How Sumologic CEO Joseph Kim grew to $301.6M revenue and 2.1K customers in 2023.

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 hent on global domination we just broke our 100,000 unit soul Mark and I'm your host Nathan Latka when I do webinar interviews or I give big Spees to thousands of people all over the world I usually will talk about data and sometimes show my dashboards like my SAS dashboard as I'm growing my SAS company the top inbox or my website dashboard which shows how I take Impressions to convert them into email leads and convert them into customers for Nathan la.com the funny thing is guys I build these dashboards with myself no developer and it's basically free and I use one tool to do it you can see the tool at Nathan la.com analytics I'll tell you more later in the show this is a episode 674 coming up tomorrow morning Andrew Yates comes on his company artisian has passed $700,000 a month de carrying revenue and has raised $40 million and I asked him a question I said Andrew would you ever acquire mattermark or any other company listen to how he thinks about Acquisitions bright and early tomorrow morning and every morning remember there's a new episode that comes out live at 6: a.m. eastern [Music] a [Music] good morning everybody my guest this morning is Ramin Seer he's currently the president and CEO of a company called Sumo logic an industry leading SAS based Cloud analytics company backed by really some great VCS and has an impressive list of customers and partners we'll jump into that now previously he was a senior vice president and GM at VMware where he developed the product and business strategy and led the fastest growing aspect of that business previously he held multiple executive roles with leading companies such as HP software Mercury software tibco software I Planet software AOL and Netscape ramine are you ready to take us to the top let's do it dude your history is like a who's who of like the SAS industry you've been around a while huh yeah I've had a pretty fortunate career um and obviously that's helped put me in the position here of the wonderful company Sumo so tell us what Sumo does and for those not familiar and what's your business model how do you make money sure so simply put uh we are trying to take advantage of the massive disruption that's taking place with respect to digital transformation and so in a nutshell whatso helps our customers do is build run and secure modern apps and a simple secure and easy to consume Service uh possibility right and we do that through variety of technology means but also uh taking a lot of complexity out of how they're really building and running these securing these modern apps today and what's your business model so obviously we're software as a service company and so therefore it's subscription based and we price and license based on how much data you're ingesting how long you want to retain it and we have a couple different versions of our products depending on your capabilities requir and so give us just obviously we could probably jump into every different customer cohort that's going to be different but if you just average across your customer base we can get a sense of customer size what's the average customer paying you per month what's your arpo the average varies right because we have uh quite a different segments and therefore cohorts across the 20 plus quarters that we've been selling I can tell you that um we track all the net dollar retention uh statistics from every firm that's out there and obviously you're probably very familiar with that and the median or sorry the mean tends to be about 103 to 105 uh the best-in-class companies tend to be 110 to 115 averaged you're talking about you're talking about annual net revenue expansion correct net dollar retention for each cohort yeah so if you look at our mean across 20 cohorts we've been well nor through 150 got it year-over year correct and lifetime not your here and what is Lifetime okay and what is the Ramin what is the just give us a sense of average customer size like I know it varies but are we talking $100,000 annual contracts on average or 25,000 or less or what so uh I guess the best way to answer that first is you know we have a massive service that's available to our customers and you know so the small Mom Pop shops the startups uh we provide them with a mechanism to use our service for free but we have quite a bit of community users that aren't paying us anything frankly and they're using the free service then we have the 0er to 250 employee segment or 1 to 250 employee segment you know they're anywhere from a $3,000 ARR to $8,000 ARR um and typically what we see the buying pattern there is pretty consistent we'll start off with um one use case and one data set and usually within a quarter and a half to two quarters after the initial uh purchase there's already an expansion of that original use case and then into another use case as you tend to move up Market we segment everything by employees um when you're in the mid Market or mid Enterprise for us that is all the way up to roughly about a thousand employees um you know the asps tend to obviously increase they're anywhere around 50 to 150k um that's annual average selling price yeah that's the annual contract value ACB um and so that usually means that there's more than one constituent also involved in that process whereas the the SMB Market tends to be the same decision maker user is also the economic buyer whereas when you move midmarket or Enterprise it stands out to usually three to five people involved in that buying process who do we typically Target then is probably the next question you're asking right or thinking yeah well what is the I'm curious what for each of those cohorts and I imagine you have subcohorts in both of those but the SMB and then the mid market up to a th000 employees in each of those segments what's I mean how many customers customers do you have are we talking thousands or hundreds in each of those segments yeah so we have well over 1,300 paying customers um and typically what we see is about 51 52% of them are Enterprise the other 50% are mid-market SMB it's a good split um obviously at ACV bases or ar bases it's a little bit more tilted towards the Enterprise than it is obviously the midmarket S&B the amount of spend they they typically would do with a public Cloud let alone a SAS company providing services for public out usage y good that makes good sense now we've kind of teased a little bit about where you are today and I want to talk about where you see this industry going tell me real quick though before we go back and kind of get the launch story where are you guys at right now in terms of capital raised or have you bootstrapped well um you mentioned earlier we have the who's who of the investor Syndicate right so we're pretty well capitalized we've done about uh five rounds so far we've raised just over about 160 million in capital um and it runs a gamut of grock stter Hill Sequoia Excel dfj and IP and a few others Y and guys uh I the reason I came across sum logic is because we actually had a uh ramine just mentioned dfj we had uh Tim Draper on the show back in episode 129 at Nathan la.com thop1 129 uh and Tim is obviously the guy behind dfj or one of the many people behind dfj so good so youve raised about 150 160 million bucks in capital Now take us back to launch date ramine when did you launch yeah so the company is just about seven years old and the vision when the company was initially founded and that was the seed investment from Greylock back in 2010 was and Still Remains The democratized Machine data and so you might wonder what that means well our founding Roots came from really the security world where only a subset of users get access to all this data that's being generated and that time inside the Enterprise and inside the data center and our Founders fundamentally believe that there has to be a simpler way to be able to expose more than just a subset of users there this massive amount of data and there's got to be a simpler way to be able to deliver this as a service versus requiring everything to be run and managed with traditional hardware and software and people the third premise was had to be an easier way to allow for analyzing this data in real time versus you know presupposing rules and correlations and looking the rearview mirror for this massive amount of data that was typically warranted around security analytics so what what was the point here the team initially felt that you know there's got to be a competitive advantage and a Technology Innovation an Innovative way to deliver machine data analytics as a service to not only the Security Professionals therefore the security Ops Team or ceso and the analyst but also a pleth of users that don't get access to that information most notably developers and devops so you fast forward all the way to today we have well over 30,000 users in our system on an average day we're analyzing well over 100 pedabytes of information and every few days I'm adding another petabyte to storage so you can only imagine how much I'm doing with AWS right and so what purpose here is our vision was always and remains to democratize machine data so we're constantly looking at innovative ways to reduce the complexity reduce the cost and improve the way and access to a plethora of users across our customers organizations to be able to share collaborate and communicate more effectively with all this machine data running these modern apps and reman so can you tell a real story like I know orange uses you guys can you tell a real story about how orange uses you on a daily basis so we'll tell you a couple stories um you know one uh is a credit card payment processing company called Visa um so they've been a customer with us for a few years and we actually start you know yeah um and interesting thing with Visa uh they actually started in a in a cyber security use case and fraud detection use case um so they're extracting all of this uh occup my data from their CDN and looking at logins from around the world and looking at patterns because of our machine learning algorithm this in the system and a couple years ago they actually if you you may recall they launched a service with apple around Apple pay and so they actually were using us for business insights to look at activations per second per minute per hour per day that's generating Revenue but at the same time they're looking at patterns around you know how does this user from this location suddenly try to uh request multiple credit card applications at the same time so those are fraud detection type of algorithms they're looking at while they're looking at the service let's use another example there's a company called metadata and metadata is trying to disrupt the pharmaceutical industry in the clinical trials process and they felt that there had to be a simpler way to provide a simple secure and scalable service so that they can expedite the clinical trial process and they tried for well over nine months with traditional on Prem tools and they ultimately came to Sumo and they realized hey we're going to move to the cloud we're going to be using the public Cloud infrastructure service we need the way to guarant and segregate this data so that you know we can pass our audit and regulatory requirements but we can also improve the cycle times for How We analyze this data for our companies so that's a great example of a different non-traditional tech company using Tech and Innovation like what Sumo provides to help transform an industry like clinical trials and pharmaceuticals so would you I mean or mean I want to understand this it sounds like I mean are you guys the plumbing that connects a lot of these app together to make the data even possible or are you just helping people analyze the data once it comes out of the system so that they can do things like fraud prevention good question so at the lowest level we simulate or collect and ingest and analyze a plethora of different sources of data most notably it's log data it's event data it's Telemetry data and time series data okay then what we've done is we've purpose tailored the analysis in our ml or machine learning algorithms to really address three distinct use cases today the first one is how developers devops teams techops teams site reliability Engineers uh improve the way that they actually build and release their code to production okay and so typically a lot of companies talk about devops and about this notion of continuous integration continuous deployment we help accelerate CI okay so how do we do that well we tie into all the various tool chain vendors from your source code control system to your cicd tools and process and your Downstream monitoring tools and we provide one single platform that analyzes all that information and provides the in context to the developer to the techops team and even to security to get a holistic 360 view so we we refer to that as full stack visibility okay so that's one use case yep the Second Use case is actually on the other side of the house typically with the CES so the security admins the security analysts and it's either because of audit regulatory requirements fraud and risk or security analytics needs so we're analyzing a lot of patterns why is this user logging in for multiple locations at the same time we've never seen this pattern from these types of IP addresses we've never seen these sets of nodes in the infrastructure connect outside you know we've never seen this type of activity with this application and you know what's real and not real or what's Normal and abnormal so our algorithms start to look at the you're you're the reason you're the reason when I travel through Europe and I buy something in Spain on my BB&T card and I've never done that before BB&T shuts my account down and says call us for fraud prevention right we're one of those platforms and services that use damn you ramine damn you no just kidding it's important you know it is important um good to understand hey let's transition because we've only got a couple minutes left I want to transition into some of the economic stuff because you've built an impressive business here You' raised a significant amount of capital um real quick on context were you one of the founding folks or were you brought in by the investors as a CEO uh so actually I joined just over two years ago so I was not one of the founding uh invest founding members um and really I was brought in to help scale the company and take it the next level and eventually take the company public sometimes those transitions can be Rocky so for someone listening right now at that stage where they're raising around and the and the VCS are going we need to replace you as CEO how would you recommend based off your own story they approach that great insightful question um you know it really comes down to understanding what the core values are and what the culture of the company is and how does that relate to what the founders wanted in terms of the core values and culture of the company that created if there is that odds there then the first thing you need to do is make sure you address that the second piece is making sure there's alignment between the investor syndicate and the founding numbers in terms of what the likely likely outcome will be for the company right sometimes CEOs are brought in to flip things other times CEOs are brought in to help scale the company other cases are brought in to turn over the team or change direction in the company whatever it might be um you have to as a firsttime CEO or even as an experienced CEO make sure there's clear alignment across the investor Syndicate and the founders and executive team as to what the outcome and destination the reason for bringing someone new in so to so the are the founders still at the company or have they moved on yes one of our two Founders are I say two of our three founders are still here um and I spent a lot of time talking to the founders of that time and trying to assess and understand what they really saw the vision and outcome of the company and how does that match or not match or align with what the investors wanted unfortunately there's a good so your focus I mean it sounds like you were brought yeah it sounds like there's good alignment you said you were brought in really to take this thing public right and a lot of folks I've had on who are in the same situation they're saying Nathan yeah we're flirting with 100 million bucks in AR we got to be between kind of 100 150 million in AR really to make a spash and go public and have it be successful if I'm doing the math correctly you said 1300 paying customers 50% are your in your Enterprise slug which you said it has an annual contract value of about 100 Grand 100 Grand times again 700 customers paying that puts you 70 million just on that cohort that doesn't even account for your other cohort which you said is about 50% on your user base so you guys have to be flirting with that $100 million Mark am I right we're somewhere in that range obviously we're a privately held company so um come on R give it to me baby yeah yeah we know we have had our fair share of Bankers here lately I'll leave it at that but um the other thing to also consider is that um you know we don't try to make customers uh consume more than they can initially and that's the flaw with a lot of traditional software companies and particularly in Enterprise companies you know we have to get reelected every single year we have to prove value as a softare software as a service company you have to constantly fight to earn the business every single year and so historically we've done a lot of annual contract deals intentionally now what's happening is customers are uh committing and signing up up to more multi-year deals themselves versus Sumo pushing for them okay because they're consuming so much in terms of utility because we become a strategic platform for them and they see the value for the uh using Sumo logic not just in one isolated use case like in security or operations but also obviously in in devops and public Cloud so while we land in one use case we quickly expand in other use cases and start to consolidate other tools out and start to line the teams and help provide better collaboration across those teams and they want to commit to a longer period with us as a result makes good yeah makes good sense for me let's I have a few just last few questions here before we get into kind of the wrap-up segment so um in terms of growth you've raised a ton of capital which means you have to have proven that you know how to spend money to acquire new customers let's just focus on your on your money cohort which is it sounds like that Enterprise cohort with about $100,000 you know acbs on average what are you spending to acquire one of those kinds of customers so some of that varies by geography just to be honest with you and uh the Enterprise segment for us is so broad I mean it's a thousand employees or more um yeah and so it it really depends um with respect to also the use case right when I first came in we were really focused on security and these were longer sale Cycles therefore the cost of sale were long was longer because we were doing displacements of traditional tools like Sim tools security information event management tools um I quickly realized that a lot of our users tended to be devops and Tech opsite reliability engineers and we pivoted a little bit towards for competency to really address that modern app use case and the public Cloud use case lo and behold our cost of sale decreased considerably by more than 40% the average new land deal also considerably decreased in terms of time and so my point here is if it's security related versus itops related versus devops related there's a different cost of sale associated with that initial land um so talk to me again about yeah talk to me again about CAC you mentioned you took something it was high and then you decreased it by 40% what did you take CAC what was it before you implemented that and what did you decrease it too okay so obviously for SAS company um LTV the CAC ratio that modern investors look for is a the payback period and B the magic number has to be 3 and more and so we're tracking at that number plus so obviously you know we're tracking to uh that same number but the other metrics we typically pay attention to obviously is gross margin and operating margin and we've looked at all of our industry peers we looked at all the companies that have recently gone public uh as well as historically gone public and we're tracking to those metrics that are required to eventually take Sumo out sir mean you mentioned your LTV to CAC ratio you mentioned is three which is a good industry standard meaning you're spending onethird of your total customer lifetime value on acquiring that customer but you also mentioned payback period is being important what is your payback period right now is it months or years it's months um and for enterprise software it's very rare to see um anything less than 2 years typ Ally is the average that we're seeing um you know obviously we're tracking below that um but you know it's based on the fact that we have this very viral land and expand selling model um our sales process tends to be anywhere from three months to five months for a new logo land and expansion happens typically within a quarter to two in terms of that same use case and then eventually even to additional use case as we cross sell that's what's driving a lot of our cohort growth and cohort expansion and so what I mean do you mind R me asking what is your payback period is it six months or five months or nine months or what it's somewhere between that one and twoy year mark I'll tell you that one and two year mark got it so so between 12 and so again your your lifetime your contract value on this Enterprise space is somewhere around 100 Grand per uh per year so 200 Grand over two years and what you've said is your payback period is somewhere between a year and two years so that helps us kind of understand uh uh you know you're spending maybe call it you know close to six figures for one of those Enterprise fit kind of customers or new logo lands yeah the other thing you have to be considered of here is that um you know we spend a lot on our infrastructure because we're having to analyze a lot of this data right and everything we do is real time and it's based off of inmemory technology and so initially our cost to acquire is a little bit higher in terms of you know the uh addition of a new customer in a cohort but the tendency to upgrade and expand really is fueling the uh Improvement in a lot of those ratios so while we look at the Enterprise segment or the mid-market segment or the SMB segment they all have different payback periods they all have different land Deals they all have different asps but average across them we're tracking well at or above what's industry norm and what's required to take a company public as we've looked at all the comps that's that's great ran uh last two questions here on team how many team members are you guys at and where are you based we're about 250 or so employees um we're headquartered here in sunny Redwood City California right South of San Francisco when I was recently in New York meeting dozens and dozens of you that listen to the show I showed many of you guys my SAS analytics dashboard I also showed you my website and a conversion dashboard for impression to free trial out of paying customer along with many other dashboards I use in my business like my social media Command Center and a few others now all of these are built with one tool I just dragged and dropped them together you can see how I did that at Nathan la.com analytics that's naa.com analytics now these dashboards guys are critical to my business you know I refresh them on my mobile phone right when I wake up in the morning I roll over and boom refresh I refresh them right before I about to take off on a flight cuz I'm just addicted to data and numbers they drive my business so I think they probably drive your business too you can see my dashboards how I use them at Nathan la.com analytics now if you go to the regular website that's the tools called pfolio you only get 14 days free you go through my link you get 90 days free so I got a great deal for you guys it does expire so you got to go there now okay top tribe I have to tell you many people go Nathan and you came out of nowhere your website's growing so fast how' you do it the answer is simple so I use host skat I don't know if you guys know that but I use toast Gator and the reason I do they have like about 4500 free templates I can use cuz I don't code they've got a great e-commerce plugin and guys I bug the heck out of their support they've got 247 support which I love so what I've done is I've worked with them you guys know I make great deals if you go to hostgator.com Nathan you can sign up get your own domain for 30% off and a 45-day money back guarantee okay again I make great deals for you guys go to hostgator.com Nathan to grab that now awesome all right let's wrap up here ran with the famous five number one what's your favorite Business book good to Great number two is there a CEO you're following or studying right now uh quite a few um particular in the Big Data space um obviously my friend uh at Cloud era and I wish them the best of luck as they recently filed to go out Mr Tom r that's a good one number three besides your own what's your favorite online tool like AC SCH favorite online tool well um I'm a social media guy so I tend to still use obviously Twitter Link in um more than anything um but I would say that uh I probably would argue that would be my most favorite because I use it most frequently Twitter Twitter and Linkedin correct great number four how many hours of sleep do you get every night that depends on the month and the quarter uh typically around 6 to 7 all right six and a half and what's your situation married single you have kids I'm married to a wonderful woman uh Samantha we have two boys that are 11 and nine two boys and how old are you I'm going to be 45 this year all right take it home for us last question take us back 25 years what do you wish your 20-year-old self knew I think that um if I was look back and tell myself um when I was 20 years old the slow and steady path um the ability to absorb experiences through different companies and stages of compan companies as well as uh refraining from jumping to the new thing and being patient to learn the skill as well as experience will pay off in the long run there you guys have it the slow and steady path will pay off in the long one from ramine he joined Sumo logic two years ago they've since gone under raise again about $150 million in total have 1,300 paying customers have a very healthy uh 3 LTV to CAC ratio uh their payback per period is between 1 and 2 years team of 250 People based in Redwood C City California potential IPO candidate here in the next several years will have to wait and see but they're certainly helping thousands of customers again when it comes to data and data analysis not only connectivity but analyzing patterns and Trends uh via their tool Sumo logic rine thank you for taking us to the top thank very much if you enjoyed rine today go back and listen to drone from yesterday where he breaks down how to get your first 100 customers for your software company 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 okay top tribe I love giving away free money I 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 adws 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 hostor go sign up now to get your free money host.com Nathan again that's hostgator.com Nathan [Music]