How NeoReach Passed 100 Customers Averaging About $200K a Year With a Team of Just Over 30 (Interview with Founder Jesse Leimgruber)

Introduction

Nathan Latka

00:00Hello, everyone. My guest today is Jesse Leimgruber. He is the founder of a company called NeoReach. He's a mentor to the Alchemist Accelerator, a Thiel fellow, and a frequent guest lecturer at Stanford and USC. NeoReach has generated tens of millions in revenue from customers like Walmart, Amazon, and NBC. Jesse, are you ready to take us to the top?

Jesse Leimgruber

00:18Let's do it.

Nathan Latka

00:19Alright, man.

Jesse Leimgruber

00:19Having me.

Nathan Latka

00:19Hey. Kick your video back on because we'll use both audio and video feeds when we publish this thing. We'll deal with the delays. It'll it'll be okay. But tell us about the company. What's what's NeoReach do, and and how do make money?

Business Model and How NeoReach Makes Money

Jesse Leimgruber

00:29Yes. So NeoReach is an end to end social intelligence platform. Brands pay us a licensing fee to analyze the performance of their sponsored post campaigns, everything from paying Tiger Woods to wear a Nike hat to Red Bull sponsoring athletes. We... To YouTubers, you know, promoting a product, we measure the effectiveness of those endorsements, and we sell that data to large brands and Fortune 500.

Average Contract Value and Customer Pricing

Nathan Latka

00:54Interesting. And give me a general idea. I'm sure you have a lot of our customer cohorts, but we're short on time. On average, what do they... One of these customers pay you per year for your technology?

Jesse Leimgruber

01:02We... Typically, the minimum licensing fee for a brand is about $25,000 annually, and we have quite a few as in more than a handful of brands spending over $1,000,000 with us annually.

Nathan Latka

01:14That's great. Mean, would you say maybe a $100,000 or a $150,000 is more of a fair average?

Jesse Leimgruber

01:19Yeah. I would say at least at least half of our customers are spending over over 50 k a month.

Nathan Latka

01:25Okay. Fair enough.

01:26You're skews for

01:27k a month or a year?

Jesse Leimgruber

01:29Sorry. 50 k. 50 k a year. 50 k a year. I think our our average revenue per customer is around $200,000 a year.

Company Timeline and Launch History

Nathan Latka

01:36That's great. Very good. So I wanna dive more into the story. You've clearly kind of jumped into an enterprise model here. We had Sprinklr on. Rajee gave a great interview, and Hootsuite is obviously other end of the spectrum. And and attribution is tricky in social in general. So put this all on a timeline for us. When did launch the company? What year?

Jesse Leimgruber

01:51We launched it in early twenty fourteen. And probably the first... That was... We launched the company then. Probably the first year, I don't think we had any customers or nothing significant. 2015 was really when we launched our product in a in a sort of beta. And then towards the end of 2015, it took its current form. And so 2016, 2017, and this year have really been the primary product. So... But it's really about two and a

02:18half, three years into, you know, live revenue, live customers, but the business is a bit older than that.

Customer Count and Growth Rate

Nathan Latka

02:24That's great. So... And then how have you scaled? Right? So from 2015 to today, how many customers are you working with now?

Jesse Leimgruber

02:30You know, it's not it's not as big as some cost... Companies by numbers.

Nathan Latka

02:33It's enterprise, by the way. So I'm expecting, like, a dozen maybe.

Jesse Leimgruber

02:36Yeah. We just passed a 100 total customers.

Nathan Latka

02:39Oh, okay. That's... I mean, that's fair. That's that's that's expect... You were hedging there. Why were you hedging so hard?

Jesse Leimgruber

02:43Well, you know, everyone, you know, has... Does does SaaS businesses like, oh, we have, you know, 35,000 customers, but it's like $5 a month or something.

Nathan Latka

02:49Well, yeah. I mean, in a freemium model, but your model, you can have a 100 and build a great business.

Jesse Leimgruber

02:54Yeah. We just we just passed a 100. I think we're at one zero two, one zero three, something like that.

Nathan Latka

02:58Congrats. That's great. Well, look. I mean, a 100 at that at that $200,000 kind of average per year puts you at, like, 1,600,000 a month, something like that. Is that accurate?

Jesse Leimgruber

03:06Not quite, but pretty pretty close.

Nathan Latka

03:06Okay. Pretty close.

03:09And can you help me understand growth rates? So you're doubling year over year. Where were you exactly a year ago?

Jesse Leimgruber

03:13You know, I I like to think of the way to scale a SaaS business as, you know, if you want to IPO, you need to triple, triple, triple, double, double over five years. So three x revenue, three x revenue, three x revenue, and double and double, and then you're you're currently... That's that's the pace that will get you to an IPO able number. We're about about that. So we are... We're in between two and three x

03:36a year growth rate right now.

Nathan Latka

03:38Yeah. So that would have put you at around, maybe call it, $600,000 a month about a year ago, a healthy growth. You added a three x in there. You know, usually, it's three x three x two two two. What changed your thesis?

Jesse Leimgruber

03:49Oh, yeah. Well, we we started with such small numbers, so I figured we need to we need to pick it up somewhere.

Nathan Latka

03:56Fair enough. Fair enough. Very good. Alright. Break down break down some of the the kind of economics around this. Right? So I'm really curious about your first customer. Was it an end... Did you start enterprise and then stay there, or did you start smaller and then scale up?

04:09Tell us

04:09the story how you got your first customer.

First Customer: Zappos and Cold Outreach Origins

Jesse Leimgruber

04:11Yeah. First customer. So the, you know, the product was like... Didn't work probably, and it was it was really buggy, and, you know, we needed a a customer that would sort of believe in it. So what we did is we actually outreach to maybe two or 300 customers on LinkedIn, and we didn't even... We didn't pitch them. We asked them for feedback on what we were building. So we said, you know find them.

Nathan Latka

04:30Like, what'd you search for? What terms?

Jesse Leimgruber

04:32CMO.

Nathan Latka

04:33Okay. Got it.

Jesse Leimgruber

04:34Yeah. We we emailed about two or 300 CMOs. I remember sending the emails through a custom email.

Nathan Latka

04:34Email or LinkedIn messages?

Jesse Leimgruber

04:34Brown Beauty. Went to the same LinkedIn mostly. And we did some email too. Yeah. And the first... We had a couple, you know, tiny startups that maybe spent a thousand dollars, but the first real customer we got was Zappos. The CMO of Zappos actually responded himself, introduced us to his ad agency, introduced us to someone

04:57else at Zappos, and they signed up for they get... That it was a small deal at the time, $5,000 for a year license, but it was meaningful to get Zappos, and they are our first first recognizable brand.

Team Size and Office Locations

Nathan Latka

05:07That's great. Now talk to me about the rest of the company today. How many people are you total?

Jesse Leimgruber

05:11Oh, total? Just over 30.

Nathan Latka

05:13Just over 30. That's great. Everyone in San Fran, or are guys spread out?

Jesse Leimgruber

05:17We are spread out. We have an engineering office in Orlando. We have a sales and marketing office in Austin, and then we've got the executive and a lot of other employees in the Bay Area.

Churn, Expansion Revenue, and API Pivot

Nathan Latka

05:28Okay. Very good. So 30 folks kind of spread out. And then help me understand today. Right? Churn is critical in any SaaS company. I'm expecting you probably have pretty significant expansion revenue based off the size of some of these accounts. What's your kind of gross revenue churn per year, and does your expansion cover that?

Jesse Leimgruber

05:44We have we have high churn compared to compared to certainly, you know, a business that's that's super, super deeply integrated. You know, the downside of our business is... And we're... Is it's a software. It's not a... You know, it's not, like, tied into the infrastructural stack of their of their company. It's not like AWS or something like that. So relative to some businesses, we have high churn. But over the last year, we've actually been pivoting a

06:08lot of customers to our API product where it is actually tied deeply in.

Nathan Latka

06:12You know, by the Jesse. Yeah. I mean, do you know about revenue churn? You talking, like, 10% a year?

Jesse Leimgruber

06:17It's a little higher than than 10% a year.

Nathan Latka

06:19Okay. I mean, by the way, like, you know it, you're pivoting to an API model, you know, tied to a usage pricing axis, which probably makes it way stickier. So this is a fun transition to make. So a little higher than 10% is your expansion. Does your expansion make up for the 15% you lose?

Jesse Leimgruber

06:34Yeah. I know. For sure. It's it's close to closer to 20% of customers churn, but we we grow at a significantly higher rate than that. And the ones that stick kind of really expand. You know, the ones that tend to churn tend to be the $25,000 a month cost... The $25,000 a year customer. They tend to not be deeply integrated. And the primary reason they churn isn't usually a product problem on NeoReach. It's more or less

06:57marketing The campaign stops. Niches of marketing, and they just can't justify it relative to their to their overall budget. Like, celebrity endorsements and influencer marketing isn't working for them, not really as much our software.

Nathan Latka

07:08Yeah. Or, Jesse, you're... It's campaign driven. Right? A campaign starts and stops.

Jesse Leimgruber

07:12Right. Exactly. Exactly. So even though our business is SaaS, you know, a lot of businesses apply for... It's a one year license, but they just launched the company or they just launched a new division, and they don't need it after that. So that's something we deal with, and it's really just about picking better customers, picking better... You know, getting API customers, larger deals, multiyear deals, that sort of thing.

Nathan Latka

07:31What does expansion look like? So you said 20% churn. What's expansion on that same cohort look like?

Jesse Leimgruber

07:37So customers that expand... You know, there's this tiny segment of customers that expands, like, significantly that drives most of our growth. So, you know, to put that into the actual numbers, we've had quite a few customers started under a $100,000 a year with us and actually expand to over a million dollars a year. And those types of customers, this tiny niche that scales massively drives almost all of our growth.

Nathan Latka

08:01Yeah. Okay. But...

08:02So that's that's that's...

Jesse Leimgruber

08:03Those are obviously outliers.

Nathan Latka

08:04You only need a few of those to really drive growth.

Jesse Leimgruber

08:07But if you look at the cohort that signed up exactly one year ago, so December 2017, you know, today, you're gonna say basically 20% of that revenue is lost. That same cohort that signed up.

Nathan Latka

08:16How much do that does that cohort altogether in aggregate expand by 30 to 40%? Okay, good. So net revenue retention is about a

08:22120%.

Jesse Leimgruber

08:22Yeah, that's right.

Inbound Leads and Customer Acquisition Cost

Nathan Latka

08:23That's really, obviously, really healthy economics. Right? So talk to me about how you get these guys in the door in the first place. So when you look at your fully weighted CAC, how aggressive are you being?

Jesse Leimgruber

08:32We we have difficult time doing marketing attribution because of the scale of our leads and because of the the length of the leads. We

Nathan Latka

08:32Jesse,

08:39you can't say you have total attribution. That's your business.

Jesse Leimgruber

08:41I know. I know. It's really bad. We joke about that all the time. Almost almost almost a 100% of our leads are inbound. Right? But we get over a thousand inbound leads a month. What really ends up happening is, you know, a salesperson flies out. We meet with them. We see them at a conference again. You know, we we work with them for a year, and then they sign a million dollar deal with us.

Nathan Latka

08:41Yep.

Jesse Leimgruber

08:41And

09:00so it's kind of challenging to attribute, like, this particular retargeting ad or this particular click. You know, if if we do it on sort of cost per lead basis, you know, we have channels that will spend between 50 and $500 a lead.

09:14And... But our close rate's under one... Like, it's under one

Nathan Latka

09:14Jesse, let me...

09:18Sorry. Let me ask this differently. To get a new $200,000 account, are you willing to spend up to first year ACV to get it?

Jesse Leimgruber

09:26We spend on a on a... On sort of our typical... If you take out outliers, we're spending about 40% of first year customer value.

Nathan Latka

09:35So, I mean, you still have, like, a five month payback period. That's pretty healthy.

Jesse Leimgruber

09:38Yeah. Yeah.

Funding, Profitability and Revenue Projections

Nathan Latka

09:39Yeah. That's that's great. That's great. Okay. Talk to me about how you've capitalized the business. You mentioned Thiel Fellow. I know that... I think there's capital involved there. How much have you raised to date?

Jesse Leimgruber

09:48We've raised 4,000,000 across about two rounds.

Nathan Latka

09:514,000,000. That's great. Well, look, I love companies where the ARR is to raised ratio is in favor of the ARR. So it sounds like again, if you're, you know, call it 1.5 ish right now per month, obviously, puts you at a great run rate of, like, I think, 20 per year. That's... I mean, that's a nice ratio. Are you looking at raising... Go ahead. You were gonna add something?

Jesse Leimgruber

10:11Yeah. Yeah. I mean, we would look to raise again, but, you know, we're profitable. And and you're about right. We're shooting for next year, we're we're we're projecting to be over 20,000,000.

Nathan Latka

10:20That's great. Sorry. Do you mind do you mind... Can you share where you're actually now so we can understand how aggressive you're trying to be?

Jesse Leimgruber

10:25You're in the ballpark. I don't wanna share...

Nathan Latka

10:27Well, mean, you're... But that is 20. Right? So, like, right now, what I just said, 1,600,000 a month is 20,000,000. You're saying you're not there. That's your goal next year. Are you at, like, one point or one point now? Like, how aggressive are you trying to be with bookings growth?

Jesse Leimgruber

10:40Yeah. We're we're trying to... We're more than double next year and more than double for us is is gonna be about 25,000,000 is what we're projecting.

Nathan Latka

10:48Okay. Got it. Got it. So I can basically take 25,000,000 divided by two and that's kinda your run right now?

Jesse Leimgruber

10:53That's that's

Thiel Fellowship and Entrepreneur Community

Nathan Latka

10:54I won't push you further because that basically is the answer. Right? Talk to me... You know, Peter Peter Thiel got a lot of pushback for the the fellowship program. I've interviewed several of the folks I've gone through. They say wonderful things. What's your take?

Jesse Leimgruber

11:05I love the Thiel fellowship. I mean, you know, it's... Peter isn't, like, super closely involved, granted I've been in quite a number of times. I mean, really, the Thiel fellowship is about the community of other entrepreneurs. I mean, in terms of businesses, you know, my business is reasonably successful. It's profitable. A lot of employees, millions in revenue. But I... I'd say on the stack of other Thiel fellows, I'm, like, way down the list. I mean, we've

11:24got, like, people like Vitalik who founded Ethereum, the founder of OYO Rooms. I mean, there's quite a few 100,000,000 and billion dollar companies in the in the batch now, and it's a really tight cohort. So to have that community is is it's the strongest network I have for sure.

Deploying Profits: Scale vs. Profitability

Nathan Latka

11:38Yeah. That's great. Very good. So, I mean, what's the... You're profitable today. Right? You know, you only raised $4,000,000. Where are you... If you... If cash is kinda just building up in the bank, you obviously wanna deploy that to either drive the company or pay it out to employees as as kind of distributions. I mean, how do you think about what to do with all your profits?

Jesse Leimgruber

11:56You know, that's a good question. It's something we think about all the time. We we... You we're constantly in this battle of increased profitability or increased scale. Right? You know, if if we invest all of our cash back into the business, does that make us more profitable five years from now? And it's a it's a... It's an unanswered question, and we're trying to balance it right now. You know, I... We're we're looking at potentially scaling up

12:15aggressively, not in terms of fundraising, but actually The pipeline. Double headcount and we could afford it. Yeah. But, you know, we're just not sure if that actually is gonna yield more revenue. And so that's that's... This year's big focus is what's the next five years look like.

Famous Five: Books, Sleep, and Life Lessons

Nathan Latka

12:26Alright, Jesse. Let's wrap up with the famous five. Number one, what's your favorite business book?

Jesse Leimgruber

12:30Favorite business book is gotta be

12:34the Lean Startup or Zero to One.

Nathan Latka

12:36Number two, is there a CEO you're following or studying right now? Preferably not like a mainstream one.

Jesse Leimgruber

12:42Oh, a CEO I'm studying or following right now, not a mainstream one.

12:48I don't think there's one CEO I'm particularly following right now. No.

Nathan Latka

12:51Number three. What what billing tool do you guys use?

Jesse Leimgruber

12:54What? Sorry. Billing tool?

Nathan Latka

12:55Billing tool.

Jesse Leimgruber

12:56Bill.com.

Nathan Latka

12:57Bill.com?

Jesse Leimgruber

12:58Yeah. Or Stripe, depending on the category of customers.

Nathan Latka

13:01Yeah. Stripe for smaller, bill for bigger?

Jesse Leimgruber

13:03Yep. Exactly.

Nathan Latka

13:04Number four, how many hours of sleep do get every night?

Jesse Leimgruber

13:06I really value sleep. So I I budget for nine and end up getting almost... Over eight almost every night.

Nathan Latka

13:12That's awesome. And what's your situation? Married, single, kiddos?

Jesse Leimgruber

13:15I live with my girlfriend of, four years in San Francisco.

Nathan Latka

13:19Any kids yet? No?

Jesse Leimgruber

13:21No kids, but some...

Nathan Latka

13:22At some point. That's great.

13:23And how old are you?

Jesse Leimgruber

13:24I am 24.

Nathan Latka

13:2524.

13:26Last question. What do wish your 20 year old self knew?

Jesse Leimgruber

13:2820 year old self, you know, I I didn't realize how how deep startups would go. I mean, it... It's it's it's crazy. The kind of the the... Where, you know, effed it's over moments and the roller coaster. Mean, I I probably would have took a few more years to learn and reflect on what I really wanna do before jumping into it. I don't regret it, but I I thought it was gonna be, you know, unicorns and

13:48rainbows the whole time.

Nathan Latka

13:49Guys, make sure you make sure you have time to learn. Coming from Jesse at NeoReach, just past a 100 customers, about a million bucks per month in revenue, call it 12,000,000 a year, hoping to double year over year to 25 next year. Growth was about two... Between two and three x year over year over the trailing twelve months. So healthy business, profitable, 4,000,000 raised, 30 people between Orlando, Austin, remote locations, 20% gross revenue churn annually, 40%

14:11expansion on the same cohort. So call it 120 net revenue expansion, spending up to call it five months of lifetime value to acquire customers. They might use profits to get more aggressive with that over the next twelve months as it looks to double. We'll see what happens again attribution for influencer marketing.

Jesse Leimgruber

14:25I thought like the craziest all the numbers out

14:27me like that

Nathan Latka

14:27Jesse.

14:29I get am I hired?

Jesse Leimgruber

14:31I know. I mean, this this is numbers we need to get out of our sales.

Nathan Latka

14:36Jesse. Thanks for taking us to the top.

Jesse Leimgruber

14:38Talk to you soon.