How Sendbird Surpassed $20M Run Rate with 422 Customers and 100M Monthly Active Users (Interview with Co-Founder and CEO John Kim)

Nathan Latka

00:00Just got done editing this interview. You guys are gonna love it. Before I do that though, I want you to know that I'm going to be in the comments for the next thirty minutes or so answering your questions. If there's additional questions you want me to ask the CEO next time I interview them, leave them below. Or if you're just loving the data points I get CEOs to share, click the thumbs up button below. That's your

00:18way of telling me you're loving this stuff, and I'll get you more of it. Additionally, again, I'll be in the comments answering any questions you have. Alright. For thirty minutes. Enjoy the interview.

Introduction and Background

Nathan Latka

00:27Hello, everyone. My guest today is John Kim. He's the co founder and CEO of Sendbird, a Y Combinator W16 class is a b to b startup providing a messaging solution for enterprises. The platform currently serve tens of millions of monthly active users and many of the best known logos around the world like Yahoo Sports, Hinge, and one of the most active websites in the world. John is a serial entrepreneur and expert in the messaging space.

00:49Little known about John is that he was Korea's number one pro gamer for Unreal Tournament. John, you ready to take us to the top?

John Kim

00:55>> Yeah. Alright. Sounds good. Let's do it.

Nathan Latka

00:57I'm not as cool as you. So what what is the Unreal Tournament?

John Kim

01:01>> Unreal Tournament is one of those earliest generation first person shooters. Ah. Like, over Overwatch, but just generations earlier.

Nathan Latka

01:09So you were in, like, a massive competition in the finale, and you had to message one of your teammates through the gaming platform, and it broke. And you said, I'm gonna launch Sendbird to fix messaging once and for all. Right?

John Kim

01:20>> Yep. Something like that.

Nathan Latka

01:23Alright. In all seriousness, so so what takes you from a gamer to a software entrepreneur? When did come up with the idea for Sendbird?

Origin Story: From Mom App to Messaging SDK

John Kim

01:30>> Yeah. We actually started Sendbird around the beginning of two thousand thirteen. Back then, we were we actually started out as a B2C company. We were building a community app for moms, and we were trying to add a chat feature for our own application. That's kinda when we realized there wasn't a decent, like, modern SDK which we could just plug it and play. So we ended up building the entire testing ourselves and then started selling that on

01:52>> the sideline. And that actually generated more revenue and more customers than our main b to c application. So we had to pivot, and then we fully launched at the Y Combinator three years later.

Nathan Latka

02:03When was the mom site launched? What year?

John Kim

02:07>> That was 2013.

Nathan Latka

02:08Oh, it was 2013. Okay. And is is like, if I look up your LLC right now for Sendbird, will it say, like, you know, moms org d b a Sendbird? In other words, is it the same cap table, same company, or no?

John Kim

02:19>> Yep. Same company, same cap table. We started out as a Smile Family, and then we actually changed our name to Sendbird Inc many, many years later, I I think around after series b. So it's been like Smile Family for almost four years, five Did

Nathan Latka

02:35you apply to YC as the mom kind of community, or had you already pivoted?

John Kim

02:42>> So we first applied to, I wanna say, with the mom's application. We didn't get in that time. But after pivoting, we applied again in late twenty fifteen, and that's when we were accepted as Sendbird.

Nathan Latka

02:55Okay. So give me some context at that moment in time. So in 2015, was your product basically what it is today, at least the origins of it?

John Kim

03:04>> Yeah. So we started building what became Sendbird around beginning of two thousand fifteen. And then we were kind of doing the private access, friends and family, selling to friends and families in the industry. Then we fully packaged our product at the end of two thousand fifteen. That's when we applied to YC with that idea. That launched in January 2016.

Nathan Latka

03:23Okay. Now a lot of my listeners will be very familiar with, obviously, like, Intercom, like these kind of companies, right, that are kind of, you know, WYSIWYG, drag as you drop. True or false? You're essentially an enterprise version of this. It's more like acts more like an SDK than a kind of JavaScript plugin on a website. Is that accurate?

John Kim

03:41>> Yeah. Two way to look at it. One is it's a plug and play SDK and API for developers. So we don't sell to marketers or sales or contact centers. We sell to product managers and engineers. And two, our primary use case is user to user communication, and that user could be two people chatting on the dating app or seller talking to buyer in the marketplace, food delivery person talking to the customer on their application. So it's

04:03>> that user to user communication is what we do.

Nathan Latka

04:05Yeah. Me texting my Uber driver saying, I'm wearing a black hat standing on the upper level of the airport. Come find me.

04:12When do you win the Uber account?

John Kim

04:16>> We haven't yet won the Uber account, but we pretty much work with Uber like companies all across the world. We practically work with the number one companies in almost all countries, except Uber. So stay tuned.

Nathan Latka

04:29Stay tuned. There you go. Okay, let's dive into your pricing model. So so what are companies paying on average per month or per year to use this technology?

Pricing Model and Monthly Active Users

John Kim

04:36>> It really depends on how how much volume you're buying. So our primarily it really depends on how much you're and yeah, so if you have a couple thousand users, the price per user would be relatively more higher than, let's say, if you have tens of millions of users on a monthly basis. And today, currently power about a 100,000,000 users that chat through our platform every month.

Nathan Latka

04:57Okay. Just because you have, I'm sure you have so many different cohorts, you probably have SMBs, mid market and then large enterprise accounts. Give me kind of a sweet spot here, right? Are we talking like a $10,000 a year account is pretty average or 100,000 a year, you know, very enterprise?

John Kim

05:13>> So overall ACV, I would say is in the tens of thousands, but as small as a couple of thousand bucks a year, all the way up to millions of dollars a year. Yep.

Nathan Latka

05:23So let's spread out. Let's the reason I wanna do this is to use a real example. So let's say that I'm signing up for your platform and I'm gonna pay your sweet spot. Let's say it's $30,000 per year. How many messages am I likely paying for going through my platform over that year?

John Kim

05:38>> So we don't charge for message. So we highly encourage our customers to send as many messages as possible. It just purely depends on the monthly active users. So usually our customers know their monthly active users numbers by heart.

Nathan Latka

05:50So so what would my MA monthly active users probably be if I'm paying you $30,000 a year?

John Kim

05:56>> Really depends on what kind of premium features you're picking. Could be 10 could be hundreds of thousands of use wait. Tens of thousands of dollars a month.

Nathan Latka

06:05No. No. Let Sam in your sweet spot. You said your sweet spot ACV is probably tens of thousands per year. Let Sam pay you 30 k per year. That customer, how many users do I probably have on my platform?

John Kim

06:17>> So this is little bit more complicated than a three shoot, but basically it could be tens of thousands of monthly active users going up to a 100,000 monthly active users.

Nathan Latka

06:28Okay, fair enough. Got it. So you're upselling against two pricing verticals, your customers' monthly active users, along with any feature based upselling you're doing.

John Kim

06:41>> Yeah. Things like if you have HIPAA compliance or if you want a private dedicated servers instead of being on a multi tenant servers, if you want like the advanced moderation capabilities and so forth. So there are certain features that a certain type of customers would prefer that are not really relevant to the entire customer base. They would actually create a bespoke plan for them.

Customer Count and Growth from 2015 to Today

Nathan Latka

07:00So 2013, mom site, pivot in 2015, start writing lines of code for this SDK. You get into YC with this idea. When was your first dollar of revenue on the new idea?

John Kim

07:11>> That was around May 2015, dollars 50 a month, a small gaming studio. Then we had like 20 paying customers all over different pricing points by the time we applied to YC because it was our first time doing B2B. We didn't know what we were doing.

Nathan Latka

07:27Yeah, so 2015, call it 20 customers total by the end of the year applying to YC getting in. And then help us understand where you've scaled to today. How many customers?

John Kim

07:37>> We have four twenty two paying customers.

Nathan Latka

07:39Four twenty two. Okay, great.

John Kim

07:41>> 3,000 applications, free applications.

Nathan Latka

07:44Yeah, so there's a lot of these four twenty two customers are like brands like maybe IAC that run many, you know, social, you know, fishbowl, Tinder and another app, so they'll pay you for those three. And so that's the 3,000 applications. Yep. Yep. Okay, very good. So four twenty two customers. Okay, nice growth here. Help me understand how you went from 20 customers in 2015 to 400 today. In other words, what's your kind of go to

08:10market strategy? Is it an outbound strategy, inbound, something else?

Go-to-Market Strategy: Inbound SEO and Outbound Sales

John Kim

08:14>> So it has evolved quite a bit since the year since the past couple of years. So in the beginning, we started out with content, purely SEO, targeting and a couple of developer websites, whether it be StackShare, Stack Overflow, and things like that. So still, to this date, majority of our revenue do come from inbound inquiries from developers around the world. Geo distribution wise, we have customers in US. About 40% come from US, about 30% come from

08:38>> EMEA, 30% come from APAC. So it's very globally distributed. Now since a couple of years back when we start building the internal sales team, we also started building the outbound engine. So I believe for the past about two years, outbound engine has been continued to grow, grow, grow. So right now, I think it's a really we're in a pretty good spot of balancing that out with inbound and outbound.

Nathan Latka

08:59How many folks are on the team today that do carry a quota?

Team Size: Engineers, Sales Reps, and Headcount

John Kim

09:03>> Roughly 20 people working reps.

Nathan Latka

09:06Okay. And what's your total team size, everybody?

John Kim

09:09>> About 200.

Nathan Latka

09:10And how many engineers?

John Kim

09:11>> Just shy of 200.

Nathan Latka

09:13How many engineers?

John Kim

09:13>> About a 100 engineers.

Nathan Latka

09:14Okay. 100. Got it. And then so a 100 engineers, 20 quota carrying reps, then 80 that are kind of admin, miscellaneous, something in the middle?

John Kim

09:21>> Yeah, marketing, there's also just general management. Yeah.

Funding History: Series A, Series B, and Total Raised

Nathan Latka

09:27Now, John, you're in San Francisco, you're growing fast. And you've also done all this completely bootstrapped, right?

John Kim

09:35>> There would be more

09:39>> to be by YC, but some well known investors here in the Bay Area, Shasta Ventures and August Capital at our series a of $16,000,000. And then series B, we were able to raise $102,000,000 from ICONIQ Capital and Tiger Global Management.

Nathan Latka

09:55Yep. So total raise to date is how much?

John Kim

09:59>> A little bit over 120,000,000.

Nathan Latka

10:01Okay. 120. And where is most of that capital going? Is it truly kind of engineering head count or is there some other big cost structure we don't know about?

John Kim

10:09>> Bitcoin and Amazon. No.

Nathan Latka

10:12Probably not. Amazon may be not a bad investment right now.

John Kim

10:16>> Yeah. Well, so majority obviously goes to hiring people, hiring and retaining the talented people. And then obviously we do actually pay a lot of the cloud vendors. And then we started to invest a little bit into marketing as well.

Nathan Latka

10:30Into marketing, yeah. Okay, so walk me through that series B, I believe, when was that?

John Kim

10:38>> It was what we announced in May of last year.

Nathan Latka

10:42Yeah, yeah. And that one, I mean, that's obviously a fairly large round. Most companies kind of in your space, once you're in the venture track, you're raising every kind of twelve to eighteen months. How are you thinking right now about the virus in terms of your burn rate, right? Are you trying to extend runway? Were you in the middle of a raise that you have to like, you know, delay now? How are you thinking about it?

Burn Rate and Capital Efficiency During COVID-19

John Kim

11:01>> Yeah, so we've been very cognizant of where we invest our capital. So one of the, I guess, corporate, almost like a culture methodology is to be really just capital efficient, how we think about spending money. So we still have majority of the money we raised from Series B, so we're not in a rush to raise any money anytime soon. But we've been creating multiple different plans and scenarios based on how this year is gonna pan out.

11:28>> Because I think we haven't really seen a lot of slowdown in Q1, but potentially there could be some impact to our customers in Q2 throughout the year. So we want to really be flexible in terms of how we respond to the market. But overall, we believe we have created a pretty conservative plan when it comes to financing. But with that said, we are also looking at other strategic opportunities to potentially acquiring companies to accelerate our partner

11:52>> workmen. So for a couple of those strategic reasons, we may end up raising sooner than later.

Nathan Latka

11:59Yeah. A couple of follow-up questions on that. When you did do the last raise in your brain, how many months of runway were you raising for?

John Kim

12:09>> I mean, back then we weren't really spending a lot. I think theoretically we had like eighty plus years of runway, but now we did add a lot of people to the company. Typically when companies raise, they raise for what, twenty four to thirty six months, if not eighteen months. We do have a lot more runway than And we want to make sure that we continue to control our destiny by just having more runway than typical companies.

Nathan Latka

12:33Yeah. You strike me as a math guy based off how intentionally you're you're giving answers. So when I when you say hypothetically eighty years of runway, I assume you're taking kind of a 102,000,000 divided by your burn and saying, you know what? We're only burning like 1,000,000 a year, maybe 2,000,000 in a in a big investment year. So we have plenty of runway. Is that fairly accurate?

John Kim

12:52>> Yep. Yeah. Back then, yes, that was accurate.

Nathan Latka

12:54Yeah. Fair enough. You obviously have ramped a bit since then. Considering the current kind of macroeconomic trends, again, with the virus, things crashing, you know, general fear in the markets, How comfortable are you driving? And how comfortable are you drive are you in driving burn up? Mean, let's say I mean, would you be comfortable sleeping at night at a million dollars a month in burn?

John Kim

13:14>> Wow. That's that's a good question. So again, we have multi multifaceted approach to this. There's definitely that aggressive accelerated plan, then there's a base plan, there's also the COVID nineteen plan. So we have different kind of approach to how we control our burn. But we do have a pretty extensive dashboard built out internally where we can monitor metrics around sales, marketing, engineering, headcount, all those things into one single data platform at our company. That's all being

13:42>> monitored in real time. So based on some of these leading indicators, we can always like move up, scale up, let's say go spend a little bit more on the marketing side or slow down the hiring and things like that. So it is really a very, very flexible plan with multiple variables being considered.

Nathan Latka

13:58Yep. Now is a great time to buy. Obviously, if you're sitting on cash, you're in a fortunate position to be sitting on cash. It sounds like, you know, $80,000,000, $90,000,000, maybe even a 100,000,000 worth of cash. How do you tactfully go out and kind of probe the market to see if you have competitors or tech stacks that you really would love to acquire, but not doing in way where the founder goes, oh, he's reaching out because shit's

14:16hitting the fan right now, and he wants to take advantage of me.

Acquisition Strategy and Process

John Kim

14:20>> Yeah. So we're not in a rush to buy anyone. But thankfully, after announcing that round, a company of all shapes and sizes did reach out to us for their strategic partnership opportunities. And I mean, I've been I sold my previous company before, so I've kind of been in that shoes of being in position to sell the company, understanding why we are doing what we're doing. So building a thorough rationale on potential acquisitions. And then what we

14:46>> do internally was, for instance, we are actually in the process of acquiring a company right now, a small studio. And then the process we went through was we basically did create a long list of companies out on Crunchbase, AngelList, and a long list. And then we applied qualifying filters. We hunkered down to about four fifty, and out of those 48 were contacted. And then we met with a team of 10 companies. And we ended up

15:12>> doing due diligence on the four companies, and we gave a term sheet to one company. So it is a very, very rigorous process, and all of that process was run in about a month. So we try to keep it efficient and very methodical. So by the time companies are talking to us, we know they have intention to sell and we know why. Is it out of morale or is it actually they built something that's highly technical, but

15:34>> didn't really get to product market fit and so forth. So by the time we are working with them sitting down on the table, our rationales and motivations are pretty well aligned. Now,

Nathan Latka

15:45yeah, no, it makes all good sense. Now, when you're doing these acquisitions, are you mainly looking for, again, talent and tech or buying revenue and something that looks good at, that you can upsell to your current base?

John Kim

15:57>> Yeah. That's another excellent question. So we always want to crawl, walk, and then run. So we had opportunity to acquire companies with a lot of revenue, but also there's a purely, purely acqui-hire place. Right now, what we're looking for is somewhere between acqui-hire and Talent, and then the IP acquisition. If they've built a software that can really accelerate our product roadmap, that'd be our sweet spot. But if you do have a product that's highly, highly aligned

16:22>> to what we do, like API driven model with subscription, that's really related to communications, real time communications, then that'd be actually a worthwhile conversation as well if they if they do have some some revenue.

Revenue Run Rate and Growth Trajectory

Nathan Latka

16:35Yep. Very good. So 2015, again, you get this thing going now today, 100 and, you know, 100 odd million raised, team size of, you know, 200 just shy 200 folks, 422 customers, average ACV, call it $3,000 a month or $30,000 a year. But obviously, again, some people north of 1,000,000 a year, some people less than, you know, maybe 5,000 per year. With that math, four twenty two customers at that ACV, I mean, that puts you somewhere

16:58at like 1,400,000 to 1,500,000 per month. Have you guys broken kind of the 20,000,000 run rate mark at this point?

John Kim

17:06>> 20,000,000? Oh, run rate. Yeah. We we certainly broken broken the milestone. We won't I won't mention the specific traction, but that's good math.

Nathan Latka

17:13Okay. Thank thank you. Appreciate that. Can can can you talk a bit about if that's generally where you are at today? I mean, go back twelve months from now. I assume you're way more than doubling year over year to do the kind of round you did last year. Is that accurate?

John Kim

17:27>> Yeah. So we've been on the path of that triple triple double double double bad. Some some years, we've been faster. Some years, we've been probably a little bit slower, but it's roughly on that path.

Nathan Latka

17:36Okay. So roughly, I mean, can can we back into this a bit? 2018, probably somewhere around kind of 5,000,000 ARR ending in December 2019, you pass or you're flirting with the 20,000,000 ARR mark and you feel like this year, depending on what plan you go with your COVID plan, your conservative plan or your aggressive plan, you would love to get above $50,000,000 to $60,000,000 bucks in ARR.

John Kim

17:56>> Oh, that'd be nice. Yeah. So the way we look at it is, again, it really depends on how the market is responding, how fast because with these kind of market, sales cycles tend to slow down. So we want to just really understand the leading indicators. And based on those, we'll be adjusting our plans accordingly. But

Nathan Latka

18:18Very good. Last question here before we wrap up with famous five. Churn is obviously critical in any SaaS company. And there's a lot of CEOs I interview where they tie the pricing to something that is actually not the key value metric. I think you're in a very unique position where it I think it's pretty crystal clear what your value metric is. Right? It's, you know, you decided not to do number of messages because you don't wanna

18:37disincentivize messages being sent. But you said, let's tie it to number of users they have on their platform, which obviously is smart. So so how how good is that metric? And that's measured obviously by churn. So if you look at your gross revenue churn over the past twelve months, where's that coming in at?

Churn, Dollar Retention, and Net Revenue Retention

John Kim

18:53>> Yeah, I won't, again, I won't answer any specific numbers, but yeah, our churn, because we are API SDK company, the churns tend to be quite low. The only caveat is that most of the churn we see is just small startups shutting down their applications or shutting down their business.

Nathan Latka

19:09That shouldn't impact revenue churn. That won't impact revenue churn much, though.

John Kim

19:15>> Yeah. Yeah. So our logo churn tends to be higher than the dollar churn. Dollar churn is pretty healthy. I would say it's definitely in that top quartile kind of SaaS category for sure.

Nathan Latka

19:25Yeah. I would say based off, like, when I sort my data, I'd say top quartile is less than 5% revenue churn annually on a gross basis. Is that fair to say?

John Kim

19:34>> I won't comment on that, but I would say we're in a pretty healthy state.

Nathan Latka

19:39Is it a fair statement to say that when you add back your expansion revenue from your historical accounts, net revenue retention is greater than 100%?

John Kim

19:47>> The dollar retention? Yeah, yeah, absolutely.

Nathan Latka

19:49Yeah, very good. And are you what is more impactful in driving your ability to upsell customers, your ability to upsell them on a feature basis or your ability like they're growing organically because they're adding more users themselves.

Upsell Drivers: Feature Expansion vs. Organic User Growth

John Kim

20:05>> Yeah, definitely latter because either they already have an existing user base and they roll out to more of their users or simply they themselves are growing. So it happens pretty organically.

Famous Five: Books, Tools, and Personal Life

Nathan Latka

20:16Yep. Very good. Alright. Let's wrap up with the famous five. Number one, favorite business book.

John Kim

20:21>> Right now, I'm reading this book, The Great CEO Within.

Nathan Latka

20:25Oh, very good. The Great CEO Within. Who recommended that to you?

John Kim

20:30>> It was recommended on Twitter by multiple CEOs from YC.

20:33>> Oh, very good.

Nathan Latka

20:34Alright. And number two, is there a CEO you're following or studying?

John Kim

20:38>> Oh, I think he was on your podcast, Eric. Eric, yeah.

Nathan Latka

20:42Yeah. I

John Kim

20:43>> I've known him for for some years now or following him for some years now, and I just love his philosophy on happiness and just general conscientiousness and grit.

Nathan Latka

20:54He did such an amazing job. Like, he came on eighteen months before they filed the s one where they had about a 150,000,000 raised, and they had already hit about a 130,000,000 in ARR. And what's fast I mean, a one to one ratio between those is just remarkable. Not only that, but he resisted the urge to do like a big round before the IPO, but still doubled revenue to 300,000,000 on one fifty raise. Just incredible numbers

21:21That you know, right now, you took a big, big I mean, look. It's a risk, but it can also be a big reward where you raise, you know, a massive $100,000,000 round, and you're in the 20 to 30,000,000 ARR range. And you have to now figure out how deploy that to kind of, you know, obviously grow revenue. Did you consult Eric on that raise, and what was his advice on raising so much on a smaller stack

21:39of ARR?

John Kim

21:41>> No. Well, no. I didn't get his advice on raising, but this round kind of happened also, kind of happened organically. We didn't set out to raise $100,000,000 We went out to raise $30,000,000 to $40,000,000 We just ended up getting a lot of interest from the investor community. And we were given a term that we thought it was aligned with what we believe where we could be. And then I think we finally kind of earned that valuation

22:07>> and probably potentially more. So we we feel pretty confident with where we are today and where we're headed.

Nathan Latka

22:13Very good. Number three, what's your favorite online tool for building your company?

John Kim

22:17>> Favorite online tool? Well Zoom. I actually might hit it'll be Zoom, but also, like I I just generally like any kind of software, whether it be Confluence or just G Suite or Slack.

Nathan Latka

22:30Number four, how many hours of sleep are you getting every night?

John Kim

22:34>> I just measured. Today, I slept five hours and sixteen minutes. Typically, somewhere between five to eight hours.

Nathan Latka

22:40Okay. Very good. And what's your situation? Married, single, kids?

John Kim

22:44>> Married, two kids.

Nathan Latka

22:45Two kiddos. Very good. And how old are you?

John Kim

22:47>> Oh, 39.

22:48>> 39.

Nathan Latka

22:49Last question. What do you wish your 20 year old self knew?

John Kim

22:52>> Things will work out. Don't give up. Just keep on focusing, and life will be kind of okay.

Nathan Latka

22:58Guys there.

John Kim

22:58>> Oh, by the way, yes, you you made it to Silicon Valley.

Nathan Latka

23:04Guys, there you have it. Sendbird, a complete chat solution, SDK, IP API based approach instead of, you know, a JavaScript, you know, embed kind of Intercom like approach. They're serving over a 100,000,000 messages. Now, John, you said monthly, right? Or annually?

John Kim

23:19>> Monthly active monthly active users.

Nathan Latka

23:21Monthly active Oh, wow. Okay. Over a 100,000,000 monthly active users across the 422 customers that are paying them anywhere between, you know, small amounts up to, know, some customers more than 1,000,000 per year, but average call it a $30,000 ACV, raise $120,000,000 to continue to drive growth still sitting on most of the last round of 100,000,000 in the bank right now looking strategically at acquisitions in a time of, you know, financial panic. Does acquisitions make sense?

23:46Do they hold it to drive burn? He has plans for all of these things. Over a 100% net revenue retention, though, as they look to continue to scale. John, thanks for taking us to the top.

John Kim

23:55>> Yeah. Really, interesting to with you.

Nathan Latka

23:59These CEOs rarely give these kinds of interviews. I hit them hard. I get the data, and I wanna do it more. So if you wanna get more of this make sure you subscribe up here, and then additionally, go check out one of my other CEO interviews right now.