How UserZoom Passed an $80M Run Rate Growing 55% a Year in the Experience Insights Management Space (Interview with Co-Founder and CEO Alfonso de la Nuez)

Introduction and Company Overview

Nathan Latka

00:00Hey, folks. My guest today is Alfonso de la Nuez. 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 $150,000,000 and backed by Silicon Valley investors, Sunstone Capital, and Owl Rock. Alfonso, are you ready to take us to the top?

Alfonso de la Nuez

00:20>> I am. Thank you for having So me

Nathan Latka

00:22hey, real quick, for people that missed our last interview from April where you shared, I believe that you had just passed out an $80,000,000 run rate in a thousand customers, correct?

Alfonso de la Nuez

00:31>> Correct, yeah.

Positioning in the Experience Insights Management Space

Nathan Latka

00:32So 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 in your bio where you used a very specific word, right? Experience insights management platform. Is that what you're trying to brand and own?

Alfonso de la Nuez

00:47>> Correct. Yes, we are. To be honest with you, Experience insights management is a little bit of a visionary 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. There's Momentive, which is the new SurveyMonkey also providing feedback. There's a lot of survey tools out

01:16>> there. And then there is others like UserZoom, which focuses on the product experience. And user research and user experience research usually takes place in the pre production stages, Nathan, which is when you're kind of in the discovery stage when you're designing and you're prototyping and solutioning as we like to call it. And then you need some validation and some testing across all these stages of the life cycle of the product development, product design and development life

01:46>> 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. So we come in with specific methodologies and metrics that provide much more than just a survey, much more than just a feedback mechanism. But 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

02:15>> questions, but tasks. And we record everything they do. So we combine kind of attitudinal and opinions with behavior data and video.

Nathan Latka

02:23Is this a marketplace though? Like, can I, as a SaaS 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?

Alfonso de la Nuez

02:37>> 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, you know, multiple products or properties, digital properties. You can test your properties or you can test any URL, you know, competitors or any other website that is, accessible through a web browser.

How UserZoom Differs from Analytics Tools like Pendo and Hotjar

Nathan Latka

02:59So who do you, like if you take off and you like crush it, like who do you kill? Mean, Pendo go out of business if you do well?

Alfonso de la Nuez

03:06>> No, in fact, Pendo, funny enough, this very morning, we were discussing this, Pendo is a great ally or partner. They're very much specialized in product analytics. They do provide feedback, but it's a very simple feedback. Do you like it or not? But their core business is analytics, product analytics. That's more specialized in the what's going on. We use Pendo by the way. Our product team uses Pendo and uses UserZoom and a bunch of other tools. But

03:36>> that's more analytics and what's happening. The visits, the monthly active users, 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 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 the how they do what they do. So very, very common.

Competitive Landscape and Market Convergence

Nathan Latka

04:03Very much. It is. It feels so like you feel so close to Pendo and you both feel so close to like Hotjar and SmartLook. I wonder why there hasn't been a mass sort of like merger between all of these.

Alfonso de la Nuez

04:15>> It's happening. Nathan, it's happening. Look, is it just, Well, let me tell you. First of all,

04:23>> I consider the whole thing this product experience, digital experience market. I see that as digital product cloud and research insights cloud. That's the category I can see. That's why we call it experience insights management for digital. There are more of what we call passive insights, which is analytics, those that will collect information and data, call data

04:51>> once you're live, once the product is live. And then there's others like including UserZoom that are more active research platforms. These are products that allow you to connect to your users and ask questions and probe them and have conversations. So one is more analytics dealer is user research. And as I said earlier, customer experience is all about feedback management and asking people once you go live. The other one, user experience research is more about design and

05:22>> understanding how to build a digital experience, a digital product. All of these guys right now, all of these vendors, all of these solutions are kind of separated. There's little categories for each, but what's happening in the market, and I can see it happening is that there's going to be convergence. So for instance, Content Square just acquired Hajar. I think the news hit this morning. Then you

05:51>> 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. They don't look at customer experience and user experiences, two different, completely different categories. They actually like to see it as an experience category. You see Qualtrics, which is one of the leaders, if not the leading company is doing brand research and market research, they're also doing product and design research as well. We

06:21>> offer a whole lot of UX tools, UX solutions for user testing and user experience research, but we also offer surveys for more marketers and e commerce and quantitative analysis. So think I what we're seeing is that over time, we're going to see convergence. We're going to see that you're not going to have separate teams working on separate things, but everything is going to be about the experience that end users have.

Nathan Latka

06:49Yep. How much revenue do you think Hotjar had?

Alfonso de la Nuez

06:54>> The press release this morning actually didn't say, they didn't specify the terms of the deal, which kind of leads me to believe that it was a fairly small deal. Don't know, maybe you're wrong, but so don't quote me on that, but clearly under a 100,000,000 likely. Based on what I knew and the fact that Hotjar was much more focused on SMB, I think they probably were somewhere in the 10 to 20,000,000 is my guess.

Nathan Latka

07:21Were you looking at the deal at all?

Alfonso de la Nuez

07:23>> No, no, because Hotjar, again, is analytics. Hotjar would be the basic tool that you need to understand what's happening with your website. So you have Google Analytics, you have Pendo, you have Hotjar doing some things and some behavior with heat maps as well. They wanted to kind of take it to the so called advanced analytics just a little bit more. But they're not really in the user research space the way we are positioned. Again, you're not

07:52>> having direct conversations with users and you're not using Hotjar before it goes live, before the product goes live. That's why we were not looking at People will

Nathan Latka

08:01use you as they're doing product research before they launch the product to do testing.

Alfonso de la Nuez

08:06>> In fact, most of the times, most of the times they'll test with prototypes, with wireframes,

Nathan Latka

08:11That's constant a great sort of way to delineate like pre product versus post product.

Alfonso de la Nuez

08:16>> That's exactly how I explained.

Nathan Latka

08:18Sorry if I didn't explain that more correctly to you or more in detail. I'm just slow.

Alfonso de la Nuez

08:23>> No, that's okay. But 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 used and dedicated and positioned in the pre production stages versus the post production stages. That's one way to

08:44>> look at it.

Nathan Latka

08:45Yep. Yep. Really interesting. Okay. So when you came on, you're doing about four or five months ago, you had done about 6,500,000, I think, in like recognized MRR in April. What are you guys up to now today?

Current Run Rate and Growth Acceleration to 55%

Alfonso de la Nuez

08:57>> I'll give you the basic numbers in terms of run rate and for the year. We're looking at clearly surpassing the $80,000,000 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.

Path to $100M Run Rate and IPO Plans

Nathan Latka

09:19Will you break a $100,000,000

09:21run rate by December?

Alfonso de la Nuez

09:22>> So $8,300,000 of revenue this December?

09:25>> Think we will by, I think we will, well, I mean, run rate maybe, but I think we will be, actually, we will be over 100,000,000 by Q1 is what we're anticipating. Yeah, that would be, I would be surprised if we don't do that.

Nathan Latka

09:36Do you anticipate you getting there by you growing 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?

Alfonso de la Nuez

09:46>> Actually both. It's a great question. And we're talking about both. We need to do both by the way.

Nathan Latka

09:50How do you do both? Aren't those very different paths? Isn't it distracting?

Alfonso de la Nuez

09:54>> Yes, but it's what it takes to scale.

09:59>> We want to go public next year, by the way. So that's our target. 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 a strategy right now, go to market strategy that up until now we've been focusing quite a bit on really expanding our current accounts. I mean, we're seeing some our NRR for instance,

Net Dollar Retention at 125% and Land-and-Expand Strategy

Alfonso de la Nuez

10:19>> I think last time we spoke was 120, we're looking at 125 right now. So we're doing even better in that sense. But we also want to see more companies come in kind of in the starting point or the low end at 12,000 or below per year to come in and start working, maybe doing some basic testing and then upgrade them in the future. It's kind of a land and expand strategy. So we want to see both

10:46>> of those growing like right away today.

Go-to-Market Structure: Enterprise vs. Mid-Market Teams

Nathan Latka

10:52Walk me through how you're actually practically doing that. Do you set up individual teams to focus on the higher volume, lower ARPU and another set to go drive expansion revenue to your biggest accounts? Do. How does it actually look?

Alfonso de la Nuez

11:05>> Well, so it's a different go to market strategy. And so what we did is we have the pricing models and then we have the different products in our case, we actually have even different products. So if you go to our site, you'll see there's a UserZoom Go, which is a former Validately that we acquired two years ago. This was a very simplified, kind of like a light version of our enterprise solution.

11:30>> And it's cheaper, it's more affordable, it's easier to use and it's less feature rich. All those things are there. And so 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 the pricing model. It's still an annual subscription so we still have the same in terms of how we engage with customers, but it's going to be

11:58>> the starting point. And we assign a team of people in marketing as well to work on those opportunities. And then we have the enterprise team that works on higher deal, high value deals. And they often work together, of course. Mean, we're seeing that's actually one of the things that I like the most about and our CRO speaks about this, talk about an escalator. We see that we have a lot of companies that started in UserZoom are

12:23>> actually moving up cause they're maturing or they want more or they want more capabilities, etcetera, etcetera.

Sales Quota and Rep Capacity

Nathan Latka

12:29And you mentioned last time you had 50 quota carrying reps. What is their quota annually? Like most reps, I'm sure there are some that are just starting where their quota is smaller, but when they're full capacity, what is the quota target?

Alfonso de la Nuez

12:41>> I think we're at 1.4. 1.4. So somewhere around that. Yeah.

Nathan Latka

12:47And how do you handle giving your CSM, your customer success managers, 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?

Customer Success and Two-in-a-Box Account Model

Alfonso de la Nuez

12:58>> Yeah, very good question. I'll answer the question telling you where we came from and how we're doing it now. So we used to have a leader in customer success and a leader in sales for new sales. They were both reporting to me. To be honest, they tried really hard, but it 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

13:22>> most of our business is high end, high value, high touch. So what we discovered is that the CSM is more like an account manager and should work together with the account 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 partners to come in and help them in the more of a domain expertise and advisory works. We call

13:49>> this two in a box, the sales guys and the experts. And that's how we set up the accounts. Now we used to have it separate and it didn't work. Now we have it. Everybody's reporting to the CRO. There's account managers that have a quota and they have a book of business and they're responsible for that. They work together with the account executive. Obviously their account managers are quota carrying and the account executive is responsible for the

14:15>> expansion dollars. But they work under the same leader and same culture, same everything. They're not separate teams.

Nathan Latka

14:25Interesting. Talk to me about capital. Have you raised I lost you.

Alfonso de la Nuez

14:28Are you on mute?

14:28>> Oh, nope.

Nathan Latka

14:29Can you still hear me?

14:31Can you hear me now?

Alfonso de la Nuez

14:34>> I believe

Nathan Latka

14:35your AirPods died.

14:40We'll keep shooting the shit.

Alfonso de la Nuez

14:41>> I can get you back. Hold on.

Nathan Latka

14:43While Alfonso is doing that, guys, as they prepare for IPO, I'm curious when he came on last time, he said they raised about a $100,000,000 at a $500,000,000 valuation from their new partners, private equity firm. He's working on the audio right now.

15:00Switch out,

15:02Turn your AirPods off. Can you hear me now?

Capital Raise and EBITDA Generation

Alfonso de la Nuez

15:09>> Bluetooth off.

Nathan Latka

15:15You should be able to hear me, Alfonso, if you turn your AirPods off.

Alfonso de la Nuez

15:19>> There you go.

Nathan Latka

15:20Can you hear me now?

Alfonso de la Nuez

15:20>> I can hear you now.

Nathan Latka

15:22Sometimes if AirPods die in the middle of an interview, happens. No big deal. But my question to you is going to be capitalization wise, is the last $100,000,000 you raised, do you think that's the last you'll need to raise pre IPO or should we expect another round from you in the next six months?

Alfonso de la Nuez

15:36>> One of the things that we did in this last few months since we spoke to you is actually generate more profit and more EBITDA than we needed or we wanted. The reason why is because it's hard to hire and it's hard to hire at the speed that we want. So we actually have more cash than we need or not that we need, but we expected

Balance Sheet, Secondary Sales, and Pre-IPO Funding

Alfonso de la Nuez

15:57>> and we foresee

15:59>> not meeting any additional rounds.

Nathan Latka

16:02Okay, Of that $100,000,000 how much went on the balance sheet? I know a lot of it was secondary.

Alfonso de la Nuez

16:06>> Yeah, know we talked about it 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.

Equity Ownership: Founders, Investors, and Management Team

Nathan Latka

16:14Tell 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 give you about 10% of ZoomInfo. There's others like Aaron at Box, he only own like 2%, right? And then there's some like Eric at one at Zoom who own 35%, 40%. You sold, I believe the majority of the business back in 2015 when you did the $34,000,000 round at a 50,000,000 valuation. How

16:35much equity do you still own and how do you keep your team incentivized with the extra pet partners, financial partners?

Alfonso de la Nuez

16:40>> Yeah, so I can't comment on the very details, I can tell you that between the management team, there's plenty of equity there still to really be a home run here. I mean, the two founders, for instance, together, almost 10%, we have a couple, I mean, there's plenty out there still. I mean, with the right valuation, we could all make some good money.

Nathan Latka

17:07Remind me too, so you were 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?

Alfonso de la Nuez

17:12>> No, no, I'm one of the founders. The other co CEO that I have with me, Dan Fischbeck, he is not a founder. He came in later. He came in in 2015 together with the investor, with a private equity firm. Private equities, sometimes they use this model, some use this model, right? Where some first time CEO like myself, provided someone to help them. And in this case, we gave Dan quite a bit of stock to help with

17:39>> this and it's worked out really well because he's brought a ton of value to the business.

Nathan Latka

17:45Did Sunstone keep any or did Owl Rock buyout all of Sunstone?

Alfonso de la Nuez

17:48>> No, no. Sunstone went from a majority to a minority but they still are actually the biggest shareholder.

Nathan Latka

17:57Sunstone is still the biggest shareholder just on a pure basis.

Alfonso de la Nuez

18:00>> It just went down in terms of the majority to less than 50%.

Nathan Latka

18:03Well, look, I'm not gonna put words in your mouth, but these will sort of be representative. What you're saying is like Sunstone might still own 40 ish percent, which is down from 60% because they sold 20 to Owl Rock. Owl Rock now owns maybe a total of 30. So they own 70 and then the management team and you guys still own like 30, something like that.

Alfonso de la Nuez

18:21>> The management, yeah, the two investors together own close to about 65%. And then the rest is the top management team and employees.

Hiring Priorities and CFO for IPO

Nathan Latka

18:29Is any of that still an employee stock option pool that's unallocated where you're to be bringing on more talent before IPO?

Alfonso de la Nuez

18:36>> The only talent that we're thinking right now in terms of management team is a CMO.

Nathan Latka

18:43CMO, interesting. So you'll stick with your same, whoever your CFO is right now, they'll take you through IPO you think?

Alfonso de la Nuez

18:48>> Yes, very much so. The CFO was one of the hires, one of the new hires this year, and he's a rock star.

Nathan Latka

18:53Amazing. All right. Anything you want to touch on, Alfonso, that I missed before we wrap up?

Alfonso de la Nuez

18:57>> No, that's it. Experience insights, man. That's what it's all about.

Famous Five and Closing Advice

Nathan Latka

19:01All Let's wrap up here. Famous Five, number one, favorite book.

Alfonso de la Nuez

19:05>> Last time we spoke, gave you Good I to actually have to talk about Sapiens. Different than business books that I really like to read, I'm reading working backwards right now, but Sapiens is a history of humankind, tremendous, tremendous.

Nathan Latka

19:22Number two, Alfonso, is there a CEO you're following or studying?

Alfonso de la Nuez

19:26>> I gave you Richard Branson last time,

19:30>> and I have so many that I follow.

Nathan Latka

19:33Are you following Girish at FreshBooks by chance? Do you think they're overbooked or Freshworks? Sorry, do think they're overvalued or undervalued on the IPO day S1?

Alfonso de la Nuez

19:41>> I'm not following, I'm sorry,

19:43>> I'm not following them. I would say that I like what Ryan Smith did with Qualtrics. I mean, he's no longer the CEO, but I admire what he did very much. He also bootstrapped the business. So I would say that he's another guy that I admire.

Nathan Latka

20:00Number three, what's your favorite online tool for building a business?

Alfonso de la Nuez

20:04>> I told you about UserZoom already.

Nathan Latka

20:06Besides your own, yeah.

20:14Who do you use to manage your team in your hiring?

Alfonso de la Nuez

20:17>> Got so many. I mean, we're looking for hiring, you mean for HR?

Nathan Latka

20:22Yeah, HR stuff. Do you use like remote.com or anything like that?

Alfonso de la Nuez

20:25>> We're using Namely and we're using Workable and a lot of these, it's kind of hard for me to pick one. Mean, I have to say that I just love to use Google apps. I mean, Google apps, I just keep getting impressed on how well designed they are and how they work on UX. They're also a great customer.

20:45>> There you go. There you go.

Nathan Latka

20:46Alright. And how many hours of sleep do get every night?

Alfonso de la Nuez

20:50>> I told you about six last time. I still have, I'm at six, but I'm trying to get seven at least.

Nathan Latka

20:56That's good. And still married with two kids?

Alfonso de la Nuez

20:58>> Yes, very much so. We're having fun.

Nathan Latka

21:00Did you have a birthday or you're still 48?

Alfonso de la Nuez

21:03>> Yeah, my birthday is on February, so I'm still 48.

Nathan Latka

21:06All right, very cool. And last thing you talked about culture being more important than strategy as 20 year old advice last time anything else you'd recommend your 20 year old self?

Alfonso de la Nuez

21:16>> I would stick to that because we're seeing how, through this whole pandemic and what everything that's going on in the world, how important this culture has been. So I think that I would say stick to culture as an advice and from a leadership perspective, define your leadership culture, not just your general company culture, but your leadership culture. I'm learning a lot from the Working Backwards book on leadership from Jeff Bezos.

Nathan Latka

21:48Guys, have Alfonso from UserZoom. They're hoping to IPO next year, hoping to break $100,000,000 run rate in Q1 next year. They're caught around 75, 80 right now with a healthy 40%, 50% year over year growth rate. Wanted to find and own the experience insights 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 refine and

22:08build the product that customers want. Alfonso, thank you for taking us to the top.

Alfonso de la Nuez

22:12>> Thank you for having me. Have a good one.

Nathan Latka

22:16One more thing before you go. We have a brand new show every Thursday at 1PM Central. It's called Shark Tank for SaaS. 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 one

22:41p. M. Central. Additionally, remember these recorded founder interviews go live. We release them here on YouTube every day at two 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 make sure you get notifications when we do go live. I wouldn't want you to miss breaking news in the SaaS world, whether it's

23:02an acquisition, a big fundraise, a big sale, a big profitability statement or else. I don't want you to miss it. Additionally, if you want to take this conversation deeper and further, we have by far the largest private Slack community for B2B SaaS founders. You want to get in there. We've probably talked about your tool if you're running a company or your firm if you're investing. You can go in there and quickly search and see what people

23:24are saying. Sign up for that at nathanlatka.com/slack. In the meantime, I'm hanging out with you here on YouTube. I'll be in the comments for the next thirty minutes. Feel free to let me know what you thought about this episode. And if you enjoyed it, click the thumbs up. We get a lot of haters that are mad at how aggressive I am on these shows, I do it so that we can all learn. We have to counter

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Alfonso de la Nuez

23:51>> See you.