Zobito in June 2013 and a $10 million Series A led by Balderton in September 2017. In the 2019 interview Skantze said, “We raised some money at the back end of last year, so about $8,000,000,” and “It was equity.” Oxx announced that $8 million growth equity investment on February 25, 2019.

The big round came after the interview. TechCrunch reported on January 16, 2020 that Funnel had closed a $47 million Series B led by Eight Roads Ventures and F-Prime Capital, with Balderton, Oxx, Zobito, Industrifonden and Kreos Capital also taking part. Funnel said it would use the money to accelerate its plans in the US and invest in its technical teams, and TechCrunch reported that the team had grown from 73 to 140 during the previous year. Dagens industri reported on January 17, 2020 that Funnel had set out to raise SEK 200 million and closed at SEK 450 million, and that the round valued the company at SEK 1 billion.

$3M + $10M + $8M + $47M = $68M raised by January 2020. The first three make the $21 million Nathan totted up on the call ($13 million plus $8 million).