How Webz.io Reached $260K MRR and 300 Paying Customers in 2018 (Interview with Ran Geva)

Introduction and Background

Nathan Latka

00:00Hello, everyone. My guest today is Ran Geva. He's a serial entrepreneur with over two decades of hands on experience in software development and leadership positions. After fan... Founding Omgili, a search engine for online online discussions and cofounding Buzzilla, one one of the top web monitoring and analytics companies in Israel. He went on to co-found webhose.io, his current project. It's a leader... Leading global provider of structured web data where he serves as CEO and lead technologist. Ran,

00:25are you ready to take us to the top?

Ran Geva

00:27Yep, of course.

What Webz.io Does and How It Makes Money

Nathan Latka

00:28All right, tell us about Webhose. What do you guys do and how do you make money?

Ran Geva

00:33Well, we sell data feeds. We turn the web into machine readable data feeds, and either individuals or companies tap into this data to feed their analytics applications. So it could be from brand monitoring, PR applications to cybersecurity, financial applications, anything. We're basically leveling the playing ground, letting anyone have access to data from the web.

Revenue Model and Pricing Structure

Nathan Latka

00:58Interesting, and what's the revenue model? Is it per API call or is it a pure play SaaS? What's the revenue?

Ran Geva

01:03It's a SaaS or data service subscription based. You can go ahead and it's a freemium model basically. Anyone can sign up for free, get access up to 1,000 API calls for free, and then you can upgrade downgrade, cancel anytime, we don't shackle you into long term contracts, because if you see value you will keep on using us, that's what we saw and that's how we go. So we have private users, developers, and we have

01:29enterprises using our software.

Nathan Latka

01:30And give me a general sense, because I know you have multiple kind of pricing levers on your monthly subscription plans, ranging from news blogs and reviews to e commerce product data to broadcast media transcripts, So do people have to choose what kind of data they want and then basically if they want multiple forms move those levers up in each category?

Ran Geva

01:48Exactly, yes. So they can start very small and scale up down very elastically. Basically, see us doing today with data or data provisioning, what Amazon did to server hosting, so you can go ahead and scale very fast and low as you need. You don't have to go ahead and buy a big plan upfront.

Average Customer and Pricing Tiers

Nathan Latka

02:12Interesting. So to avoid going down kinda every customer cohort, just quickly give me an average customer. Are we talking a grand a month, $10 a month, 1,000,000 a month? Generally speaking, where are you at?

Ran Geva

02:22Well, API usage or pay or money.

Nathan Latka

02:22Revenue

02:26per customer per month on average?

Ran Geva

02:29So the average would be between 1,000 to 3, but we have enterprises that pay in the tens of thousands per month, and we have, and it doesn't really depend on the company, have startups that are paying a lot, and we have enterprises that pay us $50 really depending on the use case. And for the small clients, it's a self onboarding process, we don't have to invest anything in support or customer success, we have of course customer

02:57success, but we have tens of thousands of users. Not all of them are paying, a lot of them are freemium,

03:05we don't have to invest a lot of customer success and support because it's a very simple system to what's integrate.

Team Size and Sales Setup

Nathan Latka

03:12Your team size today?

Ran Geva

03:14We're about 20.

Nathan Latka

03:16And none of those people are dedicated to sales or onboarding?

Ran Geva

03:19No, we have two salespeople, we have two support people.

Founding Story and Path to Webz.io

Nathan Latka

03:22Okay, all right, now give me more of the backstory here, you've had success obviously in this space, what year did you launch webhose?

Ran Geva

03:29So webhose is kind of a long story because we started, you mentioned in the beginning, I started back in 2007, even before I was self employed, developing all sort of P2P software, and

Nathan Latka

03:40What's been the PI platform?

Ran Geva

03:42No,

03:43P2P file sharing applications, and they were quite successful, but I didn't see a real career going forward with it, so then I went ahead and thought about maybe I create something for businesses, and all those applications had message boards on them, where people chatted, and I thought to myself well people are speaking and talking, companies might be interested in knowing, people are saying about them, so I went ahead and created kind of a, the first challenge

04:09was to create a system that will gather this information, that was the first basic technology. Didn't know what to do with it, so I created Omgili, B2C search engine basically, and I got some traction, got a VC calling me, I didn't know what to do with that, I didn't know what a VC was even. Eventually a nice VC from Israel was interested to invest seed funding of about $600,000 but no one else in Israel believed in

04:38the brand monitoring market. Actually never, no Israeli VC ever invested in this field. So

Nathan Latka

04:47So what happened to that company? Did you just shut it down or you sold it for a nice price or what?

Ran Geva

04:51So I found another company that we together decided to go ahead and build Buzzilla, and eventually that company called Buzzilla acquired Omgili, and it was too late to go to the international market, so we succeeded in the Israeli market, but failed going global, and the last application, last project that we tried to, before Webhose, that we tried to launch was an application called PR tracking that was supposed to track

Nathan Latka

05:19What PR happened with Buzzilla, so did you shut that down or get a soft landing?

Ran Geva

05:22No,

05:23working, it's doing very well in Israel, but but we tried to go global and failed all the time.

Nathan Latka

05:30So who's running that now? How did you remove yourself as CEO and keep it going?

Ran Geva

05:33We have... We were multiple founders, so one of the founders stayed and then... And kept on running and keep on... Keeps on running and

Nathan Latka

05:40And how so we much money has that company raised?

Ran Geva

05:43Oh, well about 1,500,000, So something like

Nathan Latka

05:47you left because you didn't think it was the future, you knew your other founders would do a great job with it, and you did what?

Ran Geva

05:53So as Thomas said, we started developing another application, and the reason it failed was because it was supposed to track PR online, and the main issue was companies told us that they couldn't find or found mentions via Google, not via PR tracking, and when I tried to find a solution that will help us increase the coverage, I failed, know Google is a closed garden in that sense, they excellent for humans, but for machines that want to

06:22tap into their index, there's no way, so that's where we set the focus to go ahead and create basically a repository database that will open the closed garden that Google has and provide this access to anyone. That's where we set to create webhose and start with news, blogs, message boards, but then

Nathan Latka

06:42And what year was that?

Ran Geva

06:45So about 2015, something like that, yeah.

Customer Count and Growth Rate

Nathan Latka

06:482015 and what have you scaled to today in terms of total customers?

Ran Geva

06:53So we have hundreds of customers, paying customers now, long tail most of them, and small customers, so most of the customers are small, between $50 to $2,000 a month, but we have some few dozens of enterprises that are about 70% of the income are enterprise.

Nathan Latka

07:15Yep. But when you say hundreds, I mean, we talking 300 or a thousand... 900?

Ran Geva

07:21Yeah. About about 300, 350 paying customers.

Nathan Latka

07:23And what

07:24are you what are you growing the company at right now year over year? Would you say, 100%, 50%, 10%?

Ran Geva

07:29Yes. So between 2016 and 2017, it was 100%, but it's easier when you have lower income. Now we expect to grow about 70%, we are really accelerating as we are providing more data feeds, for example we recently launched the dark web data feed and we see a lot of cyber security interest, so we see a lot of cyber security companies that where the money is bigger there, and we see more and more brands tapping into this

07:55data, so if on the brand monitoring you had marketing departments using our customers, more and more brands since they're hiring internal data scientists, they want access to the data, so they come straight to us and not necessarily through our clients. So for marketing department, it's excellent, but for data scientists, they need the data.

Monthly Recurring Revenue

Nathan Latka

08:16Ran, going back real quick to growth, so 100% year over year the past twelve months, ideally 70% over the next twelve months here through 2018, give us a sense of where you're at today in terms of MRR.

Ran Geva

08:25MRR about $260,000 Yep.

Nathan Latka

08:29And that's about right that, you know, if I take, you know, 300 customers times a $900 a month price point, you get about $260,000 or somewhere around there.

Ran Geva

08:38Yeah, that's

Inbound Strategy, Organic SEO and Paid Spend

Nathan Latka

08:39great and then since you grew 100% year over year over the past twelve months that means back in December 2016 you were doing what somewhere around $130,000?

Ran Geva

08:39Yeah,

Nathan Latka

08:39interesting and what's driving most of this growth where are you getting these customers from?

Ran Geva

08:52So it's organic, we actually we're now increasing our sales team because we're not doing outbound or really don't want to do outbound, but most of our leads are coming inbound, so from AdWords but also organic or from our clients, because of the method of the freemium model, you have a grassroots approach, you are the go to, we are, webhose is the go to place when you need content or web data, so developers are talking about us

09:19and projects are being published using our data, So providing a freemium solution is also a great marketing approach.

Nathan Latka

09:25You mentioned some ad spend. Give me a general sense of how much you're spending per month on on direct paid.

Ran Geva

09:30$4,000, not a lot.

Nathan Latka

09:33So very little. Now in in that paid channel on average, what are you spending on on CAC to acquire these guys?

Ran Geva

09:39That's a good question. I have no answer for you. We just are installing now a BI system to help out with the numbers that you are requesting.

Nathan Latka

09:47Which system did you did you install out of curiosity?

Ran Geva

09:51That's not my my my... I think Microsoft BI, if I'm mistaken.

Nathan Latka

09:55Okay. Interesting. So so you... So right now, you don't really know what your CAC is?

Ran Geva

10:00No. No. But it's it's very low because we we don't rely on on AdWords to really to get our customers. It's mostly organic, so we... It's mostly content.

Nathan Latka

10:00Yep.

Ran Geva

10:00And, of course, grassroot.

Nathan Latka

10:12How many of your team at twenty are focused on creating content?

Ran Geva

10:16Two, actually. And two, and we are now using external companies as well to use our data to write about it, and we see a lot of developers writing about us, so that's

Nathan Latka

10:16What

10:28tool do you use to get other people to write about your data?

Ran Geva

10:31Not necessarily, we just provide this data, so people are, you know, using the data the the data and and and writing about how they do what

Nathan Latka

10:31Yep.

Ran Geva

10:31And writing blog posts.

Churn and Revenue Retention

Nathan Latka

10:41Churn in a SaaS company is obviously critical. Tell me about your churn.

Ran Geva

10:45So, again, that's a hard number to to test that we didn't really test until recently. I can tell you that on the enterprise part, so the higher the amount they pay, we see near zero churn, we have clients who told you we started back in 2007 with providing this data, So we we have clients going back in 2007. We never lost an enterprise client and... Up unless he went out of business. On... Of course, on

11:13the lower plans, were the freemiums, the $50 plans, we see much higher churn.

Nathan Latka

11:19Yeah, you're giving me logo churn obviously, right? Which is, you know, hey, a lot, a high number of small customers will churn. We don't really care about that because we don't have any churn in higher markets. So that's why most people like to talk about revenue churn instead. Normalizes that difference. What are you at in terms of revenue churn?

Ran Geva

11:36I don't have a number to give you, sorry.

Nathan Latka

11:38How do not know that number? That's like a critical number in a SaaS company.

Ran Geva

11:43When you are VC backed it is, but we are not.

Nathan Latka

11:45Even when you're bootstrapped, mean, do you know if you have a leaky bucket or not?

Ran Geva

11:49Well, we do have, but it's on the small numbers I told you.

Nathan Latka

11:49Like less than what?

Ran Geva

11:49Oh, less than 5% probably.

Nathan Latka

11:57Annual... Annually?

Ran Geva

11:58Yeah.

Nathan Latka

11:59Okay. And that's gross churn or net? So when you add back your expansion revenue year over year, that's...

Ran Geva

12:02It... It would be net.

Nathan Latka

12:03So that's net.

Ran Geva

12:04I told you that's the that's nothing on on the November.

12:06Yeah.

Expansion Revenue vs. New Customer Acquisition

Nathan Latka

12:07Yeah. That's healthy. So so so net revenue churn annually less than 5%. That's healthy. Now what... You know, as you grow and you try and drive 70% year over year, would you say more of your revenue or more of your expansion opportunity is coming from getting people to move those little levers on your pricing page up, driving expansion revenue, or actually bringing on brand new customers?

Ran Geva

12:24Bringing brand new customers. Upsell, you know it happens, we don't put any effort on upselling, currently at least we will in the future, but currently I want more of expand my market reach, and not necessarily optimizing our current clients. That's the easy way to go, but I'd rather have bigger market to stand on.

Nathan Latka

12:49That's interesting. That's an interesting approach considering how nicely your pricing plans would allow a sales team to drive expansion revenue, it's just getting them more usage.

Ran Geva

12:59It's nice, but it really depends on the use case, on the demand of the client. I want to push a client to go ahead and increase its usage if he doesn't have a use case, if it grows, we will grow with him, because I always believe that, that's why you can cancel anytime, that's why you can downgrade anytime. I really believe that we shouldn't shackle for long term because even if if someone is is for

13:25some reason stopped using our service, don't want his money.

Nathan Latka

13:28Yeah, Ran, just to be clear, I'm

13:30not talking about locking people in. What I'm talking about is if people are getting value out of your product, they should ideally use it more, and it should drive expansion revenue, and what you're saying is no, we're not focused on expansion right now, we're focused on getting new market share.

Ran Geva

13:41Because we are providing an API, the more clients they have, the more API calls they will need. So they basically are working for us in a sense, the more successful they are, the more API calls they will need, they will upgrade organically their plans. I don't need to push them to do that, that's not necessarily, I'd rather have a new client or focus my efforts to add new clients.

Nathan Latka

14:04So you don't have infrastructure like all the guys that are in the web plumbing space, and that's Zapier, Segment, these guys. It's the same model as yours in terms of billing per API called data as a service, and showed me they can drive more API calls by helping their partners, their customers launch more integrations. You're saying you can't do that same thing. You can't drive more useful usage.

Ran Geva

14:29No, because it's usually plugged into a specific use case. So the more, sometimes they won't use the API correctly, and we will help them with that. But the focus now is adding more clients rather than trying to optimize the current clients we have.

Nathan Latka

14:44Got it, and you said you're bootstrapped,

Ran Geva

14:46Mhmm. Yeah.

LTV and Enterprise Client Value

Nathan Latka

14:47Last question here as you think about scaling and I imagine you're cash flow positive right since you're bootstrapped?

Ran Geva

14:47Yep.

Nathan Latka

14:47How do you think about lifetime value on these guys? I mean they can be a dangerous number and it's hard to come up with but do you have a minimum that you know they're gonna stay with you for at least X amount of years and be worth X amount of money?

Ran Geva

15:05Well I can tell you this, for the enterprise, or clients that are above $1,000 a month, above one year, that's for sure, that's a very good estimation.

Nathan Latka

15:18So that would an LTV of about $12,000 at least?

Ran Geva

15:21Yeah, at least, yeah, yeah. That's for the higher above $1,000 plans, it means that they have a mature platform, and you know since we are an API, we are in the back end and no human is intervening, so it's not like you have a system that a SaaS system that the guy finds out one day that he stopped using the system and then he cancels.

Nathan Latka

15:45Sure.

Ran Geva

15:45As long as we're doing a good job, we we will stay with him.

Nathan Latka

15:48And Ran, is the whole team based out there in Israel?

Famous Five Rapid Fire Questions

Ran Geva

15:51Yep.

Nathan Latka

15:51Okay. Very cool. Let's wrap up here with the famous five. Number one, what's the last business book you read?

Ran Geva

15:58I I don't read books.

Nathan Latka

15:59Okay.

16:00Number two, is there a CEO you're following or studying there in Israel?

Ran Geva

16:04Orophel.

Nathan Latka

16:06Sorry. Spell it.

Ran Geva

16:07SimilarWeb. Orophel. Similar Yep.

16:10Yep.

Nathan Latka

16:11Number three, is there a favorite online tool you have for building your business besides your own?

Ran Geva

16:16For building my business. I'm using Google Analytics, you know, that that helps me. Yeah.

Nathan Latka

16:22Number four, how many hours of sleep do you get every night?

Ran Geva

16:25Too little. But that... That's because of my kids. Six, seven.

Nathan Latka

16:29Six hours and how many kids?

Ran Geva

16:31Three.

Nathan Latka

16:32And are you married?

Ran Geva

16:33Yeah.

Nathan Latka

16:34Okay, and how old are you Ran?

Ran Geva

16:3641.

Nathan Latka

16:3641.

16:37Last question, what do wish your 20 year old self knew?

Ran Geva

16:41My twenty twenty years old. I knew. Failing is part of the success.

Nathan Latka

16:49Failing is part of the success. There you guys have it. He has been through it many times. With his first company, he then rolled up into a second company, and then he had great founders there. So he left that company. He's now building webhose.io, an API backed pricing model. It's essentially data as a service. Launched it officially in 2015. Working on with it... On it with a team of 20 out there in Israel. They're bootstrapped, serving

17:09about 300 customers, two fifty to 300, paying on average call it a grand per month. They're doing about $260,000 per month in revenue. That's up from $130,000 per month just thirteen months ago, so 100% year over year growth. He's aiming for 70% year over year growth this year. And look, he's on track to do it with these unit economics, less than 5% net revenue churn annually. Ran, we're rooting for you. Thank you for taking us to the

17:27top.

Ran Geva

17:28Thank you, Nathan.