How Rocketrip CEO Dan Ruch grew to $12.6M revenue and 70 customers in 2019.

hello everyone my guest today is dan roosh he started off many years ago and called 0708 at aol and publisher services then moved on to tremor video before landing as an eir at a venture capital firm and then eventually jumping out in 2013 and launching rocket trip which is helping you get your employees behind managing and keeping your travel expenses low dan you ready to take us to the top i am all right so tell us about the company um and kind of who we should think about you with you know a lot of folks have used i think companies like travel park many have used you as well or is that the right is that the right way to think about you guys in that space no not really so we started rocket trip the thesis here is why do people make the decisions they do and how can we make employees think differently and if we can create models where employees are as equally invested in company success as the company itself then everybody wins and so rocket trip is a business travel reward platform that partners with the largest online booking tools and travel management companies in the world companies like concur like get there like carlson and bcd and others um to inject behavioral change into existing travel management solutions we're not competing with the industry and our vision takes us far beyond the boundaries of corporate travel into any area where employees have discretion over the choices that they make areas like health care and corporate citizenship community service etc and okay so how do you you're essentially in the business of making a company dollar have the employee when they're spending it make it feel like it's their own dollar right so that's a hard loop to kind of tie back because even you know it's ideally not so how do you walk me through the incentive structure the psychology behind how you set the thing up sure so so companies have policies and let's talk about travel policy because that's what's relevant right companies have travel policies for the same reason that governments have laws because if they didn't chaos would ensue right and so we need as human beings we need laws we need the boundaries to tell us what's appropriate behavior within boundaries of permissible outcomes right so uh inside an organization i have a dress code i don't really care what my employees where as long as they are you know coming to work appropriately same thing with travel policy i don't really care what employees spend or how they travel as long as they're spending it within reason and that's not a problem but it's definitely a sub-optimized equation and so if we tell our employees that over six hours they're allowed to fly business class and we've got a deal at the ritz carlton and they can stay there then why why would they stay anywhere else we haven't made it worth their while right we haven't sat down with them and said hey look you know there's a there's a base level of behavior that we expect but if you're willing to go out of your way to help us um that's really great and we'll make it worth your while same reason why our sales teams operate on commissions and commissions have acceleration plans on them why because there's a base layer of behavior that we expect out of our teams anything above and beyond they should be rewarded for and so rocket trip is really no different than a commission but it's a commission based on savings not on earnings so our ability to go to a client say hey look this is a way for you to have a conversation to your employees say we're not going to force you to not fly business class our policy allows business class we're not going to force you to stay with a friend or state an airbnb or share a room with a colleague but hey if you're willing to go that extra mile and again we're not forcing it but if you know up to you and if you're willing to do that for us we're going to make it worth your while the way we're going to do that is rocketrip is going to predict what your trip would have cost had there been no motivation to save and if you save money if you go out of your way to spend less then half of every dollar you save goes back to the company and half of every dollar you save goes back to you to invest in what you think you want to invest in what matters most to you do you care more about business class or your kids tuition so dan just to be clear let's say that i'm going on i work for a company that's using you guys um i'm going on a six-hour trip uh your algorithm or whatever you use calculates that that cost uh is going to be somewhere around i mean it's up 2 500 bucks um i then get scrapping and so you know what i'm going to say it's a 20 a night hostel on hostelworld.com i'm going to uh sit like in the back seat next to the toilet on the airplane that actually doesn't recline because it's right up against the toilet and deal to smell the whole trip your base and let's say i do it off for 1500 bucks you're saying that delta of 2000 or sorry of a thousand will be split 50 cents back to the company and i basically get a free 500 check for saving money yeah kind of the the one exception there is that we work with a company to establish the ground rules of what appropriate behavior is right maybe the company decides that they don't want you sitting in the back of the bus by the bathroom and they don't want you staying in hostile world because it's not safe so they're not willing to reward you for that behavior but they are willing to reward you if you're allowed to fly premium economy for flying coach or if you're allowed to fly business class for flying premium economy and they are willing to allow you to stay at an airbnb with discretion right it has to be an approved for work airbnb hopio location so so the company decides the parameters and our clients are large multinational fortune 500 they decide the parameters under which they're willing to reward certain behaviors and we power that reward system and how many of those folks are you working with today we've got 70 enterprise customers about 70 okay and then put this so so we talked about how you help those folks save money or their employees get incentivized what about yourself what's your guys's kind of business model is it pure play sas uh it's pure play sas for the most part yeah we've got a reward business on the other side of our business which is direct to employees but the vast majority of our the driver of our business is sas okay so you know most sas companies are billing around you know number of seats feature-based upgrading and then usually some like data and utility-based upsell as well are you using all three of those one or two or walk me through how your pricing typically works the base price layer is volume of travel under management so if a client spends you know 50 million dollars on travel a year through our platform they would pay one price if they spend 100 million on travel through our platform they'll pay another price okay got it so it's okay got it so the measurement is not miles traveled anything like it's just dollar vault you know last year's travel expense times you're probably gonna spend 20 more this year so if you're signing up with us today forecast 70 million a budget and we're going to price against that okay very cool um and so um i guess can you give me any can you give me any indication kind of how you price against that i mean is it are we talking like a thousand bucks a month on average or a hundred thousand bucks a month on average it really depends for every client's very different uh but generally speaking it's between two and three percent uh per million so it's between twenty and thirty thousand dollars per million of volume we process annually yeah okay very good so i mean by the way you know you asked an important question there so there's an important distinction sure it's based on volume so it's not necessarily it's annual or at the point in which they exhaust the volume they purchase and they purchase more yeah no look by the way there's a lot of sas companies that struggle with pricing because they can't figure out what utility metric to tie it to you're the opposite you know exactly what the utility metric is you're tied directly to it so every additional million bucks you can get a company spent through you you know which is a reflection maybe of your cs team your onboarding team etc drives direct returns for you instantly quickly you don't have to wait for an annual renewal to pop up it also drives direct returns to our clients because they know they're saving money against everybody of course of course it's all tied together now do you have those cs reps because you again you have all the incentive searcher line do you have cs reps and if so are they quota carrying you do have cs reps they are not quota carrying but they are compensated for gold based on retention so how do you do so we've had a lot of companies on with you know pushing you know 100 million bucks in arr and this is becoming a trend where the cs folks the engagement folks more and more are being somehow there's not a quota they have to but there is some kind of incentive based on driving expansion revenue or expansion usage etc can you teach us here i mean everyone is doing it a bit different now but how do you set up the kind of upside for a killer cs rep that's driving great good new engagement saving you money saving the company of the customers money etc it's a great question uh and it's actually one we're still struggling with to be honest what we think is that if a client is a client that is not a expandable account right remember for us it's capacity of volume so if they've already purchased the maximum volume they can purchase because they just don't spend more on travel then the the account is entirely handled by the cs team and they are gold on retention and their goal for that account because there's no opportunity to upsell would be 100 retention and the bonus structure applied to it and they've got a cohort of clients they manage their own book of business if the client has upsell capacity in it then they are gold against that upsell but the upsells is kicked back to our account executive team to handle the sale and we again the the the csns have a bonus on their plan uh which is gold primarily on net dollar retention so there is a target of upsell in each of the accounts that have upsell potential and then for the accounts that don't it's a it's a maintenance model where there's some allocation of churn expected but but for sure net dollar retention should be at 100 that's super super interesting um all right let me ask some questions around here to try and even make it more clear so it sounds like you're because you have such strong upselling your average kind of net retention annually is north of 100 right your your churn is more than made up for by expansion well it should be well i mean yes sir yes or no you're it sounds like you are above 100 sounds like you're driving expansion revenue well we're privately held companies i'm not going to talk about specific metrics but by virtue of the clients we are signing up yeah we should be expanding far more than we are contracting especially as we move up into the large enterprise well yeah but by the way there's a lot to learn by someone that i mean that's what you expect but a lot of companies don't start out that way they're they it takes them many many years to figure out expansion revenue so i'm i mean that's why i'm asking it sounds like you're actually killing it in that regard i'm trying to learn from you how you are driving expansion to cover up any churn you have i get exactly what you're what you're trying to get at and i'm happy to help and talk about it we are not going to discuss specific private metrics because we're a private venture company okay are you are you above 100 net net revenue retention can you share that or no i'm not going to okay most people i mean just because i mean most people no reason they wouldn't share that as if for some reason they weren't there yet which is totally fine as well most people have their own programs i'm not going to share that information but i'm happy to chat with you about how we think about upsell business and our expansion revenue and how our accounts are performing well the reason i was going there is because any company that wanted to copy what you're doing in a different vertical and structure a cs rep kind of incentivization plan you said that it's really built around a churn that you expect right and then you have to measure what the current what that cs rep is doing above the churn you're expecting so i was going to build to that but you know that is basically you take you take a customer success rate and you look at their book of business you'll understand which accounts are not doing well why they're not doing well what we can do about fixing that and if we can't do anything to fix that if we anticipate that then you build that into their book of business you build that into their model for example if that client is leaving a partner or a bar so if they're leaving concur there's nothing we can do about that but we need to make up that revenue somewhere else and so our expectation we set a retention goal for each of our css that that retention goal is based on their book of business and what we expect out of those accounts in the coming year and if we see a lot of upsell accounts in that book of business then their retention their dollar retention metric is going to be higher than the net dollar retention metric of a csm that's managing a book of business where there isn't as much capacity for upsell but is there a tool you've built to measure what what you think the expandable opportunity is per cs rep or is this some internal tool you built or a tool you buy that my customer that my audience can buy too there are tools i mean game site does stuff like that to tango i think does stuff like that we don't we do it internally we built it ourselves okay and just to be clear there the the the expected churn and the expected potential expansion and each of these kind of books of business it's different for every single rep it's not it's not the same it's based off the accounts you assigned to them sorry you were quiet there what it can't be like i'd like it to be but well it could be because you could actually sort your leads as they come in when they close you could actually sort them per cs rep so that they're equal by upsell capacity yeah or churn or churn well you don't you don't sign up accounts knowing they're going to turn right you sign up accounts with the hope that they're all going to expand or at least stay at 100 so you can't distribute accounts evenly based on insurance sure you can expand when someone comes in and you see they've only been on concord for one month that has a higher likelihood of churning and someone's been on concord on your partners for three years all i'm saying is do you actively distribute the liability churn liability across your cs teams and in that case actually their churn expectations the expansion expectations would actually be basically the same per rep yeah you think but that's for in our business it takes us at least a year six months to a year to understand sort of what true health of an account looks like exec sponsors come and go the platform deployment of the first 90 days means a lot you know it takes a while to learn how these these accounts get up and running and work at full scale yeah fair enough hey put all this on a timeline for us real quick when did you launch the company what year 2013 2013 and kind of where were you at that point it sounds like you were an eir why'd you decide to go back to the the you know leave the dark side uh you mean the dark side being venture capital i mean i would call a lot of vc dark side at this point there's a reason people are moving away i i love our investors but but yeah no i i got more right well i joined an eir with the intention of starting a business so that was always the plan for me yeah what what was that was an incubation project out of gennacast ventures and and i built it with a team at comcast so i see sort of a joint project and then how much raised to date i think 32 million and have you chosen a leveraged venture debt at all or have you been typical just no it's all equity you use silicon valley okay have you found so there's a lot of ceos i speak with that are wondering hey should they have a more you know more mix of debt have you found the svb line to be effective or have you really not touched it no hell yes it's effective i i don't understand why you wouldn't use venture debt especially with interest rates where they are right now it's effectively a you know the counter argument to veteran debt is that the business goes sideways the bank owns the business my perspective is if the business goes sideways you've got a lot of other problems than the bank you know i think that it is what it is this is a high wire act so anything we can do to extend our runway we have a great partnership with the team at svb that's very transparent is a good thing so as long as you can maintain that relationship i think ventured that's a very financially recruiting way to build business yeah and what's team size today of rocket trip employees you've got about 70 in the u.s uh a large bpo in manila and a couple of folks actually in argentina okay 70 folks and sorry vp i assume that's just a virtual dev team epo yeah business process outsourcing so mostly developers though no mostly like back end back office task manager got it interesting okay very good um so 32 in the company 70 people plus that team and folks in argentina um helpful helpful helpful talk to me about i mean if you can um volume wise so last year about how much in terms of travel dollars put through your platform and have you passed the billion dollar mark uh we have not passed the billion dollar mark in travel under management uh we're in the sort of hundreds of millions range right now i got to say your big thing you know fintech financial it's it's aum you're kind of tum which is maybe a cooler acronym it's just travel under management is there anyone else kind of modeling and pricing around like direct to that space travel budget under management well i think yeah i mean the travel agencies the major ones right the bcd cwt american express america's president has 25 billion under management um and they're one of the larger ones and that that's how the corporate travel industry manages what manages sort of spend it thinks about growth do you think you i mean do you have a billion in sight do you think you pass it this year or next year or is it further out you think uh we don't it's an interesting question travel under management is not something we actively focus on as a metric that we we think more about current volume in arr because reason for that is is really our focus is on capturing 100 of the spend that a client signs up for so when we deploy rocket trip we deploy technology inside of their ecosystem um so if a client spends 10 million a year of travel and they purchased 10 million our goal is to capture 100 of that 10 million and it can be a work in progress to get there right so do you refund if they don't use up the capacity we don't we don't refund but we also don't charge them for the full capacity so they spend 10 we wouldn't charge them for 10 we charge them for five and then the upsell would happen when they exceed five in six or seven or eight months sorry i was assuming your billing terms were all up front they tell you 10 million their budget for the year they pay you two to three percent of that today it sounds like that's not the case or are they what are they paying monthly no they pay they pay annually so they pay up front in advance and then again we we typically under promise so uh we will sell them not 10 but we'll sell them five we'll put the full 10 million through it and then in six months time there'll be an upsell or maybe it takes seven months or whatever it is but we start slow with the intention that we don't have to refund because they end the year far surpassing what they originally purchased and they put in a position where they're purchasing more as they go oh okay so 100 of your accounts last year process more through you than what they told you they would i didn't say that that's the goal though okay yeah so that was my question right i imagine there's cases all the time where people just over project they think it's going to be 20 million it ends up only being 10 million not because of you but just because they didn't travel as much as they thought so what do you do in the cases where they pre-paid for more than what they used yeah it doesn't happen all the time um but in the cases when that does happen it depends on the relationship the client depends on it okay agreement it depends on uh how valuable our business is to them how valuable their business is to us and it's usually just a human conversion yeah very good all right well good i mean and by the way you know i don't want to you know you're obviously private i don't put any down too much here but if you're in a couple hundred millions of spend let's call it 700 million and spend and taking two to three percent of that i mean it puts you north of a 14 million dollar run rate at this point are there any other services or software you're selling on top of the percentage of spend or no uh i'm not going to comment on on your math um well my math by the way i'm just taking your numbers you said couple hundred million in travel i mean you already said two to three percent so i don't want to make anything up if it's inaccurate you can correct it but you already said those two points uh i'm not going to comment um and in terms of other stuff we're selling not today we have an implementation business so there's implementation services revenue uh on top of the business but that's um that's the other side of our yeah when do you feel like you'll get leverage back in terms of with your vcs usually that happens once your arr passes the total amount you've actually raised what do you mean leverage back i mean there's a lot of people that in models like this where for whatever reason usage or growth or whatever is slower than what they expect and really in order to get back leverage through the next round of funding you've got to get closer to a one-to-one ratio between arr and funding raise and i'm just curious how you see yourself more abreast you know getting there faster is it just more travel spend under management i don't i don't i don't i i've raised three rounds of financing i've always gotten leverage from our investors i i don't think that having to generate arr in excess or in any sort of ratio to what we've raised uh matters in terms of the added value our investors pay to us so we've got a great board they're very they're very supportive i mean i'm going by the way from when i had jay from had last scene on who who did was very effective the qualtrics team and ryan came on zoom and eric came on i'm going from what they told me which is they had the most leverage when funding the ar was closer to one to one so maybe you have some special advantage because you're an eir or as a spin-out but that's all i'm asking well i'm i'm trying to get to your definition of leverage you mean when i can control the board versus no no leverage in terms of you you can go out and raise additional capital at a round that you feel really really good about and usually that comes when again your ar catches up to the total amount of funding that you've raised no i actually don't think it has anything to do with when your ar catches up to your capital raise i think you can go out and raise money and evaluation that you're excited about when you hit your metrics and whatever those metrics are and if your metrics if your metrics on the last round projected that your arr when you got to raise max would beat your your current amount of investment in and you miss then you can't raise a valuation that you're excited about well dan sorry just to be clear i ca i have 2 000 data points of other b2b sas companies i've had on the show with more than a million bucks in revenue although up to 180 million bucks in revenue and some that are above that ceos have more leverage when they are to funding ratio is much closer to one to one what you're saying is yeah but if the expectation isn't that that's fine you'll still get a good valuation but still you have to have ar growth apparent you know pairing two again the volume you've done the reason i'm the only reason i'm pushing you on this is because you gave me a two to three percent number right in terms of per million through the platform you didn't send many hundreds of millions to the platform not a billionaire i then use your numbers you told me and put it out there and your response is no comment so i'm getting a sense that something's not accurate i want to try and correct it before we end everything i've told you is 100 okay great so two to three percent of spend and if you're doing many hundreds of millions in spend you can essentially take if you think it's 500 million bucks multiply by two or three percent and that puts you again at what that run rate would be that could be yeah i mean you're not taking account a lot of other things like discounting for multi-year agreements and early pricing models and a lot of other stuff but it doesn't matter oh no dan it does that's exactly why i asked i assumed i was missing something so i asked you what you take on average you said two to three percent and you're saying sometimes it's under that sometimes it's above it you know you're still not missing anything um but again the point is i is what you're saying that we've raised 32 million bucks we're probably not at a 32 million run rate right now and how do our investors think about that no i'm more just making sure i'm not i don't want to inaccurately represent um how you're thinking about building the company i'm trying to understand if you see most ar growth coming from sure no totally get it so the way i'm thinking about building the company is being very thoughtful about post money valuations and returning value and investment back to our shareholders including our employees but also our board members um and at a growth rate that makes sense for our investors and the business here and i think we're doing a really good job yeah are you still at the fret i mean are you still the place where you feel like you can double your over your obviously gets higher with bigger numbers but is that still achievable yeah just at this stage anything's true yeah very good and then last question i assume you're burning capital here because you've raised and obviously you know if you see growth you're going to burn you're burning right not profitable we are not profitable okay great very cool all right let's wrap up dan with the famous five number one what's your favorite business book wow that's on the spot i just room ownership which i thought was awesome yeah jocko it's a good one number two is there a ceo you're following or studying elon musk has always been a panel you've got like his flamethrower on your desk pinned up on the wall don't you you strike me as that kind of guy it's a compliment by the way it's compliment all right number number three what's your favorite online tool for building your company uh honestly the the google apps right now are the best number four how many hours are sleeping getting per night i've been a lot of sleep eight oh good very good and what's your situation married single kiddos married two kids oh nice and how are you take us home last question what do you wish your 20 year old self knew how hard this thing is [Laughter] guys it's freaking hard coming from rocket trip processing hundreds of millions of dollars in travel spend they make money directly tied to that usage metric that value metric which is critical anywhere between two and three percent per million through their platform 70 folks full-time uh in the states with other teams around the world 32 million bucks raised as they look to scale across their 70 enterprise customers founded in 2013 as a spin-out from a vc firm dan thanks for taking us to the top nice to meet you take care