How Showpad Crossed $30M ARR Growing 70 to 75% a Year (2018 Interview with Co-Founder and CEO Pieterjan Bouten)

Introduction and Guest Background

Nathan Latka

00:00Hello, everybody. My guest today is PJ Bouten. He's... Is the CEO and founder of a company called Showpad. It's the second company he's founded. In 2010, he cofounded the mobile development agency In The Pocket and still serves on its board. Prior to In The Pocket, he held senior roles at Netlog and Accenture and holds master's degrees in both communication sciences and international business. PJ, are you ready to take us to the top?

Pieterjan Bouten

00:22Yes, let's go for it.

What Showpad Does and How It Makes Money

Nathan Latka

00:24All right, good. Tell us about Showpad. What's it do and how do you make money?

Pieterjan Bouten

00:28Showpad, we're a sales enablement platform. We're focused on first of all making sure marketing understands how to influence the sales cycle, so it's about making sure that they can equip sales with the latest materials, make sure salespeople can deliver great presentations, have more value added conversations, and that they understand how that's driving revenue. Then for salespeople, we're making sales teams more productive. So it's reducing admin time, increasing selling time, making them more relevant, make sure that

01:02they can actually deliver the very best buyer experience. We're focused on B2B, a thousand customers in about 50 countries.

Nathan Latka

01:11Okay, those are paying, right, not free?

Pieterjan Bouten

01:14Paying customers, Got it.

Nathan Latka

01:16Just to be clear, should think about this like, we all have this problem. We have 10,000 PowerPoints created over two, three years in the beginning of a company, and we never know where we store them or what worked in terms of closing a sale or whatnot. When we need them today, don't know where to find them. That's like one big use case for your platform, right?

Pieterjan Bouten

01:35That's a big use case. I mean, from SMBs to big enterprise companies, the same is happening everywhere. Salespeople are downloading content, they're changing slides, they store it on their hard drives, you have Box, you have SharePoint, you have other shared drives, it's just a big big mess. At Showpad, we want to be the single source of truth for salespeople, making it easier for marketing to create what we call buyer experiences. So think about from simple folder

02:05file structures in a branded environment to easily find the content, to really guided selling, highly interactive ways of presenting materials, sharing materials, asking questions to the customer, and then getting to that right piece of content. We want to do that wherever a salesperson needs to get the job done. We have customers who have big inside sales teams, and who mainly do their work behind the laptop, or in Salesforce, or in the CRM system. So we have

02:32integrations with Salesforce, and Gmail plugins and Outlook plugins.

Pricing and Average Contract Value

Nathan Latka

02:36So PJ, give me...

02:37I want to get

02:37more of your backstory here because you have some history, which is great. Give me just a quick sense. The average customer is paying you what per month?

Pieterjan Bouten

02:45Our ACV right now is about 30 ks. $30,000 a year. We work with annual contracts, it's paid upfront.

Nathan Latka

02:52So that's about $2,500 a month?

Pieterjan Bouten

02:55Yes,

Nathan Latka

02:57And something like how are you getting that number? Because on your pricing page it's 35 per user per month, 45, are you selling just big seat deals to enterprises?

Customer Size and Deal Range

Pieterjan Bouten

03:04Big seat deals to enterprise. Our biggest customer is at 1,000,000. We have now three customers who are over 1,000,000 per year. We have a couple of customers in the 500 ks, 600 ks range per year.

03:19Then we have smaller mid sized companies with maybe, you know, who pay us $10,000 to $20,000 a year.

Nathan Latka

03:25Yeah, yeah. I mean with a thousand people at the average ACV you just told me, I mean you're well north of, call it, well you're doing about $2,500,000 a month and about 30,000,000 in ARR, correct?

ARR and Revenue Milestone

Pieterjan Bouten

03:35Yep, 30,000,000 in ARR. We crossed that mark end of the year.

Nathan Latka

03:38Congratulations, that's exciting. What does growth look like? If you go back thirteen months, what were you at?

Year-Over-Year Growth Rate

Pieterjan Bouten

03:44We've grown the business about 70, 75% year over year.

Nathan Latka

03:48Okay. So you were about 20,000,000 thirteen months ago, ARR run rate.

Pieterjan Bouten

03:53Yeah, something like that. Maybe even, yeah, yeah, something like that.

Nathan Latka

03:56That's good. Okay, well that's great. Let's dig into kind of how you've driven the success. So take us back to year one. When did you launch the company?

Founding Story and Origin of Showpad

Pieterjan Bouten

04:02We launched the company 2011 on the back of the first company I founded, it was called In The Pocket, you mentioned it in your introduction, service business. I founded a company together with Louis, my co founder, and we had an app developer service business. We had companies coming to us with various requests. At that time, again it's 2010, iPhone was just I think three years out, something like that. iPad was just launched or about to launch,

04:33and so a lot of companies came to us like hey, we want to get our content on mobile devices, or we want to have products and services optimized for these devices, or please develop as an application. So we had a company come to us say, hey, we have a sales team, we have a big trade show, we want to stop using paper, can you develop us an application to make them present materials on a booth and

04:54easily share it with the customer? As we started looking into that problem and how that company used content and what the challenges were, we actually discovered like, hey, it's not just a problem for this company. There's many companies that create a ton of content that are struggling with equipping reps with relevant piece Yeah, of

Nathan Latka

05:16P. J, that makes total sense, but I want to tell me more about the growth though. There's a lot of companies in this space. One that comes to my head immediately that we had on recently is Slidebean, but they're nowhere near your size. From all the people I've interviewed where they give me ARR numbers, you're way ahead of these guys. Why? Is it just who you're selling to?

Growth Drivers and Product Differentiation

Pieterjan Bouten

05:33No, it starts with a great product first of all, so I think we've delivered something that time to value is clear.

05:42We solve a true problem for both marketing and sales, so it's not only sales focused or marketing focused. It makes it a bit harder to sell, but your deal sizes from the start, from the first week we had bigger customers approach us

Nathan Latka

05:54Can you be specific though, give me like name one feature that these bigger customers appreciate that other competitors haven't developed?

Pieterjan Bouten

06:01I mean,

06:03think the very first feature back in the day, I'm now talking seven years ago, was the fact that Showpad was a fully branded environment. You could basically create your own application. At that time if you wanted to have your own app on your mobile device or iPad, you had to go to the app store and the whole submission, and companies were creating their own apps, Showpad you could through an interface, a web interface, marketing could create

06:32their own buyer experience at that time already, backgrounds, own logo, create this really interactive environment for sellers to sell, and it was something at that time it sounds simple, but nobody had it, and it was quite hard back in the day. Remember the first applications would constantly crash on your phone and on your iPad, and we're talking here B2B enterprise. We're selling to bigger companies. They don't want to equip their sales team with something, and at

07:01that time we were mobile focused. Now today we're a bigger platform and we do more, but at that time the fact that we had an enterprise grade application which was super stable, super snappy, simple interface, it had all the content, branded environment. It wasn't like that we had one magic feature that really triggered those customers to buy it. Was the fact that

Nathan Latka

07:23Yeah, mean PJ, just be clear, there's never a silver bullet, but you made incremental changes, 2% changes over time that have added up. I'm trying to identify some of those early 2% changes. What I'm hearing is your hyper focus on mobile early on was a big differentiator Yep. And that was really the start.

Pieterjan Bouten

07:39Yep. Yeah. For sure. Was definitely a a very big difference here.

Nathan Latka

07:42Today, in terms of getting new customers, if I asked you, like, what distribution channel are you dominating? Are you in any kind of Salesforce app exchanges or any kind of channels where you're really killing it?

Pieterjan Bouten

07:53We're in the AppExchange. I mean it's not from an acquisition point of view, it's not our main focus. Our biggest channel is just direct sales. We do all of our sales directly. Don't have resellers, we don't have We are in the Salesforce ecosystem. We are in the Box ecosystem. We integrate with a ton of content management solutions. We integrate with Salesforce on the CRM side. We're launching our Marketo integration soon, and also going to go

08:22into marketing automation.

Nathan Latka

08:23But these aren't driving you new customers, you're just doing it integration Marketing,

Pieterjan Bouten

08:29yeah, we're doing it for integration sales, and our main channel is just direct marketing, and you know acquiring customers to our own marketing and own outbound efforts.

Sales Team Structure and Outbound Motion

Nathan Latka

08:38So tell me more about the outbound, let's break down the team today and how many of them are focused on outbound?

Pieterjan Bouten

08:43Have, so Showpad has an

08:47office in Ghent, 150 people here, then we have an office in Ghent.

Nathan Latka

08:51Country is that? Ghent?

Pieterjan Bouten

08:53Ghent, Belgium, sorry. Ghent, Belgium, that's where I'm actually calling you from today. So Showpad was founded here, Ghent, Belgium, 150 people here. We have 50 people in San Francisco, about 30 people in Portland, 20 people in Chicago that's growing, and then twenty-thirty people in London.

Nathan Latka

09:10So it's two eighty total, something like that?

Pieterjan Bouten

09:13Yeah, something like that, north of two fifty, growing quite fast. And then, so on the outbound side we have here in Ghent, have about 15 SDRs, or BDRs, business development reps, people who do outbound efforts. Their main focus is on bigger enterprise companies, so Showpad has a we go to market in a mid market and enterprise way, and so our BDRs here in Ghent target enterprise companies in the EMEA region. Have

Nathan Latka

09:43Where are you getting the leads from by the way? Are they inbound leads, or they're cold emailing?

Pieterjan Bouten

09:47It's called... We typically don't do cold emailing anymore. We've done it in the past. We've seen it's not highly effective. So it's a lot of inbound that we nurture, and then based on certain activity levels, we're going to have a more proactive approach in terms of getting in touch with them over the phone, or trying to get them to one of our webinars or events for So

Nathan Latka

10:12of the two eighty people, how many are dedicated to sales?

Pieterjan Bouten

10:17So we have about 35 AEs, or from upsell to new business, to quota carrying people, and then we're gonna have about 30,

10:31probably 30 SDRs or BDRs across both continents.

Nathan Latka

10:36Real quick diving into a lot of folks that are in the 15 to 20,000,000 range that are listening to the show are starting to really scale their sales. It sounds like you've come up with a formula, you kind of understand how it works because you have 35 quota carrying reps. First off, are they on the same quota or is it different depending on how long they've been there?

Pieterjan Bouten

10:53Obviously there's a ramp and the ramp will be different from mid market to enterprise, and for us the ramp for a typical mid market person will be, it will be close to six months before mid market is fully productive. For an enterprise, it will be closer to a year before you're on full quota.

Nathan Latka

11:11What is full quota for both those segments?

Pieterjan Bouten

11:14Full quota for Showpad and enterprise will be around 1,000,000 for enterprise sales, and will be around 600 k for mid So

Nathan Latka

11:21just to be clear, an enterprise salesperson at Showpad is expected at quota after a year to be hitting about a million new bucks in ARR and they're closing that over the course of twelve months?

Pieterjan Bouten

11:30Yes. Exactly.

Nathan Latka

11:31That's great. Did you, did you kind of nail that right off the spot or did it take you some editing to figure out ramp up periods and how many leads to give them and how many SDRs per

Pieterjan Bouten

11:41I would say it took a lot of going back and forth, and actually to be honest, you're still in many ways, I think as a sales organization, you're always going you're not making massive changes, but I think you always need to be focused on fine tuning the engine, and seeing what works and what doesn't work. For example, we've made some changes in terms of what is the cutoff point for mid market and enterprise. In the past,

12:06Showpad has mid market, so that's zero to 2,000 employees, then enterprise is 2,000 and beyond, but then we also have a global enterprise account team, and those are like four people focused on the really yeah, those are named accounts. Between the four of them, they have about a, I would say about a 100, probably you know, a 100 accounts that we're focused on either Got it. Closing or expanding. And so depending on obviously, and that then

12:39trickles down to how you market, how the BDRs work.

CAC Payback Period and Unit Economics

Nathan Latka

12:43When you look at like your fully weighted CAC, I know you have probably different cohort CACs, but on average, I mean, are you spending on CAC on these guys?

Pieterjan Bouten

12:52Our ratio, I don't know the exact numbers in terms of spend in the segments, I don't have them here, but our

13:03LTV over CAC is about four, ratio And what do you

Nathan Latka

13:06assume lifetime value is?

Pieterjan Bouten

13:09Our lifetime value, we calculate it based upon our gross retention, which is in the single digit churn.

Nathan Latka

13:16That's single digit annually and is it revenue or logo?

Pieterjan Bouten

13:19It's single digit annually and that's revenue.

Nathan Latka

13:22Okay, that's good.

Pieterjan Bouten

13:24And net retention is 130%, or was 130% in that last year. So basically means we're upselling our existing customer base like crazy, and that's a combination of product innovation, and then obviously getting better at selling it.

Nathan Latka

13:41Yeah. So just to be clear, if you're low single digits in terms of revenue churn annually, you know, let's call it your churn and 5% of your revenue annually. What you're saying is you're expanding revenue almost 35%. 5% makes up the loss, and then there's 30% on top of that to get your net revenue growth.

Pieterjan Bouten

13:57Yep.

Nathan Latka

13:57Yeah. Fascinating. Interesting. Okay. So your CAC LTV, you have a nice ratio there of four. With that kind of revenue churn, I mean, you must assume that these guys are worth at least four years of revenue to you, Call it like at least 120?

Pieterjan Bouten

14:12Yeah, our LTV is actually now around the 200 ks mark. So

Nathan Latka

14:18with a four ratio there, you're willing to spend up to $50,000 to acquire these guys fully weighted.

Pieterjan Bouten

14:22Yeah, for sure.

Nathan Latka

14:24And then how do you... Do you look at payback period a lot in terms of how quickly you get your money back or not?

Pieterjan Bouten

14:29Yeah. We look at it. I mean now it's, you know, it's depending on the... I mean average across Showpad it's about... It's close to 2 years, so it's in the one and a half to two year range. I think if you would break it down, you would see differences. Obviously, I think with enterprise, you can just afford a longer payback because churn is even lower in that segment, and lifetime value is way bigger. And so we're

14:53now I feel around the maturity that Showpad is right now, if you would talk to my marketing leader, sales leader, or for example Jason or COO, we're starting to like really be more focused on those metrics. I feel we've looked at them over the last years, but I feel at this stage is the first time that you can you know, since I think 2016 and '17 were the first two years that we... You to build up

15:21the data. Need to have enough revenue have enough customers

Nathan Latka

15:24to You have afford plenty of time though. I know people that have only been around two or three years that are raising huge amounts of money on two years of data. You've got seven years of So... Yeah. Okay. And and are you bootstrapped or have you raised capital?

Funding History and Total Capital Raised

Pieterjan Bouten

15:34We raised capital. How much? About $90,000,000.

Nathan Latka

15:39Okay. And when was the first round?

Pieterjan Bouten

15:41First round was 2013. So the first two years, we bootstrapped the business. We got to 400 k, $405,100 k in ARR before we raised our first round.

Nathan Latka

15:52Which was for how much?

Pieterjan Bouten

15:54Which was we raised €1,500,000.

Nathan Latka

15:57You went to the dark side PJ.

Pieterjan Bouten

15:59Yes, yes.

Most Recent Round and Valuation Signal

Nathan Latka

16:01And when was the last round, and what was the size?

Pieterjan Bouten

16:04Last round we did a $25,000,000 round just a couple of weeks ago.

Nathan Latka

16:09Oh, couple of weeks, congratulations.

Pieterjan Bouten

16:10Yep,

16:11Very good. So was kind of, let's see it as a, we raised 50,000,000 in 2016, which is a pretty big round, and then about the end of last year we got a lot of interest from several VCs who were not in the company. They were putting out term sheets, we actually didn't need the money, but we then decided, hey, you know what, if there's interest and we can raise money at good terms, our existing investor was

16:37willing to put in additional cash

Nathan Latka

16:39Sometimes people assume a round where you raise less than the previous round is a negative thing. They assume it's a negative signal. What you're saying is no, wasn't negative. We just had extra interest.

16:48That was not a down round, right? Was a higher valuation than the 50 It

Pieterjan Bouten

16:52was double the valuation that we got the year before.

Famous Five Rapid-Fire Questions

Nathan Latka

16:55That's great. That's awesome. Okay, good stuff. Let's wrap up here with the famous five number one. PJ, what's the last business book you read?

Pieterjan Bouten

17:02Last business book I've read is, was it Give Less Fucks?

Nathan Latka

17:07Mark Manson?

Pieterjan Bouten

17:08Mark Manson, yeah.

Nathan Latka

17:09Yeah, the subtle art of not giving a fuck, basically.

Pieterjan Bouten

17:12The subtle art of not giving a fuck. I liked it. So it was chunkable and sizable.

Nathan Latka

17:17Number two, is there a CEO that you follow or study?

Pieterjan Bouten

17:21Aaron Levy. I like what he's doing.

Nathan Latka

17:25Three, besides your own, is there a favorite online tool you have for building a business?

Pieterjan Bouten

17:30My favorite, I mean my favorite actually tool for growing the business is WhatsApp. I'm constantly on WhatsApp, just on my computer and on my phone.

Nathan Latka

17:38Number four, how many hours of sleep are you getting every night?

Pieterjan Bouten

17:41I get about seven.

Nathan Latka

17:43Seven, okay that's good. What's your situation, married, single, you have kids?

Pieterjan Bouten

17:46I'm married and I have two young kids.

Nathan Latka

17:48Oh, great. And how old are you PJ?

Pieterjan Bouten

17:51I'm 36.

Nathan Latka

17:5236.

17:53Last question. Take us back to your 20 year old self. What do wish he knew?

Pieterjan Bouten

17:58That, yeah, sometimes you need a bit more patience in life.

Nathan Latka

18:02There you guys have it from PJ. Be More Patient. He had a lot of successes, decided to go out on his own in 2011, went to about $400,000 in ARR before going out and doing their first $1,500,000 round, again helping enterprises manage their sales content, their sales communications, really starting on mobile, which gave them a great beachhead in the space. He since scaled a thousand customers paying an average 30,000 ACVs, so doing about 30,000,000 in ARR

18:27right now. That's up from about 20,000,000 in ARR just thirteen months ago. So healthy growth there, 70% year over year growth. 130% net revenue retention year over year, about five to 6% gross revenue churn. So healthy expansion there. CAC to LTV, super healthy ratio of four getting paid back in less than two years. Scale and fast. PJ, thanks for taking us to the top.

Pieterjan Bouten

18:45All right. You're welcome.