SaaS Interviews with CEOs, Startups, Founders
1148 We've passed $10m in ARR helping companies make sure their analytics are working
15 Sep 2018
Chapter 1: What is the main topic discussed in this episode?
Be cautious with advice.
Chapter 2: What year was ObservePoint officially launched?
Rob launched ObservePoint back many years ago, unofficially in 2007, officially in 2010. They are helping enterprise clients make sure they've got their marketing tech, their stack, their sales stack, basically any online web apps connected, making sure the information is flowing smoothly, the tags are firing. They also do that with applications and video as well. Serving 250 customers right now.
They've passed $10 million in ARR. That's up from about $4 or $5 million just 13 months ago, so healthy growth. They've raised $20 million.
Chapter 3: How does ObservePoint ensure data quality for enterprise clients?
84% annual logo retention is healthy. He's obviously working on driving that up. Spending about, you know, or getting their money back on new customers in about 14 months with a team of 80 folks based mainly in Provo, Utah. 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 of 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 Rob Ciosi, co-founder of a company called ObservePoint in 2007, helping grow the company from a lean startup to the global leader in digital data quality that today serves enterprise clients worldwide. He's a thought leader, life enthusiast, and successful entrepreneur. He has more than 15 years of experience leading innovation in the digital marketing space.
Chapter 4: What significant milestone did ObservePoint recently achieve in ARR?
Rob, are you ready to take us to the top? Yeah, I sure am. It's great to be here. You bet, man. So tell us what ObservePoint does and what you mean by digital data. Yeah, so we're a data quality platform. We're a SaaS platform, and we ensure the proper implementation of digital marketing technologies from Google Analytics to Adobe Analytics.
Any other marketing technology, we ensure that it's properly QA'd, that's collecting the data that it's supposed to and validated properly. That's data governance. Okay. So I assume that's growing as people have more options for their marketing and tech stacks or really any stack in the SaaS world. Your business is growing.
It sounds like what you're doing is you're making sure all these things are connected properly and data is flowing smoothly and accurately. That's correct. Interesting. Okay. And you said your business model is SaaS. Is that right? That's correct. Yes. Okay. And I want to go down every customer cohort, but on average, what do customers pay you per month for this service and what do they get?
Uh, between 30 and 40,000. Okay. That's first year ACV typically. Yes. Okay. And what do they get? Give me a sample. Like, what do they get? If I pay 30 grand, what do I get for that? So the first thing you get is our ability to accurately validate an implementation for digital marketing technologies.
So we have well over 600 technologies that we're experts on and we'll go back and say, okay, you're implemented correctly, you know, across 80% of your website, for example. And most of our brands are very large enterprise brands with hundreds of properties across the world, multiple teams. So there's also a process involved where we help them manage that process. Who owns the technology?
You know, what is it trying to collect? Each digital marketing tech these days is super powerful. So you can collect as much or as little as you want and trying to validate that and make sure that rolls out correctly is difficult. So are you working with like a very, very small handful of clients called a dozen or do you have an SMB like no touch offering as well?
No, we're all enterprise, but we have over 250 enterprise customers, hotels, American express, very large brands like that. Okay. And I mean, if I take 250 brands times that first year ACB average, you just gave me a 30 grand. I mean, that's what is that? 2,500 bucks a month times 250 customers. What is that? 625 an MRR per month. Is that generally the range you're in? Yeah. We're north of that.
Okay. North, like far, like I'm way off far north of that. So we just crossed actually a really nice milestone for SAS at 10 million ARR. That would be 888. That's a good milestone. It is. There should be empty champagne bottles in the background of this headshot here. There's none. If you look close enough, you'll see some empty glasses back there. That's good.
Okay, so you're past that $10 million mark, which means your ACV, it sounds like, if I take that $10 million to buy 250 customers, is actually a bit higher, right? Yeah. Yes. I mean, you asked for first bite, right? First bite of the apple, not lifetime value. So people you're adding are typically starting at 30 grand. Now, what is the playbook you're running to drive expansion revenue?
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Chapter 5: What is the average monthly payment for ObservePoint's services?
And is that all equity? Like that's all equity or is there debt on the back of that? That's all equity. And Mercado is our lead investor as well as Pelion Venture Partners, both here in Utah. Who is it? You said Marketo is the lead? Uh, no Mercado. Oh, Mercado. Okay. God, I was going to say, I thought I heard you wrong. Okay, good. And, and what is the, so weird question here.
A lot of people wonder when founders like you guys have big successes. I know the Omniture exit was a good one.
Chapter 6: How does ObservePoint validate digital marketing technologies?
I don't know what your exit was, but I assume it was a meaningful financial event. I mean, it's hard to make a wealthy person, uh, you know, feel like their back's against the wall again. So, so how are you, uh, brainwashing yourself that your back's against the wall? So you have that drive. Well, that's really interesting. I think most entrepreneurs actually just are inherently self-driven, uh,
If you were to go back and ask me of my 20 year old self, you know, how much different I am now. And then there's just experience. I don't think the drive is fundamentally changed. So most of the entrepreneurs that I see that take companies from zero to exit and that I experienced, they go on to the next project. I know very few that have just had an exit and then do literally nothing.
They all have different projects. Sometimes those projects change from technology to real estate, but they still have a project. And that's what it is for me. Tell me about your term. Yeah, I think that's the juice, if you will, inside any SaaS business. Retention, retention, retention is our focus for this year.
As we've acquired a lot of customers, one of the things that you learn is what your best customers are. I think we've really understood what those look like, feel like, and how we interact with those in the last 18 months. So the focus on the business is ensuring that we acquire, retain, and grow the right customers. From my point of view, You can do all the, it's kind of like going to the gym.
You can do all the lifts that you want and take all the right supplements and grow. But, but if you really want to hit to juice up and grow, that's, that's high local retention, you know, high local retention, 80 high 80s to low 90%. Is that where you're at right now? No, that's our aspirational goal for this year is to grow our logo retention. What are you at right now annually?
Well, we've been at 84%. We want to get north of that. That's not horrendous, right? So logo now, now is it about the same in terms of you can wear that to revenue retention? It's about 84%. No, revenue retention is north of 100%. Well, give me gross revenue retention. Well, gross revenue retention can't be higher than 100, right? No, I'm sorry. I'm sorry. You said gross. I meant net. Yeah, yeah.
So what I was asking was, what is your gross revenue retention? Is it 84% or is it higher? It's higher than that. Okay. And then what are you driving in terms of expansion revenue year over year to then get to your net number? Well, driving just through up sales. Yeah. Or you mean an actual metric? Yeah, yeah.
Like is it 10% expansion revenue and then you've got 6% churn, so you're net positive by over 100%? Yeah, it's pretty close to that. Okay, interesting. So that's pretty healthy. Now, the people that are churning, why are they churning? Are they just shutting down domains and they're lowering their ACVs or are they canceling altogether? It's a combination of factors.
One is just that we're a new technology and some customers are better equipped to use us than others. So we certainly have that. Part of that's us identifying the right customers. We have customers from APAC and other parts of Europe that have been hard for us to service. And we've also had some South American customers as well. So there's some geographic differences. And then just overall,
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Chapter 7: How does ObservePoint drive expansion revenue?
And then all of a sudden data collection breaks. And part of our technology is to instantly notify marketing departments when that happens. Tell me more about some of the other economics about growing your customer base. So what's your CAC look like today? Yeah, so basically one of the things that we really focus on is premium analytics users.
So we know our target market in our entry-level TAM, I think really, really solid. You take a look at the best Adobe brands out there, best Adobe users, And they're generally who we go after. So I think we're pretty healthy that way because we are able to really focus and know where our bread is buttered, so to speak.
And it allows us to make sure that we're not out chasing too many balls and putting resources in the company to go outside of, you know, basically to go outside of that. It's one of the reasons we are a high level partner with Adobe. In fact, last year we won their technology of the year award. Because of the relationship and the natural value add that we are to the Adobe customer base.
Yeah, I totally understand all that. And the focus is obviously a good thing. But I'm curious, fully weighted, what does your CAC look like to acquire one of these guys? I mean, I assume you have inside salespeople working these deals. Maybe you do some paid spend or conferences. What's that fully weighted CAC look like? Yeah. That's something probably we won't talk about. Okay. Okay.
And why is that? Is it just, is it higher than what you'd expect or you feel like it's a competitive thing? You don't want to share it cause you've kept it really low. A little bit, a little bit of all those things. Okay. Um, do you pay Adobe a kickback for that partnership or no, it's just out of the good of their hearts. They love the product. Yes. Well, we're an instant ROI for them.
One of the things that the company started, if you go back to our founding story, was John Pistana. So John was the co-founder of Omniture. And their biggest problem was having customers call and say the data is not right and would blame Adobe at that time, Omniture. And Omniture and Adobe would say, it's not the analytics solution, it's your implementation of it.
And there's been multiple different attempts and ways that the market has understood that this needs to be solved from tag management solutions to CMS, high-level CMS integrations. And now when you think about it, All those are front end, but there's nothing to validate in the back end.
And the changes are so rapid in today's mobile and web development cycles that you actually need something much more proactive going out and validating proper data collection more than just, hey, it's in our CMS or it's in our tag management solution, so it must be working.
Rob, when you bring on these customers, and I don't know what your sales cycle looks like, but you invest a lot to bring them on. How patient are you considering what you've raised and how big you are? I mean, how many months are you willing to wait to recapture that money? What's your payback period look like? Well, I mean, acquiring customers in the enterprise sales cycle is long, right?
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