How HackerEarth Reached 500 Customers and 4.5M Developers with 106% Net Revenue Retention (Interview with CEO Sachin Gupta)

Introduction and Company Overview

Nathan Latka

00:00Hello, everyone. My guest today is Sachin Gupta. He's the founder and CEO of HackerEarth and has grown the company to a global SaaS platform with hundreds of customers and millions of users. He leads the marketing team today along with sales and operations. He's also responsible for product management and strategy. Sachin, you ready to take us to the top? Alright. Are you ready to take us to the top?

Sachin Gupta

00:20>> Absolutely.

Nathan Latka

00:20Alright. So tell us about the company. What what do you guys do, and what's the revenue model?

What HackerEarth Does: Enterprise Assessments and Community

Sachin Gupta

00:24>> So HackerEarth is a a developer skill assessment software. We have this technology that allows anybody to come and write code in the browser, and thats used by our customers to automatically screen and interview candidates in their technical recruiting process. We also have a community version of the product where we allow any developer out there in the world to come in and self assess themselves to either improve their coding skills or prepare for technical interviews. So we've

00:48>> got both an enterprise SaaS solution as well as a community.

Nathan Latka

00:50So would you sort of say this is sort of a combination of Codecademy plus Lambda School?

Sachin Gupta

00:58>> Well, both of those are kind of focused on skilling through structured courses. We are more focused on assessing and kind of giving you real time feedback on how your coding skills are. And it's more of self paced learning, I would say.

Nathan Latka

01:13But the intent is this success metric on your platform, does PayPal hire the engineer they gave the assessment to? In other words, it's driven by the company giving assessments.

Sachin Gupta

01:23>> It's driven by the company who's giving assessment. So they would give an assessment through HackerEarth, and depending upon how candidates perform, they would then decide whether to take them further in the recruiting process or not.

Nathan Latka

01:33I see. Okay. And then so how do you make money? Obviously, traditional recruiting firms take 30% of first year salary. I assume you have some form of arbitrage against that.

Pricing Model: Per Recruiter Seat

Sachin Gupta

01:42>> Oh, well, we don't charge on, say, the first year salary. We don't have that kind of model, primarily because we're not sourcing candidates. We are more of an assessment tool and we fall after the sourcing stage. We a... We are SaaS solution. So we have a per recruiter seat kind of model. So we charge per recruiter seat. Every recruiter seat comes with a certain number of assessments on a monthly and annual basis. And then depending upon

02:05>> the size of the organization, their needs, we kind of customize the plan. So we start as small as one recruiter seat and work to 100 of the recruiters.

Nathan Latka

02:11And which upsell kind of lever is more powerful for you guys? Charging based off number of assessments or number of recruiters on the business team?

Sachin Gupta

02:21>> Number of recruiters. Because number of assessments could vary year on year. You know, you sometimes have a slow time, in terms of hiring. Sometimes you have a sudden surge. So we don't really want... So to introduce, you know, more predictability in the business, it's better to... For us, it's been better to price a number of recruiters.

Nathan Latka

02:37And paint this sort of... I'm sure you have a lot of different price points people are paying, but give me like the sweet spot. What's the average customer paying per month or per year? And how many recruiters does their team have?

Average Contract Value and Sweet Spot

Sachin Gupta

02:47>> Yeah. So I would say the right land opportunity for us is two to three recruiter seat that comes out about 7 to $12,000 to land, and then we typically expand from there. Of course, you know, we've got a long tail, which may just start with just one recruiter seat. And then we also land enterprise accounts starting at 100 k where they're looking at probably twenty, thirty recruiter seats. But the sweet spot is to anything between two

03:09>> to three recruiter seats to begin with.

Nathan Latka

03:11I see. Okay. Got it. And then would you say that... I mean, if you look at all of your customers, are there like three that make up, you know, 30% of your revenue or do you have a fairly even distribution?

Sachin Gupta

03:21>> We have a fairly even distribution. I would say, our top customers, some of my biggest accounts would contribute only to about 10% of our revenue. I think that's that's good because it gives us a little bit more stuff. That in the business, you know, we're not at the mercy of just top three comps.

Nathan Latka

03:36That's right. Yeah. Now when you add up... Well, actually, sorry. Before I ask more questions about today, let's get some backstory here. We sort of jumped right in there. What year did you launch the company?

Company Founding Story and Origin

Sachin Gupta

03:45>> So, you know, we we started the organization way back in '20... Towards the end of 2012, 2013. And the core motivation for us to do HackerEarth was very simple. You know, I I... I'm a computer engineer, software engineer by by education. And, you know, we saw... We we felt that the way recruiting is being done today, it's highly arbitrarily, not not based on skill. And recruiters, as well as developers themselves, are taking wrong decisions in terms

04:10>> of which opportunity to go after. And, you know, being engineers at heart, we wanted to solve that problem, so that's how we kind of got into it. There's a small anecdotal story. A good friend of mine who was top of a batch, you know, top of the class, didn't get through, some of the top companies, and we were shocked, that, you know, we all think this is the guy who's gonna get into Google, Facebook, and he

04:30>> just didn't get through because, you know, the recruiting process or the interviewing process is, in some sense, broken. And that was the motivation for us to kind of start HackerEarth.

Nathan Latka

04:38And do you remember back in 2012 how many assessments you gave?

Sachin Gupta

04:43>> Personally, as...

Nathan Latka

04:45No, no. How many were done through your platform in year one?

Sachin Gupta

04:49>> So year one would be fairly small. I think we would have done about 5,000 odd assessments in the whole year to start with.

Nathan Latka

04:58Okay. Interesting. And now today, how many have you done?

Sachin Gupta

05:01>> So I think today on a daily basis, we're doing more than two, three thousand. So I lost it.

Nathan Latka

05:07That's amazing. Can you sum up? So last year, do you know what the number was for last year? Mean, are you talking... I mean, that's gotta be three... A 2,000,000 assessments all last year?

Sachin Gupta

05:16>> Yes. So we... On an on an annual basis, we are doing close to a million assessments.

Nathan Latka

05:23Yeah. That's amazing. And across about how many customers are you working with now?

Customer Count and Key Logos

Sachin Gupta

05:26>> So we're working with about 500 customers, like, you know, distributed globally.

Nathan Latka

05:31And can you sort of describe them? Are they all sort of what you would expect? They're sort of the PayPal's, the Google's, the Facebook's of the world, or is there any sort of surprising cohort that's using you?

Sachin Gupta

05:41>> So, well, I wouldn't say it's surprising now. It was surprising probably three, four years back when we would get customers who were typically into, say, engineering. When I say engineering, I'm not talking about software engineering, you know, hardware engineering or banking segment picked up tech pretty soon. So, actually, before I answer that, you know, a megatrend that has taken place is obviously, software software is eating the world, and most of the businesses today are primarily software

06:06>> businesses. And we saw why the, you know, the tech companies were an obvious suspect for us. But then we started seeing, you know, an airline company like a Boeing, hiring or using HackerEarth or or GE in the health care space using HackerEarth. So we saw a lot of different segments who were trying to build out their tech competencies in house, started building their teams internally, and then, obviously, you know, they had to build that recruiting muscle.

06:31>> And that's where HackerEarth comes into the picture.

Nathan Latka

06:32And of those 500 companies using you, if you add up all the recruiter seats, how many recruiters are using you?

Sachin Gupta

06:40>> So, you know, I'll kind of be giving you a number top of my head because some of the accounts have, say, about 300, 400 recruiters, the larger ones. And then, you know, on long tail, we go as small as one recruiter seat. So I would say if we take on an average about four or five recruiter seats, I would say five, so then we're looking at about 2,500 odd recruiters who who may be currently active at

07:03>> any given point of time. But if I look at the lifetime of of HackerEarth, more than 10,000 recruiters have gone through the system.

Nathan Latka

07:09Wow. Interesting. And what what is sort of like... Now putting back on your Founder hat and like, hey, I wanna grow revenue in HackerEarth mode. What is the key metric for you guys? Is it number of assessments, number of customers, number of companies? What is it?

Sachin Gupta

07:21>> So for us, it's the number of admins that we onboard on the platform, and that obviously gets tight. So there are two ways you could do. One is you look at growing your accounts once you land them, and that can typically happen in mid market and enterprise. Or the other is you go after a larger customer base and say, you know, I'm gonna acquire 10,000 SMEs, and each one of them is going to give me two

07:42>> admins each. So today, you know, we... We're not really segmenting our approach because the product is so maturely built out that I could fit it to a small SMB. And I just got up a call, one person shop who could potentially use HackerEarth, and then last week, we're talking to a giant who is probably going to use it across 400, 500 recruiters. So we're not segmenting per se, but, yeah, our sweet spot is typically higher SMB,

08:04>> mid market, tending towards enterprise. Yeah. So the strategy is land more accounts and then grow them.

Nathan Latka

08:09Do you feel like you have good control over predictable expansion on historical cohorts, or is that more dependent on the macro economy and if people are hiring or not?

Sachin Gupta

08:20>> That's a great question. I would say there is a little bit of element of the macro economy. For example, given the current situation, a lot of our customers have reduced the volume of their hiring, and hence that limits the expansion capabilities for us in the short term, of course. But that also lends to, in certain cases, rapid expansion. So we've seen accounts grow threefold within the same year. So there is an element of macroeconomy that plays

08:44>> into our business.

Nathan Latka

08:45And Sachin, if you look at your cohort that was active and paying for the platform exactly a year ago, so ignore all new customers out in the past twelve months, but if you just look the year ago cohort, what percent of those... Or or how much sort of churn was their revenue churn? And then how... And then add back expansion. How much expansion was there?

Revenue Churn by Segment and Net Retention

Sachin Gupta

09:03>> Right. So, again, a great question. So I would actually segment that into two... You know, segment that response. So we've got enterprise where our revenue churn is in early single digits. And then we've got SMBs, which where we actually go up to 22%.

Nathan Latka

09:17Annually?

Sachin Gupta

09:18>> Yeah. And that's not something that I'm too proud of, but it's just the nature of our business. SMBs, you know, keep on... Some of them grow our business, some of them stop hiring

09:29>> altogether year on year. However, blended, we kind of look at a churn... A revenue churn, which is in the range of about, I would say, about 15 to 16%. Having said that, our expansions typically in our accounts actually surpass that. So our net NRR, net revenue retention from existing cohort is on the positive side.

Nathan Latka

09:49Yeah. So so let's use... Let's talk about this in terms of retention versus churn. So if your annual retention is about... It was at 84%, 16% churn, You're saying you're expanding by more than that whole. So you're back up to a 100%. How much more than a 100% do you continue expanding historical accounts? Like, what is net revenue retention? Are you at, like, one ten, one twenty, one thirty?

Net Revenue Retention Rate and Targets

Sachin Gupta

10:10>> So we haven't hit the one twenty mark yet. So we are in in in the one ten range. So various quarter to quarter. So for example, last quarter was 106 for us. This quarter, are projecting about 110. Objective is to take it to 120%.

Nathan Latka

10:23Yeah. I would I would I would say anything above sort of one twenty is really good and anything above like one thirty, one forty is just world class in the b to b SaaS space at least. Yeah. Absolutely. What is... Walk me through the system that allows you to drive the expansion. And let's talk about this through the eyes of your current talent, your team. How many people total on the team today?

Team Structure and Headcount

Sachin Gupta

10:42>> So we've got a fairly large team. We've got a 140 people split across about 30 people in sales. I've got a CSM of about six... CSM team of six, seven folks. Then engineering and product development is fairly big, about 50 RP per hour there. Marketing is another ten, fifteen. Answer your question from an account...

Nathan Latka

11:00Sorry. Sachin, how many engineers did you say?

Sachin Gupta

11:03>> So product... A total of 45 people in the product team, which includes engineering, design, product management.

Nathan Latka

11:08K. And you were gonna continue?

CSM Strategy and Retention Incentives

Sachin Gupta

11:10>> Yeah. On the CSM front, so that's where the account retention strategy kind of comes into picture. So the CSM function is fairly well laid out. We've segmented that into SMB and enterprises because enterprises are typically... They require a lot of handholding. So, typically, accounts owned by an enterprise CSM is in the range of 50 to 60, while an SMB account manager could actually own up to a 100 of accounts. We, you know, have a strategy for

11:34>> kind of we we segment our... Within these accounts, we segment into high potential, where we could grow to, you know, can't really grow facing problems. So the the various models that we've kind of built into built into the whole CSM strategy, based on which the CSM team is then incentivized to, a, retain the customers and then drive upsells and referrals.

Nathan Latka

11:55And so there's a big debate right now happening in a CSM community on if you give CSMs quota based off the expansion they drive or if that's just expected and there should be no quota component to their their salary. How have you structured it? Do your CSMs get quota?

Sachin Gupta

12:08>> No. So we don't give them expansion quota. So given the latter category, I personally believe that CSM should be responsible for driving product adoption, building a customer champion, and making their customer referenceable. Expansion will happen naturally, if if all those three things are happening. Now what happens is if you give your CSM a revenue quota, then they are only worried about revenue in the sense, even if, you know, 20 of my accounts are churning, but two

12:32>> big accounts can compensate for the revenue loss, they'll go for it. And you, as a company, I don't want that. I want every customer that's important to me. So we incentivize them on retention and then give them additional incentives on top of your quota if you drive referrals. So referrals is independent. That's like your, you know, additional cherry on the cake, but your core incentive structure is predicated to account retention.

Nathan Latka

12:54And what does that look like? If you... If I'm hiring and starting tomorrow as a as a new CSM at your company, what does my sort of description look like? What does the retention metric look like? What's the target?

Sachin Gupta

13:03>> So, typically, retention metric would be in the... So we... Like I told you, right, we are operating

Nathan Latka

13:07I'm enterprise. I'm enterprise.

Sachin Gupta

13:09>> Okay. Yeah. So enterprise CSM reps, so we are already operating at, say, about 95% retention, and this is not including the expansions. So the goal that the person then kind of gets is in the range of 97, 98 so that they should be able to make an incremental improvement in terms of our historical retention rates, and that's where their incentive structure would be built in. And then whatever they do additionally in terms of upsell is a

13:31>> separate, like I said, incentive that they get.

Nathan Latka

13:33Smart. Interesting. Okay. You clearly know your numbers. I'm gonna guess that you're... You have raised capital.

Sachin Gupta

13:38>> Yeah.

Nathan Latka

13:39How much have you guys raised?

Funding History

Sachin Gupta

13:41>> So we raised total of two round... Three rounds including our seed. The seed was 500,000, then we did did a series a of 4.5, and then we did a series b of 6.5. We didn't announce the last one, so this was sometime late twenty eighteen is when we did that.

Nathan Latka

13:54Okay. So about eleven and a half raised to get altogether. Interesting. And how how do these how do these VCs value you guys? When you and your founders are on these pitch, you know, these meetings, are they valuing you based like a SaaS company or like a a recruiting agency?

Sachin Gupta

14:06>> Oh, so we... It's based on the SaaS business because that's how that's how our business model is built. So we're not necessarily a recruiting agency. And... But we also have a community element, so we typically get valued on SaaS plus community.

Nathan Latka

14:19Yeah. How many how many developers have gone through your system?

Developer Community Size and Hackathons

Sachin Gupta

14:23>> So we today have a a user base of four and a half million developers.

Nathan Latka

14:26That's amazing. I mean, you can sort of email them. If if Twilio is putting on a development conference, Twilio can pay you to sponsor an email send to 4,500,000 developers.

Sachin Gupta

14:35>> Right.

Nathan Latka

14:36Do you do that model?

Sachin Gupta

14:37>> So we do what we call as hackathons and coding challenges. In our community, if you go to hackerearth.com, you'll be able to see that there's a developer facing part of the product where developers would come in and, like I said, just solve problems. And we regularly host hackathons, coding challenges, and those are the ones that could be sponsored by our customers.

Nathan Latka

14:54Interesting. I just realized we're over time. So last two questions here before we wrap up. Burn, obviously burn's critical in any SaaS company, especially during COVID. You want a longer runway. How are you and your founders thinking about burn and how much are you burning today, would you say net?

Burn Rate and Path to Breakeven

Sachin Gupta

15:06>> So, you know, burn is obviously, like you said, a very critical element, particularly given the current scenario. Obviously, when COVID hit, our our expansion... Business expansion kind of took a hit. You know, we were all we've been we've been fairly successful in retaining our accounts and kind of maintaining the run rate that we were at compared to the last year, but future business expansion took a little bit of hit. So we, immediately kind of, you know,

15:30>> prepared ourselves for a lower burn, and that is in terms of cutting down on on marketing expenses and so on and so forth. But in general, my perspective on burn is your burn should never be out of control. Obviously, grow SaaS business, you need to spend. Right? So the way I look at our journey, it has been more of a step function. So you invest and, you know, you reach that level, so you kind of break

15:51>> even, and then you say, again, I'm gonna invest. And that's what we've always done. So, again, we're in that stage right now. We implement break even by the end of this year, and then we start reinvesting back into the business.

Nathan Latka

16:00I see. Today, are you burning more or less net than $500,000 a month?

Sachin Gupta

16:04>> We are burning less.

Nathan Latka

16:05Okay. Great. That's good. And then you think breakeven by the end the year, which is great. And then in terms of top line revenue, again, we wrap up, I mean, 500 customers at around a thousand dollar ARPU. Obviously, you do have big accounts and maybe you have smaller accounts as well, but it sounds like you're somewhere around $500,000 a month or about a $6,000,000 run rate today. Is that right?

Sachin Gupta

16:19>> That's correct.

Famous Five Rapid Fire Questions

Nathan Latka

16:20That's great. All right. Let's wrap it here, Sachin, with the famous five. Number one, favorite business book?

Sachin Gupta

16:25>> The Hard Thing About Hard Things from

Nathan Latka

16:28Ben Horowitz.

Sachin Gupta

16:29>> Ben Horowitz.

16:30>> Yeah.

Nathan Latka

16:31Number two, is there a CEO you're following or studying?

Sachin Gupta

16:36>> Not really. I'm obviously fascinated by Elon Musk, not studying.

16:40>> Yep.

Nathan Latka

16:41Number three, what's your favorite online tool for building your company?

Sachin Gupta

16:44>> Sorry. Could you repeat that?

Nathan Latka

16:45What's your favorite online tool for building your company?

Sachin Gupta

16:48>> I do a lot of things on Google Docs. It's typically just

Nathan Latka

16:53Yeah. It's a good one. Number four, how many hours of sleep per again every night?

Sachin Gupta

16:56>> I try to get at least seven hours.

Nathan Latka

16:58Seven. Okay. And what's your situation? Married, single, kids?

Sachin Gupta

17:01>> Married. A kid. Five months old.

Nathan Latka

17:04Oh, well, congratulations. What a fun time. Okay. One kid. And, how old are you?

Sachin Gupta

17:08>> I'm thirty thirty right now. I'm 30.

Nathan Latka

17:11Great. Alright. Take us home here, Sachin. Last question. What's something you wish you knew when you were 20?

Sachin Gupta

17:18>> Well, I, you know, I I kind of wish I knew in... So we kind of started our business in India, and then we expanded totally. I think, if we had known how big the market could be in The US, we would have probably made that move. This really from business perspective, nothing to do with life and personal life, but then from business perspective, have moved to The US much sooner.

Nathan Latka

17:37Yep. Guys, there you have it. Hackerearth.com. This is the tool that over 500 companies and 2,500 recruiters are using to give assessments to their development talent, and this is after the sourcing step. They monetize pay... They have customers paying about a thousand dollars per month on average, but obviously varies wildly via an s m m... SMB cohort and an enterprise cohort. The company has just passed, call it, five, six million in terms of run rate raise,

17:58$11,500,000 to drive this growth. Team of about a 100 And, how many? About a 140 odd people, 45 engineers, 30 quota carrying reps, CSMs, highly incentivized, drive that retention rate up to about a 110%. Sachin, we're rooting for you. Thanks for taking us to the top.

Sachin Gupta

18:10>> Thank you.