How Yello Passed $25M ARR Selling to Enterprise Recruiting Teams (Interview with Co-Founder and CEO Jason Weingarten)

Introduction and Company Overview

Nathan Latka

00:00Hello, everybody. My guest today is Jason Weingarten. He's the cofounder and CEO of Yello, a talent acquisition software company to simplify the hiring process. His vision for reinventing the way companies acquire talent has helped Yello grow an impressive client roster. The software powers recruitment initiatives for the world's largest brands, including a 110 of the Fortune 500. Jason, you ready to take us to the top?

Jason Weingarten

00:21Let's do it.

Enterprise Focus and Target Customer

Nathan Latka

00:22Okay. So are you hyper focused on kind of Fortune five hundred? Yeah. As you know, this is a very fragmented space, and I'm curious if you've gained ground because of that focus.

Jason Weingarten

00:29We're hyper focused on helping recruiting teams love their work. That is first and foremost what we do. And what we've found is that the recruiting teams at the enterprise don't necessarily have the the tool sets that they need to be truly successful. And so that's where life has taken us.

Nathan Latka

00:46There are two kind of models though behind this. One is that, hey, we need a critical hire. That's the CIO that's ex Google, but also worked in oil and gas in Dallas. And then there's the other version of that which is McDonald's is a fortune 500 brand, their turnover is really high and then they're hiring you know a 100,000 people a year. Which kind of sector are you serving more?

Jason Weingarten

01:06So that's why it goes back to the recruiting teams. You know it's not an individual executive recruiter that's just doing like a single big fill. Obviously, are critical and we use them here at Yello. But we help the large recruiting teams

01:22make sure that they are more strategic and less tactical.

Pricing Model and Usage-Based SaaS

Nathan Latka

01:27More strategic and less tactical. Okay. Got it. Walk me through kind of how you price the product. Right? So is this a pure play SaaS company or do you have any kind of like, you know, 30% of first year pay kind of thing?

Jason Weingarten

01:37So it's a it is a SaaS play and we model based off of usage. We define usage as the products that they're utilizing on our platform, the regions in which they're utilizing it, and different segments, like they're using it for campus recruiting versus lateral hires.

Nathan Latka

01:56Okay. Campus versus lateral. Interesting. Now do you do any... You said you have upsells based on features, regions. I assume there's some kind of upsell based off just volume of hires through the platform. Is that accurate?

Jason Weingarten

02:06Usage. Correct.

Nathan Latka

02:07Oh, that's what you define usage as. Okay. Uh-huh. What if so usage can be a bunch of different things depending on where you put it in the funnel. Is it number of kind of intros you send them or actual number of hired? Where do you put the level?

Jason Weingarten

02:19So usage is often typically by volume and complexity of that volume. So for instance,

02:28if it's about a company that needs to have 10,000 hires that year, obviously that's going to be significant volume. It may be 100 hires, but they're going through 5,000 interviews. So we take a look and we see where's the place that we can provide the greatest level of efficiency, and we really focus on efficiency.

Nathan Latka

02:52Interesting, Because of the episode is short, we won't go down every customer cohort. But on average, what would you say kind of a sweet spot is for you in terms of, you know, what a company might pay you per year for the tech?

Jason Weingarten

03:02So it really depends. And I know that's probably the greatest answer in the world, but we have companies that pay us in the tens of thousands and the hundreds of thousands and the 7 figures.

Nathan Latka

03:02Yep.

Jason Weingarten

03:02So it really... Again, it goes back to that usage and and how we can ensure that their team is most efficient.

Nathan Latka

03:18But you can look your total customer base, look at the total hires or intros you send them per year, divide and kinda get an average. I mean, are we are we talking a 100 a year or a 100,000 a year?

Jason Weingarten

03:27I'm sorry. The the... What the...

Nathan Latka

03:30No, no, sorry, in terms of like intros, right? Like I'm trying to get a sense of it's if it's a 100 per year or a 100,000 per year or a million per year.

Jason Weingarten

03:38So and again, it kind of depends on the customer base. But if I were to segment it, we have some of our large enterprise that will look at doing thousands of interviews a year. We have one customer that did over 100,000 interviews. And so it's not necessarily the intro itself, because the recruiters will get that themselves through recruitment marketing and other focuses. But it could be specific interviews, it could be specific events they attend, it could

04:08be campaigns that they send. So really, we like to sell to the enterprise in the way that... In the way in which they want to buy.

Nathan Latka

04:17Yep.

Jason Weingarten

04:18And and it's usually based off what problem we're trying to solve.

Nathan Latka

04:21Let me ask this differently. We have a lot of people listening right now that are growing their teams very, very fast. What is too small for you? What should I mean, are they talking they should be doing 100 interviews per year and spending $100 on recruiting kind of software? What's the minimum for you?

Jason Weingarten

04:33So we typically look at what we'll call large enterprise as our sweet spot customer, but we have customers that have as few as 1,500 employees that are utilizing the the software, and they're probably replenishing or or or growing it, call it 10% from a a head standpoint.

Nathan Latka

04:52And cost wise, that'd be like a $10,000 ACV kind of thing?

Jason Weingarten

04:56No. We're a premium product. So I mean, we don't typically work that way. So I'd consider ourselves more of a four seasons type product of we're really focused on

Nathan Latka

04:56Yeah,

05:08wait, so Jason, so what's the number? This will save us a ton of time. I'm like, we're like dancing right now. Are we talking like a $100,000 minimum spend on recruiting kind of tools or what?

Jason Weingarten

05:16No, again that depends and we don't disclose the exact pricing, but depending on the size and scale, we see customers that are, you know, it a 50 ks in that range. We also see some that started 7 figures. Really depends. That's why if I give you an average number, it's not gonna help.

Nathan Latka

05:36No, I'm asking for a specific story and you're staying really, really vague. I'm trying to drill down on one cohort and we're still staying vague. So that's what I'm trying to do is drill down on one very specific use case. So what I just heard you say is there is a use case around a $50,000 ACV where a team might be about a thousand or 1,500 people and they're replenishing 10 to 20% of that or growing

05:5710 to 20% of that every year. Is that kind of a good back of the napkin metric there?

Jason Weingarten

06:04It depends, but I think

Nathan Latka

06:04Yeah,

Founding Story and 2008 Seed Round

Nathan Latka

06:08let's move on. So let's put this on a timeline. When did you launch the company? What year?

Jason Weingarten

06:11Launched it ten years ago. Actually '11 now, 2008.

Nathan Latka

06:15That's a hell of a year to launch a company, Jason. What were you thinking?

Jason Weingarten

06:18That was the best time. You'd launch when there's pain, especially in the recruiting space.

Nathan Latka

06:18Yeah.

Jason Weingarten

06:18We we got funding in August of of two thousand and eight, and then Lehman hit just, you know, six to eight weeks later.

Nathan Latka

06:30Holy cow. Hold on. Let... We have to dive on that. How much... So how much did you raise right before Lehman?

Jason Weingarten

06:36We did a a million seed round.

Nathan Latka

06:38Okay. And total today, you're at what? 40 or something?

Jason Weingarten

06:41Around there.

Nathan Latka

06:41Yeah. Okay. So million right before Lehman. The investors, have they already wired the money when Lehman... Like, they try and say, hey, I know we signed, we can't wire this. That everything's crashing.

Jason Weingarten

06:51So here's the fun fact. My previous company, we had sold just a few months prior and we did really well for... It was Fred DeLuca, who's the founder and owner of Subway. So that was the only investor there, did very well for him. He said to my co founder, Dan and I, what are we doing next? We said, we got this other idea, and no business plan, nothing. He just, he wired us the money.

Nathan Latka

07:15That's funny. Okay, good. So you had the money, then it crashed. Then what? What happened?

Jason Weingarten

07:20Then it was instead of building software for specific customers where that can go wrong, We built it based off what we thought and knew to be true in the space. And it gave us, I didn't realize this at the time, obviously, like you're selling recruiting software in the middle of companies not recruiting.

Nathan Latka

07:20Cutting, yeah.

Jason Weingarten

07:20Yeah, it's different, but it gave us, you've heard me say the word efficiency a number of times, it gave us the ability

07:46to work with some of these big brands that were still hiring. And we didn't have competition, because no one was crazy enough or fondant to be able to go after that segment. So I think it gave us a three or four year runway that we then utilized to create scale.

Customer Count, Including One Large RPO

Nathan Latka

08:05Interesting. You mentioned in the bio you gave me, I think 110 of the fortune 500. But how many logos or how many brands are you working with today total?

Jason Weingarten

08:12We're working with several 100 companies now.

Nathan Latka

08:12Okay.

Jason Weingarten

08:12And one of the companies is a large RPO and they work with several 100 themselves. So we're probably about 600 total large organizations that are utilizing our software.

Market Fragmentation and M and A Opportunity

Nathan Latka

08:30And why is this space, specifically the space you're in, so fragmented? I mean gut or instincts would tell you that there would be consolidation, would be roll up, but I mean, I've interviewed probably 15 people in this space. Why is there some, all with more than maybe $10,000,000 in ARR, Why is it so fragmented?

Jason Weingarten

08:45I think if you ask me that question in three months, it'll be a very different answer.

Nathan Latka

08:50Who are you acquiring right now?

Jason Weingarten

08:55More opportunities to buy organizations in probably the last three months than I've seen in the last five years. And we're bigger, so I mean that's part of it. But there is a lot for sale right now. And it's exciting as a company that we've been able to establish our own space there. So going back to the original question of why do I feel that is? There are lots of point solutions that you can get to 3,000,000

09:24of ARR, 5,000,000 of ARR, 10,000,000 of ARR. But then you grow one year from 10,000,000 to 11, and then all of a sudden funding runs out. And so getting to that next level, I think takes a specific type of culture, it takes a specific type of long term investor, and it takes to me a vision that is not just by the founder, but by a lot of really smart people. And so we've seen a lot of

09:52companies, not just in the recruiting space, but in call it overall enterprise SaaS, try to get to 10 to 25. And that's where a lot have fallen short.

ARR Milestone: Past $25M

Nathan Latka

10:01Are you at your... You guys are past 25 at this point?

Jason Weingarten

10:04We are.

Nathan Latka

10:04Is your next big target like of the 50 ish range?

Jason Weingarten

10:07Yes.

Nathan Latka

10:08How do you... Is the reason I ask that because if you've raised 46, I mean, gain significant I've just sensed it's a back of the napkin thing. I've sensed founders typically gain a ton of leverage once their ARR to funding ratio is about one to one, they tend to then go out and potentially raise additional capital at that point, or just keep accelerating revenue past the total amount they've raised. Let's say you find something that you

10:27really want to buy, but you need more cash. How would you choose to fund that? Would you do it and just raise another round of funding internally yourself or do venture debt or what?

Jason Weingarten

10:37That's a great question. So we have a decent cap table right now. So it depends on the size. If it's a deal under 10 to 15,000,000, that's probably something we wouldn't go and bring another group to the table. If it's a larger acquisition and something we view to be extremely strategic, not just a product or a team, then we leverage the expertise of our board who've been there and done this many of times to figure out

11:09what's best based off of the conditions at the time. Right now there are more opportunities than ever before, whether it's private equity, internal, venture debt, just using credit line.

Nathan Latka

11:09Yep.

Jason Weingarten

11:09So there's a lot of opportunity right now with that. I don't believe existed our last tiny acquisition seven or eight years ago.

Nathan Latka

11:28Yep. Would you... I mean, look. There's also big companies like Vista Equity that just raised, you know, $14,000,000,000. They've got to figure out how deploy the capital. You're potentially an interesting target for them, They're paying six, seven, eight x on average. I mean, would you go sell to a Vista?

Jason Weingarten

11:42I think we would look at any private equity firm. Vista's got a nice position in iCIMS in the ATS space. And they've obviously they value recruiting. So we'd want someone who's looking at recruiting and understands it. But yeah, I mean, and K1 just did a big deal earlier this week with a bunch of smaller players. But yeah, I mean, I wouldn't turn anyone down that's looking to help us grow.

Nathan Latka

12:09Yeah, it's funny. Colin comes on the podcast and I go, Colin, are you in any talks right now to sell to Vista? And he looked at me, no, no tell any. No, Nathan. No, we enjoy staying private. Okay. I then refreshed TechCrunch like you cup... Give me three months later. Right? Because this was recently, and it's like Vista, you know, goes into iCIMS. I'm like, Colin, come on, man. You couldn't give me the breaking story here.

12:27But look. Vista's playbook is buy the hub or sometimes buy the spokes and then buy the hub. And this is a very interesting play with you and iCIMS together. You know, Colin built that thing bootstrapped to basically one twenty, one thirty in ARR. It was really impressive story. So good. Okay. This is helpful to understand how you're thinking about M and A. How are we? Good. How are you what?

Jason Weingarten

12:47Back to you.

Nathan Latka

12:48No. No. Go ahead. How how are you how are you guys what?

Jason Weingarten

12:51Oh, I thought you said how am I thinking about m and a?

Nathan Latka

12:53No. No. I said I love how you're think... That was helpful to understand how you're thinking about m and a. Yeah. Yeah. Tell me a little bit more about growth rate. So if you're, you know, sub... Or sorry, North 25 today, where were you about a year ago?

Headcount Growth and Investment in Product

Jason Weingarten

13:04So we've been growing very steadily. We don't disclose specific growth rate, but I think it's better to pull through headcount to show how we're investing. And so a year ago, we were at 150 employees. Today, we're at 209. We still have almost 40% of the business is in product and engineering. So we still believe heavily that there are additional products and additional enhancements to our products that will create additional addressable market. We're still growing

13:42in what I would consider the hyper growth phase.

Nathan Latka

13:45I mean, by the way, I would put that above 50% year over year at your scale. Is that fair to say you're above between fifty and one hundred?

Jason Weingarten

13:51We don't disclose that specifically, but from a, I mean, we did hire 93 people last year.

Nathan Latka

13:57Yeah, but Jason, my audience is smart. You know what they hear when they hear you hired 93 people? They say, well, yeah, he raised a bunch of money and now he's just burning more cash. That doesn't mean growth was there.

Jason Weingarten

14:08I appreciate your audience. And I, again, we don't disclose specific growth rates, but we do. We've hired very methodically and our investor base isn't one that's just going to sit there and throw money at people. They don't feel opportunities.

Nathan Latka

14:21Yeah. But it happens all the time. I mean, Eero, you just saw today taken out yesterday by Amazon, they've raised a $100,000,000. I mean, he came on the show and basically said the same thing. Yeah. We've doubled tripled headcount. We're growing really fast. Well, no. Revenue was not growing like it should have been growing at a venture backed company and and obviously didn't didn't end up working out so well for really any common holders. So let

14:39me maybe ask this differently where you feel like you don't have to give up any sensitive information. Over the next twelve months, what would you like to see growth rate be? You don't know what it's going be, what would make you really happy to see growth rate wise?

Growth Rate Targets

Jason Weingarten

14:53We would always want to stay above, we would want to stay somewhere between in the 25 to 50% range.

Nathan Latka

15:00Okay, fair enough. Fair enough.

Jason Weingarten

15:01A good group for us. I'd be disappointed if we got into one of the traps where we're not growing strategically.

Nathan Latka

15:09Yeah.

Jason Weingarten

15:09One of the other things that that we do consider here is rule of 40 or rule of 50. And so we're we're thinking about it that way as well.

Nathan Latka

15:17And just to be clear, because some people measure this a little bit differently rule of 40 rule of 50 is essentially taking EBITDA free cash flow plus growth and making sure that that's above 40%.

Jason Weingarten

15:17Correct.

Nathan Latka

15:17Yeah, that's great. And by the way, also, shouldn't I shouldn't hit you so hard here, because we have no idea in terms of ARR what you're at. I mean, if you're at 40, right, you said between twenty five and fifty. But

15:34if you're at 40 right now, going 100% year over year is really challenging. 25 to 50% is still what may be hyper growth for that level. So so all good there. Now, where do you think most of the the growth is gonna come from expanding current logos or adding new cohorts altogether?

Jason Weingarten

15:49Expanding current logos.

Nathan Latka

15:50Really? Interesting. Okay. So are you gonna go... I mean, do you do this through buying a company and then upselling that product across your base and

Jason Weingarten

15:58Sorry. I I I misspoke there. To me, it's expanding with the same type of product to new logos.

Nathan Latka

16:05New logos, okay.

Net Revenue Retention and JMI Investment

Jason Weingarten

16:06Yeah, we still,

16:08when JMI invested us, they looked at their cohort of companies and everyone's got like an X factor. Our X factor was net retention. So that is something that we are able to grow the base because they're able to see value, we're able to save them money, they're then upsold additional products based off of their request and their usage. And we'll continue to grow that way. But we do believe it's going to be primarily through new logo

16:36expansion.

Nathan Latka

16:37I mean, I would say to have really have net revenue retention, where it is a key kind of differentiator where you have hit on something that's really special. I mean, you gotta be talking like 140, 150 ish percent annually. Is that kind of what you're seeing?

Jason Weingarten

16:49When JMI invested, we were near there.

Nathan Latka

16:52Okay, yeah, that makes it just to be clear, that's your expansion revenue from the same cohort a year ago more than outgrew any churned revenue by a function of 40 or 50%?

Jason Weingarten

17:02Closer on the bottom side of that, but yes.

Nathan Latka

17:04Okay, no, no. But I mean, that's impressive. Now, you built the internal sales team that's incentivized to drive expansion? Like, you give your customer support people commission, for example?

Sales Team Structure and Upsell Strategy

Jason Weingarten

17:13So we have a CSM team that is in charge of retention, not of what I'd call meaningful upsells. We have a sales team that's very experienced that will, if there are new opportunities and new products or new expansion opportunities, they are incentivized to help our clients achieve those goals.

Nathan Latka

17:37Last question here on just how aggressive you're being right now. So you know, what is it, I'm curious either fully weighted CAC or we don't want to talk about that per kind of customer. How you know, what are you willing to spend right now to get a new dollar of ARR?

CAC and Payback Period

Jason Weingarten

17:53So we're Chicago based. And so for us, we might be a little bit less aggressive. But, know, we still are really comfortable with anything. We like to stay close to $1

Nathan Latka

18:09Dollar in dollar out twelve month payback?

Jason Weingarten

18:12In first year. Yeah. But for us, we have opportunities to be more aggressive. It's more of a diverse growth rate.

Nathan Latka

18:22Is the board going, listen, Jason, just push to like a 1.20 or 1.30 We can go up to the eighteen month payback and still be fine.

Jason Weingarten

18:30In certain cases, they'd like us to be more aggressive in sales and in certain cases they're probably right. But we also wanna make sure like our marketing teams hit in the right vein.

18:47The last thing I want is we're not getting enough leads in based off the number of salespeople to make sure that the can be successful.

Famous Five Rapid Fire Questions

Nathan Latka

18:54Let's wrap up here with the famous five. Number one, what's your favorite business book?

Jason Weingarten

18:59Oh, that changes every day. My one right now...

Nathan Latka

19:06Wow, that's a great one.

Jason Weingarten

19:07I'll go with Culture Code.

Nathan Latka

19:09Yep, that's a good one.

19:10Number two, is there a CEO you're following or studying right now?

Jason Weingarten

19:14Yes.

19:16I would say that the main CEO I'm looking right now is... Like everything that Aaron's doing at Pluralsight.

Nathan Latka

19:24Number three, what's your favorite online tool for building the company?

Jason Weingarten

19:29Online tool for building a company? It's gotta be Gmail, right?

Nathan Latka

19:32Hey, if that's your go to.

19:33Alright. Number four, how many hours of sleep do get every night?

Jason Weingarten

19:36I just read a whole study on that you need over eight hours and unfortunately, I'm right around six.

Nathan Latka

19:43Okay. Well, that can be approved upon. Right? Alright. Last last question here. What's your situation? Married, single kiddos?

Jason Weingarten

19:51I am divorced, two kids, 11 and eight. They're both amazing.

Nathan Latka

19:58And how old are you, Jason?

Jason Weingarten

20:0041.

Advice to His 20-Year-Old Self

Nathan Latka

20:01All right, take us home. What do wish your 20 year old self knew?

Jason Weingarten

20:06A lot.

20:09The one key thing is that life is neither as good... As great or horrible as you think it might be at that time, and things things tend to work out if you stay focused.

Nathan Latka

20:20Guys, it's never as good or bad as you think coming from Jason founded Yello again, making recruiter team... Recruiting teams more efficient, working with over 600 customers right now, north of $25,000,000 in ARR, growing... He wants to be growing kinda 25 to 50% year over year, $46,000,000 raised, 209 people, net revenue retention north of a 100%. Back when JMI invested, it was call it north of maybe one forty, 130%. Right now he's being conservative, called a

20:45dollar in to get a new dollar out in terms of ARR for a twelve month payback period, but that might change as they look to scale. Jason, thank you for taking us to the top.

Jason Weingarten

20:52Appreciate it. Thanks for your time.