Ryverrevenue & funding

hello everybody my guest today is Pat Sullivan he's been building software for over 30 years currently walking working on a company called River spelled ry ve are calm along the way he was named one of the most 80 most influential people in sales and marketing history alongside Henry Ford Walt Disney Jack Welch and Bill Gates by sales and marketing management he's also twice named Ernst & Young as Entrepreneur of the Year for both act and sales logic software Pat are you ready to take us to the top I am indeed all right so real quick out of curiosity so we've had both those guys don't act and saleslogix CEOs on were you the early CTO of both those companies well I've never been a CTO I I don't suitor myself a technology guy although obviously have to but no I was a CEO founder of both of those companies oh I see got it very good when did you when did you leave act and in ax case I was a co-founder with my community in Dallas yep so when did when did you leave act we sold it to Symantec in 1993 and then what after I started saleslogix and we went public we actually bought it back from Symantec in 1999 so on both act and so logic at twice that's so funny and when did you leave sales logic cos logics got sold to Sage software in 2002 okay and then so it was 2003 the founding year for River no sometimes it feels like it was but no River didn't you started to tell about 2012 okay so there's there what ten years you backpack through Southeast Asia what was Pat doing no I I did a couple of stints being CEO of other people's startups and so this is actually River is actually my fifth venture-backed startup where I raised money for all five of those companies I did try to retire twice and I think I found out I wasn't any good at it it makes good sense so so you launch your own coming to thirteen tell us what River does and what's the revenue model how do you make money yes River is in the team communication project management space competing competing since it's a combination it competes in a way with slack with Trello with Basecamp products like that and and pata so each of these guys some of them have you know multi-billion dollar valuations how do you how do you wage wars on all these fronts well you know in any space particularly their new space there's never just one winner and there's always a way if you really work at it to differentiate and find a place where they're not as strong as they as they see and we have done that with with River and so walk me through you know I don't go to on every customer cohort but on average what's the customer pay for this um the we have a $99 a month unlimited version meaning unlimited everything users guest storage so it is a flat rate of $99 we also have a $49 starter package if you go for 12 users or less ok so what would you say the average again pay you know payment per month is $49.99 somewhere in between well the average revenue per customer is just over $70 so and most of the users are tend to be the 99 we also in the last days have reduced Enterprise version which includes a single sign-on and a number of other half price features and that is priced based upon having a conversation with a large company and determining the value of the product for them mm-hmm and and so you found it obviously in 2013 have you raised capital and if so how much we have we've raised actually 13 million dollars and that has been over a space of the last six years yep so you mean you sold act to semantics you know then obviously takes a logic public I think that brought him thirty million bucks on day one people are going way twice well I think I like Pat with his kind of history why is he need VC money he should just you know give him the finger and do it himself well why raise money at all you know I learned long ago that entrepreneurs the second time that they start a company after selling they make the mistake of funding their own company because because now that they've sold a company they're really smart yeah in and there's a validation that you have to go through in getting others to invest along with you a wise man said you should never fund your own startup just you have to have that validation that that you're on to something that other people will believe along with you yeah that makes good sense and also it you know it puts the focus on your ability to convince other people to get behind what you're building right and they gotta put money behind it absolutely all right very good 2013 launch date we're now four five years later what have you scaled to in terms of total customers um we have nearly a million users growing very very fast in in terms of number of customers it's it's in the thousands and like I said growing very nicely can you give me a range there so can we say between a thousand and ten thousand is that fair oh I'd say between a thousand and two thousand at this point okay great so between a thousand and two thousand so if we stay conservative they're out a thousand times at $70 price point you guys are north of seventy grand per month right now who's accurate correct how do you broke with a million dollar a hour mark yet very close now is it to say that's a big one is a probably now you know you've had a lot of big wins in your life do you still drink champagne when you pass you pass that million dollar rate then you know the first million dollars is always the hardest to get and yes I definitely will pop the cork when that happens that's good now how do I have to push it here a little bit because someone listening to his numbers are going to say well no wait anything he's raced thirteen million bucks and it's taken him four or five years to hit a million dollar run rate that's actually not great growth how would you respond to someone who might be thinking that well you know a lot of people forget that this is hard you know that you know we look at the outliers the the companies that you know in their first year they're for second year they're there an overnight success and that generally doesn't happen by far the majority of companies struggle and River of all my startups has been the most difficult and you know we have the dubious distinction of having to compete with slack who is you know they're an all-star and they've done a lot of things right and you know now have raised over a billion dollars and more power to them so so we we entered a space not knowing that they were going to be a phenom phenomenons and so it's taken some time to figure out where we could differentiate in a significant way mm-hmm who launched first you were slack oh slack easily by two years but okay God because you you were okay so you were 2013 they were 2011 [Music] while we started in 2013 we didn't shift the product until about 2016 oh wow um and um like them actually they built something else before they built slack we built something else before we build River but but they were out a year and a half two years shipping when we launched River got it okay so I mean actually generally available yep you're flirting with a million bucks in ARR today call it 70 80 grand a month in revenue give me a sense of growth where were you a year ago in August of 2017 virtually zero Oh got it okay so all the growth has come over the past twelve months correct okay great talking about churn its protocol at this price point in this sector what's your turn today and how do you think about it well it's actually below industry norms it's it's slightly less than 1% of our customers go to ensuring per month yes ok great what is that now do you have expansion revenue opportunities have you gotten you know above net you know 100 percent net revenue retention annually or no um I'm not sure I understand the question you mentioned you had to price planes one most forty nine bucks a month the other was ninety nine bucks a month it's really difficult to get net revenue expansion to be more than 100 percent year over a year if you don't have strong expansion revenue from your current customer cohort my question was do you have the ability to drive expansion revenue today and is your retention higher than 100 yes absolutely we are growing you know last month we grew almost 50 percent so month over month it is growing rather quickly ten days ago we launched the enterprise version and what we found and from our finding is that we're we're much stronger in the enterprise of larger companies when I say enterprise it's different than what it used to be it used to be you know 30,000 employees and up the companies who need single sign-on and the be the enterprise features really begins around 500 users so it's really mid market and and up mm-hmm talking some very large customers talk to me about CAC what are you paying to acquire customers the it cost us $17 Li and how many leads do you need for a new customer oh gosh you're asking me things that I I don't know the answer to that well I mean if I did the math if you said you had a million users do you consider a user a lead his user is a lead a company is a lead and you know and users leave companies and go somewhere else and they say hey you should use River so a user sort of is a is always a lead okay I mean the reason I'm asking if you have a million users and a thousand paying customers you can get a conversion rate from kind of a free user to a paid one but it's obviously extremely low right now so what I mean what I'm trying to figure out maybe the better question is why do you why do you calculate your your costs on a per new lead basis instead of a per new customer basis probably because I'm just not very bright I doubt that significantly considering your history Pat well I have people who know that that's not that's not really where ice that you know that level of detail I just I have better people than I who are watching that that makes good sense what's your team size today we I have almost 20 people who are working on on ok and break-even cash will positive or know you're still investing still invest it's still investing no now is it important to you I mean do you have a break-even month in mind or no um yeah I I would like to think that in the next five to six months we will be break-even even profitable oh great good good so but but currently again you know negative ii bitte yes yep nothing wrong with that especially if you've got the cash in the bank to obviously make those investments besides user acquisition where else are you spending that 17 million you right or 13 million you've raised well in this level it's it's always development and we also obviously spend some money on marketing we we do a really good job of digital marketing but it's all about the product I you know people ask me well what's more important the product or the marketing and I and I always answer that well the product is really about 80% of the what's important and marketing is about 70% yeah yeah that's you know you can't you can't market a bad product so what do you spend what do you spend per month and paid spend you know yeah I don't know that I really want to talk about that I mean how significant there I mean we're talking like a hundred grand a month for like a million a month oh no with digital marketing you can accomplish so much more than the days of act and sales objects running a single ad for sales objects which 30 $40,000 moon my entire budget is is less than that yep and and we get more leads than I got running ads in magazines with sales lousy that's funny are you right now looking to raise any capital or no no any in any acquisition talks to sell the company no all right it's far too early and things are far too good to just sell it at this point how do you know I mean you're you you've had a lot of success how do you know when you have to cut bait on something do you say if we don't have this amount of revenue by this date I have to just shut it down and flash sale and move on to the next thing because of the opportunity cost of your time or do not think like that all you always think like that I am I'm pretty stubborn and there were were times where there were times during act which you know ultimately sold 30 million plus copies that we thought we were gonna fail we honestly thought we weren't going to make it and it crosses your mind well you know maybe we need to shut it down so yes you do think think about that but for in my case I'm far too stubborn to give up early I hear ya all right Pat let's wrap up with the famous five number one favorite business book the hard thing about hard things number two is their CEO you're following or studying right now you know I had a great respect for Elon Musk just simply because he is such a wide variety of interest so I'm impressed with Yvonne although I thought he made a mistake say that he had fun dating for a buyout hug take it in private we'll see what happens there number three what's your favorite online tool for building your business oh it has to be know besides your own besides my own you know I use you know I grew up in this industry using office Microsoft Office but have transitioned over the last couple years to Google office products in collaborating online with documents spreadsheets slides it is is amazing and I think it's better than office 365's are offline online versions nothing but the online versions of Google suite number for how many hours of sleep to eat every night how many hours do I sleep every night I sleep really well I actually use a nap and I average about seven and a half hours that's good in what situation Paton married single kids I'm American and I had a fortune 400 congratulations in how old are you I am 65 years old 65 last question what do you wish your 20 year old self knew oh my gosh I I wish I knew you know that's a great question what do I wish I I wish I'd would have understood Finance and Accounting far better you know I took an accounting course in college and it meant absolutely nothing to me because I didn't have real life or yeah I didn't have a real life experience and I - yeah but today I can I could read a piano a balance sheet a cash flow in matter of a minute and find something wrong with it whether it's my own company or somebody else's yeah guys are you having from Pat he would have learned about accounting and finance earlier on again act his first company 30 million copies sold in sales logic what then he'd bought you know act again so he's only knocked twice a lot of success started raising company for other people's folks over about a decade realize that was not what he enjoyed so in 2013 went out and launched a river with the yry ve are getting really competing with you know slack and Monday colonies other collaboration tools today they passed a million users a thousand between a thousand and two thousand customers they're about to pass a million bucks in ar-are economics are healthy less than 1% logo turn per month spending out 17 bucks to acquire a new lead 13 million bucks raised again with their team of 20 folks based mainly up there in Arizona Pat thank you so much for taking us to the top I drag Nathan thanks for having me