SaaS Interviews with CEOs, Startups, Founders
1504 Outreach Breaks $10m in New Bookings Per Quarter, Targeting $17m by Q4 2019
06 Sep 2019
Chapter 1: How has Outreach achieved over $10 million in new bookings per quarter?
Outreach growing fast, 3,100 customers, bookings per quarter. Now they passed last year, 10 million in new bookings per quarter, hoping to break 17 million in new bookings per quarter by Q4 of 2019. That'll put them past $10 million per month in revenue. They're still growing 100% year over year, even at their scale, 60 million raised, maybe a big announcement on
the way in terms of funding we'll see what happens burning call between two and three million per month right now which again is allowing them to drive so much growth 350 folks on the team in seattle 145 net revenue retention super impressive less than one sdr for two aes then one implementation manager and then again csms that are are incentivized with commissions to drive expansion revenue
Chapter 2: What factors contribute to Outreach's rapid growth and high revenue retention?
Hello, everybody. My guest today is Manny Medina. He's a CEO of Outreach, the leading sales engagement platform. Medina joined Amazon's AWS team as an early employee and helped Microsoft drive the mobile division from launch to 50 million in annual revenue. He has an MBA from Harvard Business School and a computer science master's from the University of Pennsylvania.
Chapter 3: Who is Manny Medina and what is his background in the tech industry?
Manny, you ready to take us to the top? Let's do this. All right. Come on. In the bio, your team says the leading sales engagement platform. You know, I have to push you on the fluffy stuff. So how do you know you're the leading one? You know, we have a good sense of the market. We always know who's buying who. We are in a very privileged position in which we are creating a new category.
So as the category is getting created, people are talking to all of us, to everybody in the category. So we have visibility into who is doing what at all times. So we track very closely the wins and the losses and the sizes of each of those and expansion opportunities and so forth.
So we know by the numbers that we are the one that with most accounts and the most money, you know, because we're also growing. We're also racing and, you know, we're close to Silicon Valley and everything. We hear the feedback from investors telling us that we are the leading. So it's the feedback loop and the market itself telling us.
So when you were back on the show last in February of 2018, you'd said you had about 250 employees at the time. You'd raised, I think, $60 million in funding is what you said. Give us an update on those two numbers.
Chapter 4: What makes Outreach the leading sales engagement platform?
What's team size today and have you raised additional capital? We haven't raised additional capital, but we are, you know, we're always talking to investors. So don't be surprised as news come out. We are at 315 employees right now. We actually just moved. We're in brand new offices right here in Seattle. and we are hiring a fresh new batch of the C-level suite, so we have a new CRO.
Well, Manny, hold on, hold on. New CRO, this is usually one of the first signals I'm looking for for anyone that I think might be pushing $100 million in ARR in terms of, hey, we're looking at going public. So who was the CRO, and have they taken a company public recently?
No, we hired Mike Mooney from Centrify, and he was involved in growing north of $300 million with HP, and then with Imperva, he took him to almost $800 million in ARR. And then recently he joined Centrify, but that got acquired by Tom Abravo. So he's looking for a clean slate, something to take from zero to public himself. Well, you're not exactly at zero anymore.
I mean, maybe more like 60 to public, right? Yeah. It's 60 to public and, you know, the public numbers are a moving target, right? So you can't, you know, 200 is a new 100. So you can't, it's no longer 100. Is that right?
Chapter 5: How has Outreach's team structure evolved to support its growth?
Is that it? It's really, you got to hit 200 million in ARR to have a good IPO? That's what Goldman is selling everybody. Why do you think that is? The amount of liquidity in the market is just stupid at this point. So you can stay private for longer. Stay private for longer. Funds are playing both sides. Now funds are playing both funds. I used to be public funds, hedge funds, and so forth.
I play in the private markets now too, because you can write a 50 to a hundred million dollar check and invest at all, like that whole thing into one company and then let that ride out. So if you have a $600 million allocation for a particular company, you can start making bets early on and just capture the upside as a company goes from, you know, growth stage to public.
Is you're in the back of your head, you're kind of like, wow, the whole team is kind of aligned on, we'd love to go public one day. Or do you think there's a path to actually staying private, you know, up to four or five, 600 million bucks in ARR? I think that we have to go public. The accountability is different. The liquidity is different.
I want to do what Amazon is doing, which is they pay their salaries fairly, they're fairly low. But each employee is capturing the entire upside of their execution because of the market reward. You see what I mean? Exactly. It's a beautiful position to be in, in which you sort of cap your base, but the market is paying your employees their bonuses and their salary increases.
So it's an incredible position to be in. And I want to be the Amazon for SaaS enterprise. Yeah, you see it as a way to potentially attract talent, but save your cash flow, use the equity value and the liquid markets to build a rockstar team. Exactly. And it's like the market is paying the employees a bonus for performance. Yeah. So we all, it's all aligned. There's no better alignment than that.
Yeah. All right, Manny, for people that don't know, the rare person that doesn't know what outreach is, what do you guys do?
So if you were to think of, self-engagement means that if you were to think about what a rep does every day, that rep calls and emails and follows up and book calendar appointments and documents, LinkedIn, et cetera, that whole thing needs to be orchestrated for you to be able to measure it and prove it.
So in outreach, it creates the single pane of glass where you can live and take all those actions. So what we do is we're separating the CRM layer, which is where the data is stored, to the system of action where the data is acted on. So by creating a layer where the system is acted on, you actually get better performance because you have visibility to what the rep is doing at all times.
And it's not working. It's not getting what you need out of the rep to move the deal forward. Yep. Last time you were on, again, February 2018, you said you had about 2,200 customers. What are you at now today? 3,100. And so where's, Manny, where's most of that growth coming from? What's the tactic that you've been testing? Outbound, inbound, content? What is it? So we have been heavily outbound.
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Chapter 6: What strategies does Outreach use for customer acquisition?
And I'm like, he's not replying to my emails. He's working on something big. And then I see the news. I'm like, God damn it, Manny, get out of my way, man. No, Max is a great guy and he has a book out too. How's that going so far? Oh, it's blowing up. It's blowing up because, again, we're redefining what sales means. Like sales is no longer bravado, lone cowboy, do whatever it takes to win.
Some people win, some people lose. Sales is becoming a very scientific game in which you need to optimize the time of the rep and the activity that they take to get the most use out of that transaction. And sort of like it matches both empathy, science, and obsession into one package. And that's what the book is. It lays out the groundwork for what sales engagement will be.
But to get back to your question, so we bought Sales Hacker so that we can actually have access to educating the community. What we figure is that our impediment to long-term growth was education, was educating the market that any of the stuff that we're doing is actually possible.
And every time we release something from the machine learning team and we tell the market that we just did this, the market is like, oh my God, how is this even possible? I don't believe you. You see what I mean? And because we are, you know, we're true to our Seattle-like roots in which we do what we say we're going to do. You know, we never market ahead of capability.
We needed the ability for us to have an outlet to tell our story. And that's what we bought CellSacker and that's what brings us here. So heavy outbound. Give me, give me the ratios real quick. Cause I'm sure you've tested this. You're in kind of inside sales team. So what's the ratio from kind of like SDR to AE right now? It's less than one to one.
So last time we talked, I think it was, you know, over one to one, one and a half or so SDR for AE. And now we're dialing that down significantly to less than one SDR. And we're going to get to one SDR for two AEs. Okay. Per two AEs. What has allowed the SDRs to get more efficient?
outreach can you be specific though i mean i know it's your tool you build it in but but what actually is it is it higher response rates on the cold emails i mean what is it we are non-stop testing so we have a team actually internally that what they do is they test language as we break down by persona right so we figure out what persona we're reaching out and then for each of those personas we break it down by segment you said i mean so you have you know persona make market persona enterprise persona blind how many personas do you have by the way
On the SDR team, I think we're testing about 15. And then go down one more layer. You said each persona has segments. How many segments? So we have four segments and about four personas. So four by four is 16. There's a few that are non sort of that are just not performing for us. So we have about 15 sort of sequence types that is addressing each of this persona market dot in the matrix.
And so for each, we have a sequence, every performance improvement of like 1% of connection rate or 1% on reply rates, 1% of connect rates on LinkedIn creates a downstream effect on the amount of funnel that you can create for SDR. Hold on, Manny, hold on. That's a really valuable thing. I want to go deeper there real quick. You just mentioned cold outreach on LinkedIn.
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Chapter 7: How does Outreach ensure high user adoption and engagement post-sale?
What are like two or three other like first touches you're experimenting with besides email and LinkedIn outreach? Yeah. Direct mail. Really? Yeah. So sending you something ahead of the call, sending you something ahead of the email has incredible ability to move the needle.
So the way you think about your entire go-to-market program is that you have an efficient frontier of what is SDR generated versus self-subspected by the AE. Figure that out versus what is the number that you're solving for in your CAC and your payback time. and then your margin.
And then you sort of like draw a line and like you figure out what is the right combo per segment based on your ACV and basically your time to close so that you can actually get to the right economic unit for that persona. You see what I mean? So what we're constantly doing is constantly saying, okay, so my SCR is going to perform all these activities and I'm going to get all this juice out of it.
While we're ABMing, we're doing an account-based marketing program against the same persona. Meaning the moment you get a package, you also get an ad on LinkedIn. And then the moment you click on that and you see something on the website, you're also getting retargeted. And then we see what do you spend time on? And then we have a call outbound going to you saying, hey, I noticed you did this.
Would you want to talk about it? So the ability to create that surrounding of the experiencing is that what gives us the ability to measure what is efficient and what is not. Manny, give me the inputs again. You said CAC, payback. What are the other things that changed depending on which segment and persona combo you're at? So CAC, payback, the ACD. Okay.
And then how long does it take to land that deal? You see what I mean? Because if your team is in prospecting against a deal, but it takes six months to land a $10,000 deal, it's not very efficient. You want to figure out what is the right ACD-CAC deal length combination to figure out the right program for that. Is there any single metric you are normalizing across all your segments?
Like you never want payback to be longer than eight months? You never want payback to be longer than 20 months. Gross margin adjusted. So when you say gross margin adjusted, just to be clear, you're taking your ACV, your first year ACV, you're then taking your CAC and then you're multiplying times whatever, 87, 84%, whatever your margin is. Exactly. What is your margin?
I think it's in the 80% right now. Most SaaS companies will have roughly, like assuming there's nothing weird, right? Like you don't have a big component of like, professional services, et cetera.
Assuming all that, your good, healthy SaaS company should be running margins somewhere between 80% to 70%, 65% even if you're growing really fast, because the majority of it is support in Amazon Web Services or Google Cloud or whatever you're using. Finish the kind of sales stack you're using with here right now. So less than one SDR per two AEs.
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Chapter 8: What are Manny Medina's future goals for Outreach and its funding strategy?
So the ability for you to use the application manually, like you're doing something in the application that creates an opportunity, creates a meeting, creates a reply, creates a follow-up, whatever is creating something that is moving the deal forward, we measure. And we need to get 70% of the seeds doing daily positive motions. And that's when we graduate into a CSM.
And then the CSM gets into the business of educating that account as opposed to getting to adopt. Okay. And that's break it down. Your typical implementation manager is on these accounts for about how long? Does that take a month or a year? It depends on the length of the deployment.
So if it's, again, 100% account deployment, it usually takes about a month to two months to get everybody to learn and to use it at a scale in such a way that it doesn't become a problem downstream of adoption, etc. This is your tactic to get month one to month two churn as low as you possibly can. Precisely. Our net retention is in the 140s right now because of that.
By the way, Manny, you know I do a lot of these interviews. I mean, I would consider that world-class net revenue retention. Yes, but that's how you do it. It's like you solve for the user activity by attacking that user activity upfront. Well, the deal is hot, but there is engagement and you have the champion, the ink is still wet on paper.
That's when you attack the adoption problem so that you don't have to deal with that later on when you're trying to do your renewal, upsell, cross-sell, or whatever. How many implementation managers per AE? At this point, we have one-to-one. Danny, I'm just going to summarize up to the CSM. Less than one SDR is keeping two AEs busy.
Those two AEs are closing and all the things those two AEs close, one implementation manager can handle over a month to four months, however long it takes to onboard 70% measured by sales process motions. Once the implementation manager hits that 70% seat usage, it's passed off to a CSM and call it month four or five, six, somewhere in that timeframe. How many CSMs per implementation managers?
It's a little lower because at this point, the CSM is working on education programs. The CSM, she doesn't have to worry about adoption anymore. She has to worry about education. So we already have dashboards for all of them to see how sophisticated they are in the platform, meaning are they using A-B testing? Are they using persona triggers?
Do they have their inbound workflows capturing outreach as opposed to the outbound workflows? And if it's not, then go capture that other workflow. Then go capture the account executive workflow. So the CSM is already trained to see for opportunities to capture additional workflows. It's like the implementation manager is going wide, 70% seats, the CMS says go deep. Correct. Yeah, interesting.
Okay, here's a big question. This is a big debate right now amongst other companies in the 100 million kind of ARR range. Are your CSMs quota carrying based off expansion revenue? That is a hot topic. They are not quota carrying per se, meaning they don't get fired, they don't hit a quota, but they do have a renewal target. Okay. Okay.
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