SaaS Interviews with CEOs, Startups, Founders
1466 Sales Demo Tool Passes $3m in ARR, Transitions To Enterprise
30 Jul 2019
Chapter 1: What is the new book by Nathan Latka about?
My new book is out, How to Be a Capitalist Without Any Capital. It hit the Wall Street Journal bestsellers list, and I just wanted to say thank you. I hope you get it at capitalistbook.com. Here's what user Jay Eggleston said in an Amazon review. Warning, this book is addicting, is Nathan the New Tim Ferriss. He said... I met Nathan during my college days when he was still CEO of Hale.
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Founded GoConsensus in 2014. They've just passed about 280 grand per month in revenue flat year over year as they transition from SMB customers to more enterprise. And again, these are sales reps using their tool to give more effective sales presentations and sales demonstrations. ADP, a big account.
They've raised $7 million in equity financing, about $5 million or another call it million in revenue-based financing, plus another equity, a little bit of equity on top of that. 200 customers right now paying on average 17 grand per year, willing to spend up to 14,500 bucks to acquire that customer. So healthy metrics in terms of payback period, less than 12 months.
In terms of churn, as they go through the transition, you know, 28% gross revenue churn annually, they expand by about 10% on that same cohort. So net net, about 82% net revenue retention each year to 30 people based between Utah 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 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 Garen Hess.
He's a serial entrepreneur who's founded multiple software companies, industry conferences, and a nonprofit organization. He's currently the founder and CEO of ConsenSys, a B2B demo automation platform. He enjoys reading history, mountain biking, choir conducting, and spending time with his wife and three kids. Garen, are you ready to take us to the top? Ready to go. All right.
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Chapter 2: How did Consensus transition from SMB to enterprise customers?
And even though I didn't have any idea what I was doing, I just went out and started doing whatever I thought was interesting. And to show you how ridiculously dumb that was in some sense, at one point I had five companies going at one time. I didn't even realize the principle of focus. But it gave me a lot of experience. Most of those didn't do well, but I cut my teeth on them.
So the alternative to that is, you know, bridge engineers would never have a single point of failure in the case of high winds. So why in entrepreneurship would you want to only focus on one thing? The last thing you want is a single point of failure.
Well, I think it was Andrew Carnegie that said that you ought to put all your eggs in one basket, but watch that one basket. And I suppose that there are two approaches you could take to that. But it's also just concentration of force, right?
If you think of it from a war mentality, if you spread out your force across too many points, you're going to go a mile wide and an inch deep rather than penetrate into the market.
Yeah, I would say pulling from Sun Tzu or to war, there's also a lot of value to distracting with one thing on the left side and then attacking with your full force on the right, right? I feel like it would be fun to just hypothetically debate this with you for the next 15 minutes. All right, tell us about GoConsensus. So it sounds like it's kind of automated B2B demos.
How's it work and what's your revenue model?
Yeah, so Consensus is software as a service that accelerates B2B sales through automated video demos. And the way that it works is the platform, the salesperson or sales engineer will send out a customized link to a prospect, that prospect will then answer some questions.
Might be some questions about role or industry, company size, and then it'll route them to a demo that's unique to that persona, but then ask more questions about what's driving their interest. So what's very important to them, what's somewhat, what's not important. And what we're trying to do is automate
part of the normal discovery that a salesperson does because a good salesperson is going to ask some questions, tailor the pitch and the presentation, the messaging to that unique person's interest, and then also try to discover other stakeholders.
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Chapter 3: What metrics indicate Consensus's financial health?
Are there any other pricing axes you use to drive up expansion besides number of seats?
If it's a marketing use case, then there's a usage component. But our main focus is on the sales side.
Okay, interesting. And put this on a timeline for me. When did you launch the company?
So we launched the company back in 2014 and, um, and, uh, well, technically in 2013, but got to market out in, uh, 2014. So that's kind of when it was launched out on the marketplace.
2014. And then fast forward to today, how many customers do you have on the platform?
So we've got about 200 customers. Um, it's been an interesting journey because I thought this was going to be a small business play where we're just going to charge, you know, I don't know what I, what I was thinking at the beginning, but, um, It's turned out that fairly quickly we started engaging companies that had large sales teams and they were getting good traction.
We've recently really focused a lot more on the enterprise and that's where our primary focus is now. But as an example, ADP, when they first came on back in 2014, they started with 80 sales reps and they did the split test for 90 days where they had every rep, every other deal they would use consensus as part of the sales conversation and
and sales process, and then they compared the deals after 90 days. And what they discovered was that they had a 44% increase in the close rate when they used consensus and automated demos, and their sales cycle shortened at the same time. And so that's the kind of impact that we've seen in these larger companies because they can implement it across the board. They've got this emphasis.
But Garen, I'm curious, how little were they paying for those 80 seats?
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Chapter 4: How does Consensus's demo automation work?
Should we do some more equity? Should we do another round of revenue-based financing? And they just popped up and said, hey, we're super interested. We'll help you do a mix. And they kind of helped out with that. driving a little bit of an equity raise and then also added some additional RBF on top of it.
That's great. That's revenue-based financing. Good stuff. What about churn? So gross revenue churn, it sounds like it might be kind of high over the past 12 months as you transition, but what is it if you don't mind sharing?
Yeah, gross revenue churn's been at about 28%. So not as low as we'd like it to be. In my last startup, I unwittingly had a 5% annual churn rate, which I didn't realize was so awesome. I would be upset about it every day. And now that I'm in this company, I'm thinking, wow, if I can get it down to 5%, we're going to be in really good shape.
Does expansion revenue more than cover the 28% lost? Or if not, how much does it cover?
Right now, we're at about 19% revenue-based churn, so it covers some of it.
You mean expansion?
Well, 19% revenue churn. In other words, you know, we get about a 10% save on the churn. Expansion.
Yeah. Yeah, sorry. So you're basically saying, okay, we lose 28%, we save 10% from expansion, so net-net, right, where we lose about 18%.
Yeah, and that's... We really expect to be able to make all of that up at some point through expansions because we're starting to have expansion, you know, very large expansion discussions with some of our enterprise customers. But it takes a while because you've got to get in, got to prove value. You got to do some initial expansions until two or three land. And then you can do a big expansion.
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