How Webflow Reached Nearly 30,000 Customers and 100% Year-Over-Year Growth (Interview with Vlad Magdalin)

Introducing Vlad Magdalin of Webflow

Nathan Latka

00:00Hello everyone. My guest today is Vlad Magdalin. He's the CEO of Webflow, which he co founded with his brother and a close friend. While studying 3D animation with dreams of working for Pixar in art school, he fell in love with the power of programming. He's now building the company and lives near San Francisco with his wife and two daughters. Vlad, are you ready to take us to the top?

Vlad Magdalin

00:19>> Let's go.

Nathan Latka

00:20Alright. Tell us about the company. What do you guys do and how do you make money?

Product Overview: Web Design and Publishing Platform

Vlad Magdalin

00:23>> So Webflow is a SaaS service. It's a web design and publishing company. We're basically the power of WordPress and the user interface of Photoshop married together. So you can do really complicated marketing websites, launch them, run them in production and like have crazy design control over the whole thing.

Nathan Latka

00:42And you see this more of like a landing page tool for direct marketers or actually like a Squarespace or a Weebly or Wix?

Vlad Magdalin

00:48>> It started as just a landing page builder, but then graduated into full on web publishing platform. So it's way more complex than a Squarespace or Wix. Those are for... Directly for businesses, like small small time businesses like a mom and pop shop. We're more for startups, like people who do a lot of content, especially like WordPress scale, content management scale type of operations.

Nathan Latka

01:12Interesting. What is the... Give me a sense of like what the average customer pays you per month.

Average Customer and Pricing

Vlad Magdalin

01:16>> Average customer is about $40 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 $7 a month or $10 a month for Squarespace, they'll pay like 2,000 to $3,000 to a freelancer who pays us to use our software to create a website for them.

Nathan Latka

01:36Interesting. Okay. So $40 a month. And backstory here, when did you launch the company?

Company Launch and Customer Count

Vlad Magdalin

01:40>> We launched in mid twenty thirteen.

Nathan Latka

01:432013. And what have you scaled to today in terms of total customers?

Vlad Magdalin

01:46>> We're coming up on 30,000 customers.

Nathan Latka

01:4830,000? That's incredible. It's 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 1,200,000 a month?

Vlad Magdalin

01:58>> Something like that. That's great.

Nathan Latka

02:01Now have you bootstrapped or raised capital?

Funding History and Path to Profitability

Vlad Magdalin

02:03>> So we raised a bit of capital in... The last money we raised was in August 2013, right after we got out of YC. So we raised about 2,900,000. But after that, we got profitable, cash flow positive, and just been

02:16>> kind of funding operations with customer revenue.

Nathan Latka

02:18YC has a rep for really judging success based off how much you've raised. Did you ever feel like you ever had to fight that urge to go raise capital? Was it hard for you to tell people in the YC world we're gonna be profitable and not raise again?

Pressure to Raise vs. Staying Profitable

Vlad Magdalin

02:32>> Yeah, definitely it was in the early days before there was this trend towards bootstrap companies. 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 grow as fast as possible at all costs, etcetera. So there was something wrong if you weren't raising constantly. But thankfully that's sort of died down a bit.

Nathan Latka

02:55And how do those investors that put money in many, many years ago, I mean, they must at some point when their funds expire, be going. Now everyone's gonna say they have great investors and they're patient, but they have to at some point be going, am I ever gonna get my money back? Is he gonna pay me a dividend? How's that work?

Vlad Magdalin

03:08>> 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, I'm pretty sure we're gonna have different ways to to liquidate. That's not... We're not focusing on that at all. We're trying to build the foundational company. We're going to try to figure out some way to get those companies a return. But we hadn't had any requests yet. It's been five

03:33>> years. We'll see what happens. I'm pretty sure we'll have the way that the business is going. We'll have multiple options.

Nathan Latka

03:40You know, Wistia obviously just bought out some of their early investors. I mean, would you follow potentially that similar path?

Vlad Magdalin

03:46>> Yeah. I actually just read something about that.

03:50>> Potentially, I think everything's on the table. Just depending on what folks are looking for in terms of return.

Nathan Latka

03:56Give me a sense of your growth. So $1,200,000 per month today in revenue, 30,000 customers, $40 a month. Where were you a year ago? July 2017, how much per month?

Growth Rate: 100% Year Over Year

Vlad Magdalin

04:04>> I don't know exactly. We're growing roughly a 100% year over year. So doubling year over year. We might be shy of that this year.

Nathan Latka

04:13Yeah.

Vlad Magdalin

04:14>> But not by too far.

Nathan Latka

04:15Well, it gets hard double much bigger numbers, right?

Vlad Magdalin

04:20>> Exactly. Although we've been maintaining pretty much the same growth rate over the last three years. It's something that we're really focusing on to try to double every year.

Nathan Latka

04:30That's great.

Vlad Magdalin

04:30>> That's a big focus.

Nathan Latka

04:31Yeah. Mean, look, if that's the case, that means in July 2016, you were doing $300,000 a month. July 2017, $600,000 a month. Today, 1,200,000 a month. That's great growth.

Vlad Magdalin

04:40>> That's roughly what it was. Yeah.

Nathan Latka

04:41Yeah. And at this price point, churn can become an issue. What is your churn today and how do you manage it?

Churn: Two Customer Profiles

Vlad Magdalin

04:47>> So we have two different profiles of churn. We have two different types of plans. One is our designer plans, which is like pure SaaS. You use the software, you export the code. That has a higher churn profile, anywhere from four to 5% a month.

Nathan Latka

05:00Gross level churn?

Vlad Magdalin

05:02>> Yeah. That's customer churn. And then the other side of the business, is much much better in terms of churn, is essentially zero net revenue churn where established customers are adding new sites every month as they get new customers. And they're adding things like hosting, custom domain hosting, other types of hosting plans. And those things typically once you set them up, they just run forever until switch providers or more often you go out of business or something

05:33>> like that.

Nathan Latka

05:34When you take both these cohorts and you look at them in a year and you look at your net revenue retention year over year, I assume you're north of a 100% at this point or are you not?

Net Revenue Retention and Expansion Strategy

Vlad Magdalin

05:43>> We're actually just flat It's right it's it's basically a 100%. Sometimes it's it's a net negative. Sometimes it's slightly under a 100%. So... But the direction is moving towards getting more in expansion revenue than we lose in kind of customer churn.

Nathan Latka

06:01That's what I was interested in. At a $40 month price point, it's very difficult to get net revenue retention over a 100% if you don't have something more you can sell to people, give them value. How are you thinking about creating additional product offerings to be able to drive land and expand strategies increase wallet share across one account?

Vlad Magdalin

06:17>> So we have two different axes on which we get expansion revenue. So the main one is adding additional... So our customers, the freelancers who pay us, they add additional projects almost on a monthly basis as they do new work with clients, long as they treat Webflow as sort of their, you know, go to tool for managing all their web design platforms. So a new project means more revenue, etcetera. And then each of those projects has a

06:44>> 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, to where each of those projects expands as they get more traffic, as they need more storage, etcetera. And that becomes like a... Kind of like a natural growth path we grow with the business. And then we also have some other sort of side revenue bets where we

07:13>> allow our freelancers to charge their customers a

07:18>> kind of an upcharge. So we charge $20 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.

Nathan Latka

07:33Yep. Interesting. It sounds like you're already thinking about numerical based pricing axes. You can drive expansion on number of seats, storage, right? Like these kinds It of

07:47becomes difficult to figure out which ones to price along versus which ones just include for free. How do you make those decisions?

Vlad Magdalin

07:54>> 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 the jury's still out on 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... You're talking

Nathan Latka

08:25like GMV or number of SKUs, So number of

Vlad Magdalin

08:29>> 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.

Nathan Latka

08:38I think it's a lot of gut, a little bit of data.

Vlad Magdalin

08:43>> There you go.

Nathan Latka

08:44That's interesting. Okay, good. Fill up the economics for me. So what are you willing to spend to acquire a customer? What's your fully weighted CAC?

CAC, Payback Period, and Organic Growth

Vlad Magdalin

08:52>> So we target about three months payback. So it's actually a little lower than that. Our current CAC is about eighty, eighty five. So we get our money back 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 paid.

09:21>> So we're still trying to figure that out because it's kind of a, it's not quite enterprise, it's not quite consumer, it's sort of like B2B2C sort of.

09:31>> So, and the market is somewhat limited when you're looking at things like programmatic ad buying, etcetera. So, we're still trying to figure that stuff out. And like more than 80% of our customers are still coming through word-of-mouth, SEO, things like that.

Nathan Latka

09:45And then follow-up on that. What do you assume lifetime value is in months and dollars on these folks?

LTV by Customer Segment

Vlad Magdalin

09:51>> So it's a little over, it depends on the profile of the customer because we have a bunch of freelancers. Our average LTV is a little north of a thousand dollars. But we have some profile of customers like team plans or agencies that are much higher than that to where, you know, a lot more seats, a lot more of a, like, core workflow for them to have Webflow in the middle of all of their marketing operations. We

10:17>> even have some startups like HelloSign, a bunch of other ones that switch their entire marketing team to use Webflow. 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. But the cohort of like startups 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

10:46>> 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 their next gig.

Nathan Latka

10:59So assume minimum LTV is a grand, maybe other cases it's much higher. And what do you assume? How many years is that, right? Do you consider two years, five years, three years?

Vlad Magdalin

11:07>> That's shy of three years. So it's like two and a half.

Nathan Latka

11:12Yeah. Interesting. Round out last question before we wrap up team size today, where are you at?

Team Size and Remote Work Setup

Vlad Magdalin

11:17>> We're at around 65.

Nathan Latka

11:21Okay. And everyone in San Fran?

Vlad Magdalin

11:24>> No, we're about 60 remote. So many different states, many different countries. We have about just shy of 20 folks in San Francisco.

Nathan Latka

11:32Okay. 20 good at San Fran remote locations. I love it. I mean, I'm doing the math. I mean, 65 people on 1,200,000 a month. So that's what that 14.4 or something annually. I mean, that's cranking like a $221,000 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 healthy, capital efficient growth.

Vlad Magdalin

11:55>> Yep.

Nathan Latka

11:56That's great. That's really good. How do you think... How many co founders are there? Is it just you?

Vlad Magdalin

12:00>> Three. Myself, my brother who runs design, and Brian, our CTO, who also runs like marketing and growth. So it's like the perfect trifecta, I think.

Nathan Latka

12:11That's great. And and how do you... When you guys 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?

Profitability and Future Plans for Profit Sharing

Vlad Magdalin

12:25>> 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.

Nathan Latka

12:34Yep.

Vlad Magdalin

12:34>> Because anytime we had any sort of positive cash flow, we always had areas of the business we wanted to pour money into. So, so far it's essentially been breakeven, not much money to play with. We might potentially in the future consider like dividends or profit sharing or something like that. We're kind of following Zapier in

12:56>> running a profitable business that then gives you more options.

Nathan Latka

13:00Guys very, on paper look very... Wade was on a couple of months ago. You guys look very similar on paper.

Long-Term Vision: Visual Way to Program

Vlad Magdalin

13:05>> Oh yeah. Wade and I are friends. Wade helped us get into YC. And we work together very closely with Zapier. A lot of our customers are mutual. So we just wanna build a really solid business that's gonna be here for decades because it's not something that we've built to flip. Even 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

13:31>> 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.

Nathan Latka

13:40Yeah. It's a big... It's definitely a big vision. I see you have a ring on. You're married, right?

Vlad Magdalin

13:44>> Yes.

Nathan Latka

13:44So let me ask you a question. You have about 15,000,000 today in ARR. Let's say someone comes in and gives you a ridiculous offer. Let's 15x, On your 15. So let's say it's north of a $200,000,000 to $300,000,000 acquisition offer. When you go home and tell your wife that you turn this offer down because of your big visual coding vision, like what's the number where she just kills you?

Vlad Magdalin

14:07>> 0% chance because I've already conditioned, 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 Webflow for like a $500,000,000. She's gonna say, why not 10,000,000,000?

Nathan Latka

14:20Really? That's good.

Vlad Magdalin

14:21>> You've you've can... You've that in her head the right way.

Nathan Latka

14:23Expectations that. Exactly.

Vlad Magdalin

14:25>> That's hysterical.

14:26>> If you wait another year, that that's going to be double. If you wait another year, it might be double that.

Famous Five Rapid-Fire Questions

Nathan Latka

14:31I love that answer. All right, let's wrap up here, Vlad, with the famous five. Number one, what's your favorite business book?

Vlad Magdalin

14:37>> Leaders Eat Last by Simon Sinek.

Nathan Latka

14:40Number two, is there a CEO you're following or studying right now?

Vlad Magdalin

14:44>> Honestly, used to be Elon Musk, but he hasn't been a great role model lately.

Nathan Latka

14:49A little tougher, right? Yeah. Did you buy a flamethrower?

Vlad Magdalin

14:54>> No, you mean not a flamethrower.

Nathan Latka

14:56Sorry, I meant not a flamethrower. Yeah. Number three, what's your favorite online tool for building a business?

Vlad Magdalin

15:03>> 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 Airtable or Notion just for how many things that helps me solve.

Nathan Latka

15:15Number four, how many hours of sleep do you get every night?

Vlad Magdalin

15:18>> Seven even.

Nathan Latka

15:19That's good. And what's your situation? Obviously married. Any kiddos yet?

Vlad Magdalin

15:21>> Yeah.

15:22>> Two kids in elementary Oh,

Nathan Latka

15:24wow. My gosh.

Vlad Magdalin

15:25>> You're full.

Nathan Latka

15:25And how old are you?

Vlad Magdalin

15:26>> I'm 35.

15:27>> 35.

Nathan Latka

15:28Last question. What do wish your 20 year old self knew?

Vlad Magdalin

15:32>> Oh, I wish I knew to start sleeping more and exercising more earlier. I didn't get into that until my thirties. It's just,

15:42>> I think I put my body through way too much stress early on.

Nathan Latka

15:47Guys, 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 30,000 customers paying $40 a month, doing 1,200,000 per month or about 15 in ARR run

16:13rate today. That's up a 100% year over year from about $600,000 a month. The recurring revenue in July 2017, less than 5% gross logo churn on all their cohorts. Some of their cohorts, it's way, way better than that. CAC today about $85 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 $2,900,000 raised. I'd

16:35love the ratio there from raised capital to ARR. Vlad, you're killing it. Thanks so much for taking us to the top.

Vlad Magdalin

16:40>> Thanks, Nathan.