How Movable Ink Passed $40M ARR on Just $14M Raised (Interview with Vivek Sharma)

Introduction and Company Overview

Nathan Latka

00:02Hello, everyone. My guest today is Vivek Sharma. He co founded Movable Ink in 2010 and has led the company through rapid growth to a leading market position with 200 plus employees serving 500 of the most innovative consumer brands. Through his leadership, Movable Ink is helping digital marketers embrace a visual world with intelligent creative that adapts at the moment of engagement. Vivek, are you ready to take us to the top?

Vivek Sharma

00:21Let's do this, Nathan.

Customer Base and No Freemium Model

Nathan Latka

00:24Alright, cool. Just to be clear, you say you're working with five five hundred of the most innovative consumer brands. Those are all customers, right? There's no freemium product, nothing like that.

Vivek Sharma

00:30No freemium. We got rid of that years ago. So customers, we like money, we like green dollars, we'll take euros, we'll take yen.

What Movable Ink Does and SaaS Model

Nathan Latka

00:37You're my kind of guy. Okay. So what's the company do, and is it a pure play SaaS model?

Vivek Sharma

00:42It is a pure play SaaS model. Movable Ink exists in a world where we work with lots of big consumer brands that have harvested a huge amount of data. They really understand their customers. There's APIs, data, CSV files. They manage all of this. What they struggle with is taking all this great data and translating that into compelling visual experiences. That's where Movable Ink comes in. We have a SaaS platform. It is completely on the cloud. There... There's

01:10no on premise. And any marketer will log into our system, be able to configure pieces of intelligent creative that they can embed into their email marketing. And so when that email opens up, our code fires, and we're able to generate the perfect visually compelling content at that moment of open.

Pricing and Customer Examples

Nathan Latka

01:27And, Vivek, I don't want to go down every customer cohort, but in general, what would you say a consumer or business or brand pays you on average per year for this kind of thing?

Vivek Sharma

01:36There's a pretty wide range. So most of our customers are large enterprises. So we've got brands like Starbucks, Nike, Hilton, The Gap, American Express using us. We don't really start at less than about $30,000 a year for those enterprise brands. We do have a mid market tier as well. But we've got companies that pay north of $1,000,000 a year. We've got lots of companies that pay several million dollars a year to Movable Ink to power all of their visual

02:03experiences in email.

Nathan Latka

02:04Okay, this is great. So good. Twenty ten founded, you've scaled today, 500 customers. Now have you bootstrapped this or have you raised capital?

Capital Raised and ARR Milestone

Vivek Sharma

02:12We have raised capital. We've been very capital efficient. About several months ago, passed about 40,000,000 in annual recurring revenue and most companies that have gotten to this point, you know, they've raised 80, 90, 100 million dollars in capital. We've only raised about $14,000,000 in venture capital and it's been a long time since I've gone out there raised capital. So been super capital efficient and our favorite source of capital, our favorite investor are our customers who pay us on time.

Growth Rate Discussion

Nathan Latka

02:42Yep. No, that's great. I imagine you don't miss having to go out and raise capital, so that's a good problem to have. I want to break down and kind of get into some the economics here. You mentioned 40,000,000 run rate today, which puts you at about 3,300,000 per month. What does growth look like? Where are you at a year ago?

Vivek Sharma

02:57We're growing really nicely. I think the one area we're especially proud of is in the last eighteen months, we've been able to configure our sales teams and go to market with partners more effectively. So especially on the net new side, the new completely new logos, we've had triple digit growth in bringing in new logos and revenue growth. So I can't break out exact numbers about overall GAAP revenue and ARR growth, but we're still growing very strongly

03:25even past this $40,000,000 ARR. So the future looks pretty exciting over the next couple of years.

Nathan Latka

03:30Well, okay. Generally, I love those growth metrics, but generally speaking, if we tie that back to some kind of revenue, it sounds like you're... I mean, can we say you're doubling year over year still? It's harder to do at larger numbers.

Vivek Sharma

03:40We are not doubling year over year, but we're growing very strongly.

Nathan Latka

03:44High double digits?

Vivek Sharma

03:44We're doing well.

Nathan Latka

03:44All right. You wouldn't confirm single digits, so I would say somewhere between 50 to 100% year over year, which is right in line with what companies your size, obviously, are growing at. And I love the ratio between what you've raised and your ARR, which is healthy, right, in terms of how far you've stretched a dollar, which is great. You wouldn't be able to stretch those dollars far if churn was an issue, so

04:07you figured out churn. Tell me about how you think about churn in the business and what it is today.

Churn, Gross Retention and Net Retention

Vivek Sharma

04:11Yeah. I think it's important for every SaaS company to look very honestly at both their gross retention as well as their net retention. Gross is, of course, and there's many different ways. This is the fascinating thing you kind of find out. There's very different ways people end up calculating their churn. What we like to say is we are an ARR business, not an MRR business. Pretty much all of our contracts are on an annual basis, in

04:36some cases multi year contracts. So you can't really look at churn on a month over month basis because it's not being intellectually honest. So what we end up doing is look at it at a cohort level of those accounts that landed that started last August, how many are up for renewal right now and how are we doing retaining them? So you've got the pure gross retention and then we've got a very strong land and expand model.

04:58So when we upsell those existing accounts, that leads to very strong net negative churn. So you've got to treat both of those independently, otherwise you can mask a very leaky bucket and gross retention problems if you're only focused on net churn.

Nathan Latka

05:13Peel the cover back though for me though. I mean what is gross?

05:17Gross? I mean, a lot of people have very healthy expansion engines and it covers problems with gross churn underneath because the expansion is so, so rapid. If I peel back the layer there and look at what your gross revenue churn is before you get to net negative when you add back expansion, what is gross churn?

Vivek Sharma

05:34Yeah. As a private company, we don't break out some of those smaller numbers, but it is very much in line with what you'd expect from a company selling to. We look at two different cohorts, the enterprise segment of our customers and the mid market segment of our customers.

Nathan Latka

05:48Okay.

Vivek Sharma

05:49A lot of customer satisfaction and the standard types of retention rates. I would say on the gross retention, it's pretty average across what you'd see with many other SaaS companies serving a similar type of customer. On the net negative on the net side, we have especially strong numbers because of that land and expand model.

Nathan Latka

06:07What is especially strong, like negative 5% or higher? Would you consider that exceptionally strong?

Vivek Sharma

06:12I'd say north of 110% I'd consider, you know.

Nathan Latka

06:16Now you're flipping it there, you're talking revenue retention annually.

Vivek Sharma

06:16Yeah.

Nathan Latka

06:16The net revenue and by the way, usually the same thing, but sometimes people will calculate, I don't know why they'll calculate net revenue retention differently than just being the inverse of negative revenue churn. So, healthy numbers there, a great expansion strategy. Talk to me very quickly around pricing. So a lot of people who struggle with expansion haven't kind of clearly defined pricing axes that are like

06:41utility based to drive expansion around. How did you figure out your axes and which one is most effective for you?

Pricing Axes and CPM on Email Opens

Vivek Sharma

06:48Pricing is such a fascinating subject to think about and talk about. And over the years of the company, this is probably the thing that we debated the most and argued about the most and tried to figure out. And in the early days, I was a former engineer, and I think that was to the detriment of figuring out a pricing model because you end up trying to figure out something that is maybe... Rational, right? Logically very correct

07:12and there was a... You know, we serve up visual content inside these emails. So I had this crazy model early on that was looking at square pixels. I'm like, hey, if someone's using up more real estate inside the email, they should pay us more. And it was ridiculously complex and it was just a dumb idea. So the best thing was what is the convention? What are our customers used to paying for similar types of things? And

07:32for us, was looking at the email service providers who had already established a framework for CPM based upon email sends. So we used a very similar model, but of course we can't measure sends. We only show up when an email gets opened. So it's CPM on email open.

Nathan Latka

07:32Interesting....

Vivek Sharma

07:32Card, there's some discounting that happens as you go into higher volume usage, But it is... You know, that lets us be very flexible with our customers. We can

07:56start small. We don't have to go take over their entire email program. We can land, come up with one or two compelling use cases in the first three months, get them up and running, really nail it, and then start to scale that out into doing far more meaningful things.

Nathan Latka

08:11Okay. So one axis are kind of number of opens around specific, maybe too specific of a use cases quickly. Most folks that are growing fast have multiple Do you have a second strong one like number of seats on the marketing team or things like that?

Vivek Sharma

08:23You know, it's basically that one axis that Over price

08:28the course of the next few weeks, we're actually coming out with some new products. So we've been able to adapt that model very successfully so there could be different rate cards in different conditions, but the core concept still remains the same. It's just the pricing tiers kind of change when you go to a more premium version of our product.

Cash Flow and Recent Funding Note

Nathan Latka

08:46Yep. I want to talk a little bit about how you're finding new customers. You're obviously in the enterprise space, I imagine some variation of account base. But first, from an economic perspective, based off how little you've raised, I'm assuming you're cash flow positive today. Is that accurate?

Vivek Sharma

09:00We are not cash flow positive. We could be, but we're very close.

Nathan Latka

09:04Maybe the last round is more recent than I thought. When was the last round of funding?

Vivek Sharma

09:09We did a small note with some inside investors just to feel... Not even spending it, we just wanted a little more on our balance sheet given we're a much larger business than where we were a long time ago. But before that, it was about five years.

Nathan Latka

09:22Oh, oh, five years. Okay. So that $14,000,000 you brought in, ignoring the note, that $14,000,000 that was all raised more than five years ago.

Vivek Sharma

09:27We raised about 9,300,000 five years ago and we added about $5,000,000 to it maybe six months ago.

Nathan Latka

09:33On a note, debt basically. Right, okay.

Vivek Sharma

09:35Just to have a little bit on our balance sheet to be comfortable.

Nathan Latka

09:38Vivek, hold on. Break that down. There has to be some strategy there. Don't I just saying to be comfortable, get that. I get it. But there's got to be something there driving that. Is it a bridge round to drive to a higher valuation as you're trying to scale an engineering team faster?

Vivek Sharma

09:52No. It's purely we've been in a ten year bull market, and we feel really good about the business and where things are going. But if there is a dip that happens, we'd rather have the money on our balance sheet when we don't need it, when it's sitting there. But if the economy should enter a recession after a very long bull market. We just want to have enough of a war chest to be able to make the

10:12right decisions and not have an overreaction.

Nathan Latka

10:14Yeah, I know you're a data guy, so I don't believe you're gonna say just be comfortable. I'm sure there were excel sheets and rationalizing this somehow. So I'm assuming you were taking, you know, taking the bull market by the horns, got down to a 6% or 7% super low interest rate and you said we might as lock this in, put it in the bank and hold it for a rainy day.

Vivek Sharma

10:31Yes, exactly.

Nathan Latka

10:31And just

10:32be clear, it was a no, you didn't work with a venture debt firm?

Vivek Sharma

10:35We've got some facilities with Silicon Valley Bank for, you know, a revolver in place and things like that. But you know, not a venture capital, some inside investors and, you know, we work with Silicon Valley Bank, which I think

Nathan Latka

10:35Yeah.

10:48Every time. Those guys are great. They have so many different vehicles though. Did you do a revenue based financing deal with them or was it more like an MRR term loan, like interest free and you only pay as you draw down, that kind of thing?

Vivek Sharma

11:01No? Yeah, we've changed the type of facility in the course of last year.

Nathan Latka

11:01Okay.

Vivek Sharma

11:01Yeah, so we've got a revenue based facility now.

Nathan Latka

11:10Okay, and by that, just to make sure we're talking about the same thing, I talk about revenue based, mean payback is typically a percentage of gross receipts per month. Is that what it is?

Vivek Sharma

11:19It's an MRR based facility.

Nathan Latka

11:19Okay.

Vivek Sharma

11:24Recurring revenue is tied to, yes, not GAAP revenue.

Nathan Latka

11:28Got it. Got it. Got it. Yeah, look, the thing I've seen with some people that do that is if you end up paying it back faster, like let's say you use the money to grow really quick and you've locked in a 9% like of your gross receipts per month, your payback can actually be way quicker and you hit the repayment cap way quicker than what you put in the pro forma and then the effective cost

11:45of capital is actually through the roof when you calculate the IRR. Do you look at that at all?

Vivek Sharma

11:50We've done calculations on equity versus debt versus risk factors even if you get to a certain point. There's kind of a balanced view we take and there's a mix of a little bit of both that we

Nathan Latka

11:50Yeah.

CAC Payback and Sales Efficiency

Nathan Latka

12:05Very good. Before we wrap up, again, tell me how aggressive you're being with CAC right now. Are below six months, below twelve months, below twenty four months? Where do you try and target?

Vivek Sharma

12:13We haven't had a hard target on CAC. I will say our payback periods, they are under twelve months.

Nathan Latka

12:20Oh, great. Okay.

Vivek Sharma

12:20Very efficient engine going there and our LTV to CAC is also extremely impressive. I think you're doing really well with a 5x LTV to CAC. We're surpassing that by quite a bit.

12:33So we

12:34have a very efficient sales and marketing machine going and our payback periods make a ton of sense. Building that efficient engine was important to us. I used to drive a Mustang Cobra years ago and it sounds great and it's got this big V eight, but this is the big powerful engine. What we built here is a BMW. It's a more refined, efficient engine that we can count upon It forces you to really understand what's happening under

12:57the hood, what's happening in the business.

Team Size and Office Locations

Nathan Latka

12:59Where's everybody based? Where's the team?

Vivek Sharma

13:02We've about two fifty people. I'd say probably about 180 of those are here in New York City. We've got about 30 in San Francisco, probably 25 to 30 in London. Got a couple people in Japan. We've got a person in Australia, and the international expansion is starting to happen pretty quickly. We've also got about a dozen people in Costa Rica.

Acquisition Talks and Secondary Transactions

Nathan Latka

13:21That's great. Now, last question before we wrap up with the Famous Five. If I continue down your bull market thesis and if you really want to take advantage of a bull market, you might say, Hey, we could probably get some pretty good offers right now. Are you in any acquisition talks right now?

Vivek Sharma

13:33We are not.

Nathan Latka

13:34And it's not something you're pursuing?

Vivek Sharma

13:36Yeah. We've certainly been approached in the past about interesting types of opportunities, but every time we felt like the business is at an early stage and the potential hasn't been realized. So we're very excited about, especially in the next few weeks, new product announcements, really broadening what the company does. And as we look at the next few years, we don't see that growth slowing down.

Nathan Latka

13:58No secondary, Vivek, for you and early founders or early shareholders?

Vivek Sharma

14:02No one here has ever done a secondary.

Famous Five: Books, CEOs and Tools

Nathan Latka

14:05That's pretty good. That's pretty good. All right. We'll see what happens. Let's wrap up with some much easier questions here. Number one, favorite business book.

Vivek Sharma

14:12Recently, I read Creativity Inc. There's a lot of business books around MQLs, SQLs, that kind of thing, but around the creative process and how Pixar did it. I think it's a remarkable book.

Nathan Latka

14:21Ed Catmull, that's a good one. Number two, is there a CEO you're following or studying right now?

Vivek Sharma

14:26This might be a little bit of a controversial one, but I'm still an Elon Musk fan. I think you can criticize him for certain actions and tweets and things like that, but I think more CEOs should be thinking about making a big dent in the universe about doing something very ambitious. And for that, you know, I think our society will be in a bigger place if he succeeds.

Nathan Latka

14:44Number three, what's your favorite online tool for building your business besides your own?

Vivek Sharma

14:49It's a tie for me between Asana and Slack. Slack lets me get connected to everyone in the company. Asana lets me get organized.

Nathan Latka

14:55Number four, how many hours of sleep are you getting every night?

Vivek Sharma

14:58Six.

Nathan Latka

14:58And what's your situation, Vivek? Married, single, kids?

Vivek Sharma

15:03Married to a wonderful woman, Anya. We've got two kids, six and four. So they are just a little bit younger than our company, which is eight.

Nathan Latka

15:10And how old are you?

Vivek Sharma

15:12I'm 42.

Nathan Latka

15:13All right, take us home. What do wish your 20 year old self knew?

Vivek Sharma

15:16I have a computer science background. I was an engineer right out of school. I wish I had learned and taken a job that had me selling much earlier in my career. I think selling is such a valuable skill. Everyone should get some experience. It's reality.

Nathan Latka

15:29Guys, learn sales earlier. It's funny. All the engineers say learn sales and all the sales people say code earlier. Right? That's how it works. We need each other. It has to be both. Guys, there you have it from Vivek, again founded Movable Ink back in 2010. They've now scaled to over 500 customers, about $40,000,000 in ARR. They're up, you know, growing 50 to a 100% year over year. They've managed to drive this growth on just

15:51$14,000,000 raised. So they've managed to do a lot with a little bit of money. A 110% net revenue retention annually with a very healthy pricing axis that allows allows them to drive expansion revenue really tied to, again, open rates on those emails of these big enterprise customers using them. They've got less than a twelve month payback period. They're team of 250 people cranking out new products between New York City, San Fran, London, and other remote locations.

16:14Vivek, thank you for taking us to the top.

Vivek Sharma

16:16Thanks again, Nathan.