Docsend Revenue, Valuation & Funding (2021)

this is the top where I interview entrepreneurs who are number one or number two in their industry in terms of Revenue or customer base you'll learn how much revenue they're making what their marketing funnel looks like and how many customers they have I'm now at $20,000 per talk 5 and6 million he is held bent on global domination we just broke our 100,000 unit soul Mark and I'm your host Nathan lka okay toop tribe this week's winner of the $100 is Rich Jones Okay Rich Jones he is stuck in corporate he wants to break free he's binging on the show for your chance to win 100 bucks every Monday morning simply subscribe to the podcast right now on iTunes and then text the word Nathan to 33444 to prove that you did it [Music] Nathan ly here this episode 581 coming up tomorrow morning you're going to learn from Calvin the CEO of simpo it's a SAS company with a team of just two people but guess what it makes a million per year and it's totally bootstrapped this is what I mean why it's way more important don't worry about being a unicorn hit singles and doubles Calvin is doing it and boy is he getting riched because of it you don't want to miss tomorrow's episode good morning guys and Nathan lad here our guest today is Russ hedleston he's the CEO and co-founder of docsend previously he was a product manager at Facebook where he arrived via the acquisition of his startup pursuit. comom Russ has also held roles at Dropbox graay stripe and Trulia he received a BS in Computer Engineering and an MS in computer science from Stanford along with an MBA from Harvard Russ are you ready to take us to the top absolutely very good well thanks for joining tell us first real quick so you arrived at Facebook via Pursuit uh what did Pursuit do Pursuit was a um system for human resources to manage their referral programs for employees and so it was a very smart way of tracking and understanding who's making referrals where those people coming from and helping companies just manage that whole process more effectively uh and after running that for a little over a year uh we shopped it to LinkedIn and Facebook and decided to go with Facebook I appreciate being transparent there and saying kind of you shopped it a lot of people say never you know never want to sell your company what what kind of made you guys decide to go through that if that was truly an intentional process it it was we looked at our own numbers and the theory that we had we had a hypothesis we wanted to test it you we got you know 40 companies signed up for the service few thousand users and then the numbers just weren't looking like we wanted them to for us absolutely so we would look at how many people were being referred and we figured out that they were going out of band like those hires were happening and then we were like why and then we kind of dug into psychology of what we're doing and without it being a separate podcast basically decided that some of our assumptions were incorrect in our product and that to change those assumptions would be a huge process and we were just kind of out at that point we' been doing a little over year raised about 500k okay and Facebook's one of our first customers so we went talked to them we talked to LinkedIn about you know you just like joining them yeah and you're you're right we totally decided to sell the company uh and to shop it around um so that that just made the most sense for us yeah would you say soft Landing Talent acquisition more or less oh yeah for sure the assets of the company weren't uh acquired but we were all incredibly happy with the outcome so you a product manager at Facebook what product were you on I was the product manager for the pages team uh so anything with a like button on it that's not a human being like a like a like a profile so uh that's a pretty big swath of of what Facebook does is is included under pages and you sorry you said you're working with the personalities versus the brands or the brands Brands and personalities both have Facebook pages U so both of them have like you can't add them as a friend and at the time it was a very small team at Facebook and uh I got to have a great experience being there and growing that team out significantly over a couple year periods so let's let's jump into doc send now so what year did you make the decision to leave Facebook and start docsend uh we started docsend in 2013 so it's you know over three and a half years ago now that we started the company and the very first version of it was uh something that came from an Insight I had uh while I interned it Dropbox while I was in Business School in 2010 and and that is that sending attachments is just really not a great way to go uh just brings up a lot of problems so we wanted to come up with a system that worked well for businesses to send uh documents as links and not attachments and there are a few properties that we really wanted that were just missing from all the other systems out there around security and tracking and being able to update things and just insight in what what is happening when I send uh content uh or documents out to people and so uh the first version of docsend was was just that that's just what we wanted very simple easy to use system sign up get going uh just hit the ground running and we launched that at Tech crunch disrupt in 2014 and what was uh because usually this is an embarrassingly low number which is which is obviously fine but do you remember what your first year Revenue was um if it was above zero uh no we didn't charge any money for the first year so it was for sure zero got it and we were just focused on growth um uh you couldn't pay us money if wanted to uh we launched the product and we just wanted to see what happens where does it go who looks at it like who's using it and so we launched it we saw a good Spike uh we saw a nice growth after that and we were really digging into the numbers around um like who is and it wasn't Facebook like growth numbers like if you look at a consumer company versus a B2B company it was clear that what Dacon was doing was a very high value um but it wasn't going to be a Facebook size in terms of like user count we just aren't consumer everyone is using docen for a business application but what happened in that year is that we took a hard look at everyone using doc end for instance people use it in fundraising all the time if you ask any venture capitalist about doc end they'll be like yes I get all Doc end links now and that was really nice for us um unfortunately that's not a great business to be in uh so we looked at some of the other cohorts of users that we had just that sample that use case is not a good use case for you that's right you can't build a big business around around like one time right yeah exactly after a few months they successfully and they're gone or didn't work which is unfortunately a transaction fee on that right right yeah this would be great we actually did get approached by a hedge fund about about buying the company and that would have been awful for everyone but I thought that was flattering in a way I guess that they were like we've seen so many of your links that we would like uh we would like access to your data like no security and privacy are obviously Paramount to us but in any case that wasn't a great use case what we saw was that salespeople do use doc end and they use it kind of forever yeah and sales people are kind of similar to fun people fundraising you're both selling something of high value you have to have assets that describe the value that you're bringing and you're trying to get a transaction done and there's a lot on the line so you want to make sure that the up-to-date thing is always seen you want to understand who's looking at it who cares who doesn't care so Russ if we if we fast forward you I assume you have Revenue today right we do so what is the when you turned on pricing give us kind of a snapshot January 2017 what's the we won't talk about every plan so just give us an average what's the average customer paying you per month uh it so it it's broken out uh in tears so there are basically two businesses we have one is the self-served business you can still come to Doc send and you can still sign up and pay us 10 bucks a month okay and that's great please do that it's an awesome product what we found was that we need to go after bigger teams and that the problem we solve is even more pronounced at large sales and marketing teams where um marketing doesn't know what content sales is using and sales has a really hard time just finding and sending the content they need to to close deals um and so all the tracking is involved in that but it's it's kind of a multiplayer game that we play and so that's the Enterprise plan we have and that's where we make most of our money today like more than 80% um uh it is uh do you see2 you see 820 kind of rules here that's right yeah exactly um yeah so it's especially we look forward to the next year as we go up market and sell bigger contracts we used to be 2080 and yeah 8020 is is a good rule of thumb in terms of what we uh look at we don't focus on the uh self- serve inbound stuff anymore it's more targeting outbound uh deals and for that 80 Russ for that 80% so what's the average there we have a lot of listeners that are in this space right sales people and they're going to be going hey should I try docsend or not give them a sense of kind of the average price for an Enterprise um it totally varies based on the size of team we target so we've run this experiment where we target really big companies you know like 100k plus deals and looked at how long those take and we've targeted really small deals and we look at how long those take we actually haven't found that a big difference in terms of time between we we go by the number of salespeople using the product as our what do you charge by that Russ is that is that same no matter no matter the size it it varies no it varies between $50 and $90 per user per month depending on if there's screen sharing if there's sales involved in there I think it comes out to around like $70 or $80 a user a month so let's just say roughly $1,000 a user a year uh we uh for our outbound only target teams of 30 and above uh so that'd be about $30,000 a year uh an annual contract value for that we found that like selling to a team at 10 is the same amount of time as selling to a team of 30 and if you have outbound it's expensive and so you know it needs to make sense if you get up into the hundreds of sales people the um time it takes to get that deal closed goes up significantly so when you ask like what's your average annual contract value like any outbound company the answer is it depends on who we're targeting and we can Target various size it's interesting because Dropbox has had a similar experience where they've gone way up market and they've closed some of those big logos and then they've pulled back looking at how long those take uh and just kind of the cost benefit there Target give us a sense of what your economics look like on that sales process so like what's your what's your total team size currently and what percentage of those are salese um the the total team size is around 25 and it is just six salese okay six great so what call it a fourth um all right good you guys are all based in San Fran we have one in New York and then five in San Fran okay got it sorry no your total team are most of you guys in San Francisco oh other than the one guy yes everyone's in San Francisco okay good yeah got you got you got your New York Hustler going out there closing deals right that's right you got have the feet on the street yep yep very good and okay before we talk more kind about product and why links are more important than attachments and things like that um so you launched in 2013 focused on usage usage usage when did you introduced the pricing plan we introduced the pricing plan um I think in actually a year later almost exactly a year later from when we launched so it was in like March or April of 2014 okay and if we fast forward to January 2017 whatever you care most about whether it's seats or logos that have seats under them uh how many of you pick which one how how many of either of those do you have um so we actually have over 2,800 paying companies right now okay um and we have that's a fraction of the total number that are using docs end but among those 2800 I really care about a mix of logo and um seat count okay and the reason is that if um I actually don't even know off the top of my head which which brands I'm allowed to talk don't say anything then but on average all those 2,800 paying companies how many seats per company would you say on average well no it's bucketed between ones that are just a few I we don't really care a lot about them and then amongst the 10 or above I get really excited when it's like a team of 50 or more salese because that's that's a really interesting sale to get done there's a sales Ops person involved there's a Content marketing person involved the sales and the marketing teams need to work together effectively the complexity that sale really goes up so the teams of 50 or more that we get locked into doc end and actually buy into the value prop that for me is really exciting because it it feels like a whole different product a different sale a different company than what we launched in 2013 and the economics are way better yeah so your target is obviously teams of 50 or more but if you just a total number of users on your platform right now that are under a paid plan is how many oh gosh uh I don't know off the top of my head it definitely above above definitely I mean it's definitely above 10,000 I would guess got it got it cool so that's good to that's good to understand and then walk us through some more of the history here so bootstrapped or you raised Capital we've raised Capital um we've raised about 10 million in venture capital and then another uh million in Venture debt so around 11 million uh in total uh happy about that or do you regret it oh no super happy about that August Capital led the a round Howard har and bomb is on our board he's fantastic Jeff clavier from soft Tech LED our seed round and he's on our board and he's also fantastic um I think it's a team sport uh I have a lot of admiration for the comp companies that bootstrap it and get it there uh I think for us having access to those networks and having access to to that help has been really helpful for us um even just having board meetings uh every couple months is just great to check in every once in a while look back get an outside perspective and make sure you're on track um so I've been very happy with the the investors that we we've picked to partner with and Russ you said that was 10 million total raised in yeah 11 million total including Venture debt okay got it got it yeah that's a lot of folks are kind of when did you tack on the Venture debt was it as part of your series a no it was uh post series C post series okay so it's kind of like you almost use it like a bridge between seed and series a yeah actually after we took on Venture dead I wrote a blog post about it I mean there are some very important things to keep in mind with it uh just around um the like the ratio of venture debt to to money in the bank that you have it's it's really um a insurance policy and it extends your Runway a little bit but it can really come back to bite you um depending on like a few different scenarios Happ and things like that well obviously those sorts of things but even if you get like a pretty good term sheet just the way Venture dead is structured um it will extend your Runway sum in some scenarios but it's also kind of scary in terms of just the rights they have over you um and anyway Russ if you Skype me that link we'll link to that in the show notes so people can check that out it sounds like you got some valuable stuff there um okay let's pull so I'm going to pull some of this math forward real quick okay so $70 RPO you said at a minimum of10 ,000 seats so it's fair to say you're doing above 700 Grand in monthly recurring Revenue right um I can't talk about a revenue uh okay that seat number though and the RPO number those are basically averages right that's the minimum the uh the tell me why that M tell me why that math would be wrong Russ you told me earlier $70 arpo was was average right and you definitely have more than 10,000 seats so why would you not have more than 700 Grand in Revenue monthly what uh it so it the number of companies that are paying for it range between $10 a month and basically $100 a user a month and so there's quite the split there between um the the ones that are just coming in and self- serve and then the larger ones that we go afterwards um so yeah that that split is not something that um I would like to talk about well you articulated it was basically 8020 though correct in terms of the new stuff coming in yeah um and the historical stuff I don't know what it would break out into in total okay got it so if we so basically what you're saying is that $70 r number that's really on your on your cohort of folks you're newly targeting right which are more kind of Enterprise level that's not a reflection of the total 2800 customers you have currently which a lot of them are probably self serve at 10 bucks uh many of them are yes yeah okay good I just want to get a minimum number Russ just so so and we don't have to talk about how big you are but let's say a minimum is 10 right times times 2800 customers right so you're definitely doing more than 28,000 or sorry you're and there's 10,000 seats you're definitely doing more than 100 Grand in monthly requiring Revenue can we we can so we can put a baseline on this correct um you know what I I could but I I don't really see the benefit in it for me at this point uh talking about the math corre you guys yeah I'll let audience you guys can do the math the reason Russ I think this kind of stuff is important is because it's rarely talked about and uh and and when people can understand some of these numbers it helps them better understand strategies they can employ in their own businesses right maybe they consider Venture debt if their economics look similar to yours or if they don't look similar so thanks for being transparent sure two two things to note on that that are important when we look at our Legacy business around uh inbound and self- sered sometimes companies get that right and you just take off it an incredible rate and you're like wow this is super exciting you've got to be growing at 20% a month uh with that type of number for that to be like we've made it um and you wa what kind of number the self- serve stuff just the self- serve inbound yeah because that one's hard to influence what's exciting about outbound is that you control the destiny of that and so what was exciting for me is when we got to the point where we can sell $50,000 a year deals and we can do that in a minimum amount of time and then it's really just a function of scaling up your sales team the trick is not to do that too early and the trick is to understand specifically what's going into that being successful and asking the question can that scale um and so that's why I say in terms of new Revenue that we make having that the 820 is pretty exciting for me especially in terms of building out our sales team this year and they they really are two separate businesses so when you ask questions about like the mix of the two I'm like I it's not even something I I pay a whole lot of attention to yep yep in other words you're not looking at an average across your entire customer base you're definitely splitting out at a minimum into two cohorts one is self- sered one is Enterprise probably more cohorts than just that there are more cohorts than just that but but at a rough one yeah I get excited about the larger teams that are using us for slightly different reasons than the people who are using us for their fundraising um or for other individual us churn is critical in these kinds of businesses if we just focus on kind of your Enterprise cohort um what is your gross customer monthly turn and how do you manage that what what kind of utility are you are you trying to drive you know daily so people stay sticky yeah so we haven't lost a team of greater than 10 salespeople from Doc end um that's just churned uh yet so that that's really exciting to me over your history your life yeah over our history our life um and the reason is that once a team adopts a system that connects sales and marketing like docen does it's even if sales wants to get rid of it marketing doesn't want to get rid of it the marketing decides get rid of it sales like no we need that and so it's hard to get the adoption but it's hard to get rid of it as well and that is a really attractive property for us the the churn in the self- sered stuff is is super high but our our what is that though quantify that 5% monthly 10% monthly I don't know off the top of my head what it is what's high me well those numbers are certainly high that you gave me um and the thing that matters there is the net promoter score that we get and people are really happy with it they're like oh I love docsend but but yeah of course I'm not going to pay for it anymore I don't I don't really need it now but I might use it again later this year and so for me that's oh that's great it's a nice product they like it but it's it's not a great business business characteristic I think like what is it 1% monthly is kind of a general Target for for companies to to aim for if it's much above that then that's pretty worrying have you have you hit kind of the magical net negative Revenue turn just because your expansion activities are really working oh yeah in the Enterprise like we hav had a customer churn yet of 10 or larger seats and they mostly expand um there have been a couple contractions and when that happens I I mean I feel bad for the company it's like oh that's really rough to have to cut part of your sales team it's only happened a couple times is that where your is most of your expansion is is literally when your salesp person's on the phone with that company are most of the expansion kind of benefits around team size or is it they're expanding Revenue because they're getting additional reporting features or things like that it's around seed count I mean so uh namely uh was I think one of the like a company where there's individual salesperson uh who signed up um for docsend and then the rest of the team has since just really uh adopted the whole thing and brought it on so docon has grown as namly has grown and that theany has been doing incredibly well doesn't that feel good it's great I'm really happy for them and I'm really happy for us and then they can see the value in it and as the company gets bigger our product becomes stickier with them which is a really nice characteristic for us Hey Russ last question before we get into the final five here um when was that last round of financing that you raised when did you close that uh we closed that in a little over a year ago okay so you're either right now raising your next round or linkedin's about to give you a $100 million acquisition offer which one is it uh we we uh have we don't have to raise more money at this point if we don't want to um that's the other really nice thing about doing larger Enterprise sales in terms of controlling your own destiny and the the cash up front characteristics of it are also uh pretty attractive you guys are profitable you're not burning cash well we still have cash in the bank we're not profitable and there's also cash flow profitable and like accounting profitable yeah I'll just leave it at that I we are not currently fundraising and we don't currently need to get acquired uh we're just very focused on growing our business which is really the fun part of it okay top tribe as many of you know I sold hoo and Everyone is always asking me what my expenses were when I was building heo well a big expense was that I spent over 3 Grand per month on financial services to keep me out of trouble in terms of taxes you know my mom would always haror me Nathan you got to keep all your receipts and put them in a freaking box or something to make sure you don't get an audit or things like this I'm like Mom I'm a millennial you think I'm going to keep all these receipts I now use fresh books I use their mobile app to take a picture of receipts and it makes taxes a cinch additionally I don't have to hire a $3,000 per month person to manage all my finances it's like saving so much money and my mom's happy additionally I don't waste a bunch of time creating invoices I use their templates and I can avoid using word templates or Excel files I just use fresh books to quickly send out invoices and it works like a charm to get your free first month go to Nathan lanka.com freshbooks and enter the the top in the how did You Hear About Us section again go to Nathan l.com freshbooks and enter the top in the how did You Hear About Us section I'll quickly guys pull a lesson out just for sass entrepreneurs listening because a lot of people don't talk about it like Russ does the difference between accounting profitable and and you know cash flow profit those are two very different things especially considering we can pull cash forward from these Enterprise deals so that can make you kind of accounting profitable in some sense so uh read into that and study that obviously a you see fit but Russ thanks uh thanks for being a transparent I appreciate it um let's wrap up last five questions these are like cake compared to what I've asked are you ready maybe sure go I promise number one what's your favorite Business book oh uh good to Great number two is there a CEO you're following or studying right now oh the CEO docu signed Keith is phenomenal he actually just recommended uh a book to me the the the reg just touch that I just started reading which is phal didn't that just get confirmed like today I think right new CEO there's a did you did you read that news oh uh no I don't know when when that was um confirmed I haven't I haven't seen the news on that oh oh oh I thought uh because docin was searching for a new CEO and I think they said effective this week Daniel Springer is taking over The reigns from uh from oh Keith was chairman I think yeah yeah yeah yeah I got it and I think interm CEO yeah yeah yeah very okay so you're following him good uh number uh number three besides your own is there a favorite online tool you have oh um oh favorite online tool man there's there are there are there are just so many of them um sales or personal uh what you use the most whether it's personal or business oh gosh uh I I mean other than like Gmail or slack or truly Wireless is a new one uh that I like a lot we use that for phone all of our phone calling um stuff great number four yes or no do you get eight hours of sleep every night uh yes and what's your situation marriage single do you have kids um uh single single a girlfriend who's awesome awesome no kids right no kids all right and how old are you I'm 32 all right last question Russ take us back 12 years what do you wish your 20year old self knew oh 20-y old self um I guess uh patience um do things well and be patient with them and then they will turn out well later doop dribe there you have it do things well be patient with them and good things will happen again from Russ founder of and founded in 2013 now a team of about 25 people mainly based in San Francisco with one out in LA or one out in New York sorry targeting now annual contract values or team sizes of at least 30 to or more ideally 50 or more people uh arpus again in terms of seat sizes ranging from $10 Self Serve all the way up to 100 bucks depending on feature sets and things like that raised 11 million bucks in capital last round about a year ago they really successfully employed Venture debt it sounds like as well serving over 2800 paying customers and over 10,00 ,000 seats Russ thank you for taking us to the top great thank you naan if you enjoyed Russ today go back and listen to patari yesterday he self-funded his company Vine to $400,000 a monthly occurring revenue and now has over a th000 customers and helps them get businesso business leads faster and close them quicker top drive I love giving away free money I feel like o we're giving away cars and I have something special for you today how many of you have heard our super sharp guests talk about success they've had with Facebook and Google ads well all of you listening right now yes if you're listening you get $100 in free AdWords here's how you get it okay again thanks for listening get the free $100 from Google right when you sign up with my website host provider HostGator go sign up now to get your free money hostgator.com Nathan again that's hostgator.com Nathan okay top trive I'll see you bright and early tomorrow morning and don't forget before listen to any other episodes subscribe on iTunes right now for your chance to win a 100 bucks every Monday