How RambleChat Grew to 50 to 100 Customers Before Being Acquired in 2020 (Interview with Co-Founder and Former CEO Justin McDonald)

Introduction and Background

Nathan Latka

00:00Hey, everyone. My guest today is Justin McDonald. He spent sixteen years in SaaS. He's an entrepreneur in Atlanta based focused on martech, chat, and GRC technologies. He was the CEO of RambleChat. It was acquired last year by Terminus. As the GM of chat, email and sales experience oh, sorry. Now he is the GM of chat, email and sales experience at Terminus. Also a car enthusiast. Justin, you ready to take us to top?

Justin McDonald

00:22>> Yes. Look forward to it.

Nathan Latka

00:23Well, something's in the water down there in Atlanta.

00:25You've got tope crushing it. You've got Atlanta Tech Village. David Cummings just has like a magic touch, guess.

Justin McDonald

00:30>> He does, man. It's what, three or four really great outcomes lately with Rigor and of course he has SalesLoft and Terminus in the balance. So yeah, he's got the magic touch.

Nathan Latka

00:40Yep. Okay. So you were acquired by Terminus in what month and year?

Justin McDonald

00:44>> 04/06/2020. So smack dab during the pandemic. Interesting times.

Nathan Latka

00:49So we'll now go back before that build up to that point. So when was RambleChat launched and what did the product do?

Joining as Co-Founder Pre-Revenue

Justin McDonald

00:56>> Yeah, so great question. So I came on as an original board member and advisor, and there was a sister company that been had in this great technology called Chat from Anywhere, which the whole evolution is, hey, you go to a website, go to a landing page, you launch a snippet, you have chat, right? But what about the expansion of the digital spectrum, the experience where what if you could chat with someone with one click from anywhere

01:20>> online? So the whole underpinnings of the architecture was how do you extend chat beyond the website? And so in 2018, I came on board as kind of a co founder pre revenue and we started from there.

Nathan Latka

01:31Okay. So That wasn't the plan to start, right? What happened? Why couldn't the founding team get revenue? Why couldn't they get going?

Why the Original Team Struggled to Get Revenue

Justin McDonald

01:39>> Great question. I think they were great technologists. They were great architects, but they didn't really understand the go to market motion and how to launch something. That was where I came in. That was my expertise on taking things to market. So it was just a really great skill set. They needed some fresh eyes. They needed someone to come on board to take this really great idea, this fantastic technology and bring it to life.

Nathan Latka

02:02Okay. And you're saying that that sister company, you were then rebranded as RambleChat? It was.

Justin McDonald

02:09>> It had been rebranded. The entity was doing DBA, a number of legal components I won't get into, but it was pre revenue. It was essentially launching a brand new product that had just been developed. That was kind of the underpinnings from a sister company called Teladini.

Cap Table and Prior Funding History

Nathan Latka

02:23Teladini. Okay, interesting. So I guess what did the cap table look like the day you joined? I mean, you majority shareholder as the sole founder?

Justin McDonald

02:31>> So I was not the sole founder. So I had two other co founders who were original founders of the sister company. They had raised some money. They'd raised a couple million that played into the development of the, at that time, existing Ramble technology. However,

02:48>> I would say it's a weird paradigm in that they had raised money. Some of it used in a sister company, some of it used to build the Ramble technology, but it became really a bootstrap approach. Were out of money at that point that I joined and I drew How

Nathan Latka

03:02much did they raise?

Justin McDonald

03:03>> 3,000,000 you said?

Nathan Latka

03:04Around 2.5 or so.

Justin McDonald

03:05>> They spent all of it.

Nathan Latka

03:06Bank was at zero.

Justin McDonald

03:07>> Correct.

03:08>> Yeah. Okay. Bootstrap jobs straight from 2018 on.

Nathan Latka

03:11And so I always wonder in situations like this. I understand you want to keep your current investors, give them a return, like not shut the thing down and restart, but there was no cash left. I mean, why not just shut down and restart and buy the tech and the IP from the old company and give the investors a little return?

Justin McDonald

03:25>> That's a great question. Mean, I think that kind of speaks to the outcome that we had so quickly, right? Less than two years from me coming on board, got acquired and I think that played into it. I wanted to do right by the existing base. I'd gotten to know the investors. Some of them sat on the board. Yes, of course, there could have been an IP play, but I think my partners, loyal, really great business folks,

03:48>> cared about the investors, wanted to take care of them versus do the greedy flip it over, buy the IP and get the win.

Nathan Latka

03:54Did you guys raise additional capital after you joined or you stayed bootstrapped?

Raising $250K and Staying Bootstrapped

Justin McDonald

03:58>> We raised very little. I say bootstrapped, we raised an additional 250,000 early twenty nineteen.

Nathan Latka

04:10It. So $250K then, and again, we're in 2019 now. We haven't talked about this yet, but what is RambleChat? What were people paying you for?

What RambleChat Sold and Average Deal Size

Justin McDonald

04:18>> Sure. Sure. It's a software as a service product and it sat smack dab in the conversational marketing chat space, right? You probably saw ZoomInfo acquired Insent.ai two days ago, which is another small conversational marketing player. A lot of Drift leading the way. There's a lot of momentum in the conversational marketing space, but essentially it's how do you rebrand the old legacy bottom of the funnel customer support chat and repurpose it so that sales and

04:45>> marketing folks can start to convert conversations, personalize, and really get away from forms. The whole premise is we live in this on demand society. People don't want forms in the old marketing automation conversion. How can you utilize the chat technology to create more of a conversation in collecting information and converting?

Nathan Latka

05:02And what were people paying on average for this back in 2019?

Justin McDonald

05:06>> It varied. The average deal size, it was spread around 15K ARR. Okay. Got it.

Nathan Latka

05:13It's about a grand, $2,000 a month, something like that. Yep. Okay. So again, not SMB, but not quite enterprise sort of mid market play. What give me I mean, flush out the rest of the business at that point. 2019, how many team members?

Team Size, Profitability, and Customer Count in 2019

Justin McDonald

05:24>> So we had less than ten ten team members at that point.

Nathan Latka

05:28How many in 2020 at acquisition time?

Justin McDonald

05:31>> Right around ten.

Nathan Latka

05:32Right around ten.

Justin McDonald

05:33>> We stayed fairly steady. Small business, mighty business, capital efficient at that point when I took over.

Nathan Latka

05:42A huge In 2019?

Justin McDonald

05:43>> I'm sorry?

Nathan Latka

05:44Profitable in 2019?

Justin McDonald

05:46>> It was not profitable.

Nathan Latka

05:48Okay.

05:49Close to breakeven.

Justin McDonald

05:51>> Were not profitable pretty close to breakeven.

Nathan Latka

05:53Okay. Got it. And how many customers in 2019?

Justin McDonald

05:56>> I can't disclose that. You can't share a customer count? I can't share customers. I would say it's less than a 100 more than 50. How's that?

Nathan Latka

06:03Okay. That's fine. Good to know how many. What Terminus said, we're gonna acquire you, but the one thing you cannot disclose is how many customers you had a year ago before acquisition.

Justin McDonald

06:12>> It's complicated, yeah, I'm trying to be fair to my NDAs and the non disclosure of terms. Understood.

Nathan Latka

06:20Okay, so you move forward. When did the Terminus reach out happen? Was it at Atlanta Tech Village over coffee or Hootenail?

How the Terminus Acquisition Came About

Justin McDonald

06:26>> Yeah, that's a great question. So Terminus So I had several entry points in Terminus. Eric Speth, the old CEO, obviously David Cummings was an investor, but Terminus was a customer of RambleChat. So they knew the technology, They loved it. It was working well. They were seeing ROI. So we had the benefit that they had used the technology. They did some stress testing and they loved the IP play. This was a big IP play. They didn't buy

06:50>> us for our ARR. They bought us for the team. They bought us for the technology.

Nathan Latka

06:55Are all 10 still with Terminus?

Justin McDonald

06:57>> They are not. And some of those 10 were contractors and

07:03>> yeah, all 10 are not with. The core team, the good majority of the team still is by the way. This

07:10>> is middle of COVID.

Nathan Latka

07:11The last thing most common to me about is how do I spend a bunch of capital on acquisition and preserve cash for extra runway?

Justin McDonald

07:17>> Did Terminus you guys?

Nathan Latka

07:18I'm sorry?

Justin McDonald

07:19>> What did Terminus pay for you guys?

07:21>> I can't disclose that, but I can say the multiple was over 10x.

Nathan Latka

07:26The 10x revenue multiple? Yep. And what gave you that sort of leverage? You had raised a little bit of capital already. How were you able get about

What Drove the Acquisition Valuation

Justin McDonald

07:33>> We had a patent pending on our Chat from Anywhere technology that allowed companies to engage customers beyond the website. I think the IP around that patent pending technology was valuable. I think the momentum and the growth in the market around conversational marketing and chat was tremendous with Drift and Intercom now Qualified and Salesforce backed company coming into play. I think it's highly prophetic by Tim Kop and some folks at Terminus to see the big channel push

08:01>> and how that can merge into an account based model and account based marketing technology. And so I think it was the IP, it was the talent behind it, the recognition that yes, data reigns supreme in account based marketing, but having the right channels and first party data captures is super important as well.

Nathan Latka

08:18When you guys sold the business, was most of this deal price stock now in Terminus or did the common holders, early employees that incentivized equity, did they get some cash payout on the exit?

Deal Structure and Investor Outcomes

Justin McDonald

08:30>> I can't disclose that, but let's just say both parties, our existing investor base, the Founder's customers is a great transaction for all, both for Terminus as well as the RambleChat investor base.

Nathan Latka

08:43Got it. Have to go read the Terminus announcement and see if they set up as all stock or all cash.

Justin McDonald

08:47>> Yeah. Agree with that. We just obviously did a recent series C as well for Terminus at 90,000,000. So it was a great transaction for all.

Nathan Latka

08:54Yeah. Okay. So excuse me. You sell in 2020. How are they able convince a guy like you to stick around?

Why McDonald Stayed at Terminus Post-Acquisition

Justin McDonald

09:04>> That's a great question.

09:07>> We did a recent reorg, so I know my bio is a little bit out of date that you just read. I'm the GM of all channel application at Terminus. I picked up digital ads as well as the ones that you read off. Quite honestly, I think Terminus is in this Goldilocks zone. Yes, I'm an entrepreneur. Yes, I'm no longer the CEO, but I'm working for a fantastic company, a leader who's probably the most humble, competent leader that

09:30>> I've experienced in Tim Kop.

09:34>> ABM is a hot market. You see some of the recent investments, valuations are unicorns are popping up, unicorns are popping up left and right in the space. It's a great company. It's a great culture, hot market, right? So it's hard to turn that down. Of course, they're obviously taking care of us, so stick around.

Nathan Latka

09:48Yeah. It was reported that that $90,000,000 raise was around a $400,000,000 valuation. I mean, 20%, 25% of the company in this range, I mean, you could argue is a little higher than what you see on market. What

10:02you guys or what got you guys excited about bringing on these investors and giving Great Hill a larger cut than most Series C transactions?

Justin McDonald

10:09>> Well, one of the things I point out as well is I think that valuation is quite conservative. Liquid six sensitive is right. Think their valuation was what $2,000,000,000 plus for similar run rate. I would argue that the 400,000,000 is quite conservative when it comes to the valuation.

Nathan Latka

10:24Okay. Got it. Fair enough. That was reported. I'm reading your live here, but not not necessarily confirmed by your folks. But that was based off sources. So we'll see what happens. But point being, where do you think Great Hill can add value to the business? You know, people always feel you want to reinvest to add value.

Justin McDonald

10:38>> Yeah. Great question. Experienced private equity guys, folks that understand data. So you look at some of the folks from Great Hill, some of the partners that sit on our board came from ZoomInfo. ABM is so critical, at least the data elements on how you personalize, how you collect, obviously in a privacy centric fashion. But I think their data expertise, their strategic connections are highly valuable to our base.

Nathan Latka

11:04What's your estimation? And then we'll wrap up with sort of product ideas, but what's your estimation on what Sisense is doing right now in terms of revenue?

Justin McDonald

11:11>> 6sense?

Nathan Latka

11:12Sisense. Were you were you referencing Sisense earlier?

Justin McDonald

11:15>> 6sense. 6sense is the 6sense. 6sense.

Nathan Latka

11:20Got it. What's your estimation there?

Justin McDonald

11:23>> I'd say they're over 50. I hate to use this vague term, I think they're around 60,000,000 plus between 60 and a 100,000,000.

Nathan Latka

11:34Yeah. That that that matches the data we have

Justin McDonald

11:36>> when we interviewed interviewed the folks there.

Nathan Latka

11:40So very cool. What product?

11:43Sorry. What was your question? Who do we interview?

Justin McDonald

11:44>> I was just curious who you interviewed at 6sense.

Nathan Latka

11:48Nikhil. I'm gonna kill his last name, Vora.

Justin McDonald

11:52>> Okay. I don't know him.

Nathan Latka

11:53I think he's the founder. Usually, we're interviewing the founders of companies.

Justin McDonald

11:56>> Yeah. I knew Vital. I recall one of the other co founders.

Nathan Latka

11:59Okay. Nice. It wasn't it wasn't wasn't him. But look, you mentioned a couple of competitors. Drift, ZoomInfo with They're going buy Insent and try and drive it across their current base and increase ARPU expansion across the thousands of customers. How are you thinking about chat and conversational marketing at Terminus?

Future of Conversational Marketing at Terminus

Justin McDonald

12:14>> By the way, I just told you that information, so you must have did some speed reading on this podcast here, man. How am I thinking about conversational marketing? I think it's the future of martech. I think COVID in itself has really driven the need for real time conversations, for taking playbooks and what we know about audiences and segments and personalizing. And the best way to do that on the domain, on the website is through conversational marketing

12:39>> and chat. I think you'll see a greater emphasis as a channel on the conversational marketing. And then he who takes the data, he who personalizes and adapts the experience based upon who is on the website is going to win out.

Nathan Latka

12:54I agree with you. Obviously,

Justin McDonald

12:57>> smart move.

Famous Five Rapid Fire Questions

Justin McDonald

12:58>> Yeah. Silent or Slilent or everyone else just raised $20,000,000 at $100,000,000 per year today. It's a hot, hot space. Let's wrap up here with The Famous Five.

Nathan Latka

13:07Number one, favorite business book?

Justin McDonald

13:09>> Favorite business book?

Nathan Latka

13:11Man, Hope Is Not a Strategy. I love it. Old school. Number

13:16two, is there a CEO you're following or studying besides Terminus?

Justin McDonald

13:22>> I like Nick Mayda at Gainsight. Of course, Benioff is always an interesting guy to follow. Did Nick

Nathan Latka

13:32sell too early to Vista?

Justin McDonald

13:35>> I don't know. Don't know.

Nathan Latka

13:361,500,000,000 to me seems small when you see Gong going out doing 7,200,000,000 and Outreach going out, raising 4,200,000,000 two weeks ago.

Justin McDonald

13:44>> Yeah. The things that people don't realize with Gainsight is just like most startups, it's not an overnight success. He's been in it for a while. It's a grind. So hindsight is twenty twenty. I think you could make a case that he sold too early, but I'm sure he's happy with the outcome.

Nathan Latka

13:57Number three, what's your favorite online tool for building a business?

Justin McDonald

14:01>> Favorite online tool for building a business. Oh man.

Nathan Latka

14:04What do you use the most?

Justin McDonald

14:07>> That's hard to say. We're in the mix of some big post cookie world ads product components. I think from a product perspective, Figma has been brilliant. I think there's the Whimsicals of the world, and then you just have your standard CRM behind the scenes that provides all the intelligence.

Nathan Latka

14:24Number four, how many hours of sleep are you getting every night?

Justin McDonald

14:27>> No. So we have two girls, one and a half, two and half, so more than you think, but I try to average between six to seven hours.

Nathan Latka

14:35Okay. Married, two girls, and how old are you?

Justin McDonald

14:38>> I'll be 40 next month.

Nathan Latka

14:3940. Very cool.

14:41Alright. Last question. What's something you wish you knew when you were 20? Something

Justin McDonald

14:45>> I wish I knew when I was 20. Patience.

Nathan Latka

14:50Guys, patience is critical. RambleChat playing in the conversational marketing space launched in 2018 or actually before that raised about $2,500,000, burned through all of that. Then we had Justin join as part of the cofounding team in 2018. They turned the business around, grew to between 50 and a 100 customers paying between, call it, a thousand and $2,000 per month. They sold for a 10x valuation multiple back in 2020, and Justin's now leading sales product,

15:13conversational product, all that stuff now at Terminus as they look to scale just announcing a $90,000,000 round. Justin, thanks for taking us to talk.

Justin McDonald

15:19>> Appreciate it.

Nathan Latka

15:22One more thing before you go. We have

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