How Theseventhsense CEO Mike Donnelly grew Theseventhsense to $1.3M revenue and 136 customers in 2024.

hello everyone my guest today is Mike Donnelly he's the CEO and founder of 7th sense which is a system that optimizes the timing and frequency of email for sales marketing professionals the idea was conceived during Mike's 13-year career as an individual contributor and sales leader for merging enterprise technology companies Mike are you ready to take it to the top I am and appreciate having me on nation you bet so 7 cents it's email it's timing what inputs are you feeding how this algorithm to make sure it's smart yeah so we have strategic partnerships with both HubSpot and Marketo and so we take data feeds from both of those open data click data you know is it happening on a mobile device happening on the desktop and then we also have an integration with Google's so we can also listen in on corporate email systems and those are kind of the inputs that feed our funeral systems okay and what do you have to pay some of the Cubs spot fracks or google of fractious to those data streams nothing - first added value for them HubSpot Marketo etc are looking to build out their ecosystem so that's where our relationship comes in and then Google all the user has to do is authorize access to their Google accounts well what about what do you give back - like a hub spot that that makes it you know hub something more viable for their users good it's sensitive obviously to give you this kind of data so it's actually the customer so the customer gives us access to their data and so the customer comes to us pays us signs up for our surveys and then we analyze their data and then provide value to them we don't give anything to up spot or Marketo or Google I thought you just said you have a data relationship with HubSpot and HubSpot feeds you data so we do the data does it feed us all of their data like across all of their customers if their customer decides to opt into our service then that's the data feed that we get from HubSpot oh I see that customers do you're like an app in their app exchange or something exactly got it okay so and then how do you make money is it a peer play SAS model it is a pure police ask model that's correct okay and on average what are these folks paying you per month for the service so are our poos are around 220 bucks a month we 136 customers today so around 30k and annual recurring or sorry monthly recurring revenue yep 225 so are these I mean that small maybe it's small business maybe it starts pushing mid market but I mean who are these I mean what are they usually a small business or mid market so I would say probably 60% of our customers are SMBs and then 40% of them are more larger scale I wouldn't say total enterprise we do have one very large enterprise company they this past year they did about 4.4 billion in annual revenue did they make up more than 50 percent of your revenue they do not okay got it so you're able to you don't have a worry about yeah they make up about 10 percent over there okay got it and what's the company growing at so you're at 30,000 per month hundred reasons customers paying 225 per month where we had 13 months ago so 13 months ago we were around 10k and M are so healthy it means small numbers but still healthy growth yeah yeah really that's a small team I mean we're bootstrap company self-funded totally bootstrap no no no Rick jonquils writing a million dollar check so we did do it small I shouldn't say small but we did a friends-and-family round but I have invested a pretty significant chunk of change over the past few years and wetware had well what was the small round I mean are we talking sub 400 grand yes okay got it and then you've put in your own money what's the team size that today so it's three full-time okay three full-time folks everyone based in Arlington we're spread we've got one in California one in in Ashburn and then myself and although we do have a local office in Reston okay guys so some Loudoun County action going on which I like my hometown and when did you launch company what year so we launched the company in 2013 but we were doing it as a nights and weekends project for the better part of almost two years and that was really kind of a research and development phase and then we we landed our first customer we decided hey this is the time it's adding value what year was that so that was 2015 okay and then so what have you done I mean there's there's I guess there's enough Ammar to cover three full-time salaries but but where like where did you get money from in order to invest in this new thing what gave you the confidence to take the risk so where we got the money from was I was a very successful enterprise sales rep I also was part of a few IPOs a few exits and so made money there and that's really what I've been you know where the where the funding came from where I was willing to take the risk is you know just believing in the value that it's delivering to customers and I still see there's just a huge market opportunity with where we want to go with the with the technology and then so our thirty-six customers now let's say a bunch of sign up from the show so you 137 what what what actually happens right when I sign up and start paying you so what happens is you sign up sign up process takes about five minutes you connect up to your marketing automation system whether that be hub spot or Marketo which literally takes about a minute and then we start analyzing all of the historical data that you have within your marketing automation system or in your corporate email system we then go through an analysis phase depending on you know total number of email addresses that you have anywhere from I think our smallest customer PI has two thousand email addresses our largest has around ten million email addresses and if so depending on that it can take anywhere from 24 to 48 hours to complete that initial analysis but again so keep going down that story line what do I get when the analysis is done what what am i what so once the once the analysis is done rather than say you're using a marketing platform blasting out an email to 10,000 100,000 500,000 of your closest friends at 10:00 a.m. on Tuesday what happens is we empower you to automate personalizing the sent on to each individual contact when they are more likely to engage in that email right yeah I don't have to go in and type in a new time for every person manually right it's all automated it's at massive scale we have plenty of customers to do mailing sizes of between a million to two million contacts for a single mailing and they say send a pic of send time for this you know know anything is short as an hour although if you're going to do that you might as well blast it out all the way to seven days and anything in between interesting the other the other component that we look at on the marketing automation side is ru heating up are you cooling down as far as your level of engagement with us because send time takes you so far but then you really want to start thinking about the frequency at with them mailing Sarah because Sarah might want to engage in every email that you send where as Scott you would be much better well served sending him an email once a month so we've got a machine learning system in the background that's looking at what is your pattern of engagement this week versus last week versus last month versus last year and then we determine at what level of engagement are you sitting with it up so that's what we do on the marketing side on the sales side what we deliver to the sales rep is there's all kinds of send later functionality within Gmail there's boomerang tout app yes where HubSpot sales Pro I know you have one but the fundamental piece missing is you're still kind of part of the french pissing in the wind as far as what time you should send that email we give you concrete insight into when you should be sending that email to that specific individual mm-hmm yeah why are more people using this frankly we have been really bad at marketing you're the top sales guy yeah but sales Martin sales and marketing at a you know at a SAS startup doing 220 average revenue per customer per month is totally different than Whitey's like like a guy like you with your background if you were a top enterprise rep I mean I would have built this I would keep the product exactly the same but I would increase the price ten times and I'd spend like I'd have you go duel you were really good I was just selling $20,000 a month annual contracts so we have continued to move our way upstream but selling to an enterprise is totally different than to an SMB or even a small midsize enterprise and part of those challenges are hey I've got to have a sock to compliant you know I've got to be sock to compliant because I do have access to the crown jewels of a company it's their email list it's their customer data just you know this isn't like a MailChimp email list this is like you're in their Gmail and you just look at who they've emailed in the past twelve months that we look at the entire history of that gmail account or the entire history of the marketing automation side okay so I mean I guess you'd if someone's managing a list in Marketo warehouse file you'll see that list there is mark I mean there are I should think of this like JC I'm making this up j.crew is has a list of a million dudes they have a new hat they want to sell and you're gonna tell them hey so you know send it over this week but we will tell you when to send it to each person based off how active they are on their inbox at certain times on certain days exactly yeah yeah interesting yeah it's interesting I mean they're the the I guess the question I would have for you is your input is 136 customers that's not a large enough sample size to train your like machine to be smarter than someone with a hundred thousand users so how do you I mean how do you know your send times are actually good send times because well so there's a couple things one some of our customers are quite large and they'll have up upwards of a half a billion to a billion events in a single you know Marketing System or in their instance of Marketo or HubSpot so for them that sample size is large enough where we have really proven our value is we've done a tremendous amount of a be testing with customers send your way your normal way send it 10:00 a.m. on Tuesday whatever you think is the best time and then to half and then send our way half and then we compare you know compare and contrast the results and what does it really look like so open rates on average anywhere from 8 to 13 percent some customers that have tremendous data sets we've seen far larger upwards in the forty percent that's the reason or that's the open or eight that's the games okay and then where the system has the biggest impact is click rates and conversions where we on average see anywhere from an eighteen to twenty four percent average increase in click rates and the reason for that is you're connecting with somebody at an optimal you know at a much better time for them yeah we've also seen based on some studies that we've done as far as like web down you know web balances etc coming like somebody gets an email they go to your website actually seem bounce rates drop in the order of 30 to 40 percent because again they're willing to spend more time on your website because you've connected with them but a bit you know more optimal if those Mike if those numbers are accurate you're just I just think you're priced is so you're so I mean it's so low of someone's 100 thousand person list and you're increasing opens by twenty percent click throughs by 20 percent and conversions by X percent they're getting call it 30 grand more in terms of sales per email send they're paying you 200 bucks it's low so we we do I'm saying that's the Avenue average revenue per customer our smallest subscription starts at 100 a month and then our largest today is three grand a month and then so if you've got a list of a hundred thousand people that's six hundred dollars a month I don't necessarily disagree with you that it's a lower price point but we're also just trying to bring this thing to market not just bring it to market but get a larger customer base and then as we add more increase the priests the price interesting walk me through some economics of right now so kak what's it costing you to acquire these customers so good question I don't have super strong numbers on that because I'm the one doing primarily the you know the sales but I probably spend fifty percent of my time on sales 50 percent on you know marketing podcast things like this etc so on a per customer basis [Music] because we're close to break-even or profitability [Music] I don't know couple per customer okay so maybe call it 300 and they're paying you 200 bucks a month on average to get paid back in under two months yeah yeah okay I mean that sounds generally fair and then telling about churn so churn we I think the last customer we had churn was maybe five months ago so are we I can't say that we have a super strong metric around like lifetime value yet just because we haven't been in the market that long but we really don't where we churn is somebody made a decision to move to go to seven cents and then they leave the company and so therefore we lost contact with the you know with that company and what's interesting is we have seen probably 60% of our churn has actually signed back up with us when they go to a different company yes it drives additional growth okay but you don't you might point it you're not doing any direct paid stuff yet because you don't yet know what your CAC is like you haven't you don't have a sample size large enough to actually know exactly yeah interesting yeah cool um good well Mike let's wrap up here with the famous five number one what's the last business book that you read so last business book I read was no shortcuts to the top by head vistors number two is there a CEO that you really love you know coffee dinner with you know lunch with there at Arlington so Craig a baaad who is the CEO of Kairosoft Kairosoft yeah they're one of the largest companies in the world that nobody knows about interesting numbers multi-billion dollar company number three what's your favorite online tool for building a business home spa number by the way if Brian Halligan comes to you and says hey what are you doing you're doing 360 right now per year will offer you we're offering you a million bucks for the company do you sell take a quick win to move on absolutely not hold out hold out all right number four how many hours I sleep together a night on average five five to six okay and what's your situation married single you have kids married two kids okay and how are you I am I just turned 40 awesome I'm Mike last question what he was your 20 year old self new hmm start a business earlier there you guys however mics start a business earlier although it sounds like he had a lot of success and as an enterprise sales were at building up a nice little nest egg he didn't said you know what I want my nest egg to become a little bit more risky I'm gonna throw some of that money in 2015 at again the new company seventh sense which is helping folks understand better times to send their emails to increase open click-through and conversion rates he scaled it to about 10 grand per month in December 2016 grew well over 3x you over a year now doing over 30 grand per month across about a hundred and fifty thirty-six customers paying two hundred twenty-five bucks a month too early to get too deep on you know economic stuff but his team of three in Northern Virginia growing the company it quickly Mike thank you for taking us to the top absolutely thanks again for having me on