SaaS Interviews with CEOs, Startups, Founders
1743 Zapier Hits 100k Customers, $50m in ARR, Eye on Doubling YoY with New Partnerships
02 May 2020
Chapter 1: What milestones has Zapier achieved recently?
Wade Zapier passed 100,000 customers 50 million bucks in AR back in September 2018. They've doubled the ARPU over the past 18 to 24 months up to about 40 bucks per customer profitable 200 people now awfully remote still less than 5% logo churn as he looks and doubles down on how to go from 100,000 customers to 200,000 customers less than a million bucks raised. Hello, everyone.
My guest today is Wade Foster. He's the CEO and co-founder of Zapier, a workflow automation tool used by over 3 million people to connect the work apps they use every day. Before the company, Wade worked as a customer development lead for the IdeaWorks Inc. in Missouri.
He's an alumni of Y Combinator and has degrees in industrial engineering and business administration from the University of Missouri, Columbia. Wade, are you ready to take us to the top?
Chapter 2: How does Zapier generate revenue and what is its business model?
Let's do it.
All right, man. So I think a lot of people listening to the show have probably heard of you for some or the company for some reason or another. For those who have not heard of the company, quickly, what do you guys do and how do you make money?
Sure. Zapier helps people be more productive at work by helping them connect all the business tools that they use. So if you use things like Slack or Gmail or Dropbox or MailChimp or QuickBooks or Salesforce or any number of 1400 apps you might be using and uh, your work, we help you build automations and connect them easily. And it's a freemium service, uh, so you can get started for free.
And then we have monthly subscriptions. So that, uh, is roughly how we make money.
That's great. I want to talk more about, uh, you announced recently you passed $35 million run rate. I also know last time you were on, you were really effectively executing a strategy, uh, related to launching additional landing page is 25,000 or so. So I want to talk more about kind of the growth strategy ideas, you know, blossoming in Wade's head for 2019, uh, And hopefully have a good show.
Let's start obviously with the revenue number. So you did announce, I believe you passed about 35 million bucks in AR. That was in September of 2018.
We passed 50 million.
Oh, it's 50. Okay, good. So 50 million. And most of help me understand most that revenue. Are you starting to see more enterprise level accounts coming in? Or this is still kind of low touch, low ARPU or, you know, kind of model?
Yeah, we still have very much a product-driven sale. We drive folks to the product, they sign up, and then they upgrade with their credit card. We accept credit cards, PayPal primarily is the mode of payment. We do have customers across the Fortune 500 broadly, so we have lots of enterprise usage. But it's very much a bottoms up product driven sale.
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Chapter 3: What strategies is Zapier implementing to double its customer base?
Do you see because of that, do you see, you know, most people see churn where people are canceling because it's, you know, it's too expensive. And so they're churning and finding kind of cheaper alternatives. Many people could argue you're actually at the base of a lot of these other companies. Then you look at enterprise levels like, you know, SnapLogic, MuleSoft, etc.
Do you see actually people churning you once they hit some very aggressive amount of usage?
You know, not really. I think most of that's because, you know, once you get started with Zapier, it's so simple, easy to use. The product scales really well with you, too. Like we have a lot of robust error catching. We have a lot of sophisticated features that helps folks scale their usage as well. So we see folks go pretty far with us.
And very rarely, I can't even think of a time when someone said, you know, I'm stopping using Zapier. I'm going to go start using something like a MuleSoft.
This might, let me give a better example. Do you ever hear conversations like this? Wade, I love you guys. I'm using you for like 10,000 like zaps a month, but like I need X, Y, and Z built. Can your engineering team do this? And you might go, eh, not on the roadmap. We recommend you go use X enterprise, you know, competitor.
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Chapter 4: How does Zapier maintain low churn rates among customers?
Do those come up?
You know, that comes up. All the time, you know, of course, customers always have feature requests that they're looking for more sophistication. I think every software company runs into this. And a lot of times, you know, it ends up being like, yeah, I think you probably need to go hire an engineer to build this on your own.
You probably need to start using tools like AWS to like set this up on your own. But most of our customers aren't like that. Most of our customers aren't engineers that are building their own things. They're looking for something that they can do it with off the shelf.
Yep. R proof still about 20 bucks on average.
Yeah, we've raised it quite a bit. So we're doing a little better than that, but in the ballpark.
Okay. Was that intentional or kind of accidental raise?
You know, I think as you start to get more, as you age, as companies tend to age, ARPU tends to go up if you have a good mechanism where people start to use the product more. So those older cohorts start to use the product more, get more value out of it. They upgrade to bigger plans and they start to pull your ARPU up just as a business as a whole.
So that's usually how that happens for companies. And certainly Zapier is no different.
Back in October 2017, when you were last on the show, you articulated you passed about 60,000 customers on the platform. Where are you today?
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Chapter 5: What partnerships are driving growth for Zapier?
Really popular Squarespace opened up their ecosystem quite a bit. And so we have an integration with them now. Those have all been important new apps that have been added to Zapier in recent history and have performed quite well. I think a lot of folks use those tools and so naturally they need to connect those to other things that they're using.
Yep. And North of 100,000 customers and 50 million bucks in AR, I mean, that would put your kind of ARPU more at like 40 or 50 bucks a month versus 20. I mean, you said slightly more, but that's like doubling. Is that accurate? Yeah. Okay. I mean, you're not giving yourself enough credit here, right? You're a humble guy, but I mean, that's like doubling ARPU is a big deal over just 18 months.
Okay, interesting. And walk me through any other kind of growth levers that kind of surprised you last year. You talked a lot about your landing page strategy and your partnership strategy in the last show. So we won't go deep into those, but any other growth tactics you're trying?
You know, the thing that's most important for us is we want to have ubiquity in the apps that people use. And so we spend so much of our time focusing on how can we make sure that we have coverage across all these different apps that people are using at work.
As new apps are launched, as new products from existing companies are launched, we really just focus on trying to have that ubiquity because when we support the things that people use, then Zapier becomes useful for them. If we don't support the tools that they use, then Zapier is not useful for them. And so I think that's a big, big piece of it.
You know, of course, we've also invested a lot in an area that perhaps surprised me. We've invested a lot in our internal apps. So this is kind of a thing that once users don't come to Zapier for these things, but they stick around for them, which are things like our filters, our formatter, our code steps, our delay steps, our scheduler, our email parser.
These little utilities, you could almost think of them as like a modern Excel macro.
It's like a VBA kind of macro kind of thing, yeah.
Yeah, but they're easier to use, they're more accessible, and they help folks kind of extend what they're trying to do with a lot of these applications because sometimes APIs can sometimes be messy.
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Chapter 6: How does Zapier ensure product scalability and customer satisfaction?
We're under the hood. We're using APIs. And so the end user needs a way to kind of configure a little bit. It's like, well, I have a first name and a last name here, but I really just want the first name. So our formatter can help you say, well, I just want the first split of the space and just give me the first name.
So these little utility functions help people just get more out of these tools that they're looking for in a way that's pretty accessible to kind of your average worker.
What do you look for in terms of signals for new up and coming apps that you see are doing well, but are not on your platform yet? I'm sure you have a very sophisticated approach to kind of trying to find these signals and acting on them as quick as possible.
You know, I think it's not too different than perhaps like a VC might approach things. You know, you're trying to pay attention to Are they hiring more people? Is there traffic going up? You can look at Alexa rankings and see stuff like that. Are there, did they raise some money?
Obviously that's not always a signal, but you're just trying to piece together all these like little public bits of information to figure out like, hey, is there someone that we should be talking to that we're not talking to? So it is, it does look very similar to I think like what VCs would do when they're on the hunt for, you know, trying to invest in a company that's growing.
Wait, I'm a bit shocked. I never thought I'd hear you compare yourself to a VC when you're so contrarian on the whole VC and funding model. Let's go into that branch of the business now. So you've raised very little capital, less than a million, correct?
Yeah, yeah. Right at a million.
Are those folks still on the cap table or have you kind of done the whole wistia approach and bought those guys out?
No, they're still on the cap table.
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Chapter 7: What signals does Zapier look for in emerging apps?
You know, we went through YC, a big stakeholder for us, one of the larger stakeholders for us. And they continue to just provide a lot of useful value, even at the stage that we're at. So, you know, while I think there's a lot of bad actors in venture, I do think there are very good folks out there as well that can truly live up to that value add pitch that you hear so often.
And what's team size today? How many folks?
We're right at about 200 people.
200 folks. And what's the breakdown on that when you look at kind of onboarding, marketing, sales, support, engineering?
About a third is in engineering. About another third is in customer support services, onboarding, things like that, customer name and Lint. And the rest is kind of like a, you know, marketing partnerships probably makes up a big chunk of the rest, product design. uh, HR finance, that sort of stuff.
And all remote or all in San Fran?
We're a hundred percent remote, still no office.
That's great. That's good. It saves on, save on your expenses, right?
Yeah. I mean, a little, we, not as much as you might think I, we, um, the big benefit you get at a remote is you have access to a global talent pool. So you can hire anywhere. And then your retention rates, you know, especially if you invest in your culture, you invest in your values, you invest in the type of company you are, the retention rates are really high.
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Chapter 8: What insights does Wade have about leadership and company culture?
Yeah, more or less, you know, I think the whole, the thing that So the folks that are like, I'm a micromanager, I can't see people sitting down, I actually think they might enjoy a remote environment even more so, especially if they're good communicators.
Because in a remote environment, it's less about, you know, did the person show up and smile this morning or... Say hello at the water fountain. Yeah, totally. Sorry about this.
I got to... You okay?
Something just went crazy.
what like noise or yeah like a bunch of music just started playing you're not sure where it's coming from well here's the big question what kind of music is it it was a bunch of country music just started playing sorry about that folks i think my wife like had the uh my headphones hooked up to something in the other room just that's funny well look i'm a country music fan a little bit of garth brooks never heard anybody so that's good if it's country music it had to have been my wife so um anyway sorry about that so that's okay so we're saying um
You know, micromanagers, remote, managing those teams. I think the most important piece there is that when you're in a remote environment, a big part of what you're trying to do is ask people, set the objectives, and then set the deliverables. And so if you pay attention to what those deliverables are, you can see, are they doing the work in the timeframe which I expected?
So if you think about customer service, it's, are they replying to customers? You can go look into your your ticketing software and track the numbers and see like, hey, are they actually performing at the level that I think is representative of what we should be performing at? For an engineer, you go look at their commit messages, look at the code.
Is the contributions there what I expected for product managers? Do they have stories and specs written out? And do they understand the users really well? And those logs in your project management software. So like in a remote environment, there's these little artifacts that are existing in all these different tools that you're using to help you see, are things getting done?
And if you don't see those things, you ask a question. You say, hey, what's going on? I thought we'd agreed that this would happen. And if you don't see it, it poses a question. Doesn't mean necessarily like something's going wrong, but you know to ask a question about it. So I actually think that that
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