Chorus Revenue, Valuation & Funding (2020)

hello everyone my guest today is roy renani he's the ceo of chorus.ai and an engineer with a passion for business and sales he spent his career working with startups and advising technology companies on strategy and operations he started his career at bain and company and holds a an engineering engineering science degree from the university of toronto and an mba from stanford he was the first hire at eric schmidt's innovation endeavors roy are you ready to take us to the top can't wait thanks for having me very good so you know we're joking before the call you're in a hot space call tracking specifically in the sales and marketing kind of tech stack space so what's your angle on this what's chorus.ai and what's your business model how do you make money yeah it's a great question um i would say that over the last couple of years there's become more and more of an interest in calling and so there was the an original kind of group of companies that were making it easy to record calls do more dials they were more focused on the activity side of things and in sales that started with the outbound prospecting so the guys that had to do a hundred dials a day more efficiently and the opportunity that we found and we were i would say one of the one of the first doing that started that started doing this about three years ago was that there was an opportunity for the actual quota carrying sales people right so not just the 22 year olds that are the heart of building pipeline in sales organizations but the folks that are actually closing deals and renewing deals and so those people are doing less calling but they're doing meetings they're doing discoveries they're doing demos they're building consensus they're negotiating they're upselling they're renewing and sales teams will do thousands of those meetings a quarter and those meetings just happen and they essentially disappear right there's no record of what was discussed there are so many of these things happening that managers have no idea what's happening and so you essentially have this black box around what is the most important thing that any sales person does right and what we found was that in every other part of business you look at the fundamental drivers of performance you measure them and you improve them and when it comes to closing revenue and renewing revenue that most fundamental activity is a conversation and there was no data on it so what we wanted to do with chorus was help businesses realize that a conversation is the most valuable thing that anybody on their team does make it easy to record and capture those conversations and then understand them at scale using technology and by doing that help people close more business help reps make more money help businesses better understand their customers and their markets that they can build better products now do do you dive into actual kind of voice things i.e can you tell a sales manager or a cro that their number one sales rep who always beats quota says the word price three minutes in versus everyone else waits until minute 18 they should change what they're doing yeah absolutely um we focused a lot on making those types of uh insights really actionable to folks so it turns out that um you know you picked up one around pricing but it turns out that discounting is something that happens on you know we've analyzed over a million calls at this point and it'll tend to come up on maybe 25 to 30 percent of conversations and what you find is that the way that discounting is brought up is very very different depending on if you're a very experienced rep or a less experienced rep so everybody offers the discount but very few people get something in return for it right and some people offer the discount very very early on in the sale cycle some people wait until they know that there's a real deal in place and they understand the timeline and they're using the discount to get something concrete so what we try to do is build algorithms that are going to surface very actionable very hard roi types of moments for sales teams so that as soon as you start using chorus within a week we're gonna hopefully find moments that cover the cost of the platform for your entire company for the entire year which is what what's the average customer paying you per month i know you have cohorts but if i forced you into an average what would it be yeah so the first thing that i would say is we can't we don't want to talk about pricing until we've looked at value but what i would say is we are competitive with any other core piece of the sales stack right so competitive with something like a salesforce.com so let me give you a hypothetical because i'm going to align the hypothetical with my audience members because they're obviously i want them to obviously evaluate course if someone has a team of 10 right they're doing i'm going to make this up a million in arr and they're going yeah we're bringing on two we have like two sales people we're bringing on a third and a fourth maybe they're doing a seed round of funding what should they expect to pay for the platform are we talking 100 per month 10 grand per month a grand per month yeah it would be more around the 100 per month range okay got it and is that an is that a uh an accurate description of the majority of your customers are they typically bigger or smaller than that i would say there's there's a range the people people will buy course for very different reasons depending on the size of the business so if you're a smaller team like the one that you described the number one reason that people will buy is because they'll all have that one account executive that's been around for two or three years that knows the product inside out they know how to position it versus competition they know how to create urgency they know how to do all of those things and you're buying an insurance policy because if that person decides to leave for whatever reason there's a family emergency who knows they decide to to go to that shiny startup around the block you've now lost all of those um all of that gold around what they're doing that's so effective and so you know typically if you're that startup it's incredibly important for you to hit your numbers to continue to show growth and so it's very difficult to ramp up a new rep if you don't have those call recordings and then in addition to that making it very easy to find the 10 out of maybe hundreds that are really important to listen to because they deal with a certain competitive situation or a certain part of the sales cycle or a certain objection this is basically you're auto creating a training manual for scaling a sales team just by recording these calls in a worst case scenario yeah i think i think that that's the simplest thing right the simplest thing is this is this is a data set that you want um more and more what we're finding is managers and vps of sales are starting to use corus as a way to manage their day-to-day business right and so we have some customers that tell us that they spend more time in course than they do in salesforce.com simply because salesforce is a lagging it's a lagging system right it requires sales reps to go in and update certain fields and it's based on the reps interpretation of what happened in that meeting and so for a lot of managers if there's a deal that they care about they can pull it up in chorus with one click and immediately they'll be able to see everything that was talked about what was or wasn't discussed whether or not this deal is actually going to come in you know end of month as the rep is forecasting and so what we're trying to do is find out more and more how to take it away from just training and coaching which is a very high value use case into something that is a part of your day-to-day that sounds like a sales pitch to salesforce are you in acquisition talks right now um if if we if we had to sell we'd be really disappointed take us that's a you've practiced that roy that was very smooth that was a very good answer to that question and take take me back to uh take me back to the start what year did you launch the company in uh we launched it in 2015. and did you decide have you decided to kind of bootstrap or if you raised capital no so you know pretty early on um we we realized that if we wanted to tackle this market and you know the way that i talked about it with my team is that there's a billion dollar enterprise value company five to seven years from now that's ours to lose and it's simply because they're you know this data set of customer conversations and meetings is so valuable and so core to a business that there's no way that uh every company in the world isn't starting to to to record and track and learn from and act on the insights in these meetings and so um when we started out we had a decision to make about whether we outsourced the technology or whether we built it all ourselves and we decided to build it all ourselves to do a couple of things that you can only do when you when you build uh build this technology yourself so very early on um we you know we spoke to investors and we were fortunate enough uh to close a seed round uh a pretty substantial six million dollar seed round uh that was led by emergence capital um with board was that priced or was that a no um it was actually it was priced yeah it was priced so we did we actually did a friends and family round um that was based on a safe and did you go through yc uh we did not but we decided to use the safe just to keep things simple and uh what was funny was that we were actually planning on doing a seed round based on the safe but uh things went so well with emergence that they decided to price it immediately and so all the friends and family that come on on the safe immediately got converted into the price round so it's uh so the answer is it's it's both how much have you raised a date total um over 20 million dollars okay yeah so we had the seed round that was led by emergence and then red point came in uh and led the a and what are you at today in terms of team size we're uh a little over 40 people equally split between research and development and the go to market side location-wise all stan where are you based split up between uh it's complicated so our r d team is in tel aviv when i started the business i was actually living in switzerland and i've since moved to the bay area and our go to market team is here got it okay so so tel aviv and san francisco how did you get this team set up in tel aviv to do the r d [Music] so my uh although i'm canadian originally my entire family lives in tel aviv uh or in israel and my first job uh in college was working for an israeli enterprise software company uh so friendships family um and me being in switzerland when i started the company just made tel aviv like the obvious place um but it goes without saying that it's you know it's about people and uh my two co-founders uh michael and russell are based in tel aviv and they were the right people to start the business with so you're three years in team of 40 super valuable algorithm built around a very hot space 20 million raised what are you at today in terms of total customers paying for you guys um we don't we don't get into the specifics but you could you could peg us around 100 enterprise customers and those are ranging from large companies like qualtrics with hundreds of sales reps and admiral to those you know hot high growth startups like the outreaches of the world everstring visible uberflip vidyard all of those folks so we we we've had many of those videos like we've had many of those folks on the show in the past 60 days so those are all those are good names that's amazing are you just can you can you give me a lead list i was meant to say ask us i was about to say you can literally go to getlatka.com which just creates company profiles from these audio things and you will see vidyard you'll see michael obviously lit in there you'll see all these companies so it's good um very good all right so good i mean so you when i asked that question i learned a lot from that right because you chose to say kind of we have 100 enterprise i mean are you continuing to go up market if someone's listening right now and they're just like a four or five 10 person startup is this not the fit for them no i think i i think you know we we just we we sell for very different reasons and i think that the you know the core product that we started with you know that we went to market with a year and a half ago for example um would have been better suited for small businesses and as you add more functionality like a deep bi-directional sales force integration or the ability to take all of your data that course is generating and push it into a redshift instance so that you can build dashboards in domo or tableau or periscope or looker or anything like that that functionality just lends itself more to the enterprise and of course the type of value that we can deliver just goes up exponentially the larger your team is because you have that much less visibility into what's happening yeah that makes sense uh last question related to revenue i mean uh i mean have you guys passed uh and be as vague as you want but have you passed like the 10 million ar mark we're not there yet okay do you think you'll hit it by the end of the year uh not by not by the end of this year okay but maybe 2018. we'll we'll we're going to be pretty aggressive in 2018. that's good that's good all right that's fair um take me into some of the economics on this right so it's a hyper competitive space like we talked you know i've had we talked earlier about some other companies in the space um how are your sales calls going how are you winning these customers and specific to that what's your fully weighted cac look like on those wins yeah um i actually i don't have great data on the cap right now just because we're experimenting with a lot of different approaches so much of much of our new customers come from referrals and come from inbound and we actually only hired a head of marketing a few weeks ago and so a lot of the growth to date has been purely organic um the uh sorry what was your what was your earlier question no it well let me break up those questions into just one one question each so um cac is something you're experimenting a lot when you say you're experimenting with you mean you're testing many different paid channels we're starting with inbound yeah so what we want to do is we want to optimize the inbound simply because we we have such incredible conversion rates on the inbound it's working really well that we want to we want to figure out that channel um before we start adding additional channels what's incredible conversion look like like more than 20 trial to paid or what yeah okay that's incredible all right good and then um okay instead of going maybe into every experiment maybe this is a better question so like last month would you guys spend just on paid stuff paid acquisition uh we i i don't feel comfortable sharing those numbers yet okay um so what what i would say is what's it what's it definitely what's it definitely less than it's definitely less than 10k 50k 100k yeah it's under it's under 50k right okay fair enough so under 50. most of it's organic and so why are people finding you organically is a core part of your 40 person team based on like content creation a little media company or what yeah you know a lot of it comes from just doing really good work with customers um so you know the sales community is an inherently viral type of community and meetings are inherently viral right so when chorus when chorus joins a sales reps meeting we're actually joining as a participant and what we found is a lot of sales reps will talk about chorus and the value that they're getting out of it right so you know oh nathan yeah just so you know there's another participant here it's chorus it's it's a product that's going to take notes for me so that i can be more focused on our conversation oh that's really interesting and because we work with so many customers that sell into sales right like we are working with the with some of the leading uh sales and marketing uh tech companies so when their customer success teams are meeting quarterly with their customer base and they're using course and they're getting value out of it um there's a very natural conversation that happens and so that's what we're finding works really well for us this is something i've always been very jealous of the document signing space for but you guys have such an i don't say it's such an easy job but it's so much easier than other companies to get your vowel coefficient greater than one because the invite to join chorus is naturally sent as part of the product value do you guys actively track viral coefficient and if so have you gotten above that one number we're we we've started tracking it we actually have an individual product for sales reps so if you go to chorus.ai www.course.ai slash chorus for reps with dashes between there so chorus dash four dash reps um an individual sales rep can with one click start using chorus themselves oh i see this yeah very cool and so yeah and so it's it's really powerful because you know one of the most one of the biggest questions that a vp of sales has is you know how hard is this thing to get set up and are my reps going to use it and you know there's all these questions about implementation and rollout and what we did with the platform was make it so easy to get set up that sales reps start using it they start loving it and then from there it's very easy for us to have a conversation with with sales leadership about what else we can do for them roy we're running out of time but last few unit economics questions here before we wrap up with the famous five have you guys gotten to negative net revenue churn annually yet uh we are going to find out a lot in 2018 because we're going to have a lot of those contracts coming up for renewal we do tend to have a very natural land and expand type of model so we'll start with the account executives and then maybe the sdrs or bdrs will want to get on the platform or customer success uh and so on and so forth so i think overall we'll expect it to be negative um but we'll see you're still pl you're saying you don't have a large enough sample size you don't feel like to to to confidently say a 100 000 contract in year one is going to turn into 120 000 contract in year two for 20 expansion we we we definitely see expansion within year one on most of our deals right and that's just a function of the types of companies that we work with like they're growing companies and then we expand across teams um the reason that i can't answer that is because we only seriously started going to market at the beginning of the year and so you'll start to see those contracts coming up for renewal and that's why i can't answer the question did you have no or would you have no revenue in 20 2016 was 2017 first revenue year 2016 was a lot of proof of concepts yeah so we were working with customers and perfecting the product yeah i mean the company is actually only two and a half years old we knew very quickly as i said that's really impressive because i see you guys everywhere wait so i wanna this is shocking to me wait so was revenue 2016 we'll say less than 100 grand total all in you really just turned on pricing in 2017 yup wow that's amazing okay and and you know maybe 2018 you pass a million i mean that would be very expensive i'm exaggerating i'm exaggerating a little bit yeah yeah intents and purposes it was yeah it was it was this idea of how quickly you know there are a lot of companies that scale inefficiently right and it's and it's almost like a badge of honor to see how quickly can you add people how quickly can you scale and the way that we approached it was you know what are the questions that we want to answer before we start scaling heavily and one of them for example was you know you talked about customer acquisition cost well releasing a self-serve product for an individual account executive is something that nobody else in the space has done and we realized that because we had built a product that was designed for sales people and to be valuable out of the box for them we thought what if we just put that out there and we see how it's doing and it ends up performing very well and gets us into some incredible accounts so these are things that we said you know what would what would we be really disappointed by if we didn't experiment with them before deciding to go to market heavily last question on this because i just remembered you left eric schmidt to start this why how did you have so much conviction that this space was going to blow up [Music] um you know what i i left i actually i had one job in between venture capital and chorus so you know the reason i left uh innovation endeavors was simply because it felt disingenuous for me to be advising these incredible entrepreneurs if i'd never started a business myself how old were you at that point i was i was in my late 20s so i just finished business school um and so i went back to bain to pay down my business school debt which was how much uh business school is expensive in the states uh probably like 150 grand something like that and so it was just you know pay it down as quickly as possible learn as much as possible and then i quit and actually took over a year looking at a number of different areas and for me it was more about finding something i was authentically excited about and that i wanted to dedicate the next 10 years of my life to and this idea of machine learning and ai and voice and conversations just felt like the right place for me based on my interests yeah all right roy one word answers on these famous five let's wrap up number one what's your favorite business book ooh hard thing about hard things number two is there a ceo you're following or studying i would say bezos number three is their favorite besides your own is their favorite online tool you have it would have to be it would have to be slack number four how many hours of sleep to eat every night i aim for seven okay and what's your situation married single you have kids uh married with kids how many kids two kids wow okay very good and how old are you 30 31 i am i think i'm 35. 35 very good all right last question take us home take us back 15 years what do you wish your 20 year old self knew oh man um that's a really good question um observe try to really understand what it was that the people that you looked up to that you were working with were doing try to really understand like what it was about them that that made you admire them and make you work your ass off there you guys have it from roy he's in a hot space came out of business school worked with eric then went back into vc wanted to eat the entrepreneur dog food before jumping into his own thing course not ai launched in 2015 they were really just developing all the way through 2016 really turned on revenue in 2017 now working with a hundred enterprise customers but you can get started as a sales rep by just going to that link roy shared earlier in the episode they've raised 20 million dollars super super hot space doing less than a million or so less than 10 million in ar right now but hopefully maybe passing that in 2018 if growth goes according to plan team of 40 between the r d team in tel aviv and the bay area with roy roy thank you so much for taking us to the top my pleasure thank you nathan