Pingboardrevenue, acquisition & funding

hello everyone my guest today is bill babel is the ceo and founder of a company called pingboard which provides live org charts and planning software to thousands of companies before pingboard bill was cto and co-founder of a company called webmail the largest b2b email provider before gmail after webmail was acquired by rackspace bill co-founded capital factory in austin texas to help entrepreneurs get off the ground and build great companies bill are you ready to take us to the top i'm ready all right so we're obviously friends but i also always like when i go to new york and i walk in you know caa's office or or someone's office and you it says you know type your name and check in and tell the person you're here to visit that you're ready and it says you know powered by pingboard across the bottom so tell us about the company and how you make money so uh that was actually one of our really early products that we sent killed i don't know if you know that so our product today is org chart software for businesses and we didn't start there we kind of iterated to that over the course of the first two years of the business so we basically sell software that helps companies build org charts and hiring plans and it's something that pretty much every company in the world needs to do what got what so that first that first kind of interaction i had with the product it was in the form of really honestly it was hardware there was obviously software powering the org chart behind it but did you why why did you start there from iteration perspective did you pay for the hardware to get just get it installed and get in offices and then why did you kill it so we built that initially actually out of a need we had a capital factory we we needed basically a member directory and something sitting at the front door so that a visitor court could browse the or search the directory and ping the person they were there to see that's basically how the name came about too ping board there's an ipad app that let you do that uh as we started selling the product we kind of got deeper and deeper into the directory and then the word chart side of things and really the the information sharing aspects inside of the company and really just found a sweet spot with org charts because it's been i think i think it's a interesting combination of something every company needs but something that is overlooked and really there's no solid software for it out there everybody can still build door charts and powerpoint and video i was going to say so people listening like this are going to go wait i'm curious i'm curious if bill's doing well i mean when i do an org chart before a board meeting i jump into like i create some rectangles in a like sketch mockup and i put some people's names in and i copy into my my powerpoint file and boom there's my org chart what's different about what you're offering so yeah you can build a smaller chart pretty quick in powerpoint what we sell is something typically to companies with hundreds or thousands of employees and it lets you tie in pingboard into your hr system or your identity management system so that data as the new hire comes on board or or as somebody's promoted that data flows into pinkboard and keeps the org chart up to date and then because that that's kind of one aspect of it being live in quote and the other side of it is all the employees in the company have that data on their phone so as soon as that new hire joins you know they're added to hr system it flows through the ping board and it flows through to their iphone or android so they they can always know that they have this real time information about their co-workers they can easily find someone if they need to contact someone and when was year one for this this project idea when did you jump out and start doing it we launched early 2014 2014. and since then i'm sure you have many different cohorts of customers to avoid going down kind of every cohort give me a general sense on average what are teams paying to use the platform uh across the board it's about uh 220 dollars per month okay and we have some that are paying in the multi thousands and some as low as like 30 dollars a month just kind of varying depending on size that that's such a a 220 price point is so tricky it's small enough where you can't afford to put touch on it right but it's like it's big enough where someone might want to get on the phone before they put their credit card in how do you manage either going like downstream or upstream or are you happy being right there so this is how i built my whole career it it's all about high volume transactional selling and it's heavy heavy marketing so we like for example with our product today we we generate about 3 500 signups per month so companies come to our site and sign up for a free product and that's like our lead funnel that we then can kind of convert through various stages of getting them onto one of the paid trial plans and having a sales person kind of hold their hand a little bit maybe get their data integrated with their hr system so uh it's a very like high high volume on the top of the funnel as far as marketing goes and then we we we look at data to determine when a sales person should get involved in that process and this is how we built the email business too like we when we sold that business direct base we had like around 80 000 customers and i think the average price point there was closer to 20 dollars yeah it was crazy but you did you have sales people there and basically the leading indicator would be if they selected a team size of more than a thousand make sure you give them a call because that's a big plan for you guys we had sales people there we actually called every single customer back then oh well actually because that's high volume we had to deal with a lot of fraud and with email people would sign up and send spam or do scams and stuff so we picked up the phone and called everybody and if we couldn't get them on the phone we shut off their account until we could um but like the sales process there was pretty similar where somebody signs up they can buy fully and use it in minutes without ever talking to somebody but depending on the profile of the customer you know we would try to get a sales person to like go deeper with them and make sure that they have everything they need so that kind of stick with us after the trial period yep so this whole engine there's kind of like three big components relative to cost like your direct marketing spend you're spending on ads the sales person when you do put touch and then you can kind of back into a fully weighted cache and a payback period i'd love to maybe break that down so what's team size today and kind of what's the breakdown on sales versus engineering uh team says we just hired a 23rd person it is about i think about 40 sales 40 engineering and then there's a mix of like other roles in there okay and then so you always have to fill these sales folks pipelines you're doing that you're getting 3 500 new leads per month what is your what are you spending to acquire these customers would you say fully weighted uh you mean per customer yeah per customer yeah uh so we spent about 12 it's about a 12 month uh payback so you know 220 about 2 000. yeah so somewhere in there i was about to stop myself with math a little bit uh off across the board it's 220 average customer size but when it first when a deal first closes it's about 150 we have a lot of expansion revenue that takes place over the life of the customer which is how that average comes up over time which is a nice attribute of a high volume business so uh customer acquisition costs it's about 150 times 12. yeah and ebbs and flows if we're scaling up ad spend you know it introduces some inefficiencies and have to dial it in but we try to get it to where it's about 12 months so with that 12-month payback i'm assuming you're not you're not pulling plans all the way forward and having them pay on day one because it sounds like as month by month by the pay they will expand as they add i'm assuming a larger volume of employees to the the account is that your number one driver of expansion revenue is team size oh yeah it is so we we do have other uh feature plans that companies can upgrade to but that's rather new we introduced that at the beginning of this year and um honestly haven't haven't spent a lot of time on the expansion selling motions yet we've really just tried to make sure that as leads come in we get them on the right plan from day one and the most of our expansion is companies growing i think a nice attribute or a nice uh uh the demographic we sell to the people who are companies who need to work charts the most are companies that tend to be growing which which is a nice thing for us because we charge more the bigger you are yeah that's great um walk me it so it sounds like i'm curious to understand you know churn is critical in a business like this i'm sure it was at webmail as well because right a leaky bucket becomes harder and harder to fill over time what are you guys at now in terms of churn and how do you think about that as you scale so uh yeah we with a volume business the churn is higher than like an enterprise business typically because there's no long-term contract we turn about a percent and a half a month which isn't isn't too bad because it's actually offset by expansion revenue almost exactly we're trying to get it to where expansion seeds turn but right now it it offsets it which is is nice and it and that too it adds and flows the month through a little bit under some months we're a little bit ahead looks like we're a little bit ahead this month yep so that's good so just be clear 1.5 uh kind of revenue churn per month 1.5 expansion so you have about zero percent net revenue churn per month correct on average yeah that's obviously a really healthy place to be um when people are churning why are they churning typically are they just going out of business uh so there's a lot of customers who will use our product briefly and then turn it off like though they needed to build an org chart for a board meeting and maybe they signed they signed up for the paid plan just for a few features and turn it off so this is a decent amount of that which is okay we and we try to nurture them and bring them back later we just want to make sure they're successful with the product first and foremost and then uh there's we have a kind of a highest tier plan is where you can take ping board and you know through the on the low and you can build an org chart for free on the mid end you can build an org chart and have a few users using it on the high end we try to get you to roll it out to your whole company um actually our biggest source of churn is companies who bought the company plan to roll out everyone but then for whatever reason they got pushed to the back burner and they didn't roll out and three or six months later they shut it off yep what is that emotion yeah i was going to say what is that motion someone that that exact story you just told what do you know you've got to get them to do in the first week so they're going to be sticky like what input are they connecting where you're pulling employee data in from uh yes getting an integration turned on is one of the big drivers so if they use like adp for hr or octa for identity management we try to dig in and find out what systems they're using so that we can get them to connect those systems to ping board because once they do and have accurate data it's a lot easier to to you know make the decision to move forward it gets tricky when there's manual processes involved in keeping the data up to date everybody's busy and has other systems to run and um and ping word isn't always the highest priority and and that a lot of return comes about because you know it they feel it's going to be more effort to get rolled out so the easier the quicker we can get them to turn on the data integration the easier it's going to be for them to kind of trust input and move forward 2014 was day one your first customer was your own need at capital factory what have you scaled to today in terms of total customers using the platform uh so earlier this year we crossed a thousand customers i believe we're around 1200 now um yeah and it's all it's customers with uh typically a few hundred to a few thousand employees that we're definitely that like mid market range pretty nice 400 customers of decent size yeah can i take bill can i take the 1200 customers times that 220 average price point earlier kind of back into mrr of about 264. uh i think we're slightly higher than that actually okay right yeah we're so they're you're pretty close yeah that just means either you have a couple more customers or arp who's a little bit higher but regardless we're in the right range with all that matters talk to me about growth if you're at that today where were you in july 2017 a year ago uh so i can i know when we cross the different million dollar milestone we crossed into two million in january of this year we're crossing three right now um we crossed a million with march of 2017 yeah we've been basically uh it was like 10 months to go from i think that's right 10 months to go from a million to two and then eight months to go from two to three no that's not that's not right set seven months to get two two three something like that you're get you're getting to the next million faster the the flywheel's spinning it's happening i wanna uh as we wrap up here we have about two three minutes left um you're raising capital but you're certainly not doing it in a kind of silicon valley go raise that evaluation that you're never going to be able to grow into and you know get diluted all kinds of craziness right walk me through kind of your strategy on capital raising and start with how much you've raised to date uh so we just finished a round and we've approached it a little bit differently we've raised three separate seed rounds that were each two and a half million dollars which is very difficult seven and a half million total and uh basically what i've tried to do is i guess you call it just in time financing we raised two and a half million in the very beginning to to get the business off the ground unfortunately we had become the wrong business model for the first two years trying to sell that front office solution and burnt through a good chunk of that money and ra once we decided to focus on org charts and believe we found a unique opportunity there we raised another two and a half to really like build out that business and that one felt much more like a true seed round and then we just raised another two and a half i was debating raising a traditional series a like a larger round um but decided uh to raise just two and a half for now and uh kind of complement that with some debt financing to kind of get a little bit larger and the main reason for that is is the way i run the business it's very much focused on investing every dollar we possibly can and growth but not getting out ahead of our skis where we absolutely need to raise another round of funding later a lot of people increase their burn to the point where they have no choice but raise another round and and they try to hit certain milestones to make them fundable again in quote um but more often than not i see companies miss those milestones and get themselves in a bad position where they have to raise equity on bad terms and we didn't want to do that i always operate to where you know every few weeks we're tuning our financial model to try to make sure we touch zero in the bank account which by that i mean we spend every dollar but the moment we run out of money is the moment we hit profitability so we're like optimizing for that every day as we decide to scale it down we were chatting their day you have a name for it what's the name you call that is it the zero dollar moment or something the touch the touch zero oh it is it's called the touch zero moment yeah and then i've been calling our operating model the touch zero operating model because it's really designed about optimizing for that even like triggers for hiring and things like that is triggered based on like algorithms around burn and just trying to optimize for making sure you don't run out of run out of cash but also making sure you're not sitting on in cash like you want to you want to invest every dollar there's no point in having it sit in the bank yeah it's it when i saw you and pat and your other investors kind of put out the article on the last race it's so uh it i obviously read it because i know how involved you are in many different funds i know you have a lot of information about companies you've done it yourself before so to see somebody like you do that i think it's a very strong signal to the market that more people should think about this kind of touch zero moment methodology yeah then the interesting thing that i found i i mentioned a minute ago i was thinking about raising a traditional series a and i went out and talked to a lot of bay area investors you know at the typical series a funds and just found that all of them for their funds to work they really want companies that are gonna and spend more than than than what you can in a touch zero model you're really kind of getting on the venture treadmill at that point where you're really investing in you know scaling up your sales team and engineering and and doing so to the point where there's no choice but to raise a b round later in a c round um it kind of takes that optionality off the table to and if you know if you if you miss your milestones you like i said earlier put yourself in a bad position yeah so i didn't uh really want to raise from a uh traditional vc because they didn't really align with this touch zero operating style that that i have who did you end up good okay not that i wouldn't consider it later i i think it's i would consider a larger round when like if if there was like a clear growth opportunity we unlocked that we had to capitalize on extremely fast and i don't think that's what we have here i think pushing that flywheel harder and harder every day the right way to build this type of business uh which venture debt firm did you end up using uh we haven't done the venture date yet we're working on that at the moment talking to several funds well we raised the equity from active capital which is a c fund here in uh in central texas um but yeah we're looking at a few different options as far as the adventure debt goes and my goal is to kind of bake that into our 2019 plan like we don't we don't need the cash at the moment we have some good options there are you thinking you're gonna go well there's a big there are many different options and it can very confusing fast in terms of different venture debt offerings but some people will do a revenue-based financing which is they will only lend so much you know a multiple of your current mrr you know hercules might do 36 months timmy timia might do six months other people do other months and then there's actually like like royalty rate based financing which is they'll do whatever the loan is but then you pay it back as a percentage of revenue which route do you think you're going to end up going like the fixed kind of interest rate as a multiple of your revenue or paying back on a percentage of revenue on a multiple repayment cap yeah uh most likely the percentage of revenue route the uh from what i've seen you can get a better terms that way and it's it's actually easier to model and that it's easier to plug into the touchscreen operating model that i have which i already have it and basically the way it worked out it adds about two months to the payback period which is acceptable to accelerate to basically buy more customers than you otherwise could at a cost of two extra months of uh payback that i think is acceptable to me so i'm looking at that option i'm also getting terms from some of the silicon valley bank and those guys um uh i don't there's some caveats that come with those so basically we're evaluating those options right now those are very much more kind of term loans covenants warrant kind of structure yeah exactly all right bill let's wrap up with the famous five number one what's your favorite business book uh how to win friends and influence people number two is there a ceo you're following or studying right now preferably off kind of an under the radar one you know not not really i don't yeah i don't think that's okay no no no one there that's okay number three what's your favorite online tool for building your business uh man we're loving hubspot right now are you are you people are gonna be emailing me after this going wait where can we get a template for this new you know is you know zero touch operating model are you publishing more content about this anywhere uh follow me on medium i'll be posting it soon i'm working on that post good i would say that sounds like it could be the next version of jeffrey morris crossing the chasm but this is the more you know a different approach in bill babel's version yeah yeah the hard part is taking what we've done and making it a template that can be reused right now it's it's very specific to us yep number four how many hours of sleep are you getting every night i'm good at that i get i get eight hours of sleep and i've got two kids that get me up early so uh i've got the hardest thing in starting this business was trying to figure out how to schedule my life because everything was work but now now it's scheduled and i get eight hours married two kids eight hours of sleep and uh bill how old are you i'm 41. 41. last question what do you wish your 20 year old self knew i wish i knew about this touchdeer offering model i also realized i also wish that i realized yeah just just about anything's possible i got i think a lot of things seemed harder than they actually are back then guys there you have it he had a lot of success with the kind of a no touch high velocity model at webmail one of the first email folks even before gmail was uh in the game then he helped launch a thing called it's called capital factory here in austin texas they said you know what we need people we need an easy way when people enter the office at capitol factory to understand who to ping to to have them to come to the front to let them in thus pingboard was born he burned through about 2.5 million bucks of capital in the early days on a wrong business model now is really just focused on the software for smart org charts many people are calling it really the smartest software for org charts launched in 2014 23 people now here in austin serving about 1200 customers paying north of 220 bucks per month so right now doing about 264 grand per month in revenue that's up they crossed the 1 million mark in an ar mark in march 2017 crossed 2 million in january 2018 again crossing 3 million right now churning about 1.5 percent of their revenue per month but expansion covers that so zero percent on a net basis spending up to 12 months of uh of acv or or arpu on cac and he's really fundamentally trying to figure out how to make that model grow with the latest round of funding 7.5 million raised to date bill babel pingboard thank you for taking us to the top thanks that was a great summary