How Stella Connect CEO Jordy Leiser grew Stella Connect to $7.9M revenue and 300 customers in 2019.

hello everyone my guest today is jordy liser he's the co-founder and ceo of stella connect a new york city-based software company that helps businesses drive engagement performance on their front line teams he help stella connect clients include many of the biggest and most service focus brands in the world including walmart mercedes-benz warby parker and many others all right jordy you ready to take us to the top let's do it okay so tell us kind of paint the picture for us what does cell connect do and are you guys a pure play sas model we are a pure sas model and as you described our business is all about helping frontline teams mostly customer service teams get the best out of their people engage their people and measure you know who their best people are and who their bottom people are and how to get those bottom people up um it's a tough job doing customer service all day long and so our tools and products help make it more fun and help them do their job better what is um good at warby parker is is measured by what audience surveys after a cs rep engages with a person or what yeah it's it's driven by a few things one of them is customer feedback so right after an interaction the customer the end customer will get a request for feedback with the photo of the rep they just talk to a little bio of their interests and hobbies that really humanizes the experience uh and and the brand and then the customer can can basically suggest a reward or some sort of recognition if that person went above and beyond jordy how how do you convince like if i just join warby parker i get a great pair of glasses i leave and i get a little email with the cute little face of the customer success rep that helped me and they're like you know what do you think what was he a five or a 10 i never fill that out so do you do you bribe me or how do you get those actually filled out yeah well that's the problem we're solving is that most people don't fill out any of those yeah they get like a two to three percent response rate and our company our our request for feedback are 30 to 50 what's the secret the secret is that we're humans and humans want and crave human connection and so i don't really care about the brand i care about the person and so that's the the secret sauce is that the person providing the service and the person receiving the service they realize this is about human beings it's not about some nameless faceless corporation so if the customer succeeds named you know joe james you might say hey nathan uh you know joe james next raise is dependent on like if you think he did a good or bad job help him out give him a rating something like that yeah no we just say hey what did you think of your interaction with joe uh and then we asked him hey do you want to reward joe do you think he did something do you want to like suggest he gets a a steak dinner he gets movie tickets oh fun and people actually they crave this sort of engagement and gamification when it comes to people because we've all been in a situation where you have an amazing experience and like you wish you could do something nice to suggest that this person gets something good but you're not going to fill out this like 20 question survey about the brand nobody wants to do that yeah no no the only time those get filled out is if there's such an emotional visceral reaction that it's worth it and that's usually when someone's pissed not when they're really happy it's they love you or they hate you and then get anything yeah all right very interesting let's break down the economics on this bad boy so what's the company going to pay you on average maybe per year per month to access your technology so we're a per seat per month sas model subscription model so just like the crm businesses we integrate into those businesses so salesforce and zendesk uh et cetera and so uh the pricing for us ranges any anywhere from uh 10 bucks a month all the way up to 40 50 bucks a month per seat yeah and so it's a traditional sas uh sort of business model i want to get into the actual typical like team sizes you're signing up so would you is it fair to say the average first year contract for you guys is what 50 60 80 100k where do you think it is uh we have teams of all sizes and shapes so we have we start at roughly five to ten people on a team and we work with uh brands like you mentioned walmart has many thousands of reps and so those contracts get well into the six figures so it just depends on the size of the team really interesting okay is there any team size that's too small that you won't accept because you know it won't work roughly five i mean again like if you're sitting with your team there's a lot of like high fiving and kudos and listening and helping them out that that you really you don't need necessarily something where you're having your customers kind of outsource that for you but once you reach five or ten i mean the business owner and the manager needs some help to scale that yeah yeah and if you look across again i know averages can be deceiving but just for the sake of time when it can't go down every cohort if you look at your entire customer base and then all their active users the seats they're paying for what would you say the average team size is on your on your platform um i mean we actually just looked at this i mean it's actually pretty split amongst the different cohorts that we have we've farmed more of the smaller customers just of course there's four of them but uh but yeah we have uh i think the three cohorts though are sort of like you know early startups maybe five to 25 seats and then you have like the 100 to 500 seats and those are kind of your middle stage or mid market businesses and then you have the thousands and then you actually have what i call the super enterprise which we don't work with today really and that's like the the tens and tens of thousands and there's only a handful of those companies out there but you think about verizon and at t and chase those types of companies are there are different beasts because they have you know they have 50 000 people around the world uh it's like it's a small army so it's just a different kind of stuff so are you north of and i will go more i won't go more specific than this but generally i mean are you north of like 200 000 seats a year kind of using you is that a good kind of chunk or no no not 200 000 seats so we're we're sort of um we're in the uh high five figures let's say kind of mid to high five figures in c count what's your growth goal to get to by the end of 2019 do you think you can break 100 or 200 um i mean we actually don't think about seat count we think more about a dollar and sort of arr for for us and so but obviously they they correlate but we're also trying to expand the value of the product and so if we can deliver more value in there for raised pricing or add modules and you know with a with less c count growth we can get to a bigger scale and a more valuable product for our clients so um but yeah we're trying to roughly kind of you know between 60 and 80 percent growth uh each year is sort of how we're thinking about it in a modest you know sort of modest but aggressive sort of mixed did you did you hit that trailing 12 months you grew by more than 60 percent yeah yep congratulations it's great well hold on i can't congratulate you yet i would love this if this is a bootstrap story but have you raised we have a very complicated raising story in history oh uh i mean i don't know how much you want me to give me this simple version if you can uh the simple version is we've raised uh 50 million dollars plus to date having built an entirely different business that we pivoted away from and actually recently spun out a month ago which was the bulk and majority of that funding was for that legacy business um and we had you know we had the biggest enterprise customers in the world on that legacy business what was that business by the way what's that what was that business it was called stella metrics and stella pulse they're sort of like uh brother sister products and so we recently spun that out to power reviews um and did in connection with that spin out raised the new round of funding to focus exclusively on stella connect and it was a long and complicated and hard-fought story um but now stella connect is is what was apparent to us it's definitely the winner and so we wanted to put all of our eggs in uh so how much did you raise just for that spin out uh in connection with that we raised uh this wasn't necessarily proceeds from the sale but we raised uh through the vc's um an 11 million dollar round last month or two months ago okay and how much of that actually had to go to the parent company for the right to spin this ip out versus operating operational capital all of that capital went there were sort of two transactions done simultaneously so the spin out happened and that had its own deal in economics and then the raise was 11 million dollars interesting this is one of the mentors in the race was zendesk as a strategic investor that they put in about 11 million they didn't put it in most but they were this is...