Webflow Revenue, Valuation & Funding (2024)

hello everyone my guest today is Vlad Magdalene he's a CEO of webflow which he cooked on it with his brother and a close friend while studying 3d animation with with dreams of working for Pixar in art school he fell in love with the power of programming he's now building the company he lives near San Francisco with his wife and two daughters Vlad are you ready to take it to the top let's go all right tell us about the company what do you guys do and how do you make money so webflow is a SAS service it's a web design and publishing company we're basically the power of WordPress and the user interface that Photoshop married together so you can do really complicated marketing websites launch them run them in the production and like have crazy design control over the whole thing and you just more of like a landing page tool for direct marketers or actually at the Squarespace or Weebly or whit's it started as a just the landing page builder but then graduated into full-on web publishing platform so it's way more complex than a Squarespace there are wigs those are for directly for businesses like small small-time businesses like a mom-and-pop shop one more for startups like people who do a lot of content especially like WordPress scale content management scale type of operations interesting and what is the Guinean sense of like what the average customer pays you for a month average customer is about 40 bucks a month so still on the low side a lot of freelancers a lot of our customers are people who make websites for small businesses so instead of paying seven bucks a month or ten bucks a month for Squarespace they'll pay like two to three thousand dollars to a freelancer who pays us to use our software to create a website for them interesting okay so 40 bucks a month and backstory or when did you launch somebody we launched in mid-2013 2013 it wouldn't be scaled to today in terms of total customers we're coming up on 30,000 customers 30,000 away a lot so that's Incredibles 30,000 paying customers and I mean can we multiply that times the 40 you just gave us to kind of back into a revenue number of about what was that 1.2 million a month something like that yes well that's great Navi bootstrap to raise capital so we raised a bit of capital in the last money we raised was in August 2013 right after we got a - I see so we raised about 2.9 million but after that we got profitable cash flow positive and just been kind of funding operations with customer revenue YC Hazzard YC has a rep for a judging judging success based off how much you've raised did you ever feel like you ever had to like fight that urge to go raise capital was it hard for you to tell people in the YC world we're gonna be profitable not raise again yeah it definitely was in the early days and before there was this trend towards bootstrap companies yeah there was a lot of pressure it was actually less from YC and investors and more from our peers that the right thing to do was to raise more capital and you know grow as fast as possible at all costs etc so there was something wrong if you weren't raising constantly but thankfully that's that sort of died down a bit and how do those those our investors that put money and you know many many years ago I mean they must at some point when their funds expire be going now everyone just say they have great investors and they're patient but they have to simple be going and I were gonna steal my money back is he gonna pay me a dividend how's that work right I mean we're gonna cross that bridge when we get there we we converted our investors from convertible notes to preferred stock and then at some point pretty sure we're gonna have different ways to liquidate that's not we're not focusing on that at all we're trying to fill the foundational company we're gonna try to figure out some way to get those companies a return but we haven't adding hadn't had any requests yet it's been five years we'll see we'll see what happens I'm pretty sure we'll have the way that the business is going we'll have multiple options you know Wistia obviously just bought out some of their early investors I mean would you fall potentially that similar path yeah I actually just read something about that potentially I think everything's on the table yes depending depending on what folks are looking for and in terms of return give me a sense of your growth so 1.2 million bucks four months today in revenue 30,000 customers forty bucks a month where were you a year ago July 2017 how much per month I don't know exactly where we're growing roughly 100% of year-over-year so doubling your over here might be shy of that this year yeah but not by too far well get started out to double much bigger numbers right so exactly exactly although we've been we've been maintaining pretty much the same growth rate over the last three years it's kind of thing that we're really focusing on to try to double every year that's great they're big focus yeah I mean look if that's the case that means in July of 2016 you were doing 300 grand a month July 2017 600 grand a month today 1.2 million months that's great growth that's roughly what it was yeah yeah wawk wawk at this price point churn B can become an issue what is your turn today how do you manage it so we have two different profiles of churn we have two different types of plans one is our designer plans which is like pure sass you use the software you export the code that has a higher turn profile anywhere from 4 to 5% a month gross level sure so yeah that's customer churn and then the other side of the business which is much much better in terms of churn is essentially zero net revenue churn where were custom established customers are adding new sites every month as they get new customers and they're adding things like hosting you know custom domain hosting and other other types of hosting plans and those things typically once you set them up they just run forever until you know yeah you switch providers or more often you go out of business or something like that when you take both these cohorts and you look at a year and you look at your net revenue retention you real soon you're north 100% at this point or you not we're actually just flat flatten out it's basically a hundred percent sometimes it's it's negative sometimes it's slightly under 100 percent so but the direction is moving towards getting more in expansion revenue than we lose in kind of customer terms that's what I was interested in at a 40 automatic price point it's very difficult to get net revenue or tension over a hundred percent if you don't have something more you can sell the people give them value how are you thinking about creating additional product offerings to be able to drive land and expanding strategies and Gerti swalot share across one account so we have two different axes on which we get expansion revenues so the main one is adding additional so our customers that the freelancers who pay us they add additional projects almost on a monthly basis as they do new work with with clients as long as they treat web flows sort of their you know go-to tool for managing all their website platforms so a new project means more revenue etc and then each of those projects has a separate axis for features that you know a business might need more collaborators more features like CMS site search we have ecommerce coming up which is gonna be a big one too where each of those projects expands as they get more traffic as they need more storage etc and that becomes like a kind of a natural growth path we wrote with the business and then we also have some some other sort of beside revenue bets where we allow our freelancers to charge their customers a kind of an up charge so we charge 20 bucks for hosting for example but they can actually charge a customer $200 for hosting because they throw in you know like some content changes or whatever it might be and then we get a revenue cut of that difference yep interesting it sounds like you're already thinking about the numerical based pricing axes you can drive expansion on number of seats nothing of storage right these kinds of things you it becomes difficult figure out which ones to price along versus which ones just include for free how do you make those decisions pricing is so hard I think we right now we're getting kind of developing our muscles around good pricing research how to do sensitivity surveys how to figure out which pricing levers are the most efficient ones given the customer profile that we have so it's it's the jury's still out on you know things to determine like for example we're about to release ecommerce and there's so many axes to try to figure out value and cost in terms of like gmv or number of SKUs number of see yeah so so many different things so at some point it comes down to a lot of data some gut feel and a lot of experimentation especially after you land I think it's it's a lot of good a little bit of that's interesting okay good fill up the economics for me so what are you willing to spend to acquire Custer which a fully weighted cat um so we target about three months pay back so so it's a round it's actually a little lower than that our current CAC is about eighty eighty five so we get our money back before before the three months are over but actually the majority of our growth still comes from organic channels so paid is a pretty small part of our strategy we don't have sales yet so we're still I think just like six or nine months ago we started really experimenting with with paid so we're still trying to figure that out because it's it's kind of a it's not quite enterprise it's not quite consumer it's sort of like b2b to see sort of I'm so Oh in in the market is somewhat limited when when you're looking at things like programmatic ad buying etc so we're still trying to figure that stuff out in like more than eighty percent of our customers are still coming through word-of-mouth SEO or things like that and then follow up on that what do you assume lifetime value is in months and dollars on these folks so it's a little over it depends on the profile of the customers because we have a bunch of freelancers so our average LTV is a little north of a thousand dollars but we have some profile customers like team plans or agencies that are much higher than that to where you know a lot more seeds a lot more of a like core court workload for them to have web flow in the middle of all of their kind of marketing operations we even have some startups like hello sign a bunch of other ones that switch their entire marketing team to use web flow in those cases LTV is probably closer you know above the 10k range but it's still like low compared to if we're selling up to enterprises or something like that um but the cohort of like startups and and agencies is still really really small so that's something that's kind of like a side bet for us we still focus primarily on freelancers because they're the ones who end up at agencies they're the ones who end up at product teams they're the ones who end up on enterprise and ends up being quite infectious to where they take their tool of choice to to their next game so sue minimum LTV is a grant maybe other cases it's much tire and what do you assume how many years is that right do you kiss that are two years five years three years uh that's that's shy of three years yeah like two and a half yeah very interesting round out the last questions here before we wrap up team size stay where you're at uh we're at around 65 okay and and everyone in San Fran know we're about 60% remote so many different states many different countries we have about just shy of 20 folks in San Francisco okay 20 good Sam Sann from San Fran remote locations I love it your your I mean I'm doing the math how many 65 people on 1.2 million a month so that's with that 14 for something annually I mean you're that's cranking like a 200 turn $11,000 revenue per employee which is like way above industry average from what we've done which is a result again of your you know don't raise a ton of capital just focus on efficient healthy capital efficient growth yeah that's great that's really good um how do you think how many co-founders brothers just you three myself my brother who runs design and Bryant our CTO who also runs like marketing and growth so it's like the try perfect trifecta I think that's great and how do you when you must think about personal wealth from the company right of course you can increase your salaries when you feel like it's fair and but do you guys do any like team wide dividend sharing kind of things like that or anything like that or no so not yet we haven't done anything at that level either with founders or employees because we just now started to break through to actually having profits yeah time we we had any sort of positive cash flow we always had areas of the business we wanted to pour pour money into so so far it's essentially been break-even not not much money to play with we might potentially in the future consider like dividends or profit sharing or something like that what it kind of following zapier in in like running a profitable business that then gives you more options on paper Olivera wade was on a couple months ago you guys are very similar on paper oh yeah Wade and I are friends way too helped us get into YC didn't we work together very closely with one zapier a lot of our customers are mutual so we just want to build real a business that's gonna be here for decades because it's not something that we built a flip and and that even the the offering that we want to create over time we actually want to empower a much more significant percentage of the world to be able to build software not just websites not just web applications but actually offer a visual way to program and that's you know that's a long journey you don't do that overnight it's a big it's definitely big vision I see if a ring on you're married right yes let me ask you a question you have about 15 million today an AR AR let's say someone comes in and gives you a ridiculous offer right let's say let's say 15 X right I know 15 so let's say it's north of a two hundred three hundred million dollar acquisition offer when you go home and tell your wife that you turn this off or down because of your big visual coding vision like what's the number where she just kills you uh zero percent chance because I've already conditions like we've had those conversations so many times where she would be the first one if I come to her and say like hey we're gonna sell web flow for like a half a billion dollars she's getting to say why not 10 billion really you've got expectations that's a Sarah wait other year that that's gonna be double if you wait another year it might be double that so I love that answer alright let's wrap up here glad with the famous five number one what's your favorite business book leaders eat less my simon Sinek number two is there a CEO you're falling or studying right now honestly used to be Elon Musk but he hasn't been a great role model lately you buy a flamethrower I know even not a flamethrower I'm sorry I met not a flamethrower yeah number three what's your favorite online tool for building a business honestly Google inbox is an awesome productivity tool like it's just kind of changed the game to I handle email but I'd probably have to say air table or notion just for how many things that helps me sold number four how many hours is safety gamer night seven even that's good and what's your situation marry any kiddos yeah yeah you had two kids you know oh my gosh you're full and how old are you I'm 35 35 last question what do you miss your 20 year old self new ah oh I wish I knew to start sleeping more and exercising more earlier I didn't get into that until my 30s and it's just I think I put my body through way too much stress early on guys start sleeping more from Vlad founded the company webflow back in 2013 with two of his friends one of them being his brother now at 65 people really helping you know freelancers build websites the ultimate goal a new way to code a visual way to code it's democratized anybody can do it unlocking so much power for so many people currently about thirty thousand customers paying 40 bucks a month doing 1.2 million per month or about 15 and ARR run rate today that's up 100 percent year-over-year from about 600 grand a monthly recurring revenue in July of 2017 less than 5% gross logo turn on all their cohorts some of their cohorts it's way way better than that cap today about 85 bucks payback period on the on the worst case three months because he's built the thing to be now profitable which I love 65 people based in San Fran and other remote locations only 2.9 million bucks raised I love the ratio there from race capital to a are Vlad you're killing it thanks so much for taking us to the top thanks Nathan