SaaS Interviews with CEOs, Startups, Founders
1320 $14m in ARR on $2.9m Raised Inventing New Visual Way to Code Service 3000 Freelancers
06 Mar 2019
Chapter 1: What is the background of Vlad Magdalene and Webflow?
Good morning, everyone. It is Wednesday, and I'll tell you what, I'm still in New York on this press tour. Today, I'm going to Cheddar on the stock exchange floor, then Cirrus Radio, then Nasdaq in Times Square. They're putting the book up all in Times Square. It's going to be a total takeover, but the book is live, capitalistbook.com. Yesterday, if you missed me, go back and watch again.
I was on Fox and Yahoo. Many TV stations want me on and we have massive book launches coming up later today. I'll be on CBS as well. So check it out. Again, the book is all SAS data, SAS war stories. You guys have heard excerpts of this over the past couple of days here on the podcast feed, but I'd love for you to go check it out. Take a look at the preview at capitalistbook.com if you're
young and don't have money to buy the book, you can get a lot of value there still. That's capitalistbook.com. Or just pause this or when you're done driving and just search Latka book on Google, it'll pop up. We have, we are definitely a bestseller status here. The sales are incredible. So get the book so that when your friends are talking about it, you know what they're talking about.
I don't want you guys to miss out. You guys are the originals. Okay, capitalistbook.com. In the meantime, here is today's CEO. Founded the company Webflow back in 2013 with two of his friends, one of them being his brother. Now at 65 people really helping freelancers build websites. The ultimate goal, a new way to code, a visual way to code. It's democratized. Anybody can do it.
Unlocking so much power for so many people. Currently about 30,000 customers paying 40 bucks a month doing 1.2 million per month or about 15 in ARR run rate today. That's up 100% year over year from about 600 grand a month through recurring revenue in July of 2017. Less than 5% gross logo turn on all their cohorts. Some of their cohorts, it's way, way better than that.
CAC today about 85 bucks payback period on the worst case. three months because he's built the thing to be now profitable, which I love. 65 people based in San Fran and other remote locations, only 2.9 million bucks raised. I love the ratio there from raised capital to AR.
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 Vlad Magdalene.
He's the CEO of Webflow, which he co-founded with his brother and a close friend. While studying 3D animation with dreams of working for Pixar in art school, he fell in love with the power of programming. He's now building the company and lives near San Francisco with his wife and two daughters. Vlad, are you ready to take us to the top? Let's go. All right. Tell us about the company.
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Chapter 2: How does Webflow differentiate itself from competitors like Squarespace?
So you can do really complicated marketing websites, launch them, run them in production and like have crazy design control over the whole thing. And you see this more of like a landing page tool for direct marketers or actually like a Squarespace or Weebly or Wix? It started as just a landing page builder, but then graduated into full-on web publishing platform.
So it's way more complex than a Squarespace or Wix. Those are for directly for businesses, like small-time businesses like a mom and pop shop. We're more for startups, like people who do a lot of content, especially like WordPress scale, content management scale type of operations. Interesting. And what is the, give me a sense of like what the average customer pays you per month.
Average customer is about 40 bucks a month. So still on the low side, a lot of freelancers, a lot of our customers are people who make websites for small businesses. So instead of paying seven bucks a month or 10 bucks a month for Squarespace, they'll pay like two to $3,000 to a freelancer who pays us to use our software to create a website for them. Interesting. Okay.
So 40 bucks a month and backstory here. When did you launch the company? We launched in mid 2013. 2013. And what have you scaled to today in terms of total customers? we're coming up on 30,000 customers. 30,000? That's incredible. 30,000 paying customers.
And I mean, can we multiply that times the 40 you just gave us to kind of back into a revenue number of about, what was that, 1.2 million a month? Something like that. That's great. Now, have you bootstrapped or raised capital? So we raised a bit of capital. The last money we raised was in August 2013, right after we got out of YC. So we raised about 2.9 million.
But after that, we got profitable, cash flow positive, and just been... Kind of funding operations with customer revenue. YC has a rep for really judging success based off how much you've raised. Did you ever feel like you ever had to fight that urge to go raise capital? Was it hard for you to tell people in the YC world we're going to be profitable and not raise again?
Yeah, definitely it was in the early days before there was this trend towards bootstrap companies. Yeah, totally. There was a lot of pressure. It was actually less from YC and investors and more from our peers that the right thing to do was to raise more capital and grow as fast as possible at all costs, etc. So there was something wrong if you weren't raising constantly.
But thankfully, that sort of died down a bit. And how do those, those are investors that put money in, you know, many, many years ago. I mean, they must at some point when their funds expire, be going, now everyone's gonna say they have great investors and they're patient, but they have to at some point be going, am I ever going to get my money back? Is he going to pay me a dividend?
How's that work? Right. We're going to cross that bridge when we get there. We converted our investors from convertible notes to preferred stock. And then at some point, I'm pretty sure we're going to have different ways to liquidate. We're not focusing on that at all. We're trying to fill the foundational company. We're going to try to figure out some way to get
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Chapter 3: What is the current revenue model and pricing strategy for Webflow?
Um, Potentially. I think everything's on the table, just depending on what folks are looking for in terms of return. Give me a sense of your growth. So $1.2 million per month today in revenue, 30,000 customers, $40 a month. Where were you a year ago, July 2017? How much per month? I don't know exactly. We're growing roughly 100% year over year, so doubling year over year.
We might be shy of that this year, but not by too far. Well, it gets hard to double much bigger numbers, right? Exactly, exactly. Although we've been maintaining pretty much the same growth rate over the last three years. It's something that we're really focusing on to try to double every year. That's great. That's a big focus.
Yeah, I mean, look, if that's the case, that means in July of 2016, you were doing 300 grand a month. July 2017, 600 grand a month. Today, 1.2 million a month. That's great growth. That's roughly what it was. Yeah. Yeah. And at this price point, churn can become an issue. What is your churn today and how do you manage it? So we have two different profiles of churn.
We have two different types of plans. One is our designer plans, which is like pure SaaS. You use the software, you export the code. That has a higher churn profile, anywhere from 4% to 5% a month. Gross level churn? Yeah, that's customer churn.
And then the other side of the business, which is much better in terms of churn, is essentially zero net revenue churn, where established customers are adding new sites every month as they get new customers. And they're adding things like hosting, custom domain hosting, and other types of hosting plans. And those things, typically, once you set them up,
they just run forever until you switch providers or more often you go out of business or something like that. When you take both of these cohorts and you look at them in a year and you look at your net revenue retention year over year, I assume you're north of 100% at this point or are you not? We're actually just flat right now. It's basically 100%. Sometimes it's net negative.
Sometimes it's slightly under 100%. But the direction is moving towards... getting more in expansion revenue than we lose in kind of customer terms. That's what I was interested in. At a $40 a month price point, it's very difficult to get net revenue or attention over 100%. If you don't have something more, you can sell to people, give them value.
How are you thinking about creating additional product offerings to be able to drive land and expanding strategies and increase wallet share across one account? So we have two different axes on which we get expansion revenue. So the main one is adding additional.
So our customers, the freelancers who pay us, they add additional projects almost on a monthly basis as they do new work with clients, as long as they treat Webflow as sort of their go-to tool for managing all their web design platforms. So a new project means more revenue, etc.
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Chapter 4: How has Webflow achieved significant customer growth?
Yeah. Interesting. It sounds like you're already thinking about numerical based pricing axes. You can drive expansion on number of seats, you know, storage, right? Like these kinds of things. Yeah. it becomes difficult to figure out which ones to price along versus which ones just include for free. How do you make those decisions? Pricing is so hard.
I think we, right now we're getting, uh, kind of developing our muscles around good pricing research, how to do sensitivity surveys, how to figure out which pricing, um,
levers are the most efficient ones given the the customer profile that we have uh so it's it's the jury's still out on uh you know things to determine like for example we're about to release e-commerce and there's so many axes to to try to figure out value uh and in cost in terms of um you're talking like gmv or number of excuses number of c yeah So, so many different things.
So at some point it comes down to a lot of data, some gut feel and a lot of experimentation, especially after you land. I think it's the other way. I think it's, it's a lot of gut, a little bit of data. There you go. That's interesting. Okay, good. Fill up the economics for me. So what are you willing to spend to acquire a customer? What's your fully weighted CAC?
So we target about three months payback. So it's around, it's actually a little lower than that. Our current CAC is about 80, 85. So we get our money back before the three months are over. But actually, the majority of our growth still comes from organic channels. So paid is a pretty small part of our strategy. We don't have sales yet.
So we're still, I think, just like six or nine months ago, we started really experimenting with paid. So we're still trying to figure that out because it's kind of a, it's not quite enterprise. It's not quite consumer. It's sort of like B2B2C sort of. And the market is somewhat limited when you're looking at things like programmatic ad buying, etc. So we're still trying to figure that stuff out.
And more than 80% of our customers are still coming through word of mouth, SEO, things like that. And then follow up on that. What do you assume lifetime value is in months and dollars on these folks? So it's a little over. It depends on the... the profile of the customer because we have a bunch of freelancers. So our average LTV is a little north of $1,000.
But we have some profile of customers like team plans or agencies that are much higher than that to where a lot more seeds, a lot more of a core workflow for them to have Webflow in the middle of all of their marketing operations. We even have some startups like HelloSign, a bunch of other ones that switch their entire marketing team to use Webflow.
In those cases, LTV is probably closer above the 10K range, but it's still low compared to if we're selling up to enterprises or something like that. But the cohort of startups and agencies is still really, really small. So that's something that's kind of like a side bet for us. We still focus primarily on freelancers because they're the ones who end up at agencies.
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Chapter 5: What challenges has Webflow faced in terms of funding and profitability?
Very interesting. Uh, round out last question. So before we wrap up team size today, where are you at? Uh, we're at around 65. Okay. And, um, and everyone in San Fran. No, we're about 60% remote. So many different states, many different countries. We have about just shy of 20 folks in San Francisco. Okay. 20 good San San San Fran remote locations. I love it.
You're you're, I mean, I'm, I'm doing the math. I mean, 65 people on 1.2 million a month. So that's what that 14 for something annually. I mean, you're that's cranking like a $221,000 revenue per employee, which is like way above industry average from what we've done, which is a result again of your, you know, don't raise a ton of capital.
Just focus on efficient, healthy capital, efficient growth. Yep. That's great. That's really good. How do you think, how many co-founders are there? Is it just you? Three, myself, my brother who runs design and Brian, our CTO, who also runs like marketing and growth. So it's like the perfect trifecta, I think. That's great.
And how do you when you guys think about personal wealth from the company, right? Of course, you can increase your salaries when you feel like it's fair. And but do you guys do any like team wide dividend sharing kind of things like that or anything like that or no? So not yet.
We haven't done anything at that level, either with founders or employees, because we just now started to break through to actually having profits. Because anytime we had any sort of positive cash flow, we always had areas of the business we wanted to pour money into. So, so far, it's essentially been break even, not much money to play with.
We might potentially in the future consider like dividends or profit sharing or something like that. We're kind of following Zapier. in running a profitable business that then gives you more options. You guys look very, on paper, Wade was on a couple months ago. You guys look very similar on paper. Oh, yeah. Wade and I are friends. Wade helped us get into YC.
And we work together very closely with Zapier. A lot of our customers are mutual. So we just want to build a really solid business that's going to be here for decades because it's not something that we built to flip.
And even the offering that we want to create, over time, we actually want to empower a much more significant percentage of the world to be able to build software, not just websites, not just web applications, but actually offer a visual way to program. And that's a long journey. You don't do that overnight. Yeah, it's a big, it's definitely a big vision.
I see you have a ring on, you're married, right? Yes. So let me ask you a question. You have about 15 million today in ARR. Let's say someone comes in and gives you a ridiculous offer, right? Let's say, let's say 15X, right? So let's say it's north of a 200, $300 million acquisition offer.
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Chapter 6: How does Webflow manage customer churn and retention?
That's good. You've got that in her head the right way. You've expectations that. Exactly. That's hysterical. If you wait another year, that's going to be double. If you wait another year, it might be double that. I love that answer. All right, let's wrap up here, Vlad, with the famous five. Number one, what's your favorite business book? Leaders Eat Less by Simon Sinek.
Number two, is there a CEO you're following or studying right now? Honestly, it used to be Elon Musk, but he hasn't been a great role model lately. A little tougher, right? Did you buy a flamethrower? No, you mean not a flamethrower. Sorry, I meant not a flamethrower. Yeah. Number three, what's your favorite online tool for building a business?
Honestly, Google Inbox is an awesome productivity tool. Like it's just kind of changed the game to a handle email. But I'd probably have to say Airtable or Notion just for how many things it helps me solve. Number four, how many hours of sleep do you get every night? Seven even. That's good. And what's your situation? Obviously married. Any kiddos yet? Yeah. Yeah, two kids.
Oh, my gosh, you're full. And how old are you? I'm 35. 35. Last question. What do you wish your 20 year old self knew? Oh, I wish I knew to start sleeping more and exercising more earlier. I didn't get into that until my 30s. And it's just I think I've put my body through way too much stress early on. Guys, start sleeping more from Vlad.
Founded the company Webflow back in 2013 with two of his friends, one of them being his brother. Now at 65 people really helping freelancers build websites. The ultimate goal, a new way to code, a visual way to code. It's democratized. Anybody can do it. Unlocking so much power for so many people.
Currently, about 30,000 customers paying $40 a month, doing $1.2 million per month, or about $15 in ARR run rate today. That's up 100% year-over-year from about $600,000 a month through recurring revenue in July of 2017. Less than 5% gross logo turn on all their cohorts. Some of their cohorts, it's way, way better than that. CAC today, about $85 payback period on the worst case.
three months because he's built the thing to be now profitable, which I love. 65 people based in San Fran and other remote locations, only 2.9 million bucks raised. I love the ratio there from raised capital to AR. Vlad, you're killing it. Thanks so much for taking us to the top. Thanks, Nathan.
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