How Funnel CEO Fredrik Skantze grew Funnel to $50M revenue and 1.2K customers in 2024.

hello everyone my guest is frederick escanza he is the ceo and co-founder of funnel which aggregates marketing data for some of the world's leading advertisers before funnel he led the team that developed a qual is it qualia facebook advertising tool and co-founder of the online e-commerce retailer otto quake frederick are ready to take us to the top yup qua what what kind of name is kwaya that is a hell of a name to try and remember how to spell oh yeah yeah yeah yeah funnel is much better by the way i think funnel.io is much easier yeah all right what's funnel do so we are a marketing data platform and we basically help companies aggregate and bring in all their marketing data put it all together so that they can then analyze it and report on it so they really understand you know what's going on and then update us update us kind of last time you came on you shared kind of average acvs i think you had mentioned that you were trying to go up market have you increased kind of the the average amount each customer is paying since 12 months ago yeah yeah absolutely so um average customer value on a monthly basis was around 450 dollars then and and now it's about it's more than twice that okay so close so it's fair to say kind of average customer paying more than 900 a month at this point yeah yeah around a thousand dollars and how did you so how did you drive that change again it's a significant change you had to churn probably a lot of logos that were you know smb ish how did you manage that yeah not so much churning but just focusing on when we were bringing in newer customers and and actually it was partly driven by us and partly also driven by the market so more as we became more established in the company in the industry as our product was more capable larger and larger companies found us and and wanted to do business with us um and then also having the capability of serving them which has more requirements as you kind of move up markets now you were at about 340 customers back in november 2017 when you and i last spoke what have you scaled to today how many customers are you serving 700 700 okay yeah that's good growth now where have you had to change your kind of sales flywheel since then and if so how um a little bit so you know we have we have substantially more sales people so we have specialized sales roles a little bit some some uh are focusing on smaller customers some teams are focusing on larger customers um we've grown our our u.s presence quite a lot you know we're a european company um we've also built out a pretty large office in boston so about 30 people in boston how many total people on the team just north of 100 okay and how many are quote carrying of those um so about uh 15 sales people in general okay and how many engineers have a hundred uh about 40 to 45. okay so how did you i mean one of the things that as you know as people go from kind of where you're at where you were two years ago to where you're at today getting kind of the sales person pro forma right is something that's always being edited so literally what should quote a target be you know what should earnings you know their full earnings be at ot relative to the quota the new booking ar bookings they're bringing in how did you kind of take a stab at that initially and modify it over the past 18 to 24 months um well i guess you experiment and see where you get at and then you try to improve it and it also depends on you know whether i guess we are sort of mid-market-ish or or even at the lower end of mid-market and at that time we think sort of five thousand dollars in new mrr per sales person is pretty good whereas if you are yeah per month um and if you are in in the real enterprise that gives us sort of a payback time of 12 months but if you if you are in the real you know enterprise base you probably want more but you'll have a lot fewer deals and a lot of misses as well if a sales person is adding five thousand dollars per month uh in new mrr why is that a 12 month payback well so you you basically have you know you see how much they bring on in on the year uh and then you add the lead costs um that you might be paying to generate that you have an str team you might do uh you know advertising and so on so if you if you fully load the full uh the full costs then that's what it works out the cost of the sales person or the cost of the customers they're bringing on no the yeah well the fully loaded cost of bringing in the customer i got it got it yeah yeah that makes sense so 12 months it's not just what you pay the sales person but you might have lead gen costs you might have sdr team all the things around it yeah no i underst i understand that um so so a 12-month payback at a thousand bucks a month in terms of acv that you're saying you're happy to spend 12 grand to get a new customer yeah and when you split down where you spend that when you split up where you spend that 12 grand you obviously have sales person commission where else are you investing to drive that growth in lead generation we do a lot of hourly generation online um you know basically what eating our our dog food and and uh spending it on digital advertising um and that helps us drive leads which channel does the best for you all the big all the big channels it's it's not just one you gotta try pick one so we can go deep so obvious one is search marketing okay so search marketing so in the search marketing channel i mean are we talking like you're spending 100 grand a month in that channel something like that yeah okay and how do you kind of back into your metrics so just from that channel how many leads would you expect to get from that channel um well you yes you gotta kind of you gotta say okay well if i wanna close 40 customers how many do i have to speak to well you probably have to speak to 400 customers in a in a month you mean you mean 400 trials to get 40 new customers yeah well maybe not trials but at least dialogues with customs you've got to speak to 400 people if you're going to close 40 40 customers if you have a conversion rate of 10 which is pretty normal yeah is is that what you're at right now about 10 approximately yeah from the initial discussion that's good now that's obviously just your search marketing channel but if you look at like your total new discussions or your new demos or your new trials however you quantified every month a total across the company how many new of those about each month are you bringing in we have about a dialogue with about a thousand prospects every month um but you know it's high and low some are are or just want to talk they're not good fit so you got to kind of sift this through and and it's only you know say a hundred that really is high value but those are really high value yeah well you said it at 10 conversion that would be about 100 new customers each month from the thousand dialogues right yeah that's good and how do you break down how your sdrs or your aes kind of attach themselves to those those thousand conversations per month is it geography based or something else yeah for us geography absolutely plays some it makes a place in you know we have a boston team that handles the us and and south america uh and then we have a european team that handles europe and the middle east we don't have a big presence in asia at the moment um and uh so geography that's the biggest play and then also the size of the lead uh measured by what uh typically by revenue or number of employees okay i see so you have different motions different teams sdrs depending on the team size of the lead yeah if it's a small lead you want you want fewer people touching it you want to be more automated and more fast but if it's a larger deal then you want a whole team on that lead you know from an str from an account executive maybe a product specialist uh and really kind of stuff up to be able to serve them your annual gross churn revenue churn back in 2017 you shared was about 35 what's it today uh it's between uh one and a half and two percent a month okay so 24 would be max about half of what what we had done yeah let's let's assume it is the full two percent per month or 24 in annual gross revenue churn does your expansion on the same cohort more than make up for the 24 loss yeah yeah we have negative nature now how negative a little bit negative it's just it's just turned negative so maybe half a percent negative okay so this is the same okay per month so this is the same as saying if it's per month point five times twelve obviously it's six percent or negative six percent right the inverse of this would be to say that your net revenue retention is about 106 correct yeah yep uh that's great that's obviously good how do you get that i mean at your acv i mean 106 is good but i'd say world class or best in class is like 130 135-ish how do you get your net revenue retention up to that range yeah i think you do it primarily by having a much higher annual contract value so dealing with larger customers than you have then you have typically have much higher net retention alternatively...