Zoominforevenue, market cap & funding

hello everyone my guest today is henry schucke is the co-founder and ceo of a company called discoverorg he bootstrapped the company to 25 million bucks in arr and now three acquisitions later he's backed by the carlyle group and ta associates at about 165 million bucks in ar henry are you ready to take us to the top i'm ready dude your people your people are like okay we know henry's going to talk with nathan we're just going to put the ar in the bio so nathan doesn't have to hit henry about it [Laughter] i love it i love it last the last time you came on man let's see it would have been about um almost two years ago and i think at that point you had told me you were doing around 70 and now you're kind of 165. um i want to dive into that in a second but first for new listeners that didn't hear that first episode tell folks what you do so discoverorg is a sales intelligence tool it's actually used by sales reps and marketers to find the companies and the people to sell to when to reach out to them and how to get a hold of them so imagine i'm selling an information security device i know all the chief information security officers i know what projects and initiatives they're working on i know their phone number their mobile phone number their email address and i know all the people around them as well yep so you launched the company back uh i think you told me what would you say 2011 actually i launched the company in 2007. oh okay 2007. and then how long did it take you to get it to 25 bootstraps seven years seven years and is that when you sold or you held onto a little longer than 2014. uh well that's when we took private equity money so depends on your definition of sold but we sold a piece of the business to private equity in 2014. majority uh we sold over 50 okay so that was the start so i have to ask you a question how old were you in in 2014 in 2014 i was 30 29 30. and where so where was looking back now let's see there's another 30 year old listening that boots dropped to 25 million and they've got you know there's so much there's so much it's very frothy around the marketplace they've got a private reform going let us buy 60 you know mainsail partners we'll throw a mainsail under the bus for a second i love those guys but they were my first uh they were my first offer really that's actually hysterical and then two years later i got three times as much as they offered me two years previously good good small company firm say small world okay but so let's say one of my listeners now is getting a deal from mainsail and they're saying hey we want to buy you for like x amount of money i mean what are some like lessons you learned selling the majority of the company kind of i would argue pretty early on um lessons i learned number uh first of all i never found an issue with selling a majority of the company and i sort of viewed the first um i sort of viewed the first transaction like an exit and then once that happened it took a lot of sort of day-to-day pressure off of my shoulders and so i could operate in a better way because it wasn't like all of my money in the company it was like we were partners and so i had taken some chips off the table and i could be a much better operating executive um i think the exciting thing about private equity and my perspective is they've seen companies grow much beyond probably your imagination can see your company growing and so they're sort of behind you pushing you to get to the the next stage and helping you sort of believe the story of the company growing much larger but i think the key there is you have to find a great private equity partner or investor in general and i i think we sort of got lucky um because you meet all these guys and they're like oh it's just like a marriage we're gonna be partners you know we like to let entrepreneurs run their businesses and like half of them are telling the truth and half of them are not the half that are not wanna like do things that the way they wanna do them they have a vision of a ceo that may not be you that they're not gonna tell you in a deal process they're gonna you know there's just a lot of people who are you know selling you a bag of goods and it's sort of hard to tell which ones are which you just have to talk to other founder ceos that they've made investments in yep now that makes good sense okay so 2014 25 million bucks in ar you go in and take a deal sell majority too was that carlisle that was ta oh ta came before okay got it so ta first and then we introduced carlisle to the equation when did that happen so then we operated for almost four years we made a couple of acquisitions had grown pretty significantly and we're sort of at the end of what would be typically a hold period for a private equity firm we're four years into what's typically a five year hold and so ta decided we were going to go to market they were the interesting thing here is ta was like we can sell some portion of discoverorg today we can sell all of it our whole position we could sell half of it we could sell none of it and what they ended up doing was selling about uh 30 of it uh of their holdings because they took carlisle because they saw a much uh bigger future ahead of us as well and so we were a very successful company in their portfolio because you can imagine we were 25 million when they invested and from a runway perspective were probably 120 130 when carlisle came in and so last year that was this year in march okay got it and so you've added what another 35 million bucks in an are over the past couple months that's about right it's a little less than that but yeah so so this to me i look at your space and i really see you duopoly between you guys and zoom info i mean there's a lot of these little like i would call them kind of hacky-ish companies that do like an email scrape there or like something illegal on linkedin over there or like some other you know what i'm talking about how do you differentiate against zoom info and do you really see it right now as a duopoly i don't see it as a duopoly um i actually see there are a ton of companies who have momentum in the space who can spring up in a short period of time i think what you see in this space today is getting access to data has become significantly easier than it was five years ago five years ago if you wanted someone's direct dial phone number we're the only shop in town today there are a variety of different vendors who have a variety of different places that they can go to to get direct phone numbers and mobiles and personal numbers um and we have to like continuously innovate to keep ahead of those folks there are there's you know there's obviously like a long tail of what you might call like mid market and smb companies that play in this space and then there's linkedin and like in our space microsoft is the big player um and so all of us combined have nothing on uh on the size and scope of linkedin and microsoft as a sales solutions provider um and so i view microsoft as the 800 pound gorilla and then there's a whole sort of litany of other providers that are competing against microsoft yeah talk to me about acquisition strategy so you've done three acquisitions when you go out and you do make an acquisition what are you typically buying and what are you looking for yep i'm looking for growing profitable companies that uh that i can make grow faster and more profitably typically um adjacent to what you already do so you can drive arpu expansion across your current base or directly in line with what you do so you're buying a customer base in revenue it's a little it's a little bit of both so uh so one i'm looking i ideally for sort of other really interesting data sets so you're a company that does something really interesting in healthcare and i have a bunch of clients who sell into the healthcare space so i can take that data set and i can sell it to all of my clients you're a company that does something really interesting from a data enrichment perspective we made an investment in a company that does email verification and email validation for two reasons one we could use that to cleanse all of our data in a more uh optimized way and two we think just cleansing data is a core competency of ours that we can start selling to our customers as well so there has to be sort of an overlap where i can take what you're doing that you're really good at that i'm not good at today and then apply it to our 4 500 customers uh uh some way shape or form yeah um i have no insider information here but then good i was gonna say and then the other thing i would say is like most companies don't figure out their go to market motion they're they have like a really interesting product and through sort of just grit they're able to sell it a couple times and build a million dollar ar business or something like that um and so i'm also looking for like bad sales processes because i think we have a really great one and so that we could come in and sort of apply our domain expertise around go to market to a company that hasn't figured out that motion and then really accelerate it can you tell us more about that process your go-to-market strategy why is it different than what most people would expect yeah so i don't know if it's different than most people would expect it's like i think what we're doing is what everybody knows they should be doing it's just really hard to get there and there's like and the road to here is sort of littered with like mistakes and uh wasted money and but so for example we have a pretty dialed in sdr process so we have almost 50 or a little over 50 sdrs they come in they they sit in front of a computer they're they have front spin as a dialer they have outreach and sales loft as email automation tools the data flows from discoverorg into salesforce out to those tools and they come in they have a set of accounts and it tells them like here are the people that you're calling today here's the background on them here's their direct dial phone numbers they're teamed up with count executive hold on henry how many per day typically for the 50 what's the target how many appointments yeah so like for the sdr they're making calls every day there's 50 of them how many uh one of them how many calls are they making a day oh how many calls are they making anywhere from call it 80 to 150. and then sorry keep going yeah the the actual metric that we we look at more closely is how many completed demos are they doing a month and we're looking for that to be more than 20. okay 20 completed demos per month interesting um and then you are going to go into aes at some point when does the ae get involved the ae gets involved after an appointment gets set by an sdr so aes don't do any hunting on their own they're teamed up through with a pot of sbr so you can think like five aes and five sdrs are grouped together um and then the ae gets involved once the appointment is set i see so those 20 target demos per sdr an account executive is on that is giving that demo that's right interesting um the sale the sale closes does the a stay on the account or does it pass to a cs team that's incentivized with expansion it gets passed to a cs team that's incentivized for expansion now that is actually if you pause there sort of if you think about what we just talked about they're very specialized roles right there's an we actually even in sdr it's specialized so we have outbound sdrs we have inbound sdrs and then we have something called swot sdrs so our inbound sdrs if you fill out a form on our website we're going to call you in two to three minutes to try to set that demo um an outbound sbr they have a list of target accounts they use discoverorg data to go set what's you know typically a purely cold call we have a swat sdr where it's somewhere in the middle like someone's come to our website they filled out something and then we've nurtured them to a point where it's warm it's not cold but it's also not inbound and so there's three levels of specialization in the sdr role on the account executive side there's also levels of specialization there are sort of commercial reps who are doing sort of our smb accounts there are regular sort of reps and then there are enterprise reps and so they get those leads get passed based on sort of where those regular is mid-market regular would be mid-market and then when that's done that goes to a csm team so i close a deal it actually goes to a learning and development team that does onboarding and training for our customers they schedule a training and onboarding they give you sort of like all the best practices and they do live trainings with our customers you underwrite that with the setup fee past the customer we don't okay um our business is 100 recurring revenue subscription there's no professional services there's no onboarding or implementation fees it's all recurring 100 recurring and subscription okay so learning in dev team and then at what point does that get handed off to the cs rep after onboarding although the cs rep is sort of riding along the learning and development cycle and how do you def what is the moment where you say yes they're onboarded everybody's been trained interesting okay so so you mean everyone on the company that has purchased they know how to log in they know how to use it they have their usernames they've all been to tr through training interesting and then they and then yes person sort of owns the account from there okay and and so other ceos that are in your ar range that i've asked this question on i haven't gotten the same answer twice which tells me there's a lot of experimentation happening well no it's on this specific thing it's the cs incentive the customer success incentivization right so if they are some of them are quota carrying some of them are not some of them it's a pool of money that then gets distributed at the end based off a team goal some it's not are your cs folks quota carrying they are quota carrying yes interesting individually or as a group individually interesting now individually and as a group so so let's say i'm a i'm a csm that manages accounts that have over a thousand employees my quota from a revenue perspective it's based on revenue so i have a hundred dollars of business that i'm managing my quota as that rep would be to get 115 dollars from my list of accounts in the in the subsequent year so 15 expansion 15 expansion ish if i'm like a small company rep where i'm dealing only with companies with less than 25 employees and by the way we have a long you know almost out of our business is sub 100 employee companies and so if i'm cut out 100 smallest of those um more than 50 of our businesses sub 100 employee companies and if i'm working with the smallest of those so i'm working with the sub 25 employee companies then my quote is different right like i can't i'm not going to get 115 out of smb businesses it's just a different sale my quota there might be 90 so the group all of the sort of small company reps have the same quota and then but they're different quotas for the different groups as you go sort of up the employee ladder what and your most aggressive one is 115 net expansion somewhere between call it 115 and 125. and most the levers those cs folks are pulling to drive expansion it's obviously i assume seat base maybe contact base like tell me about the pricing axes that's that's right just uh and data yeah okay what about um like additional product lines all together um well the way we think about product lines is data so i may come in and say i want to buy access to all of the companies that have over 5000 employees and then that goes really well and so then i say you know what i'd like the rest of your data i'd like it on all companies that are sub 5000 employees but greater than 100 employees it's like okay great we can sell you that data that's a pro product sku that we can sell you and then obviously you have a bunch of different reps who are who are selling to those accounts so then we sell you users and then that data those are the two elements and when you roll the whole your whole business up together net revenue retention year over year i assume you're above 100 percent how far above 100 um it's close to 100. it's about 100. and that's because you have such a big cohort of smbs i have a big i have a big long tail of smb clients yeah i do you get you must get pressure from the private equity go upstream go upstream yeah it's a little bit like i get pressure two ways one um go upstream is great like we have this is the first year we have an enterprise sales team that's that's working on land and expand in a real way but then the second is like look we're gonna we're gonna serve smb clients and so as long as we're doing that we better get good at doing that yeah we can't just go like oh well you know they're smb clients so they don't renew at the same rate it's like no this is something that we can go figure out and so we're doing a lot of innovative stuff with our smb clients like giving them free access to um email and dialing solutions because they tend to be um they tend to be less sophisticated from a from how to engage with people doing more consulting with them having more consultative reps there who understand the smb space like uh you've done a couple interviews with clayton at uh at infusionsoft and i think about that business a lot because i was an smb client of infusionsoft i ran our whole business on infusionsoft until we were about 15 million in revenue and then i was like yeah i should probably graduate to like marketo or pardot and then get salesforce as the underpinning of that whole thing and that sort of happens in the smb business in the smb space you graduate um but we should be working with clients with the same mindset as infusionsoft does in the smb space which is you know grow on make them really successful and you can't just like thumb your nose at the fact that you have a big smb base yeah yeah no totally agree with you there um what do you guys what do you have today in terms of total customers about 4 500. 4 500. okay interesting and then um question on how aggressive you're being with keck you know i recently had um i'm gonna forget his name uh oh adam on ping identity you know vista obviously just kind of owned those guys and they're getting more aggressive with kind of their dollar based cache they're spending like a dollar sorry a dollar twenty to get a dollar of new ar right now are you generally getting more or less aggressive on your payback period um we're getting more aggressive but it's still really profitable it's still like a one to one yeah okay pretty good it's pretty good um and why get more aggressive well well let me let me say it's actually less than one to one which is part of the beauty of the sales model that i that i talked about even with sdrs going one to one to reps and and sort of like the optimization across that go to market layer makes the customer acquisition pro process really efficient and really profitable so just be clear here when you say less than one to one you mean you could spend like 80 cents to get a new dollar of ar that's right yeah is that the number 80 no it's no it's not 80 but it but it's it's it's slightly less than 80. okay good um interesting um walk me through so last question before we wrap up i just raised her out of time uh you let you you let my you let my boy ilya get away i'm sure you looked at data knives it goes to zoom info why didn't you make a move on that i have better technographics than day to night is that what you just told okay i was about to say i'm just going ilia listen like if you think your techno graphics are better then you need to go to henry and get a bidding war going and he's like well yeah but you think your techno stuff's better nathan i lost you i was just saying i'm just saying you have complete confidence your technographics are better than data knives i do okay good stuff let's wrap up here with the famous famous five number one henry what's your favorite business book uh the hard thing about hard things number two is there a ceo you're following or studying i really like dog culture shall we at uber yep number three favorite online tool for building your business besides your own um [Music] great question probably google apps google apps guys so unique henry i tell you what never heard this before all right number number four how many hours of sleep to get every night i get eight hours of sleep every night that's good and what's your situation married single kiddos i'm married and i have a two and a half year old oh that's exciting and how old are you i am 35 35 all right take us home here what do you wish your 20 year old self knew uh oh that's a great question what do i think my what do i wish my 20 year old self knew um to hire the most talented people you can find at all stages of your business hire more talent faster guys there you have it from henry launch discover org back in 2007 grew to about 25 million bucks in arr in 2014 sold a majority to carlisle uh back then and then uh sorry to ta uh and then ta in 2018 and they scale from 25 million bucks in ar up to 130 million bucks in arr ta then brought in carlisle sold about 30 of our holdings there he's still incentivized still growing the company broke down the sales process today as they march past 165 million bucks in arr henry thanks for taking us to the top thanks david