How Knotch Reached 20 Enterprise Customers with Zero Churn and $14M Raised (Interview with CEO and Co-Founder Anda Gansca)

Introduction to Knotch

Nathan Latka

00:00Hello, everyone. My guest today is Anda Gansca. She's the CEO and cofounder of Knotch, the leading independent provider of real time intelligence for marketers. Founded in 2013, Knotch has been recognized as one of the most innovative marketing technologies in the world as it to change the way global brands engage and understand their audience. Anda, are you ready to take us to the top?

Anda Gansca

00:19I'm so ready.

Nathan Latka

00:20All right. Tell us about the company. What do you guys do and how do you make money?

What Knotch Does and How It Makes Money

Anda Gansca

00:24So we help brands understand the impact of their digital marketing. We started off specializing in content marketing because as a new category, there weren't a lot of solutions out there to help marketers make sense of ROI. And we make money because we work directly with brands and we try to help them as much as possible to get unbiased data that sits across all of their different partners, whether it's publishers, agencies, and other distribution channels.

Nathan Latka

00:49Just to be clear though, are you a pure play SaaS model?

Anda Gansca

00:52Yes, we are.

Pricing and Average Contract Value

Nathan Latka

00:53Okay. And give me a general sense. I don't wanna talk about, you know, every customer cohort, but on average, what's the customer pay per month for this, would you say?

Anda Gansca

00:59So we have, I mean, we're pretty transparent with all of this. We have three different buckets. We have a bucket for measuring owned and operated channels that sits between $150K and $250K a year. We have a second bucket of measuring paid channels that sits between $203.50 ks a year. And then we have an enterprise level deal, which can honestly go up to a million dollars.

Nathan Latka

01:19Okay. So just again, so we don't have to break down every single one. Give me an average. Would you say the average contract is called a $250,000 per year for you, would you say?

Anda Gansca

01:27It's around 300 k.

Nathan Latka

01:28Around around 300 k. And are they typically engaging with just one of those products you just mentioned or are they, you know, buying multiple together?

Anda Gansca

01:34They start with one and they end up being enterprise level customers.

Nathan Latka

01:37That's great. Okay. And put all this on a timeline for me. When'd you launch the company?

Anda Gansca

01:42So we launched a company about four and half years ago, but when we launched it, it was a consumer facing kind of data focused company and it ended up becoming a data focused, slight consumers aspect to it. So, as most startups, we ended up pivoting a lot and trying to find our way and responding to the market. And we found that enterprise SaaS was the best way to go to market.

Nathan Latka

02:03Enterprise SaaS is a good space to be in. How many customers have you scaled to over the last four years?

Customer Count and Growth Inflection Points

Anda Gansca

02:10So we're at around 20 big paying customers at the moment and we have a lot more in the pipeline. I would say the biggest conversion of the pipeline has happened in two tranches, probably the first one about a year ago and the second one about three, four months ago.

Nathan Latka

02:24And what were those inflection points?

Anda Gansca

02:26Well, the inflection points were one, raising our initial funding to hire a sales team to build a pipeline to take the leads through the pipeline. So that was, I would say the second inflection point. The first one was really just me getting our first two to three big customers and trying to figure out how do you build processes around that and how do you ensure customer success?

Total Funding Raised

Nathan Latka

02:46Yep. Now how much have you raised to date total?

Anda Gansca

02:4814.

Nathan Latka

02:4914,000,000. Okay. Very good. And all equity or is there debt built in there?

Anda Gansca

02:52No, all equity.

Nathan Latka

02:53All equity. Now, if I take 20 customers times that, you know, call it a, I guess you said $300,000 first year ACV that puts you right now at about a $6,000,000 run rate. Is that fairly accurate?

Anda Gansca

03:02We're in the range. Yeah.

Nathan Latka

03:03Okay. And talk to me about growth. So if you're at in that range today, where were you about at about a year ago?

Year-Over-Year Growth Rate

Anda Gansca

03:08So we've tripled growth year on year. That's Yeah. And we are... We're pushing for an even more aggressive growth rate at the moment.

Nathan Latka

03:17That's great. So that would mean about a year ago you were doing call maybe a 2,000,000 run rate. You're now three x that up to six. That's incredible. Has Has most of that growth come from expansion or adding new customers altogether?

Expansion Revenue and Net Retention

Anda Gansca

03:28It's both actually, I would say about 60% of it has been from new customers just by virtue of being a new company. But about 40% of that has come from upsells and cross sells.

Nathan Latka

03:36That's an incredible kind of expansion revenue rate, you know, across the base. I want to dive more into how you're doing that, but let's start at the number, right? So net revenue retention annually, how high above a 100 are you?

Anda Gansca

03:48Oh, we have not had any churn.

Nathan Latka

03:51So, okay. So you've had no revenue churn, even downgrades.

Anda Gansca

03:51No.

Nathan Latka

03:51Okay. So the net revenue retention, if you have about 40% expansion would be about 140% year on year. Is that right?

Anda Gansca

04:00Yes. Negative churn and whatnot. Yes.

Nathan Latka

04:03Yeah. Yeah. But yeah, so negative churn or net revenue retention, 140%. Let's dive into how you're doing this. So when you are expanding these accounts, are you, what are the axes you're using? Is it additional features, additional seats, additional usage? What is it?

Anda Gansca

04:15It's a great question. So as I said, we usually start with one license and then we build into an enterprise level license. So imagine inside of a bank, you have a business unit, let's say the credit cards unit. We started with a paid license at $250K. Then we add an owned license for 150. Then we add, we have a couple of other products.

Nathan Latka

04:33Owned license, like owned content or owned marketing?

Anda Gansca

04:35Content, owned content. Yeah. Yeah. Then we have a couple of other adjacent products that are really helpful for marketers around competitive intelligence and benchmarking, as well as a different product for planning. And so we kind of build up to an enterprise level deal inside of a business unit, and then we cross sell with other business units. So we could go from credit cards to auto loans, to student loans, etcetera.

Nathan Latka

04:58Interesting. And you know, when you have no churn, if you extrapolate to get to LTV, you can, I mean, the numbers get huge, right? So you obviously don't do that. Right? Because you want to say-

CAC, LTV, and Unit Economics

Anda Gansca

05:09I've been, honestly, I've been assuming 10% churn just to kind of come up with an LTV. So I started doing CAC to LTV. So yeah.

Nathan Latka

05:17So what that's what I was going to ask you, right? Okay. You use 10%. So what do you assume lifetime value is in terms of dollars on these accounts typically?

Anda Gansca

05:24We assume it's between 2.5 to 3,000,000 at the moment.

Nathan Latka

05:28Okay. Yeah. And and again, it's kinda... It's really back of the napkin. It's very difficult to think about, but it does help you think about what you can spend on CAC. So what are you spending to acquire these customers?

Anda Gansca

05:36So right now it's pretty crazy because we're super lean. So we're spending between 45 and 50 k.

Nathan Latka

05:41Okay. To get a $300,000 first year ACV account.

Anda Gansca

05:41Yes.

Nathan Latka

05:41That's great. So I mean, payback is what, three months?

Anda Gansca

05:48Yeah. It's super fast and the CAC LTV is a crazy number.

Nathan Latka

05:52Yeah. Well, yeah. $50K to 3,000,000 is obviously a crazy number.

Anda Gansca

05:56Exactly.

Nathan Latka

05:57Walk me through what's the team size today?

Team Size and Composition

Anda Gansca

06:00So the team size is almost 30 at the moment. We're hiring really fast. I think part of the CAC is gonna go up a little bit because we're a bit understaffed on the sales and marketing front. And the composition is really kind of a third engineering, third marketing and sales, and a third product operation executive.

Nathan Latka

06:20Everybody's in New York?

Anda Gansca

06:22Almost everybody's in New York. We have a couple of people on the engineering front that work remotely. They kind of work remotely in New York. And then we just hired someone to run West Coast for us.

Nathan Latka

06:31Got it. And walk me, so I want to go back now since we kind of understand all the numbers and the growth and all that. Your first few customers in '14. Tell me the story of how you got your first customer.

First Customer: Cold Email to Beth Comstock

Anda Gansca

06:41Yeah. I got a cold email intro to an amazing woman whose name is Beth Comstock and she is like, know,

Nathan Latka

06:48Former GE, right?

Anda Gansca

06:50She's the CMO that all CMOs want to be. And I didn't know that at the time because I didn't know anything about the industry. But she was kind enough to, I guess, just take an intro. She... I guess she did a bit of research on us and then introduced us to her team. And that's really what kicked it off. We did a really good job of over delivering for that team. And then she started introducing us

07:12to other CMOs. She then ended up investing in the company, which was amazing. And so we had a really strong story going into meeting Unilever, JPMorgan Chase. JP Morgan Chase has probably been a similarly amazing, I guess, customer and situation for us. Kristin Lemkau, who's the CMO there, then started introducing us to other CMOs. So really, we started getting our first few customers by, I guess, word-of-mouth, CMO word-of-mouth.

Nathan Latka

07:35So that initial Beth though introduction. So by the way, was this when she was still at GE?

Anda Gansca

07:40Yes. At the time she was the CMO of GE.

Nathan Latka

07:43Okay. So GE was your first customer there. How did you get that cold intro though? That, I mean, that's really the secret sauce here. How'd you get that?

Anda Gansca

07:49Well, I was coming to New York. We were based in Silicon Valley at the time and I was coming to New York and meeting literally everyone I knew and just asking them, do you know any CMOs? Here's my value prop. Can you help me get to them? I probably met 200 people before I got five introductions. And of those five only Beth responded.

Nathan Latka

08:06Oh, interesting. Very interesting. Okay. And she ended up invest. Yeah, that's great. She ended up investing as well, which is nice. How big was your angel year? Like your first round, your seed round?

Anda Gansca

08:15So we did an initial round of four and then a second round of 10.

Nathan Latka

08:19Did you do that initial one, like on a safe or was it a typical convertible note?

Anda Gansca

08:23We did the initial one in Silicon Valley on convertible notes. And then the second one was an equity round.

Nathan Latka

08:29So walk me. That's a big move. Most people say you go to Silicon Valley if you're building a software startup. You went the other way. Why?

Moving from Silicon Valley to New York

Anda Gansca

08:36Because I felt that in order to be truly empathetic to the people who were selling the product to, we needed to get out of the bubble and get closer to the people who were selling the product to.

Nathan Latka

08:44There's a lot of CMOs in New York.

Anda Gansca

08:46There's CMOs. And if they're not here, they come here all the time. So it makes sense. And to be honest, it's not just about the CMOs because we work with a bunch of people on their teams. We work with their agencies. So it was really important that we were close to them.

Pricing Strategy and Leaving Money on the Table

Nathan Latka

08:58Is no churn a bad thing?

Anda Gansca

09:01You know, it's funny. I've been thinking a lot about this. I think to some extent it's weird with investors almost. It also fucks up a lot of the metrics that you're trying to calculate. So in a way it's bad on paper because it makes your job harder. But I mean, who are we kidding? Of course, it's an amazing thing. I mean, it means that we've figured out how to do customer success properly and that we have

09:21a product that works. So I'm not going to complain about it.

Nathan Latka

09:24Well, position it differently. If nobody's churned, maybe you're too cheap and you're leaving a lot of money on the table.

Anda Gansca

09:29I feel like we're very expensive.

Nathan Latka

09:32But nobody's churned.

Anda Gansca

09:34Nobody's churned. I think if you look at the, I guess, competitors, they're not really competitors, but their prices are probably a quarter to half.

Nathan Latka

09:46But you just said they're not really competitors. I mean, my basic question is usually when you look at anyone's cohort data on their churn customers, AFF, know, 50% will be, you know, credit card failure. If they're like SMB, once you get mid market enterprise, a lot of it is just expenses and budgets. It's too expensive. That's why they churn. You've had no churn. So are you leaving money on the table? Have you, like, if you double

10:05prices, what do you think would happen?

Anda Gansca

10:07To be honest, I think that's an area where we do need to rethink some of the pricing and how we capture the value that we bring. The challenge of building software for an emerging category is that there's a lot of stuff that you kind of have to invent and define. And so we have to constantly reconsider what is the value that we bring? What is the ROI that we bring? And are we leaving money on the

10:31table? And I'm a 100% going through exactly that exercise with our head of sales.

Nathan Latka

10:35And while taking in those conversations, because a lot of people go through this. I mean, how do you run a pricing experiment like this if you decide, yeah, let's test a higher price point.

Anda Gansca

10:44Yeah. And we are constantly thinking about what is the percentage of the media spend that goes towards measurement analytics? Then we're like, okay, well, how much of that money goes to the agency as a pass through cost? And then how much of that money then goes through the distribution channel? And if we centralize that, how much money are we saving the brand? And then on top of that, how much money are we kind of making them

11:06by just bringing those insights in real time when the alternative today is that they would get it three to six months later. So we're kind of, and we're working closely with all of our partners to ask them these questions because obviously the data is and you can't just Google this stuff. So.

Nathan Latka

11:20So just to be clear, Anda, if GE is going to spend a $100,000,000 in Q4 on ads or something like that, you know, one way they could do it is through an agency. And there's typically what people call an agency tax there, a lot of middlemen, and maybe only 60% of the 100,000,000 goes towards the actual placement, call it 60,000,000. The other option is to use you. And what you're saying is, well, if we're saving them

11:39that 40,000,000 of that agency tax, but we're only billing them $500K in ACV, that's the comparison you're doing. Should we be charging more? Because that's what we're saving them. Is that right?

Anda Gansca

11:49To some extent. So actually we're a percentage of that as well. So we are just measurement analytics. We don't actually run the media through any platform. So we're trying really hard to be an independent judge as opposed to kind of be both judge and jury. So I would say if GE spends a 100,000,000, then they would probably end up spending 60,000,000 across, let's say six different distribution channels. So they would spend 10,000,000 per distribution channel at

12:15the level of the distribution channel, 6%, six to 8% of that is going to go towards measurement and research, analytics research. And so that is the tax that we save them, which

Nathan Latka

12:15Which is we

12:26work $600K to $800K per channel then?

Anda Gansca

12:29Yeah. So we work directly with the brand and centralize the data collection across all these different distribution channels. And that's a big part of our value add.

Nathan Latka

12:38Interesting. The last round of funding, when was it?

Fundraising Plans and Build vs. Sell Decision

Anda Gansca

12:41The last round of funding was about a year and a half ago.

Nathan Latka

12:44Okay. So you're either raising capital right now or you're selling to Adobe, which one is it?

Anda Gansca

12:49I can't tell. What I can say is that the rate of growth has been very exciting for everyone in the industry, including investors.

Nathan Latka

12:59Oh yeah. Mean, if you're 3X ing year over year, you basically have any option you want. Now, you cash flow positive right now or no, you're still burning a little?

Anda Gansca

13:05Still burning a little, but Very, very

13:08very close.

Nathan Latka

13:08Okay. So you really could do anything. You, if let me ask you this a different way. If a VC came or an investor came and gave you a term sheet at a valuation that you really liked, but someone, another company called Adobe offered you that same valuation to buy the company, which direction would you go?

Anda Gansca

13:24The VC a 100%.

Nathan Latka

13:25So you want to keep building?

Anda Gansca

13:26I think there's so much opportunity, especially with Moat being a part of Oracle, Integral Ad Science now being part of Vista's portfolio. I think there's a lot of opportunity to be that independent source of truth across all digital marketing. Yeah.

Famous Five Rapid Fire

Nathan Latka

13:42Very good, Anda. Let's wrap up here with the famous five. Number one, what's your favorite business book?

Anda Gansca

13:47Beth Comstock's book.

Nathan Latka

13:48She just came out with it, right? It's fairly new.

Anda Gansca

13:51It's coming out on Monday actually, which is very exciting. I got to read it before. So yeah, Imagine It Forward.

Nathan Latka

13:57What's the next one?

13:59Imagine It Forward. Very good. Number two, is there a CEO you're following or studying right now?

Anda Gansca

14:03Yes, Jeff Bezos.

Nathan Latka

14:04Of course.

14:05Number three, is there a favorite online tool you have for building your business?

Anda Gansca

14:10You know, I really like this product called Nota Bene. It's started by Sam Lessen. It's a really simple app that enables you to take really fast notes and send them to either yourself or your assistant.

Nathan Latka

14:20What's it called?

Anda Gansca

14:22N O T A, nota, bene, B E N E.

Nathan Latka

14:26Interesting.

Anda Gansca

14:27I pronounce it with a Romanian accent.

Nathan Latka

14:29I like it. It makes it sound like it should be priced more, right? Makes it more expensive. Number four on the, how many hours of sleep are you getting every night?

Anda Gansca

14:36About six and a half.

Nathan Latka

14:38That's good. And what's your situation? Married, single, kiddos?

Anda Gansca

14:42Is that a good question?

Nathan Latka

14:43Well, I'll tell you why. Because a lot of people when they listen, they like to go, Oh my gosh, she's married with seven kids and she's gonna go, I can do it too. They get inspired. So what's your situation?

Anda Gansca

14:43I'm sure you're

14:52gonna say that people are gonna try to date me. No. I'm in an amazing partnership.

Nathan Latka

14:57Okay, got it. No kids yet?

Anda Gansca

14:59No kids.

Nathan Latka

15:00That's great. And do mind me asking how old you are?

Anda Gansca

15:0230. I just turned 30 a

Nathan Latka

15:02Congratulations.

Anda Gansca

15:02Few days

Nathan Latka

15:05Very good. Last question.

15:06What do wish your 20 year old self knew?

Anda Gansca

15:09That I needed to trust my gut.

Nathan Latka

15:11How so? Were you stuck in corporate or something?

Anda Gansca

15:14No, no. I've been building a company for a while. I was in the VC land before, and then before that I was building NGOs across the world. And you have a lot of moments when you have to make hard decisions with very little data and you have to just trust your instincts. Guys. I've trusted my instincts more.

Nathan Latka

15:32Trust your instincts. Knotch again launched in 2014, now doing about $6,000,000 in terms of run rate. That's three x year over year, August 2017, doing only about 2,000,000. So healthy growth, 14,000,000 raise. 20 enterprise customers that pay, call it, on average $300K first year ACV. They haven't churned anything. So net revenue retention annually is about 140%, which is great. Just really working out CAC to LTV stuff. They assume LTV is, call it $34,000,000, assuming a 10% churn

15:59rate, even though they don't have any churn, which means they could spend, call it $50 to 60 grand, something like that on CAC. Lots of room to play there as they look at growing their sales team. 30 people right now based between New York City and other remote location. Again, transparently collect, own, and action the data from your digital content marketing for enterprise brands. And thank you for taking us to the top.