Pepperirevenue & acquisition

hello everyone my guest today is offer your vexel he's the co-founder and ceo of a company called peppery the mobile commerce platform for brands and wholesalers before founding the company he spent over 20 years in executive leadership positions with enterprise technology companies including amdocs jakarta enigma and tufan all right off are you ready to take it to the top sure all right so what's uh peppery do and how do you make money uh we do uh b2b commerce which means that we are selling to consumer typically consumer good manufacturers and distributors uh that are selling to uh businesses as opposed to consumers okay and what are they getting for that i mean what are they paying you for what's the software do the software is helping them sell better we help them sell better both online and offline meaning both over the internet through their customer portal which is actually peppery portal as well as through their sales people their retail execution people which are merchandisers in the field uh we're basically providing them the the tools to sell better including trade promotions and other means in order to increase their sales and is your business model a pure place sas company yep okay 100 cents us so so what do these folks pay you on average per month to use the technology uh just when we talk about average we have customers that are paying us hundreds and thousands of dollars and uh we have customers that are hardly paying us thousands of dollars yep no offer i get it we only have 15 minutes on the show so we can't talk about every one of your individual customers so the best approach i take is to try and kind of get your sweet spot and go from there so what would you say kind of the mean is a couple thousand a month uh yeah yeah a couple thousand a month isn't it yeah okay and what so if someone's paying you three grand a month versus someone who's paying you a hundred grand a month what's the biggest difference between the two is it number of skus or velocity or what typically it's the number of users okay users yes either reps or customers or the combination of both okay and put this on a timeline for us when did you launch the company uh started in what we are doing today 2012. okay and what were you doing it sounds like maybe you had a pivot or something when did the company exactly we had the pivot from 2009. uh 2009 we were dealing with warranties in the cloud this is how the company started but we pivoted to what we are doing today in 2012. okay but you kept the same cap table yep okay so so how many customers have you scaled to today we have around thousand customers today okay a thousand customers and have you guys decided to bootstrap the company or raise capital uh we raised capital from uh two uh private investors that are not institutional from day one until today okay and these are these are like angel investors yes okay how much have you raised a date i'm not uh i'm not giving this information to the public okay i think uh it's actually already i mean this is public because you have to file this kind of stuff let me pull up my research real quick and figure out what it was okay while i'm doing that help us understand strategically why you don't like to share this publicly uh we don't like to share that publicly because we are trying to not to provide the information about the company unless it's necessary at this point of time because we're not public yet sure but there are plenty of private companies where uh for example someone who might want to sign up with you as a customer if they see that you've raised capital they might see you as more stable more reliable over time so it's advantageous to publish it sometimes and sometimes it's not why have you decided it's not advantageous uh first of all we are pretty much on a break even right now and generating our own funds uh so uh hold on break break even break even and profitable are two very different things are you operating a break even or are you profitable um operating on breakeven okay and what does that have to do back to my funding question why you choose not to disclose it exactly for that reason we are no longer we are not in a situation that uh where we need to publish that we need money uh we are break even we are sorry you're not you're not understanding my question offer i'm not i'm not asking you to beg for money or say you need money or say you're burning cash need money i'm asking why you choose not to share what you've already raised that's what i'm trying to understand i typically don't like to provide information unless i need to about the company that has to do with its financial information okay let me just need to that makes sense let's move let's move on so you launched the company in 2009 you pivot in 2012. was most the capital that you raised for the original idea or for the second idea the second idea okay okay interesting well i mean why do you say of course there are plenty of companies that raise for one idea it doesn't work they pivot a new company and keep the investors yeah because uh 2009 until 2012 we were much smaller than what we are today we started from scratch and uh we had much longer periods since then 2012 to 2018 actually 19 right now what's the team size today how many people we are like 100 people uh divided to three offices melbourne israel and uh and the us okay where in the us uh new york ah very good okay good and where do you send most of your time israel officer i would say uh uh no actually i'm spending like 40 of my time in new york 60 or 50 israel the rest is uh around the world very good help us understand i mean hitting a thousand customers in this kind of space is not easy you've clearly tapped into some growth channels that are working nicely for you how did you get your first 100 customers on the platform uh mainly from app stores and from google and it's still the case today the majority of our customer came through inbound uh searching for something and finding peppery yeah these are all very often you're not giving yourself enough credit these what you just give is a very generic answer you clearly are dominating these channels in order to get this kind of customer velocity so when you say google that's not very helpful in terms of learning from you what do you mean google what are you doing specifically uh very generic things so unfortunately i have nothing uh unique to tell you by the way offer if it was generic you'd have competition and it wouldn't work anymore so you're not you're doing things that are not normal otherwise it wouldn't be working what we are doing is we thought about the words that uh people will be searching uh in order to find a system like ours and really did a very good seo job and then ppc and then we went to more sites like ed roles that are more specific and simply and then we did seminars in order to uh uh which are more vertical oriented to specific vertical within our industries the industries that we are dealing with uh from the customer side and uh i think it's pretty generic but when you talk about i think when you talk about seo how do you identify what keywords to go after walk me through that process uh it's a combination of what we thought people were searching for and then how many searches uh are on those words and then seeing whether our competitors are there or not on those words because you can see clearly and easily see what our competitors are putting their money on as well so it's a combination of all those things in order to identify you know where we think we can get the best return on our investment and then uh obviously the the more competition there is on the words and then gradually you see where you can turn those leads into sales as opposed to just getting leads it's it's a process that it's an ongoing process and then also as as year goes by your strength is changing i mean the company strength is changing and you need to change those words to where you can generate more money it's an ongoing process um cac is something you're obviously going to be fine-tuning as you look at ppc and different hours and different channels right so we talked earlier and said hey you know a customer coming in at 3000 bucks a month is pretty average for you how aggressive are you being in terms of acquisition are you willing to spend kind of first year acv to get the customer or maybe first two years of acv how aggressive are you being generally speaking we are aiming toward the one acv okay so one year so three thousand bucks a month you'll spend up to 36 grand to get that customer uh this type of customer in this size but obviously in some cases we have much much larger customers and then we'll spend more well yeah but it's still a ratio right so someone's going to come in and pay 10 grand yeah the ratio is there yeah it's right it's still a year so your opt what you're saying is right right now it's a year you're you right now are aiming for a year payback period or you're higher than that right now trying to get it lower i'm a bit uh higher than that and i'm aiming to get to one i see i'm a bit higher than that how do you do that in a channel right so you know you can spend x amount of money on certain keywords and that your cac on that channel is x i mean how do you go about driving cac down especially when you know your competitors might see you running ads on that word and then they enter the thing and then it gets more expensive i think uh one of the way that we are dealing with it is actually going after larger and larger customers and which enables us to uh to spend more and this is a process that is constantly happening for us every year we see the average customer size getting bigger and bigger and then our investment in bringing those customers getting bigger as well however typically the investment is getting uh the the growth of the investment in sales and marketing is slower than growth in the customer size that we are bringing in and this is giving us the improvement so we're focusing on larger and larger customers uh every churn's critical in any sas business obviously when you look at the cohort that signed up with you about a year ago what does churn look like today and how do you keep that low actually again it's a gradual process at the beginning we didn't have uh account management we just assumed that the customer will stay with us because when you are young and your customers are relatively uh started with you not too long ago then they are typically more stable with you or and then as year goes by better as well as your customers are no longer excited about what they've bought few years ago it's no longer is innovative as it used to be so you need to invest more and more into those customers so gradually we increase the spending on account management improve the methodologies uh on keeping customers another interesting process that happened to us is we started to realize which customers are customers that we want to keep and which one we do not want to keep anymore and uh before we before we get into all the strategies you're building out to reduce churn help us understand where it is today i mean are we talking 10 annual revenue churn or where are you at yeah this is more or less our gross churn uh however our nature is negative meaning we have more expansions than people that leaving us so when you look on the overall chair and annual churn it's a yearly annual churn is typically not typically it's always negative for us i think we have uh about uh five percent negative okay so negative five percent so that would mean if you're churning ten percent growth you would need to be expanding by 15 to get to net revenue retention of 105 percent exactly is that that's exactly okay where is most the expansion coming from like what what pricing axes are your sales team using to drive expansion revenue we have two types of expansions the more uh the bigger one is uh the global expansion we are starting with customers in one one country and we are seeing it in many many cases i can give you many examples and then we expand to many more countries with that customer and becoming sort of a global solution for that customer this is where we see most of the expansion and then we see expansions within the customer of two more types but they are smaller one of buying more of the features modules of the the platform can provide and the other one is uh adding more users but these are much smaller than the graphical expansions that we see last questions here before we wrap up off with the famous five so we talked earlier a thousand customers you said three thousand bucks a month it's kind of a fair sweet spot for you i mean that would put you at about a three million dollar a month kind of mr target is that accurate no okay uh it's we're talking about the currently because we're talking about the current customers uh we have legacy customer we started with much smaller customers we are over 10 million afl but we are still not in the 30 million will you uh when do you think you might break 30 i think not this year but next year it's visible okay and if you're if you're doing more than 800 grand a month today which would put you again north of 10 million run rate what were you doing about a year ago so what was what's growth rate look like i don't talk about it as well again okay growth rate right now uh i mean you've already shared a revenue customer counts churn cac rpoo why would you not share growth rate there are certain uh figures that i'm more sensitive to and this is one of them i'm not sure in there it would be exactly it would be very sensitive if you were flat and you saw it as a weakness i mean are you flat is that the problem if i was flat i would not telling you that in two years might be around 30 million and i'm telling you i'm over 10 million now you might you might need you might you might easily say that i'm not flat i'm not flat i'm not flat i'm far from being flat okay can you give us a range are you above 100 year over year growth no we are less than double double high double digit figures so between 50 and 100 yes okay that's fair enough range that's healthy growth very good all right let's wrap up with the famous five number one what's your favorite business book [Music] uh execution from uh uh what's his name uh guy from honeywell yeah yeah and he will uh no it's not annual i think no executioner the honeywell ceo wrote a book called execution yeah so maybe it's him yeah okay it's the ceo and i think i think he was known only well i think he was uh i forgot g i think it was g i think it was g well ge isn't honeywell part of ge maybe yeah number two is there is there a ceo you're following me is there a ceo you're following or studying right now uh i i read the uh no no right no no number three what's your favorite online tool for building the company online tool for building the company uh very basic google analytics number four how many hours of sleep to get every night uh six okay and what's your situation married single kiddos married how many kids married plus two two two kids great and how old are you 55 55 last question offer what do you wish your 20 year old self knew i didn't understand your question what do you wish you knew when you were 20 when i was 20. i wanted to be a ceo of of a high tech company this is what i wanted okay that's not the question the question is what's something you wish you knew when you were 20 oh when i wish i knew the importance of uh teamwork better importance of teamwork yeah teamwork is critical launched uh peppery back in 2009 on a totally different idea than in 2015 really doubled down 2016 on this idea they've raised a little bit of money uh he's seen that private for now but they've scaled to about a thousand uh b2b commerce platform uh brands and wholesalers uh leveraging the tool they're north of 10 million bucks in terms of ar growing 50 to 100 year over year about a hundred people on the team between israel australia and the u.s 10 gross churn annually 15 expansion for 105 net revenue retention 36 000 acv on a 3 000 account so about a 14 15 month payback period as he looks to drive that down to about a year offer thanks so much for taking us to the top thank you very much as well