How Sailthru CEO Neil Lustig grew to $48M revenue and 400 customers in 2018.

hello everyone my guest today is Neil Lustig he brings more than 25 years of experience in software hardware and cloud technologies to his current company sail through as president and CEO he leads the development execution of the company's strategic vision and daily operations before joining he served as president CEO of an Davao a leading provider of revenue and price optimization and management solutions before that he successfully directed Arriba's North American field operations and previously European operations preceded by 16 years at IBM serving in a variety of sales and sales management roles in e-commerce in the e-commerce space Neil are you ready to take us through this out I'm ready alright so just to call a spade a spade here real quick you are not a founder but you joined recently and now you're running the company that's exactly right ok when did you join and why I joined three years ago and I joined because I met the founder Neil Capel and and he I got captivated by the vision this notion of engaging with consumers by really connecting with them as human beings instead of as marketing segments really resonated with me and I thought this is definitely where marketing is going in the future and I like sail throughs positioned and like the team and give me quick context before we dive into what the company does when was the company created what year was it founded so the company's just on his 10th anniversary now and I joined 3 years ago so 2008 heck of a year to launch company 2018 today obviously and you joined in 2015 right that's right alright and where were you I mean what did you did you give up a bunch of stuff to come in I mean did you pursue them or do they pursue you how'd that work so I had actually just sold pandava a few months before and was just kind of catching my breath taking a little time I got a call from her friend who said hey you should meet these guys and sell through there at the next stage of growth to looking for a CEO to take them to the next level and we kind of took it from there interesting ok good no was that an investor in sales through that they were looking for they were kind of doing CEO search right so the investors the investors and the founder were all involved in the process I think they reached that conclusion that to go to the next level required more operational discipline and more execution focus the company had grown fantastically from a visionary founder and now needed a different balance of the team yeah okay tell us what that what the product does what are people paying it for yeah so people pay us for one simple thing as I mentioned connect as a human being so we personalized engagement which means our platform learns through machine learning what a consumer likes about your brand what products what articles they like to read about what time of day they like to engage on what platform and channel they like and then we automatically tailor the communications to reflect that so this results in one-to-one communications at a pretty massive scale we send a hundred billion emails for example on behalf of our customers and literally everyone could be completely different interesting so I mean should we think of you like an email marketer science email marketing company is that a significant portion a revenue stream or that's just one very small part so you should think of us as half you know I'd say half us says we're an email marketing platform half is personalization machine learning based personalization and it's that combination and while we grew up in in email and that was really the founders for a because we felt like that was that was one of the easiest things to personalize in the biggest opportunity makes a lot of sense what are people paying on average per month for this kind of product so our average we we engaged on an annual basis and our average customer is paying $120,000 a year okay and was that when you joined was there was it much lower than now as your strategy to go downstream or upstream generally so we've been moving upmarket considerably we when I started our a CV was about half that oh well and we've been we've been pushing up into larger more enterprise customers I see and and walk me through the success you've had on that in terms of how many customers are serving today yeah so we actually serve roughly the same number of customers today as we did years ago it's just a very different mix so yeah we have a shed a number of our are very small tumors and but we've also added customers like like an NBC or tory burch or NASCAR we're just much much bigger I think we're halfway through this journey of getting to an average customer size an average relationship size of about $200,000 a year yep yep what do you got there today are we talking like a hundred customers ten thousand customers a thousand customers where yeah generally roughly 400 400 okay great so so you're very much in the inner realm in terms of your price point where you can afford to put touch on these kinds of sales with an inside sales team walk me through what your team size is today and how it's broken up yeah so I'd say roughly 40 percent of our team are technical so engineering product and I'd say 20 percent of the team sales see Allison says marking we do have a small inside sales team that we have a direct sales force so these transactions definitely warrant a human being selling to you and then the balance of our team and a bit our next biggest team after engineering is customer success so we do embrace our customers at that price point we throw our arms around our biggest customers and make them successful and and we do a lot to make sure that we kind of take this philosophy that if our customers are universally successful sales would be successful it's a total team size is what roughly 200 200 folks okay very good and then um walk me through obviously economics and this kiss-asses like this are very much tied to kind of churn and how sticky folks are what is your turn today and how do you mitigate that how do you always to make it better yeah so a great question so I think our growth turn this year will be south of 15% that's balanced I say that's gross churn that's balanced by our customers grow organically and they grow by adding businesses and new divisions and new products so on a net basis on a net dollar retention basis this year will be north of 100 how far by 100 a couple of points I think yeah yeah good I think I think well better going forward but you know never satisfied with the who food where we are and in that mix but that's part of the equation the other part and how we grow is is through the sales team and obviously that's that's a key part our most productive sales channel is referrals so and we focus on that that's part of what we focus on making our customers successful our customers move around a lot the average tenure at an e-commerce business is two years so if we make you successful we hope you'll take us with you in your next enterprise and so I'm for sure our most productive source of new business is referrals from customers who have moved on to their next ecommerce for media business yep now those obvious are the best kind of cheapest kind of new customers but when you do look to scale and you do kind of spend money on customer acquisition what does your fully weighted Catholic like today yeah so our CAC is you imagine it's pretty high relative to our customer size so it's probably one of the half times are our first two your cost which is you're pretty high it's about a hundred about 180 grand yeah Russell yeah that's right and and so your cartridge said differently you recover that money in about 18 months right yep in our lifetime value for our customers is maybe is a multiple that's in the long term it's it's a profitable business to grow and expand so I'm not looking to shrink our our acquisition cost much below that I think our opportunity is to grow our customer value by acquiring bigger customers and having them be even stickier yeah and upselling well so what do you assume life I know it's a dangerous number because it can lie to you very easily but what do you assume a minimum lifetime value is reach 1 in 360 480 yeah so I I would say the last time we did the model was just north of 400,000 ok and walk me through a lot of people get lost in LTV because it's some kind of useful some find it ain't no some don't do you use it really to guide you at all or or no just a number you need for investors so we look at it and we track it because it's important for investors it's not something we stare at every day the things we every day are the average customer size in our pipeline so we targeting the right customers and our churn what we we we talk to every customer who turns we have an outside consultant that we hire that calls every customer who turns to say why did you turn what was the decision we feed that back into our our business process our a product pipeline or our our customer success business so we really focused on making sure that the customers we acquire on the right customers and that they stay with us forever just to confirm earlier you said fit less than 15 percent low is that logo turner revenue churn annually revenue true okay so gross gross revenue churn less than 15% which means to get to 103 percent net dollar retention you needed 15 to 18 points of expansion revenue so that those added together through the three percent right right that's great interesting what's driving most of the expansion revenue are you selling additional seats additional product lines what are the pricing axes you're selling on so two big dimensions one is organic expansion so as our customers grow because our annual cost is linked roughly to the size of their business and their volume as they grow we grow with them you mean like a number of website visitors they get are the number of emails they have or the number of active users they have on mobile I see I see so as they grow as a business we're going to benefit from that at the renewal will renew at a higher level and we'll get the benefit of that and then the other thing is so I go ahead no you go ahead I was just say that so that's one element of expansion a lot of our customers especially now that we're the enterprise have many many businesses so we might have for example scripts as a customer of ours and we have Food Network and we have HDTV they have but they have lots and lots of brands a lot of our customers will start off with here take these two or three brands and if you're successful will have the right to serve them in multiple additional brands yep and so we'll grow across them that way and we have several products so you might have started with us and then you added mobile and then you added well on site or you might have started with listen mobile and now you want to add your email program to that so we we have a product expansion element as well that's great and walk me through what growth looks like right now year-over-year what do you run at so overall I'd say our growth is in the 20% range year of the year and we've had a balance so I'd say not to be defensive on this but we've also been hot we haven't raised money since 2013 and are you profitable today yes so they'll great what we're intent on being profitable and cashflow positive and growing when will that happen oh so that's tab so we were cashflow positive significantly in q1 will never lose money again that's great how much had you raised before that total total invested capital is just under 50 million 550 okay good and then last question here so I mean jumping in a revenue here for a second 400 customers at the ACV talked about earlier puts you at about 4 million bucks a month in revenue is that generally accurate it's a little more than that okay well will be between 40 and 50 million in revenue in a RR by the end of this year or right now by the end of this year by the end of this year okay good and then I can basically subtract 20 percent from that because you're going 20% year-over-year growth you see where you're okay good that's good that's healthy growth what about I mean a company like this it's raised that much capital you have it now where you don't need to do anything because you're cashflow positive I mean are you and acquisition talks with anybody no so right this year our focus is is get a full year of profitability and cash flow positive and growth under our belt and then next year I think look I'm not we haven't said we won't have a raise capital again there are certain things we want to do that will require additional capital like an acquisition or we're primarily in North American business we'd love to expand in a big way in Asia all those things would require extra capital so I think in the early part of next year we'll look at do we want to raise money again to do something to accelerate our growth beyond this you've struck me as a guy that likes to come into a situation that's you know all over the place run your playbook you love excitement you love being a wartime CEO and moving things and changing and then once things kind of balance out right where there's no emergencies anymore I could see you getting bored are you gonna be around here a while or no so this is the third time that I've done exactly that and I love it you're right and there's certain about the chance something about the challenge of not actually knowing the first day how you gonna fix this how you're going to how you to improve everything so the point where it's an incredibly valuable asset I'm not done so I have I have definitely have another year or two of exciting things we want to do to to take this where we want it to be and then we'll see yeah but I definitely I love taking things to the next level Neil makes good sense let's wrap up here with the famous five number one what's your favorite business book execution by Larry Bosley number two is there a CEO you're following or studying right now yeah so you should probably over played but I study Elon Musk and I follow him religiously I just think his passion is unparalleled did you buy a flamethrower No number three what's your favorite online tool for building the business so I asked this but I thought about this question because my folks said you would ask it so you know the thing that I act that I use the most on my phone right now is actually I'm totally addicted to to listening to content so audible podcast two hours a day all my transit time all my down time listening and try to listen to learn it's great number four how many hours of sleep to get every night at least eight that's good in which the situation married single you have kids Oh married three teenagers three teenagers well you're busy and how old are you I'm 57 57 last question Neil what he was your 20 year old self new yeah I think but I would tell my 20 year old self IBM's a company but move to a small company sooner it's more fun move to a small company sooner you guys heard of hear from Neil again he loves coming into companies and things up sail through he joined about three years ago was founded in 2008 he joined in 2015 has since improved the economics really focusing on doubling or increasing at least a CV they've got four hundred customers spanning media and e-commerce paying on average 120 grand a year so they're flirting with the forty to fifty million dollar ARR mark they've got less than fifteen percent gross revenue churn annually net dollar retention at about one hundred two hundred three percent CAC 180 grants they get paid back in about eighteen months with our team of two hundred folks again focused on serving the media and retail personalization markets in terms of marketing and sales Neil thank you for taking us to the top I pleasure thanks for having me