How DataStax Surpassed $100M ARR with Over 75% Gross Margins and Net Expansion Well Beyond 110% (Interview with CEO Billy Bosworth)

Introduction and Background

Nathan Latka

00:02Hello everyone. My guest today is Billy Bosworth. He is responsible for strategy growth and day to day operations at DataStax. He's got twenty years of experience in the database industry and roles ranging from DBA to senior executive. Before DataStax, he spent 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

00:26and 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 bachelor of science in computer science from the University of Louisville. Billy, are you ready to take us to the top?

Billy Bosworth

00:43I am. Thank you for that great introduction, Nathan.

Billy's Path to DataStax and the Founding Story

Billy Bosworth

00:44Am hired?

Nathan Latka

00:44You're on. Alright. You're on the team. 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 DataStax. You raised over a $190,000,000. 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 DataStax and what you do.

Billy Bosworth

01:08Yeah. At Quest Software where I ran the database business, we could see that the trend of the relational model 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 them over the next ten months, at which point they asked me

01:34to join as CEO. So I knew these guys from the day they started the company, and then I joined the company....

Nathan Latka

01:34Customer at Quest?

Billy Bosworth

01:34A partner. So we 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 then support.

Nathan Latka

01:50Okay. Now, I mean, dive into that. I mean, have they asked you? Was this was this an email? What was the subject line? Was it a phone call? I mean, how'd that work?

How Billy Joined as CEO

Billy Bosworth

01:58They 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. 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 and a technical founder and a semi technical founder who was doing the CEO

02:21work, and it was the Matt 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.

Nathan Latka

02:37Were they seducing you or were you secretly seducing them?

Billy Bosworth

02:41I think it was a mutual love affair. We...

Nathan Latka

02:43It was a mutual seduction....

Billy Bosworth

02:44Liked 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 is a nontrivial event. That that is a very, very mature move by 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

03:03last year by the way was...

Nathan Latka

03:04So this would have been 2011 when you joined?

Billy Bosworth

03:07That's correct. May 2011.

Nathan Latka

03:08Okay. And, you know, without getting into too much detail here, cap table wise, how they actually structure that? I imagine they give you a big chunk. They were early. They were pre funding. Right? Were they pre revenue?

Billy Bosworth

03:18Pre 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.

Nathan Latka

03:40Yep. And then total today, you've raised about 190,000,000. Is that accurate?

Billy Bosworth

03:44That's right. Through series E as in echo. Yeah. So through those five rounds of funding, we've raised almost 200,000,000.

Product Overview and Business Model

Nathan Latka

03:50Okay. We'll jump more into that in a second, but I wanna take a step back. Tell us about the product. What does DataStax do, and what's the business model? Is it pure play SaaS, or is it pay as you go based off usage?

Billy Bosworth

04:02Yeah. So DataStax is a leader in data management for cloud applications, which we'll talk about have a whole different kind of scale set of requirements for the database. The way we make money is we sell our flagship product, DataStax Enterprise, on an annual subscription basis. And you can consume that either as a service, where we have a managed service that we'll do for you, or you can consume it where you manage it, and you may decide

04:28to run it in the cloud, or you may decide to run it on prem. But we have about 60 to 70% of our workloads are already being run-in the cloud, either with us managing it or our customers managing it.

Nathan Latka

04:39And generally, the ACV on these on average are what? I mean, are we talking $10,000, a $100,000, a million, 10,000,000?

Billy Bosworth

04:47Close to the $100,000. Service enterprises and we stay very focused on enterprise class problems and enterprise class customers.

Customer Acquisition and the Data Architect Persona

Nathan Latka

04:54That's fair. Walk me through the story in terms of customer acquisition. So many... If 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 in organizations and what's your acquisition strategy?

Billy Bosworth

05:16That'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

05:39they will come directly to us. And then eventually, after two or three projects, we make our way into the centralized team.

Nathan Latka

05:46Interesting. Interesting. So it's a land and expand approach. Okay. So how does that first person inside one of these lines, these teams that represent one of these lines, how do they find you?

Billy Bosworth

05:56Our primary persona with whom we engage is a role called a data architect. And this is the person who's responsible for fitting together the entire data strategy of a set of applications or 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 database. And so they kinda

06:25know that to begin with. And then because we are the company who essentially built 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.

Nathan Latka

06:36What are you paying to acquire these data architects as a customer? What's your CAC on average, would you say?

Billy Bosworth

06:43We 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 to 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 wanna be pastor Nathan. You you wanna

07:04be an open source person. You wanna be anonymous. You wanna go grab the open source code. And then you find us through many things that we do on our training, like, DataStax has a site called DataStax Academy, which provides free world class training.

Nathan Latka

07:04Mhmm.

Billy Bosworth

07:04Many 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 who also goes after direct

07:26enterprise accounts as well. So it's a combination of the two.

Team Size and Sales Organization

Nathan Latka

07:28Tell me about the sales force. What's your total team size today and how many are on the sales team?

Billy Bosworth

07:33We have in the company north of 450 people. About half of those roughly are in, product and engineering, and then about half of those are in the sales and marketing organization. We blend those two together. And then, remainder of 10% or so is in the G and A team. So, that's our general breakdown. We have pretty standard model of enterprise sales manager. We teamed up with a SC teamed up after the fact with a customer success

08:03team. So there's a there's a whole value chain along that whole customer journey.

Nathan Latka

08:07When I speak with CEOs that have done more or that are doing, you know, more than a 100,000,000 in ARR, they typically talk about metrics a little differently than somebody at the 50,000,000 or even 5,000,000 range. When you look at what you like to 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?

Revenue, Gross Margin and Cash Position

Billy Bosworth

08:28Yeah. 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... Our revenues exceed 100,000,000 in ARR. We have over 75% gross margin, so we're very much a software company. We have a a very, very clear and close line of sight to cash flow positive, so our cash is kinda in our control.

Nathan Latka

08:49What does that mean? Can you quantify that? What do you mean in your control or close to it?

Billy Bosworth

08:54It means that we have no need to raise more money. So we have a complete control over our future in terms of whatever we wanna do next in terms of timing, whether that's, I always get asked, you're gonna ask me at some point, are you going public? When are going public?

Nathan Latka

09:06Wait, Billy, come on. Let me do it. Billy, I have a big question for you. Are you when are you filing to go public?

Billy Bosworth

09:11Shocking. I've never heard that one. And I'm sure you've never heard the answer. We don't talk about those kind of things. We don't reveal those futures. But what I can tell you is because our cash is in our control, then 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

09:31unit 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 in 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

09:59first project is successful, the expansions happen much, much faster. Now the the inverse of that is true as well. If we don't get that first project right, it can really retard 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

10:21should we stay away a little longer?

Net Expansion Rates and Enterprise Unit Economics

Nathan Latka

10:22Yep. Sub twelve twelve months in terms of payback. Is that fair?

Billy Bosworth

10:28Well, it depends on the payback model you're using because, once

Nathan Latka

10:28Tell me what you use.

Billy Bosworth

10:28We look at how fast we expand and what the expansion rate is inside the account. And so what we wanna see is expansion rates, net expansion rates over 110. That's kind of the industry So, what we want to say is, okay, if we're doing well, if we're efficiently growing inside of our enterprise accounts, we should see net expansion rates, which includes

10:52churn and then also expansion, over 110%. And we see well beyond that at the moment with our enterprise class accounts.

Nathan Latka

10:59Okay. And you obviously just did that kind of altogether at the company level. At your individual customer, $100,000 first year ACV level, what do you know you have to drive expansion level to? Or what can you accurately predict ACV's gonna grow to in year two? Is it 120, 120% growth, something different?

Billy Bosworth

11:17It depends, again, on the nuance of what project they're 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 three sixty, recommendation engines, fraud detection, personalization.

11:37Many 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 then move on to the next 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

12:02could 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 kinda blend into the overall company metric because there's too much bespoke activity per account depending on what project they're trying to take on.

Nathan Latka

12:17What you're telling me is what most CEOs at this level tell me, which is, Nathan, we're a 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 speed of onboarding and things like that.

Billy Bosworth

12:32Yeah, then they blend together. I will tell you there's an emerging category that 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 customers successful. I used to think six, seven years ago, customer success was just nice title for services.

Nathan Latka

12:32Yeah.

Billy Bosworth

12:32And it's it's not, you know, Nathan. It it is a real discipline that is new

13:01and has changed and is evolving very rapidly. And so we have invested very heavily in our customer success organization and and will continue to do so.

Nathan Latka

13:10You keep talking about the initial project being successful. Is there a professional services component, upfront for these folks to get them onboarded, or is it just a pure play SaaS model?

Billy Bosworth

13:20No. There is a professional services model. You know, one of the advantages of my background, which fortunately, you made me five years younger than I am. I've actually been twenty five years, believe it or not, in the industry.

Nathan Latka

13:30I'm trying to help you, Billy. You know, we help each

Billy Bosworth

13:30Yeah.

Nathan Latka

13:30Other, you

Billy Bosworth

13:33It 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, kinda 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 from mainframe to client server. Therefore, what you what you require is some initial handholding with your customers

14:01because they're still thinking on old relational paradigms. And when I say relational, that's Oracle, SQL Server, Sybase, those kind of things. And you gotta get them transitioned into this new way of thinking in these distributed databases. That's a people issue. You know, even if it's a SaaS 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

14:23very critical part of what we do.

Customer Count and Geographic Distribution

Nathan Latka

14:24And now what are you at today in terms of total customers you're serving?

Billy Bosworth

14:28Our total customer count, believe is around 500, but I'll have to give you that more specifically. But I think it's the 500.

Nathan Latka

14:37He's squinting looking at the data.

Billy Bosworth

14:39Squinting, trying to remember. I do know this. We have them in over 50 countries. So we have a lot of good geographical distribution right now.

Nathan Latka

14:47The math I was doing, Billy, was take your 100,000,000 ARR divided by 12 puts you at about 8,300,000 in MRRs. I don't need you probably well north of that, but then your ARPU in terms of your ACV first year is $100,000, which is about $8,300 a month. So you need about 1,000 customers at that ACV to hit over 100,000,000 in ARR. Now are you... I won't make you put a really specific cap on this, but generally,

15:10I mean, can we say between $100,000,000 and $200,000,000 in ARR, or are you, like, well north of 200?

Billy Bosworth

15:15Yeah, no, between $100,000,000 and $200,000,000.

Nathan Latka

15:17That's fair. Yeah. Okay, good. And obviously it's harder to grow large numbers. Over the past year, what was your growth rate? What'd you grow at?

Billy Bosworth

15:25Yeah, we continue to have our models, 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 higher.

Nathan Latka

15:25Okay.

Billy Bosworth

15:25And so even as we look out the next three years, we believe we can stay in that hyper growth category.

Nathan Latka

15:41Okay. Yeah. I mean, so just to be clear, did you hit that or beat that over the past twelve months?

Billy Bosworth

15:46Yeah. Our growth rates have been really strong ever since I got here.

Nathan Latka

15:49That's that's great. Okay. Good.

Funding History and Capital Discipline

Nathan Latka

15:53A lot of people, we touched on this earlier, will look at a company that has raised as much as as you have and said, you know what? If they don't keep raising year after year, it 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 on because it looks bad, or they're not strong enough to IPO. You've countered that and

16:09said, 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 cap table, especially common holders, start to get maybe antsy at some point, and they want some kind of return. Was any of the capital that's gone in the company secondary, or was it all going directly to operations?

Billy Bosworth

16:28That was almost all going to operations. There 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 not a Valley person in that respect. And what I mean by that

16:51is I still believe in really good fiscal management of an organization because I think when markets turn, and they will, and you know they will, you know what's gonna happen. As soon as that happens, everybody is gonna get cash crazy, and they're gonna start asking you, do you have control of 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've we've leveraged it. We've

17:15taken advantage of it. But I'm sorry. I'm not gonna get silly with it. I'm I'm not gonna treat it like it's free water because it's not.

Nathan Latka

17:23What I mean, Billy, though, is like a guy like John, right, Vionis back in... What would that have been? 2010 maybe? Your seed round. 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 Calciana, Sequoia, and and John. But, you know, 2,700,000, those guys at some point, you know, we're approaching ten years on that money going, and at some point, they

17:41start to get antsy. They're never gonna pressure you because you're growing, and it's a success. But if Lightspeed wants to go raise their next fund or Sequoia or Jason or whatever, nice to 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 them by new investors so you can keep their story a good one?

Billy Bosworth

18:00Yeah, 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 are we gonna get this thing going? Because they look at the health of the company, they see that it's on

18:25the 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 wanna rush it and do something silly now that you've gotten 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 from maybe their LPs because their funds are performing so well. So, we've got a really

18:45high class lot of investors, and the truth is I I do not feel that pressure from them.

Employee Equity and Internal Communication

Nathan Latka

18:51Last set of questions on this topic before we wrap up with the famous five. I understand the argument that you make about investors, but you also have, you know, early employees who you used equity as leverage to get them to join, take a lot... You know, lower salaries as you recruit them from Rackspace or other companies. At some point, they're going, I'd like a return. I don't think Billy's gonna IPO because they just raised a 109,000,000.

19:12That 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 can I get liquidity? If those questions come up, and maybe they don't get asked, they're being thought, how do you address them?

Billy Bosworth

19:24Oh, 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 inside the company.

Nathan Latka

19:24I was

19:35very nervous what you gonna say there for a second.

Billy Bosworth

19:37You

Nathan Latka

19:37Freak

Billy Bosworth

19:39have 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 bet? Am I in 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 we're making, and they know they've made a good bet,

20:05and 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, and open with our company.

Acquisitions and Exit Optionality

Nathan Latka

20:17Are you in the process right now of making any big acquisitions?

Billy Bosworth

20:20No. 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 graph 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 in as you grow, I am always looking for the the right fit for things to fall in. Now,

20:45at our size, it's usually not an a... 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.

Nathan Latka

20:59And if Bezos brings a billion 5 check to your board, do you sell the company or no?

Billy Bosworth

20:59Yeah.

21:06Like, I'm gonna answer that, Nathan.

Nathan Latka

21:08Reading your smile. It tells me everything I need to know, Billy.

Billy Bosworth

21:12Yeah. 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, that Great companies are never sold, they're bought. 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. Right now, we don't have to worry about external parties to

21:35make that happen.

Famous Five

Nathan Latka

21:36Alright. Famous five, one word answers here. Favorite business book?

Billy Bosworth

21:40The Advantage.

Nathan Latka

21:41Number two, is there a CEO you're following or studying right now?

Billy Bosworth

21:45Brad Smith, at Intuit.

Nathan Latka

21:46Number three, what's your favorite online tool besides your own for growing the business?

Billy Bosworth

21:52Slack.

Nathan Latka

21:52Number four, how many hours of sleep do get every night?

Billy Bosworth

21:55Six.

Nathan Latka

21:56And what's your situation? Married, single, you have kids?

Billy Bosworth

22:00Twenty five years married.

Nathan Latka

22:00God, I thought you were

22:02gonna say 25 kids. Whoo.

Billy Bosworth

22:04Twenty five years married, three kids.

Nathan Latka

22:06Three kids. And, Billy, how old are you?

Billy Bosworth

22:0848.

Nathan Latka

22:09Last question. What do you wish your 20 year old self knew?

Billy Bosworth

22:12Don't be so arrogant and obnoxious and go learn from your betters.

Nathan Latka

22:17I don't think... Did you guys think he was arrogant? Billy, I thought you were great. You were a trooper. He came on. You were super transparent. Launched the company back in 2011 with two cofounders between Austin and Dallas. They were... It was a mutual seduction. That's what we'll call it. A mutual mutual seduction. Billy ended up joining, as part of the company. First round of business getting the series b closed. They since... They have since raised

22:36a $190,000,000 helping over 500, 600 ish customers really understand their data. The company is on a tear growing 40% year over year, north of a $100,000,000 in ARR right now, but south of 200,000,000, about a 110% net revenue expansion annually. So the economics look healthy. Billy, thank you for taking us to the top.

Billy Bosworth

22:53Thank you, Nathan. Have a great day.