How Nudge CEO Paul Teshima grew to $720K revenue and 2K customers in 2018.

hello everybody my guest today is Paul Toshima he's the CEO and co-founder of nudge day I a relationship intelligence platform that helps businesses find and grow the right relationships to drive revenue he's a successful technology executive who has run services customer success account management support and product management teams as part of a local executive team he helped lead the company from zero to over 100 million revenue then through IPO and a successful acquisition of for nine hundred fifty seven million by Oracle he's a big believer that that culture Trump's strategy every time and that storytelling is an essential part of creating the business he's had a successful track record as a leader with a strong focus on sales and customer engagement Paul are you ready to take us to the top I am thanks Nathan for having me on board today you've been so I love it when someone who like came out of you know taking out what is 0 to 100 million right you were you had the corner office you were doing the big thing you say you know what I'm gonna go and start a little from scratch I'm gonna go back to the full details and the computers that don't have all the specs alone because we're trying to save some cash so tell us about none John AI what's it doing how do you make money so nudged AI we are a relationship telogen platform so what we focus on is tracking the strength of relationships within the business network and finding you ways as a sales person particularly b2b salesperson those relationships to get access to accounts and then ultimately close deals and that's where our focus is what signals are you using to measure to measure strength of relationship so we are using actual communication signals so your email your calendar your phone it's not proxy by social media or connections on LinkedIn it's the fact that you are having a real relationship real interactions with people that's what we measure how is this I mean remember conspire full you know Brad Feld owes invested and then full conduct took it up and then you know Bart just said hey we're setting this thing down it's not working how are you different than conspire I think we're different a couple things first off I think we we're not a I think to conspire was a fully automatic opt-in across the board and so I think a lot of like commercial sales teams were reticent and coming on board so we actually it's an opt-in process to share that information with others on our platform we've about 20,000 users on today and what happens is if you're a b2b sales team and you want to know someone on your board or someone in your customer advocacy has access to a new target account we can tell you and whether it's with a strong relationship or a weak relationship okay I think I understand this let me and let me rephrase this um I am an LPN many venture capital funds I am flying to San Francisco and really want to meet with venture capitalists s I can go put in the managing directors of funds of invest students and try and see which one of them has a connection to venture capital X in San Francisco that's right if you are sharing that with those people from those if they were part of your Universal of nudge users that you share that with I see so good that's what I was gonna ask you are there security issues there so what you're saying is I have to say hey allow you know friend X to have access to my connections and to see who I'm closest with so that they can then ask me for those intros if they want them that's correct and in a business in an actual corporate setting all the people within a team or corporation share automatically and so you automatically get to see you know the head of IT or the chief people officer who they know and then that way as a sales person really can demanding advantage of the real relationships within your network so Paul let me ask you a question so like in my email that same working in a company everyone else in the company has access to like understand my connection so I've connected my LinkedIn with you my inbox with you my chat with you my texts with you on my phone my calls on my phone let's say I have a secret lover that I want to know what he know about how do I make sure that only the texts and the emails from my secret lover never show up to my coworkers well the first thing we never look at the contents of anything that is sent the contents or the of the calendar or the email so we're only gonna know names and we're gonna know the back-and-forth time and date - you can at any time hide someone completely from the system so I'm not saying that that's come up ever before but if you for some reason wanted that you can just hide that person they'll never show up ever again a nudge if you don't look at content of the email though how do I know that my coworker is connected to potential new partner why if you're not reading the emails they sent to potential partner why because there's a lot you can gain 90 percent they're just on the understanding the frequency the balance the type of interaction for example if you have a one-on-one meeting with someone that's gone over the last two years every six to eight weeks or so that's a pretty strong relationship the person is someone you're engaging with on a regular and it's just you and that person if you have a flurry of activity and a whole bunch of back for the emails in one meeting and then it disappears that's not that's that's a sales call that didn't go in further and so it's those types of things we can learn and we today we track about fifty million business relationships about form and so we can sort of we've learned what makes a real relationship and what doesn't interesting so where LinkedIn might show if I visit your profile you know when people search for Paul they also search for a boom boom boom and I'll probably get a list of everyone else that's your company this is an opt-in version of that and it's a much stronger signal because I'm seeing the time and frequency of when you emailed or when you call it or when you did whatever with X or Y other people that's correct in LinkedIn is great don't get me wrong it's a fantastic business network it just doesn't have the strength of connection sharpen and and and today everyone has more connections than ever before Paul you put that you guerrilla or help draw go 200 million of BIOS oh you're topless on a money guy which I love how do you make money on this thing we sell it so we sell if you're a sales professional ahead of sales and you want your team you get access to target accounts through the network you buy a nudge receipt for every sales user in the organization and every other person you want to see their network and then to we plug in the analytics into CRM so that if you want to track how it deals progressing and whether the salesperson is growing the right relationships with the right people you can see that right in CRM and so that's how we make money we charge heads of sales for the put this tool in place and on average I don't to it on every customer cohort cuz we get lost quickly but on average what are people paying per seat per month you know our stress our straight down the middle product is $30 per user per month us okay got it and would you say that it did that has taps your average very accurately I do yeah absolutely okay all right give me more the back story here um when did you leave I assume you left Oakland and went directly into this right we got my Oracle I stayed on for a year to help with the transition and in October 2013 I took two months off and then my co-founder Steve woods and I started much is that a sexy way to say you had to stay at Oracle for a year to get by the earn out we didn't have an ur no none at all I don't believe you there was nothing to help with retention of key employees I mean there was there was additional upside okay there was there's no Reve esting we owned all our shares we could we'll walked away on you know day one after the the acquisition was confirmed got it okay so you left you take a two-month break and then where did you find your co-founder so Steve woods was a co-founder at eloquent as well so I've been working together for almost 18 years now that's good okay I love that so now you guys launched this company I'm gonna guess based off your history you said why would we use our own money when we can probably easily raise it our peoples plan to grow this so how much have you raised so today we've raised just a little over seven million u.s. and we have put some our own money in but it is it is a good way to test the business to see you can go raise money even a second town entrepreneurs it's still a good way to test a business how do you because we have a lot of second how much for ours on all that listen to the show and they always go Nathan you ask questions like this one so Paul when you are on raise additional capital after it is clear and I work in the market noise you just had a big win how do you overcome the obvious which is the investors going Paul why do you need us to give you 7 million bucks use your own you just made a killing I don't think they were guilt come with that objection they actually want to be part of the second one so they're actually looking as an opportunity to de-risk another investment with with entrepreneurs who've done it before I think to be fair the probably the question that may ask is how do we know you have fire in the belly anymore yeah it's hard when I turn the money I went to make them rich yeah and and so what that's that's all it to use an entrepreneur to prove to them you still have passion I mean we could have we could have retired if they're staying in a working for four years probably but instead we're gonna go back at it and we want to do something big and we explain why and our passion for it and I think they that's why they buy into it I love that okay so and what your was that so we we we didn't do the the VC financing around until 2015 sorry I meant when did you what do you say when did you watch the company oh well we started coding probably back in late 2014 well we come out with a product it was a pretty long build for about two years till we came it was something that we thought people to play around Wow and and and so you basically funded it with your own money for two years before doing that race yeah effectively sat and some friends and family yes yeah yeah interesting okay and what have you still to today in terms of total customers using you so we only launched the commercial product around four months ago five months ago which one else what's that December 2017 yeah a little before that probably beginning of q4 and so we avoid 30 customers our largest is a thousand sale seats that's amazing what what are those customers on average like how many seats would you say for 500 or 1028 yeah in that range but it ranges to be fair we have a self-service offering on one end where you can plug in for 10 users and never talk to us ever again and then we have our managed service offering with sales and customer success and yeah you're over 200 300 seats into the pirate let me ask that question differently how many seats would you say on your platform today across all your logos well we've well over 20,000 seats oh that's amazing okay so you you definitely see kind of 80/20 world where you have some big customers that make up you know well North attempt or sending a revenue currently yes interesting okay good and how are you signing these folks up for these X alcohol relationships people that have left and joined other companies I mean how are you gonna use initial customers it's a spectrum of everything from yes some relationships that were from the past to some some of the users who are on the product or in a trial or free and us helping them upgrade and go through that process from the from the product leadside okay but but I imagine you're too early in terms of you don't have any engines spun up or there's direct paid acquisition your tech lating tacked to pay back with all that jazz right I mean we we calculated stuff but it's the error bars are massive on it so I would say yeah you're right it's not at a point where we'd say okay if you put in X dollars this is exactly what comes out the other side now sure we're we're pretty that kind of scaling scaling part of series beers these late series a yep yep but just being it just because I just get a general range I mean with twenty thousand seats at 30 bucks average couple maybe there's somewhere in the 600 brand per month range at this point rank comes tomorrow yes really be clear not all of those are paid seats we got those some of those are freemium some of those are premium they're paying individually some of those are self service and then some ones are managed okay four tiers and I would say the majority are free to be fair yeah yeah okay so I mean can we say like usually ten percent of a user base is paying sometimes I mean I get some around 2000 paid seats yes warned that and well the reason and the reason I want to ask is because um you're in a valuable spot of building a business you're right the beginning and you're a guy that just went through it so you know the playbook and you're executing it I think that's a good barometer on benchmark for listeners to understand so you launched it five six months ago five months ago right here now at 2000 sees 30 bucks puffs so maybe more like 60 grand per month in revenue today versus 600 yeah that it's in the more in that range and I will say that I am much more focused on and and this is probably a good point on just massively growing seats it's getting to some large enterprises and seeing that product market fit you know that must have renewal will need to have peace and so I'm probably more balanced on that bat then on just sheer volume of seats yep so let me ask some questions around that what do you know one son has paid for a seat and they're being on-boarded what do you know you have to get that seat to do in the first 24 hours where they're gonna be waste to here so let me break this in two parts are we actually lead with an analytics plate for sales management first and then the end-user tools are too so on the analytics side what we need to do is identify some single threaded deals for sales management they're like oh my god I can't believe that's in forecast I'm going to talk to the reps and make sure that they do their work on broadening the relationships of that account right the other won't close so that first aha moment of seeing a deal that Wow that wouldn't have actually closed unless I got involved and it is for those sales management and then on the sales user side it's just hey if we show you something that gives you a chance to get one more meeting we produce some insight around the person or some access point that gets you a meeting you never would have that's an aha moment that's a Wow interesting okay all right good and and so do you have the 2,000 seats isn't a huge cohort but it's enough I mean are you looking yet at you know if a seat does XYZ in the first week there X percent more likely to bring on three additional seats like are you looking to expansion revenue metrics yet or no we are you I would say that we probably know there's three or four things that they have to have set up to be that to be successful but I wouldn't say that we know the order in other words it's there's no correlation to order so far we definitely know the cohort we do for analysis every month and every month our cohort 90 day retention goes up so we're doing something right but we still haven't figured out that magic path yet what's it at today what's the north of it's north of 35% okay days so just to be clear if someone signs up on a paid account in the firt you'll retain 35 per so this is for all at all including fries okay our pate is much higher I'd say 35 per se that would be I'd be worried no no this is a free this is including this is massively influenced by the freebase we look that's important too because the freebase if they're happy that's our lead pool for selling into our pay base right yeah have you turned any paid customers today tour no oh yeah we've turned some small paid customers but no large ones okay and like is that like would you say sub 3% local term per month do you generally have what that number is yet or no it's too early it's too early for that but it's it's low its low it's not below what I would expect at this stage of the business by any means sorry not above not above the turns not a bug what I would expect in the first sort of year of selling what do you expect I mean what do you like give us that benchmark I mean I always think you had to be under 1.5 percent of total mor turn per month as you start to scale that cement benbrook we usually look what the hell is true and then he always was gonna net retention on top of that I was gonna say I was gonna say was that 1.5 percent revenue turn per month was that net revenue churn or gross revenue churn no that's gross revenue churn pre expensive yeah because I think you got to look at those things as two different signals right net is a great way to hide both yeah but but expansion you can expanding on three accounts that are big and then losing a whole bunch of small ones and it tells you something about the business still so answers getting a look at them separately okay good cack it's too early LTV and that kind of it's too early I mean you impede and payback period really too early for that kind of stuff right yeah that's right but like I mentioned we're we're we're excited about the self-service revenue streams and then the credit card stuff but really focus on can we grow a small account to a large account I do they lock in for two years I bet what's your tenth size right now it's 22 people okay all where you guys I'll base Toronto Canada sorry everybody everybody oh wow that's great okay good very good all right Paul let's wrap up here with the famous five number one what is your what's the last business book that you read oh the last positive book I read was the sales development handbook by Trish Bertuzzi this sales development handbook yeah okay number number two is there a CEO you're falling or studying right now no number three besides your own with your favorite online tool for building the business oh I like I love a full story that's a good one number I later come full story both are you angels in either of those no okay alright number four how many I was just leaked to get every night um six that's good and what's your situation Paul married single have kiddos married with kids how many to two okay and how old are you I'm forty five forty five last question what do you wish for twenty year old self new I wish I wish I wish they knew I wish my 20 year old self knew how hard it is to build a business guys it's hard to build a business they're gonna from Paul was there earlier lol with one of the founders David built that obviously sold that to Oracle stayed there for about a year then left took a two-month break partnered up with again former colleague in Dave that it gets sick of each other through the Elco story which obviously makes sense cuz it was a successful one now they are jumping into relationship intelligence basically you connect up your feed I say yes Paul you can have access to my network talkin and see who I'm close with and ask for more appropriate intros from stronger signals than you really can get anywhere else I love the business concept they're scaling they're now 22 people launched in 2014 spent about two years building the products using their own money they've now raised seven million bucks serving about two thousand seats across thirty logos do it you know doing call call it's a sixty grand per month IFS right now in revenue and scaling quickly up there in Toronto Paul thank you for taking us to the top thanks David for having me