SaaS Interviews with CEOs, Startups, Founders
810: SaaS: With $70m Raised, White Board Videos Secret to VidYard 2x YoY Growth
12 Oct 2017
Chapter 1: What is the main topic discussed in this episode?
founder of vidyard again they are growing almost doubling year over year since the last time we had them on they've passed a thousand customers additional product lines growing not only wallet share on their current base but expanding their total addressable market 70 million bucks raised they're just now dipping into the 35 million they raised in their series c about 18 19 months ago they've doubled their team up to 300 people between vancouver boston and waterloo again helping you with video marketing and many many other aspects surrounding that space
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. I'm now at $20,000 per top. Five and six million. He is hell-bent on global domination. We just broke our 100,000-unit soul mark.
Chapter 2: What updates has Vidyard made since the last episode?
And I'm your host, Nathan Latka.
many of you listening right now don't have time to listen to every b2b sas ceo that i've interviewed if you want to get access to the database i've created with year-over-year growth rates customer accounts margins and many many other data metrics and data points you can go to get latka.com here's the thing though this that database i keep it to myself it's so freaking valuable and to preserve the quality of the data and make sure that the people that have access to it have a true advantage i'm only letting 10 companies on each month
So we're full this month, but you can go to getlatka.com to get on the waiting list for next month. And look, there's big people on the waiting list. I mean, the biggest VCs you've ever heard of. You've probably heard of them. They're big, private equity, billions and billions under management. So it's an impressive waiting list. Go get on now at getlatka.com. Hello, everyone.
My guest today is Michael Litt. He's the co-founder and CEO of the leading video marketing platform called Vidyard. While he's not bringing leading video-based technologies to market, he serves as general partner of Garage Capital, a seed stage fund focused on super cluster companies looking to expand their networks into Silicon Valley.
Chapter 3: How does Vidyard manage its finances and budgeting?
He also sits on the Communitech Board of Directors, a KW-based organization designed to help companies start, grow, and succeed. Michael, are you ready to take us to the top?
Absolutely.
You bet. Yeah. Thanks for coming on. So we had you on back. I mean, it was almost I think we're just talking about a year ago. And at that point, you'd share to us the company was launched in 2010. I think you had 132 employees at that time. Give us an update. What's video do for people that missed that episode and where are you guys at now?
Yeah, so we're about double in size. We're approaching 250 employees now. So pretty quick growth as it is in high growth scaling SaaS. We're now across three offices, Vancouver, Boston, and our headquarters in Kitchener-Waterloo. And we've launched a whole bunch of new products, including a self-serve a product called Mute It. Say it again, what's it called? It's called Mute It. Mute It.
Which is, yeah, V-I-E-W-E-D-I-T.
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Chapter 4: What strategies does Vidyard use to acquire new customers?
It was launched as a test to see if we could build a product that was free for all users to easily create video content, webcam recording, screen recording, Turns out it's very useful for sales prospecting, internal communications, customer success. And we actually just announced that we had 100,000 users sign up a couple of weeks ago. And that was just since October. So it's been a fun ride.
That's great. Okay. So when was, and is that, by the way, is that tool still free? Okay. Got it. So viewed it. And is it, um, is it a Chrome extension or how's it actually work?
It's a Chrome extension. Yeah. Yeah. So it's, uh, uh, in the future, um, there's obviously gonna be a mobile version and an extension list version of that tool, but one click to install a one click to either record your webcam or your desktop or a browser or your tab in your browser. When you send the video, so if you dump it into Gmail, it automatically parses it as a thumbnail.
You send it to the recipient, and then you get a notification in an email that tells you how much of the video the recipient viewed and for how long. So that's why it's called Viewed It. And again, it tends to be very useful in sales prospecting.
Yeah, this is great. So I want to get more into how you decide at a company or scale to launch new products and how you decide which products to launch when you do that.
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Chapter 5: What is Vidyard's approach to maintaining cash flow?
Quick update funding wise, last time you were on, you had about 70 million bucks raised. Have you just focused on using that aggressively or have you raised additional capital?
Yeah, so one of the unique opportunities of being a Canadian company is that we sell in primarily USD and spend in Canadian. So there's a bit of a hedge on Forex, which allows our money to go a lot further than it would if we were elsewhere in the world. So we actually just started dipping into Series C cash.
We raised it well in advance of needing it, and we've been pretty conservative with spend despite our growth.
What was the Series C portion of the $70 million? $35 million. $35 million. And when did you raise that round?
Chapter 6: How does Vidyard ensure customer retention and upsell?
That was announced in January of 2016 now.
Yeah, so that's almost, what, 18, 19 months ago.
Yeah.
Yeah, that's serious in advance. That's some good planning.
Yeah. Yeah. You know what you, uh, so a wise person once told me to drink tea when tea is served.
That's good. And you mentioned your, your, you feel like you're pretty strong at kind of managing burn. Give us some insight into that. Right. So we only have maybe a handful, I want to say maybe 20 or 30 CEOs that have raised no a hundred million bucks, or they're definitely on the IPO track. And so when I have a chance to talk about things like burn at that scale, I do it.
How do you, I mean, how do you manage that?
Yeah. So first of all, uh, your CFO has to become what we call the house of no. And so you get to a phase where as you bring in experienced executives and individuals who've been a part of bigger businesses, they want to spend a lot of money.
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Chapter 7: What unique marketing strategies has Vidyard employed?
They know there's a big balance sheet. They want to hire really valuable executives. They want to spend lots of money on campaigns. Maybe they want to do a Super Bowl commercial, which everybody knows is an awful idea. And so, A, the CFO is final approval on anything over a certain amount of money. You have to put these policies and parameters in place.
You have to hold everybody accountable to budgets. We have a very strict budgeting process which starts about three months before our year end. We use a platform called Adaptive Insights where we allocate budgets according to the board rollout plan. And then the final thing is it's based on your values. So one of our values is to be relentlessly resourceful.
That's a value that we carried forward from YC. It's something that Paul Graham wrote an essay about a very long time ago. And through that mindset being a value of the company, it means we hire against that mindset. We fire against that mindset. And people are applauded and rewarded for doing big things with as little money as possible.
Because at the end of the day, this company dies if we run out of cash. And so we have to be very careful with our lifeline and make sure that we can grow the business and attain a level of top line ARR required for the next funding vehicle, whether that's an IPO, a PE round, another growth stage round, et cetera, to justify a larger value.
And we need to maintain that cash and bank to get to that point.
Yep. Now, I think you mentioned, just to understand some economics around the kinds of companies and the kinds of people using you, I think you shared last time you had an ARPU, does this sound right, about $2,500 a month?
yeah yeah it's uh that's about right and what are they getting for that yeah so um the company has has definitely diversified its product line so one of my goals as ceo and a product oriented ceo has been to build technologies that consistently expand our total adjustable market while expanding our share of wallet inside our company so we'll often sell into the marketing team as a beachhead and maybe the marketing team is buying our live streaming solution
personalized video, a video hub, or just the video analytics platform for which they're managing all of their content, that generally is the starting point that has that ARPU associated with it.
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Chapter 8: What is Michael's perspective on company valuation and offers?
We now have a segmentation inside that product where we'll actually sell a cheaper version of that tool to an SME. So a business doing less than $50 million in revenue actually will get a discounted rate on some of that functionality. Same thing goes for an enterprise that is using a whack of video inside of the system and a bunch of integrations. They'll obviously pay much more than that.
Then we introduce our sales solutions, which are powered by this product called Viewdit, which is a video prospecting and selling tool that connects to CRM. We've got our service and support solution, which integrates with Service Cloud and Zendesk, so you can respond to support tickets, et cetera, with video. And all of that content goes back to the same hub. So since we last spoke,
Our ARPUs stayed about the same in that we've introduced a new lower segment, but it grows. That's our ARPU on an initial customer acquisition. It grows over time as we go across the company and get a larger share of wallet of that business.
I mean, annually, if someone's paying you $10,000 in year one, are you pretty predictably expanding that to $15,000 in year two for 50% expansion? What's the expansion on average?
Yeah, so our target for upsell within the base is actually about 30% of net new revenue. It's aggressive. Oh, of net new revenue, okay. Yeah, net new revenue. So I don't know on a customer-by-customer basis, but the key KPI for a customer experience team is 30% upsell.
Yep, interesting. And you do that, again, by increasing seat kind of usage and also now upselling additional product lines that increase your wallet share on these current customers, but also increase your total addressable market.
Yeah, yeah. I mean, it's kind of the strategy a lot of growth companies employ, but obviously only successful if your customers are getting value out of your product.
Michael, to your credit, I mean, a lot of times when I talk to CEOs at this stage, they're not thinking about those two things at the same time. They're thinking about products that are completely separate to increase their total addressable market. Yeah, absolutely. Yeah.
Logo churn annually. So I personally do not know the logo churn number. However, so our net retention in terms of revenue and gross retention in terms of revenue, we target to be best in class SaaS. Best in class for gross tends to be north of 90. Our internal target is 95. of which I'm compensated against. And then best in glass net retention tends to be about the 120% range.
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