SpotMe Lost Half Its Customers in 2020 and Doubled Recurring Revenue From $6M

Between March and May 2020, SpotMe was working through roughly 900 cases of customers trying to pull their contracts back. The Swiss company sells event software — event websites, mobile apps, check-in, payments, streaming — to enterprises that run conferences, and in the space of eight weeks its customers stopped running conferences.

“Business was pretty tough the first two months, from March to May,” Pierre Metrailler, SpotMe’s CEO, told Nathan Latka when the two spoke in September 2020. “And starting June we went up very, very strong.”

What March to May actually cost

Metrailler would not put a clean number on the damage, because in September he still did not have one. What he would say is how long the hole was.

We do think overall we’re gonna lose between three to four months of recurring revenue. And here we’re talking potentially a lot of churn, because some people immediately went to some other providers — and there’s also a big potential now to win those clients back.

Latka pushed him to convert that into dollars. SpotMe’s 2019 top line was about $22M, which works out to roughly $2M a month, so three or four months of it came to $6M to $7M — recurring contracts plus the setup fees, services and upsells attached to events that never happened. That is the number the rest of 2020 had to climb out of.

The conversion that was already running

The reason a lost $6M to $7M did not end the company is that SpotMe had spent 2019 rebuilding what kind of revenue it collected. In 2018 it had none of the recurring kind at all. In 2019 it booked about $22M in total revenue with roughly $6M of annual recurring revenue inside it — a business that had sold event projects for two decades converting itself, one contract at a time, into a subscription.

Then the pandemic arrived and did the selling for him. One client had asked SpotMe for online event tooling a few years earlier, so the product already existed when every customer needed it at once.

This COVID thing is actually for us just perfect. I hate to say this … but for us it’s just perfect, because it pushes us and it pushes our customers more towards SaaS anyway.

By September the recurring line was running at about $9.5M, up from $6M the year before, and Metrailler expected to land the year at $12M to $13M — “more than 100% growth” in ARR, as he put it. Top line, meanwhile, was heading the other way: he guessed $16M to $20M against 2019’s $22M, because the setup fees were gone. The trade is the whole point. Subscription revenue goes from roughly 30% of the business to something like 65% or 70% of it.

One inconsistency worth flagging: in his closing summary Latka described $9.5M as SpotMe’s SaaS revenue for the year. Metrailler had given $9.5M as where the recurring line stood in September, with $12M to $13M as the year-end figure. SpotMe’s GetLatka profile records $17M of revenue and 105 employees as of 22 September 2020, which sits in the middle of his own top-line range.

Half the base gone, and more customers than before

SpotMe went into 2020 with 250 customers. Asked how many were left, Metrailler was blunt about not knowing: “It’s totally unclear how many have actually churned and how many are still on their way back.” His working assumption was 50% churn — call it 125 survivors. Against that, the company had signed 160 new customers since April and expected 100 or more by the end of the year, landing at “probably plus 300.”

So the customer count more than recovers. What does not recover is the size of a customer. A $22M year across 250 customers implied an average contract value north of $80,000, and Metrailler said plainly that the new cohort will not carry that. The replacement book is built out of two packages.

$24,000blended average contract value SpotMe was targeting for 2020, against the $80,000-plus its 2019 base implied

An $11,000 customer, paid back in five months

The reason Metrailler was willing to spend into the wreckage is that the pandemic handed him something he had never had: a stable, measurable cost of acquisition. Two months of consistent data put CAC at $11,000, against a blended ACV of $24,000 — five or six months to payback, on cash that mostly arrives up front.

• North of $2M booked — in the month of the interview alone, most of it collected in advance.
• Break-even next month — Metrailler had just come from his CFO; net burn at the time was in the low hundreds of thousands per month.
• 50% more acquisition budget — approved two weeks before the interview, on the strength of sales cycles short enough to read the return within a month.
• 140 people down to about 100 — the spring downsizing, of whom 26 are engineers and 15 carry a quota.

That last group is worth its own line. Fifteen quota carriers on a hundred-person company, with account executives expected to bring in about $1.2M of new ARR a year — roughly six times on-target earnings. Account managers carry an expansion quota too, which in a normal year is where SpotMe’s growth actually came from.

Latka asked the obvious question: if the market is being remade right now, why chase profitability instead of burning to win it?

Even if I invest like right now — which we’re investing a ton — if I see those returns, and I should be able to see those returns in a month because the sales cycles are like super short right now, I don’t think we need to dig a big hole in cash flow for doing so. I don’t think it’s healthy anyway.

A retention model built for a different year

Ask Metrailler about expansion and he describes a company that, until 2020, was very good at this.

• 110% net revenue retention — the historical figure; Latka called it out again in his closing summary.
• 10% gross churn — against the 20% Metrailler says most guests on the show report.
• 15% to 20% expansion — the difference between the two, sold by account managers carrying their own quota.

None of that survives contact with a year in which the underlying event disappeared. A book losing roughly half its logos is not a 10%-revenue-churn book, and Metrailler did not pretend otherwise — he said outright he could not yet separate customers who had left from customers who were on their way back. The 110% machine is the thing he is rebuilding toward, not the thing that carried him through 2020. What carried him through 2020 was 160 new logos at a third of the old price.

Twenty years, almost no outside money

Bank debt, cash flow, and a culture of secrecy

SpotMe is not a venture story. It was founded in 2000 as a hardware business — networking devices handed out at conferences — and Metrailler joined a few months later, in 2001, as a software engineer. None of the original founders remain in the company, though some are still shareholders.

• 2000 · Founded a hardware company; a single-digit investment in the early years is the only outside equity of that era.
• 2011-2012 · The rewrite software rebuilt from scratch, funded by a small equity round deliberately tied to bank debt — raise a little equity, then leverage debt against it.
• 2012 · Software launch a $4M business.
• 2019 · $22M reached at a 15% to 20% EBITDA margin the whole way.

How much equity, exactly? Latka guessed two, three, four million and got a shrug. “We have a culture of secrecy in my home country in Switzerland,” Metrailler said, and left it there. GetLatka’s database has no funding rounds on file for SpotMe at all and lists total funding as zero, which is the tape’s figure rounded down to the only thing anyone can verify. Everything since 2012 has come from cash flow and bank debt.

One thing history did teach me here is that if you manage the company a little bit like a household, it works. Things like COVID can happen and you can still pivot the business and still have a bit of a safety net to grow.

Pierre Metrailler, CEO, SpotMe

The practical payoff of two decades of 15% to 20% EBITDA is not the margin itself. It is the conversation with the bank. “If you have a history of being cash flow efficient, when you go and talk to banks, that’s a really, really easy discussion,” Metrailler said — a credit score, as Latka put it, built out of eight profitable years. In 2020 the margin goes, because the revenue went and the spending did not; GetLatka records SpotMe as cash-flow negative at the time of the interview. The credit history is what buys the right to be negative.

What he is actually worried about

Not churn, and not the acquisition math. Metrailler’s stated concern is the composition of the customers arriving now — how many of them are buying a stopgap.

The one number I’m looking at is how many customers I’m talking to who are using our platform just as a plug because of COVID, and how many are actually going to invest long term into online events. Our target customers are enterprise, more than 1,000 employees, and they are very traditional, quite conservative, and a lot of them are talking of going back in person. And we’ve burned our ships — we’re not going back to that. We can do hybrid.

That is the bet underneath the doubled ARR. SpotMe has converted its revenue model faster than its customers have converted their behaviour, and the gap between those two conversions is the risk on the 2021 book. Metrailler reads Crossing the Chasm, watches Drift’s David Cancel, has run the company on Salesforce since 2002, sleeps five hours, is 41, and was expecting his first child in December. Asked what he wishes he had known at 20, he did not talk about any of it.

I thought it was very important to be super clever. But I’ve learned that it’s more important to be kind, and then clever a little bit later.

Sources Nathan Latka’s interview with Pierre Metrailler, CEO of SpotMe, recorded September 2020 — all revenue, customer, churn, pricing, CAC, headcount and funding figures are his unless noted. SpotMe’s GetLatka profile, which records $17M of revenue, 105 employees, 300 customers, $11,000 CAC and 10% gross churn as of 22 September 2020.