Founder Interview
How Switch Automation Serves 20+ Enterprise Customers Across 9,000 Buildings with 35%+ Year-on-Year Growth (Interview with CEO Deb Noller)
- Interview Date
- July 30, 2018
- Interviewee
- Deb NollerCEO and Co-Founder
Company Metrics at Interview Time
Customers (2018)
More than 20
Buildings on Platform (2018)
9,000+
Year-on-Year Growth (2018)
Better than 35%
Team Size (2018)
45
Total Funding Raised (2018; currency not stated)
6,000,000
Historical Snapshot
These numbers were reported by Deb Noller during the interview recorded in July 2018 and are a historical snapshot, not current figures. See Switch Automation’s current numbers.
Key Takeaways
- 01Switch Automation had more than 20 but fewer than 30 enterprise customers as of mid-2018
- 02The platform supported over 9,000 buildings across those customers
- 03Year-on-year revenue growth was between 35 and 38 percent
- 04The company had 45 employees total, with more than 20 in software engineering based in Sydney
- 05Fully weighted, acquiring a new customer cost "greater than 150K", and sales cycles ran between six and nine months
- 06The company targeted a payback period over the first year of a three-year contract
- 07On average a customer paid between $10,000 and $30,000 per month for a large portfolio of buildings, with $10,000 "more like a starting point"
- 08The company was expanding from a direct sales model into a value-added reseller and partner model
- 09WeWork was a named customer on the platform
Company Metrics at Time of Interview
| Metric | Value | Source |
|---|---|---|
| Customers (2018) | More than 20, less than 30 | Founder interview, July 2018 |
| Buildings on Platform (2018) | 9,000+ | Founder interview, July 2018 |
| Year-on-Year Growth (2018) | 35% to 38% | Founder interview, July 2018 |
| Team Size (2018) | 45 | Founder interview, July 2018 |
| Engineering Team (2018) | More than 20 | Founder interview, July 2018 |
| Denver Office Headcount (2018) | 15 | Founder interview, July 2018 |
| Total Funding Raised (2018; currency not stated) | 6,000,000 | Founder interview, July 2018 |
| ARPU (large portfolio) (2018) | Between $10,000 and $30,000 per month | Founder interview, July 2018 |
| Sales Cycle Length (2018) | 6 to 9 months | Founder interview, July 2018 |
| Contract Length (target) (2018) | 3 years | Founder interview, July 2018 |
| Proof of Concept Size (2018) | 10 buildings | Founder interview, July 2018 |
Growth Breakdown
Revenue
Deb Noller put year-on-year growth at better than 35 to 38 percent as of mid-2018. On average a customer paid between $10,000 and $30,000 per month for a large portfolio of buildings, and she called $10,000 "more like a starting point", which reflects the company's enterprise focus.
Customers and Buildings
Switch Automation had more than 20 but fewer than 30 enterprise customers at the time of the interview, with over 9,000 buildings on the platform. The company uses a land-and-expand model, starting with a 10-building proof of concept before growing the customer's footprint.
Team
The company had 45 employees in total. The software engineering team of more than 20 was based in Sydney, while the Denver office had 15 people, mostly building performance people such as energy engineers, data scientists and mechanical engineers. Denver also had a marketing team, and the sales team was about to grow.
Funding
Switch Automation had raised 6,000,000 in total at the time of the interview, including a Series A round of 3.8 million that had just closed as priced equity. Deb did not name the currency, and the lead investor came from Australia. The company was not yet cash positive.
Growth Strategy
Land and Expand Sales Model
Every customer starts with a 10-building proof of concept, and Switch Automation then expands the account. Sales take a long lead time and long conversations, and Deb said all of the company's customers were in expansion mode at the time of the interview.
Value-Added Resellers and Partners
Switch Automation was actively migrating from a direct sales model to a partnering model, targeting companies that already service buildings and can take the platform to their own customers. At the time of the interview, Switch Automation was about to do a seven-city tour with the global distributor Anixter.
Enterprise Focus on Large Portfolios
The company deliberately targets customers with large numbers of buildings, such as commercial real estate owners, property managers, and retail portfolio operators. Single-building customers were no longer pursued because the platform adds the most value at scale.
Geographic Expansion
Switch Automation is an Australian-founded company. Its platform launched in 2012, it came to the US in 2013, and by the time of the interview it was headquartered in the US. Most of its customers were in the US; because it started in Australia it also had quite a number of buildings in Australia and New Zealand, some big customers in Canada, and partners in Israel and Belgium. The sales team was being expanded in Denver.
Proof of Concept Pipeline
At the time of the interview, at least four customers were completing proof of concept stages and moving into expansion, and two large banks were about to begin proof of concept engagements, indicating a structured pipeline for near-term growth.
Best Quotes
“We are in the world of transitioning buildings from the old world of disconnected assets, disconnected data, disconnected systems into a whole new digitized world. So it's about connected buildings, smarter buildings because not all buildings are smart but we're aiming to make them smarter.”
“On average it would be between 10,000 and $30,000 per month, but this is for a large portfolio of buildings. We don't tend to do single buildings. So we do a whole portfolio.”
“We have 45 in total, a substantial software development team. So we started in Australia and our team, our software engineering is all still driven out of our Sydney office. Our engineering team is more than 20 persons and in the Denver office here we've got 15 people on the team, mostly building performance people.”
“We're better than 35 to 38% year on year.”
“All of our sales are fairly long lead time, you know, long conversations. Every customer starts with a proof of concept. So it's a land and expand kind of sales model. So we will do a 10 building proof of concept and then we'll expand that customer.”
“We're looking at three year contracts and we would hope to have a payback over that first year.”
“We don't have a huge number of customers, but they have an enormous number of buildings. So we've got over 9,000 buildings on the platform, a small number of customers, and we're really in growth mode now and migrating from a direct sales model into a partnering model.”
“I think the thing that I always tell people is that you can't plan any, you can't plan your life. You're going to get amazing opportunities that cross your path and it's whether you choose those opportunities or not that will take you on your journey.”
What Happened Next
At the time of this interview in July 2018, Switch Automation had just closed its Series A round and was actively building out its Denver sales team while transitioning from direct sales to a partner-led model. Deb Noller described the company as firmly in growth mode, with at least four customers coming to the end of their proof of concept stage and moving into expansion mode. Visit the Switch Automation company profile on GetLatka for current figures and any subsequent developments.
View Switch Automation’s current profile and metricsFull Transcript
Chapters
- 0:02Introduction and Company Overview
- 0:31What Switch Automation Does
- 1:13WeWork as a Customer Example
- 1:50Data Types and IoT Connectivity
- 4:13Revenue Model and Pricing
- 4:23Average Customer Pricing
- 5:11Fundraising and Series A
- 6:09Customer Count and Buildings on Platform
- 8:15Growth Rate and Sales Model
- 9:13Churn and Net Revenue Retention
- 10:29Team Size and Office Structure
- 11:12Unit Economics and Customer Acquisition Cost
- 11:57Famous Five
- 12:42Advice to Younger Self
Introduction and Company Overview
Nathan Latka
00:02Hello, everyone. Today, my guest is Deb Noller. She's the dynamic CEO and cofounder of Switch Automation, a smart building software company specializing in building performance optimization. With twenty plus years of experience in real estate, technology, and sustainability, she's passionate about helping enterprises leverage next generation facilities management technology to execute more efficient business operations. Deb, are you ready to take us to the top?
00:26There, Deb How are you Deb?
Deb Noller
00:28Yep, I'm fantastic, thanks.
What Switch Automation Does
Nathan Latka
00:31Good, okay. Tell us about the company. What do you guys do and what's your revenue model? How do you make money?
Deb Noller
00:36Sure, so we are in the world of transitioning buildings from the old world of disconnected assets, disconnected data, disconnected systems into a whole new digitized world. So it's about connected buildings, smarter buildings because not all buildings are smart but we're aiming to make them smarter. If So you look at the way real estate's being managed for the last twenty or thirty years, it's like 1980s out there. All the information is in. It's locked up inside buildings
01:06that people are making decisions without access to good quality data and that's the problem that we're solving.
WeWork as a Customer Example
Nathan Latka
01:13And give me an example of a company using you right now just so we can put a face to this problem.
Deb Noller
01:17Sure, so we are working with WeWork. So we work with any company that has a lot of buildings because they all have the same problem and it doesn't matter whether you're a commercial real estate owner or a property manager like Cushman & Wakefield or a services company like an engineering services company or a tenant or a retail portfolio. It actually doesn't really matter. If you've got lots of buildings, you've got all different hardware and you've got
01:45lots of different service providers and you've got lots of different systems and you have no single source of the truth.
Data Types and IoT Connectivity
Nathan Latka
01:50Okay so at WeWork when you talk about data tied to those buildings, what kind of data? Mean are we talking like AC usage data? Are we talking like some kind of electronic check-in data? What are you talking about?
Deb Noller
02:00It's everything. So if you think about what WeWork cares about, they care about the tenant. The tenant or the occupant and the occupant experience and that's about how hot or cold the spaces are, how that space is being utilised, what's the feedback from the tenant, what's the lighting levels like, but also they care about the cost of maintaining those buildings. So there's a two sided equation there. One is how do I run my buildings at the
02:29cheapest? But the second one is how do I provide the best possible user experience?
Nathan Latka
02:33Is this a...
Deb Noller
02:34Yep.
Nathan Latka
02:35I was gonna say, is this the pure play SaaS model or are you installing some kind of physical piece of hardware to measure things like temperature and light?
Deb Noller
02:43We have an IoT gateway. So IoT stands for Internet of Things. So we connect to on premise systems like smart thermostats, lighting systems, sensors but our model is not to sell any of that. It's to connect with what people already have connected. But in the case of WeWork a very important data feed is just their ticketing system because that gives them insight into buildings where they have problems and they've got lots of complaints.
Nathan Latka
03:10Interesting. In terms of A, it's too crowded here.
Deb Noller
03:13Yeah. Or it's always hot. Yeah. And you know, and so that particular suite might be in the Southwest corner of the building. And so that means different ventilation or different temperature controls to say the other areas of the building.
Nathan Latka
03:28What is the number one device you're connecting to? Is it like a Nest thermostat?
Deb Noller
03:33A Nest is actually not an open device. So it's actually very difficult to connect to a Nest. So we connect to generally speaking, we would start with building management systems. So really large building management systems that run all of the heating and cooling in a building. Most of those systems are moving to open protocols like BACnet. So we would connect to those types of systems but we can also connect to individual sensors. For example, we're working
04:00with a company called Monet that does everything from door opening and closing to sensors in every seat and desks so that you can see which seats and which desks are being utilized.
Revenue Model and Pricing
Nathan Latka
04:13Interesting. Okay. Revenue model. Is this a pure play SaaS company?
Deb Noller
04:17Yes. We do software as a service based on number of buildings, of data points and the size of those buildings.
Average Customer Pricing
Nathan Latka
04:23And give me an average. I don't wanna go down every customer cohort, but on average what's a customer pay you per month?
Deb Noller
04:29On average it would be between 10,000 and $30,000 per month, but this is for a large portfolio of buildings. We don't tend to do single buildings. So we do a whole portfolio.
Nathan Latka
04:44But that is if you look at all your paying customers, you would say $10,000 is an accurate reflection of the average or it's
Deb Noller
04:44That's
04:51probably more like a starting point. So yeah.
Nathan Latka
04:55That's a good minimum.
Deb Noller
04:56Yeah.
Nathan Latka
04:57Okay. Very good. That helps me understand more kind of you're in the very much in the enterprise space. Your team probably reflects that.
Deb Noller
05:02Enterprise sales, B2B and really looking at how we now migrate because we're in growth stage now. We just finished our Series A round.
Fundraising and Series A
Nathan Latka
05:11How much have you raised?
Deb Noller
05:13We raised 6,000,000 in total, but we just closed a Series A round of 3.8.
Nathan Latka
05:18Okay. Was that priced equity or debt?
Deb Noller
05:21The priced equity.
Nathan Latka
05:23Got it. Do you mind me asking, did you do that in Boulder? Was that what you just moved to Denver? Did you raise from Brad Feld or Cohen or one of those guys and they made you move?
Deb Noller
05:31No, actually, look I'm not going to get into my fundraising story because that could be a whole podcast on the phone. But we actually end up doing a flip up which is what you call when you re headquarter into The US. We're an Australian founded company, but we're now headquartered in The US, but we ended up, getting a lead investor out of Australia.
Nathan Latka
05:56Interesting. Okay. Very good. So so you've raised capital. When did you launch the company?
Deb Noller
06:02This... The platform launched in 2012 and we came to The US in 2013.
Nathan Latka
06:07Okay.
Deb Noller
06:08So... Yeah.
Customer Count and Buildings on Platform
Nathan Latka
06:09And then fast forward to today, so over the past six years, how many customers are now using you?
Deb Noller
06:15We don't have a huge number of customers, but they have an enormous number of buildings. So we've got over 9,000 buildings on the platform, a small number of customers, and we're really in growth mode now and migrating from a direct sales model into a partnering model. So who are the companies that want to take this platform to their customers? So these could be companies that are servicing buildings, or it could be we're actually about to do
06:44a seven city tour with a global distributor called Anixter.
Nathan Latka
06:48Yeah, by the way, I wouldn't expect that you'd have a high number of customers because of what you just articulated, right? You're in the enterprise space, so you will have a low number, high touch, but they represent thousands of buildings. So what is that customer number? Are we talking like four customers or 10 or what?
Deb Noller
07:02More than 20.
Nathan Latka
07:03Okay.
Deb Noller
07:03Than
07:0420 less than 30.
Nathan Latka
07:04Okay.
Deb Noller
07:04And most of those, most of our customers are in The US but we do have quite a number of buildings because we started in Australia. We've got quite a number in Australia and New Zealand. We've got some big customers up in Canada. We've got a partner in Israel. We've got a partner in Belgium.
Nathan Latka
07:22Yeah, no, it makes sense. Look, if you have 9,000 buildings across a minimum of 20 customers, I mean, are like 450-building deals you're selling on average. These are big deals.
Deb Noller
07:30Yep. Yep.
Nathan Latka
07:30And then if I take 20 customers, again, you said between twenty and thirty, but let's say 20 at your minimum price of $10,000 a month. I mean, you guys are north of 200,000 per month at this point, correct?
Deb Noller
07:39Correct.
Nathan Latka
07:39When do you think
07:41you break like, you know, 500,000 a month or what's your next big revenue milestone?
Deb Noller
07:45I would like to think that we'll be there next year because of the stage that the company's in now, we've kind of gone through re headquartering into The US. We've gone through our whole fundraising. We are really expanding our sales team now in Denver. We've got a really experienced engineering services team who are helping our customers to get maximum value out of the platform. So I would expect to see that the growth of our company would
08:13really ramp over the next two years.
Growth Rate and Sales Model
Nathan Latka
08:15And what has the growth been over the prior twelve months? So if you're doing about $200,000 or a little north of that today, what were you doing about a year ago?
Deb Noller
08:21We're we're better than 35 to to 38% year on year.
Nathan Latka
08:26Okay. That's good. So call it... I'm gonna be a $140,000 a month in revenue about a year ago. Is that about right?
Deb Noller
08:26Yep.
Nathan Latka
08:26And where's most of that growth coming from? Is it expanding more buildings across the same customer base or bringing new customers on altogether?
Deb Noller
08:38Yeah, that's really a fantastic question. So all of our sales are fairly long lead time, you know, long conversations. Every customer starts with a proof of concept. So it's a land and expand kind of sales model. So we will do a 10 building proof of concept and then we'll expand that customer. So all of our customers are in expansion mode. We've got at least four customers that are just coming to the end of their proof of
09:07concept stage. So they're in expansion mode. Then we've got two big banks that are about to start a proof of concept mode.
Churn and Net Revenue Retention
Nathan Latka
09:13Churn is critical in this kind of business. Even if you don't have logo churn, you might have revenue churn of people, you know, decrease the amount of buildings on your platform or vice versa. What is your churn today?
Deb Noller
09:22The things that we've churned are mostly things that we wouldn't take as a sale today. So you know in the early days you take every sale. So we took a lot of single buildings and it's very hard for us to add value to a single building. A single building will have a building manager, they can wander around, they can talk to the tenants, they know what the problems are, and so it's harder for us to add
09:49value in that situation. Whereas if you're a customer that's got a thousand retail stores across The US, you literally cannot keep your eye on what's going on across that retail portfolio unless you have access to good analytics.
Nathan Latka
10:04So let me ask a different question, right? So annually, what is net revenue retention? It sounds like it's probably over a 100. I'm curious by how much?
Deb Noller
10:16Sorry. I I can't just pull that number off the top of my head.
Nathan Latka
10:19That's okay. Do you know... So when you take the revenue you lost and you add back all the revenue you gained from that same customer base, it... Do you know if it's over a 100 or not?
Deb Noller
10:28I don't know, sorry.
Team Size and Office Structure
Nathan Latka
10:29You're not sure, okay. Tell me about your team. How many teammates?
Deb Noller
10:33We have 45 in total, a substantial software development team. So we started in Australia and our team, our software engineering is all still driven out of our Sydney office. Our engineering team is more than 20 persons and in the Denver office here we've got 15 people on the team, mostly building performance people. So energy engineers, data scientists, mechanical engineers, that style of person controls a lot of skills and controls and we also have a marketing team
11:08here. We're about to really grow our sales team.
Unit Economics and Customer Acquisition Cost
Nathan Latka
11:12Cash positive yet or no?
Deb Noller
11:12No.
Nathan Latka
11:12Yeah. I was gonna say if you have 45 employees and you assume an average salary of $60,000, which might be on the low side, that's 225,000 a month just in direct headcount expense. And you're doing, call it 200,000 top line. So you're burning right now, growing.
Deb Noller
11:12Yeah. Yeah.
Nathan Latka
11:12Very good. Which has made sense why you raised. Last question here on unit economics. What are you spending to acquire these new customers
11:33fully weighted?
Deb Noller
11:36It'd be greater than 150K.
Nathan Latka
11:39Yeah. And how much time does that typically take?
Deb Noller
11:42It's anywhere between six and nine months.
Nathan Latka
11:44Okay. And then payback period wise, do you try and aim for a twelve month payback period or less?
Deb Noller
11:51We're looking at three year contracts and we would hope to have a payback over that first year.
Famous Five
Nathan Latka
11:57Okay, so twelve months, yeah. Very good. Let's wrap up here with the famous five. Number one, what's your favorite business book?
Deb Noller
12:04The Hard Thing About Hard Things.
Nathan Latka
12:05Number two, is there a CEO you're following or studying right now?
Deb Noller
12:09I love Elon Musk and Marc Benioff.
Nathan Latka
12:12Number three, what's your favorite online tool for building your business?
Deb Noller
12:16Microsoft Teams.
Nathan Latka
12:18Microsoft Teams, a new one there. Very good. Number four, how many hours of sleep are you getting every night?
Deb Noller
12:24Seven to eight.
Nathan Latka
12:26Okay, that's pretty good. And what's your situation? Married, single, kiddos?
Deb Noller
12:29I am happily married, thirty one years.
Nathan Latka
12:32Congratulations.
Deb Noller
12:34I have four sons who are in their early twenties.
Nathan Latka
12:38That's great. And do you mind me asking Deb how old you are?
Deb Noller
12:41I'm 55.
Advice to Younger Self
Nathan Latka
12:4255. I love that. And last question, take us back to your 20 year old self. What do wish that she knew?
Deb Noller
12:49See, this is the question that I get about what would you do differently?
Nathan Latka
12:53No, no, no. It's not what you would change or do differently. Just something you wish you knew back then.
Deb Noller
12:59I think the thing that I always tell people is that you can't plan any, you can't plan your life. You're going to get amazing opportunities that cross your path and it's whether you choose those opportunities or not that will take you on your journey. And sometimes those opportunities you turn them down and sometimes you say yes and those opportunities can be overwhelmingly good.
Nathan Latka
13:28Yep. Guys, you can't plan your life, pay attention to the new opportunities coming at you every day. From Deb founded Switch Automation back in many years ago, 2012. It since has grown to a team of about 45 people, again, supporting and helping these, you know, owners of hundreds and hundreds of buildings understand things like temperature changes or air flows or which seats are being used. They currently serve 20 enterprise customers that span over 9,000 buildings doing
13:56about $200,000 per month right now in revenue. That's up about 30, 40% year over year when they were doing about $140,000 per month in July 2017. She just closed another round of funding. So 6,000,000 into the company to date. Economics wise willing to spend up to $150,000 to acquire a new customer targeting a payback period of about twelve months as she looks to expand and grow. Deb, thank you so much for taking us to the top.
Deb Noller
14:19Thank you.