SaaS Interviews with CEOs, Startups, Founders
1085 We're #1 In Salesforce for Call Routing, Tech with $10m+ in ARR
14 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 Josh Tillman.
He began building his company, DialSource, in 2005 while studying at the University of California, Davis, to seal the gap between business and consumers through analytics and automation. The engineering firm has since changed the way modern enterprises communicate, earning Product of the Year honors in 2016 and 2017. He received the Sacramento Business Journal's 40 Under 40 Award in 2016.
Josh, are you ready to take us to the top? I am. All right. Tell us about DialSource. What do you do and how do you make money? Sure. Well, first I'd say we are a group of professional nerds.
We enjoy tackling many of the largest, most complicated problems and enjoy the luxury of designing our own hardware and our own software from the ground up, allowing us to take our custom-built technology and wrap it around some of the largest problems for the biggest enterprises in the world using either Salesforce.com or Microsoft Dynamics as their CRM. And what does the tech actually do?
I mean, is this like a call rail or these kinds of call tracking companies? No, it's different in the space. The best way to think about it is that we are more like a native IVR PBX inside CRM. Hey, Josh, my audience won't know all those acronyms. Can you say that spelled out? Sure. In a simple explanation, we facilitate enterprise communications inside the CRM.
So we help organizations make and receive phone calls based on the data inside their CRM and allow intelligent and dynamic routing of that inbound phone call or that outbound phone call based upon data contained within the CRM. Are they an existing contact? Do they have a revenue opportunity associated to it? Is there a technical case?
And based on these data points, we create analytics with inside the CRM
and use those data points to then automate the labor-intensive processes and procedures that sales and service reps are supposed to do at the end of the conversation, often take a lot of time to do, and if not done, the most common scenario, then the data does not exist within the CRM for management to make actionable and intelligent decisions.
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Chapter 2: How did Josh Tillman start DialSource and what challenges did he face?
I won't get into too many details, but we do have accounts that are sub-Fortune 250 of the Fortune 500 that do have seats that are into the many thousands that do have price points in that range. And without getting into specific customers, because obviously you can't do that, what are you doing right now in terms of just total seats using DialSource?
we're well into the tens of thousands of seats on dial source. We're into the high hundreds-ish in terms of accounts. But as you can imagine, an account could be five seats, an account could be several thousand seats. Got it. So, I mean, it's fair to say you've gotten north of, you said low 10,000s, 20,000 seats.
Those are folks that are companies that are paying you for one of their employees to be using your platform via Microsoft or via Salesforce. That's correct. Okay. Give me more of the backstory here. When did you launch the company? So I started this out of an undergrad at the University of California.
I was writing a research paper with a handful of friends on telecommunication technology, database, and outsource labor. That college paper then turned into a publication in the American Computer Machinery Journal. I was then contacted by some early players at Salesforce.com in the early mid-2000s. And as a handful of early 20-somethings fresh out of the University of California, I
we started building some prototypes and selling a cloud-based CRM with built-in telephony into real estate, into insurance, and other industry segments. And it was at that point we were contacted by Salesforce to build our unique hardware in the programming language of Salesforce, becoming the first native communication system for Salesforce.
And 12 years later, we still are the only fully fledged for sales and rank as the number one sales application on the Salesforce AppExchange, the number two support application on the Salesforce AppExchange, and the sixth ranked application of thousands worldwide as a result of that technology. Has Salesforce approached you to buy the company? I'm not at liberty to discuss that.
Why haven't you sold to Salesforce?
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Chapter 3: What unique technology does DialSource provide for CRM systems?
Um... I don't believe that our business is in the right position to warrant the dollar amount that I would accept for an exit. I believe that we have another couple hard years of work in front of us, perhaps another round or two of funding in front of us to build the team to get to where we want to go. Part of that strategy was
diversifying our technology from not just being the leader for Salesforce, but over to Microsoft Dynamics. And so we've launched many players within the NFL. We recently just finished launching all of Madison Square Garden holdings on our Microsoft product of DialSource.
And so these type of strategies allow our organization to grow in size and in redundancy, which of course translate to the value of the organization I would accept for an exit event. So I have some follow-up questions there. Number one, how much have you raised today total? Today we've done about $7 million in funding. Okay, and obviously I imagine that was not all just convertible debt.
You've done a priced equity round at this point? Correct. Okay, got it. And when was day one, start date? I know it was in your dorm room, but what year was that? That would have been 2005. Okay, wow. You've been at this a while. 10, 11 years. That's great. Well, more than that. Yeah, 15 years. Okay, 2005. Go ahead.
To your point, though, we were a bunch of college students looking to solve problems. And then that morphed and we started generating hundreds of thousands of dollars and into millions of dollars. But we really were a technology engineering firm first and foremost. It wasn't until just a handful of years ago that I would say we really pivoted from the
being top engineers to also building a sales and marketing team and a business around the technology, which is atypical for how technology companies build by saying, let me go raise funds, put a model together and then scale. We were already doing millions of dollars in revenue before a single dollar was ever raised. What year did you raise that first dollar?
It probably would have been, um, around the early 15 timeframe. And what was trailing 12 months revenue when you do that? I'm curious how big you got bootstrapped. Uh, we were, we were doing seven figures at that point. We were doing low seven figures. Okay. Call it two, 3 million, something like that. Yes. Okay. A little bit more in the North on the high side of that. Okay.
And what are you growing at now? Year over year? What do you like to aim for? We closed last year at 121% growth of ACV of the year prior. As you can imagine, we're a lot bigger now than we were at that previous state. I would like to see this quarter at about equal to last year's revenue. So we're growing quite a lot, but we are also stacking revenue.
many of the largest enterprise organizations into multi-year contracts into DialSource as well. Payable up front? Generally. So it's generally we're getting like 12 months up front. And then as you can imagine, nobody's paying 36-month contracts up front. You'd be a genie if you figured that out. Right, right. I'd like to think we would, but we're happy to do 24- and 36-month contracts.
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Chapter 4: How does DialSource's business model work and what are their pricing strategies?
So I would say it's probably somewhere around $12,000 per account to land that account right now. But that is... Why do you talk about your CAC in terms of per account, but ARPU and other metrics are tied to seat numbers? In other words, what's your CAC per seat, or do you not look at that? We haven't been looking at that.
It doesn't translate the exact same way as we were looking at for the seats. But to be honest, there are always areas of improvement. We brought on some deep financial departments across controllers and others who are helping us make more analytical decisions as we grow, as we're chasing our next. Sure. What is the, when a new account joins you on average, how many seats do they start with?
Starting is probably around,
55 to 60 okay got it so 50 people come on paying that minimum well it's probably they probably don't get that cheap price of 50 bucks per seat with only 50 so it's probably closer to 100 or 115 yeah so 50 times 115 is 5700 bucks a month you're paying 12 grand to get them your payback there is less than three months that's healthy correct yeah that works interesting um what do you assume lifetime this is a dangerous question because it sounds like it could be actually infinite which would be dangerous uh but what do you assume lifetime value is on these accounts
It's a lot. The Sacramento Kings were our first NBA account. I think they just finished their fifth year on contract going into a three-year renewal. Same has happened at several subsidiaries at Vista Equity Partners and some other large ones. And so to your point, we're extremely sticky.
And our development roadmaps outstrip the problems our clients identify, and they're constantly growing into the technology that we're standardizing as best practices, whether it be Wall Street, academia, the USC's, the Stanford's of the world that are on our technology. and sharing these best practices.
And then as a result, we built these implementation and customer success management teams to make sure that our clients are continually growing into solving problems. And that causes major land and expand and very, very low churn. Yeah.
you assume lifetime value is on one of these guys look if i do it on a per seat basis you mentioned you have gross seat churn about 12 that's one percent per month you could assume a seat stays with you for about 100 months times that 150 point says each seat is maybe worth 11 grand to you but that's really fishing it kind of not hard numbers there what do you assume
Yeah, it's a difficult one because of the age of our organization and the fact that the size of the accounts have changed dramatically over, let's call it the last 36, 24, even 12 months for us. So the size of the account, the price per size,
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