Funnelenvy Revenue & Valuation (2018)

hello everyone my guest today is arun siva shankar and he's the founder and ceo at funnel envy a startup solving b2b website marketing optimization challenges with a sas business model he and his team have optimized websites for some of the largest brands in the world as an engineer and serial entrepreneur erin wants to transform the way marketers experiment arun are you ready to take us to the top absolutely all right this is a tough tough space optimizely unbounce all kinds of no-touch solutions how are you competing and what kinds of deals are you winning well uh we're first of all uh from a market perspective we're focused on b2b i think b2b b2b marketers have some unique challenges um and some of those challenges have been overlooked by by a lot of vendors now uh we're also partners with some of those uh some of those companies that you mentioned so it's it's really about uh what's the best solution for a customer based on the problems that they're trying to solve and so tell me about something you're saying if a b2b uh someone who has a b2b website is looking at you guys versus optimizing you'll win that deal because you're they're focused maybe more on like consumers or prosumers people like that well first of all we we think about uh optimization and personalization that's primarily a data problem uh and and and delivering the right experience using data now uh a lot of platforms like optimize they primarily even focus on b2c customers and so that's yeah and that's fine but they have different challenges in b2b customers so we can take our data capabilities and integrate with optimizely or service the customer ourselves uh so we have we have some flexibility there ultimately it's about you know delivering the uh right experience to our customers customers that ultimately turns into revenue and so that's all okay and give me a general sense of the kind you know the size of customers you're working with in terms of your average acv are we talking 10 grand 100 grand a thousand what's it typically yeah so we're in from a sas perspective we're still in the relatively early stages so there's some there's a pretty wide distribution and we also do services so from a product acv perspective you know that can run anywhere these days from like 30k to 100k it's a pure sas annual that's the sas part of it and then services optional but they're you know they're uh additional on top of that um because personalization optimization it's it's an it's an interesting space but it's also relatively new so people have to understand kind of how to do it and be successful over the past 12 months what's the breakdown percentage-wise in terms of professional services revenue versus pure play sas revenue over the last 12 months uh we're about uh 30 30 70 uh services to products so still still uh so 70 sas company no i don't know other way around 70 professional service more recently we're we're starting to flip the other way but look at like trail trailing 12 months it's about 30 sas revenue and so what's your team size today uh that's about 15 of us 15. okay got it so that gives me a sense i mean it sounds like you guys are really an agency you saw this problem now you're developing a sas product to deliver a problem that a lot of your customers were having that's exactly right like we were we were an agency for years actually doing conversion optimization across like b2c b2b a wide variety of things i'm a product guy by background but it was a way for us to sort of learn about the space learn about where the opportunities were where ultimately the white spaces also build capability and knowledge over the last year we have transitioned to a product company so that's been fueled by a lot of the learnings and and cash from the agency business before you started that transition give me a sense of the size of the agency i mean were you guys doing a million a year two million a year what generally where were you at a couple million here couple million a year okay and and what uh what was the catalyst that made you start thinking about moving into software well actually i was thinking about moving into software on day one um in fact one of the for one of the customers that i had i built an integration between marketo and optimizely um and because i wanted to use the data that was in marketing automation to fuel better or to drive better sort of experiments and experiences on the website uh that over the course of a lot of iteration and evolution um led us to where we are now with the product interesting okay and year one was which year year one was 2013. we started mid-2013 the agency or the sas product okay yes two years years ago is what i technically consider if you discount the first year so goofing off as a side project and what have you scaled to in terms of total customers now using the sas product uh there's uh seven customers on the sas product okay seven yeah so these are you these are this is kind of you know an enterprise-ish sale at 30 you know thousand bucks acv minimum but i can do some back of the napkin math there and assuming because they're doing what somewhere north or somewhere around 20 grand a month in revenue just pure play sass right right yep very good and that comes what is that about 200 grand a year in pure play sas um interesting what does what does that kind of revenue predictability enable you to do from a hiring and growth perspective that you couldn't do when you were just an agency well nothing right now i mean it it it we we feel like and with some of the new things that we're doing in the product um the pipeline is getting significantly bigger and pilots are there and things like that but we're it's still early right so um the hope is we build a lot more predictability in the pipeline to be able to do like the the long-term hiring and longer-term uh moves that we want to make but you know the nice thing about having the services as well to augment the the product as we have you know we have a little bit of a hedge there and and can uh can play both sides of the equation interesting and what's growth looking like again there's just sas today are you growing 100 of you every year 200 what's it look like um well shooting for 100 yeah yeah what'd you do over the past 12 months though uh do you know no it's like today you're doing a call at 17 18 grand per month in revenue just on the sas side if you go back 13 months was that around 5 grand 10 grand where was it at oh it was it was less than five sub five okay so really just launching yeah yeah absolutely and where is are is most the growth coming from just upselling your agency customers are there people entering your world strictly from sas like the sas product side uh so there are some conversions um that were happening the problem is there's this little bit of a hangover with some of the agent customers thinking of us as a product company now there's quite a few now that are just coming into us from the south side we're not really approaching the market as an agency anymore interesting okay interesting and in terms of churn what's that look like uh none yet actually well sorry that's not true uh a couple years ago when we were running some pilots and it was just kind of an integration platform we had some come through and turn like in the pilot phase um so if you count that as churn i'm not sure but we once i mean we do annual contracts we haven't had a customer return yet but that's that started manual that's great any like downgrades as revenue churn also zero yeah revenues turn to zero okay do you have adding pretty aggressively to the platform so uh i mean again still still kind of building building up capability as opposed to uh holding on and people don't go away have you honed in any of the economics yet like cac rpo ltv things like that yeah no youtube economics is a several year out problem it's it's uh now we think we're sort of uh rounding the corner on that product market fit we're releasing and piloting some new capability that i think is is is pretty compelling for our market and that's where we're seeing all the interesting growth um so it's really about pushing that forward and we'll figure out the unit economics later got it and give me a last few questions here before we uh jump into the famous five location wise where are you guys based uh well we're based in milbury california but we have a really distributed team okay so main remote yeah and bootstrap to date or no which is up to date i love that man resist resist the urge can't say that's going to be the case forever but it's been it's been good so far have you had offers uh yes actually why'd you say no uh well i think early on i'm a fan of sort of constrained experimentation as a way to learn it it takes a while um but you don't get that sort of back pressure of scaling too quickly and and all then look you know having an agency uh bootstrapping software um failing a bunch of times this is these are all things that we had to do and the struggles we had to go through to to get to this point and hopefully have that that future that we envisioned yep why not just sell the agency so it's not a distraction and then a triple quadruple down on the sas yeah it's it's it's some it's conversations i've had and something i've been thinking about the flip side of that is what is the distraction of selling the agency and what does the net benefit of the agency bring we've skate we've uh focused our agency business and the sas business to be attacking the same market and same set of problems um and we made the mistake before not doing it it was a huge distraction so i think we're in a better place now by solving a consistent set of problems uh with a consistent market and a much more focused market that the distraction is is hopefully much less that's good all right let's wrap up arun with the famous five number one what's the last business book you read um uh radical candor radical candor number two is there a ceo you're following or studying currently um no i get cash a pretty wide net okay good number three what's your favorite online tool for building a business uh trello number uh four how many hours of sleep are you getting every night uh i shoot for seven but usually around they go to six all right and what's your situation married single you have kids married kids ten kids two okay and how old are you uh how how how old am i you oh forty one forty one okay last question what do you wish your twenty year old self knew around uh slow down enjoy things uh yeah very much there you guys have it from our runes slow down and enjoy back in 2013 launch an agency grew to a couple million bucks in revenue before just two years ago launching and really starting to think about a sas product related to funnels and optimization for b2b folks not b2c folks which obviously there's a lot of competition there already uh he's scaling it he's upselling agency customers on the sas product they've done that to seven so far paying on average and minimum 30 grand per year on those deals so they're doing call it 20 grand per month right now that's just the pure play sas revenue obviously they have cash from the agency fueling the growth of this side of the platform too early on many of the economics their team of 15 remote with him uh rune based in california one to watch totally bootstrapped roon thank you for taking us to the top thanks david