How Usertesting CEO Jamie Anderson grew to $140M revenue and 3.5K customers in 2021.

you're gonna love this interview just got done editing it i'm glad i got it live for you i'll be in the comments for the next 30 minutes hanging out answering any questions you have in fact leave a comment below about data points or what you think is going to happen to the company and i will respond to every comment additionally if you're just loving the content click the thumbs up and i will go and check out your profile as well and give your videos some love as well in the meantime enjoy the interview hello everyone my guest it is andy mcmillian he brings 20 years of enterprise sas experience to usertesting.com as a former former product executive at oracle in salesforce he saw the critical role that customer centricity plays in creating great experiences andy you ready to take us to the top absolutely all right so so we're in kind of unprecedented times obviously with this kind of virus crisis user testing is in an interesting spot because well many people would would wonder does this hurt or help you in terms of what you provide online so give people the quick kind of product overview and then you know what are you thinking about literally in this moment right now markets crashing what's going to happen yeah it's an interesting uh way to think about it i guess we um we are a product that helps people understand and view the experience often of their digital products so if you want to kind of virtually look over the shoulder of your user and understand what's it like to do mobile banking or to use your mobile ordering app or to do whatever that might be that's what our customers use our platform to do this has been an interesting moment in time for us like most folks we've moved to kind of a work from home remote stance for our employees but a lot of our customers are now reaching out to us and saying hey one we're standing up more and more digital channels to help people who are maybe in a shelter in place or whatever it might be that they're dealing with it's also interesting from a product and marketing messaging perspective i actually believe most people in most brands are trying to be empathetic and do the right thing and reach out to their customers and help but even that is a hard tone to get just right where you don't want to seem opportunistic like you're taking advantage of a pandemic to push your product at the same time you might be sitting there thinking our product can be really helpful to people in this moment and just like our company we're going through that we're reaching out to healthcare systems and everyone else and saying hey can we help you make your messaging clear and kind of help with the emergency people trying to strike that balance and so we're seeing a lot of customers use our platform to test their messaging and test their content to really understand how it's received by their end customer and just so i want to get more about kind of how you're handling this from your own perspective as well will churn spikes happen how do you change your burn plans what are your you know investor calls sound like over the past three days we'll talk about that in a second but give people a benchmark context here so uh how many customers are you now serving today and is it all pure play sass so it is all pure place sas uh we started the company years ago i was i joined two and a half years two years ago now but the company started 12 years ago it was originally a pay-as-you-go business where you could pay to get a single video for the past five years it's been entirely a subscription-based sas platform about 35 000 people have ever tried the product or used it as a pay-as-you-go model we have about 3 500 sas customers that are paying us on an annual subscription base 10 conversion is not bad andy it looks pretty good yeah it's right it's a great business um i'm very proud to be a part of it uh 3 500 and then help me understand kind of pricing last time you told me average you know the company's gonna pay you two two grand a month based off how many tests they're running with you is that still about accurate it is for kind of an smb customer and then we scale way up i mean we're doing um you know supporting massive research teams and design teams at some of the largest tech companies in the world that might be spending you know over a million dollars a year with us okay and have you changed anything about your your cap table structure or still about 74 million dollars raised uh we actually just raised around so uh we're doing this interview we're recording it we're gonna do a press release uh in two days okay but we just raised 100 million dollars from uh insight partners um and have yet to announce that publicly but pretty excited to have raised that yeah will and it sounds like we'll probably release these around around the same time there give me timing on that uh was the money wired and the deal done prior to you know the wuhan news and the spread of coronavirus being you know mainstream news yeah we closed i want to say three weeks ago four weeks ago so really before it hit the u.s i mean it's been kind of an interesting it feels like a fast evolving story but if you go back i mean it was december when we were first starting to hear about the challenges in in some parts of the world but um yeah we closed the round of funding before there was really a significant u.s impact yeah or even really the impact of the global supply chain that we saw happen yeah and then this is obviously gonna be rapidly changing as you figure out how the best way to use i mean you're a very fortunate position to be on this kind of cash heap now you can really do some serious damage with it especially if you look at a you know everything else is being cheap right now what's your team size say though how many people uh we're about 500 people and how many engineers uh probably 80 out of that okay and any quota carrying reps yes we have uh smb mid market enterprise and global account teams that support that how many total people carry reps or carry quota i think we're at 55 right now oh wow okay fairly significant that's good um okay so with those with those kinds of uh benchmarks um and again i mean look by the way from a growth perspective that sounds pretty healthy right so if you've got 3500 paying customers at you know still around that two thousand dollar arp i mean that puts you at about seven um seven million a month you were at five at least 5.5 million a month about oh what is that 19 months 18 months prior when you last came on does it sound about right yeah we're we're growing pretty rapidly um the business last time we spoke about 18 19 months ago was what's growing about 25 a year a very healthy business um we've really seen it pick up i think in many ways uh we're riding this wave of people being focused on customer experience and understanding their customers and building customer empathy so we're going to cross 100 million in arr probably mid this year uh growing about 40 percent so we're actually speeding up as we get larger yeah andy the overlook so so again i'm not a guy to you know give softballs or a lot of compliments to founders you know you know i see a lot so it's hard to be impressed but you you rarely see a situation where someone goes from call it 40 50 million in 2017 to 65 70 million in 2018 so call it 25 30 growth and then actually see growth pick up with on a larger base because it's much harder with a larger base what what drove your ability to do that i think it's a couple things i mean there is a market dynamic uh that's supporting us i mean product market fit goes a long way when you're trying to grow and we are seeing a dynamic where um two things are really happening one our core audience was originally these folks called ux researchers people that are part of a product team they're kind of understanding the usability of the product understanding the flows and things like that that is is growing so companies are investing in our core audience of buyers and they're therefore buying more of our product we're also seeing this trend where outside of that core you know buying group that we originally had other teams are realizing the value of our product they're saying boy we should watch and see what it's like for people to use our product they want to build that empathy and customer intuition so we're seeing product teams design teams marketing teams um getting on the product running their own tests understanding their customers more closely more deeply and really scaling so where our largest customer couple years ago might have had you know 20 or 30 seats we have a customer right now we're working with that's looking at doing you know over 10 000 seats with us because they want to see everyone in the company who builds or markets or designs the product be able to have that direct interaction and see people using the product and so i think those two things combined have really created kind of a perfect storm for growth for us you touched a little bit about your ability to drive expansion revenue on a per seat basis i want to loop back that here in a second what's gross revenue churn like it looked like over the past 12 months uh we've actually seen improvements on gross revenue churn as well uh we're at about 86 right now retention so call it 24 sorry 14 uh gross churn yep um and again we sell on all segments you see you know higher numbers in the smb segment that's a weighted that's a weighted average across all because it's revenue right yeah dollar based when you okay so then add back expansion revenue dollar base how much a little over 100 but we're starting to see that really tick up as these no more seats are deployed that's net that's net or just the expansion piece that's net okay got it so you are churning 14 on a dollar basis you're adding call it 14 15 percent gets you above 100 and you're seeing that expand yeah and both of those are picking up okay well hopefully just the expansion you know insurance picking up you know none of that i mean the gross and the net are both going they're both getting better yeah that's right what what is what is driving well first off uh what role out user testing is responsible for the upsell right to get better expansion numbers and what's driving their ability to close more upsell revenue yeah this is one of the things i have a little bit of religion on and sometimes i end up in debates on different kind of sas stages with folks about um i have a chief customer officer who reports directly to me and they are solely responsible for making sure the customers are successful they don't sell them anything they don't upsell them anything they are just get in there and make sure that every dollar a customer spends with us they're getting incredible value from then i have my sales team and their job is to manage the contracts and growth and expansion and everything like that so i pay the sales team for net new logos i pay them for growth i pay them for upsell i pay them for cross-sell and i have my customer success team solely focused on gross dollar retention as a metric but mostly focused on just csat customer success adoption i view gross dollar retention as really an outcome metric from doing those things right okay uh this is really valuable benchmarks here going back to the current situation you now have again let's say you know you have 100 million dollars cash in the bank you you could look at what's currently happening in a couple different ways and i'll be evil here right so people can throw throw tomatoes at me instead of you you can look at us and say wow i've been waiting for this moment it's been a bull market for the past 11 years everything's been overpriced uh everything's cheap now right uh i should go invest aggressively again i'm taking off my emotional empathetic hat where there's people dying right the other side of this is you know we i actually don't know when it's going to end so i'm going to hold on to as much money as possible to make sure that user testing is good on burn for the next three years if we add no new customers right which path are you taking we're definitely leaning into growth mostly because what we're seeing is our customers saying to us in this time this is we need this help right we need to use your product to talk to customers we need to understand their their preferences and how they want to be communicated with and so you know us building out our field capacity and kind of leaning into that i think only makes sense for us in the market and it's probably the healthiest thing to do for the company so we're going to continue to grow we are seeing a lot of interest in international expansion as well we opened our first office overseas last april so what now 11 months ago hired our first employee we're already at 42 people in edinburgh scotland that's growing like crazy makes up more than 10 of our revenue now internationally working we'll be looking to acquire internationally as well one of the announcements we'll be making with by time this is live as we're acquiring a company called test on which is based in norway allows you to test a couple different languages that we don't yet support on our platform so i think that demand is going to continue to be there especially as more and more companies think about how are they going to focus on digital means of communications and connecting with their customers and kind of this new model um we think that demand is just going to push us forward um how did you find so if someone's listening right now going you know what i'm in andy space nathan i can't believe you got him on the show you know you know i don't know how i'm going to make it through this but i've got four million bucks in arr i think it might be something andy wants i'm bootstrapped i'm a sole decision maker how are you thinking about what companies to acquire if you go do a bunch of acquisitions yeah i mean it's always interesting when people reach out and i think sometimes there can be some serendipity in that but i'm a little bit more of a of a shopper than a buyer i mean i think you know we lay out a strategy and think about where do we want to go what makes sense for us what things are our customers in the market asking for from us then we do a buy build partner around those and think about how to go service that need as best we can you know m a sounds easy the day you announce it it's hard work and you need to be thoughtful about it you think about you're not just impacting your own customer base and your strategy for your own platform you inherit and are now the stewards of another customer base that you need to take equally good care of and make sure that there's a good path forward for them and so i think um you know it's something that we'll continue to be deliberate about and we'll do it when it matches the strategy that we're laying out and what our customers are asking us for more so than you know seeing something that looks as a you know we're not buying depressed assets and beefing up a balance sheet or financial engineering growth in the company we're really focused on what do our customers need the solution to do how do we buy build and partner to make that happen for them yeah okay let me let me give you some real examples here um let's say that you know because you've run surveys across your user base that you could pretty effectively upsell a product that allows people to launch surveys right survey monkey is too big if you've done the sprint analysis with your cto you know it would take about six months to build your own product internally let's say there was a company like questions pro right 30 million top line 4 million ebitda vivec is basically bootstrapped the company uh like is now the time to pull the trigger more aggressively like for you to put your seller's head on even more aggressively i think now it's the time where deals will happen in some of those cases but you know from our perspective a lot of it still goes back to that what are we creating in the market i mean some of the companies you mentioned like survey monkey or qualtrics they're great partners of ours we spend a lot of time going to market with them a lot of our customers are looking to really deploy enterprise class tools to go engage with customers and so you know again every acquisition is sometimes stepping into a partnership area as well where maybe partnering is what the customer really wants and so i don't think about how do i just collect a small amount of that revenue from my balance sheet i think about what makes sense for our customer base how do we over time build a lot of value for them and very often that's playing in ecosystems not just buying them up so yeah um it could be i mean and there are you know that i'm picking on your specific example i don't mean to to dive into no i want i want to do that on purpose yeah but but there are um you know there are sometimes things you look at and think hey our customers really do want us to go do this next thing international expansion is a good example of that for us and we will look at you know in some cases we'll build features that help us go do that in some cases you know we might acquire those mm-hmm has there have you i doubt heads of corporate bd are thinking about this right now but if they are sitting on a pile of cash they've been waiting to invest they might come look at companies like you and say maybe andy's feeling the pressure maybe i can get him at something under a 20x forward-looking revenue multiple let me open that conversation now have you gotten emails like that and if so how do you respond i think the companies that we would probably get those kind of emails from we already spent plenty of time with and have strategic partnerships and go to markets around i think they're pretty excited about the way we're building the business you know raising a funding round is is not a typically a near-term exit strategy uh so you know i think we're in this for for the foreseeable future i think i mean our management team our board our investors our employee base i think we see a lot of opportunity for us to go continue to build the business but i don't think um you know the size and scale we're at i don't think those people kind of emerge from the shadows in a time like this i think they're the people you already know and you're already doing a lot of business with yeah last two questions um again you're obviously not gonna have issues covering your burn through a time of crisis because you just raised so much money but prior to the raise and prior to the crisis when you looked at what you're burning per month i mean were you comfortable burning million two million per month as you invested in growth yeah absolutely and that's probably right somewhere in that window is probably right about where we were um but again on our cac payback and all that kind of stuff it's a it's a good investment to be to be going and acquiring customers at the rate we've been acquiring them and we'll we do you know with the funding raise and with everything being cheaper right will you double down on that burn rate you come to one of three four million even in a crisis well what we don't do is just throw people in the into the field i know this is something that happens often when people lay raise late stage venture rounds it's like well let's just double the sales team and hope for the best and then we'll fire half of them that don't make it i mean that's just not really our mo in user testing what we do is we pretty meticulously manage and measure our pipeline we saw massive pipeline growth last year our pipeline was up 75 percent year over year so you know we look at something like that and we think okay i've got capacity to hire reps and you know feed them with with leads so we'll keep doing some of that but um again it goes back to things like investing in the product we're doing we acquired a company six months ago called truth lab which is about doing uh ai video processing so we're processing the videos that uh people do on our platform and using machine learning to help our insights come out more quickly so we're making investments in the product we'll be making investments international expansion we'll do all of those kind of based on leading indicators where i'm confident that i can grow the business comfortably and not just you know throw money at hope and uh and hope ar comes at the end of it that's just not a solid strategy have you had a quarter yet where net new bookings passed that 10 million mark yes that just happened last quarter did that in in q4 and we'll probably do that again in q1 uh we'll see interesting quarter right now obviously very um uh so far you know we've seen a mix we've seen some people who are you know holding their budgets a little tight and saying maybe we'll buy next quarter and so you know you get some deal slippage but at the same time as i said we've seen this demand where we have customers calling us up and saying we had a bunch of stuff we were going to do in person events and we want to move all of that onto your platform so we can connect with our customers so at this point we'll see what happens last question uh ipos a lot of people looking at direct listings you can't really have this conversation or even think about it until you're at 80 90 120 million bucks in arr and you know zoom's case 300 million ar how do you think about the public markets i'm a huge fan of the public markets i think it's a great way for for companies to create value overall in the world i think most great brands are public companies i love the idea of being a public company at some point but i don't think it's in the near term for us having just raised that round i would think um you know we've got 24 36 months or something before we'll get real serious about thinking about that all right andy let's wrap up with the famous five number one favorite business book favorite business book is the goal by eli goldrath number two is there a ceo you're following or studying i'm a huge fan of eric won right now at zoom he's amazing yep number three what's your favorite online tool for building your company uh i live and die in google so i'm a big gmail google assistant everything number four how many hours of sleep to get every night i do seven hours a night that's great and situation married single kids uh i've got a wife and three kids two boys eleven and eight and a three year old little girl and they're all at home right now as we're sheltering in place so is it to say we got this whole interview there was no screaming no doors opening no daddy daddy so that's a that's a win yeah i'm actually in the garage working on a ping pong table in front of a green screen so you know we're all making it work wait can you tilt your camera so we can see certainly i can't look i got some uh some hockey baseball bag that is so cool i love that all right and how old are you andy i'm 42. last question what does your 20 year old self knew i wish my 20 year old self knew to uh probably focus as much on relationships as gathering knowledge i think at this point in my life i've realized it's all about the people guys there you have it user testing time of crisis interesting place 100 million dollars just raised andy congratulations there but not only that just on raising they're also driving real revenue growth in fact they're growing more year over year than they were on smaller numbers so caught 60 70 million bucks an ar called 18ish months ago now breaking past 80 85-ish million are hoping to pass the 100 million dollar mark on the next call at two to three quarters we'll see what happens there again serving this is great serving over 3 500 customers who are now doing you know potentially way more digitally in a time where you can't meet face-to-face economics look super healthy right 14 gross revenue turn annually more than that in terms of expansion so greater than 100 percent net revenue retention as looking to continue to scale their team of 500 folks 80 engineers 55 sales reps andy thanks for taking us to the top thank you so much enjoyed it you guys know i fight like heck to get these data points for you from these ceos that rarely do these kinds of shows if you want more shows like this make sure you subscribe right now we're trying to get 10 000 youtube subscribers by the end of september here 2019 and it would mean the world to me if you clicked now to subscribe additionally i've got two more great interviews for you if you want more data points from the world's leading sas ceos click and watch