SaaS Interviews with CEOs, Startups, Founders
1757 How Wistia Hit $18m Revenues, Used $17m Debt from ACCEL KKR To Buy Out $1.4m Seed Investors With Tender Offer
16 May 2020
Chapter 1: What is the main topic discussed in this episode?
All right, guys, what's up? Nathan Lackey here. Today, our guest is Chris Savage. He's the co-founder and CEO of Wistia, a web-based software solution that helps marketers turn viewers into brand advocates to grow their businesses.
Chapter 2: What is Wistia and how did it start?
Now, more than 500,000 businesses across 50 countries depend on Wistia's products to build their brands like HubSpot, MailChimp, Sephora, Starbucks, and Tiffany & Co. Chris, you ready to take us to the top?
Let's do it.
All right, man, I already told you I'm envious of your video setup here. You're totally putting me to shame.
I'm just at my desk, man.
This is how it looks. Just another day in the office. All right. So we just hit on the bio, but anything you want to add in terms of Wistia for folks that, you know, if they haven't heard of you guys, what you guys do?
Yeah. I mean, I would just say, um, we've been around for a long time. We're a classic overnight success, you know, field of security for many, many years. Um, and then figured out like how to build a freemium business. Um, and we just help small medium sized businesses use video better. And that means, um,
analytics, see how your videos are performing, hosting, sharing tools, marketing tools, the ability to build channels. Like we have a ton of stuff to help people do that.
Yeah. Now the context of this, what I want to talk about is something very unique to what you've done, which is an acquisition offer you got recently and decided to do something totally off the rails, which was instead of taking the acquisition offer, raise debt and buy the folks out. So we'll get to that in about two or three minutes, but first give us context in terms of where you're playing.
So would you categorize yourself as kind of SMB mid-market enterprise? What's the average customer looking like?
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Chapter 3: What unique acquisition offer did Wistia receive?
My dad was a professor and had a good deal. And so we saved the meager amount we earned the first year of school. And that is what we use to fund ourselves the first two years.
Yeah. Now, 2017, obviously, was about two years ago. Give us it before we talk about kind of logistics here. Give us a sense of size of company at that point. How many customers were you serving? And if you can kind of revenue range?
Yeah, I think the revenue range was around like. About, like, right at the time of the offer, I think we were about, like, an $18 million run rate or so. And I don't remember the exact customer number offhand at the time.
A couple thousand. Tens of thousands. Tens, okay, good. That's good range, tens of thousands.
Chapter 4: How does Wistia define its target market?
Okay, so the acquisition offer comes in. Were you expecting it? Was it a surprise? Did you solicit it?
You know, what's funny is that we actually had three companies approach us at the same time that all said, we want to acquire you. And I... I was quite surprised because people have pinged us over the years and poked around, but never have we had three companies at once. And the fact that those three companies came at once, we're like, oh, maybe something's changing in the market.
And so we should take these offers more seriously. And then it just kind of evolved. You don't really expect to be spending your time doing that, and then suddenly you're spending all your time talking to people about it.
It took all your time. I mean, it was super time intensive.
It became very time intensive because, you know, there was like, we were, we really were not sure what we wanted to do with the business actually. So it was like, we had the acquisition offers coming in. We also had thought maybe we would raise a growth round. So we were talking to growth firms.
Um, we were looking at how much, what were you, what were you, what were you, if you did go VC that, that time, what would you raised?
I mean, when I was being sold, what they were trying to convince me to do is to raise, you know, 40 million bucks, something like that. Um, And so we were spending a lot of time like looking at our data and looking at the unit economics and like how things were changing and evolving, um, and thinking through what we would do in each of the different scenarios.
Yep.
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Chapter 5: What challenges did Wistia face in customer acquisition?
Okay, good. So you're, you're looking at kind of the VC side now, did it actually mature into a term sheet or you shut that kind of down quickly?
Um, it was returning, it was turning into a term sheet almost exactly the same time that, um, we were getting like the real offers.
Okay. Did any of the acquisition offers turn into a real LOI or a real term sheet, real diligence?
We were just, we had gotten the numbers and like we were getting, I think we had gotten to one of them, like the LOI to sign.
Okay. So where did, I mean, when did debt enter your head?
So it's funny because we're basically sitting there with this offer, trying to decide like, should we go to the next step? And, um, we realized in that moment, a couple of things like, well, what would we do if we sold? Well, if we sold the company, we would work at this new company for two years and then we would leave.
And then my co-founder and I, at this point, we've been working together for 11 years. We think we've worked together really well. Um, so we thought we'd do something together again, and we thought we'd probably try to build another company. And we talked about the type of company we try to build and we're like, well, we really liked the SMB space. We want to build a company with a strong brand.
We think there's a lot of stuff we can do in video. you can see where this is going, where we started to realize is that we were like, we saw the business we're going to try to rebuild with. And then they were like, why do we need to rebuild it? And that was the funny part was like, I didn't expect that. Like, you know, why, why rebuild?
And it was in that part of the conversation that we actually admitted to each other that we were not happy. Why we had been throwing the throttle down on growth for a couple of years. And we had, you know, we'd been profitable in funding the business through having customers and we, and we had cash reserves.
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Chapter 6: What decision did Wistia make regarding investor buyouts?
Um, and so I think there was like definitely a trust element involved.
What return did you, I mean, did you pitch them on a return when you raised, did you say, Hey, we're going to optimize this to get you a 10 X return?
You know, I was not a fan of saying an exact number at the beginning. I was always a fan of like when someone asked me what the market size was, I'd be like, I don't want to tell you what the market size was. But I will tell you, if you look at WebEx, you look at GoToMeeting, you look at the people over there, if they were spending just $50 a month, that would be a big market.
People would be like, that would be a multi-billion dollar market. You said it, not me.
You're like, that's the math.
I mean, because that is what we thought it was going to be. And, you know, there was things where there were a lot of stuff we're right about. I think one of the things we were very wrong about in the early days was just like the speed that our market would grow. We thought our market would be like two years giant.
I mean, what we didn't understand was that like, at least for business video, people wanted to be, they were nervous about the brand impact and then they're nervous about getting a camera and then they're nervous with the ROI and all of these things have been like a governor on our market. So our market's been a very, very good market, but it has taken way longer than people expected.
And you can look at the list of competitors we've had in the past, and many of them were overfunded, actually, and that's why they failed. Because they tried to get the market, and the market wasn't there. Then they had a giant team, and they couldn't support it, and so they'd get sold off or whatever.
What's your team size today?
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