How Squirro Reached 48 Enterprise Customers and 100% Growth with a $150K ACV AI Platform (Interview with CEO Dorian Selz)

Introducing Dorian Selz

Nathan Latka

00:01Hello, everyone. My guest today is Dorian Selz. He's a co founder and CEO of Squirro. Before that, he co he founded the Swiss search platform local.ch and made it the market leader in four years. Prior to that, he was partner and COO at Namics, the largest ecommerce consultancy in Switzerland and Germany. He holds a PhD from the University of Saint Gallen and a master's in economics from the University of Geneva. Dorian, you ready to

Dorian Selz

00:20>> take us to the top? Sure. Alright. Thank for having me.

What Squirro Does

Nathan Latka

00:24You bet. So you're building Squirro today. Tell us what the company does and what your revenue model is. How do you make money?

Dorian Selz

00:30>> Squirro is an augmented intelligence company. What we do is we help companies do more with their datasets, particularly with their unstructured datasets. And for that, we build an AI platform that is a liable to take these datasets, to extract insights of them, and get them to people in the case of their workbench, as an example, integrated into Salesforce or Microsoft Dynamics or other such systems. Our business model is very

Types of Data Squirro Processes

Nathan Latka

00:55I was gonna say, what kind of sorry. I didn't mean to cut you off there. What kind of data are people feeding you, though? So what are the inputs that feed your system?

Dorian Selz

01:01>> That could be, as an example, textual datasets, like earnings transcripts from for financial services, as an example, or research research notes that can be company internal datasets, like, as an example, call notes, contracts, emails, all types of SharePoint documents, Word documents, everything that you and I, Nathan, can read every day, but computers have a hard time to do and deal with.

Pricing Model and Average Contract Value

Nathan Latka

01:23Mhmm. Okay. And your pricing model, is it a pure play SaaS company?

Dorian Selz

01:27>> It's a pure play SaaS company. We price on the number of seats or in some very rare situations, we price by the number of transactions you use the platform for.

Nathan Latka

01:38Okay. And then help me understand on average, what's the company gonna pay you per year to use your technology?

Dorian Selz

01:43>> What we see over the past years, and that I think holds true for AI, AI is still an nascent industry. There are not many really big operational cases out there. So in many cases, we see companies coming to us at the very beginning with maybe 50 ks, 100 in terms of a bit of services, a bit of subscription mixed in year one, and then year two, it goes up, and we have seen our largest customers in

02:06>> the multimillion dollar range.

Nathan Latka

02:07Okay. Just the pure play SaaS business, excluding professional services or onboarding, what would you say the average customer pays per month or per year?

Dorian Selz

02:14>> Per year? On average, at the moment, we have about ACVs of about 150 k US.

Nathan Latka

02:21Okay. So this is very much an enterprise play. Do have an inside sales team?

Dorian Selz

02:24>> That's correct. We do have an inside sales team. It's very much an enterprise play. It's very much play that tackles company internal business issues around as an example, deal origination or or service service insights.

Team Size and Locations

Nathan Latka

02:37And And so how many people are on the team today, total?

Dorian Selz

02:39>> We have at the moment about 30 people on the team.

Nathan Latka

02:41And where's everyone based?

Dorian Selz

02:42>> In Zurich. Engineering is based here in Zurich, Switzerland, and then a half pre sales, post sales sales teams in New York and London and Munich.

Company Timeline and Capitalization

Nathan Latka

02:51Okay. So Switzerland and remote locations. And and, Dorian, put us on the timeline for me. When did launch the company?

Dorian Selz

02:57>> With Squirro, started in two thousand thirteen, fourteen.

Nathan Latka

03:00Okay. Twenty thirteen, twenty fourteen. And and have you in terms of capitalization, have you bootstrapped or raised?

Dorian Selz

03:06>> We have the the first two years completely bootstrapped. That is my co founders and I have built private companies, and and we put up the initial money. Then we took a bit of pay business management money back in two thousand sixteen, seventeen. And then back in 2017, Salesforce joined us plus a Dutch based investor called Finch Capital.

Nathan Latka

03:24Okay. So how much have you raised to date?

Dorian Selz

03:26>> In total, we have raised about 15,000,000.

Nathan Latka

03:28Okay. Five-oh?

Dorian Selz

03:30>> One-five.

Nathan Latka

03:31One-five.

Dorian Selz

03:31>> Okay. Got it.

Nathan Latka

03:33Very good. And and all equity or is any of that debt or venture debt?

Dorian Selz

03:37>> All of that is equity with a small token that we did in the early age the the days where it was a convertible debt drive.

Nathan Latka

03:44Okay. Makes good sense. And walk me through, so 2013, you're kind of leaving. Where was your head at that point? Did you just sell your prior company or where or did you quit your full time corporate gig? What were you doing?

Dorian Selz

03:56>> My founding team and I, we built back in 2004 to about 2009, as it's the largest homegrown web platform by by any KPI, local search, called local.

04:07>> Google at your own game in the local market here. That was acquired in 2009 by Swisscom, which is the incumbent telecoms company. As we hanged around a bit

Nathan Latka

04:16What was the acquisition price?

Dorian Selz

04:19>> About 500,000,000.

Nathan Latka

04:20Okay.

Dorian Selz

04:23>> And then my team and I, my co founders and I, who go back together for about twenty years by now, we started that back already in two thousand seven, eight as a little side project, a thing called online note taking. Back in the days, there was no Evernote, as an example. OneNote on Microsoft was really kind of like a forgotten child of the Office platform, and we saw an opening with an online memory, for you, for

04:49>> me, whatever we collect digitally. We started to build Mnemonic, and then, well, face it, a bit of financed American rival called Evernote came up, and in the b to c space, very different from a b to c b to b space. So in the b to c space, Evernote overtook us, and then we folded, back in 2013, started a fresh thing called Squirro.

Nathan Latka

05:09Okay. Very good. So back going back to 2013 or when you exited that first company before jumping into Squirro, how were you the founder at that company?

Dorian Selz

05:17>> Yes.

Nathan Latka

05:17And what did

05:18you guys scale that company to in terms of team size?

Dorian Selz

05:21>> The prior company, local.ch, was scaled to about 600 people.

Nathan Latka

05:25Okay. So fairly large. And did you did you bootstrap that yourself or raise there as well?

Dorian Selz

05:30>> Parts of it was raised. Parts of it was bootstrap.

Nathan Latka

05:33How does that work? What it's either one or the other, isn't it?

Dorian Selz

05:36>> Well, you know, at the beginning, it was bootstrapped. And then later on, we start to inject commercial we start to inject institutional capital from a big media company in Switzerland and eventually also from Swisscom who eventually acquired the company.

Total Customers and Named Accounts

Nathan Latka

05:49Okay. Very good. Alright. And then so let's focus back here on squirro. So you launched in 2013. What have you scaled to today in terms of total customers on the platform?

Dorian Selz

05:57>> We have today about about four or five dozen customers on the platform around the globe, from Asia to South Africa to Europe to The US and even South America. Predominantly in the financial services space, customers like we can talk about, like Investec as an example, Standard Chartered, but many other others that unfortunately always come with NDAs. They don't want us to tell anyone that we use.

Nathan Latka

06:22That's a good thing, Dorian. That means they really like you.

Dorian Selz

06:26>> I don't know. We'd love to talk about their success stories, because at the end of the day, all of these companies share one common trait. They have so much data that they don't do anything with. And I think over the past five years, we learned a trick or two how to do more with unstructured data. And it will be good to be able to tell those stories here and there, whether it's financial services or outside, because

06:47>> there are so many other companies that simply don't use to the best extent possible their data.

Nathan Latka

06:53So, Dorian, you said you have 4,000 customers today, and they and they all are paying.

Dorian Selz

06:57>> 4,000. I said four dozen. Four dozen.

Nathan Latka

06:59Oh, four dozen. Okay.

Dorian Selz

07:00>> Got dozen.

07:01>> And Big Bay enterprise customers.

Nathan Latka

07:02I was gonna say that something's something's not matching up here. Something doesn't work. Okay. So about maybe forty eight fifty customers today Yeah. That's right. At the ACV you gave me earlier, would put you at about $600,000 per month right now in revenue. Is that about right?

Dorian Selz

07:15>> That's about right. Yeah.

Nathan Latka

07:16Okay.

Dorian Selz

07:16>> And wouldn't go into too much details. We don't disclose our because a proud held company, we don't disclose figures.

Nathan Latka

07:21By the way, I'm only multiplying numbers you gave me. I don't want you to tell me numbers that you can't disclose.

Dorian Selz

07:26>> That's okay.

Growth Rate and Sources of Expansion

Nathan Latka

07:27Well, help me understand what growth looks like. You've done this before. So over the past twelve months, what have you grown by?

Dorian Selz

07:32>> Over the past twelve months, we've grown by about a 100%.

Nathan Latka

07:34Okay. Good. So if you're doing $600,000 today, that means you're doing $300,000 a month about a year ago.

Dorian Selz

07:38>> Yeah. That's right.

Nathan Latka

07:39Where's most of the growth coming from? Expansion revenue or new customer ads altogether?

Dorian Selz

07:46>> We actually just did the math at the board meeting late earlier today. And if you break our numbers, a good half of it is actually coming from expansion revenue from existing customers that actually go broader. And actually, we expect that to be even bigger, a slice of the chunk in 2019, because we see some phenomenal growth with some existing customers. At the same time, we have been selectively onboarded we have selectively onboarded new customers in the

08:10>> financial services and insurance space, and we expect the game to change late twenty eighteen, early twenty nineteen, because we also have now set up a number of worldwide distribution partnerships, as an example with Refinitiv, the former financial services and risk division of Thomson Reuters, that resell our stuff with Salesforce, who's an investor in ours. And, we now see early tractions of that starting to kick in with bigger deals with newer customers. So we expect that game

08:36>> to change radically over the next twelve months.

Nathan Latka

08:38And the expansion revenue you're driving, what pricing axes are you driving that expansion around? Is it really just number of seats or number of transactions, or is there some other value based metric?

Dorian Selz

08:46>> Most of our most of our product is used in conjunction with an existing workbench, such as Microsoft Dynamics, such as Salesforce. All those workbenches are sold on seat based pricing. And we simply adapt to that model for making it easy for a customer to kind of engage with us because it's simply then a portion of that workbench expense that they have. And in that sense, it's a model that they're used to.

Nathan Latka

09:09So it truly is just your expansion revenue is seat based.

Dorian Selz

09:12>> Most of our expansion revenue is seat based. That's great.

Distribution Partnerships and New Customer Channels

Nathan Latka

09:15Yeah. That's great. Okay. Great. And then help me understand kind of what the team looks like today in terms of adding new customers. What's the growth channel you're using?

Dorian Selz

09:23>> You mean in where we acquire most of our new customers?

Nathan Latka

09:26Yeah. Walk me through how you get a new customer today.

Dorian Selz

09:30>> We do a lot of outbound marketing. We have a lot of inbounds through our own efforts, plus what we also have done over the past twelve months, we have created a number of distribution partnerships, like with Refinitiv slash Thomson Reuters, or Salesforce, tier one, but also Buhler in the industrial space. On the other side, we have a number of implementation partners, such as Accenture as an example. All of these three channels bring us customers. Once a

09:54>> customer is there, we normally split the work in terms of professional services, not with us, but actually with a partner. We direct all new customers to partners for the implementation side of it. Us, we focus predominantly on the platform, platform selling. We have a small pre sales, post sales team, delivery team, that in almost all cases supports an implementation partner in delivering the solution to an end customer. As we deal here with company internal data sets,

10:22>> in each case, whether one likes it or not, even in the cloud based era, you need to attach yourself to existing solutions, and often these solutions are strictly on prem, so you need actually to make that step to go on prem to do the dirty work of, as an example, connecting to an existing, maybe aging contract system that you want to actually attach to our platform to, as an example, do insurance underwriting more efficiently. So there

10:49>> is partners involved, us is the product, and together we deliver a first class service to our customers.

Nathan Latka

10:55And Dorian, how aggressive are you being today? So to get a new $120,000 a year customer, what are what are you willing to spend on fully weighted CAC?

Dorian Selz

11:04>> We, at the moment, are on a lifetime value to CAC ratio of about 2.5. I'd love to get that to about 3.0 ratio. At the moment, in that sense, we pay slightly too much for the cost of acquisition.

Nathan Latka

11:18Which is about how much?

Dorian Selz

11:21>> We, at the moment, if I told you about our average average tech size, we have about four years lifetime value of what we see in those early stages. So you can guess that I spend about 100,000 acquiring a new customer, 250,000 acquiring a new customer. You can calculate that. That is still a bit too high, frankly speaking, but again, it's enterprise customers with very long time ranges of being customers with us. We have had, over the

11:49>> past five years, just two customers resigning from contracts, one because they changed their total business, they went out of the line of business that we supplied our software business, our software to, and another one because there was a complete change of management that they simply want to have everything in the press.

Customer Churn and Retention

Nathan Latka

12:06So, Dorian, what does that mean in terms of actual revenue churn annually for you?

Dorian Selz

12:10>> We have, at the moment, kind of like in last year 2018, we had zero Okay. Including growth. Single customer. We kept every single customer. There was no customer going away. Every single customer grew year over year.

Nathan Latka

12:22Yeah. But you you can keep all your customers but still have revenue churn from downgrades. You're saying there were no lost customers and there were no downgrades?

Dorian Selz

12:30>> That's correct.

Nathan Latka

12:30Okay. So when did you lose the two customers you're referencing?

Dorian Selz

12:34>> I I lost one of them. I lost one of them in 2017. I lost one of them in 2016.

Nathan Latka

12:39What does no churn tell you about a business? Are you priced too cheap?

Dorian Selz

12:43>> That's maybe a guess, you can say that, that you price too cheap.

Nathan Latka

12:47I mean, shouldn't

12:48you have churn though?

Dorian Selz

12:49>> Yes and no. You know, AI is an early stage thing. What I'd love much more, what we pride ourselves much more that in the exception of about three customers we saw expansion in every single account. So our typical gauge model is what we have seen over the past years, so the customer will come to us maybe in the first year. I'll walk you through an insurance customer here in Switzerland. An insurance customer

13:13>> in Switzerland, they came about two years ago with a small pilot, about 50. That was two years ago, 2017. 2018, we rolled out to one of their divisions, and within the division, to one line of business in one country. Average contract value, annual contract value, about 80,000. Now, at the end of the year, they came back, and they did two things: first, they declared us to be the de facto platform for every unstructured data analytics piece

13:38>> in that insurance company, it's about 5,000 people in that insurance company across Europe, number one. Number two, they started now with us a plan of rolling that out from that one single line of business to the other countries, that adds about another 200 ACV in 2019, and they will have been discussing with us taking the platform and rolling it out into other use cases within the business. So within the span of about three years, we became

14:04>> a core component of their enterprise software infrastructure.

Net Revenue Retention Discussion

Nathan Latka

14:08So 0% gross revenue churn annually, you said 50% expansion is pretty normal. That would put your that put your net revenue retention annually about a 150%. Is that accurate?

Dorian Selz

14:18>> Oh, you're better at these kind of calculations. I haven't done that. Wait. Wait. No. I'm just I'm

Nathan Latka

14:24just adding two numbers, Dorian, that you told me. You said 50, 50% ARR growth comes from customer expansion, and you said you had 0% revenue churn.

Dorian Selz

14:34>> That's right. Yeah.

Nathan Latka

14:35So how is that complicated math? That means you'd have a 150% net revenue retention.

Dorian Selz

14:41>> 150% net revenue. Sorry. I don't follow that. It might be late over here. It's 9PM. I haven't followed that concept.

Nathan Latka

14:48Okay. Just so net revenue is just you take your churn revenue and you add back your expansion. You're saying you churn nothing. Your expansion is typically 50% on the historical cohort. So net revenue retention be one fifty. Right?

Dorian Selz

15:00>> Okay. Yeah. That's right.

Nathan Latka

15:02Okay. Interesting.

Dorian Selz

15:02>> For walking me through that.

Nathan Latka

15:03Well, no. I but but I don't wanna walk you through it just because that's my number. Clearly, that's not a guide a leading indicator for you. It's not something you're No.

Key KPIs: Net New Bookings and NPS

Dorian Selz

15:10>> It's not. Yeah. No. It's not. I can tell you what my leading indicator is.

Nathan Latka

15:13What?

Dorian Selz

15:14>> We at the moment we at the moment just look at two KPIs. We look at net new bookings from net new logos, because that gives us an early indication what's gonna happen twelve months, twenty four months down the road, number one KPI. And we look at Net Promoter Score in our existing accounts, because that tells us something how fast we can actually expand in in in year one in year two and three.

Nathan Latka

15:37Yep.

Dorian Selz

15:38>> There are two only KPIs to look at. That might be a bit un American, but that's the KPIs that are important

Nathan Latka

15:43That's not that's not an American at all. By the way, net new bookings is is is that's the the percentage version of that would be net revenue retention. I mean, it's it's basically the same thing except net new bookings you actually measure in terms of what the actual ARR is not the percentage. That's great. No, I think it's a great metric. Very good. All right. Last question here before we wrap up. If you sold your last

Why Build Instead of Buying a Platform

Nathan Latka

16:03company for, I think you said half a billion dollars, correct? 500,000,000? Would your you most valuable asset is time. Why wouldn't you go buy a platform, right, that already has these customers and then edit it so that the product matches your vision? I mean, why hustle and scratch and grind for four or five years when you can afford to just go buy something?

Dorian Selz

16:23>> Well, go back five years ago, there was text analytics around, but the whole process of taking unstructured data sets, processing them through an engine, and down to a sentence level, be able to identify future looking statements, as an example, about the financial markets transaction, that was simply not existing in the marketplace.

Nathan Latka

16:40It actually was an automate it actually was automated insights, which Vista Equity acquired, dud this exact same thing in the financial services market, and that was back five, six years ago. I'm just curious as it was somewhere

Dorian Selz

16:51>> I wasn't aware of that.

Nathan Latka

16:51So at

Dorian Selz

16:52>> the end of the day

Nathan Latka

16:53My biggest, Dorian, my bigger question is a guy like you who's your your biggest asset is your time. You can't buy more of it, and you have cash resources. I'm just curious why you chose to build versus buy to save yourself time.

The Zero to One Challenge

Dorian Selz

17:05>> I love that stuff.

17:09>> Crazy things don't happen the straight route. Crazy things happen if you go there in yourself. Frankly speaking, five years ago, we had only limited we know exactly where we want to go, because I saw that I I've I've done the entrepreneurial exercise. I've funded about four companies. Frankly speaking, I don't know to do anything else within my time, professionally speaking. That's what I do. I've been building companies. Look, Nathan, Nathan, I I divide that in three

17:34>> aspects. There is the zero to one challenge. There's the one to 10 challenge. It's the 10 to 100 challenge. And then come the bureaucrats that ruin a 100 plus company. Right? The zero to one challenge is the most interesting challenge, because at the very beginning, you just have an empty piece of paper. And you need to make that empty piece of paper something that other people sing your song better than yourself, a. K. A. Your customers

17:59>> love you so much, they're willing to pay money for that. And that zero to one challenge is the challenge I'm after. That's the challenge that motivates me. To simply take something that is already one, or maybe if, to take your analogy, is already 10 and build it to a 100, maybe there are people much better than me doing that. I I've been over the past twenty years for that zero to one challenge.

Nathan Latka

18:20That's the answer to the question. It's that's what you're passionate about. That's why you didn't use your money to save yourself five years of of grinding. You like that part of the grind. Makes sense.

Famous Five Rapid Fire Questions

Dorian Selz

18:27>> That's right.

Nathan Latka

18:27Alright. Let's wrap up with the famous five. Number one, what's your favorite business book?

Dorian Selz

18:31>> Good to Great.

Nathan Latka

18:32Number two, is there a CEO you're following or studying?

Dorian Selz

18:36>> There is one here in Switzerland called Calvin Greeter.

Nathan Latka

18:39And he's a CEO of what?

Dorian Selz

18:41>> He was the CEO of Buhler manufacturing company that owns about 60 of the food processing space. So if you had a sandwich for lunch today, they would, by all chance, have actually produced flour for that sandwich bread. And this is a company that has one hundred and fifty years in its bones and reinvents today a manufacturing, solid manufacturing business into a data driven business. I find that fascinating.

Nathan Latka

19:09CEO of Buhler. Very good. Number three. What's your favorite online tool for building the company?

Dorian Selz

19:14>> The one we use for about fifteen, eighteen years is Atlassian.

Nathan Latka

19:18Number Part of it. No. Atlassian is great. And by the way, we had Jay on who runs Atlassian. He's the president on a couple episodes ago. You guys can go listen to that episode to hear about their growth story. Number four, how many hours of sleep do get every night?

Dorian Selz

19:29>> About six to seven.

Nathan Latka

19:30And what's your situation? Married, single, kiddos?

Dorian Selz

19:34>> Married with a wonderful nine year old daughter.

Nathan Latka

19:36Oh, very good. And how old are you, Dorian?

Dorian Selz

19:38>> I'm 47.

Nathan Latka

19:39Last question. What do wish your 20 year old self knew?

Dorian Selz

19:45>> Not quit the pilot flying school to become a Swiss bomber pilot.

Nathan Latka

19:50Don't quit it?

Dorian Selz

19:52>> No. I quit. I left because of the first Gulf War, and I thought that doesn't click with my brain. But then again, with 47, I sometimes think it would have been really cool to fly a Mach two plane.

Nathan Latka

20:04Guys, don't quit, especially if you're training to fly a Mach two plane. Now he's working on AI and intelligence specific to unstructured data building. Squirro started in 2013. Now 48 customers paying, call it, $12,500 a month. It's about $600,000 a month in revenue, up from $300,000 a month just a year ago. So healthy growth. They price on number of seats or no of transactions per year in rare cases. $15,000,000 raised. Team of 30 in Switzerland and

20:27remote locations paying up to $200,000 to get a new $120,000 a year customer. 19 payback as he looks to scale. Dorian, thank you for taking us to the top.

Dorian Selz

20:36>> Thank you, Nathan.