How Bloomreach Reached $50M to $100M in Revenue with 250 Enterprise Customers (Interview with CEO Raj De Datta)

Host Introduction and Guest Background

Nathan Latka

00:01Hello, everyone. Our guest today is Raj De Datta. He has brought ten years of enterprise and entrepreneurial experience with him when he co founded his current company, Bloomreach. Before launching the company, he was entrepreneur-in-residence at Mohr Davidow Ventures. Prior to that, he served as Cisco's director of product marketing and was on the founding team of telecom company FirstMark/LambdaNet, which grew to 80,000,000 in run rate in ARR, I presume. He also worked in technology investment

00:24banking at Lazard Freres. He holds a bachelor of Science in Electrical Engineering from Princeton University and an MBA from Harvard Business School. His thoughts on navigating the challenges of high growth startups can be found on his blog at ddata.com. It's dedatta.com. Raj, are you ready to take us to the top?

Raj De Datta

00:40>> I am. Absolutely.

What Bloomreach Does and How It Makes Money

Nathan Latka

00:42Alright. Tell us more about Bloomreach. What's the company do and how do you make money?

Raj De Datta

00:46>> Absolutely. So what Bloomreach is is we're in the business of offering a platform to power digital experiences. So think of every interaction you have online. You go out, you buy a pair of shoes, you look for a date, you're organizing a movie. All of those experiences online can be pretty painful. The start of the company was really asking the question, why couldn't every experience on the web feel the way it does at Netflix or at Amazon

01:09>> or at Uber or some of the sort of much more modern tech companies out there. When we think of enterprise brands, the banks and the airlines and the insurance companies and all of the other big businesses we interact with in the world, their digital experiences feel nothing like Netflix and Google and the like. So we came about trying to say, let's create a great digital platform that makes it possible for every enterprise in the world to

01:33>> build an amazing digital experience. And let's offer that platform to everybody. Let's get 7,000,000,000 people around the world to have an amazing digital experience. That's why we started the company. Fast forward now several years later, we make money in a SaaS based business model. So we offer our services in the form of a subscription, and large enterprises sign up and we drive their digital presences.

Nathan Latka

01:56And are we talking, give me a sense here of generally on average in a year, they're paying $10, a $100, a million, 10,000,000, what's general size?

Average Contract Value and Enterprise Pricing

Raj De Datta

02:03>> Yeah, ASP for us is around $250K per year. We've got several clients that pay us more than a million dollars a year. Yep. So it's an enterprise type business.

Pricing Levers and Expansion Revenue

Nathan Latka

02:15And what pricing levers do you use to drive expansion ARPU? Is it number of site locations like a Neiman Marcus or what are those utility metrics?

Raj De Datta

02:22>> Yeah. So there's a bunch of ways by which we grow. We grow because people, when they launch digital properties, websites, apps, they'll often do it in many countries. So they'll have different properties. They will own many brands. You mentioned Neiman Marcus. Neiman Marcus owns a selection of brands beyond Neiman. Williams Sonoma, another one of our clients also owns Pottery Barn, Pottery Barn Kids. They'll have multiple brands and they'll pay us more when that's the case. And

02:46>> then we'll charge them more as their page views grow and as their traffic grows, then they'll use more of the platform. And finally, they buy more products from us. That's when they buy more products, then that's an expansion in the amount that we charge.

Nathan Latka

02:59So number of languages, site impressions, and just pure additional product upsells.

Raj De Datta

03:05>> Additional products. That's right.

Company Founding Story and Early R&D

Nathan Latka

03:06Interesting. Okay. Give me more of the backstory here. So when did you launch the company?

Raj De Datta

03:10>> Yeah. So, you know, started working on the company in 2009, and it was a small team of us, myself, my co founder, Ashu, who had built a lot of the search engine at Google. We pulled a team of people mostly out of Google. It was a group of five or six of us and the original pitch was, if we can build a platform that you can plug any website or app into and it's going to immediately

03:31>> generate highly relevant experiences for consumers. Wouldn't that improve the consumer experience and drive more revenue for whoever's publishing the website or app? And if we could build that platform, it would serve everybody. So we spent about a year, year and a half kind of in R and D. Built a machine learning system around that basic problem, proved that it could work by kind of 2010, started to approach a set of clients and really only launched the

03:54>> company publicly in 2012, or maybe it was end of twenty eleven. And that was when we sort of began to take it to market.

Nathan Latka

04:01And how'd you support yourself in those first two, three years? You guys just had savings from Cisco and Google that you lived off of or what?

First Investor and Initial $5M from Bain Capital

Raj De Datta

04:07>> Yeah, so we definitely did that for a period of time. Eventually we had our first investor, Ajay Agarwal, who's a partner at Bain Capital Ventures. He put in the initial $5,000,000 and kind of our pitch to him was pretty simple. It was sort of, if we build this platform, it's going to transform every website and app in the world. Wouldn't that be a great business? Yes. And so the risk here is really the technical risk of

04:29>> whether we can build a machine learning, self learning system that could work for any website or app in the world. And so to mitigate the technical risk, we got to hire the 10 best engineers we know who are at places like Google and Facebook and recruit them in. And so he put in the original $5,000,000. We said we wouldn't really spend it. We'll just perfect the platform. And once it was up and running, we'll start approaching

04:50>> clients for revenue.

Total Funding and Capital Raised

Nathan Latka

04:52So today, how much total have you raised?

Raj De Datta

04:54>> So today we've raised a $100,000,000.

Nathan Latka

04:56Okay. So obviously significant capital raising after that was, you know, I want people to make sure they pull the right lessons from this interview. I mean, of the reasons you were able to get 5,000,000 early on, obviously, is because of your guys' backgrounds, right? It's not as simple as just saying, look, here it is. It's going be a success. Boom. Right? Yeah. Yep.

Raj De Datta

05:12>> That's right. It was... You know, I... I'm a third time entrepreneur. I've done this before. Ashu was a well regarded machine learning kind of guru out there. So it was our backgrounds. And I think we had a crisp problem statement that was pretty different. Nowadays, the use of AI and machine learning is popular. In 2010, 2009, we were very early in saying, we're going to have every website and app in the world powered by that. And

05:33>> so it was a distinct message and a distinct proposition of, hey, we'll do something pretty different with this class of technology, solve it in a different way, with a different kind of team, and with a fairly clear business idea that we were going to go after enterprises and a SaaS based pricing model. So we were fairly clear what we wanted to go about doing. What's interesting so many years later is the mission of the company hasn't

05:54>> changed.

Nathan Latka

05:55So what have you scaled to today in terms of total customers you're working with?

Customer Count and Scale of the Business

Raj De Datta

05:59>> Yeah, so we work with about two fifty large enterprises and, they have tens of brands each. So if you think about it in terms of websites or apps, it's probably a thousand plus. If you think about it in terms of companies, it's probably two fifty.

Nathan Latka

06:14The number you gave me earlier of the $250K ACV though, that's really per, that's per company you're working with, right? Per two fifty that you work with or no, it's per website or something else?

Raj De Datta

06:23>> Yeah. So that's, that's, that's an average per account. And, and you can think of the scale of the business as being between 50 and a $100,000,000.

Nathan Latka

06:30Yeah. I was just going to say, so if I take two fifty times $250K a year, you're cranking somewhere, 5.2 ish, I think per month that comes out to or somewhere around what, $55,000,000 to $60,000,000 annually right now.

Raj De Datta

06:43>> Yeah. And so when we have services revenue that we charge for as well because when people use our platform they have to implement it and we support them through that. So you can think of our ARR or our total revenue as between 50 and 100.

Nathan Latka

06:55Got it. Now of the number that I just gave out though, the basically 5,000,000 a month, is that pure play SaaS, the $250K or did you include the professional services in the two fifty ACV? I

Raj De Datta

07:05>> did not include the professional services in the ACV.

Nathan Latka

07:08And is one of the reasons, so tell me the correlation between how you think about professional services and what that's done to help you reduce your churn. I assume you're basically taking that money in to do onboarding and things.

Raj De Datta

07:18>> That's right. We do a couple of things with professional services. We help with onboarding. We help with analytical services. People use our services. How do they get more value out of the software once they've bought it? We'll do things like premium support services. So some of them are technical in nature. Some of them are business consulting in nature. We also have a very large partner community. So we'll do training of partners and certify them on our

07:39>> platform. All of that is services.

Churn, Net Retention, and Unit Economics

Nathan Latka

07:41And so diving deep into some of the unit economics here for a second, what is your churn today? How do you think about it?

Raj De Datta

07:47>> Yeah, so we think of gross churn for an enterprise business, we think best in class, you wanna be at no more than say 10% to 12% gross churn. And we are in that range. And then you want to be pretty close to 0% net churn or negative net churn. And we are there as well because we have a healthy upsell business.

Nathan Latka

08:08Just to be clear, that range you gave, that's 10 to 12% gross revenue churn annually and negative churn obviously annually as well for net.

Raj De Datta

08:16>> Yes. Yep.

Nathan Latka

08:17The ones that do churn, why do they churn?

Raj De Datta

08:19>> Yeah. I think it happens for a variety of reasons. You might have mergers and acquisitions and companies may get folded in. Some of them might go out of business. Some of the smaller businesses will go out of business. Some of them will use the platform and then decide they have a change of strategy, wanna build some of the software. Others might, a selection of them will go to competitors. At the scale that we're operating at now

08:41>> where we're driving the number of accounts and the number of deals that we're doing, it could be for a variety of reasons. But what's interesting in our space is I think we are very much a challenger in an $8,000,000,000 market that is dominated by people like Adobe that have a $1,200,000,000 software revenue stream in our market. So from market's perspective, we're sort of the fast growth challenger with a net new platform that's opened and has machine

09:07>> learning and intelligence built in. It's much more cloud, it's much more subscription. All the sort of new software models that we in Silicon Valley take for granted is still not the predominant model in the industry.

Acquisition Offers and Decision to Stay Independent

Nathan Latka

09:18Would you sell to Adobe for 400,000,000 if they offered it?

Raj De Datta

09:21>> Well, I think I think it's fair to say that we've received very healthy acquisition offers, you know, at or around that range and turned them down. Yep.

Nathan Latka

09:29And, and, and walk me through as an entrepreneur, how do you manage that risk? I'll never forget the mistake I made at my first company where I turned down an acquisition offer that would have changed my life, but I'm like, you know what? I read that mark turned down Yahoo for 1,000,000,000 and you know what? My dick's big too. So I'm going to say no. And it a huge mistake. So how do you manage when you

09:45take your wins and move on to the next big thing?

Raj De Datta

09:49>> Yeah, I think there's no right answer to that question. One, it's a very personal question. Each individual, I think is in a very different spot in their life. And so one, think you got to ask yourself, you got to not be doing it for ego. You got to be doing it because it's what you really want in your life. No one will reward you for making a bad decision later, but just because you made a decision

10:09>> to satisfy your ego at the time. So know yourself would be the first thing I would say. The second thing is know your opportunity and be real about it. I think every time you turn down one of these things, the moment that I've talked to every entrepreneur about is you have that, oh shit moment after you say no, or something bad happens and you're like, man, I should have taken that deal. And you got to know

10:29>> that's coming.

Nathan Latka

10:30It will happen.

Raj De Datta

10:31>> Yeah. It will happen. You got to know the risks as you do it. And then of course, it's about the rest of your shareholders, ecosystem, customers, employees. I believe in the promises that we make both to our investors, our employees, our customers. So I take those things pretty seriously. It's not just about the money.

Nathan Latka

10:49Last few economics questions here before we wrap up with the famous five. So at 12% gross revenue churn, I mean, do you assume a minimum is? Maximum can get dangerous because you're doing so well at term, but what do assume a minimum is in terms of lifetime value on these accounts once you get them in?

Customer Lifetime Value and CAC Payback

Raj De Datta

11:04>> You know, I think in our kind of business, these accounts are with us for a minimum of five to seven years. Yeah. So that's kind of a good minimum. I mean, many are, I expect longer than that. But yeah, so if you think about lifetime value calculations off of churn, they're very healthy lifetime value.

Nathan Latka

11:24Yeah. Mean, if five years at $250K a year, and I assume that's probably that ACV is expanding actually year over year, but minimum that's 1.2.

Raj De Datta

11:30>> That's right.

Nathan Latka

11:31Yeah. How does that help influence what you're willing to spend on CAC?

Raj De Datta

11:35>> Yeah. I mean, believe that CAC is about a few things. First, you can look at the lifetime value economics early in a company's life cycle. The reality is you actually don't know the lifetime value of your customers. They just haven't been with you long enough. You can divide by churn and the Excel works, but you don't really know how long they're with you. And I think we're still early. So yes, I look at lifetime value as

11:55>> a ratio of CAC, but I also just simply look at risk. So if you, where we are today, tend to spend sales and marketing at a ratio of about a one CAC ratio, right? A one year payback period, basically. And that to me seems healthy for where we're at.

Nathan Latka

12:10Just to be clear, your first year ACV is $250K, you're okay spending that first year ACV on acquisition, So $250K.

Raj De Datta

12:17>> I don't think spending a first year ACV because I know at a minimum, I've got five to seven years on the back end. We've got a high gross margin business.

Nathan Latka

12:23Plus expansion revenue.

Raj De Datta

12:25>> Plus expansion revenue, etcetera. Right? So it makes sense. Now, arguably one could be more aggressive than that as well. I I think there it's about risk. It's about saying, well, stuff might change downstream, all kinds of market factors affect your business. You really can't predict for five to seven years out with certainty at this scale of a business. You need to think about the risk associated with that. And we have gone back and forth between kind

12:50>> of, I would say eight and nine month payback periods and as long as fifteen month payback periods. And it's sort of gyrated through the life.

12:56>> Just depending on cohorts.

Nathan Latka

12:57Totally. Yeah. What's your team size today?

Raj De Datta

13:00>> About two fifty people.

Nathan Latka

13:02All in Mountain View?

Raj De Datta

13:03>> No. We've got offices in Mountain View, Dallas, a small office in Boston, London, Amsterdam, and Bangalore.

Growth Rate and Path to $100M

Nathan Latka

13:10Bangalore. Interesting. And last question, year over year growth. What are you targeting? What are you at?

Raj De Datta

13:15>> Yeah, I think that the, without talking about today's growth rate, I think that the intention for the company is to get to a point where the company cross, when it crosses a $100,000,000, it's a profitable company growing at 40 to 50% year over year, and we're on track for that.

Nathan Latka

13:29Okay. Good. I mean, can you give me a sense over the past twelve months? Have you doubled, tripled year over year or?

Raj De Datta

13:34>> Year over year has grown really nicely.

Nathan Latka

13:36Okay. I mean, is that more than two or three X? What's really nice for you?

Raj De Datta

13:40>> It's grown really nicely without getting into the specific.

Nathan Latka

13:42Okay. So you just to be clear, my audience may not know what really nice means, but you... That's something you don't wanna dive into.

Raj De Datta

13:47>> Yeah. I'm not into diving into the specific growth rates or the exact revenue numbers. I think it's a... It's between 50 to a 100. We're on track.

Nathan Latka

13:54That's great, good.

Raj De Datta

13:55>> So over the past twelve months you've grown between 50 The and a

13:58>> revenue is between 50 to a $100,000,000.

Nathan Latka

14:01Got it.

Raj De Datta

14:01>> And the expectation is that as we approach a $100,000,000, it will grow between 40 to 50% and it will be profitable. And that's with insight.

Nathan Latka

14:10Yeah. Because of how large numbers work. I mean, it's fair to say you have to be growing faster than that though currently, right? And as you get bigger, you'll settle into 40 to 50.

Raj De Datta

14:20>> You have to manage your both the growth and the profitability to achieve those targets. Yeah. Because if you're growing really fast and burning really fast, you don't hit the profitability target. And if you're on the other hand, growing too slowly, don't hit the growth target. So the art is in balancing both of those.

Nathan Latka

14:35It's certainly

Raj De Datta

14:37>> a dance.

Famous Five: Books, Tools, and Personal Habits

Nathan Latka

14:38Let's wrap up here, Raj, with the famous five. Number one, what's the last business book you read?

Raj De Datta

14:43>> Well, the last, let me just say the last book that I read that I believe applies to business is The Giver, which is kind of a children's book and is about a world without emotions and irrational behavior and what that looks like. And what that tells me by the way, is there's a lot of things we like about our life that are irrational.

Nathan Latka

15:02Number two, is there a CEO in Mountain View you're following or studying?

Raj De Datta

15:07>> Well, the CEO that I admire the most is certainly Jeff Bezos. You know, I think what he's done with Amazon is extraordinary and, you know, a lot to learn from them.

Nathan Latka

15:17Number three, besides your own, what's your favorite online tool for growing the business?

Raj De Datta

15:21>> Yeah. I think I think my my favorite on online tool to grow the business is actually Salesforce. I... As much as I like all the cool martech stuff that we do, I think the single most important thing to get right is use of Salesforce at our scale.

Nathan Latka

15:35Four, how many hours of sleep are you getting every night?

Raj De Datta

15:38>> I get about seven to eight.

Nathan Latka

15:39Okay. So it's healthy. And what's your situation? Married, single, you have kids?

Raj De Datta

15:42>> I have two kids and I'm married.

Nathan Latka

15:44Awesome. Two kiddos. And how old are you Raj?

Raj De Datta

15:47>> I am 42.

Nathan Latka

15:4842. Okay. Last question. What do you wish your 20 year old self knew?

Advice to Younger Self

Raj De Datta

15:53>> I wish my 20 year old self knew to get into entrepreneurial undertakings even earlier. And I did it pretty early.

Nathan Latka

16:01How old were you in the first company?

Raj De Datta

16:03>> I was, 26.

Nathan Latka

16:06All right, guys, there you have it. Raj, get in before you. If you're listening right now and you're past twenty you're too late. Start. Go. Go faster. At least that was... That's what he wishes his 20 year old self knew. Launched the company bloomreach back in 2011 scaling nicely, raised their first 5,000,000. They're now helping over 250, really enterprise customers paying on average $250K a year Managed DXP, right? Digital experiences at scale. They've raised a 100,000,000

16:30to date. Looking at, you know, settling in as they look to, you know, you know, hit them, break the $100,000,000 mark, settling into 50% year over year growth rate. Healthy growth rate today, currently doing between 50 and $100,000,000 in revenue, 12%. Again, gross revenue churn annually between 10 to 12%. Healthy economics with our team of a 120... Or sorry, two fifty based across Mountain View, Dallas, Boston, London, and a few other locations. Raj, thank you for taking us

16:53to the top. Awesome.