UserZoom Revenue, Valuation & Funding (2021)

hey folks my guest today is alfonso de la noes he's building a tool you've probably heard of it called userzoom.com the experience insight management company that helps businesses gather and manage the insights they need to design and deliver an exceptional digital experience they've raised over 150 million bucks and backed by silicon valley investors sunstone capital and al rock alfonso are you ready to take us to the top i am thank you for having me again so hey real quick for people that missed our last interview from april where you shared i believe that you had just passed about an 80 million dollar run rate and a thousand customers correct correct yeah so help me understand you know this is a very frothy space like user feedback in general how are you positioning yourself i mean there's a clue on your bio where you used a very specific word right experience insights management platform is that what you're trying to brand and own correct yes we are um to be honest with you experience insights management is a little bit of a visionary uh way of positioning ourselves in a market where right now there's a bunch of companies specializing in ux and a bunch of companies specializing in cx and then there is other companies that are talking about experience management such as the case of qualtrics um you know there's momentive which is the new surveymonkey also providing feedback there's a lot of survey tools out there and then there is others like user zoom which focuses on the product experience and user research and user experience research usually takes place in the pre-production stages nathan which is where you're kind of in the discovery stage when you're designing and your prototyping and you know solutioning as we like to call it and then you do some validation and some testing and across all these stages of the life cycle of the product development product design development life cycle you want to be in touch with those users before they become customers now once you become customers there are multiple ways to measure and track experience and so we come in with specific methodologies and metrics that provide more much more than just a survey you know much more than just a feedback mechanism but you know you can also do qualitative research you do one-on-one interviews you can do unmoderated sessions where you ask them to complete certain tasks not just questions but tasks and we record everything they do so we combine kind of attitudinal and opinions with behavior data and video is this a marketplace though like can i as a sas tool pay you to go find people to test my software and you record them testing it doing an action i asked you to do it or are you enabling me to get this data from my customers directly you can we our customers use the product as a self-service so you don't actually need to ask us for anything we just give you the login and password and you as a company you know you have probably a you know multiple products or properties digital properties you can test your properties or you can test any url uh you know competitors or any other website that is accessible through a web browser so so who do you like if you take off and and you you like crush it like who do you kill i mean does pendo go out of business if you do well no in fact pendo funny enough this very morning you know we were discussing this vendor is a great ally or or partner because they're very much specialized in product analytics right they do provide feedback but it's a very simple you know feedback you know you do you like it or not but their their core business is analytics product analytics that's more specialized in the what's going on like what are we use pendulum by the way our product team uses pendo and uses user zoom and a bunch of other tools but that's more analytics and what's happening the visits the monthly active users like activities that we call cold data it is very important but that's different than user research which is when you actually engage in a conversation and you um ask people to complete certain tasks and you record everything they're doing so we're not just saying what we actually focus a lot more on the why and how they do what they do yeah so very very compliment very much you know it is it is it just it feels so like you feel so close to pendo and you both feel so close to like hot jar and smart look i just i wonder why there hasn't been a mass sort of like merger between all it's happening nathan is happening look tell me square just well let me tell you so uh first of all the the whole thing i consider the whole thing this product experience um digital experience market right i mean i see that as a as a digital product cloud and you know research insights cloud you know that that's the category i can see okay that's why we call it experience in science management you know for digital um there are more of what we call passive insights which is analytics those that you know will collect information and and data uh code data on on um you know once you're live once the product is live and then there's others like including user zoom that are more active uh research platforms this is when these are these are products that allow you to connect to your users and ask questions and probe them and have conversations right so what is more analytics dealers is uh is uh user research and as i said earlier um customer experience is all about feedback management and asking people once you go live the other one uh user experience research is more about design and and understanding you know how to build a digital experience right a digital product all of these guys right now all of these vendors all these solutions are you know kind of separated and and there's a little there's little categories for each but what's happening in the market and i can see it you know happening is that there's going to be convergence so for instance um content square just acquired hotjar i think the news hit this morning right um then you see um uh you know you see qualitative and you see customers i talk to customers all the time that think that qualitative and quantitative they need to be paired up and they don't look at what customer experience user experiences two different completely different uh categories they actually like to see it as an experience category right you see uh qualtrics which is one of the leaders if not the leading company is doing you know uh uh brand research and market research and and they're also doing product and design research as well we offer a whole lot of ux tools ux solutions for for user testing and user experience research but we also offer surveys for more marketers and e-commerce and uh you know quantitative analysis so i think what we're seeing is that over time we're going to see convergence we're going to see um you know that you're not going to have separate teams working on separate things but everything is going to be about the experience that the end users have yeah how much revenue do you think hotjar uh hotjar had you know uh the press release this morning actually didn't say um you know they didn't specify the the terms of the deal which kind of leads me to believe that it was a fairly fairly small deal i don't know maybe wrong but so don't quote me on that but you know clearly under under 100 million like like right based on what i knew and the fact that hotjar was much more focused on smb you know i think they probably were somewhere in the 10 to 20 million it's my guess were you were you looking at the deal at all no no because hodger again is analytics hotjar would be the the the basic tool that you need to to understand what's happening with your with your website right so um you know you have google analytics you have pando you have uh hotjar doing some things and some behavior with heat maps as well so they wanted to kind of kind of take it to the so-called advanced analytics just you know a little bit more but they're not really in the user research space the way we are positioned again you're not having direct conversations with users and you're not using hotjar before it goes live before the product goes live so that's why we were not looking at people people will use you as they're doing product research before they launch the product to do to do testing in fact most of the times most of the times they'll test with prototypes with wireframes that's a great that's a great sort of way to delineate like pre-product versus post product that's exactly how i explained that's sorry if i didn't explain that more uh correctly to you or more in detail i'm just slow i'm just slow no that's okay but you know you're not alone trust me i'm telling this story to a lot of people but actually the one way to make it very simple to delineate or differentiate is that one is a lot more uh used and dedicated and and you know positioned in the pre-production stages versus the post-production stages that's one way to look at it yeah yeah yeah really interesting okay so when you came on you're doing about about four or five months ago you had done about 6.5 million i think and like recognized mrr in april what are you guys up to now today um we are i mean i'll give you the basic the the numbers in terms of run rate and for for the year i mean right now we're looking at clearly uh surpassing and the 80 million dollar run rate because we grew when we spoke to you we were growing at almost like i would say 45 40 to 45 we're now growing at 55 so it's not a hell of a lot more it's not like we're doubling in growth but we are growing more will you break dollar run rate by december so eight point three million dollars yeah revenue this december no i think we will buy i think we will well i mean run rate maybe but i think we will be actually we will be over a hundred million by q1 is what we're anticipating yeah that would be i would be surprised if we don't do that do you want to look at you getting there by you growing your your acv above that 80 000 average or will you move down market and try and widen your top of funnel more mid market smbs actually both uh it's a great question and we're talking about both we need to do both by the way how do you do both aren't those very different paths isn't it distracting yes but it's it's what is it's what it takes to scale uh you know we we want to go public next year by the way so that's our target right and if you want to go public you need to show that you're able to grow in both expansion dollars as well as new bookings or new logos so what we have is as a strategy right now go to market strategy that up until now we've been focusing quite a bit on you know really expanding our current accounts i mean we're seeing some rnr for instance i think last time we spoke with 120 we're looking at 125 right now so you know we're even doing even better in that sense but we also want to see more companies come in at the in the you know kind of in the in the starting point or the the low end you know with 12 000 or below per year to come in and start working you know maybe doing some some basic testing and then upgrade them in the future you know kind of a land and expand strategy so we want to see uh we want to see both of those growing uh you know um like right away today [Music] walk me through how you're actually practically doing that do you set up individual teams to focus on the higher volume lower rpo and another set to go drive expansion revenue to your biggest accounts we do we do how does it actually look well so it's a different uh it's a different go to market strategy right and so what we did is we we have the pricing models and then we have different products in our case we actually actually have even different products so if you go to our site you'll see there's a uc musician go uh which is the former validate lee that we acquired two years ago this was a very simplified kind of like a light version of our enterprise account uh enterprise uh solution and you know it's cheaper it's more affordable it's it's easier to use and it's less feature rich all those things are are there and so you know we we use a tech touch approach or semi-tech touch approach where we have a team of people that will sell that type of license and that type of product with a different with the pricing model right it's still an annual subscription so you know we still have you know um the same uh in terms of how we engage with customers but it's going to be the starting point and we assign a team of people and marketing as well to to work on those uh on those opportunities and then we have the enterprise team that works on higher deal you know higher value deals uh and they often work together of course i mean we're seeing that's actually one of the things that i like the most about and our cross speaks about this talk about an escalator right and we see that we have a lot of companies that are started in uc go are actually moving up because they're maturing or they want more or they want you know more capabilities et cetera et cetera and and you mentioned last time you had 50 quota carrying reps what what is their quota annually right i like most the reps i'm sure there are some that are just starting where their quota is smaller but when they're at full capacity what is the quota target i think we're 1.4 1.4 somewhere around that yeah pat and how do you handle giving your csm your customer management manager is a book of business do you give them like a million and say you're responsible for hitting 25 expansion in this or how do you do that yeah very good question i'll tell you i'll tell you i'll answer the question telling you where we came from and how we're doing it now right so we used to have a leader in customer success and a leader in sales for new for new sales right and they were both reporting to me and to be honest they tried really hard but they didn't really work that well the retention wasn't where i wanted it to be and they didn't talk to each other that much keep in mind that most of our business is high-end high-value high-touch okay so what we discovered is that the csm you know is more like an account manager and work and should work together with the accounting executive that sells the deal and should be kind of like in the same team i felt like what we needed there is a consultant we call them research we call them research partners to come in and help them in the more of a domain expertise and advisory work so we call this two in a box the sales guys and the experts and that's how we set up the the accounts now we used to have a separate and it didn't work now we have it everybody's reporting to the cro um there's account managers that have a quota they have a book of business and they're responsible for that they work together with the account executive and you know obviously their core counts their account managers are quote occurring uh and the con executive is responsible for the expansion uh dollars but they work under the same uh leader and same culture same everything they're not separate teams interesting talk to me about capital have you raised i lost you are you mute oh nope can you still hear me can you hear me now i believe i believe your airpods i think your airpods died we'll keep we'll keep shooting this one i can get you back hold on while alfonso is doing that guys um as they prepare for ipo i'm curious when he came on last time he said they raised about 100 million bucks at a 500 million valuation uh from uh their new partners private equity firm he's working on the audio right now switch out switch turn your airpods turn your airpods off can you hear me now bluetooth off you should be able to hear me alfonzo if you turn your airpods off there you go can you hear me now i can hear you now yeah sometimes if airpods die in the middle of the interview that happens no big deal but my question to you is going to be capitalization-wise is the last hundred million dollars you raised do you think that's the last you'll need to raise pre-ipo or we should we expect another round for you the next six months one of the things that we did uh in this last few months since we spoke to you is actually generate more more profit more ebitda than we need it or we want it uh the reason why is because it's hard to hire you know and it's hard to uh uh to hire the speed that we want so we actually have more cash than we than we need or that not that we need but we that we expected uh you know and we are we foresee uh not needing any additional rounds okay okay of that hundred million how much went on the balance sheet i know a lot of it was secondary yeah i can't i know we talked about a little bit i can't comment though okay that's okay yeah some of it was but i can't comment on the details sorry tell me more like i'm always curious when founders are preparing to go public you know you look at henry shuck who is able to keep about ten percent of zoom info there's others like aaron at boxing like two percent right so and then there's some like eric that wanted zuma owned 35 40 you sold i believe the majority of the business back in 2015 when you did the 34 million dollar round at a 50 million valuation how much equity do you still own and how do you keep your team incentivized with the extra pet partners financial partners yeah so i i can't comment on the very details but i can tell you that between between the management team you know there's plenty of equity there right still to really you know be a a home run here right i mean the two founders for instance you know together you know almost 10 percent we have a couple i mean there's there's plenty out there uh still and um you know i mean with the right valuation we could all make some good money mm-hmm so remind me too so you you are not one of the founders you came in a little bit later are you also at around ten percent or are you less than them no no i i'm one of the founders okay one of the the other co-ceo that i have with me dan fishbach he is not a founder he came in later he came in in 2015 together with uh investor with a private equity firm private equities you know sometimes they use these models some use this model right where some you know first-time ceo like myself you know provided someone to help them um and in this case we gave dan quite a bit of stock um to help with this and uh it's worked out really well because he's brought up he's brought a ton of value to the business did sunstone keep any or did a rock buy out all of sunstone no no samsung went uh from a majority to a minority but i think they have they still act actually the biggest uh shareholder uh sunstone is still the biggest shareholder on just on a pure basis it just went down in terms of the majority to less than 50 yeah yeah yeah well look i'm i'm not going to put words in your mouth but these will sort of be representative what you're saying is like sunstone might still own 40ish percent which is down from 60 because they sold twenty to al rock right now maybe a total of thirty so they own seventy and then the management team and you guys still own like thirty something like that the management yeah the two investors together own close to about sixty five percent and then the rest of the top management team and employees yeah is any of that still an employee stock option pool that's unallocated where are you gonna be bringing on more talent before ipo uh the only talent that we're thinking right now in terms of uh uh you know management team is it's a cmo cmo interesting so you'll stick with your same whoever your cfo is right now they'll they'll take you through ipl you think yes very much so the cfo is one of the highest one of the new hires this year and he's a rock star amazing all right anything you want to touch on offense that i missed before we wrap up no that's it experience insights man that's that's what it's all about all right let's wrap up here famous five number one favorite book uh last time we spoke i gave you uh good uh i actually have to talk about sapiens um different than business books you know that i really like to read i'm really working backwards right now but sapiens is a history of humankind tremendous tremendous number two alfonzo is there a ceo you're following or studying i gave you richard branson last time um you know and i have so many that i follow uh are you following garish at fresh fresh books by chance do you think they're overbooked or fresh work sorry do you think they're overvalued or undervalued on there on the ipo day s1 not following i'm sorry i'm not following them no you know um i would say that uh you know i like i like what ryan smith did with qualtrics i mean he's no longer the ceo but i i admire what he did very much you know he also bootstrapped the business so i would say that he's another guy that i admire number three what's your favorite online tool for building a business i told you about user zoom already besides your own yeah yeah but um uh who do you use to manage your team and you're hiring got so many i mean we're looking for for hiring me for for hr yeah hr stuff do you use like remote.com or anything like that uh we're using namely and we're using workable and a lot of these it's kind of hard for me to pick one i mean i have to say that that you know i i just love to use g you know uh google apps i mean google apps i just keep getting impressed on how well designed they are and how they work on ux and they're also a great customer so there you go there you go all right uh and how many hours of sleep to eat every night yeah i told you about six last time um i still i'm at six but you know i'm trying to get seven at least that's good and still married with two kids yes very much so we're having fun did you have a birthday or you're still 48 um yeah my birthday's on february so i'm still 48. all right very cool and uh last thing you talked about culture being more important than strategy as 20 year old advice last time anything else you'd recommend to your 20 year old self you know i i would stick to that because we're seeing how you know this whole pandemic and what everything is going on in the world uh how important this culture has been you know so i think that i would say um i would say stick to culture um you know as an advice um you know and uh from a leadership perspective you know define define your leadership culture not just your general the company culture but your literature culture i'm learning a lot from the working backwards book and leadership from bet jeff bezos guys here how about alfonso from user zoom they're hoping to ipo next year hopefully to break 100 million dollar run rate in q1 next year caught around 75.80 right now with a healthy 40 50 year over year growth rate they want to define and own the experience inside management space this really means you can start using them even pre-product when you're trying to figure out what to build next along with after you build it making sure you refinance the product that customers want alfonso thank you for taking us to the top thank you for having me have a good one one more thing before you go we have a brand new show every thursday at 1 pm central it's called shark tank for sas we call it deal or bust one founder comes on three hungry buyers they try and do a deal live and the founder shares back end dashboards their expenses their revenue arpu cac ltv you name it they share it and the buyers try and make a deal live it is fun to watch every thursday 1 p.m central additionally remember these recorded founder interviews go live we release them here on youtube every day at 2 p.m central to make sure you don't miss any of that make sure you click the subscribe button below here on youtube the big red button and then click the little bell notification to 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