How Odoo Reached $44M Revenue and 11,000 Customers in 2018 with 110% Net Revenue Retention (Interview with CEO Fabien Pinckaers)

Introduction and What Odoo Does

Nathan Latka

00:00Hello, everybody. My guest today is Fabian Pinckas. He is the founder and CEO of a company called Oodo. Fabian, you ready to take us to the top?

Fabien Pinckaers

00:08>> Yes.

Nathan Latka

00:09Alright. Open source business apps. Tell us more about what you guys are focused on at Oodo.

Fabien Pinckaers

00:13>> So we basically do a suite of business apps from CRM, website builder, accounting, manufacturing, inventory. Those are individual business apps, but if you install several, they fully integrate to each others. Yep. We have a SaaS version as well as an on premise version.

SaaS vs On-Premise Revenue Split

Nathan Latka

00:29Okay. And if you break down your last 12 revenue versus SaaS versus on prem, how much was SaaS?

Fabien Pinckaers

00:35>> It's more or less fiftyfifty.

Nathan Latka

00:37Oh, fiftyfifty.

Fabien Pinckaers

00:38>> But I would say that even the on premise SaaS, It's just hosted by someone else.

Nathan Latka

00:43Got it. So both kind of both SaaS model. And can you give me a general sense of scale today? What are doing per month?

Current MRR and Growth Rate

Fabien Pinckaers

00:49>> We are in MRR. We are $2,600,000 per month or 65% per year.

Nathan Latka

00:57Okay. Sorry, you cut out there. So you're doing 2,600,000 per month?

Fabien Pinckaers

01:02>> Yes, in MRR.

Nathan Latka

01:03And what were you doing exactly a year ago in December 2017?

Fabien Pinckaers

01:09>> In Bing for the year will be around $44,000,000

Nathan Latka

01:14Sorry, what was your growth rate over the past twelve months?

Fabien Pinckaers

01:17>> Growth is 64%.

Nathan Latka

01:20Okay, 64%. So you were doing about 1,500,000 per month exactly a year ago. Some some something like that. Yeah. And then and then grew that you said 64%?

Fabien Pinckaers

01:33>> Yes.

Nathan Latka

01:34That's great. Very good. Where did help us understand kind of more about where this growth is coming from? How are you signing up customers?

Year-Over-Year Growth and Annual Revenue

Fabien Pinckaers

01:45>> We do have two channels. One is direct. So on our SaaS platform direct, and we sell with the partners who offer the product on premise.

Nathan Latka

01:55Okay. So what kickback? What

01:58kickback are you paying partners? Is it a twenty, thirty, 50% commission?

Fabien Pinckaers

02:03>> It's ranged from 10 to 20.

Nathan Latka

02:05Okay, 10.

Fabien Pinckaers

02:06>> The smallest have 10 and the largest have 20%.

Nathan Latka

02:0810 to 20%, interesting. Okay, and put all this on before we get too much into the numbers here, this on a timeline for us. When did you launch the company? What year?

Customer Acquisition Channels and Partner Commissions

Fabien Pinckaers

02:15>> I launched the company thirteen years ago when I went back from the university.

Nathan Latka

02:19Oh that's great, so 2005.

Fabien Pinckaers

02:22>> Yes, and I bootstrapped the company, it was very slow at the beginning. I was alone, second year I was alone, then two people, then four, then eight, so it took a lot of time.

Nathan Latka

02:32How many people today?

Fabien Pinckaers

02:34>> 600, no, it's five eighty.

Nathan Latka

02:36Five eighty, and where is everybody based?

Fabien Pinckaers

02:41>> 50% are in Belgium, 30% are in The US, San Francisco. We also have an office in New York and the rest across Asia and Middle East.

Nathan Latka

02:50Okay, very good. So Belgium, US, New York City and remote locations. And are you still bootstrapped today or have you raised capital?

Fabien Pinckaers

02:56>> No, we raised €10,000,000, so $12,000,000

Nathan Latka

02:59Okay, $12,000,000. And why did you decide to raise? I mean, sounds like you've had a lot of success growing it basically, I mean, with little capital in the company. When did you decide was the right moment to raise?

Fabien Pinckaers

03:10>> So when we were 100 people, we were doing 1,000,000 in revenue per year. We wanted to switch the business model because we started as a service company doing implementation service to our direct customer in Belgium, Then and we wanted to switch to a more vendor style business model, selling subscription instead of selling services. So we had to stop all our service activities from one day to another and focus on building the partner network who would do

Company Timeline and Bootstrapped Origins

Fabien Pinckaers

03:37>> the service for us.

Nathan Latka

03:38So

Fabien Pinckaers

03:39>> it was quite risky and at that time, so we raised $4,000,000 do the pivot.

Nathan Latka

03:45Interesting. And what year was that?

Fabien Pinckaers

03:47>> It was in 2010.

Nathan Latka

03:492010, okay. And so how many customers do you have today?

Fabien Pinckaers

03:53>> 11,000. 11,000.

Nathan Latka

03:5511,000,000 would be a lot.

Fabien Pinckaers

03:57>> We we actually have four millions of users because we do have a lot of free users because of the open source nature of Adobe.

Nathan Latka

04:04Yep. So if I take your 2,600,000 you're doing per month today, and I divide 11,000 customers into that, that means each customer is paying on average 200 or $300 a month. Is that right?

Team Size and Office Locations

Fabien Pinckaers

04:17>> Yes. Yes.

Nathan Latka

04:18Okay. And your current run rate, I can take 2,600,000 times 12. You're doing about 31,000,000 in annual run rate right now?

Fabien Pinckaers

04:25>> No, we do more because we have non recurring revenues.

Nathan Latka

04:29I see, but just recurring 31,000,000.

Fabien Pinckaers

04:31>> Yes. Yeah.

Nathan Latka

04:32And the non recurring, what is that installation fees for the on prem stuff?

Fabien Pinckaers

04:36>> Yeah, it's implementation service. So import of the data, coaching, customization.

Nathan Latka

04:42Interesting. Walk me through how you scale that. How many people on your five eighty person team are in charge of kind of the onboarding one time revenue stuff?

Fabien Pinckaers

04:51>> Close to 120.

Funding History and the 2010 Pivot

Nathan Latka

04:53120. Okay. Interesting. And is that a lower? Is that a low? Do you run cohort analysis on people that do have professional services on their account versus not? In other words is lifetime value or churn lower when you do have implementation fees on an account?

Fabien Pinckaers

05:06>> Yes, it changes a lot.

Nathan Latka

05:08How much?

Fabien Pinckaers

05:13>> They don't have a service, we have a churn of 30% on the first year. If they do use the service, we are closer to 15%, 20% depending on the size.

Nathan Latka

05:22And blended together, what's your annual revenue churn? Sorry? Blend all your customers together, what's your annual revenue churn?

Fabien Pinckaers

05:30>> It's close to 20. What It's decreasing a lot because we changed the business model two years ago. So most of the customer we churn today are the ones who purchased based on the old business model.

Nathan Latka

05:43Yeah. Okay. So 20% of revenue churn, I assume that's gross annually. Do you have any expansion revenue?

Fabien Pinckaers

05:49>> Yes, it's 30%. So the net churn is around minus 10.

Customer Count and Free Users

Nathan Latka

05:53Got it. Yeah. So 30% net expansion, which means if I take 30% net expansion minus 20% churn, you have a 110% net revenue retention.

Fabien Pinckaers

06:01>> Yes.

Nathan Latka

06:02Where is most of the expansion coming from? What are you upselling?

Fabien Pinckaers

06:05>> Two things, more apps, so they expand in the company, so they would start with a CRM and then they want to use the website or accounting or inventory, and the number of users. Usually they start small and put more people on board.

Nathan Latka

06:18One of the things that's remarkable to me, if I've been about your business model, is I mean you have apps for email marketing and invoicing and a CRM. But you could say, okay, how do they beat Mailchimp on email marketing? How do they beat FreshBooks on invoicing? And how do they beat HubSpot's free CRM on the CRM? Because these are companies built basically exclusively around those things. Would you credit your success really to the fact that

06:40it's all in one?

Pricing Model and ARPU

Fabien Pinckaers

06:42>> Yes, if you need one application you have a lot of competition. Like as you said, you need task management you will have Trello and that kind of thing. But if you need two or three apps, there is nobody more. You have to go to the ERP like SAP or Microsoft Dynamics who are very complex. So as long as you need two or three apps, it's much easier to use Odoo rather than trying to integrate different apps

07:05>> together.

Nathan Latka

07:06Yeah. When you when you go out and and sign up a new 100 or $300 a month customer, what's your fully weighted CAC look like?

07:14>> Say that again?

07:14What's the

07:15What's your fully weighted customer acquisition cost?

Fabien Pinckaers

07:19>> It depends if direct or indirect. If we sell directly it's €2,000 or 2.5, $2,400. If it's through a partner it's 1.2.

Nathan Latka

07:31Okay, now does that 1.2 include the kickback to the partner?

Fabien Pinckaers

07:36>> It's yes.

Nathan Latka

07:38Does? It

Fabien Pinckaers

07:39>> includes the commission of the partner.

Nathan Latka

07:40Okay. And what percent of your new sales are direct versus indirect?

Fabien Pinckaers

07:44>> It's fiftyfifty.

Nathan Latka

07:45Fiftyfifty. Okay. So if we did get to a blended number, be something like one, you know, 1,800 US dollars

07:54But even though you have two very distinct cohorts, direct and indirect. So worst case, $2,400, you're going direct. Your payback period there is what about twelve months to get your money back?

Fabien Pinckaers

08:05>> Yeah. Actually, it's as we sell per year, most of our contracts, we with the payback is quite is instantly.

08:12That's great.

08:12>> Yes.

Nathan Latka

08:13I I wanna dive more into where you're spending that money when you do go direct. But first, I have to ask you. You said you listen to the show. Right? Yes. Why do you listen and you know what you're getting into? Why'd you agree to come on? I'm enjoying this, by way, but I'm curious why you agreed to come on.

CAC Direct vs Indirect and Payback Period

Fabien Pinckaers

08:28>> I think I was curious.

Nathan Latka

08:30Curious about what? You want to say, is Nathan a nice guy?

Fabien Pinckaers

08:33>> No. I never did the show, so I wanted to know if I could do it or for me, it's more an experience for myself.

Nathan Latka

08:39I well, listen. I how do you feel you're doing?

Fabien Pinckaers

08:43>> The question is for you, actually.

Nathan Latka

08:44I think you're doing I think you're doing great. I think the audience is gonna love You know, it's my job. A lot of people will come on and kind of spout random stuff like we're the best or we're number one. It's much more valuable when someone like you comes on and shares numbers and then lessons on top of the numbers. So let's continue doing that. $2,400 CAC. Where do you spend that money typically? What's the growth

09:03channel you use?

Fabien Pinckaers

09:04>> We don't spend a lot in marketing compared to our competitors. We do spend a lot in the products. So usually the best marketing impact we have is when we release a new version. Every time we release a new version from one month to another, we have an increase of the lead by 20%.

Nathan Latka

09:21Okay. And when you say new version, you mean you're adding like a new app like invoicing or you're reworking the whole architecture?

Fabien Pinckaers

09:26>> No.

09:27>> We've a big new version. So all the apps are improved at once. We do that once a year. So once a year we have a growth of leads from 20 to 25% just because of the new version.

Nathan Latka

09:38Interesting. Okay. When you do like how much money are you spending per month today directly on like paid paid activities?

Fabien Pinckaers

09:44>> Oh, nothing. Search and search engine activities maybe 20

Nathan Latka

09:49Okay.

Fabien Pinckaers

09:50>> Per month. And some billboard and some other ads maybe 20 k extra.

Nathan Latka

09:54Sorry. What was the second one?

Fabien Pinckaers

09:57>> Billboards on the the street.

Growth Tactics: Product Releases and Marketing Spend

Nathan Latka

10:01Oh, billboards. Billboards.

Fabien Pinckaers

10:02>> Billboards. Yeah.

Nathan Latka

10:03Interesting. Okay. And do they I mean, how do you track if the billboards work?

Fabien Pinckaers

10:08>> It's impossible to track. It's just word-of-mouth. We hear people talking about it and that's it.

Nathan Latka

10:12Fabian, we saw you on the billboard, like amazing. We signed up yesterday.

Fabien Pinckaers

10:17>> We don't know, but we don't spend that much. We spend a few 100 k per year on that kind of thing. Yeah.

Nathan Latka

10:23Well, to you, by the way, I look at it as a percentage of revenue, right? So yeah, very small percentage of revenue for you. Now now the the fixed number for someone maybe only doing $10 a month in revenue, that'd be a very large number, but makes sense for where you're at in terms of scale. Are you guys profitable today or no?

Cash Flow Positivity and Capital Allocation

Fabien Pinckaers

10:38>> Yes. We do $500,000 cash flow positive every month.

Nathan Latka

10:42500 k cash deposit per month. And what do you do with the 500? Is it just gonna sit in your bank account or or how do you choose to reallocate that?

Fabien Pinckaers

10:50>> That's my biggest problem nowadays. Yeah. It sits on the back bank account and it's yeah. I think it's an issue. I want to recruit faster, but we we we have difficulties recruiting faster, good developers.

Nathan Latka

11:01Would you ever deploy that capital and go buy companies to add to your product suite?

Fabien Pinckaers

11:06>> No. It's not our strategy. We prefer to grow organically. Mostly because we have a strong company culture and I'm not sure if we buy it, will just spread the culture. It wouldn't help. We have a way to operate which is very different from traditional companies. I'm afraid that if we buy, we will have complexity merging the two

Nathan Latka

11:25Tell me about that. How are you different than other companies in terms of how you're operating your culture?

Fabien Pinckaers

11:32>> It's extremely R and D, so everything is managed by developers. No meetings, extremely efficient.

11:42>> It's difficult to explain. There is no manager, it's mostly leaders and the people have more power than the manager usually. And so if someone comes with a title, nobody will listen to him.

Nathan Latka

11:54So of your five eighty, how many are engineers?

Fabien Pinckaers

11:58>> 50%.

Nathan Latka

11:5950%. Okay, so over kind of two seventy, two eighty are engineers. And let's say like break down the team that builds out your CRM app. Like who's the leader and how many team members and how do they work together?

Fabien Pinckaers

12:13>> We are not organized per app. We have organized across all apps. So if you take one app like Mailchimp to Send Email or Task Management, I would say 85 of what you have to do to build this app is generic. You need a mobile interface. You need to have a front end with drag and drop stuff, the UI. You need a back end and you need the subscription mechanisms to make your customer pay. All those things

12:43>> are generic. So what is very specific to an app is like a CRM is probably 5% of the value is in this really in the CRM, the rest isn't the same. Yeah. So our team are more transversal. We do have people focus on some big apps like accounting and I think I have 10 people maximum, which is one of the biggest.

Nathan Latka

13:02Interesting. Tell me quickly about your pricing page. It's one of the more unique pricing pages I've seen where I put a number of users at the top and then you have about 30 different checkboxes of things I can check to add on my apps. Then you have extra integrations like FedEx, DHL and EasyPost and eBay. I mean, is this page effective for you?

Fabien Pinckaers

13:20>> Yes. It took us a lot of years to understand the right way to do it. So basically we have two axes. One is per user, and you pay according to the number of user, and one is per application. So like if you need a CRM, it's a few dollars. If you need an accounting, it's a few dollars. Not related to the number of user, but if you and then you have a price per user.

Nathan Latka

13:42And then you essentially, it's a matrix and you multiply the two and that's how you get your price point.

Fabien Pinckaers

13:45>> No, we assume the two, not multiply.

Nathan Latka

13:48You sum them both.

13:52Yes. If I put 10 users in though, right, and I select your invoicing at $12 a month and your sales at $12 a month, you're saying, I mean, it would take so 12 plus 12 is 24 times the 10. Correct? 10 users.

Fabien Pinckaers

14:07>> No, it's not times. It's plus.

Nathan Latka

14:10I'm confused.

Fabien Pinckaers

14:11>> You're multiplying users times the total sum of all the per seat.

Nathan Latka

14:14I mean, that's what your things doing right now. I'm looking at my screen 10 users for two products each $12 a month. It's $24 a month for invoicing and sales for 10 users.

Fabien Pinckaers

14:25>> Yeah,

14:26>> you have 10 users plus $20.

14:30>> I don't have the same number because the numbers depend on the countries.

Nathan Latka

14:34So you're saying the total pricing would be $30 a month?

Fabien Pinckaers

14:37>> Let me check I will check-in your country in United I

Nathan Latka

14:41think this might be a language thing that you and I are getting tripped up on because your pricing your pricing page is telling me 10 users times 24 is $2.40 then a user discount of $40. The total per month is $2.36.

Fabien Pinckaers

14:54>> What app did you choose? Yeah. Invoicing and

Nathan Latka

14:57I just want to get to the point of you're multiplying number of users times

Fabien Pinckaers

15:01>> Invoicing and sales is actually free because for us, if you use only a few apps, it's free. So let's add CRM. You will have 10 users multiplied by $20. Exactly.

Nathan Latka

15:13So it is multiplied. It's multiplied.

Fabien Pinckaers

15:16>> Just for the users. Yes. And then the apps is added.

Nathan Latka

15:18Yeah. Yeah. Yeah. That's what I meant. Yeah. Yeah. I thought we might just be getting caught up there. Yeah. That's what I meant. Yeah. By the way, I love it. It's I mean, your pricing page is built around your pricing axes, which I mean, I assume allows you to just drive incredible expansion of 30%, which you already articulated. So congratulations on that. Any plans to raise capital today? No. Any plans to exit?

Fabien Pinckaers

15:37>> No. We we might have a secondary exit to help one of our investor to to go out, but we plan to we have too much money. We don't know what to do. Yeah.

Nathan Latka

15:46So Why why would you do secondary though? Right? So like why not just pay yourself out operating dividends out of the 500 gain in

Fabien Pinckaers

15:52>> of It's cash flow from It's not for me. One of the VC, one of the front need to exit for his own reasons.

Nathan Latka

16:00Would you buy them out as the company using your cash flow?

Fabien Pinckaers

16:04>> No, it's too much.

Nathan Latka

16:05Oh, so you'd to raise a little bit. Yeah. Would you ever look at venture debt?

Fabien Pinckaers

16:10>> Yeah, but no, never. We had regular debt, but not venture debt.

Nathan Latka

16:15What would you consider venture? A lot of companies like Wistia are using venture debt to buy out early investors.

Fabien Pinckaers

16:20>> Yeah.

16:22>> That would be a lot. We are talking about hundreds of millions of dollars.

Nathan Latka

16:27Oh, they're asking you to pay a big multiple on the 12,000,000 they put in, not just help them recover the cash.

Fabien Pinckaers

16:33>> Oh, maybe. I'm not yet don't to be think.

16:39Yeah. Yeah.

16:39>> No one's worried.

Pricing Page Walkthrough

Nathan Latka

16:40I basically just wanna understand. So, like they've put in 12,000,000 and what you're saying is you've talked to them, they want to get bought out, but they want get bought out at like a 10x multiple or like 100x multiple.

Fabien Pinckaers

16:51>> Yeah.

Nathan Latka

16:52And you're saying to raise that cash would be a lot.

Fabien Pinckaers

16:56>> Yeah. I think the cash will be way too much for the company to buy it, whether we use debt or not.

Nathan Latka

17:01Yeah. Okay. Very good, Fabian. Let's let's wrap up here with the famous five. Number one, what's your favorite business book?

Fabien Pinckaers

17:10>> Arowitz, the bad the

Nathan Latka

17:13Hard thing about hard things.

Fabien Pinckaers

17:14>> Yeah. Hard thing about hard things.

Nathan Latka

17:15Number two, is there a CEO you're following or studying?

Fabien Pinckaers

17:19>> No.

Nathan Latka

17:20Number three, what billing tool do you guys use?

Fabien Pinckaers

17:23>> Odoo.

Nathan Latka

17:24What's underlying? Like authorize.net or Stripe or what?

Fabien Pinckaers

17:28>> We have a mix according to the different according to the country. We use Stripe, we use Authorize and OGON, Ingenico. Spell it. Ingenico.

Nathan Latka

17:38Ingenico. Oh, yeah.

Fabien Pinckaers

17:39>> Yeah. G e n c o.

17:42>> Yeah.

Nathan Latka

17:43Number four. How many hours of sleep do get every night?

Fabien Pinckaers

17:45>> How many? Sleep? Seven.

Nathan Latka

17:47Okay. It's good.

Fabien Pinckaers

17:48>> What's Two.

17:49>> And I'd like to do more.

Nathan Latka

17:50What's your situation, Fabian? Married, single kids?

Fabien Pinckaers

17:52>> Married, two kids.

Nathan Latka

17:54Married, two kiddos. And how old are you?

Fabien Pinckaers

17:56>> Five seven. No. You? Ah, 39.

17:59>> 39.

Nathan Latka

18:00Last question. What do you wish your 20 year old self knew?

Fabien Pinckaers

18:04>> I don't know.

Nathan Latka

18:06Guys, there you have it from Fabian. Started off as a services company back in 2005, then pivoted in 2010 into a SaaS company now serving 11,000 customers that paid about $203,100 bucks per month doing $2,600,000 per month or about $31,000,000 per year in terms of SaaS run rate. Another 9,000,000 on top of that in terms of professional services. They've done this by just raising $12,000,000 in capital, cash flow positive every month adding $500,000 in free cash

18:30flow to their bank account, five eighty people based between Belgium, US, New York City and other remote locations 20% revenue churn per year that's gross 30% net expansion means he's got about 110% net revenue retention annually spending $2,400 to get a new customer so a twelve month payback period Fabian thank you so much for taking us to the top.

Fabien Pinckaers

18:48>> Thank you.