How ObservePoint Reached $10M ARR with Over 250 Enterprise Customers (Interview with CEO Rob Seolas)

Introduction and What ObservePoint Does

Nathan Latka

00:01Hello, everyone. My guest today is Rob. He cofounded a company called ObservePoint in 2007, helping grow the company from a lean startup to the global leader in digital data quality that today serves enterprise clients worldwide. He's a thought leader, life enthusiast and successful entrepreneur. Has more than fifteen years of experience leading innovation in the digital marketing space. Rob, are you ready to take us to the top?

Rob Seolas

00:21Yeah, sure. Am. It's great to be here.

Product Overview: Digital Data Quality Platform

Nathan Latka

00:23You bet, man. So tell us what ObservePoint does and what you mean by digital data.

Rob Seolas

00:27Yeah, so we're a data quality platform. We're a SaaS platform, and we ensure the proper implementation of digital marketing technologies from Google Analytics to Adobe Analytics. Any other marketing technology, we ensure that it's properly QA'd, that's collecting the data that it's supposed to and validated properly. That's data governance.

Nathan Latka

00:47Okay. So I assume that's growing as people have more options for their marketing and tech stacks or really any stack in the SaaS world. Your business is growing. It sounds like what you're doing is you're making sure all these things are connected properly and data is flowing smoothly and accurately.

Rob Seolas

01:00That's correct.

Nathan Latka

01:01Interesting. Okay. And what's the... You said your business model is SaaS. Is that right?

Rob Seolas

01:05That's correct. Yes.

Enterprise Pricing and Customer Base

Nathan Latka

01:06Okay. And I don't want to go down every customer cohort, but on average, what do customers pay you per month for this service and what do they get?

Rob Seolas

01:12Between 30 and 40,000, basically.

Nathan Latka

01:15That's first year ACV typically? What do they get? Give me a sample. Like, what do they get? If I pay you $30,000, what do

01:22I get for that?

Rob Seolas

01:22So the first thing you get is our ability to accurately validate an implementation for digital marketing technologies. So we have well over 600 technologies that we're experts on. And we'll go back and say, okay, you're implemented correctly across 80% of your website, for example. And most of our brands are very large enterprise brands with hundreds of properties across the world, multiple teams. So there's also a process involved where we help them manage

01:49that process, who owns the technology, what is it trying to collect? Each digital marketing tech these days is super powerful, so you can collect as much or as little as you want and trying to validate that and make sure that rolls down correctly is difficult.

Nathan Latka

02:02So are you working with like a very, very small handful of clients, call it a dozen or do you have an SMB, like no touch offering as well?

Rob Seolas

02:09No. We're all enterprise, but we have over 250 enterprise customers.

Nathan Latka

02:13Okay. Got it.

Rob Seolas

02:14Marriott Hotels, American Express, very large brands like that.

Crossing $10M ARR Milestone

Nathan Latka

02:19Okay. And, I mean, if I take 250 brands times that first year ACV you just gave me of $30,000, I mean, that's what is that? $2,500 a month times two fifty customers. What was that? $625,000 in MRR per month? Is that generally the range you're in?

Rob Seolas

02:30Yeah, we're north of that.

Nathan Latka

02:31Okay. Like far, like I'm way off far north of that?

Rob Seolas

02:34No. So we just crossed actually a really nice milestone for SaaS at 10,000,000 ARR.

Nathan Latka

02:39Yeah. That would be $8.88.

02:40That's a good milestone. You should be...

Rob Seolas

02:41It is. Where's...

Nathan Latka

02:42There should be empty champagne bottles in the background of this headshot here. There's none.

Rob Seolas

02:46If you look close enough, you'll see some empty glasses back.

Nathan Latka

02:50That's good. Okay. So you're past that $10,000,000 mark, which means your ACV, it sounds like if I take that 10,000,000 divided by two fifty customers is actually a bit higher, right?

Rob Seolas

03:00Yes. I mean, you asked for first bite, right? First bite of the apple, not lifetime value of the customer.

Domain-Based Pricing, Products and Growth

Nathan Latka

03:05Yep, yep, yep. So people you're adding are typically starting at $30,000. Now, what is the playbook you're running to drive expansion revenue? Are you selling more seats? I know you have three product lines? What's expansion revenue look like?

Rob Seolas

03:17No, so we actually focus on the number of domains essentially. So we're not seat based, we're domain based. So a large customer like Turner, for example, can have over 100 worldwide properties. And then there might be a really large company that only has two or three. So like a Best Buy, for example. So it just really depends on where the brand places its most value. And so that's around domains. And that's how most companies think about

03:42it. They think about domains and that's how we do it as well. And we have an app product that allows for validation of Adobe Analytics and other key analytics tags inside an application.

Nathan Latka

03:52Okay. And the video. I get WebAssurance and AppAssurance. Describe the VideoAssurance product.

Rob Seolas

03:58Video is a very simple thing to manually QA as well as to validate out in production. Imagine So you have to watch a thirty five minute video to validate that there's an Adobe Analytics heartbeat tag happening inside. We can do that via software.

Nathan Latka

04:16And I was going say there's no humans.

Rob Seolas

04:18Yes. And provides a huge and immediate ROI for all of our customers.

Nathan Latka

04:22Okay. And now what are you growing at? So you just said you just passed 10,000,000 in ARR. What were we at twelve months ago?

Rob Seolas

04:28Yeah. So we nearly doubled the last previous year and we have some really high lofty goals for ourselves this year.

Nathan Latka

04:34That's good. So December 2016, you recall it, you know, 5,000,000 in ARR or about $400,000 per month. Do you think now you and I obviously know this, Rob, it's harder to double year after year when your numbers get bigger. Do you think you can double again this year or you think it'll flatline to 70, 60%?

Rob Seolas

04:49Yeah, I think that's probably where we put ourselves right now this year. We have some tailwinds coming. Think we talk about data governance and have as for years. Right now, if you were to ask most of our EMEA customers we have quite a few there as well.

Nathan Latka

05:05Your what customers?

Rob Seolas

05:06EMEA.

Nathan Latka

05:06What's that?

Rob Seolas

05:07Europe, Middle East, Asia.

Nathan Latka

05:09Got it.

Rob Seolas

05:09Sorry. So if you were to ask one of our London based customers and ask them what data governance

05:16is, they would say GDPR. Because that's actually what GDPR is, it's data governance. It's just called GDPR. So that is a tailwind that we expect to see in a really positive way for the next two, three, four years of the business.

Founding Story, Bootstrapping and Funding

Nathan Latka

05:29And give me more of the backstory, what year did you launch the company in?

Rob Seolas

05:33What year did we launch the company in?

Nathan Latka

05:34Yep.

Rob Seolas

05:35So we incorporated, if you will, in 2007, but that's not fully accurate. Really, we feel our first year is 2010. Our first real alpha customer came on board in '20

Nathan Latka

05:45So what was happening between 'seven and 2010?

Rob Seolas

05:50Well, not a lot actually. I had built and sold a company previous to this. The other co founder is John Pestana. So John Pestana was the Omniture co founder. They obviously had the Adobe acquisition and the transition there. So he was busy doing a few other things as well. That kind of caused us to take the business not as seriously as we started to. And it takes time to build software. So we bootstrapped our way all

06:13the way to being profitable to $1,000,000 plus. And then we went

06:20out and got capital for the business to accelerate after that.

Nathan Latka

06:22How much have you raised to date?

Rob Seolas

06:24Pardon me?

Nathan Latka

06:25How much have you raised to date?

Rob Seolas

06:26North of 20,000,000.

Nathan Latka

06:27North of 20,000,000. Okay. And is that all equity? Like that's all equity or is there debt on the back of that?

Rob Seolas

06:31That's all equity. And Mercato is our lead investor as well as Pelion Venture Partners,

06:36both here in Utah.

06:37We're a

Nathan Latka

06:37Who is it?

06:38Mark... You said Mercato is the lead?

Rob Seolas

06:40No, Mercato.

Nathan Latka

06:41Oh, Mercato. Okay. Got it. I was gonna say, I thought I heard you wrong. Okay, good. What is the... So weird question here. A lot of people wonder when founders like you guys have big successes. I know the Omniture Exit was a good one. I don't know what your exit was, but I assume it was a meaningful financial event. I mean, it's hard to make a wealthy person feel like their back's against the wall again. So

06:58how are you brainwashing yourself that your back's against the wall so you have that drive?

Rob Seolas

07:04Well, that's really interesting. I think most entrepreneurs actually just are inherently self driven. If you were to go back and ask me and my 20 year old self how much different I am now and then, there's just experience. I don't think the drive has fundamentally changed. So most of the entrepreneurs that I see that take companies from zero to exit and that I experience, they go on to the next project. I know very few that have

07:27just had an exit and then do literally nothing. They all have different projects. Sometimes those projects change from technology to real estate, but they still have a project. And that's what it is for me.

Churn, Logo Retention, and Net Dollar Retention

Nathan Latka

07:37Tell me about your churn.

Rob Seolas

07:40Yeah, I think that's the juice, if you will, inside any SaaS business. Retention, retention, retention is our focus for this year. As we've acquired a lot of customers, one of the things that you learn is what your best customers are. I think we've really understood what those look like, feel like, and how we interact with those in the last eighteen months. So the focus on the business is ensuring that we acquire, retain and grow the right

08:04customers. From my point of view, you can do all the it's kind of like going to the gym. You can do all the lifts that you want and take all the right supplements and grow. But if you really want to juice up and grow, that's high logo retention. High logo retention, high 80s to low 90%.

Nathan Latka

08:23Is that where you're at right now?

Rob Seolas

08:25No, that's our aspirational goal for this year is to grow our logo retention.

Nathan Latka

08:29What are you at right now annually?

Rob Seolas

08:31Well, we've been at 84%. We want to get north of that.

Nathan Latka

08:34That's not horrendous, right? So logo now, is it about the same in terms of you can wear that to revenue retention? It's about 84%?

Rob Seolas

08:41No, revenue retention is north of 100%.

Nathan Latka

08:43Well, give me gross revenue retention.

08:45Well, gross revenue retention can't be higher than a 100.

Rob Seolas

08:49No, I'm sorry. You said gross. I meant net.

Nathan Latka

08:52Net. Yeah. Yeah. So what I was asking was what is your gross revenue retention? Is it 84% or is it higher?

Rob Seolas

08:58It's higher than that.

Nathan Latka

08:59Okay. And then what are you driving in terms of expansion revenue year over year to then get to your net number?

Rob Seolas

09:03Well, driving just through upsells. Yeah. Or in an actual metric?

Nathan Latka

09:07Yeah. Yeah. Like, is it 10% expansion revenue and then you've got 6% churn, so you're net positive by over a 100%?

Rob Seolas

09:13Yes, pretty close to that.

Nathan Latka

09:14Okay, interesting. So that's pretty healthy. Now the people that are churning, why are they churning? Are they just shutting down domains and they're lowering their ACVs or are they canceling altogether?

Rob Seolas

09:22It's a combination of factors. One is just that we're a new technology and some customers are better equipped to use us than others. So we certainly have that. Part of that is us identifying the right customers. We have customers from APAC and other parts of Europe that have been hard for us to service. And we've also had some South American customers as well. So there's some geographic differences. And then just overall, understanding how we best get

09:50traction and deep traction inside these larger enterprise brands, which sometimes can be somewhat difficult to work with and almost dysfunctional to a level.

Nathan Latka

09:59Yep. The pricing axes you told me earlier that you can drive expansion on, you said, a number of domains. I mean, a business can still grow revenue significantly, but not grow their domains. I mean, do you feel like you're a handicap because you don't have other metrics that you can upsell on, like number of seats or number of corrected errors or anything like that?

Rob Seolas

10:22No, I don't think so. It hasn't felt that way. And there's certainly modularization of the product line and clear room for us to grow down the future that we were not necessarily concerned so much about changing the pricing model. That doesn't seem to be a big positive or negative inside the business right now.

Nathan Latka

10:40So you feel like you can drive meaningful expansion revenue just by upselling additional product lines, even if their number of domains aren't expanding and you don't have a per seat model. So it really is just upsell additional products.

Rob Seolas

10:51Yes, but I would say that I don't know of a current enterprise customer that doesn't have some type of increase in domain and increase in apps. In fact, you take a look at like cbs.com, it's been a customer for quite a long time, how many properties they have and then how many apps they've gone from three years ago with apps that number less than their domains and now apps number three times their domains. So there seems

11:17to be plenty of growth in there for us.

Why Customers Keep Renewing

Nathan Latka

11:18Got it. Another question. So once somebody uses you to make sure everything's working properly, right? Boom, they check that checkbox. Why do they keep using you month after month?

Rob Seolas

11:28Well, because a website is almost like a living, breathing thing. It changes all the time. So a website can work perfectly and have perfect data collection one day and you have a release from a team over in India or a team in Cincinnati or Miami or wherever that team is, and then all of a sudden data collection breaks. And part of our technology is to instantly notify marketing departments when that happens.

CAC, Sales Cycle, and Payback Period

Nathan Latka

11:50Tell me more about some of the other economics about growing your customer base. So what's your CAC look like today?

Rob Seolas

11:56Yeah. So basically, one of the things that we really focus on is a premium analytics users. So we know our target market and our entry level TAM, I think really, really solid. You take a look at the best Adobe brands out there, best Adobe users, and they're generally who we go after. So I think we're pretty healthy that way because we are able to really focus and know our bread is buttered, so to speak. And it

12:23allows us to make sure that we're not out chasing too many balls and putting resources in the company to go outside of basically to go outside of that. So one the reasons we are a high level partner with Adobe. In fact, last year we won their Technology of the Year award because of the relationship and the natural value add that we are to the Adobe customer base.

Nathan Latka

12:43Yeah, I totally understand all that. And the focus is obviously a good thing, but I'm curious, fully weighted, what does your capital like to acquire one of these guys? I mean, I assume you have inside salespeople working these deals. Maybe you do some paid spend or conferences. What's that fully weighted CAC look like?

Rob Seolas

12:55Yeah, that's something probably we won't talk about.

Nathan Latka

12:58Okay. Okay. And why is that? Is it just, is it higher than what you'd expect or you feel like it's a competitive thing you don't want to share because you've kept it really low?

Rob Seolas

13:04A little bit, little bit of all those things.

Nathan Latka

13:06Okay. Do you pay Adobe a kickback for that partnership or no? It's just out of the good of their hearts, they love the product?

Rob Seolas

13:12Yes. Well, we're an instant ROI for them. One of the things that the company started, if you go back to our founding story, was John Pestana. So John was the co founder of Omniture. And their biggest problem was having customers call and say the data is not right and would blame Adobe. And at that time, Omniture. And Omniture and Adobe would say it's not the analytics solution, it's your implementation of it. And there's been multiple different

13:36attempts and ways that the market has understood that this needs to be solved from tag management solutions to CMS, high level CMS integrations. And now when you think about it, all those are front end, but there's nothing to validate in the back end. And the changes are so rapid in today's mobile and web development cycles that you actually need something much more proactive going out and validating proper data collection more than just, hey, it's in our

14:06CMS or it's in our tag management solution. So it must be working.

Nathan Latka

14:09Rob, when you when you bring on these customers, I don't know what your sales cycle looks like, but you invest a lot to bring them on. How patient are you considering what you've raised and how big you are? I mean, how how many months are you willing to wait to recapture that money? What's your payback period look like?

Rob Seolas

14:23Well, I mean, acquiring customers in enterprise sales cycle is long, right? So we average, you know, little bit shy of one hundred and fifty days, which is pretty much right in the wheelhouse for customers. We've had customers that take nearly two years to fully acquire. Because of that, you work really hard to get them and so you have to work even extra hard to retain them.

Nathan Latka

14:46Again, so in terms of payback period, I mean, you trying to operate the business from an efficiency perspective where you get that money back in the first year or the first two years? Or are you less aggressive and six months is what you want to get it back in?

Rob Seolas

14:57Yeah, right now we're pretty healthy with it slightly over a year.

Nathan Latka

15:00Okay. That's pretty good. So call it fourteen, fifteen months, something like that. Yeah. And then, I mean, backing into that, right? So if you say first year ACV is between 30 and $40,000, it's fair to say you're comfortable spending something like that amount to bring these guys on at all.

Rob Seolas

15:13Yes, that's right. As most...

Nathan Latka

15:14Go ahead.

Rob Seolas

15:15And you have to. I mean, sales cycle and the expense of trying to acquire an enterprise customer mandates that you retain them and mandates that you actually grow and upsell into your account. You can't just have the first bite of the apple be the only bite of the apple.

Growth Drivers: New Logos vs. Expansion Revenue

Nathan Latka

15:28That's right. Yeah. I know. Is most of your growth year over year coming from expansion revenue into the current base, or is it coming from brand new customers?

Rob Seolas

15:28Both.

Nathan Latka

15:28Okay. But if you had to pick which one is driving more growth, which one?

Rob Seolas

15:39Right now, logo grows more.

Nathan Latka

15:39Okay.

Rob Seolas

15:39It's more growth than upsells.

Team Size, Lifetime Value and Spending Discipline

Nathan Latka

15:43Okay, good. And last few questions here. What's your team size look like today?

Rob Seolas

15:47About 80 people. It's about 70 people here in our Provo, Utah headquarters. And we have an EMEA team as well with the London office and some contractors as well.

Nathan Latka

15:58Okay. And wrapping up and closing up the economics lifetime value. I don't know why people use lifetime value because I think you can lie to yourself really easily, especially with you have some pretty healthy economics here in terms of revenue retention. You could probably rationally argue to your team that these folks are worth an indefinite amount to you. How do you keep yourself rational? I mean, what do you assume a minimum lifetime value is on these

16:18guys?

Rob Seolas

16:19Well, I think it comes down for us to logo retention, a high logo retention rate. And as long as you're doing some level of upsells, basically most of the metrics fall in line pretty simply after that. Most of the metrics kind of get wonky if revenue retention, therefore gross and net dollar retention get wonky too. And so my point of view is the simplicity of a very high logo retention solves most of the especially once you

16:47get to a business that's doing north of $67,000,000 in ARR and growing.

Nathan Latka

16:52Yeah, I guess my question is, you mentioned earlier with 84% annual logo retention that I think reverse comes out to 16% churn each year or call it 1% per month, which means the average customer staying with you, you could argue rationally about a hundred months at that $3,000 per month price point on average. I mean, you could argue that these folks are worth north of $300,000 a pop to you guys. Right? And the reason I asked

17:14that is maybe you feel like it's worth more, maybe it's less, but a lot of CEOs will use that LTV number to drive back to what their CAC is. And they can sometimes drive spending up too much because of an unrealistic LTV. So I'm just curious how you think about balancing these.

Rob Seolas

17:27Well, think efficiencies in the business has got to be a focus. It's very easy to talk about all the different pieces that you need in order to service a large customer or any customer, but particularly large ones, just because the dysfunction inside a lot of big brands and the multiple teams. And I don't know very many of our bigger customers who don't have multiple teams in multiple cities across The United States, let alone the world.

17:54So it's really easy to convince yourself how much more you have to spend and how you have to market and talk to them. And it's easy to kind of get efficiencies kind of sideways. So I think it's just a... It has to be a discipline of the business to do that.

Inside Funding Round and Capital Strategy

Nathan Latka

18:07When did you raise your last round of funding?

Rob Seolas

18:11So seventeen

18:14months ago.

Nathan Latka

18:14Okay.

Rob Seolas

18:14Sixteen months ago, something like that.

Nathan Latka

18:17So Rob, you're either raising right now or you're selling to somebody. Which one is it?

Rob Seolas

18:21So we've got a little add on round with our lead investor doing an inside round.

Nathan Latka

18:27Yeah. And typically you see those inside rounds being done where you need a little extra capital to grow to kind of a run rate you want to grow to. And that gets you to the next point where you can go out and get the value you want on a new round from outside investors. Is that generally what you're thinking?

Rob Seolas

18:40Generally, the thought process, yes.

Famous Five: Books, Tools, and Habits

Nathan Latka

18:42Cool. Alright, let's wrap up with the famous five. Number one, what's the last book you read?

Rob Seolas

18:46Boy, the last book I've read. I reread The Advantage.

Nathan Latka

18:50Number two, is there a CEO you're following or studying right now?

Rob Seolas

18:54There is one, but I

18:59almost don't want to share his name.

19:03I'm still a fan of some of the local CEOs here in Utah. I think Utah's got a little bit of an interesting culture. And so there's some folks here I talk to.

Nathan Latka

19:03Well, if

19:14my audience wants to study who you're studying, name one you're comfortable sharing.

Rob Seolas

19:18Well,

19:21so I love him and hate him. It's hard not to to love and hate Steve Jobs, but because there's so many things he does well and there's so many things I look at and say, I'm not sure I wanna be that guy.

Nathan Latka

19:30Yeah. Yeah. All right. Number three, name a tool that you use every day to build a business.

Rob Seolas

19:35We use Domo quite a bit to help build a business.

Nathan Latka

19:37Number four, how many hours of sleep do you get every night?

Rob Seolas

19:41Don't get my required and recommended eight hours, but I get generally six to seven.

Nathan Latka

19:47That's pretty healthy. And what's your situation Rob? Married, single, have kiddos?

Rob Seolas

19:52I am divorced with five kids.

Nathan Latka

19:54Holy mackerel, five kids, that's amazing. Are they all... Are you empty nester or no?

Rob Seolas

19:58No. That's a Utah water kind of thing.

Nathan Latka

20:01I'd say almost every CEO I've spoken with, it's like five, six, 12. Aaron Ross has 12 kids. I'm like, what is you... What are you drinking? All right. Five kids. And how old are you?

Rob Seolas

20:10I'm 46.

Advice to a 20-Year-Old Self

Nathan Latka

20:1246. Okay, last question. What do you wish your 20 year old self knew?

Rob Seolas

20:15Just to keep going. I think they're so easy to get discouraged. And I think the number one thing is you hear so many great pieces of advice. Information has never been easier to attain or acquire. But with that is the prerequisite to say, what piece of information am I hearing and does that apply to my business right now? Because you're going to hear somebody talking about what worked for them as a $50,000,000 business or a $5,000,000

20:41business, and you might be right in the middle and it may be disastrous if you implement that. So it's very, very careful to validate

20:49and understand what piece of information you're listening to as a CEO and what you actually want to use and strategize on in the business.

Nathan Latka

20:55There you guys have it. Be cautious with advice from when Rob launched ObservePoint back many years ago, unofficially in 2007, officially in 2010. They are helping enterprise clients make sure they've got their marketing tech, their stack, sales stack, basically any online web apps connected, making sure the information is flowing smoothly, the tags are firing. They also do that with applications and video as well. So bring two fifty customers right now. They've passed $10,000,000 in ARR. That's

21:24up from about 4 or 5,000,000 just thirteen months ago. So healthy growth. They've raised $20,000,000. 84 percent annual logo retention is healthy. He's obviously working on driving that up. Spending about, you know, or getting their money back on new customers in about fourteen months with a team of 80 folks based mainly in Provo, Utah. Rob, thank you for taking us to the top.

Rob Seolas

21:42It's good to be here.