SaaS Interviews with CEOs, Startups, Founders

637: Reason Infusionsoft Didn't IPO, Passes $100M ARR, $125M Raised, Helping 45,000 SMB's With Marketing and Sales Automation with CEO Clate Mask

22 Apr 2017

26 min

4905 words

2 speakers

22 Apr 2017

Audio

Description

Clate Mask and he has been educating and inspiring entrepreneurs for over a decade. He's recognized by the small business community as a truly visionary leader. His passion for small business success stems from his personal experience, taking Infusionsoft from a struggling startup to an 8-time Inc. 500 and Inc. 5000 winner. As CEO, he's leading Infusionsoft on its mission to create and dominate the market of sales and marketing software for small businesses. Under Clate's leadership, the company has landed 4 rounds of venture capital including a $55M series D led by Bain, with contributions from prior investors including Signal Peak Ventures and Goldman Sachs. He's also named Ernst and Young Entrepreneur of the Year Finalist, a Top 100 Small Business Influencer by Small Business Trends, and one of the 100 Most Intriguing Entrepreneurs of 2013 by Goldman Sachs. Famous Five: Favorite Book? – Crossing the Chasm and The Advantage What CEO do you follow? – Marc Benioff Favorite online tool? — Thumbtack Do you get 8 hours of sleep?— Never If you could let your 20-year old self, know one thing, what would it be? – Clate wished he knew that business, not law, was the path for him AND that building a team and culture is far more fun than making money. Time Stamped Show Notes: 01:18 – Nathan introduces Clate to the show 02:28 – When you serve small businesses, make sure you have the right target customers 02:35 – There are 27M small businesses 03:02 – "You got to get it right. You got to get the market fit" 03:20 – Infusionsoft focuses on businesses with 2-25 employees but the sweet spot is 2-10 employees 03:28 – Average customer pay per month is $250-300 03:54 – "It's CRM, marketing automation, sales automation, e-commerce on one suite" 04:03 – Majority of Infusionsoft's revenue is SaaS 04:10 – Infusionsoft's $3.4B payments processed 04:36 – Infusionsoft created their own payment solution 2 years ago 05:04 – It triggers all kinds of Infusionsoft's automation 05:50 – Infusionsoft started in 2002, as a software company 05:56 – Infusionsoft pivoted in 2007 and decided to really go for it 06:16 – "We started, like every small business, with no intention to build something big" 06:34 – Clate saw how Salesforce moved upfront quickly and that opened up the opportunity for Infusionsoft 06:43 – "Why not be the Quickbooks to sales and marketing software" 06:53 – Infusionsoft's dark days 06:56 – In the first 3 years, every day was a fight for survival 07:43 – The second dark day for Infusionsoft was when their product market fit went off and the churn rate went up to a 8% gross monthly customer churn 08:08 – Infusionsoft had raised $17M when their churn skyrocketed 08:38 – Infusionsoft's churn rate is usually 2-2.5% 09:15 – Infusionsoft has raised a total of $125M and about half was capital for the business 10:00 – "When you create something that's growing, there's always a new investor who wants to replace an old investor" 10:27 – When the round becomes "over-subscribed", you have to take a percentage of what you've raised and make it available for your existing shareholders to sell some shares 11:09 – Infusionsoft currently has around 600 employees and still continues to grow 11:20 – Infusionsoft has around 135K users 11:30 – Infusionsoft just completed their 10 year adverse completion 11:56 – There are more things coming up for Infusionsoft 12:27 – Average MRR 13:19 – Clate shares why they haven't gone public 13:58 – What happens is private money is easier to raise 14:06 – Historically, public valuation was better than private valuation, but that shifted over the years 15:00 – When the market changed in 2014, Clate had decided that it's better to stay private as long as they could 15:30 – Infusionsoft is currently between $100M – 150M ARR 15:51 – The leverage that Clate pulled to turn their monthly churn 16:10 – Infusionsoft is serious about helping small businesses succeed 16:22 – The breakage model that results in you having a lot of churn 16:45 – Infusionsoft says "no" to thousands of businesses every month 17:06 – The challenge when you serve small businesses is you that have to tweak and adjust to get the LTV-CAC ratio right 17:17 – Infusionsoft is currently at $4 LTV for a dollar CAC 17:44 – The LTV-CAC ratio is the number that every SaaS business has to manage well 18:15 – It's better to look at your revenue in unit churn 18:42 – The upfront fee was the number one factor for Infusionsoft's churn moving from 8% to 2% 21:05 – The Famous Five 3 Key Points: When you serve small businesses, make sure you have the RIGHT target customers and be committed to helping your customers. Going public requires a deep understanding of how adaptable you can be in an ever changing market. The LTV-CAC ratio is the number that every SaaS business has to manage well—that's the trick. Resources Mentioned: The Top Inbox – The site Nathan uses to schedule emails to be sent later, set reminders in inbox, track opens, and follow-up with email sequences Organifi – The juice was Nathan's life saver during his trip in Southeast Asia Klipfolio – Track your business performance across all departments for FREE Acuity Scheduling – Nathan uses Acuity to schedule his podcast interviews and appointments Host Gator– The site Nathan uses to buy his domain names and hosting for the cheapest price possible Audible– Nathan uses Audible when he's driving from Austin to San Antonio (1.5-hour drive) to listen to audio books Freshbooks – Nathan doesn't waste time so he uses Freshbooks to send out invoices and collect his money. Get your free month NOW Show Notes provided by Mallard Creatives

Chapters

1. What is the main topic discussed in this episode? 2. What is Infusionsoft's target customer market? 3. How did Infusionsoft navigate its early struggles? 4. What challenges did Infusionsoft face during its dark days? 5. Why did Infusionsoft decide against going public? 6. What is the significance of the LTV-CAC ratio for SaaS companies? 7. How has Infusionsoft reduced its customer churn rate? 8. What new strategies is Infusionsoft implementing for future growth?

Featured

Nathan Latka

Clate Mask

Transcription

Chapter 1: What is the main topic discussed in this episode?

0.031 - 15.796 Nathan Latka

This is The Top, where I interview entrepreneurs who are number one or number two in their industry in terms of revenue or customer base. You'll learn how much revenue they're making, what their marketing funnel looks like, and how many customers they have.

Chapter 2: What is Infusionsoft's target customer market?

16.277 - 21.245 Nathan Latka

I'm now at $20,000 per top. Five and six million. He is hell-bent on global domination.

Chapter 3: How did Infusionsoft navigate its early struggles?

21.265 - 24.069 Nathan Latka

We just broke our 100,000-unit soul mark.

Chapter 4: What challenges did Infusionsoft face during its dark days?

24.089 - 44.092 Nathan Latka

And I'm your host, Nathan Latka. I just finished traveling Southeast Asia for 41 days, and I usually always get sick when I travel, and quite frankly, eating is difficult for me. It's hard to find a restaurant, and I'm spoiled in Austin with my personal chef. Well, I took these little packets with me this time, 30 of them, in my carry-on suitcase.

44.112 - 52.665 Nathan Latka

They kept me totally healthy with 11 different secret ingredients. You can see them at nathanlatka.com forward slash juice. I'll tell you more later on in the show.

Chapter 5: Why did Infusionsoft decide against going public?

52.866 - 63.027 Nathan Latka

That's nathanlatka.com forward slash juice. You're in for a treat today, folks. This is episode 637. I talk with Clayton Mask, and I ask him why Infusionsoft did not IPO.

Chapter 6: What is the significance of the LTV-CAC ratio for SaaS companies?

63.428 - 65.152 Nathan Latka

Coming up tomorrow morning, you want to tune in as well.

Chapter 7: How has Infusionsoft reduced its customer churn rate?

65.172 - 73.49 Nathan Latka

We've got Patrick McGinnis with us. He breaks down alternative investment ideas. His book deal included a 10% royalty and $100,000 advance.

Chapter 8: What new strategies is Infusionsoft implementing for future growth?

74.011 - 88.482 Nathan Latka

Again, he gets into all of the details. Good morning, everybody. Nathan Latke here. Our guest today is Clayton Mask, and he has been educating and inspiring entrepreneurs for well over a decade. He's recognized by the small business community as a truly visionary leader.

88.902 - 105.045 Nathan Latka

His passion for small business success stems from his personal experience taking Infusionsoft from a struggling startup to an eight-time Inc. 500 and Inc. 5000 winner. As CEO, he's leading Infusionsoft on its mission to create and dominate the market of sales and marketing software for small businesses.

105.685 - 117.176 Nathan Latka

Under Clayt's leadership, the company has landed four rounds of venture capital, including a $55 million Series D led by Bain, with contributions from prior investors, including Signal Peak Ventures and Goldman Sachs.

117.596 - 129.367 Nathan Latka

He was also named Ernst & Young Entrepreneur of the Year finalist, a top 100 small business influencer by Small Business Trends, and one of the 100 most intriguing entrepreneurs of 2013 by Goldman Sachs. Clayt Mask, are you ready to Take us to the top.

130.71 - 132.314 Clate Mask

I am Nathan. That's quite an intro.

132.334 - 145.041 Nathan Latka

Those awards, baby. That's a mouthful. That's great. Thanks. Small businesses are notoriously tough. Small ARPUs, high churn. How do you crank through kind of Infusionsoft's darker days and get to where you are now?

145.477 - 162.162 Clate Mask

Yeah, great question. Well, a huge part of it is making sure that you've got the right target customer. When you serve small businesses, you know, there are 27 million in the U.S. on record. There are probably at least that many that aren't on record in the U.S. And then the numbers globally are, you know, even bigger than that.

162.242 - 180.912 Clate Mask

So a massive, massive market, you got to serve the right kind of small business customer. And I think that's probably been the biggest thing for us over the years. And we haven't always got it right. I mean, we got our ups and downs and challenges over the last 12, 13 years, particularly about six, seven years ago when we didn't get it quite right. And it just about killed us.

180.932 - 192.352 Clate Mask

So you got to get it right. You got to get the product market fit. You know, that's always critical. I think everybody, everybody that has a SaaS product knows that it's just really, really tricky to get, to get that product market fit right in the small business market.

SaaS Interviews with CEOs, Startups, Founders

637: Reason Infusionsoft Didn't IPO, Passes $100M ARR, $125M Raised, Helping 45,000 SMB's With Marketing and Sales Automation with CEO Clate Mask

Chapter 1: What is the main topic discussed in this episode?

Chapter 2: What is Infusionsoft's target customer market?

Chapter 3: How did Infusionsoft navigate its early struggles?

Chapter 4: What challenges did Infusionsoft face during its dark days?

Chapter 5: Why did Infusionsoft decide against going public?

Chapter 6: What is the significance of the LTV-CAC ratio for SaaS companies?

Chapter 7: How has Infusionsoft reduced its customer churn rate?

Chapter 8: What new strategies is Infusionsoft implementing for future growth?

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SaaS Interviews with CEOs, Startups, Founders

637: Reason Infusionsoft Didn't IPO, Passes $100M ARR, $125M Raised, Helping 45,000 SMB's With Marketing and Sales Automation with CEO Clate Mask

Chapter 1: What is the main topic discussed in this episode?

Chapter 2: What is Infusionsoft's target customer market?

Chapter 3: How did Infusionsoft navigate its early struggles?

Chapter 4: What challenges did Infusionsoft face during its dark days?

Chapter 5: Why did Infusionsoft decide against going public?

Chapter 6: What is the significance of the LTV-CAC ratio for SaaS companies?

Chapter 7: How has Infusionsoft reduced its customer churn rate?

Chapter 8: What new strategies is Infusionsoft implementing for future growth?

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