DataStax Revenue, Valuation & Funding (2024)

hello everyone my guest today is Billy Bosworth he is responsible for strategy growth and day-to-day operations at data stacks he's got 20 years of experience in the database industry in roles ranging from db8 a senior executive before data stacks he spent in six years at Quest Software which many of you are familiar with under his leadership the industry-leading quest database business grew from supporting traditional relational databases to a portfolio that now includes tools for the cloud and many other scenarios and situations prior to quest Billy led product teams from Embarcadero technologies database productivity solutions and he served as the director of tableau software he holds a Bachelor of Science in computer science from the University of Louisville Billy are you ready I take it to the top I am thank you for that great introduction am I am I hired you're on all right I'd be fired in about two seconds I'm a horrible employee we talked earlier so you go from football coach to databases to now data stacks you raise over 190 million bucks take me to the story the company was launched you were not a founder you said you joined when they were 20 walk me through that story and then let's hear about data stacks and what you do yeah at Quest Software where I ran the database business we could see that the trend of the relational model was was starting to flatten and we saw this new class of databases start to emerge many of them were around this open source technology ours was founded in a technology called Apache Cassandra I partnered with the company when they had just formed and I got to know him over the next 10 months at which point they asked me to join as CEO so I knew these guys from the day they started the company and then I joined the company our customers with that quests a partner so we were doing was we were a ecosystem player so what we would do is look for the new technologies that we would build tools to them support ok now I mean dive into that I mean how they asked you was it was an email what was the subject liner was a phone call I mean how'd that work they were in Austin and I was living in Dallas and so it was a nice easy drive down there and got to know them and the team and as we started talking about how we might be able to help them with tooling and such it just naturally led to conversations about the market and where are you guys going and how are you developing and a technical founder and semi technical founder who was doing the CEO work and it was the mat file who was the semi technical founder who came and said you know I think I could learn all this stuff but I'm not sure I should learn it as fast as I could which would be best for the company and so I think you would be a great fit if you were interested and the rest is history were they seducing you or were you secretly seducing them I think it was a mutual love affair we meet each other it was we really liked each other from the start and I tell you for a founder to give up the CEO title is a nontrivial of a net that is a very very mature move but by Matt and Matt stayed with the company for like another six years you know he was with us for a long time just moved on last what year what year by the way was this would have been 2011 when you joined that's correct May of 2011 okay and you know without getting into too much detail here cap table wise how'd they actually structure that I imagine they give you a big chunk they were early they were pre funding right were they pre revenue pre revenue but not pre funding so they had just raised the series a I came in my first assignment was actually to go raise the series B which was tough because we were still coming out of the nuclear winter and it was in 2011 still not a great fundraising environment so we put significant effort into raising the series B and then the subsequent rounds got easier after that yep and then total J you've raised about a hundred ninety million is it accurate that's right through Series II as a MEC oh yeah those five rounds of funding we've raised almost 200 million okay we'll jump warned it on a second but I want to take a step back tell us about the product what does data stocks do and what's the business model is that pure play SAS or is it pay-as-you-go based off you usage yeah so data stacks is a leader in data management for cloud applications which we'll talk about have a whole different kind of scale and and set of requirements for the database the way we make money is we sell our flagship product data stacks enterprise on an annual subscription basis and you can consume that either as a service where we have a men's service that will do for you or you can consume it where you manage it and you made to run it in the cloud or you may decide to run it on Prem but we have about 60 to 70% of our work clothes are already being run in the cloud either with us managing it or our customers managing it and generally the ACV on these on average are what I mean are we talking about 10 grand a hundred grand a million 10 million posted on a grand we service enterprises and we stay very focused on enterprise class problems and enterprise class customers that's fair walk me through the story in terms of a customer acquisition so many if my business listeners are going I always find it difficult to sell to the CTO CTOs listening are going are saying oh it's so easy because we we speak the same language who are you selling to an organization's and what's your acquisition strategy that's actually a fabulous question because it's a it's a little bit of a surprise to a lot of people but many of our entry points inside of organizations do not start with the centralized technology teams they actually start with a line of business and the lines of business are the ones who are tasked with moving very fast to either gain market share or stop the erosion of market share they have to move quickly and so often they will come directly to us and then eventually after 2 or 3 projects we make our way into the centralized team interesting interesting so it's a land and expand approach okay so how does that first person inside one of these lines these teams that representing these lines how do they find you our primary persona with whom we engage is a role called a data architect and this is the person who is responsible for fitting together the entire data strategy of a set of applications or a given application and that person generally knows right now I think that among silver minded people in the industry there's a very good agreement that Cassandra which is our core technology is the de-facto scalable industrial-grade performance data base and so they kind of know that to begin with and then because we are the company who essentially bill Cassandra if you look at the amount of contributions we gave to open source and all the marketing we did then it's a very natural path to us what are you paying to acquire these data architects as a customer with your CAC on average would you say we don't reveal CAC in that manner but I can tell you that it's a combination of a couple things so one is the open source trail which by the way you you can't really draw a direct monetary line too because the whole point of open source is a lot of times it's all about come and get things without having a direct connection you know so in other words you don't want to be pestered Nathan you want to be an open source person you want to be anonymous you want to go grab the open source code and then you find us through many things that we do on our training like data stacks as a site called data stacks Academy which provides free world-class training many people find us through that as an example so you can't really measure the CAC directly in that way but we also have a direct sales force who also goes after direct enterprise accounts as well so it's combination of the two tell me about the Salesforce what's your total team size today and how many are on the sales team we have in the company north of 450 people about half of those roughly are in product and engineering and about half of those are in the sales and marketing organization we blend those two together and then you know some remainder 10% or so is in the GNA team so that's our that's our general breakdown we we have pretty standard model of enterprise sales manager with teamed up with a SC teamed up after the fact we the customer success team so there's a there's a whole value team along that whole customer journey when I speak with CEOs that have done more or they doing you know more than a hundred million in ARR they typically talk about metrics a little differently than somebody at the 50 million or even five million range when you look at what you liked optimize your payback period for that's maybe a better question than CAC how quickly do you like to keep your money velocity like coming back to you yeah so it's all about how fast we can get those first projects to success to give you an idea of our size by the way we're a revenues exceed 100 million in ARR we have over seventy five percent gross margins so we're very much a software company we have a very very clear and close line of sight to cashflow positive so our cash is kind of our control what is that what does that mean can you quantify that way mean in your control or close to it it means that we have no need to raise more money so we we have a complete control over our future in terms of whatever we want to do next in terms of timing whether that I always get asked you're gonna ask me at some point are you going public when you go in public Billy come on let me do it Billy I have a big question for you what are you fine when are you fine to go public talking I've never heard that way and I'm sure you've never heard the answer we don't talk about those things we don't reveal those futures but well I can tell you is because our cash isn't our control then that that creates a ton of optionality for us we don't have to worry about racing the markets to get money but what that does mean is we're also very efficient in the way that we look at our unit economics around our accounts and so for us this is partly why we focus so much on enterprise number one the use cases lend themselves much better to our technology in big hairy problems and enterprises but number two the unit economics are infinitely better than SMB so we stay very focused on getting that land very efficiently but then making sure very quickly how fast can we make that first project successful what we find is once that first project is successful the expansions happen much much faster now that could be inverse of that is true as well if we don't get that first project right it can really the progress on on expansion because it's still new Nathan a lot of these technologies are still new there's a lot of eyeballs in the company in the customer company that are waiting to look at that first project to say should we double down on that or should we stay away a little longer yep sub 12 twelve months and here's a payback is that fair well it depends on the payback model you're using because again once tell me what you use we look at how fast we expand and what the expansion rate is inside the accounts and so what we want to see is expansion rates net expansion rates over 110 percent that's kind of annoying better yeah so what we want to say is okay if we're doing well for efficiently growing inside of our enterprise accounts we should see net expansion rates which includes churn and then also expansion over 110 percent and we see well beyond that at the moment with our enterprise class accounts okay and you obviously just did that kind of all together as a at the company level at your individual customer 100 grand first your ACV level what do you know you have to drive expand or what can you accurately predict a Seavey's gonna grow to an ear - is it you know net you know one twenty one twenty percent growth or something different you know it depends again on the nuance of what project are implementing so as an example sometimes customers will start we have two very large buckets of use cases one bucket is around customer experience so this is a set of use cases like customer 360 recommendation engines fraud detection recommendation many times what they'll do is they'll start very granular with one of those projects and that expansion might take a couple years to really get that first project off the ground get it solid and and move on to the next one another class of applications we have is around enterprise optimization these are things like supply chain inventory management asset management security access all those things internal to the company those tend to happen much quicker so that project could be a big project initially with a very rapid expansion so I see what you're trying to ask me but unfortunately it really does kind of blend into the overall company metric because there's too much bespoke activity per account depending on what project they're trying to take what you're telling me is what most see is it is all will tell me which is Nathan where mature company we really have a good handle on individual cohorts and every cohort performs economically different and we tweak those cohorts to make them work depending on you know speed of onboarding and things like that yeah then they blend together I will tell you there's an emerging category that is is more important than I would have imagined five years ago and that is the role of the customer success team is part of that expansion and part of making our customer successful I used to think you know six seven years ago customer success was just a nice title for services yeah and it's not you know Nathan it is a real discipline that is new and has changed and is evolving very rapidly and so we have invested very heavily in our customer success organization and will continue to do so you keep talking about the initial project being successful is there a professional services component up front for these folks to get them on board it or is it just a peer play SAS model no there is a professional services more you know one of the advantages of my background which fortunately you made me five years younger than I am have actually been 25 years believe it or not in the industry Sun help you Billy you know we hope it's not air you know yeah it makes me feel good but one of the challenges is I lived through the mainframe to client/server transition so when I came out of school Oracle was still considered largely a potential toy kind of off to the side so I chose my career path on that direction but what people forget is how long that transition took in the market I'm the client server therefore what you what you require is some initial hand-holding with your customers because they're still thinking on old relational paradigms and when I say relational that's Oracle sequel server or Sybase those kind of things and you got to get them transition into this new way of thinking in these distributed databases that's a people issue you know even if it's a SAS product even if we're managing the ops side I still have to work with you to help you understand how to how to do this new world so services is a very critical part of what we do and now what are yet today in terms of total customers you're serving our total customer count I believe is around 500 but I'll have to give you that more specifically but I think it's 500 he's squinting at the data so we think trying to remember I do know this we have them in over 50 countries so ok we have a lot of we have a lot of good geographical distribution right now the math I was doing Billy was take your hundred million a are divided by 12 puts you at about 8.3 million and Mr RS I don't need to be probably well north of that but then your ARPU in terms of your your your a CV first year is 100 grand which is about eighty three hundred bucks a month so you need about a thousand customers at that a CV to hit over 100 million in ARR now are you I won't make you put a really specific cap on this but generally I mean can we say between 100 and 200 million in ARR or you like well north of 200 ya know between 100 and 200 that's there yeah yeah okay good and obviously it's harder to grow large numbers over the past year what was your growth rate would you grow at yeah we continue to have our models even even our three-year business model we're projecting still being in a hyper growth category which generally people at our size would define as 40% or okay and so even as we look out the next three years we believe we can stay in that hyper growth category okay yeah I mean so it should just be clear did you hit that or beat that over the past twelve months yeah our growth rates have been really strong ever since I got here that's that's great okay good a lot of people we touched on this earlier will look at a company has raised as much as you have and said you know what if they don't keep raising year after year means one or two things they're not growing as fast and they can't raise capital at the valuation they want and they don't wanna do it down because it looks bad or they're not strong enough to IPO you've countered that and said no we're just we just have control of our cash we don't need to raise that being said early investors yourself included on the captive especially common holders start to get it maybe an C at some point and I want some kind of return was any of the capital it's calling the company secondary or was it all going directly to operations that was almost all going to operations there was some very very minor rounding error type of secondaries early on but that goes all to operations and I have to tell you maybe this is one of the differences where you are talking to an old football guy talking to a guy from a steel town outside of Pittsburgh I didn't come from the valley and I'm not and I'm not a valley person in that respect and what I mean by that is I still believe in in really good fiscal management of an organization because I think it when markets turn and they will and you know they will you know what's going to happen as soon as that happens everybody is going to get cast crazy and they're going to start asking you do you have control your cash and so I'm thrilled with the bull market we've been experiencing I'm thrilled with the access to capital we've had we we've leveraged it we've taken advantage of it but I'm sorry I'm not gonna get silly with it I'm not gonna treat it like it's free water because it's not good I mean Billy those like a guy like John Briones back in what would have been twenty ten maybe your seed around I think you were there or no you were in charge of the B round so I guess they just raised the a round from from kalsi Anna Sequoia and and John but you know 2.7 million those guys at some point you know we're approaching ten years on that money going and at some point they start to get antsy they're never gonna pressure you because you're growing in at six success but if Lightspeed wants to go raise our next fund or Sequoia or Jason or whatever it's nice be able to point to you guys as a case study where they've gotten money back somehow have you figured out a way to create liquidity for early shareholders by replacing him by new investor so you can keep the you know their story a good one yeah we great question we've been very blessed in this regard that anxiety that you mentioned is also directly tied to the success of the funds that you're already in and in our early investors their funds are performing extraordinarily well and so we don't have that pressure from them they are not on my back saying like geez when we gonna get this thing going because they look at the health of the company they see that it's on the right trajectory they see that we're growing well at a material number they see we have optionality ahead of us and they don't want to rush it and do something silly now that you've got to this point and that's really nice when you have investors that have had success in their funds that they don't feel that pressure necessarily I think as much for maybe their LPS because their funds are performing so well so we've got a we've got a really high class a lot of investors and the truth is I I do not feel that pressure from them last set of questions on this topic before we wrap up with the famous five I understand the argument you make about investors but you also have you know an early employees who you used equity as leverage to get them to join take a look you know lower salaries as you recruit them from Rackspace or other companies at some point they're going I'd like to return I don't think Billy's gonna IPO because they just raise a hundred nine million that basically was an IPO in terms of cash and they're wondering when am I ever gonna actually have these things be worth anything when I can get when can I get liquidity if those questions come up and maybe they don't get asked but they're being thought how do you address them oh we know they're being thought I mean everybody's human everybody's thinking that way and so what we do about that is I'm pretty much a freak on communication and transparency is I become very nervous what you're gonna say there for a second you have to you have to really be maniacal about communicating the vision and communicating the company's progress and if you don't do that then you do have employees who are very nervous about the future and is this did I make the right bat in mind the right company and so it's up to me really to make sure that that communication of our vision is being prosecuted effectively people understand the progress or make and they know they've made a good bet and then they're willing to be patient if they ever feel like things are too ambiguous or vague or they don't see where we're going that's where you're gonna get people that are gonna get squirrely but we try very hard to be very clear transparent open with our company are you in the process right now of making any big acquisitions no we have done two though which I think for a company our size is good because I think you should build that DNA early we acquired a grass company and we acquired a cloud company a managed service company and those have been really good learnings for us and I think that develops that muscle because I am a believer and as you grow I am always looking for the the right set for things to fall in now at our size excuse me not na it's usually not an incremental revenue type of acquisition it's more about a portfolio acquisition you know do you need to fill some gaps that you could do faster through acquisition so we're always on the lookout but I don't have any in progress and if phases brings a billion five check to your board do you sell the company or no yeah like I'm gonna answer that Nathan I'm reading your smile it tells me it tells me everything I need to know Billy yeah we take a week we always are prepared like I told you for any eventual outcome but here's what I believe I believe that that old cliche is actually very accurate they've been great companies are never sold they're bought and as long as we take care of our business and stay focused then we'll look at every option we have to make sure that we're growing the company effectively to service our customers and right now we don't have to worry about external parties to make that happen all right famous five one-word answers here favorite business book the advantage number two is their CEO you're following or studying right now Brad Smith head into it number three what's your favorite online tool besides your own for growing the business [Music] black number four how many hours of sleep to get every night sick and what situation married single you have kids twenty-five years married guy thought you gonna say 25 kids three kids three kids in Billy Howard are yet 48 last question what he was your 20 year old self new don't be so arrogant and obnoxious and go learn from your betters I don't think did you guys think he was arrogant Billy I thought you were great you were a trooper II came on you were super transparent launched company back in 2011 with two co-founders between Austin and Dallas they were it was a mutual seduction that's what called a mutual mutual seduction Billy ended up joining as part of the company first round of business getting the series be closed they sense they have sense raised 190 million bucks helping over 500 600 customers really understand their data the company's on a tear growing 40 percent year-over-year north of 100 million bucks and a are right now but south of 200 million about a hundred ten percent net revenue expansion annually so the economics look healthy Billy thank you for taking us to the top Thank You Nathan have a great day