How Apptimize CEO Nancy Hua grew to $6M revenue and 100 customers in 2018.

hello everyone my guest today is Nancy Aquash she's a CEO of optimize and they're probably installing your phone right now because they work with over ten they work with ten apps in every category in over a hundred plus countries those were the top ten apps prior to co-founding the company she led the fixed-income quantitative strategies team at get Co after studying math and see us at MIT Nancy are you ready to take us to the top yeah definitely all right tell us about the company what are you doing how do you make money okay so what apptimize is all about is we work with mobile teams anyone with an app and we let them do a be testing and feature flagging for their products so they can make different versions of their apps and send them to different users to measure what's gonna do better and let's see our monetization monetization strategy is pretty straight forward in terms of being a SAS company so we charge based on like two axes of monthly active users and the features and service that you get with our products so it's a yearly contract and it's like pretty straightforward in terms of building out our enterprise sales team which has been the main focus for at least the last few years I want to talk more about that we know you're at forty people or forty seven I think you said today we'll talk about the growth there give me a sense of average size so like what would you say the average customer pays you per year um it's our a CD has gone up to a little more than 35 K now per year and they're our biggest customers are paying more than 300 K per year and we have customers that pay us like sub-point a per year too but a lot of those are on the website and what axis is a is a higher leverage point for you for driving additional kind of expansion revenue a number of monthly visits or them adding additional feature sets um both of them because oh definitely the monthly active users our biggest monthly active users are like like we're in some of the top apps in the world like viber that's one of the top ten apps in the world and they have more that I mean I don't know how public eight it like you know they have you know hundreds of millions of monthly active users so that's huge and to support that kind of scale we've had to do a lot of things in our infrastructure at the same time that like massively can grow as well but I'm the like services side there's not that much more that that can grow yeah sorry to interrupt II know it's okay other companies though that are tied to some variable like that when customers originally sign up they're always nervous because they don't want their fit they want the cost to be fixed not to scale with their growth did you have that objection when you're signing up customers and if so how do you overcome that objection especially via your enterprise sales team yeah we definitely don't just scale linearly so the more they the more they add on monthly active users the like more economical to get her monthly active user and then I think for a lot of the big ones like if you're if you're a Viper's scale like it is hard for them to buy a lot of products so they will find pricing for a lot of company is prohibitive so it has to make sense in terms of how you are Kate architected your products so that you're not like each additional month active user is that much more expensive so you can still like do a lot of the processing yep I want to get more the back story here on the growth but let's start from where you are today how many customers have you scaled to a few hundred couple and yeah where it feels like it's a grind you know like he's always like oh it's always getting harder like the Calvary is coming I've like talked with the team about the that blog post a lot where he talks about how eventually it'll feel like there's this when you're at like Julian a or whatever like then there's this end in sight or something like that and when you guys know in terms of scale um you mean in terms of AR yeah we're very close are you close to ten we're getting there but it's still like I don't feel like it's that much easier it's I think a lot of it is that the market has evolved too because with when we first started very few people had apps that they were that strategic about and very few people were doing any kind of AV testing I think that it was something that everyone aspired to but not something that people viewed as really normal and now it's like really normal so the the landscape has totally changed now we're selling into companies like I mean our customers are now Starbucks and like the Wall Street Journal and stuff whereas our early customers we're mobile first companies like hotel tonight and Strava so that's a pretty different sale on profile so I think that caused this like have a lot of learning and just it's not like it becomes it's not like the same sale as the earlier sales you know like we had of all the time what currently growing at year-over-year well we're always targeting into XT over your growth rate okay that would be great great like what you had in 2017 I don't know if I can say like well our year ends tomorrow actually because our fiscal year is it ends at the end of January so everything depends on like these two deals that are literally getting approved right now so if you're working then that'll be great that'll be great for our growth rate but if they slip a little bit I mean obviously it's not that big of it like I'm not gonna discount or anything to get it in a week early but it is it does always just come down to the wire somehow it's like the last day of the quarter the last day of the year that's an answer fair to say if these two deals closed you'll be at your 2x target if they don't you'll be a little below is that fair to say we'll be a lot below it's like wow so like if you close these two deals I mean do you have any customers that make up more than ten percent of your revenue no we're still pretty balanced in terms of like still having a bunch of a bunch of like diversity in the customer set but I think that's our goal though like for the next year we do want to close a million dollar deal and stuff like that and that'll that's pretty aspirational for us right now because it's like it's already in the pipeline basically right so we know we'll have to close one of these deals for that in money that's not I mean that's great I love it and is it fair to say I mean you said a hundred you said hundreds of customers but just take a minimum of a hundred and then take your ACV that you mentioned earlier 35 I mean you guys are north of 300 grand a month right on revenue yeah yeah how do you broken 500 um yeah we're very close to like we're right around there right now and then they'll be like it really depends on the I think thanks thanks for sharing that I know a lot of people sometimes they do sometimes they don't but it helps my audience better gauge kind of where you're at so good so about 500 about 500 right now a couple hundred customers some big deals and pipeline scaling the enterprise sales team you've dealt with this the past 12 months give us where you are today in terms of your total team size how many are they sales people and what's been the challenge in getting them up to speed there's five sales people there's actually now there's six sales people there's also six STRs and the rest of team is like you know embrace my company has customer success in marketing and engineering sizes what it's 40 something like it fluctuates a little bit I think like what this is everything the sales team is really new I think that's a lot of it we have two people who are a pretty experienced in sales but a lot of it is people who are moving into sales from other areas that they were in and learning to do sales for the first time at optimize so I think you know they're like super smart and hardworking but we need a lot of training in terms of the basics of sales so like objection handling things like that yeah and just like pushing and what the arkad the deal is like and I think we've had we had a lot of success with generating Enterprise pipeline earlier this year I think it was just a market shift where there were a lot more like I described there was a lot more interest from established companies that are not mobile-first in making sure that their digital strategy is really solid so a lot of them just came to us and a lot of our content just started generating a lot of pipeline around there so then we had to give Enterprise deals to a lot of salespeople who had never done any sales before you know and that's like a lot of work and then they're kind of just thrown in there so I think a lot of it was this is nice um a little bit in some ways I think it's more I want to make sure that the salespeople feel like motivated to do it and don't feel like they're just in over their head you know because I think that's the whole sales team like just runs on morale I guess the whole company does to some extent so we see how seem has to feel like they're gonna kill it you know and if they don't know what they're doing at all or they just feel like it's very confusing and they're not a control of the deal then I think that's hard do you have them along quotas oh yeah of course about how many months does it take a new salesperson or ramped up to the point where they're pretty consistently hitting quota they get ramped they're off they're there on the ramp quota for the first quarter and then after that they're on a full quota um and I think like so three months of three months ramp yeah they start with the man see you're aggressive well with them in market deals I think you can see like really early um that like you know just how qualitatively to how the conversations are going so you can see like if they're picking it up and if they know if they can talk to our market and have a lot of empathy for the user base which is product people yep and generally what do you set full quota at um I think it's right now most them are on around an 800 K per year quota okay and you know it's like 50/50 Basin bonus yep and and I think you mentioned earlier with a $35,000 a CV I mean that kind of thing had a divide that and 800 grand they're coming to close what 20 deals a month to hit that or quarter yeah that's okay 20 20 20 deals times $35,000 ACB gives you around the 800 mark I'm just curious if that's over a month they have to close out over a quarter over a half a year oh no that's over a year oh that's over a full okay they have a whole year to hit that quota yeah Oh got it okay got it that's Ethan that's that's interesting okay good so that's scaling and give us a sense of what date when day 1 was when you launched we officially launched in January 2014 we launched on TechCrunch and I don't know like yeah the different news outlets most of our these have always been inbound so um how much hype is it now I'm not sure if you're like I've been more out of the loop on what is really cool a lot of founders that like don't know better they go guys just get on TechCrunch everything's gonna change but then people that who have done it they go oh my oh so overhyped we see a spike and we got like no new customers I think it depends on what your target audience is for us for Mobile first companies they definitely look at it which are early customers but for when we're selling into like you know the Starbucks of the world they don't really read TechCrunch that much yep you know economic stuff what's your Turin look like today oh we improved a lot they're actually like for a little while we had just I think we just did stuff in the order of the funnel that it was coming in so like we first optimized onboarding rate and then we optimized like some other stuff and then like later on we're optimizing the customer success stuff and we hadn't even tracked like usage very properly or like looked at any of this stuff which is the main leading indicator of churn so now I'm usage is one of the key company metrics like when the top 3 metrics the whole company looks at and we all are trying to improve and so our turn is sub 10 percent in terms of like not counting growth and then our goal is that logo churn nancy or revenue turn no its revenue turn annually or monthly that's a recorder okay over quarter so you're turning about 40 percent of your revenue annually oh I don't think it's that high okay man I feel like you know the sass math way better than me no I'm just curious what you're looking at uh no I think it must be annually then because it's not that high it's like when we yeah I think we just report it like quarterly because everything like comes in at the end of the quarter so we see what the turned numbers are ten percent annually revenue churns seemed I mean yeah that's about average for this kind of space yeah I think it was it was like worse than that last year why I think it was like 20 percent a little more than 20 percent even and I'm remembering it was because we weren't like doing anything we weren't tracking it that hard it was like every company that churned would be a total surprise you know because we would talk with them periodically but we weren't really looking to see if they were using the product you're like well they hadn't logged in in three months no wonder Charlie and we would discover that like some of them had never properly installed it or different things like that and that was just bad it was bad on us and so we started tracking usage in different adoption metrics and that gave us way more leading indicators because turn is the ultimate lagging indicator where you're like you feel safe just ignoring it for a long time because it doesn't come up until finally like a lot of the yeah a lot of the bigger customers like they are just always seem really happy you know or like they're just they they say they move really slow so they're just making excuses for why they haven't like done anything for a while so you feel kind of safe but now we're like we don't trust any of that stuff anymore like start using you know yeah that was revenue turn what's logo churn out annually do you know is about the same um I'm not sure what it is I don't think we track logo turn because we have all these self-serve customers - that aren't on annual contracts and so that turn is just something that we haven't paid attention to I think we started moving towards more gap metrics so the way we're like we're focused more on like just stuff that is really standard horst return is not you know a Gavin try self-serve stuff makes up what percent of your annual revenue would you say less than what it's around 15% rate that's really low um yeah but it's still like I pay less attention to those customers a lot though because they're kind of the most they get the most pure product experience because we never talked to them and they don't talk to a sales person so they're just like what you would what you don't do the perfect no trench nail yeah yeah it's just like can they figure out how to use our product without us doing anything yep and in some cases know something like okay what happens to you and like what did you end up doing what do you like to optimize your payback period for on your $35,000 ACB cohort well I don't know how fast doing your money back I think it's like we're just looking to make sure that that equation the like LTV is greater than three times kak or whatever is true yeah so I'm not exactly you know what you spend a choir customer it's pretty estimated yeah like right now um it's like a few thousand dollars or something really it's less than five grand yeah that's amazing that's a mate's someone's paying you thirty five grand a year you're getting your money back very quickly yeah I think that was because for a long time we we do very little AdWords or anything and we weren't doing a ton on the marketing side and very recently we like started with our SDR team so now I have to see what it is now yeah but a lot of parties for a long time we're just like inbound from the blog if you get a ton of leverage thirty thirty-five grand a year comes out to about I think three grand a month so if you're paying five six grand and kak I mean that's a two-month payback and that's assuming people are paying this annual contract monthly I assume probably some of them are all annual upfront right yeah we started moving to like we changed the way we're commissioning or you know kind of paying the salespeople so they're more incentivized to pay to get paid up right now and that's made a big difference in our cash flow here's a dangerous question what do you assume lifetime value is on these customers um based on what we were measuring it like we haven't had enough churn that it looked like it was lower than you know like nine years or something like it was on average it was really weird so we just assumed three because that's what is standard and we want to be conservative in our operating model so 35-grand times three years is the conservative approach about a hundred grand yeah that's conservative though since you said you're working deals now and you hope to close a million-dollar deal soon yeah I have them I mean our product is pretty sticky one and just once it's adopted because when they start integrating us into their product they'll use us to make all the changes in their apps so any new feature will go through optimize and everything that they're doing becomes targeted and and that becomes pretty hard to pull out after a while so if they're actually using us for the vision of the product to make sure that they're accelerating what they're learning about their user base then hopefully we're with them forever and we can you know become this tool that helps them learn everything that they want to know about their users yeah in the acquisition candidate you're probably testing many different acquisition channels are you testing conferences at all conference sponsorships we started doing that a little bit there work it's hard to tell it's hard to tell I think our meeting to like demo conversion rate is really confusing so I need to look at that because we were looking at it and I think that we're starting to probably decide to measure conferences just based on acceleration of a deal instead of new deals because it was getting too weird interesting like a lot of your customers are already here you can meet their knock out 20 meeting new prospects at least I feel like when we are at conferences I don't know if it's just the way we're doing it but somehow it's already people who are already in our pipeline that we're meeting with saying last two questions here before we wrap up with the famous five growth rate what are you growing out you said it's 2 out you're doing 2x about year-over-year and you said you're about 500 grand today so where you add about what to 200s twelve months ago yeah it was yeah I think it was a little above that okay right now I would like a lot depends on these two tails they're clouds coming just go back twelve so data you already have so go back twelve months you it was somewhere around to 10 to 20 something like that mm-hmm I think so okay this feels like so long ago I know it is just crazy isn't it you should ask ruin my finance guy money well listen we've got we've got a bunch of data here I'm gonna love you so much if you say you're bootstrap but I have a say I haven't I have an idea this you're gonna about to say that you're not how much have you raised we raised a little more than 20 million Nancy oh daggers in my heart no I'm just kidding okay she raised 20 million bucks obviously he kind of have to do that especially here in San Francisco with rents and the growth strategy you guys are pursuing but the growth is there and your friend izing the sales team so that all sounds good we know his last win was last round um our B was in 2016 okay are you raising right now no we i when I raise the B I was very like I'm never gonna do this again yeah I mean it was not a good time to raise do I think it was I mean it we got it like it wasn't the round was really good to us but what do you mean I mean um like we raised more than we embed too and it was oversubscribed and everything our valuation or just more money both both like because when in 2016 it was the SAS apocalypse thing was happening and where people are saying various startups were being overvalued I remember zenefits was getting like she lay down like they had a weird drama like LinkedIn and Salesforce even in the public markets we're getting hammered like lots of things are happening so that the SAS markets weren't that good and then like a lot of VCs weren't even really out there looking so I got a lot of advice that we shouldn't be raising then but we like so as a college did you end up raising and last round it was almost 15 million okay and and was it were you out like do were you pre money were you more or less than twenty five million dollar valuation we're more you were more okay that's great so I mean you were doing back then about two and a half million ARR so well over a 10x multiple pre-money oh yeah definitely it's great it's really good I think these multiples are just like really random because they're just kind of like in SAS I've seen anything from like a like a 5 X to like a 40 X like yeah me too I know I'm a good answer why they vary so much outside of just the charisma of the founder and and sometimes there's some rationality in the numbers I mean why do you think you commanded a great valuation which enable you to raise that capital and only give up you know less of a company than you would have what would you credit it to I mean it's just about negotiating and having other alternatives and stuff so it's like how much they can tell how much you need the money and then they can also tell like you know if you have other term sheets and stuff and then it all just kind of sets the price so just the negotiation yep are you couch for positive today are you still spending that money investing we're targeting in that is pretty soon so that's what when I raise the last round it was very like we're gonna target going cashflow positive with this that we don't have to raise again and control our destiny and not put me through this experience again and you think q3 is here no the target it sounds like it's gonna take like to the beginning of next year then we'll be pretty cashflow positive but it the the model also still assumes that we're only collecting quarterly if we do succeed in getting everything over to upfront annual then that'll make a huge difference and so yeah hopefully good stuff Nancy let's wrap up here with the famous five number one what's your favorite business book oh my god um I feel like everyone says the hard thing about hard things and I did just reread that again I think like every once in a while you need to you know just read something that you find really inspiring that's a good one yeah it's good on number two who's your favorite CEO in San Francisco to go get dinner with well I have so when you see your friends they really like well the last friend that I had dinner with was Brad from talkable he's I think you would love him a lot you should have him in your show they're basically fats and they make a lot of money and I mean I think they're just really good at the fundamentals and killing it in their space your last round did you take any money off the table yourself or was it all going to operations no it all goes operations anyway I'm already you know fine like my previous career and everything I just want to make sure that our companies do really well that's great number three with your favorite online tool to build your business besides your own oh we used so many tools I mean I use sales laughed a lot and just like out bounding to everybody I still like do a lot of SDR work cuz you know I find it's fun yeah number four how many hours of sleep to get every night um seven okay and what's your situation married single you have kiddos oh no I have a I have a boyfriend okay so not married no kids no kids I first my eggs last year Oh what amazing so I'm laying which company did you used to do that and I just want to UCSF interesting interesting and Nancy do you mind me asking how old you are I'm 32 32 okay think about that last question take us back 12 years what do you wish your 20 year old self knew well the MIT quant what he was she knew mm-hmm I didn't know anything then I think hmm I didn't think I was ever gonna be an entrepreneur it was really surprising that I started my own company so I think it's that you know that I had good instincts about the type of people I wanted to be surrounded by I think that's like the first factor and what led me to this where I felt inspired by the people that I was meeting who had done their own companies and stuff like that and you must have so much fun every day just like talking with it I saw my last house company Nancy and I just do this all the time I love can you tell that I love it all right guy from Nancy against there on yourself with mentors early on she wishes maybe she would've started that company earlier on clearly she's having a lot of fun and optimized again helping folks understand and do a/b testing at scale to the tune of you know hundreds of millions of monthly visits into the apps there all the way down to a self-serve model that makes up about 15% of their revenue they launched the company in 2014 they raised about 20 million folks sorry 20 million bucks serving hundreds of customers that pay on average thirty five thousand bucks a year in terms of ACV they're doing around 500 grand right now in revenue up about from 220 grand just 12 ish months ago so healthy growth less than ten percent revenue turn per month with our team of 45 people based out there in San Francisco as they double down on scaling their sales team Nancy thank you for taking us to the top thanks David