Sailthru's $50 Million Was the Raise, Not the Revenue
Neil Lustig joined Sailthru as CEO seven years after it was founded, doubled the average contract, and explains the retention arithmetic that holds a $48M business together.
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This URL says Sailthru achieved $50 million in revenue. The $50 million on the tape is the other side of the balance sheet: total invested capital, “just under 50 million”, raised across four rounds ending in 2013. Revenue at the time was around $48 million and heading, in Neil Lustig’s words, for “between 40 and 50 million” by the end of the year.
The two numbers being nearly identical is the whole story of the business Lustig inherited: a decade old, well funded, and finally growing into its own capital base.
The CEO who is not the founder
Lustig joined in 2015, three years before this conversation and seven years after Neil Capel founded the company in 2008. He had just sold Vendavo, the price-optimisation company he ran, and was “kind of catching my breath” when a friend called. Before Vendavo he ran Ariba’s European and then North American field operations, after sixteen years at IBM.
He is unusually plain about why the job existed at all.
The investors and the founder were all involved in the process. I think they reached the conclusion that to go to the next level required more operational discipline and more execution focus. The company had grown fantastically from a visionary founder and now needed a different balance of the team.
Neil Lustig, President and CEO, Sailthru
What sold him was the product thesis rather than the numbers: “engaging with consumers by really connecting with them as human beings instead of as marketing segments.”
Half email platform, half machine learning
Asked whether to think of Sailthru as an email marketing company, Lustig split it down the middle. Half the value is the sending platform; half is machine-learned personalisation that decides what a given consumer sees, when, and on which channel. The company sent a hundred billion emails on behalf of its customers, and the pitch is that no two of them need be the same.
Why email was the wedge, not the plan. “We grew up in email and that was really the founder’s idea, because he felt like that was one of the easiest things to personalise and the biggest opportunity.” By 2018 customers were arriving through email and adding mobile and on-site, or arriving through mobile and adding their email programme.
The up-market move, in one number
Sailthru served roughly the same number of customers in 2018 as it had years earlier — about 400 — but the mix had been deliberately churned. Small accounts were shed. NBC, Tory Burch and NASCAR were added.
The average customer paid $120,000 a year. When Lustig started it was about half that. The target he named was an average relationship of about $200,000, and he put the company at the halfway mark on that journey.
15 per cent out, 18 points back in
The retention arithmetic is the most instructive passage on the tape, because Latka made Lustig pin down which number he was quoting.
Gross revenue churn — south of 15 per cent annually. Revenue, not logo; Lustig confirmed it when pressed.
Net dollar retention — “north of 100” by “a couple of points”, so 102 to 103 per cent.
Which means 15 to 18 points of expansion revenue, every year, just to stand still and finish slightly ahead.
That expansion comes from three places. Pricing is linked to the customer’s own volume, so a growing customer renews at a higher number without anyone selling anything. Large customers hold many brands — Lustig’s example is Scripps, with Food Network and HGTV under it — so a two-brand start earns the right to the rest. And there are multiple products to cross-sell.
$180,000 to win a customer
Sailthru’s fully weighted customer acquisition cost was about $180,000, roughly 1.5 times the first-year contract, recovered in about eighteen months. Lifetime value, the last time they modelled it, was “just north of $400,000”.
Lustig is candid that LTV is not a number he manages by.
We look at it and we track it because it’s important for investors. It’s not something we stare at every day. The things we look at every day are the average customer size in our pipeline — so, are we targeting the right customers — and our churn.
He also declined to treat the CAC as a problem to be solved. “I’m not looking to shrink our acquisition cost much below that. I think our opportunity is to grow our customer value by acquiring bigger customers and having them be even stickier.”
On churn the company hired an outside consultant to call every customer who left and ask why, feeding the answers back into product and customer success. The cheapest new customers, meanwhile, arrive for a reason specific to the category: the average tenure at an e-commerce business is about two years, so a marketer who was happy with Sailthru takes it to their next employer. Referrals were the single most productive source of new business.
Profitable, and in no hurry
Sailthru had not raised since 2013 and was profitable at the time of the interview, having turned significantly cash-flow positive in the first quarter. Lustig’s phrasing was categorical: “we’ll never lose money again.” Growth was running at about 20 per cent year on year.
He ruled out acquisition talks for that year and framed any future raise as optional rather than needed — something to fund an acquisition of their own, or a serious push into Asia, from a business that was then primarily North American.
Latka put it to him that he seemed like a wartime CEO who would get bored once the emergencies stopped. Lustig did not disagree with the diagnosis, only the timing: it was the third time he had done exactly this, and he had “another year or two of exciting things” in mind.
His advice to his twenty-year-old self, after sixteen years at IBM, was one line: move to a small company sooner.
What happened after
The Sailthru profile on GetLatka records the company as acquired, by Campaign Monitor. Headcount, 200 at the time of this interview, is recorded at 164 by December 2018 and 146 to 147 through 2019 and 2020.
Sources — Neil Lustig interviewed by Nathan Latka; the recording is dated 11 June 2018 and the video was published on 15 July 2018. GetLatka’s record previously carried an interview date of 19 September 2011, which the tape contradicts — Lustig says “2018 today”, dates the company’s tenth anniversary to that year, and describes joining in 2015 as three years earlier — and it has been corrected. Revenue, customer, headcount and funding figures are as stated on the tape or from the Sailthru profile on GetLatka, with dates as recorded.
