How Socialtables CEO Dan Berger grew to $20M revenue and 5K customers in 2019.

hello everyone my guest today is don berger he's the founder vp and general manager of the washington dc based social tables founded in 2011 the company provides event sales marketing and operation software which have enabled over 250 000 planners and 5 000 hotel and venue professionals to execute 4.5 million events uh the company was recently acquired by seavent don you ready to take us to the top let's do it all right man so uh tell us quickly before we get to kind of where you're at today give people context on what the company does and are you or were you or are you today still a pure place sas company so i started the company eight years ago and initially we were just seating chart software and as we kind of built the product and realized there's a market need for something greater than seating chart software and event management we developed more and more tools to help hotel professionals and event professionals create more successful events so basically our software is cloud-based you go online you can edit you can choose a venue look at the floor plans start editing the floor plan invite people to collaborate on it and then build a successful event as a result of that and it is your peer play sets pure play sas interesting okay so a lot of people that i've had on that are in the event space they they call themselves a sas business but when you look at the economics it's so seasonal and difficult and sometimes people will say well we're just going to charge kind of a per event fee and others have customers that you know do 30 events a year and it makes sense to have a sas model in that way how do you handle kind of the seasonal nature of the event business sure i think most people when they talk about events they automatically think about serving the event planner so i let me just take a step back i think event events event planning is like sales everybody does it they just don't realize they do it and it's not necessarily in their title right i'm sure we we planned an event just coordinating this interview 27 million meetings in the united states every single day that are either one-on-one or giant conferences but but the most of the most of the software in the space serves the event planner we targeted event planners early on but then realized exactly that we were charging one-time event fees and that wasn't sustainable or predictable so what we did is we went after the hotel professionals and over time we saw a total shift we used to serve 20 percent of our customers or hotels and venues now it's 20 of our customers are actually event planners and 80 percent our hotels and venues that's who pay us the majority of our revenue and 100 of our revenue is recurring um and and we serve the hotel and venue professionals who put on the event and they as a result serve that software to their clients interesting okay so give me a general sense here of kind of what segment you're targeting and i'm sure you have a bunch of different customer cohorts but on average what's the customer paying per month or per year for this on average between 4 and 5k okay interesting and that might be like the marriott in downtown dc that puts on an event every weekend exactly and the reason the reason why hotels are so interesting is because even though there's only like seven major chains in the world that own a majority of the supply the reality is that it's a very owner operator uh type business there hotels and venues are essentially small businesses i mean they're operated relatively independently even though they're mostly franchised so we do go door-to-door for the most part and of our over 5000 customers um almost are our contracts with the individual property interesting okay and earlier the price point so that was acv or monthly price four thousand that's that's so that's uh arr okay got it uh so acv would be plus the setup so acv is about five grand um interesting on the first year are you pulling uh are most of those payments are you kind of pulling them all forward in one chunk or they are paying monthly absolutely one of the things that was critical to our success is making bessemer really like this customer did our a round and then followed without our wanna say as the union economics made sense back um went up a little bit but it was in the beginning 12 months and and that's because we collected that uh that that fee right away so it was 30 day uh net 30 pay up front and it was all ar not mrr which i think was critical especially early on in generating the cash flows needed to run the business so how much you mentioned you raised i know you launched in 2011 how much money did you raise 22 and a half 22 okay and that was all uh equity or was our venture debt built in or anything it was that doesn't include any debt we had another we had another uh venture debt of four million okay do you request so this is like a uh actually it's a hot topic fetch your debt and how much they raise no no but but sometimes people just mix it up without even realizing it but i am curious to ask you so there are adventure jets kind of getting hotter and hotter as people go wow i can maybe use this to grow without getting diluted i mean would you recommend it did it work well for you we we got it as you know when we sold we had um over 10 million of cash in the bank yeah and what i think venture debt helped is kind of in two ways number one it gives you an insurance policy and number two when speaking to enterprises you can say you have more cash on the balance sheet than you may actually have had if you didn't do the debt round so i encourage it is more of an insurance policy we never needed it because because we just we were i mean if we weren't going to be sold last quarter we would have been ebitda positive this we would be profitable this year and we're still going to be profitable as a business unit so um i think it's a good idea but for the right reasons uh the new york times had an interesting piece about how more and more founders are choosing uh to do away with equity rounds because they're because of the vc style um um you know the impact that vc raising is having on startup so i think it's up to the founder at the end of the day my philosophy is raise money and dilute yourself because that increases your chances of success um uh and so you know take a 10 20 hit early on in order to have a much bigger enterprise value going forward yeah i'm curious here about actually let me just ask this so so you have four four thousand five thousand bucks your one kind of acv five thousand customers i mean that would put you at like 1.7 million bucks a month right i mean is that about right uh it's a little more than that it's a little more or seasonal by quarter so q1q4 are very busy in hospitality events q2 and q3 slow down um we try to balance that with actually serving the university market about 500 of our customers are universities okay and they have events year round so that's a good just a good kind of tip for for founders if you have a seasonal business try to find something tangential and adjacent to what you're doing in order to kind of uh smooth out your seasonality but um yeah i mean you're on an annual basis on a monthly basis we probably do about between two and four million okay good okay good i mean okay so then you've definitely across the 20 million ar mark at this point yeah we just crossed it uh last that we literally crossed it in december okay congratulations that's great so let me ask you and we'll get to the acquisition in a second but now that and you're part of another company now so there's planning there coming from other people but what are you hoping to hit and grow to this year we'll grow 35 this year and where were you exactly a year ago back in joining january 2018. we grew 25 last year so we're seeing acquisition having a real impact on on on on our on our ability to to sell more yeah so 25 year over year growth that means you're doing what like 15 million bucks in ar about a year ago um yeah that's that's exactly right something around there interesting so the reason i asked that because i always like to compare funding raised relative to ar and what's the ratio and it sounds like you were actually just crossing kind of a one-to-one ratio as you ultimately end up deciding to sell the company um go ahead if i can comment on that you know i think um we made a mistake a few years ago where we decided to go ahead and rewrite our entire core product instead of developing a new product so basically taking most r d resources and putting it towards uh building a new version of the of the core software um and and that was that was a tipping point we and that kind of slowed our growth down what we should have done is we should have said hey we're going to deal with some of these this tech debt these these issues we've had with the core software and build a new product in order to keep growing because i do think that sas businesses that start slowing down their growth and are not doing the 40 50 percent a year yeah hurt their their long-term chances of success but we're seeing that kind of turn the corner now so wait so hold on so what's the advice there you're saying ignore technical debt or knock it out earlier i'm i'm saying well you know it's you put me in a tough spot sorry i think i don't think anybody should ever ignore technical debt but i do think you have to constantly consider um new products and innovation in order to not stunt your potential future growth so you know if you choose every decision you make as a regard in regards to r d uh will impact revenue impact down the line so if you choose to rewrite your software and your cam is a little more limited or you're serving a specific vertical you may not necessarily have the opportunity down the line to sell new software because you're not going to everything in the pipeline in terms of innovation interesting okay very good and round up the team for me so what do you guys think in terms of team size we are right around 100 all in dc uh about half a dozen remote okay dc and remote that's great and then um take me back take me through some of the other economics and i'll just know that um of those remote employees all of them were in dc at one point so they were so good you wanted to keep them when they moved away yeah i mean look i think as as as as an early stage kind of as an early stage company it was important for us to have everybody in the same in the same building um and working together we have an amazing incredible space here thirty thousand square feet like two blocks from the white house and you know we we were really proud of that space and it would kind of be a shame to have everybody remote and not be able to enjoy that so um if you worked at social tables and decided to go remote no problem but generally we um i'm not a fan of remote remote work yeah uh round out some of the other economics here so sas companies turns critical how did you think about retention how do you think about churn today dude we we knocked we knocked that out of the park our our revenue retention is 105 we're we're doing 95 percent um in your lesson thank you you want to reshoot that question no you're great so 100 105 net revenue retention and you said you were gonna say 95 gross it sounds like with 10 expansion exactly yeah that's great then the 10 expansion revenue you're driving to make up the five percent loss plus give you the five percent you know over 100 retention where's that expansion coming from what are you upselling sure so there's three categories one of the benefits of releasing a new version of your software is your ability to up charge uh more so instead of going up and saying three percent five percent you can say 10 15 because we're giving you a new version of the software so that's certainly helped up charging is one component the other one is um the natural price increases that come when you're in a in a in a sas model one of the one of the strategic decisions we made was done sorry what are those what do you mean natural price increases i mean the three percent you have baked into your contract oh no this isn't normal by the way not everyone has this so yes so just talk about how you built it's essentially like almost like when you lease a a place when you're a college student there's a natural accelerator year over year on your rent's going up yeah that's right and we had that baked in but the thing is one of the one of the strategic decisions we made was to actually not have multi-year deals and this this can hurt valuation so it's k you have to be careful but not having multi-year deals if you have very high retention rates you you don't want multi-year deals because then you have an opportunity to increase the contract at a higher value so you know you're gonna be locked in that two three percent annual increase over the three-year period over a three-year term so um but that gives us the opportunity to have those conversations with the decision makers on an annual basis to justify the larger price increase what percent of your and then the third the third component is um is uh new products yeah and john what percent of your customer contracts today are on that three year kind of annual plan ten percent oh not a ton okay no so you don't i was going to ask you you don't work with any of these firms that will basically pull forward a three-year contract value give you the cash today and then basically bill out an interest rate to the customer as they pay over three years i think it depends on your resources we have a really incredible account management team and they are renewing constantly they're doing 300 400 accounts per person so they're having those business reviews on a regular basis and are able to pull to increase some acvs on an annual basis um that being said if you don't have a big team you probably want a multi and you have any and you have a smaller acv you probably want to have multi-year deals yeah um real quick back to the pricing axes question are there any you mentioned some things like feature upsells things like that three percent kicker are there any actual utility-based value metrics you're upselling against whether it's number of events number of seats at marriott that's on youth like things like that you know one of the things we don't want to do because we have collab we're essentially collaboration software for events one of the things we don't want to do is limit the number of events or limit the number of users because that decreases the amount of uh network effects we can have so we have unlimited users um we have because and again in a hotel you want multiple people using it in different departments so that then you can go to those departments selling different products so we have um unlimited users unlimited events where we do limit um the the price is around square footage so um basically the price is a proxy to the size of the event space a property has okay that's interesting uh interesting so it's just basically my guess there to founders is you know figure out what is that currency that you can use to charge and there and it really depends on on your business uh obviously users and and number of units is kind of you know uh an obvious one but there may be other triggers it might be it might be storage or for us it's events they may i don't know excuse me so for us to square footage there may be other triggers that can increase your price um if you tier it up don you mentioned your inside sales team when you look at fully weighted cac what's that at today to get a new five thousand dollar your customer how long is your ltv well you tell me so you know it's funny we had a lot of good conversations with the board around this i've always said if you look if you actually do the ltv calculation um our you know our customers are stay with us way longer than five years but the board was really um adamant about not going past five years so using lte ldv with five years um it's it's about it's a 3.5 sorry you said 3.5 yeah okay so if you're basically saying you got a 60-month ltv right that's five years at five grand a month that's 300 grand and so 3.5 would mean you're willing to spend up to what 70 80 grand to get the customer well um yeah for 30 000 300 not 300 uh are you sure six years yeah yeah yeah six six sixty months times five thousand bucks a month well no it's five thousand bucks a year oh my bad okay yeah thirty thousand okay sorry so yeah take that back you're saying you're willing to spend maybe up to seven grand to get the customer um yeah or even or even ten yeah okay we're in ten and okay so by the way you brought up an interesting point because there's a lot of people that have healthy economics like yourself and when you actually just do the extrapolation in the excel sheet it will say lifetime value is like you know 40 years and 4 million dollars and if you use that to plan like your cac obviously you get in trouble so it's like how do you decide where to put like the hey let's be realistic the excel sheets lying to us where do you choose to put that artificial height look i think i think when it comes to deers i agree with with the conservative view of limiting it to five you don't know what's going to happen um and and and what maybe seven it again it depends on depends on your retention but let's just say it's amazing let's like ours like 95 percent to cap it at seven so you have that and that's that's a that's a static variable in your equation the other the other part of the formula you can play with is obviously what is cac um and again we had very long conversations at the board level about this and that's why we had an ltv cac which was uh fully fully loaded and then we had adjusted ltv to cac where the cac was a little more uh uh liberal um because some of the things we don't want to include in in in in the calculations started creeping up like for example where does product marketing fall yeah um as one example so as a result we had two ltv to calc uh ratios an adjusted one and an irregular one our fully loaded one the regular one was uh 3.5 and our adjusted was a you know five yeah and the adjusted would include those those softer things that weren't maybe directly correlated but could be the adjusted wouldn't include sorry would not that's why it was a higher ratio yeah very good and then so just to get us and you liked them larry phillips um yeah incredible you know most bankers have a certain reputation larry phillips and the moreland team were totally like the the inverse of that um they're they're they're extremely um hospitable and and patient with us uh and we've worked with them for years um as as at first an advisor then a retained bank and then through the process which was unsolicited by the way um so then we had to run a process um because the first offer was unsolicited and one of the things and i really advise talking to bankers in your industry about this because they will give you um a glimpse into how acquire companies will look at your ltv so let me let me ask you a question real quick so you're saying first off when did the first connection between you and either vista or reggie whoever it was happened oh my gosh i met i met reggie and team um five years ago maybe six okay so call it 2013. now did you work most of this directly through reggie or did brian and those guys get involved at vista so i and i'm in vista actually two years ago um and i met donald park over there so um and brian shea is obviously on the on the c-van board as is donald um he and and moreland is the one who connected with vista two years ago it was you know it was it was truly like i can't i'm not bullshitting here it was truly a um a slow and steady wins the race kind of thing yeah you know when we first met with them we were we were we were a tiny little product what was your revenue back then when you first met oh my god zero okay um our first revenue was yeah like maybe it was like i don't know like ten thousand dollars yeah but uh it was truly a process and we mostly work with with corp dev and then the executive team as things got more and more serious past the summer the deal we signed loi late august the deal closed october 16th august 2018 you're stopped talking august no august 20 20 that's right august 2018 we started talking and the deal closed two months later yeah no that's great and the reason i ask when you say unsolicited something i was like wait a second because because moreland is really well known for the deals they've done with vista whether it's people admin or aptian they've sold a bunch to vista so i'm going i i thought you were going to tell me we knew vista was a great fit we retained more than because they know vista really well no no not at all and and you know we talked to steven before vista acquired them yeah we talked to steven yeah before before they even went public yeah i want to just go back to one thing we talked about because this is one of the really important lessons that i've learned at cvent um obviously under vista and at social tables over time it is so important for founders and ceos to truly define the metrics that work for them um and what i mean by that is the lgbt conversation is a perfect example where you figure out the metric that that that you want to report on and you truly define it in concert and in collaboration with your executive team and with your board but by just using in um generally accepted definitions and i'm not talking about gaap stuff like the accounting is counting i'm talking about the operational metrics and and the other metrics and the kpis you use to run your business truly defining them because they change from business to business yep well and different ones are your different leading indicators for different things right exactly yeah very good we um the deal price was you guys did not make public so we'll stay away from that but let me just ask you a different question a lot of founders especially new ones don't realize there's something called the deal price and then the payment terms and they're very different things right sometimes you have earn outs stock i mean all kinds of crazy stuff built in so can you talk to us about the percentage one way or the other i mean was there an earn out component if so what percent was cash versus earn out sure uh so is it all cash deal okay great the one of the things that again you don't learn until you sell a company is the deductions that may happen after um once the deal takes place and and there's debt like items that you that your price gets dinged on like what um like tenant improvement like uh deferred rent um other you know those are two two prime examples that are costly i don't understand i don't you're that's the space understand haven't been through before so what do you mean deferred rent so for example when you sign a lease like we did you know our our rent was a million two a year okay uh we had we got seven months free rent um and that was a that was you know a perk we received and it's not one that stephen necessarily enjoyed in the beginning in the first three years so we had to go ahead and adjust the deal price to take into consideration the free rent we received additional the tenant improvements we got three million dollars in ti yeah i'm the landlord again we have to um we have to we have to look at that number and actually adjust the deal price based off of um you know the free improvements we receive from the landlord so they would dig that down by the if the deferred round you committed to it for five years at 1.2 million take 1.2 million times five plus the three million in ti up front and they basically dig it by what 10 million bucks uh well i wouldn't it wasn't 10 million it was probably less than that because it depends it's retro it depends on the how long the you received that benefit without being owned by the by the acquirer yeah um so it was over three years so we got dated by like two two million dollars oh that's okay not horrible very good and then um then as far as the terms yeah which you asked um yeah all cash feel like i said um i have an earn out um and that earn out is um um time based um one of the things that you know founders want to keep in mind is is it going to be tenure based can be performance-based obviously 10-year is better because you don't know what's going to happen you don't know what you don't know um and and the other the other piece of it is don what's yours tenure based mine's two years my 10-year base two years there so there isn't there are no performance metrics they just said we want don he's talented let's keep him in that's right and obviously there's always going to be a potential bonus component that would be performance based on your salary one of the things that an acquirer may do is try to argue you know your comp is is your base plus bonus plus you know the or not you have and you have to stay away from that because look the deal price is the deal price regardless of whether i got the money all the money today or or a certain percentage percentage of it in the future um so whenever you have those conversations you have to you have to make sure you remind the acquirer that the deal price is the deal price and your comp does not include future payments yeah no that makes perfect sense i always wonder though when a founder like you know it's very hard to motivate a guy once they're made rich by somebody so it's like how on earth do you would they retain a guy like you and you're thinking man i just sold the thing i've been hustling since 2011 i want to go like explore the world right now for a little bit what's keeping you motivated oh my god you know it's funny you say that because i've i've actually never been as motivated as i am today post deal very good and i'll tell you why um there's probably two major reasons the first one is if i ever want to do anything again i have to understand what goes beyond 20 million i have to understand what goes beyond 100 employees and i can't get that you know without working at a larger organization it's almost 4 000 people um so that's number one number two it is really inspiring to work around successful operators one of the things i love about cvent is that 11 of the 14 original guys are still there that's great yeah um and that's that's and they're celebrating 20 years this year so you know that tells you just how committed the team is how work how well they work together and how successful they've been very very especially considering the fact they've been public and they went private and their own by vista um you know when sometimes private firms have a reputation for bringing on different management teams so um ceva does retain their folks um and so that motivates me i go to work and i look up to the people i i work alongside with or report to and reggie's a real inspirational leader so i i i really i'm learning that's good i just realized we totally ran out of time but so let's wrap up here quickly but first real quick it was reported and it was reported and rumored the price was around 100 million bucks is that fair can you comment on it i'm not gonna comment on that all right all right let's wrap up with the famous five number one what's your favorite business book i did not i didn't know you're gonna start with that one um my favorite business book uh is uh predictable success by les mcewen number two is there a ceo you're following or studying [Music] reggie agriwall give me an under give me like an under the radar one in dc most people don't know about oh gosh um um [Music] my god no no i i'm literally i it's on the tip of my tongue um come back to that okay we'll stick we'll stick with reggie number number three what before you guys were acquired by vista what billing tool were you guys using um what what what billing tool were you guys using or was it all invoice in yeah we were using um quickbooks obviously for accounting and then uh zora for the you know the revenue recognition and then quoting and all that number four how many hours of sleep to get every night um between five and seven that's good and situation married single kids um not married no girlfriend and uh no kids i have a dog i think i was gonna say he's he's behaving very nicely back there he's uh he's watching all right and how old are you i'm 37. last question take us home here what do you wish your 20 year old self knew um that that learning how to program was the best thing i could have done at that time guys learn how to program early as best as you can it will pay off in life coming from don again founded social tables back in 2011 now over a hundred people all based into dc and a couple folks remote 95 gross revenue retention 10 expansion 105 net revenue retention again serving hotels mainly um over 5000 of them paying on average caught 300 400 bucks a month so they just passed 20 million bucks in terms of run rate that's up 25 year over year uh as they move towards break even before the big vista acquisition via cvent they've raised their ears 22.5 million bucks prior to that as they look to scale again being semi-aggressive on cac paying seven thousand bucks to get a new call at five thousand dollar per year customer so 16 month payback again deal was all cash dan now work or don now working hard on the earn out and uh learning from the cvent team dom thanks for taking us to the top thanks man i really enjoyed it