How Thousandeyes CEO Mohit Lad grew to $102M revenue and 1K customers in 2020.

hello everybody my guest today is mohit lad he runs a company called thousand eyes which empowers businesses to see understand and improve connected experiences everywhere the cloud platform offers unmatched vantage points through the global internet and provides immediate visibility and experience for every user and application over any network so companies can deliver superior digital experiences the company is central to the global war operations of the world's largest and fastest growing brands including comcast ebay hp 100 of the global 2060 of the fortune 500 along with five of the six top u.s banks and 20 of the 25 top sas companies mohit are you ready to take us to the top uh yeah i am look forward to it it's pretty it's pretty remarkable this what this all started with what a million dollar grampy got in small chunks huh yeah so it actually started with a 150k grand that was from the national science foundation and we chose it out of building the company based on really building a first version of the product and taking it to market versus raising venture money so that grant over a period of time over the next two years totaled about a million dollars but yeah small start well that's right and what year was that when did you launch so this was 2010 so we we started the company officially in 2010 and we launched the product in 2013 but we started selling it from early 2011 and we're just sort of acquiring customers making sure we really understand what what are the problems we're solving for the customers and then working on from there yeah so give us a good example here so people can really wrap their head around what you do because you obviously touch a lot of big brands but what do you specifically do for say one of the top six us banks yeah so uh we really help people understand how the internet works and how it's affecting digital experience and so there's there's several examples of how we help but the the one example that resonates a lot with folks is if you have an online asset let's say you're a banking site that you're reaching your consumer users that are all over the world and you're relying on this public best effort internet to actually reach them and we help them help our brands really have this google maps like view of what the red is and how can they actually route around it so you would be still able to get a great amount of reachability to your user base so that's one use case and the same technology also works when you're a large enterprise organization and you're going to cloud-based applications like office 365 and salesforce and all these apps that are outside because you're still dependent on this internet which is outside your four walls as a network so we're really helping people understand these complex environments and help them run their business and ensure the best digital experience for their customers and so what's an action someone might take once they start using you you make the you make the invisible visible they see red spots what do they do to correct the red spots so oftentimes the most basic things people get into when there is an issue is gathering 10 teams the app team the server team the network team the infrastructure team and nobody knows what's going on so just the starting point of where do we even start to look at where the problem is is really important so one of the first things we do is let them have a very clear understanding of the application is fine the servers are fine the network is a problem so the rest of the guys can go now the network team it's not your network it's the internet so okay now that we know that it's the internet which part of the internet and then you can understand how do you fix it so for example most online businesses would have multiple providers that they use at their data centers and once they know where the issue is they can move traffic away from one move it towards another if you're using a cdn and one of the one of the areas that the cdn has is problematic then you again help them understand what needs to be fixed so if a company has a highly trafficked pricing page and they want to knock a couple of milliseconds off the load time because that'll increase conversions by three percent they might use you to figure out how to get those milliseconds back yeah correct and like your application in your data center might be really fast but when it's transiting over the internet especially as it goes to regions like asia and africa and so on the user experience can be really bad because you're covering large distances over public environments and interesting once you know what paths people are taking you can start to make the experience better by optimizing around it interesting okay and give me a general sense here i know you probably have tons of different customer stories but i'm going to try and force you into an average just because we're short on time i mean are we talking average acvs here in like 10 grand 100 grand a million 10 million generally where do you play yeah so we we won't we're a private company so we don't share financials but we have a ton of customers that are anywhere from the 100k range to a few million dollars in annual spends okay so these are it's it's really important uh to be connected to your customers as as a consumer brand as well as to provide a continuous highly productive environment for your employees and so from a standpoint of the risk and the importance of the internet this is a big deal yeah so i want to talk more about that but let me in terms of security and things of that nature but first color the team for me what's the team size today uh the company yeah yeah so we're about to closing to 250 employees now and we're headquartered in san francisco offices in austin london new york uh japan as well and growing had a face fast space including a recent office in dublin that's great so of the 250 people walk me through your sales machines so sdrs aes customer success what's the ratio between all of them yeah so on the sales team in general and and this is sometimes it's a little hard to uh decouple a certain set of functions for example we have a customer support function that indicates that engages a lot with customers and they would be also helping sometimes in a poc if there's a certain element of integration working and so on but i would say the sales team at this point if i combine everybody on the sales side including str's and so on would be somewhere in the 70 200 range okay 70 folks there and then you know a big debate right now with with you know see you as i interview they're doing anywhere between 60 and 200 million bucks in arr the customer successful is really important to drive expansion revenue but people have tons of different models in terms of incentive structure some of them are quota carrying some are not some it's like a pool bonus how do you generally incentivize your customer success team yeah so customer success means different things in different companies for us customer success team is actually more of a technical team that solve issue so they're not the team that's renewing customer accounts they actually engage with the customers to drive adoption to make sure that the customers really understand how to use get the most out of the platform we actually accept we built that looks into uh taking care of renewals and that also is responsible to make sure that they're quarterbacking any kind of coordination and so on and that team you would incentivize them based on a renewals target which is fairly standard on the sas side of the world is that the ae that initially closed the deal that stays with the account or there is a pass off no so we don't pass off entirely because we work with enterprise customers and all our customers continue to grow so we need an ongoing relationship but we would add a team to the the team that would close the account but then we would have an account management team that would add on to it and they would be the quarterback for the relationship while the sales team will continue to engage and look our sales team is not transactional where they will disengage if there is no deal the the idea of the sales team is there they're invested in the success of the customer and oftentimes we don't have a customer that is buying in a quarter but our team is still engaged heavily to make sure that they're getting the most value and this is something that i think entrepreneurs should realize is you want to create some division of responsibility so the the account management can own the renewals but you never want the sales team to be only focused on new dollars and forget the customer otherwise you your the team's responsibility is to make the customers successful yeah 100 that's what these sdr to ae to customer success to onboarding is such such a critical relationship um that's helpful to understand um one of the things you know brian hogan when he came on talked really importantly about how pricing axes enabled him to drive significant expansion revenue and that was a critical moment for them because that's how you get really incredible exponential growth so for you you know i'm gonna i'm gonna say i'm a sample customer let's say i sign right now for a hundred thousand dollar acv account over the next year i mean what what what would you expect me to expand to in my next year's contract yeah so a typical customer let's say they sign up for a hundred thousand dollars they would focus on making sure that they can understand and improve their experience for like the two or three key apps that they care about or the two or three key apps that they're having some concerns or problems around and as they see value they would add more apps or they would add more coverage from a monitoring standpoint or they would say hey a security team this is really cool and very useful you guys should look at it as well so our accounts would go from you know 100k to a few hundred k to a million dollar the customers that are spending multi-million dollars with us they all started in the 5200 gear range interesting okay so i mean is it you can kind of fairly predictably kind of put a pro forma together and assume accounts are essentially you know doubling in the first year uh we so we have a very predictable model in terms of growth but over time our land rates our land sizes have also grown gone up so when you model something that you want to you know model accurately over the last 24 months or 36 months and your land sizes are also increasing that changes the model yeah it makes it makes it difficult yeah at this point we're sort of continuously adapting it but we have a very heavy uh customer retention plus also the customers continue to do more with us and we focus on mid to large enterprises right so we have eight of the top 10 banks we have 60 plus fortune 500s we have about 110 global 2000's and these are not easy customers to get into business with uh they they're really really uh you know hard to sell to and we're proud of the fact that we've acquired them as customers but they continue to grow with the company and a lot of them are on multi-year deals to begin with when they start engaging so you said you're really proud of your really high retention i mean i would consider best-in-class gross retention before adding back expansion to be kind of north of 97 98 percent are you guys best in class yeah we're best in class so i the the retention ratio that investors often focus on is the retention with growth the dollar rate revenue retention and we're best in class there but when i take that out and just look at net retention we're still best in class breaks sorry i don't understand that right you know i look at obviously obviously net revenue retention being north of 140 being best in class and gross being above 97 being best in class then but how are those different how are those two things i just said different than your two metrics no so the two metrics are right there's retention right there's dollar retention and then there's dollar expansion but the terminology is often confusing in terms of different companies say different things when they say drr they're including growth okay so we're talking about the same thing yeah i think both metrics are equally important and both metrics are really strong yeah so just to be clear i would consider best-in-class net revenue retention to be north of 100 and 340 percent you guys are in that range yeah we're in so here's the thing about drr we're in the range but drr is also not point of time so when you look at these revenue retentions and so on oftentimes what company would do is they would look at one point and then tell you hey our retention but we actually track it across the entire cycle of uh the uh growth of the company so we we're constantly tracking that on a trailing 12-month basis as well yeah so how do we understand that most people will track net revenue retention obviously on on a cohort basis per month so you go look at what signed up last month or sorry a year ago and look at what it is today you're doing that as well yeah so if you look at some of the s ones that are filed and so on uh the revenue retention is done more of a point of time basis versus like continuous graph i see of course cohort analysis yeah yeah yeah very good okay listen if you're looking at s1 it means you're thinking about going public so you're past 80 million bucks an arr so again unfortunately we cannot share that look at this smile guys look at the smiles guys i will tell you this that we're looking at the two i guess two and two and two to two and a half year horizon to be ipo ready and the reason i say ready is i think going public not a good it's one of those things that you know effectively is like a milestone but what we want to focus on is making sure that we continue to grow as a business and continue to really acquire great customers so that's really what we're about yeah that's fine and then uh i won't push you there on obviously revenue metrics but in terms of total customers you've scaled to today what general range are you at yeah we're at 500 plus customers at this point of time okay god and again most of these again big kind of enterprise like accounts correct yeah yeah now for us every logo is not bringing up customer logos there are companies that work with small businesses that can say we have five thousand customers and then our focus is like the really high and mid line of the enterprise base yep yep and look i mean you you know 500 customers you kind of gave me an acv earlier of 100 grand that should put you at about 4 million a month today or about 50 million bucks in arr i mean generally am i directionally correct i would say like you have to track us for the next two years and you'll get all the details and then you can go back to the the historic financials we would have in the s1 and no no i don't i don't like waiting but look you gave me 100 grand acv you gave me 500 i'll just do some multiplication there but listen why set the i mean look a lot of security companies i've talked to malwarebytes no before stu i mean you know they all you know they all kind of want to go public right because ultimately by going public there's something to be said about being a security company and being more bona fide by being public you can close deals faster i mean why besides that reason why else would you go public there's plenty of money in private markets right now yeah so just to be uh just to clarify we're not a security company we we focus on more network performance network intelligence digital experience but some of the use cases we track cover security that aside in general companies go public for various reasons including they need cash or employees need liquidity for us the primary reason that we would look at is whether it creates more customer confidence and helps us from that standpoint the the fundamentals of the company are very strong and given we were built on a small grant and customer acquisition fortunately for us we're not one of those companies that needs cash every 12 months to continue oh hold on here i have to push you on this because i was just gonna say i really would have loved your story if it was just a million dollar grant and you were really smart and you figure out how to you know have vc in terms of vested customers and instead of actual vc and being delivered but you raised pretty significant capital how much capital have you raised yeah and so let's talk about that the way we raised capital is when we believe that we can use capital to scale the company and what i what i want to point out for example is our last raise was in december 2015 and we haven't raced since then and so anytime we raise it's not because we need the money it's because we believe that capital infusion will take it to the next level and that's the difference between companies that need to raise every 12 months otherwise they actually end up not being able to operate right and that's not the mode and what happens when you when you raise a series a on a slide deck and then you go and build the product by the time you've exhausted your series a you now have to raise your b because otherwise you can't take it to market and so that's that's different in companies and this this we're not the only ones there are companies that are more organically built in the early days where the growth is slower in the early days but it's more sustainable because your fundamentals are really strong that all makes good sense that all makes good sense but total today you've raised what 60 million bucks we raised about 60 uh till date yeah and i think according to pitch book that last valuation was about 273 billion bucks so i mean look that's nothing crazy right i mean that strikes me as someone that's or a company that's being financially disciplined and not trying to be some unicorn with no revenue yeah and look we've had revenue since the first year right so we were not one of those companies that that raised at a high valuation with a slide deck and that's what i'm getting at is everything the only currency we care about we don't really even care about valuations and the only currency we care about is customers customer bookings and growth and like really making an impact for their customers as well i was at an event where we announced our cloud report recently comparing the different cloud providers and there was an engineer from one of the banks one of the large banks there and at the end of the event he actually he was one of our customers he came and just gave me a hug and said hey there are so many times that you guys actually have in the light on where the issues are when historically we would have just been yelled at for being the network guys that were that were creating problems and so those are the kinds of moments that we really really feel good about yeah that's making an impact on these lives that's great quick last two questions here because we're out of time a growth rate today obviously you're at big numbers now so three exiting year over year becomes more difficult uh last 12 months is it fair to say kind of high double digit growth so nathan i wish i could go into all kinds of rates but again as a private company you already did though you already did because you said over that you're eyeing an ipo ready in two to two and a half years yeah i mean so and you study s1s and you look at nes ones recently they're looking at anywhere between called 30 and 80 year over year growth so the statement i made was just based off what you already said yeah so here we are so i lost you for a second that but uh based on our historic and our future forecasted plans were in the in a really good class of companies that have gone public and we feel really good about it and at the same time we're not the kind of company who needs that a crazy amount of cash to like get there so i just want anything else you want to add to that uh no i look we we're on a good ramp here and uh i feel excited about the the next two years ahead two two and a half years ahead that's great last question before we wrap up with the famous five um aggressiveness uh i want to get in your head here i'm not interested in your own number but what i emission is theoretically if you are going to go acquire a 100 000 acv account how willing are you to spend money to get that account are you happy with a 12 month payback will you push it to 24 months how aggressive are you being i am i'm losing you so the the way i look at this from a sales and marketing expense or cost of customer acquisition is more around how it trends over time and so the suggestion i give to entrepreneurs is you cannot ever look at cost of customer acquisition in vacuum nor can you look at sort of a metric and say okay this is good or bad so when when we think about cost of any kind of customer acquisition and the ratios we trend to look at how do we model this and historically has this been moving in the right direction as in our return on the customers uh gets sooner and sooner or are we actually going worse why do you actually make why do you make that statement that that getting sooner and sooner payback is actually better a lot of companies as they prep for ipo they actually push their dollar base cac up from a dollar up to say two dollars when you look at the last 12 ipos a lot of them are in the dollar twenty two dollar 80 range for a new dollar of ar yeah and look there's two models right so there are companies like atlassian if you look at them they have actually gone some got some really good organic growth and then they have started to create a strong base and scale and there are moments of company when you want to change the ramp rate that you invest in sales and marketing costs and the returns of those costs are not in that quarter they're returned like a year later or not four quarters later or five quarters later and this is why i'm saying that when we when anytime i consider a model for what our current expenses are and what our future expenses will be they have to trend in the right direction so the fundamentals of the company won't be good if the dollar you spend to acquire a customer is getting worse and worse and worse then that's not good for the business but that's what i'm asking you use the word worse there are a lot of companies that say if you can't push your dollar base cac up assuming because assuming whoever can spend the most to get a customer actually gets the customer they would actually say spending more is better because you have confidence in your economics where you can afford to spend more you're saying the opposite you're saying no that's worse so just be clear i wanna make sure i'm understanding you correctly you're driving your dollar base cap down yeah so here's how i look at it right there's two things can you get more out of a customer over time and if you believe you can get more out of a customer over time then you can afford to invest more in that customer in general when we think about cost of customer acquisition we want to trend it down over a period of time and that's the way we think about it we don't want our cost of customer acquisition to go on so i i don't i don't know the financials of the companies that want to do that well you just said it you said if the lifetime value is higher you're happy to push dollar base cash up you're pushing it down which means for whatever reason you believe lifetime value is getting less of what i said no no what i said is if you can create a scenario where for a specific class of customers whether it's a specific let's say you want to go after a federal market because you believe that if you go after that specific market the model of customer of the model of the consumption of the product is different but over a period of of lifetime like if the federal customers do six year contracts with it not which is non-standard in your business or customers then you can have a different model there for cost of customer equity that was my point yeah okay fair enough gotcha yep all right let's wrap up quickly here famous five number one favorite business book um i would say the best book i enjoyed was the hard thing about hot thing about hard things yeah ben horowitz number two is there a ceo you're following or studying right now um the ceo i probably respect a lot was is uh godfrey sullivan from splunk godfrey sullivan from spunk good number four um our number three what do you guys use for your billing system uh for customer billing yeah like zora or yeah we use zoro yeah okay got it number four how many hours of sleep to get every night uh i would say between six and eight okay it's pretty good and what's your situation married single kiddos uh i'm married i have two kids married two kids and how are you mohit uh i'm in my late 30s but i won't be able to use that line next year i like it positioning all right last question what do you wish your 20 year old self knew uh so that's a good question i think the the main thing i would the main thing i'm surprised by if i look back is how quickly the role of a ceo changes and sometimes when you make that transition you don't end up doing all the the things that make an immediate impact as easily as you scale so i would just say if i had to go back and inform my 20 year old i'd say be prepared for more accelerated changes in your in your role than than you would expect guys there have it mohit founded 2010 on a very small grant now 250 people thousand eyes again helping teams really network teams make really what's invisible visible so they can go attack the right problems whether it's website loading time a cyber security use case or other things they have over 500 customers paying caught on average 100 000 acv net revenue retention class in the 130-ish 140 range with an eye to the being ipo ready in the next two to two and a half years in mohit's awards space between san fran and other remote locations mohit thanks for taking us to the top thank you