How Brandwatch CEO Giles Palmer grew to $120M revenue and 2.4K customers in 2021.

hello everybody my guest today is guiles palmer he's the founder and ceo of a company called brand watch a leading social intelligence company formerly of b sky b giles started brand watching since its launch in august 27 is growing to become one of the world's leading social media analytics and listening companies guys are you ready to take us to the top ready to go ready to go all right good um and and and correct me by the way if i'm wrong your name is it a hard g on the front or is guile's right uh sahaja yogi giles sorry about that i didn't choose it don't apologize for your name i just want to make sure i get it right giles okay good giles palmer so tell us about brandwatch what's the company doing and how do you make money what's the revenue model it's a subscription business it's a sas business uh and it's basically a data business so we uh down we crawl about 80 million websites and have feeds from the social networks uh we aggregate all of that and we allow brands to to kind of check out what the world is saying about them their competition and so on and it goes back you know five years so it's a research tool and a real-time insights kind of engine for brand managers primarily so if you went in there and i plot you know uh mcdonald's against wendy's can you actually see in your trends when wendy's hired that super witty social media marketer that just grills people on twitter can you actually see the lift or the drop possibly we it you can certainly see any changes in the conversation of anybody mentioning wendy's online and what they're talking about so you can even the system will even tell you when unusual activity starts and an unusual activity could be uh when a certain phrase gets mentioned close to a brand for the first time ever um so there's this kind of this big big kind of algorithmic engine behind the scenes watching for unusual activity and then it kind of tells you oh look this is a new thing that's happened today we haven't seen this before interesting like i got i got i i got a sick we call them signals uh we got a sig i got a signal today about one of the companies in our space uh having made an acquisition within uh six or seven minutes if it hit going online because the system was just kind of kind of watching for for that kind of activity who was that uh falcon social guys in copenhagen uh they're quite another local local company uh i can't actually remember the name of it because i hadn't heard of it but i'd say do you know enough about the deal to know if it was a good buy or bad buy for them look it looks like a sensible buy um it's a small buy but uh it looks sensible to me yeah interesting so so give me a general sense of customer size i mean are these folks paying a hundred bucks per month or a grand or 10 grand per month what's general acv uh annual contra value is about thirty thousand dollars okay so 2500 a month on average yeah so it's it's it's enterprise grade it's not cross-enterprise um you know those systems tend to be more and more expensive but it's it's a high-end professional tool like it's not an it's it's it's not hootsuite no it's it's it's like it's like a bmw not not a not a whatever mini metro mini monster whatever when did you launch the company what was your one august uh 2007. so let me ask you a question there was a i would say the last big pop of mna activity in this space was 2012 when you had buddy media going out victory wildfire all these guys you i'm sure yes i'm sure you had offers you chose not to sell why we had a lot we had a lot of approaches we had uh one kind of pseudo offer um we didn't know yeah exactly exactly we we decided um i guess we thought we were in in a kind of uh up and to the right phase and and we didn't think that the the deal that was being offered to us was uh was representing that strongly enough and also we were kind of like you know we we didn't do this to sell we didn't we didn't start it to just sell it we started to build a company and we didn't feel like our job had even been half done at that point i mean and and actually if you look at those acquisitions none of them really have gone on to meet to be meaningful there i mean wildfires shut down who who even knows where buddy media is and that you know i mean in salesforce right who knows vitru who knows where they are involve or where where are they i mean mostly they got shut down yeah so it and that would indicate to me that they were bought prematurely you know they weren't mature businesses they hadn't figured out what why they existed and what they were trying to solve for um and i don't think we totally had at that point either so if we'd sold it would have been a kind of oh look somebody's come along with a big amount of money here is and and actually one of the reasons why we're still around and we're doing pretty well is because there's a bit you know there's an honesty in in in what we're trying to do we're not we're not trying to build and sell we're trying to build a great company and and i don't think that we were ready to to sell it at that point so what have you scaled to today in terms of total customers using you uh just under 1500 1 500. um you know this year we'll do more than 60 million dollars in revenue and there's 420 staff in the business so and it's profitable so we've got it to get a good spot are you so where's growth that so you said you're gonna you're you will over the past 12 months you did 60 million are that's what you will do uh last year's record recognized revenue was around 50. so this year it will be above you know well above 60. okay and take take me just so we can get a growth rate take me back 13 months ago december 2016. what was your run right then i can't remember but last last year we we we you know we grew it healthily it wasn't 40 50 but it it wasn't like it was like it was like 30 ish right around that yeah yeah yeah yeah so if if you did fit you know if you ended the year at a 50 minute or you're gonna do or you're on a 60 million run rate today right you you were somewhere caught in the in the 48 49 million run rate december 16. something like that i haven't got the data in front of me that's okay you know it gives you a sense of the scale i'm gonna really love you if you tell me you're bootstrapped but i have a feeling you're gonna break my heart yeah i know sorry about that how much have you raised it we've raised 50 million bucks um five zero yeah yeah not all of that's gone into the company but the majority of it has how much of it went to secondary versus operating um i mean four fifths of it went to operating something okay that's healthy yeah i mean the the reason why uh we're not totally bootstrapped is isn't because we've scaled sales and uh and all that kind of stuff and been super aggressive it's because we had to build the back end a way ahead of actually being able to monetize it and that's an expensive exercise that's hardware software and data so you know it's it's a big that we've got something like a thousand servers that sit behind the live application i mean we could put it on the cloud it doesn't you know either way it's gonna it's an expensive machine to run because it's a massive data processing storage um game that we're in well it's a nice moat for you now now that you're at scale it's hard to compete exactly it is that's true enough yeah interesting okay tell me about churn that's obviously critical in this kind of business churn is yeah it's and it's it's the um as the business gets bigger it's it's an absolutely killer thing that you just have to get under control i mean we're not one of those businesses sadly that that that get that signs on for like a dollars worth of revenue and in five years uh that that's two dollars sort of thing on on average taking account of churn and so on i you know i i i'm envious of of companies like netsuite and and i guess salesforce that just end up having this kind of viral effect across once they get it once they get a a customer uh we have to work very hard for retention we have to make our product incredibly sticky we have to onboard our customers in a really smart way such that they're successful we have to keep innovating like crazy to make sure that our product is something that they're going to continue to choose in some ways it makes us fitter as an organization but it's also um you know a huge challenge um to scale a business because you know if you've got one percent per month churn is that what you're at right now yeah not quite but there are there abouts in terms of revenue or logos either way it's very similar um uh the you know that's a lot of revenue to replace now obviously we've got upsell so that's gross churn so upsell and and increasing your footprint with an existing account so that's going to reduce that on a net basis what is your debt um it's varies but if we don't we don't disclose that but are you over are you over 100 in terms of net revenue retention annually they're or they're about so it varies depending on the cycle um but but uh but my job is to is to think about you know how do we bring out new products that uh our existing customer base would like to would like to use or like last year we acquired a company called buzzsumo and although it's not really aimed at the same sort of market space as our core product that is something that our that our customers um are actually you know taking as well so so there's more by the way that move that move by you really confused me and it confused me even more now when you tell me what your rpu is because i see buzzsumo as like a growth hacker college student in their basement trying to hack their way into some extra seo value not a major brand that's you know paying your kind of money i mean so i don't like what was the reason your head behind that acquisition so both sumo have uh 3 500 customers um they have a lot of uh blue chips using their software but like on a credit card right like 100 bucks a month kind of thing yeah up to you know that their average is about 130 bucks a month so um so so they have they have a lot they they have a it's the best product on the market for content analysis so so you know there isn't a better one even if you pay 10 times more so so they get a lot of people using it but the reason why we bought by sumo there's there's three or four reasons number one it's just a brilliant product and it's very rare that brilliant products that have enormously loyal user user bases um come to market without being incredibly expensive um and so brilliant product amazing team um and and then two other core reasons number one is that they've got a data set with the you know the amount of the share data content share data that is almost unique it's just an extremely valuable aggregated data set and we can use that within our existing why has no one replicated it is is there really hardcore tech yeah and it's it's super hard to do you know at scale getting billions of bits of content and getting the accurate share data on those bits of content up to date on an ongoing basis you try doing there there's no feed there's no twitter feed of shares there's no facebook feed of shares that you can just like tap into you've got to figure out how to do it it's really interesting tech interest and then and then i've always wanted to have a self-serve product or suite of products that are self-serve and because we're you know high price we have sales people talking to prospects and so on and so forth and all of the um engineering effort and the pro development within brand watch goes to serving that you know those kinds of people because that's those are our customers and that's what that's what we're focusing on um so there never came a point where i was like okay let's let's let's launch a self-service version of brandwatch that just never happened yeah and it wasn't ever likely to happen so uh so so i bought a company we bought a company to go in at that low level we're going to keep that brand and we're going to launch some other products that are basically self-serve which can maybe borrow off their savings off our infrastructure and leverage some of the stuff that we've built uh internally so so it's a way of like addressing a a different market segment with a very efficient go to market model great team great product great amazing mousetrap exactly yeah much better mousetrap than anything else out there so three thousand folks when you bought it at 150 bucks a month i mean what they're doing 450 grand a month something like that yeah i think uh yeah about that that's way bigger by the way than i would have ever thought yeah and they've got 400 000 freemium users so they've got this huge database of freemium users it's a free list for you amazing that's great so what it um i don't know if it's enough remove now where you can share more of the details here but it's valuable um how do you value a company like that there's obviously strategic regions but i mean do you pay a 4x multiple 5x1x how do you value it uh well it depends valuing companies is an art form in of itself though um okay anything like if you're paying 5x 5x revenues for a company it's got to be a really really good company um uh i would i think buzzsumo is a really really good company um did we pay 5x no not quite but you know it's it it's you were north of 3x i'm not saying but it was it was a good it was that the founders of boss sumo did great um it was a cash almost exclusively cash deal um they're in it for the long term as well for them it's like well why would they sell such a successful company and the answer to that is well in order for them to get to the next level then they would need to build sales forces and and build a structure and professionalize the whole organization but sumo was didn't even have an office let me ask them let me ask this question differently did you lock up an loi with steve before you went out and said we want to raise 25 million oh yeah yeah i mean we didn't raise we paid off balance sheet well what i'm trying to get at is was the majority of that fundraise specifically for the buzzsumo acquisition oh no no no no it wasn't it wasn't okay so the the loi to steve came after it wasn't it wasn't like you lined up the yellow line and said we got to go raise the capital to do the acquisition to be honest that's probably a smarter way round of doing it but uh no we didn't do it that way around yeah yeah well no i mean it's quite hard to get all that all those ducks in a row right it is it definitely is i mean yeah i know it is that it's amazing i mean that's i didn't realize it was that big i mean 450 a month times you know call it 10 or 12 months i mean you're putting four five six million bucks in ar and if you do think they're a best best best company and pay 5x i mean that's a significant amount of your cash 20 30 million at least from the last raise out the door now you're profitable today you said right yeah and how much total have you raised uh 55. so so how are you able to be i mean it's going to sound a little bit weird but how can you raise that much capital and be profitable unless you just let all of it sit in the bank and do nothing oh so i mean that capital was raised over four different rounds um so the last round which we did in uh end of 15 just over two years ago we we didn't we ended up not not needing anywhere near as much of that round as we thought we would got it so you had way longer than you thought yeah we we were you know actually pretty close to profitability at that point as it turns out we we were gonna be burning more but uh i i i can't i our cfo is a pretty prudent dude that's a good thing so yeah we were we we were sensible with it so that was two years ago a friend of mine said is is make loads of foreign it's like what that doesn't make any sense that was the right signal we were said we were sensible with it yeah that's good i mean so that was two years ago right now you're either you're either raising additional capital or you're in talks to be acquired which one is it it's neither actually come on i don't believe you we're not raising that um there is an opportunity and everybody knows it in our space uh to to rationalize the market a little bit and and and have have you know a bit of a consolidation uh in and around these kind of social tools you saw mini version of that in 2012 yeah exactly um but uh it's not clear which entities are going to be the ones to kind of um create this sprinkler have kind of done it a little bit by making lots of small acquisitions um but there are some significant companies a bit like us um some bigger many many smaller um who've got duplication of gna duplication of data storage duplication of all sorts of stuff without giving too much benefit to the customer in general so if you if you take six or seven of these competitors and turn them into one or two then you've got one or two very very valuable businesses even the company i mean look even a company like ryan at homes at hootsuite i mean if he's looking to deploy capital a smart way and his idea is how do we increase our poo right across our current customer base which they have a huge base they bring on a tool like yours and you know add an upset that kind of thing absolutely i mean you know they're more i mean they're going enterprise that's for sure but historically they've been more smbs that's right that's right interesting stuff okay cool last few economics questions before we wrap up with the famous five cac what are you spending right now to acquire new customers uh tens of thousands annoyingly um so uh our cac payback we want to get our payback on a margin basis below 15 months okay and we're there or thereabouts when you say on a margin basis you take acv right and then you multiply times 85 gross margins so call it 30 grand times 0.85 it's like 25 grand and so you're spending about 28 29 grand to acquire them and you get that back in 15 months exactly interesting um and where are you spending that money typically is that mostly a sales team or is that paid ads mark we don't do enough paid ads i don't think actually i think that's an opportunity marketing we've got a big marketing team how many of the 420 30 32. it's pretty healthy that includes in-house design we've got an in-house design team of like seven or eight um so probably 25 24 marketers and eight eight kind of graphic uh creative design guys interesting um it's how we've built the brand we get 15 000 uniques to our website every day and and over 100 demo requests that that that's because we've taken a long-term view with our with our marketing and our and our kind of content um our content strategy enjoy what do you assume like on these folks lifetime value can really lie to you uh especially if you just multiply right what do you assume a minimum ltv is they're definitely worth x amount um i mean it's it's interesting it's like we would look at five years as a uh as an average ten year but it's increasing because the company is growing so um yeah i mean uh uh hopefully we can get that to ten you know five to ten years is is the is the play over the next five years well even even at five years or sixty months right i mean you've got i mean if i do the math on that what is that 30 grand a year that's assuming no expansion revenue year over year which i'm sure you have but 30 times 6 i mean that's 180 grand minimum right lifetime value which isn't bad that's you know but as you scale a business you want to you want to keep pushing that out and then and then the growth rates don't slow down yep interesting all right let's wrap up here with the famous five number one what's the last business book you read oh the last one i thought was the favorite one the last one is um uh is nasim talib's book um anti-fragile anti-fragile number two is there a ceo you're following or studying currently not really i don't i should do that i i mean i admire ceos i don't tend to study them i don't know how to admire i like i mean i i i think larry page has done an astonishing job at google i mean you have to admire that all the the ceos are the super famous companies but if i had to pick one i pick him just because i love his he's more understated than than the than the other guys and i like that number three uh what's beside your what's your favorite online tool for building the business um google docs and number four uh how many hours of sleep are again every night i get about eight that's good okay what's your situation married single you have kids uh have kids divorce but we're with with a with a partner okay so not married two kids and how old are you giles uh i'm 48 48. last question what do you wish your 20 year old self knew uh move to san francisco that's what i would do there you guys have it from giles i i look i love first off he resisted the urges in 2012 to sell he founded the company 2007 really hard to stay disciplined in those early years when so much capital has to go into just building the engine to even make this thing run to get your first dollar in sales usually the pre-sales playbook is good one to start it's hard for him to do that but he did it now 420 people full time again brandwatch helping enterprise brands paying on average 30 grand in acv about 1500 of them right now helping them monitor their themselves and competitors in their market space across uh online sources especially social growing about 30 year-over-year up from about 40 million run rate in december 2016 up to you know over 50 million today 12 or less than 12 percent annual gross revenue churn about 100 annual net revenue churn obvious retention sorry that varies 28 grand cac 150 grand minimum ltv payback around 15 months giles thank you for taking us to the top