SaaS Interviews with CEOs, Startups, Founders
1481 Don't lie to yourself. "Free Users" are not "Customers"
14 Aug 2019
Chapter 1: What is the premise of the podcast episode?
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They've got less, they've got 200,000 free and paid users. They have some amount less that are actually paying the ones that are paying pay between 500 bucks per month and $2,000 per month. They're growing about 25% year over year, 70 or to 80% of that growth is coming from new customers. The rest is expansion from older cohorts. Uh, Christian joined the company in 2015. It was founded in 2007.
Today, there are about five zero people, 50 people in remote locations, spending up to 12 months of first year ACV to acquire the customer. So $6,000, 12 month payback period. 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 Christian Schmidt. He's been CEO of Clever Reach since summer of 2015.
Together with Jens and Conrad, he manages the international email marketing company with more than 200,000 customers in 152 countries. Christian, are you ready to take us to the top? Yes. All right. Very good. I see.
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Chapter 2: How does CleverReach® differentiate between free users and paying customers?
Are those Nerf guns behind your head? Do you guys have Nerf wars in the office frequently?
Yes, exactly. We have. And it's correct. We sometimes play Nerf guns. Who wins?
Always somebody else. You don't dominate? No one's a consistent winner?
No, it makes fun. And we have great teams. And sometimes the to one team and sometimes to the others.
That's good. All right, let's talk about Cleverreach. What's the company do and is your revenue model a pure SaaS one?
Yes, it is a pure SaaS one. And our objective is to deliver a solution for direct message communication, specialized in email marketing and small SMBs and also big agencies and enterprises are able to create their direct communication to send campaigns globally and to analyze them. And that's our solution. We try to help people to communicate and to outreach their target audiences globally.
And in the future, we do have other channels and emails like Facebook Messenger, chatbots like Alexa and so on.
Very good. And give me a general sense. I don't want to talk about every customer cohort, but I think you're playing in the enterprise space. What's the average customer pay you per month, would you say?
The average customer pay, it's completely different because our core target audience are SMBs where we have small baskets. A basket could be between $500 per month up to thousands per month, depending if it's an enterprise, an agency, and what kind of plans they book. Because we do have flat rates for high-volume customers. flat rates and prepaid plans for low-volume customers.
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Chapter 3: What is CleverReach®'s revenue model and target audience?
They call those people users. So these people that are sending emails with you, how much can they do for free?
It's different. We have a similar opportunity in the U.S. where you can send to 2,500 users. Customers free emails four times a month. You mean subscribers to your list, 2,500? Yes. And in Europe, the number is much lower. It's 250 subscribers four times a month.
Okay, fair enough. And then how far under 200,000 are your actual paying customers? We're talking 1,000 or 100,000. Give me a general range.
Well, we do not talk about this number. Oh, why not? I'm not allowed to give that kind of numbers to the public.
Okay. Why do you say 200,000 customers though? It's very misleading.
Well, I don't, I don't understand why you, uh, let's talk about customers about users. It's for us, everybody's the same, you know, and, uh, we treat everybody the same. Everybody is on the same quality. Everybody should grow.
Christian, just sorry, just to jump in. You can't treat an enterprise customer paying you 20 grand a month, right, who might have an account executive, a CS rep on them the same as somebody on a free plan. The economics don't work. Why can't we? Well...
With Cleverreach, we have a calculation where a few customers pay, a few customers or a lot of customers do not pay. And they have all the same treatment, all the same professional solutions. And, of course, Cleverreach is treating everybody the same. We don't care.
Our approach is that everybody has the same opportunity, has a professional tool to do the same direct message marketing or email marketing like a huge enterprise is doing for lots of money.
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Chapter 4: What is the average revenue generated per customer at CleverReach®?
If every one of your 200,000 people, whether they're free or paying, messaged you right now, how do they decide what to focus on?
Well, first come, first serve.
Okay, so if all the free people emailed first, you would tackle them first, even at the risk of everyone who is paying significant amounts could potentially churn because your support goes to three, four, five days.
If that would be the case, yes, but this is not the realistic case.
Well, I'm obviously being black and white here because I'm trying to understand how you handle enterprise accounts. And it's tricky because you're throwing... Go ahead.
If you want to be treated faster or be on a primary line, you can book a primary support. For example, we have a free email support and we have a phone line where you need to pay for to call us and to speak to somebody. And if you have booked the primary support, you get treated faster than... then who, who has not booked this, this special support and that's paid. Yes. Okay. Yeah.
So support is not paid and the email support is for free. The phone support, uh, the help center and the phone is only for a payment, uh, for payment, but not, you know, you can have a free plan and just pay for phone support. And we do have a guaranteed reaction time within a paid support within 24 hours.
Yeah, so just to be clear, Christian, you don't treat free users paying nothing and people who are paying the same. They pay for support and services.
But we have plans for sending emails and we have a... Premium support where you pay for to get faster support.
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Chapter 5: How does CleverReach® handle customer acquisition costs?
That's why, yes.
Okay, when you are upselling past customers, are you selling them new products typically or just higher volume plans?
Higher volume plans.
Okay, and that happens organically, no touch or do you have a sales team that's actively selling into those accounts?
No touch. No touch.
That's great. Good. So just kind of a volume play there. And then last question, you're on economics. So CAC, what are you spending to acquire a new customer typically?
Sorry, say again?
What do you spend to acquire a new customer? It's called your CAC.
Well, we usually say that we are willing to pay one year average sales of one customer to invest into a new customer.
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