Privy Revenue, Valuation & Funding (2020)

hello everybody my guest today is ben jaboe he is the founder of privy.com a marketing automation platform used by over 250 000 marketers around the globe he's worked with companies like lisa hubbell contracts lifetime fitness the ellen show dr x and many more to rapidly accelerate e-commerce conversions and sales ben are you ready to take us to the top absolutely all right this is a hot space let's hear it what do you guys do and how do you make money yeah so we found that in the small midsize e-commerce market there was really a gap so much of those marketers are focused on driving traffic to the site and then on automatic you know nurturing campaigns after conversion but you know if 98 of the traffic's not converting that was the opportunity that we found to build a really easy to use quick time to value sas platform focused on converting more website traffic into leads and sales okay got it and what's the revenue model is it pure play sas or what um yeah it is so it you know we go to market through a freemium model um but you know it's basically premium sas subscription based on you know the level of features that you need uh in terms of targeting coupon integration uh and certainly we have some scaling metrics based on traffic to the site it's pure play sas though yes okay there's not like a there's not like a transaction fee on sales driven if your tools being used or things like that nope okay yeah great and pure sap and give me it before i i wanna learn more about your backstory here but before we do that i don't wanna go down every customer cohort but on average what would you say customers pay you per month yeah we have kind of two segments that we look at we have a fully self-serve funnel uh the average there is about 50 bucks a month okay and then we have kind of a product qualified inside sales driven effort that's growing that's about three hundred dollars a month okay it's a little variety there uh can you give me the revenue breakdown on those what percent is coming from self-serve what percent coming from the other one yeah so uh right now let's see it's about uh eighty percent of the business is self-serve we actually just brought on our first member of the sales team um about four months ago so uh ramping quickly um but already twenty percent of the mrrs coming from direct inside efforts and let's just keep going down that team path here for a second what's total team size today uh we're 20 today we'll be 30 by the end of the year breakdown is 11 on the engineering team uh a handful of customer support uh small marketing team of three and uh one sales person i can always tell who's listened to the show before you've listened haven't you yeah absolutely big fan all right good i'm glad you're enjoying it so okay 20 people right now and when did you launch the company um we launched this product we had a completely separate product that failed um but we launched this product in january 15. okay wait hold on i got it tell me the thing that failed what was it oh man we so it's a long story i'll make it short we were focusing on brick and mortar retail uh giving them kind of a a sas platform to help them track uh which of their kind of online audience was actually walking into their store with phones using offers so this online yeah super cool a bunch of techies got a kind of a groupon groupon-ish living social like about hard hard to do the attribution thing exactly and and just hard to sell into so how much how much money you think into that about two million dollars okay and how did you know like it's always hard because entrepreneurs we have to be optimistic so we always tell ourselves it'll get better next year let's keep pushing it takes balls to say you know what we put two million in we have to shut this thing down and move on what prompted you to be able to do that that's that's very i mean self-aware that's really nice of you to say unless your bank account was at zero that makes it easy right no we we were we kind of had a suspicion that this was going to be a slog so we had two m a offers on the table um more like aquahire type situations so we decided to pursue those um and then we were kind of right on the finish line with one of them and and it fell apart um so you know the bank account was basically zero we had about a thousand dollars in the account yeah and the deal fell apart so we were really forced to say are we shutting down what was revenue by the way at that time uh it was maybe 150 000 a year yeah okay all right good okay so then the pivot right so uh obviously you pivot to what you're doing today privy um that was in you said 2016. did you keep the same cap table or did you restart totally uh we actually kept the entire you know the cap table as is okay so do you have investors and if so how much have you raised across both companies across both efforts uh we've raised four million to date okay yeah because just to be clear people that put in money back and like before 2015 they're still on your cap table right yeah yeah yeah does does that ever eat you up inside you're going oh man they bet on me for like a whole different idea and like i could own like 100 of this company if i just started from scratch but like you know obviously you want to do good by your investors how do you manage that in your head yeah i mean we were like the structure of our rounds has been very much seed and angel focused so a lot of the people that came in originally were the people that came back in uh the second time around um some of those are you know very close friends some of them are just awesome hugely supportive investors um and they've been relatively hands-off so you know at the end of the day yeah i have had some of those thoughts but um you know at the core you know it's still the same brand it's still the same kind of handful of people that take place exactly all right and then uh what are you today in terms of total customers um paying customers yeah we're about to cross five thousand oh great okay good yeah yeah i can tell you're reading off a sheet what other data you have for me um so uh what do you what do you want to know what does it say you have it there i might as well just let you say whatever you have in front of you and then if i have here if i'm curious about something else i'll ask it yeah so we have over 100 000 active users about 5 000 of those are paying customers um and today we're at 3.1 million arr yeah i was gonna say at a minimum 5 000 times that 50 price point obviously puts you at about 3 million in ar but i know you have some of those on the on the new plan which is 300 ish exactly where were you a year ago uh a year ago [Music] uh 1.3 million ar in june okay so call it what is that about a hundred grand ish something like that and monthly so you've more than doubled you every year yeah exactly yep that's great i mean look that's healthy growth where's most of growth coming from um i mean honestly we do we do a lot of integrations with kind of different storefront platforms like shopify uh wix weebly you name it and then on the esp side as well we really sit between those two core uh things in the stack so we integrate there's a clear value prop and then you know we work on bd for distribution um with each of those partners so most of it comes through this marketplace freemium distribution model that we have i bet i'm going to ask you to pick a baby which of these channels drives you the most new customers shopify right not you didn't even hesitate i mean for sure you know that it's kind of like a rocket ship over there and we we're the number one app in that ecosystem for what category like what search term uh we're the number one app in marketing uh but i think we're also like the number two app in the entire app store um depending on the day so that drives a ton of demand um it's taking a lot of hard work to to figure that out and to get there but um a great product that adds value quickly even for free users is kind of at the forefront of that oh yeah i'm looking at this now so if you have 15 478 reviews on shopify that doesn't happen by accident you've done something on your onboarding flows or something that says hey don't forget to rate us on shopify walk me through what that process is like yeah for sure so we do onboarding you know you owe off your shopify or weebly account or any one of those we walk you through setting up your first campaign and then you know because it's a free product uh after a series of kind of onboarding steps you'll be prompted to say hey if you know if you're seeing value out of this product and you like our support we'd appreciate a review um and you don't have to do that it's not required but we certainly see a lot of people doing that i okay i want i want to make sure though i capture all your genius here because you've done something with the verbiage on that ask where a significant portion people have actually went and left the review you're making people feel guilty or there's some incentive what care and what stuff like what is the actual verbage there do you know um or is it really just you just threw something up and it works it's it's you're not allowed to actually incentivize reviews so we i think a lot of like other vendors in the ecosystem kind of try to see what we're doing there that's special but there's no there's no silver bullet i mean the reality is we have a team of live chat support reps that support even our free users um do you ask at the end of each of each support chat hey if you enjoyed it go leave a review nope okay just purely in some of the onboarding emails based on success metrics but we've never like a b tested it we've put way less of a focus on that than making sure that merchants are successful all right well look matt russell optimized everything at t sheets to be number one in the intuit app exchange grew to about you know 30 million in ar then flipped it for about 10x to brad a couple months ago there is definitely an exit strategy when you can basically you know monopolize a distribution channel in somebody else's app store so the begs the question why haven't you sold a shopify for like 25 million bucks i mean we're super stoked honestly like we see a very clear path from four to eight to ten next year you know we're doing a lot around platform expansion on our end um you know because of our position and that app stores and others there's a ton of sites that are actually adopting privy even before they have anything like mailchimp in place uh so we're rolling out some additional use cases and automation there like we're we're really not thinking about selling the business at this point obviously we dream of that someday but when you have your eyes set on kind of the next big milestone and you know exactly how to get there you have the money to do it and the team you know why would you kind of get distracted with anything else and just be clear too the reason you mentioned mailchimp you're essentially you're essentially like life cycle related emails for e-commerce brands correct um that's not our our roots are really just sitting on top of your site and helping you convert people through like exit intent offers okay um but we have found that because of our position and the brand and the support a lot of these sites are adopting privy before they have something like that in place so we are rolling out some of those simple uh use cases that you would need around e-commerce automation like uh abandoned card emails post-purchase emails win back stuff like that that is just kind of what a small e-commerce merchant needs all-in-one friendly you know greatly supported interface well i'm curious how you manage the leverage that they have over you or you have over them and let me be specific what i mean by that because it is a very real thing so if you look at salesforce for a second serious insights brandon bruce came on the show and said our number one channel by far are the leads we're getting from salesforce they were number one in the app exchange they didn't want to sell to salesforce so salesforce wouldn't bought related iq related iq is now number one because it's owned by salesforce and guess who's not in the app store at all anymore cirrus insights right so how do you balance this very delicate game you're playing for example let's assume shopify decides that wants to get in this space you don't want to sell how do you manage the potential repercussions of that should they buy somebody else yeah i mean look we're always open to the conversation very there he is but the reality is there's already a lot of players in the shopify ecosystem right and even in examples where they don't own any though right uh not any of our competitors or potential competitors but we have seen that in the past shopify has made some acquisitions around other categories um and certainly you know they put some more emphasis behind marketing that uh versus some of the others but they're they're not like ripping out uh in the same way that we've seen that happen and inside other kind of platform plays um but look i mean shopify is is one of our best channels it's not the only channel um and so part of it for this year is going deeper within that ecosystem but also expanding into other ecosystems where we're adding a lot of value that are also growing quickly yup no i remember kids i had the kit guys on my show and then before i know it three months later after they come on the show and share all their numbers shopify is acquiring them and now i see them even you know prominently placed at the top of the marketing ecosystem in their app store even though they only have 948 reviews and there's many below them that have thousands and thousands of reviews for maybe you could argue the same-ish thing so there's definitely a premium placement thing but they do a good job at labeling made by shopify yeah for sure interesting okay very great company by the way that i i totally agree with you um talk to me real quick about churn what's your turn today and how do you manage it yeah so obviously within the long tail of smb we've got challenges around sites going out of business today at a gross level we're kind of around uh between three and four uh but as we've expanded return revenue revenue mrr got a gross revenue on a net basis it's actually trending trending close to negative zero negative with some of the upsell stuff we have going on and expansion through uh the platform expansion so if you extrapolate your your today's numbers and you looked at forward-looking net revenue retention are you above 100 um yes that's great that's great and where is most the expansion happening is it just not like number of site visits number of skus number of emails collected yeah so um for one kind of the mid-market level site traffic is a big lever for us um our self-serve plan caps out at uh 250 000 visits per month so if you're kind of approaching that or above then you'll hear from a member of our team certainly as we roll out more on the the email side and the automation side uh a contact-based uh lever as well is being introduced i can imagine people watching this on youtube are gonna want me to ask us are you standing in your shower right now no we have like these little phone booths in our office and they have little curtains on them very it's a curtain made it look like you like i was on like the soap part of the shower the computer resting looking at me hey guys that's hilarious there you guys go so if you're just a phone booth okay last few economics questions here cac what are you paying to acquire these things um so we actually don't do any paid marketing okay um so you know uh based on the channel it kind of depends obviously if if it's an inside sales person here reaching out to one of our users there's cost there um yeah give me like fully weighted uh cost to acquire yeah fully weighted though like ignore if you don't spend anything on digital you obviously have a team focused on sales or maybe content team etc um i we actually don't even look at it right okay yeah okay so it's you're growing you're you just know it's it's so obvious it's working you don't measure it actively yes in terms of now that we're growing an inside sales team we look at that a little bit differently in terms of how long to pay back yeah um and we're seeing you know between two and three months basically oh i mean well that's still extremely good i mean a lot of sas companies are you know 12 14 months yeah i mean our our sales cycles are short because these are product qualified users they already trust the brand and we're kind of educating and expanding um so it's a it's a highly transactional process yeah i mean look if you've got you're spending you know two or three months of of of kind of revenue on acquisition and they're paying 50 bucks a month i mean you're talking 150 bucks to acquire a customer worst case yeah yeah interesting um uh you said your team's 20 where's everyone based we're all here in boston oh great which part like cambridge area or downtown or what ah downtown you like yvonne's yeah that's a good spot i freaking my freaking go-to man oh really the way that the way they brought that bar down from new york i mean just it's just like oh gorgeous oh i didn't know it was in new york yeah that bar that they've got in yvonne's they shipped that thing down and stored it until they got the lease there on milk street oh wow yeah yeah expensive but worth it yeah we're right right around the corner pretty much very good all right ben let's wrap up hero with the famous five number one what's your favorite business book ooh uh hug your haters jay bear number two is there a ceo you're following are studying right now toby luke shopify yep uh number three and you swear you're not an acquisition talks with him right now i swear he doesn't even know who we are all right number number three i don't believe that number three what's your favorite online tool for building your business besides your own oh good question um intercom number four how many hours of sleep to get every night seven okay it's good and what's your situation married single kiddos married with an awesome wife and uh two-year-old daughter oh wow okay so one kid oh and how are you ben uh 32 32. last question what do you wish your 20 year old self knew ooh stop uh focusing on trying to raise money spend more time with your customers guys there you have it stop spending time raising money the best investors are your customers spend time with them launch the company after a pivot really in 2015 really focused on helping e-commerce friends build their email list and then once obviously they're helping you manage all these emails and these leads they're doing a lot of life cycle email related things today ranked very high in the app store at shopify that's a core strategy of theirs across many other partners as well they now have over 5 000 paying customers paying a minimum of 50 bucks a month so 250 grand in monthly recurring revenue that's up more than double year over year they're doing about 100 grand per month back in june 2017. four million raised three percent gross revenue churn uh per month they're above uh 100 net revenue retention annually today with about a hundred dollar cac two to three month payback and that's just that's only on select cases where they're actually spending money growing their team of 20 is all based up there in boston ben thank you for taking us to the top yeah thanks nathan really appreciate it