How 15Five CEO David Hassell grew to $99M revenue and 3.5K customers in 2023.

hello everyone my guest today is David Hasselhoff preneur on the co-founder and CEO of a company called 15-5 his fraida entrepreneurship began nearly 20 years ago co-founding three companies in ad tech kitesurfing adventure travel and leadership coaching before starting 15-5 where he sees the opportunity to help organizations and everyone in them reach their highest potential it was formerly Sir a formerly served as the president of the San Francisco chapter of the EO organization or entrepreneur organization and was later named by Forbes the most connected man you don't know in Silicon Valley David are you ready to take it to the top I am alright so you're doing a Oh when you just you just got to you said I gotta get back in the game I gotta start my own thing let me jump in with 15-5 huh exactly alright tell us what the what's the company do and how do you make money as if your place ass so we're SAS for assess we charge in a per seats and subscription basis and we build software that helps leaders and managers be great managers and leaders help bring out the best in their team it had so how does that work is it a feedback loop kind of thing or how's it work it is a feedback loop kind of thing that the core of 15-5 and the reason it's called 15-5 is the basic practice employees spend fifteen minutes a week writing a report that takes their manager no more than five minutes to read and answering key questions like how are they feeling where are they what are they what are their challenges what other successes they give high-fives to each other pure appreciation all that rolls up into quarterly performance reviews okay and so my obvious question to you is Pino sales you know CMOS have our heads of sales have a tough time getting there you know Account Executives to use Salesforce right for data entry how do they convince you will actually use this thing on it on a weekly basis you know and it's actually pretty popular sales teams it's one of these things that once people start to use it they see the value for themselves they see they have access to their leader in a way that they didn't have otherwise we're we're asynchronously they can be getting feedback on their challenges that can be looping in other people from their team they can have conversations the most important their issues get surfaced to leadership in the company without having necessarily go through that VP of Sales I see and so things start to happen organization wide and what's your revenue model is it SAS company it is a SAS company yeah per seat subscription so we had a hundred people you pay per person per month and on average what does somebody pay for a seat anywhere between seven and fourteen bucks a month okay so I assume you're kind of high volume but low ARPU kind of business model actually with two business models we have an inbound self-service that is that and then we have a sales driven model so that you know the RP there is probably 10x to self-service so as you know large accounts with multiple monthly thousand multiple thousands of employees that are sales driven and then small teams say you know three to 100 people that's more self-service is the effective though per seat cost even on the enterprise deals still between seven and fourteen bucks or is our big volume this job or it's good right they're tense we do do some discounting it depends on which version of the software people people go with yeah and put all this on a timeline for me when was launch date we launched the product in March of 2012 and by June we'd been picked up in ink magazine and phenomenal phenomenal launch they wrote about us we've got our first hundred customers right out of the gate and so we've been in the market about was it six and a half years okay and what have you scaled to today in terms of total customers we've got a little over 1500 customers the companies really had a big inflection point lately we were you know we were twenty people at the beginning of last year we were 50 people last month will be 65 next month and you know 120 but it's time next year and so I mean if you raise capital or drive some of this these hiring sprayers are all funded by revenue currently its funded by revenue yeah okay and get so you're bootstrap today yeah we're not bootstrapped we could relative to our competition we were a very small amount of capital raised about 3.7 million to date okay we have you know some some of our you know can ahead take competitors are raised between forty and a hundred million dollars and who are some of those competitors who do you see yourself competing with I see the the three most three companies we bump into most often or a come to caliber flag dude another company called lattice and a third called better works yep yep very good and and help me understand what you've scaled to today if you can in terms of like ARR or even a range is fine [Music] yeah I would say that I can't disclose that sorry okay what else okay give however big range you want to give to stay as vague as you want I mean generally speaking yeah so I mean we're you know we're you know I would say near eight figures okay good so so you know getting close to approaching that 10 million ere our mark right there okay is it an aggressive goal for you to say that you're looking at you know hit that by the end of this year that's a pretty comfortable goal no it's it's we're moving very very quickly okay okay very good and and so you've obviously been able to hire from that kind of revenue walk me through it's driven most of the growth and maybe let's just actually do this from your team size first so the team you said today I believe is like 55 60 people 50 people 50 50 people and break that down for me so how many of those are inside sales working Enterprise deals so we've probably got sales team now is approaching 15 people in five yeah that's yeah but that's you know we've probably got six six the county executives we've got STRs we've got you know now we have a chief revenue officer we've rolled customer success and signals together because a large part of our business has to do with acquiring the customers either through a self-service or sales driven approach and then we have a land expand model that goes of course yeah that makes a lot of sense just for the landing right of maybe it's just even one seven dollar account at you know uber right or something like that well what does that costing you to acquire that again just that one landed that one landed account I think right now our CAC tell TV anyway which you know would be a good measure of that is probably have a five or six to one okay so without going to specific costs you know the you know it's obviously very profitable on that front a lot of that comes in through a combination of inbound self-service the expansion deals I talked about and then some outbound as well let me ask that a little bit differently how aggressive are you being in terms of your patience to recover CAC I mean are you happy to wait 12 months six months 24 months I would say today we're below 12 months oh it's great yeah we've been we've been extraordinarily capital efficient I would say that a lot of companies or building SAS companies will you know will kind of front load their hiring and then make up the you know make up cost on the and you know we've hired in arrears so you know as the business is scaled we hired we hired more people this is a scale to hire more people we've maintained cashflow positivity for for quite a while so whether we continue to do that is a question what I think I think it probably makes sense to to raise additional capital in the near term yep we'll talk more about that later but let's keep going on the economics here so you know anytime you're talking about a price point that's several hundred bucks per month even per seat churn is obviously an issue you got to get the accounts to expand their seats you got to get retention expansion activation all that jazz what is your turnout today it varies so it varies based on the segment like I said you know we have one product but we're servicing to two cohorts of customers right so you've got the the inbound self-service those folks tend to turn somewhere in the in the twos percentage-wise and then you've got the folks who are you know kind of sales leads a 100 account under employees a to say 3,000 those tend to churn well well below 1% yep and just to be clear scent of your exhibit 2% number you're giving me and yourself served models I'm not 2% logo turn per month right right it's a logo turner revenue churn logo churn okay love every term we've always been or at least net Mr Archer McCoy's been strongly negative yeah we have no right I was gonna say you have it sounds like you do have an expansion path you have axes to drive these accounts into larger ones are you at are you above a hundred percent in terms of net revenue retention annually today yeah hundred like you know 120 percent hundred thirty percent and and where is most most the expansion coming from besides just adding additional seats it's primarily additional seats okay it's primarily additional seats going into different departments we tend to work with growth or growth you know growing organizations who are adding employees we and and also there's you know other expansion opportunities when we sell into a particular department and then we close another department and then we go company-wide those are you know kind of obviously larger expansion opportunities and and how have you let's just focus on the free self serve model first I guess that probably feeds your your leads to STRs an account executive to do larger accounts but you know you mentioned a little bit about your cocktail to thee I mean generally speaking what kind of distribution channels have been most effective for you to get these new $7 $14 month customer well this is our most effective distribution channels have been content marketing and word-of-mouth and that's why we've been able to build a very capital efficient business we actually haven't spent a lot on paid acquisition that's that's a game that I think can be played with a lot of with a lot of capital when you're figuring things out obviously you know as you as you hit on something where you can essentially buy customers at a certain cost you tend to go through that at a certain point and have to continue to find other ways to buy customers right but the I think the most sustainable way to build in business is by is building a product that people love that they talk about that assigned a promoter score and so if you go online you look at my g2 crowd you'll see all the ratings we've got you know 700 800 customer reviews were ranked number one and employee engagement for one performance management we have customers are rave about us and love the brand and the product you know very high Net Promoter Score all those things lead to you know when people are deciding to buy a product like fifteen five we have a seat at the table yeah what do you do to drive that behavior in your app you know a lot of people you know you might put was a very soft reminder hey if you're enjoying this go leave a review on on Jeju crowd for example specifically what you do to drive the reviews yeah it's a good question so we've asked in the past one of the things when we started working with Jeju crowd you know a lot of companies that do do this you know they emailed our customers on our behalf with no incentive you know there's no incentive or anything like that people left the reviews did so because they wanted to but there was a nudge and a reminder we'll just be cleared out so I'll say there's a lot of very popular tools that have no ratings because they don't give a nudge I mean I'm not saying right I'm not asking do you bribe yeah I'm saying what you doing the onboarding or what do you do to make sure that if they do love the thing they're going and leaving that review yes exactly one of the things that we've done in the past I'm not sure if this is actually set up right now but when people would leave in their Net Promoter Score you know if they were a promoter or game you know even if they were neutral or a promoter we might say hey you know if you're really enjoying 15-5 consider you know going here or there to leave a review so when they're in the mode of already giving feedback asking them then that has worked in the past at this point we're not as focused on it because we've had so much you know kind of so much feedback there's a lot of strong need to continue pushing that necessarily we've done those things to the best you're pushing 10 million in air are today talk to me about growth a year ago where were you add we've grown we've grown the business probably about seventy five eighty percent across-the-board the the what we call our mid market business the sales business is growing north of a hundred percent year-over-year and and there's no kind of sign of letting up I think there's you know like I said the word of mouth is one of those things we started 15-5 there was no market for what we were doing we basically you know we thought this was a some way we could add a lot of value to the world we thought you know creating more transparent open communication and organizations supporting managers in bringing out the best and there are people that's what--that's that that's the value we wanted to create and but we were you know we're kind of market leaders in that way that you know we were basically pushing this thing and having to get into things like ink magazine and Fast Company to get the work out fast forward five or six years and there's now a movement toward this very thing that we do a lot of key analysts in the space are saying everything's moving toward what we call continuous performance management so we're really riding that wave of now there's an awful lot of pulls from the market as well and that's what's driving you know a good part of our mmm-hmm now last question you're in economics before we move on and wrap up with a famous five lifetime value can be dangerous because a lot of times you're extrapolating numbers and it can or cannot be accurate but generally speaking back of the napkin what do you assume lifetime value is on dollars in your enterprise cohort conservatively yeah it's a good question I mean you know the the the shorthand way to figure out your lifetime value is obviously to take your you know one divided by your churn rate which gives you a number of months and you multiply that by you by your and that would be 50 months for you at 2% logo term per month right multiplied by your ARPU right yeah so 3% you're about 36 exactly and I'm Cooper saying you there and under 1% obviously it starts to stretch out we're like well we're you know is that really the length that people are going to stick around we now have a number of customers who who have so we kind of balance between you know that churn number and also you know Kyle so looking at the tenure of our longer accounts the other thing that's I think worth worth noting is that you know our rates have trended lower and lower lower over the past two years because the project has gotten better we've gotten better product market fit we've increased our you know capacity and in terms of in terms of our customer success skills and things like that so getting back to your question you know I think that you know looking at an average account paying you know roughly about a twenty eight 25k a year you know times four or five years or six years you know you're looking a hundred two hundred fifty K and a lifetime value there yeah that's um I did the math on my end just because I'm curious I would pan out but if you and maybe have power laws obviously a play here too but at ten millionaire are about eight hundred grand per month and divide your fifteen hundred customers into that that means each one would pay about five hundred six hundred bucks per month it was again yeah the problem with our business when looking at averages is that we've got a whole load of little self service again yes I totally get it it's a little and and expand yeah exactly but what's interesting is they both have their unique kind of average revenue per account and lifetime values churn rates really you know so our sales driven accounts roughly pay 10x what the what the self service counts pay yeah what I found across you know about a thousand or two thousand of these interviews though is typically speaking when people are looking at payback periods because payback is relative right it's a relative function of RPM plus kaq on that account generally speaking payback periods are the same across very very different cohorts and that's yeah it's based on the CEOs aggressiveness that's great though so and and fifty people is everybody based kind of spread out or we're guys that we're pretty spread out our headquarters in San Francisco we've got about you know approaching 20 people there we've got a pretty big office now in Raleigh North Carolina that's almost as big we've got folks in New York City the engineering team is mostly New York City and in Eastern Europe and then we've got a number of other people who are just remote in Washington and San Diego Vermont etc and take us home here so raising capital you said you might consider doing it why would you raise and if so what would you try and how much would you try and raise what would you spend it on we've never done a formal Series A and so so I think that you know there's a number of things that are really really working for the business right now we've got we've got clear product market fit mark is there was the you know kind of dramatic hope from the market I think that you know there's there's a lot of interest in the space your mother outside investors so if we were if we were to close around we would focus on you know continuing to invest a product would essentially be product marketing and sales and I think that there's a good case to be made that given the kacct LTV and these other things that we look at we could invest that that capital really effectively to grow and scale the business because we already have a also a very solid foundation in terms of team and culture and what would you aim for you call it ten million raise of twenty million raised I don't know probably smaller than I would produce at sixty sorry six to eight yeah yeah yeah yeah I mean looking at that run rate that means I mean you probably get away with giving away probably less than ten percent of the company for that amount of money so it's obviously great very good David let's not home here with the famous five number one what's your favorite business book favorite business book you know as you can see I'm I love books so I was thinking about that actually the first book I was given right out of college first company I work for was seven Habits of Highly Effective People and I've actually found a hard hard book to to match mainly because you know I think the best business books are the books that have you be better at business like as a human being working with yourself and working with other people on that one has some timeless principles number two is there a CEO you're following or studying right now that's a tough one I think that you know the two CEOs who I really admire for very similar reasons are Ivanka Jannard is no longer CEO Patagonia and and Richard Branson both because they you know they they had a real focus on caring for their people and also making sure that they created environments where they delegated effectively found great leadership and also didn't sacrifice things on the personal side where they were still connected to nature and doing things that like yep number three what's your favorite online tool for building your business new we want to get exposed to recently was an email client called superhuman which isn't quite out yet but so far it's definitely making me much more productive number four how many hours is sleeper again every night about eight that's good and then what's your situation married single kiddos I have kid I have a five-year-old kid yeah five-year-old and how are you I am 42 42 last question what he was your 20 year old self new 20 year old self I would say that my advice for my 20 year old self would be to just be patient you know life is an unfolding process and I think that you know I definitely caused myself a lot of stress along the way of like wanting things to happen sooner than they would have naturally unfolded and you know things need to ripen guys be patient let things ripen again coming from David lunch 15-5 back in 2012 again scaling nicely approaching ten a ten million dollar run right across fifteen hundred customers two very different cohorts those seven to fourteen dollar kind and no touch plans and then they have a whole inside sales team dedicated more enterprise accounts you know 100 seats 150 seats even a mean even larger than that growing at a nice clip about sixty percent year-over-year six point five million bucks in ARR last year again rounding up get growing to about ten million bucks today they're doing this really capital in a capital efficient manner as well three point seven million bucks in the company which is great healthy economics 2% logo term per month 120% net revenue retention annually cocktail to be or L to be to calculate 6x which is great and he's you know totally comfortable waiting call it six to twelve months to require that cack team of 50 people based in San Fran and other remote locations again building fifteen five to help people with continuous performance David thank you for taking us to this OP alright thanks so much