SaaS Interviews with CEOs, Startups, Founders
1217 We've increased employee retention 30% at call centers
23 Nov 2018
Chapter 1: What inspired the creation of StellarEmploy?
I spent a lot of time researching this as she finished her degree and then traveled the world between 2012, 2016. Then realized this was a real problem. Got $100,000 from an angel investor who sits on the board of the Kennedy School. Since has raised an additional $550,000 for $650,000 in total funding. Has three customers right now doing about $5,000 per month in revenue.
Very close to closing, though. Some big contracts, specifically in the call center vertical, which is very interesting. They've got a team of three based up in New York City. 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.
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Chapter 2: How does StellarEmploy improve employee retention?
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 Sarah Nadal. She's the co-founder of a company called Stellar Employ.
The company's B2B SaaS platform uses deep learning to help employers hire better hourly workers and improve retention by over 30%. She developed the technology while completing her PhD at Harvard. She has 10 years of international operations experience and completed her BA at Stanford University. All right, Sarah, are you ready to take us to the top?
I'm ready.
All right. HR tech, tell us all about it. What do you guys do and how do you make money?
Yeah, well, Stellar Employ...
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Chapter 3: What unique hiring challenges do call centers face?
The thing that we sell on is helping the employers of hourly jobs quickly identify and hire their best employees. So we've demonstrated that we can reduce turnover by 30%. A lot of HR tech is sort of in fancier job space, but this is really exciting. There are 60 million Americans in hourly jobs. That's 40% of the labor force. People who make your coffee, fill your Amazon orders,
clean your hotel rooms, et cetera, they tend to leave their jobs once a year at an average cost of $1,000 to replace them. We're talking about a $60 billion problem. So if we're reducing turnover by 30%, saving about $20 billion.
And how do you do that?
Yeah, so the way we do this is we have a 15-minute questionnaire. It gets at a person's underlying abilities and what motivates them. It's very elegant, very quick. It looks at the fundamental baseline of what drives hourly jobs. And then a machine learning algorithm that we can calibrate based on every single client.
So we learn the main drivers of success for every client, filter their applicants as they come through. So first thing applicants do is take our questionnaire. If they're good, they can schedule an interview before they close their browser. And then we're getting feedback on them constantly getting better every day.
So how would I use this? I mean, the way that I think I like to, I want to do interviews, try and think about like how I might use this and currently like how I find new talent to hire full time at my company. It's, I'll just put out like the same process doc to like 30 different people on Fiverr and I'll pay them all, you know, 10 bucks to do the task.
And then whoever like goes above and beyond like the five that do, I'll then like narrow them down and give them more complicated tasks. And then I end up hiring the one full time that like does the best. I don't know if that's against Fiverr's terms of services, but walk me through. Would I use your tool in conjunction with that or they compete?
Yeah. No. So that's a great question. So the types of jobs that we fill are...
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Chapter 4: How does the questionnaire work in the hiring process?
tend to be jobs that require being on site that people are hiring like hundreds of people for the same job. So let me use the shoes of a hiring manager at a call center. Call centers are our biggest vertical. The way they typically hire today is they post jobs on Indeed, maybe ZipRecruiter, Facebook jobs, get inundated with resumes. Now they have a pile of resumes. They're going through resumes.
You don't really have to have a particular educational or professional background to do well on the job. So the resumes are actually useless. They end up trying to get the applicants on the phone to call, bring them in for an interview. It takes them five phone calls to get someone on the phone, then the people who come in.
And we discovered that, not surprisingly, they are over-indexing on people who are personable. So then they hire people who are personable, they're not necessarily good at the job, et cetera. What happens with us is our employers continue to post their jobs everywhere, but they get a simple redirect link that takes applicants directly to our site.
Most applicants are applying online using their smartphone, right? So asking for a resume is also a big pain in the butt. To upload, they get a lot of dropouts. Now, instead of doing that, they're just answering a couple of questions. Got it. Perform easy. And then they're told whether they get an interview.
Yeah. So I am not your target customer. You're going after the Starbucks, the call center stuff, et cetera. And basically what the employees are filling out, potential employees, it's like basically a recruiting version of StrengthsFinder.
Yeah. Very similar. Interesting.
Okay. And how do you price?
Um, we're B2B SaaS. Our clients commit to an annual contract based on the number of hires they expect to make. We have tiered pricing, but it's kind of like a quick and dirty numbers that we end up charging about a hundred dollars for every hire they make through our platform.
Interesting. And give me a general sense of scale, like per contract or people doing a hundred jobs per year, a thousand, what's the average contract size annually?
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Chapter 5: What is the pricing model for StellarEmploy's services?
Okay. So if you look across your entire customer base, most of them are hiring about a thousand people per month.
In the call center space, which is where we're starting. You know, once you get down to like Starbucks, it's a little bit different, but yeah. Um, we only work with clients who are, who are hiring at least 30 people per month because the data is really crucial for us to do our job well.
So your minimum is three grand a month then?
Where, I'm sorry, what?
Can I then back into that and basically say your minimum is three grand a month, 30 times a hundred. Okay, great. Okay. Tell me more of the backstory here, right? It takes a unique kind of person that want to go into HR, you know, the HR tech space. So you, you get all these amazing degrees. Uh, did you jump into this right after college?
Um, yeah. My trajectory makes sense, but it's really random. I studied international relations in college. I always thought that my dream job would be to work at the World Bank or something like that. I got a job with a nonprofit organization that did really interesting behavioral science research internationally. They sent me to Lima, Peru. I spent two years down there.
I grew the organization from two people to 40 people worldwide. went back to Harvard to start my master's. And then I spent my summer at the World Bank thinking I was like, I had arrived. This was my dream job. I was bored out of my mind. It was far too bureaucratic for me. I wanted to do something much faster paced. Got back to finish my master's. It was September of 2008. The economy crashed.
And my advisor says, well, listen, you have tons of ideas that you want to research. Why don't you just stick around and do a PhD? And I thought that was a great idea. So I continue to be really interested in this question of kind of broadly, how can you use data to improve bottom of the pyramid? And so when I started thinking about my dissertation, I started thinking about the labor market.
Something I had seen both in the US and also abroad is that employers that are hiring people who don't have the fancy degrees that I have, for example, it's much harder to figure out who you want to hire. Started hacking around with that for my research, realized there was actually kind of an awesome way to help companies hire better.
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Chapter 6: What is the current scale of StellarEmploy's operations?
And that's why customer engagement company Freshworks is jumping into the game with their new product, FreshChat, which helps engage website visitors, convert them into customers, and retain and support those customers to become happy, engaged users. Now, Freshworks is valued at $1.5 billion and has more than 150,000 businesses around the world using them.
Their new product, FreshChat, differentiates from the market because one, they've got channels to create focused message threads and threading. Number two, it's self-service inside the messenger. Number three, they have a lower price point, mainly because they have revenue from other revenue streams. It allows them to get away with a cheaper price point.
And number four, it's specifically built for marketing, sales, and support teams. If you want to try Fresh Chat today, you can do so at NathanLatka.com forward slash Fresh Chat to turn visitors into leads and customers into happy, engaged users. Again, sign up for a 30-day free trial. It's a beautiful thing. So easy to sign up. NathanLatka.com forward slash Fresh Chat. I'll see you there.
So how much funding did you get in that initial tranche?
Oh my, no. I mean, this was an angel investor who became a mentor. He ended up putting in a hundred grand. He worked very closely with us, but it was enough to give, uh, to give me the sort of to keep on going.
Was that your professor?
No, he wasn't. He, um, he sits on the board at the Kennedy school, which is how I connected with him, but not, not a professor.
Okay. And what year was this? When was the official launch?
We started in the U S we started taking paying clients in 2016. Um, I had done some initial hacking around with the idea of while doing research internationally. And that started, you know, I would say like initial research started in 2012.
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Chapter 7: How does the guest measure success and growth?
Yeah, it was a tough decision. So we now have, we have demonstrated that we reduce turnover by 30% in five industries. So call centers, retail, fast food, delivery, fulfillment centers. We have two really big clients. I mentioned one to you earlier that are about to convert from four month pilot and we need more capital to keep them happy. And we're kind of ready to grow.
We see the market growing. interest in data in the hourly market is increasing and we're kind of ready to ride that wave. So that's what we decided now. We looked at how long it takes to roll out, where we want to be, what we would need to get to 3 million ARR by the end of 2019, landed on about 1.5 million, which is what we're raising right now.
That's great. And where will most of that capital go to?
I'm sorry?
Where will most of that capital go to in terms of who you're hiring?
Sales. Absolutely. We are currently, my co-founder Irene Chung is running sales right now. She's fabulous, but she's got to do other stuff. And data science, which we basically have up and ready to go. The algorithm I wrote during my PhD. However, I also have to do other stuff. So those are the two, mostly sales, a couple other people, a lot of conferences.
I hear you. And what have you scaled to today in terms of total customers using the platform?
We're filtering about 2,000 applicants every week. And that's across three industries in five locations.
Okay. Do you measure how many call center brands you're working with? You have Starbucks and Pete's Coffee. Do you measure customer logos like that or no?
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Chapter 8: What advice does the guest offer to aspiring entrepreneurs?
And sorry, across how many businesses is that?
It's across three, three businesses and five different locations with relationships that we're managing.
Interesting.
This is very early. We joined ERA, the Entrepreneur's Roundtable Accelerator in January. This is when we moved out of sort of beta phase and started with the industries that we had identified. So we're kind of just coming out of that and getting ready to take off.
Well, but it sounds like you have good growth. I mean, what's your revenue today if you don't mind me asking?
We're about 5K a month.
Okay, well, that's great. I mean, look, you got to start somewhere. Yeah. So, so again, three customers, we talked earlier about that kind of three grand per month kind of minimum that puts you at around, you know, nine ish, but maybe you gave discounts early on. So you're at 5k right now. Um, you've got two logos, you're, you're focused on, on closing, which is great.
Um, have you, how do you measure churn in your kind of business? Obviously you have a very small kind of sample size to work with, but how do you think about churn?
Yeah, well, we, I mean, we think about clients that don't convert from pilot to full contracts. Um, that's the, that's the biggest thing again, B2B small number, but that's, that's what we're concerned with.
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