How Test CEO Philip Soffer grew Test to $9.7M revenue and 180 customers in 2018.

hello everyone my guest today is Philip so far he's the CEO of test IO since May of 2016 and a half sorry has been since May of 2016 splitting his time between Berlin and the San Francisco Bay Area before test IO he held senior leadership roles in product development and marketing at Plumtree software lithium technologies and piazza Phillip are you ready to take us to the top I am all right tell us about test I'm guessing it's in the DevOps space which we know is a very very hot space so what do you do we provide software crowd testing services to companies so if you need your software tested by real human beings using real devices in the real world we have a network of people around the world who like to do that and you can get that done and as quickly as an hour for an exploratory test okay and how is this compared to something you know I've use usertesting.com before it's kind of manual you say who you want to test it and you say go through this process and it's screen records and sends it back to you how do you differ so that's that's really a usability test our tests our functional tests so you give you give some guidance through our interface about what you want to test and what's changed and what we're providing is functional functional bugs basically mmm-hmm okay great and give me a general sense of what customers are paying for this per month on average well the the base price is $3,000 a month for a subscription for a product that we test and when you pay for that subscription you can test as many times as you want and so what we encourage our customers do is basically do a lot of testing and do it earlier in their development process but we also have customers who will test early in their development process that even test in production tests when they do code merges so we're all about trying to shift the testing left and more often when you do this kind of testing but Phillip you said the base is three grand a month yeah okay so you're very much caught up in the enterprise space no I would say we're in SMB space you have small businesses paying three grand a month for testing for some people that would be north of 30 40 percent of our monthly revenue well not not that small okay got it that's why I'm asking right so so enterprise to us means a billion dollars in revenue right we're you know we have some customers that how do you define small-business you said you're an SMB SMB would be like you know 100 to 500 people and you know in the millions of rabid you're gonna make so many enemies on this everyone listening with us in a hundred employees are gonna go well Philip doesn't even care about us well you know there's only so many people we can sell to profitably and we try to target those this is still this is a profitable company it's not we're not sort of one of these high-flying Silicon Valley companies that goes on endlessly with that without profits that's good so profitable your cashflow positive today yeah that's great walk okay so 3,000 baseman and by the way that I don't go to every customer cohort but it's three grand a month a good kind of representation of the average or is it actually much higher than that the average is higher okay like can you give me a general range of what the average might be higher than 3k I'd say the average is probably for new customers that we saw and now it's probably in the four and a half range okay and if you generally you kind of said that very specifically do you have historical customers that have a much cheaper price point you've increased over time why do you phrase it like that yeah I mean so the company is is seven years old now and obviously when it was a start up there they were willing to accept lower prices before they knew everything about what things cost so in those days people signed on with with with cheaper plans and and maybe gap deals that we that we can't sustain any more profitably so you know so some people some people are less than the average but new customers are signing on at our so so how do you handle that because every company goes through that in the maturation process you know folks you came on early maybe give a discount to do you just let them stay at that same price point for the same features or do you kind of kindly ask them to go up to the new price point how do you manage that I think it's a combination I mean we we've we basically sort of restructured our pricing over time and each time we do it we try to get people and do into a new band of pricing that they would be more and more more comfortable with with with a price and and what they're doing with the software or with the service that's great so it's it's you know we don't we don't stick it to anybody but we like to have conversations about it so 2011 you've been building this thing for seven years what have you scaled to today in terms of total customers on the platform it's somewhere in the neighborhood of one hundred and eighty goes 180 okay great and I know you said you're not like some high-flying Silicon Valley company but have you raised capital or you bootstrapped so the company has raised capital in the past so I guess the you know the the headline number that you would see from the 2015 fund raise which is before I got there is is five million dollars so okay so walk me through this dynamic you're currently CEO but it sounds like you're not the founder what would happen there well so I was I was actually recruited to be the CEO in 2016 so the money that was put in the previous year was designed to to to underwrite a u.s. expansion so test I originally is a German company based in Berlin but obviously the biggest market for software testing services is going to be in the US because we develop a lot of software here and so the board understood that it would be been able to have somebody with some Silicon Valley or US experience and so that was the auspice season under which I was I was hired and the company didn't actually have a CEO at that time was that content by the way it was that was that contingent in other words they basically will put five million bucks in but you've got to let us put a new CEO in and it's gonna be Philip no no no okay the money came in before I was before I was so who pursued you who was the person on the team that pursued you as an investor or the early II or the one of the founders or what this is actually an interesting story I don't know how much how far back you want to go but if you go back to 1999 okay fool Jesus Philip I I work for Plumtree which was basically sort of a talent Factory our our our philosophy of poetry was you go and you hire the smartest people that you can possibly find regardless of how much or how little experience they had and so we did a lot of college recruiting out of out of the local colleges and I was at Berkeley recruiting people and I recruited a guy there who at the age of 21 was already incredibly mature and sophisticated in his understanding of markets ended up doing M&A for plum tree then ended up doing private equity and basically he's got a firm and he is the one who introduced me to the test I a team he's an investor in test IO so I basically hired out of college somebody who is now on my board and effectively my boss which is funny and it's yeah it's it's an interesting testament to to longevity in this business was this or just one of the folks from turn River that's right oh very good very good that's great okay good so walk me through funding obviously raised back then you have sense invested that if I take the customer you're just customer Connie just gave me one hundred eighty multiplied by the ARP you just gave me so call it 4500 bucks per month I mean that puts you guys at almost a nine million ten million dollar a hour run rate is that accurate or am I too high or too low it's you know I don't want to quote specific numbers but it's broadly it's broadly accurate okay let me ask you a different question when do you think you passed ten million bucks in air are is that a goal for this year or next year or what that is a goal for soon okay goal for soon good good let's move forward on some of the economic stuff right so in terms of customer growth as you're driving growth you over here are you driving expansion revenue at a great lake at a high rate or is more the new revenue coming from brand-new customers yeah that's a great question and so more of the revenue is coming from new customers but we are focusing now more heavily on expansion than we were as we've matured as a company we've been able to differentiate sort of the hunter from the farmer so to speak and on this on the sales side and so you know previous to about six or eight months ago we we didn't really have anybody who was doing was focused on expansion sales and now we do and and walk me through kind of what growth has looked like Dover over the past year then and we'll jump more into the sales team and how what your team looks like so if you're kind of flirting or around in the general range of 9 million ish today or eight hundred grand per month where were you a year ago oh gosh generally you know we grow 60 65 somewhere in there year-over-year yeah which is you know which is I think been...