How Centro CEO Shawn Riegsecker grew 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 didn't bring on debt for that one yeah yeah okay good have you have you used it in any other acquisitions or no uh we have not used the first the you know it's an interesting the first acquisition we did in 2008 um you gotta remember 2008 was a really weird time this is real real cities yeah this was real cities and the way we structured that it was i not to get too deep into a night ritter had pretty much gone bankrupt mcclatchy had purchased the assets for night ritter real cities came along with that it wasn't an asset that they wanted to take over or invest in and so what we did is we worked out a deal because i didn't have any money at the time i hadn't raised my own capital so that was actually a seller financed note in which we put a price tag on it um it's about 10 million dollars and we paid them as a percentage of our net revenue and we ended up paying it off over like i think three years or something like that well and what was the percentage i have no i so long ago i don't remember that's okay but you basically paid it off uh before what 2012. yeah yeah yeah that's interesting okay very good um there's so many creative ways to structure things these days that's why i ask you have to be creative inside of them you got everything you've got equity you got seller finance you've got debt i mean there's so many different ways you can take it yeah but you there you have strategically chosen to do other things besides debt which tells me you feel like you've got leverage doing other things instead of just taking a seven percent kind of you know debt line and doing these things i'm trying to get a better sense of why you feel that way i just think it's also depending upon your profile we've never been trying to run the company to maximize profit in order to actually bring on significant amounts of debt you're going to have to have a higher profit profile than what we've chosen to i mean we've been continually trying to invest in growth every single year and so there's also just a level of working capital you need in our business because we run approximately call it 60 million dollars a year through the company that we only get to keep a margin on and so just to be clear sean that's that's the ad spend through your platform the gm right yeah yeah that's right and then if you take a look at you know look google and facebook theoretically they want to get paid in 30 days okay well your client doesn't pay you for 80 days or 90 days and so you know we have to you know we've got a huge float you know that we've got to really manage a negative it's actually a negative float right it's a reversal a negative flow yeah and so that's why we need so a lot of uh and then you know we have to have debt in order to create the working capital line and so we've got that but that on the other hand limits our ability to theoretically take on even greater debt to actually do acquisitions or or whatever we'd want to do with it how cheap have you been able to get that working line out are we talking like six seven percent or is it more expensive um no i think it's actually below that but it's probably right around six at this point okay that's pretty good okay um very good and then 2001 was launched obviously you've grown via mna you raised some capital doing it obviously in intelligent ways how many customers are you serving now today it's about 1700 uh on a yearly basis okay 1700 and true or false all of those pay the software fee and a 50 of them also pay you to run the instance of the software they purchase from you yeah directionally that's true okay got it um something here is wrong with my math unless you're a billion dollar company that i didn't know about um if i take 1700 customers times that average acv you told me earlier of 250 000 that would put you at 34 million bucks a month right now on revenue obviously that's too high what's wrong i'm sorry that was actually gross media spend running through the platform uh and then we get a cut on something like and so we get a cut on that so if you look at here here if you do the numbers you know our margin collectively you know is right around 15 to 20 percent uh based upon the total gross dollars that run through the actual total run through the whole company including services and software and if you do the math that you know call it 700 million dollars that'll run through the platform you'll actually get to what our revenue is about 90 million [Music] it'll be closer to 150. okay good so 15 well i was only taking of the 700 was last year and i think we're probably interacting around 800 to 850 maybe 900 million dollars this year through the platform yeah i was going to say 700 through the platform obviously and taking 15 of that you'd be at about 105 in terms of run rate now is that your entire business or are there is the sas model included all on top of that no that's the entire business yeah that's what i thought okay and then this year 140. correct it's a blended margin yes that's exactly right yeah very cool all right very good and then what are you spending to get a new customer fully weighted cac how aggressive are you being uh i don't have that data uh in front of me sorry do you know i'm uh i mean hypothetically as a ceo running a you know you know a fast growing company would you spend first year to get them up front or no is that too much um it's not something it just because of our model the way we look at it it's not something on a cac basis we track specifically because it's not necessarily marketing driven here's what we spend uh there's a you know if you got to look at it you know whatever we pay our sales person we expect that salesperson to bring in 4x whatever their compensation full opt yeah so for about four so about it's around 22 uh and we're a very sales-driven uh culture i mean almost all of our clients come from sales team not marketing and so from that perspective if you take a look at the numbers about 22 of our revenue goes out in the form of sales expense uh okay yeah that makes sense but just to be clear if a salesperson's on target earnings meaning they get their full commission comes out to essentially a hundred grand you're saying their quota would be a minimum 4x that in terms of new business so 400 grand correct yeah that's that's actually not as aggressive that's actually what they will do over the course of a year and they've got a lot of customers who they still get paid on that they signed up say two years ago so it's not necessarily a 100 it's not necessarily new business per se but if you look at you know a seller you know making 150 200 you know we expect them to bring in anywhere from 800 000 to about a million dollars in revenue on a yearly on an annualized basis yeah that's actually sean that's way less aggressive than most ceos and the kind of hundred 200 million run rate range on that they're they're usually optimizing for like 7 to 10x i wonder if that's a function of your revenue split or something i think it has a more to do a function of uh one probably the revenue split but frankly it's also a matter of just the growth and the ramp of that because if you look at a seller who's been here for let's call it five years they're much closer to 10 to 15 times revenue book that they're carrying but if we look at the new sellers you know what's going to happen the first year what's gonna happen year two year three year one proform on a new sales tire yeah the year one pro forma they're gonna bring in approximately 2x what they make from a compensation perspective and then you hope over what period of time they get up to 15x usually it's a they hit that in about four years okay i mean that's pretty pretty good actually very good um let's uh let's wrap up here with uh actually wait hold on real quick before we wrap up burn are you are you burning today are you casual positive cash flow positive oh you are that's wonderful so any any plans to raise in the future fund another acquisition or no uh yeah i think you're gonna see us uh do something fairly substantial in a substantial more or less than 100 million dollar acquisition uh well it won't be an acquisition it'll be an actual uh capital raise okay interesting i would expect that uh given our profile given our ability to go international given just where we're at from the new software that uh you'll see us do a fairly large call that over a hundred million dollar uh why do that instead of ipo uh there's two reasons number one uh i personally as well as other team members haven't taken much liquidity out of the company over the years and which is secondary you wouldn't want to do yeah you wouldn't want to become a public company uh and then have the ceo obviously unloading shares and so it makes a lot of sense to create some level of liquidity both for previous investors as well as for employees yeah yeah so just to be clear let's say you end up we're doing something like a kkr or something it's a secondary with a private equity firm most that cash going towards what you just said liquidity for early employees early founders etc what do you think the majority of that round will be secondary will anyone go to operations no i would actually say uh look i mean we haven't kicked off the entire process yet but if at a high level you would look at it where you'd say probably close to 50 would be in secondary you would take a look and say probably thirty percent uh is going to go towards uh m a uh and then you would say probably about you know 15 maybe 20 percent it just sits in the uh uh coffers for working capital it's a nice place for capital to sit right all right let's wrap up here with the famous five number one what's your favorite business book uh losing my virginity richard branson number two is there a ceo you're following or studying um nobody at this very second uh although uh where do i normally go i'm sorry i'm not okay by the way do you interface with bill walsh at all media ocean uh bill wise sorry that's what i meant do you interface with him at all oh yeah i love bill so so he just came on the show he just came on the show and i've interviewed most of the vista ceos because they all us i'm a su this is an assumption i have no insight information but when vista closes 14 billion fund you know all those ceos are getting calls from brian and robert going hey guys go find acquisitions we gotta deploy this capital in an intelligent way are you in any acquisition talks with with media ocean or vista no uh if anything we're good friends and and uh i think if we do something it'll kick off more as a partnership i think you and bill would be great together i love bill uh you know it's really funny if you know you for people in the industry followed us for years we've got a lot of twitter banner banter a lot of facebook banter uh you know we we love competing with each other but also a lot of love and respect between the two of them okay i'm telling you if i see a headline like two days from now that says media ocean by centro for a billion dollars i'm going to be pissed because i could have gotten the break from you now but you're saying not gonna happen it'll start as a partnership first well listen if uh if there's a headline that says meteos is buying us for a billion dollars uh i won't be pissed robert uh bill bryan i wouldn't bet on it though i doubt that that one's coming there you guys have it all right fun stuff number three what's your favorite online tool for building your company uh i have no good answers for you on this that's okay we'll skip it yeah you know what i i don't know i'm looking over here my what do i what are all the things that i use that's okay i don't think there's anything specific i mean we've gone through so many different damn tools like for so many years uh if anything it's you know look the thing that we run our business on uh is the bi platform uh so pentaho has been a great uh tool for us overall to help launch that uh and then you know i think what microsoft's done right now with power bi uh making it easy for kind of the masses to actually build dashboards profiles um it's been great yeah number four how many hours does you get every night seven and a half and situation married single kids single okay any kids nope all right and how old are you oh i'm not answering that question oh come on i was just about to say young handsome single you have the world at your fingertips i wish i was young uh yeah no i'll be uh 47 coming up oh wow that's that's much higher i would i guess that's great all right take us home what do you wish your 20 year old self knew uh i think i wish my 20 year old self would know um you see this is why i want the questions beforehand i know he picked anything off guys he pinged me he goes nathan send me the questions before and i said sean this those things are a very boring interview they're all going to be on the spot on the fly so if you can't think of anything that's okay but anything on the top of your head uh no ma'am like i mean it's like i've always had this belief just in in life that um if you want to be successful it's going to take a lot of hard work and effort to put in and i knew that i wasn't as smart as most people so um you know i've been working my ass off if anything i'd say probably try to figure out a way to create some more of a balance because i just haven't had any balance you know and kind of life is passing me by and i'd probably say you know work is great and the success is awesome and everything goes with it's awesome but you know take time you know just don't give up on the personal life as you go through it all yeah i would say the glass is always greener on the other side i've interviewed many people that are in marriages or have kids that you think are happy and actually they're miserable and they go i wish i just had a company where i was financially free and independent and here you are building this great thing so guys there you have it centro centro.net caught 100 million bucks north of 100 million bucks in revenue last year hoping to break we'll call it 150 160 this year they've smartly used capital and stock and equity and seller financing notes to do m a they raised 52 million today cash flow positive expect them to announce call it you know a fairly large we'll call it north of 100 million dollar round of financing here in the next call a year or so as they look to provide some early liquidity to or some liquidity to early founders shareholders uh and most importantly employees they got a team of 700 people right now building out the company and 1700 customers sean thanks for taking us to the top yeah i appreciate it thanks david