Goconsensus Revenue & Funding (2024)

hello everybody my guest today is garen hess he's a serial entrepreneur who's founded multiple software companies industry conferences and a non-profit organization he's currently the founder and ceo of consensus a b2b demo automation platform he enjoys reading history mountain biking choir conducting and spending time with his wife and three kids garen are you ready to take us to the top we're ready to go all right real quick what were the names what are the names of some of the past companies that you founded so my last tech startup was rapid intake but i actually started i went to an entrepreneurship lecture series when i was in college and it just lit the fire and even though i didn't have any idea what i was doing i just went out and started doing whatever i thought was interesting and to show you how ridiculously dumb that was in some sense i at one point i had five companies going at one time i didn't even realize the principle of focus but it gave me a lot of experience most of those didn't do well but i kept my teeth on them so the alternative to that is you know bridge engineers would never have a single point of failure in the case of high winds so why an entrepreneurship would you want to only focus on one thing the last thing you want is a single point of failure well i think it was andrew carnegie that said that you ought to put all your eggs in one basket but watch that one basket and i suppose that there are two approaches you could take to that but it's also just concentration of force right if you think of it from a war mentality if you spread out your force across too many points you're going to go you know a mile wide and an inch deep rather than penetrate into the market yeah i would say pulling from sun tzu are to war there's also a lot of value to distracting with one thing on the left side and then attacking with your full force on the right right yeah we could i feel like it would be fun to just you know hypothetically debate this with you for the next 15 minutes all right tell us about tell us about go consensus so it sounds like it's kind of automated b2b demos how does it work and what's your revenue model yeah so consensus is software as a service that accelerates b2b sales through automated video demos and the way that it works is the platform the the salesperson or sales engineer will send out a customized link to a prospect that prospect will then answer some questions uh might be some questions about role or industry company size and then it'll route them to a demo that's unique to that persona but then it asks more questions about what's driving their interest so what's very important to them was somewhat what's not important and what we're trying to do is automate part of the normal discovery that a salesperson does because a good salesperson is going to ask some questions tailor the pitch and the presentation the messaging to that unique person's interest and then also try to discover other stakeholders and so as the as the viewer the prospect goes through the demo it grabs video clips and documents based on their responses to all these questions organizes them in a way so there's this perfectly tailored um demo for them and then as they share the demo with other people and this is one of the primary goals is to discover and engage other stakeholders in the buying group as they share that demo with others the demo will again personalize automatically to each stakeholder in the buying group and then under the behind the scenes or under the hood where we're tracking all that that's going on we actually bring back analytics we'll call demolitics back to the sales person and this allows them to see not only what's happening with the individual prospect but how what that one prospect is doing compares to what all the other stakeholders are doing so you get the sense of alignment or misalignment yep got it and us get real quick before we move on past that price point on average what's the average customer paying you per month for this so average customer average deal size is about seventeen thousand dollars a year okay so so you're selling into like an organization i mean are what drives up kind of revenue is it number of seats or number of demos uh number of seats okay so we typically get in a lot of companies about 25 seats um and then they scale up from there a lot of companies because we're a brand new technology arguably brand new category software need to see proof in the pudding before they're going to expand and so they'll start out with a team of say 20 to 30 reps see what happens then expand from there um interesting are there any other pricing axes you use to drive up expansion besides number of seats um if it's a marketing use case then there's a usage component but our main focus is on the sales side okay interesting and uh put this on a timeline for me when you launch the company so we launched the company back in 2014 and um and well technically in 2013 but got to market out in uh 2014 so that's kind of when it was launched out on the marketplace 2014 and then fast forward to today how many customers do you have on the platform so we've got about 200 customers um it's been an interesting journey because i thought this was going to be a small business play where we're just going to charge you know i don't know what i what i was thinking at the beginning but um it's turned out that fairly quickly we started engaging companies that had large sales teams and they were getting good traction we've recently really focused a lot more on the enterprise and that's where our primary focus is now but as an example adp when they first came on back in 2014 they they started with 80 sales reps and they did the split test for 90 days where they had every rep every other deal they would use consensus as part of the sales conversation and sales process and then they compared the deals after 90 days and what they discovered was that they had a 44 increase in the close rate when they used consensus and automated demos and their sales cycle shortened at the same time and so that's the kind of impact that we've seen in these larger companies because they can implement it across the board they've got this emphasis but i'm curious how little were they paying for those 80 seats how little were they paying yeah well i think at the time they were paying about 40 grand okay and they've since expanded to over 100k see i always wonder there's there is a real death gap in the early years of a company where people eat you you have to choose you have to have a whatsapp model where you have a billion users paying a dollar a year or like a peter thiel palantir model where there's you know the customers the us government they pay you 100 million a year but you only need three customers a lot of people like get stuck in the middle they don't ever pick a side so i'm curious have you like drastically increased pricing as time has gone on or will a company like adp which sounds like they're getting loads of value from you and you know directly tied to revenue and close rates you know still not paying you in your opinion you know what the value is that you're delivering to them i mean we've experimented with lots of different pricing over the years especially as we tried to balance small business with large business and all of that and and um so adp we've locked into the pricing we we haven't raised pricing on them because they've been with us for four years now they keep expanding and um and so we don't we don't see a reason to change that um over time we get the you know the lifetime value of the customer really was what pays for it interesting um okay good so uh 200 customers today you just mentioned about 17 000 bucks kind of acv on average which i think comes out to like 1400 bucks a month can i do that math you're doing about 280 grand a month right now uh yeah you're doing some good math right around there okay and what's growth rate so about a year ago where were you so right now we're seeing pretty flat growth because we've been seeing a change in our focus so we've been focusing mostly on enterprise and so we've seen a growth rate of about 50 percent annually in our enterprise but overall we've been pretty flat just because we've seen super active turn as we've turned out some of the customers that it doesn't really necessarily isn't the right fit for on the on the smaller side not to say it can't be used for small business but you have to put in a pretty significant effort at getting your content in there and the larger companies tend to have the resources whether it be pre-sales sales engineers that are building content or sales enablement focused people that that are able to go through the implementation phase more effectively i think that's been a learning curve for us so just be clear about a year ago maybe still doing about 280 grand a month then but your customer kind of density has changed over the past 12 months they're significantly more of your revenue made up from kind of a lesser amount of customers you churn off low rpo accounts yeah exactly we had one investor call it proactive churn i think it was because it's a little frustrating to uh see growth in the enterprise but not see a lot of growth on the top line but we know that we'll return to that and and what we're doing is is you know transforming maybe what you might call low quality revenue to high quality revenue yeah i mean it's a shift and you have to like go all in but i mean one once you get past kind of a maybe a year or two of being flat the expansion revenue then becomes just incredible so it sounds like you're well on your way to kind of really build out the enterprise version and hopefully you drive up first your acvs from 17 grand to 50 to 100. that's exactly where we see it heading our acv used to be at about 12 13 something like that and so we do see it increasing what i think is interesting is i was sitting in sequoia capital's office with matt miller over there a couple of years ago and i was telling him we're trying to make the shift and he said you know i'm going to tell you something that no one else will tell you and i said what is that and he said moving from small business to enterprise focus will be as hard or harder as starting your company over uh starting your company in the first place and um it was actually really good advice and and i've i've appreciated that because even though i knew it was going to be challenging i hadn't thought it would be that challenging it turns out it is that difficult i think to make that transition and even though we're doing it successfully um it was great advice because it's given me a little bit more stamina just kind of knowing what i'm getting into going into it it's huge you also have i think it's harder than starting from scratch because you have to get over the sunk cost of all these customers that are paying you revenue that you literally have to essentially get rid of it feels so counter-intuitive yeah and we aren't getting rid of them per se um even though many of them you know are just come on you don't want you're getting rid of them you want to focus on enterprise that is true we do want to focus on enterprise but in case any of our customers are out there we're still servicing them and helping them out so yeah interesting um as you're trying them out is that because you're showing them like hey your pricing is going to you know increase over the next like month and they're saying i don't want to pay that and they churn like how is that natural turn actually happening no we're not really increasing the pricing for any existing customers or anything like that um what we're doing is just letting them turn if they don't get the kind of support that they're looking for if they aren't implementing effectively like i said the the content is one of the primary issues so um in the past we we actually worked through this model where we were building content for people because yeah that was it was painful because right out of the gate you know we said hey we have this great platform it personalizes video experience for an automated demo and people said well how do we get our content in there and and so we started trying to figure out how we could tr take control of the sales by offering a complete solution i mean you try to set up fee a lot of companies will do that where there's significant onboarding they'll just disguise it as like a consulting fee or a setup fee yeah we definitely did that that the problem is the content phase building out content um turned out to be a a massive mistake yeah um and that's because even though we were able to get deals done and and close and grow quickly and the content development phase of the project would really get bogged down and it wasn't because we didn't have enough resources we're actually very innovative in how we built out an agile content development methodology and all that but the clients would get stuck just not focusing on it so we'd turn around a script for a video piece or whatever it might be and uh and the client would you know take three weeks to get back and it'd be another six weeks and then they get bogged down and six months after they bought the software they don't have content and i would say that's the number one reason that this small business accounts are churning um because they just struggle to get the content in there got it talk to me about funding it sounds like you were you know you did your whole rounds and on sandhill road have you raised capital enough so how much uh we raised a little over eight million dollars in capital okay and it was a variety of um traditional vc uh angel investors and then we actually took on some revenue-based financing as well how much is this pure equity how much oh of the capital yeah um about uh seven seven and a half million something like that seven million actually some somewhere in that range and who i know this is getting the kind of revenue-based financing is getting very hot there's a lot of firms offering it i'm curious who'd you decide to go with uh we weren't with riverside acceleration capital i don't know if you've heard of them they're relatively new but they have been awesome partners yeah they're based actually down here in austin uh or i know some of them are down here in austin yeah it's great and when you say revenue-based financing just to be clear it's not a term loan with a fixed interest rate it's revenue based so you pay back four five six seven percent of gross receipts per month over some fixed period of time yep exactly with the repayment cap yeah yeah exactly that's great i love it yeah and i've loved working with them i would highly recommend them to any entrepreneurs uh looking around for that out there because i looked at a lot of other firms like lighter capital and others and nothing against the other firms but these guys have been awesome and and you mean just from a terms perspective they were better terms or just the people were quicker to work with or better or easier to work with um you know not having worked with some of the other firms not having done a deal with them i but i don't know for certain but i would actually say both they had better terms and then jim toth and some of the other guys over there have just been incredible to work with as an example at one point we were just trying to figure out you know what we should do should we do some more equity should we do another round of revenue based financing and they just popped up and said hey we're super interested we'll help you do a mix and um they kind of they kind of helped out with with driving a little bit of an equity raise and then also added some additional rbf on top of it that's great that's revenue-based financing good stuff what about churn so gross revenue churn it sounds like it might be kind of high over the past 12 months as you transition but but what is it if you don't mind sharing yeah gross revenue churns been at about uh 28 so you know not as low as we'd like it to be i'm in my last startup i i unwittingly had a 5 annual churn rate which i didn't realize was so awesome i would be upset about it every day and now that i'm in this in this company i'm thinking wow if i can get it down to five percent we're going to be in really good shape does expansion revenue more than cover the 28 lost or if if not how much does it cover right now uh we're at about 19 okay my revenue-based churn so it covers some of it but you mean expansion uh well 19 revenue churn in other words you know we get about a ten percent uh yeah yeah sorry so you're basically saying okay we lose 28 percent we save 10 percent from expansion so net net right where we lose about 18 percent yeah and and that's that we really expect to be able to make all of that up at some point through expansions because we're starting to have expansion you know very large expansion discussions with some of our enterprise customers but it takes a while because you've got to get in you've got to prove value you've got to do some initial expansions until two or three land and then you can do a big expansion i just we're out of time so quick answers here if you can team size uh we're at about 30 total and where's everyone based uh we've got people um here in utah we've got people um some of our dev team out in eastern europe and um and some people in south america and payback period to get a 17 000 acv account what are you willing to spend to acquire those uh we spend about 14 five okay 14. so less than a 12 month payback that's great yeah very good all right let's wrap up here with the famous five number one what's your favorite business book the one thing by gary keller number two is there a ceo you're following or studying oh boy you know it's funny i haven't found a ceo that i just absolutely love um but i'd have to say steve jobs is always one that i love to look at but you know he's he's gone but he's still good to follow yep number two is there a favorite online tool that you have or that you enjoy for building your company favorite online tool yep one you use a lot we actually use zoom so we do a lot of remote collaborations since our team is distributed around the world uh so we use it every day number four how many hours of sleep are you getting every night oh my heavens this would be a bad day to ask me um but yeah i average four to six okay we'll call five there in the middle and what's your situation married single kiddos oh married with three kids love them to death and how old are you i can be happier i'm actually uh 49 going on 50 amazingly congratulations that's great my oldest daughter just got married last summer uh a year ago so uh anyway love the married family life how exciting all right uh last question what do you wish your 20 year old self knew i wish my 20 year old self knew that there weren't really any limits if you just went after it and got the right kinds of input and the right mentorship from other people i didn't really realize that at least in our country in the united states that as long as you believe that there are no limits you can actually accomplish that not saying that there aren't actual boundaries or obstacles or challenges but um think big think big that's that was my biggest problem at that age was i thought way too small and i i acted too small guys think big founded bill consensus in 2014 they've just passed about 280 grand per month in revenue flat year-over-year as they transition from smb customers to more enterprise and again these are sales reps using their tool to give more effective sales presentations and sales demonstrations adp a big account they raised seven million bucks in equity financing about five million or another call million in revenue-based financing plus another equity a little bit of equity on top of that 200 customers right now paying on average 17 grand per year willing to spend up to 14 500 bucks to acquire that customer so healthy metrics in terms of payback period less than 12 months in terms of churn as they go through the transition you know 28 gross revenue churn annually they expand by about 10 percent on that same cohort so net net about 82 net revenue retention each year with 30 people based between utah and other remote locations garen thank you for taking us to the top hey thank you so much it's been great to be with you