SaaS Interviews with CEOs, Startups, Founders
1461 Does Your CS Team Carry a Quota? $8M in ARR on $2.5M Raised Roadmunk CEO Explains
25 Jul 2019
Chapter 1: What is the main topic discussed in this episode?
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He founded RedMonk in 2013, now scaled over 2,000 paying customers on just 2.5 million bucks raised, which I love. They've passed about 600 grand per month in revenue. That's up doubled year over year, so about 300 grand a month just back in October of 2017. 24% gross revenue churn annually, but expansion more than covers that. So net revenue retention annually, well over 100%.
Willing to spend up to 14 months of lifetime value on acquisition in the worst case scenario. They're well below that on probably most of their signups, but Healthy Economics, they've got a team of 66 folks between Waterloo, Toronto, and other 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 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 Lateef Nanji.
He's the co-founder and CEO of a company called RoadMonk, a product roadmapping platform that enables clients like Coca-Cola, Citibank, MasterCard, and Adobe to visualize and collaborate on strategic plans. All right, Lateef, are you ready to take us to the top? Absolutely. All right. So this is like, I mean, is this like, you know, Trello or Basecamp for the enterprise?
In a sense, yes. But really what we actually do is we think of ourselves as the mezzanine layer above those tools. In a lot of cases, tactical teams need to still stay in the Trello's and Jira's and Asana's of the worlds, and we're not there to compete with them.
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Chapter 2: How has Roadmunk scaled to $8M in ARR with $2.5M raised?
We look at ourselves as a way to make it easy to visualize and manage and create plans that that executive stakeholders or stakeholders that are not used to working in those day-to-day tools really need some level of visibility into.
Interesting. Okay, very good. And give me a sense of, you know, we obviously know the monthly kind of averages in terms of price points for those tools. On your tool, what's the average company paying per year, would you say?
Yeah, so we have sort of three different segments, but on average across sort of the mainstream of customers, you're looking around $4,000 per year. Okay, good.
Okay, so not super enterprise, but bigger than SMB, I would say.
Yeah. So we do have a whole segment of customers that are a mid-market and enterprise that do pay in the more traditional numbers, which would be somewhere between 25 to 100K, just depending on if they take advantage of some of our security features. So we do offer virtual private clouds for the enterprise, as well as just larger seat volumes, which come in at platform pricing.
That's interesting. So are those your two main leverage points in terms of your pricing axes to drive expansion revenue?
Yes, as we also have a per seat model as well, which is more traditional and we use that. And then on top of the enterprise, they have other requests that we've enabled us to grow our business and expansion beyond the traditional per seat pricing.
Interesting. So seats, security features and some other product features. Exactly. Interesting. Okay, put all this on a timeline. When did you launch the company?
2013 is when we started and founded the company in January. Okay. And then we launched into market at the end of 2014. So we've been in market for about four years now.
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Chapter 3: What pricing model does Roadmunk use for their product?
We actually do it based on the quick ratio. So we look at both expansion, contraction, churn, and new if they're closing any deals. Usually, they're able to do any transactional deals, so deals that are smaller than $5,000. And then from there, our sales team would take over if there are larger deals and have to go through a traditional procurement process.
So I want to dive into that. How do you set... Because I'm seeing the CS role really... The companies that have healthy expansion have really smart CS teams. And I'm trying to understand how CEOs like yourself are motivating these CS folks. Because these aren't people you're just hiring off the street. I mean, these are very talented people, right?
So when you say you motivate them, that there is a target, but it's not... It's not a quota-carrying role. What does that target actually sound like?
Yeah, so for example, so they have a portfolio of customers. So we have to start there. They own a segment of, let's say, somewhere between 200 to 400 customers, depending on the tenure of that particular CS rep. the experience and the relationships they've built with customers. So they own that. And what they're responsible for on a month-to-month basis is both the expansion and contraction.
So it's a ratio. So basically, let's say in the quick ratio world, you want to be aiming for every $4 you bring in, you don't want to be losing more than a dollar. That's sort of like the sweet spot. So let's say, for example, they're comped on that and they get X amount of dollars each month or quarter if they shoot over, let's call it 4.25.
But if they get between 3.75 and 4.25, they're then comped another dollar amount. So this has been working sort of early on in the business. But as we continue to grow, we're looking at new models that are not just focused on both expansion and contraction or churn. It's also like saying here is the expansion business as a dollar amount that we want you to focus on.
So we're seeing, we're starting to experiment that transition. Um, but we haven't fully gone over to that side just yet.
Interesting. So let me role play with you for a second. Uh, you, I'm, I'm a CS, you know, person at road monk. We're having our one-on-one and my number is not four in one out. It's like four in three out. And you're going, Nathan, what happened? I'm saying Latif. This sales guy closed this huge $100,000 ACV deal and promised all these things that we can't actually deliver on. I had no chance.
They churned. And that's why it's three bucks out instead of $1 out. That's why I missed my target. That's why I'm not hitting my comp. I'm leaving. Sorry. I didn't hit my comp. I need to make more than this per month. How do you handle that? I'm being a little facetious, but you get my point.
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Chapter 4: How does Roadmunk ensure healthy expansion and manage churn?
A hundred percent.
And it's, it's crazy. Like if you think about human history, like a hundred thousand years ago, or even 50, 20,000 years ago, there was no clocks. There was no alarm clock. You just woke up on your own circadian rhythm. And why should we just have this jarring thing? Wake us up. It's crazy.
It is crazy. All right. Uh, and what's your situation? Married, single kiddos, single, single, no kids. And how old are you? Nephews and nieces, 34. That's good. All right. Last question. What do you wish your 20 year old self knew?
I would say that, uh, Building a higher degree of empathy and emotional intelligence will build better human connections than just using raw intelligence and trying to be smart.
Guys, there you have it. Start building your EQ, emotional intelligence, as early as you can. Lateef founded RedMonk in 2013. Now skilled over 2,000 paying customers on just $2.5 million raised, which I love. They've passed about... 600 grand per month in revenue. That's up doubled year over year. So about 300 grand a month just back in October of 2017.
24% gross revenue churn annually, but expansion more than covers that. So net revenue retention annually, well over 100%. Willing to spend up to 14 months of lifetime value on acquisition in the worst case scenario. They're well below that on probably most of their signups, but healthy economics. They've got a team of 66 folks between Waterloo, Toronto, and other locations.
Lateef, thanks for taking us to the top.
Thanks, Nathan.
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