Employ Inc Revenue & Funding (2024)

hello everyone my guest today is pete lamson he is focused on building a company called jazz hr he's also a results oriented executive with a 25-year history of strategic metrics driven approaches to accelerating revenue he's focused on the global small business market with deep experience and b2b high velocity new customer acquisition as ceo of jazz hr lamson is responsible for jazz hr's strategic direction company performance day-to-day operations and services support center for his revenue teams pete you ready to take us to the top it's great to be here again nathan and yes i am all right so jazz hr folks missed that first episode what are you selling to people so we provide recruiting solutions for small businesses which we define as companies with between 25 and 500 employees and what we do is we replace in our target market most customers are using some version of microsoft office which is excel docs and word documents and email inbox management so we provide we replace that with a very simple to use software solution that is very affordable easy to use and with uh industry leading support so is this sort of workflow and admin management for smbs or helping them hire or both helping them higher helping them higher okay so the obvious question anyone listening is well wait a second what's pete doing now no small businesses are hiring right now or at least most aren't because of the virus so i i think it depends on on where uh you're looking um in fact we have had the most jobs posted most new jobs posted with by jazz hr's customers in the history of our company with just the past month in july how what was that number how many posted just over 40 000. wow and okay well wait so this is completely different than what i would have predicted the data would say so what are you seeing when you dive into those 40 000 applications what are you seeing so it's in the areas you might you know when you hear them they're sort of intuitive so we're seeing a hiring explosion in things like logistical support you know all the companies and people that are involved in in those trucks coming down all of our driveways every single day with the things we need to work from home we're seeing a lot of work in healthcare we're seeing a lot of work a lot of hiring in technology um so the hiring is shifted away from from some industries tragically such as restaurants and and and uh retail stores and and fitness centers and so forth um but there are jobs being created elsewhere and by the data we're seeing uh literally at record levels and help me understand what a small business might pay you to use your platform where they pay on average per month yeah so our account average is a little under 200 dollars per month okay so very consistent doesn't it just just it's designed to be affordable and our pricing starts as little as just 39 a month so you can you can get the ball rolling in an even more affordable way but averages i guess a little under 200 per month and launch date for the company was what year 2009 and you came on what year uh tail end december of 2015. okay got it and we covered guys how pete came in in a last interview back from uh march uh march 28 2018 so we won't dive into that today but give us an update uh pete when you came on last you guys had just broken about 3 500 customers what do you have today just under 7 000. wow okay so incredible where did most that growth come from over the past two years um in terms of industry or by channel or answer it however you define it so um well i'll answer both ways so so we're industry agnostic we do have uh clusters uh of industries or verticals that are largely focused around where hiring has taken place over the last few years so we see a lot of work in manufacturing we saw we'll see a lot of work at a lot of hiring and technology health care financial services non-profit just to name a few um but no one vertical within our business is more than five percent of our business so it's a really nice even distribution which candidly in a time like this also gives us some downside protection that's right um and then in terms of of how we're acquiring them um when i joined jazz hr we sold only through direct means so in other words kind of the one-to-one relationship of jazz hr to a small business customer we launched indirect sales or channel sales um not long thereafter and that today is almost 50 of our new business and growing i would expect it would be more than 50 by end of this year or beginning of next and what that allows us to do is move beyond the one-to-one nature of our direct customer acquisition which is still important and we will remain 100 committed to um to the one-to-many nature of uh channel or indirect relationships so we partner with a number of different uh human capital management um and payroll companies uh who in turn offer jazz hr to their customer bases and whether you're acquiring via a channel or direct via paid spend or something else a bunch of writers doing great seo work when you look at your sort of your fully weighted blended cac what would you put it out to get a 200 a month customer so we are right now just under a 12 month kind of payback so we're a little just about two thousand dollars yeah are you happy with that um you know not unhappy i mean i think it always can be better and and that you know part of our move from direct to indirect is in fact to to impact that i mean there's no free lunch but for for indirect what typically happens if you do it well is your cap will go down but you're shifting that cac to to success driven revenue share so it's a more efficient use of use of a cost of capital um so your cap goes down your gross margins go down too because you're paying a rev share as does your arpu if you're thinking at it on a net basis but um but that's a driver of our continued improvement will continue to be a move towards indirect which not only as as you know drives drives cac um but also increases velocity of acquisition diving deeper on this indirect channel strategy that you launched about 18 months after you joined the companies about 2016 and now it's responsible for more than 50 percent of your business we just had such almost almost 50 percent almost 50 okay we just had sachin gupta on with hacker earth and he articulated how that company has now grown they're about to break five million dollars in arr they've passed uh he told us 500 customers super healthy economics in terms of retention you just launched a partnership with them how does that work um i'm sure that the the company again is hacker earth yeah um so heck i i can't comment on the uh well you know i'll tell you everything that that you might want to know about our business i'm not going to talk about anyone else's business that's kind of that that starts to get into territory that i i wouldn't share but but certainly you know we have some partners that that perform more than others um partnerships typically do take a little bit of time to get up to speed but we're dedicated to helping all of our all of our partners perform as best as they can got it uh yes sorry and maybe this is because chuck brownfield is the one quoted in this press release saying we're thrilled to integrate with hacker to empower teams to hire talented engineers faster what i'm trying to get at here is with this surreal like a real idea of a channel party or hack earth what does that actually look like so are they putting a button for jazz hr inside of hacker earth or vice versa what is that how does it actually work so it varies partner by partner um and we first we off we allow them to offer jazz hr to their customers either on a resale or a referral basis so um whichever they're more comfortable with so in all cases there'll be generally some form of recruiting promotion on their website and that their sales teams will will be offering to their customers um their customers either then are referred to us in which case then we would work with their customer um if their customer chooses to purchase then pay them a revenue share in perpetuity um for the first time as long as that as long as their customers are are paying us we are paying them we don't limit it after a 12-month period do you have any claws in that agreement sorry i don't want to put you off there but do you have any i mean one of the things i talk to vc's all the time about just margin improvement in businesses and and one quick way to get margin improvement in a business obviously if there's channel partners a big chunk of it is to have a clause and that channel partner agreement and all your channel partner agreements that say you have the right to buy out that rev share for for looking 12 months at any point in time that way if you go out and raise 30 million bucks you essentially buy back whatever your rep shares with that partner so 30 margin right for a forward looking 12 months do you have that clause built into your channel partner agreements or no no no and we wouldn't you know yes mathematically that will work and it'll look good in a spreadsheet and yes you will improve your gross margin short term it's also a great way to limit sales yeah yeah i mean you know because that after a period of time that partner can just switch to a competitor of ours um we use it as a as a retention strategy where they get to the point where they're getting a nice chunk of change from us every month and it builds up over time um if they leave us they're walking away from that and it takes time for them to rebuild that with someone else so it's it's um it's a uh uh it's a benefit we're delighted to offer and then the second way that we sell is of course resell um and if our partner partners who are reselling um which would include adp and others um what they effectively do is they're purchasing a jazz hr subscription at a discount from our retail price and then they then mark it up or not at however much they choose to do so and result to their customers so in that case there is you know the button or our pure ecommerce uh solution that resides on our partner pages now pete 7 000 customers at about 190 200 bucks a month i mean it sounds like you guys have broken about 1.3 1.4 million dollars per month now in terms of mrr yeah we're just under 7 000 but uh that's your numbers are correct okay which is great growth right when you came back on into early 2018 you're at about an eight and a half nine million dollar run rate so nice growth what is that about uh 9 80 90 growth uh have you done this with the capital you'd already raised at that point you had raised 26.6 million back then did you raise more capital we have not raised any additional capital oh wow that's great i was expecting you to raise a bunch more now we run the business at cash flow break even um we could be uh cash flow positive if we chose to but we plow everything we can back into the business to drive additional growth that's great what's the team like today should i say that again i said i just was saying that's that's great uh being at break even what's what's the team look like today how many people 80 employees 80 how many engineers that's a good question i'll say uh low 20s but i'm kind of guessing about 20 is fair enough and obviously this price point does not lend itself usually to an inside sales team because the acvs aren't high enough to give commission do you have quota carrying sales reps on the team we do you do okay so i'd love to learn about how many do you have and how does that work so we've got i'll say again i can't give you i mean i would give you exact numbers i just don't know the top of my head i'll say we've got probably uh 12 or 13 um inside sales reps um and they're broken across our direct and indirect teams so they're they're their day-to-day activities are a little bit different but our with our direct team it's entirely an inbound model so our marketing team is driving customers to jazz hr where they can do a number of things they can download a white paper they can participate in a webinar they can watch videos but ultimately what we really hope they will migrate towards is beginning a free trial or request a product demonstration and that's when our sales team really leans in and we have found that with the addition of a sales team the the lift and conversion rate uh uh more than um covers the investment we're making in in those sale steps um and on top of it our north star is customer lifetime value so so if we look at the expense of a sales team um of a quota carrying sales team to bring in a customer who's going to stay with us for 10 years ish on average it's it's more with that through that lens it's it's more than worth the investment we don't look at it purely as a as a you know the revenue we bring at the time of the initial sale because our retention metrics are such that people tend to stick with us for a long time so the math works yeah speaking about lifetime value obviously churn is critical to this it's part of that lifetime value equation last time you came on in 2018 you told me annual revenue turn was about 12 so actually fairly low i would say for this price point in this cohort is it still at around 12 percent or has it changed ash actually a little our our net retention now is um uh about point eight percent per month um so your gross your gross turn per month or your net churn our net churn net so net churn per month is let's just call it one percent for some one turn per month so you're under 12 yeah that's that's great can you peel back that on you know for me because you have expansion revenue added to churn and that's where you get the one so can you give me those two metrics uh so for on a gross basis uh our gross churn right now is still at about that 12 number okay um and our net is or one percent per month a little over one percent per month um and i mean we're in the 1.2s generally um and then our net is when we because of of uh expansion revenue which we which we define as both add-on sales and upgrades is where it drops down below one percent i see i see got it so you've got if i if i just multiply times 12 to do annual you've got about 12 gross revenue churn annually maybe a little above 12 you've got about five or six percent expansion so your net revenue retention is right around 97 98 yep not bad for this price point do you see a path to getting that above 100 net revenue retention with some maybe higher priced products you know net negative churn is of course the holy grail for sas companies um hard easy to say hard to do in the smb market as you suggested um so i you know i i hope so uh certainly that's what we keep marching towards as best we can um we continue to make progress towards it i don't know if we'll get there or not but but you know every tenth of a point of progress we make adds value to the company and to our customers um so i i hope we can get there but even if we don't it's it it is a uh an effort worth pursuing because even if we get halfway there from where we are now we're better off still better off yep all right pete let's wrap up with the famous five number one favorite business book um well my favorite hasn't changed it's i think it's still the hard thing about hard things number two is there a founder that you really respect or admire um i'll say uh dave maffey with a coumado uh mafia okay great number three what's your favorite n-a-f-f what e-i ei number three what's your favorite online tool for building jazz it's evolved right now size sense psi sense i haven't heard of those guys they used to be periscope oh got it number four how many hours of sleep do you get every night seven and a half okay not bad in situation married single kids married all right how many kiddos any kids three three what busy guy all right how old are you 57 57 last question what do you wish you knew when you were 20 um that's a great question uh i i'll say uh push yourself harder guys there you have it jazz h argan helping smbs get their hiring needs taken care of they serve almost 7 000 customers up from 3 500 just about 20-ish months ago so nice growth without raising additional cash their break-even today with 26.6 million raised approaching 15 16 million dollar run rate as you continue to drive growth even during cobit with one of their record months happening just last month 40 000 new applications coming through their system in just one month pete congrats on the growth and thanks for taking us to the top thank you one more thing before you go we have a brand new show every thursday at 1 pm central it's called shark tank for sas we call it deal or bust one founder comes on three hungry buyers they try and do a deal live and the founder shares back end dashboards their expenses their revenue arpu cac ltv you name it they share it and the buyers try and make a deal live it is fun to watch every thursday 1 pm central 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