Interview
How AX Semantics Reached About €3.5M a Year in Revenue and Around 800 Customers with 60% YoY Growth (Interview with Chief Revenue Officer Steven Morell)
- Interviewee
- Steven MorellChief Revenue Officer
Company Metrics at Interview Time
Annual Revenue (at interview)
About €3.5M
Customers (at interview)
Around 800
Annual Growth (year over year, at interview)
60%
Team Size (at interview)
About 40
ARPU (first-year revenue / 12, at interview)
€761 per month
Historical Snapshot
These numbers were reported by Steven Morell during the interview at the time of recording and are a historical snapshot, not current figures. See AX Semantics’s current numbers.
Key Takeaways
- 01AX Semantics was generating about €3.5M a year in revenue at the time of the interview
- 02The company had around 800 customers across 23 different countries
- 03Revenue grew at 60% year over year
- 04The team was about 40 people, split into similar-sized groups across sales, engineering, customer success, and operations
- 05AX Semantics spent about €250K a year on Facebook, Instagram, and Google ads to generate leads
- 06Average revenue per customer was €761 per month, calculated as first-year revenue divided by 12
- 07Lead cost was €25 to €35 per lead, with 25 to 30% converting to an appointment
- 08By the time of the interview AX Semantics hardly lost any customers and had net dollar expansion, with growth from existing customers about twice the growth from new customers
- 09Churn had been the company's biggest problem, at about 90% in its darkest days, and it took almost three years to stop the bleeding
- 10The product supported natural language generation in 110 languages
Company Metrics at Time of Interview
| Metric | Value | Source |
|---|---|---|
| Annual Revenue (at interview) | About €3.5M | Interview |
| Customers (at interview) | Around 800 | Interview |
| Annual Growth (year over year, at interview) | 60% | Interview |
| Team Size (at interview) | About 40 | Interview |
| Engineers (at interview) | About 10 | Interview |
| ARPU (first-year revenue / 12, at interview) | €761 per month | Interview |
| Paid Ad Spend (at interview) | About €250K a year | Interview |
| Lead Cost (at interview) | €25 to €35 per lead | Interview |
| Lead to Appointment Conversion (at interview) | 25 to 30% | Interview |
| Appointment to Qualified Opportunity Conversion (at interview) | 70% | Interview |
| Qualified Opportunity Close Rate (at interview) | 50% | Interview |
| Countries Served (at interview) | 23 | Interview |
| Languages Supported (at interview) | 110 | Interview |
| Sleep per Night (at interview) | 6 hours | Interview |
Growth Breakdown
Revenue
At the time of the interview, AX Semantics was generating about €3.5M a year in revenue, growing at 60% year over year. The average revenue per customer was €761 per month, derived from first-year revenue divided by 12.
Customers
The company had around 800 customers at the time of the interview, spread across 23 different countries. Early customers came from the founder converting his content agency clients into software customers, while later growth was driven by paid acquisition and an SDR-led sales process.
Team
The team was about 40 people at the time of the interview, divided roughly equally across sales, engineering, customer success, and operations, with approximately 10 engineers.
Profitability and Funding
AX Semantics had raised external funding on multiple occasions, as Steven Morell noted the company could not be bootstrapped given the years of software development required to build natural language generation for 110 languages. Specific round sizes and valuations were not disclosed.
Growth Strategy
Paid Acquisition on Facebook, Instagram, and Google
AX Semantics spent about €250K a year on paid ads across Facebook, Instagram, and Google to generate inbound leads at a cost of €25 to €35 per lead. This was the primary customer acquisition channel at the time of the interview.
SDR-Led Qualification and Consultation Process
Leads generated by paid ads were called and qualified by sales development representatives to confirm business intent and product fit. Qualified leads then moved to a consultation call, with 70% of appointments converting to a good-stage opportunity and roughly 50% of those closing.
Converting Agency Clients to Software Customers
In the early days, the founder leveraged his existing content writing agency customer base to seed the first customers on the platform, providing a foundation before the paid acquisition engine was built.
Churn Reduction and Net Dollar Expansion
Churn was the company's biggest problem, because customers had to put in two weeks to learn the software. It was about 90% in what Steven Morell called the darkest days, and it took almost three years to figure out how to stop the bleeding. In the last year before the interview, in his words, "we cut the bleeding down to zero and now we have net dollar expansion": AX Semantics hardly lost any customers, and growth from existing customers ran at about twice the growth from new customers (a one-to-two ratio).
Product-Led Expansion into Personalization
AX Semantics was developing a personalization capability that would tailor product descriptions based on the inferred user type, targeting a larger addressable market and opening the door to outbound sales as a new acquisition channel.
Best Quotes
“Well, in a nutshell, it's an AI that writes content for you. So you probably know the pain. You wanted to write those five blog posts this week. You didn't. If that's painful, imagine writing, I don't know, 15,000 product description for your e commerce store. Multiply this with five languages. You need some help.”
“Well, we have an average sales price of 761. I know because I just calculated this two days ago because we're always looking on customer lifetime value that I was asking myself, how much do we get in the first year? So if you take the first year divided by 12, it's €761. That's probably $850 US.”
“you know, if if you start out, the first 50, not 10, first 50 customers, it's not sales, it's coercion. You go to everybody you know, you know what, I know where you live, you've got to buy this now. I need you to buy this. I don't care. And the founder did a great job in turning his agency customers into software customers.”
“What we do, we run and we iterated over years, week for week. We run Facebook, Instagram, Google ad campaigns generating leads and then we have a very traditional SDR calling qualifying. Is this a business? Do they understand the product or was that just you know fat finger on Facebook? And then we have a consultation call.”
“Churn was our biggest problem. We we we we needed, three years to figure this out. Why? Because the software is... You you have to learn it. There is... You have to put in two weeks to learn how to use it.”
“So we had we had in in in the darkest days, and those were really dark days, we had like 90%.”
“In in total numbers, it's zero. So we hardly lose any customers and we have in growth numbers, we have a one to two relation ratio of growth. So for every $100 that come in with new customers, we grow existing customers by $200. Does that make sense?”
“you cannot bootstrap NLG because you have to put in years of software development and that's very, very difficult to do. There's only like five companies out there who do natural language generation at all. And coming up with a product that everyone can use and that supports 110 languages. Man, imagine the grammar of 110 languages.”
What Happened Next
This interview captures AX Semantics at a specific point in time, when the company had around 800 customers, about €3.5M in annual revenue, and was growing at 60% year over year. Steven Morell described plans to expand into outbound sales and launch a personalization capability, which were ambitions at the time of recording. Visit the AX Semantics company profile on GetLatka for the most current available data.
View AX Semantics’s current profile and metricsFull Transcript
Chapters
- 0:00Introduction and What AX Semantics Does
- 1:14Average Revenue Per Customer
- 1:36Steven's Background and How He Joined
- 2:51Getting the First 50 Customers
- 4:03Paid Acquisition and SDR Sales Process
- 5:14Lead Conversion Funnel Breakdown
- 6:41Annual Revenue and Growth Rate
- 7:17Bootstrapped or Funded
- 8:11Team Size and Engineering Headcount
- 8:40Sales Team Structure and KPIs
- 10:10Churn History and Why It Took Three Years to Fix
- 11:17Current Churn and Net Dollar Retention
- 12:23Future Plans: Personalization and Outbound
- 13:28Famous Five Rapid Fire Questions
Introduction and What AX Semantics Does
Nathan Latka
00:00Hello, everybody. My guest today is Steven Morell. He's a startup geek, serial entrepreneur, mentor, digital native coder, sales guru. It's a hell of a combination, aspiring skiing instructor. He spent too much time in art, tech and the science of SaaS sales, currently chief revenue officer at AX Semantics in Germany. Steven, you're ready to take the top?
Steven Morell
00:21Yes. Thanks for having me, Nathan.
Nathan Latka
00:23You bet. So what is AX Semantics for those that don't haven't heard of them?
Steven Morell
00:28Well, in a nutshell, it's an AI that writes content for you. So you probably know the pain. You wanted to write those five blog posts this week. You didn't. If that's painful, imagine writing, I don't know, 15,000 product description for your e commerce store. Multiply this with five languages. You need some help.
Nathan Latka
00:49Is this who you're selling to? You're you're selling to e commerce brands that need meta descriptions built at scale?
Steven Morell
00:54Yes. Yes. Essentially, you take data, you take your knowledge about the products, you combine this and the machine produces on scale content. Also works for weather report. Everything that is repetitive and based on data, the machine can write better than the human.
Nathan Latka
01:09And what are these guys paying per month on average to use the tech?
Average Revenue Per Customer
Steven Morell
01:14Well, we have an average sales price of 761. I know because I just calculated this two days ago because we're always looking on customer lifetime value that I was asking myself, how much do we get in the first year? So if you take the first year divided by 12, it's €761. That's probably $850 US.
Steven's Background and How He Joined
Nathan Latka
01:36That's great. Okay. And walk me through your involvement here, because you're not the founder. Were you there at the start? When did you launch?
Steven Morell
01:43Oh, yeah. Well, I know the founder for twenty five years. Both used to have advertisement and digital agencies what feels like a century ago and his evolved into a content writing agency. At some point he started developing a software for his own needs to scale and then he pivoted from content writing agency into pure SaaS AI high-tech company and about that time I was coming back from Silicon Valley. We had a couple of beers next morning.
02:16I started working for him and going, I'll help you help you too.
Nathan Latka
02:16What year was that?
02:21When the company when did the company launch?
Steven Morell
02:24I started in 2016.
Nathan Latka
02:26Mhmm. And...
Steven Morell
02:292016.
Nathan Latka
02:30Now, did you get equity? I mean, you basically a co founder?
Steven Morell
02:33Yes, I have equity and I'm with him and two, three others. We are the C level and we we hacked this to today's size.
Nathan Latka
02:44I love that. Okay. So you launched in 2016. Talk me about tell me about the first 10 customers. How'd you guys get them?
Steven Morell
02:50Well,
Getting the First 50 Customers
Steven Morell
02:51you know, if if you start out, the first 50, not 10, first 50 customers, it's not sales, it's coercion. You go to everybody you know, you know what, I know where you live, you've got to buy this now. I need you to buy this. I don't care. And the founder did a great job in turning his agency customers into software customers.
03:16In the beginning, it was crappy. It was hard to use. It was difficult to understand. You know, language is probably the most complex thing that you can try to solve. So it came with, you know, onboarding, training, service. It was really, really difficult. By now, today, everybody can use it. We are like the only natural language generation product out there that is real for the rest of us. Everybody can just go there, have a trial, try
03:42it out.
Nathan Latka
03:42So so
03:43first 50, it's not sales, it's coercion, you get them on the platform. How many customers are you working with today?
Steven Morell
03:49Today, we would have around 800
Nathan Latka
03:49Wow.
Steven Morell
03:49From 23 different countries.
Nathan Latka
03:56So how are you getting customers? Obviously you're selling today. It's not coercion. How are you getting customers today?
Paid Acquisition and SDR Sales Process
Steven Morell
04:03That's a great question because I talking to other, I hear a lot about empty pipelines and lack of volume. What we do, we run and we iterated over years, week for week. We run Facebook, Instagram, Google ad campaigns generating leads and then we have a very traditional SDR calling qualifying. Is this a business? Do they understand the product or was that just you know fat finger on Facebook? And then we have a consultation call. We see,
04:41do they have the data? What is the exact need? And then we onboard them and close the deal.
Nathan Latka
04:47So with all the spend you're doing on Facebook, Instagram and Google, first off, quantify that for us. How much did you spend last month on those paid platforms?
Steven Morell
04:55I wouldn't know on a monthly basis, but I can tell you that it's probably 250 k. I'm talking euros. Yeah. So at 10, 15%.
Nathan Latka
05:03Yeah.
Steven Morell
05:03250 k a year.
Nathan Latka
05:06Yep. On ads. Okay. Got it. So with that kind of sample size, you should sort of know what your CAC is. What do you pay to get a new, you know, $50 a month customer?
Lead Conversion Funnel Breakdown
Steven Morell
05:14Well, a fresh lead
05:19is about 25 to €35 per lead. From there, we have 25 to 30% conversion into an appointment.
05:32From the appointment, we have 70% conversion into an opportunity in the good stage. And when I say good stage, it's a stage that keeps moving. It's not like circle back or reconnect or whatever. It's something like a signature handover. The two famous stages that we have ping and pong. You have to do something. They have to do something. Lead appointment.
Nathan Latka
05:58Now they're qualified. Then what?
Steven Morell
06:02Then we have this consultation call with them. Yeah. And from there, we move them in seventy percent of the cases into a good stage, and half of those close.
Nathan Latka
06:12Okay. Got it. So let me just repeat that back to you. You sent $40 for a lead, 25 to 30% of the leads convert to an appointment, 70% of the appointments convert to a qualified lead, a good lead, and then 50% of the qualified leads actually end up closing.
Steven Morell
06:28Yes.
Nathan Latka
06:29There you go, guys.
Steven Morell
06:30There you have it.
Nathan Latka
06:30CAC in a nutshell. We love that. Okay. Now, can I take this math? I mean, you've got what you said 800 customers at $850 a month on average, you're doing about $680,000 a month in revenue.
Annual Revenue and Growth Rate
Steven Morell
06:41We are doing about 3,500,000 A year. Per year.
Nathan Latka
06:46Okay. Got it.
Steven Morell
06:46Yeah. So this is 4 4.2 or something.
Nathan Latka
06:46Yeah. Got it.
06:50Got it. So more like $354,100,000 dollars from a
Steven Morell
06:5360, 60% growth year over year. Know what you're gonna ask.
Nathan Latka
06:58Yeah. You you...
Steven Morell
06:59Was... You do...
Nathan Latka
07:00You must listen...
07:01Do you listen to the show?
Steven Morell
07:02Of course.
Nathan Latka
07:02Listens.
07:03He listens.
Steven Morell
07:03Do I do...
07:04Yeah. Big fan.
Nathan Latka
07:05Okay. So you like the process. You you still agree to come on in. You enjoy it.
Steven Morell
07:09Absolutely.
Nathan Latka
07:10Good.
Steven Morell
07:10Absolutely. I love
Nathan Latka
07:12Good. We love that. So that's good growth. Now, you done this Bootstrap or did you raise a bunch?
Bootstrapped or Funded
Steven Morell
07:17No, we've been raising multiple times. I'm not at liberty to go into details, but they raised the first time when I wasn't around.
07:28And
07:30then, you know, the thing is, you cannot bootstrap NLG because you have to put in years of software development and that's very, very difficult to do. There's only like five companies out there who do natural language generation at all. And coming up with a product that everyone can use and that supports 110 languages. Man, imagine the grammar of 110 languages.
Nathan Latka
07:30Yep.
Steven Morell
07:30This is not sending emails or, you know, doing on page analysis or something. This is
08:04really high-tech.
Nathan Latka
08:05Yep. No, we love that. Okay. Let's talk more about the team. How many folks total?
Team Size and Engineering Headcount
Steven Morell
08:11Roughly around 40.
Nathan Latka
08:13And how many engineers?
Steven Morell
08:15I'd say maybe you could divide it up in similar sized teams, sales, customer success,
08:26administration
Nathan Latka
08:26How many engineers?
Steven Morell
08:29Probably 10.
Nathan Latka
08:29Okay.
Steven Morell
08:29Each 10.
Nathan Latka
08:31And then how many... Do you have any quota carrying reps? And if so, how many?
Steven Morell
08:35Come again?
Nathan Latka
08:35Do you have
08:36any quota carrying sales reps?
Sales Team Structure and KPIs
Steven Morell
08:40This is not how we built we... How we built our sales team. The sales team works as a team and not as sales reps who compete against each other.
Nathan Latka
08:50Do the
08:50does the team have a quota?
Steven Morell
08:54They have their own KPIs,
08:58and
09:00Actually, they figure out their KPIs on their own and present it. Go like, this is what I'm doing. This is what I think the team should know that I'm doing, and this is what I want to be measured by. And then the rest of the team goes like, yeah, sounds right. I want to know that you're doing this.
09:18So, is how we build the team. We also don't sit on hire and fire. Normally say, you should, even if you're good, half of the salespeople that you hire, probably have to let go because it's just not a good match for them. I don't believe that. I believe you have to develop people and to train them and to build a team based on experience and knowledge of this product, this company, this customer type. It's not... I
09:47see a lot of others are just hiring and firing till they find this guy who does it well. This is... There are no naturals.
09:55It's training.
Nathan Latka
09:55Understood. So 40 people total, 10 engineering, 10 sales reps, then about 20 other people in other roles.
Steven Morell
10:02Yeah. Customer success, support, operations.
Nathan Latka
10:05Churn's critical in a SaaS business, as you know, Steven. So what's biggest churn?
Churn History and Why It Took Three Years to Fix
Steven Morell
10:10Thanks for asking. Churn was our biggest problem. We we we we needed, three years to figure this out. Why? Because the software is... You you have to learn it. There is... You have to put in two weeks to learn how to use it.
Nathan Latka
10:25What are the numbers first, and then explain the backstory. So what is your gross revenue churn annually?
Steven Morell
10:29So we had we had in in in the darkest days, and those were really dark days, we had like 90%.
Nathan Latka
10:35Yep. Annual churn.
Steven Morell
10:38Now we are monthly trip.
Nathan Latka
10:41Oh, wow. Okay.
Steven Morell
10:42Monthly trip. Yeah. So we were we were
Nathan Latka
10:45I mean, that's not a SaaS business.
Steven Morell
10:46I mean, that's that's an agency. Loading in... Yeah. We were loading in customers, onboarding customers, and we were losing them at the same time on the other end.
Nathan Latka
10:46Yep.
Steven Morell
10:46And it it took us almost three years to figure out how to stop that bleeding. And in the last year, we cut the bleeding down to zero and now we have net dollar expansion.
Nathan Latka
11:08Well, hold on. So so what is... Let's do gross and then expansion and then net. So what's gross revenue churn monthly?
Current Churn and Net Dollar Retention
Steven Morell
11:17Now it's... In in total numbers, it's zero.
11:23So we hardly lose any customers and we have in growth numbers, we have a one to two relation ratio of growth. So for every $100 that come in with new customers, we grow existing customers by $200. Does that make sense?
Nathan Latka
11:42Yeah. It does. It's just a complex way to talk about this. What is your expansion revenue either monthly or annually on accounts, on historical accounts percentage wise?
Steven Morell
11:52I would have to look that up. I don't know
Nathan Latka
11:52But that from
11:54what you do know is that net dollar retention annually is now above a 100%.
Steven Morell
11:58Yes.
Nathan Latka
11:59Got it. The expansion from historical cohorts is more than that same revenue you lost from that same cohort.
Steven Morell
12:04Yes.
Nathan Latka
12:05I see. Well, congratulations. That's a big step.
Steven Morell
12:08It was a long, very, very dark way. And... Yeah. But we we made it through.
Nathan Latka
12:16Do you plan how do you plan to get customers this year? Is it still gonna be about $400,000 of Facebook, Instagram and Google ad spend?
Future Plans: Personalization and Outbound
Steven Morell
12:23Well, we are playing around with new ways. We are looking into outbound for the first time. We are also developing the product further. Next step is, I'm not sure it's totally official, but it's going to be official like next week. We are going into personalization. Let me give you a quick example. Take a power driller. If you have a power driller, it's a different tool for a carpenter than it is for a car mechanic than it
12:50is for an electrician. Yet it has the same description why they're doing different things with it. So if you can tell from the path that you're from the user journey, this is a carpenter or this is somebody who is into car parts, give them a different description of the tool.
13:11So it's close to one-to-one personalization. And this is where we are heading with the product. This naturally has a bigger market. So we are looking into outbound as a new acquisition channel.
Famous Five Rapid Fire Questions
Nathan Latka
13:28I love it. Great. We'll see we'll see how it goes. You have to come back on and give us an update. In the meantime, though, let's wrap up here with the famous five. Number one, favorite business book.
Steven Morell
13:36Right
13:37now, it's the Mountain Test.
Nathan Latka
13:39Number two, is there a CEO you're following or studying?
Steven Morell
13:42Not really. No.
Nathan Latka
13:43Number three, what's your favorite?
Steven Morell
13:44I like the school guys.
Nathan Latka
13:46What's your favorite online tool for building your business?
Steven Morell
13:51Lately, it's Slab and documenting everything that we do and having a SLAB, s l a b.
Nathan Latka
13:57SLAB. Interesting. Number four, how many hours of sleep do get every night?
Steven Morell
14:01Come again?
Nathan Latka
14:02How many hours of sleep do you get every night?
Steven Morell
14:05Plenty.
Nathan Latka
14:06Many? About the journey.
14:08How many hours?
Steven Morell
14:10I I get my six hours.
Nathan Latka
14:11That's good.
14:12And situation, married, single kids?
Steven Morell
14:16Girlfriend.
Nathan Latka
14:17Okay. So not married, no kids yet?
Steven Morell
14:19Girlfriend, 14 year old teenager, two dogs, two cats.
Nathan Latka
14:23You're a busy guy. How old are you?
Steven Morell
14:2552.
Nathan Latka
14:26Last question, Steven. What's something you wish you knew when you were 20?
Steven Morell
14:30I was building companies that the the startup didn't exist, but I was doing exactly that.
Nathan Latka
14:39Well, what's something you wish you knew when you were 20?
Steven Morell
14:43Being an being an entrepreneur, always.
Nathan Latka
14:45Guys, there you have it. AX Semantics. They're helping you write content at scale faster. They were doing about, call it, they're doing about 4,200,000 in terms of run rate today, up 60% year over year. Team of 40 currently spending and getting most of their customers. They have eight fifty today getting those customers on paid ads. They spent about $300,000 last year on paid ads, paying out $40 to get a lead. Steven, thanks for taking us to
15:07the top.
Steven Morell
15:08Thanks for having me.
Nathan Latka
15:11One more thing before you go. We have a brand new show every Thursday at 1PM central. It's called Shark Tank for SaaS. We call it deal or bust. One founder comes on, three hungry buyers, they try and do a deal live and the founder shares back end dashboards, their expenses, their revenue, ARPU, CAC, LTV, you name it, they share it. And the buyers try and make a deal live. It is fun to watch every Thursday, 1PM
15:35central. Additionally, remember these recorded founder interviews go live. We release them here on YouTube every day at 2PM central. To make sure you don't miss any of that, make sure you click the subscribe button below here on YouTube, the big red button, and then click the little bell notification to make sure you get notifications when we do go live. I wouldn't want you to miss breaking news in the SaaS world, whether it's an acquisition, a big
15:56fundraise, a big sale, a big profitability statement or something else. I don't want you to miss it. Additionally, if you wanna take this conversation deeper and further, we have by far the largest private Slack community for B2B SaaS founders. You wanna get in there. We've probably talked about your tool if you're running a company or your firm if you're investing. You can go in there and quickly search and see what people are saying. Sign up for
16:17that at nathanlatka.com/slack. In the meantime, I'm hanging out with you here on YouTube. I'll be in the comments for the next thirty minutes. Feel free to let me know what you thought about this episode. If you enjoyed it, click the thumbs up. We get a lot of haters that are mad at how aggressive I am on these shows, but I do it so that we can all learn. We have to counter those people. We gotta push
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