Interview
How Vtiger Grew to Over 3,000 Customers Without Raising Capital, Spending Under $50,000 on Ads in 13 Years (Interview with CEO Sreenivas Kanumuru)
- Interview Date
- November 16, 2017
- Interviewee
- Sreenivas KanumuruCEO
Company Metrics at Interview Time
Customers (2017)
3,000+
ARPU (2017)
$100 per customer per month
Team Size (2017)
102
Prior Monthly Revenue (late 2016)
$220,000 per month
Bootstrapped
Yes, no outside capital raised
Historical Snapshot
These numbers were reported by Sreenivas Kanumuru during the interview recorded in November 2017 and are a historical snapshot, not current figures. See Vtiger’s current numbers.
Key Takeaways
- 01Vtiger had over 3,000 SMB customers at the time of the interview in 2017
- 02Average revenue per customer was $100 per month
- 03The company was fully bootstrapped with no outside capital raised
- 04Team of 102 people, almost all based in Bangalore with one person in San Francisco
- 05Monthly revenue in late 2016 was approximately $220,000 per month
- 0699% of leads came through inbound channels with less than $50,000 spent on advertising over 13 years
- 07Annual plan customers had approximately 10% annual churn; monthly plan customers saw 3% monthly logo churn
- 08Vtiger started as an open source CRM in 2004 and pivoted to SaaS in 2010
- 09The guest put customer lifetime value at about $1,200, closer to $2,000 for customers who joined in the past year, and said he needed to run the numbers again
- 10LTV to CAC ratio was approximately 4 to 1 according to the guest
Company Metrics at Time of Interview
| Metric | Value | Source |
|---|---|---|
| Customers (2017) | 3,000+ | Interview, Nov 2017 |
| ARPU (2017) | $100 per customer per month | Interview, Nov 2017 |
| Team Size (2017) | 102 | Interview, Nov 2017 |
| Prior Monthly Revenue (late 2016) | $220,000 per month | Interview, Nov 2017 |
| Annual Churn (Annual Plan Customers) (2017) | 10% | Interview, Nov 2017 |
| Monthly Logo Churn (Monthly Plan Customers) (2017) | 3% | Interview, Nov 2017 |
| Customer Lifetime Value (2017) | About $1,200 | Interview, Nov 2017 |
| LTV to CAC Ratio (2017) | 4 to 1 | Interview, Nov 2017 |
| Total Advertising Spend (lifetime) (2004 to 2017) | Less than $50,000 | Interview, Nov 2017 |
| Year Founded | 2004 | Interview, Nov 2017 |
| SaaS Pivot Year | 2010 | Interview, Nov 2017 |
Growth Breakdown
Revenue
Asked what Vtiger was doing a year before the interview, in late 2016, the guest said it was about $220,000, which he confirmed was per month. He did not state a revenue figure for the time of the interview itself.
Customers
By the time of the interview in 2017, Vtiger had grown to just over 3,000 SMB customers. Customers paid about $100 per month on average, and the guest noted that the average customer size had been growing more recently with larger accounts coming in.
Team
Vtiger employed 102 people at the time of the interview, almost all based in Bangalore, India, with one person in San Francisco. The company described itself as engineering-driven, with product management and product marketing roles being added more recently.
Funding and Profitability
Vtiger had raised no outside capital and had been bootstrapped since its founding. The guest noted the company became profitable within a couple of years of starting, around 2006, initially through large on-premise customization contracts before pivoting to SaaS in 2010.
Growth Strategy
Inbound Lead Generation
According to the guest, 99% of Vtiger's leads came through inbound channels. The company spent less than $50,000 on advertising over its entire 13-year history, which the guest called "kind of a weakness."
Open Source to SaaS Pivot
Vtiger began as an open source CRM in 2004, attracting large customers like Nokia who paid for on-premise customization. In 2010, the company pivoted to a SaaS subscription model, which became the foundation for scalable recurring revenue.
SMB Focus Across Marketing, Sales, and Support
The company concentrated on front-office functions for small and medium businesses, covering marketing campaigns, sales opportunities, and support help desk cases within a single CRM platform.
Customer Activation Through Communication Channels
The guest described a clear onboarding goal: get new customers to connect their email and import contacts into the CRM within the first week. Once communication channels were live, customers were considered sticky. Appointment pages for salespeople were another key activation step.
Expanding into Product Marketing
At the time of the interview, Vtiger was beginning to hire product marketing managers for each of its core product areas. The guest acknowledged the company had been late to marketing and had not yet tapped the advertising and lead-generation programs, such as webinars, that other CRM companies used.
Best Quotes
“vtiger is actually a SaaS based CRM player, and we started out back in 2004. So Vtiger actually started out as an open source project. And in around 2010, we shifted to the SaaS business model, and most of our customer base is SMBs”
“$100 per customer.”
“We are a little over 3,000 customers.”
“We did not raise any capital.”
“So most of our leads come through inbound channel ... it's 99% of our leads. So we have very limited, I mean, overall advertising budget for the last fifteen years or maybe thirteen years is actually less than $50,000”
“if you are coming to that lifetime versus CAC, I think we are between four and five. So basically about four is to one.”
“Today it's about $1,200”
“within a couple of years, we were profitable. So early on in the vtiger, we had customers, larger customers like Nokia”
“we have annual plans that are geared towards a little more higher. So in fact, more recently, we are seeing larger customers coming into play, and we have the average size of the customer is actually growing.”
What Happened Next
At the time of this November 2017 interview, Vtiger had a little over 3,000 customers, mostly SMBs, and a team of about 102 people, almost all in Bangalore. It had raised no outside capital, and 99% of its leads came inbound. The guest said the company was starting to bring in product marketing managers, feeling it was "a little late to that marketing game." Visit the Vtiger company profile for current figures.
View Vtiger’s current profile and metricsFull Transcript
Chapters
- 0:00Introduction and Background
- 0:31Why Tony Left Zoho and Vtiger's Origins
- 1:55What Vtiger Does and How It Makes Money
- 2:56Pricing and Subscription Plans
- 3:17From Open Source to SaaS: The 2010 Pivot
- 3:42Early Profitability and Open-Source Customers Like Nokia
- 4:33Customer Count and Bootstrapping
- 5:13Late-2016 Revenue and Churn
- 5:55Customer Stickiness and Onboarding
- 7:20Customer Acquisition and Inbound Marketing
- 8:06LTV, CAC, and Unit Economics
- 12:27Team Size and Location
- 12:48Famous Five: Books, CEOs, Tools, and Life
Introduction and Background
Nathan Latka
00:00Hello, everyone. My guest today is Sreenivas Kanumuru. He is the founder of a company called vtiger. He is from South India, studied at many different universities, and worked at AT&T for two years. In 1995, he joined Tony Thomas shortly after he founded Zoho Corporation. And in 2004, he then followed Tony when he launched another startup, which transformed to become vtiger in 2007. He's been the CEO of vtiger since 2008. Sreenivas, are you ready to
00:29take us to the top?
Sreenivas Kanumuru
00:30Yes, sir.
Why Tony Left Zoho and Vtiger's Origins
Nathan Latka
00:31So update us. Everybody, I think, probably knows Zoho. Why did Tony leave Zoho? And why did you say, I'm going to ride this Tony guy. He's a smart dude.
Sreenivas Kanumuru
00:41Oh, yeah. So Tony and I, we... I first met Tony in 1995 when we were working together at AT&T, and then he started Zoho Corp. At that time, it was called as AdventNet Network Management. It was AdventNet actually. So I guess everybody knows Zoho from the online SaaS, as an online SaaS player, but the roots were back in network management. And so Tony started it out, and then I joined him in the first year,
01:13and then so I think we continued until about 2004, and Tony actually in his heart he is an engineer, and so he has been and even today to this day, he still spends about I think 6 to 8 hours of his time doing coding. And he has been involved in many things, so he wanted to hand it over to Sridhar Vembu, who is the CEO of Zoho Corp, and he wanted to start something on a new
01:44thing, and so that's when I also had each to do something, and then I joined him a little later, and so that's the maybe I'm kind of going on and on, so please catch me here.
What Vtiger Does and How It Makes Money
Nathan Latka
01:55So what vtiger and how do you make money?
Sreenivas Kanumuru
01:59Yeah. So vtiger is actually a SaaS based CRM player, and we started out back in 2004. So Vtiger actually started out as an open source project. And in around 2010, we shifted to the SaaS business model, and most of our customer base is SMBs, and we actually have a kind of our mission is to really enable and empower people to thrive. And when we say people, we are kind of more focused on the front office
02:34players in businesses, and within SMBs, people who are working with customers from marketing to sales to support. And we are very much focused on those three functions, and trying to see how we can really make their business work more exciting and make it more interesting for them and provide something in terms of data and other things to make.
Pricing and Subscription Plans
Nathan Latka
02:56So Sreenivas, what's the average customer, would you say, paying you per month now?
Sreenivas Kanumuru
03:00We have about $100 per user.
Nathan Latka
03:03Okay.
Sreenivas Kanumuru
03:03And... I mean, dollars per customer, I would say.
Nathan Latka
03:06Say that again.
Sreenivas Kanumuru
03:08$100 per customer.
Nathan Latka
03:09Yep. $100 per customer. And they can sign up monthly or do they have to do annual?
Sreenivas Kanumuru
03:14They can do monthly, and we also have an annual plan.
From Open Source to SaaS: The 2010 Pivot
Nathan Latka
03:17Okay. And then you just gave us some of the backstory, and forgive me, you said 2004 or 2014 was your start date?
Sreenivas Kanumuru
03:252004 is when vtiger started as a open source CRM product. And in 2010, we started the SaaS business model. So in fact, that was the interesting pivot we could... We kind of repivoted to the SaaS based model from the old open source based business model.
Early Profitability and Open-Source Customers Like Nokia
Nathan Latka
03:42How did you support yourself in terms of, like, paying a salary and building a team between 2004 and 2014?
Sreenivas Kanumuru
03:48Yeah. In fact, interestingly, within a couple of years, we were profitable. So early on in the vtiger, we had customers, larger customers like Nokia and
Nathan Latka
03:58Even when it was open source?
Sreenivas Kanumuru
04:00Yeah, in fact, when it was open source, we had customers who were using it on premise, and they were engaging with us to customize it, and that was where we were getting kind of big, large pieces of money to customize it, and it was actually working out great, and we were profitable, and within a couple of years from 2006 onwards, it was self sustained. But then we realized about 80% of the work we were doing was
04:26kind of going into for that customer and for this customer and for that customer and we
Nathan Latka
04:26yep.
Sreenivas Kanumuru
04:26Did not
Customer Count and Bootstrapping
Nathan Latka
04:33And now what are you at today in terms of total customers?
Sreenivas Kanumuru
04:36Sorry. I didn't
Nathan Latka
04:37What are at today in terms of total customers?
Sreenivas Kanumuru
04:39We are a little over 3,000 customers.
Nathan Latka
04:41Okay. 3,000 customers. And so can I take 3,000 customers times a $100 per month? You guys are doing about $300,000 per month right now? Yeah. That's accurate? And are you bootstrapped or have you guys raised capital?
Sreenivas Kanumuru
04:54We did not raise any capital.
Nathan Latka
04:56Bootstrapped. Congratulations. That's exciting.
Sreenivas Kanumuru
04:59Thank you. Thank you. Yeah. So it certainly gives a little more freedom, and I think we can keep going. But I guess there are... I've seen a lot of companies that are thriving with VC funding and all. So this is just a model we chose.
Late-2016 Revenue and Churn
Nathan Latka
05:13And help us understand how kind of quickly you're growing. Currently, you're doing $300,000 per month in revenue. Back a year ago, late twenty sixteen, what were you doing then?
Sreenivas Kanumuru
05:23We were about $220,000
Nathan Latka
05:26Per month?
Sreenivas Kanumuru
05:26Yes.
Nathan Latka
05:26Got it. So that's good growth. And one of the issues companies have in the SMB space is churn. What does your churn look like annually?
Sreenivas Kanumuru
05:37Annually, I mean, the customers who are on annual plan, we have about, I would say, 10% churn. But whereas with the customers with monthly plan is when we have a little more churn. So we actually see like two to 3% churn.
Nathan Latka
05:51Okay. That's a logo churn or revenue churn monthly?
Sreenivas Kanumuru
05:54That's a logo churn.
Customer Stickiness and Onboarding
Nathan Latka
05:55A 3% logo churn monthly. I see. Are some of the... So with a CRM, we've had a lot of folks running CRMs on the show, and they all have different things that they know they have to get a new customer to do in the first week to make that customer sticky. What do they have to do on vtiger so that you know they get sticky?
Sreenivas Kanumuru
06:21Yeah, it starts off with the communication channels. So the communication channels with their customers, like emails, getting their emails into the CRM and making sure that they're able to... Obviously, it starts off with importing their contacts and all, but then when customers send them emails, they can get them into CRM, then we know, okay, they are actually starting to use the basic communication channels. And I think in the end, CRM has probably about four key pieces.
06:47If it has both marketing, sales and support, you have marketing campaigns, you have opportunities, and you have cases for the support help desk system. So if you can really get the emails going, then we have the other things taken care of. And there are other things like appointment pages. So if you have... If a salesperson is using a CRM, most of the time, one of the key things is to make sure salesperson's calendar and the meetings
07:12are all in the CRM. And for that, have things like appointment pages in vtiger, and so we want them to set up those appointment pages.
Customer Acquisition and Inbound Marketing
Nathan Latka
07:20I see. Walk me through how you're driving customer growth. What are you spending currently to acquire a customer?
Sreenivas Kanumuru
07:27So right now, in fact, ours... So one of the things that is interesting about vtiger is we have... And it's kind of a weakness also is that we have not really done much of marketing in terms of advertising and all. So most of our leads come through inbound channel, when and I say most, it's 99% of our leads. So we have very limited, I mean, overall advertising budget for the last fifteen years or maybe thirteen years
07:54is actually less than $50,000
Nathan Latka
07:56So you spent over the past twelve months less than $50,000 on paid stuff?
Sreenivas Kanumuru
08:01When I say... No, actually it's over the last fifteen years.
Nathan Latka
08:04Got it.
Sreenivas Kanumuru
08:04Last thirteen years.
LTV, CAC, and Unit Economics
Nathan Latka
08:06Is your fully weighted CAC? In other words, do you have team members dedicated to onboarding support and sales?
Sreenivas Kanumuru
08:13Yes. So the sales plus marketing, we have some members in our sales team and we have a few members in our marketing team. So overall, I would say, I think if you are coming to that lifetime versus CAC, I think we are between four and five. So basically about four is to one.
Nathan Latka
08:33Yeah. And what do you assume lifetime value is in terms of dollars on your customers?
Sreenivas Kanumuru
08:37Today it's about $1,200
Nathan Latka
08:371,200?
Sreenivas Kanumuru
08:37Yes.
Nathan Latka
08:41Okay. And so that is four times what you're spending on fully weighted CAC. Is that what you just said?
Sreenivas Kanumuru
08:47That's right.
Nathan Latka
08:48So you're spending fully weighted about $300 to acquire a $100 per month customer who is worth about $1,200 for you, meaning you recover your CAC in about three months, which is pretty quick.
Sreenivas Kanumuru
09:00That's right. Yeah.
Nathan Latka
09:01That's great. So why not be more aggressive with CAC if you recover the money so quick?
Sreenivas Kanumuru
09:07Yeah. In fact, that is something we have... We have been a very engineering driven company, and I myself focus most of my time on engineering, and now I'm trying to get that help from others. So we have kind of brought in product management, and we are now starting to bring in product marketing managers for each one of these areas like marketing, sales and support areas within the product. Yeah. And we are... I think there are a
09:30lot of things that we have not done that we should be doing, and we have... We just figured that and I think we are a little late to that marketing game where I see a lot of other CRM companies that are doing great in terms of getting leads and all, mainly through advertising and lead gen programs like webinars and all that, and we have not really tapped those things yet. So we have been focused on just
09:52getting the product.
Nathan Latka
09:53That's a good focus. Real quick, if I take your churn monthly, which you said is 3%, and I do one divided by 0.03, that gives me thirty three months that the average customer is going to stay with you. They pay you, you said earlier, about a 100 per month. So a 100 times 33 months is about $3,300 in lifetime value. You told me you assume lifetime value is less than half that of 1,200. Why?
Sreenivas Kanumuru
10:19So we have actually with the mix of annual plus the monthly customers, and we have annual plans that are geared towards a little more higher. So in fact, more recently, we are seeing larger customers coming into play, and we have the average size of the customer is actually growing. When I actually mentioned that the 2% to 3%, so in fact, so the churn could be a little more than 3%, I think it's maybe 3% to 4%
10:47monthly. So I think the overall lifetime value, we are actually seeing that growing with larger customers coming now. So that number is a little closer to the 2,000 thing, I think, if you look at customers that have come in the last one year.
Nathan Latka
11:01No, but my question is, the arguments you just laid out would argue for a higher lifetime value. Like currently, even with 4% monthly churn, that means the average customer stays with you for twenty five months at $100 a month. That's $2,500 in lifetime value. You told me though a few minutes ago, you assume lifetime value is 1,200. Why do you assume it's so little?
Sreenivas Kanumuru
11:24Yeah.
11:28With the lifetime value, we are actually looking at specifically the monthly customers that I mentioned. So those I see the 3% is what I can see is the for monthly customers, monthly plans, I'm seeing that it is actually 3%. So we do see I think a very high churn when it comes to monthly
Nathan Latka
11:48It's much higher than 3%?
Sreenivas Kanumuru
11:51No, no. 3% is what we see for monthly.
Nathan Latka
11:53Okay. Yeah. If you have 3% monthly churn though, and you divide one divided by 0.03, that gives you almost a thirty three month. Yeah, yeah, times a 100 gives you $3,300 in lifetime value. But you told me it's 1,200. I'm trying to figure out why there's that gap.
12:10Do you multiply that $3,300 times your gross margin to get a gross margin LTV?
Sreenivas Kanumuru
12:17No, no. So I'm... I'll need to run the numbers again. So I feel there is probably a difference in the annual and monthly plan. So I need to run that.
Team Size and Location
Nathan Latka
12:27Hey, the good news is you're conservative. At least you're not saying your optimism is way higher than what it actually is. You'd rather be too low, right? So that's a good thing. What's your team size today?
Sreenivas Kanumuru
12:37We are 100 and... Yeah, 100 plus, about 102.
Nathan Latka
12:40102 people. And where are guys all based?
Sreenivas Kanumuru
12:43In... So almost all of them in Bangalore, and we have one person in San Francisco.
Famous Five: Books, CEOs, Tools, and Life
Nathan Latka
12:48Bangalore. Very good. Alright. Let's wrap up here, Sreenivas, with the famous five. Number one, what's your favorite business book?
Sreenivas Kanumuru
12:58I like The Cathedral and the Bazaar by Eric Raymond. He's actually more of a software
Nathan Latka
13:02What is it again?
Sreenivas Kanumuru
13:04Cathedral and the Bazaar.
Nathan Latka
13:06Okay. What was the first word?
Sreenivas Kanumuru
13:10The cathedral, sorry.
Nathan Latka
13:11Oh, the cathedral and the bazaar.
Sreenivas Kanumuru
13:13And there's, I mean, in the business book, I like The 4 Disciplines of Execution. That's nice.
Nathan Latka
13:18Number two, is there a CEO you're following or studying?
Sreenivas Kanumuru
13:22Not one in particular, but I recently heard the Patagonia CEO, so Yvon Chouinard, so that I certainly like some of these things. But I don't follow one CEO in particular.
Nathan Latka
13:35Number three, besides your own, is there a favorite online tool you have?
Sreenivas Kanumuru
13:39I like Flipboard. I like NPR One, the... To listen to a lot of podcasts.
Nathan Latka
13:44Yep. NPR One is a good one.
13:45Number four, how many hours of sleep do get every night?
Sreenivas Kanumuru
13:49I get about six hours.
Nathan Latka
13:50And what's your situation? Married, single, do you have kids?
Sreenivas Kanumuru
13:54Married with two kids.
Nathan Latka
13:55Two kids. And how old are you?
Sreenivas Kanumuru
13:57I am 45.
Nathan Latka
13:5945. All right, Sreenivas, take us home here. Take us back twenty five years. What do you wish your 20 year old self knew?
Sreenivas Kanumuru
14:06I would say maybe travel more. I think you might meet more people by traveling more.
Nathan Latka
14:13There you guys have it from Sreenivas, Founder of Vtiger with Tony, the former c... Well, the founder and former CEO of Zoho. They've grown the company really on an open source basis for the first, you know, many, many years of the company. Now it's really SaaS. They have over 3,000 customers paying a $100 per month in December 2016, so about twelve months ago, doing two twenty grand a month in revenue. They've grown that to about
14:37$300,000 in monthly revenue, so healthy growth. They have a churn of just 3% per month, which is pretty healthy actually in the SMB space. CAC is $300, which they recover in three months and assume lifetime value of $1,200. Again, as their team of 102 people in Bangalore build this tool to help folks manage and grow their CRMs and their customer relationships faster and more efficiently. Sreenivas, thank you so much for taking us to the top.
Sreenivas Kanumuru
15:03Thank you, Nathan. Thanks for taking the time. I appreciate it.