How SEMrush CEO Oleg Shchegolev grew SEMrush to $330M revenue and 104K customers in 2024.

quick context this was recorded March 28th and 29th so a couple weeks ago at my live event SAS open.com we had a thousand software CEOs there if you missed it we hope to see at the next one September 5th and 6th in New York City SAS open.com but for now let's jump into the recording what was it like ringing that that Bell in the middle of Co our CEO he was extremely upset this whole chart has kind of my pride and [Music] joy hey folks folks if we haven't met yet my name is Nathan Latka I launched and sold my first software company back in 2015 and went on to write a book about it which you guys made a Wall Street Journal bestseller purchasing over 30,000 copies thank you so much for that after the book I launched this show and went went on to create founder path.com I raised a large fund to do non-dilutive deals with B2B software Founders so far we've invested in over 400 software Founders total $150 million here in 2024 we're doing three to four New Deals per week so if you're looking for Capital and don't want to give up Equity go sign up at founder path.com for free to get your offer all right let's jump into the interview Eugene thanks for being here man all right I'm not lying right you'll share more data since we've got a more curated audience yeah we're we're public so so if I share something I'm not supposed to share you can not trade our stock fair enough fair enough so um I want to first start uh and just jump right into the revenue graph right so you guys see the company really got going what was actually first year was it 2013 when I've met Founders 14 2014 is when you met the founders and what was the size of the Angel check you put into the company uh so actually they didn't take my money they just offered me a job okay I I pursued them for two years but they were so profitable the the margin was like 40% they didn't know what to do with money so I said why why don't we do this way I figure out how to speed up business and use more capital and you give me shares okay got it so can you tell me what they ended up comping you what what percent of the company did you own back then I mean it's all public so I um in total I own uh at at the peak I owned about 2% 2% of the company okay great so you get going uh the company is scaling you see here and I got that right right over 300 million bucks of Revenue today yeah absolutely okay great so not Revenue AR ARR AR over the next 20 minutes uh you know I studied the the public calls we talked obviously before we want to go deep on a couple sections pricing growth and then the IPOs so starting on pricing this was the original pricing page it was before your time slightly I think right well let me go back I want you guys to zoom in if you can read it can you guys read the price in the little yellow box is that big enough it's $49.95 a month that's what that's what these guys launch with and maybe can you describe the makeup of the two co-founders are they Tech or business they're old Tech Engineers by trade uh when uh when they first launched Sam Rush actually they used it for other businesses in traffic Arbitrage space so they needed research tool to figure out where to buy traffic and whom to sell it to um and data was just so good that a lot of people started approaching them and asking an access to this and that's how they've launched Sam rush but they they didn't really know how to properly monetize so I think they were giving away just too much of a value you guys can't read this I'm going to read it to you you'll see Sam Rush was designed by the developers of SEO Digger and SEO Quake for Google organic so they had sort of these micro tools and to make them win they built the side project the side project ends up winning it's why we talk so much today about go build a side project in the zoom Marketplace in the stripe Marketplace in the HubSpot Marketplace because you just don't know where it's going to lead these guys ended up sitting on obviously what we now know now as a gold mine back then 20 million domains uh and you can see 85,000 users uh one of the early go to market motions was this affiliate Playbook so I'll let you guys squint in and read what the affiliate the original affiliate motion was do you guys have an affiliate program today did this work still still have uh it's not as big as it used to be but I think early on that was extremely important uh the way affiliate marketing in in B2B SAS works is not that people will sell your product for you but if they want to write some kind of article having affiliate program gives them extra incentive to write about you so uh for us it really helped to spread the message it would never work if product was not good but because product was so good affiliate network was a huge boost early on now it's of course a smaller part of the so at its peak how much revenue did Affiliates bring the business oh at its peak probably a third a third of and what year was the peak do you remember like that was around 2012 2013 all right so 2012 13 and what was Revenue back then I that green bar is too small ah I mean so couple million was a couple of million three three three four million okay so affiliate sck off now do you still pay today at scale 40% of monthly recuring Revenue back out to Affiliates we had to so that's that's uh actually something that I don't recommend to do so do Perpetual 40% we did it because maybe early on we're a little bit desperate um it was a phenomenal deal for Affiliates it attracted a lot of really great people but Perpetual fees they sort of incentivize people to kind of grab something and do nothing with it because they just uh get paid forever so we had to change this Perpetual fee and now we reward people for bringing new customers but we don't pay pay Perpetual Revenue share so what do they get now uh right now there's just CPA so you you get you get paid for uh registration for trial and for new paid customer and there are diff you know different tiers and also depends on Country so so you know new paying customer in the United States more expensive than in let's say southeast Asia uh but uh if I'm not mistaken it's a couple like for the whole thing you'll get a couple hundred dollars Greg had hosted a great dinner last night a practical founder Jenner and we're always looking for unique ways to bootstrap early on this was would you say a key way you got early Revenue without outside funding absolutely 100% recommend just don't do Perpetual fee do maybe two years 3 years not perpetual there you go have an end date there um you then did raise outside funding right Boston a Boston Business Journal covered this here uh talk to me about what it was like the day you signed this $40 million term sheet so that was a second round we we did a little bit of a smaller deal before that but the second deal with great craftt was $40 million uh was also partially secondary so uh how much was secondary I I don't recall but it's all in public did you take money out on that second not me no did you fire anyone that took money out you said oh you don't believe in the vision no that would be we didn't have to do that yeah that's that's good okay so so you get this done how much of the company did you sell in this round do you remember um yeah the valuation was uh around 200 mil 200 okay great got it so 20 25% of the company is what you're selling there now moving forward I want to talk about this because everyone knows this graph right and it's all about for each cohort of customers you sign up how does revenue expand or contract what does Net dollar retention look like like over time the dark red bar you see here is basically the CT of customers you you guys signed up before 2016 and what we see especially like with the blue bar is um you're signing up more customers faster but you're also getting them to pay more faster how is that happening so th yeah this this whole chart is kind of my pride and joy because um when when I joined it it didn't necessarily look this way so we had to work a lot on monetization uh early on we would sort of get customer through the door very quickly recover customer acquisition cost very fast generate a lot of cash but we didn't Focus that much on expansion so when I joined we changed monetization entirely um to drive more expansion down the line and uh you know at at the peak we got over um over 120% net revenue retention which is like for SMB martech business is is just phenomenal um what's the guidance you've given this year in terms of where you guys think you'll come out in terms of nrr ah we don't guide nrr the last quarter was 107 okay 107 got it interesting so we'll come back to this chart in a second with some more recent cohorts but I want to go back to what you guys were selling in 2020 uh this was the headline uh do you remember this headline you've moved away from this since then a little bit because I I think when you say you do allinone people don't understand what you're really doing so um you want to be a little bit more specific about about the the portfolio of products and also sometimes you know in in a at the...