How Groove CEO Chris Rothstein grew to $5.2M revenue and 75K customers in 2018.

hello everyone my guest today is chris rothstein he is the ceo and co-founder of groov a sales and engagement platform before group he built skilled and managed enterprise sales teams at google chris are you ready to take us to the top yes i am all right you threw your hat in a very hot war so tell us what groov does and what's your revenue model how do you make money yeah so we are a sales engagement platform as you said really what we do is we help sales teams be more effective understand what's going on and repeat their process and and make it more consistent across their sales team we make money in a very traditional sas model just pure sas pure sas and without going down kind of every cohort what would you say the average company uh pays per month the average is probably around 13 000. okay 13 000 per month and so this means it sounds like selling maybe multiple seats to a team how many seats you usually per team yeah we we really focus on 30 and above but we scale up to our largest customer has about 7 000 seats and then we have our 8 000 now we have a bunch above a thousand okay so about 13 000 per month on average's payment i mean that would actually i would say put you kind of more into kind of mid-market enterprise level versus some of these more starter programs yep yeah very cool um let's kind of put this on a timeline when did you launch the company what year yeah so i left google technically in 2012 but we really focused on this in 2014 um and then we really i would say started monetizing more in 2015. okay and who's we uh my co-founder and i were at google and then our first hire was also from google uh oh i bet google i bet google loved you for that yeah yeah yeah they do they're they're a customer as well so well that's good um describe the makeup of the founding team so what's your role what's his or her role yep yeah so we've had uh we had three co-founders all of us can code and all of us have sold so we're kind of a weird uh mix good mix chris i would say that's not weird that's very good yeah yeah so we we love selling we've done kind of sales engineering roles i've built sales teams but i also like the code in my free time um and then my co-founders are the same way so very cool we're all a little bit of both self-taught coding uh yeah two of us are self-taught one has a master's in cs how did you teach yourself i just literally i i i i always worked on it but then when i quit in 2012 i just coded every every day for almost a year and a half that's amazing did you use like code academy or tree house or any of these tools just online just read online and build stuff that's great you're you're a problem solver all right 2014 and then scale it up to today so how many companies on the platform today uh today we're a little over 400. okay that's pretty good those are all paid no free accounts yep no free and boots dropped or we raised we were bootstrapped for you know until we raised the small round in 2015 and then we we've uh just a note and then we've raised the official one price round so 3.8 million in in funding total yep that's great okay so 3.8 million now if i take 400 you know customers times that monthly average of 13 grand i mean that puts you like 5.2 million a month is that accurate yep we're in that bubble okay very cool so you the reason i kind of asked that was skepticism is because your account would actually put you in a very rare category in terms of you take your arr and divide that you know by your funding you know most people have less ar than what they've raised total you're very much the opposite yes we're very very conservative originally my co-founder and i wanted to bootstrap always and we were planning on we we saved up money we went down that road for a while we built up and with that eight our first 800k we became profitable we had over a million revenue with that um but then we're like we can grow faster and we should grow faster so that's why we raised that money but we're still i would say slightly abnormal at least for the value you're you're definitely abnormal i've i've done about 3 000 interviews and i can say with emphasis you are definitely not not the norm so what about growth rate a year ago what were you at run rate wise uh a year ago about 2 million okay so you more than doubled your every year yeah we've more than double every year that's great and where has most that growth come from is it expansion revenue across the same accounts or brand new customers that's a great question it's almost exactly split it changes month because we still get large deals here and there um but almost always it's 50 50. almost exactly yeah and what do you anticipate so right now if you're doing five million a month what is that 60 million a year i mean oh no sorry five five million eight ar oh that's a okay good i was wondering i was going to say this is like this makes you like a very much not silicon valley company your arp who you give me that was not monthly that was an acv there yeah yes yes got it that's where the that's where the misnomer was i was like okay no no no that would be that would be uh very very nice yeah so just to be clear you're doing about 450 grand a month today that's up for about 200 grand a month a year ago that's great okay still but by the way still healthy so you still doing more revenue than you are what you raised yes exactly talk to me what now when you look at kind of expansion revenue usually companies at your stage they have very clear pricing axes that allow them to drive expansion and usually it's like a seat model a feature model and a kind of data usage model what are your axes yep yeah we have uh kind of two we we grow seats obviously but then uh we have a modular element so you buy into our platform platform fee and then after that you can add on different elements a dialer an unlimited sku uh sms and all these different things so you add on these and that that's kind of how we upsell we honestly haven't even focused on upsell most of it's been natural interesting okay so that that flat though initial feed that is like a base recurring fee and then you can add on top is that accurate yep and all the add-ons are also uh reoccurring fees as well it's just you can enable other parts of the platform and and basically so if i have 100 seats and i'm paying you for the base thing and each one is 20 bucks a seat if i add on the cost scout shirts like adds five dollars per seat across the whole account exactly it's a beautiful thing if it happened can you just no touch a lot of it a lot of and that is right now we should be doing more but we aren't because we're still a little resource strategy yeah no i totally get that now this should all be reflected in in a really incredible net annual kind of retention revenue retention rate what i assume you're well above 100 how far above yeah i think uh on a monthly basis we're like uh our net churn is like negative two and a half three percent per month when you look at the revenue retention annually how far above 100 are you do you know oh uh i haven't looked at that recently but yeah it's every year it's very very solid growth i can't i don't remember off the top of my head that's okay do you know what a year like of a year one account is 13 grand typically what that usually morphs to in year two i think on average i i think in a lot of the cohorts it's double uh okay doubling so i i would have to look it is a little chunky because we we tend to go after super high growth companies so we have a lot of the fastest growing companies in the world and these just naturally are growing incredibly fast um so it does depend but a lot of the cohorts are growing yes they're all growing at a very nice rate i would have to look at the exact number let's go back to the initial sale fully weighted cac on a 13 dollar acv account is what how aggressive are you comfortable being yeah it's it's interesting getting the average is hard because we do have these massive deals and so on when i calculate it's about 7.9 k so around 8k let's say um but you know it is it it does depend most of our sales is is not through marketing costs it's actually the cost of doing sales the cost inside sales team etc exactly so around 8k yeah so around 8k to get a 13 000 account that's like a nine month payback period does that pay that period hold no matter if the the first year acv is a million or a dollar it's usually always a nine month payback typically pretty much yeah if anything our large deals just pay back faster yeah yeah that's interesting um talk to me since you come from kind of being inside sales organizations writing sales code you have 360 degree how have you structured your inside sales team yeah we have um basically a one-to-one pair of sdr and ae so like a pod structure it's now called um and and they we give them a target list and they just work on capturing those accounts where we know we can provide value we do a traditional cop model pretty much and everything else is fairly traditional a lot of the you know classic things just work and classic incentives for people people listening might not know traditional so when you say traditional you're talking you know you know your total potential salary 60 is based 30 as you know commission usually or what yeah roughly 60 40 i think is what we do roughly um and then we we set a monthly ac uh goal for them and then whatever they hit on that that gives them uh you know the percentage of their commission and then we have accelerators and accelerators are key in a in a sale structure so that if they blow out their month they're going to make a lot of money which is good for us and then yeah so if they close a few large deals in a month they're going to have very good months and that's what we want to incentivize and both same plan for sdrs and the ae or just the ae that's just the sdrs have a meeting goal and we use a point system which i think is the way to go um basically if they if there's certain competitors that we think we could win against more we go after them and and they get more points or certain sizes or they get a top 10 list if they get that they get a chunk of the revenue as well so it's a little more complex but we just incentivize the behaviors that we know will drive business success yeah so it's kind of like when i go to chuck e cheese i buy tokens and i get 7 000 tickets because i won the good games the question then becomes what are those points actually worth to the sdr how do they exchange those points for yeah uh it's just straight uh straight money yeah oh it's a salary yeah it's basically let's say their goal is 15 points if they have you know 30 that means they get 200 percent of their own target earnings uh oh really interesting interesting that that that is a arcade that i want to i'd want to go visit uh everyone would want to play that game yeah okay very cool and then uh talk to me about total team size today yeah we're at about uh 35 today 35 and how many of those folks are sales uh 10 in sales and uh then about 10 12 in engineering and then uh you know basically admin others yeah yeah and where's everyone everyone in san fran yep uh no we now have a couple people in in san diego and then four people and or three people in seattle okay very good that's great so growing um any plans to raise ah that's the big question right now yeah are you what it sounds like you're casual positive so you don't need to we don't need to we can definitely be in a nice spot but at the same time we're in a market i'm sure you're aware of those very competitive yeah so at some point it makes sense to just go a little faster yet and we'll probably you know consider that yeah if you do this is obviously all hypothetical if you do decide to raise at your current kind of economic structure on your current air you know run rate how much would you like to raise that's the part i need to figure out i would say you know it would have to be a reasonable amount for it to make sense otherwise we should just grow this way so i'm not sure honestly i would say it's going to be more than 5 million though more than five and when you say reasonable like what does that like what do you mean worth your time to do the whole funding process no uh just to if we're gonna go that route we need to know we can make some great investments and those investments have to be you know big enough that we just don't make those with you know bringing on new customers and doing it naturally uh so if we're gonna do it i think it makes sense to go one route or the other i see what you're saying and if you do raise five i mean you're well connected in value you probably hear valuations thrown out all the time but if you do raise five at your kind of current levels i mean what kind of valuation do you think you could probably get i have no idea i haven't went out and had any conversations yet you know i think we would just like to uh if we did we would just want a valuation that uh would be the next you know milestone that we can march to that that was uh made sense for both sides that's how we've always built this business and and we want to continue to it's yeah you know it's it's not fully bootstrapped but it's also not this hyper you know raising insane amounts of money yeah so if someone we have a lot of investors listen to the show if one of them reach out to you after goes live and says hey chris would you consider like a 5 on a 30 pre i mean is that an email you'd read i think it depends who they are probably a good good answer assuming that's a great fit though economically is that the kind of ratio you're looking for yeah probably i think whatever the norm is for the market you know i would have to talk to everyone well you know it's very different if you're in san fran it's very different than if you're in idaho right yeah um by the way i love idaho so there's a lot of great bootstrap companies out there um talk to me real quick before we wrap about product so again this space is very fragmented i mean is your model basically just keep having your engineers at you know create add-ons because you know x percent of your base is going to upsell that and it grows your revenue that way i mean what does structure look like product wise yeah i think a lot of it is just continuing to build out where we're strong we focus more on aes where a lot of the space focused on the sales development area um so i think that is one thing different there are a few new areas that i'm very excited about this whole account based area and so on that i think are really interesting we're building some cool features so right now it's more we can't keep up on the product side uh there we will continue to add different modules but a lot of it is just reinforcing where we're strong and providing more value to the customer yeah and even on that we have a long way to go yeah very good chris let's wrap up here with the famous five number one what's your favorite business book uh i'm just started one that uh just recently called scientific advertising it's like incredibly old maybe 1920s or something is that ogilvy uh no it's someone else i i forgot charles i think um it's interesting it's free it's it's pretty interesting oh look it up number two is there a ceo you're following or studying right now uh i i really like naval from angelus i think he has a lot of interesting thoughts number three what's your favorite online tool for building the business i would have to say gusta it just takes away a lot of things that you know would be a lot of work and i wouldn't want to normally do yeah i i if i was a better man you know josh was on the show recently i would say they're potentially looking at ipo in the next 12 months if the market stays hot we'll see yeah number four how many hours of sleep breaking every night uh well i have a baby right now so not much but you know i i am trying to actively do more uh or sleep more so i'm shooting for seven but okay and so it sounds like married kiddo how many kids uh two kids uh both under two and a half uh married yeah and how and how old are you chris uh 34 34 last question what do you wish your 20 year old self knew um i would say you know i would just stress the importance of compounding you know everything in in life is compounding and in in setting good habits at the beginning uh as early as possible is is important because everything takes longer than expected guys everything takes longer than expected groove founder chris joining us again just passed about 5 million bucks in arr that's up more than double year over year 400 customers paying about a grand per month that's how we get to that number net revenue retention well over 100 percent year over year they've raised about 3.8 a million dollars to date they're using that in the form of cac for example spending about eight grand to acquire 13 000 a month customer so about a nine month payback period no matter which cohort you're looking at small customer big customer etc team of 35 folks based in san francisco seattle and other remote locations founded in 2014 chris thanks for taking us to the top all right thank you for having me