SaaS Interviews with CEOs, Startups, Founders
1203 SEMRush to hit $80m ARR This Year, Here's How
09 Nov 2018
Chapter 1: How did Eugene Levin's career in VC lead him to SEMrush?
He was on the, I'm calling it the dark side because I think it's the dark side. It's hard to make a lot of money. But anyways, very successful doing VC-related things, especially with this Russian firm. Sourced a lot of the U.S. deals for them, including Lyft and some other very well-known companies.
Saw the data from SEMrush, and when he put it in the VC format, said, I've never seen anything like this, right? I mean, these guys are growing it. 60% year-over-year growth without working really hard, 40% EBITDA margins, one-month payback period. Today, they're growing rapidly, adding 1,000 to 5,000 new customers per month.
They currently have north of 30,000 customers paying $180 a month, so well north of, call it 60, 65 million bucks in ARR, 105% net revenue retention, Annually, $40 million raised with a team of 500 people based between Philadelphia, Europe, and Russia. Payback period, six months. CAC, 600 bucks. Super healthy economics. Again, as they help the world understand how to do search engine marketing.
Chapter 2: What strategies did SEMrush use to achieve 60% year-over-year growth?
Now expanding product lines into other marketing products as well. 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 Eugene Levin, and he's currently chief strategy officer at SEMrush, where he's helped to more than triple its revenue in less than two years and raised over $40 million from tier one VC firms. Before joining SEMrush, Eugene was a partner at Target Global, a pan-European and growth stage venture fund that invests in consumer internet companies.
There, Eugene was in charge of the U.S.
Chapter 3: How does SEMrush maintain a high customer retention rate?
pipeline and invested in a number of notable companies, including Blue Apron, Lyft, and Juno. Eugene started his VC career as senior associate and then partner at Foresight Ventures. That company was focused on early-stage U.S. technology companies, and the fund generated a number of profitable exits over three years and was ranked top 10 Russian VC firm by Forbes in 2013.
Eugene, are you ready to take us to the top? Absolutely right. All right, so you start off in VC, which is the dark side, and now you join the good side. Why make the switch? The easy answer is money. You can make more money. There are more risks because there is less diversification, but eventually if you have the right lottery ticket, then you will make more money being on this side.
So that's why I wouldn't call it the dark side at all. Yeah. Well, I want to learn more about how that transition took place, but first get us updated on the product. What's the product do and how do you make money?
Chapter 4: What is SEMrush's product offering and pricing structure?
Yeah. So it's, it's, it's really simple. Uh, we sell subscriptions. It's a hundred percent software as a service model. And what we do is we, we sell, um, search engine marketing software. And also a number of other software solutions in content marketing space, social media. Recently we started doing things in PR space. So it's actually today really broad
marketing suite that covers all major aspects of digital presence. Okay, I want to chat more about why you decided to expand the kind of product pipeline to drive expansion revenue and things like that. But first, I mean, your core product that I think a lot of my listeners know you for is your search engine marketing one. So give us a general sense.
If one of my listeners wants to join today, I mean, what's the average customer pay per month just for that product? So it's super affordable. You can get quite a decent deal for $100 per month.
Chapter 5: How does SEMrush plan to expand its product lines?
Okay. And would you say that's a pretty fair average in terms of folks across the SEMrush platform or is that on the low side? No, that's, that's entry, but I'm saying this is fair deal comparing to how much value you're getting for this money. But what cohort do you guys cater to now? Is it more enterprise? You're selling big seat deals. I mean, tell me more about that.
So, um, I'd say majority of all the subscriptions are still, um, in, um, you know, little bit below 200 per month. So it's still very affordable. And obviously you need like bigger subscription when you start using more software. But yet again, everything is super fair. You pay more only if you use more.
But, you know, on the other side, we have huge accounts that that are approaching half a million per year. So it's, you know, one of the stories where we have presence in
Chapter 6: What metrics indicate SEMrush's financial health?
in SMB segments with mom and pop shops with bloggers. And then we have seven out of top 10 world biggest advertisers. We have 25% of fortune 500. So it's really I like I like the Dropbox analogy because I think this is the same kind of solution company of any size can benefit from it. And history wise, what year was it launched? And then I believe you joined what you said two years ago in 2016.
Roughly, yeah. A little bit more than two years. And when was it launched? Yeah, but I know founders for many more years. When did they create the tool? So the first version was in 2008. But till 2012, it was more like a hobby. Not a serious business. And they used to have other businesses.
Chapter 7: How does SEMrush acquire new customers effectively?
And only 2012, they really realized that SCM Rush on its own is probably going to be bigger than everything else they're doing. So they focused exclusively on it. Eugene, how did they know that? And the reason I ask, there's a lot of people listening right now that have four or five side hustles.
And the ability to understand which one has the opportunity to be the next SCM Rush is difficult then. So what did they see that made them go, we got to go all in? Growth. I mean, this was a company that was consistently growing without significant investments in sales or market organically just because product was really strong and viral. And I think this is the indicator.
So there are other businesses in, let's say, advertising, traffic, arbitrage space, and opportunities there are usually kind of more limited. And once you have another business that is your kind of hobby, your personal passion, uh, passion and, and they grows, um, you know, two times every year, like a clock and you don't really invest too much time and money in it. That's probably something.
Chapter 8: What are Eugene's insights on future growth and challenges for SEMrush?
So can you give me a general sense of 2012, the size of the company when they, when they decide to say, we're going to go all in? Um, I can check, but it was not really that big. I think that, that what was, uh, important is consistency of growth. And, um, And also it was purely organic growth.
So, I mean, are we talking like a couple of hundred customers and doing less than a hundred grand per month in revenue, something in that range? It was probably closer to a million per year. Okay. A million per year. Got it. That's fair.
And a couple of hundred customers and they weren't, the trick is they weren't putting a lot of effort into it and it was growing organically doubling year over year. Yep. Okay. And what have you scaled to today in terms of total customers on the platform? So we have a premium model. So we have more than 2 million users, adding a lot of new users every month.
In terms of paying customers, it's, let's say, between $30,000 and $50,000. In terms of scale of business, it's between $50,000 and $100,000. $50,000 and what? And $100,000. And you truck in terms of ARR annually? Yeah. Yeah. Yeah. I mean, at a minimum, right, if you have 30,000 customers at the 180, you said earlier, you said a little less than 200 ARPU.
I mean, that there is 5.4 million a month or 64 annually, and that's on the low side. So, you know, in summary, the company is doing really, really well. I want to go back to your story now. You're sitting pretty, right? Russian VC firm doing really, really well. You know, these guys, I mean, what do they do? Did you pursue them or do they pursue you? Yeah, actually it was me.
I use the product a lot. You know, it's actually, we have quite good traction in the VC community as a product because it allows you to identify competitors and every time you talk to a new company, they will tell you they have quite a unique product, no competition whatsoever. And then you go into SM Rush and type in their domain name and you see that
There is not just a competition, but this competition is probably bigger, and they spend tons of money on advertising. So extremely helpful product. And then when I was even younger, I did a lot of stuff in marketing and search engine optimization. So I knew product really well. And then I thought, okay, I know the product improves significantly over time. I know this is a good product.
Let's see if it's also a good business. So I've met. uh, founders and, and they give me some numbers and, and it took me some time to really put it into, you know, VC style format. And then I realized this is probably either the best or one of, let's say top three companies that I've ever seen. And I've seen tons of companies. So it was pretty much a no brainer.
What, what metrics did you look at where you were able to quickly say this is top three? Yeah. So, uh, Obviously, growth rate, a combination of growth rate and profitability, and then customer acquisition cost recovery. So those were unbelievably good metrics to give you a perspective.
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