Rock Contentrevenue, valuation & funding

hello everyone my guest today is diego gomez he is the chairman chief executive officer and founder of rock content a sas blogger researcher and evangelist rock is among the fastest growing sas companies and a global leader in content marketing solutions diego is also an endeavor entrepreneur angel investor and his spare time he blogs at sassholic.com diego you ready to take us to the top i'm ready i'm excited to be back all right let's not bury the lead here we're going to get into a product in a second but first you said fastest growing sas company so what are you at today in terms of revenue and where were you a year ago so rock has been in a trajectory to really lead the content marketing category and we've seen really fast growth over the last few years last year we closed at around 13 million this year we're expecting to close between 25 26 and where are you today in terms of run rate around 24 and something wow so because it's because of covid you're only planning to add about a million dollars in new er between now and the end of the year yeah we're expecting one to two million and we slow down a little bit in sales in the future okay there you go so there you guys have it fastest growing we just quantified it diego let's back into the product here for a second you have four critical components to the business tell me about the products and the product lines and how you help customers perfect so content marketing is a complex and challenging process for several companies we have four main offers to help our marketers tackle that with a complete suite so our we have a talent marketplace where we have eighty thousand three freelance creators uh it's called visual visually visual.ly there you can find talent to create infographics videos uh pdfs ebooks it's a very important piece of our ecosystem we also have rockstudio which is our content marketing platform it helps you plan your strategy schedule your content distribution measure your results we have a digital experience platform based on wordpress it's called stage it's for helping customers build high performance websites and content hubs and lastly we have ion which is an interactive content platform which helps customers with lead generation and really rich data-driven experiences for their lead generation processes and what do customers pay on average for this suite so not all customer buys all products our average says acv is around twenty thousand dollars a year okay so there are a few hundreds of thousands but the the average is around twenty thousand okay that's very different than when you came on back in i think it was july of 2018. your ac then was just about two thousand dollars so have you guys really moved i mean significantly at market significantly like we really shifted the organization focus to scale and enterprise sales team today we have two sales teams the velocity team which focuses on smaller businesses in mid-market and the enterprise we call it solution sales team which is the fastest growing right now okay and how many sales reps do you have that are full time and carry a quota i would say around 40 50 i don't have the exact number but it's that's right and what's the total team size today everybody we're around 400 people spreading four countries wow okay 400 people 10 countries 45 sales folks how many engineers around 100 people in product okay got it so 100 are actually writing code yes uh i'm also accounting for product designers this is the whole product in engineering organization it's around one-fourth of our headcount today i see interesting so this is not an easy transition right again about 25 months ago you had an average acv of 2000. today you have an average acv of 20 000. does that mean that you let a bunch of your customers from two years ago churn you had 1500 customers two years ago did you let the cheaper ones paying smaller amounts turn off yes we actually evolved for a self-service model in a kind of self-selecting on the smaller business segments uh kovi was a big accelerator so if we look at january 2018 we were around 60 percent of our revenues were coming from small business if you look at january this year uh around 20 and covid actually increased our churn in the smaller business segment which we were able to replace it for enterprise customers so kovid brought the small business segment to around 10 percent and we replaced that with enterprise customers so how many total paying customers do you have today uh a little north of 2000 2000 okay got it fascinating so i mean can i take 2 000 times a 20 000 acv i mean i'll put you like a 40 million dollar run rate so you're not your acv is closer than like 10 or 15 000 on average oh it's because i have a lot of customers that are not sas subscribers like they use only the marketplace and our business has the sas component in the marketplace component which is transactional so people buy an infographic uh an article and i would say when it comes to sas customers the number is significantly below that i don't have the exact number in front of me what percent so you finished 2019 i think you said 13 million in terms of run rate what percent of your last 12 months revenue was marketplace or transactional versus pure sas would you say it's slowly decreasing but it's still around 40 percent of the total revenues so we have around 50 percent says out of 25 million we have around 12 to 13 million in sas we have around uh 40 of that which would be around 10 in marketplace and a little 10 percent approximately in professional services sorry breakdown again 50 sas 10 marketplace and 40 percent like someone buying one infographic no forty percent marketplace and ten percent professional services i see got it got it and what's the profession what professional services do you offer um mostly content hub development interactive content experiences creation we have expert advisory services for large enterprises that want to create a content marketing program from the ground up we have a very strong uh professional services team taking a very conservative approach interesting okay do you get hit from your investors on stop doing this professional services do more sas uh no i know it never happened with us because we started in the early days doing more services than anything else i think the first one year and a half we were doing the services in the marketplace piece and we started building up sales revenues uh in the middle of the journey uh i actually see professional services as a great rnd tool to revolve the product and i love the services team and the services revenues and the investors are super aligned with us and that how much have you enabled us to be super kept efficient and uh increase retention services drive rotation up it's been a meaningful component of our offers let's go to churn in a second but first how much have you raised a date around uh uh 11 12 million dollars 12 million okay and so would you i mean can we look at other companies sort of in the space that have also raised i think these are what are these companies like contently would you put them in the same category as you i would say yes there are intersections with contently news cred these are companies that uh they raised a lot more capital but they are on the same space yeah contently has raised 20 million skyward i think is 60 and news credit is over 100 million uh they've got they've got cash to play with are you in any acquisition talks with either any of them no not at all like we i see these companies they hyper scale too early my personal take and that comes with a cost they didn't have the efficiency we we always valued um i don't see a clear path for any consolidation with any of them in the short term maybe in the future but we're not pursuing a direct competitor move in the next let's say 18 to 24 months many people would say you're like the hubspot of brazil but you're also now getting and really good at content uh mark roberts is also an advisor to you so you have strong dna ties to hubspot would you sell the hubspot if they gave you the right price no no we are really committed for the long term uh actually uh marco roberts is a mentor for matt dawyan our cro came from hubspot so we are very inspired we have a deep admiration for what we've built our sales and marketing machines were are similar to there so i think that's one of the uh we are a key partner we really like to work together with customers yeah i in prep for this i reached out to marcus and mark what do you think about these guys he said nathan look whether you're in boston boca raton or brazil applying these sort of fundamentals of a sales methodology is really important the buyer journey the sales process qualifying matrix to a world-class team as a recipe for success and he goes on and said um adding that to a business whose mission you guys is firmly grounded in customer success rock is on a course for super interesting success in this content first world so he's clearly a big fan of what you guys are building yeah i i'm a big fan of his his book uh the sales acceleration formula is one of my favorites uh our cro matt was coached by him and worked directly with him so he is a big inspiration when we spoke last week he he's always providing advice and and and helping us with strategy and direct strategy and direction you're talking about churn earlier and how you like professional services as an r d tool but also to retain customers your network attention is higher when you put professional services on an account what is your revenue churn uh annually today so last quarter we we closed that uh annualized 94 so that's around half a percentage point mostly uh i'm sorry retention yes in your life so around point a half a percentage point uh monthly we are working very hard to improve that driving nps up uh going up market it's a combination of different initiatives that we are being able to this month by the way was our first month with 100 revenue retention across all our sales products we actually got negative a few points it was pretty exciting wait how did you do that i mean we're in the middle of a crisis you're telling me not one single of your 2000 customers paid you less they did no downgrades or anything you lost no dollars of revenue [Music] no no i'm saying net revenue retention so uh not gross yeah in terms of uh we had a lot of expansion in cross selling because our business has a suite of offers the journey is the customers typically start in one product more often than not a cheaper product like stage which is a simple website and content hub hosting platform and then they go to studio to ion and gradually this the cross-sell machine is picking up fast i'm really excited about that that's my name can you quantify that i mean do you know what your expansion is annually on annualized basis um i do i don't have this uh in front of me right now but i can bring it up in in one minute from now i mean it sounds like if you have point five percent right monthly revenue churn your expansion is at least point five percent if you hit 100 net revenue retention last month yes now it was last month was a massive cross-sell move for us so i think we were negative three percent uh mostly true cross-selling our interactive content platform to all customers um let me see if i can find expansion rate i mean while you're doing that while you're while you're looking for that three percent expansion last month and point five percent churn gives you basically net revenue retention of 102.5 percent so obviously if you do that annually and do that every month that's basically 125 net retention on annualized basis yeah but last month because we are introducing this new uh product i am across the board to our customers it's accelerating faster now i don't expect to sustain 125. my personal target is to close the next year closer to 110 which is the median for public traded sas companies my expansion rate last month oh where is the consolidated numbers here um was around six percent in latin and two percent in the u.s that's great talk we're running out of time here let's talk top of funnel for a second what are you spending fully waiting to get a new twenty thousand dollar your customer um today it's it's very depending on the geography uh we have lower tech in [Music] latin america than we have in north america but we are having a payback of three to four months considering that a significant number of deals are up front around 70 of our contracts are up front the cac is typically between 12 to 14k us this is blended global average got it so so twelve thousand dollars to get a new twenty thousand dollar a year account on a blended global average that's about a six month payback period again talking averages here is that right yeah it's actually i would say it's closer to seven but because we have a significant up number of upfront deals with immediate payback this number goes down to closer to three months very cool let's touch on acquisitions real quick you've acquired two companies are you looking at acquiring additional companies in the future yeah i think acquisitions are a tool that most entrepreneurs and sas companies do not leverage often i believe there's uh if you find the right strategic partner you should pursue that both the acquisitions we did today were very successful we see ourselves as a company who will pursue a both organic and inorganic growth strategy we are looking for business that have a strong cross-sell opportunity to our customers or consolidations in some of the spaces that we are acting so you bought scribble live did they have real revenue when you bought them or was that more of a tech acquisition they had real revenue they had their own iron the interactive platform came from them uh i am product has around uh six million dollars in annual revenues uh i think a significant more than that but that was back then so when you bought the company they were doing six million a year in revenue they also had visually which was a scribble live product doing around 2 million if i recall correctly so that company together was doing 8 million in total revenue how did you come up with the money to go buy that that company was like an all stock deal that's why we raised uh we we raised uh 10 million dollars to pursue this acquisition the consideration was a mix of cash and stock unfortunately i can't disclose the specifics but uh uh we raised for pursuing this deal yeah so to say anyone doing the math if the company was doing eight million in revenue and you're saying you wouldn't raise 10 million to the deal i mean there's no way they sold for one a little more than 1x revenue what you're saying is there's also some stock options in play as well that juiced the deal for them yes yes there were we had some delusion and especially for key members that remained with us we had a very strong team joining us very good okay um and so if someone's sitting right now and they're going i wonder if diego would be interested in acquiring my company what's like the perfect fit or is there a specific sector you're looking to acquire in right now we really like any space that is adjacent to content marketing so there's not a specific focus right now but all the pieces that touch the content creation distribution analysis and hosting are interesting to us i cannot give you a little more color on that but we we get a lot of opportunities in the pipeline and we're always observing what's out there uh we really think about our strategy is to own the customer in a sense that we want to provide every need that they have when it comes to content marketing so we want to ex consolidate a few categories like vertical marketplaces that ties or let's say audio other skills that we don't have on our talent network today and products that could match the same customers needs would you ever go buy a network one of these networks you can go hire writers to create content for you or no you want to stick to pure sas acquisitions i would consider definitely uh visually for instance which was one of the scribbles lives products was acquired because we didn't have a tele network in the north america back then now we have this skill and we have a large pool of talent we would consider looking at uh other marketplaces like that that would add new skills by new skills i mean let's say an audio marketplace or a specific language a spanish marketplace or german but we are mostly focused on sas guys there you have it diego let's wrap up here with the famous five number one favorite business book i would say the outsiders the outsiders that is a good one number two is there a ceo you're following or studying i am in a warren buffett phase number three is there a favorite online tool that you use to grow your company i would say that's a hard one i would say gmail is where i live but it's not a favorite though it's pretty much very original answer there diego all right number four fireflies. transcribing my meetings i'm loving this though there you go number four how many hours of sleep to eat every night uh five six when i slept a lot and what's your situation married single kids married no kids no kids and how old are you i'm 34. 34. last question what are you wishing you knew when you were 20 that's a hard one for me uh i wish i knew uh uh how to better lead and communicate uh by inspiring people and by setting the example and tone uh i am an introvert so i'm working a lot of my personal communication skills and leadership skills that's something i think it's an ongoing journey forever but i wish i stood started studying that earlier on guys rock content dot com growing fast 2018 four five million dollar run rate in 2019 they finished a 13 million dollar run rate and this year they're hoping to close at a 24 or 25 million dollar run right currently already at 23 24 million in terms of run rate healthy customer race of 2 000 customers a portion of that are also paying for professional services they're scaling nicely 12 million raised a lot of that was to fuel two acquisitions they did he's still looking for great acquisitions 400 people on the team 100 engineers 45 quota carrying sales reps networking retention last month was above 100 for the first time and they look to continue to scale and drive growth a lot through expansion and cross-sell opportunities diego thanks for taking us to the top thanks a lot one more thing before you go we have a brand new show every thursday at 1 pm central it's called shark tank for sas we call it deal or bust one founder comes on three hungry buyers they try and do a deal live and the founder shares backend dashboards their expenses their revenue arpu cac ltv you name it they share it and the buyers try and make a deal live it is fun to watch every thursday 1 pm central additionally remember 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