SaaS Interviews with CEOs, Startups, Founders
1724 He's Raising $100m Now Despite COVID, $20m in Revenues, 101% YoY Growth Serving Online Retailers
13 Apr 2020
Chapter 1: What urgent updates does the host share at the beginning?
Hey guys, I'm recording this here on April 5th. It's Sunday. Everyone's trying to survive the crisis. Quick note to you guys, we are moving, you know, we used to delay these episodes by, you know, four to eight months after we recorded them in terms of releasing them on the podcast. We've changed that.
A lot of these interviews you're gonna hear over the next many months are gonna be ones we recorded only
days prior we think that's a smarter way to run the show i've made the change so expect more urgent information coming out secondly i am getting destroyed on itunes reviews by these people that say nathan's rude he's hard-hitting blah blah blah which by the way i am it's part of my style it's what works the problem is people that love that style never take the time to go leave a five-star review
So I only get one or five star reviews on iTunes. And right now there's a streak of one star reviews that is driving me crazy. It would mean the world to me, guys. If you're loving the show, you love how direct I am. You like the style. If you go leave a review on iTunes now, if you do that and tweet it to me, text it to me, email it to me, whatever you want.
I'm going to reply with a very special surprise. I think a lot of you guys will really like it is heavy, heavy data oriented. All right. So I appreciate that. Thanks, guys. Enjoy the show. Exponia looking to do $100 million round, a big secondary here. The company's doing $20 million in AR, or $19, $20 million in AR, up from $3 million just about two years ago.
101% year-over-year growth over the past 12 months. Now serving 190 online retailers and online e-commerce brands, helping them get all their customer data in one spot and act on that data. They're seeing nice growth in the era of the virus and the recession. Again, hoping that helps fuel a healthy round that they're doing. 121% net revenue retention with the team.
of a hundred and i'm sorry 220 people 60 engineers 20 quota carrying reps others obviously admins all remote obviously hello everyone my guest today is peter erikovsky he is the ceo and founder of a company called exponia which is a combination of a cdp uh customer develop hold on what is cdp customer data platform yes i got on the money baby uh he helps he helps help folks with cd their cdp and omni channel campaigns all right peter you ready to take us to the top
Of course, let's go. So talk to us a little bit about this. The idea of CDP, there's a lot of people starting to use this term as taking off, but it's still a pretty fragmented market. Where's Exponia playing? Are you serving a specific customer base or what's your angle? We're actually a customer data experience platform.
We're combining the actionability of campaign tools with the smartness of our CDP, and we're focusing primarily on online retail and e-commerce. That's our niche where we are the strongest. This combination is really unique in one thing, it enables us to have the fastest time-to-value on the market, and with that, we are also the best rated CDP on the market.
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Chapter 2: How has Exponia achieved significant revenue growth during the pandemic?
60, okay. Are they concentrated in a specific international office? Yeah, no. So we, most of the developers are in Slovakia and then we also have some in Czech Republic, but that's the, we are keeping them focused because we believe that for engineering, it's useful to be in one office. Whereas now it's, it's not that useful, but yeah, in general, we believe in this. Yeah.
Obviously we're talking about the virus. We'll talk more about how COVID is potentially impacting you guys and how you're planning to play it, but finish out the team here for me. So 60 engineers, any quota carrying reps? Yeah, of course. How many? Yeah. Uh, less than 20 now.
So you say, of course, but like, look, sometimes if you have a price point, an average ACV of less than like $5,000, you can't afford to pay people quota. So you don't use a quota carrying wrap model. What is the average customer paying you per year? Uh, a hundred K just like 96, 97 is currently the average. Oh, wow. Okay. So that's much higher than it was four years ago.
You told me four years ago, it was about 30, 30, 40,000. So you've gone up market. Yes, significantly. Yep. And was that, um, Was that from driving expansion revenue off that historical base or you just brought on bigger customers from the start over the past two years?
So both, we've also, you know, awarded some of the smaller customers because at the beginning we were not that focused on online retail. And so we've had some other customers. And so we actually awarded some of them and, you know, focused on bigger customers, but also have driven significant expansion. So our net retention has been long over 130. Now it's like 121%.
And like, we have a few contracts, expansion contracts that can drive it to 140% again. And break that down for me. What's the gross revenue churn under that? 12% is the annual gross revenue churn. And so the, you know, 121 is the net revenue churn. Got it. So you've got 12% gross revenue churn, then you've got call it like 32 ish percent of expansion to get up to 120% net. Yeah.
That's upsell, gross sell and expansion in total. Yeah. Yeah. Okay. That's great. And how many customers are you now serving today? So we're at 19 million in CRR, so that gives you something like 195 customers, something like that. Got it. You said you're at about $19 million run rate? Yeah. Yeah. And word has it you're talking about some growth equity funds right now.
Are you trying to find more capital? And if so, what would you use the capital on? Yeah, so like we've got to an impasse with our current investor. And so we are looking at the different options and growth equity seems best. And so we're already in the process with some of the top growth equity funds who actually share the vision that we have. We want to make this into a multi-billion company.
We believe we can drive the company to over 200 million in revenue in like five to seven years because also the crisis is structurally playing strongly in our favor.
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Chapter 3: What unique value does Exponia provide to online retailers?
because digitization is like the topic everywhere in retail. So we see that there's a big opportunity, especially in the US, and we want to have an investor who would enable us to reach the full potential. So because of the virus and obviously we're recording this on on Friday, April 3rd, and we'll release it pretty quick soon after.
But there's two kinds of like I've talked to a lot of VCs, a lot of growth investors. There's kind of two very different playbooks people are going. One is they're just not doing any more deals. Right. Or maybe they're only putting some extra capital into portfolio companies to help support the portfolio companies. And then others are saying, you know, this is an opportunistic time.
I'm going to find companies that are thrive during the crisis and put money behind them. It sounds like you found some that are taking the latter, the last approach, right? What are the conversations sound like? Are you seeing any kind of, you know, small, you know, smaller valuations in the crisis than you would have seen four months ago?
Yeah, so definitely the valuations would be lower, but I was worried that they would be significantly lower. It doesn't seem to be the case. When you look at the stock market, the SaaS companies are down 17% compared to where they were before this started happening. So it's not that massive drop in terms of valuation.
And there are quite a few funds who were really fortunate enough to raise significant new funds in the
during 2019 and many of them are looking at this and thinking about who will actually win and who will benefit from what is happening and from the changing behavior and those are the funds that i believe are the best because they are having you know the right mindset they are skating where the puck is going to be not where the puck was and you know they see that we are actually the company that will benefit from this how much would you like like what are you targeting to raise
So all options are on the table. So, you know, we're talking about majority deal because we believe that through this, we will onboard our original investor. And the question is, you know, where would we agree with the rest? Okay. Sorry, you would. So let me just repeat this back to you.
You would sell more than 50% of the company because a large chunk of that would be buying out your early investors. Yes. Okay. And strategically, why would you do that? So we see that our existing investor has different views than we have, and we don't believe having two investors beneficial for us.
So we believe that the easiest way is to do a large secondary to, you know, getting off the cap table and really continue with the expansion. One example of like where we have really big differences in opinions is, you know, he would want us to focus on Europe and we actually significantly, we see the significant opportunity in the US and want to keep driving that.
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Chapter 4: What challenges did Exponia face during its growth journey?
We love that. I bug the hell out of them. They always get back to me. So I've got you 30% off along with $100 in free AdWords credit. To grab it, just go to HostGator.com forward slash Nathan. But you got to do it now. Again, HostGator.com forward slash Nathan. When you say you're not profitable today, you're talking like maybe burn of, you know, a million a month or less than that?
Less than that. Okay. Like less than a hundred grand a month?
no no okay so between between 100 grand and maybe 500 grand a month something like that okay fair enough and how are you so so let's talk about the virus for a second right assume you can't get a deal done right how many as the ceo of sas company during a crisis how many months of runway are you planning for again assuming you don't get a deal done with the with the growth equity firm no so so the thing is
We currently are burning money and we gave everyone in the company a promise that we are not going to do cost cutting. We're focused on ensuring that we pay the salaries to people. The only people who are leaving the company are those where we already had some performance management process initiated. And so there are some people who left, but it's like single digit numbers.
And we are looking at it from the perspective that we believe we will raise the money because there's quite high interest. Now, if we don't, we've already made it public to also, if we don't by end of July, we will announce some of the measures that we would need to be taking. And we are now doing the scenarios.
It might not even be needed because like the pipeline in terms of sales is moving slightly better than we were expecting like two weeks back when we had this kind of all company meeting where we were discussing this. So there are still deals moving in the pipeline. So if sales is progressing well, we might not even need to do any cost cutting.
But it also very much depends because like even big companies that are, you know, working with us are struggling heavily because most of the big retailers, they have 25, 30 percent online sales. And, you know, if 70 percent is gone, you know, even if the 30 percent doubles, that's still just 60 percent of your original revenues. So, you know, it pretty much depends on the macro environment. Yep.
Yep. I mean, I guess what I'm curious about is like, have you left yourself enough cushion? So your series C was a $15 million euro round, sorry, 50 million euro round back in June of 2019. I mean, do you still have the majority of that caught maybe more than $10 million in the bank or have you already plowed through a lot of it? No.
yeah okay we we've got uh if i remember correctly we have got something over five okay in total that we you know that we have on the accounts plus from the investors okay so you have assuming you're burning less than 500 grand a month right now and you have more than five million bank i mean you have plenty of runway to figure this out and and you feel good about raising the round we we we rate we're burning slightly more than 500k per month right okay yep
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Chapter 5: How has Exponia's team structure evolved over the years?
So we now have a great new CMO and she's building the entire inbound engine. And so we will be spending much more there. But, you know, we're in the transition on that. And what does growth look like? So last month, how many new customers did you add and how many do you think you'll add this month? Uh, so, so, you know, year on over a year growth for 2019 was, uh, 101%.
So we barely made it through the legit, you know, trying hard to the very last moment. And, uh, February wasn't very strong, uh, and March could still be strong. There's still, uh, one contract that should be coming in today. Uh, and, and, you know, with that, The total growth for the month would be around 700K. Yep. In new ARR? Yeah. Yeah. Sorry, that's in this month? That's in April?
That's for March. Oh, March. And we were actually, so like before COVID hit, we were expecting about 1.5 million. So that shows you that a lot of deals, they're not lost, but many are postponing the decision to see what's going to be happening. Yep. Yep. That makes good sense.
I mean, look, the growth is there right back again, when he came on last or late 2017, you're at a three and a half million dollar run right now you're at 19. So so the growth is clearly there. The question is kind of how do you pivot in kind of the virus environment? So let me ask another question, right?
If you're trying to go out and with some of these growth equity firms and raise $100 million, you have to obviously tell a story to get a valuation you like so that you don't get like super, super diluted. What I mean, from from a range perspective, what valuation are you targeting? So it will strongly also depend on, we're not patient as the only parameter.
We, we really want someone who would drive, uh, drive it forward with us. So, but like the, we only so far go, you know, we're early on in the process and we only got some indications. The, and the indications were saying something around 200. Yeah. So, uh, now that's, That's given what's happening in the market. I think that's roughly fair.
We were able to get much higher valuations like a year back. We had several investors who were willing to pay 300. And so there's some discount. However, I really look at it from the perspective that we want to showcase that there is a company with strong ethics out of Europe that can make it global and can be a leader in a category.
If we find an investor who shares that vision, even if someone would be willing to pay whatever, 10, 20 million more, we would still likely choose that vision.
yeah so your deal since you're going to sell about 50 60 percent of the company i mean you could see a deal happening where it's like a hundred million dollar investment on a hundred million dollar pre-money valuation which would be 200 million post and you're selling 50 of the company i actually i think we the percentage can be even higher but i like there are so many variants that you know yeah yeah very good all right let's wrap up here peter with the famous five number one favorite business book uh blueprint to a billion number two is there a ceo you're following or studying
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