SaaS Interviews with CEOs, Startups, Founders
1227 Would $24m ARR Dashlane Ever Merge with LastPass?
03 Dec 2018
Chapter 1: What inspired Emmanuel Chalit to transition from Mars exploration to password management?
He wishes he knew nothing more than what he already knew. He's really enjoying the journey, having a lot of fun. Likes thinking about Mars. Decided to go do something more practical in the short term. We're going to have a bigger impact, and that is passwords and password management. Really, you know, the macro trend of cybersecurity in general. 2012, the company was launched. They've now passed.
They're about to hit 10 million total. They're adding out 250,000 new users to the platform every single month, about 50-50, installing mobile first versus desktop.
They've converted a significant portion of those caught between 5% and 8% to actual paying customers, about to cross $2 million in monthly recurring revenue or $24 million in ARR, 105% net revenue retention annually, again, with their team of about 180 people based all around the country. Super healthy payback period to less than 12 months.
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, everybody. My guest today is Emmanuel Chalit.
He's the CEO of a company called Dashlane, the world's best password manager.
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Chapter 2: How did Dashlane achieve significant user growth and revenue milestones?
He has over 20 years of management experience across the tech and media sectors. Before Dashlane, he was CEO of CBS Outdoor France, EVP of Universal Games, and the founder and CEO of Flipside.com. He began his career focused on navigation algorithms for the Mars Exploration Rover. Emmanuel, are you ready to take us to the top?
I am all the way to Mars.
No offense, but I think like Mars exploration is a little bit cooler than password management. Why did you decrease your cool factor and go into password management?
Because I think at the end of the day, short term, I can have more impact on mankind by focusing on this.
Good answer. Good answer. All right. So you came on back in October last year, 2017, told us a lot about the business. Give us a quick update. For those that did not hear that interview, what's the company do and what's your revenue model? How do you make money?
So we are very focused on getting revenue from the right place, which is from our users. Why? Because that allows us to be very transparent about our business model and to earn their trust. We make money because they pay us for the services we provide, not because we do anything with their data.
Yep.
So we are a few days away from passing the 10 million user milestone. And a large portion of these users are paying subscribers.
Yep. I think you told when you were last on the show, you told me you had about 500 folks, 500,000 folks minimum paying three bucks a month minimum. And so minimum, you're doing 1.5 million a month at that point. But those were all minimum. So you could be way bigger.
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Chapter 3: What is Dashlane's business model and how does it generate revenue?
That's a reasonable assumption.
Okay, great. And just to be clear, you're not selling data, all that revenue is coming from a number of paying subscribers paying three bucks a month, exclusively, whether they are individuals,
or whether they are companies that buy the business version of our product for their employees.
I see. So whether the consumer buys it or the person buys it directly on their own credit card, or you're selling a team plan, the average seat price still comes out to about $3.
$3 on the individual side, more like $4 on the business side.
I see.
Because there are additional features.
I see. So if I divide $3 into $2 million in monthly revenue you're about to hit, you'd have about $650,000 paying customers, something like that?
directionally correct. Because it depends on the mix between the two, but you're in the rough ballpark.
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Chapter 4: What strategies does Dashlane employ to maintain low churn rates?
I'm going to get the paid version. And so we add more people. to our premium subscriber accords every month or every year, then we lose through chart. We effectively have net negative chart.
Let me ask that differently. It's a little easier to understand. Annually, what is net revenue retention? How far over 100?
Uh, you could think about 105.
Okay. That's pretty healthy at this kind of volume. So good. 105% annually. And have you, have you made any additional tweaks? I mean, you have a huge user base, 10 million people, you know, converting 500, 600, 700,000 to paid is obviously a healthy rate, but if you can add or eke out an additional percentage point, it's huge for your business.
Are there any tests or levers you're pulling to try and do that?
Constantly, but our focus, um, and it's going to be more and more the case, is on engagement rather than revenue. We see revenue as a direct consequence of engagement. Another way to think about that is the ratio between, let's say, for instance, monthly active users and paying subscribers is one of the most stable metrics in our business.
And so our focus is how can we get more engagement because we know byproduct of that is an increase in retention and in revenue.
So you, because you have a huge cohort, you probably know the one or two things you've got to get a new signup to do in the first two hours to make sure they're sticky. What are one or two of those things?
The two clearest indicator of future engagements are people that have added 10 or more passwords in their app very soon. And even more so people that have installed Dashlane on two devices, your phone, your laptop. The moment you've done that, The likelihood that you stay for a very long time and that you end up becoming a premium subscriber is very, very high.
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Chapter 5: How does Dashlane enhance user engagement to drive conversions?
So that's one of the ways we drive that engagement is to tell them, now you can go get these passwords because they sit in your browser. And actually, it's a good opportunity to remove them from that browser where they're not secure.
Interesting. Each month, how many new users are you adding, free users total?
Think about a quarter million.
Okay. And what percentage of those are coming from mobile first versus desktop installs?
Today, think about 50-50.
Okay, that's pretty healthy. And how aggressive are you being in terms of TV promotions, direct paid spend?
Well, more and more because the challenge we have to address is very simple. Today, the vast majority of individuals know about the problem, the pain points related to digital identity, but they don't even know that there are solutions. Our biggest competition is do nothing or it's an Excel file or an Evernote note, which is a terrible idea. most people don't know that there is a solution.
That is why, as the leader in this market, we have to invest more and more aggressively to educate consumers, to educate businesses about the fact that there is actually a solution.
That makes good sense. I mean, tell me what more is, though. I mean, are you talking like you're spending a million a month, five million a month? How aggressive are you being on direct paid monthly?
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Chapter 6: What marketing tactics is Dashlane using to attract new users?
I see. I see. Okay. So you'll let it fluctuate, but right now it's currently less than 12 months and you won't go above 12 months ever in any cohort.
No, we're trying to stay below 12 because then, you know, that increases our ability to be capital efficient.
If you guys are like me, it was quite a shock to me when I was building my first company, Heyo, and we reached like 10, 11, 12 people. And all of a sudden I'm going, wait, why am I getting notices from all these states? And that's because I had to file payroll and stuff in these states as we started hiring people from remote locations. It was the biggest pain in the butt. I hated the paperwork.
I hated the payroll. And so now today when I'm launching new companies, hiring new remote employees, I use a company called Gusto. It's very simple. Payroll benefits in HR for modern small businesses. What I like most, and I've timed this, it takes about seven minutes on average for my folks to run payroll. It's got fast, easy to run payroll, including W-2s and 1099s.
I love that they have health benefits and 401ks all built in for nearly any budget. So you kind of just pick what you want. And they've got expert HR support just to call away so you don't have to hire HR people in-house.
But most importantly, it frees up my time so I can go back to my monday.com Kanban board, plan the next sprint, put the next spec out on the line, and talk to three more customers. If you want more effective payroll, you know, a lot of people change payroll providers at the end of the year. Now is really the best time to switch.
So listeners of the podcast, you can go to nathanlaca.com forward slash gusto to try a demo and test it out. Again, that's nathanlaca.com forward slash gusto, and you'll get three months free once you run your first payroll. All right, I'll see you there.
Talking about capital efficiency, if you spend a million a month on direct paid stuff and you're adding a quarter of a million folks, right, in terms of free users, that's about $4 per free user. And you mentioned earlier, you have about almost 10 million users. You've converted 600, 700 grand, 700,000 of them into paid. So 7% conversion rate, it means you need what? What is that?
You need about 13 leads to get one new paid customer over some period of time. So can I multiply that $4 for a free lead times the 13 to kind of back into your CAC?
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Chapter 7: What are the advantages of using debt financing for Dashlane's growth?
I know I won't get him to do that. Sorry.
Okay. Yeah. Well, I can do this. Worst case, it's $52 based off what the number you just gave. But what you're saying is there's other things I don't know about. It's actually a little less as well. It's significantly less than that.
Yes, and there are synergies between the B2B side of our business and the B2C side of our business, which means that whenever we generate individual users, they end up working somewhere and that somewhere they tell that company to. And so the value of those relationships and this engagement we're creating is actually much higher than just thinking about the CAC and the first year.
And again, when you have very, very high retention, When you're, you know, in the low single digit annual churn, those lifetime values are extremely long. In fact, we don't know where they end. And so, you know, you're creating a true asset.
I want to dive more into kind of the land and expand kind of synergy you just articulated. I think a good place to start is on team. So last time you were on seven months ago, you had about 130 folks on the team. What are you at today?
Um, all in, I think it's closer because that, that 130 includes, um, both employees and people that are working exclusively for that functions like user support QA that are not employees, but that are effectively members of our team. If I include all of that today, um, I think we are, uh, North we've grown by about 25, but our growth is now accelerating because we've, uh,
We've raised new capital. And so, you know, that all in number could be pretty close to 180 to 200 by the end of the year.
And how many of them are sales folks or onboarding?
The bulk of our business is actually happening in a self-serve way, whether it's consumer or whether it's with small businesses. We have a small focus sales team that deals with bigger accounts.
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Chapter 8: Is there a possibility of a merger between Dashlane and LastPass?
When you get to later stage rounds, you're often constrained by things like minimum check size, which then force you to either accept a lot of dilution or a very high valuation that may turn against you if the markets go in the other direction. In our case, we needed capital, but we didn't need an extremely high amount. And I felt it was bad for the company to take more than we needed.
That's why debt was very attractive. There's no notion of minimum check size. There's very little, if any dilution, and there is no forcing mechanism on the valuation that ends up being artificial and turning against you.
Yep.
Now, You need to have the unit economics to attract that debt. But today we're fortunate that we do.
Yep. Look, you're approaching 24 million bucks in ARR. You've raised 55 million in equity. You have some debt on top of that. I mean, when are you going to go sell this thing for, you know, 500 million bucks and go start figuring out how to go to Mars?
Well, given the cost of going to Mars, my target is closer to 2 billion. That's 500 million. So I need a bit more time. But look, we right now. we see our business accelerating more than we anticipated. We see macro trends around what happened with GDPR, what's happened with Facebook and Cambridge Analytica, furthering that acceleration. We have no interest in selling.
Of course, if somebody knocks on our door with an offer, we will look at it very seriously, especially if it's an offer that can help us accelerate our growth. But we are very, very focused on the acceleration of our business right now because we are carried by macro trends that are extremely favorable.
Would you in last pass ever merge?
Well, LastPass was sold to a company called LogMeIn two years ago now.
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