How Optimove Reached More Than $10M ARR While Staying Profitable After 8 Years Bootstrapped (Interview with CEO Pini Yakuel)

Introduction and What Optimove Does

Nathan Latka

00:01Hello, everyone. My guest today is Pini Yakuel. He's the founder and CEO of Optimove, provider of the science first relationship marketing hub. His extensive experience in analytics driven in customer marketing, business consulting, sales, along with his innovative approach to entrepreneurship, business building and marketing have earned him recognition as a thought leader. Pini, are you ready to take us to the top?

Pini Yakuel

00:22I am.

Business Model and Revenue Mechanics

Nathan Latka

00:23All right, tell us about Optimove. What does it do and how do you make money?

Pini Yakuel

00:28So we make money by selling a SaaS software. Essentially, work with companies, they pay us a monthly fee, this is how we make money.

00:37And what we do, are, as you said, a relationship marketing hub, this means that we help brands to thoughtfully communicate with their customers at scale by leveraging by leveraging machine learning and data science. So when every every time they talk to a customer via one of the channels, whether it's whether it's email, Facebook, Google retargeting, call center, whatever the one to one channel is, that conversation that they start with the customer is that much more meaningful

01:01and engaging because it's based on the data. It's based on the wisdom of the machines learning to understand really what drives customers to detect patterns, things like that.

Pricing and Average Contract Value

Nathan Latka

01:10And what is the average customer pay you per month, you say?

Pini Yakuel

01:14So I would say that like our price point is around 130K a year.

Nathan Latka

01:19Okay. And that's representative of what people would pay on average as well? That is the average. That is the average. Okay, so that's what is that? That's about $10,800 per month, something like that?

Pini Yakuel

01:32Exactly.

Payment Terms and Cash Flow Positivity

Nathan Latka

01:33Do you make them sell or pay annual upfront or can they pay monthly?

Pini Yakuel

01:39So usually our default contract starts with a quarterly in advance. That's how we start. We're not the type of a company, a lot of companies are, you know, strapped for cash. So they want to... So usually they want to get the money upfront for a year. And then the next year there's this notion of renewal where you want to get again a big check for the next year. If typically we build the businesses that would track,

02:01we're cash flow positive, we've always been profitable. So for us, we're not that strict on that. So we can... So typically we do quarterly in advance. We can do monthly in advance if they insist.

Company History and Pivot to SaaS

Nathan Latka

02:13Okay. So you're cash flow positive, bootstrapped. And when did you launch the company? What year?

Pini Yakuel

02:19So the company was launched in 2009 as essentially in a way a consulting gig, around machine learning and data science and CRM automation. But everything we do today is what we did manually with people and presentations and Excel files. And throughout the years, for the first three years we've accumulated money through this agency business. And in 2012, we actually launched the brand Optimove, the software product Optimove. And we, I think a year more into the future.

02:46So 2013, we probably completed a pivot to fully become a SaaS business and not a service business.

Revenue Mix: SaaS vs Services

Nathan Latka

02:52Okay. And over the last twelve months, what percentage of your revenue was SaaS versus agency model?

Pini Yakuel

02:58Oh, no. So ever since that time, 2013, we killed the agency business. So today, 12% of our business comes from services.

Nathan Latka

03:07A 100, sorry, say that again, you cut out.

Pini Yakuel

03:10Today, 12% of our business comes from services and 88 comes from SaaS licensing.

Brands, Team Size and ARR Range

Nathan Latka

03:16Okay, and what have you scaled to in terms of total customers?

Pini Yakuel

03:21So we we work today with around 300 brands. Note that one customer can have more than one brand, right, especially when you sign with a company that owns multiple brands or multiple entities. So it's 300 brands. It's it's on our site, and we're 150 people in the company.

Nathan Latka

03:38Okay. 150 people, 300 brands. Is that generally a one to one ratio though in terms of company to brands? Like do you have about 300 companies or no?

Pini Yakuel

03:45Oh, no, no. That's what I know. So it's... I forget the exact number, but essentially it's... Sometimes a company could have more than one brand. I think the average is probably 1.4 or something like that.

Nathan Latka

03:57Okay. But it's So you've got you've got somewhere than around like a 120 companies, 300 brands, something like that.

Pini Yakuel

04:07Not exactly, but let me keep something for myself.

Nathan Latka

04:11Fair enough. Yeah. Because because you know what I'm doing here. I'm gonna do the math. The 100, if you do have around 120, right, times the ACV you gave me earlier, mean, are you guys doing about, you know, north of a million bucks a month right now?

Pini Yakuel

04:23So you can just... We do... You can think of a 150 company... 150 people company and it is and is profitable. So you do the math and you can get pretty close.

Nathan Latka

04:35Mean, that math would give me if I wanna be exact 1,600,000 in monthly recurring revenue. Is that about what you're doing today?

Pini Yakuel

04:42It's no, but let me keep something for myself.

Nathan Latka

04:47Well, just tell me which of those numbers are wrong. Because they're, I'm just multiplying 150 times your ACV you gave me.

Pini Yakuel

04:56No. So so the ACV is is right because I gave it to you and one of them is wrong.

Nathan Latka

05:02Got it. Okay. So I'm obviously too high on customers. I won't push harder there other than... Mean, can you give me a general sense of size? Are you, you know, less than 10,000,000 or more than 10,000,000 in ARR?

Pini Yakuel

05:13No. No.

Nathan Latka

05:13Yeah. A lot more than

05:1410,000,000. A lot more. Okay. But south of a 100,000,000?

Pini Yakuel

05:18South of a 100,000,000.

Nathan Latka

05:19Yes. That's a big that's a big enough range. Right?

Pini Yakuel

05:22Right. I mean, it would be nice to get to a 100,000,000. Yes. So south of a 100,000,000.

Nathan Latka

05:27Is that a million?

Pini Yakuel

05:31Usually they don't have a 150 people. Have around 500 and north of that.

Nathan Latka

05:35Say that again.

Pini Yakuel

05:37Usually companies that do a 100,000,000, they have a lot more than a 150 people.

05:41Not always.

Nathan Latka

05:42I've interviewed a few that have around a 150, 200 to Yeah.

Pini Yakuel

05:45You're right. No. At least in the enterprise software space, Right? Of course, you you can be like, yeah, I don't know, a money printing machine that can have... Can do a ton of money with 50 people. Right? But in the in the enterprise software space, it's usually there's like a metric that says, okay, so how much you're making per employee, it is like SaaS revenue per employee. And typically that number, know, goes between 150,000 to 220,000,

06:14something like that. So, and of course, that raise money and pre hire, they tilt the odds. So if you talk to a company that raised a lot of money and they pre hired, this will not indicate on the revenue. We are... We've always been kind of like making more than the number of employees.

Nathan Latka

06:32In other words, the average, you know, the average SaaS company does $150,000 in ARR per employee. What you're saying is because you're bootstrapped, you're doing actually well north of that. You're better than average.

Pini Yakuel

06:44I don't I know the average is... I'm not sure. I know it ranges from $150,000 to $220,000. We checked it like a while back. There's this... All these reports, you know, that you can get. But, I'm just saying that sometimes companies, when they raise a lot of money, they pre hire, for example, they can have like a 100 employees, but actually make, you know, 4,000,000 in revenue in ARR. So this would be very misleading. Yeah.

Nathan Latka

07:08You're but you're but you're bootstrapped. So you're not... Let's not talk about that because that's that's not your model. What what I'm curious is, are you saying are you saying you're beating that one fifty to two twenty range or you're in that range, your average, you're with everybody else?

Bootstrapping History and the $20M Growth Round

Pini Yakuel

07:22We are in a good place in the range. And another thing I want to mention because you talk about the bootstrapping, so we've been bootstrapping all the way to like year and a half ago in which we took our first round of growth funding of $20,000,000

Nathan Latka

07:37Okay, come on. You can't lead me on like that, Pini. That's not bootstrapped. That means you've raised capital.

Pini Yakuel

07:44After eight years.

Nathan Latka

07:45Yeah, but okay, I'll give you credit for that. But now you're on the dark side. I liked you way more a minute ago. You know that, right?

Pini Yakuel

07:53If I know that, no, I don't know that.

07:58I'm from a society that idolizes fundraising, so I'm not sure that you...

Nathan Latka

08:03The entrepreneurs that are most impressive to me are the ones that bootstrap their way, they make themselves very wealthy, totally bootstrap. But I get what you're saying. Mean, you hustled for eight years. You said you just raised 20,000,000. Now is that that's all you raised is 20,000,000 total?

Pini Yakuel

08:17Right.

Nathan Latka

08:17Okay, got it. So 20,000,000 you bootstrapped. And I mean, look, I can put a better minimum on this, right? So if you say you have 150 employees and you're in a healthy, you said, quote, a healthy area in the range between $150,000 a year in revenue to $220,000 per employee. I mean, at a minimum, guys are, I mean, you're north of 22.5 million.

Pini Yakuel

08:38Dude, you're obsessed with that number. Let's carry on with the interview.

Nathan Latka

08:41I'm absolutely obsessed with it. But if, because you're giving me data points that it easy. I'm just multiplying your team size by the minimum of the range one fifty k.

Pini Yakuel

08:50Okay. You can, you know, you can guesstimate whatever you want.

Nathan Latka

08:52Well, I'm not guessing though, Pini. I'm just using your numbers.

Pini Yakuel

08:56Alright.

08:59You want me to you want me to what to confirm a number to

Nathan Latka

09:02No, move no, no, I just I just want to now I'm understanding because you just revealed that you've actually raised. And now I'm thinking about to what you said, which is sometimes people hire upfront and there's a lag time for growth, which

Pini Yakuel

09:15is Yeah, but that's not the case with us.

Nathan Latka

09:17That is not the case. Okay.

Why Raise Capital and What Changed

Pini Yakuel

09:19Even after we raised money, essentially, the company is still profitable even after raising money. And we took the, you know, we took the round for various reasons, but if I would, you know, boil it up, it's mainly to essentially, I thought it was the right time to kind of like to gear up and acquire ammunition. And I felt that Why

Nathan Latka

09:42did you feel that?

Pini Yakuel

09:44Because we're in like, know, do you know the... Your conditions were perfect. Right? You know the the Flight of the Conchords and their song, check it out. It's pretty interesting. It's pretty funny. But conditions were perfect, so we had Which conditions though? Our growth trajectory, the market maturity, the way we were perceived, the type of, you know, what we were able to get in terms of kind of like maintaining the company's structure and the way it

10:12was going to run with the new investors, the investors philosophy which were aligned with ours, the way they you know, their specific experience which I thought was pretty interesting. And all of those things made it to be a lot more appealing. And And there's a few more things you're getting from fundraising, right? You're getting an external credibility that you never had as a bootstrap kind of like for eight years, And you're getting the ability to

10:42buy companies all of a sudden, because now your stock is worth something. Somebody paid something for it. So it's worth something. You can buy a company with the combination of cash and your stock.

Nathan Latka

10:54Is that why you raised?

Pini Yakuel

10:57It's one of the, again, it's like, I'm saying it's like, if you do things at the right moment and at the right terms, then there's many good positive outcomes that could come from it. One of them is acquisition that I couldn't do before. I'm doing now many things which are pretty more aggressive that I didn't do before. I'm still profitable, but there's some things that I would never fund as a bootstrap because your state of mind

11:20and your mentality is most survival kind of a state of mind when you're bootstrap.

Nathan Latka

11:24Name one of those more aggressive things.

PostFunnel: The Content Marketing Publication

Pini Yakuel

11:26PostFunnel. So we've built a newspaper. We have our own publication that covers everything to do with relationship marketing. It's a separate brand called PostFunnel. We've actually built a publication.

Nathan Latka

11:38A real magazine?

Pini Yakuel

11:39A real magazine. You can check it out. It's called PostFunnel. Like everything happens after the funnel, hence relationship marketing, retention marketing. And, you know, we have external writers, we have an editor, we have designers, we actually What's it cost you to run?

11:56It's like altogether, this year it's around 500,000 a year.

Nathan Latka

11:59And you just put that into marketing expense?

Pini Yakuel

12:01Exactly. Yeah. It's topsy.

Nathan Latka

12:03I like it. I like it, it's a unique idea.

Pini Yakuel

12:05I like it too, that's why I did it. But probably with the bootstrap state of mind, I would Yeah,

Nathan Latka

12:14that makes sense.

Pini Yakuel

12:16It's more of a survival, like you never know, like you want to prepare for a rainy day. So even if you have some extra funds, you keep them and you handle yourself differently, right? So it's a mind. Still I'm not rehiring like crazy and I'm not changing my philosophy because of the fact that I've raised money, but I'm trying to always open my mind and listen to the investors and to best practices and see if it's

12:38a good fit for Optimove, but that's the story.

CAC Payback Period and Customer Acquisition

Nathan Latka

12:42What payback period are you optimizing for today and have you increased what you're willing to, how long you're willing to wait to get that money back after you raised?

Pini Yakuel

12:51You mean the investors are waiting to get their money back?

Nathan Latka

12:54No, no, your payback periods. When you acquire a customer, how long you're comfortable waiting to make that money back?

Pini Yakuel

12:59Like CAC to LTV?

Nathan Latka

13:01Well, kind of, but it's payback period, a little different.

Pini Yakuel

13:03I'll say we're good with a year.

Nathan Latka

13:05You're healthy. And has that drastically changed pre, you know, bootstrap mindset versus fundraise mindset?

Pini Yakuel

13:11Yeah. I think before that we were, know, we had like amazing CAC to LTV ratios because we got a ton of business word-of-mouth. So for many, many years we've got like with very limited marketing investment, we got very strong business. However, as you scale and as you grow, we came to The US like two years ago, slightly less than that, like one year, nine months ago, I moved here to New York. I'm in New York right

13:39now and I moved here and started the office. We have 20 people in the office here in New York today. And obviously when you go into new markets then it's more expensive at the beginning right? There's diminishing return. So every additional that you spend on a new market, a new vertical, it takes you more time to acquire brand equity and you know, good clients that give you, that refer you to new clients and provide you proper

14:03word-of-mouth. So that takes time, takes more money.

14:06Yep.

Nathan Latka

14:07And what's... Look, you told me earlier, your ACV is about $130,000. That was your average. So to get it back in a year, that means you can afford to spend up to $130,000 to acquire. That gives you a lot of wiggle room.

Pini Yakuel

14:17Yeah. Yeah.

Churn: Gross and Net Revenue Retention

Nathan Latka

14:18What about what about churn?

Pini Yakuel

14:20What about churn?

Nathan Latka

14:21So what is

Pini Yakuel

14:21We find churn for our customers and and we... Our churn is pretty good. It's pretty solid. Mostly, it's actually very, very good, but mostly when we lose business is because we have a very tight partnership with our customers that's that's mainly, established upon data. So we get their data from their databases, their first party data. And when it goes sour is when there's issues with their data and and, you know, or there's kind of like quirks

14:54in in operations and the way that they send us data and it breaks and stuff like that. So this is when the relation goes sour. It's pretty rare, but other than that, other than that, it's mostly strong.

Nathan Latka

15:07So what, I mean, what is mostly strong? Do you care more about logo retention or revenue retention? I'm curious how you think about that.

Pini Yakuel

15:13Revenue.

Nathan Latka

15:14Okay. So what is revenue churn annually would I you

Pini Yakuel

15:16do care a lot about... So on a monthly basis, we churn a 0.8%.

Nathan Latka

15:22That's not bad. Now, when you add back expansion revenue, is it still 0.8% net?

Pini Yakuel

15:29Oh, you mean upsells?

Nathan Latka

15:30Yeah. So when you add your upsell revenue, does that more than make up?

Pini Yakuel

15:33No.

15:34Negative So then we churn.

Nathan Latka

15:35Got it.

Pini Yakuel

15:35So this is only taking into account the revenue that we lose on a monthly basis.

Nathan Latka

15:41It's It's gross revenue churn, not net.

Pini Yakuel

15:45Exactly, no, the net is that we have negative churn, which is great for us, but

Nathan Latka

15:50How negative are you on that? Annually?

Pini Yakuel

15:54We do about, yeah, so I think we do, if you go to the other side, it goes to a point 5%.

Nathan Latka

16:01Got it. So you have, you mean when you say go to the other side, you mean you have a 100.05% net revenue expansion?

Pini Yakuel

16:09No, we have. So if we have a 0.8 churn, right? So we have plus, how much is that? It's 0.5. So plus 0.3% on the other side.

Nathan Latka

16:22Got it. So that's 3.6% basically points over the year.

Pini Yakuel

16:27Over the year it's times 12.

Year-Over-Year Growth Rate

Nathan Latka

16:29Yeah, yeah. Yeah, point three times 12. Yeah, the delta. Interesting. That's cool. What's growth last question here before we wrap up with the famous five. What's your what's your growth rate right now year over year?

Pini Yakuel

16:40So we did mostly, so throughout the years, it's always been fluctuating, but it's always been between 60 to 100%.

Nathan Latka

16:47Okay. And you were in that range the past twelve months?

Famous Five Rapid-Fire Questions

Pini Yakuel

16:51Yes.

Nathan Latka

16:51Okay, that's great. Good growth. Alright, man. Let's, let's wrap up here with the famous five. Number one, what's your favorite business book?

Pini Yakuel

16:59Good to Great, Jim Collins.

Nathan Latka

17:02Number two, is there a CEO you're following or studying right now?

Pini Yakuel

17:06No, I'm very bad at it. My

17:11sister's husband, he's like a big CEO back in Israel, so I consult with him a lot from time to time. And my wife's mother boyfriend is the ex CEO of Teva. He's 78, I call him her boyfriend.

Nathan Latka

17:25Did say your ex wife's boyfriend?

Pini Yakuel

17:29My wife's... No, no, my wife. Did I say ex? I'm not sure. I'm not sure as well, you can check on the recording, but my wife's mother's boyfriend, he is the ex CEO of Teva, the pharmaceutical company. So he's like really global, you know, CEO leader and very experienced. So I I spent a lot of time talking to both of them to gain experience.

Nathan Latka

17:52Very good. Number four, or sorry, number three, what's your favorite online tool?

Pini Yakuel

17:58LinkedIn.

Nathan Latka

17:58LinkedIn, okay. Number four, how many hours of sleep you get every night?

Pini Yakuel

18:02Seven and a half, seven.

Nathan Latka

18:04Pretty good. And what's your situation? Obviously, you're married. Any kids yet?

Pini Yakuel

18:08Yeah. Two kids. Both of them are in bed while I sleep and kicking them... Kicking me in the head or the butt or somewhere.

Nathan Latka

18:15And how old are you, Pini?

Pini Yakuel

18:17I'm 40, just turned 40.

Nathan Latka

18:19Alright. Last question. What do wish your 20 year old self knew?

Pini Yakuel

18:24So maybe I wish I would study computer science and then I would build the product myself and not having to bootstrap through all the years. But on the other hand maybe it made me who I am. But I was always I was always kind of like in college and I was like I'm a people's person I don't want to sit in front of a computer all day. Guess what we all sit in front of a computer

18:44all day. And I studied math and operations research, but I wished I had studied how to code.

Nathan Latka

18:51There you guys have it from Pini. He wishes he would have learned how to code earlier on. Launched Optimove back in 2009. He bootstrapped for eight years and then raised $20,000,000 recently. They're growing between 60 and a 100% year over year. They're north of 10,000,000 in ARR. Super healthy economics. Churn is less than a 0.8% per month. That's revenue churn. Net revenue churn, 0.5%. So... Or sorry. Negative net revenue churn, which is great. They're willing to

19:17spend up to one year of ACV, that's $130,000 to acquire the customer. So a payback period of twelve is healthy. Their team of 150 people, again, making it easier for marketing teams to use AI to understand and foster emotionally intelligent relationships with prospects and customers. All right, Pini, thank you so much for taking us to the top.

Pini Yakuel

19:35Thank you, Nathan. Bye bye.