How Cloudhealthtech CEO Tom Axbey grew Cloudhealthtech to $50M revenue and 3.5K customers in 2018.

hello everybody my guest today is Tom axe be he became president and CEO of cloud health technologies in September of 2017 a veteran software executive he was formerly CEO of venture backed rave mobile safety where he spearheaded the turnaround growth and acquisition of rave by a leading West Coast growth equity firm Tom are you ready to take it to the top yeah absolutely all right tell us about cloud health what are you guys doing how do you make money how do we make money okay so the company was founded five years ago and essentially the cloud is the fastest-growing computing paradigm probably ever okay is transforming businesses is an unprecedented rate so people are moving to the cloud because they can accelerate the development of new applications and as they do that it becomes very complex the great thing about the cloud is ease of use and spinning up instances and compute power the bad thing about the cloud for users is the ability to manage and govern that that's where we come in we've got a whole cloud management platform that allows finance engineering DevOps and IT to really get arms around their visibility cost management security and governance of their cloud infrastructure ok so this is a cloud era cloud ability in this kind of space a cloud ability is and those those products are more like tools we're more of a platform approach ok so does that is that code for your more enterprise exactly more multifunctional ok so you know a tool approach is when you're doing one particular task or one particular persona well we are really is doing multiple tasks for multiple personas and we're aggregating all that data so the executive purview you know you've really got inside these your whole organization I see ok I don't go to on every kind of customer cohort but on average what's a customer pay for the platform you know a direct customer pay probably you know say up to anywhere between 50 and a million per year and a customer through a partner will probably pay anywhere between you know ten and okay so is it fair to say 50 thousand is a fair average I think that's a good is purely ASB yeah and then obviously I'm sure you have expansion and things like that we can talk about that later okay put all this on our timeline for me so so you joined in 2017 when did they launch the company launched in 2012 2012 okay and then fast forward of 2017 you pursued them or they per surge you or you came in with a venture around how that work yeah essentially what was happening was the company raised around 46 million in that day around compliant of Perkins sapphi ventures and scale ventures and the current investors at that time Owens family was Hilo will have decided he wanted to become chairman of the board and move out of day-to-day operations because he obviously taken that money men that it's gonna be a longer runway potentially an IPO and you know he wanted to go and do some pursue other interests so they opened up a search I knew a couple of the investors already and I was coming off the success of rave selling that k1 said the timing was perfect I know the space very well I've sat on boards of other cloud companies and I knew the whole management space very well from my time with Mike from using IBM so it really was perfect timing so I and was all that 46 million was that all going towards operations as were or as part of that a second area for early folks no it was all got no operations it's all operations okay and so total funding to date is how much 86 got it and and so you join in 2017 you probably had a lot of opportunities on the table you're just selling this last company you mentioned the board seats you're familiar with the space again any other reasons I mean you had any options really to go anywhere any reason you chose specifically to go and jump into this company sure there's actually multiple reasons number one you know I always believe the best money goes to the best the best companies go to the best money great that's life you know you see the you know people like line of Birkin scale Sigma and 406 repeat victories over and over again though the caliber and quality the investors were very poor and I wanted a company obviously where you know they had demonstrated ability to attract top talent and cloud health Airport okay so I want to talk about the team here in a second but first so what have you scaled to in terms of total customers using the platform we have over 3500 okay and just be clear that's not like a freemium model those are all paid customers okay that's great and and the team size that's tough kourt's those folks walk me through the team size today we just show you have 300 people on a global basis okay so Boston I assume has headquarters or where's everybody based on students postings headquarters without two honking yeah now very good enough I take that that ASP you gave me earlier of 50,000 bucks and multiply it across the 3,500 number customer how you just gave me that puts you at like 14 15 million bucks per month right now in revenue is that generally accurate no I knew you were gonna do that those current customers acquired through our MSP channels though we've got a hundred and thirty msps which are managed service providers on a global basis and typically they'll be going after SMB businesses although they - not so large enterprises so that skews the IASB I see when you see the total number of customers if you're trying to figure out what our revenue is I can tell you it's roughly roughly between 59 okay fair enough so good between 1500 that's a fair enough range now and so reuters reported that the price is about five hundred million dollars is that generally accurate you know I can't say yes or no so that you know that but well where'd they get that number from Rutter's they do research they don't just make stuff up yeah they probably got it from somewhere in the VC community or someone I don't know where they go to early October now are you obviously you know deals like this there's components of up front plus earn-out plus key executives staying on do you see yourself with VMware for you know a couple years out for this are you gonna jump into a new opportunity like you did with your last company after you sold it no no no I'm all in on this yep okay let's I want to dive more into kind of customer growth especially we're ever led to expansion it so take me first you said you're doing call it between 50 and 100 million when you were just obviously acquired taking back a year before that so what were you doing called August 2017 in terms of run rate I mean you can think about businesses growing 70% you know year-over-year on you yet very good revenue runs driven you crazy so yep when you when you look at you break down there right you know the revenue growth obviously some of that comes from new customers and then a lot of it probably comes from expansion of you know past accounts as well when you look at your net revenue retention annually I assume you're above a hundred percent how far above a hundred percent we mention is around I think it averages out about a hundred and four between 100 and 400 cameras to peel back the onion there for me on net chart on net revenue retention so net obviously are well above 100% when you just look at gross revenue churn are we talking 5% a year 10% a year what is that well we're talking less than 4% so it's like 3.9 3.8 okay that's four I mean that's that's pretty good through our customers actually it'll show up his tomb but also show up his net new business as well in a different channel and when you look at you know leading a company you need to obviously determine how aggressive you're going to be in terms of customer acquisition which we can measure be a payback period and kack ratios so what are you spending to acquire and that's just assume a $50,000 first year ACV what are you willing to spend to acquire that kind of customer we're willing to spend up to you know up to 50 percent of the new IRR customers for the first year okay so that's pretty hell I mean that people would actually say that's not that aggressive considering how much you've raised a six month payback most are at 12 or 24 months once they were a significant capital absolutely so why not be more aggressive I think we are we're aggressive in our global expansion no but on the channel side I mean I imagine you're paying some kind of kick back to those channel partners are right or know your market development funds they earn so that's what they do so yeah absolutely we will invest them when we got co-marketing funds but we can extrapolate that across multiple partners as well sorry explain that core marketing funds what any made at well basically they can earn Co marketing funds by you know certain number of customers they bring on a number of leads are bringing into the system and will help them close them okay and I mean does that look something like okay we'll pay 30 percent of a cv as long as that customer stays active with us in perpetuity something like that no not so much that basically market development funds are is co marketing funds so they want to do an event so if say a partner says okay what we'd like to do is post a movie night for the Star Wars premiere invite all our we'll say okay great will you Luna to use your marketing development funds and will pay 50% of that so there's no kind of direct fixed kickback that hits your your your gross margin on these accounts that come through channels you know we don't know the words kickback no yeah by the way I mean this isn't about HubSpot...