SaaS Interviews with CEOs, Startups, Founders
1562 Why $40m ARR Algolia CEO Believe Developers Should Do 1 Day of Support Per Month
03 Nov 2019
Chapter 1: What is Algolia and how has it grown since its founding?
founded Algolia back in 2012. They did call it 20 million bucks in AR last year, more than doubled this year with 40 million bucks in sight, serving over 6,000 customers ranging from a long tail and then embedded in that about 300 enterprise customers. Those 5% of our customers make up more than 80% of their revenue. So definitely
model there they're doubling down on with a sales team you know inside sales team prospecting things like that 300 people based between san fran and four other offices in terms of payback you know willing to spend up to 12 months of acv to acquire the customer obviously that actual number different you know is different by cohort in terms of retention over 120 net revenue retention annually coming a lot of that's coming from a 30 expansion year over year on that same cohort so really healthy growth
Hello, everybody. My guest today is Nicholas Duceyne. He's a co-founder and CEO of a company called Algolia, the leading search and discovery API for websites and mobile applications. Launched in 2012, the company now is used by over 5,800 companies around the world. Before Algolia, Nicholas spent over 12 years working on information retrieval at Exelad and Thales.
All right, Nicholas, are you ready to take us to the top?
Yes. Thank you for having me, Nathan.
You bet. So I'm hoping a lot of my audience has maybe seen your actually search tool kind of across some of their favorite websites. But for those that have not used you before, tell us what you do.
Yeah, so we basically help developers of website apps like Medium, Twitch, Under Armour, and many others power their internal search. So if you search on any of these companies, you are basically using us behind the scenes.
That's great. And what's the business model? Is it kind of a pure play SaaS company or how do you monetize?
Pure Play SaaS. It's only in the cloud. So it's only subscription-based. We are going to have customers from a long tail of developers that are going to self-serve on the service. We start at $35 a month. And we're going also to have up to bigger enterprises that can use us. But we're speaking more of like upper six-figure deals per year there.
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Chapter 2: How does Algolia's business model work and what is their pricing strategy?
300. Yeah. Over five offices today.
Okay, great. So, so spread out San Fran is headquarters.
Central headquarters, we started in Paris. We have a big team in Paris. All of our engineering is there. And we have sales offices in London, New York, and Atlanta.
Oh, very good. Okay, and then you mentioned in the intro, you launched in 2012. So over the past six months, how many logos have you grown to? How many paying customers?
We're about 6,000 customers right now. Oh, great. Exactly the last six months. I couldn't tell you. But yet 6,000 today, we're pretty much doubling year over year.
Sorry, pretty much what? Doubling. Oh, doubling year over year. That's great. And then you said about 5% of those are actually enterprise. So about 300 enterprise and the rest kind of long tail? Yeah, that makes good approximation. Yeah, that makes good sense. And then, I mean, I can kind of back into this, right?
If you said kind of your enterprise ACVs are getting close to that six figure mark, that would put you somewhere around kind of 2.5 million today. And that's just 80% of your revenue. That's monthly. Is that generally accurate?
We're always looking at the yearly thing. Yes, that's pretty much the right ballpark. We crossed the, so we crossed the 20 million ARR milestone last year. And we're going to close to double this year. So we're going to be over 40 million this year.
That's great. Do you need these last 30 days to really get over the 40 hump or you're already over 40?
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Chapter 3: What percentage of Algolia's revenue comes from enterprise customers?
I think that it would have if we had a support team.
Well, Nicholas, let me role play with you right now. Nicholas, you just hired me as a senior engineer. You're paying me like 180 grand in San Francisco. And you want me to answer support tickets? I don't want to answer support tickets.
Actually, yes, you should. No, I hate the word pacing. But no, I think that's very important to have engineers who really care about the product they build and about the customers they serve. You know, actually, it's such a satisfying feeling when your customers have an issue and you're able to solve and help them and receive that thanks, that appreciation.
like really heartfelt thanks from the customers, I think actually it's a good thing. It's all a matter of proportion. You don't want to spend your days at doing that. But spending half a day Two half days a month answering support is actually a great thing.
Is that how you structure it? Each engineer has to spend basically one whole day per month on support?
Yes. And as we speak, we're actually creating a support team now, dedicated support team, mostly to be able to do 24-7 support and have a higher quality of support and response time. That's great. But we still ask our engineers to participate to that. So maybe that is going to reduce a little, but still going to be there.
And how effective has this been? So what actually is your churn per year today?
So we don't communicate about the churn, but let's say that the most important here is really to have a net negative churn, which we have. For SaaS businesses, you always try to look at both the dollar churn and the dollar upgrades from existing customers. So what you want is to retain, to have an increase in the retention of dollars.
Yeah. Expansion more than makes up for what you lost.
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