How Engagedly CEO Srikant Chellappa grew to $6.9M revenue and 400 customers in 2024.

hello everyone my guest today is sri showa but he is a passionate entrepreneur and leader in building high performance organizations that care about their people he spent over 20 years in leading organizations and software development and consulting in the us with a unique background in technology people management health i.t and film writing tree brings a diverse set of experiences across industries and specialties to build high performing highly engaged organizations at his new company engagedly.com sure you're ready to take us to the top yeah all right so so what what is engagedly.com well engagingly is the sas product essentially a solution for organizations that are you know looking to build high performance teams so we really focus on aligning organizational objectives with with people right because people have aspirations they want to go somewhere in their career they want to learn they want to develop they want to have good management and organizations have an objective of you know higher revenue higher profits and engaged workforce so our platform helps connect the two by providing tools to align their goals you know align their performance objectives provide training programs internally for employee development career growth and engagement tools to really engage in so what are hr teams paying for on average how much are they paying you per month to use this tool well it's perceived basis right so every employee is a seat essentially um so it's usually anywhere from you know five dollars to sleep to seven dollars a seat per month and subscriptions are typically annual okay so i guess the question is how many seats are people usually signing up for when they're signing up in bunches well that depends on the size of the company right we have clients that are 20 000 seats you know and we have clients that are 80 so the average is probably somewhere around 4 or 500 employee organizations roughly so you have customers of 20 000 seats paying five bucks a seat so that contracts worth a hundred grand a month yeah wow incredible uh that's great okay so on average it's 400 uh 400 seats each and when did you launch the company put this on a timeline for me you say it again put this on a timeline for me when did you launch oh we launched the product in late 2015 so really our first year of revenue was 2016. um and we started off you know really focusing on the engagement part of the product right we're focusing on how to actively engage employees how to keep them connected in the organization so we started with employee social gamification things of this nature and then later we became more of a talent management suite and how did you your first 10 customers well the first customer was my previous customer that's how we kind of built the product around their needs uh and then after that it was just hustle man it's not easy right after that it was a hustle you know sharing come on give us something to work on here hustle isn't a good answer how did you get your after the first customer how did you get your next six seven eight what'd you do specifically um we started doing some ppcs we started doing some cold email campaigns uh and that's basically what's there how much are you spending today per month on ppc ads ppc we've spent about 20 000 a month okay 20k per month and so what do you what's your cap to get a new customer our our payback period is typically within six and nine months to get a new customer but ppc is not the only thing we do have an sdr team as well so seo as well and so that seo team or the sdr team how many well let's do the whole team first how many people are on the total team total which means your whole team your entire business my company's about 102 people 102 and how many are engineers uh about 30 30 and then how many sales folks sales forces well sales and marketing is too different right so sales itself is about 18 20 something like that and how many of those reps carry our quota uh eight of them eight the rest of them are some you know sales options the eight that carry a quota like if i joined your company today and i was one of those eight carrying a quota what quota target would you set for me well that really depends on the segment you'll be on right if you're at the enterprise segment you probably carry a quote off a million dollar error um but if you're on the mid market it will it would bear you anywhere from 300 to 500 so do you pay i mean if i'm if i'm a mid market sales rep for you and my target is you know uh you know a 300 000 quota you know if you want to keep a five to one ratio of my full on target earnings relative to 300 quota you can only pay me like 40 50 grand a month all or a year all in is that right no we ours are a lot lower than that so we don't do a five five to one we do more like two and a half three to one how do you make that work at scale that's that's very tight margin on your sales team well that is true because but we have longer you know we have long term contracts so our contracts are typically two to three year contracts we don't do month-to-month contracts at all one year minimum one year our average contract size is two years what what percent of new signups like last month signed it assigned a deal that was more than one year um like 70 okay wow so the majority are you know one and a half two-year sort of concept contracts yeah some of them are four or five-year contracts too why is someone willing to pay you for you know sign up for a contract five years out i mean they have no idea what you're gonna be doing five years from now well five years is an exception i'm doing someone like you know a freshman fraction um but here's the thing right and this is an enterprise software so when you're implementing enterprise software that affects everybody's life it's not a sales software this only sales team uses our payroll software that only hr uses and when you implement implementing an enterprise software it takes about three to six months to really realize the full value because there's a lot of change management that has to happen within the organization so if you're looking at a product like let's say i'm i'm going to give an example like a workday or sap we have the same segment except we play on the lower end of the segment right i mean their implementation cycles can anywhere from six months to a year just to implement the product and roll it out and typically that for enterprise wide enterprise scale products a one-year deal is generally a minimum for the most part do you have automatic accelerators as the customer moves from year one to your two year two to year three where the acv will increase by five or ten percent fixed in the contract um in some contracts we do not know interesting okay so ppc had some cold outreach you just hustling those that first year in 2016 to get that first customer how many customers are you serving out today how many customers do we have now today yep uh we have a little over 400 400 great and what do you think you can add this year we should finish the year around 600. um but i think what one of the things we are doing is we're also going more upmarket so our acv has been going up pretty much every quarter over quarter so if we were to look at 2016 for example our acv at that time was more like 4 000 per client and right now our acv on an incremental basis or equity basis is roughly around you know eleven twelve thousand percent and so i mean can i do the math there 400 customers at 2 000 a month on average means you're doing about what 800 000 a month in revenue no no so i said 12 000 a year 12 000 a year that's the incremental our current average is right around nine thousand that if you look at the historical so what is mrr today mrs right around three point six roughly at this point so you're doing three points i'm sorry error 2.68 okay great 3.6 uh annually so you're doing about 300 000 per month right now in revenue right so you said you had one customer paying a hundred thousand dollars per month that's a lot of customer concentration risk they make up 30 of your total revenue a hundred okay no no 100 000 a year another 100 a month 100 000 a year you said earlier that customers pay five dollars per seat my question and then you said we have some customers so that's the average right so the outlier in that case they're they're paying like two dollars or three dollars to see so that's more like 150 200 000 so you do have a customer with 20 000 seats but you given a group discount out of about a dollar or two per seat correct i see what you're saying i see okay very cool so how are you those are obviously outliers right and we have to make special pricing for yeah uh out of curiosity out of across 400 customers you have today how many paid seats are on your platform if you added them all up yeah that's great and are you seeing adoption a lot of times these hr tools get they get purchased by hr they tell their teams to use them they pray for the seats but the teams don't actually use them adoption that's why the engagement part becomes important you know so if you add the social component if you add the learning management component or internal training you know a lot of organizations have to take training especially especially if it's a compliance training they kind of have to do it at the employment management level social gamification and their adoption does increase now if they're only using it for performance reviews once a year or goal setting but they don't look at the goals at all up until the year is over then that option does become a problem so there's a lot of process aspect to it which is where our professional services organization really comes in to help them improve their marketing last year when you look at total revenue what percent of professional services or sas oh our profit services is tiny it's like four percent right now okay and what are you selling there what is the service uh there are two types of services one is the implementation services how much do you charge for implementation um it varies based on the size and the complexity of implementation it can go anywhere from two hundred three hundred dollars to five thousand dollars but it's usually like a loss leader we don't really make a lot of money in it you know but it's very in our interest to implement them correctly so they can you know they can get the best adoption possible and what does growth look like today if you're doing 3.6 million in arr today where were you a year ago uh a year ago we were at 2.4 two four okay good growth now have you driven all this growth bootstrapped yes okay congrats man we love that thank you are you are you looking would you consider raising are you looking at raising you know i keep going back and forth because as you know and as other people were saying in your uh webinar you know our our emails are blowing up from vcs you know there's too much cash out there they're trying to invest and i'm trying to just see how far i can take it without having to raise cash you know yeah we are not a bit that positive yet but we will be uh in the in the q3 q4 time frame so if you're burning money on your bootstraps who's making up the loss are you personally putting cash in the business every month yeah we are how much have you personally put in we've put in between me and my partners we put into date about three million okay system okay and and so like how did you get money to spend on this did you have you exited a company before before yeah i got my graders to show for it yeah we had an exit you know for another consulting company that we did that got acquired by private equity about a year ago what would you value your business at today yeah it's hard to value man you know because the valuation metrics are so all over the place you know you can say i'm 10x revenue or 20x revenue depending on where you are uh i mean i would i would suspect today it's probably in the 30 50 range depending on who's who's buying it is it buying it for strategic reasons or if they're buying it for purely cash no i hear you hey last few questions before we wrap up churn is critical in the sas business what's your revenue churn over the past 12 months our net revenue turn over the past 12 months was really bad because of the curve you know a lot of our lower end customers a lot of them went out of business or cut your staff dramatically um but we ended up still doing pretty well i think we ended up with a net revenue retention of little over 90 percent okay and can you peel that back from me what was gross churn and then what was expansion so the gross turn was in the low 80s so not 80s 80s retention gross revenue retention was in the low 80s and the rest of it was expansion you got it so you turned it for 10 grocery retention was in the 80s so flipping that gross churn was about 20 percent expansion 17 18 actually yeah i think what like logo turn or dollar gross i'm talking dollar term yeah dollar question is first about 18 churn and then you've got it sounds like about eight percent expansion and that's where you get 90 net revenue retention right that was for the year now i will say the q4 we actually had a 105 revenue retention for q4 so the market is definitely behaving at this point that's great what are you paying to acquire a new customer right now i know you have a 69 month payback period but what are you paying what about paying who customer acquisition cost all in fully weighted about uh six six to eight thousand per per deal and where are you spending that money besides sales people commissions we spend our money on marketing right so we have a marketing team that runs paid campaigns but also it runs a lot of campaigns in general um we have content writers seo i'm factoring in all that cost very good sri good stuff here we're rooting for man let's wrap up with the famous five number one what's your favorite business book my my favorite book is actually black swan by nassim bale number two is there a ceo you're following or studying you know i really like the ceo of atlassian i forgot his name um which one did simmons who just left jay simmons not that guy the other guy mark or what his name they have a great story of how they're bootstrapped and you know and the humility i just really like what they've done number three what's your mo what's your favorite online tool for building a business google analytics number four how many hours of sleep to get every night about seven and a half seven seven years and which situation married single kids um i'm single with a with a with a kid okay good and how old are you oh man that's a tough one now i'm 48 48 last question what's something you wish you knew when you were 23 patients i i i should have had more patients in my 20s guys he's in the hr tech space helping teams manage themselves employee performance and increasing tool engagedly.com they've grown about 3.6 million bucks in terms of run rate up from 2.4 million just a year ago they've done this all bootstrap serving 400 paid customers right now they're still burning cash the co-founders have put in about three million bucks to grow the business today uh team says about 102 people 30 engineers 18 sales employees eight of them carry a quota of call between half a million and a million bucks rooting for you thanks for taking us to the top hey thanks thanks nathan it's always a pleasure always a pleasure thanks for doing all the good work one more thing before you go we have a brand new show every thursday at 1 pm central it's called shark tank for sas 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 1 pm central additionally remember these recorded founder 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