How Weebly CEO Dan Veltri grew to $24M revenue and 250K customers in 2018.

hello everyone my guest today is david rusenko he's the ceo and co-founder of weebly he created the company in his penn state dorm room back in 2006 and weebly now hosts over 50 million entrepreneurs and 225 countries all around the world he's helped scale the company to 300 plus employees in five different global offices he's dad to a 1.5 year old and his hobbies range from the stunt car driving to roaring to a roaring game of bridge with his mother-in-law david are you ready to take us to the top yeah let's do it all right so here's the big question uh on an average night who wins bridge moore your mother or you uh you know it like bridge is a tough game and i've only been playing for a few years now so uh so i gotta give it to my mother-in-law she'll win every time and what are the stakes does she get a percentage of the company every time you lose what's on the table here that would not be a great bet uh you know you usually it's bad over a bottle of wine that's good all right let's jump into weeble here so i think most people obviously are familiar with the space but for the rare person who's not quickly tell us what weebly does and what's your revenue model how do you make money sure uh so weebly is the easiest way if you're starting a business and you're trying to trying to get online um and get found we was the easiest way to do that if you're trying to sell online and start an online store or even just get something as basic as a website up to get started you can sign up on weebly.com within 10 minutes you can have something online within a couple hours you can be completely finished and be ready to go and what's the revenue model is it a pure play sass or is it mix or what it's uh really easy um we're uh offer a monthly charge um it starts with free so you can get started for free um actually about eighty percent of what we offer is completely free um and it's very honest if you like the service um it starts at four dollars a month uh all the way up to um about 35 a month and um and just a simple monthly charge no advertising um you just uh if if you see value you you just pay for what you get and david is it fair to say the average is probably in terms of if you just looked at your paying customers you're closer to four or five bucks a month or is the average actually higher end 30 35 bucks a month no most people are sort of somewhere in that like 8 to 15 a month price range um so it's still really affordable okay and what different pricing uh kind of metrics are you using to drive up arpu is it number of seats is it number of pages on the websites is it number of widgets included what what leverage points are you using so for us it's entirely functionality right um and you know you get unlimited paid views you get effectively unlimited storage um so there's no limits on those kind of things but it's really just down to the functionality so are you using a more basic website that's just kind of telling your story that's probably the four to eight dollar months range are you starting to do some e-commerce and starting to sell online um that's in sort of that 16 to 25 price point um are you really getting advanced with the e-commerce you want to include our email marketing products um you know our facebook advertising products and really start to grow your business and get found that's where you get in some of those slightly higher price points and why have you chosen to take the war to two separate spaces and what i mean by that is on your website there's a clear delineation right when you start are you building a website or an e-commerce platform and on both of those sectors you have massive competitors be it shopify on e-commerce or squarespace wix and their guys on the on the you know website side why fight two wars at once sure i mean the space is huge you know i i i a lot of entrepreneurs like to um pride themselves on saying we have no competition if you have no competition that's a bad sign um you know that usually means you're in a small market so um the market's absolutely massive i think you know we um we go where our customers are and what our customers have told us more and more is that they're looking to start selling online i think maybe 10 years ago it was really about you know expectations were just a little simpler it's like hey i just want to get found i want to get that website online that's kind of our bread butter that's where we started and there's a whole host of people are just looking to do that um we're finding increasingly that our customers are trying to actually say look getting found is great but i need to start transacting online and that's where the magic starts to happen that's where you go on vacation your business is running itself right that's where you're making money while you sleep um and so increasingly that's what our customers are looking to do and we listen to our customers and we offer what they're looking for why not then go all in on e-commerce that ignore the regular hosting ecommerce is nice too because you have a direct attribution model they can see a return yeah i mean look uh you know we're continuing to push like i said exactly where um where where our customers are looking for value um i think it's you know we've delineated website and e-commerce um sort of on our home page it's not quite so black-and-white of delineation i mean you might you know even if you're gonna sell a physical product you might get started by setting up a website um you know even ecommerce functionality is on a website right so it's not quite so black and white i think for a lot of our customers um you know it makes sense as they're getting started understand are you selling today or are you gonna sell later that's kind of really the delineation um and you know i think over time a lot of people are going to be upgrading to transacting online it's just sort of the logical next step yep so you launched back in 2006 in your dorm room you've scaled to today i know you've raised capital give us a quick update there how much have you raised total yeah so uh we uh started um uh i wrote the first line of code in february 2006 it was a part of a class project at penn state um you know continued working on it throughout that class and that summer um i uh we're interning in new york city uh well applied for it got accepted to y commoner that fall moved out uh dr you skipped out i should say um from our last semester as well because we all david sorry i want to cut you off there real quick when you were doing this and you applied to y combinator what got you in were you post revenue at that point the revenue numbers impress them or your user base no the the you know this this was 2017 for simpler times uh if you will uh why commentary just gotten started most companies that were applying for y combinator at that point in time were just idea stage that's obviously very different today at the time i think we were one of if not the furthest along company um that had ever applied to and gotten into y combinator in terms of what though user base code lines written what so we had actually launched something okay um and and we had effectively launched a beta and that was at the time the furthest along but there was no way that you could pay us even a single dollar that that wouldn't come for another couple of years people actually at one point in time were just mailing us unsolicited checks for 50 bucks saying i'm really afraid you're going to go out of business like here just take some money like i love your product so much just have some money david that actually happened or that's just a hell of a good story utility and it kind of happened like it happened multiple times do you have a wall somewhere of all those just checks put up you know what like if we were smarter we would have kept the checks i think at the time we actually didn't need the money so you cashed them you're like that's what a burger tonight that's mcdonald's tomorrow night exactly that's funny right there yeah so 2006 you get into yc um to keep the story going from there yeah so we skipped us well i said we skipped high school because we all ended up graduating after the fact but we had a semester left and just and just i drove out um from uh uh penn state to san francisco um this was early january i drove 80. uh it turns out i would not recommend driving 80 in january i got stuck in wyoming for about three days um but but made it through um with all the servers intact in my car um made it out here to san francisco participate in the y combinator program um that april uh kind of a kind of a fun i suppose if you want to call it that milestone we we at one point were left with less than a hundred dollars in our bank account we just paid rent we just how many how many how many people were on your team at that point uh just the three pounders okay um and so um but but so we had food for a couple weeks and we had rent do like another two to three weeks so we basically had a couple weeks left and and we're really sure how we're going to make it through but demo day was coming up and we were sort of uh you know cautiously optimistic um we ended up uh so so it was 20k from y-com near in january we made that stretch um about four months that was your first round essentially 20k effectively that was the first round and what have you raised today on uh today we raised just a little over 35 million in primary capital okay uh when you say primary why do you make that delineation have you done secondary stuff or venture debt or what yeah we've done a little bit um and i think primary capital is the best way to look at the business basically is like how much is actually taking in and we actually so so not to kind of just to skip through the story really quickly um 650 650k was in april of 2007. um uh you know kind of just continued scaling the business from there um in uh 2014 we raised 35 million from sequoia um and 10 cent and um uh you know today we actually have more cash in the bank than we've raised now how have you managed i mean you know once you raise capital you essentially put yourself on a timeline and so i imagine you are fighting your board meetings might sound something like this these guys are going david spend more money acquire more customers grow drive growth growth growth growth and you're going i don't want to drive growth at the sake of the bottom line i want to be casual positive how do you keep pushing off the the board's drive and desire for growth with keeping cash flow you would be actually surprised um that's not how our board meetings go at all um they uh i think i think the key is having the right investors and we've been super super lucky to have investors who are the best of the best right so it starts off with y combinator you then have ron conway steve anderson mike maples um you know iden you know these sort of best-known angels um uh then then of course uh sequoia um and then most recently also 10 cents so i think um uh you know having just a fantastic set of investors around the table um means that they're also long-term focused and um there's no pressure for driving towards an exit or driving towards an outcome um that uh that isn't in the long term you know as far as how we think about growth um you know i think uh there's you'd be you know what i've witnessed is a lot of very sub-optimal decision-making as far as spending goes um very common to get ahead of your keys appears david exactly yeah um very common to just hire too many people i think just being deliberate about how you grow the team is just critically important i'm very common to just go spend money i'm in a very undisciplined way um and we've always wanted to spend money smartly so um so i think look uh we've always said like we're going to use this money to invest in growth where it makes sense but we're not going to go and spend the money in a very undisciplined sort of foolish way just because we feel like we need to yeah that makes sense now walk me through some of the growth you've driven incredible growth so where are you i'm sure a lot of it is free because you have a premium model but when you do spend money to drive new customer growth where are you tend to where do you tend to spend that money how are you getting new customers yeah so so i'll start by saying that um that we've had uh substantially all of our growth has been via word of mouth and i think at the end of the day if you build a fantastic product it's not that you build it and they will come but the core of all success of any company does come down to the product and does come down to having just a fantastic experience with the product um i think uh you know for us a lot of that is driven by the freemium model that drives uh basically word of mouth i think the freemium model only works if there's a couple things that has to work it only works number one if it is driving word of mouth for you it only works number two um if your marginal cost per additional user is low enough to sort of support the freemium model so um so you know right so can you might be asking can you quantify that in a given month what percent of your new customers will come from someone that clicked powered by weebly on a free account so there's a ton of different ways that people come um i will say that for the most part it's never been a a simple sort of growth hacking uh trick there there hasn't been a single sort of trick that's caused um i would say the very large majority of our growth has just come from to the best we can tell dinner table conversations um you know uh conversations over uh you know a cocktail at the bar just people who are saying hey here's where i am talking their friends about their needs and someone saying hey have you tried weebly yeah right and so the very large very large majority of our growth has come from effectively um untrackable uh you know either uh hits our home page directly or searches weebly on google and that's where the large majority of it comes from so when you look at on an eight dollar per month average plan you say maybe up to 15 what are you spending on i mean what's your cat what's your all-in tack on these guys yeah i mean so that's obviously something that we look at very carefully i'll say that you know the specific numbers you know for our business obviously are proprietary um uh being a private company but the things that we do really look at i think the the freemium model is really interesting because not only do you have your traditional sort of cohort cash flows over time that you would see in a sas business you also have this additional layer on top which is your premium conversion over time from a sign up cohort perspective right so that adds like a really interesting layer but what it does is it adds a lot of sort of historical momentum in the business so you know for us it's quite predictable how many of uh you know that you know the patterns are basically pretty consistent of how many people come to the door and how they'll convert over time so on average how long does a free user use you until they're converting are we talking like six months 12 months or even longer you have to be more patient two three years you know it entirely depends um you know what you're looking at in terms of cohorts or seasonality in the business it also depends on um you know the customer type are you looking at someone who's doing more commerce are you looking at someone who's doing um uh you know maybe a a website for their classroom and they're a teacher so that's the general range but i mean less than a year or more than three four i mean i'm curious how patient you have to be um i think that uh you know again that those numbers are like fairly proprietary for us um but you know in general these are patterns that we see we see people converting um six years later for the first time someone who signed up for the first time who has been consistently using the service who's paying us for the first time six years later so david is that an outlier though i mean are you giving me an extreme example or is that pretty average that's not average um but uh but we do see those patterns that people do uh you know a lot of people convert up front a lot of people will be converting over time as well yep okay so 2006 to today you've got a lot of growth coming from freemium you have a board who's patient which is wonderful you've got nice core analytics in terms of being able to predict things like growth and conversion rates what have you scaled to today in terms of total customers using the platform yeah so we're over 50 million people um that are using weebly um the the vast majority just are entrepreneurs they have an idea they're trying to get this online they're trying to get access right to the digital economy and and the economy more broadly and um and you know of those 50 million people the coolest stat for me is about 325 million people every single month visit one of those websites or online stores uh that were created um by those entrepreneurs i think that's really cool um that's a global number just the u.s component that represents about half of the u.s population yeah i think that's our coolest metric because that's a reflection of the success of the people on our platform to be clear though david with 50 million users i mean you specifically have the user number which i understand because it's the biggest number but from a paid customer account are you going are you guys north of a million paid accounts at this point yeah i mean that's like another another stat that we just don't disclose you know we're a private company but um but there's a large number of paying customers as well i think you know what we see in terms of conversion isn't um maybe slightly better not totally out of line with the with the ranges that you see in a lot of premium businesses can you edu i mean obviously we just saw drew's because the s1 came out but when you say average based off knowledge i have i would say average is anywhere between like four and eight percent on a freemium model or i mean when you look at averages and you use the word we're like other people is that a fair average or is it am i off by a little yeah i mean like like like again like specific stats are gonna be tough like really tough for us to disclose um but uh but you know again like um you know i would say i would say we're a bit above average in terms of a lot of people yeah all i'm trying to say ignore your numbers for a second educate us real quick on i mean you know a lot of people in the valley you're well educated here what do you see as the average in a freemium model typically from free to paid i look i think that um that the out like i'll tell you where we started when we first because i think this is really important um when we first started introduced our first paying subscription which was weebly pro and uh when we first introduced that um i think it was in june of 2008 we saw a conversion rate of um just under point five percent okay so you know for someone getting started who's looking to start a premium business i think it's it you absolutely have to keep in mind that these numbers that you see in terms of what's average for free businesses first of all um you know what's average like sort of what's that what's the mean in the median are very very different um in premium models um but number two where you start with is going to be very different than where you end up when you're mature and so i think it's really worth taking that account if you're looking at um sort of uh you know introducing either a freemium or or just a sas model on top of your business and you're expecting to get the average on day one i would say lower your expectations because it takes a lot of time to get there a lot of optimization a lot of price testing a lot of funnel optimization to get to the point where even at average um but then again for some businesses you may start day one above average right but i think i think in general it's fair to say lower your expectations at least in terms of your planning and what you're planning for what david once you hit maturity though and again i'm not asking you to reveal your numbers but the reason i love this show is because i get people on who know more than i do right so when you talk to other friends in the freemium model space are they typically able to mature to a point where it's four five six percent free to paid is that an average or is it too low or high you know it's it's again it's really hard i mean some businesses are able to do four five six some businesses are never able to get there some businesses are able to do 10 plus right i think freemium you know freemium and um free trial are you know it's not binary it's more of a continuum right and so you have premium on one and i think the really important thing to understand as far as conversion rates go for businesses um in freemium is you have to have something that makes sense to your customers in terms of how you delineate between free and paid right a lot of people think look i'm just going to slap a premium model on top of something and i'm just going to get that four percent and that's just not how it works right i think going back to the dropbox example you know in some ways i've envy drew um and by the way we started uh you know we we when we were in white comedy in 2007 we were in this building that we called the y scraper because there's so many y combinator companies there and um and drew and arash were there too about two floors down from us so it's just kind of really fun kind of moment in time in 2007 when a lot of those companies were starting um one one thing i always envied um about the dropbox model is that you know your your model has to resonate with your customers in a way that they understand why they have to pay more for something or they just won't do it if it comes off as sort of fake comes off as this like artificial constraint it's not going to work and for them uh it's always made sense because um people get that you have to pay more for storage right there people are completely trained and attuned to that um what's your what's david just we're running out of time here what's your similar metric is it like number of page views number of sites for us it's the features right um you know first which feature so so there's a whole bunch of features i think broadly speaking um in the earlier packages it's really about branding and making sure that you're set up um for for um you know success from that perspective you need to remove the powered by weebly so you look more professional no it's not it's not necessarily removing the power by weebly it's your own domain it's sort of like several things all together to add up um you know in in the later features it's it's some of this professional sort of functionality that you might get um you know maybe if you're a freelancer and you need um you know to get leads or you know you're looking for like high quality video player like kind of some of this functionality to really look very professional um and then the later features it's all about you know later packages all about e-commerce so cool last few quick questions here on economics david then we'll wrap up with the famous five uh payback period how quick do i get paid back on these folks is it average around a year like other sas companies are you more or less yeah i i don't think we're particularly unusual compared to others churn is obviously critical in this kind of company constant contact whatever reason when it was public was valued at like way lower in terms of pe multiple than other folks because their churn was just insane what did and there's smb space similar rps to you what's your turn today and how do you manage it yeah so i think i like to look personally i do not like looking at churn as is defined i know churn is sort of both a concept and sort of a a defined metric um i prefer to look at renewal rates by cohort um because current is sort of this uh this this sort of composite measure that that i'm not as much of a fan of um so uh you know so so our renewal rates are one of the steadiest metrics in our business and i think if you um uh you know if you have um a product that doesn't have product market fit you're going to see a really low renewal rates if you have a product that has really great product market fit you'll see really high renewal rates and i think that um that that that is a key sign for business on whether you know the product marketplace is healthy so i mean are you north annually of 90 in terms of gross logo retention and it's pretty steady at that yeah i mean it's kind of a different measure for us you know we don't like look at logo retention you know there's there's you know 50 million people that come to sign up there's a certain number of those that have converted to paid well tell me how you think about it you have an interesting perspective how do you measure it so the way i think about it is basically looking at our cohorts and then understanding their renewal rates by term so let's just say you look at a cohort that paid us for the first time in january of 2009. sure and let's say it's an annual package right not a monthly so what i like to look at is say of that cohort what percentage of them will either have um renewed um or uh upgraded or extended right those are kind of three things that you can do um within the first term and then within the second term so t2 would be you know t1 would basically be in january 2010 t2 would be in january 2011 right and looking at those renewal rates by term and then effectively comparing cohorts looking at the january 2009 cohort versus the january 2010 versus 11 versus 12 versus 13 um and looking sort of you know apple's apples um to make sure we count for seasonality and just looking at the trends in those cohorts and making sure that those are um remaining really consistent or improving and in our case they're improving which is great and that gives you sort of predictability in the in the out years you're not going to give me a minimum in terms of retention annually are you unfortunately i can't do that you're you're you're similar to other sas companies playing in this space though nothing crazy and you do cohort analysis like everybody else exactly all right last question here um you mentioned when you first prepped the pro account it was a point five percent conversion rate from free to paid can i pin you down on this one thing you've gotten better since then not worse yes we've gotten significantly better since then guys there we go we have a floor right so with 50 million paying people if you only are converting point five percent he's north of this but only point five percent that's 250 000 paying customers if you've got an eight dollar rpu which again could be up to 15 but i'll do minimums that's 2 million a month in revenue or north of a 24 million dollar annual run rate david fair to say or north of that right just multiplying your numbers you know it's fun to watch you try to work it out you guys can watch his face on the youtube to see if i'm accurate or not but fair to say david those are those are numbers from you minimums at least i think you're doing well north of that i want to give you credit for that let's wrap up here with the famous five one word answers number one what's your last business book that you read uh my last business book um not the last one my favorite one is um is the one on admiral rick over the rickover effect the rickover fact number two is their ceo you're following or studying right now phil i'm following or studying um no i mean no one in particular comes to mind one one person who um who has been helpful um is uh pete flynn of trulia number three besides joan what's your favorite online tool for building your business um this is this is like a really cheap answer but i'm obsessed with boomerang for gmail i would not be able to do what i do if not for that uh product number four how many hours i sleep to get every night um between eight and nine okay that's pretty good and what's your situation a married single and just one kid or more uh married with one kid okay good married one kiddo and how are you david am 32. 32. last question what do you wish your 20 year old self knew uh what do i wish my 20 year old self knew um uh i think for for the most part i think the the thing i wish i knew was to make sure to um keep the business and um the company on the same level so a lot of people make the mistake on the other side of hiring too quickly um earlier on we made the mistake of hiring too slowly and i think both are mistakes guys there you have it david from weebly when he's not getting his butt kicked by his mother-in-law at bridge he's building lily lunch back in 2006 made the truck across the country to get into yc where he raised his first capital they've now raised over 35 million bucks last race really was back in 2014 he's managed now to keep the company profitable with more cash in the bank today than all the money they've raced so more than 35 million bucks in the bank when they first launched the pro account they were converting just .5 of those users don't expect to do more than that that's a good lesson for everybody generally gotten better than that today over 50 million paid accounts if you assume some of the numbers he gave us you can maybe back into a minimum of about 24 million bucks in arr growing fast and profitably in the valley it's rare david thank you so much for taking us to the top thanks for having me