How Keeper Security Reached 15 Million Users and Profitable Growth with a 140-Person Team (Interview with CEO and Co-Founder Darren Guccione)

Introduction and Company Overview

Nathan Latka

00:00Hello, everyone. My guest today is Darren Guccione. He is the CEO and cofounder of Keeper Security, the creator of Keeper, the world's most popular password manager and secure digital vault and KeeperChat, the world's most secure messaging app for all your devices. The software is used globally by millions of people and thousands of businesses. Alright. Darren, are you ready to take us to the top?

Darren Guccione

00:20>> Yes. I am.

Defending the "Most Popular" Claim

Nathan Latka

00:21Alright. Popular is a big word, and my audience expects me to ask about it. So when you use the word popular, defend that. Why are you the most popular?

Darren Guccione

00:28>> Well, we have millions of users in over a 100 countries. So we, you know, we grow rapidly. We thousands of users a day are being added to the platform globally. It's it's fantastic.

Nathan Latka

00:39Okay. So like, I mean, do you know for sure you have more users or customers in like a LastPass or other people in your space?

Darren Guccione

00:46>> We don't really compare to others, but I can say we have, you know, millions. We don't really know what, you know, other privately held companies have or don't have, but we know what we have and

Nathan Latka

00:58So why do you but in order to be popular, you have to be higher than somebody else. Right? So that's why I asked the question more define your market for me. Right? That's really what I'm asking is define your market.

User Base and Market Definition

Darren Guccione

01:07>> Sure, so we sell to individuals and businesses. We've got over 15,000,000 people globally using our application. We have thousands of companies using our product. We began selling the business product about two years ago, and have amassed thousands, several thousand over the past couple of years. We're traditionally private, so we don't typically disclose the exact number that we have, but I will tell you that based on what we see in terms of App Store data and App

01:38>> Store reviews, we have really the highest level of customer satisfaction, highest consumer ratings in iOS, for example, were a 4.9 out of five, which is very rare for a security application. And we really let the customers speak on our behalf in terms of how they evangelize the product and speak about their satisfaction and compliance with the product in terms of having a, you know, safeguard their most sensitive digital information.

Nathan Latka

02:04So Darren, who is actually paying you? Is it a company and then they force all their employees to use you? Or does one employee start paying you and before you know it, the whole company is using you?

Who Actually Pays: Consumer vs. Business

Darren Guccione

02:13>> Well, on the consumer side, you know, we sell to individuals on app stores through the website as well. So we have individuals paying us just for their personal lives,

02:24>> and then we have employees that pay us and also expense it through their company, And third, we have the actual company that buys it for the benefit of their employees. So it can take its form in different ways. There's a multitude of ways to access the product. So you can buy it for yourself or the company can purchase it for you. Or like I said, we see employees purchase it and because their their company doesn't really

02:46>> sponsor it, sometimes they'll just pay for it themselves or they'll expense, you know, that through a report and send it to the company for reimbursement.

Nathan Latka

02:54Okay. Well, just for the sake of really understanding what you do, let's just say then at the actual individual user level and and just I will understand that that user can be by themselves, part of a team or part of a team where this the company actually sponsors it. But we'll just talk at that level for the interview for just everyone can understand. So if someone listening right now wants this product and goes to the App

03:15Store, what are they going to pay to download it from Apple or Android or wherever you're at?

Pricing: $30 Per Year and Add-Ons

Darren Guccione

03:22>> So $30 per year and it covers unlimited devices.

Nathan Latka

03:27Okay, got it. $30 per year unlimited devices. And then I assume if you do have a sales process where you're selling directly to companies, if they buy a thousand seats, you'll maybe obviously wiggle down on that $30 price point for volume discounts?

Darren Guccione

03:40>> Yeah. So we'll start at 30 for really SMBs. And then if you need more advanced provisioning tools, things like Active Directory, more sophisticated architectures, we'll pay $45 per user per year. And so, yeah, it can escalate. We also sell a family plan. We sell add ons like secure digital file storage or something new called BreachWatch, which is a fantastic solution that protects you from the dark web. And then we also sell things like, you know,

04:09>> I mentioned secure digital file storage, and then we have something called KeeperChat, which is an encrypted messaging application. So it starts with password management, and then we layer in additional security solutions that are all really focused around preventing a data breach.

Nathan Latka

04:24Yep. And do those additional, obviously, product lines allow you to drive revenue from $30 a year to 35 to 40 to 50 over time?

Darren Guccione

04:32>> Yeah, so we, you know, typically people start at $30 and then they start adding to the solution so they can layer in additional services that they find a benefit to them. But we try to really price at value so that the product is highly affordable. You're protecting sometimes millions of dollars in digital assets, right? Because it's your identity, it's your bank account, social media, email, etcetera. And we try to price it very reasonably so that, again

04:59>> millions of people can access the system and the software for themselves or their companies.

Company Timeline and Founder Background

Nathan Latka

05:05Put this on a timeline for us. When did you launch the company?

Darren Guccione

05:08>> 2011.

Nathan Latka

05:092011, and let us in your personal life a little bit. Mean where were you? Did you just leave corporate or I mean, where were you at?

Darren Guccione

05:17>> I've been a serial entrepreneur most of my life, so, you know, started my first company in my 20s with my partner Craig Lurie. That was acquired by CNET Networks, and this, you know, just bringing this fast forward, it's our third technology company. I hope you get better at it as you go along, Yeah, and it's our third

05:36>> it's been the best. The ride's been amazing, but I have an interesting background. Know, my background is really like a bean counter smashed with an engineer. So I'm a CPA. I've got an undergrad in industrial mechanical engineering, and typically that's so different than, you know, going into software, but I've been running and building software companies really most of my professional life. And for about fifteen years, took a break and focused on really real estate development. Oh,

06:06>> interesting. So did real estate development, yeah. I did real estate finance and development for like high end residential resort hotel properties, and did that for about fifteen years, as well as a lot of tax structuring and tax planning. And then I got back into technology just about eleven years ago full time. So I've been doing, this is my latest venture, which is Keeper Security with my partner, Craig Lurie. It's our third company together, and we think

06:33>> it's the greatest thing that we've done really since the start of our technology career.

Nathan Latka

06:39Fill the team out for us. It's you and Craig, and how many others today?

Team Growth from 35 to 140

Darren Guccione

06:43>> Today it's about 140. So we've grown a lot. Know, the past couple of years, we've really almost quintupled the size of our business. We were roughly 35 people, and we decided to launch our B2B and enterprise business, and that has really driven a lot of the growth and just expanding the whole cybersecurity offering with our individual users as well, getting into other things aside from just password management, really focused on the problem with preventing a data

07:12>> breach. So where are all the different things and tools that you should be using to really protect yourselves, whether it be from the dark web or with passwords or secure file storage or encrypted messaging. If a hacker gets their hands on your smartphone, tablet, or computer, you really want to make sure that you have a multitude of different tools that are protecting you and safeguarding you against an attack.

Nathan Latka

07:34And Darren, have you guys built this up of the harder but more respectable bootstrapped way, or did you guys go out and raise capital?

Bootstrapped and Profitable

Darren Guccione

07:41>> Yeah. We haven't raised any outside investment capital yet. So this was bootstrapped, and I seed funded the company and never looked back. It's been a blessing. You know? We've taken a lot of the profits, and we continue to reinvest in our growth.

Nathan Latka

07:55So you're breaky, then you operate basically at breakeven today then?

Darren Guccione

07:58>> No, no. We make really high profits. Yeah, we're a profitable business.

Nathan Latka

08:04Well, point is though, if you bring, I'm gonna make this up, if you bring 10% monthly to the bottom line, you're probably gonna reinvest that next month to drive growth, right? Or are you paying out like dividends or rev shares to employees?

Bonus Pool and Employee Compensation

Darren Guccione

08:14>> Yeah, so we have, we do really what we call a discretionary bonus pool at the end of every year. So yeah, so we pay out to our team members, and we'd like to think that we're a pretty generous company in that regard. And so, it's privately held, majority owned by my partner and I, but we have, you know, stock options. We've got the discretionary bonus pool. So we like to make sure we take care of our

08:39>> team and also leave, you know, ample working capital on the balance sheet to, you know, fuel the investment in our team and our growth.

Nathan Latka

08:47Yep. I'd love to see, and there are a lot of people thinking about this, Madwire JB Kellogg just came on. They just passed about a $104,000,000 in ARR, and he's doing this model where it's essentially you know, they don't want IPO. They're hugely profitable. They just basically do rev share across their whole base. And everyone kinda models it differently. Some people, it's just, you know, the founders. There's a pool of I'm making this up $10,000,000 at

09:05the end of the year. You figure out on a one on one basis who to give what to. I mean, do you have a system for how to distribute this capital to your teammates at the end of the year, or is it really just pull it out of your head?

Darren Guccione

09:16>> No. We you know, the board meets. We out where our bonus pool's gonna be, and then, you know, Craig and I really allocate. We lay out the entire employee roster and just, you know, go team member by team member and look at, you know, maybe what they did last year in terms of bonus, and we really lay it out methodically and go through, you know, each and every person on the team and say, okay, you know,

09:39>> what do we want this person to receive? And there's a lot of checks and balances with that. We take great care and making sure that each separate person is taken care of first, and then, you know, my partner and I are last in line. So we make sure that we take care of our team, you know, they always come first, and whatever's left, you know, we'll we'll take it from there.

Nathan Latka

10:01How do you how do you avoid the inevitable conversation before everyone leaves on Christmas break, but after you've paid out the bonuses where Joe talks to Sam, and Joe realizes he got paid less than Sam, but Joe thinks he's smarter than Sam?

Darren Guccione

10:14>> Yeah. You know, we haven't had that problem. You know, I think people there's always a thing where, you know, sometimes people are gonna discuss what others have received, but, you know, we try to let people know that, you know, what's what what a person gets versus b, we don't disclose that to anybody. We're not open like that. You know? An individual employee's, you know, compensation to us is private, and with them we hope that they keep

10:42>> it private. We've never really had a situation where someone comes in and says, Oh my god, that person got a bonus that was higher than me. I'm upset about it.

Nathan Latka

10:50Yeah.

Darren Guccione

10:51>> We just, we've never really had that happen.

Churn and Retention Rates

Nathan Latka

10:53That's great, very good. Churn in the spaces, you know, can be difficult. We've had LastPass, we've had Dashlane, we have a lot of your competitors on. What is your churn today, and how do you manage it?

Darren Guccione

11:04>> Our churn is pretty low. Mean, the consumer side, our churn is right around 8%.

Nathan Latka

11:08K. That's logo churn No. Per

Darren Guccione

11:11>> So we we charge annual recurring subscription. So we do not do monthly subscription plans. We'd only do annual. So we have about a 90 to 92%, you know, retention on our subscription plans, which is pretty high. And we see about the same in the SMB channel as well. So you know, 90 plus percent renewal rates.

Nathan Latka

11:31Okay, so across your entire subscription plans across your entire customer base, really 90% plus retention rates annually, meaning you'll churn up to 10% of the revenue each year.

Expansion Metrics and B2B Growth

Darren Guccione

11:40>> Yeah.

Nathan Latka

11:40Okay, that's not horrible. Now, do you have an expansion machine where you know, like expansion is 20 or 30% year over year or not really?

Darren Guccione

11:50>> Expansion? Yeah, so we, we have pretty strong expansion metrics. We don't disclose what those are, but I will tell you that

12:00>> we're really, I think, capable in terms of what we do with expanding ARPU, which is the metric that we look at on consumer, and then in terms of ASP on the enterprise side and account sizes. Within the first six months, we see significant expansion, especially on the B2B product.

Nathan Latka

12:19What's significant? I mean, we talking 120%, 180%?

Darren Guccione

12:23>> No, no, I'm saying, you know, if you look at, it would be, I'll say it's over 50% of the accounts that you sign up will start expanding, adding more employees to the platform or buying additional services. So it's great to see that, you know, companies are taking cybersecurity seriously, and they're addressing it more pervasively. So, you know, before it used to be, you know, most mainly for the IT department, now we're seeing more enterprise wide deployments.

SMB Focus and Sales Motion

Nathan Latka

12:54Yep. Darren, we're running out of time here. Last few questions. When you do sign up a team, typically in that first year, I mean, are you signing up 10 of their employees or 1,000 or a million? I just want get a sense of kind of where you're playing?

Darren Guccione

13:06>> Yeah. We don't don't disclose the average number of employees per plan, but typically the buyer in our business will be an IT, and then it'll expand either from the IT department out or, you know, maybe it's HR, accounting, finance.

Nathan Latka

13:23Yeah, but Darren, I'm sorry, I just all I'm trying to do is so I just gave a massive range. I said 10 employees or a million. I mean, you can give me some range here. I'm trying to understand if you're kind of small, mid or enterprise kind of sales.

Darren Guccione

13:35>> 85% of our business is to SMB.

Nathan Latka

13:39Yeah, but I know I see but SMB is a label. I'm trying to understand how you actually define that. So are you talking 10 employees or less 100 employees or less 500 or less?

Darren Guccione

13:47>> Yeah, so SMB for us is under 1,000.

Nathan Latka

13:50Okay, good. Okay, good. So 80% of your new signups are teams that are less than 1,000.

Darren Guccione

13:55>> Correct.

Bottom-Up vs. Top-Down Adoption

Nathan Latka

13:56Okay, that's great. And is that usually coming from bottom up? Or it's the IT guy finds you in signs of all 1,000 at once?

Darren Guccione

14:05>> When you say bottom up, can you please explain?

Nathan Latka

14:07Sure bottom up means one of the people on the IT team installed you at their when they were on vacation with their family one day, they went back and told their boss we all need to use this, and then before you know it, you're moving to a thousand person plan.

Darren Guccione

14:19>> It's been both. So we, you know, we see upstream deals like that where the jeweler who used this for, you know, three years decides to go to his company and say, we should really consider this for the entire organization. We also market that way, more of an upstream approach, which we call grassroots. So we'll market to the existing individual user base. And then additionally, we'll do a lot of digital marketing. We have a lot of inbound

14:48>> lead gen that comes in where people have never used the application. So we see both and we handle it that way.

Nathan Latka

14:54And then last question here. So you said, and correct me if this is wrong, said at top of the show, have about 15,000,000 total free and paid users on the account on the platform? Yes. Okay. And and of those 15,000,000 Over over that. Yeah. Okay. Over 15,000,000. Yeah. Of those 15 or over those 15,000,000, how many are actually on a paid plan?

Darren Guccione

15:15>> Yeah, we don't disclose that.

Nathan Latka

15:17Okay.

Darren Guccione

15:17>> To the public.

Nathan Latka

15:18It is it are you generally, you know, others have disclosed it. So I know kind of what's average or would you say you're generally above average or below average?

Darren Guccione

15:29>> We're leading.

Nathan Latka

15:30Yeah. But see, how do you you you can't know if you're leading or not? Because If you don't

Darren Guccione

15:34>> I I do know.

Nathan Latka

15:35How do you know?

Darren Guccione

15:36>> I just well, I know because I know what the metrics are with the other businesses, but

Nathan Latka

15:40How many paying and I how many paying customers does LastPass have?

Darren Guccione

15:45>> Why do you want me to disclose that?

Nathan Latka

15:47I have them on. I know the number. The only way that you would know if you're leading

Darren Guccione

15:50>> is I'm if you know not gonna look. I'm not gonna get into a debate with you about it. I'm not gonna No, Darren.

15:54>> I don't want just to be clear.

Nathan Latka

15:55I'm not pushing you to disclose.

Darren Guccione

15:57>> No, don't okay.

Nathan Latka

15:58I'm telling you now, don't disclose. But what I'm gonna say is you can't come on and say you're the best or have the top when you don't know what

Darren Guccione

16:07>> I'm everyone saying I'm the best.

Nathan Latka

16:10You just said you're the top. You said most popular. I'm

Darren Guccione

16:13>> not saying I'm the best. I'm not saying I'm the best. I can say you can go to the app store and look at our rating, and you can compare our rating with one of the other competitors. More than welcome to do that. Okay. That's different.

Nathan Latka

16:25Saying you have the best rating is saying your rating is the highest is very different than saying you have the most users or the most paying customers.

Darren Guccione

16:32>> I don't know what you're asking me. You said you asked me if we're the best. I'm just giving you a metric.

Nathan Latka

16:37No, no. I'm I'm asking questions based off what you tell me. And what you said was Right.

Darren Guccione

16:41>> But you asked me you asked me how many paid users do we have?

Nathan Latka

16:45And you said no.

Darren Guccione

16:45>> And I I'm moved saying we don't disclose that.

Nathan Latka

16:50And then what did you say right after that?

Darren Guccione

16:53>> I have no idea. I don't I don't know.

Nathan Latka

16:55You said

Darren Guccione

16:56>> I'm just answering your questions.

Nathan Latka

16:58No. No. I'm going off what you tell me Darren and what you said right after that was you're at the top. You said, you know, you're the best. And I said, how do you know that? What's LastPass customer account? And you said, well, I'm not telling you that. I know what they are, and the only way you know if you're at the top or the best on that metric is if you knew those data. So what

17:14I can say, and I don't know this because I'm on my phone in front of me, but what you're saying is you have the highest rating on all these platforms where people can download. Is that accurate?

Darren Guccione

17:24>> That I've seen, I mean,

17:27>> it's highly rated, it's 4.9 out of five. I think that's pretty high. If you look at, go to the App Store and just pull it up yourself, look at our ranking versus the other products. I mean, I'm not here to like bash. I'm just here to answer questions.

Nathan Latka

17:42No. No, Darren. I like I like data. Not not not when you say things like popular or top or best or most downloaded. I like data.

Darren Guccione

17:51>> There's no antidotes, but you have to understand something. We're privately held, we're somewhat guarded in the terms of the data. You've asked me about compensation, you asked me how I pay my employees, you've asked me how many customers we have, you asked me how many are paid. I didn't realize that the interview was going to be, you know, a data harvesting session at our company.

Nathan Latka

18:13Darren, have you listened to any other episodes?

Darren Guccione

18:17>> I have not.

Nathan Latka

18:17Okay. So that's your fault, right? Because we've done 3,000 interviews.

18:22No, no, But my point is I'm gonna be respectful of data points that you say you don't wanna share. I'm not pushing you on customer count. I asked, you said no, and I moved on. Thank you. Then when you use verbs and adjectives like top, best, or most popular, I'm gonna quantify those. I can't let you just run away with that without understanding what you mean. So what I'm saying, what I'm hearing you say, wanna make

18:44sure I get this right, is you're the highest ranked on the on these plat these downloaded platforms, and that's what you were intending to say. Is that accurate?

Darren Guccione

18:54>> Well, it's not what I intended to say. It's what I said.

Nathan Latka

18:57Okay. Is it true?

Darren Guccione

18:58>> Are are you the highest the facts.

Nathan Latka

19:01You have a highest rating than last you have a highest rating than LastPass and Dashlane on the App Store.

Darren Guccione

19:07>> On the iOS App Store, yes.

Famous Five Rapid-Fire Questions

Nathan Latka

19:10Great, awesome. Let's wrap up here with much easier questions, Famous Five. Number one, what's your favorite business book?

Darren Guccione

19:19>> I would say my favorite

19:23>> there's several, but I do like the art of worldly wisdom by Baltazar Gracian. I wouldn't call it the

Nathan Latka

19:29first you said?

Darren Guccione

19:31>> Art of worldly wisdom Worldly. By Baltazar Gracian.

Nathan Latka

19:34Worldly wisdom. Okay. Great. Number two, is there a CEO you're following or studying?

Darren Guccione

19:42>> Several. I would say I like Larry Ellison. I've read Steve Jobs, the book.

Nathan Latka

19:53Number three, what's your favorite what's your favorite online tool for building your business?

Darren Guccione

20:01>> For building our business, I'd say

20:07>> the one that we use the most is probably workflow products from Atlassian.

Nathan Latka

20:12Number four, how many hours of sleep do you get every night?

Darren Guccione

20:17>> I'd say

Nathan Latka

20:20You cut out how many?

Darren Guccione

20:24>> Six.

20:25>> Six.

Nathan Latka

20:26Great. And what's your situation? Married? Okay. Yep. Married, single, kiddos?

Darren Guccione

20:30>> Married with kids.

Nathan Latka

20:31Oh, very good. And how old are you?

Darren Guccione

20:35>> 49.

20:36>> 49.

Nathan Latka

20:37Last question, Darren. Take us back twenty nine years. What do you wish your 20 year old self knew? I

Darren Guccione

20:45>> don't really think about it like that. My 20 year old self was, I'd say, a lot different. I was the lead singer of a rock band at 20.

Nathan Latka

20:57Is anything you wish you knew anything you wish you knew back then?

Darren Guccione

21:02>> I would say I think the most important thing is really treat time as the most precious thing that you have. Don't waste time.

Nathan Latka

21:10Guys, don't waste time. It is precious. Keeper Security launched back in 2011 after an eleven year hiatus in the tech industry. He's back in it now. He's got about 15,000,000 users on his product. He's got thousands of logos using it. 80% of the revenue coming from kind of what he defines as SMB is less than a thousand employees on those teams. They charge $30 per year for the platform. They churn about eight to 10% of the

21:33revenue each year. Healthy economics there as I look to scale with our team of a 140 folks. Darren, thanks for taking us to the top.

Darren Guccione

21:40>> Thank you.