Rallywarerevenue & funding

Intro to episode from Nathan Latka hello everyone my guest today is george l fund he's the ceo of rally ware performance enablement platform and a renowned global expert in implementing future of work technologies he was instrumental in helping companies around the world to drive their workforce performance and bring the best in each individual through data-driven training and engagement embedded in daily workflows george ready to take us to the top excellent thank you really nice to meet you you bet okay tell us about rally aware what does the company do and are you pure play sass excellent yes we are a pure place uh pure play enterprise sas platform as you mentioned performance enablement platform what does it mean we see three trends in the future work first of all work is getting very distributed and but the current tools are designed for mainly hierarchical organizations and that's a problem second is data is very important in driving the workforce productivity and it's not being utilized as much in the hr tech and especially in the learning solutions and the third is the millennials millennials are increasingly in the workforce right now and then they demand tools that are effective for their personal and professional growth and based on that we uh what rally where is we're basically connecting the learning activities with operational and performance data on each of the members of the workforce okrs kpis things like that exactly exactly and based on those who provide specific activities for each person in the world so when you say enterprise give me a general sense the average company is going to pay you what per year to use your technology so uh there's no such thing exactly as leverage for us but like we start i'll give you a range we start and it's pretty wide range but we started around 50 000 in acv and the contracts could go all the way up to about a million and a half i i understand it's difficult even average because you really do have different cohorts it's just the tricky thing with the show is we don't have time to talk about every cohort so i mean if you took total revenue divided by total customers it's fair to say an average is gonna be closer to a fifty thousand dollar acv or like a million dollar acv uh it's somewhere in between but it's probably i would say it's it's in a couple of hundreds couple hundred okay good so not 50 but a couple hundreds and so let's role play for a second if if i'm signing up right now to use you guys for let's say 300 000 acv how big is my team probably uh so your team uh for for a 300 uh thousand year team would probably be around uh around 10 to 15 000 people okay so that is your sweet spot i mean when you when you look at your leads your sales motion all that you're targeting companies at that range north of ten thousand employees we're targeting uh more than ten thousand uh you get value if you are about a thousand or more if you're less it's you still get value but uh in many cases you could do a lot of it with the manual what's your team look like today how Team size of Rallyware many people uh so we are around 60 people right now and what's the split between engineers and everyone else or quota carrying sales reps so we are pretty heavily on uh on engineering we're about uh to order engineering right now okay so call it uh 40 people engineering and then how many are folks are quota carrying quarter carrying we have uh four enterprise sales reps interesting i mean is that something you're scaling or do do you have too many leads for your four enterprise reps already we're looking to we're looking to scale that and what comes with it is obviously the leads and the good sales reps and both are hard to find especially the the right uh the right sales reps that are very good at selling into your enterprise and not just into enterprise but let's have this mentality like we come in with something new we're not like something that is faster or cheaper or better than what they're using right now we're bringing a new thought process into a lot of organizations so someone who can have this consultative background is very important how much total have you raised to date or have Amount raised by Rallyware you stayed bootstrapped so we've raised about two and a half million dollars okay why did you have to raise all that why couldn't you stay bootstrapped uh so we actually raised it in the in the very beginning just to to get our product and uh and sales process going and that took us to the to the break-even point so how much did you spend fully weighted on your mvp like before your first dollar of so uh before our first dollar of revenue we didn't spend we spent probably like half a mill or something okay so that's just you had to spend that getting the tech to the point where you could sell getting to the point where we could sell and getting but again like where we could sell but sell to the enterprise what was that When was Rallyware founded? time frame so when was the first line of code relative to the first dollar revenue uh so uh first line of code was in around the end of 2012 and uh but first dollar of revenue i would say like pilot driving is it wasn't 14th we were getting quite quite a lot of free pilots before and then the true revenue we started generating in 2015 i would say and then fast forward today how many customers are you serving Rallyware serves around 50 customers uh so we're uh we're slightly above 50 enterprise deals okay 50 folks that's great um 50 folks scaling the team are you planning to raise any time soon uh so it's it's an open question yeah uh raising has its pluses and minuses and uh for for me what's important is to is having this specific need specific uh project for that right it's not just raising for the sake of raising so that we get you know reason about the tech crunch and everywhere but more about like what are the uh specific important uh milestones you've used both equity which obviously you take significant dilution and debt you did a debt deal with lighter capital for 175 grand back in march 2016. which one in your opinion which one has been more effective for you in terms of growing the company but keeping as much upside for yourself and your employees as you can i'm a big fan of lighter capital model to be honest uh for two reasons first of all like as your company grows you're actually your cost of lighter capital becomes uh much smaller no no it's it's actually opposite uh rev i mean you correct me if i'm wrong but let me just paint a picture for you most lightning capital deals the revenue what they'll lend you is something between three and 6x your current mrr and you're paying back anywhere between three and eight percent of your gross receipts monthly and the tip that the payback that they optimize for something between 1.3 and 1.6x over two to three years if you grow fast and you're paying on a percentage of revenue you pay it back faster and your enter the effective cost actually drastically increases yeah but the way i'm comparing it is to the equity that i'm giving up is oh i see i see but but it is this is one thing that i wish venture debt would change you shouldn't it shouldn't be more expensive the faster you grow it they should people should figure a way to make it less expensive the faster you grow yeah but let's say i agree with you but at the same time the faster you grow they actually the less painful it is to repay it so uh the companies i would say the faster they grow the less they're worried about but still a dollar is a dollar right you'd rather put that dollar instead of paying back interest into the machine that you've created which is making getting more and more efficient that part is very true that part of the model would be would be very useful to revise and i think the second part with the venture that at least like in the uh lighter capital itself is the uh and i know they've been working on this is increasing the limits that you can borrow yeah what what they're right now they cap out i think it like 1x arr or something like that yeah but they're also capital like at about uh milan oh yeah into in any company have you already are you are you at full like you're at a million already you can't go any more uh no we're not but getting a little bit more does not make sense for us so like if they were to give me a significant amount a more significant amount i would be comparing them to potentially like when i when i go and race but raising another 3 400k from them would just not make a difference why not uh if it takes i mean once you raise with them i've heard stories where ceos will get money in like 48 hours uh so the trick is you don't have to so why don't you take another 300 grand reinvest it then go take another 700 grand then reinvest it then like you see what i'm saying it's uh it's a possibility but it's at some point like it because because reinvesting uh like taking like three to four hundred grand uh yes that could allow me like get more uh salespeople but like getting really like kind of like big on marketing and advertising that will probably not do the trick uh so uh kind of so how much would you target then if you want to go out and raise right now what would you target uh so we would be looking at uh something more closer to 10 million okay and what valuation would you like aim for obviously you have to negotiate it but what would you hope for uh it's uh you know like i'm not like at least point like uh it's pretty standard to do like about uh 20 25 of the of the company yeah so you'd aim for like a 40 for like a 40 30 40 million pre-money yeah yeah something like that it's uh basically at that point what the key would be is not even the valuation evaluation is standard if someone is trying to push you too much into the on the valuation it's probably not a good investor for you in the first place because they probably don't understand the game uh and the key for me is actually getting like when we go ahead and raise more is getting the right investors people i can work with i've gone like we've we didn't start yesterday so like we've we've been at it for a while i've seen all sorts of uh different types of investors different had different conversations and uh i've realized and i've built i've built a business yeah i mean look i think by the way george i want to i want to give you credit here too right i mean you told me there are 50 customers and if each one is paying a couple hundred thousand in terms of average acv i mean that puts it like 1.2 million a month right now on revenue is it accurate oh i cannot tell you the exact revenue numbers but we're looking at very good growth and that uh revenue where we're comfortable with not running and raising money right now well where the so those uh i'm not making up numbers i'm taking numbers you you already gave me so i just i want to correct one of those if they're wrong is the acv actually lower than 300 grand the average arpu they have different cohorts in there so i know that's why people measure it's not necessarily the average i cannot give you the exact average okay but i i want to be clear when i ARPU (Average Revenue Per User) asked that question i asked arpu our poo stands for average revenue per customer right so if that's not accurate i want to correct it it's not 300 grand it's less yeah sure that's our sweet spot it's not necessarily because we have all sorts of different cohorts plus quite a few of the legacy customers so i want to make sure like uh we're not misinterpreting them got it let me repeat this back to you because i want to make sure you get it accurate you said earlier that minimum acv is 50 grand sweet spot 300 and you have some that are obviously anomalies that are big enterprise deals that are bigger than that yeah i don't think it's an anomaly i actually think that's where we we're getting as we're maturing like well you can measure you can measure it you can measure it did 20 to your top 20 custom percent of your customers make more than 80 percent of your revenue uh at least point uh there are top 20 customers there twenty percent well done funny yes yes it'd be like do your top five ten customers make up more than eighty percent of your revenue no no okay then maybe they're more distributed than we that we talked about look i guess what what what i will do is MRR (Monthly Recurring Revenue & ARR (Annual Recurring Revenue) say okay 50 at your minimum 50 000. puts you north of 150 grand a month at this point it's fair to say you're above that correct of course okay and you said healthy Rallyware Revenue in 2018 growth so if you're there north of that today where were you a year ago do you remember uh so a year ago were slightly slightly below slightly below the halfway right now okay so so you're doing like 75 grand or 80 grand about a year ago we were doing about a year well i don't want to get into exactly because 150 is not uh is not the accurate number by itself but uh we were doing we were about we were we grew about slightly above 2x over the course okay okay got it so you wherever you're at today you were essentially 15 of that yeah a year ago for our like internal reasons i just cannot disclose the exact number no no it's fine we have a good range already which is you're north of 150 grand a month in revenue uh it sounds like you know i mean i guess what i'll ask is does it do does it feel like a massive stretch goal to get up to like a million a month by the end of this year do you think you have to wait one more year to get that i think it will be sometime next year yeah it's not it's not going to be by the end of this year you mean a million in uh a month yeah yeah yeah it won't be this year but it will be sometime next year yeah yeah good well i mean and do you think most that growth will come from adding new customers or getting more revenue from current customers i think like our model right now is more is getting more into into the doors of more companies uh we do have land and expand strategy but i can't say we've been amazing at it yet like we're pretty we're very good on uh customers uh on serving the customers we're very good on uh managing the churn yeah oh hold on hold on you can quantify that right so i have benchmarks on this so i don't know if it's actually good or not in terms of your churn you know whatever you want to give annual revenue churn growth spaces what is it so uh in terms of the chart again like if we look at the cohorts like if you look at the uh at the higher end of this like it's all practically no churn very uh like we don't like the high end it should it better be net revenue better it better be above 100 net revenue retention exactly exactly yeah sorry george just we don't have time to go down all of your cohorts i don't mean to keep cutting you off but the reason people measure revenue churn is specifically so that every customer becomes equal relative to the amount they're paying per month so if you look at your revenue Gross Churn is 24% Annual, Made up with expansion - 100% net revenue retention churn across your entire base over the past 12 months about what was it so uh it's uh it's definitely less than two percent so it's per month per month yeah okay so 24 annually and then does your expansion revenue more than make up the 24 hole uh yeah pretty much yeah okay so you're about 100 net revenue retention yeah yeah interesting okay good and then look you know managing cash is critical and i always like to get a founder's head to understand like how aggressive you're being are you comfortable burning a bunch of cash right now to drive growth or you're trying to break even uh we're actually more on the we're more on the break-even type of culture so we are at that at that point where we got to break even we're burning a little bit but uh we're almost a little you're talking like 5 or 10 grand a month uh probably like closer to 30 to 50 grand a month but that's a comfortable zone for us that's good well CAC (Customer Acquisition Cost) for Rallyware yeah i mean obviously uh with the revenues you know you can buffer that however you want and then how aggressive are you being to get new customers so to get a new 50 000 acv account will you spend the full 50 grand up front or no uh it's uh not the full uh to get a 50k we will not spend the the entire 50k we could for for getting like a larger accounts we do spend something closer but it's not close it's not 50k but it's it's pretty comparable too my point is are you optimizing for a 12 month payback period and where you're at today in terms of your payback period we're actually payback period is uh is pretty good for us like we're at around like i would say we're around six months six months okay so on a 50 000 account you'll spend 25 grand and most that's on sales people person commission or paid spend or what uh it's it's mainly on the commissions and sales team and we do not do or we do very little almost non veto to attend yeah very good all right let's wrap up here with the famous five number one what's your favorite business book so uh i really like uh the book i read recently called thinking in baths by any duke uh it's about decision making number two is there a ceo you're following or studying uh i like mark daniel for his bold decisions even though i don't always agree with them but uh he tends to be more right than i am if he offered if if salesforce offered to buy the company for 10 million bucks do you sell today uh uh no but i would i would be delighted that they're interested in us but number three what's your favorite online tool for growing your business uh i like to to-do list right now what to-do is to do this yeah number four how many hours i sleep to get every night uh try to get seven okay and how old are you uh i'm 38 38 in situation married single kids i'm married with a baby who is 14 months oh wow congrats all right last last question what do you wish your 20 year old self knew ah i think like take more calculated risks don't follow the crowd guys take more risks rallywear.com again playing in the space it's a hot space we all have heard about it again performance management especially across distributed workforces 2.5 million raised to date burning caught 30 40 50 grand a month driving growth 40 engineers four sales folks 60 people total 24 gross revenue turn annually expansion matches that's those so called 100 net revenue retention doing north uh basically 50 customers paying north of 50 000 acvs so-called again north of 250 grand a month right now in revenue doubling year over year so nice growth rate hoping maybe go out and raise a you know they don't have to they aren't breaking them but they might go out and raise call it 10 million on a 30 or 40 pre and the next call it two three quarters in the meantime george thanks for taking us to the top thank you very much