Talend Revenue, Valuation & Funding (2018)

hello everyone my guest today is Mike - can he joined Talend as CEO recently but before that was CEO of rapid7 a security software stir up that provides one of the leading security assessment platforms he joined rapid7 in 2008 and grew the company by 10x in just four and a half years rapid7 was consistently one of the fastest growing companies in Boston and was recognized as the best place to work by the Boston Business Journal right Mike are you ready to take it to the top you bet for a good morning thanks for joining so tell us about talent what's the business model and what do you guys do so talent is the software company that's all about helping companies take advantage of their data right we started out years ago because companies have an enormous amount of data that they simply can't use because it's in the wrong place it's in the wrong format it's dirty its inconsistent and until you solve those problems you can't use your data so that's what we saw and what's the revenue model is it pure SAS yes it is pure subscription okay and take us more here give us the back story what our company so we get a sense of the kinds of customers using you are we talking customers paying on average you know 10 bucks a month 10 grand a month 10 million a year what do you guys generally apply in customers tend to be spending let me see fifty to sixty thousand dollars per year on average that's just that's helpful okay good it's a fifty grand a year and then give us more the back story here so it said you join the company where you want how did the initial founders bring you in and were they seducing you or you seducing them they were seducing me so the initial founders started the company in France there are two French entrepreneurs and they've grew the company from zero to fifty million dollars in revenue in one years of us cheese they started the company in 2005 and I came in in 2013 so over eight years they grow from zero to fifty million and we're really looking for someone to take it to the next level and then ultimately take it public and so they in the board were looking to bring me in got it so 2013 you join are doing about 50 million bucks and a our our update us today we're yet in terms of total customers using the platform we have over 1500 customers using the platform right now and business has been growing over 40 percent a year for the last couple of years and you know right now analysts are estimating that we'll get between 145 to 150 million in revenue in this calendar year are we gonna be your last gunner yeah I was gonna say if I take 1,500 customers today times and ACB of call it 50 grand at a minimum you get about 6.2 million bucks a month currently or about 75 million bucks in air our today is that accurate generally no that's actually way low okay what's wrong my customer count number or is your ARPU - you're at your ACB's - low Oh what's going on is there's a couple of things that the deal size I cited is actually an upfront deal size and then customers add you know we have a hundred and twenty percent net expansion rate every year so customer the total size that a customer grows over time above the initial deal size that's thing number one thing number two is I said over 1,500 and so the number is over 1,500 is not exactly 1,500 got it okay so where are you at today you said your analysts are predicting you'll break 100 million this year or you've already passed 100 million we did 100 million in revenue in 2060 in the earth that we went public got it okay said in 2017 last year analysts estimated will do between 145 to 150 we haven't released their earnings report for q4 so I can't be any more precise than that got it okay good but generally speaking still healthy 40 percent year-over-year growth that's right okay yeah route 40 percent yeah let me ask you question a lot of people they say once you make a man or woman wealthy it's very hard to motivate them or once you make them rich it's hard to stay motivated you took the company public you made it to the top of the hill with still motivating you well I tell you what we're just getting started you know we are right now a pimple on the tail of the flea on the dog I mean we're such a small part of an enormous market that you know for us the opportunity is not to take a company public but to really be the leader in an enormous market right where the people spend 16 billion dollars of the year solving the kind of problems that we solve and for us that you know rounding to 150 million we are such a small part of that business right now that we have a lot of room to grow in coming years how do you look at actually yesterday we had billion from data stacks now maybe obviously raise significant capital you could argue the hundred nine million they did in 2014 was essentially going public but how do you look at a company like that in terms of either partnering with them or you know preventing them from eroding your market share or you know how do you view a company like that so they're they're basically one of the number of partners and so anyone that has a database technology data stacks clearly being one or a data processing technology like you know all of the big you know public cloud companies have both databases and data processing technologies our friends over data bricks have sparked all of those players are partners of ours and we leverage all of them because our customers want to use the best frosting technologists in the world the best eight of technologies in the world and so we help them take advantage of all of that technology and you know for us we're kind of a Switzerland in between all of that if acquisitions to drive growth became a key part of your strategy is data stacks too big for you guys to acquire most definitely and also a little anti strategy because once we were to you know really be a a database technology company ourselves we'd be competing with a whole bunch of our partners right which would be a little hard for us position wise that'd be hard for us to play yeah for us when we think about acquisitions we've done a few we just did one a couple months ago most of what we target tend to be relatively smaller companies how's that all right well we just did one that had zero revenue yeah that's you can't you can't give a much smaller than that yeah yeah they had about fifteen or twenty people and that's really kind of directly in the target wheelhouse for us and you know for us you know zero or a couple of million dollars in revenue but most importantly a great team and great technology that you know either deepen some technology that we already are building or broadens us into new markets that we are currently serving that's exactly for us wheelhouse of what we're looking for growing the business through acquiring revenue is a historically a much riskier game to play at an early stage neither were trying away from that right now name two markets you're really interested in right now whether you're gonna build it yourself or you know acquire somethin or whatever card two main markets that were not already in but I can certainly name some of the markets that we've been building into in the last couple years that were not yet the leader in but were on the path yeah name two yeah so one of them would be the self-service data integration market and that's a market where companies are rather than using data engineers you know developer kind of people to solve their data integration problems to blend data together to clean it up and so on allowing anyone who's just a data analyst to do it themselves or if you're comfortable using Excel and a tool like tableau then here's a way for you to solve that same kind of data integration problem in a much much simpler approach bad B one another approach is data governance one of the problems that every customer has is figuring out what happens you know what happened to the data along the way right for this data in this financial report where did this particular field come from and what happened to it along the way and then by the way if I were to change this field in this database what's impacted right which other databases which other field which other downstream things get touched so those kind of impact analysis and so called lineage of where does something come from those are real important problems for companies to solve as they become more and more data-driven this is analogous to the tomato and Walmart where you want to track the embodied energy in the carbon footprint where was grown in China shipped to the US and you want understand all the things that factor that whole supply chain right very cool walk me through more of the story what incentivized you to join right walk me through that the reason is we have a lot of listeners that might be at the same stage call it 10 20 30 40 maybe even 50 million in air are there looking to bring in a CEO how should they approach that for me it was a no-brainer so what I was looking for was a big market where I like the competitive set up a company that had a great team and a unique competitive Stan market in every company that's looking to bringing in a CEO is going to have problems and so the questions were what would the problems the company had and the ones that I felt comfortable I could solve it right in my wheelhouse and you know for talent and we had it was a 16 billion dollar market it was dominated by the the big legacy incumbents Hill High gems and Oracle's and informatica of the world we had a unique and wildly disruptive approach and we had a team that had a great technology team and a great product but weren't as strong in the sales marketing side in you know all of eminently fixable problems what do you guys had today in terms of total team size we just crossed over 900 yesterday parallel nine that's a lot of expense oh are you that's great I was I say your if your team's listening I'm sure some are they'd kill me if I just catalyze them as an expense they're much more than that but that's good your cash flow positive nine hundred people and what percentage of those are how many of them are sales and marketing good question probably this is a rough estimate somewhere between thirty to forty percent is gonna be sales marketing now nearly a similar number is gonna be engineering those are gonna be your two biggest expenses in any you know strategic technology company got it last few economics questions before we wrap up with a famous five um how many dollars do you have to spend to drive an additional dollar and ARR today right now I'm gonna flip that number around and use a slightly actually less favorable to the company metric but it's the right metric the way we look at it is how long does it take how many months does it take to pay back the gross margin of an ACV subscription right and that's the most stringent measure and it's the exact right measure I believe because it tells you if that number is relatively short you should be piling on the coals and investing in sales marketing it's relatively long you need to fix what is relatively short ours is about eighteen months right now okay thanks short or long so that's uh that is a very good number that compares favorably with most companies that are at scale to business but got it you've talked about other public companies at your size they remember you spending more than that that's right and you know there's a whole number really egregious companies in our history when I came in our you know we were spending it was taking us well over two years and probably two and a half years to pay back our acd gross margin I mother sales and marketing expense and the you know so the phone the first job that we did was to fix our sales marketing economics and so when we benchmarks ourselves back then we did a whole bunch of benchmarking we were definitely in the bottom quartile and then as we went public we were right around the middle of a pack and right now we're sitting you know writer at the in the top quartile and so you know that transition has really been all about improving sales productivity and improving that gross margin record and just to ran up a numbers associated with that equation what is your gross margin today eighty seven percent okay so you're taking essentially your a CV of 50 grand gross margin a CV would be obviously multiplying times the the you know eighty seven percent so your your gross margin a CV is forty three five and what you're saying is it takes you about you know that times almost another full year so call it somewhere around 70 grand after eighteen months to get that fully paid back that's exactly right got it interesting that's really interesting what other metrics things had to change as you went public so first one when we were contemplating going public the first question that we had was really what was the the financial story that we wanted to build and so we did this you know obviously when I came in in 2013 when public in 2016 two and a half years later and so the what we decided was based on our historical roots as a as a European as a French company and we had a much more conservative financial profile than most US companies and so we felt like the approach that we're gonna take was going to be a balanced plan approach where we had not just what we call these days that growth at any cost kind of model were you willing to burne crazy amounts of money and have a kind of a negative 80% and Hagan 100% EBIT kind of profile but instead have a model that had moderate losses being cash flow neutral or cash flow positive in the year the IPO which we were and growing at a healthy pace and at the time that meant as we were going public were growing in the 30s and then we accelerated through the next year and ultimately ended up growing in around 40% for last couple years do you regret going public no it's been a great experience and good it gives our customers a ton of transparency when you're selling to large enterprise companies one of the things that they're always wondering about is are you gonna be a key partner of theirs you know five or ten years from now and having transparency and your balance sheet your financials it's really important part of that right so there's nowhere to hide all right if you're a private company there they always have that question in the back of their mind of will you still be there for me and this you know now we can say look you know here we are yeah we're girl from the fastest growing companies in the space we're at scale and we're cashflow positive it's pretty simple story you've added to your your sales call a link your sales team they're scripted responses to overcome that objection their responses now we're public right yep you'll be around report there you go all right Mike let's wrap up here with the famous five one-word answers number one what's your favorite business book execution if I only get to choose one word just one Larry paucity all right number two name is CEO in your city that you really love just jamming with over dinner it's always a good brainstorm Steve sing he's on our board too which is a super opportunity for me Steve sang right number three besides you're on what's your favorite tool for building the company my favorite tool for building a company Wow like some online tool you use pretty frequently well I'll go to salesforce.com every news is that right yeah all right number four how many hours of sleep to get every night between eighty nine ain't okay that's pretty healthy good and then what your situation married seeing we have kids we're married go and get married and one kid oh and how are you 52 all right Mike last question take us back to your 20 year old self what he was she knew you know for me I I love the experience I've had since then so to me it's just keep doing what you're doing rock and roll keep doing what you're doing eyes her to hear from Mike he joined Talent back in 2013 after this the the founders launched the company you know prior to that in 2005 grew to about 50 million bucks in ARR he even came in more than doubled the revenue with the sole goal of helping it go get to go public obviously in December or sorry in 2016 they did go public they're growing 40 percent year over a year they've got 120 percent net revenue expansion annually by the way Billy said yesterday they're doing data stacks about a hundred and ten percent so Mike you win that little battle there their payback period is about 18 months their team of 900 folks based all around the world Mike thank you so much for taking us to the top