Engagio Revenue, Valuation & Funding (2018)

hello everyone my guest today is John Miller he's a marketing entrepreneur and thought leader he's currently the CEO and co-founder of engag oh and account based platform and orchestrates outbound interactions across departments and channels previously his name might look familiar he was co-founder of a Marketo a leader and marketing automation he's a speaker and writer about marketing best practices and his author of multiple marketing books including clear clear and complete guides to account based marketing sales development along with Marquitos definitive guide to marketing automation John are you ready to take us to the top it was good all right so everyone knows Marketo let's pick up the story there when did you leave and why would I leave Marquette oh yeah I left in 2014 the I mean the reason why you know Marketo just got to be a bigger company you know and as we passed you know a thousand employees it started feeling less like my baby more like a job you know and so I was craving kind of going back and doing the entrepreneurial thing again and then it was just a question of finding the right idea yeah your what you like being there on the early days scraping hustling right first customer kind of stuff yeah I just love how impactful you can be when like you you get 24 things done and in a day rather than needing 24 people and they meeting to get one thing done yeah so did you put that suit jacket on just for this call I did all right talk to us about the new company do you how did you launch engage EO right in 2014 after you left yeah literally it was a long weekend in between okay so that's that's funny you you didn't take any break at all well you know Marketo actually had a sabbatical program so I had the opportunity to take a couple of months the summer before in Italy as part of you know still being a marketing ploy so I had my break and then I was ready to kind of hit the ground running okay so usually founders you know that build something like a Marketo then spin out it's usually they saw some like wow we really need this in Marketo but I got stuck in meetings and bureaucracy I could never actually execute it so I'm just gonna leave and start it myself was that the case here and if so what does engage you do that Marketo just couldn't yeah well it was exactly that you know for me it was more I knew I wanted to you know go start another company I knew I wanted to start something that was in marketing technology because that's my love and my passion so the question really is what's the idea what where where did I see an opportunity you know in marketing technology and as I sort of looked at you know the landscape and where people were focusing and so on you know I kind of came across this you know new style of marketing called account based marketing and it did reflect back to a pain that I did have back at Marquette Oh because you know you know we're kind of when we were doing our marketing we were innovators and sort of the demand gen inbound marketing kind of model it's what I call fishing with a net yeah we create content we'd run campaigns you know we cast that net out there we didn't care who responded we just care did we catch it off no and that worked for a long time at Marquette oh but as we started to try to move up market sell to bigger more complicated more enterprise companies turns out those big companies don't just happen to swim into our net all right we had to find ways to reach out to them that was hard with Marketo the tool wasn't really set up to support that mostly because marquetta was a lead based system and on a count paste system you know and so that's where I started selling to opportunity for this new new kind of platform and marketing technology instead of fish with nets it's something I called fishing with Spears because we're gonna reach out to those big fish proactively that was sort of idea it makes a lot of sense walk me through so today I'm sure you have loads different customer cohorts but two questions one is it a pure place ask company and two if so what's kind of the average customer paying per month for your solution it is a software service solution we do annual contracts so I tend to think things more in terms of annual contract value as opposed to monthly recurring revenue so our average annual customer values about 30,000 okay 30,000 and walk me through what they're getting for that typically is it but like a seed based approach or what it's not sea based you know typically marketing software isn't sold by the seat just because you know you don't have that many users in marketing and frankly I want to have as many people touching the software as possible so I'll come back to the actual pricing metric in a second the what you get its couple key things you know the first we call an account foundation you know effectively the challenge is tools like Marketo and Salesforce and your corporate email system all the stuff you've got it tends not to roll up to the account level you know leads and Salesforce don't tie to accounts for example so the first thing our solution does is just aggregate all your account information together uses something called lead to account matching to tie it to the right account and then we can expose that information back out so it's not super sexy but it solves a real challenge is you know you're trying to be a cow paste your other systems aren't we're gonna make everything account based John just to be clear when you say lead to account you're talking like Suzanne at company XCOM and Joseph at company XCOM are two separate leads your system would say that's actually part of the same account it's just two people under the company X account is that accurate that's correct and you know the challenges if you get a list from a trade show or you know somebody fails in its form on your website they may not even put in a corporate email just they might put in a gmail address right and you know sometimes you know you might have bad data in your system so you might have two copies of the same account so a lot of science ISM which are the right things to roll to roll things up to the right account once you have that foundation then we have two other main things that we do the first is we actually let you orchestrate multi-channel plays for reaching out to accounts so this is the spearfishing super simple example is you know an email from your CEO to their CEO we'll probably more effective than an email coming out of your marketing automation system so how do you manage the workflow of you know somebody else drafting the email for their seat your CEO and then they just approve it so different tactics for kind of activating and reaching out to accounts and then the third piece measure I mean Marketing measure is done using quantity based attrex how many leads did you generate for example that doesn't work in a VM it's more about quality you know am i reaching out to the right people at the right accounts and so you need different ways to measure if it's working and we provide those solutions got it so year one was again 2014 you took a long weekend essentially you have not bootstrap I believe you've raised how much have you raised today a little over 30 million and why did you decide to write it I don't know if you do that right of the gate but why did you decide to go to the funded path versus the bootstrap path honestly it was because of the hype that I had coming out of it you know I mean I I could have bootstrapped and built a prototype and gotten some customers and all that but I don't think I would have actually gotten a better valuation then I was getting literally just being John Miller coming out of Marquette oh you know and if anything you might have actually produced you know reduced it because they'd be basing on a reality and not based on rights yep yeah no that's a really interesting and and honest perspective that I appreciate that walk me through we've scaled to today total customers on the platform a little more for 200 customers you can do the math because it sold you the ACV yeah you get you can get a sense of what our annual recurring revenue looks like today yeah that puts you at about 500 a month right or about six million annually yep we still have a good chunk of our cash left just about you know just under half of it so we got lots of runway still to keep building yeah our solution talk to me about growth so if you're at about six million in AR in terms of run right today where were you a year ago we don't disclose kind of numbers but we're growing we're growing fast can you give us a range triple digits ain't high single digits or double digits yet probably high doubles high double digits okay great and whereas most that growth coming from is it focused on kind of expanding accounts you already own are really bringing on brand new accounts it's a good mix of both you know I mean we do have a fair I mean we practice what we preach we drink our own champagne we do account its marketing we have our target accounts and we do a generally good job of reaching out and and engaging with the companies that we want to talk to we actually have you know 95 percent of our target accounts know who we are which is which is pretty cool and then you know typically our larger customers the ones that are most likely to have significant expansion or and so you know obviously that's an important part of growing in these SAS business net revenue net revenue retention assuming turns on a huge issue I imagine is above 100 percent if so how far have you been it'll push that well the we definitely you know we see we see what I'll say is in the right segments the kind of core segments we see those kind of metrics the reality is you know is a smaller business you know your first year or two you don't necessarily always sell the exact right customer the smaller companies have higher trend rates and larger companies you know so kind of dialing into the ICP is definitely part of the entrepreneurial journey we grew so fast you know to hit six million in just about three years is pretty you know from literally from a stand I mean standing starts still at Marketo you know past that that's pretty quick you know and so definitely there's learning that happens along the way yep yep you're signing customers up but you're just kind of chasing you're not sure if it's a fit you didn't learn six months in there not if it's oh they churn and you're like do we count that as real churn they're not really our customer target moving forward right yeah what can you come in can you generally you have three years of historical data you know churn on annual basis I mean what are you optimizing for where is it that today we'll say is you know what we found not surprising a lot of companies see this you see significant higher turn and companies with fewer than hundred employees and companies with more than hundred employees yep you know and so you know like a lot of business you know we're not trying to be just enterprise just large company but we certainly try to focus on companies you know that have enough scale and sophistication to really take advantage of what we're doing yeah if we norm obviously people like to measure revenue or to revenue churn because it ignores kind of big ARPU differences or or at least quote you know takes that into account so if you just look at your revenue turn across the base I mean is it in a spot that you feel as healthy and if so what is that general ranger in no one disclosed exact numbers I always like it to be better you know I mean you know and again wellness you know say in that core segment of the ICP that we found very common with retention what does ICP stand for ideal customer profile got it very good walk me through walk me through here driving customer growth so when you look at CAC and your fully weighted CAC in what payback period or kind of optimized for walk me through your thinking about those metrics sure um you know like most SAS companies we'd like to sort of see a CAC of roughly about $100 to get a dollar first year on any or a revenue you know and as you know as you said you know you kind of get hundred percent plus net revenue retention you've got self a nice annuity that way I tent we think if we tend to think about how we're gonna allocate that dollar of CAC between marketing and sales is a rough rule of thumb be you know I think that the percentage of marketing you know if you look at the ratio of your marketing investment to your sales investment that percentage ratio should roughly correlate to the percentage of pipeline that is generated by marketing so at Marketo we spent almost 5050 between marketing and sales so the ratio was 100% and marketing generated almost 100% of all the pipeline yeah ad engage you we are more like 1/3 2/3 marketing to sales so marketing 50% marketing is generating about 50% of the pipeline for sales and then the outbound account based efforts whether it's ADR STRs or salespeople that's about the other 50% interesting so of that dollar of CAC adding a Geo you'll say I think I just heard you say you put 30 cents on marketing and 70 cents on sales 3565 yes something like that yeah interesting and then you said that's kind of your target I mean are you are you are you at that today and you're and you're having to pull back to not go above that or are you already above that and trying to work your way back down we we really dial the business in to about that one okay that's I mean that's healthy that's great walk me it talk to me more about a lifetime value right this is a metric that I think lies to a lot of people some people don't care about at all or people really use it a lot do you use lifetime value as any kind of leading indicator not really I think that's a lot more common in you know kind of businesses that have monthly economics and you know and all that I mean you know effectively again you got greater than 100 percent net retention your lifetime value goes to sort of infinite so we don't tend to look at that way we look at the more traditional enterprise apps metrics some talked about cack gross retention net retention so on what steams nice today about sixty people sixty and how many of them are dedicating their sales or marketing uh twenty twenty okay that's a pretty healthy about a third they're very good John let's uh let's wrap up here with the famous five number one what's your favorite business book I really like the advantage by Patrick Lencioni number two is their CEO you're following or studying right now not really number three is there a what's your favorite online tool for building your business besides your own their online tool for building my business Google AdWords do you guys spend a lot there not as much as we did at Marketo but I still think you know I mean search is just all obviously pretty cool yep number four how many hours of sleep to eat every night about 8:00 and what's your situation married single kiddos married these kids how many I got to twelve grow boy in a nine year old girl yeah I was gonna say kids not wise alright last question Joe I'm sorry at the last two questions here how old are you John forty six and what do you wish your 20 year old self knew that when things are things are never as good as they seem when things are good things are never as bad as they seem when things go bad guys things are never as good or as bad as they seem Marketo really pioneer this approach of castanet out hope you catch something now I'd engage you is really focused on again a spear based approach so launched in 2014 has raised thirty million bucks serving two hundred enterprise accounts paying on average twenty five hundred bucks a month so about six million dollar run rate today that's up call it you know high double digits in terms of growth year over year they've raised thirty million bucks healthy economic spending about a dollar to get a new dollar an AR that split you know 6535 between sales and marketing is a scale with our team of 60 folks healthy payback period about twelve months as well John thank you so much for taking us to the top thank you