SaaS Interviews with CEOs, Startups, Founders
1595 Chegg Founder's New SaaS Company Breaks $7m ARR To Help CNBC Communicate
06 Dec 2019
Chapter 1: What is the main topic discussed in this episode?
Founded Convo back in 2013. Today serving 250 enterprise customers that make up over 100,000 paid seats. Average seat price is about $7 per seat there. They've raised $9 million, but really Osman has invested a lot of his own money, his own capital, his own time in that. Coming off his win from Chegg. Obviously super high growth there. They're six months away from being profitable.
65 people between California and Pakistan. Less than 5% gross revenue churn there. per year north of 100 net revenue or attention uh they he's happy with the 24-month payback so spending again up to the first two years of acv to get the customer in the door they're expanding rapidly uh taking this conversational kind of team communication approach for large enterprises like cnbc
Hello, everybody. My guest today is Osman Rashid. He is the winner of the prestigious Ernst & Young California Entrepreneur of the Year back in 2009. He's also the co-founder and CEO of online textbook rental and student hub Chegg, remaining involved in it until early 2010 after dramatically growing the company from its inception in 2005.
Today, he's the CEO of Convo Corp, an enterprise software company that focuses on in-context collaboration that replaces email as a conversation tool at work. Osman, are you ready to take us to the top? I am. All right. Convo, what does the company do and is it a pure play SaaS model?
Yes, it is. So Convo is an enterprise social collaboration platform. It's designed to enable easy, secure conversations between desk and feed employees to accelerate company productivity and engagement. And unlike existing email-focused or chat-centric collaboration platforms, Only Convo combines the ease of social networks with rich collaboration capabilities for your enterprise.
So also, I think my audience listening, they're going to go, wait, he just gave a pitch for Slack, except the end part, right? So is that really your differentiator? You're trying to say kind of the social element or some component of that is what differentiates you?
Yeah, so there are actually a few things which really differentiate us. We are really focused on document collaboration and conversations around areas of your work. For example, Slack is a fantastic product, and it's a messaging tool. And we are... Our use case really is 3% of our users for messaging. So we frankly plan to integrate with products like Slack.
97% of our use case is people working on a document or a conversation in large groups and hate email because it creates so much more clutter for you. And for them to be able to easily use Convo without having to worry about email groups and sending and forwarding emails to each other makes it almost 25% easier for them to work.
And that number is based on a study done by McKinsey that collaboration tools like Convo improve productivity by up to 25% for your employees when compared to email.
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Chapter 2: What is Convo Corp and how does it differ from traditional collaboration tools?
What year?
So Convo was founded in 2013. So we're in our fifth year of the company. And so we're excited. We are roughly 65 people across the globe.
All remote?
Yeah.
Sorry? 65 remote?
65 people total.
Yeah, they're all remote?
No, they're in two locations. One in Silicon Valley and one offshore.
Okay, San Fran. And which offshore, kind of where do you use offshoring talent from?
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Chapter 3: What is the average cost per user for Convo's services?
We want to control our growth.
um you know control our expenses so but it's been happening naturally where we are able to with new sales coming in get closer and closer to profitability but that's not you know it's a good thing to worry about yeah that's great that's good all right very good and then you know churn is critical in any sas company especially an enterprise kind of cohort walk me through how you think about churn and kind of where you're at today
So when you say churn, you're talking about customers, you're talking about employees, which area are you talking about?
Well, I asked it vague on purpose because I wanted to see what you defaulted to talking about because that's what's going to be most important to you. So if you had my choice, I think the most valuable metric is revenue churn at these kind of ACVs.
Yeah, so what we find is 90 plus of our customers, 90% plus of our customers who have gone to more than 20 users, they don't churn. They stay with us because we've become such a critical part of the communication network, the history and the knowledge base and the product builds. That they want to stick around. They want to stay.
So where you have the churn, in our case, when it comes to customers, it's people coming in and trying the product out and then deciding, all right, we're going to do something at the company level. How do I bring IT or headquarters into it to help me make a decision because we like something?
Talk to me about revenue churn, though. Annual revenue churn, gross.
So we are at almost 5x growth over the last 12 months. And we expect to be 5x in just Q1 of next year.
Okay, well, Austin, sorry, that doesn't answer the question of the underlying. I mean, churn can be covered by exceptional growth, which is what you just articulated. So congrats on that.
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Chapter 4: How does Convo handle customer onboarding and what team sizes do they cater to?
But when you look at the underlying revenue churn metric, I mean, is it pretty low, like 5%, 10% per year or what?
Yeah, it's below 5% actually.
Okay, that's great. So below 5%. And I imagine a lot of this growth is coming from expansion as well because of your land and expand. So if a customer starts with you at maybe a $10,000 ACV, what do you typically predict expansion is going to look like from year one to year two?
So we, depending obviously on the customer size, right? I mean, a big customer is a small customer. But on average, we expect them to be around $70,000 to $75,000 in the second and third year.
Okay. I guess what I'm trying to get at is net revenue retention. I know you're above, I believe you're above 100% because your expansion more than makes up the 5% that you lose. I'm curious how far above 100% you are.
So from the overall revenue perspective, right? I mean, we are at two, 300% of our overall, the growth of the company. So we are not losing revenue from customers leaving. So that's not our challenge, right? Our challenge is as a small company, how can we go and- Wait, sorry, I'm sorry.
How are those two things correlated? You said you have 200 to 300% year over year growth, which is fine. That includes new customer additions. I'm talking about cohort behavior. So if you have 5% of the cohort that signed up a year ago churning, what I'm trying to understand is, What does expansion in that same cohort look like, ignoring new customer ads?
And are you above 100% net revenue retention and by how much?
Yeah, look, I mean, the cohorts in which you come in from a customer, say a customer that started in 2017. If we take a look at that as a cohort, we see almost 250% growth on average within a customer.
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