How Centro CEO Shawn Riegsecker grew Centro to $145.8M revenue and 1.7K customers in 2024.

hello everyone my guest today is sean riggsiker he is the ceo and founder of a company called centro he founded the company in 2001 intent on developing the most comprehensive automated and intelligent software platform for the digital media industry his leadership commitment to innovation and modernized approach to culture and employee happiness has led center to receive many accolades he's also a member of the young president's organization and founding director and co-chairman of unite america sean you ready to take us to the top let's do it all right so what's centro doing and what's your revenue model are you pure play sas oh we actually have both uh i get the question a lot of investors always ask me what are we you know we services are we software and a message is always look you know we try to meet customers where they are and as much as we love to sell 100 software there's a lot of customers out there who still need help services training education support so uh today our business is around 50 percent uh where we do services for our customers and around 50 where they do it all through our through our software yeah let me ask you a quick question this is going to be hyper specific then we'll go back to a macro level um if you split up the cohort of customers you've put professional services on and you look at their churn data and expansion data so gross annual churn net revenue retention things like that do you see that that they grossly over perform they expand and stick at way higher rates than those that you use no professional services on wait so you're uh asked that real quickly are you saying do the services turn faster than the self-serve softwares well here's what i'm actually saying i also believe that services can be an important factor in a sas company especially to drive retention of customers essentially an onboarding fee so my question to you is have you split out your cohorts those that have paid for services and onboarding versus those that have not and do the ones that have paid for services and onboarding have a higher stick rate oh we actually you know at this point we're not charging uh onboarding and training uh for services that's actually something that comes along with the contracts that we sell so people aren't necessarily paying for it what we do find though is that well wait what what's your service business what's the 50 services is when so it's digital marketing services so there's a lot of brands and a lot of clients who say look i don't want to bring the platform in-house i want you guys to actually do the work for me and so it's more like an outsourced digital marketing services business you don't require that they that they pay the sas fee as well if you do the custom professional services yeah now there's actually a sas fee then there's a service fee on top of the software fee so in other words we go out and we sell software okay and then the software is be you can use it all on your own but if you need us to actually work and help inside your own instance then we'll add a service level on top of that and that's helping them it's kind of like a training wheels if you know going from i'm i need help to i got some team who can do it so i'm fully self-served so we really take people through the continuum across the board that's what i'm asking the ones that you run it for them they pay for the software instance but then you run it is the churn rate higher or lower on that cohort the services is lower uh there's a higher churn rate than the actual embedded software and i would say the reason for that in our business is that if we're just doing services for someone um they can easily theoretically go and find another services provider but if they have our software installed and you gotta remember our software is slightly different than ad tech software where it's your system of record it's your financials it's your workflow automation it's all of your client brand supply chain management so everything's inside of it once you install the software it's very very difficult to actually rip that out because your finances are running on top of it what general i mean are we talking an enterprise play here on average what's the customer paying you just purely sas per month or per year to use your technology yeah so because we work in the marketing business and there's a trading aspect uh to the platform so real-time bidding programmatic advertising it's actually a blend so we charge on a percy uh license basis but then we also actually have a variable pricing based upon margin based on what runs through the trading and real-time bidding platform yeah i imagine that that revenue is both those streams you just said are very predictable you can look at one customer and pretty predict them over time yeah yeah absolutely i mean there's a lot of seasonality specifically in advertising and marketing depending upon the quarter depending upon what's going on with brands uh where it's not like a sales force where theoretically it's you know always on everybody's using it in equal parts so for us you know q4 is obviously the largest quarter for us every single year because it's just with the ad market works but uh but we have the ability through just a ton of analysis we understand seasonality we understand the ram time we understand how long it takes to get people to hit where their you know minimums are so there's a lot of work that goes into it but it's fairly predictable so when you add sean that use the the flat sas fee plus then the usage based variable feel on top of it on average what's a customer going to pay you per year for the tech uh right now it's averaging somewhere in the 200 to 250 000 okay so you're very much an enterprise playbook then yeah yeah absolutely what so with that in mind let's go to your team for a second what's your team size today how many people uh just shy of 700 we'll probably hit 700 next month okay 700 and what portion of those folks are uh you know quota carrying commission you know comp kind of sales folks yeah if you look at a pie chart of the business um easiest way to think about is we've got around 150 in r d uh you know development uh there's approximately 125 folks in sales uh the services team uh just for the marketing services around 200 and we've got a customer software support team which is around 50 folks and then you probably throw 100 150 in the various you know gna whether it's marketing or accounting finance uh you know hr things like that yeah that's great now you mentioned investors and kind of telling them the services versus sas storylines so how much have you raised to date 52 and a half million okay 52 and a half now why did you need to raise that money to grow the company in other words could you have done this a little bit slower but kept all your equity with no raise you know the funny thing is i didn't raise capital for nine years uh well i should say the movement i raised two million dollars after i bootstrapped it for five years i raised two million then five years went by and that's when i raised our series a which was 22.5 million um and then three years went by and that's when we raised 30 million so i mean if you add in the angel it's actually like 55 million bucks that we raised in total so but if you look at it from this uh perspective half of all of that money went out for acquisitions uh so we haven't really needed a lot comparatively to our competition uh to actually build a company i've always said there are two muscles that you can you know build the company figure out a way to be great at raising capital or you can figure out a way to you know create revenue and service customers and i've always you know taken the slower road and said let's actually you know be great at servicing let's be great at creating revenue uh and let's build it uh intelligently and because of that you know if you add up all of the investors it's still a very minority stake inside of the overall cap table would you say less than thirty percent total it's actually about right on three percent so i expected it was something around there do you have co-founders or just you just me that's great now you just give a great timeline but we i forgot to ask you the start date was it 2001 yeah they late at the end of 2001. okay um okay interesting and then so talking about funding you said a lot of those were actually m a right so let me go into one of these for a second so site scout was that a pure place sas company or was it services as well uh pure but they didn't they didn't have a sales person in the entire company so was sas a hundred percent so that was a 40 million dollar acquisition price there did you you know there's a lot of companies today especially private equity firms but even bigger companies that are doing roll ups hub and spoke models where they'll go buy a company like site scout for and the price will be 40 million bucks but actually what they'll do is they'll go hook up with an svb or cibc or a debt provider and their equity exposure will only be like five to ten percent did you use any kind of debt in these deals or did you just raise capital right off your balance sheet and then just pay that in so uh we actually set up the deal where it was uh cash upfront um there was a two-year earn out based upon performance they got paid 100 percent of what that looked like and then the uh remaining value of it came and centro equity okay good okay so you would admit that yeah we...