Intermix Revenue & Valuation (2018)

hello everyone my guest today is paula lopass he is the ceo and co-founder of intermix dot io he owns multiple patents for cloud computing and performance analytics and in 2007 he co-founded gogrid one of the early cloud computing companies which agreed over 50 million dollars in ar paul are you ready to take us to the top i am thanks for having me you bet okay that's a big cliffhanger we have to finish up the go grid story before we talk about intermix what happened to the company the company got acquired who'd you sell to 2011 by uh data pipe a big a big data center uh cloud provider yeah what was the ecosystem like back then yeah so i mean was it a good exit or a soft landing or what we had the opportunity to blow it up to be much much bigger if we had taken on a lot more capital it's uh it's very expensive to build cloud services um but uh we're really really happy with the outcome that's great all right intermix so did you go directly into intermix after go grid or if not what was the in between story so i spent a couple of years consulting with a few companies to help them bring their products to market you know i had focused on technology at go grid and i really wanted to spread my wings and learn more about other sides of the business marketing and sales and so um you know i sort of was helping some other other startups i landed in 2013 in how i got the idea for intermix at a company called um criticism criticism he was later renamed to actually what much better name was it was a crash reporting tool for companies developing mobile apps and it was um super super big platform we had a little library that ran on over 1 billion devices across apple and android and what was really interesting about the company is that we were sitting on a ton of data for example we could we could tell you um for android how many activations were done on the att network in los angeles in january um because of the data that we had and it wasn't it wasn't part of what we were selling but my co-founder lars that joined intermix at the same time as me that's where we met approached me one day and said hey can we put this data into a place where we could sell it i have a few companies that would be interested in buying it some private equity firms other consultancies that were just interested in this industry data that was really hard to get and so i said sure you know how hard could that possibly be and i hired a data scientist to help me uh to do that and almost immediately when that person joined they were like okay great where's the data um i was like well it's here it's it's in all these databases you know just go out and find it you know and he's like no um i need to have it all in one place it needs to be clean and complete and correct and i need to be able to run my tools on it my specialized data science tools and i said okay um interesting and then i spent three months doing that and getting the data to a place where where it was useful and really at the time i talking to other peers in the industry realized that a lot of companies were having the same challenge in making data scientists successful and so um you know decided to leave that company and lars and i joined up to start intermix uh shortly after lars was the data scientist no lars was the head of business development at criticism did you bring the data scientist with you or no uh i did not come on paul night well you know you kind of people that you would hire later stage um are different from people that you need to start a startup such a diplomat smart guy all right talk to me about how people can we understand the product i think because you just give a great story tell us tell us how you monetize is it a peer play sas company it is yeah it's a it's a sas company we uh we sell to enterprises uh it's a subscription and uh people will either prepay for one year or two years okay so on average i'm sure you have a lot of cohorts but we're short on time what would you say like an average company might pay per year to use your tool it's between five fingers moving up to six fingers uh to six figures now okay okay got it and that's kind of first your eighth cv so call maybe anywhere between 50 and 100 grand yeah what do they so let's let's role play for a second if i sign up today for 50 grand give me a sense paint paint a picture here what would i get for that so what you get for that is a single dashboard whereby your your your uh data teams the ones that are there that are that are building out your data lake infrastructure um that your data scientists plug into you'll get a single view into all the apps that are connected all the users that are running queries the way that data flows through that system and a very very easy and quick ability to aim figure out is everybody having a good experience are apps working is the data lake working or if not why and what the cause of that so that you can very quickly pinpoint where data's getting stuck interesting okay very good and uh put this on a timeline for us so what was the official year you launched so we launched at the end of 2016 and one of the interesting things nathan is that we got to revenue our first dollar of revenue came only six months after we wrote the first line of code for the business i i love that you lead with that it's like a technologist who says you know what all techies don't just only focus on product we made money after six months well sorry maybe not maybe not made money you had revenue in six months right that's great i want to get the story behind that first dollar in a second but let's go backwards so today how many customers have you scaled to so we and now have over um over 25 customers we're still a seed stage company nathan so we're still quite small and we're looking at nine dollars what do you mean when you say you're still steve how do you define that so the way that i define that is we're still um you know we have a lot of revenue we have good customers our churn is really really low how low tiny it's um we're um you know over 100 revenue retention because a lot of our customers will expand with us what about gross churn though if you peel back that onion um so our platform is focused on amazon redshift right now which is a a major cloud data warehouse yep so as companies ship to other data warehouses where they might turn off of us i snowflake or uh bigquery yeah and so our vision is to support all of those databases going forward but for right now we're small so i mean is that code for like is that good for like maybe 10-ish annual revenue turn on a gross basis or like what is churn today annually gross it's under under five percent oh i mean that's super healthy okay so you lose less than five percent of revenue annually you more than expand that same core by five percent so you have net revenue retention north of 100 at this point yes that's great okay yeah take me back to the backstory so you you said define seed stage and i and i said how do you define that yeah well you know we're at the point where we're still figuring out the right go to market right what is the best way for us to acquire a dollar can we make at least three dollars you know can we make that money back within one year consistently and and have enough data points where we can go to an investor and say hey if we if we million of your dollars we'll be able to grow at this at this rate over the next two years um we're close to that at this point but we're not quite there yet so we're still we're still at that stage of the company have you capitalized the company if so how much have you raised to date we've raised a little bit over five million dollars okay across uh two rounds of funding and why'd you decide to raise instead of bootstrap it sounds like you're able to get revenue going pretty early yeah well you know when you're building hard tech like we are you need software engineers and software engineers are expensive and so are you all in san francisco you gotta have i'm sorry are you guys all in san francisco um not all hq is here but we have engineers in new york and europe as well so we're distributed and how many people total nine people total nine okay that's great and then look i mean if i take the 25 customers right times we'll stay on the minimum side so let's say 50 000 ac i mean you guys are you've got to be either flirting or just past kind of the million dollar ar mark or is that something you're gonna pass in the next couple of months yeah we're gonna pass that within at the in the in about q2 time period that's great and can you can you can you give me a general sense of growth year over year so if you're out call it 70 grand a month today where were you a year ago so i mean we're growing at over 12 per month at this stage nathan um adding adding new customers not only are we adding new customers but the acv is also growing and our expansions are approaching over 30 percent of our monthly growth at this stage you mean a lot of revenue growth is coming from expanding old cohorts that signed up yeah so customers will renew and they'll double down they'll increase their acv uh and also the way that we build is a function of how much data our customers are processing and the thing that's true for everyone is they're they're processing more data they're storing it for longer they're doing more things with it and so our pricing goes up as a function of how much data they're crunching so paul with 12 percent kind of monthly growth growth i mean that's you know obviously north of 100 year over year i mean fair to say you were doing maybe call it 25 30ish grand a month a year ago something like that um so you've more than doubled yeah yeah yeah we're we're more than doubling every year easily yeah that's great yeah um talk to me talk to me about so you the last tranche of funding you said you did in two tranches when was last tron trays and how much was it for we raised a round in may led by encore capital that was a three million dollar uh seed round okay and you had a feat kind of a thesis or a pro forma built out on how you deploy that capital we're now several months into that has it panned out how you thought it would and if so where's if not where's it different so um it is panning out the thing that is the most exciting is that we've recently gotten traction in the enterprise very large fortune 500 companies are now using us as part of their digital transformation so when large enterprises shift their data services to the cloud they they they experience a lot of pain and we're we're there to help them help them make that transition away from the traditional data warehouses like oracle and teradata and so we've been really excited to find that niche for ourselves because obviously those are much higher acv customers and a much better market segment for us yeah do you do you have enough kind of a large enough sample size yet to have a good understanding of what your cac is or is it too early um we we do um our our cac at this point um is you know south of 10 um of 10k um our you know the the nice thing about our business is that we can sell it over the phone uh typically customers will make a decision there's a free trial um and they'll make a decision in about two weeks uh two to three weeks of whether to buy us so our end to end sales cycle is south of two months at this stage even for the larger customers so ten thousand dollar cac on call it 50 000 acv account you guys are what three four month payback period something like that yeah that's i mean look obviously that's healthy is that are you generally getting more aggressive with that or less aggressive we constantly want to um try to increase you know increase prices we always want to make sure that we're adding value but with those economics we're really confident that we're at a good spot for additional venture rounds and it's healthy business i guess my question is are you looking i mean just to be clear you have healthy payback for four months is a healthy payback period for your stage what i'm trying to get at are are you running more and more paid marketing experiments to try and figure out how you can get more customers quicker so that 10 grand you're driving that cac up or are you staying here or going down yeah um we're we're always trying to get the cac the the cat down um you know our um the way that we find customers is in two um two ways one is they find us through content we publish a lot of content about data lakes performance monitoring visibility through a blog post or a white paper that we've written and then we're also reaching out to customers that we know are using amazon redshift um and so um how do you know that is there something like javascript scrape you do or how do you get that list that's a really good question nathan um so it turns out the word redshift is pretty not common in job descriptions and so if you scrape indeed for example you can kind of figure out which companies are using it so we have scrapers that go out to job boards and then they collect company names and then we just sort of get lists of people that work in those companies with the right titles get their phone numbers and just basically do cold outreach really smart is that how you got your first dollar when you were six months in um so um a little bit we also used our network um at that stage because lars and i have been in the valley for 20 years so we know on time that we do start signing up early early alpha users to a not fully baked product super early on um and and so the first few customers were largely founders network that's great and i assume today since you just raised that capital you're obviously not break even or cash flow positive you're still investing in burning capital right now true yeah we're we're investing in r d our our biggest our biggest cost is uh you know engineering and software development um and so um our goal is to raise another round of funding about this time next year would you ever paul consider i know i don't know if it's popular value or not because there's so much vc money out there but i mean have you looked at venture debt at all to take to basically fuel growth without having to take dilution yeah we we um we're not able to do that yet because um venture debt the the banks that we work with um only give you venture debt if you're after a series a uh like svb or what square one yeah yeah exactly have you talked to like i'm talking about people that play lower down the ecosystems like so for example lighter capital will go like pre-vc as long as you're north like 15 grand a month in revenue i mean have you talked to folks like that or no not yet yeah we haven't had a need to but um i think venture debt is a great idea um and i'm gonna look at seriously doing it um next year just because it's another financing option without giving away equity oh totally man i love it i mean obviously capital it can be a little expensive but again if you understand your growth levels it's i'd rather keep the equity you know exactly yeah all right cool man let's wrap up here with the famous five number one what's your favorite business book good strategy bad strategy by richard riemel number two is there a ceo you're following or studying uh i really love uh lou cerney at new relic uh number four how are number three how many sorry what's your favorite online tool for building your company gosh i log into heap analytics a lot to keep tabs of our metrics all right good one number four how many hours of sleep to get paul seven that's good in which situation married single kiddos uh you know i'm um married with a small toddler and one on the way um and so it's uh shocking that i get seven hours of sleep but um our kid thankfully sleeps through the night for now that's good all right married one kid another on the way and how old are you yeah i'm 42. 42 last question what do you wish your 20 year old self knew uh to have to have kids sooner it's awesome having kids and uh you know now that you have some you kind of want it yeah i wish i had them a lot sooner than that but um yeah guys have kids sooner launched intermix back in 25 again giving visibility into data pipelines working now with really an enterprise segment as they're growing working with 25 customers call it a you know a 50 000-ish acv but anyways they're flirting with in the next couple of months about a million bucks in terms of arr that's up from about 30 000 bucks a month just a year ago so healthy more than doubling year over year burning capital they've raised five million bucks nine people in san fran new york and europe less than five percent annual revenue churn but more than five percent expansion as well so 100 net revenue retention annually spending up to 10 grand to get a new customer so healthy payback period as they look to scale paul thanks so much for taking us to the top thank you nathan