Clickdimensions Revenue, Valuation & Funding (2020)

hello everyone my guest today is mike dickerson he's the chief executive officer of click dimensions the leading marketing automation solution for microsoft dynamics 365. he joined click dimensions from pgi a global provider of web conferencing software and collaboration technology where he served as executive vice president of strategy and business development and now he developed partnerships with some of the biggest players in the technology industry including microsoft before that he started pgi's global collaborative services division growing it from 86 million to 240 million in revenue and serving as a trusted advisor to some of the most recognized brands all around the globe mike are you ready to take us to the top absolutely all right tell us about click dimensions for folks that have not heard of the company what do you do and how do you make money is it pure place ass uh it is a pure play sas it's a marketing automation company uh focused primarily on b2b the thing that makes it a little bit different is that the company was uh built originally in the microsoft dynamics ecosystem built natively on the dynamics platform okay and ultimately developed a unique distribution system in that uh um in that market which is um special because there are about seven thousand martech firms out there and i think one of the key things that the founders of the company did was that they picked a um a distribution scheme and a segment of the market that they could really dominate in and and protected themselves from the vicious comp competition that was going on in the rest of the martech uh industry i would agree with you a lot of people overlook this but i think the most effective thing you can do in a crowded market is find one channel and monopolize the heck out of it it sounds like your guys and your folks did that what year was launch when did they create this it was launched in 2010 great uh startup story a guy who had had one successful uh small business operating out of his basement had uh connected with a developer in tel aviv israel who was writing code in his parents apartment the two guys had never met they had an idea for a company and they worked it and from that without taking any venture capital they built it up to uh a company that by the time i came in had 2 800 customers and was doing almost 20 million dollars in run rate revenue when did you come in what year uh january 23 2017. oh well okay okay so fairly recently and what would they come to gra over the past 12 months yeah so we're we'll do about 40 million this year we grew 36 last year to just uh almost 31 million last year okay that's great so from 31 million to about 41 million in terms of ar this year where's most of that growth coming from new customers or expansion revenue uh new customers uh i think that's one of the the opportunities that excited me about this business was they had a very uh efficient uh customer acquisition cost and a really efficient machine to acquire new customers and the opportunity to sell those customers a second and the third product seemed um seemed like a great uh great potential and are you referencing the dynamics kind of channel for distribution still or are there other ones you've discovered we really focus on the dynamics channel and if i were to look back at what the real genius of the guys that started this company they really understood the microsoft dynamics uh channel uh they understood how they made money they understood how to connect with them they understood what it was like to live in a business that is dominated by the world's largest software company and they really connected well on that um and so uh what we've really taken um you know the opportunity to do is to leverage our very effective cost of acquisition and allow us to build out uh you know a complete digital marketing portfolio for b2b customers and we get to do it in a domain where frankly we win more than our fair share of customers because of our dynamics expertise so we're sticking in the uh in the dynamics ecosystem it was primarily the growth came through new logos but we've been working on that uh cross-sell and upsell motion for the last nine months and mike you talk about your effective cac what is your cac today what are you spending to acquire a new customer fully weighted um i'll tell you what our cact our ltv to cac ratio is because about our exact numbers but uh we're operating at about a 7x which is um pretty darn good yeah no that's great now let me ask you a different question that will kind of help me understand about how aggressive you're being uh how aggressive are you being with payback period you happy to wait 24 months or you want to be 12 months or six months or less yeah so uh you know i'm sort of like standard sas businesses to be you know under 12 months 12 months or less if you can do it we're a good bit less than that um and you know one of the things that's that's really unique about this um channel model that these guys built uh that would be very hard to replicate and very you if you were looking at a business plan that said hey i'm going to build a business that has 650 active partners that's how many partners we've done at least one deal with in the past year to build that from scratch would seem you know intimidating if you look at what does that mean i'm like sorry partners i thought you had one big one which was it which was dynamics no it's the it's the there are 7 000 microsoft dynamics partners who sell dynamics install dynamics configure it migrate data all of that kind of stuff um so those are are essentially our sales force and of those uh 650 did at least one deal with us in the last 12 months of those 650 60 of them have 10 consultants or less so this is a real long tail phenomenon that these guys built up um and would be hard to replicate what's the kickback there are you paying like 30 of the arr or something like that how do you incentivize these guys yeah so um also interesting normal sas um uh you know sort of commissions can range and then microsoft world 16 to 20 can range up you know 40 and higher uh in other places but the real uh beauty of this model was let's take a typical deal say it's a you know 75 seats of microsoft dynamics my numbers may be a little bit off but that might be 120 000 of microsoft uh you know uh subscriptions probably a hundred and twenty thousand dollars of implementation fees and maybe ten thousand dollars of click dimension software on which that partner might make you know a 21 margin so what's the deal well the thing is that 10 that 10 000 was the fuel accelerant that helped them win that much larger deal including the 120 000 of services which is really their main business so there's no kickback no there is a kickback it's 21 but the the point is that 21 of 10 000 is um pales in comparison to the fact that they actually won a 250 thousand dollars yeah they used your feature set to win the deal in the first place they used the feature set yes but more importantly than that they used our uh cell with sales motion so our sales force is expert in marketing automation digital marketing and microsoft dynamics most of the dynamics partners are really strong in it and in implementing crm they are not marketing people they couldn't tell you you know what seo is all about they couldn't tell you about uh you know how to build the effective nurture tracks so what we do is we are effectively a product sales specialist for uh sis that looked a lot more like itse and mike is this recurring or is it on first year contract value oh it's recurring and that's a big deal for us we're helping a lot of those in perpetuity in perpetuity um as long as the customer stays with us yeah and the idea is that you know a lot of these guys are struggling with how do they make their their business cloud resilient and so we spend a lot of time working on how we can help them not only make residual margin on the software of ours that they sell but how they can build recurring subscription-based managed services around digital marketing and how sticky is it obviously trend is critical in a sas business what's you're going to just churn today yeah so our churn's about 15 which is higher than i'd like it to be logo or revenue uh that's logo um on a constrained basis for a year that's uh yeah that's saying that he bad if it was per month we wouldn't be having this conversation um so uh uh yeah and the uh for our customer range this is also something that's unique normally you would say back with your your thesis in the beginning find a segment of the market focus on it and drill it our focus is customers who use dynamics that's the that's the segmentation dimension we have customers that range from fortune 500 firms to small firms with 50 employees and uh the differences in churn between the smaller and the bigger are are significant if i were to look at our our larger customers the churn rate is is on a logo basis is much below 10 yep yep and look at a 15 logo term per year that means you could kind of back into this is dangerous to extrapolate like this but you could back into kind of a six month lifetime value essentially well i would hope six years but sorry did i say six months i meant six years exact sears all right good and still bootstrap today are you guys raised so um in 2016 in may of 2016 the company sold to private equity firm excel kkr that focuses on mid-market uh uh sas companies and it enabled services so um that's very different than a venture raise where you're taking in capital for growth um this company has been managed uh with its own you know cash uh cash flow and bank debt so it's a very um uh you know again that's a rare story to see a company that that grows at 36 in a sas business that's profitable enough to be able to use bank debt to grow yeah now when you talk about bank debt you're talking like kind of like the hercules of the world they'll pirate on kind of like this venture debt model term loans things like that yeah um this is classic private equity lbo kind of bank debt it turns out um we bank with silicon valley bank there are some folks that focus on uh you know private equity uh uh structured uh sas deals they're usually for companies bigger than our size but with our growth characteristics and our profitability we were able to do it yeah i'm just saying with most lbos right i mean they are looking at physical assets they're looking at what what will banks write debt against and things like that and the sas model you're seeing this new era of kind of financing kick into play when you look at kind of downstream you've got the sas capitals the lighter capitals of the world and then once you're at your size 30 40 50 million 100 million in ar you can go to like a hercules atymia and they're doing things like like or silicon valley bank and they're actually doing real term loans you know first 12 months interest free then paying back a fixed rate after that is is the debt you're looking at is it fixed rate or is it revenue-based financing a percentage payback of your monthly revenue yeah it's it's uh it is uh term-based it's fixed-based it's not it's not receivables based financing got it but you you've got the drill the key is that they're looking at those recurring revenues and they look at churn and they look at lifetime value and they look at growth that's right no that's exactly right very good and then you said you had 2 800 customers right well that's when i started we have a little uh not we're between 3 600 and 3 700 customers now oh great hopefully we crossed the 3700 mark that's great yeah so if you hit 3600 or 3 700 and you also hit that 40 million ar mark i mean the average customer's paying you what about a grand a month something like that yeah a little less than that i think we're i think we'll end up this year just under 11 000 in average revenue per account yeah no that's great now you know what i'm about to do here you didn't give me the cache number earlier but you told me it was a kind of a seven ratio and if you got a six months l six year sorry ltv multiplied by that 925 per month price but we kind of back in and assuming you're you'll want to spend caught seven or eight grand to acquire these customers on a 70 000 ltv is that accurate pretty damn close where will you spend that money besides incentivizing partners with that 21 fee do you do any direct paid stuff or conferences or yeah we do and um but i'll tell you we put more and more and more or you know the bulk into the into the channel um our sale at the moment really comes and we win a disproportionate amount when somebody is in the early process of deciding to go to microsoft dynamics we win a lot more in the front than if somebody's implemented dynamics and it's you know two years after they've been live and they decide they want to upgrade their marketing automation yep our win rates aren't quite as high there so what we're really doing is trying to help uh our partners drive more new dynamics uh activity that pulls us along and so it's a very different model than say what a hub spot or a marketo or an act-on would do yeah now did excel kkr recruit you after they acquired it or were you already at the firm and you said i want to jump in that company after you buy it now excel kkkr brought me in but yeah and what were you doing before uh i was at a a new york stock exchange company that did uh collaboration that we had just taken private in 2015 so i did one year after uh being part of the management team that took that company private and then uh got the chance to go back to really to my roots which were not only uh you know uh digital marketing but in the more the growth phase uh you know venture capital kind of growth phase so this has been a lot of fun for me to switch from going with you know i had great customers before like bank of america and citibank and sap and apple to now get back to uh you know regular small businesses that are fighting every day to compete with big brands and it's um you know it's it's uh there's there's definitely more of a personal dimension and a human dimension to the business that i'm in now let's wrap up here quickly team size how many people yeah so we have just under 200 folks including full-time contractors okay and we operate we're in uh uh the us in three cities and we're in uh the hague outside of amsterdam and we're in tel aviv where most of our r d is and we opened up an office in christchurch new zealand we do business in 61 different countries right now wow very good mike all right let's wrap up here with the famous five number one what's your favorite business book um i think i would say probably good to great number two is there a ceo you're following or studying right now satya nadella that's it probably expected there and that's one for two reasons honestly i love studying ceos spent a lot of time studying jack welch's you know a lot of different folks um what he's doing the transformation that he's doing at microsoft um makes what lou gerstner did at ibm um you know uh pale in comparison well i i was gonna say what he did at ibm was pretty amazing so you get the point yeah favorite online tool um evernote number four how many hours of sleep to get every night sleep yeah what's that i get about uh get about seven hours that's not bad and what's your situation mike married single kiddos married with three kids three wow you got a full house and how old are you uh i just turned double nickel double what is that 50 55. though very good all right take us home here what do you wish your 20 year old self knew what i wish my 20 year old self knew um i think i wish that i knew how powerful it was to take enough time on a regular basis like weekly to sit back and um you know systematically reflect what did you learn this week and what are you going to do about it and you know more specifically how to you know organize that reflection so that you're asking a set of questions and seeing what you learn the cumulative effect of that is huge and i wish i'd started doing that 30 years ago in may 2016 excel kkkr purchased and took private click dimensions mike then came in a ceo he says he wishes he would just started earlier reflecting every single week to really systematize any learnings or mistakes from that week today they're scaling quickly over 3 600 paying customers about to break 40 million bucks in arr growing 36 year-over-year uh between 2017 and 2018 15 logo churn per year assumes essentially a lifetime value of about six years healthy ultimate attack ratio of seven spen and payback period less than 12 months there a team of 190 people based uh in the us and other remote locations company founded in 2010 again really playing in the microsoft ecosystem helping you know over 600 of these kind of agencies consultants people on board folks onto the system at all and again our technology is helping them win those deals paying a 21 kickback on that mike thank you for taking us to the top thanks nathan