Automatedinsights Revenue, Valuation & Funding (2018)

hello everyone my guest today is Mark Zion T's had a successful career leading company since 1987 and is currently the CEO of automated insights a vista effort a partner's own company his independent board director for pivot 3 and many other companies on with friends of the earth decide to join time with family he is an avid outdoorsman an accomplished bicycle racer mark are you ready to take it to the top I am alright so for having me you bet give us the story here so let's start from the beginning and go from there what does automated insights do and what's your revenue model I do make money yes so automated insights is a leader in natural language generation or nlg and essentially what nlg is is that we take structured data as an input and we can create from that data a story or a narrative or a report that sounds like it was written by a person that we do that through software the business model for this is is it is a subscription service so today Enterprise SAS software subscription in which our users with a basic subscription can create an unlimited number of use cases have an unlimited number of users and then they're picking how much production they want per month basically how many outputs if you want 500 stories 5,000 we have customers that do over 20 million a month is it based on your ease or or the word count per story not word count it's based actually on it technically on an API hit which equates to each output but we really don't care that outputs a sentence a paragraph or three pages what determines the weather oh it's all the same in terms of cost structure and output yeah it's just a matter of how many outputs you create but the length of the output doesn't matter okay so paragraph is gonna be one API call and so is a single word that's correct okay so someone writes a bit you know you know I mean it's a 10 paragraph long piece of piece of work via your tool they're gonna pay the same as someone that types one or you generates one word yeah yeah nobody's gonna generate one word but that's the point a sentence is the same as 10 pages for most people the kind of output that we create is anywhere from a couple sentences to a paragraph and at the most typically it's going to be a couple pages that because that might be some sort of a report I see okay and um will you see if you use the word enterprise so let me give me a general sense here our people are paying what 10 grand about the hunter grand a month or are you higher than that even know a basic subscription so we have an annual you know minimum of an annual contract so our most basic subscriptions about $24,000 at a year so usually there's a very powerful return on investment here because if you compare it to the hours of a full-time equivalent this is gonna save money and it's gonna allow people to work on more valuable things yeah and would you say that 24 grand is also I know that's your minimum but is it also fair average or no no the average is actually you know higher I've just based on the blend of customers and then we have a slightly different business model when we're because when we work with business intelligence our product also integrates with leading bi solutions like tableau click MicroStrategy TIBCO Spotfire power be God and there we we basically look like a Purdue or kind of model that matches the subscription that they charge for their services yep or most of the folks that you're working with are they actually you know do your traditional media companies or no that's a small portion it's very visible however so the work that we do with you know people like The Associated Press is very visible or the cool stuff that we do in the game Call of Duty or that we do at Yahoo NFL that's very outward facing so people see that but the vast majority of our customers are business-to-business where we're inside dashboards we're working in e-commerce we're doing reporting for businesses mark give me the the unsexiest use case of automated insights well I mean if you just think about I mean you know for all of it it's you know it all relates to the same thing and that's our vision statement and that is to make the world's data understandable so our general belief is that we live in a world where our problem isn't that we don't have enough data our problem is the exact opposite we have too much data and we're just trying to make sense of it and we just want to be able to get to what does it mean to me and how do I make it so tell me a real customer though like II like who many people will define as a very unsexy space but where you provide a lot of value Oh weekly sales reports so we have a large insurance company they have about 15,000 people between their direct and independent agents and once a week they want them to get a report based on their role whether you're an agent an agency or in the sales management of the company they want a weekly report that says how they're doing how they're trending and giving them some advice weekly on how they can improve their performance so that's 15,000 reports a week times 52 weeks a year and you know that's certainly not as fun as fantasy football but it also is really great for helping them run their business in a more efficient manner when did you launch this company this company started just about 10 years ago I am NOT the founder just to be clear I I am I took over from the founder just over a year ago our founder is our chip is our executive chairman and he's a technical founder so I came in through the private equity owner to scale up the business and continue to grow it to the next level so when I think it was Vista Equity right when did that deal happen that happened just over two years ago that they acquired the company so we were backed by venture investors originally how much was in the company pre pre the deal oh I actually don't have these doubts on that but you know under the pre the pre deal but we were purchased died in just over two years ago by Vista I came in through the Vista side of things to run automated insights I've been running company since 1987 so and a hundred percent of what I've done my whole life is technology and just I'm doing that and I just love the technology that we have great team great set of customers so it's a it's a very exciting time for our company how did that work I mean did you most private equity firms or people in-house always looking for deals and sometimes when that person kind of leaves the deal internally they end up actually running the company post deal was that the case with you add Vista or know like how did how did best to say oh we got to get mark on this company yeah so I knew a number of the vista CEOs in vista people so you're right that sometimes that happens where an operating partner looks at the deal and they take over in this case I was a known entity to Vista and I was I was very very interested in working with Vista because they're quite unique and that uniqueness is is that they exclusively invest in enterprise SAS companies so when you think of private equity there's some niche firms that are very vertically focused but they tend to be smaller vistas very large but vertically focused on software businesses you see other you know companies in their size they may invest all over the place they don't necessarily have an expertise in the industry so I think the Vista model is quite unique I think it brings a lot of advantage to our customers I also think it's very attractive for our team because it provides him with a tremendous amount of development and how to operate a business with best practices okay so 2008 was founded you joined about a year Vista bottom called in 2016 you joined in 2017 obviously the Avista the founder original founders so I think you said Chairman's was still involved to some degree I think we understand the products nicely what have you guys scale to in terms of total customers I don't have a total customer count but it is several hundred customers that are that are active and what's really interesting is that our sales team is in the US and we're based in Durham North Carolina we now have people on the East Coast on the West Coast we're expanding the team outside we don't have anybody outside the US but we actually have customers now in 40 countries that are creating their use cases in over 25 languages so that's something else you can create this this output in English or Mandarin or French whatever you want so our reach is quite large for the size and what's also really interesting is that we have fortune 100 customers and we have customers that have 10 people that are just growing their entire business using technology and leveraging technology so that they can punch way above their weight yeah so it's really fascinating to work with that range of customer sense well yeah it's certainly not out of $24,000 man on a CV on year one I mean obviously it's not an SMB play but yeah you feel still be stay pretty scrappy with that budget and really save a lot of times you know you think about it I see usually when running that sales report on a small team every week if they can automate that saves a lot of time right and we're not unlike some of our customers in that you know one of our core beliefs is automate everything so we'll you know anything that can be automated should be automated so your people are doing the most valuable things they can be doing what is your team size today so we're sixty five people today when I joined a year ago it was about 40 and we anticipate being close to about a hundred by the end of the year okay that's great and just refreshing again you said raleigh-durham and where else so-so Durham is the headquarters we have people in the Northeast in New York and in Boston we have folks in Seattle in Oregon and soon we'll have people in the Midwest and in the southwest okay so fairly fairly remote then fairly spread out right those are just senior account exact they're working larger enterprise deals I see daaad entire development team is based in North Carolina where we are very fortunate to be able to draw a great talent out of North Carolina State UNC Duke and we're just around by awesome schools did you grow up there or did you move there at post-acquisition I moved here post-acquisition after living in Chicago for over 30 years okay it was excited to move as once our kids all exited the house my wife and I were excited to move somewhere else that's good all right let's jump in the roping some other economics for a wrap up sojourn is obviously critical in a SAS business tell me about your turn yeah the turn is really nominal I mean you know for us it's it's either you're gonna know real upfront if it's working or a dozen our customers kind of think through the process so in the vast majority of the time they just go with an initial subscription one year or multi-year in some cases a customer if they need to do some a be testing or they need to do some thorough testing they might do a shorter paid trial and then they and they buy in but I mean I would say our turn is very very low single digits at this at this point okay and is that you're talking like one or two percent gross logo charm per month that's well actually it's it's in the single digits per year okay got it huh yeah cool so we'll call it maybe four or five somewhere between 9% in gross but I'm driving that's gross logo share are not revenue sure that's correct and by the way in fact what normally happens is the exact opposite once somebody has us in on one use case they actually grow yeah because you say oh I'm doing this report I can use it for that report oh I'm using it for internal reporting just with some data set G I can put this into my tableau what is average expansion from your window year to would you typically see yeah so what we typically see is that there's some kind of initial learning curve introduction of the first use case but then it's not unusual that you'll see them go up 10x between year one and year two so from a twenty thousand dollar plan up to a two hundred thousand dollar year plan well maybe volume going up that our pricing doesn't go up linear in a linear fashion so your volume goes up exponentially and your pricing goes up less so that's it's a good that's a good value play but I mean if you were a quantify that are you talking like a hundred twenty percent retention revenue retention for account 100 SEK sixty seventy I mean it's not unusual that somebody will double revenue you know from year one dude yeah yeah that's pretty healthy um and then and then tell me more I don't know if you focus more or less on this now that obviously or you're under Vista but what do you like to keep payback period under when you're when you are spending money to acquire these customers yeah so I mean you know for us it's it's a very rapid payback we're very fortunate that in terms of kind of the way we get our customers we get a tremendous amount of inbound inquiries that happens to relate to a lot of the public facing services that we provide we get attribution so people are constantly reaching out to us so from that perspective we we get a lot of inbound we also have a pretty well thought out digital outbound marketing machine so I think our our payback is very rapid on those expenditures are getting like less than six months Oh much less much less yeah that's right our most expensive kind of customer acquisitions revolve around a number of marking events we partner with all the BI companies that their customer shows yep we also do a lot with Gartner mark just to be clear though attendance when you say much less than six I'm talking like fully weighted including you know dividing the salaries of your salespeople Commission structure plus all your direct paid spend yeah yeah okay yes that makes a lot of sense and then what do you assume and this is a tough tough question but you're the guy to ask cuz you've done this many times when you put your finger up in the wind what do you assume these customers are worth to you in terms of lifetime value a minimum at least yeah so I mean our view with these customers are that I mean you know we don't necessarily see them tapering off after some you know sort of a certain amount of time our customers are continually moving up in the length of contract so so mark you can argue infinity though right so what prevents you from getting incident we have customers now that they started off with one year and now they're signing five years for their sign five years with two-year extension so I think it's very fair to think that these are at least five-year engagements with customers and the the you know kind of our average revenue you know you know the minimum of 24 thousand a year it is significantly higher than that so if you if you go even a few times at times five you can get a lifetime value of a customer yeah yeah it means easily north of a quarter of a million you probably have many customers and many many millions they've already paid you that's right yeah that's right okay very good and let me see here so last question I'm curious about this when a firm like Vista right a private equity firm buys like a traditional SAS company I done this before I imagine you you kind of know a few things you want to do I mean what was the first what was the biggest opportunity you saw to in terms of what you wanted to implement at the company right after the acquisition yes so what I think automated insights if you say when were we most recognized for it it would be in our product and our innovation so the first thing I want to do is not change that because that's really important to our culture it's very important to our customers in our differentiation we were less known for being commercially focused so my focus was on the sales and the marketing and the channel partners that would give us the leverage to grow and expand the business so it was really do try to equal wait the business side of the business if you will along with the product and techno technology and innovation side of the business so that was my goal is to take what Robbie started and improve upon that not to reverse anything per se but to add on those elements that would allow the business to grow in scale and now today what are you growing at year over year we are triple digits growth in terms of percentage we see that for the foreseeable future I'm gonna say that's pretty good cuz I assume you guys have some skill I think this acquisition was two years ago as I think something like 80 million and if you just said you have three hundred or a couple hundred customers at minimum twenty four thousand a CVS I mean you're north of I mean you're well your way north your minimum your potential in on the 600 random month but your way north of that and and would you say there's more well actually let me let me say that question for different time last question here before we wrap up um three metrics you're focused on like today your most important ones you're focused on are what new customer acquisition / you know they the the a cVTC be for those customer sets the product roadmap that we're continuing to execute upon that gives us the differentiation and then final is the levers that we're getting with with bi and si partners okay okay so the first one was it was it was a true like economic term give me like two other economic terms like are you focused on driving expansion revenue at a certain percentage or some other component yeah so it was certainly the you know the bookies which then would relate to the revenue it was what portion of that revenue was moving through channel and then and then the other you know kind of KPI numeric would be the productivity of the sales organization how do you measure that oh I mean you know how long it takes for them to reach quota essentially you know it's a training it's a development so you just want to make sure that your sales productivity is in line with your expectations as you're adding people all right mark let's wrap up here with the famous five number one what's your favorite business book oh great question favorite book would be oh I'll just go back with - a classic sons ooh that's a good one our door number two is their CEO you're following or studying right now yeah I really you know try to read about you know about all all CEOs out there I certainly I think I admire you know everything that Apple has done in terms of innovation I think it's been remarkable to watch the transformation that's going on between jobs and cook so I like to follow that in particular number three with your favorite online tool for building your business boy I mean my whole you know everything is everything's on my you know I have so many tools that's a really hard question but I would say certainly for me you know watching Salesforce all the time because we built in a lot of things into Salesforce so our Marketo comes into there all of our campaigns come into there so I can get a pretty good dashboard view right from there number four how many hours we'll see for you and every night not a big sleeper six ok and what's the situation and they mentioned married and kids so so married and how many kids married 28 years or adult kids that that I and we all like each other that's good thing mark and how old are you fifty-six all right last question what he was your 20 year old self no I probably would have switched sports earlier I'm a competitive bike racer but I didn't switch over until my mid-thirties I was a runner I probably would've gotten my biking earlier so that's a non-business thing but I probably have started bike racing a little bit earlier switch to biking earlier there you guys Howard from mark he's been in that of SAS companies many many times most recently hooked up with Vista and jumping on their portfolio companies that basically helps really with automating a lot of content creation right whether it's sales scripts going out or helping ap write posts all based on data so significant timers time costs right on humans that used to write these things himself automated insights is the company not several hundred customers 65 people between Durham New York Seattle many other locations less than nine percent gross logo journey annually it's not unrealistic to see their customers doubling their a CVS year-over-year which is great LTV definitely north of 250 grand again average contract value first year about 24 grand with triple digit year-over-year growth mark thank you for taking us to the top thank you thanks for having us on