Coveo Measures Customers Over Five Years, Not One
Coveo's CEO refused to give a revenue figure, then explained at length why the number the interviewer calculated for him was wrong — and what he measures instead.
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Nathan Latka’s method is to take two numbers a founder has already given him and multiply them on air. Louis Têtu gave him a thousand customers and a $200,000 average contract value, and then spent the next several minutes explaining why the product of those two numbers is wrong.
“A thousand customers and $200,000 ACV — if I just multiply those, why would those not be accurate?”
A company like ours has a history, so we’ve not always been at this pace. The $200,000 is an average of the sales I would say we’ve made over the past two to three years. A decade ago the company started very small, acquired smaller customers with a smaller portfolio of solutions, and then as we grew the platform we inherited much larger accounts.
Louis Têtu, chairman and CEO, Coveo
It is a genuinely useful correction, and one most founders would have let slide. A recent-cohort ACV multiplied by a lifetime customer count is not revenue; it is two different eras of a company multiplied together.
Têtu would not give a revenue figure at all. “We don’t disclose revenue — we’re a private company… per the investor desire we do not disclose revenue.” The $90 million recorded against this conversation on Coveo’s profile now carries an estimate marker, because it is inference, not disclosure.
What he did say
The one thing he was willing to be pinned on was the threshold. Latka asked whether Coveo would cross $100 million ARR that year.
“We’ll cross this and much more, very imminently.”
Around that, a set of figures he gave freely:
Pricing runs from $50,000 a year at the low end to several million for the largest brands, tiered to volume — “they’re basically buying this by the drink.” The customer base sits mostly in high tech, financial services and manufacturing.
When Latka pushed the back-calculation anyway — if you’re near $100 million and growing 50 percent, you were near $70 million a year ago — Têtu conceded the shape without the substance: “There might be ways that the company is structured, but you’re in the range.”
A dollar becomes $1.58
The metric Coveo does publish is the one Têtu clearly considers the real measure of the business.
$1.58what a dollar of subscription bookings becomes after two years
“If you take a million dollars of subscription bookings today,” he explained, “next year that million is going to be maybe 970 or something. But that cohort, if you fast forward two years, is going to be almost 1.6 million, because those same customers will have expanded the use of our platform.” On a one-year basis that is around 124 to 125 percent net revenue retention.
The expansion path is a sequence through the customer’s own organisation. A company engages Coveo on one use case — usually self-service and call deflection — then takes it into the contact centre so agents get the same intelligence, then onto their websites, then into e-commerce. And each step is chargeable: “We’ll charge more for these use cases, because obviously that drives more queries and content consumption.”
The world of actuaries
Latka objected that net revenue retention is normally an annual measure, and asked why Coveo reports it over two years. The answer is the most distinctive thing Têtu says.
What’s really important is understanding the long-term economic value of a customer cohort. We’re really in the world of actuaries. We’re not in the world of accounting.
Louis Têtu, chairman and CEO, Coveo
He has standing to say it. Before Coveo he co-founded Taleo, which Oracle bought for about $2 billion and which he describes as “a large SaaS player with about $300 million of recurring revenue.” He came to Coveo first as an investor while still running Taleo, “and then loved the company so much that I joined.”
Coveo actually models five years, not two, and the reason it stops there is arithmetic rather than optimism. “A company of our size will use discount rates of about 15 to 20 percent because of our cost of capital. When you do a net present value with that type of IRR, what you’ll realise is that looking beyond five, six, seven — actually beyond eight years out — it’s a plateau. If you actualise money ten years from now at 15 percent, it’s not worth a whole lot.”
Latka put the counter-argument he hears from other founders at similar scale: churn is so low that lifetime value is effectively infinite. Têtu did not entertain it.
“Nothing is infinite, obviously. We look at actual customer growth, we look at mature customers — that’s a basic cash flow equation. And that’s why healthy B2B recurring businesses tend to create a lot of value.”
The practical consequence is that the five-year view feeds product decisions: “That gets factored into the R&D and all the products, to make sure we keep growing the economics — because the cheapest customer to sell is the customer you have.”
What it costs to buy a dollar
Coveo expresses acquisition cost as a ratio rather than a figure, which fits a company that thinks in cohorts: it spends between $1.20 and $1.70 to acquire a dollar of annual contract value, depending on the line of business. Against a cohort that reaches $1.58 in two years and keeps compounding, that is the whole model in one sentence.
Revenue churn is under 5 percent annually, with some lines as low as 2.2 percent. Capital raised at the time: “a little in excess of $150 million,” including a recent $125 million from what Têtu called a large Palo Alto investor. Coveo’s GetLatka profile records that April 2018 round at $100 million, and its own headcount for that period at 350 — where Têtu says “about 300 employees today.” The profile’s later figures show where it went: $137 million in revenue and 4,156 employees recorded for the end of 2024.
Asked which CEO he studies, Têtu declined to name one, and the refusal is more revealing than a name would have been.
I try to stay away from white knights. I believe great CEOs eliminate their own job, to an extent, and they know how to build and push a team to collaborate. Getting the most out of others is what I admire — CEOs who tend to put their own success at the forefront, candidly…
Louis Têtu, chairman and CEO, Coveo
Asked what he wished he had known at twenty, he gave the same answer in a sentence: “Empowering others is the secret to success.”
Sources — Louis Têtu interviewed by Nathan Latka, recorded 6 August 2018. Revenue, headcount and funding figures from the Coveo profile on GetLatka, with dates as recorded. Taleo’s acquisition price as stated in the interview.
