Radius Revenue, Valuation & Funding (2016)

[00:01] Hello everyone. My guest today is Joel Carroussone. He's the CEO of a company called Radius, the first B2B enterprise customer data platform. Joel holds a wealth of knowledge on and a passion for the CDP space and was one of the original architects of Radius Unify, the first ever fully flexible B2B CDP bringing the new solution to market. Joel, are you ready to take us to the top? [00:20] >> I'm ready. [00:21] All right. So first off, help us be really prescriptive here and kind of the definition of how you define B2B enterprise customer data platform. What's that mean? [00:30] >> For sure. Yeah. I mean, I think CDPs have been around for quite a while now. It's more synonymous with the the business consumer side. About a year or so ago, I mean, Radius has been in the I would say the b to b customer data space for a number of years before CDPs got hot on the B2B side. At the end of the day, we're doing is we're taking through either native integrations or through an open [00:52] >> API that we have available, ingesting, merging, matching, normalizing customer data, whether it's from first party systems like CRM or marketing automation, or third party systems that they're buying data from, say, Dun and Bradstreet or InfoGroup or some of other major players, and basically leveraging our infrastructure to create that single source of truth or that single customer view with the idea that you can then pump that that that kind of single source of truth out across the [01:21] >> organization. So it's not just for marketing, but it'd be for marketing and sales and ops and even in IT for data, you know, analysis or or data science. [01:31] So help me understand. Single source of truth is an interesting concept in the data space. And the reason I say that is because when I talk to so many of these providers ranging from small sub 10,000,000 AR players all the way up to $102,100,000,000 dollar range. It's very incestual, kind of everyone buys everybody else's data, and it's hard to understand who truly has a moat around the dataset. So when you're capturing this data, is it unique [01:53] data that nobody else can get ahold of? [01:56] >> Yes. Our model is it's based on two different kind of two different approaches. So one is we do have our own core data assets. So Radeus has its own proprietary b to b dataset. Domestic only today, we cover approximately 18,000,000 businesses in The US and somewhere in the neighborhood of 25 to 30,000,000 contacts. We've got partnerships. We just announced a big partnership. We're doing some co selling with the folks over at Dun and Bradstreet, so the [02:21] >> D and B global file is part of our ecosystem as well. But the nice thing about our model is that it is somewhat of a consortium. So clients that are working with us, the, you know, enterprise clients, we do have some ability to leverage the data that their sales and marketing teams are generating as part of their to do data validation, standardization, even in even in some cases suppression. So it is a crowdsourced type model. We're [02:49] >> not doing enrichment on it, but it's more from validation and norm and suppression. But it's leveraging, you know, our customer base, Comcast, Sam's Club, First Data, you know, large large enterprise clients with large sales teams and large marketing teams. So they're generating a lot of exhaust data as part of just normal business processes. So that's our moat, at least the way that we've defined it today is that that network contribution side of the business. [03:13] So Joel, how might how might exhaust data or we'll call it sawdust at the sawmill from First Data influence the value that customers like Infusionsoft get from Radius? [03:24] >> Yeah. For sure. So I think the the usually the use case that I go through pretty quickly is, let's assume that you've got, you know, an Eloqua or a Marketo Winston, so it's got 10,000,000 contact records in it. You know, you can leverage, you know, there's a lot of email validation providers, but there's a subset of emails that are just not verifiable. Right? The the email admins go out of their way to make it very difficult [03:43] >> to to be able to test those. But you can imagine when you have a large number of customers that are all marketing to, you know, different populations, you're going to get some overlap. So what we're seeing is, you know, an email campaign that may go out by Comcast. There's gonna be a population of those that are open. There's gonna be a population that bounce. Within thirty minutes of that bounce happening, it's available for our purview, and [04:06] >> then we can go look across the customer base and say, who else has this email address? It's bounced. Let's go and actually scrub [04:11] it. Interesting. [04:12] >> So you can leverage that type of exhaust. And it works not just for emails, but for phones. We help on the ranking logic because you've got, you know, n number of sources that are available within our ecosystem, as well as what the client's bringing on board, you know, being able to choose the right revenue, choose the right head count for that client, that exhaust data becomes extremely valuable. If their salesperson is putting in the head count [04:35] >> of the revenue, you know, we have potentially can make some more assumptions on the machine learning side that that number may be better accuracy than something that you got from six months ago. [04:44] It looks like you guys are serving a pretty wide cohort of customers, Joel. But if I forced you kind of into an average just so we can focus the discussion, what would you say the average company would pay per year for this kind of dataset? [04:55] >> So we do sell into three different tiers. So we've got a mid market offering. It's typically in the, you know, the 50 to 60,000 range. Annually? Annually. That's correct. Yeah. It's a SaaS product. We don't charge for data. So when you purchase our platform as part of that, you get unlimited access to our standard data offering. So that 17,000,000 business dataset is just it's kind of a free a freebie that we give away as part of [05:19] >> the relationship. The second group are gonna be the the enterprise clients, some somebody within say 750 employees or less. That one, you know, get into the, you know, the 100 to 200,000 range. And then we have some that are, you know, that exceed the $2,000,000 ACV. [05:36] Yep. That's great. And is there any cohort that you have concentrations in or it's really fairly equal? [05:42] >> Yeah. I would say the bulk I think 80% of our revenue comes from our top 20 customers. So it's fairly well concentrated. They're large strategic deals, multiyear in most cases. And then we have a, you know, a decent volume in that mid market mid market 500 to seven fifty range. [05:59] Yep. Fair enough. Put this all on a timeline for us. When did you guys launch the company and help me understand your involvement? Were you one of the early founders or you were kind of leading product at the beginning and now you're CEO? How's that all work? [06:09] >> Yeah. It's it's been an interesting journey. I joined the company about three years ago on the product side. My background was in more on the on the data space. So I came out of healthcare data, enterprise data management for one of the Boston hospitals. So I was actually more interested in some of the data challenges as opposed to just like the marketing and sales aspect of what we do at Radius. So I joined the company three [06:30] >> years ago on the product side, was VP of platform for a number of years, and then moved into a CTO role almost a year ago now. And then over the last year or so, Darien and I, who founded the company, have been talking about, you know, what it would potentially look like for his transition. He was looking to move more out of the operational side of the business. He's now moved into chairman of the board as [06:54] >> of the last couple of weeks when I transitioned into the CEO role. [06:57] Mhmm. Okay. And company was founded in 2012? [07:00] >> Company was founded in 2012. Yeah. The company was there's two. There was an initial company that was more of a data provider called Fwix, and then that was that after one of the, I think, the series a, they they rebranded as Radius, and that's kind of the path that would've on since. [07:14] And total capital into the company today, how much have you guys raised? [07:16] >> About 100,000,000. [07:17] K. 100,000,000. All equity or is that some of that debt? [07:20] >> So some of it was debt, but vast majority of it was equity. [07:24] Okay. Were you there when the decision was made to use some debt? [07:28] >> I was not actually. So that happened [07:32] >> trying to think. I was at the company, but at that point, I wasn't involved with any of the fundraising. [07:36] Got it. And I was gonna ask strategically why that didn't or didn't make sense, but we'll skip that for now and focus on things that you might be closer to. So, okay, good. So you joined about, call it, three years ago. And what have you guys scaled to today in terms of total customers using the platform? [07:50] >> So there's around a 100 customers today. As I said, the bulk of the revenue comes from the top 20 logos. [07:56] Yep. Yeah. So a 100 customers. Yes. So this is very much kind of, obviously, you know, high touch, high ARPU kind of accounts. What's your team breakdown today? And what does the sales organization look like? [08:06] >> Yeah. So the team, the company is around 75 employees right now. Sales is around 20. Yep. That's broken down. We've got a sales leader, there's three RVPs that cover different territories. They've each got, you know, a handful of people, this is a total sort of size around 20. Engineering is 23 today, combination of folks that work on either data engineering, data science, and then we have our platform team that are writing the APIs and some of [08:31] >> the the micro services as part of that. [08:33] And where's everyone based? All San Fran? [08:36] >> Yeah. [08:38] >> All of engineering product is based out of San Francisco. Sales is we've got some folks in the West Coast, but majority of them are just based on where they're what the regions that they're covering. Okay. So some in East Coast, New York, New Jersey, and some in Midwest as well. [08:49] Yeah. That's great. Help me understand. And, again, I'm sure this is different across each of your cohorts. If we just look at a macro level net revenue retention each year when you factor in that gross revenue churn plus add back expansion, I assume you guys are probably north of a 100%. How far north of a 100? [09:08] >> So in term without getting into specifics, north of 100. [09:13] Okay. Yeah. Can we put a can we put a cap on and say between a hundred and one fifty? Is that fair? [09:19] >> That would be close. [09:21] Okay. Got it. Fair enough. [09:21] >> A little of upside. [09:23] Got it. Okay. Good. Well, we'll say north of 150, then I won't push you any I won't push you any harder there. Sorry. Sorry about that. Where their valuable lesson here, though, is how you think about driving expansion revenue. Typically, there's very well defined pricing axes and that gives your sales team a lot of leverage. What are those axes for you? [09:41] >> So I think there's a few things that come into play on our side. So one is obviously the size of the brand. Large logos, we typically there is a value based pricing as part of it. [09:50] Also Size by what though? Team team size? [09:53] >> So both on the total headcount size, but more more typically is based on the number of records that we're gonna be records under management. How many sources is it? Are they large sources, small sources? We look in aggregate based on the type of source. A, it influences what our infrastructure costs are to just provide the CDP offering. And at the same time, we also there's the validation components and things that have you know, there's there's cost [10:21] >> on our sides, cost of sales that get incorporated. So we look at total number of records under management, number of discrete sources just holistically. Is it Salesforce plus marketing automation plus, you know, ten third party or what? And then the other piece is going to be how much of it is going to be professional services. So we've got some API offerings where we're helping the clients do some onboarding. Comcast is a great example. Where we're running [10:47] >> some of the stuff on their behalf, the large datasets that they may be getting from third party providers, just faster for us to do it internally. And then how much of it are they gonna be doing themselves. So there's an API volume based metric that goes in as well. [11:00] Interesting. Did you were those always really clear? Or how did how did you kind of evolve your pricing to get to those? [11:08] >> So the UniFi offering is fairly new. [11:10] The what offering? [11:12] >> The UniFi offering, the CDP offering from a platform perspective. We we released it. The first client got on about a year ago. We were in limited release for six to nine months, and we actually GA ed right around Dreamforce this year. So it's only been fully GA ed for a few months now. In terms of the banding, we experimented. You know, obviously, we initially started with how many sources are you going to onboard to the platform. [11:39] >> That works okay if the sources are all around the same size, but we'd had somewhere maybe 20,000,000 records in CRM and 5,000 records in a third party. So we started to move away from having just the sheer number of sources have as much influence on the pricing and more towards how large and what are the total number of records in aggregate. The velocity is another big one. So the enterprise part of the enterprise b to b [12:03] >> CDP is really important here. The scale and the volume of records that were processed. [12:07] Sorry. Do you mean velocity? That's number of number of records processed per day? [12:11] >> Per second because we're [12:12] Per second. Okay. [12:13] >> Yeah. So we've got some customers that are doing, you know, upwards of 200,000,000 records over the course of say four or five days. So we're dealing with large large volumes of transactions. Infrastructure wise, and again, we look at what the cost to serve is. That is the single most expensive thing for us to be able to scale, is how many requests per second do we need to be able to index into our platform. So we have [12:38] >> a standard offering which includes, you know, somewhere around 15 to 20 requests per second. And then it obviously scales up based on, you know, the size of the client and what the velocity that they wanna send us records out. [12:48] Last few questions here just because we're out of time. How aggressive are you being in CAC? And maybe said specifically, how many dollars are you spending to get a new dollar of ARR today? [12:58] >> So similar thing without getting into too many specifics. So bulk of our business is coming from field events today. So we spend we do a decent amount on the marketing side. It's not huge, but field events, exec dinners, we get a lot of referrals slash relationships from folks that have worked for one of our customers, and then they change into a new wallet, some another business, and then they come back to us to try sign up. [13:23] >> So it's been manageable right now. [13:25] To just avoid the CAC number since you don't want go into that, can you I just wanna get a sense of again, how aggressive you're being. Can you talk to me maybe in terms of payback period? I mean, you happy with the twelve month? Are you being more aggressive at 18 or 20? [13:36] >> Yeah. So we definitely discount more heavily on the multi year, both from a [13:44] >> implementation. It takes, you know, somewhere around thirty days for most clients to be able to, you know, get full start seeing full ROI from the system. Just it's just how long it takes for clients to a lot of times get their sources together and ready to go. [13:56] But we're Sorry, Joanna, your your payback period. Sorry, on your CAC. [14:00] >> Oh, got it. I'm sorry. We make money after the first few months. Okay. Yeah, it's not too bad. [14:06] I mean, that's I mean, that's actually that's a very surprise. That's very surprising to me. Most companies that have raised your level, they're pushing twelve, sixteen, twenty four month payback periods because they have to. [14:16] >> Yeah, now our margins are actually pretty decent. [14:18] Okay. So you're caught maybe some six months payback. That's obviously healthy. And one of reasons I was looking forward to this interview is because it's actually rare that I see someone with a capital makeup of radius, especially in this space. And what I mean by that specifically, is you guys, you know, the founders got on the kind of the funding road early on, right, in o seven, and they did a damn good job at it and [14:35] growth looks like it was there considering what you raised. But the last round, I think, was 2015 or 2016. And so you've come in and you've had to make some obviously serious changes to continue driving growth without additional capital. And so, you know, thanks for being transparent there. [14:51] >> Yeah, for sure. I mean, I think we did it's not to say that we're not opposed to raising additional money if we need to. I think one of the things that I'm looking at here as we as, you know, transitioning into this into this new role is, you know, where are some optimizations that we make in terms of just sort of cost for us? We did raise a sizable amount of capital. We grew the team, you [15:12] >> know, fairly quickly in order to be able to to push out a lot of new product. When you're going fast, you know, sometimes you may not necessarily make decisions that are quite as economically friendly. So we're we're doing a full kind of top to bottom review, making sure that we're spending our money wisely. Obviously, VC money is really nice, but it comes at a, you know, in a lot of cases, a fairly significant cost. So if [15:35] >> we can get away with not having to fundraise again, we are expected to be cash flow positive at the end of next year, which At that point, you know, obviously, fundraising would be more if we wanted to accelerate growth. But at the clip that we're on right now, I think the business feels pretty comfortable with, you know, if we raise again, it wouldn't be a huge amount. [15:54] That's great. And then look, one of the big metrics in terms of like super healthy companies that have raised at your scale is when they start to really approach a one to one ratio in terms of funding raised relative to ARR. Do you have that big beautiful $100,000,000 run rate kind of in your sights you feel like or it still feels like a stretch goal two to three years out? [16:14] >> So two to three years is probably about right. [16:17] I mean, [16:17] >> I think we're yeah, that's probably a good estimate. We [16:24] >> I guess I'll answer that by saying there's decisions that we can make as a business to get there faster. And we're weighing right now whether it makes sense for us to do that. You know, we we could go down market a bit more and just push more sales volume to grow top line. The downside of that is you then have some significant costs associated with customer success, you know, in the support side of the business. So [16:48] >> we're we're trying to grow it at a at a clip where we don't need to grow the company to a 150 people in order to get a $100,000,000. I think we can do a $100,000,000 in revenue with potentially 15, you know, plus 15 of where we are today. [17:00] Yeah. That's great. If you could do a 100,000,000 on a 100 employees, that's pretty good revenue per employee where an industry average is call it $1.87 in ARR. Exactly. Yeah. That's great. And then look, I mean, you gave us some numbers earlier in terms of scale today, a 100 customers, you kind of said middle price point was called $405,100 grand ACVs. I think that puts you at like 40,000,000 ish run rate today. Is that generally correct? [17:22] >> Sure. I'm not as I said, it's it we've got some large clients that pay us a lot of money, and we have a fair number of smaller clients as well. So it did there's a pretty wide band in terms of what the, you know, what the customer base looks like. [17:36] And what do you hope to grow in terms of growing year over year at slow growth, healthy growth, not crazy cash burn growth? [17:42] >> Yeah, I think the the not crazy cash burn growth is certainly, you know, something that we're looking at. We fortunately as a business, we've just never had trouble raising money. Yeah. Darren has done an amazing job of fundraising. We've got a really strong board, we've got a really strong investor base. So it's not that they're we if we don't if we wanted to go out and raise some additional capital, we we certainly could. We're trying to [18:04] >> grow at a at a fast rate, but at a smart rate. [18:07] What is that, Ojal? I mean, are you talking 30% year over year, your scale or 90%? [18:12] >> Somewhere between I would say fifty and ninety at this point. [18:15] Yeah, it's still I'd say still pretty healthy growth. I mean, you haven't raised in a couple of years. So good stuff. Alright, let's wrap up with the famous five number one, what's your favorite business book? [18:24] >> Oh, man. [18:31] Or last one you read? [18:34] >> Yeah. I'm trying to think of a good one. [18:38] >> So the Jack Welch book, I think, was probably my favorite book. [18:41] High Alpha Management? [18:43] >> Yeah. So I read that, and it's been probably six, nine months since I read that one. But that was, I think, the last one that was at the end of it, I felt that I may want to read it a second time. [18:53] That's rare and a good sign. Thank you. Number two, give me an under the radar CEO, Joel, that you that you're learning from right now. [19:02] >> Oh, interesting. So [19:05] >> on the CEO side, actually, not a ton right now. I think I've been more working with the COOs because that's an area of the business where I needed some additional capacity. I think the you know, some of the the financial side of things is where I had a little bit of a gap. Our old COO actually at Radius, so David O'Brand, one of our board advisers has been extremely helpful through this whole transition process. So Great. [19:28] >> He and I talk, you fairly regularly. [19:30] And number three, besides your own, what's your favorite online tool for building the company? [19:34] >> So I think if it wasn't for Slack, I don't know I could if I would be able to survive. I think if you look at the Slack statistics for Radius, I am number one by a fair margin. [19:46] Number four, how many hours of sleep do you get every night? [19:51] >> As of late, it's been a lot fewer than it used to be. My wife tries to get me to make sure I go to bed by like 01:00. [19:58] Okay. So what does that give you? Like six, seven hours a night? [20:01] >> Probably around five. [20:02] Five. Okay. So and then what's your situation? Obviously, you're married. Any kiddos? [20:06] >> Yep. Yeah. I've got a son who's just about two, actually turns two in a couple of weeks. [20:11] Oh, wow. Okay. So one kiddo. And Joel, how old are you? [20:14] >> I am 36. [20:15] 36. Last question. What do wish your 20 year old self knew? [20:19] >> Oh, interesting. [20:22] >> Take more chances. I think I followed the more conservative path throughout my career. I think over the last couple of years, I've been more aggressive in terms of some of the opportunities that have presented themselves. I wish I had done that ten, you know, ten years ago. [20:37] Guys take more chances from the current CEO of Radius, Joel, again, launched in 2012. He got really active, call it a year, year and a half ago in terms of being in on the executive team. They raised about a $100,000,000 again, helping with data management, specifically customer, being a customer data platform in the B2B space. They really focus on a tight number of customers called a 100 customers, high ACVs targeting 50 to 90 year over year [21:02] growth moving forward, 150 net revenue retention annually because they have very clearly defined pricing axes and again, less than a six month payback on most of their acquisition strategies right now. Team of 75 based mostly in San Francisco. Joel, thanks for taking us to the top. [21:15] >> Yeah, thank you for having me.