SaaS Interviews with CEOs, Startups, Founders
1685 Why Data CEO Turned Down $35M Offer, Would Never Work for Facebook
05 Mar 2020
Chapter 1: What is PerfectCloud and how does it generate revenue?
Founded Perfect Cloud back in 2015. Now 850 customers paying two grand a month doing 1.7 million bucks a month or just south of 20 million bucks in ARR. That's up from 850 grand just 12 years ago. They're bootstrapped, which I love. 13.5% EBITDA margin. They're using that cash flow to reinvest in some blockchain related stuff now, but currently a pure SaaS company. Team of 35 in India and Canada.
20% revenue churn last year. Doesn't know net revenue retention yet, but again, happy to spend about 150 bucks to get a new two grand a month customer. Obviously pay back their super healthy as they look to scale. Turned down, walked away from many offers, one of them north of 35 million bucks, hopes to maybe sell or do a deal in three to five years. Hello, everyone. My guest today is Mayuk Gan.
He's been working in the technology industry, specifically cybersecurity, identity, and access management for the past decade and a half.
Chapter 2: How has PerfectCloud scaled its customer base over the years?
He's been part of multiple successful startups as an early employee before he ventured out on his own. He's also consulted for Fortune 500 companies. Mayuk, are you ready to take us to the top? Absolutely. All right. You're working on PerfectCloud.io today. Tell us what it does and what your revenue model is. How do you make money?
So PerfectCloud is a unified cloud security platform, predominantly in identity management, single sign-on, and data rights management as a service. Our revenue model is pretty straightforward. It's a subscription-based revenue model.
as well as uh some of the big companies are using it as a licensing model as well interesting so yeah so on on average i don't go down every customer cohort because it's a short interview but on average what are companies paying you per per month or per year to access your technology Uh, anywhere between $5, uh, per user per month to about $20 per user per month. Okay.
If we go above the user level and just talk about logo, the whole, the whole organization.
Chapter 3: What challenges did PerfectCloud face with customer churn?
So like on average, are we talking a grand a month, 10 grand a month, a hundred grand a month? Uh, range is anywhere between two to about 20 grand a month. Okay. Two to 20 grand. Good. That's still a pretty big range though. I mean, are you more long tail in average around three or four grand a month, or are you really focused on 20 grand a month enterprise? We are targeting big ones now.
But besides that, it's predominantly anyone that comes on board and registers on our service. Okay, good. Okay, but minimum there we'll say is two grand a month, something like that. Yeah. Okay, good. Put this on a timeline for us. When did you launch?
Chapter 4: Why did the CEO turn down a $35 million acquisition offer?
We launched our product in 2015, August, and we've been growing at around three to 400% year over year since then. That's great. How many customers have you scaled to today? Uh, approximately 850. Okay. 850. That's great. I mean, so can I take 850 times that 2000 a month? You just told me you're doing about 1.7 million a month. Right. That's great.
And so when you say 300 or 400% year over year growth, I mean, that would mean you were doing what? 400, 500 grand a month a year ago? Uh, well, uh, we would say we were about, uh, 250, uh, enterprise customers last year. So we are at $850,000 at the same time this year.
Chapter 5: What is the company’s current EBITDA margin and financial strategy?
I see. Okay. So December last year, $850,000 a month. Now way more than doubled, $1.7 million now. Yep. That's great. Okay. I mean, so most of that growth, is it, well, you just told me you added about, what, 600 customers. Do you have a powerful expansion pricing axes yet, or is it really just adding number of seats to older customer cohorts? We don't do marketing per se. It's all word of mouth.
So for us, it's companies that come on board 90% of the times that it is the same company that helps us acquire more customers. So it's ramping up and we pretty much bootstrapped from day one. Are you still bootstrapped today?
Chapter 6: How is PerfectCloud approaching blockchain integration?
Absolutely. Mayuk, I love that. You're my favorite. This is great. Talk to me about the team. How many people? So currently we are about 35 employees globally. Okay. And is there a hub? Where is everyone based? So I would say most of our developers are in India and Canada. And we have some marketing folks spread out between India, US, Canada, as well as UK. Okay, so India and Canada mainly.
And then talk to me about some of the other, you know, critical things in a SaaS company. So churn is critical.
Chapter 7: What is the structure and location of the PerfectCloud team?
What's your churn look like today? And how do you keep it low? Uh, we had a very bad churn, uh, two years ago. Uh, it was close to 50% and 50% revenue turn that year. Yes. Okay. And why was it so high? It was, uh, because the product was still immature and, uh, slowly based on the companies that stuck around, we improved the product immensely.
And plus, people didn't understand the security and privacy that we were providing. So they thought it was too much for them. So they say, hey, you know what, let's just move on to the ones that are, you know, well known rather than more secure. So now the same people are coming back after they found out that the companies that they had gone to, they are getting breached left, right and center.
Okay, so what's your turn today? Your last 12 months revenue turn was what? About 20%.
Chapter 8: What future plans does the CEO have for PerfectCloud?
Okay. So that's not bad. And then what's your expansion revenue on that same cohort? Well, you know what? The funny thing is we are putting in less than 5% for that currently. Wait, what are you saying? I don't understand what that means. So the total revenue that we are generating right now, we are putting 5% of that for the people who are leaving us because we feel that
If we put more than 5% right now, we may not be able to get the companies who are leaving us back. Mike, sorry, I'm still not following. You're saying you put 5% of your total revenue towards customers leaving you. I don't know what put means. What do you mean? So we are diverting it to... The acquisition, instead of going for newer customer, we are going for the same customer base.
We are going for newer customer rather than keeping the same customers who were not good enough for us. Oh, so you're basically telling me you spent 5% of your revenue on marketing. Oh, you could have just said that. That's much easier. All right. So you're churning 20% of your revenue.
So if you look at everyone you signed up a year ago, right, in December of 2016 or 2017, 20% of them churn, right? Do you add, does that same cohort, do they add, do they grow by more than 20%? So is your net revenue retention above 100%? Uh, good question. I don't know about that. I may have to check. Yeah, I may have to check. That's okay.
Talk, talk to me about, well, you just said 5% of your revenue goes towards acquisition, but if you want to sign up a new $100,000 a year, or sorry, a new $2,000 a month client, what will you spend on CAC, customer acquisition? Uh, probably about 150 to $200, uh, based on what we have been spending, uh, for new customer acquisitions so far. Hold on. Come on.
I don't believe $150 to a new $2,000 a month customer. That's fully weighted CAC, not just paid spend, but, but head count. Yeah, it is fully weighted. Yeah, it is. Okay. So why, why wouldn't you go then put a billion dollars in that channel?
uh because we don't have that kind of money right now so for us to go that route you'll have to go for funding which we are not why though you only have 35 people well hold on i don't i'm something's missing here you should have tons of money you have 35 people so your headcount expenses are low and they're in india and canada you're you have you're and you're doing 1.7 million a month or you're doing almost call it 20 million dollars a year you must have a ton of free cash flow
We do, but we are going into a new channel of business, which would require, we are moving into blockchain. So we are doing a lot of R&D on blockchain. Okay. So if you look at your current kind of monthly revenues, obviously you're cashflow positive because you're bootstrapped, I assume, correct? Okay. So, I mean, can I ask how much, like, are you 10% EBITDA margin or 20%?
And then are you taking all of that and putting it into blockchain research? We are about 13.5% right now. 13.5% EBITDA. Okay, so when that money sits in the bank account at the end of every month, what do you do with it? We are reinvesting in new R&D work plus new patents that are going in. New what? Patterns? Patent. Oh, new patents. Got it. Do you have a bunch of patents today?
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