How Outbound (acquired by Zendesk) CEO Josh Weissburg grew Outbound (acquired by Zendesk) to $360K revenue and 100 customers in 2017.

hello everybody my guest today is Josh Weisberg he's the founder and director of go to market at outbound a customer communication technology acquired by Zendesk in May 2017 he challenges businesses to rethink communication with customers by centering marketing sales and service teams on the human relationships they can build using this customer data Josh are you ready to take us to the top let's do this all right tell us about outbound we'll focus outbound first then acquisition and then more about strategy inside of Zendesk so when did you launch outbound and what does it do for folks yeah so we launched it in 2013 and my co-founder Dhruv and I basically realized we were both working at Getaround which has been like Airbnb for cars basically helps people do do car sharing and we needed a tool that was essentially a marketing automation tool so we would have these car owners who would get stuck in the funnel and they would take certain steps but not complete go all the way through and we looked at all the marketing automation tools on the market so like our exact target and Marketo and a lot of last generation tools and we just were not happy because they were based on email and they were based on lists and we wanted something that was based on the actions people take inside a product and they could communicate across channels and in 2013 not much of that existed the markets exploded for those tools now so it's a really interesting competitive space because I think a few of those oh man autopilot intercom does some of this lean plumb does it app boy does it yeah so there's lots of new new competitors in the space but but our core innovation was using events so we realized customers don't need to use lists as much anymore they need to use the actions people take inside a product could be a mobile product could be a website could be a server-side event but basically we wanted to use actions instead of lists to figure out what messages people should get and and that's the hardest thing for people I mean I come from the world where people brag about their list size the problem is when they send a blast out like 1% opens but these people that understand one how to track events in their app like air I just signed up I just bought a new investment here in Austin it's an Airbnb the onboarding air is incredible I mean they'll know when you stop part of the onboarding and email you the morning after and say what happened last night did we lose you you know and it's incredible so you out helps folks do that kind of stuff that's right that's right and that was the first phase was just understanding like people need to move from lists to to actions so that you're you're sending a message at the right time in the customer lifecycle and then when we've had events coming in we realized we can use those same events to figure out do these messages work yeah now let's what people do yeah let's yeah let's keep talking pre May 2017 so before any acquisition just to make your story easier there in terms of paint like business model this is this a typical SAS model yeah it was a SAS model I think when we started out we didn't quite know where's where are people gonna find the value so when you're figuring out pricing you're figuring out business it kind of where's the value coming from that's always an open question is what is the pricing unit what are we gonna where do people derive value from this product and I think you know we kind of felt around a little bit and a lot of other products we're using list size so we're using how many contacts do you have and for us our big innovation was it's messaged users so how many people are actually getting messages and it doesn't matter to us how many messages or what channels so we'll take the number of messages off the table we'll take your list size off the table it's just about how many people are you actually engaging with and what are they doing because of the messages so that was our subscription model that's great interesting and can you give me a general sense the size I mean are we talking people on average paying 10 bucks a month or a thousand a month or 100 per month yeah when we started off you know we wanted to make a self-service product which is actually one of the reasons we ended up at Zendesk is that they have that in their DNA too it's really hard to do so we have an epi integration and everybody of course wants to start off no sales people will just build it like Atlassian we don't need any salespeople and you know eventually we realize that the API integration is a big hurdle so you need to help people over that hurdle and at first it was cheap and so we were self-serve and then we realized over time we need to be more sales assistant and now we're actually trying to move it back towards self-service we're trying to lower the price point that's always been our dream is that we can get this product out there and we can give it to everyone yeah I'm at different levels of sophistication but we started off you know and you were paying I think when we started off with launch it was under 100 bucks a month for our first couple customers and now you know it's it's definitely risen to at least a few hundred dollars a month for most businesses that are using us and some of them are paying us much more than that so Holliday 300 ish on average yeah I mean it varies by varies by industry and varies by use case but yeah there's kind of a lot of growth stage companies who are probably paying somewhere around there and then more again of the back story here pre-acquisition did you bootstrap the company or raise and if you raised how much yeah so we raised 2.1 million in an initial seed round and then we did YC after they rejected us the first time but we got Gary tan on board and he was just terrific investor and kind of rallied around lots of people so his fund initialized he's a YC partner and and it brought us back into YC at that point and we're able to use those relationships to get our first kind of growth stage customers we got insta card and we got door - and some other customers using us and really like feed us those use cases and help us to grow in the right direction so to stay ahead of competitors in the space based on what growth stage companies needed and that became our vertical is what do growth teams need and we were the the lightest tool we were the most powerful event based tool we could do a/b testing we could do cross channel and those growth marketers they became our bread-and-butter and really kind of directed our product for us what did your again pre-acquisition what did things like churn look like hmm I think you know it varied a lot I think the biggest lesson we learned around churn is is that you need to find that you need to find the persona who will stick with you and I think early on we had some customers who did churn who expected that list based tool and when we found the growth marketer who was ready to do the API instrumentation and who knew who was ready to kind of track all the events send them over to outbound and really invest in the tool churn lowered a lot like from white to white can you quantify that yeah I can't show the numbers now because we're part of a you know public company that's I'm saying can you do it before like what how many percentage points were able to get churned out when you made that change you know I would say we reduce churn probably we probably cut it in half Wow when we were able to get our persona right so before you know we had differently had apples and oranges we people who wanted to send email blasts we had people who wanted to send onboarding messages and then we had developers who were just looking to set up transactional messages and when we figured out okay what is the mix of people who can actually use this product and use it consistently then we at least cut it in half probably probably more than that and are you were you directly in line with kind of most healthy SAS companies I'm talking you know sub three percent monthly logo churn is that fair to say I think yeah by the time we dialed it in we were we were probably a bit better than that and you didn't have a ton of you know some of these companies that are doing you know 100 million an AR that I've had on they have really aggressive kind of upsell customer flows and their expansion revenues crazy but their price points are way higher I imagine that wasn't a big part of your playbook you were looking at spread not depth that's right and I think one of the things we realized is um if we give people a couple of really valuable use cases and we start to small we will grow those use cases over time if the product is good enough and you can see hey I can send emails I can send push notifications and every message that goes inside outbound I'm gonna be able to evaluate what people do because of that message that was a strong enough poll factor that it's like well we're sending some other messages in SendGrid let's put him in outbound we're sending some other messages you know with our in-house push provider let's put those in outbound and so so we were relying on that kind of poll rather than pushing a strong sales process and I think we'll continue to do that few more economics questions here before we move forward to kind of post acquisition days what did you like to keep kind of payback period to in those days when you're adding customers you know...