How Crystal Knows Grew from $3M to $4.2M ARR with 350 Enterprise Customers (Interview with CEO Drew D'Agostino)

Introduction and Crystal Knows Overview

Nathan Latka

00:00Hey, folks. My guest today is Drew D'Agostino. He's the Founder and CEO of Crystal, specifically crystalknows.com since 2015. Backed by Salesforce, HubSpot, other investors, he was Forbes 30 Under 30 in enterprise tech. He's author of Predicting Personality: How to Use AI to Understand People and Win More Business. He's a classically trained pianist, pilot, and distance runner. Drew, you ready to take us to the top?

Drew D'Agostino

00:21>> Yeah. Let's go.

What Crystal Knows Does

Nathan Latka

00:22Alright. So what is Crystal Knows for folks that are not familiar?

Drew D'Agostino

00:26>> Crystal is an adaptive selling platform. So we use personality data and other behavioral insights to help people connect better with their customers and communicate more effectively. So yeah, we've been around about seven years now.

Target Market: B2B vs. Consumer

Nathan Latka

00:40Are you selling to an e commerce brand trying to identify consumers or like a B2B brand that's looking to identify new business customers?

Drew D'Agostino

00:47>> We've got customers all over the place, but primarily B2B. And if it is consumer, it's consumer, like very high ticket consumer items, really high touch sales processes, which are like very relational. So So not so much transactional or ecommerce or anything like that.

Nathan Latka

01:02So should we think of this like I mean, it's not cookie oriented or maybe it is. It's more like first party, a little more like a Bombora sort of style tool?

Drew D'Agostino

01:11>> Yeah. In that lens, it's adjacent. It's not competing with tools like that. So Crystal is dealing with behavioral data and specifically like predicted behavioral data. Give me an example. There's a lot of information out there about people. So if you're looking at a LinkedIn profile or there's lots of enrichment services where you can get someone's job titles, interests, skills, anything that you could use to personalize communication. So there's a lot of that data out there. And

01:40>> it makes personalization on one hand possible, but on the other hand really hard because it's impossible to do all that research and actually put that into action in an efficient way if you're a sales rep or if you're communicating with customers. So what Crystal does is uses predictive models to take all of that information and then summarize

02:05>> the best approach for that person and then how you can do things like negotiate with them, discuss pricing, really follow them throughout the sales process. So what we have is machine learning models that say, Okay, based on all that we know about them, like the facts, here's how you should present your message and your process. And that could be based on we use a model called DISC. So we've historically been this personality, kind of a personality

02:29>> app. And ever since we've gone upmarket, we've kind of adapted that whole model to just make the sales process a lot more efficient and personalized.

Nathan Latka

02:38So Drew, upmarket, when I hear that, I hear higher ARPUs, higher ACVs. What's the average customer paying you these days?

Drew D'Agostino

02:45>> So our business is still divided between this self-service customers, who historically for the first six years of Crystal was our main customers, and our B2B customers. So for them, we have annual enterprise contracts. So the whole focus really right now is on the B2B side, so I'll just focus on those numbers. That is around $8,000 annual contract value versus the self-service, which has historically for us been mostly monthly contracts. But if it's annualized, it's

03:16>> 5 or $600.

Shift to Enterprise B2B and Revenue Mix

Nathan Latka

03:17Mhmm. Yeah. And what's the breakdown between both of those? Like, I guess you were founded in 2014, so you were doing the self-service all the way up through 2020. Is that right?

Drew D'Agostino

03:28>> We we actually just got out of self-service last month. So we Yeah. But over I would say since we started really focusing on B2B in mid-2020, and that business just started kicking in beginning of 2021. So since really the beginning of 2021, it's gone from almost 0% B2B to about 60% to 65%. So it overtook the majority of our revenue.

03:56>> Probably more importantly than the ACV, the retention is a lot better on the B2B side. I kind of anticipated that, but I didn't anticipate the degree to which it would be better. So we realized that our business is actually much better suited to be an enterprise SaaS company as opposed to like a self-service product totally product driven one. So that's we decided to just it's still technically an experiment because we don't know if self-service is totally

04:22>> in our past, but we wanna see what this business how it performs with a just total B2B

Enterprise Customer Count: 350

Nathan Latka

04:26So how many customers today pay for your B2B tool?

Drew D'Agostino

04:31>> I

04:34>> would say 350.

Nathan Latka

04:39Oh, what's going on there, YouTube? Good to see you guys. Now imagine this. You love watching these interviews with SaaS founders, but imagine if we took all of the valuation data out from over 2,807 interviews I've done manually. Saves you a lot of time. Well, we've done this. We've built it into the beautiful interface inside of Founderpath. Check this out. I'll show you how you can access this in a second, but you log in, you connect

05:02your Stripe account, you see your valuation real time. You can see what it changed over the past 88 days and even set goals for valuation this year. Now the secret evaluation is there's many different ways to value a SaaS business. So the reason you're gonna see three or four different valuations inside of your Founderpath dashboard, this is all free by the way, is because depending on who's doing the buying of your SaaS company, you're gonna

05:26get a different valuation. A VC is gonna pay a different valuation. Private equity firm is different. If you're gonna do a minority sale, that's different. And if you sell the whole business, that's a different valuation. You can see all those when I hover over here,

Drew D'Agostino

05:39>> Right? So

Nathan Latka

05:40the teal is what a VC would pay. Yellow is what private equity and red is if you sold the whole thing outright. Now what's cool about this is this is not built off random data. Again, you guys hear these interviews on YouTube. All these datas are built from real time valuation data points founders share with us on the show. So traction, $1,200,000 seed round, $3.7M raise. They sold 22% of their business. Go in here and filter

06:04by the event. Maybe you only wanna see companies that have sold the whole business. Well, here are a bunch that have been acquired the valuation and the multiple. Maybe you're going out right now and you're raising your seed round. We'll go in here and look at all this recent seed deals that went down, what they raised, what valuation they raised at and what percent that they sold. There's never been a larger dataset of SaaS valuations than

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Mining Self-Service Users for Enterprise Deals

Nathan Latka

06:53go ahead and sign up to give it a whirl. Again, all that valuation data live right inside the platform. I hope to see you there. Alright. Let's jump back into the interview. Did you recruit those 350 out of individual users who used to be your self serve, or do you have to go recruit those three fifty brand new over the past twelve to eighteen months?

Drew D'Agostino

07:11>> It's in a mix. So the the breakdown is actually, I don't I don't really know the direct breakdown other than just guessing it. But there's definitely a contingent of those who were using our product for a long time as individual users. And then we didn't just change the pricing model. We also added a lot of robust features to the product that made it better for enterprise. So a a lot of them have come in through self-service

07:33>> mechanisms. Some examples of those are, like, big professional services organizations. Like Accenture is one of our big customers. They've they've used Crystal as individuals for a very long time. And ever since then, we've kind of slowly been piecing together team deals and going with more of B2B motion. It's kind of an example of that. Yeah. It's a good it's a good thing

Nathan Latka

07:57for anyone to do that's just like the self serve folks is go look at all your thousands of self serve users paying $29 a month. Look at the domain name of signups, alphabetize them, and then highlight conditional formatting in Excel where there's duplicates. And when you see Accenture, Accenture, Accenture, there's like seven people on a team at Accenture using you, there's clearly an enterprise motion there. Is that sort of what you did?

Drew D'Agostino

08:16>> Yeah. So there's a difference between self-service customers and Crystal's free user base. We've got a massive free user base. It's about 30 to 40,000 people depending on the month who sign up monthly for our product. And they go through the motion of filling out personality assessments, downloading trials of our tools. Like, there's lot of things you could do in Crystal for free. That's still the main funnel for our enterprise business, but there is a segment of

08:41>> those who have signed up for

08:44>> different types of paid subscriptions we've had over the years. And I mean, you were to add them all up, there's probably been something like 18,000 to 20,000 of those paid customers for some Crystal product. Some of those have been recurring. We've also had nonrecurring products in the past. So of those, that's kind of like the low hanging fruit for us. So we can either look at the current customers, also revisit the ones who have had a

09:08>> individual subscription in the past and start rolling out in like a marketing qualified lead flow to to find out opportunities. So we're we're kinda going at it. The the good thing we have is seven years of experience and seven years of a giant funnel into Crystal. What we're not so good at is really efficiently identifying those opportunities. So that's one of our big priorities this year.

Self-Service Customer Base and ARR Contribution

Nathan Latka

09:31And, Drew, so so how many folks are still paying today for that self-service tool? You know, $600 a year sort of deal?

Drew D'Agostino

09:36>> It's I'd to get the updated count, but it's definitely more than 3,000. So it's more than 10x the — yeah, it's more than 10x the enterprise customer base in terms of just number of users. Yeah.

Nathan Latka

09:45So that's still I mean, three three thousand times 600. What is that? That's like $2,000,000 of ARR right there. Right?

Drew D'Agostino

09:51>> It still is. Yeah. It's still a big chunk. Yeah.

Nathan Latka

09:54So how do you

09:55I mean, do you you mentioned, like, you shut it off, and now b two b is 65%. Like, what does shut off mean? Do you do you stop servicing them? Let them turn off? Like, what does that mean?

Drew D'Agostino

10:03>> No. So we everyone that had a self-service account still has access to all their tools, and they and most of those users are are pretty active at this point because they've they've had the opportunity to just like, you know, you settle out with that churn curve. So our approach with that has been let them keep their access to the tool, but at the same time build onto the enterprise offerings that we have. And there's a lot

10:30>> you can do in Crystal now that you just as a company that you can't really do as a customer or as an individual user. So we've been trying to go ahead from a value perspective. Like, alright, make this enterprise product more appealing to these customers who have these self-service accounts. But as far as new customers go, you can right now, if you go to Crystal's pricing page as a free user, you can't sign up for the

10:52>> self-service account. So for that, we've used the approach we've actually just kind of taken the approach to a lot of these other sales enablement businesses like Gong, where it's just this big pricing request form. And you can kind of go through that and just basically just talk talk to our sales team in a pretty fast still pretty high velocity like Understood.

Nathan Latka

11:13And so when you look at the total revenue mix today, I mean, look, if you have 65% of your revenue is B2B and your current like B2C or your lower-ARPA model is, you know, $1,820,000 revenue. That means you got another 2,000,000 on the b two b side. So are you guys sort of around, like, a 4,000,000 run rate today, something like that?

Drew D'Agostino

11:27>> Yeah. We're around, like, 4.2 ish.

Nathan Latka

11:31Okay. And where were if you're there today, where were you about a year ago?

Drew D'Agostino

11:36>> Year ago? Let me look it up real quick. I'm gonna say three. Somewhere around three. Yeah.

Nathan Latka

11:42I'm curious. When you say look up, what tool do you use to track this stuff?

Drew D'Agostino

11:45>> Well, I if I am looking in Baremetrics right now.

Nathan Latka

11:49Do not really want to look at Baremetrics.

Drew D'Agostino

11:53>> Why is that?

Nathan Latka

11:54I like these

Drew D'Agostino

11:56>> I've just had some issues with the tool. So I all of these tools have always I use Baremetrics, ProfitWell, Founder— technically, Founderpath for a couple of the things. I look at all these and I look at my spreadsheet,

12:13>> and all of them have just like little quirks about them that make me need to use another tool. So I could tell you right now, I use for my investor updates and my screenshots with the graphs. I use Baremetrics for analyzing churn rates and segmenting my customers and all that. I use ProfitWell for looking up mostly on Founderpath, it's kind of like looking up the the amount of funding that I could get, you know, seeing what

12:41>> the seeing what the business health. I really like the business health scores of it. So seeing where I am benchmarked relative to other companies is very helpful. So I always like toggle between these things. That's so my financials and my spreadsheet. Yeah.

Nathan Latka

12:52We you can tell me. We we are actively trying to figure out, can we just create all this in one thing and give it away for free? But it's like everyone wants, like, a different little quirk, and many times you just end up in the spreadsheet anyway.

Drew D'Agostino

13:02>> Yeah. I would I would say, yeah, I I definitely want to I definitely wanna replace most of that with one tool. As far as financial source of truth goes, there's there's only so much you can get around the spreadsheet. But

Nathan Latka

13:13Yeah. Yeah. Definitely growth. Wise. Yeah. 3 to 4,200,000. I mean, that's good growth. Now now you did raise the Obanj, I mean, back in, I think, 2015, 2018. Right? Have you raised since then?

Funding History and Salesforce Partnership

Drew D'Agostino

13:24>> We've not raised since January 2018. That was the last round that Salesforce put in.

Nathan Latka

13:30Yeah. That's been a while. Mean, have you given any thought to buying them back out?

Drew D'Agostino

13:39>> You know what? I haven't really. It's more of like, there's not a great reason to buy them back out at this point, I don't think, because Salesforce is a really helpful partner for us. And they're just great to work with.

13:58>> It's been a good partnership. I really like having them on the cap table. Salesforce is also one of our larger customers too. So it's kind of great to have those multiple levels of connection. So I would say if they were just a random VC, then I'd be looking at that. But because it's strategic and good Salesforce, yeah, I like having them on the cap table. There's no

Profitability and Future Fundraising Plans

Nathan Latka

14:20And any plans to raise in the near future or you're good to go? You're profitable? You're gonna say sort of bootstrap mentality moving forward?

Drew D'Agostino

14:27>> I wouldn't say bootstrap mentality. So this year we are adopting so we've spent about eighteen months kind of solidifying what this enterprise I call enterprise, what this B2B model looks like. Enterprise means a different thing. So after that first eighteen month sprint of it, I'm actually now way more convinced that Crystal has far more legs and this thing could have a very viable path to maybe not a 10x, but a 5x from where the revenue we

14:53>> are right now.

14:57>> That might take more money. I don't know yet. Yeah. We've got plenty of cash because we've been profitable for about three years. So Love that. Yeah. So we're not like looking to raise, but I am investing now. So we got a burn rate again. We are growing on the product side, especially doubling down on some of our

Nathan Latka

15:13What's the team size, Drew, today?

Team Size and Engineering Investment

Drew D'Agostino

15:16>> There are 30.

Nathan Latka

15:17And how many engineers?

Drew D'Agostino

15:18>> Couple more.

15:21>> Engineers plus data science is nine. We'll be 10.

Nathan Latka

15:26There you go. That's how I measure as someone really doubling down on product and R and D. Okay. There's nine. They they're doubling down. This is great. By the way, you're like the exact I mean, if your run rate, I mean, Founderpath could get you pretty I mean, almost overnight about $2,000,000 of capital. I mean, you're the exact kind of founder we like to sort of work with.

Drew D'Agostino

15:41>> So I'll follow-up with you afterwards on that.

Nathan Latka

15:42I'd love that.

Drew D'Agostino

15:43>> Alright. Yeah. Yeah. Yeah.

Nathan Latka

15:44Yeah. Alright. Very very cool story here. We're also excited to have you speaking at Founder500 on September 1 in Austin, Texas. Why don't you tease a little bit what you're speaking about? What what should people expect to see in your slide deck?

Founder500 Talk Preview: Life After Freemium

Drew D'Agostino

15:56>> Yeah. I've always thought that you shouldn't go speak at an event unless you have something to say. So I wanted to actually I'm I'm glad we actually had an interesting insight from the last couple of years. I think the most helpful thing for me was getting out of my security blanket, which was our self-service business and leaning on a sales team and letting my sales and customer success teams do what they do well, and ultimately figuring

LTV Growth from $500 to $2,000

Drew D'Agostino

16:22>> out that we could increase our LTV from around roughly 500 to 2,000 total. And that's across the whole customer base. That's because the LTV between our two businesses are vastly, vastly different. So that was the main insight. So being able to in eighteen months or so, or maybe a little more than that, it might span a two year technically span. But going total

16:54>> LTV from like 500 to 2,000 has been a really big insight for us. And that's just going keep improving. I'm trying to accelerate that by just making sure most of our new customers are all coming in this 8,000 and upside. And we're kind of continuing to just let the self-service business sit in its current form.

Famous Five Rapid Fire Questions

Nathan Latka

17:14Guys, miss this presentation. It'll be on Friday, September 2 on the main stage at 2PM. And the title is Life After Freemium, How They Killed Their Free Business Model and Built a New One From Scratch and Increased LTV by 400%. It'll be a good one. Drew, let's wrap up here with the famous five. Number one, favorite business book.

Drew D'Agostino

17:36>> How to Win Friends and Influence People, probably still. Yeah.

Nathan Latka

17:40Number two, is there a CEO you're following or studying?

Drew D'Agostino

17:44>> CEO following or studying?

17:50>> Read Jeff Bezos' investor letters, probably trite at this point, but I read his investor letters pretty frequently, so I'd have to say him.

Nathan Latka

17:58Number three, what's your favorite online tool for building Crystal?

Drew D'Agostino

18:03>> Never. It's Google Apps. Yeah.

Nathan Latka

18:05Yeah. Me too. Number four, how many hours of sleep do you get every night?

Drew D'Agostino

18:09>> Try to get eight.

Nathan Latka

18:10Okay. And situation, married, single, kids?

Drew D'Agostino

18:14>> Single. No kids.

Nathan Latka

18:15Okay. No kids. And how old are you?

Drew D'Agostino

18:18>> 32.

18:18>> 32. Last question.

Nathan Latka

18:19Something you wish you knew when you were 20.

Drew D'Agostino

18:23>> I wish I knew

18:28>> I wish I knew that I was actually capable of being technical and also learning classical music. I used to think of myself as a total creative and I just was not capable of learning technical skills. And I learned who I am. So

Nathan Latka

18:42Guys, there you have it. Crystal Knows. They're helping. They used to help sort of self-service customers. Now doing more b to b work with companies like Salesforce, helping them build profiles of their potential customers so that Salesforce knows how to go sell to those customers ahead of time. A really interesting business model. Have 300 enterprises using them today, but 3,300 total customers altogether just past a $4,200,000 run rate up from 3,000,000 just a year ago. That's

19:03all while being profitable over the past three years despite raising about $6,900,000 of VC back in 2015 and 2018. But again, profitable today, growing nicely team of 30. Drew, thanks for taking us to the top.

Drew D'Agostino

19:14>> Alright. Thanks, Nathan.

Nathan Latka

19:16One 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 end 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

19:42Central. Additionally, remember these recorded founder interviews go live. We release them here on YouTube every day at 2PM 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 world, whether it's an acquisition, a big fundraise,

20:04a big sale, a big profitability statement or something else. I don't want you to miss it. Additionally, if you want to take this conversation deeper and further, we have by far the largest private Slack community for B2B SaaS founders. You want to get in there. We've probably talked about your tool if you're running a company or your firm if you're investing. Can go in there and quickly search and see what people are saying. Sign up for

20:26that 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 and 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

20:45got to 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.

Drew D'Agostino

20:52>> See you.