Keaprevenue & funding

hello everyone my guest today is clade mask he's the CEO of Infusionsoft and they're currently on a mission to simplify growth for millions of small businesses worldwide under clades leadership the company has landed four rounds of venture capital he's a national speaker and co-author of the New York Times bestseller conquer the chaos he's got a BA in economics from Arizona State University and MBA and a JD from Burnham Young University as well clay Tarr you ready to take it to the top I'm ready of course so so last time we spoke I think was a little over a year ago real quick I'll summarize some of those metrics you had about 600 employees 125 million raised over 45,000 customers north or flirting with about a hundred million bucks an annual occurring revenue and last time you're all you were talked about how you're looking to really grow towards profitability so that you didn't have to raise money or IP or anything like that give us an update where are things today yeah you bet thanks so much well it's been we haven't made a lot of progress we we did get to profitability that's been a great thing so we're not burning a bunch of cash and I think that's probably the one of the nice things about getting to a certain level of scale and maturity as you control your own destiny a little bit more when you're not dependent on outside funding sources so that's been a huge thing for us we've got we now we went I think when we talked last time we're about a hundred and forty thousand users for an app to about a hundred seventy-five thousand users many of those are paying late customers 175,000 paying users so yeah we that we don't we don't report the non paying users in fact we just we just started our free trial work and so there's a bunch of now there's now we have free trial customers but that's not really what we really focus on the paying users so we've made a lot of progress I think the key thing is that we when we kicked off the new Mars mission as we caught and by the way you said it very nicely to simplify growth for millions of small businesses worldwide you know that's the Mars mission that's what we kicked off at the beginning of 2000 being of last year 2017 and that takes us through the end of two thousand thirty so that's our you know our B hag that we're working on you know we see the opportunity to serve millions of small businesses and help them by simplifying their growth helping them to conquer the chaos that they live in create order automate what they do and get the benefits of efficiency in their growth so that's what we're up to I think what you've seen in the rebrand and that work is much more around really focusing on CRM and helping helping our customers deliver great service to their customers and build great relationships with them played back in the day when I was boarding building my first company had the privilege of really learning a lot from you one of them was you know you said Nathan my favorite book is it's crossing the chasm by Geoffrey Moore I went on to interview him many times and recommend his book all the time but in addition to that you also I remember in your office you when you when you move in with a big football field your doors had these big kind of banners on them with the mission what was the one before Mars mission was Everest right it was the Everest mission yeah from beginning of to the it basically was 2007 to 2010 yep and I remember asking some folks working there kind of how you guys codified that and I believe the recommendation from the book perspective on that one was Rockefeller habits buy bribe earn right yeah so two major books Rockefeller habits and then one by Jim Collins called beyond entrepreneurship it's like nobody knows about that book because he's out you always hear about good degrade and built to last and great by choice and all those things but for entrepreneurs beyond entrepreneurship is amazing and it's the first book he wrote like I read it I didn't even know it was it was like the Jim cons it was like James C Collins when I realized Oh chapter two in particular talks about how to step vision and we've been big believers in that for a long time and our everest b hag was was those those For people right now listening to this going I want to plan similar to how Clate plans help us understand because they haven't seen it like I have on the door what actually is on Mars is it like a number goal of customers is it more soft like a vision statement what is it? is it it's literally five million small businesses worldwide okay and that's customers or users or? businesses five million businesses got it so when we say simplify growth for millions small businesses worldwide that's really what we're talking about got it and what are you at today? literally we're like, like I said we're about 175,000 oh so that's the number, it's the same thing? Yeah that's right just to be clear it's paying? I should have said by customers I mean number of customers using thesoftware confused yeah okay so while key that's a significant gold load up from 175 that's great hi so how do you obviously to do that you've got to invent a bunch of kind of better mousetraps on different product lines to pull in new users like an a/b testing platform but in every one of those mousetraps you try and launch you're gonna compete with another business that is only focused on that how do you think about that yeah yeah it's a great point I mean there's features that you compete on but really the platform is where we're where we really compete are we're not trying to be all features for everybody we're trying to provide small businesses the customer relationship management platform that they need to deliver great service show up to their customers follow up with them not have things slip through the cracks if any small business owner in the sound of our disguise my voice in this discussion knows that it's really easy to drop the ball and they do it all the time and and it's so difficult as your business gets going to deliver like you said you were going to deliver your customers and it's it's really frustrating to make those mistakes and drop the ball so you need a platform and a way to follow up and to show up to show up follow up delivers the great experience to your customers and so that's what we're doing it's not a it's not a feature war for us it's really a platform that allows our customers to get all their to get organized and get all their stuff in one place and to have you know stop the chaos that they live in and be able to serve their customers more effectively so what you see is really our focus on our CRM platform okay I want to talk more about the book here in a little bit as well so is CRM platform so let me ask a few questions here just to kind of codify that you know cabbage is doing very well their missions name is almost exactly the same but they're doing small business lending almost 5 million lent out would you ever get into that space potentially but more likely we would partner with those folks you know that we that's today that's the way we see it but I would yeah I'd never say never but no we love what they're doing from a lending standpoint about the fact that capital is is a constraining factor for small businesses but a lot of times their businesses is just kind of it's in chaos and so capital is not necessarily going to help they've got to get organized first they got to create a system they got to create a way to deliver their service and do it in in a really positive way for their customers has anything drastically changed economics wise on your end since last time we spoke besides profitability for example you ran a big test cuz you had bad churn numbers back several years ago and now you're down I think you said two to three percent last time has turned still the same calculus to basically the same yet churns still the same I think the big change that's happened for us since we talked is that when we jumped when we entered into the Mars mission it was really about I mean now we're talking about serving millions of small businesses not just the early adopters who are marketing savvy marketing enthusiasts that sort of thing that that's where our when when ten years ago we took our software to the market it was it was marketers who grabbed a hold of it and said oh wow I can see the power of this automation and I can really I can really get a great return on my investment with this and so that's really where we've been focused is these savvy small business marketers we've now expanded that to not only include those savvy small business marketers but serving regular everyday small businesses that that aren't great marketers but want to deliver great service to their customers well if you're going to expand in that way then you have to make some major changes to the way that you operate the business and this is what we've been doing over the last 18 months or so since the beginning of 17 and the Mars mission it's really been a change in our in our product a change in our partner strategy and the way we go about that and then a pretty significant change internally in the way we operate to deliver for many more customers so what does that look like in terms well the churn is the same the the customer the number of customers we bring in has gone up pretty dramatically and we're now serving solopreneurs as opposed to in the past we really didn't serve one-man businesses very well you know it was it was more for businesses that were a little bit more sophisticated particular than their mark in their marketing so you see is serving a lot more customers the LTV CAC is stronger than it was before which is really great because a lot of times when you serve a less sophisticated customer your khaks going to go up or your LTV will go down that hasn't been the case we've got a better ratio than we had before so ladies your CAC still about about 3k I think it's 320 last time no it's actually gone down to below 2k okay but our LTV has gone down as well because we're bringing on a customer because we now have a $99 price point and customers who can come in without paying you know 250 or 300 dollars out the gate it's so interesting you're doing that because I remember you tell me back in the day one churn was eight nine ten percent though these are the way you've tested to solve that was a big upfront fee and it sounds like now you're going back back direction you've learned something in between yes yeah what we've learned is it's about simplify simplify simplify so the mission is simplify growth for millions of small businesses and what we it all starts with product and so if you look at our product today versus our product two years ago the interface is dramatically different you can get a free trial and get started a bit much easier there's templates so that you don't have to create campaigns from scratch there's there's so much more to help you get started and get value quickly and that's the key thing so what we've done your remember well what we've done is we've used our customer success as the gating factor on the price and the opportunity that you know the way that we expand the market because if you if you remember I talked a lot about mark product market fit and and if you don't get the success rate right then your LTV CAC blows up on you and so you don't and you don't make this in one extreme move I mean the reality is we've been working on this for two or three years but we got to a point last year where we could start to expand the market and bring in customers who are a little less sophisticated and yet needed the benefits of Infusionsoft but we could only do it at the rate at which we could maintain that LTV CAC ratio and a simple way to put that as what does the churn look like and what is the what is the CAC look like I imagine people I mean look I think it's interesting imagine people listening right now are going well this is opposite of if investors are listening their way this is opposite of what we tell our portfolio companies to do which is expansion revenue increase wallet share move upstream this is the opposite they're gonna follow your story closely because they're gonna see if you can prove them wrong and execute it right so so so I like it uh quick kind of fireball questions here um are you making any acquisitions of other companies you think in the near term is that a strategy or no it is a strategy we're always looking at different things we don't have anything imminent but you know I I'd be lying if I didn't say we're looking at stuff we always are yeah flipping the stripper not for a second you and any serious acquisition talks to sell yourself to any other bigger competitor no not at all and still no IPO you don't need to not don't need to although I have to admit as I watched the IPO market over the last few months I'm I'm looking at that with a little bit more it's hard to ignore yes it's crazy unfortunately I think there's a few that could make it problematic for others but but but it's it's going well you know we're we're doing well we're not in a place where we have to have capital but we I you know we'd be silly if we weren't if we weren't I in the public market so yeah we certainly are there's nothing imminent there either we've got some more work we got to do but you know as the new Infusionsoft gains more and more traction which we you know as you know we just launched as that gains more and more traction then you get to a place where you have the predictability in the comfort level where it does make sense to go public and can you give us an AR update last time you say around a hundred have you passed 12 million a month yet yes so big big thing that happened is we are our revenue now is almost entirely subscription revenue so I think we talked beginning last year we were probably you know ninety ten down from about eighty twenty meaning at one point we're about 80 percent subscription revenue twenty percent service revenue early last year we were probably I think I Cameron when we talk was about a year ago yeah we were probably at about ninety ten at that point we're now like ninety-seven percent of revenue being subscription revenue so we've kind of pushed traded out some some service revenue which has caused the overall revenue growth rate not to be as high but but yeah we were over the hundred million revenue raising the margins better on SAS obviously far better our margins are over eighty percent we're doing great in there okay quickly before we wrap up concrete and chaos why should people buy it yeah because the actually they should wait till I do until I launch the revised edition I'm working on right now if they really want to see what conquering the chaos all about they can go look at the edition that we did eight years ago but really what happened is the conquer the chaos is we recognize that is the reality of what small business live in they're disorganized they're not they're dropping the ball they're not servicing their customers well because they're forgetting and both you know they're dropping the ball things are slipping through the cracks and there's an opportunity for them to get organized automate be very efficient in delivering great service so they can grow their business through word of mouth and so that's conquer the cast is really all about getting organized as a small business and serving your customers well and automating as much as possible so that you can grow efficiently love it clay let's wrap up with the famous five give me a new book favorite business book oh you know what I just I just read a story brand marketing I like that that was actually that was a quarter ago well I don't know I like that one a lot okay that was pretty good story brand marketing good number two is there a CEO you're falling or studying right now I I like B Zoe's a lot I've been watching a lot of what they were doing it's hard to ignore when you look at what they've been doing over the last couple years that's right number three besides your own what's your favorite tool for growing the business growing the business gosh we just started using drift and I really like that that's been a that's been a cool thing it's helped us on the conversion side it's great number numbers I say I anticipate there's going to be a large war between between you know HubSpot since they've invested and whoever else wants to come after a drift eventually David cancels a very impressive entrepreneur so it's good to hear you're using that effectively - number four how many hours asleep were you in every night you know I'm doing better now but I I probably get on average six or seven and some nights I'll get eight or nine that's great and remind us all situation married single kiddos married six kids they're awesome you got to hurry up and get a mold so they can start working you know for free in the company right that's how it works yeah I one of them just my oldest just graduated from college and just got a real job post post college so that's that's very cool and clayed how are you I'm 46 my last question what do you wish your 20 year old self knew I wish my 20 year old self knew okay I'm gonna be really open and vulnerable I wish that my 20 year old self knew the impact of my intensity upon others both the positive side of it and the negative side of it I love that guys there you have it from callate mask Infusionsoft you guys familiar with it they've been through quite a journey significant amount of capital raised they've completed their Everest mission now focused on their Mars mission which takes them through 2030 they want to service 5 million business owners and that's not like free users or anything that's paying customers they're currently at about 175,000 doing north of 100 million in ARR they've really shifted almost entirely to SAS higher marginal revenue at this point launching additional solutions inside of their platform so these businesses can get everything they need in one spot to truly conquer the chaos clay thank you for taking us to the top great thanks Nathan