How Talkdesk Reached About 1,200 Customers and 50,000 Seats with a Net Negative Churn Business (Interview with COO Gadi Shamia)

Nathan Latka

00:00This 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 do

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Introduction and Background

Nathan Latka

00:43>> Good morning, everybody. My guest this morning is Gadi Shamia. He's the chief operating officer at a company called Talkdesk, the world's leading call center software platform. It's backed by DFJ, Storm Ventures, and Salesforce Ventures. Talkdesk grew eight times during or 8X, sorry, over the past two years, and has over two fifty employees, along with a thousand customers, including Box, Shopify, Dropbox, and weather.com. Prior to Talkdesk, Gadi founded a company that was acquired by SAP and

01:12>> now generates $500,000,000 in global business and was a senior VP at SAP and a general manager at ReachLocal. Gadi, you ready to take us to the top?

Gadi Shamia

01:22Absolutely.

Nathan Latka

01:22>> Was that SAP company, EchoSign, by chance?

Gadi Shamia

01:25No. EchoSign was acquired by Adobe.

Nathan Latka

01:28>> Ah, got it. What was the one that went to SAP?

Gadi Shamia

01:31The company name was TopManage, and the product that SAP sells today is called SAP Business One.

Nathan Latka

01:36>> Very cool. Okay. So you're in a unique spot at Talkdesk. So your chief operating officer, they were founded in 2011. I think you joined in 2015. Is that right?

Gadi Shamia

01:44Yeah. I joined a little over two years ago.

Nathan Latka

01:46>> Okay. So I want get into kind of how you came into the business, but first tell us what Talkdesk does and what's the business model? How do you make money?

What Talkdesk Does and the Business Model

Gadi Shamia

01:52So Talkdesk is a cloud based, actually born in a cloud call center solution. So it's fully integrated with voice, SMS, and agent management call center solution. So companies can literally log in and within minutes or days have a fully operational call center that can power companies with five, ten employees or a company that's 55 with hundreds and hundreds of of agents serving customers twenty four hours a day.

Nathan Latka

02:21>> And what's the business model? How do make money?

Gadi Shamia

02:24We like many other enterprise software companies, we charge users for license fees, and we also charge for the telephony company. So the advantage of of Talkdesk is you have one vendor that provides both the software and telephony SMS services, the one bill and one company to work with.

Nathan Latka

02:41>> So is this I mean, this is a SaaS company?

Gadi Shamia

02:44Yes. It's absolutely a SaaS company.

Nathan Latka

02:46>> And so I wanna avoid going into every, like, individual customer cohort you guys are working with. But on average, what's the average business paying you guys per month?

Gadi Shamia

02:57It's it's really dependent all over the place. So a company with, say, 50 users, who pay, let's say, $5,000 a month or or $7,000 a month for the service.

Nathan Latka

03:09>> So, yeah, again, give me an average just so we can get a sense of, like, your average customer fit.

Gadi Shamia

03:14I I I don't have an average, though, on my head. So we have customers with three users, and we have customers with 850 users. So it's really hard to average them out.

Nathan Latka

03:23>> Can you normalize around seats, around users? So what's the per user cost per month on average?

Pricing Per Seat and Telephony Costs

Gadi Shamia

03:28Yeah. The the per user cost per month is between $65 to $125 depending on the subscription. Then typical customer will spend another 30 to $40 on telephony a month.

Nathan Latka

03:39>> Got it. Perfect. Now as a telephony aspect, is that that's really usage based, right? That goes up and down based off the data? Yeah. Okay. Got it. Absolutely. Okay. Good. That's helpful. So tell me about why you joined Talkdesk. You're it's kinda unique. I mean, do they see you as a founder, or what's your role?

Why Gadi Joined Talkdesk

Gadi Shamia

03:55You know, how how Talkdesk sees me? We need to ask Thiago as the founder of the company. You know, I I don't think of myself. When you join three years in, and I I did found a company myself. When you join three years in, you're not a founder anymore, you have to acknowledge that. I joined generally because I really like the space, and I really like Tiago, the founder. So it was two two combinations of really

04:17interesting market. The the call center space is $22,000,000,000 market. It's still dominated by old players like Avaya and Cisco and Genesys that sell the same system for for twenty, thirty years. So one side of it was here's a market which is huge and ready for disruption. The other was we already had a proven product. Tiago and team, although the team was very small, built a very impressive product that had a couple 100 customers even by the

04:43time I joined. I really liked the product and continued using it for over a year by the time I joined. What was The third Go ahead. Sorry. And the third was I really like Tiago. When you join a COO, you cannot look not like the CEO and you cannot not wanna engage with the CEO. I really thought we can have we can be really good partners. I think that the the fact I'm still here over two

05:05years after proves to you that it's probably correct.

Co-Founder Departure and Company Health

Nathan Latka

05:08>> Was that a is is Diego the sole founder or were they cofounders?

Gadi Shamia

05:13Thiago was a co founder. He had another founder that after four, four and a half years left to do her own thing.

Nathan Latka

05:20>> What happened? I mean, that's always like an interesting people never talk about this, but very rarely when you have two, three, four person co founding teams, very rarely do all co founders make it to, you know, the the promised land or the end. What was the conversation around that exit? Were you there for that or no?

Gadi Shamia

05:35Yeah. I was there. And and, you know, I I think a is a personal issue, so I don't wanna get into the specifics of this situation, but I can tell you what I know from experience with other companies. In the best of companies, as you mentioned, founders some founders leave. And they usually do because either they don't find what they do exciting enough or they couldn't find themselves in a position where they can make the same

05:56impact they did in the early stages. And the worst situation is when a founder stays. And I know companies where two founders that didn't speak with each other and stayed all the way until the end. And this is devastating for the company. So it's really healthy for a company to be in a situation where a founder can actually say, I've done I've done a great job, I built this company and now I'm ready to take on,

06:18you know, my next task or maybe be a CEO in a different company.

Nathan Latka

06:23>> And what that makes sense. So this was this all kind of happened around when you joined right around 2015, 2014?

Gadi Shamia

06:30Actually, it's happened a year after I joined.

Nathan Latka

06:33>> Okay. And what did you said the company when you joined size was was a couple 100 customers. I mean, had it broken the million dollar ARR mark when you joined or was it still earlier than that?

Gadi Shamia

06:43No. It it it did break the million dollar ARR, which was amazing to me. Seeing such a small team doing so well was, again, one of the other attractive attracting points to to Talkdesk because What was the team size when you say small team?

06:57I think it was 20 people when I joined. And, you know, Thiago and the very few engineers we have really built a compelling product that spoke for itself. In the first two years of the company or a year and a half after start selling the product, because the product was actually sold maybe from the mid twenty thirteen, even also the first day of the company, Thiago was the only salesperson. He was running around positioning the product,

07:20showing it to customers, and was able to to get remarkable brands to use to use the product.

Nathan Latka

07:26>> And were you the the relationship around you and Diago, I mean, this something where you were like an EIR at DFJ and they put you in with their round of financing or what did you come in kinda before the financing? How did you two meet?

Gadi Shamia

07:40I came before the financing. So I actually met Thiago through my friend at Storm Ventures. I was an EIR at Storm Ventures seven, eight years ago, so lifetime ago, and I'm still in very good very good contact with all the investors there. And, you know, they told they told me, I think, in in in the midst of 2014 that I should meet Thiago. He's just an impressive guy. And I went on and and met him, and

08:07and we met several times during 2014. And towards the end of 2014, we say, no, we like each other enough. We can help each other. And I decided to join.

Nathan Latka

08:15>> Did you lead Storm Ventures round and and Talkdesk $3,000,000 series a or or c?

Gadi Shamia

08:20No. So so Storm was there before. So Storm do talkdesk through the investment relationship they had.

Customer Count, Seats, and Seasonal Customers

Nathan Latka

08:28>> Got it. Okay. And then so take us forward. Let's talk more kind of about the the the the macroeconomics about the industry. So when you guys are growing well, first off, how many customers are you at today? Fast forward.

Gadi Shamia

08:37About 1,200.

Nathan Latka

08:38>> Okay. And is that seats or businesses using you?

Gadi Shamia

08:41No, this is a business that's using using us.

Nathan Latka

08:42>> Okay. Let's talk about the bigger number. How many people, how many seats inside of those 1,200 companies?

Gadi Shamia

08:47I think it's about 50,000.

Nathan Latka

08:49>> Okay. 50,000. And I mean, can I can I you you gave a seat range earlier on the low end of $65 a seat? Can I mean, can I do $65 times 50,000 to back into the MRR number?

Gadi Shamia

08:59You can try. I don't know which number you're gonna get to and I'm not really good at the quick math.

Nathan Latka

09:03>> Well, I mean, is that I mean, so that number comes out to about $3,200,000 a month recurring revenue. Is that basically accurate, or is that math wrong?

Gadi Shamia

09:11You know, I I don't we don't talk about finances. So Well, Gadi, just say something. I'm just doing

Nathan Latka

09:15>> I'm just doing the math. Right? You said $65 on the low end ARPU range seat wise, and then you just said 50,000 seats. So I'm just doing math based off the numbers you told me. Is that accurate, basically?

Gadi Shamia

09:25Your math is not wrong. Sounds but it's more complex than this. Some of the seats are seasonal. Some of them are come and go, but the math is not vastly vastly wrong.

Nathan Latka

09:33>> Okay. So so so the 50,000 customers, when you mentioned seasonal, tell me about that. How do you guys manage churn?

Gadi Shamia

09:39So this is a little different. Seasonal customers are so a lot of our customers are ecommerce customers, and they, they they will have to ramp up towards the the hot season, which is November, December, January, and then ramp down. So when customers come to us, we usually come up with a solution, give them bank of users that they can use towards the the end of the of the year, ramp up their business, and then ramp it

10:00back down. They're not locked into, you know, 300 users or 200 users they don't have to use. So natural growth happens, and this is where customers will add users, but many of our customers do need a seasonality aspect to their business, And we we work with them to to offer this flexibility. So they're not stuck with unused licenses.

Nathan Latka

10:19>> So are you guys, I mean, have that sounds like a a big obstacle in the way of trying to get to like a net negative revenue churn number. Have you guys hit net negative revenue churn yet? And if not, what are some things you're trying to do to drive more than just seasonal usage?

Net Negative Churn and Net Revenue Expansion

Gadi Shamia

10:31So we're definitely a net negative churn world. And if you think of it, we're looking if you look at the business on an annual basis, this is another thing will reoccur. So if if a customer went from, say, 200 agents to 500 agents in year one, they're likely to go from two fifty to maybe 600 in year two. So seasonality reoccur. So on AR basis, it doesn't really create Oh, I see. Churn, especially when you build

10:55it into the annual contract. So what we we learn to do with customers is we talk about upfront about the seasonal needs, and we build it into their annual contracts. From revenue perspective, we don't really see this revenue fluctuates. But from user users using the platform, we definitely see more users in December than we see in, like, February couple months after despite our natural growth. But then it's comes comes back again, and the next year is

Nathan Latka

11:21even larger.

11:21>> So are we talking about, like, net revenue expansion year over year, like, 120%, 150%, 110%?

Gadi Shamia

11:28You know, we don't disclose those numbers, but it's not it's very healthy and comparable to some of the great SaaS companies in the industry.

Nathan Latka

11:34>> Give me the number one of the other great SaaS companies you respect.

Gadi Shamia

11:38We, you know, we respect many of them for different reasons. We really like Workday for how innovative they are in a pretty boring business. We love Salesforce. Very boring, so Yeah. We love Salesforce for what they do and and how they actually train the market to to really work the Salesforce way. We love the way they manage our ecosystem, and we have great relationship with them. We work now closely also with ServiceNow. It's another great company.

12:03It came through a very very small niche, but then building out of this niche and and building more products out there. But really get to got to be dominant in the IT services niche and and build a billion dollar revenue company from this one small 4 billion dollar niche. So, you know, personally, when people ask me who which person I'm inspired by, I always say there's no one person. I think I think it's the

12:25same from companies. I like many companies, and and I we can learn something from every one of them.

Nathan Latka

12:30>> Yeah. You anchored to those companies as kind of what you aim for in terms of in terms of revenue expansion year over year. So like, I don't know if this number off the top of head. Workday and Salesforce, these guys, what are they aiming for in terms of year over year net revenue expansion?

Gadi Shamia

12:42I think best of breed companies do over a 100% so they don't lose revenue. Of course. The best companies and the best companies will get to typically one ten to one twenty.

DoorDash Seat Growth

Nathan Latka

12:52>> Got it.

Gadi Shamia

12:52It's pretty hard to get much more than this just because of natural growth of companies, etcetera. It's all depends on the economy. I think we're in a great time where most companies that work with us benefit and and grow. We have customers like DoorDash that start with us. Like who? 40 seats. DoorDash Okay. The sale was actually probably 40 seats, and then now at 800. Wow. This is a little bit because of us because we've done

13:18a great job helping them out. But at the same time, DoorDash is just a phenomenal company.

Nathan Latka

13:24>> And what so for for a company like DoorDash, I mean, that kind of growth makes sense. I'm curious though, kind of your team makeup in terms of how many of them are inside salespeople calling into your customers like DoorDash. So what's your current team size and how many of them are doing sales?

Team Size and Sales Breakdown

Gadi Shamia

13:37As I said, we're about 250 people in the company, about half of them are in r and d. So if you ask where we invest, a lot of our effort is r and d. We truly believe there's so much to do in this space that we have to continue investing in in in our engineering team. It's also very different than anybody else in our space. Most of our competitors in the call center space wouldn't invest more

13:57than 15%. Name who?

Nathan Latka

14:00>> Who do you compete with? Name two or three.

Gadi Shamia

14:02Know, Five9, inContact, Genesys, Avaya are the main competitors. Most of them are more in maintenance mode than in innovation mode.

Nathan Latka

14:12The rest of our employees are are split between sales, customer service, customer success, and professional services. How many are ones that

14:20>> are sales of the two fifty? How many are just sales?

Gadi Shamia

14:22The sales probably 80. Including SDRs, sales operations, AEs, everything that makes up a sales team.

Nathan Latka

14:31And are you if you look

14:32>> at if you look at your growth, I mean, and you had to credit you had to pick one of these to credit the majority of your growth too. Would it be new customer sign ups or seat expansion in your current customer base?

Growth Drivers: New Customers vs Seat Expansion

Gadi Shamia

14:41New customer signups is larger. Seat expansion helps to, to kind of amplify the growth.

Nathan Latka

14:46>> That's great. Now tell me, Gadi, in terms of funding. So obviously companies have to make a decision at some point to raise capital or not raise capital. We know you guys have raised capital. How much total have you raised?

Funding History and Capital Efficiency

Gadi Shamia

14:5624,500,000.

Nathan Latka

14:57>> Okay. And when was the last round?

Gadi Shamia

15:00Almost two years ago. July 2015.

Nathan Latka

15:03>> Alright. So so give me the details. Right now, you're either raising a monster round or you're selling to Salesforce for a lot of money. Which one is it?

Gadi Shamia

15:11Neither.

Nathan Latka

15:11>> Come on. Look at this guy smile.

Gadi Shamia

15:14No. Neither. Honestly. So our investor, Joe Stein, was was speaking at at our sales kickoff meeting. And one of the thing I'll quote him on this, he said, I'm amazed by how efficient Talkdesk is and how fast it grows given how much capital it spends. Yep. We are, as a company, we're really focused on building a real business. This is something that Tiago is is very is very focused on. We don't wanna be this company

15:40that burn its way into growth. So everything we do has to have our ROI, which means we still have a lot of the money we raised before.

Nathan Latka

15:49>> That's great.

Gadi Shamia

15:50We're not running out of fumes, and we are not in any any urgent need to raise a cup raise round. We're definitely gonna raise a round sometime this year, but we don't need to. We're not pushed against the wall in any way, shape, or form because we are not wasteful. When we moved to a new office, we didn't invest 2,000,000 and and make this office really pretty knowing that we're gonna move out of this office in

Nathan Latka

16:10a year and a half or two. What'd you invest You in your new

Gadi Shamia

16:13know, I don't even remember the number. Not not big enough for me to remember.

Nathan Latka

16:17>> Yeah. What is the so okay. Good good. Interesting feedback. Are you I assume you guys aren't breakeven. You're still burning cash per month, right?

Gadi Shamia

16:25We're still burning cash, but we're very good about burning relatively low numb low amount of cash every month. And it's also remember, when you grow fast, customers also help your growth. You don't have to only use and normal business don't use investors to to fund the growth. Startups do that, and we do it to some extent too. But a lot of our growth is driven by great customers making long term commitment to us. Are you

Nathan Latka

16:48>> pulling that cash forward? Are they paying upfront?

Annual Upfront Contracts and Cash Flow

Gadi Shamia

16:51Many of our customers will pay most of our customers pay annual upfront.

Nathan Latka

16:55>> Good stuff.

Gadi Shamia

16:55And this is good for them and good for us. They they don't like to to pay us monthly, and we would love to get the money upfront and be able to fund the cost of sales and and, invest back in R and D, etcetera.

Nathan Latka

17:06>> Yeah. And got you have to fund great new CEO hires. Right?

Gadi Shamia

17:11I was.

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Famous Five: Books, CEOs, and Tools

Nathan Latka

18:11>> Alright, Gadi. Let's wrap up here with let's wrap up here with the famous five. Number one, what's your favorite business book?

Gadi Shamia

18:18My favorite business book. You know, it's hard. There's so many great ones. It's exactly like my answer about companies. But I think the book that mostly influenced me and it's really old is The Innovator's Dilemma.

Nathan Latka

18:31>> Yeah, that's good one.

Gadi Shamia

18:32It's an old book, it's twenty years old. And I think that had such a meaningful content for me and it helped me to think about product innovation throughout my career.

Nathan Latka

18:41>> Number two, is there a CEO that you're following or studying currently?

Gadi Shamia

18:46Again, I study and follow many. I think that, I just watched

18:53Jeff Lawson from Twilio on stage today, I love how down to earth he is and how hands on he is about what he does. I really admire what Marc Benioff does. Really driving hard drive a company hard and driving everybody in Salesforce to grow, grow, grow, but at the same time have compassion side of him and and the community side of him. So I love what he does. And again, I think there's a lot of great

19:16CEOs out there and there's no single one you can learn from.

Nathan Latka

19:18>> Number three, what's besides your own, what's your favorite online tool?

Gadi Shamia

19:23My favorite online tool. Oh, you're asking me hard questions. Should send me a question like that.

Nathan Latka

19:28>> Want These are, like, easy compared to the ones I've been asking you.

Gadi Shamia

19:31Yeah. But again, there's so there's so many of them. At the end of day, I spend most of my time in Gmail, and I really like what what Google did for the efficiency of of managing email. I spend a lot of time on Slack, which I find disruptive and innovative at the the same time. So I guess between the two of them, again, super boring, but it is what I use a lot.

Nathan Latka

19:55>> Number four, Gadi. How many hours of sleep do you get every night?

Gadi Shamia

19:59Six and a half.

Nathan Latka

20:00>> Okay. So not bad. What's your situation? Married, single, do you have kids?

Gadi Shamia

20:03Yeah. Married. Another tech another tech executive working for Stitch Fix, and I have two kids.

Nathan Latka

20:13>> Two two little. And now are they super young or what?

Gadi Shamia

20:15They're super young. One of them is almost 20 and the other is, is at 16. I have two teenagers at home. One of them is at home. It's in college.

Nathan Latka

20:23>> Almost empty nester. And how old are you?

Gadi Shamia

20:26I'm 48.

Nathan Latka

20:28>> Okay, last question, Gadi. Take us back twenty eight years. What do you wish your 20 year old self knew?

Gadi Shamia

20:34You know, 20 you're blowing my mind with these questions. You know, I was very at 20 maybe not 20, but 22, 23. I served five years in the army, I really started my life at at 23, 24. So back then, I probably really wished I knew what I'm gonna do when I grow up. I was really stressed about that. I I I was really concerned about my not being as successful as as my parents, I guess

21:00as many kids are. And I wish I knew I will it will be fine. I wish I knew that I will be fine and I will be less stressed about that. I see my kid going through the same level of stress right now.

Nathan Latka

21:11>> Well, Gadi, thank you for your service. Again, he wishes he was at more ease about his future when he was younger. Again, now join the talkdesk. They've raised a significant amount of capital, about $24,000,000, serving about 1,200 businesses making up about 50,000 seasonal seats. Those seats paying between $65 and $125 per seat. They've got a team of two fifty folks, about 80 of them focused on inside sales again, focused on bringing the call center

21:38>> online and making it significantly more efficient for everybody everywhere. Gadi, thank you for taking us to the top.

Gadi Shamia

21:44Thank you very much.

Nathan Latka

21:45>> If you enjoyed Gadi's story today, go

21:48back and listen to Mike Wynn yesterday. He's raised $30,000,000 for this company called DroneDeploy. I think he might be the first drone trillionaire. 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

22:11>> it with no listeners, but

22:12boy, oh, boy, it makes my day and 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, oh, 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

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