SaaS Interviews with CEOs, Startups, Founders
1343 Data Cleaning and Analytics Tool Passes $7m ARR, Raising $20m on $80m Pre
29 Mar 2019
Chapter 1: What is the main topic discussed in this episode?
Hello, everyone. My guest today is Chris Maddy.
Chapter 2: What is Versium and what services do they provide?
He is leading a company called Versium, which delivers automated predictive analytic solutions, which provide actionable data intelligence faster, more accurately, and at a fraction of the cost of hiring expensive data science teams or professional services organizations. Chris, are you ready to take us to the top? I'm ready. All right. We're going to talk everything Versium today.
Tell me about the company. What do you guys do and what's your revenue model? How do you make money? Yeah, so we're a data technology company. We help marketing organizations become highly data-driven. What that means is we help them use data more effectively to drive all their marketing initiatives, ultimately to drive significant improvements in marketing ROI. Okay.
And how do you... So there's a lot of tools out there that will do the predictive analytics. The biggest challenge is churn goes through the roof because you can't get them to actually take the data you give them and make actionable insights on it that improves their top or bottom line. So what do you have to do in the first month to make your new users sticky? Yeah.
The first step is, and there's really three blocks to what we do, but the very first thing any organization has to do is fix the existing data they have. For example, 40% to 50% of data in a CRM is not usable. It's old. It's outdated. It's not formatted properly. There's errors. There's omissions. So data is a mess. Lots of times data resides in silos.
So the first step is you've got to get in and fix the data.
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Chapter 3: How does Versium help organizations improve their marketing ROI?
That makes it more actionable. It allows you to reach your existing customers and prospects better. And it's the first step before you can do anything that has to do with predictive analytics, machine learning, or artificial intelligence. Because if you have garbage going in, you get garbage coming out. So the first step is fix the data. The next step we do is we enrich the data.
So we own over 1.5 trillion data attributes, and we're able to overlay that onto the existing data the organization has. That helps the company understand who their customers are better. It helps them understand their behaviors, their characteristics. We use clustering to create new segments that were previously not known or identified that have common characteristics.
This then allows you to personalize your messaging. And then the last thing is we take those combined data sets and we train our artificial predictive models so that we can determine or build a predictive model to predict who's most likely to buy the products and services of our customers in the future. And we use those models to guide the marketing effort.
So first we fix it and clean it, then we enrich it and then we model it. Great. And give me the backstory here. So, so we'll actually, before I go to that in terms of when you launched the company, customers that are paying for this, are you talking kind of no touch high volume sales model or very much enterprise based? What's the average customer paying per month?
We've got two different tiers, right? But small, medium, well, three different, small, medium, and large. We've got a self-service tool where the average price point is $1,000. Then we go to sort of mid-tier markets. Per month? Yeah, per month.
Mid-tier markets, where it's five to seven, and then the big enterprise grade, which is 20 to 30 grand, based upon volume of exercising our platform, which generally ties to volume of customer records. Okay. Got it.
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Chapter 4: What are the first steps in making data actionable for new users?
So, so I mean, if I was, if I was to, just cause I don't, we don't have time to go to an every customer cohort, but if I forced you into an average, is it closer to a grand a month or two grand a month? 10 grand a month. Okay. So this, that's very much, that's a price point where you can afford to have an inside sales team. You can afford to have them spend six to 12 months closing the deal.
It's a very different model than a thousand dollar a month, no touch sale. That's right. Okay. We productize this. So we've automated the ability to do all of these things. Automation is a key theme here. So we're not doing professional services. We run a high gross margin.
And so we've, we've set out to productize all of these different data technologies, which allows us to operate at scale very effectively, cost-effectively to our customers. Yeah. Sorry. What I meant in terms of putting touch on each sale was, was before they've purchased, right?
So what the sales organization looks like, what is your team size today and how many of those folks are focused on sales? We got a pretty small team on the sales side, right? And so primarily because we're using a channel strategy to go to market.
We're working with marketing agencies and helping them to help their clients become more data-driven so that they ensure their spend goes through the agency. So we are the data technology partner to agencies. So we launch a business development effort to work with agencies as well as consulting services companies to help take our solutions to market.
We do have a small direct sales team, but we're seeing substantial growth using channel strategies and partners to get to market. And so Chris, what is the team size today? Six people. Six people. Okay, great. And then when was year one? Year one was 2012. 2012. Okay, very good. And then have you bootstrapped this or have you raised capital? We've raised two seed rounds.
So a very capital efficient, $4.2 million over two years. The last round was two years ago and we just notched our seventh consecutive quarter of being profitable. So we've pretty much bootstrapped it. We didn't take big institutional money. Hey, Chris, congratulations.
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Chapter 5: How does data enrichment enhance marketing efforts?
I wish more people celebrated folks like yourself. You need your own TechCrunch headline. You know, we turned down a billion dollars of VC money because we're profitable, right? That would be much better. Well, you know, you control your destiny when you're not burning, so. That's right. Okay, good. So bootstrapped, you raised, how many customers are you working with today?
Oh gosh, we've got hundreds of customers. We've got 300 companies using our APIs directly. We've got 250 to 300 on a monthly basis that are the small mid-tier folks. And then we've got about 50 enterprise clients that are paying us the bigger money. Okay. So if you just add it up, just because I'm adding all those together in my head, I can't do quickly.
If you had just total customers, it sounds like about 400, 500, something like that? Roughly, yeah. 500-ish. Okay. And I mean, can I take that 500 times the $10,000 a month number you just gave me and kind of back into a revenue figure of about 5 million a month or no? No, you'd have to go lower than that. So when you think about the volume of numbers, the lower end skews that considerably.
So when I said 10,000, that's probably not accurate average on a per customer basis. Okay, got it. Well, if we go back down even to your minimum, right, of a grand per month, it sounds like that was what you got to spend to get started. That's still about 500 grand in revenue. Is that more accurate in terms of your monthly... Yeah, that's pretty accurate. We're at a 7 million run rate right now.
Oh, great. Targeting about 9 million, 8 to 9 million this year. That's great. And take me back, give me a sense of growth. So you're at 7 million right now. Where were you in July of 2017 in terms of run rate? So we've pretty much, we've grown about 50 to 60% year over year. So if we go back about a year ago, we were probably, I don't know, 4 or 5 million run rate. Got it.
So call it maybe 280, something like 280 grand a month. Yeah, maybe 300. Yeah. That's good. And where is most of that growth come from? Is it coming from expansion revenue on accounts you already had or brand new accounts coming in? It's coming from working with agencies. And the reason being is that the agencies are getting beaten up by the consulting services companies, right?
Accenture is the fastest growing digital agency now. The reason for that is that they're going in and solving these data problems and using data to guide the marketing effort. We see two, three, 400% improvement in marketing ROI when we start helping organizations become data-driven.
And so what's happening is that these Cognizance, Wipro, Accenture, Capgemini are going and solving data problems, but all those organizations have created digital agencies now.
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Chapter 6: What is the revenue model for Versium and their customer tiers?
So the traditional digital agency is getting beat up pretty bad. We come in and we say, we will be your data technology partner. We will solve data problems, solve data silos, and use our engine to drive your marketing targeting. And it's a great winning strategy, and they're embracing us quite rapidly.
Chris, what I was trying to get at there though, is are you driving more growth over the past year from expanding customer accounts? You already had upselling them or bringing on brand new accounts from channel partners, brand new accounts, brand new from channel. Okay. And what's the kickback you give the channels? Why do they do it? A couple of reasons, right?
In the case of the consulting services company, they make billable hours wrapping professional services around our capabilities. But we also provide a revenue share on an annuity basis for everything that comes through the pipe, right? So when you get the Perseum platform for data cleansing or for data enrichment or for targeting, it's an ongoing SaaS-based recurring revenue model.
And we're able to share in that revenue ongoing with those partners. So what is that, like 30%? What's the percentage? 30% to 50%. 30% to 50%. Okay. So if I back into your CAC, right, if you're acquiring a 12 grand to your customer or a grand per month, you're willing to spend up to 3000 or 4,000 bucks in terms of the kickback to the channel partner to acquire that customer.
Uh, you know, I'd have to look at, you know, I don't know what our, I have to get our CFO to look at the CAC numbers to be able to answer that fully accurately, but we're definitely willing to invest in the partner to grow the business because it's an ongoing revenue stream.
So early on with some of the new adopters, we're just launching a new dev portal that allows dev developers to access via API. We'll be a bit more aggressive on the revenue share initially, but we think it'll settle out about 20% to 30% because they're also making money writing to those APIs or they're making money on the creatives that drive through the channel.
So it's a very synergistic partnership. So we don't have to be too aggressive on our revenue share. Sure. Well, I mean, I would say if you give them 50%, that's pretty aggressive. 30% is a little, obviously, more or less aggressive. Maybe the first year, right? Yeah. Yeah. What's churn today? Churn is very low. It's like below 5% to 7%. And that's revenue churn net per month?
I don't know if that's on a logo. That's going to be on a revenue basis, not logo basis. Okay. But monthly or annually? Annually. Oh, annual. Okay, good. Yeah, that's really healthy. Good. And that's net or gross? That's a financial question. I have to get my CFO to answer that. I don't know. I'm not sure what you mean. It's a big difference though, right? So 5% to 7% churn annually.
Basically, are you adding back expansion revenue or not? Do you know? We're adding back expansion revenue. Okay. Got it. Got it. So good. That's helpful to understand. So 5% to 7% revenue churn annually, and that's on a net basis. That's great. Well, I mean, what do you think you have to do to get to net revenue retention annually of over 100%? Net revenue... Sorry, sorry.
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Chapter 7: How has Versium achieved profitability and growth?
We apply certain technologies that allow us to do some things. But even if you have a unique source, I give that a somewhat fraction of value because eventually it becomes a commodity. It's about the technology you wrap around the data. Our identity matching engine, which is leveraging 30 years of experience dealing with the challenges of consumer and business entity data.
Our automated ETL processing and data hygiene engine that cleans up data very rapidly. Our automated pipeline. I'll give you an example, right? One of the competitors in the space, to quote one of our customers, it takes them nine years to build a predictive model. They may have met nine weeks or even if they met nine days. We can build a predictive model in a matter of a couple hours.
And that takes the data in, it cleanses it, it standardizes it, it enriches it with our proprietary data, and then it pops it into an automated AI-based modeling pipeline. Throughout that entire process, I mean, that's six years of work we've done productizing and automating a technology layer around the data. So the differentiation, yes, data is unique. Yes, data is powerful.
We'll go head to head against anybody that has Axiom's data or any other data source, any other data source. Even if we gave them our data source, we would beat them because it's what we do with the data, with technology layered around it. So data is a commodity. If you're just a data business, you're going to be treated as a commodity. If you're a technology company, you're going to get the
Let's wrap up here in a second. Two quick questions before that, though, are you raising capital right now? Uh, we are, uh, in process looking at various ways to grow the company. Uh, capital raise is certainly one of them. And, um, you know, we've got some good things coming down the future. If you are considering a raise, you've modeled kind of where you would spend the money.
So, so I am curious, right? So if you did raise today, how much ideally would you be looking to raise to fund your growth plans? Yeah, so where this whole industry is going, there's a lot of companies that are being features, I should say, being run as companies. You're either the platform or you plug into the platform.
So we believe that the future is the customer data platform, which is going to be the centralized data storage within the enterprise from which all marketing is driven if you want to achieve the benefits. So that's the direction we're headed. We believe we'll have a unique solution in that direction. You know, 20 to 30 million gives you the funding. You don't need to go raise 50, 67.
I mean, 20 to 30 gives you enough to build out the team on the tech side, but mostly invest in sales and marketing. Is that what you're aiming right now? You're going to go raise about 20 or 16 to give you a total of 20? 20, somewhere between 15 to 25, depending on the structure of the deal. Okay. And you'll sell somewhere between call it 10 and 30% of the business, something like that.
Target 20%. Yeah. Yeah. Very good. Okay, good. Let's wrap up here with the famous five. Number one, what's your favorite business book? Oh, my favorite business book. Let's see. Um, or when you read, I said, I don't have much time to read books to be honest, but, um, you know, the subtle art of not giving F. Very good. That's a good one.
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Chapter 8: What strategies does Versium use to drive customer acquisition?
Sell and call it 10, 20% of the business. Chris, thank you so much for taking us to the top. Thank you very much.