How Exponea CEO Peter Irikovsky grew to $18.9M revenue and 190 customers in 2020.

the interview is live look at that hey guys quick reminder before you enjoy today's episode i do a lot of work in the descriptions below to timestamp when the founder gave me critical data points like revenue and they finally shared their customer count or their team size and valuation so you can use those time stamps to click around also i'm going on a walk here while i keep rocking my lock down beard and while we all wait for this nasty virus to go away but i will be hanging out in the comments on my phone i'll be looking for your comments and i'll be replying to all of you guys so if you have questions that you want to ask the founder or ask me you can put them below i'll see them all in the meantime enjoy today's episode hello everyone my guest today is peter arakovsky he is the ceo and founder of a company called exponia which is a combination of a cdp uh customer develop hold on what is cvp customer data platform yes got on the money baby uh he helps he helps folks with cd their cdp and omni channel campaigns all right peter you ready to take the top of course let's go so talk to us a little bit about this the idea of cdp there's a lot of people starting to use this term as taking off but it's still a pretty fragmented market where is exponentia playing are you serving a specific customer base or what's your what's your angle yeah so we're actually a customer data experience platform so we're combining the actionability of campaign tools with the smartness of a cdp and we're focusing primarily on online retail and e-commerce and so that's our niche where we are the strongest and you know the this kind of combination is really unique in one thing it enables us to have the fastest time to value on the market and with that we're also the best rated cdp on the market so define best rated like is that via g2 or what what survey okay g2 and if you look at it like we're by far the leader in there and who else is in the space uh you have quite a lot like you have blue shift latex optimal and few other customers like that companies like that okay and are you unique in that again there are other cdp platforms but you're hyper focused on online retail and e-commerce so i think the the combination of the having the focus on online retail and a lot of use cases specifically for this niche and having the campaign part uh directly in the tool and build ground up that's unique okay now when you last came on the show this was back in september of 2017. so almost what is that two and a half two and a half years ago or so you had shared that you launched the company in 2015 and then at that point you'd raised about i think three million dollars have you continued to just use a three million to drive growth or did you raise more capital we raised significantly more so we've raised over 35 million okay and where's most that capital gone what are you spending it on growth into new markets that's the that's the biggest part be specific though like is that what i mean building an office building in dublin or what does that mean yeah so like we now have uh quite a big team in the us in germany you know at that time when we were speaking we were only launching the uk and now uk is by far our biggest market and so like the the biggest expansion is is going into sales but we've also increased significantly the size of our product team and further increased the leadership in the product okay so how many folks are on the team now today today in terms of uh ftes we are around 220 230. 220 and how many are engineers uh around 60. 60. okay are they concentrated in a specific international office yes no so we most of the developers are in slovakia and then we also have some in czech republic but that's the we are keeping them focused because we believe that for engineering it's useful to be in one office whereas now it's it's not that useful but yeah in general we believe in this yeah obviously we're talking about the virus we'll talk more about how covet is potentially impacting you guys and how you're planning to play it but finish off the team here for me so 60 engineers any quota carrying reps of course uh less than 20 now so you say of course but like look sometimes if you have a price point an average acv of less than like five thousand dollars you can't afford to pay people quota so you don't use a quota carrying rep model what is the average customer paying you per year uh 100k just like 96.97 is currently the average oh wow okay so that's much higher than it was four years ago you told me four years ago it was about 30 30 40 000 so you've gone up market yes significantly yep and was that um was that from driving expansion revenue off that historical base or you just brought on bigger customers from the start over the past two years so both uh we've also you know off-boarded some of the smaller customers because at the beginning we were not that focused on online retail and so we've had some other customers and so we actually awarded some of them and you know focused on bigger customers but also driven significant expansion so our net retention has been along over 130 now it's like 121 and like we have a few contracts expansion contracts that can get drive it to 140 percent again and break that down for me what's the gross revenue churn under that uh 12 percent is the annual gross revenue return and so you know 121 is the the net revenue churn got it so you've got 12 gross revenue churn then you've got call it like 32-ish percent of expansion to get up to 120 net yeah that's up sell cross sell and expansion in total yeah yeah okay that's great and how many customers are you now serving today so i so we're at 19 million in crr so that gives you something like 195 customers something like that got it you said you had about 190 million sorry 19 million dollar run rate yeah yeah and word has it you're talking to some growth equity funds right now are you trying to find more capital or and if so what would you use the capital on yeah so like we we've got to an impulse with our current investor and so we're looking at the different options and growth equity seems best and so we're already in the process with some of the top growth equity funds who actually share the vision that we have we want to make this into a you know multi-billion company we believe we can drive the company to over 200 million in revenue in like five to seven years because also the crisis is structurally playing strongly in our favor uh because digitization is is like the topic everywhere in retail so we see that there's a there's a big opportunity especially in the us and we want to have an investor who would be enable us to reach the full potential so because of the virus and obviously we're recording this on on friday april 3rd and we'll release it pretty quick soon after but there's two kinds like i've talked to a lot of vc's a lot of growth investors there's kind of two very different uh playbooks people are going one is they're just not doing any more deals right or maybe they're only putting some extra capital into portfolio companies to help support the portfolio companies and then others are saying you know what this is an opportunistic time i'm gonna go find companies they're gonna thrive during the crisis and put money behind them um it sounds like you found some that are taking the the latter the last approach right what are what are the conversations sound like are you seeing any any kind of you know small you know smaller valuations in the crisis than you would have seen four months ago yeah so like definitely the valuations would be would be lower but uh i i was worried that they would be significantly lower it doesn't seem to be the case when you look at the stock market you know the sas companies are down 17 to compare to where they were uh before this started happening so so it's not that massive uh drop in in terms of elevation and there are quite a few funds who were really like fortunate enough to raise significant significant new funds uh you know in the during 2019 and many of them are looking at this and thinking about who will actually win and who will benefit from what is happening and from the changing behavior and those are the funds that i believe are the best because they are having you know the right mindset they are skating where the puck is going to be not where the puck was and you know they see that we are actually the company that will benefit from this how much would you like like what are you targeting to raise so all options are on the table so yeah you know we're we're so we're we're talking about majority deal because uh we believe that through this we will off-board our um original investor uh and the question is you know where would we agree with the rest okay uh sorry you would so let me just repeat this back to you you would sell more than 50 to the company because a large chunk of that would be buying out your early investors yes okay and strategically why would you do that so uh we see that the our existing investor has different views uh than than we have and we don't believe having two investors beneficial for us so we believe that the easiest way is to do a large secondary to uh you know getting off the cap table and really continue with the expansion one example of like where we have really big differences in opinions is you know he would want us to focus on europe and we actually significantly we see the significant opportunity in u.s and want to keep driving that and also for that we believe having an investor who is established here and can help us you know drive that growth is definitely beneficial interesting okay so i mean it sounds like you don't have the exact number of pin down but what do you think like it can you may arrange like it sounds like this would need to be something between like 40 and like 70 million or something like that in terms of valuation no in terms of what you'd be raising ah actually i think it's gonna be even more it's we believe it's going to be north of 400. okay okay got it so you think it'll be okay yeah and because there will also be some money flowing into the company you know to fuel uh further growth so it will definitely be you know north of 100. ignore ignore the money ignore the money going to the to grows in ljr like buying those folks out how much do you want on the balance sheet of the company uh for operations so we don't really need much so it will strongly depend on how the investor will look at it because we we were actually expecting to break even uh during second half of 2020. now with what's happening it's you know it's slowing down the sales cycles so i don't know how well we will be able to get there and you know how long this would last so it's difficult to say so we don't really need much however if we want to drive the growth further i believe it will make sense to invest more and drive the the grow further in terms of short term because there will be the dance period as they call it you know the hammer and the dance so once things go down people will still be worried all those stores would be open nobody will go to shop and you know people would still want prefer online significantly now how can we help companies do this there's a lot that we can do like nobody now knows how do their buyers you know think what kind of personas do they have online and people are blind to this and we can very quickly help them discover this and then enable them to have you know the customer experience that would be consistent across channels and would be really you know not pissing off the customers that they have but really making them into loyal customers that they can have for the long term yeah no i mean now's the time basically everything you've told me for what you're focused on like now is the time to invest aggressively now are you in a spot right now where you don't need to raise if you can't get a good deal are you profitable today so we're not profitable but uh as our backup option is we know that if we if we don't raise uh by the summer we will have to take some cost cutting measures to make us profitable but it wouldn't have to be very aggressive okay and when you say you're not profitable today you're talking like maybe burn of you know a million a month or less than that less than that okay like less than a hundred grand a month no no okay between between 100 grand and maybe 500 grand a month something like that okay fair enough and how are you so so let's talk about the virus for a second right assume you can't get a deal done right how many as the ceo of sas company during a crisis how many months of runaway are you planning for again assuming you don't get a deal done with the with the growth equity firm no so so the thing is we currently are burning money and we we you know gave everyone in the company a promise that we are not going to do cost cutting we're focused on ensuring that we pay the salaries to people the only people who are leaving the company are those where we already had some like performance management process initiated and so there are some people who left but it's like single-digit you know numbers and we are looking at it from the perspective that we believe we will raise the money because there's quite high interest now if we don't we've already made it public to also in if we don't uh by end of july we will announce some of the measures that we would need to be taking and we are now you know doing the these scenarios it might not even be needed because uh like the pipeline in terms of sales is moving slightly better than we were expecting like two weeks back when we had this kind of old company meeting where we were discussing this so there are still deals moving in the pipeline so if we if the if sales is progressing well we might not even need to do any cost cutting but it also will very much depend because like even big companies that are you know working with us are struggling heavily because most of the big retailers they have 25 30 percent online sales and you know if if 70 is gone you know even if the 30 you know doubles that's still just 60 of your original revenues so you know it it pretty much depends on the macro environment yep yep i mean i guess what i'm curious about is like have you left yourself enough cushion so your series c was a 15 million dollar euro sorry 50 million euro round back in june of 2019. i mean do you still have the majority of that caught maybe more than 10 million dollars in the bank or have you already plowed through a lot of it yeah okay we we've got uh if i remember correctly we've got something over five okay you know that we have on the accounts plus from the investors okay so you have assuming you're burning less than 500 grand a month right now and you have more than 5 million banks i mean you have plenty of runway to figure this out and and you feel good about raising the right we we we rate we're burning slightly more than 500 k per month price okay yep yep yep okay what about some of the other uh economics so you know in terms of onboarding new customers last time you came on uh you shared uh that you were spending about 38 000 on cac what's the updated full weighted cac today and where are you spending that money yeah so like now it's it's definitely more because also the contract size is is bigger so currently if you do the weighted which is quite difficult because you know we have new regions where we're investing heavily and don't see the traction that you need from that yet but like the the return on cac is on the blended average is 21 months but if you look at some of the regions that are already well performing we were just slightly over 12 which is what we want to achieve in all the markets once we you know go through the ramp up period got it so that gives you uh the rough answer also you know looking back at the numbers yes you're spending like and ten thousand up to maybe 150 000 150 000 in new markets 110 000 in mature markets to get a new hundred thousand dollar your customer yeah yeah i mean some of the new markets even slightly more than that yeah and where is that money going is it mainly sales comp or where are you spending it so it used to be mainly uh people cost and events uh now we've pivoted significantly towards digital so we now have a great new cmo and she's building the the entire inbound engine and so we will be spending more much more there um but you know we're in the transition on that and what does growth look like so last month how many new customers did you add and how many do you think you'll have this month uh so so you know year on over year growth for 2019 was uh 101 so we barely made it triple legit you know trying hard to the very last moment and uh february wasn't very strong uh and march could still be strong there's still uh one contract that should be coming in today uh and and you know with that the the total growth for for the month would be around 700k yep and new in in new ar yeah yeah yeah and that's sorry that's that's in this month that's in april that's for march how much and so yeah and we were actually so like before kobe 8 we were expecting about 1.5 million so that shows you that a lot of deals they're not lost but many are postponing the decision to see what's going to be happening yeah yeah that makes good sense i mean look the growth is there right back again when you came on last or late 2017 you're at a three and a half million run right now you're at 19. so so the growth is clearly there the question is kind of how do you pivot in kind of the virus environment um so let me ask another question right if you're trying to go out and with some of these growth equity firms and raise 100 million dollars you have to obviously tell a story to get a valuation you like so that you don't get like super super deluded what i mean from a range perspective what valuation are you targeting so it will strongly also depend on we're not as the only parameter we we really want someone who would drive uh drive it forward with us so but like the we only so far go you know we're early on in the process and we only got some indications the and the indications we're saying something around 200 yeah so uh now that's that's uh given what's happening in the market i think that's roughly fair we were able to get much higher valuations like you know a year back we had several investors who were willing to pay you know 300 and so so that's that's there's some discount however i really look at it from the perspective that we want to create to showcase that that there is a company who with strong ethics out of you know europe that can make it global and can be a leader in a category if we find an investor who shares that vision you know we even if someone would be willing to pay whatever 10 20 million more we would still likely choose that yeah so your deal since you're gonna sell about 50 60 percent of the company i mean you could see a deal happening where it's like a hundred million dollar investment on a hundred million dollar pre-money valuation which would be 200 million post and you're selling 50 of the company i actually i think we the percentage can be even higher but i like there are so many variants that you know yeah yeah very good all right let's wrap up here peter with the famous five number one favorite business book uh blueprint to a billion number two is there a ceo you're following or studying [Music] um not really number three what's your favorite online tool for building exponent currently zoom z yup number four how many hours you'll sleep to get every night there is a lot but still get average of seven plus probably okay and situation married single kid is um happily married with two amazing kids two okay so that's one new one since two years ago huh yeah i congratulate you congratulations two-year-old two-year-old boy all right and how are you uh i am 35 or 36 35 still 35 changes every year right all right wrap us up here peter what's something you wish your 20 year old self knew um i was thinking about it and i would say probably to be more patient but i wouldn't have listened like that so [Music] guys there you have it exponent looking to do a 100 million dollar round a big secondary here the company's doing 20 million dollars an hour 19 20 million dollars in ar up from 3 million just about two two years ago 101 year-over-year growth over the past 12 months now serving 190 online retailers and online e-commerce brands helping them get all their customer data in one spot and act on that data they're seeing nice growth in the era of the virus and the recession again hoping that helps fuel a healthy round that they're doing 121 net revenue retention with a team of 100 and i'm sorry 220 people 60 engineers 20 quota carrying reps others obviously admins all remote obviously now peter thanks for taking us to the top thank you an item oh you should be a sales guy all right guys what'd you think enjoy the interview if you like that one a lot of data be sure to click the little like button here on youtube and then additionally coming up tomorrow we have a founder revealing their valuation the day after we've got someone raising a hundred million right now in the middle of the virus how the heck are they going to do this i don't want you to miss these interviews so be sure to click my face right here and click the subscribe button to subscribe to the youtube channel so you don't miss those new episodes in the meantime if you're looking for something else to do i recommend you check out one of these two episodes for more data on sas companies and if you ever want more data just look in the description of the videos and you can click to getlatka.com where we have over 1400 companies and all their revenue data their churn their cac their valuations it's 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