How Siftrock CEO Adam Schoenfeld grew to $1.1M revenue and 140 customers in 2018.

hello everyone my guest today is Adam Schoenfeld he is the CEO of a company called sift rocked he joined his ex post facto co-founder in October 2016 he's passionate about all things related to SAS marketing and sales previously he was a founder and CEO at Simply Measured in the social analytic space he's also a beauty member at visible leader in the b2b marketing attribution space Adam are you ready to take it to the top let's do it all right I remember Simply Measured back that was you know the heyday for those companies back in 2012 when wildfire vitru buddy media all those guys sold you sell the same time I know later it was it was uh I was in the business for a long time grew it and then it I left the business to come join sifter out and then it's sold to sprout social posts was that got it what did would it I mean size-wise what might get up to you guys were a couple million in a are right can you share no can't share details of that it was it was definitely more than a couple but I can't can't share details about why'd you leave why not stay with sprout social through like an earn out or something um so I actually left before the the sprout social acquisition and for me you know the company had grown we're over 100 employees you know had some success I'd learned a ton and I really love the the earlier stages of a business yeah and I wanted to go do something I want to go bootstrap a business actually I wanted to try different model and when I met Chris who was had started sift rocks so though I was just drawn to him and his energy and so I just had the opportunity to go do something else that was really passionate about yeah I'm sorry my numbers were way off too because yeah I mean you guys had raised I mean there was well I know one round you'd a debt that's simply measure was like 20 million you guys had raised a significant amount of capital right yeah we did yeah we went on the the VC path and and we did put a lot of capital in the company and as you know you were you know you're in that space at a similar time and yeah you know a lot a lot of companies that space got very crowded very quickly yeah it was a that space was a show I mean we had all kinds of different lis at different times there were some I should have probably moved forward with there were others that I should have said no to but um yeah I'm glad we got out of that space I'll just leave it at that so why get into walk me through you're doing today so what's company view and how do you make money yeah SAS model we work on annual subscriptions and we saw this sort of niche in b2b email marketing so if you send any volume of email to leads and customers you know whether you're sending on webinar invites or following up on white papers what happens after your email sends go out is you get a bunch of replies back mm-hmm like out of office messages and notifications that somebody's changed jobs those things just happen right and then you get people who actually want to talk to you and that's how many more and more so swift rock is basically managing and mining all of those replies so we take the hand-raisers the real people that want to talk to you we send with a sales rep we look at the out of office messages for signatures we look at the left companies to clean your database so this this process that just works behind the scenes to basically help you automate and kind of improve your process after the send okay and and so I love the products but I'm also curious about like how you ended up here so you said de facto CEO there's a lot of words and that bio which means usually some hit the fan and you had to come in I mean what happened why'd you come in and see his co-founder CEO I wish there was a juicy story about that hitting the fan but you know I used the Jason Lemkin ex post facto CEO because I came in as co-founder as CEO after the company had been founded sure we actually company was founded in December 2014 ok yeah so he'd been running it for about two years solo so you know one guy technical guy also a very entrepreneurial super impressed I mean can you imagine right he'd built the product he validated with early customers he sold early customers he iterated the product he built multiple integrations solo and he just got to a point where it was like hey either I need a co-founder to handle sales and marketing and help me take this to the next level or I need to sell the business yeah I said let's go do it yeah what did and he paid bootstrapped it at that point right yeah absolutely bootstraps and it says amazing so up to where you're at today so I mean it bootstrap have you raced capital fully bootstrapped ok it's too good Europe taking a full 180 from your previous ventures huh yeah you know I learned a lot through that process and I wanted to try this way I'm not like violently opposed to the VC model yeah I just think there's lots of businesses and lots of opportunities to you know take a different approach to take a more a little bit of a slower kind of more intentional approach to kind of the market and that's what we're doing here plus it's a way better story for you to take podcast interviews from your closet than it is some big fancy boardroom you spend all your VC money on all right tell me more about the kinds of customers you're working with so I mean like on average what would you say the average customers paying you per month yeah so on average existing business it's 7,500 per year okay and the kind of customers are you know people who send a good amount of email and who use a marketing automation platform so folks like a Valera LogMeIn procorp Glassdoor you know people that have a pretty big database they're nurturing those leads they're emailing their customers they use Marketo Eloqua HubSpot or part those are the platforms we primarily integrate with mm-hmm and what's the difference between someone paying 700 bucks per year to your expansion or every door they might pay 20 30 40 50 grand a year what what pricing axes are you selling up on yeah we just added the the second axis of features so we have we have a feature I have to feature SKUs and then we have volume basically volume of replies that we process which is a function of how much email they send so interest area Buhl's and which one is more effective for your salespeople for upselling is it just driving more usage to get more volume and that's the most effective no-touch way to upsell probably for upsell it's the features because you can't change their volume you know what I mean so we have no ability to affect that where we can kind of inspire them to try something new on the feature axis and so that's where a lot of our product development is to enhance our second feature skew and add a third the volume it's just do you send or do you not I mean they can expose this to more business units and regions to get more volume but pretty much at the start of the contract we know how much volume they're going to generate and what if you guys now scale to in terms of total customers using the platform we're about 140 customers okay that's pretty good so so I mean if I take a hundred forty times seventy five hundred bucks I mean I can kind of get into like generally are you guys are passed or flirting with that million dollar mark right now yeah we just hit that we just hit the million of air our mark last mile - congratulations that's that's a big I mean that's a big milestone yeah I know I'm super proud of it I mean a six employee we just hired a sixth employee so you know functionally a five employee company retail I know they are are on zero capital I think it's a cool milestone I mean it's it's small relative to many of your guests on the show obviously when you're talking hundreds of millions but it's always hedge the atom I don't understand why can I tell you a secret the the interviews I do with people that are at your level get almost three times the downloads as when I have Ryan on from Qualtrics and they're about to IPO it's you know why because those are inspirational but they're not actionable like your this episode will be actionable you're gonna say things that other people at your exact same oh they can go try it sure yeah no I love it I love kind of operating this size figuring out what it takes to get from 100k to a million it's a it's a fun problem and you try to get from one to two and you just sort of take it one day at a time yeah what's interesting to me though is so how old are you today thirty-five got a few grades coming in not too bad though it's interesting to me how you're able to put your mind back in this mode after you know I mean you guys raise north of 2530 million I think it's simply measured I mean it's a very different thing to grow at that kind of capital behind you versus the mindset you're in now I mean have you done anything to shift your mindset that way or no it's easier than I'm making it sound it's hard sometimes I mean I think but I like it because it keeps you keeps you humble right like I have to write copy for the website I have to design images for our LinkedIn ads right like I am I have my hands in the weeds of the operation and I love that and I did that a lot at Simply Measured in the earth it is and I love doing that so I think so much learning comes from that and doing it for you know a second time effectively is is awesome and I'm sort of relearning things I learned seven eight years ago it was a mindset shift right versus having a big team and having an EA and having somebody manage your calendar and write just like all the little things I think and and it's definitely taking a shift but I settled back into it pretty quickly because I think this is where I'm most comfortable actually what was the initial what was the initial gentlemen's name Chris Hundley Chris so so you guys got obviously hooked up I mean are you a true co-founder if I looked at the cap table I could clearly pick both of you out as the two co-founders or are you at like you know two three four or five percentage points kind of thing no no I'm a true co-founder in that sense I mean obviously we tilted it a little but for you know him and the sacrifices he's made but you know it's a it would be a typical you know if we had started a company and I had to pay for that right I had to sacrifice a lot of salary and and trade what I where I was that's that was my fault question right because if I if I looked at okay I've got the CEO who built this social company Simply Measured raised a bunch of capital obviously it hadn't exited yet but clearly many many many millions in ARR you must have really seen something here that gets you very excited for you to take you know when you measure your opportunity cost yeah yeah and you can see that Nathan right but a lot of people don't get that they're like why would you do this and I'm like you need to go talk to Chris because I think as a business co-founder right the most important thing and I benefited from this at Simply Measured I had a phenomenal product co-founder and a phenomenal CTO but you need that other side you need somebody who can functionally complement to you but also personality and style wise and so when I saw him and we spent a ton of time together dating and sort of informally advised him for probably a year before I actually you know joined the business but that was just I just saw that as such an opportunity that you know I was willing to make a lot of sacrifice to come on board what's growth look like you just passed a million in aor where were you 12 months ago oh man I mean we're in those ridiculous percentage growth rates right but we really think about it in dollar growth I guess at the end of last quarter we were growing like 260 percent right I mean we went we it took us 18 months to go from basically 100k to a million a day or so you know when I came in we were about 100k of just what eat cobbled together and you know we just crossed the million 18 months after I guess so so summarize that in 20 launched in 2014 he grew about a hundred grand in ARR in 2016 when you joined it was about a hundred grand in ARR you've grown now over the past two years up to you know north of a million so 10x over two years pretty healthy growth yeah yeah 18 I mean it was like it was q4 2016 and I came in so had it yeah just an 18-month window so it's been we came in and and I brought in the first day I mean and you know lessons learned right the very first day I brought in a Director of Sales very first day I joined her and I sat down together it was like because it you know that was a lesson to I learned is investing in sales too late and things like that so we it was great I had a great partner in terms of you know be able to bring a new business which of course you need when you have very few customers what that what that conversation with your first sales right what did that sound like I mean was she asking questions like where my Gucci leads from and you're going well here's your commission structure here's a target ACP like get me into that conversation yeah yeah she's very bright so she asked all those questions luckily we had the the personal relationship because we'd work together she had been at Simply Measured then went on to a different company so fortunate that we had a history to sort of draw on and I said hey look here's the sacrifices I'm making to do this here's my confidence in the business and you know like why don't you take the leap and let's see what happens and luckily you know we were able to sort of set up a commission structure where she was benefitting pretty quickly from actually closing business so she then I think bought in pretty quick after that so where where are you guys feeding her leads today are they just they're just coming in through the website or are you doing a direct paid stuff yeah we're doing some paid some paid social and that pencils out really well for us and then we've we've got really good word of mouth and sort of position within our partner ecosystem you know those platforms we integrate with people tend to talk about us inside of those communities so that's been a big wheat source that we've generated and then we're just starting to build the outbound muscle I bet we've closed of our you know 140 customers maybe 15 of them have actually been closed through outbound and we're trying to get that mix up interesting so right now across your entire base when you've got your fully weighted CAC where would you pin it yeah so it's about it's about half of what our ACB is it takes about six months to pay it back got it so call I mean it fluctuates you know some quarters it's for some it's eight right like these numbers are still small right so you you're still seeing it bounced around but we're always keeping it under that sorry I want to keep it under ten and lay back yeah yeah yes your six-month payback today on 700 or a CV so call it 3500 bucks in CAC or somewhere around there and bounces right exactly interesting and then this is tough especially at kind of where you're out right now but when you put your finger up in the air and you look at what you think LTV might be how do you calculate that and what do you think it is oh man you know I don't think about LTV and SAS I just look at the CAC ratio and then the end the payback period because I think when you start doing LTV on a half a percent of churn on an early cohort it's like your LTV is three hundred years or something right and so you just get this weird equation so I really just think about you know the I think about those components the renewal rate and the CAC and then the CAC payback and and the the a CV growing obviously is important but I don't I don't really think LTP did I hear you say that right here you're churning in terms of logo churn a half a point every month no so we we look at it as renewal rate since we're doing annual deals we have a few legacy I think we have three month the month payers left from the old days but you know everything now is on an annual deal so I look at renewal rates um I pulled this up because I needed ask but are so are if I just look at everybody who's renewed over the last 18 months we have a 99.5% dollar gross renewal rate but Nathan it's like these early cohorts you need to be that high like these are your early adopters the people who are like loving your product they're willing to take a chance on you so I I don't know that's indicative about where that's net dollar retention no that's gross that is gross okay that's like 135 yeah but again like your early customers should upgrade at a higher rate so I think when I look at that first cohort of people that were acquired you know in 2017 and earlier it's like you know we should be we should be delivering at a really ridiculous rate for those people yep and you mentioned six-month payback period we talked a little bit about about again six folks on the team now today we're guys all based we're all in Seattle on one room I love that so obviously not all Jan in that closet is it a co-working space or is it just a space you found outside it's a space we found yeah just in in Pioneer Square in Seattle we got a little walk up and it's fun yeah there's a nice 7-eleven downstairs where you can you know buy some drugs and a bag of Cheetos or whatever you need and it's a fun it's a fun neighborhood there guys have its if Drock powered on powder on you know tylenol and Cheetos Adam last question here I mean you've been here you've done this before so I have to ask you know ver the next 12 months in terms of driving growth you mentioned trying to experiment growing the outbound muscle I mean what are three metrics you're really focused on over than next year as you drive trying drive more growth yeah I mean actually outside of metrics but I'm mostly focus on and I guess the metric would be you know expansion revenue or starting a CV is is product expansion we really like we I mean email is an old channel but it has a lot of room to innovate and I think we've we've sort of open people's eyes to when you try to get people to reply to your marketing emails magic can happen right when you get that two-way engagement and so we want to do more stuff with the product to make that easier for people to take that to the next level and so I'm really actually focused on new product and new innovation on the on the product itself right now because I think we have like the model working at the level that can sustain our business and be cashflow positive so I guess that ties back to to expansion or a CV but but I think it's a little more qualitative than that right if a Marketo or a you know sales force or on these companies that they see you rising up their app rankings really quickly approaches you and says hey here's a five million dollar check sell the company just you sell uh not four five I mean everybody's got some number right I'm not gonna share it on your show here but I think we we are building the business as if we're gonna be doing this in ten years and if those conversations happen like we'll entertain them I mean but I think we we're just taking the lens of like how do we generate cash flow to to pay the employees pay the rent you know run the business and make our customers happy and and you know then we'll sort of see what what doors open yeah are you running right now at about breakeven yep right about breaking up and you know some months a little over some a little under so 2017 the nice thing about annual contracts right is you can you can make this work bootstrapped if you can if you can do it yep Adam let's wrap up here with the famous five number one what's your favorite business book you know I've been really into Seth Godin right now so I'll go with the purple cow number two is their CEO your phone you're studying currently a lot a lot I love doing this um I'll go with a local CEO sandy Lynn she's the CEO at skill jar they just raised a big round and she's super super sharp I love talking with her so if somebody I know personally and I've been kind of watching her grow number three what's your favorite online tool for building the business besides your own oh man it's so tough because I know I'm really excited about drift and outreach and they're you know they're all in the sales and marketing world where I live both of those since we're getting outbound going outreach has just done some amazing things to help help that especially in terms of like personalized emails so really like that tool number four how many hours of sleep are getting every night oh I'm pretty steady in the seven ball park now in six and a half and which the situation married single you have kiddos married two young ones four year old in a two year old okay that's incredible and you said you're 35 right yep and and last question here what do you wish your 20 year old self knew oh man that that idiot I don't know what I tell him yeah probably just not trust your gut but listen to your gut I think any time I was sort of straight it's been sort of like not listening to a gut feeling not asking why not digging down on that so I think sort of really thinking about who you are and sort of trusting what what those signals are even if they're hard to figure out why you're you're hearing them so that's probably I'd tell myself I don't trust your gut but make sure you're listening to it Adam had a lot of success of his first company Simply Measured raise a lot of capital group to many many millions in ARR before he left and then obviously went on to sell now he's joined up with a sounds like a very talented CTO in 2014 the CTO launched companies sift rock again helping with you know emails you get all the replies what do you do with replies when someone says I'm you know I'm out of office or I've changed jobs and how do you update your serums and all your data records to make sure reflects everything you're collecting from those automated replies and then most importantly how do you actually again engage the people that wrote you real replies from those mass emails you sent out he's solving it their team of six people based up there in Seattle totally bootstrapped 140 customers paying on average 600 700 bucks a month so doing they've passed a million bucks in a are are growing and I have about 10x - over the past 18 months which is healthy hundred thirty-five percent net revenue retention year over a year again healthy growth sift comm Adam thank you for taking us to the top thanks Nathan