ClickUprevenue, valuation & funding

[00:00] Hello, everyone. My guest today is Zeb Evans. He's a serial entrepreneur that started several software companies with over a $100,000,000 in revenue. Currently, he's the founder and CEO of ClickUp, a productivity platform where people plan their work. Zeb, are ready to take us to the top? [00:15] >> Absolutely. Thanks for having me, Nathan. [00:16] You bet. We were just chatting. Both both Virginia Tech dropouts. What was your first company dropout of tech? [00:23] >> Yeah. So I did a a social media firm. We did social media automation and management kind of at the early phases of that in 2009, 2010. [00:32] Very interesting. Okay. So give us sort of the download on ClickUp and I won't bury the lead. You guys bootstrapped. I think you launched in 2017. You bootstrapped. You just raised a bunch of money. We'll get into that in a bit, but tell us what the company does first. [00:44] >> Yeah. So ClickUp is a productivity platform to put all of your work in one place. Usually, have separate applications for project management, docs, resource management, time tracking, mind maps, all of productivity in separate locations. And ClickUp is just a place for you to bring all of your your work into one platform. [01:01] And are people loving it? How many customers do you have using it today? [01:05] >> Yeah. We've we've got about 30,000 paying teams that use us today. And and we've got about I mean, we have a lot we have a freemium product as well. So we have a lot of of free users. [01:15] Okay. Got it. So freemium. And and so you very specifically use sort of the word team. So do you measure customers based off teams or the number of seats inside those teams? [01:25] >> We numb we measure customers on the number of teams. Okay. So it's it's about 10 seats per team would would be our average. But, yeah, team is just kind of the the high level organizational unit. [01:35] And what is that organizational unit that's typically using you guys? Who are those 10 seats? What are their titles usually? [01:42] >> It it varies. You know, it's it literally it's it's all the whole goal of ClickUp was being flexible enough for you to work on it for any type of use case. I mean, it started as an internal tool. And so for that reason, you know, I mean, we have families that use us and then we have people that are, you know, sending rockets into space. [02:00] That is that is that is one organized family using you. Holy crap. I can't their Thanksgiving must be wild. [02:08] >> Yeah. I don't know if I'd wanna be in that family. [02:10] Yeah. That that's that's that's great though. Okay. So this is interesting. So you started from your model and then again is launch year correct? Was about 2017? [02:18] >> Yep. End end of twenty seventeen. [02:19] End of twenty seventeen. And you said this was an internal tool. What were you building in 2017 where you then made a decision to spin this out? [02:26] >> So we were actually gonna do a Craigslist competitor where you could pay in app and and like remove the sketchiness from Craigslist. Craigslist is actually the source of the largest fraud in The United States. So but that that was our whole goal was preventing that. And and while we were doing that, ClickUp had always been kind of an idea in the back burner just for an internal tool from the frustrations of having, you know, 15 different [02:47] >> productivity apps that we were using at at my previous company. Mhmm. [02:50] So you built this though, but it's still a tough decision. People build internal tools all the time. The decision to actually shut down the past thing. Right? Because you have a real opportunity to actually take the leap into the new thing is not easy. I mean, or or maybe it was for you. [03:03] >> Well, so so to be clear, we didn't actually get started on that that Craigslist competitor. It was in the idea phase and when we were like, let's just spend a month and create this platform where we can put all of our work there. And and that's what we did. And long story short, we we got into it after that month and realized there was a lot more. I had I've had four near death experiences. I had [03:23] >> I had my third one, and that was when we moved out to Palo Alto. And fortunately there, we do we we met neighbors that had companies, had tech companies, and we kinda just started they started using our our software, our internal tool because they asked us what we were working on. And and so, yeah, I mean, I I didn't want to get in the most competitive market software market, but it it it kinda just kinda happened. [03:45] >> Yeah. [03:45] It's a very competitive space. I also wanna touch on that here in a bit because anytime I see someone with real revenue in a very competitive space, it's clear to me that they've built some mousetrap that other people have not thought of. So take me back to your original mousetrap. How'd you get your first 100 customers? Do you remember? [04:01] >> It was all organic stuff. I mean, blogging is not dead. Blogging helps a lot. Content is certainly king. We create helpful articles for people searching long tail keywords of competitive information or just product how to productivity hacks in general, things like that. So yeah. So we started with with organic stuff. I mean, you know, Reddit, Quora, all of that stuff still really works especially for your first 100 customer. [04:27] Do you remember those first original blog posts? Was there a particular other platform you were targeting that you felt you were doing something better on so you would do something like clickup versemonday.com and why people are switching or something like that? [04:38] >> Yeah. It's exactly like that stuff. I mean, I think we even did when people, you know, didn't know our name, they weren't searching click up yet. So we did like Asana versus Trello and just capitalize on those. [04:48] Yeah. Super smart. So you have a this is very much sort of an early SEO play. You were inserting yourself in the decision making process, people looking for these tools and then eventually said, oh, by the way, we have one. Exactly. Super compelling. Interesting. So what did that original team look like? It sounds like you had some SEO brains on the team early on. [05:08] >> Know, honestly, I did most of the SEO. It was we're we're very very bootstrappy and and lean. And at my previous company, had a lot of experience doing organic marketing there. Yeah, mean early on it was just like three or four of us that were working on this. [05:23] Mhmm. And so is that sort of mind and just your background why you rank, you know, in the first position for critical keywords like free project management software according to Ahrefs brings in what? 7,800 clicks to click up every month? [05:36] >> I mean, would say that's the start of it. Of course, have an amazing team now that that I don't I don't do that anymore. So we have an incredible team. But I mean, it look. It's it's a long term play. SEO is is very long term. You've you've gotta set it up for the future and know that it's gonna be years before you get real value from it. So it's it's starting to pay off what we [05:54] >> set up two years ago. And and again, it's just it's just about putting those pieces in place to where you have, you know, a great team that can crank up content. [06:01] What does your team look like today? How many folks? [06:04] >> We've got about a 130 people. [06:06] Okay. How many engineers out of curiosity? [06:09] 20. 20. Okay. And what what do the rest spend most of their time on? [06:15] >> Customer service is is huge for us. I want like probably 40 customer service people. We just started hiring our sales team a few months ago. We've got a a decently sized marketing team now. We're we're we're we were all organic until a few months ago, then we started doing paid acquisition. And so we've we've started building out that team. Of course, we have the ops team and our our product teams, design teams as well in QA. [06:39] >> I want [06:40] I wanna come back to how you are incentivizing your first couple of sales hires here because I believe your your model is a you were freemium, and now you're a low ARPU, high volume play. On average, what are customers paying you per month? [06:54] >> It's it's roughly $10.10 to $15 per seat per month becomes the average. So I mean, the ARPU is like $1.01 50 per per per user. [07:05] $1.50 per user. Sorry. So it's $10 per seat or oh, per year. Got it. Got it. Got it. Got it. So so 300,000 customers again or sorry, seats across 30,000 logos. Again, those 300,000 customers, it's somewhere between 10 and $15 a seat. You have so walk me through how you think about it for sales hire. A lot of people would say at this price point, unless you're doing a high volume of demos, you can't make the [07:27] commission structure work to have input touch on a sale. [07:32] >> No. I mean, ours I look I actually was in that camp prior to to starting it. I wanted to go very slow and methodically with sales. But we we have, you know, kind of an awesome head of head of sales, Tommy, and he's pushed us hard on on sales hiring and it's worked phenomenally well for us. I mean, I think that the reality is, again, going back to this flexible platform that you have simple use cases [07:57] >> but also very complex use cases. The complex use cases takes a hand holding process. And and so yeah. I mean, it's it started off, you know, small, but it's it's it's a big portion of our revenue today is is the hand holding process. [08:10] When did you hire that first sort of VP strategist in Tommy? Can I mean, can you tell me what revenue hit before you pulled that trigger? A lot of founders wonder when to pull that trigger. [08:20] >> We were around just a few million dollars in revenue, probably a little bit more than that. Would say $6.07, 8,000,000 in revenue. And and I mean we had of course, we had, you know, some enterprises reaching out to us and I was, you know, using a fake name to to to be the acting salesperson in some of the calls. But I mean, when when he joined, we we hired our first couple salespeople and it's just been [08:44] >> kind of a rocket ship growth on the sales side. [08:47] Why why did you feel you needed a fake name? [08:50] >> You know, you you appear small. Right? You you kind of appear small when the CEO is the person doing the sales and answering the question. So I I kinda had to do that early on. What was your faking name? Tyler. [09:03] Tyler. I love that. Alright. Alright. Cool. So 2017 blog post gets you going. You've now scaled up to about 300,000 seats using your platform across 30,000 logos at $10 a pop. What I mean, you guys are somewhere around 3,000,000 in MRR currently? [09:16] >> We're a little bit less than that. [09:19] Okay. A little bit. Do you think you'll break $36,000,000 run rate by the end of twenty twenty? [09:23] Stretch We'll see. Stretch goal. Fair. So so you it sounds like you had a meaningful revenue. Right? When you look at the $35,000,000 raise that you guys just did, lot of people would say that's a lot of money sort of for the first money into a company, but it sounds like you had scale. What was the tipping point for you where you said, know what, I'm gonna intentionally choose the sort of VC path, is very different [09:43] than the build a $20,000,000 profitable pay myself dividend as founder path? [09:48] >> Yeah. I mean, it's a great question. And I the simplest answer is that I I didn't enjoy many of the VC conversations that I had until I met David Sachs at at Kraft. And and, you know, he's obviously an entrepreneur himself and and kind of just I think was more in the mindset that I was and and kind of letting us run the company and doing the same things that we've always done. So I mean, that [10:13] >> that I would say would be the biggest piece to it. But I mean, second piece is is look, we're in, you know, again, a very very competitive market. And so we've had competitors, you know, everybody rips everybody's features off. And and we have people copying our messaging, copying our ads, copying many of our features. And and so it it's it's a defense a defensive play in many ways is is to do this. And I think that [10:35] >> it's it's more about, you know, getting our brand out there and getting market share pretty quickly. But what I always will advocate for is, you know, go as as far as you can without raising to get product market fit. Right? And then when you do raise, you you have you have the leverage to pull. Right? You you have the leverage. [10:52] Walk me through that conversation with David Sachs. Obviously, you had leverage before I assume you're profitable going to get a VC raise? [10:57] >> Yep. [10:58] Yeah. And obviously, you're not profitable now because you're now investing that cash. Correct? [11:03] >> We're we're trying not to be profitable. Yeah. We have to be. We're on the line. [11:07] Yeah. It's like once you raise, you you gotta invest it to drive growth. Right? [11:12] >> Yeah. Exactly. [11:13] Interesting. Okay. And your thesis, I believe you already touched on this. Your thesis in driving growth, you said, you just started really scaling up paid spend. You also just started scaling and bring on your salespeople. Anywhere else you're gonna invest that 35,000,000? [11:27] >> It's it's mostly that. I mean, of course, we're gonna ramp up our organic marketing side also. That's that's our engine behind. I mean, that's that's still vast majority of of sales today and and self-service. So we'll we'll continue ramping that stuff up as well as customer service. We're we're big customer service companies. I want, you know, instant instant demos, instant response times twenty four seven. [11:45] Last couple of questions here before we wrap up. Churn is obviously critical in this sort of business. What are you guys trying to optimize for in terms of gross churn monthly? [11:53] >> We're we're under 2% monthly. One to 2%. [11:56] That's okay. So that's incredible. I've talked to a lot of other people in your space and they are not under percent gross revenue churn per month. Are you doing anything specifically that you feel like is really driving those great numbers? [12:07] >> I mean I mean, we we ship a new version of ClickUp every Friday. And it rallies our customer base around us listening to them, and they they broadcast us because of that. But I mean, I I think it really just we've kind of created this, like, organic, like, fan base around releasing every Friday and shipping a new version of ClickUp every Friday. It's it's I mean, people livestream the event. Everybody tweets about it. I I think [12:31] >> that that has a lot to do with it. But it also is just like the preface for like how we care and how we're so intentional about product and and improving the product that I think I think people stick with us. [12:40] Now flip side of churn, when you have a a seat base of 300,000 paid seats, a 2 or $3 ARPU increase across that base starts to become meaningful. Do you have meaningful expansion revenue yet or is that something maybe for 2022? [12:54] >> I mean we do. Our net retention is very high. I think that you know it certainly obviously increases as you go up market for for retention. I mean, our our SMB I I don't have the exact numbers where SMB is. It's certainly less than our enterprises. [13:08] When you say high net revenue retention or or net revenue retention, what does that what does that mean? How high? [13:13] >> More like one fifty. [13:15] Incredible. So if you're turning 24%, you've gotta be expanding 75% to get to net one fifty. Interesting. And most of that is seat expansion or product like additional product features? [13:27] >> It's it's seat expand so our actual most revenue product is our middle tier, our our business tier, which is kind of the premium one. But the vast majority of people, it's like 95% of people start with the unlimited. So we do we do feature paywalls a little bit differently in the sense where everybody actually gets access to the feature that is paywalled. And they don't they don't really know that it's paywalled until you kinda start using [13:51] >> it. You get a 100 uses of of every of every feature. And and then it changes user behavior because users generally will optimize for the features that are free. And so if you if you don't really kind of let them know that they're not free, then they start using them. And and I mean, on the flip side of this, really, our our mission is just saving people time, making people more productive. And we we strongly believe [14:11] >> that lots of these paywall features do that. And and that's why we wanna get them in front of users. [14:16] I can feel folks listening to episode going right now. But Nathan, you gotta ask Zeb, if you don't tell them that it's paid upfront and you wanna get them addicted first and then throw a paywall up, there's gotta be pushback when you throw up the paywall. You've obviously thought through this. [14:27] >> I mean, look, there is there is some at the end of the day. But I again, like our our value I think is is outweighed on that and and people end up appreciating that they actually started using the feature that they would have not used otherwise. [14:39] Yep. Fair statement. Alright. Last question here on CAC. It sounds like you know the numbers pretty darn well. I mean if you're bringing on you know a new a new account with 10 seats, a $10 a seat, so a $100 per month account. What are you willing to spend to get that customer? [14:53] >> Yeah. I I mean, we're still figuring out all that stuff out right now. And and it greatly depends on what channel you're buying from. And we we can we can get customers for as as low as like a thousand bucks. Paying customers for as low as a thousand bucks. I mean, we're we're shooting we wanna we wanna aim for low low thousands. Yep. But honestly, it's you know, as as you know, when you start testing some [15:12] >> of this stuff, gets it gets expensive. It gets a couple thousand, $3,000. But the reality is our blended CAC, it becomes so low because of organic. You know, about 95% of users are still organic is that we can we can kind of spend a little bit more outside of what our our lifetime value would be I think for for most companies. [15:30] So before we wrap up with the Famous Five, is there anything you're like, I can't believe Nathan didn't ask about this. This is like the big thing right now. [15:37] >> I mean, I I know it's like we touched on all of the revenue stuff and I think that it's again, that this market is just it's so so hot and frothy right now. It's it's it's like the right timing market to be in. But I mean, yeah, it's it's always a competitor differentiation questions that we get, you know, like how how are you different from from your other other products? [15:56] Mhmm. What what you obviously got evaluation from Saks. Why not take that evaluation and go to Monday and say, wanna buy us before we scale and try and beat you? [16:05] >> I don't really have any interest in doing that. Know, I I I I think I've I've kind of exited a company in the past and and I feel like this is this is the one to go public and kind of create that meaningful lasting lasting business that that's here when I'm gone. [16:19] Public or bust? You heard it here first from Zev Evans. Famous five here. Number one, favorite business book. [16:26] >> Thanks so much, Nathan. Yeah. My favorite business book, I actually I actually love it's called The Slight Edge. Everybody gets everybody at ClickUp reads it every single day or every single time they start. And yeah, it's it's basically about our core value of progress over perfection kinda growing 1% every day. [16:43] Number two, there a CEO you're following or studying? [16:46] >> I love Elon Musk. [16:48] Number three, favorite online tool besides your own? [16:55] >> Front. [16:56] Number four, how many hours of sleep are you getting every night? [16:59] >> 4.5. [17:01] Four point very specific. Is that point two situation? Married, single, kids? Single. Okay. Got it. No. Because last question oh, sorry. How old are you? 30. 30. Okay. Last question. What's something you wish you knew ten years ago when you were 20? [17:17] >> It's a great question. I mean, I I think that tech was gonna be the hot thing and that I would have learned coding earlier than than I did. [17:25] Guys, there you have it. ClickUp, flirting with called $3,035,000,000 dollar run rate serving over 30,000 companies across 300,000 paid seats that can average 10 to $15 per month. They're driving great growth. They just did their first round, $35,000,000 round, but they had all the leverage. They were profitable, had many millions in revenue. Today, they've got a team of 130 people scaling quick, 20 engineers scaling up their sales team, marketing team of 40. Our first 100 customers [17:49] all came from sort of organic and SEO inbound now testing many more channels. Zeb, thanks for taking us to the top. [17:56] >> Likewise. Thanks, Nathan. [17:59] One more thing before you go. We have a brand new show every Thursday at 1PM central. It's called Shark Tank for SaaS. We call it deal or bust. One founder comes on, three hungry buyers, they try and do a deal live and the founder shares back dashboards, their expenses, their revenue, ARPU, CAC, LTV, you name it, they share it. And the buyers try and make a deal live. It is fun to watch every Thursday, 1PM central. [18:24] Additionally, remember these recorded founder interviews go live. We release them here on YouTube every day at two p. M. Central. To make sure you don't miss any of that, make sure you click the subscribe button below here on YouTube, the big red button, and then click the little bell notification to make sure you get notifications when we do go live. I wouldn't want you to miss breaking news in the SaaS world, whether it's an acquisition, a [18:44] big fundraise, a big sale, a big profitability statement or something else. I don't want you to miss it. Additionally, if you wanna take this conversation deeper and further, we have by far the largest private Slack community for B2B SaaS founders. You wanna get in there. We've probably talked about your tool if you're running a company or your firm if you're investing. You can go in there and quickly search and see what people are saying. Sign up [19:05] for that at nathanlatka.com/slack. In the meantime, I'm hanging out with you here on YouTube. I'll be in the comments for the next thirty minutes. Feel free to let me know what you thought about this episode. If you enjoyed it, click the thumbs up. We get a lot of haters that are mad at how aggressive I am on these shows, but I do it so that we can all learn. We have to counter those people. We gotta [19:24] push them away. Click the thumbs up below to counter them and know that I appreciate your guys'support. Alright. I'll be in the comments. See you.