Wespirerevenue, acquisition & funding

hello everyone my guest today is Susan Hunt Stevens she's the founder and CEO of a company called a we spire she's recognized she's a recognized expert in the use of social and game mechanics drive positive behavior changed and was named an ey entrepreneur of the year and 2015 previously she was GM and SVP at the New York Times company leading a large regional digital media division Susan are you ready to take us to the top sure all right very good by the way do you miss your New York Times days or no it's exciting I am grateful every day to the good work that the New York Times and other journalists around the world do I do not miss having to figure out that new business model to support that journalism move I was referencing was not the tenacious nature of our nation right now but more about the declining nature of the business model I was on the side of the business that was happened to increasingly fund the the side which was the consumer so the switch to charging for digital access the switch to raising subscription prices because the ad model was just declining and so you know I was always on the side that got to see the growth but there was always this urgency and this question of would you be able to grow enough to be able to fund the first estate you know I like to call the folks in digital working intuition on journalism you guys are the subsidized errs in chief your revenue subsidizes the decline all right all right let's talk we spire what's the company doing what's your revenue model how do you make money sure so we're an enterprise software as a service platform and large generally forward-thinking companies are using our platform to essentially design run and measure the impact of employee engagement programs on so we will go into a large company and help them run their sustainability initiatives their social impact initiatives things like volunteering and community engagement holistic well-being programs meditation and mindfulness physical health on family work-life integration and then most recently we launched a positive workplace culture which is a lot around diversity equity and inclusion innovation positive you know belonging psychological safety all those kinds of things the model is we paid on a per employee per year basis so they're running this program for every employee there's a fee for every employee if they're running it for a subset of employees it's based on the number of a place so very very good and I'm sure this varies a ton and I don't want to good on every customer cohort but on average what's the company paying you per year would you say so on average on a per employee basis would be about $12 per employee per year hire a smaller company per employee lower if you're a larger company yeah sorry when I was more interested in is like generally what are the team sizes that are using or this like a start-up one like a 10,000 very large companies um so we've got about 35 companies they're almost all in the fortune 500 they collectively I'm about 1.5 million employees around the world so um you get a sense it's it's tens of thousands and in many cases hundreds of thousands of employees yep so just to be clear those are those contracts when you're landing these accounts obviously you're not getting all 1.5 million plays in media I don't unless you're a genius and a wizard which maybe you are but now the on the model but generally yeah generally speaking when you're landing these these logos first your a CV I mean are we talking like a hundred grand 500 grand 100 grands fair okay so that's typically the pilot size and what's that test cohort look like how many employees is that covering typically around 10,000 employees around 10,000 okay fair enough good so you're able from kind of cohort we I don't know can you mention somebody can we mention the cost of the customer an awesome yeah our website there's some customers who have been fabulous enough to provide testimonials so it's customers like Caesars Entertainment MGM Resorts Unilever and you know and Cox Enterprises and others who are using us we have lots of bigger clients who we can't reference publicly but it's what's been really cool to see over the last five years is it really has been there's not a sector that we haven't worked with at this point so we have health care clients we have automotive financial services consumer products tech biotech really owe a wide swath and what they have in common is that they have recognized kind of two things one is that being a force for good in this world is actually really good for business um so these kinds of programs that have you know an environmental a social or a health impact also are helping them attract employees retain employees are helping employee performance and then the programs themselves like a sustainability program has a really hard ROI and energy waste water and fuel savings and so what they're realizing is that there's this very strong connection between being a force for good in this world and inspiring employees to do things that enable the business to be a force for good and business outcomes yep so I mean those are all great it make complete sense that doesn't you know the I'm curious here to get a sense of how fast this kind of space is growing so put this all on a timeline for me what did you launch so eight years ago it this is and so eight years ago um and just to give you a sense two years ago Gartner finally created a category at the end of 16 around what we do they called it worker engagement platform they put six companies in the space and they put it at the very very beginning of the HCM hype cycle and said it's still 5 to 10 years from market maturity so this is Vicky this has been a you know a just grind it out eight years or are you bootstrapped or have you raised so I've raised almost 10 million dollars okay you did decide to raise why'd you decide to raise why not bootstrap um in the beginning we just couldn't build the technology with the enterprise features and security and you know so the clients that needed this were really really big companies but we started in the consumer space and so we had built you know kind of leveraging small amounts of capital to make that switch to enterprise we just had to add a lot we had to be able to add security audits operational performance SLA performance and things and I needed to raise capital to be able to fuel that then the second piece of it was the enterprise sales model we tried inside sales and other things that would be lower cost sales model the reality is we're evangelizing a market and these are really really big clients and so these are enterprise sales reps who sell this and investing in that sales and marketing infrastructure is expensive as well so on that on that model that sales what's your fully weighted CAC today is it like first-year a CV or less than that or more what is it well it's a little bit better now than first-year a CV but in the first year you know in the early days it was like a you know a 1 a cap ratio of 1 we've now gotten it much better it's all you know we almost improved almost you don't have double the cap ratio so just think where you think you've got it you've got it down now or you can spend 50 grand or acquire $100,000 first year customer that's great so payback period down to about six months it you know in a in a scenario where we're getting an average contract if we're getting above average contract it's paying it even faster if we're getting a below average contract what we see a lot it's gonna take a little longer to pay that well just to be clear though Susan typically though payback craisins the ratio on a bigger account you'll spend more to acquire so it's still usually this might pay back yes that doesn't happen to anything not it's not it's pretty much the cost to acquire is pretty much the cost to acquire and you know what it's interesting an enterprise where we see the real expense I mean other than the Commission expense obviously that's variable but where we see the cost is it is the same to get through legal and InfoSec for a company that is licensing us to use with all their employees as it is to get through it for a company that's why Cygnus to use this with 10,000 of their employees that's a fixed time a fixed expense of fixed wait and then for us implementation is pretty similar between the two as well whether you're gonna run these campaigns for 10,000 people or run them for a hundred thousand people there's not a lot of variable cost in that so and what's your team size today so we're 20 people today and break that down for me how many are caught on this team is machine you built for inside sales or or sales in general so sales in general sells in marketing in generals for people and then we have five people in customer success and you can't underestimate the importance of customer success but a quota carrying CS folks or no they're not quota caring but they you know are responsible for upsell interesting yeah baby I've talked a lot of CEOs at different kind of ARR ranges even up in the 8090 million range and no one really yet has presented a good plan for driving revenue retention above 110 hundred twenty percent based off the upsell capabilities of their CS and onboarding teams typically they're not quota carrying so the question then becomes well how do you incentivize them to drive the expansion our proof it's not the initial sales persons job you haven't found a good answer to that well so I think what we've found is that the people we hire are NCS motivated as much by their clients driving impacts as they are by their own personal wallet and you know it's the kind of people we hire and so keep in mind that when these programs are working and they're expanding and they're growing they're driving greater environmental impact they're grinding driving greater social impact they're writing you know they're just doing more they're more successful and I think our customers success orientation has really been how do we make sure that this program is really working and really successful and then we're proving this and so they take an extraordinary amount of pride in in expansion because it means the program is having greater impact and I think that that has been why you know we're seeing this year so far hundred twenty-five percent net positive you know grow it broke off our existing count count base so just because it's a hundred percent net or revenue retention yeah yeah well peel that onion back for me so obviously part of that is expansion revenue but then you have gross revenue turn under that what is gross revenue turn in that same cohort so it's under six percent right yeah that's great so you have about thirty one percent expansion on the same cohort that's great that's that's super healthy um what are you typically you know a lot of people have different pricing axes they drive expansion around as yours really just adding additional seats well seats and modules modules okay the other thing is that you know there's four modules on the platform sustainability social impact on you know volunteering and positive workplace culture and so some of our clients have one and somehow about four and so there's growth with taking somebody who has one and getting them to add a second or add a third or out of four but then there's also growth for taking somebody who has one with 10,000 people and getting them to you know to have more yep and and just be clear - I mean you mentioned 35 customers today and kind of your your average a CV of a hundred grand that first year so it's fair to say you guys are north at this point we're three point million-dollar run right it's not something I can talk about publicly on on video but your math you do math well as I say sigh I don't want to make them numbers I'm just multiplying two numbers you gave me okay good so north north of that and the growth rate of the whole company year-over-year is about what so we're a little less than doubling right now okay fairly how I mean so fairly so to go you back a year and you're caught out about oh maybe 1.7 1.8 million run right that's healthy growth newbee are getting mostly mostly new customers are driving driving your ability to double revenue is a really expansion it's really but well you know you just heard our expansion revenue numbers okay yep yep yep very good any any channel sales strategy or anything like that or it's all pretty direct um so we have just initiated several partnerships that were really excited about the UM since we are designing and running engagement programs many of our clients have rewards platforms like the global force or achievers or merits bi worldwide things like that and increasingly we are doing partnerships with those rewards platforms so that a company not only can do manager and peer-to-peer recognition and rewards they now can do programmatic recognition and rewards using we spire so we have an API level integration now with achievers for example and so and then have signed a partnership with them there's also some platforms in the donation employee donation giving matching space um and we're very good at getting employees to give but we don't want to do the you know processing and moving money to not-for-profits globally that's a very different business and so we will partner with a your cause you know who's in in Texas like you are benefiting and people like that and be able to really bring new customers or you're just giving them traffic and customers both okay we have formal partnerships with some of the players in informal partnership you know and its tommix its driving traffic back and forth but we have Ries you know a reseller partnerships with some of those as well and you said 20 folks on the team where's everybody you know it's all over and well north east on but we have people in primarily in Boston it's where we're headquartered but we have it you know sales folks in New York and then we have some development up in Vermont kind of in Northeast and when was the you mentioned ten million bucks we did in terms of what you raised we didn't put that on a timeline no so you launched obviously about tech things at ten years ago or eight years ago 2010 did you raise most that back in the early years or one was lost raised so um let's see the timeframe was we did a seed in 2010 than we did our a and 2015 okay and what were the numbers on both those so it was a little south of two million on the seed and a little north of six on the a got it I was 2015 yeah okay convert to a B that we're in the middle of what does that mean we're doing a convertible note right now basically that will become part of a formal be round when we go and raise to be around okay so typically when I hear about this it's typically like a bridge round to your Series B you want to buy a little more time to be able to grow into evaluation that you really want to get your Series B term sheet out is that that right yeah okay and when you say convertible note I mean are you doing this is this like venture debt or no it's a convertible note like a safe note it's convertible note it is a convertible note okay very very good alright let's wrap up here with the famous five number one what's your favorite business book good to great number two is there a CEO you're following or studying right now Elon Musk can't help but watch yeah number number three for him and I really really hope every that we're all driving electric cars here in the future so cheering for him number three what's your favorite online tool for building your business uh force number four how many hours of sleep are you getting every night 6.5 according to my Fitbit that's pretty good in what's your situation married single kiddos married 14 year old 11 year old and just rescued a puppy oh wow it's two and it will call two and a half well for that Sleep Number going down yeah that's funny and Susan do you mind me asking about how old you are no problem forty-eight that's great and last question what do you was your 20 year old self new oh my goodness I you know candidly I think I wish my 20 year old self knew that it gets better every single decade guys it doesn't get worse it doesn't get worse everyday decade it only gets better coming from coming from Susan launched we spire back in 2010 raise 10 million bucks to build this platform that helps with employee engagement employee giving back just employees bettering bettering the world honestly they're currently at about 35 really enterprise customers these are big teams 10,000 20 you know 50 100 thousand person teams using them they've just passed about a 3.5 million dollar run rate doubling you over a year from both expansion and new customer additions economics or health 125 percent net revenue retention annually and that's about 6 percent in gross revenue churn under that number 50,000 bucks to acquire $100,000 customer payback is healthy under six months 20 people between Boston and other remote locations building up this bad boy Susan thank you for taking us to the top thank you bye-bye