How Xactly Used Three Acquisitions to Cross-Sell Into 1,600 Customers (Interview with Chris Cabrera)

Introduction and Background

Nathan Latka

00:00Hello, everyone. My guest today is Chris Cabrera. He founded Xactly back in 2005 and has since led the team from startup to IPO now back to private equity owned company at Vista. Previously, Cabrera was SVP of operations for a company called Callidus, acquiring acquiring a 100 plus customers and leading a successful IPO. He holds a BS and an MA from USC and Santa Clara University. Chris, you ready to take us to the top?

Incentivizing Customer Success Teams Like Sales Reps

Chris Cabrera

00:22I'm ready.

Nathan Latka

00:22Alright. So I'm gonna actually just go like go right in. My audience is pretty sophisticated SaaS. One big debate I've had with many of the CEOs that have come on my show doing between call it 60 and $120,000,000 in ARR that have really strong expansion revenue muscles is do you incentivize the customer success team like you incentivize the sales team with the base plus commission on expansion revenue they drive. Because you service this market exactly and

00:47you see all kinds of incentive structures, what are you seeing right now? Are these companies incentivizing with the commission based structures on customer service teams?

Chris Cabrera

00:55Well they're not all doing that, and you know it kind of depends on what you're defining as customer service if you're talking about the renewals teams that we call them CAMS, customer account managers that are responsible to re up to customers. They are absolutely getting paid commissions very much like a sales rep base plus commission, we're seeing that pretty across the board. If you're talking about customer service people that are more just servicing the customers ongoing,

01:20they're not responsible for the renewals, We typically will see bonuses in that area, but you won't see typically you won't see straight line commissions you know with multipliers and kickers and presidents club eligibility. So a lot things that are more standard in the sales comp roles.

Commission Structures for Usage-Driving Roles

Nathan Latka

01:38Let me take a stab at being more specific. These would be for people, they're not account executives, but when you look at your pricing axes that these SaaS companies are pricing against, there's always a utility... At least the good one, there's always a utility based upsell. For Twilio, it's number of API calls, for HubSpot it's number of contacts, you have your own upsells. So the people inside of those teams that drive the usage metric up, do

01:58you see those people being comped like a salesperson with commissions?

Chris Cabrera

02:04Not always, we don't always see that. I think some of the better companies are recognizing that they shouldn't do that, and they're recognizing that comp can drive dramatic behaviors and whatever it is you're trying to drive, whether it's getting the customer to engage more, or be online more, add more contacts or whatever the case might be. And so we are seeing progressive companies doing that, but I still think there's a lot of companies and a lot

02:31of it has to do with the fact that they're hamstrung on excel based systems.

Xactly's Customer Base and Incentive Flexibility

Nathan Latka

02:35Yep.

Chris Cabrera

02:35And

02:35so when you're in these excel based paradigms, it's very, very difficult to create complex you know compensation routines to provide the dangling carrot which is the visibility you know through your cell phone or whatever. And so I think that's one of the reasons that companies just avoid it. What we find is in our customer base because they have a tool that allows them to do that elegantly, easily and with great visibility, we find them paying all

03:02kinds of people, the people that you're talking about as well as almost a 100% of the population including receptionists at the front desk. I mean literally anybody who is seeing a customer or interfacing the customer in any way, shape or form, they're using our systems to motivate behaviors to have that experience be better.

Founding Story and Salesforce as First Customer

Nathan Latka

03:19Very cool and those of you that are not familiar with obviously Chris' s platform, that is exactly what they help do which is why I led with some of those questions. Chris, let's take a step back here for a second. So you've gone from kind of nothing, believe 2005 was founding year to an IPO to then you know teaming up with with Brian and Robert and the great team at Vista and then go private again. Let me

03:38just get some context, where was your head in 2005? Were you kind of broke on the street, had to make this thing work? Where... Why'd you launch the thing in the first place?

Chris Cabrera

03:46Well, it's quite a long story, I'll try to make it very quick and you can read about it on my book called Game the Plan on Amazon. I was working at a competitive company selling on premise software, the big license, the big hardware, the big install and salesforce.com sort of pushed me out of the nest and said, we're not gonna buy this from you because we... It's the wrong religion, it needs to be SaaS, it needs

04:09to be cloud, the cloud is the future. Of course in 2005 there weren't that many cloud companies and so I tried like heck to get my old company to embrace the cloud unsuccessfully, we might have had some bad words that ended in me getting fired, and so I was going into Christmas in 2004 without a job, but with Salesforce saying you know, if you build this we will come, and I had eight years of experience in

04:35this compensation you know realm and you know it was kind of a no brainer to go start this company. And so that's what I did and Salesforce true to form became my very first customer today or our longest standing non user.

Nathan Latka

04:48I love that. And now obviously you raised capital for the company pre IPO, so up to the IPO not including funds raised on IPO date, how was the company capitalized total amount in?

Chris Cabrera

04:57It was like 96,000,000.

Nathan Latka

04:59Okay and out of curiosity, now obviously when was IPO date, what year?

Chris Cabrera

05:02It was 2015.

Nathan Latka

05:03Okay, so economics is a little different back then, but generally speaking what was your ARR to funding ratio? Was it close to one to one or did you get more revenue than funding?

Chris Cabrera

05:12It was just very close to one to one, a little less.

Nathan Latka

05:15Okay. So I'd consider that in today's day and age actually high leverage with the outstanding exception being Eric where there's like a two to one ratio which is an incredible story at Zoom. But okay, you had obviously leverage there. So leading up, first off was Salesforce just a customer or did they also invest out of the fund?

Chris Cabrera

05:30They were an investor too.

Nathan Latka

05:31Yeah, okay interesting. So your first 100 customers you got, did you rely on the Salesforce app ecosystem or walk me through how you landed those folks?

Chris Cabrera

05:39Were partners with Salesforce right out of the gate, we worked very closely with them, but you know we also were partners with Oracle and everybody else. And so we were really just focusing on at that time companies that had 300 or 400 or 500 sales people in their sales force, that was sort of our sweet spot in the early days. And you know what we found in that sweet spot was companies that were definitely using manual

06:02based, excel based systems, they had tons of pain, lots of error rates and no web based visibility or cell phone based visibility. And so it was a little bit like you know shooting ducks in the pond in those early days because you know the ROIs were phenomenal and fantastic. So that's kind of how we started with the first 100 companies, we're all like say mostly high-tech companies that were embracing SaaS. We were generally either the first

06:27or second SaaS app they were buying back in those days. Because it just wasn't that many SaaS apps.

Nathan Latka

06:32And Chris, what kind of contract, those team size, the target you just articulated, what was kind of average first year ACV back in that day? Were talking about $100,000 kind of plans or north or south?

Chris Cabrera

06:40Yeah, probably about a $100,000.

Acquisitions and Expanding the Product Suite

Nathan Latka

06:42And where have you matured to today, are you kind of more upstream or downstream from there?

Chris Cabrera

06:45Well interestingly we sort of done both, clearly you know we just... I mean it's only been less than a year since I talked to you last, in that timeframe we have done another acquisition, so we've done three acquisitions in the last fifteen months which is allowing us to sell a lot more products, which is getting our ASPs going much higher. We just closed the largest initial deal we've ever done in fourteen year history just last month.

07:12So we're starting to see much

Nathan Latka

07:12Which company was that?

Chris Cabrera

07:12Oh we can't say, I didn't give any permission to talk about it, it's very large

Nathan Latka

07:19Oh it's not public yet?

Chris Cabrera

07:20No, not the name of the company, no.

Nathan Latka

07:22Oh okay, okay. Well I mean look I harassed the hell out of Andre just from paying, we had numerator on, we had bill on at media, I go you guys are all getting calls after the $14,000,000,000 fund closes, know Reggie going, you know Vista going guys listen we got to deploy the capital, find some places to deploy it responsibly and let's rock and roll.

Chris Cabrera

07:39Yeah, well that's what's been so much fun about being part of the Vista family, you know it was part of the reason we took the company private was you know they sort of said, we believe in your vision, we want you to go from an ICM company just handling sales comp to an SPM company which is sales comp and all the surrounding areas like territory management and sales planning and on and on. And so go find

1,600 Customers and Cross-Selling Strategy

Chris Cabrera

08:02those companies that can build up the story that you've been wanting to tell Chris and we'll support you and it's been an incredibly fun ride, but the benefit is exactly what you were saying, we're seeing these much larger ASPs, we're going back and able to sell, we have 1,600 customers now all over the globe, we're able to go back to them and upsell, cross sell all these different products now that we have. Whereas before, we were

08:24kind of fairly much a one trick pony, we had comp and that was sort of it. So we've expanded our TAM pretty dramatically.

Net Revenue Retention and New Bookings Mix

Nathan Latka

08:32Chris, we're running out of time here, I want to get this number since it seems to have been a focus. Obviously doing additional acquisitions allows you to drive ASP up, allows you to drive expansion up, obviously does amazing things to you in economics across the board if your pro formas pan out. When you look at the historical cohort that you signed up a year ago on kind of first year ACV that are renewing kind of in

08:49the past one or two months, what are you typically expanding those accounts to kind of year one over year two?

Chris Cabrera

08:55It's well north of 100%, know I don't know the exact number because it does bounce around depending on whether it's SMB or mid market or enterprise. But we're upselling and cross selling quite a lot, in fact you know something like high double digit teens percentage of our new bookings is coming from these new products that we've acquired in the last fifteen months.

Nathan Latka

09:19Cross selling them into the current base?

Chris Cabrera

09:20That's right.

Nathan Latka

09:21Yeah. So net revenue retention, are you guys north of one forty at this point across the entire base?

Chris Cabrera

09:25Probably not that high. No.

Nathan Latka

09:27Okay. You think you can get there though if you keep doing the acquisitions, you keep cross

Chris Cabrera

09:27Yeah. I do.

Nathan Latka

09:27Yeah. Yeah. Alright. Very good. Last question here. Right when Vista does the deal, I'm assuming you were looking at a lot of other players as well. Vista saw something that other people didn't pay so maybe they could pay the most for the deal which is why you did it plus they're great partners. What's the first change or

09:44maybe the first two changes you made post Vista acquisition that only Vista would kind of would have been able to kind of help you see and help you execute?

Denver Center of Excellence Post-Vista

Chris Cabrera

09:54Yeah, that's a great question. Mean we did so many good things with the company. I think one of the things we did was we had offices all over the place, we had people all over the place, and we sort of said let's create a center of excellence in Denver where we already had a small footprint, had about 75 people in Denver. You know, just two years later now we have 350 people in Denver on its

10:15way shortly to 500. And so we've really consolidated a lot of our hiring into that single area and I think that has been a very positive thing for the culture of the company, a lot of you know just getting everybody under the same roof working rather than spread out all over the place. We still have a lot of offices elsewhere, but that center of excellence approach was a Vista initiated program which I think has been great.

Counterintuitive Contract Changes: Longer Deals With Annual Increases

Nathan Latka

10:40Anything counterintuitive related to unit metrics, for example Andre told me that he's actually pushing his dollar based CAC up to drive competitors out of the channel, then when they leave you can drop the CAC lower. Most people would say keep your CAC as low as you can. Are you doing any counter intuitive things?

Chris Cabrera

10:53I think know, think one of the counter intuitive things was something we call rule of x, which is this idea of we used to sign three year deals and during the three year deals there was no increases annually. And one of the things we decided to do was go with over five or seven year deals and have annual increases every single year in the contract. It certainly seemed counterintuitive, we thought we would get tremendous push back.

11:21But in fact it's proven out to be a great thing for us in our business and our customers like it as they're locking in, they like the longer term contract, they're happy with the ability to buy all these additional products. So you know that's something I wouldn't have seen or foreseen a couple years ago.

Nathan Latka

11:38Yep, last question and then we're gonna wrap up here. Who gets to a billion dollars in ARR first, you or Reggie?

Chris Cabrera

11:46Reggie's a little bigger than me, but I'm gonna give him a run for it. I love Reggie. He's a he's a wonderful guy.

Nathan Latka

11:53Guys there you have it. Xactlycorp. Check out his book Game The Plan. He published it back in 2014 in the heat of this as he was going public and then taken private by Vista here recently. Now looking to scale past our 1,600 customers driving ASPs up higher with additional acquisitions using the war chest that is the Vista $14,000,000,000 machine behind him. Chris, thank you for taking us to the top.

Chris Cabrera

12:15Thank you very much Nathan. Good talking to you.