SaaS Interviews with CEOs, Startups, Founders
1684 With $60M in ARR, How Braze Drives Serious Expansion Revenue on Old Cohorts
04 Mar 2020
Chapter 1: What is Braze and how does it help brands engage customers?
Braze, helping big brands really understand customer engagement, simplifying it. Formerly Appboy, call it $30 to $35 million run rate a year ago, now growing, call it $5 million-ish per month. That's from 600 enterprise customers paying north of $100,000 ACVs. Founded in 2011, Bill was the co-founding CTO, took over as CEO about two years ago.
Today, there are about 300 people, $170 million raised to drive that growth.
Chapter 2: How has Braze's revenue grown over the years?
revenue churn or sorry net revenue retention again a little south of 140 so healthy expansion revenue totally healthy depending on the archetype between a 16 and 24 month payback period as they look to scale hello everybody my guest today is bill magnuson he's the ceo and co-founder of braze formerly appboy bill's humanizing connections between brands and customers at a global scale by streamlining customers past present and future data in an interactive feedback loop
Braze allows brands to take immediate actions on insights, creating personalized messaging experiences. Bill, are you ready to take us to the top? Absolutely. All right, so tell us about the company. What's the company do and is it a pure play SaaS company? Yeah, so Braze is a SaaS company. We sell technology, we sell the platform.
At our core, what we're trying to do is help people form better relationships with their customers through a customer engagement platform. We've really built Braze to be the backbone of customer engagement for people as they're looking to run more sophisticated strategies, better engage their customers, form more valuable relationships with them.
Chapter 3: What challenges did Braze face during its early years?
Interesting. And, and walk me through, uh, on average, kind of a customer, are they going to pay you, you know, a hundred bucks a month, a grand a month, a million a month? What general space are you playing in? So we work with, uh, you know, generally large scale consumer companies. Uh, and so, you know, average annual contract values are in six figures. Okay. Got it.
So call it a hundred grand or north. Yeah. Okay. Very good. And walk me through, you know, kind of put this on a timeline for me. When'd you launch the company? So we were founded in mid-2011. So we've been at it here for a little bit over, or coming up on seven and a half years.
Chapter 4: How does Braze measure customer churn and retention?
And, you know, when we first started, you know, I think that we saw this fantastic opportunity in the market where we really fundamentally believed that the advent of, you know, mobile as a technology platform, as a way for brands to communicate with customers, as a way to deliver products and services or supplements, you know, were a
real world products and services would really kind of transform the economy across every vertical and transform that relationship between brands and customers. And so when we started, what we wanted to do was bring technology to play in that, you know, particularly hard problem and create an opportunity for brands to reach out with, engage and engage customers in a way they couldn't before.
And have you been able to kind of grow and scale this bootstrapped or did you kind of give in and say, OK, we're going to raise some capital here? We raised venture capital from the onset. And, you know, over time, we've kind of tried to, you know, responsibly match our own growth rate to the transformation that we were seeing in the industry.
You know, I think that the first six years of the company, if you look at the financing history, we raised about $40 million. And now in the last about year and a half, we've actually added another $130 million to that. So obviously quite an inflection point recently. And we think that that, you know, is largely matching the opportunity that we're seeing in the market. Got it.
So $170 million to date. Uh, yeah, roughly. Did you, did you choose to do most of that, um, on equity or as a bunch of that kind of debt on the back of a big round? Uh, that's all equity. It's all equity financing. Okay. Interesting. Yeah. We've, we've used venture debt a couple of times along the way.
Uh, but you know, presently sitting without debt and, you know, generally preferring equity financing. Tell me quickly, when was the moment you said, okay, now's the right moment to use some venture debt here? You know, we've never really had to tap it necessarily for operations or anything like that.
But just to give us some breathing room, you know, as we were growing, make sure that we weren't under the gun for financing timing so that we could just stay focused on the business fundamentals and not worry about the financing as much. Yeah, makes sense. 2011 is launched six years and obviously growth there. It sounds like you're growing even faster over the past 12 months.
What have you scaled to today in terms of total customers using you? So we're coming up on about 600 customers today, and we'll end the year close to around 300 employees as well. And that customer base is across a lot of different verticals.
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Chapter 5: What strategies does Braze use for customer expansion?
We kind of broadly break out our client base into what we call digital first and then enterprise, but broken out across a lot of different regions. One of the things I think that was really interesting was especially as we kind of had our provenance with a lot of mobile digital first companies.
If you go back to, you know, 2013, 2014, and some of our early clients there that they were a lot more global than, you know, a lot of other businesses were. Your early customers were more global? Yeah, I think more global than even our investors expected.
You know, and I think a big part of that was just that the app store and phones and, you know, the distribution platforms were very global and with digital goods and such. And as well as a lot of the new ways for businesses to scale, they were increasingly being started in places all over the world and scaling all over the world. So we've been kind of global from the very early innings.
But now, you know, very much have a broad global client base. Talk to me about kind of economics around the SaaS space, obviously critical related to churn, CAC, ARPA, Payback, these kinds of things. Help me understand churn and how you measure it at your scale and what it is today and how you keep it low.
Yeah, I mean, I think that, you know, looking at cost, so obviously we're measuring customer churn on kind of a net dollar basis as well as from a brand base or from a logo basis. And You know, it's changed over time as well, especially as, you know, we've ascended into working with enterprise companies and as digital first companies and such have also grown in their own size and stability.
In the early days, you know, there was, you know, we worked with a lot of mobile startups, you know, a lot of which didn't survive and what have you. And so as we've matured as a business, you know, we've seen our churn, you know, declining year over year for the last few years, you know, partially due to improvements that we've made in terms of how we integrate onboard and support customers.
as well as just changes in our client mix and, you know, a lot of other kind of business changes. So when you leave expansion out for now, I'm sure you have a healthy engine there. But if you leave that out for a second and look at just gross revenue churn over the past 12 months, I mean, are we talking like five, 10 percent? Where do you fall there?
Yeah, something like that, you know, and it depends on the category. Obviously, the kind of more traditional enterprise Fortune 500 are going to be on the lower end of that. And then when we're looking at, you know, mid-market digital first companies and other regions, that's going to be a little bit on the higher range. Yep. I've noticed
Chris, once companies that are at your scale that have your price points, you know, typically have very healthy expansion machines. When a customer or a group signs up for you in year one, I'm going to make this up. Let's say I sign up for a hundred grand. What do you typically expand that same kind of contract to in year two?
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Chapter 6: How does Braze utilize venture capital for growth?
Yeah, I mean, it kind of depends because we have a few different archetypes of how we get started with the customer. So, you know, sometimes we'll start on a particular product or a particular set of channels. You know, we really work across a lot of different mediums and across a lot of different messaging channels. So we're going to work with
a client with their mobile user base as well as their web user base, maybe they're people using digital set-top boxes if it's a media client, things like Apple TV or what have you, and then messaging going out across owned channels on those first-party platforms like delivering messaging to the web or web push, maybe mobile push, maybe email.
Some clients, when we first start working with people, they're going through a digital transformation and we take over all of the client communication for them kind of right out of the gate. And so when we see growth in those clients, it's usually because their customer base is growing or they're adding new products or we're expanding within the corporate umbrella.
In other cases, we've had clients that have grown 10, 20x because we started out working with them on just one channel. And then over time, we've kind of taken over all the customer communication. That's great. Well, so let's just look at it at a macro level then. When you look at net revenue retention annually across your entire cohort of customers, I assume you're north of 100%. How far north?
I'd say best in class is like we've had some people on at 140-ish. I mean, where are you generally? Yeah, I mean, we're a little bit lower than that. But again, it's kind of a bimodal distribution, right? There's some people that are, you know, huge multiples and then others we just grow as their user base grows. Yeah, no, that makes sense.
The reason I like to ask that question is I always like to understand how much of your growth year over year is coming from expansion on your cohorts versus brand new customers. What would you how would you answer that? Yeah, I mean, that's been an increasing number.
So the amount of our new business that comes from Upsell has been growing over time as we've added more channels and as we've added more places that we are. And also, obviously, as our customers have continued to break down silos within their organizations, this idea of
consolidating responsibility for customer communication so that you can kind of have one cohesive experience is really something that we're seeing more and more into the enterprise and kind of across all different verticals. And so that's been an evolving story for us over time. And it's something that's been growing.
And if you go back even two or three years ago, we didn't have a dedicated account management function. And now we have that. It's a dedicated team.
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Chapter 7: What unique methods does Braze employ for customer acquisition?
It's global. It's split out. into specializations across different categories as well. Some other CEOs I've had on that are at your scale or North or just barely South, like Cvent, Reggie, you know, Ryan at Qualtrics.
When they talk about dollar-based CAC, in other words, what they spend to get a new dollar of ARR, a lot of them are actually doing something which most people at lower scale would think is counterintuitive, which is they're pushing their dollar-based CAC up because they assume that if you can, you know, whoever spends the most for the customer wins the customer.
And if you have confidence in your kind of cohort lifetime value expansion, you have confidence to spend that upfront. Where is your head in terms of aggressiveness around CAC? Yeah, I mean, I think that that's another, you know, that's another thing that we certainly break down by client category as well as by region as well.
And it all correlates back to renewal rates that we're seeing and how that breaks down. So, you know, I think that at a high level, that idea of obviously spend into renewable business, right? We want to have customer relationships that last for the long term. And, you know, those are the places where we want to be investing dollars from a just kind of,
more kind of absolute number standpoint, you know, we try to benchmark ourselves against the numbers that are available. Right. So it's it's hard to kind of get the full story, especially as from a lot of people, especially as definitions change or what have you. So we like to analyze S1s and kind of look at what companies that went public looked like in the years prior, you know, as
when we look at kind of where our scale is right now to help us understand where we sit in ranges. And I think that our fundamentals in a lot of this due to, you know, I think the we raise relatively less money than a lot of the competitors in our space for the first five, six years of our life.
And so there's a lot of kind of discipline and, you know, kind of careful, responsible spending and investment that's ingrained in the culture here. And so, you know, we always benchmark very well kind of within ranges that we that we've been able to collect. Yeah. Would you, so like we obviously saw in terms of another B2B SaaS company, we just saw Qualtrics S1 before obviously SAP scooped in.
And so we get a good sense of their kind of dollar based CAC. I mean, generally speaking, I'm going to ask this in terms of ratio, because as you said, you have different archetypes, you put this around, but generally speaking, no matter what the archetype, no matter what the channel, I mean, are you happy with call it a 16 month payback period? Are you happy with 24 months?
You know, you can make money there. Where do you try and optimize payback period for? Yeah, I mean, I think that, you know, we're certainly comfortable with, depending on the client, we're comfortable within that range. You know, we just looking at our turn and renewal and, you know, upsell and all those types of things. We can certainly run a sustainable business in a range like that.
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Chapter 8: What insights can be gained from Braze's journey to $60M ARR?
At like 16 months? Yeah, I mean, like, yeah, certainly, you know, that would be that's that kind of those kinds of numbers are fine. But again, it depends a lot on the category, right? Like and with a large Fortune 500 company, that 60 to 24 is totally fine. You know, with a smaller, you know, mid market digital first company, you know, we obviously need it to be lower than that. So yeah.
Because you're assuming churn might be a little higher or lifetime value lower, things like that. And there's business risk with them or the expansion dynamics are different or whatever it happens to be. Interesting. When you do spend money to, I mean, you spend money to acquire customers, right? Where are you spending that money?
I assume there's some headcount of the 300 that are focused on this. I'm assuming you're doing some paid, but anything unique you're doing there? You know, I think I would say something unique. We do a lot of internal dogfooding and use Braze at Braze quite a bit.
And so as we're moving, and we do this not just for prospects, but also for new customers and for new employees, where these are all just kind of a lifecycle journey, right? And we want to be able to kind of communicate and orchestrate across all different channels as we are working to improve relationships. And so there's a lot that's done there. And you know, that
ability to kind of have real-time data flowing through the system and taking action across a lot of different channels has allowed for us to run some great strategies. I think that we're not built to be a kind of B2B scale platform. We sell primarily into consumer scale businesses. And so it is interesting with us kind of dogfooding our own product at a smaller scale than that.
It's an interesting kind of lens from a product insight perspective as well. Yeah. Have you guys passed 100 million bucks in ARR yet? Yeah, we haven't passed that yet. It's certainly within range. You know, the way that we're given our growth rate, you know, it's a number that we can see in the near future. Do you see that like next year? Are you still thinking maybe two years to hit that?
I think that we could get there next year for sure. It's like like it's a stretch kind of uncomfortable goal for next year or no, it's like we should do this. Otherwise, we're not growing how we should. Yeah, we feel good about it. Yeah, that's good. All right. Very good. And then in terms of, I mean, today we can kind of back into a minimum, right?
So if everything's starting out at a hundred grand in terms of ACVs and you've got over 600 customers, that puts you north of 5 million bucks a month today. Is that accurate? Something like that. Yeah. Yeah. That's great. And then when you look at growth year over year, where were you about a year ago today? Uh, uh, I don't know, mid 30s, something like that. I don't remember exactly.
You mean like 35, 35% of your growth or ARR? We're chatting, uh, that's, that's ARR. We're chatting December 13th right now. So, uh, you know, obviously Q, end of Q4 is coming up, uh, and end of Q4 was coming up last year. So I don't remember exactly, but. Yeah, yeah, yeah. No, well, so look, Q4 is a big one. You know, your sales reps are going, Hey, listen, buy it now. It's a 30% discount.
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