SaaS Interviews with CEOs, Startups, Founders
1434 She Saved a Pre Revenue $60m Raised Company, Then Launched Own Passing $6m in ARR for Team Alignment Tool
28 Jun 2019
Chapter 1: What is the main topic discussed in this episode?
If you guys love the podcast, you want to get the audible version of my new book, How to Be a Capitalist Without Any Capital at capitalistbook.com. A user named just J on Amazon said this in a review, a four-hour workweek for 2019. He goes on to say, I bought this book because I read somewhere that it was like a four-hour workweek of 2019 and it absolutely delivered.
The book delivered on both big ideas and has specific actionable templates, including unredacted and minimally redacted emails. This book is not chock full of self-promotion or useless platitudes, but it's broken down into four key rules explained in solid detail and with specific and often amusing anecdotes.
Reading this really got my wheels and my head turning of how to be resourceful, which many say is the ultimate trait of a successful entrepreneur. My favorite of the four rules is blank.
Chapter 2: How did Deidre Paknad turn around a pre-revenue company?
You have to go read the review to find out. But guys, thanks for supporting me on the podcast. I hope you go grab the book on Audible today at capitalistbook.com. Ran a big turnaround, company that raised about 60 million bucks, you know, a couple of years in, nothing, pre-revenue, nada. She came in, turned around, basically got everyone's investors money back, which was great.
Then was at IBM for a bit, saw a big need for alignment inside of companies. Left IBM in 2014, launched WorkBoard. Today serving over 50 enterprise clients that pay on average 125 grand in first year ACV. Doing about 500 grand, 600 grand per month right now in revenue. That's up three X year over year.
Chapter 3: What is Workboard and how does it help organizations?
Net revenue retention, incredible economics here. 140%. Expansion is really through the roof as they go from leader one to leader two. She's willing to spend up to a dollar to acquire $2.50 in new revenue. They've got a team of 55 folks based between California, India, and other remote locations.
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 two point seven million. I had no money when I started the company.
It was one hundred and sixty million dollars, which is the size of many IPOs. We're a bit strapped. We have like twenty two thousand 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 Deidre Parker.
nod. She's a CEO and co-founder of WorkBoard, has decades of experience leading enterprise and startup teams, and is passionate about helping other leaders engage their teams in great achievement. She's founded and led several companies, has twice been recognized by the Smithsonian Institute for Innovation, and has 16 patents. Deidre, are you ready to take us to the top? Yeah, absolutely.
All right. What is WorkBoard? What do you do and how do you make money? WorkForward's a software company that helps other organizations align, measure, and achieve their strategic priorities more quickly, more effectively. Okay, so you're selling these kind of to HR managers' internal team purposes.
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Chapter 4: What factors contributed to Workboard's customer acquisition success?
Actually not to HR managers, right? And if you think about an enterprise, whether that's a growth company or whether that's a huge enterprise like a Microsoft or IBM, the person with the strategic priorities is leading a business unit, right? We need to grow this much. We need to enter these markets. We need to drive this top line growth and this bottom line margin and profit, right?
And that's not the head of HR. That's the head of the business, right? And that's who we're trying to help drive acceleration for. Interesting. Okay. Very good. But all B2B SaaS. Absolutely. Yep. Okay. And I want to get, I want to put us on a timeline and get more of your story before we do that though. Give me a general sense here.
I don't want to go on every customer cohort, but on average, what's the customer pay you per month for this? Would you say? Actually, we think of, we do annual contracts. We sort of think of what their ACV per customer is. And it's about 125K. We've got really large enterprise like a Sony, Samsung, Microsoft, right, Deutsche Telekom.
And we've got a bunch of growth companies, a couple hundred people like Trendkite and Fluidiv and others. So, sort of in the middle of that zone is about 125K ACV. That's great. And put all this on a timeline for us. When did you launch? We actually launched a company about four years ago and took a, and we haven't used a ton of money to get here. Right.
And so it was perfect the product for, I think of it as the individual contributors, right? The people who execute against those strategic priorities and make sure they loved it, they got power, they got value.
And then stack on top of that, enable the managers, especially first-time, second-time managers who aren't really awesome at it, to connect the strategic priorities to the work their team's doing. And then elevate that to strategic priorities going up seven, eight, nine layers in the organization. So we walked up For two years on product, people love to use.
And then dashboards and alignment executives really, really need to have. And they put those together, right? And so we kind of got to revenue generation in 2016. And we've been growing at a pretty healthy clip since 2016 in the revenue. Okay.
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Chapter 5: How does Workboard achieve high net revenue retention?
And so obviously there are two years there pre-revenue where you're obviously funding, you know, development code, et cetera. I guess you raised early on. How much have you raised to date? Yeah, so we've raised about 12 million. I started the company from inside IBM and, excuse me, which bought my last company. Which company was that? That company was PSS Systems.
I was a turnaround CEO there and I led it for seven years. Deidre, turnarounds are fun. So you're a wartime CEO, huh? You bet. I love that. I love that. Heal it back to the bone and do over, right? That's not easy. Congratulations. Actually, it was through two recessions. It's so not easy. I started in 2003. The company had raised $60 million and had nothing to go to market with. Pre-revenue?
so pre-revenue. Oh my gosh. Yeah. Yeah. It had, uh, yeah. Anyway. Uh, and this is in 2003, right? The heart of, uh, depression one or recession one gonna get up and over that ended up, end up with an exit that was no down round, no recap, got to value on, on that capital. You were able to get everyone their money back out. Yes, I was. Wow. That's incredible.
Any, did any flow down to common holders or no, you didn't, it didn't get that far down the cap table. We got a little down.
Chapter 6: What is the significance of Workboard's pricing model?
We got a little, we raised one more round before exit and, um, and we had pretty good, uh, pretty good run. That's impressive. Uh, no, much bigger run inside IBM grew the same business a whole lot more like 10 X more. But in the running of that business, I, I, I encountered this problem we solved in deep pain, right?
Which when I left to start this company, I was able to go back to my investors in the last company and say, Hey guys, I got, I got an idea. And so we were able to raise a pretty big seed round in 2014. It's like 2.75. And that took us a couple of years, right? It gave us the time to get product, right. And not rush the let's add salespeople, right.
And then find out we don't have the product, right. Yep. Or the funnel or the metrics or the SDR to account executive ratios or anything like that, right? Yeah, that's right. Very good. So over the past, I guess, two years since you've been post-revenue, what have you been able to grow your customer base to? How many customers today?
So we have about 50 enterprise customers, which I think of it at that kind of scale we just talked about. And we're growing revenue three, three and a half X a year. So we're really kind of a good role. We just raised another round at Series A, the fourth quarter of last year, building out the management team, deepening the sales team and so on.
So we're adding, if you will, the capacity to grow at a faster rate now. That's great. Now, I mean, if I take 50 enterprise folks at the level, you just told me 125,000 ACV, that would put you at about 520 grand a month right now on revenue. Is that about accurate? In the neighborhood, yeah. In the neighborhood? Yeah. I mean, I just want to give you credit where credit's due.
If you're 3X-ing year over year, that means just a year ago, you were doing about 175 grand a month. Yeah, no, it's been a steep curve. In fact, we had huge growth before I raised the Series A, and so it was on, like, shoestring. We had 50% of our revenue was coming from our install base, and we were, yeah, we were struggling, to be honest, to, as you might say, to eat what we kill, right?
To deliver what we took down. And it was a hard stretch. We even got to a point where for every buck we were spending in sales and marketing, we were generating almost five in revenue. When was that? What year? Last year, just before I raised, right? So for most of 2017, that was a ratio. Um, and that was because our customers were expanding really rapidly, right?
We were the land and expand play was working where the expansion would happen within the first quarter, right? And then it would happen around what pricing, sorry to cut you off around what pricing axes, number of seats, additional features, what'd you upsell?
seats right and so in our case it's we're going to start with this part of the business unit and get everybody aligned and then we're going to add this part of the business unit and the next part of the business unit so it's really users seats right to it so that expansion was drive a ton of our growth and a lot of our efficiency right and really helped us figure out two things are important right like what do people buy in the first instance and then how do they get happy and happier over time right we had um a really thin team to go make that happen um
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Chapter 7: How does the onboarding process drive customer satisfaction at Workboard?
Yes. Deidre, you told me you're driving expansion in the first couple months. Extrapolate over the first year. If your first year ACV is 125, what's your typical first year expansion? So the first year, the average ACV is sort of where we end up at the end of that first year, right? So our first bite might be, here's a typical one from this quarter, 50K first deal in July, 200K ad in September.
Okay, got it. So that would be 400% kind of expansion in the account. I imagine you have net revenue retention then way over 100%. Yep, I sure do. Maybe over 250 or 300%. It probably comes out somewhere like 140. Yeah. Right. And it's, yeah, probably comes out around some 140. Some of our large enterprise customers lay off as many people. Got it. Okay. So that's what I was going to ask you.
The other, the other layer to that net revenue retention onion is what gross revenue churn is under the expansion. So what is that revenue churn typically annually? So, We don't have logo churn. We do have gross revenue churn. And that comes from two places. Literally, layoffs are a real thing, right? Companies like IBM, for example, which is a customer. And the GM loses his job. Yeah. Right.
And those are the two biggies. And so part of our expansion motion, part of our learning in 2016 really was if we, the exposure to you lose the leader, the exposure to that is high. And so part of our, we're going to drive a path where we expand within the first quarter. Multiple leaders. Yeah. Exactly. Within Q1, you've got leader two and in Q2, you've got leader three, right? And so on.
Well, it's tricky for your salesperson because they're thinking, I don't want leader one that I closed. I feel like I'm going around them. But really, it's your only insurance policy is to have a leader two and a leader three as an internal champion. Yeah, we, for sure. And so what we, there's this peak of euphoria for leader one is on day 21. Why?
We have a really, really cool onboarding approach. Really cool. Like that leader got value beyond their expectation on day 21. Deidre, you're teasing me. What is it? What's the magic there? So they buy WorkBoard because they want higher alignment on the strategic priorities. They want faster results. And our onboarding process isn't to say, here's the tool.
It's actually facilitating the alignment itself. the substantive alignment and capturing that in the tool. And so that's a whole like skill and process and way of thinking that companies don't have a lot of skill at. They're not very good at it, right? So we bring in a team of coaches that in a week or two coach teams to real alignment on real results, not tasks and activities, right?
And to-do lists, but on outcomes. Will they pay for that as an onboarding fee? They will absolutely pay for that on onboarding fee, right? So we have that as a whole other revenue stream. Some will pay for it as an annualized managed service. That's great.
So I mean, this means that you should then, I don't know what your CAC is, but I imagine that professional service upfront setup fee probably recovers most of your CAC, right? It does, and it drives that attach rate to leader number two, number three, and number four.
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Chapter 8: What strategies does Workboard use for customer expansion?
That's right. Because my ACV number didn't include my services number. Exactly. And they're paying the service upfront and the software, annual software upfront as well. That's great. What's the team size today? We're about 55 people. And where's everyone based? Most of the marketing and customer success team, CTO and support are in Redwood City, field sales guys across the U.S.
We have dev and some customer success in India. We have large customers in India as well. Yeah. Very cool. Talk to me about, so last time you raised, I think you said it was Q4 last year. You're now hitting this growth trajectory. I mean, the usual pattern you see is kind of a raise every year as you scale through the 3X, 3X, 2X, 2X, 2X.
So, I mean, are you any plans to raise right now or in the next six months? Yeah. So, we raised in October. I'm a I'm a pretty conservative, not first timer, don't spend it because you have it, spend it because it's smart person. So we probably won't raise until we even start the process until next April or May. Oh, very good.
And there are a bunch of things I want to have in place and perfected and kind of really teed up as we go into that. And of course, I want to push it out as long as I rationally can. Yep. If a company like a McKinsey comes to you, someone that, you know, is hired to drive performance, right? And they say, listen, you're doing 500 grand.
Let's say you're doing 8 million, 9 million, 10 million bucks a year right now. Let's say they offer you 10X at 100 million. Do you sell the company today or no? Not today. Not even for 10X? So it's not the multiple really, right? Because it's a multiple of what? You just want to look at where you are and you look at where you are in revenue now.
Look at what you believe to be the potential revenue in one year, in four years, right? And it's somewhere between the one and the four year horizon. Don't look beyond that. Don't fool yourself, right? But in that one or four year horizon, you think, well, where do I think revenue is going to be then? what, you know, if the world implodes, where do I think it will be? Right.
And then what's that 10 X multiple look like? Yep. Where do you think you'll be in a year? Good question. Don't know the answer. Don't know. It's so much about like, does the Salesforce I've just seeded, do they hit it out of the park? Does it take them one quarter to do that? Does it take them two?
There's so much variability, which is why I'm going to figure that out and then do the raise, right? Do you have the economics yet to pro forma for a new salesperson? Is it a six month ramp for three month ramp? What's it take them to hit get to quota? Right now we're looking at four months. Yeah, my VP of sales crashed in Q1. He carried a bag and like, I'm going to understand how to do this.
I'm going to be the best sales guy, right? So I can hire and coach the best sales guy. He's an experienced guy too, right? His first quarter, he nailed it, right? But we're still working on, if you can do that with one guy, doesn't mean you can do it with four or eight. Yeah. And is your ratio in terms of quota, you know, target relative to what your base comp is?
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