Workato Revenue, Valuation & Funding (2024)

[00:01] Hello everybody. My guest today is Vijay Tella. He is the creator and one of the founders of a company called Work Auto. He's led the creation of market leading integration technologies for over twenty five years. Before Work Auto, he was the CEO of Kik, a consumer video communications company acquired by Skype. He helped create two multibillion dollar integration products before that. He's also part of the team that created the world's first middleware platform, TIB, the information [00:25] bus, if you guys need a jogged down memory lane there, Act Technetron Software Systems, which was acquired by Routers PLC in 1994. He's also the founding on the founding team and SVP of engineering of TIBCO through its IPO. As chief strategy officer, he then helped launch Oracle's Fusion Middleware platform in 2005. Vijay, are you ready to take us to the top? [00:47] >> Yes. Of course. [00:48] Alright. I always know when a when a bio has lots of acronyms in it, you must be impressive. Right? That's how it works. [00:53] >> Oh, well, let's see. [00:56] All right, tell us more about Work Auto. What's the company doing? How do you make money? [01:01] >> So we are an integration software company. [01:07] >> Companies out there are using a lot of apps. You know, large companies have over a thousand apps. There's an explosion of SaaS in every corner of a business. And the challenge with all of that, Nathan, is that the information about your customers and your business is splintered and split across so many different apps. So you don't have a really complete or consistent view of what's happening with your business, with your customers. Workato's products, helps you connect [01:36] >> all these apps together and automate your processes that cut across all these apps. [01:42] Elastic.io, Zapier, Segment, how do you beat all these guys? [01:47] >> Yeah, I think it's a very big market. Some [01:54] >> of the tools that you talk about focused on sort of the small business segment and are suitable for just moving data between applications A and B, right? Know, Workato's heritage comes from companies like TIBCO and Technicron that you referred to earlier. You know, there's, you know, it really refers to enterprise grade integration for connecting sort of these mission critical applications in large companies. For example, when you are integrating Dropbox with Instagram, and there's a photo coming [02:35] >> in on Instagram with Nathan tagged in it, and you mistag Nathan, or you kind of tag it twice and put the photo in twice into a Dropbox folder, it's still fun, but not so in enterprises where all of these integrations and automations and workflows need to be super robust and very reliable and secure and all that. So Workato is like an enterprise [03:00] >> version of integration tools. [03:02] Got it. What would you say the average customer is paying you per month? I know you go from about $600 up to $2,500 a month and probably much higher. [03:09] >> Yeah, much, you know, even much higher. I mean, I think it's, we have Fortune 500 companies that are paying us 6 and 7 figures. But the problem is very broad. Have companies Vijay, [03:24] if I forced you into an average though, just before I move on, what would you say the average customer is paying you per month? [03:28] >> No, we're not sharing that, Nathan, but we support [03:36] >> a range of customers from line of business and sort of mid sized companies to enterprises. That's Give sort of [03:41] me a general range. I understand you wanna keep it vague, but generally between what and what, just to slim it down a little bit. [03:47] >> Well, I think, know, we have enterprise plans at 60 ks and line of business plans that go up to 30. It's sort of in the- A [03:55] month or year? [03:57] >> That's per year. [03:58] Per [03:59] >> year? That's the starting, the enterprise plans start at 60 ks per year. And then, like I said, we have, you know, we have companies that pay us 6 and 7 figures per year. [04:07] Got it. [04:08] >> And then we have line of business, which are more departmental purchases that, you know, go up to 30 k a year. So it's sort of in that range. [04:14] Okay. That's okay. Good. So we'll say kind of fair to say $30,000 ACV on average. That's about $2,500 a month. That's a good kind of sweet spot for you guys. [04:21] >> It's it's probably trending up from there, but [04:24] yeah. And and and give me now that we understand kind of the co that's kind of a sweet spot cohort. You said it's trending up. So are you intentionally trying to move up market, increase expansion revenue? [04:34] >> I think expansion has been happening very naturally for us. We have [04:39] >> companies that start on Workato, like within months they have hundreds of integrations going, and they're connecting hundreds of apps. So there's expansion within existing customers that is happening. [04:51] Is that your number one pricing lever, by way, number of connections? [04:56] >> I think we've priced by features as well as number of connections. That's correct. So the more projects you'll think of it, the more integration projects you do, the more you'll pay Workato. [05:06] Interesting. Give me more of the backstory here. So you have a well documented history and kind of this heavy tech space, when did you start this company and why? [05:17] >> Yeah, that's a really good question. So, you know, yeah, as you mentioned, our background in this space goes back a long time. Know, we invented the integration software at this company called Technicron, and then which became TIBCO, which became public, and then we started the middleware group, middleware product line at Oracle. But, you know, in between, you know, I was the CEO of a consumer video company called Quake. It was a mobile video application that grew [05:43] >> to 20,000,000 users, and it got acquired by Skype in 2011. [05:47] You guys relied, I think I remember you guys, because you relied heavily on Facebook's API, and then they shut you off. [05:53] >> Well, no, they didn't shut us off, but we were the first people [05:58] >> that basically launched with the Facebook mobile SDK. [06:01] Was that your most effective customer acquisition strategy and the cheapest for you though was through Facebook's SDK? [06:07] >> It was actually Facebook, the Apple App Store. We were the top paid Apple app in the Apple App Store for many months. [06:13] Okay. [06:16] >> And we were preloaded by carriers like Verizon, Sprint, and Quake, and Docomo onto millions of phones, Samsung and Nokia. So they all preloaded us. So we had growth coming in through social media companies, carriers, as well as handset makers. [06:37] And how much did Skype end up paying for the company? [06:40] >> They paid 150,000,000 for us. [06:42] Okay, 150. And how much had you raised? [06:46] >> We had raised 15. [06:48] Okay, so I assume this made you, it was a significant, was it this the most significant financial event of your life to that point or no? [06:55] >> Not really. I mean, was the third one for me. [06:59] Had But was it the most significant or no? No, it You had larger successes before that in terms of exiting companies? [07:05] >> That's correct. [07:06] Interesting. You obviously got your investors'money back and then some of those, so it was a good event. How does a guy like you stay motivated after you've created so much wealth? [07:14] >> Yeah, no, that's a really good question. It goes back to your earlier question on why we started this, right? So we have a long background in this space. So one thing that happened, Nathan, is when I got out of like we were part of Skype and after I did my time and got out of there, and I looked at what was happening in the world of software, what I saw was that there's just been a huge [07:35] >> consumerization trend in the enterprise space, especially with SaaS and the cloud based apps and the business users sort of driving this kind of transformation that's going on. And what I saw was the integration tools that was required to make all these apps work together and connect together remain complex and technical. [07:59] >> They kind of move to the cloud in form, but not in the spirit of it. Meaning you still needed to be like a developer or a technical guy to kind of use these integration tools. Whereas the whole business transformation, the cloud apps are being driven by business people that don't know what XML is or what JSON is and so on. So the thing that we saw was we saw maybe one of the biggest gaps in enterprise [08:24] >> software is the ability for these non technical business users to be able to connect all their apps and automate all their systems at large scale in a very dynamic environment. So we saw a really big [08:38] Vijay, what year was this, by the way? When were you launching this [08:40] >> This was in 2011 and 2012, we were looking at this whole space. And what we saw was we needed to bring the consumerization approach, the things that we learned at Quik and how you build and grow consumer products, that type of approach was really very much needed in the enterprise integration space. And so it was really, you know, bringing together a background, a long time background in the integration space with a consumer background that made something [09:09] >> that worked hard to And [09:10] who's we? How many founders? [09:12] >> I have four found, we have four founders. [09:14] Okay, that's a tough conversation to have. How do you figure out who gets what equity at the beginning? [09:19] You say, listen, I've sold a bunch of companies. I get 80%, you three split the 20. [09:24] >> Yeah, it was something like that. [09:25] Was it really? [09:27] >> Look, I think the other guys were like the rock stars, they were some of the smartest guys I've ever worked with in the integration space. [09:36] Are they [09:37] >> still at [09:37] the company? [09:38] >> They're still all at the company. You know, one of them was a very early person that created AWS, and one of them ran products at TIBCO after I left. I mean, guys are I wouldn't be doing this without them. Okay. Brains behind the company. [09:51] So twenty twelve, four of you guys, you get together. It sounds like really intelligent people. You've scaled to where you are today. How many customers are you serving now today? [10:00] >> Yeah, we have about 21,000 organizations that are, that have signed up on Workout, about 800, eight to 900 a month are signing up each month. [10:09] Okay. Now you said that very specifically, I think that was a free organization number. How many of them are actually paying? [10:18] >> You know, we have, I mean, you know, [10:21] Definitely more than what? [10:22] >> What what you know, again, I think we're not, like, you know, sharing that out, Nathan, but I I think we you know, when when you say organizations, know, Workato is is used by teams. So you have a customer success team in a large company or a finance team. And the licensing with Workato can be done at the team level or they can actually roll it up to an entire company and lots of organizations within the team [10:47] >> can roll up under that. [10:52] Can Vijay, you have above a thousand paying organizations. Is that fair to say? [10:58] >> Yeah, about. [10:59] Okay. Right around there. Okay, good. That's helpful to understand. Talk to me about growth. And the reason I'm asking this question specifically is because you said you brought growth from the consumer space and lessons from Quick into this. Name one lesson that was applicable both to consumer and you've used, you feel like exceptionally well at Work Auto. [11:18] >> No, absolutely. You know, the scope of this integration problem is so large. There are so many [11:26] >> hundreds of thousands of companies and so many different groups within these companies and with so many different apps to connect. The scope of it is so large that we took a GitHub like approach to integrations. So we have, you know, Workato is basically like a GitHub for integrations. We have about 225,000 public integrations. You know, we call these things recipes. You know, these recipes, this core concept in Workato. [11:48] Is Google Sheets to Instagram or Gmail to whatever, the different mixes. [11:53] >> Yeah, Salesforce. The more typical scenarios are like Salesforce and SAP, NextSuite, Google Sheet, these kind of things, right? If you want to integrate Instagram, you probably go to like the other tools that you were mentioning earlier. It's more business or enterprise apps that we connect, right? So we have about 225,000 public recipes on Workato or public integrations that anybody can pick up as a starting point to connect their apps. Right? And about 75% of people that [12:26] >> are creating integrations on Workato start with one of these community recipes. So this community based approach to solving an enterprise problem directly came out of our experience in the consumer space. [12:38] Interesting. Churn is always a critical component of any kind of SaaS company. What is your churn today and how do you manage it? [12:44] >> Yeah. I think the churn, you know, varies. You know, it's you know, churn in enterprise customers is basically almost nothing. You know, in smaller businesses, we do see churn, especially when people do integrations like to kind of do a campaign, you know, and they need to, you know, do integration for a couple of months, and then, you know, and when the campaign is done, they need to stop. So we see we we you know, we're not [13:09] >> again sharing some of those the numbers, but we we see, you know, like in large companies, it's larger companies, it's been very strongly expansion oriented. We just like keep, you know, with So the number of [13:22] ignore gross and net logo churn. Talk to me about revenue churn or revenue retention. Where do guys at there? [13:29] >> We're doing really well there, Nathan, but again, I'm not a [13:34] lot of Well, Jay, I can't let you say you're doing really well without backing it up with data. You're a data guy. Give me something there. What do you mean you're doing really well? [13:42] >> In the segments that we focus on, mid market and enterprise, see the churn is net very positive, meaning our expansion, we typically [13:56] >> do the same amount of new revenues with existing customers from twelve months ago than, you know, like when we have a the revenue base, we start with a set of customers. We do as much with them in the following year as we did, to land. So our expansion business, we're a platform company where like you're know, [14:20] >> when you're [14:22] Vijay, hold on. Sorry. I wanna clear this up. So if your current customer base over the past twelve months, I think what I just heard you say is that any revenue that you lose in the next twelve months, you more than make up from other customers in that same segment upgrading. Is that accurate? [14:38] >> You know, quite a bit more than that. I mean, it's like, [14:41] mean, Like how significantly more than that? Like talking 10%, 50%, 100 [14:45] >> It's at least 50% and it's higher when it goes to larger companies. [14:51] Okay, got it. Got it. So revenue expansion is greater than 50% year over Yeah. [14:57] >> Okay. Interesting. With existing customers. [15:00] Talk to me about acquisition. Obviously your recipe component, you probably have some recipe story with SEO and SEO play that helps. But talk to me about CAC. What are you spending to acquire these organizations, which you've got, you know, 21,000 of? [15:12] >> Yeah. I, you know, I don't have the numbers, you know, in front of me, but it's, you know, our CAC to [15:22] >> our, you know, sort of revenue to CAC ratios are are well over once. We're good with that. [15:28] Well over what? [15:29] >> You know, we're we're you know you know, so, Nathan, we are like, we don't share out these revenue these numbers with anyone, so I'm not, you know, like [15:37] Yeah. Vijay, sorry. The the reason I asked so have you listened to the show before? [15:42] >> No. I have. I have not. [15:43] Okay. The show drives incredible amounts of new ARR to companies that come on. And so one of the trade offs is you share lessons with hard number data and in exchange, my audience gets exposure to your tool. And so that's part of the trade off here. So I understand if you don't want to give specific numbers, but helping us in tying lessons you're teaching us with some kind of range is really helpful, and that's really all [16:05] I ask. So when you say something like your LTV to CAC ratio is really healthy, but then you say it's greater than one, a Here's the situation. Mean, our [16:15] >> company has been around for four or five years. [16:18] >> A lot of our customers have, a lot of our revenues, we've been ramping our revenues fast. Our- How [16:24] fast? Like are you talking about a 100% year over year growth or more? [16:27] >> No, we grew 300% last year in 2017. So, you know, the LTV is, you know, over you know, we are still early to kind of talk about LTV because, like, you know, we don't see the it's really much more about expansion. But what we are saying is that, in the segments that we are focusing on, mid market and enterprise, [16:52] >> both new and expansion revenues are kind of like more than what we spent. [16:58] How quickly do you like to get your money back on CAC? What payback period do you like to optimize for? [17:03] >> We [17:07] >> make that up in the, [17:11] >> I think the key thing that we focus on is like revenues over sales of a quarter over sales and marketing expenses for the previous quarter. We [17:21] do want to lot of Yeah, that's a sales efficiency ratio though. Give me the payback. I'm curious about payback period. I mean, you try and recover costs in the first twelve months, twenty four months, six months? [17:30] >> Within twelve months. [17:32] Okay, good. So, I mean, that's great. And you said you're, you know, generally an average first year ACV is around 25, 30 Yeah. [17:39] >> Reason I'm holding back a little bit on that, Nathan, is that like you saw, we've been a young company that's growing fast. So the LTV, you're able to talk a lot better about LTV with more years of history with these companies. [17:51] Yeah, sure. But Vijay, payback period has nothing to do with LTV. Payback period is a function of CAC and ACV. Yeah. Right? So I understand what you're saying about LTV. LTV can really lie to you if you're just plugging numbers into Excel sheet, but I'm just talking about numbers you already which is CAC and how quickly you get the money back. That's all. [18:06] >> Yeah, no, that's within a year. [18:08] Okay, that's great. Have you raised, I assume you raised capital or have you bootstrapped? [18:13] >> We've raised about 17,000,000 total, about 10,000,000 from ourselves, and about you know, the number one and two SaaS companies, Salesforce and Workday are investors, and so is a longtime Silicon Valley VC called Storm Ventures. [18:28] That's great. Storm both all those guys are are obviously great guys and gals. Segments right now doing about $20,000,000 in terms of ARR. Are you larger than them? [18:37] >> You know, again, we're not going I'm not going to, you know, talk to that. You know? [18:41] Generally speaking, you say you have above a a thousand organizations paying and you said at minimum, they're paying $30 a year or $2,500 a month, that's put you at about $2,500,000 a year or 30,000,000 annually. I mean, those are just your numbers multiplied. Is that generally accurate? [18:57] >> And, you know, no. I'm I'm I'm not gonna comment on that, Nathan. [19:01] Okay. Well, are one of those numbers you told me earlier not accurate, either the thousand or the $30,000 ACV? [19:09] >> I mean, the I I I think those are generally accurate, but those are all no. Those are things that have been going up. And I talked about the segments that we are, you know, that where we're the ACV for the segments that we are focused on, right, which is the mid market enterprise. [19:24] Why does it make you nervous to say you're doing, you know, more than $25,000,000 in ARR? [19:27] >> Because we're not shaking these numbers out. You know? It's, you know, it's that [19:32] Yeah. Vajay, strategically help me understand that. What makes you nervous about doing that? It's [19:40] >> I think people are gonna, you know, it's I think people, you know, we like, you know, sort of being private and, you know, sort of [19:55] >> making determination of our, like, you know, what kind of strategy approach we take, and change, you know, change path and plans and things like that, and putting so we know, like that's one of the benefits of being a private company, and we know we want to take advantage of that. [20:09] Sure. I mean, one of the things is, and one the things I have to hit on is, I mean, we see so many press releases go out that are full of PR jargon. So someone says we went from $1 of ARR to $3 of ARR. Hey, we grew 300% year over year means nothing. Right? And and so one of things I do with this show on purpose is to try and cut through that kind of stuff [20:25] and get to real numbers and credit. Yeah. Frankly, your success. I mean, it's incredible what you've built. You've had a lot of success in the past. You've learned a bunch of lessons. You're pulling that into this company. So the more numbers you can share, the more valuable it is for my audience. But [20:36] >> Yeah. But I understand that. [20:38] Yeah. But but I but I also understand your your interest in keeping things vague as well for competitive reasons. So talk to me more about team today. Where are you guys at in terms of team size? [20:47] >> We are around 80 people. Most of us in I mean, not I mean, the headquarters is in Palo Alto, but about two thirds of the team is remote. [20:54] Okay. So so okay. Interesting. Mostly remote. And where are you growing most right now? Break down that team for me. [21:02] >> We're growing most in The US and we're also growing in Asia and Europe. [21:10] I meant, sorry, engineering, sales, marketing support? [21:14] >> Yeah, I think our sales and marketing is definitely growing faster, but, you know, than engineering. We were traditionally, you know, very engineering and product focused for the first two or three years, and that's been shifting last couple of years. [21:25] Are you spending right now a bunch of money on paid stuff, or is it mostly branded content, content marketing, things like that? [21:34] >> We don't do much paid stuff. [21:38] >> It's much more, you know, we get a lot of our leads in through partners and referrals from existing customers. So it's been pretty organic. You know, we have 80 to, you know, sort of every day around like, you know, 60 to 70, you know, sign up, you know, to try us out. And a lot of that is pretty, you know, pretty word-of-mouth or through partners like Salesforce, Workday, ServiceNow, Slack, [22:07] >> you know, and [22:11] >> sort of, you know, other customers. [22:12] Vijay, before we wrap [22:13] >> Marketing it is also a big part of it. I mean, we when people are looking for us, looking for certain apps and for certain types of solutions, we show up. Yeah. [22:25] Your last fundraise, when was that? [22:27] >> About a year ago. [22:28] Sorry, you're fundraising right now? [22:31] >> No. [22:32] Are you profitable? [22:33] >> We're operating well within on our power. So at this point, that's all I'm gonna say about If [22:39] you kill all your variable marketing expenses, are you profitable? You could easily pull that lever if you needed to? [22:44] >> We can pull that lever if we if we need to. [22:47] Interesting. Great. Last question before we wrap up with the with the famous five. What year do you think you'll break $50,000,000 in ARR? [22:56] >> Well, I mean Will you do [22:57] will you do it this year? [23:01] >> You know, I think, you know, we're looking to do that, do it, you know, within the next one to two years, yeah. [23:06] Come on Vijay, that's when you get to stand on a soapbox and say, we're gonna kill it this year. We're gonna blast past it, man. [23:13] >> Yeah, no, that's, you know, within a couple of years. [23:16] Those of you listening, those of you watching, you're going, Nathan's trying to be all energetic and Vijay is just like engineer, boom, boom, boom, boom, boom. But I love it, Vijay, that's good stuff. Let's wrap up here with the famous five. Number one, what's your favorite business book? [23:29] >> I'd say it's The Hard Things by Ben Hurwitz. [23:33] >> Yep. [23:34] Number it's a good one. Number two, is there a CEO you're following or studying right now? [23:39] >> You know, I've followed [23:41] a [23:42] >> couple of people like Thomas Curian from Oracle and Vivek, who was my old CEO at TIBCO. [23:46] Okay, number three. Besides your own, what's your favorite online tool for growing the business? [23:51] >> For growing the business, you know, we use a lot of, you know, we are big consumers of technology here from Salesforce to, you know, Intercom to all kinds of tools. You know, are you talking about company tools or [24:04] Yeah, just like what you use personally to help you grow the company. [24:12] >> You know, I think, you know, for me, it's not tools that I use to grow the company, right? It's strategy and the team. [24:19] Yeah, sorry, Vijay. The question is just name a tool that you use daily that helps you keep everything organized. Absolutely, [24:24] >> yes. I think I use Pomodoro Timers to organize my own time. What's it called? Pomodoro Timers. [24:32] Ah, yeah. Pomodoro Timer. Yeah, very good. [24:34] >> And I use this tool called self control when I need to like really lock down and not be distracted by all the news and sports and politics and everything else. [24:43] >> That's good. [24:44] Number four, how many hours of sleep do get every night? [24:47] >> About seven. [24:48] That's good. And what's your situation? Married, single, you have kids? [24:51] >> I'm married with two kids. [24:53] Okay, two kiddos. And how old are you, Vijay? [24:56] >> Me, I'm 53. [24:58] 53, okay. Last question. [24:59] >> What do you wish your 20 year old self knew? [25:03] >> Well, I wish they [25:07] >> would be, you know, when I was 20, I was very impatient for results and outcomes around everything I did. I would encourage that person to focus and enjoy the process. The results will come. [25:21] There you guys have it from Vijay. Be more patient. He's had a lot of success now working on Work Auto, an enterprise version of some of the more consumer oriented folks that help really create the plumbing for the new cloud infrastructure that is growing so rapidly by connected apps, many, many different recipes. They have loads of folks using them, over 21,000 organizations, well over 1,000 that are actually paying ACV first year, call it $30 on average. [25:45] So you can do the math, figure out generally how they're doing. 300% year over year growth in 2017, which is great. Dollars 17,000,000 raised. 50% net annual revenue expansion. Super healthy. Their team of 80 and about onethree in Palo Alto, the rest remote going rapidly. Less than twelve month payback period. Pretty there efficient there with cash founded in 2012. Vivek, thank you for taking us to the top. [26:07] >> Thank you. Thank you, Nathan.