How Rapid7 CEO Tas Giakouminakis grew Rapid7 to $456.7M revenue and 92K customers in 2024.

hello everyone my guest today is corey thomas he's the ceo of rapid7 and chairman of its board of directors he has extensive experience in leading technology companies to the next stage of growth and innovation before rapid seven he worked with microsoft and deloitte he graduated from vanderbilt university and had and his mba from harvard business again now building rapid seven playing in the security analytics and automation space corey you ready to take us to the top absolutely exactly we were chatting with you all right man all right so tell us about rapid seven what's the company do and are you a pureplace sas model we're a peer play sas model we're in the security analytics and automation market at the core we actually help people understand what's happening in their environment from a security perspective using a massive data collection engine and figure out are they vulnerable are they compromised and if so helping them quickly remediate those issues and are you kind of a kind of a malwarebytes bottoms up model where you're selling six dollar a month plans to employees and then before you know the cto is buying a big enterprise license or are you going kind of top down enter you know you know what i mean yeah no absolutely so we sell to teams within our in organizations so it's typically much larger transactions than having sort of like a couple dollars a month all of our revenue is recurring based revenue but most of our deals actually come from selling to fairly large teams within enterprises okay so if someone's listening right now and they're looking for such a a platform like yours on average what's the customer going to pay you per year to use your platform yeah so we make it really easy to get started so customers can get started you know in the tens of thousands of dollars range then we of course have customers that go up to the millions of dollars okay um per year range but we try to make it as easy as possible for people to actually start building out their security program okay so i mean would it be fair to say someone you know you know a team size have caught you know 30 40 people is gonna maybe pay fifty thousand dollars a year or something like that to get going that's it that's started and what you find is we actually have four core sets of products vulnerability management um incident detection response and sim uh application security and the um and our last one is the security or automation orchestration and so that 20 to 50 000 is typically sort of for one team one of those projects and as they deploy more projects to cover more in their environment it's more tonight corey can i ask you one of the key things to any sas company expanding rapidly is obviously driving expansion revenue year every year it sounds like you are nicely set up to drive expansion revenue with multi-product lines probably a multi-seat approach and some probably usage-based metric as well so an account that starts with you let's just make the math easy at you know 50 000 per year typically from year one to year two how much will you expand them by you double them or triple them or what yeah so you know our expansion rate is roughly 120 on a year-over-year basis so we focus on life study expansion over time and that's really you know our view the thing i love about the sas model is you don't pre-buy like it's based on your usage uh and so if you think about what the inherent bottleneck in security is right now it's that people have to staff up their teams they have to have capacity we draw productivity but they actually pay more and buy more as they actually are getting more value and more usage yep so a cohort that signs up with you a year ago you're saying you'll expand that cohort on average by 120 um that means you obviously have expansion and churn built in there so so what do you see if you peel back ignore expansion for a second your gross churn on a revenue basis annually are you kind of sub 10 percent in the healthy stages are you more or less yeah no so it so it is uh in the healthy state the thing that we've reported publicly engine rate is 90 the last time that we actually quoted our expiring um revenue retention rate and really that's the mix of two things is mid market customers which actually as you can imagine have higher term rates corey real quick sorry you cut out what was that 90 number that's your net revenue retention or your gross retention no that's the expiring so you we have two sort of like renewal rates one is the expiring oil rate deals that are up this year and so like how many customers say from a dollar perspective that's 90 if you look at our overall renewal rate includes upsells and cross sales that's 120 percent uh and so i'll say the 90 is a mix of some smaller customers that actually have slightly higher um churn rates and then larger enterprise customers that have more established programs that actually have a much much higher retention rate yep yep so just repeat that back to make sure i got it you know 90 stay or said differently 10 of your revenue churns annually but you expand that same cohort by 30 so your net revenue retention is 120. yep you got it 30 perfect amazing all right let's let's put this back on a timeline i want to get the back story here when did you launch this company what year so the company was actually founded in 2000. i joined the company uh as the head of operations in 2008 and i became the ceo in 2012. okay 2012. now was this part of a round of funding and avicii said we want corey leading otherwise you're not getting our money or or what how did you come in and see yeah so it's the i joined in when bain originally yeah i wanted i joined when um bain capital ventures uh did the initial investment and i joined as the head of operations um and then subsequently as the company was plotting out its next stage of growth they asked me to become the ceo okay so how much raised so far oh so we're public today yep and so before we had actually gone um public we had raised um a little under 100 million dollars around 90 million dollars um and then we've done a couple different public races and some um subsequent races after we became public when we're rhyming again sorry what year do you guys ipo 2015. 2015. okay so you had joined uh i guess you were there for what four or five years uh before that yeah i joined in oh eight yeah and yeah exactly so i joined in oa and then we went public a little bit later yeah so so walk me through that transition because there's a lot of companies that you know the founder is not the one that goes from zero to one is not the right guy also or gal to take it public right so what's the relationship like with the actual original founders were they supportive of this move was it more hostile how did it work incredibly supportive i mean the one thing that i actually learned is alan matthews and natasha kanakas and a guy named chad loader who was the founding team um they had this great model of what in retrospect i thought about is sort of like stewardship um and they were saying like their core purpose is the mission of the organization so our core purpose was how do we actually take the complexity of security so how do we simplify security overall um through analytics and automation and their whole mission was that listen you need the right people in the right jobs at the right time and so when they made me see ceo allen became chairman toz is still here as our cto um and then chad went on to go start another set of ventures but when i became ceo allen's feedback to me was just like hey take the company to the next level but also have the self-awareness to recognize when you're a steward for a period of time and to actually inhibit the mission and if you're not supporting the mission or someone else can do a better job of it then it's your job to actually find them and help bring them in uh and i think that's just such a great mentality about how to think about things that's interesting so you you closed out i believe uh 2018 in terms of arr at somewhere around i think like 240 250 million around that people can look it up but 240 250. but i do remember the growth rate year over year was something like 30 in terms of ar growth rate year over year is that right so our ar growth rate actually ended the year last year over 50 percent and so we had really accelerated our overall um ar growth rate uh 53 percent yep exactly let me ask you a question being a publicly traded uh kind of ceo we've had maybe seven or eight others in the sessions that are publicly traded i always like to ask this question do you believe public markets understand like deeply what expansion revenue means and if all your growth over the next 12 months you didn't add a single new customer but you grew 53 again year over year off from expansion would they value higher or lower because of that it's a good question depends on what evolution i would say public companies uh and public investors um have different levels of sophistication when it actually comes to this in fact you know one of the interesting things for me is that i found different types of investors have different levels of depth and understanding this transition what i would say for where we are right now our investors very much are looking for and are invested in rapid 7 because of the expansion um because of the expansion capability and so if you think about what most of our investors are talking about is they're like you've actually steadily grown your um renewal rates...