How Vanillasoft CEO David Hood grew Vanillasoft to $10M revenue and 650 customers in 2018.

hello everybody my guest today is david hood he's the ceo of vanillasoft a successful software entrepreneur with extensive international experience in finance business development sales and marketing under his leadership vanillasoft has grown over the past decade from a small startup to a leader in the sales engagement market david are you ready to take us to the top we're ready to go all right inside sales it's a hot space tell me how you guys are playing in the space and what's your revenue model how do you make money uh so actually we've been uh we kind of like to say we're the original sales engagement platform so we've been in this since 2005 before it was really well known um and we're completely uh reoccurring revenue model okay got it and and help me understand what you're doing for customers when they pay you what do they get so essentially what we're doing is we're accelerating the sales performance so again we're a bit ahead of our time at the time everyone was using crm uh they thought this was great for managing leads and as more and more studies came out people started realizing that with crm uh leads were decaying they weren't being followed up on they weren't there was no persistency no follow-up so we're really driving that persistency driving that speed to lead driving cadences so it's really about driving activity you're talking appointment setting lead in sales tracking call recording i mean all these kinds of things yeah absolutely what one of the big things we do is we take marketing qualified leads and help turn them into sales qualified leads um and of course with all the marketing automation up there right now everyone's moving into that you're generating tons of these marketing qualified leads people are dumping them into crms and quite honestly they're dying there and this has been seen over and over again walk me through kind of an average customer what will they pay per year per month to get access to this tech you've built so we actually target the small to medium-sized business so our customers do very quite a bit but they'll be paying usually between a thousand dollars um you know up to potentially fifty thousand dollars a month but we have quite a few smaller customers that are around that thousand dollars a month uh that they're paying for their agents to uh to really accelerate their sales performance that's great and what what team size is that typically if i'm paying you a grand a month do i have five people on my inside sales team usually or what actually no we're pretty reasonably priced so that's usually around a six seven eight person sales team so it depends a bit on the options you have got it and how many teams are using you today how many organizations so we have about 650 700 organizations running uh five six thousand seats with us right now oh that's great okay so and by the way that's not like free those are all paid those exactly that's great can i david can i take the 650 times a thousand bucks a month you guys are north of 650 grand a month at this point uh we're actually north of uh 10 million are at this point yes oh very good good good so a little higher acv than average yeah where were you so if you're north of 2010 today so that would be about 800 grand a month where were you exactly a year ago so a year ago we'd have been about uh 30 below that so we're on a good revenue growth good good good yes so 30 year-over-year growth that's healthy there is most that growth coming from expansion revenue or new customer ads altogether uh and you know when it's coming from both so we're growing existing customers but we're also bringing on quite a few new ones and where how are you getting new customers what what is the growth channel so so far actually we've concentrated mostly on driving inbound leads so doing exactly what we're helping a lot of our customers with taking those mql inbound leads turning them into sqls uh we're actually just starting to ramp up our activity more in the outbound there and make sure that everyone's aware of what this type of software can do for them and are you boot-tripping the company have you raised capital we have not raised a lot of capital to date tell you the truth we've probably raised about half a million dollars since the start of the company in 2005 so been very much concentrated on growing it and making sure customers are satisfied and you know sales come with it i love nice organic non-vc funded growth it's the best kind of growth how have you resisted the urge to take capital i'm sure you get the cold emails every day we do although to tell you the truth like i said we're kind of one of the original sales engagement platforms so back in 2005 2006 it was actually hard to explain to people what's the difference between this and crm um it's now a really hot market money's pouring into it but i think the problem with money pours into markets like that is you get actually companies concentrated more and how can they raise money and how can they drive sales and less concentrated on how can they actually deliver value to their customers so quite honestly i think it's been a huge advantage of ours to have had that 2005 to 2012 type of thing where we really concentrated on delivering value to customers supporting them making sure we were getting it right yep i can tell you're committed you're pushing through an interview with you know cough or cold you're a guy that's you say you're going to do something you're going to do it right absolutely i do apologize for the voice i think it's great i listen i'm i'm i'm in awe i think it's wonderful it's a it's a testament to how you live your life so talk to me about your team how many people today so today we have about 50 55 people on the team uh we're growing it pretty rapidly and where is everyone based i actually have two offices we have one out of ottawa canada and another out of plano texas why plano well actually plano was a bit of a happenstance so uh the company started out in new orleans uh 2005. i don't know if you remember what happened in september 2005 but uh we never got back into those offices and wow so that it destroyed i mean katrina totally destroyed you katrina totally took things out thank god it was a sauce company so we didn't lose anything but people dispersed and so the main founder found himself in uh the plano area and there we go interesting okay when did you come into the picture i actually came into the picture so the company kind of started in 2004 developing a product i came into the picture in 2005. and so we actually okay so fairly early absolutely yeah before we had a product out started the canadian operation two months before katrina so actually it was a very very lucky timing interesting very interesting okay good obviously and then again you're obviously casual positive because you're basically bootstrapped correct absolutely yes yeah well do you actually do you operate cash deposit or do you operate right at break even you're reinvesting everything well we have been reinvesting but not enough that uh it stopped some cash from piling up in the bank so that's nice good problem we're in a good situation absolutely very nice feel comfortable good talk to me about churn what's what's revenue term per year so revenue trend for us we actually one of the few companies that runs a monthly contract by the way just to mention that i think most companies really require you to walk into an annual and we're turning at about 1 1.2 so we're actually i i'd hate to say we're coming with it i think no one's happy with any churn but it's actually pretty good for the industry that's per month uh yes exactly that's great and then if you look at expansion right from the same cohort month over month what does that look like expansion wise we tend to slightly grow over the over the longer term period so we're probably up to three percent um monthly on a month-to-month basis and that's uh on on an annual basis it's actually relatively stable month to month okay interesting so three percent expansion annual and if you're turning one point two percent monthly times twelve that's what like fourteen percent churn that's around fourteen percent sure yeah fourteen percent annual turn three percent expansion so net you're at what is that eighty nine percent net revenue retention something like that exactly right around that and then your new customer additions make up for for obviously those shrinking cohorts so absolutely new customers replaces lost revenue and obviously has been powering us to growth is there i mean in in this kind of space i feel like there's got to be you know i call the churn trough there's got to be some point where there's historical cohorts where expansion eventually more than overcomes the churned revenue do you feel like you have pricing axes set up where that can actually happen or no well there's no question as you look forward you keep going the bigger revenue gets as a percentage the more churn you're going to get as gross revenue so you do need to keep increasing sales but i think one of the other things we've done in the last year's really put a lot of effort into starting to implement programs to prevent churning often that's really just detecting are people having trouble using the software are they are they actually using the system 100 so it's all part of that customer service making sure that we're really delivering value to the customers um quite honestly because we're in the small and medium-sized business market our churn tends to be on the smaller side so these are companies that are trying out uh sales activity for the first time quite honestly trying out tools for the first time so some of that churn is simply sales teams disappearing uh but we have customers have been with us since i think the oldest is now...