Appdirect Revenue, Valuation & Funding (2024)

hello everyone my guest today is Dan sacks he's president and co-ceo of app direct the only end end cloud commerce platform for succeeding in the digital economy which he co-founded in 2009 with his partner he and his co-founder dream to someday build a business worthy of the Inc 500 lists and starting his entrepreneurial journey dan and his co-founder officially launched the company in 2011 raised over 245 million in venture financing and reach to a company valuation of more than 1 billion the app direct ecosystem now powers millions of cloud subscriptions worldwide and connects channels developers and customers to simplify the digital supply chain alright Dan are you ready to take it to the top yeah all right very good so let's just jump in kind of at day one tell us first off before I get to that story kind of what app Direct does and how you make money that money is a pure play SAS yeah so direct helps businesses find by news conferences and we generate revenue both from share of the transaction for your the right share as well as a platform fee for those that use our services to make money in the cloud and tip I mean today when you break down revenues though is more of it coming from essentially there were furel fees or more coming from just the flat SAS fee to use the platform a combo boat but definitely the platform fee was the you know line share of the initial product and then we see a really really high growth of the transaction fees as well so it's similar to you know a billing platform in that we run a kind of subscription as a wait labeled marketplace and developer ecosystem that helps businesses of all types of large businesses and small businesses we were a lot of major telcos Comcast and others around the world helps them get to market faster and then we also share an upside we didn't need software and so tell us the story about Comcast specifically how do they use you yeah definitely so if you can one of the opportunities that's emerged over the last several years with the growth and cloud is that businesses want to be able to access cloud services from people they trust and going back to the early founding about direct you always had this fundamental perspective that most businesses don't necessarily want to just go online and subscribers didn't want to buy everything they need from a trusted provider so Comcast is an example of a brand with Comcast business that offers you know telecom services you know internet it is a great trusted provider so often things like collaboration services email backup and others so that's how we hope that we enable them to get access to a portfolio of services that they think solves their customers and then you've got kind of four different I think sectors with your market reseller devices and then your billing platforms each of those there are mega mega mega players in terms of competition so talk to me about kind of like the network modules built into app direct since you are a platform about how that allows you to defend each of those four beachheads yeah I think what's unique about out direct is that based on the way that we are positioned in the market we're really the only player that can able someone to resell our portfolio of cloud services and we focus on helping people monetize in the cloud as well as manage relationships and our products fall across that different bucket so while within each area there may be you know pure-play competitor in terms of us we're operating as the only suite so you can think of it as what humps bodies for marketing and sales or for what NetSuite is you know for back-office we are for commerce so really helping a business and manage anything that they need in terms of making money in the cloud and managing their customer relationships in the car yep and then give me a sense on average I mean what are people I mean I sure was a huge span I don't know good on every cohort but on average what are these customers pay you per month um definitely so uh your license fees range you know dramatically yeah we have entry level into perspectives that would start around UK per month depending on the complexity and going all the way up to you know the hundreds of thousands for more complex deployments yeah today well I mean I'm sure you have an inside sales team this kind of thing is there a specific cohort you're focused on today are you generally moving upstream or downstream yes we started you know the highest of upstream and then we created Beach heads and different verticals so we've ruled out from toko Taborn MSP and now actually was a fascinating vertical for us is manufactured so even traditionally you wouldn't have thought of a manufacturing firm is one that just had a core a software company but many firms are looking to digitally transform themselves through IOT and therefore if you used to you know produce hardware it's not the values not necessarily the hardware itself it's around the connectivity in the software and the ecosystem you can provide so we're seeing grow that are getting back to your vertical and just to be clear the number you said earlier where you kind of let people in in the many many thousands range you're talking a CV a CV they're a monthly ARPU monthly ARPU okay let's get more to the founding story so 2011 where was your head I mean did you just quit a corporate job and your backs against the wall and you got to make something work where were you yes I was actually graduating at school and it was you know just really the height of the recession so businesses around the world were struggling my family had a furniture store in Niagara Falls Canada and bean street and you grew up in the store my great-grandparents started it it was really the pride for us in the community and you know when the recession hit we had to shut it down and that really kind of you know mark me in saying you know the the opportunity for entrepreneurship you know in the early year 2009-2010 timeframe was really bleak on the other hand came to visit my co-founder who at the time was a painting company in San Francisco and we kind of saw the opportunity that cloud services can bring to really help empower business owners around the world the biggest gap that we saw in the market is that for my family experience I remember that buying software was a major decision and that we knew the people who sold us the software I still remember the person's name who sold my family that made our peace solution was brickster and he knew the prints are vertical really well so we really start to build this global network that connects the developers of applications with the and businesses and thus you know we become this you know he do system for distributing services around the world and would have you scaled to today in terms of total customers using the platform yeah so we reach now over 35 million customers around the world so super excited to have knew such a wide business footprint you know from starting an apartment what do you say 35 million are we talking like seats per logos or give me tell me exactly what that means that's a reach so that would be the customer customers of our customers that we have reach to but we do have millions of business users got it got it so I'll just I'll just put a minimum and say you have definitely more than a million and those those obviously then touch you know on average 35 each right if there's 35 million with a minimum of a million I'm sure it's not something like that you have Network effects that's a easy way to say it right that's yeah walk me through for that first year so who was your first customer and how'd you land them yes / first customer was actually Bella Canada in Canada and you know it wasn't the furniture company huh I know there we go yeah but the there were two people we were two people in apartment at the time and you know the idea of enabling this massive company was was definitely a daunting task but we really believed that if we could empower a company that has you know big reach over you know a country or an area then that would have the biggest impact so instead of you know going toward a door and selling directly to small businesses we start to partner with you know people who had millions of business customers so Dell had you know over half a million business customers at the time in Canada and we really wanted to enable them to have early access to stop solutions so we went me aggregated relevant services for the Canadian market and that was our first footprint and then because of your bill we got silicon because that we got what was that first says oh well well I'm well I mean what was a size I'm curious can you share since it was so long I don't yeah so so the funny thing is that we we went in with this idea that okay we're gonna propose this we're gonna get budget and it's gonna be millions of dollars and you know early days we kind of thought because the project value was so big we get a lot of that but one of the things that we realized is that while we approved an earmark the project out on a lot of money they didn't have enough you know a lot of budget for us ourselves so we had to think creatively about how we helped them to support you know the business case and get to market so to do this is usually an embarrassing number but I'm curious what you remember what first year revenue was 2011 yeah he was in the okay good so any bootstrap or did you raise before you even had a product on so we bootstrapped as long as we could and then it started to ramp up and we start our growth but we very early to the idea for that first punch was that it was a nine-month sales cycle and once we had the letter of intent from the company then the investor said okay well you know we'll give you the first seed money to make this happen and when he raised today and what have you raised today Daniel 2:45 and so this is obviously fairly aggressive right a lot of people are arguing that you can actually stay private now with so much kind of VC money out there is that generally the plan for you guys you're kind of out of the I mean you'd have to do some very drastic things I imagine prepare yourself to go public and get out from under kind of liquidation preferences and things yes we've always had on long term purchase the business and you know clean terms from investors so you know I think for us it's really about when the market opportunity makes the most sense and for now you know we're seeing a lot of growth and trajectory in the private markets but at the same time we do see it being more attractive and there's a bigger opening than ever for enterprise companies about profile to go public so I think that we're you know investing ahead of the curve and and you know hopeful that we continue to focus for though the long track whether that means you know private or what the other wrote yep and what do you today in terms our revenue can't expose okay how do you put out anything that's given a general range and that are what was the last update you gave publicly he was probably years ago but you know we've been recognized as being one of the fastest companies in the world and new continuing to or in the Bay Area technology and then they're definitely continuing that the growth trajectory and excited to have announcements in the future yeah I mean there's a pretty reliable source that said I'm 13 you passed 9 million and then in 14 you'd more than doubled up to 18 have you guys passed the 100 million dollar mark yet I'm like I said I can't say we've definitely grown tremendously since then so it's been a fun Steve what at your scale what does what does the tremendous growth actually mean it changes it's easier to go from $1 to $2 it's much harder to go from 190 to 200 million yeah so what I would say is that we should call this they don't like the formula 1 track which is if you can go triple triple double double so for a while that was you know the trajectory that we're on and now we're falling nicely into what you'd see in public comps in terms of growth rates for preventive arts that does that mean just south of just basically just south of doubling can't say but well what just say me they work from finding the public benchmarks mean when you say you're looking at public benchmarks what specifically are you to other SAS companies that are public in their birth rates at your size or yes yeah got it very good tell me about churn um so one of the things that unique about us is we have a net dollar attention across our customer cohorts so because we have the potential upside within enterprises that we started on you mean a 100 percent everyone hasn't that dollar retention but you mean you've ever wondered more than hundred percent yeah yeah so it's pretty cool because our customers you know stick with us and buy more which is which is super exciting do you have I mean you have enough I imagine F years of history to understand pretty predictably what a year one ACV turns into an e or two and your three and your four I mean generally speaking are you driving like a hundred ten percent net dollar retention hundred forty percent what's that look like it reaches by customer but we definitely see is that you know and once our customers can get going you know there's a trajectory that's north of double digits in terms of your predictable growth depends on the size and everyone obviously changes pricing product mix etc to understand which kind of levers are most effective for driving expansion revenue you probably get a lot of feedback from your sales team on this but what have you found to be the most successful kind of pricing axes to drive the expansion is it a utility metric like a number of what ever build contacts or is it a product add-on where do you see that falling yes I mean I think when you think about the pricing the way I look at it as always how do you create the most value for the customer stakeholders that you're working with so we really kind of kept the same pricing framework but really always anchored it based on value so as we rule out new products we look at you know what value would like create for our customers and how do we make it work with their business cases so oftentimes for customers you know of ours they want to move to a predictable recurring model but at the same time they may have some new catbacks or want to do certain integrations so what we focused on is a really automating a lot of the components are platform to reduce the cost to deploy and launch and that makes for a much more predictable revenue stream and we can do that through a lot of product automation so yeah you go back to some of our first customer launches it would have taken thousands of custom engineering hours to get that going we've gotten that down to point click which adds huge value in ecosystem so for our summers it reduces time to market drives more predictability in thereby your value is there a single utility metric you've kind of identified as the core value metric HubSpot would say number of contacts salesforce might use something else you know Twilio would say number of API calls via text do you guys have a metric like that that really drives a lot of your business yeah so it's the either get yourself through across any one client and making sure that that meets their objectives and goals got it so net dollar retention obviously in a great spot what are you paying to acquire new customers typically um so what we would you think about us is that we have a really kind of small elephant hunting type team so for those revenue scale that we have we've traditionally had a relatively smaller enterprise sales team which really gives us an effective cost of acquisition bees to get some of these large deals and we have one rapid which was really exciting is that you know for the sales team here the more they stayed typically the more skill sets they gain and they can really make a lot of money in terms of you're working with the right deals and I'm having a lot of your customers what's your team size today so overall we're about six hundred and fifty people okay based mainly in San Fran or spread out on spread out so one of the things we started you're in San Francisco and scaled to about 200 here and then through both acquisition and organic have grown elsewhere so we have a big footprint in Canada both in Montreal Calgary in Ottawa and continue to grow you know different vectors let me ask of the economics question around CAC a little bit differently you probably at a scale where you focus more kind of on you know new dollars of ARR driven per dollar invested or kind of magic number kind of stuff do you have a typical payback period you like to try and hit or stay below um definitely we have internal targets in terms of where we want to be I think that it depends on really the cohorts that were selling into so as I mentioned we have our enterprise sales force we look to your benchmark against that you know certain you know bacteria talk to me about just the enterprise side there what do you see don't talk about your civic numbers but when you do try and benchmark who are you looking at what are those paybacks are typically benchmarking again yeah I mean I think the way that we'd like to see it is you know because we have low turn or a net dollar attention because we can generally get long sales cycles what we what we see is that if we pay more upfront from a compensation perspective or cost a sales perspective over time we make that back pretty pretty significantly and we've played around with different levers in terms of you know what you want to look at but if my advice to anyone who would be looking at setting you know comp and and expectations is to really think about you know what are the where the behaviors or drivers that will happen no matter what so you know that your customers are signing up there's a lot of value you're a state for a long time then you can afford to be more flexible on the on the outside providing the market opportunities but I'm Joey I mean you've raised so much cap what I could I could see a very rational argument where you're being more aggressive in terms of pay that because you have the cash cushion I mean are you up north of like 18 months right now in terms of payback are you closer to 12 or 6 we're definitely in range over but but I think you can definitely again because of the customer lifetime values we can definitely be a larger agent six how do you a last question before we wrap up how do you model lifetime values with with confidence you know a lot of people say we have six years of lifetime value and they could argue for like indefinite value it's infinite because churn is so low but that can be dangerous how do you keep yourself honest on that metric yes sir I think when we approach long-term value and you can lean from the data in the past approve but ultimately there has to be a call and comfort level made and that's where the letters can can draw so as you mentioned you know if you have more of a catch 15 you want to be more aggressive to capture a lot of market then you can take a bolder stand so on either way you think about that lifetime value have nothing what you can be you know more conservative yep actually I lied one last question before we wrap up so I guess fine to go public in the next 12 months or no I obviously can't answer that but I think we're really excited about the position we're in and you know definitely reach out to you more news to come very good let's wrap up here with the famous five number one what's your favorite business book how to win friends and influence people number two is there CEO you're following us studying right now easysharp from the four seasons who was that is he sharp from the four seasons I've always admired and got a chance to meet up earlier this year number three what's your favorite online tool for building your business besides your own let me know a ton of amazing online tools but I'll say first box is great for invoicing number another another good Canadian breakout story number number for how many hours will sleep to get every night six that's pretty good and what your situation married single you have kids I'm getting oh good no no kids yet then huh no all right very good and how old are you I'm 33 33 last question what he was your 20 year old self new just have conviction keep going guys there you have it have conviction your vision keep going he learned a lot from his furniture company in terms of buying software in the difficulties with it back in 2011 after he graduated teamed up with his buddies had his sites out for a big multi-million dollar our first deal to hit the ground running and learned the hard way it wasn't gonna be so easy but they've had success they've scaled the company in over 650 people at app Direct basically doing what a you know HubSpot might do for marketing and sales they're doing for e-commerce for core products many more or sorry beachheads many products under each of those beachheads again measuring kind of gross market volume or gross transaction volume across their customers using those products super healthy economics 245 million bucks raised millions of paying customers Daniel thank you for taking us at the top thanks a lot take care