Greenhouse Revenue, Valuation & Funding (2024)

hello everyone my guest today is daniel chaney is the ceo and co-founder of greenhouse which builds software tools to help companies make recruiting a competitive advantage before greenhouse he co-founded lab 49 a global firm providing technology consulting solutions to the world's leading investment banks daniel are you ready to take us to the top let's do it all right man you are in a extremely competitive space give us an update you're on about a year and a half ago where's greenhouse today and is it pure still are you guys still pure place ass yeah still doing sass um still uh still you know having a great time growing um we had our biggest uh conference ever this summer greenhouse open with uh 1300 or so attendees it was a huge part of our year and we where was it uh here in new york city we did the javits center which was a big step up for us that's a big space that's a big space to fill you got to be a celebrity daniel those of you that don't you know that haven't been in new york or don't know the space like it's where they do the auto show and the boat show and so you know you come into like a big cavern like that you really got to bring it so we upped our game we did a big roll out for business executives and business leaders called talent makers which is kind of moving the idea about outside of hr and into the broader business conversation around when you're a business leader you need talent and and you can't upload that to your hr team you got to take responsibility yep very good now for those people that didn't catch your first episode on the program put this on a timeline for us when did you launch greenhouse we started greenhouse in 2012 january yep 2012. and then again last time you came on was in 2017 you said you were serving i mean your price point then was around kind of 18 000 acvs have you held steady there have you generally increased or decreased you know prices move up a little bit but the thing for us that's really happened is that we've been serving increasingly larger customers so you take an average number like that you know that's represents a certain customer size but we serve customers nathan from 25 or 30 employees all the way up to you know 10 20 000 employees or more so obviously like the the involvement and the investment on both sides for a bigger engagement like that is pretty significant of course as we've grown and built the company you know we're just engaging with a more global business uh you know customer base and and larger larger organizations so i totally understand you have all these different cohorts which is great you're able to span that spectrum but when you look at kind of all your customers paying today relative to obviously revenues the is the average moved up from 18 have you driven meaningful expansion revenue across the same base it has a bit and and part of that is also driven by we've we've rolled out new products so last year we launched greenhouse inclusion which is our newest product which is really around combating implicit bias and helping you measure the effect of your recruiting process on different groups so customers are now buying crm from us they're buying employee onboarding they're buying inclusion and doing other things with us beyond what they traditionally have so all that stuff in conjunction is really leading to larger deal sizes and kind of just more stickiness and more impact that's good i will dive more into those products here in a second uh but first i want to try and get an accurate number here so was 18 grand kind of average do you think it's supposed to like 25 26 now today or more uh i don't know that i would be prepared to say okay but generally it's increased for sure okay absolutely the one way to obviously measure these increases is to look at how these new product launches have changed how your customer success reps drive retention on historical accounts which then reflects itself in net revenue retention help me understand how you've you know who's in charge of getting your historical accounts active on new products or is it the aes or the csms or what so we have an account management team which is a sort of combo between customer success and our aes are really focused on new logos team for us is really in the intersection of the two where they work with existing customers on not only renewals but you know any new product sales that they want um that they want to talk about and so we'll have conversations that start with a csm a customer success manager or a customer success director around a problem the customer is having an opportunity to see and then we'll pull in the account management team to do like to run the sort of process and do paperwork and show product demo and have sort of new product expertise there as well so it's a joint effort for a lot of these ceos that i've talked to recently called on the 50 to 100 million range a lot of them are experimenting with adding quota to csms who are only driving expansion revenue have you taken that plunge or how are you are you doing any extra incentives for your csms we're sort of doing we're sort of going a different direction with it so for the account management the ones that are focused on really these expansion sales absolutely they're you know it's a very sales-minded team for our customer success we're actually moving them further uh towards mission-aligned metrics and less around financial aligned metrics so if you think about greenhouse our mission is to help every company become great at hiring if you're an rcs team your job is to help your customers firstly become great at hiring ultimately they should be renewing and buying new things and all that stuff as well but your job is primarily make sure we're having that kind of impact so we're aligning them much more closely around you know our as a customer is on greenhouse longer are your customers you know sally csm are your customers doing a better job of pinpointing the right talent doing a better job of making hiring decisions doing better job with delivering good candidate experience as measured through our products wait yeah daniel's gonna say what are you're basically uh you're basically quantifying kind of your activation metrics there but you gave kind of high level number actually quantify those for me is it sound like hey sally the csm of greenhouse um does your average account you know place at least 300 jobs per month where there's a you know minority of at least thirty percent women and twenty percent for with a new inclusion product like how do you actually quantify these things yeah so we think so basically our value is in kind of four quadrants and so each quadrant has a little bank of of metrics aligned to them so there's a quadrant around candidate experience and it's literally like there's a candidate experience survey that our product will automate yeah so the csms are now looking at number one are the customers using that product or is actual data they're turning on the survey they're collecting the data are they looking at the data and then are the trends going up and so measured by number remember measured by number of candidates that use that per month measured by the candidate response basically we send a survey to the candidate we say hey you just interviewed for a job at airbnb you know rate us on basically give us a net promoter score um and then the customers use that data to identify opportunities to improve they might see a certain team within their company where managers aren't getting back fast enough or i was asked questions that were off-putting they need that information improved so it's really about is the number going up are candidates saying better things about you as a company and so look at like operational rigor using data to make decisions every area of their hiring funnel is measured in greenhouse and our csms are just aligning to to putting that up we haven't yet though nathan aligned like confident incentive to that yet yep that's later on we've got that road mapped out so once we have enough confidence the numbers are right and that we know the place to move them all correctly then we can like comp to it real quick name name the other three so canada experience what are the other three quadrants so the first is pinpointing the best basically like how quickly when i open a job can i get a list of really good candidates okay uh to interview for so whether you're sourcing them or finding them internally or finding them through other channels um uh candidate experience decision making so are you actually making smart decisions are you doing it quickly okay and then operational rigor are you actually able to use data to adapt to changing conditions okay very good so those are your four quadrants now how many people total are on the team today and then we'll go into how many csms at greenhouse the total company yeah about 380 380 that's up significant it's almost double from 200 back in 2017 so that's good huh i said we've been busy well that either means you just increased your expenses significantly uh or hopefully you also increase revenues at the same time so it's a good hiring spree yes that's a good heart did you still have about 60 in the company 60 million raised or did you do another round we raised our series d last summer so i don't know if it was uh just after we talked uh or you know or when it was in relation to but yeah we raised a 50 million series d in the middle of uh last year so about 110 in total you got it when you what are the metrics say on the series d so most ceos you and that you talk to i mean are you seeing ceos raise for 18 months burn or 24 or 36 months burn what'd you kind of plan for you know it's kind of interesting when you talk to a series d investor it's very different than like the earlier stages the earlier stages there's kind of a dream and you know they you got kind of pie in the sky and so you can kind of adjust your plan afterwards to whatever happens on the ground at the time that you're at a you know company like ours and you're raising a series d it's a lot more like metrics driven um and there's like a sort of operating plan in place that they're just looking at and fueling the growth so on your side though so on your side like other studios i've spoken to they said yeah nathan we raised 50 we think that's going to get for the next 24 months at which point we'll be break even again like like do you i mean do you must look at that kind of stuff yeah i mean i think it's no i don't think that's necessarily changed i mean i think you know whatever the time span is you kind of estimate is like whether it's 18 months or 36 months that's the general time frame of those business plans the thing i will say the reason i'm not so precise about it is the phrase of planning is really valuable but plans are useless like you don't know what's going to happen in the economy or competitively um and you don't know when you're we're launching a whole set of new products like you have to see how they play out so we'll see what i'm actually asking is trying to get a sense of how comfortable you are sleeping at night with certain ratios of burns so if you raise 50 million and you only plan for 18 months runway that would mean you're comfortable going up to 2.7 in terms of net burn million per month i'm just trying to get a sense of of your how aggressive you're being in terms of burn i think we're pretty well i think we're pretty well controlled i mean most of the investments that we're making are relatively controllable so if we hire a little bit ahead of plan and let's say we don't do as well in a month or two of sales that we thought we would you can kind of just grow through it because we're growing at a pretty decent clip if on the other hand like happened this year we're growing ahead of plan and you hire a few more people the revenue is on the way so you kind of can control that a little bit it's not like we're making fixed capital investments in like 15-year building leases that we then have to hope the market has for example to name other things you may yeah higher flying yeah so i mean so when you say i mean obviously fast growth solves a lot of burn questions right so when you see you're growing fast over the past 12 months i mean you think you'll grow how much this year in 2019 yeah i think we'll probably add uh close to a thousand customers this year i think that represents um when you when you look at the increased deal sizes you know uh approaching like 50 annual growth okay that's good now obviously you're probably growing more than that in prior years because you are multiplying smaller numbers math man what was it though i guess so from 2017 to 2018 was it closer to 100 percent i'd have to go look i'm not sure okay okay good i one of the things that i was trying to understand is people talk about the 3x 3x 2x 2x 2x kind of rule but it's never actually exactly that rule everyone kind of has their own pattern so i'm trying to capture your pattern before this 50 year what was it before there's these rules and there's the like the rule of 40 and all these like rules of thumb and i don't really honestly pay like a lot of attention to that i look at like the fundamentals of our business more like what's our ratios of like r d to sales and marketing spend like what's our like growth efficiency and then to your point like there are periods where we'll invest like pretty significantly for example this year we had a half dozen new initiatives that we launched and so rather than looking at a big lump of burn and like oh we're burning this much on a rule of thumb we actually have like the ordinary like run the business which is burnt which is some amount of burn and growth and then we have targeted investments we're opening an office in dublin ireland we're building a professional services team we're launching a distributed engineering team and so there's like targeted investments that we've done in each of those areas that once they're made they kind of are are set so it's not the same thing as like what's your burn rate of the company when you think about managing the business sustainably yeah i mean i get that but you have calculated it you just you just have peeled the onion back a bit there's your kind of burn to run the business and then there's like your rnd burn right the burn that like you're taking a controlled experiments on that's right yeah uh okay well very good well so break down the team for me so 380 people how many are engineers today engineering teams uh about 90 okay and how many are like quota carrying reps uh so the sales team is just a similar size maybe 90 to 100 i don't know the exact number of top of my head okay but they all carry quota or css that's the whole sales team i mean you can look on linkedin and figure out whose job title is what um i'm not going to do all that work daniel i care about you but not that much so i mean you talking about like 20 people on your sales team with quota or something like that yeah 20 30 something okay okay and are you are you so you mentioned some variable stuff you're expanding into in terms of international kind of expansion but when you look at just growing the core business in terms of where you're expanding is a lot of that money going towards additional head count or no it's towards international offices and things like this i'm trying to i'm trying to understand the question the question is where you raised 50 million you wouldn't take that delusion just to take the dilution because you're a smart guy where's most that spend going towards where are you investing it international expansion yeah international expansion a bunch of additional r d both in terms of like you know solving for enterprise customers and building you know features for them as well as continuing to innovate building new products um investing in in recent you know products that we've launched like inclusion um and then there's just a bunch of the faster as you know like as you're growing fast you have burn that you have to cover just to handle your your growth um we have like 18 or 19 months payback on new customers so every new customer you get you have to be able to fund and so that's that's a big part of it yep is that has that payback generally gotten longer since you have more cash cushion over the past 12 24 months it's gotten better as um gross margins um deal sizes have gotten better retention has stayed strong um so our our cactile tv is improving that's good well cactile tv can be really good but you can still widen your payback period one's a measurement of time one's a measurement ratio right so like so i guess in my mind i was going down the whole layer cake but yeah yeah well so let me just role play here for with you for a second if you got an acb of 20 grand your one ac is 20 grand you're saying you're totally comfortable spending what is that 25 000 to get the customer up front like that yeah yeah and where will most that be split across is there any direct paid stuff or it's mostly sales commissions very dependent on um the segment so our smaller our smb like small business segment is more marketing driven and our larger enterprise business is more sales driven which is a very typical typical thing so you have a dinner at a fancy restaurant with you know two dozen executives you know that's mostly like uh you know that's about as much marketing as you can really do otherwise you know they're not clicking on you know ads uh or shopping on you know g2 crowd whereas for smbs like there's a lot of that kind of automated marketing and things that we do so it's a bit of a split depending on that overall at a basket level it's more or less at any given time half and half sales and marketing um but again like that you got to peel back the onion to understand like the workings of the different business pieces uh ignore customer churn because you have customers at all kind of different price points so if we just talk about gross revenue trend over past 12 months last time we came out in 2017 your answer was about 12 percent is it still about 12 percent or has it gotten lower it's gotten a little bit better yeah so we're probably we're at like 90 percent retention gross retention that's pretty good and what's expansion on top of that 20 30 percent or uh working towards that not there yet okay when do you think you'll break 100 net revenue retention we've got we got it we've plus 100 negative net revenue retention but 90 you asked plus 20 or 30 like no no we're above that well yeah so i'm categorizing so so basically what you're saying is right now you're between 10 and 20 percent expansion on historical accounts right why is it so don't don't be offended here but i mean at your scale that's actually pretty low i would see most companies at this acv and at your scale i'm assuming north of 30 million in ar you have like 120 130 net revenue retention why aren't you there yet it's somewhat to do with the market so we came into a you know a pretty crappy market in the like applicant tracking software like was never like a place anyone wanted to be and we saw this really big opportunity and so we've entered in the market now as you've seen companies like linkedin and google have come into the market i think in recognition the fact that the market is changing but like the dynamics were the company bought ats once for not a lot of money maybe they renewed it over time but like that was kind of it and we're sort of expanding the pie and like no there's all this stuff you need to do to be great at hiring and so it just takes time to change how the whole industry works that's great you mentioned back in 2017 you'd pass about 2000 customers of that point you mentioned you're opened out another thousand here this year to get 50 year over year growth how many customers are you serving now today actively i think today we're probably north of 3 500. okay i think we're going to buy in around 4 000. yeah that's real that's obviously great growth um and as most when you look at the total revenue growth year over year what percent is coming from expansion on historical cohorts via cross selling and things like that your new products versus brand new revenue altogether do you know yeah i mean i think it's kind of as we as we said i think you have maybe 10 or 15 percent of it is for expansion um no but that's on the historical cohort that's that ignores all new revenue i'm saying if you add you take all your new revenue you've added over the last year yeah what percent of that pie came from expansion versus new logos all together do you know it's okay it's a tricky it's a tricky question yeah yeah i'd have to i'd have to have more fingers and toes than i have all right and then look i mean can i do the math 3500 customers 20 000 acvs that puts you north of 6 million a month right now on revenue is that about right it's more right than wrong i mean do you have eyes on 8 million a month do you think you can do that this year you have to wait till next year to do that no we won't do that this year next year reasonable sure we'll talk to you next year did you raise any debt on the back of the 50 or is it pure equity uh no it was bureaucracy have you leveraged any debt for acquisitions or operations uh we have access to that but we haven't drawn any who i always like asking who people like using fred do you just do the svb basic thing i don't remember i'd have to talk my financing okay but you haven't used it yeah any acquisitions on the horizon [Music] nothing i'm prepared to talk about anything you're excited about i'm excited about everything if you did acquire would it be for a customer base a tech stack or a team i think it would be for like you could say tech stack or product vision that's kind of like the thing you know custom logos are what they are but like if you have capabilities that's to me the thing you should be building not overlapping capabilities but new capabilities that you're buying that's right yeah very good all right let's wrap up like we did when we acquired parklet it was about a new capability in that case some play onboarding yeah what'd you buy them for employee onboarding no no like what was the price we didn't disclose that you didn't disclos you didn't disclose it was it all cash or was it a split earn out cash stock we didn't disclose that come on that's an easy yes or no answer yes all right there he goes all right daniel let's wrap up here with a famous five number one what's your favorite business book uh my new favorite business book is the is the alliance number two is is there a ceo you're following or studying um is there a ceo i'm following or studying um no okay number three what's your favorite online tool for building your company besides your own uh google slides number four how many hours you sleep to eat every night six to seven okay situation married single kids uh married one kid one kiddo and how old are you i'm i just turned 46 uh monday oh congratulations very good last question what do you wish your 20 year old self knew uh don't bother getting a job just start your business guys greenhouse. seeing some nice growth again helping folks recruit smarter better and a more inclusive way serving 3 500 customers today called 20 000 acv's around 6 million a month hoping to grow obviously year over year you know call it 30 40 50 percent as they look to obviously multiply bigger numbers 110 million raise state 380 folks on the team 10 gross revenue churn uh with about caught 10 to 20 expansion for a little over 100 net revenue retention as they looked across some more of their products currently 18 month payback across most their cohorts as they look to scale daniel thanks for taking us to the top thanks a bunch