SaaS Interviews with CEOs, Startups, Founders
1181 How MovableInk Broke $40m in ARR with 1 Pricing Axis to Drive Expansion Revenue
18 Oct 2018
Chapter 1: What is the main topic discussed in this episode?
Founded Movable Inc.
Chapter 2: How did Movable Ink achieve $40 million in ARR?
back in 2010. They've now scaled over 500 customers, about $40 million in ARR. They're up, you know, growing 50% to 100% year over year. They've managed to drive this growth on just $14 million raised. So they've managed to do a lot with a little bit of money. 110% net revenue retention annually with a very healthy pricing axis that allows them to drive expansion revenue.
Really tied to, again, open rates on those emails of these big enterprise customers using them. They've got less than a 12-month... payback period, our team of 250 people cranking out new products between New York City, San Fran, London, and other remote locations. 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.
Chapter 3: What strategies did Movable Ink use to drive expansion revenue?
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 Vivek Sharma. He co-founded Movable Inc.
in 2010 and has led the company through rapid growth to a leading market position with 200 plus employees, serving 500 of the most innovative consumer brands. Through his leadership, Movable Inc. is helping digital marketers embrace a visual world with intelligent creative that adapts at the moment of engagement. Vivek, are you ready to take us to the top? Let's do this, Nathan. All right, cool.
Just to be clear, you say you're working with 500 of the most innovative consumer brands. Those are all customers, right? There's no freemium product, nothing like that. No freemium. We got rid of that years ago. So we like money. We like green dollars. We'll take euros. We'll take yen. You're my kind of guy. Okay. So what's the company do? And is it a pure play SaaS model?
It is a peer-placed SaaS model. So Movable Inc. exists in a world where we work with lots of big consumer brands that have harvested a huge amount of data. They really understand their customers. There's APIs, data, CSV files.
Chapter 4: What is the significance of the pricing axis for Movable Ink?
They manage all of this. What they struggle with is taking all this great data and translating that into compelling visual experiences. That's where Movable Inc. comes in. We have a SaaS platform. It is completely on the cloud. There's no on-premise. And any market or They'll log into our system, be able to configure pieces of intelligent creative that they can embed into their email marketing.
And so when that email opens up, our code fires and we're able to generate the perfect, visually compelling content at that moment of opening. And I don't want to go down every customer cohort, but in general, what would you say a consumer or brand or business or brand pays you on average per year for this kind of thing? There's a pretty wide range. So most of our customers are large enterprises.
So we've got brands like Starbucks, Nike, Hilton, The Gap, American Express using us. We don't really start at less than about $30,000 a year for those enterprise brands. We do a market tier as well. But we've got companies that pay north of a million dollars a year. We've got lots of companies that pay several million dollars a year to move blank to power all of their visual experiences in email.
Okay, this is great. So good. 2010 founded, you've scaled today 500 customers. Now, have you bootstrapped this or have you raised capital? We have raised capital. We've been very capital efficient. About several months ago, we passed about $40 million in annual recurring revenue. And most companies that have gotten to this point, they've raised $80, $90, $100 million in capital.
We've only raised about $14 million in venture capital. And it's been a long time since I've gone out there and raised capital. So it's been super capital efficient. And our favorite source of capital, our favorite investor are our customers who pay us on time. Yep. No, that's great. I imagine you don't miss having to go out and raise capital. So that's a good problem to have.
I want to break down and kind of get into some economics here. You mentioned 40 million run rate today, which puts you at about 3.3 million per month. What does growth look like? Where are you at a year ago? We're growing really nicely.
I think the one area we're especially proud of is in the last 18 months, we've been able to configure our sales teams and go to market with partners more effectively. So especially on the net new side, the new completely new logos, we've had triple digit growth in bringing in new logos and revenue growth.
So I can't break out exact numbers about overall gap revenue and ARR growth, but we're still growing very strongly even past this $40 million ARR. So the future looks pretty exciting over the next couple of years. Well, okay.
Generally, I love those growth metrics, but I mean, generally speaking, if we tie that back to some kind of revenue, it sounds like you're, I mean, can we say you're doubling year over year? Still, it's harder to do at larger numbers. We are not doubling year over year, but we're growing very strong. High double digits. We're doing well. All right. You wouldn't confirm single digits.
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Chapter 5: How does Movable Ink maintain high customer retention rates?
Yeah. The net revenue... And by the way, usually the same thing. But sometimes people will calculate... I don't know why they'll calculate net revenue retention differently than just being the inverse of negative revenue churn. So healthy numbers there. A great expansion strategy. Talk to me very quickly around pricing. So a lot of people who struggle with expansion...
having kind of clearly defined pricing axes that are like utility-based to drive expansion around. How did you figure out your axes and which one is most effective for you? Pricing is such a fascinating subject to think about and talk about. And over the years of the company, this is probably the thing that we debated the most and argued about the most and tried to figure out.
And in the early days, I was a former engineer. And I think that was to the detriment of figuring out a pricing model because you end up trying to figure out something that is maybeā¦
rational right logically very correct and there was a you know we serve up visual content inside these emails so i had this crazy model early on that was looking at square pixels i'm like hey if someone's using up more real estate inside the email they should pay us more and it was ridiculously complex and it was just a dumb idea The best thing was, what is the convention?
What are our customers used to paying for similar types of things? And for us, it was looking at the email service providers who had already established a framework for CPM based upon email sends. So we used a very similar model, but of course, we can't measure sends. We only show up when an email gets open. So is CPM on email open? Interesting.
There's some discounting that happens as you go into higher volume usage. But that lets us be very flexible with our customers. We can start small. We don't have to go take over their entire email program.
We can land, come up with one or two compelling use cases in the first three months, get them up and running, really nail it, and then start to scale that out into doing far more meaningful things. Okay, so one axes are kind of number of opens around specific, maybe two specific use cases quickly. Most folks that are growing fast have multiple axes.
Do you have a second strong one, like number of seats on the marketing team or things like that? You know, it's basically that one axis that we price upon. As we are over the course of the next few weeks, we're actually coming out with some new products. And so we've been able to adapt that model very successfully.
So there could be different rate cards in different conditions, but the core concept still remains the same. It's just the pricing tiers kind of change when you go to a more premium version of our product. I want to talk a little bit about how you're finding new customers. You're obviously in the enterprise space, so I imagine some variation of account base.
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Chapter 6: What challenges did Movable Ink face with funding and capital efficiency?
Or was it more like an MRR term loan, like interest free and you only pay as you draw down that kind of thing? Yeah, we've changed the type of facility in the course of last year. Okay. Yeah, so we've got a revenue-based facility now.
Okay, and by that, just to make sure we're talking about the same thing, when I talk about revenue-based, I mean payback is typically a percentage of gross receipts per month. Is that what it is? It's an MRR-based facility. Okay. So recurring revenue is tied to, yes, how much, not gap revenue. Got it, got it, got it.
Yeah, look, the thing I've seen with some people that do that is if you end up paying it back faster, like let's say you use the money to grow really quick and you've locked in a 9% of your gross receipts per month, your payback can actually be way quicker and you hit the repayment gap way quicker than what you put in the pro forma.
And then the effective cost of capital is actually through the roof when you calculate the IRR. Do you look at that at all? We've done calculations on equity versus debt versus risk factors even, if you get to a certain point. And so there's kind of a balanced view we take, and there's a mix of a little bit of both that we come to. Yeah. Very good.
Before we wrap up, again, tell me how aggressive you're being with CAC right now. Are you below six months, below 12 months, below 24 months? Where do you try and target? We haven't had a hard target on CAC. I will say our payback periods, they are under 12 months. Oh, great. Okay. very efficient engine going there. And our LTV to CAC is also extremely impressive.
I think you're doing really well with a 5X LTV to CAC. We're surpassing that by quite a bit. So we've got a very efficient sales and marketing machine going and our payback periods make a ton of sense. And, you know, building that efficient engine was important to us. I used to drive a Mustang Cobra years ago. And, you know, it sounds great. And it's got this big V8.
But, you know, this is the big, powerful engine. What we built here is a BMW. It's a more refined, efficient engine that we can count upon. And it forces you to really understand what's happening under the hood, what's happening in the business. Where's everybody based? Where's the team? We've got about 250 people. I'd say probably about 180 of those are here in New York City.
We've got about 30 in San Francisco, probably 25 to 30 in London. Got a couple people in Japan. We've got a person in Australia. And the international expansion is starting to happen pretty quickly. We've also got about a dozen people in Costa Rica. That's great. Now, last question before we wrap up with the famous five.
If I continue down your bull market thesis, and if you really want to take advantage of a bull market, you might say, Hey, we could probably get some pretty good offers right now. Are you in any acquisition talks right now? We are not. And it's not something you're pursuing. Yeah, we've certainly been approached in the past about interesting types of opportunities.
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