How Workable Reached 20,000 Customers and 60% Growth After Ending 2018 Slightly Below a $20M Run Rate (Interview with CEO Nikos Moraitakis)

Nathan Latka

00:00You're gonna love this interview. Just got done editing it. I'm glad I got it live for you. I'll be in the comments for the next thirty minutes hanging out answering any questions you have. In fact, leave a comment below about data points or what you think is gonna happen to the company, and I will respond to every comment. Additionally, if you're just loving the content, click the thumbs up and I will go and check out your

00:18profile as well and give your videos some love as well. In the meantime, enjoy the interview.

Host Introduction and Company Overview

Nathan Latka

00:25Hello, everyone. My guest today is Nikos Moraitakis. He's the CEO of Workable, makers of the popular recruiting software used by 20,000 companies in a 100 countries. He led the company from its inception in 2012 to a fast growing organization with 300 employees in The US and Europe, raising 95,000,000 of venture financing from top European and American investors. Alright, Nikos, you ready to take us to the top?

Nikos Moraitakis

00:45>> Nice to see you, Jan.

What Workable Does and Customer Count

Nathan Latka

00:46Good to have you back on. Alright, so give us an update. And for those that missed the first episode, quickly tell us what the company does, and are you pure play SaaS?

Nikos Moraitakis

00:55>> It's a pure play SaaS. Workable is a recruiting solution for employers, mid sized companies. Mostly, we're operating all over the world. We have about 20,000 customers. What the software does is it helps you find, evaluate, and manage the whole process of hiring people.

Nathan Latka

01:14And it goes just because they're all 20,000 paying customers, correct?

Nikos Moraitakis

01:17>> That's correct.

Nathan Latka

01:18That's significant growth. When you came back on in May 2018, you were at 6,000. Is that right? That's a lot of growth.

Nikos Moraitakis

01:24>> Yes. What's happening is that we also have an SMB product that is appealing to smaller companies, let's say, in twenty, fifty, 100 employees, which is pay as you go. They can just go and just pay for the hires they're making. So we have a lot of small customers. About three quarters of our customers are companies with fewer than 100 employees.

Average Contract Value Across the Base

Nathan Latka

01:45I see. Okay. So if you then took a kind of an average, right, of your entire base, what's the average customer paying you per year, per month to use the technology, would you say?

Nikos Moraitakis

01:54>> I think the average customer relies slightly below 10 ks.

Nathan Latka

01:57It's slightly what?

Nikos Moraitakis

02:00>> Slightly above 10 ks, I'm sorry.

Nathan Latka

02:02Slightly above 10 ks annually?

Nikos Moraitakis

02:08>> Yes.

Nathan Latka

02:08Okay. That I mean, that's up significantly. Right. So last time we came on the show, you said ACV is about 3,000 across the base. So you've more than tripled your average ACV?

Nikos Moraitakis

02:17>> Yes. Because in the last couple of years, we've seen a lot of traction from midsize companies, let's say a few 100 or a few thousand employees, and these tend to come with higher CVs, obviously.

Nathan Latka

02:30I got it. But but when you look at the average, I mean, you opened up top of funnel, that would pull your average down because you're getting more customers in that are paying way less. You said two thirds of your customers have less than a 100 employees.

Nikos Moraitakis

02:40>> It's it's happening both ways actually. Okay. But the net effect is normal in such companies that affects us. You get bigger companies in the mix. Typically, the ACV goes up even if you have an SMB product.

Nathan Latka

02:52Yep. Yep. Well, I mean, the reason I'm asking is if I take 20,000 customers times that ACV you just gave me, mean, that would put you at like 16,000,000 a month in revenue, which I know you're doing well, but not that well, I don't think.

Nikos Moraitakis

03:03>> No, no, no, year, per year, I'm sure, per year.

Nathan Latka

03:07Yeah. No. I know. Yeah. So if I take 20,000 times a $10,000 ACV, that's $830 per customer per month. 830 times 20,000, right, is 16,000,000 a month in revenue, which I know is,

Growth Rate and VC Expectations

Nathan Latka

03:34When do you break 30,000,000 in ARR?

Nikos Moraitakis

03:39>> I think it's gonna be this year.

Nathan Latka

03:40Okay, so you're close, I was gonna say, I was guessing that's what would it be about? You have three months left in the year, you think you can break 30?

Nikos Moraitakis

03:45>> Around the end of the year, we're be somewhere.

Nathan Latka

03:49Okay. And what is that up from? So a year ago, what was the run rate you finished with?

Nikos Moraitakis

03:54>> It was it was about 20 slightly below 20.

Nathan Latka

03:58Okay. So so I mean, good growth, not a 100% year over year growth, though. Were your VCs not happy with that?

Nikos Moraitakis

04:04>> Yeah, absolutely. Absolutely. Because it's a huge market. The international part of the market is seeing a lot of growth. I mean, we're seeing in Asia and Europe a lot of people are switching on to these sort of solutions, and there's more stuff coming down the line. Right now we're launching video interviewing capabilities, we're launching assessments, we've launched international ad ons, recruiting marketing. So basically the revenue of the customers themselves are growing because we're doing more for

04:33>> them. Mhmm.

Nathan Latka

04:34But but again, once you've raised $95,000,000 I mean, at this scale, I mean, you wanna see a 100% year over year growth, right? So going from 20 to 30, I imagine was not exciting for your VCs. How do you manage their expectations?

Nikos Moraitakis

04:45>> To be honest with you, you know, I think, you know, the growth obviously is one parameter, but it's also, you know, how you're growing, how much money you're spending, how efficient your sales are. So actually, we're happy to be at 60% growth. It's the whole picture of the PMM is obviously Yeah. The result.

Series C Raise and Runway

Nathan Latka

05:07Now when you raised that, that last one was recent. Right? Because last time you one, you had about $39,000,000 to $40,000,000 raised. So you raised like $50,000,000 to $55,000,000 recently.

Nikos Moraitakis

05:14>> We we raised another 50,000,000 last summer.

Nathan Latka

05:17Last summer. Okay.

Nikos Moraitakis

05:19>> We still have a long way to go with that. Actually, to be honest with you, we raised quite a bit for how much we're burning.

Nathan Latka

05:26Quite a bit for what?

Nikos Moraitakis

05:27>> Compared to how much we're burning.

Nathan Latka

05:30What does that mean? Help me understand that.

Nikos Moraitakis

05:32>> I mean, we have a long runway even after a year following the fundraise.

Nathan Latka

05:37I see what you're saying. When you raise that 50,000,000, you raised for like twenty four months of burn versus like twelve months of burn.

Nikos Moraitakis

05:43>> Nearly three years of burn actually.

Nathan Latka

05:45I mean, okay, that's a lot. Why'd you go, I mean, obviously you take dilution, the more money you take today, the more dilution you take. Why raise for three months of runway, or three years?

Nikos Moraitakis

05:54>> We got the right investors. We have a long term plan. I think also right now the markets are pretty good for raising money, if you get a good deal, you just pick up the extra money. So so far, in all the rounds, we ended up picking up a little bit more than we needed, and we needed it.

Nathan Latka

06:13Yeah. Okay. No. I think I'm

Nikos Moraitakis

06:16>> not the only one who will say this.

Cash Burn and Acquisition Plans

Nathan Latka

06:17No. No. There's a lot of people that would say that they're raising more than what they need right now because they think the macroeconomic conditions are really good for raising. So, I mean, I'm I'm not hitting you. I'm just trying to understand where your brain was at. 50,000,000 raised on for a three year kind of runway, that'd mean burn is something like 1,400,000 a month, at least that's what you're comfortable with. Is that about where you're

06:36at right now? 1.4 a month?

Nikos Moraitakis

06:37>> Quite a bit less right now. Actually, at the end of the day, we're burning less than 10,000,000 a year.

Nathan Latka

06:43Less than, okay, good. So I mean, that's in less than $800,000 per month basically.

Nikos Moraitakis

06:47>> We have the ability to use additional money to do acquisitions, to invest in R and D in the next couple of years. There's a lot of new stuff we do.

Nathan Latka

06:57Yeah. So I mean, most of this 50,000,000, you probably still have sitting in the bank then. Correct?

Nikos Moraitakis

07:00>> Exactly.

Nathan Latka

07:01Yeah. Is it all of it sitting in the bank?

Nikos Moraitakis

07:03>> Well, most of it. Yeah.

Nathan Latka

07:04Okay. So when you think about acquisitions using that capital, what kind of acquisitions would be interesting to you?

Nikos Moraitakis

07:12>> Right now we're very interested in the recruiting marketing space and what's happening with job sites that deviate from traditional job sites and create communities and have, you know, richer audiences in terms of the data, their intent, and where you can help people actually source better candidates. There are a lot of local ones, there are a lot of vertical ones, and these are closer to ATSs than they are to job sites.

Nathan Latka

07:42So, okay, so you're looking for for more kind of HR tech tools, whether it's like doing interviews via chatbots instead of putting a human on it or just things like that?

Nikos Moraitakis

07:51>> That sort of thing too.

Nathan Latka

07:52Interesting. Okay, so 20,000 companies using you, 70,000,000 candidates. How many hires have you placed over the past year?

Nikos Moraitakis

07:59>> Over the past year, it must have been something like bit less than half a million.

Nathan Latka

08:03Okay. And over your total life, about a million hires. Correct?

Nikos Moraitakis

08:06>> About a million actually, but they must be nearly about a million and a half total hires.

Nathan Latka

08:12That's mean, that's that's pretty good. Really good. Now your revenue model, are you charging a flat SaaS fee, or is it somehow tied to like a percent of first year salary of the employee you're placing?

Nikos Moraitakis

08:23>> We charge a flat SaaS fee.

08:27>> In some of our products, it would perhaps make sense to mimic the recruiter and agency business model, but we try to stay away from it.

08:38>> It's a complex discussion over there, but in fact what we're trying to do is essentially to replace and automate some of what agencies do in the future, and we felt that following their business model would not send the right message.

Team Size and Engineering Headcount

Nathan Latka

08:54Yep. What's your team size today? How many people?

Nikos Moraitakis

08:56>> It's about 300 people right now.

Nathan Latka

08:58300? Okay. How many engineers?

Nikos Moraitakis

09:01>> The engineering team must be 90 to 100 people, yeah.

Sales Team and Quota-Carrying Reps

Nathan Latka

09:05Okay. And any do you employ a lot of, like, quota carrying sales reps?

Nikos Moraitakis

09:10>> Yes, absolutely. About a third of our team right now are, you know, sales related.

Nathan Latka

09:16How

09:17many carry quota though?

Nikos Moraitakis

09:23>> About twenty, twenty five.

Nathan Latka

09:25Okay, 25ish. And what's their motion look like? Is it field sales, inside sales, demos?

Nikos Moraitakis

09:32>> We typically do transactional inside sales, meaning sales cycles below twenty days, very often just like a few days. But lately we have a lot more consultative inside sales or occasionally field sales for bigger customers.

Largest Customer Size and Market Positioning

Nathan Latka

09:50Yeah, yeah. I mean, when you look at whoever your largest customer is, are they paying you more than 1,000,000 a year?

Nikos Moraitakis

09:55>> No, no.

Nathan Latka

09:56Okay, so you

Nikos Moraitakis

09:57>> have Yeah, no

10:00>> don't have steak dinner sales, no?

Nathan Latka

10:02Yeah, yeah, yeah. That's a fly out and do a steak dinner. So what, I mean, what would you put your largest customer at? Like 500,000, a 250,000 a

Nikos Moraitakis

10:08>> Customers are like low 6 figures.

Nathan Latka

10:11Low, okay. So your customer paying you the most right now annually is low 6 figures.

Nikos Moraitakis

10:16>> Exactly.

Nathan Latka

10:16Okay. Do you think there's opportunity to have three, four, five X that helping them place more candidates or no, your growth is gonna come from getting more customers, like new brands altogether?

Nikos Moraitakis

10:26>> To be honest with you, we're not so keenly interested in million dollar contracts, because that would necessarily mean that the product would become less appealing to the smaller customers. Right now, the way the market is, we are the leading player with companies with fewer than 500 employees, and we don't want to lose that.

Nathan Latka

10:46Who's the leader above 500 employees?

Nikos Moraitakis

10:49>> I think that you will find people like iCIMS,

10:55>> perhaps Taleo, it's a non software from Oracle. iCIMS is probably the leader over there, but people like Greenhouse and SmartRecruiters are also doing good work in that area.

Nathan Latka

11:05Yeah, Colin now has private equity behind him at iCIMS. Are you in any acquisition talks with him?

Nikos Moraitakis

11:11>> Even if I were, I couldn't tell you, but no.

Nathan Latka

11:14Let's go to hypothetical land here for a second. Does that marriage make sense?

Nikos Moraitakis

11:20>> Who knows? Maybe it would. I have no idea.

Nathan Latka

11:24I don't believe you haven't thought about it.

Nikos Moraitakis

11:27>> It's too early.

Churn by Customer Cohort

Nathan Latka

11:32All right. Fair enough. Talk to me about churn. So churn is critical, obviously, in a SaaS company last twelve months, what's gross revenue churn been around?

Nikos Moraitakis

11:42>> Well, for we have to categorize our customers. The the bigger customers that go through inside sales, and the more typical SaaS customers are about a 100%, 95 to a 100. The smaller customers, their churn is a lot bigger, like 15 to 20% growth.

Nathan Latka

12:02Sorry, you said the middle, the smaller customers are 15 to 20% gross revenue churn?

Nikos Moraitakis

12:08>> Yeah.

Net Dollar Retention and Expansion Revenue

Nathan Latka

12:09Okay. Does expansion revenue on those cohorts more than make up for the churn?

Nikos Moraitakis

12:14>> Actually expansion makes up for the churn pretty decisively. But I thought you asked for growth.

Nathan Latka

12:20Well, I know what I was asking for. So ignore over the past twelve months, ignore all the new customers you added. If you just look at churn revenue on your old customers plus expansion on the old customers, is your net revenue retention above a 100?

Nikos Moraitakis

12:32>> If you add expansion, then the revenue retention is above a 100 for annual call for customers. For the monthly, the small ones, it's about 85%.

CAC Payback Periods

Nathan Latka

12:42Okay. Got it. Good. How do you okay, guess that makes sense. The reason I'm asking is because as you back into CAC, right, I'm sure you're willing to spend a different amount for a small customer versus a larger one. But regardless of the cohort, are you optimizing for a twelve month payback?

Nikos Moraitakis

13:00>> Yes, typically the payback is for the small customers is actually six or seven months and for the bigger customers is twelve to fourteen.

Nathan Latka

13:07Okay, twelve. Now are you

Nikos Moraitakis

13:08>> generally That's the industry.

Nathan Latka

13:10Are you generally getting more aggressive there or less aggressive?

Content Marketing and Organic SEO Strategy

Nikos Moraitakis

13:15>> What has happened over the years, we've been very successful in the past with the content marketing operation. Right now I think we have the most popular HR website in the world with about 25,000,000 uniques a year for HR professionals. So a lot of our leads are coming inbound through organic channels and SEO. So for the smaller customers, we don't tend to spend a lot of money, so it's, you know, it's a net profit from the very

13:43>> beginning. For the bigger customers, obviously, you have sales costs, and there, you know, it's a choice. Actually, right now we're trying to ramp, which means we're spending a little bit we're willing to take a bigger CAC to accelerate the growth.

Nathan Latka

13:56That's good. Yeah. That's what I was asking. And then you have the money to do it. Right? You can be aggressive that way. Are you planning on raising any additional capital?

Nikos Moraitakis

14:04>> Not anytime soon.

Nathan Latka

14:05Just because you don't need it. Right?

Nikos Moraitakis

14:09>> Yeah, absolutely. Mean, we have plenty of runway right now.

Nathan Latka

14:13Yeah. When you, that 50,000,000, was that a Series B?

Nikos Moraitakis

14:17>> It was a C actually.

Nathan Latka

14:18It was a C. Okay, so this is a little old data because you did it over a year ago, but generally speaking, when founders are thinking about their Series C round, how much of the company are they gonna sell usually?

Nikos Moraitakis

14:30>> I think in C rounds, I think typically somewhere below 20%. It's not like A and B rounds. It's usually like ten, fifteen, that sort of thing.

Nathan Latka

14:38Mhmm. Okay. So like if you sold less than 20% of your company for the 50,000,000 Series C, you're saying valuation there was obviously I mean, you put your valuation there at like $250,000,000, basically.

Nikos Moraitakis

14:49>> A little over 200.

Nathan Latka

14:50Yeah. Can you break next year? I mean, I would say if you double from 30 to 60 at the end of next year, you could potentially start pushing that billion dollar kind of valuation mark. Is that reasonable or is that too aggressive?

Nikos Moraitakis

15:01>> I guess so. But to be honest with you, the theoretical valuation of preference stock is not my main concern.

Nathan Latka

15:08It unlocks, as we saw with Mr. Newman at WeWork, it does unlock additional capital for you that's non dilutive.

Nikos Moraitakis

15:15>> Of course.

15:18>> Having a good valuation generally is a good thing, but for me the primary thing is to have a company that grows the state of it. There are plenty of companies in the HR space which, because of a mix of a good growth with low burn and a steady big market, have achieved remarkable outcomes. I don't know, like for Bamboo, for example. They've had remarkable outcomes because their whole P and L was not just focused on, you

15:50>> know, growth at all costs.

Gross Margin and Rule of 40

Nathan Latka

15:51Yeah. I mean, but the tricky thing is even with you. Right? So if you burned, right, 10,000,000, right, on 30 top line, that's negative 30% EBITDA margin on growth of 50 to 60%. So your rule of 40 multiple is actually below the target of 40.

Nikos Moraitakis

16:06>> Exactly. You want to be much below that. Depends then what margin, because we have margin of 87%. Yeah. Which is pretty much software.

Famous Five Rapid Fire Questions

Nathan Latka

16:15Yeah. Yeah. Okay. Let's wrap up with the famous five. Number one, what's your favorite business book?

Nikos Moraitakis

16:20>> My favorite business book? I think it's Fooled by Randomness by Talheb.

Nathan Latka

16:24You said Alchemist?

Nikos Moraitakis

16:26>> Fooled by randomness by Nicholas Taleb.

16:29>> Fooled by randomness.

Nathan Latka

16:30Number two, is there a CEO you're following or studying?

Nikos Moraitakis

16:34>> CEO.

16:36>> And Naval, like everyone else.

Nathan Latka

16:39Right. And Naval, AngelList?

Nikos Moraitakis

16:40>> I love him.

Nathan Latka

16:41Number three, what's your favorite online tool for building your company?

Nikos Moraitakis

16:45>> Online tool.

16:51>> I don't have a favorite one.

Nathan Latka

16:53Okay. Number four. How many?

Nikos Moraitakis

16:55>> So many I like, that's what can't be for.

Nathan Latka

16:58How many hours of sleep are you getting every night?

Nikos Moraitakis

17:00>> I am getting consistent eight hours of sleep every night. I used to used to sleep for five hours and think that was clever, but it wasn't. Getting good sleep is very important.

Nathan Latka

17:13And Nikos, what's your situation? Married, single, kids?

Nikos Moraitakis

17:17>> I'm married, I have two kids.

Nathan Latka

17:19Two kids, alright. And how old are you?

Nikos Moraitakis

17:21>> I'm 43.

Nathan Latka

17:22Last question. What do wish your 20 year old self knew?

Nikos Moraitakis

17:27>> I wish I knew how easy it is to create a company and, you know, build whatever product you like and, you know, make a career out of it.

Nathan Latka

17:36Guys, there you have it. Workable.com finished last year in a 20,000,000 run rate. We'll finish this year at a 30,000,000 run rate. So fifth caught 50 to 60% year over year growth, burning about 10,000,000 annually again to drive that growth, working out the economics, raised 50,000,000 last year to bring the total fundraise to about 90,000,000. They saw most of that 50,000,000 sitting in the bank as Nikos looks at smart acquisition on both of customers, right, have

17:56a less than a twelve month payback period on most of their base, but also can deploy that capital, do some strategic m and a work. We'll see what happens. In the meantime, Nikos, thanks for taking us to the top.

Nikos Moraitakis

18:04>> Thank you very much.

Nathan Latka

18:07You guys know I fight like heck to get these data points for you from these CEOs that rarely do these kinds of shows. If you want more shows like this, make sure you subscribe right now. We're trying to get 10,000 YouTube subscribers by the end of September here 2019, and it would mean the world to me if you clicked now to subscribe. Additionally, I've got two more great interviews for you. If you want more data points

18:31from the world's leading SaaS CEOs, click and watch one of them right now.