Olark Revenue & Valuation (2024)

hello everybody my guest today is ben congleton he is the ceo and co-founder of olark live chat it's a bootstrap profitable and proud helping over 12 000 businesses grow by communicating with the right customer at the right time he's passionate about building strong work cultures where teams bring their whole selves to work ben are you ready to take us to the top let's do it all right oh look first off i love that you're bootstrapped and i love that you are competing with giants who are raising probably way too much money for their own goods so this is going to be a good story for people that have not heard of the company tell us what the company does basically we were the first company that made it really easy to live chat your website so like when you're shopping online uh as a visitor you can get you can chat with an operator from the business but more importantly as a business you can get more value from the traffic that's currently on your website so if you're an e-commerce store you can capture more leads convert them into sales if you're a b2b business we have customers that have generated you know upwards of five million dollars a year from leads coming off of chat so uh we basically help businesses grow that's great and uh i'm sure you have plenty of cohorts and you do all kinds of analysis but on average what does one of these customers pay you per month on average a customer of ours pays us like you know you know in the range of we'll say under 100 bucks okay somewhere near 100 fair enough and um what uh before we kind of get your timeline here what pricing axes do you do people kind of they'll pay higher for or less for like number of seats number of chats what is it we're just we're just number of seats we have a couple of add-ons you can add like onto a plan but primarily is just number of seats very simple pricing yeah all right timeline when did you launch uh we launched i guess like the early early beta was probably 2007 and then we launched paid in 2009 uh and so i've been going strong for a guest full time for almost 10 years and then you're bootstrapped right um so we raised under 85k but we raised 85k total so you can figure out whether that's bootstrapped or not but i think for any modern company that's that's nothing well when we look at some of the others in your space intercom drift i mean what they're raising i would say yes you're very much bootstrapped um between 07 and 09 what were you doing so like to walk me through those first kind of struggle years how were you paying yourself how are you surviving yeah so at that time 2007 i was a phd student so i was working on a phd this was just a side project so basically like on sundays me and a couple of friends would get together and hack on this thing on sundays we were running a uh it's probably like a more important backstory here so basically i was running a web hosting company through high school uh through undergrad running this web hosting company it was just sort of generating more or less passive income how much graduated from uh senior year at gross like over 170k it's pretty good for a senior you're a popular senior then i'll help pay for college for for us so uh so then by uh you know by the end of undergrad you know my two friends who were doing this with went on one way out to california to a band one uh you know was just doing freelance consulting and getting paid and i was doing a phd and so uh we were doing a bunch of freelance consulting as sort of a secondary source of income and we hated doing it so we decided like hey uh we're building software for startups we could we could do better than this we could build a better product than this and so that was like 2007 uh when we built the first version of olark which we called habla uh that was basically funded by that consulting firm or interesting aside interesting okay and then fast forward to today so 10 years later what do you guys that in terms of total customers on the platform so um you know we have over like the number the public number i use is like over 12k okay and is that when was it like that public number when was the last time you released that so you had 12 000 customers at what date that's that's a couple years old okay it's a couple years old all right so i mean i assume you've probably grown past that any update you can give there have you passed 20. yeah we don't we're waiting for kind of a fun a fun opportunity okay now so but that's that's the biggest public number we offer fair enough okay so 12 000 folks and i mean can i can kind of multiply here 12 000 times 100 on average i mean you're north of 1.2 million bucks a month at this point um we don't really talk about any of those numbers you can kind of do matthew do you want but well i i don't want to guess i'm literally just taking numbers you gave me i mean i think you're probably significantly larger than that at this point i mean is that fair enough to say um i'll just say no comment we can kind of move on but you guys can you guys can do the math okay why by the way why do you hold that back i feel like in the space it's such a strong thing to be able to say you're bootstrapped and like doing this well uh it's good question i don't i don't think i have a great rationale for holding it back but it's just something where we like as a management team we haven't agreed to release any numbers so i try not to like what the heck why'd you release it without us yeah exactly so like we just don't don't talk about those numbers unless we have like a press or a pr kind of event yeah well guys listen i'm knocking the hell out of ben i'm making him give me all these numbers so don't blame him come after me send me a season desist or something all right all right ben um this is great so talk to me about customer acquisition growth where did the first 100 customers come from in the early days right we launched this free product in 2007 right so back then there was nothing else there so we went and just grew it on forums basically looking for people that you know had the problem that we were solving and just gave them a solution for it and then over time uh because we were the first people who put this little floating chat box on the internet that created some virality so like you know someone adds this to the site uh they see it's olark and then they want it for their own site nowadays that strategy doesn't quite work as well because the space is so crowded with little widgets to float in the bottom right-hand corner but back in the early days we were really the first company doing that and that helped us grow quite a bit did you guys ever get down to like details and actually model a viral coefficient where if you know one user installed it today they would invite 10 users at a 30 conversion and then it would kind of your flywheel was working um the numbers like it was highly variable based on what site it was on and whether they turned off branding or not so like we let people turn off branding so it was it was more of an efficient it was attached to like who's the audience like for example if you're an e-commerce company like we'd end up getting less customers that way if we were if you're a b2b sas company you'd see more i imagine that both drift and intercom have seen like similar growth uh sort of based on where they're where they're installed yeah interesting today as you add customers i imagine you've probably tested some paid stuff maybe you have some inside or sales or you know customer success people when you look at like your fully weighted you know cost to acquire a 100 a month account what are you willing to pay for that we are like uh we are like horrible marketing so like right now so this is the area where i would say as a business like it's the area where the least invested so uh even though our product is bought by marketers and you know we have a lot of very smart customers using our product that have done a lot of modeling like you know cost acquisition off chat how that converts into a paying sale like olark we've mostly done organic and we haven't really like pushed it out we're actually in the process of uh sort of basically investing in marketing like bringing in someone who's like far better marketing than we are to sort of help us scale because we realize that organic uh is nice but i think we can do a lot better now yeah that's interesting hey by the way we have very smart people listening to the show private equity people b2b sas ceos all that make the make that pitch a little more clear so are you looking for like a head of marketing or what what's the title what would they do it'll be closed this just be closed by the time these guys apply like we get some really freaking amazing people in the pipeline you've already really yeah it's like i mean there are probably over 300 applicants for this thing like it's it's when you can hire a remote you get a lot of people from all over the place and some of those people are quite fantastic so let's learn from that right so you get all the first off how did you call for applicants um so uh more or less i think it was indeed and uh we work remotely i i personally didn't run that hiring process right so i have a director of peopleopps they run the hiring process when we need to do an exec search they're you know very experienced have done other exact searches in the past so this is just for them it's their their forte for me uh where i come in it it comes down to defining what i want in that position and what uh sort of skills that we're looking to hire uh you know what they need to be able to do in the first year and then uh you know building building interview process making sure we can assess them on those skills et cetera that's that's sort of like where i come in but the sourcing isn't something that i worked on directly can you share that detail so when you said hey what do you want to do in the first year were you able to give like a numbers like hey we want them to do this this this or um i think what we did for them we basically uh you know wanted to hit the ground running so we gave them like a 90 days like hey figure stuff out because you know we're don't have a lot of uh established uh sort of background in marketing so there's going to be a lot of learning to come on and you know taking that taking that team that is there and sort of assessing them and figuring out how to help them really grow and succeed and then and then we sort of set a target for the next 90 days and let people sort of show us how they're going to do that we actually did something pretty interesting where we uh paid people to do homework so we gave them a bunch of stats they were kind of made up numbers but pretty close to our real numbers and said like hey uh give us like what opportunities you see what assumptions you need to make given this data we've given you uh what uh you know put together a first 90 day plan and a second 90 day plan like what are your key results for each of these periods and then we sat on call and talked to them about this that's crazy so how many people did that actually return to plan um i think it probably under 10 but at that point we had like really filtered things down so so uh you know you filter resumes you do phone screening calls and then we do homework because we just you know we only want people that we think could get the job doing this homework yeah have you met have you met these people like over the phone or in person yet you know them all the names um so uh i mean at this stage when we've given them the homework so uh mandy is doing all the phone screens and then i we give them the homework so they've basically been they've had they've passed resume screen the past phone screen they're giving homework we pay them for it so we give you like you know a bunch of you know reasonable size amazon gift gift card because it's going to take time to do this work what are you doing like a thousand bucks or ten thousand bucks or what oh sorry i'm curious when you say reasonable size you mean like 100 bucks or 10 grand or what oh yeah on the scale on the scale of 100 on scale 10. i mean you know where i don't know what reasonably size is i mean buying all those books on your bookshelf behind you you need you know 300 bucks so i don't know fair enough fair enough but you know most people don't pay at all so this is like you know helping offset that a little bit buy yourself something nice uh and then the people make it through that process and um and you know then we can talk to them about their homework ask some hard questions figure out like what they know i'm just i'm just trying to understand when you personally come in is that what you do you come in and actually grill them with questions after you review the homework you got it that's where i come into this process for this exactly interesting because like i mean manny can do a fantastic job on the first example so let me ask you like why the hell i mean you're seeing all these other companies in the space and you're going what the heck they're like stealing our lunch and we have a better product and we're here first like why are why isn't this us in the headlines like why did you wait so long to do this oh i mean we were trying stuff internally it wasn't working like we had marketing that didn't work right so we were we needed to restart and tell me about what you tried that didn't work tell me one or two examples i think like historically olark had a very strong partner marking channel and uh what ended up happening is those partners started building chat and so uh what we realized was that while that worked really well in the early days it no longer worked strategically so we needed to come up with a new channel and the existing team was completely built around that partner marketing channel it's interesting and so we were unable to like really adapt internally and have to bring in uh you know want to bring us some new some new thinking some new expertise there to help us try some new new uh new channels ben just be clear like i'm making this up you know hubspot maybe was an early partner but then they released their own chat product a year ago and you're like crap now we've got we're another competitors not partners you got it and that so that happened a couple of times yeah like basically anyone who has chat now was an olark partner in the past so it was a great channel but like and you know some of these guys have relatively bad products so still like you know our chat is far superior to these bolt-on chat products like say hubspot or yeah or you know zendesk hasn't evolved their chat in like four years since they bought zopim but this uh so like we still get customers and have many customers using those channels but what ends up happening is those partners don't want to market for you anymore yeah so so like so even though you have all these customers in common that are very well served you can no longer use that as a marketing channel so that that was one of the challenges that we've been facing a bit talk to me you know churn is critical in this space especially at this price point what is your churn today and how do you measure it uh we don't we don't have a public number for churn but uh basically we measure it this the standard way so just that's not helpful for my audience describe teach us how do you measure churn uh we measure churn based on you know you take uh you can do monthly churn right so you take your mrr for one month and then you look at that mrr from that set of users at the end of the you know the beginning of the month from the end of the month and that gives you a number right so you can you can just look at the negative churn you can just look at the people who left and you can also look at upgrades so you can kind of break those out into two parts and look at the like how much are people growing during a month and how much are people leaving during a month and then what we try to do is survey the guys that leave to try to understand why they're leaving and sort of break that out because you know we have a lot of small business customers many small businesses churn out they just die right you know you have customers who outgrow you for example there's a lot of like you know let's say you're hipaa or you're dealing with a very strong like kind of more enterprise compliance requirement you might move up to someone who you know has a has a situation better that's better to serve that like large enterprise need and then we try to like figure out like okay is this journal we care about or not and right now we're very happy with our turn rate and it's uh and it's solid from industry standards and we've you know benchmarked it against other companies churns for uh for companies that with similar levels to us yeah i would say just from our data you know we've done about i think you're over 3 000 interviews like this so we have an interesting benchmark data here i mean i would say average good churn for this price point in this space would be like definitely sub 3 logo churn per month and then revenue churn in terms of like net revenue retention even is really dependent on your ability to upsell and expand revenue so i mean would you generally say you're kind of in those ranges yeah we're within those right okay how do you add the ability i mean do you have do you feel like you have strong pricing axes to drive expansion revenue so you can get to net negative with just basing it on number of seats i don't think you can do it on pure seats i think that was uh i think that's basically just a challenge of the s smb target i think you need to have add-ons and so add-ons are something we've launched recently and they've done pretty well there i think i think if you look at sort of some of the competitors pricing where people are charging like for usage-based pricing i mean it's pretty interesting but as a smb it makes your pricing like super unpredictable so like uh you know you may think you're paying 50 bucks a month but all of a sudden you're paying 200 a month and you know if if you're not a high growth startup that's funny that out of vc like those numbers actually do affect you so i think the place where we've uh you know been able to shine is having like predictable simple pricing that makes it really easy for you know our entire customer to get up and running it doesn't scale as well like it's not going to give us like an intercom style valuation but i think like honestly like most customers don't really care what the company's valuation is when they're buying service they just want predictable pricing they want to understand uh the co like their costs and the value they're getting out of the product and not have this not at this cost like scale such that that company can reach unicorn status which is awesome look i would say with intercom and drift in any of these companies by the way yes they get great valuations but also they've invented pricing models that more directly correlate to value and so the revenues are growing now i would say you're in the ultimate situation because your ratio between ar and funding raised is infinite whereas many of theirs they may be raised more than what even their current run rates are which is obviously not a great position to be in but i i'm just i am curious why um they've kind of identified additional pricing axes and you have not gone that route and you just explained why it's unpredictable for an smb yeah yeah and i think also like i'm not trying to maximize overall enterprise value i think those guys have maximized overall enterprise value they need that because they need to drive cost up significantly to justify their valuation which i don't need to do it what do you mean drive costs up so basically they need the price yeah they need to it costs for the customer yeah i got it got it revenue or cost yeah we i didn't realize this we ran out of time so quick questions here if we can um growth what are you growing at your every year uh no comment okay uh i mean health give me a range that you're comfortable with uh we're healthy and profitable okay like can we say like but like in the double digits or single digits you can say under 50 year-over-year growth okay under 50 percent that's healthy and then uh well i mean i don't know it could be zero but under 50 percent um and then a team how what's the team size today and where's everyone based we're all over so we're all across the u.s fully distributed fully remote you know you have people in new york san francisco little little island scotland um there's always like a little bit of hiring i would say like probably like sub 35 is probably the current count that's great good with one big higher coming on here soon it sounds like all right uh very good ben let's wrap up here with the famous five number one what's your favorite business book favorite business book i guess i i like small giants number two is there a ceo that you're following or studying and under the radar one under the radar ceo that i'm flying studying i i i really like uh kind of the relationship between the uh zingerman's co-founders you guys probably haven't heard of them but basically they run a co-op in ann arbor michigan there's like arie wit weinberger or winsburg i'm going to mispronounce the guy's name that's okay let's do zingerman's guys guys number three besides what's your favorite online tool for building your business ah man favorite online tool for i mean i guess stripe i mean it's just like i like seeing money come in and stripe has really done a pretty fantastic job of scaling out what they do uh such that you can use it for invoicing manual not just credit cards i mean they're doing a fantastic job and i love that product number four ben how many hours of sleep are you getting every night i'll try to get between like i don't know six and eight and which is i have a new child so that certainly makes it hard i'm just gonna ask what's your situation married single how many kids married uh one kid out one on the way oh wow and how old are you uh i am 36 36 last question what do you wish your 20 year old self knew my 20 year old self knew wow that's such a great question i think man i don't know i i have a hard time like reflecting back on 26 i think probably self-awareness is super freaking important like i think understanding self-awareness and your communication styles and how you communicate with others uh is super freaking important i think i've always been super driven and wanted to get a lot of stuff done but i think it was only through the experience of building olark and learning the importance of management that i gained that sort of self-awareness and the understanding around communication styles 20-year-old ben uh didn't really understand the value of management and i think uh you know i think i'm actually 35 so 35 year old ben is actually i unless you got past 30 who cares and then uh uh guys there you have it from ben self-awareness is critical founded olark as a side project back in 2007 2009 got more serious about it today they're well north of 12 000 paying customers the shared average price point caught just around 100 bucks per month obviously if you multiply those comes up to about 1.2 million dollars per month churn is kind of like an industry range called three percent logo churn per month range really now starting to experiment with how to drive expansion revenue uh around healthy pricing axes that are friendly to small business owners that's really the key and he's able to do that he's bootstrap so they drive the company however they want to drive it growth is less than 50 year-over-year but again totally bootstrap team of 35 based all over the country in remote locations ben and also over the world ben thank you for taking us to the top for sure thanks nathan