SaaS Interviews with CEOs, Startups, Founders
1076 We pivoted to pure play SaaS, now $1m in ARR growing 100% yoy
05 Jul 2018
Chapter 1: What is the main topic discussed in this episode?
This is the Top Entrepreneurs Podcast, where founders share how they started their companies and got filthy rich or crash and burn. Each episode features revenue numbers, customer counts, and other insider information that creates business news headlines. We went from a couple hundred thousand dollars to 2.7 million. I had no money when I started the company.
It was $160 million, which is the size of many IPOs. We're a bit strapped. We have like 22,000 customers. With over 5 million downloads in a very short amount of time, major outlets like Inc. are calling us the fastest growing business show on iTunes. I'm your host, Nathan Latka, and here's today's episode. Hello, everyone. My guest today is Chris Kenton.
He's a CEO of a company called Social Rep, providing social sales enablement to global brands since 2008. He ran a digital marketing agency in San Francisco during the dot-com boom, then ran the CMO Council. He's also been a columnist for Business Week and guest lecturer at Thunderbird. He's a coach for the California champion Drake mountain biking team. Chris, man of many talents.
Are you ready to take us to the top? Sure. All right, very good. So do you ever do business while mountain biking? Does that ever work? You know, it's funny. I wrote a piece for LinkedIn on how everything I learned about business, I learned on my bike. So absolutely. That's good. Okay. Tell us about Social Rep. What's the company doing? How do you make money?
So essentially, we are a sales enablement platform primarily for social media. And so the way that we make money is we provide timely content tools for salespeople in order to be able to provide relevant information to their buyers. So You know, the long story is we started out in the social media intelligence space. We created tools for mining social content for market intelligence.
We did that for many years. What year was that? When was launch? So that was 2008. Okay. And so you're to launch a business, by the way. Yeah. Well, you know, that's we came to we pitched about 40 VCs on our business. came to terms the week before the bottom of the market fell out. So not very good timing. Did you get it funded and wired before the crash or no?
No, actually the best piece of advice I got, one of the partners took me aside and said, you can take the money, but you need to understand the clock doesn't stop ticking no matter what's going on in the marketplace.
And he said, my best advice to you would be to step away from the table, go focus on your customers for the next year or two, see where the market lands, and then come back when things turn around. And that's what we did. And lo and behold, what we found was that focusing on our partners actually turned out to be a very sustainable way of doing business.
We did that all the way up until, I guess, about 2015. Three years ago, where that led us in order to expand our business was partnering with some of the big companies like PwC and Deloitte, where we were providing tools and services to them to scale a collection of market intelligence from social data.
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Chapter 2: How did Chris Kenton pivot SocialRep to a pure play SaaS model?
Are you certain that you are covered for this particular vulnerability? So we provide them with the content to be able to have those kinds of conversations, whether it's on Twitter, LinkedIn, Facebook, WeChat, WhatsApp, around the world in eight languages worldwide. Um, we give them that timely insight that they can bring into the conversations that they're having with customers.
Chapter 3: How does SocialRep generate revenue through its platform?
They know their customers needs much more closely, understand the pain points that their customers are having. And in that way, they can have a meaningful conversation rather than just using social media for spam and saying, I've got something for you to buy. Do you want to buy it? And are you, is it a pure play SaaS model? Uh, pretty much.
I mean, it is the SAS model, but we have services on top of it. Um, so like significant, like what percent of services in your last 12 months revenue, what percent of services make up? Uh, actually about a two X licensing revenue. Okay, explain that to me. I don't understand. So our primary focus is on licensing revenue. So companies license our platform. Right, exactly.
And then on top of that, we provide training services for social sales training. We provide training to partners to help onboard partners onto the platform. And we're beginning to train agencies to provide services on our platform to customers as well. And are we talking like, you know, huge, you know, $300,000, $500,000, $800,000 kind of annual deals on average?
Or are you playing more in the $10,000, $1,000 range? What would you say an average is? Typically over $250,000. Really? A year? Okay, now give me your team makeup. Do you have a big inside sales force? Yeah. No. What's the team size today? 12. 12 people. Interesting. What's the breakdown? So let's see.
Most of the team is actually divided between analysts who are delivering value in terms of helping interpret what's happening, market signals, providing that to customers to help them understand what are the talking points that they should really be hitting on, what should they be looking at with respect to strategy. Um, and then there are two of us that are focused on sales.
Um, primarily, uh, you know, most of our sales is inbound. Okay. So you won't see us doing outbound marketing.
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Chapter 4: What challenges did Chris face during the initial funding process?
You don't see us doing a lot of, uh, we don't do any email lead generation. We don't do any telemarketing. Uh, we don't do any spam. Uh, we've been in business for a long time. So we've got a lot of, uh, uh, relationships and a good reputation. So primarily most of our business is happening through word of mouth. Fix my numbers here, though. I'm missing something.
So if you have 3,500 customers and you just quoted a quarter million ACV on average, I mean, that puts you at something astronomical, like almost, what, $870 million a year in revenue if I multiply that? No. So many of those customers. So there's a breakdown between customers that are being subsidized by our manufacturing partners in that $250,000 licensing deal. I see. Yeah.
So they're being subsidized for that. So if you broke that down per customer, you know, that would bring it down, you know, quite a bit per customer. Got it. Got it. Got it. Got it. So the 3,500 is kind of like the end users. You have some middlemen. Those middlemen are typically the ones paying the quarter million. Right. I see. I see. Okay. And what are you growing at right now? Year over year?
Well, so since we pivoted two years ago from doing mostly back-end intelligence mining to building our platform for sales enablement, we're at about 100% year over year. So we'll double this year again in revenue for that platform. And what are you at today, if you don't mind sharing a range? We'll do a million this year on that platform. That's pretty good.
So take you back 13 months in December 16, you were doing about $500,000 in ARR? As we pivoted to the new platform, yeah. Got it. Now, does that old... Go ahead. Yeah, go ahead. Does that old platform still make up any revenue or you've completely shut that down? No. So that's actually... The old platform was our intelligence engine, which we have...
a patent on the algorithms that we use for that engine. So we incorporated that engine into our new platform, built a new front end on it to make the data that's in the intelligence engine more accessible. But we still use that back end platform to provide some of, you know, what those traditional products looked for us
uh looked like for us were basically large uh quarterly and monthly intelligence reports so we would do risk analytics opportunity analytics and provide these you know pretty monumental reports on where particular markets were moving where the opportunity was where the white space was for positioning where risks were coming from so we still have the capability to provide those to our customers that are using it for sales intelligence
That just tends to be bigger, more overarching types of strategic analysis that we do more sporadically now than we used to do. Got it. So generally speaking over the past 12 months, total revenue was call it somewhere between 800 and 1.2-ish, something like that altogether. It's all from the sales enablement platform, yes. Yeah, yeah, yeah.
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Chapter 5: What strategic partnerships has SocialRep formed to enhance growth?
I'm just trying to understand, you're not running two separate businesses here. All your revenue is coming through the sales enablement platform. Correct. Yeah, interesting. Okay, cool. How do you think about, I mean, have you identified a growth channel yet where you know you can pour gas on the fire in terms of, you know, you know the CAC, you know the LTV, go raise capital, make it happen?
Yeah, and that's kind of the position that we're in right now. So we are talking to a couple of PE firms. We're talking to a couple of strategic investors. And there are a number of plays that we could potentially take depending on how aggressive we wanted to be. So currently, our focus is on the IT enterprise channel. There's a lot of room for growth in that space for us still.
Every time that we start in the channel, we almost immediately get pulled into many other areas of the business. So we start in the channel, we immediately get pulled into direct sales, rapidly get pulled into marketing communications. It's like land and expand, right? Yeah. Exactly.
So that's one area that we're looking at is moving beyond the channel, but staying within the general market that we're in. What's that cost you, though, to land on average? It's a long sales cycle because it is a big sell. How long? Anywhere from six to 18 months. Okay. So it does take some time to go in there and demonstrate what we're capable of doing.
But beyond that, ultimately our vision is kind of in our name, is Social Rep. The idea is that sales is increasingly becoming social. People are looking for information from their peers and from people who can help them make better purchase decisions based on their own experiences.
Notwithstanding the VC fascination with automating everything and making everything bots, people still do turn to their peers to try to figure out...
Which is all great, but I think the challenge is that if you take sort of a pure VC vision, their notion is that AI and bots will almost do away with the human, that we'll reach a point of beautiful efficiency where people won't need to make decisions with input from other human beings.
They'll just have a very efficient bot that will assess their needs, tell them what they need, and boom, they make a sale. Um, our vision is a little bit different. We think that, um, you do need humans in the equation. The question isn't, you know, um, how do we do away with humans?
It's how do we make humans smarter and more efficient by using technology to automate the things that computers are really good at, but allow humans to shine into things that humans are really good at, no matter how much AI you apply, um,
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Chapter 6: How does SocialRep's customer base influence its business model?
I get it. I mean, it's a huge need. What you're doing is a huge need. Take me back to, we're running out of time. Take me back to the economics real quick. What is CAC? What have you nailed that down to? So, um, you know, we can get that down to about, uh, say 25,000 to $50,000. Got it. And then, so your payback on that is what, what are you trying to optimize for? Well, uh, in a year, uh,
The payback on that is about, what, about 5X. Okay, good. So you get your payback in about three months, two months. Right, correct. Yeah, interesting. Really interesting. And then you gave me the 35 number earlier. Tell me though, go up one layer. How many of the partners are you working with? You mean for a given channel?
Well, you mentioned that the 3,500, that's like total end users, but they're subsidized by partners you work through. I'm curious, how many of the partners are you working through? So that's what you're selling to, right? Correct. Right. So currently we've got three on our platform that are all in the IT space.
Historically, one of the things that we did when we bootstrapped initially, our model was to sell premium services to large companies, figure out how to automate what we were delivering and then expand that down. So we've market tested our platform in financial services, automotive, pharma, consumer packaged goods, entertainment, and IT.
We zeroed in on the IT market because of the robustness of the channel and because of the availability of resources through traditional market development funds that manufacturers make available to partners. And what do you think LTV is on that specific cohort? How much are those customers worth to you over their life, you think?
Um, our average lifetime, uh, relationship with customers is about four years. Yep. So over a million. Yeah. Yep. Interesting. Um, this is really interesting. So, so you really have to cater to those three customers. Those are really your fire hoses to the 3,500 end users. You haven't lost any of those before. Have you? No. The three. Yeah. Good stuff. All right. All right.
Let's wrap up here with the famous, uh, five one word answers here. Number one, what's your favorite business book? Oh my gosh, probably, oh, I know, Punished by Rewards. Number two, is there a CEO you're following or studying right now? I mean, Dion Weisler at HP is doing some amazing things. Number three, besides your own, what's your favorite online tool for growing the business? Buffer.
Number four, how many hours of sleep do you get every night? Not enough, six. Six, okay, and what's your situation, married, single, you have kids? Married, and I've got one son who's 16 years old. Oh, good. And how old are you? I am 49. 49. Last question. Take us back to your 20-year-old self. What do you wish you knew? ROI. That's it from Chris. ROI, that's what it's all about.
From building social rep, launched it back. Heck of a time to launch. Back in 2008, made the smart decision to walk away from a term sheet, focus on his customers. It's paid off. He's working through three really specific partners right now that pay on average a quarter of a million a pop to basically reach about 3,500 end users.
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