How ZoomInfo Reached $20B Valuation Growing 60% at 40% Operating Margins (Interview with CEO Henry Schuck)

Nathan Latka

00:00Founders, what's going on? You guys know I love in person events and they are back. The recording you're about to hear is from our most recent event where we had hundreds of founders come together, share intimate details, templates, KPIs, OKRs about their business, and it was something special, something special. We'd love to meet you in person. If you want to see the next live events we have coming up via our schedule. The link will be down

00:23below in the description. If you're listening on iTunes, check this out on YouTube, you'll see the links in the description. Or you can just Google Founderpath or Latka next event. We'd love to see you in person. In the meantime, though, enjoy this recording. It's a good one.

Henry Schuck

00:38>> Whose idea was it to IPO in the middle of a pandemic anyways?

Nathan Latka

00:58ZoomInfo is still founder led. Henry Schuck is the CEO and started the company while he was in law school by putting $25,000 on his and his cofounder's credit cards. You know, we're investing for the long term.

Henry Schuck

01:10>> I'm focused on building this company into something much larger than it is today. Our team at ZoomInfo is innovative. We're hardworking. We're always looking to define new possibles, and we're just getting started.

Nathan Latka

01:24Three, two, one.

01:29Marketing platform ZoomInfo opened for trading earlier today. The company's CEO, Henry Schuck, joins us now remotely from his home outside of Portland.

Henry Schuck

01:37>> ZoomInfo helps sellers find their next best customer. Whether you're a pallet manufacturer in Alabama or you're a Fortune 1,000 technology company, ZoomInfo helps sellers find those companies and find the buyers of those companies.

Nathan Latka

01:50We've got ZoomInfo set to go public this very morning.

Henry Schuck

01:53>> How is the current environment affecting you? What advice would you give if another company was out there looking to come to market right now?

Nathan Latka

01:59Congratulations. It's always a big deal.

Henry Schuck

02:01>> Let's do this.

Nathan Latka

02:11Guys, before we meet that guy, welcome to Founderpath. Whoo.

02:20Can I get a mic?

Henry Schuck

02:22>> Yeah.

Nathan Latka

02:22Yeah. Thanks. So guys, Henry Schuck, we're thrilled to have him with us. Before you meet him though, I just wanna say it's incredibly back in person. I hope it feels good. Does it feel good? Yeah. Feels good. Drink lots of coffee, keep your energy high. We've got outlets for every person so if you get bored, can just open your computer and look up occasionally to act like you're paying attention and go back to your Gmail. Okay?

Henry Schuck Introduction and Format Overview

Nathan Latka

02:41So it'll be perfect. There's plenty of extra seats on this side of the room if you wanna grab one of those as well. So let let's let's get into some of the content here. Henry's story is really incredible, right? So many many years ago before he was now a publicly traded SaaS Founder, I don't know why he responded to cold email like going on the podcast but he did and I was so impressed with how he's

03:02building the company, how he's doing it, but specifically because he was creating multiple opportunities for liquidation before IPO. There's some very non traditional stuff that he sort of did and I'm excited to have him teach us exactly how he did that.

Henry Schuck

03:15>> You bet.

Nathan Latka

03:16You bet. You bet. Bet. I'm glad you're here, man. Where are you where are you flying from?

Henry Schuck

03:19>> New York?

Nathan Latka

03:20San San Francisco. He's a San Francisco guy.

Henry Schuck

03:22>> I'm actually in Portland, but I was in San Francisco to

Nathan Latka

03:25San Francisco is open now, Yes. Okay. Alright. Very cool. This is a little bit different attire than like dorm room days.

Henry Schuck

03:32>> This is what I wear to work.

Nathan Latka

03:33What I wear to work, alright. So take us back in the story. Over the next twenty five minutes we're gonna really chat about how you got going, where you are today, where you see markets going, some of the key things that were important for you to hit your first $10,000,000 in revenue, how you did a big secondary $40,000,000 bucks when you were 27 years old and what a secondary means. And now sort of pre IPO metrics

03:54versus post IPO metrics. So we'll have fun. That's all expected, right? No surprises yet?

Henry Schuck

03:59>> No surprises.

Nathan Latka

03:59All right. All right. So, here we go. This is Dorm Room Henry. Dorm Room 25 Ks in debt. Was that on student loans?

Founding Story: Law School, Credit Cards, and $25K in Debt

Henry Schuck

04:06>> I mean I was actually like $150,000 in debt. You can't tell by my smile in this picture. But I was a $150,000 in debt if you count law school, undergrad. And then when we started the business, I put $25,000 on my credit card and my co founder put $25,000 on his credit card. For some reason Chase gave us this ridiculous limit. It made no sense for a 23 year old. But that's how we funded the business.

Nathan Latka

04:33And what was the original idea? So you guys can follow along on the bottom of this chart and see sort of Henry's product launches as they got going. But you started in 2007 with org charts. Why org charts?

Henry Schuck

04:41>> I had worked for a similar company when I was in college and we grew the company from about 300,000 in revenue as a lifestyle business to 5,000,000 in revenue. At 5,000,000 in revenue, was like $4,800,000 in EBITDA. And so there wasn't much of a business there. And so I left, I went to law school and then we founded like a company that we wanted to actually build a company around and invest inside of. And so, a

05:10>> lot of it was a replication of that company but done in a more professional, scalable way.

Nathan Latka

05:15And before we go to the next slide, just out of curiosity, stand up in the room if you're running you're a founder of a software company. Stand up real quick. Stand up. Don't raise your hand. Stand up. Stand up. Stand up. Stand up. Okay. Let me stay standing. Also stand up if you own if you own a little bit of a SaaS company. You're on the cap table of a SaaS company. Now, there we go. Okay.

05:36So, I love how we really want to curate this event. You guys are all operators. You all have upside. You're on the cap table. You all have equity. So, good. That's a good view. Now sit down. So, Henry, take us into this deal right. Explain first what a secondary is, how the opportunity came about in 2012, and how you negotiated this LOI.

First PE Approach in 2012 and the Bad LOI

Henry Schuck

05:54>> Yeah. This was a bad LOI for what it's worth. But the business was profitable because we didn't know how to run a we didn't have an option otherwise. And so you have to build a profitable business because after the $25,000 of Chase financing ran out, there was no more money to run the business. So we ran the business in this really profitable way. And then we started getting calls. We got on the Inc. 500 list and

06:19>> then we started getting calls from venture capital firms and private equity firms. The private equity firms ended up being the ones most interested in us because we had profitability and that's what they would give a multiple off of.

Nathan Latka

06:32Give a sense of that real quick. What was revenue in 2012?

Henry Schuck

06:35>> In 2012, revenue was probably $20,000,000 and it was like $10,000,000 of Yeah.

06:46>> So, when the venture capital guys came in, they said, okay, here's what we want to do. We want to buy 50% of the business, what is it, 70% of the business for 35

Nathan Latka

06:56got dollars close-up, baby. We got a close-up of the LOI.

Henry Schuck

06:58>> Yeah. Jump in there. Portion of the business we want to buy. And when we buy that business, we'll give you and your co founder the dollars. Because the business is profitable so the money doesn't Henry, what

Nathan Latka

07:10do want to say? $40,000,000?

Henry Schuck

07:12>> Was it $40,000,000 here?

Nathan Latka

07:13Yeah, the second highlight down on the left, right, you can see it specifically says part of this deal is buying Kirk and Henry, co founders, $40,000,000. This is sort of, right? Is this

Henry Schuck

07:24>> Yep. Yep. No, that's right.

Nathan Latka

07:26Okay. You keep going. See it. I know. Sorry. Sorry. Sorry. Sorry. Can you guys see it from the tables when you look up? So that's risky, right? They can all see it and you can't. You're going off memory from ten years ago.

Henry Schuck

07:38>> So buy the company, give us cash in exchange for ownership in the business. And then the things you're thinking about here, like, do I want to give up control? Do I not want to give up control? Do I like these people? How is the board going to be set up? What do they want to do? My biggest mistake during this was they asked me, what do you want to do after the investment? And in my head,

08:04>> was like, well, you're to give me $40,000,000 I could do whatever you want me to do. I don't, whatever, what do you want me to do? And so they were like, well, why don't we bring in a CEO? We'll bring in a professional CEO and they can run the company. And I was like, yeah, okay.

Nathan Latka

08:20You're 27 at the time.

Henry Schuck

08:21>> Here I'm Yeah, 27. Yep. And if you're gonna give me that money, great. Bring in a new CEO. I didn't really understand how business worked. There wasn't like networks of people like this really, back then. Like Jason Lemkin was writing some stuff on Quora. That was the extent of

Nathan Latka

08:39That's a long time ago.

Henry Schuck

08:40>> Yeah. So then he started introducing me to other CEOs and saying like, look, when we do the deal, we're gonna bring in this professional CEO. And I was like, yeah, okay, great. Luckily, this deal fell apart. And we took a year and then kind of rebuilt some of the pieces of the business. And had I taken that deal, you know, I would I don't think I would have ever been a public company CEO.

Nathan Latka

09:08Well, just going back to that for a second, you can see the yellow highlight on the right, I believe, is the proposed post cap table deal. So, you'd be down to 10% effectively. They were buying up 90%. Is that accurate?

Henry Schuck

09:21>> Yeah, that's right.

Nathan Latka

09:22So, what were some of the reasons you turned this down? Obviously, that's a big one.

Henry Schuck

09:26>> That's a big one. They actually re traded this deal. That retrading is like an industry term for, hey, I gave you an offer and then after diligence, I changed the offer on you. I gave you a worse offer.

09:40>> That's like also, if you tell somebody that a firm retreated you, it's really bad for their reputation. These guys retreated me right at the end. They said, oh, come down to San Francisco and have lunch with us. So I came down to San Francisco and they were like, yeah, there's some things in diligence we didn't like. And so we're gonna cut the deal in half. And then in a year from now, we'll have the right to

10:10>> buy the other half at the same rate as what we're proposing today. This is like really nasty. And we'll help you figure out how to scale the business. It's like what does this guy need?

Nathan Latka

10:21Of course. Of course they Yeah.

Henry Schuck

10:23>> And then I just said no.

Nathan Latka

10:26Round of applause for saying no, right, to 90% dilution. All right. So, let's keep going here with the story. Okay. So, you say no. Do you do anything in 2012 cap table wise?

Henry Schuck

10:36>> Nothing in 2012.

Nathan Latka

10:37All right. Take it to what happened in 2014?

2014 TA Associates Deal: $110M at $275M Valuation

Henry Schuck

10:39>> 2014, we decided we would pick the process back up. We hired a banker. It was a small niche investment bank in Seattle. Investment banks, by the way, I didn't know what investment bank was. Basically, it's someone who sells your business for you. They build the decks. They talk to the private equity and venture capital firms. They come to all your meetings. They're a broker, like a real estate broker but for businesses. So we hired an investment

11:05>> bank in Seattle. They built sort of the marketing materials, started talking to private equity firms, and then we brought in our first institutional capital, a firm called TA Associates, who bought 50% of the business at a $275,000,000 valuation.

Nathan Latka

11:22Pre or post?

Henry Schuck

11:24>> Pre.

Nathan Latka

11:25So, much did they put in?

Henry Schuck

11:26>> They put in 110,000,000 and then 80,000,000 of debt.

Nathan Latka

11:34Okay. Help us understand, just quickly touch on this, debt on the back of an equity round, was it the SVB sort of deals back then or who'd you go with on the debt side?

Henry Schuck

11:41>> It was a firm called NXT Capital.

Nathan Latka

11:44Okay.

Henry Schuck

11:44>> So, at this side, at that point, the company's $35,000,000 of revenue. It's growing 60%, and it has 50% EBITDA margins. So it's very profitable. And so when private equity firms do a deal like that, they can increase their return if they fund a part of the deal with debt. So instead of it all being equity that shares in the upside, they do a portion of it in equity, and then they do the rest of it in

12:14>> debt that the company has an obligation for.

12:18>> And the company pays the debt down but it juices their return because the debt doesn't participate in the upside.

Nathan Latka

12:27I'm just reading faces to see if people are following. I think they got it. They'll follow along. Alright. So, between 2014 and 2018, you grow the business, you grow the business. What was revenue in 2018?

Henry Schuck

12:38>> Revenue in 2018 would have been like pre we made an acquisition. 2018 was post acquisition. So, 170,000,000.

Nathan Latka

12:46And so was this LOI pre or post the 1.5 billion valuation?

Henry Schuck

12:50>> Pre.

12:51>> Pre. Pre. Pre.

Nathan Latka

12:59Yep. Did you know in this LOI that you were gonna use a bunch of debt to go do the ZoomInfo deal?

Henry Schuck

13:03>> No. We didn't know we were gonna do the ZoomInfo deal when we got this LOI. Okay.

Nathan Latka

13:07So explain This

Henry Schuck

13:07>> is the same firm as the other firm who I wasn't gonna do business with, but I really wanted to frame their bullshit offer next to one like a few years later that said $1,500,000,000 for a much less of a portion of the business. And so a few years later, the private equity firms or venture capital firms who come in, they have a hold period. They need to get in and out of investments usually within five years.

13:34>> And so, within five years, whatever the business is gonna do double, triple the value, they have to exit either all of the business or a portion of the business within that period of time. And so this was four years post the investment. We had done an M and A acquisition. So TA made this investment at $275,000,000 and now we're four years into the future. This offer's for 1,500,000,000. We ended up taking an offer at 2,000,000,000, which

Debt Recap and Employee Equity Pool

Henry Schuck

14:02>> TA ended up selling a portion of what they owned and then holding on to the rest. And then myself, my co founder, and then we had an employee pool of I should talk about that. We have an employee pool of shares, all participated alongside that as well. This is actually interesting. So I had a co founder. My co founder left in 2015, left the business. When he left,

14:30>> he agreed to put 25% of his ownership and I put 15% of my ownership into a pot that we set up for employees. And so private equity firms are notoriously not great at giving equity down to the last employee. So we were able to take this fund of our shares and then give it out to employees so that they would participate in the upside of the business. And so every time TA or Carlyle or anybody sold,

14:58>> the employees also had an opportunity to sell in those transactions as well. And so when we were out in 2018 selling a portion of the business so TA could get their returns internally, the employees TA sold 33% at this time. We asked the employees, what do you wanna do? They were like, we'll sell 50% at $2,000,000,000 valuation. The company's worth $20,000,000,000 now, so it wasn't the best decision.

15:25>> But they so they sold 50% of what they owned and people put a lot of money in the in the bank at that point.

Nathan Latka

15:31You sell any of yours?

Henry Schuck

15:32>> I sold 33% of what

Nathan Latka

15:34>> I owned.

15:34At that time?

Henry Schuck

15:35>> At that time. So I had And along the way, we missed a couple points, but along the way

Nathan Latka

15:40Touch on where you pulled capital out

Henry Schuck

15:42>> a little Yeah, exactly. That's what I was gonna do. So TA makes the acquisition in 2014, and then they do this thing called a recap, where they go out and they add additional debt to the business and then dividend that debt out as a return to the shareholders. It's a weird thing. I didn't know what it was. But we're like a year in, the business performed and they said, Hey, we have an opportunity to add another

16:08>> $25,000,000 in debt or 40. I honestly, I can't remember. And when let's say it was 40. When we put $40,000,000 in debt on the business, the business is super profitable, so it can continue to support paying that debt down. So we're gonna put 40,000,000 on. We're gonna take $20,000,000 as a return, and then you guys are also 50% owners. So Henry and Kirk will also take $20,000,000 out of the business at that point too. So that's

16:35>> another capital return. That was the only debt recap we did. When you do those debt recaps, you get like a you get in a room. Have you ever seen a conference room at an airport? I remember like walking through airports and going like, who does a conference in an airport? Like, that sounds horrible. You do these conferences in an airport, debt conferences. That's what they're there for. So you go to an airport conference room, and there's

17:03>> like a bunch of debt guys, people who work at SVB or NXT. There's like this group of companies that does kind of like mezzanine debt, debt that's kind of weird and takes specialization to understand. And then you pitch the business to these debt people, and then they decide what they would give you and at what rates.

Nathan Latka

17:26And so okay. Do you take capital out any other time before IPO? Yes.

Rain King Acquisition and Antitrust Review

Henry Schuck

17:32>> Post the Rain King acquisition and before this, when you put the two businesses together, we made this acquisition of a company that was doing $40,000,000 in revenue and $10,000,000 of profitability. We acquired the business, and then three months later, it was doing 45,000,000 and $35,000,000 of profitability because we optimized and we cut where there was duplication.

Nathan Latka

17:57That mainly employees?

Henry Schuck

17:59>> It was half of it was employees. Okay, this is Rain King. This is Rain King. And when we made that acquisition, because we had a whole bunch of additional profitability, we did another recap of the business. Like a small $15,000,000.

Nathan Latka

18:13Okay.

Henry Schuck

18:14>> That was the last time we did that.

Nathan Latka

18:16And then, so then take us through, you're now preparing yourself to go after one of your largest competitors.

18:23You know what my big question on this is?

Henry Schuck

18:25>> Yeah.

Nathan Latka

18:25If I was in your shoes, I mean, you read a lot of the regulators reports on sort of going into IPO. And I'm going, does Henry worry about people blocking this deal? Because if you listen to all your presentations publicly, you always say LinkedIn's our biggest competitor. We compete with LinkedIn. It's LinkedIn. It's not ZoomInfo. But privately, ignore LinkedIn. ZoomInfo was really like about $100,000,000 revenue against your 165,000,000 something like that?

Henry Schuck

18:46>> Yeah, exactly.

Nathan Latka

18:47So why did you do this deal and how did you deal with regulation? Was there any issues of maybe it not closing?

Henry Schuck

18:52>> Yeah, so when we did How disseminated is this? Is this like going on a public thing?

Nathan Latka

18:58This was your interview with me. I can see you smiling.

Henry Schuck

19:01>> Yes. I remember that interview.

Nathan Latka

19:02This was your voice in '20, I think, something.

Henry Schuck

19:06>> No.

Nathan Latka

19:07I mean, this the recording This

19:08will keep will keep

Henry Schuck

19:09>> I don't believe you.

Nathan Latka

19:14Probably a smart idea. Don't say anything there.

Henry Schuck

19:17>> It's a very big market. When we made the acquisition of Rain King, we actually you you have to get antitrust approval. And we went and and the regulators didn't love the Rain King acquisition because they felt very similar, two very similar companies. And so we actually went to Washington DC. We met with a panel of Department of Justice regulators in the antitrust division. And included like lawyers and economists trying to figure out how anti competitive these two

19:50>> companies coming together would be. They stretched it out until the last day of when they would basically deny or approve it. They approved it. We put those two companies together and then a year later we acquired ZoomInfo, which was another player in the market. That process was not as difficult.

Nathan Latka

20:10As Rain King?

Henry Schuck

20:11>> As Ranking.

Nathan Latka

20:12Wow. Did that surprise you?

Henry Schuck

20:13>> It did surprise me.

Acquiring the ZoomInfo Brand for $785M

Nathan Latka

20:16How did you get that deal done? You're buying DiscoverOrg, I'm sorry, you're buying ZoomInfo, I believe, from a private equity firm.

Henry Schuck

20:21>> This is a complicated deal from a debt perspective. So what happens here, and the company wants to You want to use debt as well as you can if you're a profitable business because And I'll do this point again. Every time you use debt, debt doesn't participate in the upside of the company. And so if I take $100 of debt and it has a 5% interest rate, and then for three years, my company grows 100%, the debt

20:50>> doesn't get 100% return, it gets a 15% return over those three years and the company participates in the upside. So when we went out to buy ZoomInfo, ZoomInfo was an $800,000,000 acquisition, just under 800,000,000. We

Nathan Latka

21:07It took me forever for you to get the freaking number. You didn't give that number out.

Henry Schuck

21:12>> Yeah. I don't think we talked about the number.

Nathan Latka

21:14We got close though.

Henry Schuck

21:15>> Yeah. Yeah. It's close.

Nathan Latka

21:16I got pretty

Henry Schuck

21:16>> Yeah. It's actually like $785,000,000, so it's pretty close. And so we had to go out and raise raise as much debt as we could, as much as the company could handle. And at the at these levels of debt, you actually have to go to Moody's and S and P and get them to rate your debt, you know, like junk rated debt. Like, I didn't know what this was. And you, like, go to S and P and

21:41>> you go to Moody's and you do the same pitch, and then they decide the rating of your debt. And based on the rating of your debt, a whole bunch of other people buy the debt at certain rates. What happened here was we ran out of debt room. Like, we took as much debt as we possibly could.

Nathan Latka

21:59Which was how much?

Henry Schuck

22:00>> Which was 1,200,000,000 we needed.

Nathan Latka

22:04Against how much of profit?

Henry Schuck

22:08>> With the combined business, you would have had about $100,000,000 of profitability. So, it was like 13 times levered, but less than that in the future. It's a lot.

22:21>> And and so but there was no more room. So you you could raise debt up to, like, 900,000,000, and then you had a hole. You had a $300,000,000 hole in getting the deal done. And so Carlyle, who came in in 2018, the Carlyle Group, stepped in and took a thing called preferred equity, which is equity that looks like equity but acts like debt. Jeez. It's like I'm a finance guy now. Disgusting.

Nathan Latka

22:51I wasn't gonna talk I wasn't gonna talk about your tie. I was listening you describe the bankers in the airport conference room going, he's trying very hard not to say negative things about these bankers.

Henry Schuck

23:01>> The so it's it's it's kinda debt, but it it's it's debt that gets a higher return. And that's really hard debt to get, especially when you when you put it behind, like, a billion dollars of other debt. But Carlyle stepped in. And so then we bought ZoomInfo with $1,200,000,000 of debt

23:21>> and started operating the business.

Nathan Latka

23:23And so 1,200,000,000 against how much of their revenue? What multiple do you pay for ZoomInfo?

ZoomInfo Revenue at Acquisition and the $240M Pass

Henry Schuck

23:28>> ZoomInfo is doing a 100,000,000 revenue, a 105.

Nathan Latka

23:31So that feel expensive at the time? Yeah. I mean, what, Vista's deals are usually like 7.5, 7.8, like nine x. That's was a high price.

Henry Schuck

23:39>> Yeah. Was a high price. And the funny thing, funny, a year later, had a A year earlier, I had an opportunity to buy ZoomInfo for $240,000,000 and I passed. And that might feel like a bad decision. Like, oh, that was dumb. He had to pay $800,000,000 one year later. It wasn't a bad decision. Like, the business wasn't ready to take on that acquisition and we would have fumbled it. A year later, we were in a much

24:03>> better place. But a private equity firm came in at $240,000,000 that year before. And they're happy to hold the investment for four to five years because that's the hold period they had. I had to come in a year into that hold and pay them for what they thought they would get four years into the future. And so they weren't gonna transact with me unless I could tell them, like, I will pay you now for what you

24:30>> what would be a great return three or four years from now.

Decision to IPO and Pre-IPO Metrics

Nathan Latka

24:35Heck of a story there. So sort of moving forward, were you did you already know at this point, obviously, you're gonna IPO when you're doing this ZoomInfo deal?

Henry Schuck

24:41>> No. You didn't? Okay. No. I thought we were putting two great private companies together, and three months in, it went really well. The integration went really well. The m and a was really positive. Everywhere we thought we had upside, we did and more. And so it was this really exciting time in the business. Three months into the acquisition, the board went, hey, maybe you should IPO. And I went like, well, I'm kind of putting two companies

25:10>> together right now. And so I don't know how I'm going to find time to set up for IPO. But they didn't care. So we started the pathway to IPO the business.

Nathan Latka

25:21And so talk us through, there's sort of pre IPO, Henry. There's a lot of Henry. So there's pre IPO, then there's post IPO. Talk to us about some of the key metrics you were looking at going into the IPO.

Henry Schuck

25:31>> So going into the IPO, we track everything. So we, obviously, on retention side, we're looking at net renewal rate, net retention rate, upsell dollars. We're looking at different products that we sell and how those are being sold. We're looking at how products are being adopted across the customer base, how they're getting implemented. On the new business side, we're looking at the top of the lead funnel. How many leads are we generating? How many of those are

25:59>> converting to appointments? How many of those are converting to good fit demos and opportunities? And how many of those are closing? And then we get a daily pacing report, which tells us, like, based on this month, we expect to close these dollars and where are we day over day over day over day, and how are we pacing against that target, and then any numbers that are off every single day. The only unique thing pre to post

Billings Complexity Post-IPO

Henry Schuck

26:29>> IPO is that in IPO world, in the public company world, analysts and investors like the billings number, and we never tracked billings internally.

Nathan Latka

26:40What does that mean?

Henry Schuck

26:42>> Billings is basically how much have you sent an invoice out for. And so if I sold a deal, however many deals I've been able to send an invoice out for, however many dollars I could send an invoice out for, that's your billings number.

Nathan Latka

26:58Wait, Henry, real quick. Raise your hand if you've ever sent an invoice and it hasn't been paid. So can't you just send out a bunch of invoices?

Henry Schuck

27:04>> I mean, you can't.

Nathan Latka

27:05I mean, you don't. They're actually sold deals. You think they're sold deals. How do you control actually, like, it's not money.

Henry Schuck

27:11>> You have like a bad debt expense that investors understand. So some portion of your dollars never get paid, and so they can discount against that. The problem with billing well, the reason why billings became important for our company post IPO is that we weren't we don't release an ARR number. We don't tell investors what the ARR number is. And instead, we just tell them the revenue number. The revenue number is a lagging indicator. Right? Or it's

27:39>> a lagging indicator. So if I sell a whole bunch of deals in March, only a third of that actually shows up in revenue in that quarter or less if it's at the end of March. So revenue is always lagging. Well, billings, what I actually sent invoices out for, is something that they could get a feel for what you actually sold in the quarter. And the problem we went we IPO ed in in the middle of the

28:03>> pandemic, and one of the things that happened to us was customers wanted more flexible payment terms. And so instead of sending annual selling annual upfront subscriptions, We started selling, like, monthly or quarterly. Well, that has a big billings issue. Right? Because I'm not sending you a invoice for your whole term. I'm sending you a one month invoice or one quarter invoice.

Nathan Latka

28:26Sorry. Explain why you did that again because everyone here is going, wait. I thought you'd do annual upfront, collect cash, no CAC issues. Why were you doing this again?

Henry Schuck

28:32>> Only because in the middle of the pandemic, people wanted more flexible payment terms. We had never done that before. And so all of a sudden, we started doing this thing that complicated the billings number. So my first earnings report, which I was like really proud of, it like, we had all our numbers, totally crushed it, like carry me out of the room.

28:51>> The analysts were like

Nathan Latka

28:52Go on CNBC. Look like this.

Henry Schuck

28:53>> Yeah. Billings, billings, billings, billings, billings, billings, What's up with billings? And I was like, we don't even we know we don't. We don't look at billings. Now we look at billings.

Nathan Latka

29:06You sent me a really funny email because I put out in my newsletter I said like I think this guy might be an IPO watch list. I think if they do it'll be like 5,000,000,000. I would go the next morning and get an email from you and it was something long. I'm paraphrasing here. It was something like, why not 10 or something. Is that what you said? It was something like Totally, yeah. It was literally like

29:24a one sentence subject line only. And it was like, why not 10 would be question mark. And I wrote back and said, well, here's my math. Here's my analysis. And of course, I'm wrong, right? So did you expect this on day one?

IPO Day One Pop and Pricing

Henry Schuck

29:35>> Well, people were telling us at this point that like this was an amazing company and the IPO markets were gonna be really excited about seeing it come out. So we expected that the company was gonna go out around 8,000,000,000.

29:52>> And, but I did, we didn't expect, I didn't expect it was gonna, it was gonna rocket the way that it did the first day.

Nathan Latka

29:58And any, I mean, are some people in here with 50 to $100,000,000 in revenue that are hiring the CFO that might be thinking about the IPO. I mean, would you do anything different? Like, is it okay that you under route or that it's basically doubled?

Henry Schuck

30:10>> Yeah, you're gonna read articles that say like, oh, the pop on day one, like, that just means you, like, did a bad job of pricing your IPO. It's not really true. Like, we had the best advisors, the best people around the table on this. You don't really want an IPO that doesn't go up on the first day, creates like bad issues and morale issues for your team. You want a successful IPO. And ultimately, the trick is

30:36>> we didn't sell a 100% of the company in the IPO. We sold, like, 10% of the shares in the IPO. And that's how all companies are. They don't sell the whole company in the IPO. Like, we're publicly traded, but most of the shares are privately held.

30:51>> So you can do a small amount in the IPO, get a kick, get a bunch of press and excitement about it, and then downstream, you sell the rest of the shares at a higher value.

Nathan Latka

31:02And so so you go to the IPO. You do well. By the way, we're gonna talk about founder dilution later on, I think tomorrow. We talk about some SaaS founders when they went public and how much they still owned of the company. And some these are very small numbers. 2.5%. You were able to optimize a bit here. Are you comfortable sharing sort of how much you owned at IPO?

Henry Schuck

31:18>> Yeah, do you have it?

Nathan Latka

31:19I can tell you 12 off the top.

Henry Schuck

31:21>> Percent actually.

Nathan Latka

31:23What do mean do I have the best ones in my head?

Henry Schuck

31:25>> There's like it's the employee pool. It's complicated. But I had 2% somewhere else.

Nathan Latka

31:30Yeah. Yeah. Cool. So talk to us quickly as we wrap up here about ZoomInfo today and what's next.

Henry Schuck

31:36>> Yeah, so a couple things. One, if you get to like $10,000,000 of ARR, you don't have a great CFO, you should probably get yourself a great CFO. And you're probably thinking, because I was you, like, I got a guy who does the books and sends the invoices and does the bank stuff. Like, what do I need a big expensive CFO for?

Nathan Latka

31:57What's big expensive?

Henry Schuck

31:58>> Probably 300,000.

Nathan Latka

32:00You paid your that higher fee?

Henry Schuck

32:02>> First one, probably $2.50, 300.

Nathan Latka

32:04Okay.

Henry Schuck

32:04>> It's worth every penny if you get the right CFO. The great CFOs are business strategists, and they help you understand the rhythm of the business. They help you see where to invest behind the company and how the business operates. And you have a feel for it because you're a founder. CFO makes your life a million times easier. Don't wait too long for that hire.

ZoomInfo Today: 60% Growth, 40% Margins, 12 Acquisitions

Henry Schuck

32:30>> Look, we're public. The company's growing 60% a year. It's doing it profitably at 40% operating margins. We've done 12 acquisitions in our history. We'll continue to do M and A.

Nathan Latka

32:40Who are you buying next?

32:43I try. You used to tell me everything. A little YouTube recording. Now, nothing.

Henry Schuck

32:47>> Yeah. Didn't you know, for what it's worth, Nathan has the best content on this stuff. It's why I'm here. It's why I respond to his emails. It's the most it's the most dead on content.

32:59>> And the way he asks questions in interviews, like, nobody really understands the SaaS space well enough to articulate questions the way he does, which I think, by the way, is why people come on and why they, like, share information because usually you're talking to like an analyst who doesn't understand your business or a journalist who really doesn't understand like business, period.

33:23>> But we're going to continue to grow the business. We help sales marketers and recruiters hit their numbers, find the best candidates. It's a SaaS platform. It's an annual subscription. There are multiple dimensions of it. Are there customers here?

Nathan Latka

33:38Raise your hand if you use ZoomInfo.

Henry Schuck

33:39>> Yeah.

Nathan Latka

33:40Thank you guys Nice.

Henry Schuck

33:41>> Very

Nathan Latka

33:42And you guys should they've got a booth right outside of the nursery area. You should definitely chat more. You've got some interesting new products coming out as well. But, again, Henry, incredible growth story here. Anything you wanna sneak in that I didn't ask?

Henry Schuck

33:53>> No. But maybe just a piece of advice. Please. Like, someone asked me the other day if I'm having fun. I'm not. Like, by the way, the job is just too hard. It is just too hard. There are too many moving pieces. It is not fun. I am fulfilled. I am challenged. I would never do I there's nothing else I would wanna do professionally, but it's not fun. And so I respect everything that you guys are doing.

34:21>> It is a hard job. You should embrace it. It does not get any easier. It's hard all the way through, but it is the best thing I could ever imagine doing.

Nathan Latka

34:33Guys, Henry Schuck, ZoomInfo. Give it up.