How Smartsheet CEO Mark Mader grew to $943M revenue and 1.7K customers in 2024.

this is the top where I interview entrepreneurs who are number one or number two in their industry in terms of Revenue or customer base you'll learn how much revenue they're making what their marketing funnel looks like and how many customers they have I'm now at $20,000 per talk 5 and6 million he is held bent on global domination we just broke our 100,000 unit sold Mark and I'm your host Nathan lka I just finished traveling south East Asia for 41 days and I usually always get sick when I travel and quite frankly eating is difficult for me it's hard to find a restaurant and I'm spoiled in Austin with my personal chef well I took these little packets with me this time 30 of them in my carryon suitcase they kept me totally healthy with 11 different secret ingredients you can see them at Nathan la.com juu I'll tell you more later on in the show that's Nathan la.com slj folks many of you reach out to me and you say Nathan so many guests on your show talk about the importance of batching but whenever I try and batch you tell me this you go Nathan they don't book back to back times so you or they don't show up after they book it's frustrating the answer is guys you have to use Smart Tools I use a tool called AE scheduling at Nathan lat.com schedu I'll tell you specifically how I use it later on in the episode Nathan L here this episode 627 and coming up tomorrow morning all you young folks out there listening and are in for a treat 19-year-old CEO Ido Gino joins me he just raised 3.5 million for his company Rapid API which helps you connect with apis faster but how does he make money tune in to find out good morning everybody Our Guest this morning is Mark Mater he is the Chief Executive Officer of smart sheet he's passionate about delivering Superior customer experiences and organizational excellent Mark strives to find innovative ways for customers to collaborate more intelligently using the smart sheet platform and its partner ecosystem prior to Smart sheet Mark served as senior vice president of Global Services for Onyx software leading the cons Consulting and consumer operations team in the Americas Europe and Asia in 2015 he was recognized as Earnest and young entrepreneur of the urine technology for the Pacific Northwest Mark are you ready to take us to the top I am very cool okay so tell us what smart sheet does and what's your business model how do you make money so we're a software SAS company so we make money by helping clients obviously but we're subscription service and the people who subscribe to us are teams and Enterprise team who have a need to manage and automate collaborative work so that's taking it beyond the conversation and taking it into the realm of tracking reporting automating and scaling very often in the context of projects and processes so is this I mean are you playing kind of in the Trello Maven link is space yeah in in a sense uh but sort of Enterprise class so think of it less about like a structured task or very specific time capture and more handling everything from tracking space launches to events like this Super Bowl things that are very diverse in nature and require data that goes well beyond just a task definition interesting so I could probably get like Gant chart functionality inside a smart sheet yeah that's one of the things we do but uh definitely not not the sole purpose of the of the offering interesting um to kind of quantify that maybe the easiest way to quantify kind of the target you're going after you said more Enterprise on average what are these customers paying you per month yeah on average we serve about 65,000 distinct Brands today on a paid basis okay on average each one of those Nathan provide about a th000 bucks a year ARR but the the diversity is huge it goes all the way from 200 bucks a year to 1.65 million a year so the the reach is quite dramatic largest customer in the tens of thousands of users the smallest uh sole proprietorship who collaborates with a few customers got it but you said 65,000 paid Folks at an average annual R proof about a th000 bucks per year right yeah that's just on our domains and then we have obviously a ton of just ISP uh subscribers as well so I mean I can Mark since you give me the numbers I'll do the math 65,000 time 83 bucks a month on average that's 1,000 divided by 12 means you're doing well north of 5.4 million bucks in Mr is that accurate yeah we're about a $80 million annual annual business today you cut out there sorry I say that again we're about we're about an $80 million business today on an annual basis and we're a super grower in the last our kagar over the last five years is north of well north of 60% a year yeah so call that what about 6.6 million per month right that puts you on the 80 million run rate yeah yeah what when you say super grower sorry you said 10 to 20% year-over-year over the last four years uh no no no the super grow is over 60% a year growth that's imp Mark that's tough that's not easy no it isn't and as as you know Nathan as you get bigger that growth rate is more challenging so you need to have it's not only getting new customers but helping those customers grow and see new value uh you know a big part of our growth is obviously getting new brands on the platform a huge part of the growth is also taking the existing Brands and having them really expand their usage that's right I always thought I was so clever when I was launching my first SAS business and I went from like $1 of Revenue in one month to $2 and I would put in the subject line 100% month-over-month growth you learn quickly investors look all on that fast that's awesome so okay your 80 million run rate right now you're growing 60% on average year over year so what' you do like 40 million last year 50 million yeah and as you know Nathan in a Fasto business the Gap income you show uh last fiscal will will actually recognize about 66 million in Revenue while our run rate is in the mid 70s y we're growing pretty healthy every every month so we're going to hit Triple digit ARR here come mid year in 2017 that's a big number Mark that's exciting yeah it is exciting it's you know we've worked hard at it we sold our first C customer in the fall of 2006 and I would say the spet kind of turned on as we kicked into 2011 and then we've had very very healthy Revenue growth since then what did so so take me give us more context here because people are going to be f fated by you 2006 was that the launch date or did you start in 2005 with no revenue and then your first customer was 06 yeah it was and I think one of the questions people often ask is do you remember your Revenue in year one yeah that'd be zero Bob uh so it was 2015 or 20 2005 2005 company was formed first customer subscrib fall of 2006 and the revenue for a number of years as we thought we had the Magic Bullet but didn't was under a million dollars in ARR for a number of years up to what year rework the product the promise of what we wanted to do which was helping people track report automating and scaling their work in a collaborative way the promise didn't really change but how we brought the product to Market change dramatically uh making it more consumable really de enterprising ourselves from what we had done in our prior lives and that's all about having people be able to find the product use the product buy the product without a human engagement and even today Nathan as we start dealing with much larger customers 60% of our new AR that comes in is unassisted in nature that means a human being is not speaking with the Prospect and then where we put the sales energy on the inside is once they land helping them understand the possibilities and so what take me up what year how many years did it take you to break that million dollar AR Mark uh we broke it in 2010 okay got it so there was a good five years there where you sub one million in AR before it really turned on and you're saying the reason it turned on is you went down Market you lowered arpus and you made no touch sales a priority uh I wouldn't say we went down Market we went into a market got it we we were able to crack the code on what people wanted right sizing the capability the ease of use and the price point and uh it was a team of nine or 10 people there for the first uh first number of years we did friends and family rounds we took our first round of institutional in Fall of 2007 and that partner maor eventure group out of Seattle stood by us as we cracked the code and then in 2012 inside Venture Partners uh doing around and then 2014 stter Hill out of Palo Alto so we've raised a total of 70 million so far it's one of the more efficient if not one of the most efficient SAS companies out there where we've raised 70 we still have a lot on the balance sheet and we have ARR that exceeds the total amount raised that's pretty uncommon in SAS uh so you know we feel we have a very good platform on which to to grow and build what's your team size right now we're 480 people we're grow to about 730 this year adding a lot of folks in the customer success and sales realm so really coupling that self-directed motion with a very curated expansion flow yeah one of the things I do I've interviewed over over 300 B2B SAS entrepreneurs and I always love measuring uh new dollars of Mr of ARR per dollar raised it's a great measure of efficiency another one is revenue per employee so I just did the math on you what is that 166 Grand Revenue per uh sorry uh AR per employee uh pretty healthy actually when you rank them against everybody else yeah and you know as you know as you invest more this year you have to have the balance sheet and the confidence in your model to add 300 people this year many of whom are in sales you really need to feel confident they're going to produce and you know in a in a growth in a growth model um we're still trying to uh focus on efficiency but as the as the the metrics play out you have more and more confidence to to invest ahead of the curve I just had Josh mcarter on back two episodes ago of Booker they had raised they're actually a lot like you they just they raised $80 million to date and he mentioned you know their last raise was back in 2015 but they have 24 months of Runway even today on net cash or on on yeah on net cash burn do you have the same kind of Runway and if not how do you think about a Runway when raising Capital yeah I mean in in our business Nathan as a super grower you can make the decision to slow your growth and and drive profit overnight we could do that tomorrow if we wanted to but we and our board and uh and our strategic customers want us to get big and off have amazing offerings so uh again the market is rewarding us for growth right now we think we can innovate more quickly by doing that um but again control your own destiny we have a business model where if we wanted to be a 35% grower year-over-year we could do that next month and generate profits cash flow positive yet or no uh no our investment model right now is not but you know we're adding tens of millions of ARR a year burning low single digits and again we could turn the SP it off or change the pi at um at a whim uh 480 people where are you guys based uh based in Seattle Washington we just opened this month our first Outpost in Boston so by end of year Boston we'll have about 80 85 people on the ground there primarily in field operations function sales customer success uh over time that we expect to also have some Dev competency established out there in Boston yep um you mentioned you can turn the spicet off any minute and kind of turn on profitability usually that spicet comes down to paid marketing spend per month you can tone that down a bit what are you spending per month today on on paid acquisition per month uh we have a really diverse uh funnel we get well north of a thousand trials a month and it is really distributed Nathan across uh across SEO partner marketplaces like the Office 360 5 ecosystem Google Apps Marketplace or Gite Marketplace we do spend in the millions of dollars on Advertising a year okay uh we'll stay a little bit mum on how we go about doing that we've obviously innovated a lot in that space and we think that's a competitive Advantage for us yeah I was going to say there's a lot of people that have true very true uh uh intellectual insights on distribution channels and when I was doing my research with you guys um I'm seeing you guys just built in everywhere I mean every app store Google Chrome you've got 270,000 uh you know active users I mean you you guys are all over the place you'd say that's key to your growth yeah I think you need to go to where the action is right and people our whole Mantra has been dominate in the world of collaborative Work Management and partner effectively with the tools people use and love so partner with box partner with slack partner with Office 365 partner with places where the heat exists and it's not so much about displacing others in neighboring categories like we're not going to be the collaboration winner and displ all we're going to dominate collaboration and collaborative Work Management and help the communication guys do great and the storage and syn guys do great and the authoring guys do great it's all about having that ecosystem mindset because I think people's people shift from sort of single Source provider to best in breed apps that work beautifully together I think that's actually a real promise that you can deliver on yeah and then take me into the economics you you have a huge cohort more than I usually speak with of 65,000 paying customers so I'm sure you probably understand your unit economics in this regard gross customer turn per month what do you at yeah we uh we disclose that really on our higher contributing domains and and it's not a very it's a huge population but we really report on the customers who are engaged with us in sort of an over $5,000 a year ARR which is not a particularly High number and that unit turn is less than 1% on a unit basis okay well just hey educate us mark on that what's that mean so that means if you have a hundred customers who are paying you over 5,000 bucks a year one will leave got it okay so that's 1% annually not 1% monthly annually and that's that just to be clear that's not net negative that's not net revenue turn that's that's customer unit turn unit you have 100 100 companies stand in front of you one will leave that's impressive now now when you look at the we have a broad population we serve though so we have ISP customers who have like individuals who maybe have a spot need who may have a higher unit turn but that those dollars represent such a small percentage of our AR that we really report on those domains and one of the things things Nathan as you know talking to a lot of SAS people the key to sustained long-term growth is not just keeping but expanding so the reason we've been able to do this north of 70% average compound annual growth rate the last five years is because the people who stay not only stay on the roster they they grow and the combination of new winds staying and growing that builds a durable SAS company assuming that in 2017 you add zero new customers but you still have the success you're having in upselling what percentage would you grow by 30% that's impressive so you take your current customer base your sales team is that good they just they upsell by seed expansion how else do they drive expansion mrr well there's there's two parts of it yes I love crediting the sales team but there's also half of our expansion that happens without a human being being involved from what what lever seats product features what what the lovers yeah it's it's viral so when we look at how we monetize we charge the people who create new work in our application but we welcome every single participant known as a collaborator who gets to do it for free so what happens we get exposed to so many people with in and outside of a domain that you have this natural sort of uh engine that feeds off itself within a company as opposed to monetizing everybody out of the gate we earn it as we go and that is sort of a natural engine for our growth when you are making decisions high level decisions you know your at your management meetings about kind of customer acquisition costs relative to lifetime value lifetime value is very difficult and it's dangerous to just extrapolate because it can get to some funky numbers what what do you assume as kind of a safe lifetime value per customer and how does that allow you to back into your CAC number we are very we we rarely look at that on averages Nathan we always look at Bas on segment if we're talking about a construction company who's a large established company that has very low Flight Risk that produces 50,000 AR a year we may spend tens of thousands of dollars pursing as opposed to the online lead where we might spend 60 bucks so I think the key thing is we really look at the source the camp specific Source the campaign and what we spend per campaign and we have hundreds of them across the business and each one has its own economic levels layers I see too many businesses look at averages and averages can either completely turn you upside down or completely leave you under investing so we never look at the average we always look at the discreet item Mark it's one of the big things I tell you that I struggle with on the show because I want to get deep in numbers and so it's hard to talk about a 100 different cohorts so I talk about averages but many times the averages can be very deceiving um what are you manage internally what what are you using any online tools or are these all internally built to manage all these separate cohorts and the the different economics on each cohort yeah the cohort analysis is is really native to to our stack so RBI platform what we use for analytics how we track that through Google campaigns and SEO sources we basically map every single source and pathway into our world and then the then the graph that exists between our users so you can attribute there really multiple attribution points what was your Source when you first came in what was your secondary source maybe through a viral reach and then understanding the models of what causes the conversion so if you have that those Pathways understood you can actually tie back to uh the individual or the spend you had that resulted in the lead or the conversion and very often people say is there you can only assign CAC to something on which you're spending money like an advertising campaign but you should also do the same thing on your SEO campaigns who's actually writing the content it salaries so if you look at in a fully Lo way you can actually have a very nice model that that can that can guide your investment thesis do you typically drive your investment thesis on a on a fully weighted CA dividing in salaries and everything else or no uh multiple ratios we have we have sales marketing we have just pure advertising we have fully loaded I mean there there are multiple ones um and again depends what channel fascinating when was your last round you raised 80 million total when was the last one or 70 million spring we raised 35 in the spring of 2014 and uh it's fueled as well we still have most of that on the balance sheet and uh just have been a very efficient Growth Company over the last couple years so mark that was a that was what two three years ago so so maybe you're raising more Capital now or you're looking at an acquisition which one is it uh in terms of looking at raising acquiring companies I'm trying I'm trying to get you to tell me that that you and Benny off are talking and he's about to buy you for 700 million bucks of course you would to know that breaking on the top here we go breaking people yeah I don't share that in podcast no I'm kidding well I'll get you drunk one day and I Le just kidding guys I get asked all the time Nathan you host all these interviews hundreds of them per month how do you do them efficiently and guys the answer is simple people always agree to my calendar backtack meetings I batch my interviews to stay very efficient and the way that I do it is I use a tool called Acuity scheduling at Nathan lat.com [Music] schedu and the reason I use them is very simple they keep my noshow rate very low because they send out reminders about when the interview or the meeting is coming up and also they make it very easy to schedule time right I don't have to go back and forth VI email 10,000 times with people I'm trying to meet with okay Nathan lea.com schedu helps me so much and by the way look I like have so many meetings I'm the best at meetings okay I do them back toback very very efficient you guys know me many people say I'm the most efficient they've ever seen okay so I use the tool it's so efficient and by the way I got Gavin I said Gavin he's the CEO I said I want a great deal for my people he said Nathan well most people get a 14-day trial isn't that great I said no he's giv us a 45-day free trial at Nathan ler.com schedu that's not going to stay up forever so go get it now Nathan lat.com all right Mark let's wrap up here with the famous five number one what's your favorite Business book fa I don't have a favorite but what I'm reading right now is I'm reading play bigger which I love it's talking about how to knock it out in an emerging category number two is there a CEO you're following or studying right now I am I'm following Satya nadela uh his Mastery of a very diverse business has been impressive and something that uh is very relevant to our business with Microsoft being a huge partner of ours I was gonna say are you partner with them yet well we are in mult multiple dimensions that's great number three is there a favorite besides your own is there a favorite online tool you have like host skater uh as a traveler I am a huge fan of triet and uh something that actually uh keeps my I'm an organizer organizer mindset the key is besides smart I am an AV user of our own f as well number four yes or no do you get 8 hours of sleep every night uh negative what do you get on average uh 5 and a half okay that's not bad and how old are you I am 46 and what's your situation married single do you have kids married two kids and a dog oh I love that okay so married two kids and a dog you're 46 take us back 26 years Mark what do you wish your 20-year-old self knew you tell me what the major Trends were over the next three decades in Tech and I would make you a lot of money Nathan is there wrap that up in a lesson if there's a 20-year-old listening right now what's the lesson you'd tell them to save them sometime on their life uh try to get some inputs on whether or not you're early by like five years in a market that you're going after uh extraordinarily difficult to determine but timing is everything do not be too early top tribe there you have it from Mark Mater timing is everything he launched this thing in 2005 and sat on a big old zero egg of Revenue that first year nothing and even up to 2010 still doing less than a million bucks in ARR their team was call it 1015 folks that point now today they're over 480 people between Seattle Washington Boston they're opening up that location 80 people there by the end of the year they're serving over 65,000 customers at an average uh monthly uh revenue of 83 bucks so they're doing well north of 5.5 million actually they're already at a $80 million annual run rate looking to break the $100 million mark this year did about 66 million in 2016 Revenue gross churn less than one this is impressive less than 1% annually for their cohort with larger than $5,000 annual contract values over $70 million raised and sitting on most of that $ 35 million of their last round still in the bank Mark Mater thank you for taking us to the top thank you sir if you enjoyed Mark today go back and listen to Derek yesterday he's a senior editor at the Atlantic and is releasing a book that helps you predict popular in this new age we live in the distraction age it would mean the world to me if you guys got any value from this episode if you would go leave a review on iTunes right now and then subscribe you know I hustle like heck to get these episodes out every freaking day for you guys and trust me I love it I would do it with no listeners but boy oh boy it makes my day and it makes my team's day when we see great reviews and get your feedback so thanks so much top drive I love giving away free money I feel feel like o we're giving away cars and I have something special for you today how many of you have heard our super sharp guests talk about success they've had with Facebook and Google ads well all of you listening right now yes if you're listening you get $100 in free AdWords here's how you get it okay again thanks for listening get the free $100 from Google right when you sign up with my website post provider HostGator go sign up now to get your free money hostgator.com Nathan again that's hostgator.com SL Nathan so guys I'm so glad to be back in Austin I just got back from a major tour of Southeast Asia I went to Sydney Bangkok Bali and Japan and you know I always get sick when I travel and this particular trip my gosh 15 different airports 20 different hotels I mean imagine flushing in airport bathrooms I was worried about germs and getting all the nutrition I need I mean finding a restaurant in Japan difficult because nothing's in English so it's hard enough to figure out the train system but my point is is I had a guy named Drew canoli on the show who said Nathan if you're concerned about that take these little green packets with you you just mix them once per day with water they'll keep you super healthy you get all your nutrients and they'll keep you from getting sick so I took them and guys they worked unbelievably well I got no sickness just mix them with water once per day they didn't make my water bottles all sticky that's like nice a lot of these mixers they make them sticky it was very clean and smooth took them once per day never got sick so they've got 11 superfoods and they're perfect if you're not traveling but you're just on the go from your office to work so you can check them out at Nathan la.com juu that's Nathan lanka.com juice [Music]