How Goconsensus Reached 200 Customers at $17,000 ACV While Transitioning to Enterprise (Interview with Founder and CEO Garin Hess)

Introduction and Garin Hess Background

Nathan Latka

00:01Hello, everybody. My guest today is Garin Hess. He's a serial entrepreneur who's founded multiple software companies, industry conferences, and a nonprofit 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. Garin, are you ready to take us to the top?

Garin Hess

00:20We're ready to go.

Past Companies and Entrepreneurial Journey

Nathan Latka

00:21All right, real quick. What the name of some of the past companies that you founded?

Garin Hess

00:25So my last tech startup was RapidIntake, 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

00:51realize the principle of focus, it gave me a lot of experience. Most of those didn't do well, but I kept my teeth on them.

Nathan Latka

00:58The 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 wanna only focus on one thing? The last thing you want is a single point of failure.

Garin Hess

01:09Well, 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 gonna go a mile wide and an inch deep rather than penetrate into the

01:31market.

How Consensus Works and Revenue Model

Nathan Latka

01:32Yeah, I would say pulling from Sun Tzu art of 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? I feel like it would be fun to just hypothetically debate this with you for the next fifteen minutes. All right, tell about goconsensus. So it sounds like it's kind of automated B2B demos. How's it work and what's your revenue model?

Garin Hess

01:54Yeah. 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. 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 ask more questions about what's driving

02:27their 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 interests, and then also try to discover other stakeholders. And so

02:50as the viewer, the prospect goes through the demo, it grabs video clips and documents based on the responses to all these questions, organizes them in a way so there's this perfectly tailored 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

03:17stakeholder in the buying group. And then under the behind the scenes or under the hood, we're tracking all that that's going on and we actually bring back analytics, what we call demo analytics, back to the salesperson. 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.

Nathan Latka

03:17Yep, got

03:44it. And then

Pricing and Average Contract Value

Nathan Latka

03:45Real quick before we move on past that price point on average, what's the average customer paying you per month for this?

Garin Hess

03:51So average customer, average deal size is about $17,000 a year.

Nathan Latka

03:56Okay. So you're selling into like an organization or I mean, what drives up kind of revenue? Is it number of seats or number of demos?

Garin Hess

04:04Number of seats.

Nathan Latka

04:05Okay.

Garin Hess

04:06So we typically get in a lot of companies at about 25 seats and then they scale up from there. A lot of companies, because we're a brand new technology, arguably a brand new category of software need to see proof in the pudding before they're gonna expand. And so they'll start out with a team of say 20 to 30 reps, see what happens and then expand from there.

Nathan Latka

04:28Interesting. Are there any other pricing axes you use to drive up expansion besides number of seats?

Garin Hess

04:36If it's a marketing use case, then there's a usage component, but our main focus is on the sales side.

Nathan Latka

04:44Okay, interesting. And put this on a timeline for me. When'd you launch the company?

Garin Hess

04:48We launched the company back in 2014 and

04:55well, technically in 2013, but got to market out in 2014. So that's kind of when it was launched out on the marketplace.

Customer Count and Enterprise Transition

Nathan Latka

05:022014 and then fast forward to today, how many customers do you have on the platform?

Garin Hess

05:06So we've got about 200 customers. 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, I don't know what I was thinking at the beginning, but 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

ADP Case Study and Customer Outcomes

Garin Hess

05:34as an example, ADP, when they first came on back in 2014, they started with 80 sales reps and they did the split test for ninety 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 ninety days. And what they discovered was that they had a 44% increase in the close rate when they used Consensus and automated demos and

06:01their 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 in

Nathan Latka

06:01But Garin, I'm curious,

06:14how little were they paying for those 80 seats?

Garin Hess

06:17How little were they paying? Yeah. Well, I think at the time they were paying about $40 and they've since expanded to over $100,000.

Nathan Latka

06:25See, I always wonder there's a real death gap in the early years of a company where people, either 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 the customers, the US government, and they pay you a 100,000,000 a year, but you only need three customers. A lot of people like get stuck in middle. They don't ever

06:43pick 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 directly tied to revenue and close rates, still not paying you in your opinion, what the value is that you're delivering to them?

Garin Hess

07:01I 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.

07:10So ADP we've locked into the pricing. Haven't raised pricing on them because they've been with us for four years now. They keep expanding. And so we don't see a reason to change that over time. We get the lifetime value of the customer really was what pays for it.

Nathan Latka

07:29Interesting. Okay, good. So 200 customers today, you just mentioned about $17,000 kind of ACV on average, which I think comes out to like $1,400 a month. Can I do that math? You're doing about $280,000 a month right now?

Garin Hess

07:41Yeah, you're doing some good math there.

Growth Rate and Proactive Churn Strategy

Nathan Latka

07:43Right around there, okay. And what's growth rate? So about a year ago, where were you?

Garin Hess

07:47So 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% annually in our enterprise, but overall we've been pretty flat just because we've seen proactive churn as we've turned out some of the customers that it doesn't really necessarily isn't the right fit for on the smaller side. Not to say it can't be used for

08:16a 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 are able to go through the implementation phase more effectively I think. And that's been a learning curve for us.

Nathan Latka

08:40So just to be clear about a year ago, maybe still doing about $280,000 a month then but your customer kind of density has changed over the past twelve months. They're significantly more of your revenue made up from kind of a lesser amount of customers as you churn off low ARPU accounts.

Garin Hess

08:52Yeah, exactly. We had one investor call it proactive churn. Think it was because it's a little frustrating to 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 what we're doing is transforming maybe what you might call low quality revenue to high quality revenue.

Nathan Latka

09:12Yeah, mean, it's a shift and you have to like go all in, but I mean, once you get past kind of 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 drive up first year ACVs from $17,000 to $50,000 to $100,000.

Garin Hess

09:28That's exactly where we see it heading. Our ACV used to be at about $12,000 to $13,000, 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 this shift. And he said, you know what, I'm gonna tell you something that no one else will tell you. And I said,

09:51what is that? And he said, moving from small business to enterprise focus will be as hard or harder as starting your company over, starting your company in the first place. And

10:04it was actually really good advice. I've appreciated that because even though I knew it was gonna 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, 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.

Nathan Latka

10:24It's huge. You also have to, 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 counterintuitive.

Garin Hess

10:35Yeah, and we aren't getting rid of them per se, even though many of them are just

Nathan Latka

10:41Come on, Garin, you don't have to sugarcoat it. You don't want, you're getting rid of them. You wanna focus on enterprise.

Garin Hess

10:45That is true. We do wanna focus on enterprise, But in case any of our customers are out there, we're still servicing them and helping them out. So

Nathan Latka

10:52Yeah. Interesting. As you're turning them out, is that because you're showing them like, hey, your pricing is gonna, you know, increase over the next, like, month and they're saying, I don't wanna pay that and they churn. Like, how was that natural churn actually happening?

Garin Hess

11:04No, we're not really increasing the pricing for any existing customers or anything like that. What we're doing is just letting them churn if they don't get the kind of support that they're looking for, if they aren't implementing effectively, like I said, the content is one of the primary issues. So in the past, actually worked through this model where we were building content for people because yeah, that was painful because right out of the gate, we said,

11:32hey, we have this great platform. It personalizes video experience for an automated demo. And people said, how do we get our content in there? So we started trying to figure out how we could take control of the sales by offering a complete solution.

Nathan Latka

11:47I 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.

Garin Hess

11:54Yeah, we definitely did that. The problem is the content phase building out content turned out to be a massive mistake. And that's because even though we were able to get deals done and close and grow quickly, 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

12:25get stuck just not focusing on it. So we'd turn around a script for a video piece or whatever it might be. And the client would take three weeks to get back and it'd be another six weeks and then it 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 the small business accounts are churning because they just struggle to get the content

12:48in there.

Funding and Revenue-Based Financing

Nathan Latka

12:49Got it. Talk to me about funding. It sounds like you are, did your whole rounds on Sand Hill Road. Have you raised capital enough so how much?

Garin Hess

12:56We raised a little over $8,000,000 in capital. I know it's a variety of traditional VC angel investors. And then we actually took on some revenue based financing as well.

Nathan Latka

13:06How much is just pure equity?

Garin Hess

13:09How much of the capital?

Nathan Latka

13:11Yeah.

Garin Hess

13:14About $7,000,000 to $7,500,000, something like that. 7,000,000 actually some somewhere in that range.

Nathan Latka

13:20And 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?

Garin Hess

13:27We went with Riverside Acceleration Capital. I don't know if you've heard of them. They're obviously new, but they have been awesome partners.

Nathan Latka

13:35Yeah. They're based actually down here in Austin 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 or five, six, 7% of gross receipts per month over some fixed period of time.

Garin Hess

13:50Yep, exactly. With the repayment cap?

Nathan Latka

13:53Yep, exactly.

13:55That's great, I love it.

Garin Hess

13:56Yeah, and I've loved working with them. I would highly recommend them to any entrepreneurs 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.

Nathan Latka

14:09And you mean just from a terms perspective, were better terms or just the people were quicker to work with or better or easier to work with?

Garin Hess

14:17Not having worked with some of the other firms, not having done a deal with them, 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 what we should do. Should we do some more equity? Should we do another round of

14:37revenue based financing? And they just popped up and said, Hey, we're super interested. We'll help you do a mix. And they kind of helped out with driving a little bit of an equity raise and then also added some additional RBF on top of it.

Gross Churn and Net Revenue Retention

Nathan Latka

14:50That'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 twelve months as you transition, but what is it if you don't mind sharing?

Garin Hess

14:58Yeah. Gross revenue churn has been at about 28%. So, you know, not as low as we'd like it to be. 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 5%, we're gonna be in really good shape.

Nathan Latka

15:19Does expansion revenue more than cover the 28% lost or if not, how much does it cover?

Garin Hess

15:24Right now we're at about 19% revenue based churn. So it covers some of it,

15:29but

Nathan Latka

15:29You mean expansion?

Garin Hess

15:32Well, 19% revenue churn. In other words, we get about a 10% save

Nathan Latka

15:32Yeah. On

15:40sorry. So you're basically saying, okay, we lose 28%. We save 10% from expansion. So net net, right, we lose about 18%.

Garin Hess

15:49Yeah, and that's, we really expect to be able to make all of that up at some point through expansions because we're starting to have expansion, very large expansion discussions with some of our enterprise customers. But it takes a while because you've got to get in, got to prove value. You got to do some initial expansions until it's two or three land, and then you can do a big expansion.

Team Size and Geographic Distribution

Nathan Latka

16:10I just realized that we're out of time. So quick answers here if you can. Team size.

Garin Hess

16:14We're at about 30 total.

Nathan Latka

16:15And where's everyone based?

Garin Hess

16:17We've got people here in Utah. We've got people, some of our dev team out in Eastern Europe and and some people in South America.

Customer Acquisition Cost and Payback Period

Nathan Latka

16:27And payback period to get a $17,000 ACV account. What are you willing to spend to acquire those?

Garin Hess

16:32We spend about 14,500.

Nathan Latka

16:34Okay, 14,000. So less than a twelve month payback. That's great.

Garin Hess

16:36Yeah.

Famous Five: Books, Tools, and Personal Life

Nathan Latka

16:37Very good. All right, let's wrap up here with the famous five. Number one, what's your favorite business book?

Garin Hess

16:42The one thing by Gary Keller.

Nathan Latka

16:44Number two, is there a CEO you're following or studying?

Garin Hess

16:48Oh boy, you know, it's funny. I haven't found a CEO that I just absolutely love. But I'd have to say Steve Jobs is always one that I love to look at, but you know, he's gone, but he's still good to follow.

Nathan Latka

17:02Yep.

17:03Number two, is there a favorite online tool that you have or that you enjoy for building your company?

Garin Hess

17:08Favorite online tool?

Nathan Latka

17:09Yep. One you use a lot.

Garin Hess

17:10We actually use Zoom. So we do a lot of remote collaboration since our team is distributed around the world. So we use it every day.

Nathan Latka

17:18Number four, how many hours of sleep are you getting every night?

Garin Hess

17:20Oh my heavens, this would be a bad day to ask me. But yeah, I average four to six.

Nathan Latka

17:28Okay, I'll call five there in the middle. And what's your situation? Married, single kiddos?

Garin Hess

17:32Oh, married with three kids, love them to death.

Nathan Latka

17:35And how old are you?

Garin Hess

17:36I can be happier. I'm actually, 49 going on 50 amazingly.

Nathan Latka

17:40Congrats, that's great.

Garin Hess

17:41My oldest daughter just got married last summer, a year ago. So anyway, I love the married family life.

Advice to Younger Self

Nathan Latka

17:49How exciting. All right, last question. What do wish your 20 year old self knew?

Garin Hess

17:53I wish my 20 year old self knew that

17:59there 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. I'm not saying that there aren't actual boundaries or obstacles or challenges, but

18:25think big, think big. That was my biggest problem at that age was I thought way too small and I acted too small.

Nathan Latka

18:31Guys think big founded goconsensus in 2014. They've just passed about $280,000 per month in revenue flat year over year as they transitioned 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 $7,000,000 in equity financing about 5,000,000 or another call it million in revenue based financing, plus another equity, a little bit of equity on top of 200

18:55customers right now paying on average $17,000 per year, willing to spend up to $14,500 to acquire that customer. So healthy metrics in terms of payback period, less than twelve months. In terms of churn, as they go through the transition, 28% gross revenue churn annually, they expand by about 10% on that same cohort. So net net about 82% net revenue retention each year, team of 30 people based between Utah and other remote locations. Garin, thank you for

19:19taking us to the top.

Garin Hess

19:21Hey, thank you so much. It's been great to be with you.