How Percolate CEO Doug Winter grew Percolate to $40M revenue and 200 customers in 2018.

hello everyone my guest today is Randy wood ton he's the CEO of percolate he also has been a leader and strategic innovator in the marketing technology industry for over 20 years prior to percolate he served as CEO of leading predictive marketing platform rocket fuel where he repositioned the company and led it to its sail during his career Rania's held senior positions at Microsoft in Salesforce he's a graduate of Harvard Business School st. John's College and the u.s. Naval Academy Randy are you ready to take us to the top sure let's go all right tell us about percolate what do you guys do and what is your business model is it a pure play SAS company take the second one first yes pure play SAS company focused on Fortune 2000 companies that are struggling with the challenge at all marketers are facing is about how do you deliver on the promise of personalization how do you get content the right person at the right time and actually make marketing work better yep very good and you join the company I believe you said in 2016 correct no actually I've only been here six months so I came in six months ago to help them continue the evolution of the company from a social media management monitoring only solution into an enterprise software solution sold to the whole marketing organization so percolate really well-known for social media management capabilities we're out there defining a new category called content marketing platforms yep Randy put put the company on timeline for me when did the company launch yeah sorry it's company started in 2011 so it's been around for about seven years and I joined six months ago okay so question for you how a lot of success what you know right why not go out and start your own thing from scratch why do I join percolate it's a great question I so I'm a grower not a founder what I do is they come in and help companies scale so I'm gonna go to market guys sales service at marketing I like companies that are in this stage of often described as that series see you have product product market fit and now what you need to do is go activate in the marketplace and so I'm probably just not smart enough to have an original idea I come in and help get stuff done how did you learn that about yourself that's a great question I background in military was a naval aviator and just I like things moving fast and making quick decisions and I think that coming out of the school the types of problems I was interested in were the ones where the innovation was coming from collaboration around interesting ideas and scaling things through organizations versus being the guy sitting by myself and coming up with a big idea did you come into the company with around the funding where you basically Annie I are at a VC firm er no I wasn't I we did secure some additional funding as you can imagine whenever you bring in a new CEO it takes a little bit to define a new strategy and then you want to have the funding to execute I had left rocket fuel took some time off and went surfing in Costa Rica I did some yoga you know try to come in touch with myself and then my wife got sick of me trying to get in touch with myself at home so go get a job but I was very deliberate in looking for a company at this stage on focused on this problem lots of exciting opportunities out here but I thought percolate had made enough of the transition that I can be successful so I wanted about capital real quick and then we'll talk more about the story here how much capital no companies date so raised to date 75 million okay all equity or is there debt on the top of that well there's we have a line of debt that we run with Comerica just like many companies do we access it as a working capital line versus a funding line the equity last round was done in 2015 so like most startup you end up you get a little money to prove a thesis and you execute 12 to 18 months you go get a little bit more money and you keep going brandy out of curiosity because debt I know just getting hotter especially in a good economy did you decide to do like revenue based financing where you're paying back as a percentage of monthly revenue or did you like an M R term loan where there's an interest rate interest rate for the first 12 months an interest in principal over say four to six years wow that's a really technical question what I was curious yeah we so i inherited the debt line that we had it's an MMR debt line the additional debt is a convert okay so you're not you're not paying at as a percentage of gross receipts per month it's it's a fixed interest rate fixed interest rate yeah and I was interested in your question your something around the debt what I found is in having done in this rocket fuel as well with debt financing is there a bunch of banks that are just lined up with the VCS top pcs in the world and they got these different deals that they do and they invest in the portfolio and you get good terms because you're a Sequoia back where like Sequoia ggv Lightspeed the first round those types of companies want to the bank's want to do business with those companies and so it's a matter of I I think capital structure is one of the most interesting things you have to think about is the CEO and for early-stage entrepreneurs getting smart on that is really important because I see capital to cost a capital of debt versus equity and how much you take and when you take it really different instruments and different expectations and and and clearly something that people CEOs CFOs need to be think about all the time yeah last question on the debt do they require that you keep let's say that the debt vehicle was I'm making this up a ten million dollar vehicle they require you that you always keep ten million liquid in the bank as long as you're accessing that vehicle or no or you don't know no no it's more of a we can access up to our capacity the capacity is determined by our m RR yeah okay very good all right let's move on so that's capital race let's refocus back on the products you said fortune 200 or you're focused at give me a general scent are you say fortunate two thousand or fortune 214 mm so entrepot its enterprise software companies we talk about brands such as MasterCard Unilever ei we are working with some of the largest brands in the world because what we like is complexity the problem we're solving is when there's a lot of products a lot of channels a lot of markets and a lot of marketers trying to figure out what is the campaign they should be executing how did have people build content and orchestrate that from a global centralized operation all the way down into local so the problem we saw is primarily b2b big enterprise type problems and Randy what I don't have it on every cohort but on average one of the woodies enterprises pay you per year what's your average ACB would you say yeah so we're north of 200 thousand per year when I would say a lot of our contracts are tcv so they're multiple year deals because what you find with these large enterprises is a brawny robust partnership process and they're looking for partners and so if you make it all the way through and you get to the end they often say great let's do a three-year deal they're also looking for preferred pricing if they make the commitment and that web such but it's very very different than like a midmark high transaction sale are you a are they just committing to that via SEMA are you actually pulling 3 years of cash forward on day one it's a great question I won't give you the exact number I would say all of them or I'll tell you that 95% of our deals are paid upfront a large percentage of them are paid annually on the on the contract date some are paid upfront fully so neat about this business versus when I was at rocket fuel where we were having to buy inventory chase agencies to get paid they had to go chase advertisers to pay them we were playing basically playing a bank to the agencies in the pure SAS model where you get paid up front the more you grow the more cash you have yeah it's so wonderful working capital dynamics especially if your figure even take a fraction of your new sales getting paid two years upfront I mean the answer that looks great and churn you also reduce overall cost of customer acquisition cost so you know bigger deals longer terms I will always go for those yep um would it be scaled to now in terms of total customers you're working with we publicly talk about 600 brands okay got it now now are those all different companies or those brands roll up to a hundred like parent holding companies not a great question so you can imagine with the company like Unilever they have multiple brands we counted at the brand level it really depends on how the company is structured but I would say it's in the range of every company has a couple of brands yeah so maybe like I'm gonna make this up 200 companies and on average I've got caught three brands under I'm something like that yeah I won't comment publicly but it's you're in the order of magnitude what I would say the opportunity for enterprise sales is as you know is when we go into a large company you get in with one organization and the opportunities expand and so enterprise sales as MOOC is about landing the big logo but it's the expansion especially for a work Automation tool its value is realized when you have the entire division the entire marketing division working on it yep we can quantify this in terms of net revenue retention annually so I assume based off...