How Privy Grew from $1.3M to $3.1M ARR with App Exchange Distribution (Interview with Founder Ben Jabbawy)

Introduction and What Privy Does

Nathan Latka

00:01Hello, everybody. My guest today is Ben Jabbawy. 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 Leesa, Hubble Contacts, Life Time Fitness, The Ellen Show, Dr. Axe, and many more to rapidly accelerate ecommerce conversions and sales. Ben, are you ready to take us to the top?

Ben Jabbawy

00:21Absolutely. Thanks

Nathan Latka

00:21This

Ben Jabbawy

00:21for having

Nathan Latka

00:23is a hot space.

00:24Let's hear it. What do you guys do and how do you make money?

Ben Jabbawy

00:26Yeah. So we found that in the small and midsize ecommerce 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 SaaS platform focused on converting more website traffic into leads and sales.

Revenue Model and Freemium SaaS

Nathan Latka

00:58Okay. Got it. And what's the revenue model? Is it pure play SaaS or what?

Ben Jabbawy

01:02Yeah. It is. So it... You know, we go to market through a freemium model, but it's basically premium SaaS subscription based on the level of features that you need in terms of targeting, coupon integration. And certainly we have some scaling metrics based on traffic to the site.

Nathan Latka

01:20It's pure play SaaS though.

Ben Jabbawy

01:23Yes.

Nathan Latka

01:24Okay. There's not like a transaction fee on sales driven if your tool is being used or things like that?

Ben Jabbawy

01:30Nope.

Nathan Latka

01:31Okay. Yeah. Great.

Ben Jabbawy

01:31Pure SaaS.

Customer Segments and Average Pricing

Nathan Latka

01:32And give me a... 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?

Ben Jabbawy

01:40Yeah. We have kind of two segments that we look at. We have a fully self serve funnel. The average there is about $50 a month.

Nathan Latka

01:40Okay.

Ben Jabbawy

01:40And then we have kind of a product qualified inside sales driven effort that's growing. That's about $300 a month.

Revenue Split and Sales Team Growth

Nathan Latka

01:54Okay. Good. So a little variety there. Can you give me the revenue breakdown on those? What percent is coming from self serve? What percent coming from the other one?

Ben Jabbawy

02:01Yeah. So right now, let's see. It's about 80% of the business is self serve. We actually just brought on our first member of the sales team about four months ago. So ramping quickly, but already 20% of MRR is coming from direct inside efforts.

Team Size and Composition

Nathan Latka

02:21And let's just keep going down that team path here for a second. What's total team size today?

Ben Jabbawy

02:25We're 20 today. We'll be 30 by the end of the year. Breakdown is 11 on the engineering team, a handful of customer support, small marketing team of three, and one salesperson by

Nathan Latka

02:38I drawing can always tell who's listened to the show before. You've listened, haven't you?

Ben Jabbawy

02:42Yeah. Absolutely. I was a big fan.

Nathan Latka

02:44Alright. Good. I'm glad you're enjoying it. So, okay, 20 people right now. And when did you launch the company?

The Failed First Product and Pivot

Ben Jabbawy

02:49We launched this product. We had a completely separate product that failed, but we launched this product in January 2015.

Nathan Latka

02:56Okay. Wait. Hold on. I gotta... Tell me the thing that failed. What was it?

Ben Jabbawy

02:59Oh, man. We... So it's a long story. I'll make it short. We were focusing on brick and mortar retail, giving them kind of a a SaaS platform to help them track which of their kind of online audience was actually walking into their store with phones using offers. So this online...

Nathan Latka

02:59Yeah. Super cool. A bunch of techies get excited

03:21about LivingSocial, like, about hard to hard to do the attribution thing.

Ben Jabbawy

03:25Exactly. And and just hard to sell into.

Nathan Latka

03:28So how much how much money do you think into that?

Ben Jabbawy

03:31About $2,000,000.

Nathan Latka

03:33Okay. 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 2,000,000 and 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.

Ben Jabbawy

03:49That's really nice of you to say.

Nathan Latka

03:51Unless your bank account was at zero. That makes it easy. Right?

Ben Jabbawy

03:54No. We we were... We kind of had a suspicion that this was gonna be a slog. So we had two M&A offers on the table, more like acquihire type situations. So we decided to pursue those. And then we were kind of right on the finish line with one of them, and and it fell apart.

04:15So, you know, the bank account was basically zero. We had about a thousand dollars in the account.

Nathan Latka

04:15Yep.

Ben Jabbawy

04:15And the deal fell apart. So we were really forced to say, are we shutting

04:23down the

Nathan Latka

04:23by the way at that time?

Ben Jabbawy

04:28It was maybe 150,000.

Nathan Latka

04:30A year?

Ben Jabbawy

04:33Yeah.

Nathan Latka

04:34Okay. Alright. Good. Okay. So then the pivot. Right? So obviously, you pivot to to what you're doing today, Privy. That was in, you said, 2016. Did you keep the same cap table, or did you restart totally?

Ben Jabbawy

04:44We actually kept the entire, you know, the cap table as is.

Nathan Latka

04:48Okay. So do you have investors? And if so, how much have you raised across both companies?

Ben Jabbawy

04:51Across both efforts, we've raised 4,000,000 to date.

Nathan Latka

04:55Okay. Yeah. Because just to be clear, people that put in money back in... But, 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, a 100% of this company if I just started from scratch. But, like, you know, obviously, you wanna do good by your investors. Do

05:13you... How do you manage that in your head?

Ben Jabbawy

05:15Yeah. 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 the second time around. Some of those are very close friends. Some of them are just awesome, hugely supportive investors, 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,

05:42you know, at the core, you know, it's still the same brand. It's still the same kind of handful of people that

Nathan Latka

05:42Still you know? Place.

Ben Jabbawy

05:42Exactly.

Current ARR and Paying Customers

Nathan Latka

05:49Alright. And then what do you have today in terms of total customers?

Ben Jabbawy

05:53Paying customers, we're about to cross 5,000.

Nathan Latka

05:57Oh, great. Okay. Good. Yeah. You're... I can tell you're reading off a sheet. What other data you have for me?

Ben Jabbawy

06:03So what do you what do you wanna know?

Nathan Latka

06:06I was gonna say you you have it there. I might as just let you say whatever you have in front of you. And then if I have... If I'm curious about something else, I'll ask it.

Ben Jabbawy

06:12Yeah. So we have over a 100,000 active users. About 5,000 of those are paying customers. And today we're at 3,100,000 ARR.

Nathan Latka

06:22Yeah. I was gonna say at a minimum 5,000 times that $50 price point obviously puts you at about 3,000,000 in ARR, but I know you have some of those on the new plan, is 300 ish.

Year-Over-Year Revenue Growth

Ben Jabbawy

06:31Exactly.

Nathan Latka

06:31Where were you a year ago?

Ben Jabbawy

06:34A year ago,

06:371,300,000 ARR in June.

Nathan Latka

06:40Okay. So call it... What is that? About $100,000 ish, something like that in in monthly. So you've more than doubled year over year.

Ben Jabbawy

06:45Yeah. Exactly.

Nathan Latka

06:47Yep. That's great. I mean, look, that's healthy growth. Where's most of the growth coming from?

06:53The...

Ben Jabbawy

06:53I mean, honestly, we do we do a lot of integrations with kinda different storefront platforms like Shopify, Wix, Weebly, you name it. And then on the ESP side as well, we really sit between those two core things in the stack. So we integrate. There's a clear value prop, and then, you know, we work on BD for distribution with with each of those partners. So most of it comes through this marketplace freemium distribution model that we have.

Shopify App Store as Primary Growth Channel

Nathan Latka

07:19Alright. Ben, I'm gonna ask you to pick a baby. Which of these channels drives you the most new customers?

Ben Jabbawy

07:24Shopify.

Nathan Latka

07:25Right. Not... You didn't even hesitate.

Ben Jabbawy

07:27I mean, for sure, you know, that... It's kind of like a rocket ship over there, and we've... We're the number one app in that ecosystem, which is a high...

Nathan Latka

07:35For what category? Like, what search term?

Ben Jabbawy

07:38We're the number one app in marketing, but I think we're also, like, the number two app in the entire App Store, depending on the day. So that drives a a ton of demand. It's taken a lot of hard work to to figure that out and to get there, but a great product that adds value quickly even for free users is kind of at the forefront of that.

Nathan Latka

07:59Oh, 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.

Ben Jabbawy

08:13Yeah. For sure. So we do onboarding. You know, you OAuth 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, 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. And you don't have to do

08:38that. It's not required, but we certainly see a lot of people doing that.

Nathan Latka

08:42I... Okay. I wanna I wanna make sure, though, I capture all your genius here because you've done something with the verbiage on that ask where a a significant portion of 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 verbiage there? Do you know? Or is it really just you just threw something up and it works?

Ben Jabbawy

09:01It'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.

Nathan Latka

09:20Do you ask at the end of each of each support chat, hey, if you enjoyed it, go leave a review?

Ben Jabbawy

09:24Nope.

Nathan Latka

09:25Okay.

Ben Jabbawy

09:25Just purely in some of the onboarding emails based on success metrics. But we've never like AB tested it. We've put way less of a focus on that than making sure that merchants are successful.

Nathan Latka

09:36Alright. Well, look, Matt Russell optimized everything at TSheets to be number one in the Intuit AppExchange, grew to about, you know, 30,000,000 in ARR, then flipped it for about 10 x to Brad a couple months ago. There is definitely an exit strategy when you can basically, you know, monopolize a distribution channel on somebody else's app store. So the beg... Begs the question, why haven't you sold to Shopify for, like, $25,000,000?

Ben Jabbawy

09:55I mean, we're super stoked, honestly. Like, we see a very clear path from four to eight to 10 next year. You know, we're doing a lot around platform expansion on our end. You know, because of our position in 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. So we're rolling out some additional use cases and automation there. Like, we're we're really not

10:23thinking 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?

Nathan Latka

10:38Yeah. And just to be clear too, the reason you mentioned Mailchimp, you're essentially you're essentially like life cycle related emails for ecommerce brands. Correct?

Ben Jabbawy

10:46That's not our... Our roots are really just sitting on top of your site and helping you convert people through, like, exit intent offers.

Nathan Latka

10:52Okay.

Ben Jabbawy

10:53But 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, use cases that you would need around ecommerce automation, like, abandoned cart emails, post purchase emails, win back, stuff like that. That is just kind of what a small ecommerce merchant needs all in one friendly, you know, greatly supported

11:19interface.

Nathan Latka

11:20Well, 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, Cirrus Insight, Brand and 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 AppExchange. They didn't want to sell

11:37to Salesforce. So Salesforce went and bought RelateIQ. RelateIQ is now number one because it's owned by Salesforce. And guess who's not in the App Store at all anymore? Cirrus Insight. Right? So how do you balance this very delicate game you're playing? For example, let's assume Shopify decides it wants to get in this space. You don't wanna sell. How do you manage the potential repercussions of that? Should they buy somebody else?

Ben Jabbawy

11:58Yeah. I mean, look, we're always open to the conversation.

Nathan Latka

12:03There he is.

Ben Jabbawy

12:07But the reality is there's already a lot of players in the Shopify ecosystem, right? And even in examples where-

Nathan Latka

12:07They don't own any though, right?

Ben Jabbawy

12:07Not any of our competitors or potential competitors. We have seen that in the past, has made some acquisitions around other categories. And certainly, you know, they put some more emphasis behind marketing that versus some of the others, but they're not like ripping out in the same way that we've seen that happen

12:38inside other kind of platform plays. But look, I mean, is is one of our best channels. It's not the only channel. 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.

Nathan Latka

12:57Yep. No, I remember 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 prominently placed at the top of a marketing ecosystem in their apps, even though they only have nine forty eight reviews and there's many below them that have thousands and thousands of reviews for maybe you could argue the

13:14same ish thing. So there's definitely a premium placement thing, but they do a good job at labeling made by Shopify.

Ben Jabbawy

13:19Yeah, for sure.

Nathan Latka

13:20Interesting. Okay, Gary.

Ben Jabbawy

13:21It's a great company by the way.

Churn and Net Revenue Retention

Nathan Latka

13:22I totally agree with you. Talk to me real quick about churn. What's your churn today and how do you manage it?

Ben Jabbawy

13:28Yeah, 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 between three and four. But as we've expanded...

Nathan Latka

13:28That's what

13:42we're trying to revenue.

Ben Jabbawy

13:43Revenue, MRR.

Nathan Latka

13:45Got it. Gross revenue.

Ben Jabbawy

13:46On a net basis, it's actually trending close to negative, zero negative with some of the upsell stuff we have going on and expansion through the platform expansion.

Nathan Latka

13:58So if you extrapolate your your today's numbers and you looked at forward looking net revenue retention, are you above a 100%?

Ben Jabbawy

14:06Yes.

Nathan Latka

14:07That's great. That's great. And where is most of the expansion happening? Is it just not like number of site visits, number of SKUs, number of emails collected?

Ben Jabbawy

14:14Yeah. So for one, at kind of the mid market level, site traffic is a big lever for us. Our self serve plan caps out at 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, a contact base lever as well is being introduced.

Nathan Latka

14:39I can imagine people watching this on YouTube are are gonna want me to ask, are you standing in your shower right now?

Ben Jabbawy

14:44No. We have, like, these little phone booths in our office, and they have little curtains on them.

Nathan Latka

14:52Kurt made it look like you... Like I was on like the soap part of the shower, the computer resting, looking up... Hey, good. See...

Ben Jabbawy

14:58That's hilarious.

CAC and Payback Period

Nathan Latka

14:59There you guys go. Here... A phone booth. I was like, just a phone booth. Okay. Last few economics questions here. CAC, what are you paying to acquire these things?

Ben Jabbawy

15:06So we actually don't do any paid marketing.

Nathan Latka

15:08Okay.

Ben Jabbawy

15:09So, you know, 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.

Nathan Latka

15:19Yeah. Give me like fully weighted.

Ben Jabbawy

15:23Cost to acquire?

Nathan Latka

15:24Yeah. 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, etcetera.

Ben Jabbawy

15:32I... We actually don't even look at it, frankly. Yeah.

Nathan Latka

15:35Okay. So it's... You're you're grow... You're... You just know it's it's so obvious it's working. You don't measure it actively.

Ben Jabbawy

15:41Yes. In terms of of CAC. 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.

Nathan Latka

15:41Yep.

Ben Jabbawy

15:41And we're seeing, you know, between two and three months, basically.

Nathan Latka

15:52Oh, that may... Well, that's still extremely good. I mean, a lot of SaaS companies are, you know, twelve, fourteen months.

Ben Jabbawy

15:58Yeah. 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. So it's a it's a highly transactional process.

Nathan Latka

16:10Yeah. That mean that... Look. If you got... You're spending, you know, two or three months of of of kind of revenue on acquisition and they're paying $50 a month, mean, you're talking 100, $150 to acquire a customer, worst case.

Office Location and Team in Boston

Ben Jabbawy

16:21Yeah.

Nathan Latka

16:21Yeah. Interesting. You said your team's 20. Where's everyone based?

Ben Jabbawy

16:25We're all here in Boston.

Nathan Latka

16:27Oh, great. Which part? Like Cambridge area or downtown or what?

Ben Jabbawy

16:30No. Downtown.

Nathan Latka

16:31You like Yvonne's?

Ben Jabbawy

16:33Yeah. That's a good spot.

Nathan Latka

16:34My freaking my freaking go to, man.

Ben Jabbawy

16:34Oh, really?

Nathan Latka

16:34The way they the way they brought that bar down from New York, I mean, just... It's just, like, oh, gorgeous.

Ben Jabbawy

16:42Oh, I didn't know it was in New York.

Nathan Latka

16:44Yeah. 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.

Ben Jabbawy

16:50Oh, wow. Yeah.

Nathan Latka

16:52Yeah. Expensive, but worth it.

Ben Jabbawy

16:55Yeah. We're right right around the corner pretty much.

Famous Five Rapid Fire Questions

Nathan Latka

16:57Very good. All right, Ben, let's wrap up here with the famous five. Number one, what's your favorite business book?

Ben Jabbawy

17:01Oh, Hug Your Haters, Jay Baer.

Nathan Latka

17:04Number two, is there a CEO you're following or studying right now?

Ben Jabbawy

17:08Tobi Lütke, Shopify.

Nathan Latka

17:10Yep.

17:11Number three. And you swear you're not in acquisition talks with them right now?

Ben Jabbawy

17:15Swear. He doesn't even know who we are.

Nathan Latka

17:17Alright. Number number three.

17:18I don't believe that.

17:19Number three. What's your favorite online tool for building your business besides your own?

Ben Jabbawy

17:23Oh, question.

17:27Intercom.

Nathan Latka

17:28Number four, how many hours of sleep do get every night?

Ben Jabbawy

17:32Seven.

Nathan Latka

17:33Okay, that's good. And what's your situation? Married, single, kiddos?

Ben Jabbawy

17:37Married with an awesome wife and a two year old daughter.

Nathan Latka

17:41Oh wow, okay. So one kiddo. And how old are you then?

Ben Jabbawy

17:4432.

Nathan Latka

17:4532. Last question.

17:46What do you wish your 20 year old self knew?

Ben Jabbawy

17:49Oh, stop focusing on trying to raise money and spend more time with your customers.

Nathan Latka

17:57Guys, there you have it. Stop spending time raising money. The best investors are your customers. Spend time with them. Launched the company after a pivot really in 2015, really focused on helping ecommerce brands build their email list. Then once obviously they're helping you manage all these emails and these leads, they're doing a lot of life cycle emailing related things today ranked very high in the app store at Shopify. That's a core strategy of theirs across

18:17many other partners as well. They now have over 5,000 paying customers paying a minimum of $50 a month. $250,000 in monthly recurring revenue. That's up more than double year over year. They're doing about $100,000 per month back in June 2017. 4,000,000 raise, 3% gross revenue churn per month. They're above a 100% net revenue retention annually today with about a $100 CAC, two to three month payback. And that's just, that's only on select cases where they're actually

18:43spending money growing. Their team of 20 is all based up there in Boston. Ben, thank you for taking us to the top.

Ben Jabbawy

18:49Yeah. Thanks, Nathan. Really appreciate it.