SaaS Interviews with CEOs, Startups, Founders
1670 How This 24 Year Old Built a $12M ARR Company on $4m Raised in Influencer Marketing Attribution Space
19 Feb 2020
Chapter 1: What is NeoReach and how does it generate revenue?
just past 100 customers, about a million bucks per month in revenue, call it 12 million a year, hoping to double year over year to 25 next year. Growth was about two, between two and three X year over year over the trailing 12 months.
So healthy business, profitable, 4 million raised, 30 people between Orlando, Austin, remote locations, 20% gross revenue turn annually, 40% expansion on the same cohort. So call it 120% net revenue expansion, spending up to call it five months of lifetime value to acquire customers. They might use profits to get more aggressive with that over the next 12 months as it looks to double.
We'll see what happens Hello, everyone. My guest today is Jesse Leimgruber. He is the founder of a company called NeoReach. He's a mentor to the Alchemist Accelerator, a Thiel Fellow, and a frequent guest lecturer at Stanford and USC. NeoReach has generated tens of millions in revenue from customers like Walmart, Amazon, and NBC. Jesse, are you ready to take us to the top?
Let's do it.
Hey, kick your video back on because we'll use both audio and video feeds when we publish this thing. We'll deal with the delays.
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Chapter 2: How has NeoReach scaled its customer base since launch?
It'll be okay. But tell us about the company. What's NeoReach do and how do you make money?
Yes, so Near Reach is an end-to-end social intelligence platform. Brands pay us a licensing fee to analyze the performance of their sponsored post campaigns, everything from paying Tiger Woods to wear a Nike hat, to Red Bull sponsoring athletes, to YouTubers promoting a product. We measure the effectiveness of those endorsements, and we sell that data to large brands and Fortune 500s.
Interesting. And give me a general idea. I'm sure you have a lot of different customer cohorts, but we're short on time. On average, what do one of these customers pay you per year for your technology?
Um, we typically the minimum licensing fee for a brand is about $25,000 annually. And we have, uh, quite a few as in more than a handful of brands spending over a million dollars with us annually.
That's great. I mean, so would you say maybe a hundred grand or 150 grand is more of a fair average?
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Chapter 3: What challenges does NeoReach face with customer churn?
Yeah, I would say at least half of our customers are spending over $50K a month.
Okay, fair enough. Wait, $50K a month or a year?
Sorry, $50K a year. I think our average revenue per customer is around $200,000 a year.
That's great. Very good. So I want to dive more into the story. You've clearly kind of jumped into an enterprise model here. You know, we had Sprinkler on. Rajeev gave a great interview. And Hootsuite is obviously other end of the spectrum. And attribution is tricky and social in general. So put this on a timeline for us. When did you launch the company?
Chapter 4: How does NeoReach measure the effectiveness of influencer marketing?
What year?
We launched it in early 2014. We launched the company then. Probably the first year, I don't think we had any customers or nothing significant. 2015 was really when we launched our product in a sort of beta. And then towards the end of 2015, it took its current form. And so 2016, 2017, and this year have really been the primary products. But it's really about two and a half, three years into...
you know live revenue live customers but the business is a bit older than that that's great so and then how have you scaled right so from 2015 to today how many customers are you working with now um you know it's not it's not as big as some companies by number it's enterprise by the way so i'm expecting like a dozen maybe yeah we just passed 100 total customers okay that's i mean that's fair that's that's that's expect you were hedging there why were you hedging so hard
Well, you know, everyone, you know, does SaaS businesses like, oh, we have, you know, 35,000 customers, but it's like $5 a month.
Well, yeah, I mean, in a freemium model, but your model, you can have 100 and build a great business.
Yeah, we just passed 100. I think we're at 102, 103, something like that. Congrats, that's great.
Well, look, I mean, 100 at that $200,000 kind of average per year puts you at like 1.6 million a month, something like that.
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Chapter 5: What is the significance of the first customer for NeoReach?
Is that accurate? Not quite, but pretty close. Okay, and can you help me understand growth rates? Are you doubling year over year? Where were you exactly a year ago?
You know, I like to think of the way to scale a SaaS business as, you know, if you want to IPO, you need to triple, triple, triple, double, double over five years. So 3x revenue, 3x revenue, 3x revenue, and double and double. And then you're currently, that's the pace that will get you to an IPOable number. Where about that?
So we are, we're in between two and three X a year growth rate right now.
Yeah. So that would have put you at around, maybe call it 600 grand a month, about a year ago, a healthy grow. You added a three X in there, you know, usually it's three X, three X, two, two, two. What changed your thesis?
Oh, yeah.
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Chapter 6: How does NeoReach's team structure support its business model?
Well, we, we started with such small numbers. So I figured we need to, we need to pick it up somewhere.
Fair enough. Fair enough. Very good. All right, break down, break down some of the kind of economics around this, right? So I'm really curious about your first customer. Was it an end? Did you start enterprise and then stay there? Or did you start smaller and then scale up? Tell us the story how you got your first customer?
Yeah. First customer. So, uh, the, you know, the product was like, didn't work probably. And it was, uh, it was really buggy and, you know, we needed a customer that would sort of believe in it.
Chapter 7: What strategies does NeoReach use for customer acquisition?
So what we did is we actually outreached to maybe two or 300 customers on LinkedIn and we didn't even, we didn't pitch them. We asked them for feedback on what we were building.
So we said, you know, like what'd you search for? What terms? CMO. Okay, got it.
Yeah, we emailed about 200 or 300 CMOs. I remember sending the emails. We were a custom email. Email or LinkedIn messages? We went to the same school. LinkedIn mostly. And we did some email too. Yeah. And the first, we had a couple of tiny startups that maybe spent $1,000, but the first real customer we got was Zappos.
Chapter 8: How does Jesse balance profitability and growth for NeoReach?
The CMO of Zappos actually responded himself, introduced us to his ad agency, introduced us to someone else at Zappos, and they signed up for I think that it was a small deal at the time, $5,000 for a year license, but it was meaningful to get Zappos and they were our first recognizable brand.
That's great. Now talk to me about the rest of the company today. How many people are you total? Oh, total, just over 30. Just over 30. That's great. Everyone in San Fran, you guys spread out.
We are spread out. We have an engineering office in Orlando. We have a sales and marketing office in Austin. And then we've got
executive and a lot of other employees in the bay area okay very good so 30 folks kind of spread out and then help me understand today right churn is critical in any sas company i'm expecting you probably have pretty significant expansion revenue based off the size of some of these accounts what's your kind of gross revenue churn per year and does your expansion cover that we have we have high churn um compared to compared to certainly you know a business that's that's super super deeply integrated you know the downside of our business is
And it's a software. It's not tied into the infrastructural stack of their company. It's not like AWS or something like that. So relative to some businesses, we have high churn. But over the last year, we've actually been pivoting a lot of customers to our API product where it is actually tied deeply in.
What's high though, Jesse? I mean, do you know about revenue churn? Are you talking like 10% a year? It's a little higher than, than 10%. Okay. I mean, by the way, like, you know, it, you're pivoting to an API model, you know, tied to a usage pricing axes, which probably makes it way stickier. So this is a fun transition to make. So little higher than 10% is your expansion.
Does your expansion make up for the 15% you lose?
Yeah, for sure. It's closer to 20% of customers churn, but we grow at a significantly higher rate than that. And the ones that stick kind of really expand. The ones that tend to churn tend to be the $25,000 a month, the $25,000 a year customers, they tend to not be deeply integrated.
And the primary reason they churn isn't usually a product problem on near reach, it's more or less a marketing software for particular niches of marketing, and they just can't justify it relative to their to their overall budget. Like celebrity endorsements and influencer marketing isn't working for them. Not really as much our software.
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