SaaS Interviews with CEOs, Startups, Founders
1159 SF Company w/ $50m Raised "Of course we're burning cash!"
26 Sep 2018
Chapter 1: What inspired Zack to start Pantheon?
After doing a lot of consulting work, having a lot of success with his agency, growing at about $5 million in revenue, 2012 started early prototyping on Pantheon. Launched now today, has raised over $50 million, has 150 folks in San Francisco and other remote locations. Again, helping folks scale what they're doing on their websites faster, more aggressively, and more efficiently.
It's obviously a huge market. They've got well, they've got tens of thousands of customers. So a minimum statement would be definitely north of 10,000. They've got customers paying a minimum of 30 all the way up to millions of bucks in terms of annual contract values and 30 bucks a month.
So you can just multiply 30 bucks times 10 grand and say they're definitely north and I think probably well north of 300 grand per month in revenue with very low gross churn. This is the Top Entrepreneurs Podcast, where founders share how they started their companies and got filthy rich or crash and burn.
Chapter 2: How did Pantheon evolve from consulting to a SaaS model?
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.
Chapter 3: What differentiates Pantheon from other website platforms?
My guest today is Zach Rosen. He pioneered the first large-scale Drupal website for the Howard Dean campaign in 2003 and then co-founded the world's first Drupal development shop, Civic Space. He then went on to co-found a successful Drupal development shop, Chapter 3, and also co-founded Mission Bicycle.
When it started as a professional website development epiphany, we're doing it wrong, evolved into an all-in-one platform after he and a few trusted colleagues got together and started solving problems. We're going to jump into Pantheon today. Zach, are you ready to take us to the top? Sure. All right. So tell us about the company. What's Pantheon doing?
Chapter 4: How does Pantheon generate revenue from its customers?
How do you generate revenue?
Yeah. So we are a website operations platform for WordPress and Drupal. So we host websites, but our real value is our developer tools. And we're built for marketers who want to iterate really quickly on the websites.
Got it. And so how are you different than like a WordPress or Weebly or Wix or Squarespace?
Yeah, so the website industry is a very large industry. It's about $200 billion a year. So as an industry, we spent more money on our websites than anything else, more than digital advertising.
Chapter 5: What is the customer base like for Pantheon?
And there are a few different segments of products. So on one end of the marketplace, you have the Wix's, Weebly's, Squarespace's. And those are built for companies where the business owner typically is building the website themselves. So you're choosing a template, buying the main name, and then launching a website in a couple hours. So those are not our customers.
So we work with companies where they have professional marketers on staff, and the marketers are designing and building the website to drive the business. And then it was an enterprise part of the marketplace where you have customers who spend upwards of $3, $4, $5 billion on a single website implementation.
Okay, so you're playing only in the enterprise space then, and it's a SaaS model? We're much more in the mid-market. Okay.
Chapter 6: How does Pantheon manage churn and customer retention?
Okay. Is it, is revenue model wise, is it a pure play SaaS model? Yeah, it's all SaaS. Okay. So like, I mean, what, on average, if you are paying you a grand per month or what, what's the average would you say?
It's a wide, it's a wide range. So it ranges from, you know, a few hundred dollars a year, you know, 20, 30 bucks a month up through, we have customers, you know, in the millions.
Okay, got it. But so I mean, those are, you know, developing in terms of your engineering resources for $20 a month customer versus a million dollar your customer, very different product roadmaps. I mean, where are you generally focused SMB or the million dollar plus range?
Chapter 7: What are the growth metrics and goals for Pantheon?
It's actually you'd be surprised. So the product, the core product is the same for a million dollar customers as our $25 a month customer. And it's because we built it for web teams. So the commonality is that the smaller customers are serviced by agencies. So the agency has a web team that's building dozens of websites or hundreds of websites that can service customers at that scale.
And then the larger customers, the websites are bigger and have, you're right, there are some product differences. There's security, compliance, scalability, performance, all that kind of stuff. Uh, that they have, but you know, it turns out folks who, who have small businesses care about performance as well. So it's essentially the same product.
What, I mean, but there's, there's a reason someone's paying you 30 bucks a month versus 30 grand a month, right?
Chapter 8: What advice does Zack have for aspiring entrepreneurs?
Is it mainly like number of seats on the team? Is it an SLA agreement? I mean, what is it?
Yeah, it's a good question. So it is a combination of number of sites, traffic of the sites, and then support requirements around the sites.
Okay, fair enough. Got it. Good. Let's go back here and get more of the backstory. So what did you launch the company officially in?
So we got to market in 2012 and it came out of the consulting work that we were doing. So we specialize essentially in DevOps for large scale website projects. So we helped rebuild Economist and projects for the NBC where they pay upwards of a million dollars just on the DevOps infrastructure. And we did that all by hand. We give it back to the IT teams at the end of it.
And typically, the customers really did not have the skill sets internally to manage the infrastructure themselves. You know, IT teams typically have the skill sets to manage servers and SLAs around them. But when you get in the world of website DevOps, you have CDNs, caching, APMs.
You know, the whole LAMP stack, and then you have dev environments, test environments, deployment systems, caching systems. It's a very long kind of spew of technologies that you have to master. And so what we would see the pattern would be basically that the website developers themselves would have to do the DevOps because the IT teams just didn't have that background.
which wasn't any fun for them. So it'd be like, hey, Jen, the only one we trust to deploy changes, guess what your new job is? You're now gonna deploy everyone's changes, which is pretty miserable for Jen. So eventually the light bulb went off. We did that project about a half a dozen times.
And- So Zach, what was the consultancy revenue before you started thinking about SaaS? When you were doing 2 million a year, 5 million a year, a million a year? Yeah, it's around 5 million. 5 million a year. Okay, and then in 2012, you said, we need to productize this.
Uh, yes. A little before that, we need to productize this and turn it into a SaaS service. And so we incubated it inside the web agency for a little bit and then took them there.
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