SaaS Interviews with CEOs, Startups, Founders
865 SaaS: Hootsuite On It's 16m Paying Customers, $100m+ ARR and Social Media Marketing
06 Dec 2017
Chapter 1: What is the main topic discussed in this episode?
This is the Top Entrepreneurs Podcast, where founders share how they started their companies and got filthy rich or crash and burn. Each episode features revenue numbers, customer counts, and other insider information that creates business news headlines. We went from a couple hundred thousand dollars to 2.7 million. I had no money when I started the company.
It was $160 million, which is the size of many IPOs.
We're a bit strapped. We have like 22,000 customers. With over 5 million downloads in a very short amount of time, major outlets like Inc. are calling us the fastest growing business show on iTunes. I'm your host, Nathan Latka, and here's today's episode. Hello, everyone.
My guest today is Ryan Holmes, who founded Hootsuite back in 2008 and has helped to grow into the world's most widely used social relationship platform with nearly 15 million users, including more than 800 of the Fortune 1000 companies. Recognized as an authority on digital transformation, entrepreneurship and social media, Holmes started his first business in high school.
He now applies his experience and expertise to support the startup community and socially conscious ventures. Ryan, are you ready to take us to the top? Yes, I am, Nathan. Great to be here. Thanks. What was the high school business out of curiosity?
It was a paintball company. I started my first business in grade 10. In between grade 10 and grade 11, paintball company. I convinced my parents they had a little bit of property. I built a paintball course on it and bought paintball guns and paintballs and started the whole thing. It was obviously a really fun high school business.
What'd you, what'd you make on that in a summer or wherever, however long you ran it?
So my best, so this is why being an entrepreneur can spoil you. My best day I made, uh, about $6,000 in one day. And so, you know, how do you, how do you go back to like a nine to five job after that?
Was that, was that top line sales or even after expenses, six grand to your bank? That,
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Chapter 2: What is the story behind Hootsuite's founding?
What is it doing for people not familiar with it? Kind of what's your revenue model? How do you make money?
So Hootsuite is a SaaS business. It's a subscription model. We have over 16 million users. They use us to connect with their customers on social. So they use us for social marketing, social customer support, social selling. And, you know, we help small, medium businesses all the way through to big enterprises. You mentioned over 800 of Fortune 1000 use us.
We recently won the Forrester Wave that talks about, you know, enterprise use of social. And so it's really just helping brands to better connect with their customers through kind of engagement on social, through customer support, through listening to what's going on, ROI measurement, social advertising, everything to do with social. We help manage and make it easier for brands.
what's the kind of average customer paying you per month, would you say?
Well, it's a real spectrum because we have a freemium model even. So we give it away for free and we let people play with it. They get in, they use it, they grow with it. And then they can also start day one with a paid model if they have a large team they want to get on board, credit card and go. We don't bother them with a sales force if they don't want to talk to a sales agent.
They don't have to. They can get in self-served. And then as they grow, and this is the real beauty of the model, is that when their needs get bigger and bigger, when they want customer support, when they want a dedicated account manager, when they want other features that enterprise businesses demand, we have that there for them.
And so we really work with our customers through their whole journey. And as they mature, as they bring in bigger teams, we're absolutely able to help that. We have teams of tens of thousands using our product on a daily basis. uh, to, to help connect with their customers. And so, uh, the model matures.
So we, we go from, uh, tens of dollars to millions of dollars in terms of the spectrum of our customers.
If I, for just for the sake of avoiding going down every cohort, cause you probably have hundreds you track from different channels and upgrades and all this stuff. I mean, is it fair to say that, you know, a team of, you know, three users with 20 profiles is maybe the average kind of hoot suite customer and they're paying a hundred bucks a month. Is that a fair average or
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Chapter 3: How did Ryan Holmes transition from a paintball business to Hootsuite?
I think it's really complicated for us to look at it that way. I think that maybe if we broke our business into two, a self-serve business and an enterprise business. Let's do that. Yeah, then we would say our average kind of self-serve customer, they're kind of a 10-person team. Our average enterprise customer, they go north.
Hey, Ryan, round that out for me. So the self-serve, it's a 10-person team on average. What is the average price there?
You know, we don't really publicly talk about our pricing and too much depth across these cohorts. So I'm going to have to ā it's in the hundreds of dollars for LTV. And on the enterprise side, it's tens of thousands of dollars in terms of annual recurring and just in kind of general numbers.
Now that we kind of understand some of these cohorts and kind of the size of the business, take me back to day one. 2008 is a hell of a year to start a business.
Yeah, it was a really exciting time. So I had an agency after the paintball company, did that for a number of years, post high school. I actually started a restaurant, did that for a few years, sold that. And then in 2000, I started the agency. Agency was called Invoke. It was a digital services company. So we did a hybrid of services work. And then we also did product work.
We built products that kind of scratched our own itches and also helped our customers. So customers would bring us problems. And for your listeners out there that are in services business or agency business. It's amazing because people are always bringing you problems and opportunities to solve.
And one of the problems that we had, our customers were asking us more and more to help them build audience and help market through social media. And so we started scaling up a little bit of a team to do this. We were helping our customers do this.
And what we realized really quickly in 2008 was that there weren't any good tools to help manage social media as a team and manage multiple team members and multiple brands. And so, you know, we scratched our head a little bit. And because we had this culture of building products, we decided to build this product out to scratch our own itch.
And we put out a prototype, really rapid MVP, got it out in probably two months and had immediate traction on it. We saw the numbers, 10 people, 40 people, 100 people, 200 people, 400 people, just growing so quickly through word of mouth, product virality, K-factor. And it was just in the fact that people needed needed a tool to manage social in a better way.
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Chapter 4: How does Hootsuite's revenue model work?
There you go. Now, what was that first round size that you closed for that seven person hungry baby? And what have you raised to date total?
Yeah, so we've done, oh, wow, you're testing me here. The first round was 1-6 on a 5-something pre, 5-6 pre, I think. No, at that time, it was just, this is just four people were even doing notes.
You're aging yourself, Ryan. You're aging yourself.
Well, we're granddaddies. We're almost 10 years old. That's amazing. So, yeah, it was just a price round.
1-6, 5 pre, and what's to date? Yeah.
Yeah, to date, it's north of 200. You can go to our Crunchbase and track it all down if you're that curious. But I would say that a big chunk of the ā we got to cash flow positive very quickly. It was important for me to start driving revenue out of the business quickly. We wanted to be a tool for businesses. It wasn't a consumer play.
A lot of products we see out there are consumer plays, and they don't really have a path to monetization. Their model is to get acquired. That wasn't us. Our model was to build a cash-generating, revenue-generating business. So we continued to move on. A big chunk of the fundraising that we did do was for secondary liquidity for early investors. And so we changed out investors.
But in terms of where the business has gone, we've been able to build a great cashflow positive business.
Guys, big news. Last month was a huge month for the company I recently acquired, which was www.thetopinbox.com. I liked the company so much when I met the person who created it. It lets you send emails later on Gmail, set up reminders like snooze almost to keep your inbox clean. Do things like send auto follow-ups and do open tracking so you know when your emails get opened.
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Chapter 5: What is the average customer profile for Hootsuite?
Seats. Okay. What's the number? Are you comfortable sharing the number of businesses that represents?
It correlates to a little bit less than that. I mean, the law of large numbers, some of the big enterprises obviously take out with 10,000 seat deployments. We have a lot of individual solo entrepreneurs. To give you another idea, I mean, we've got double that in accounts auth. So social accounts auth into our system.
So, you know, on average, we're seeing, you know, an account will set up with two social networks. So call it a Twitter and a Facebook. But we also have Instagram integration and a whole network. Long tail of others, LinkedIn, et cetera, et cetera.
So your cohorts perform very differently based on what you told me. But I mean, it sounds like it's fair to say, you know, if we take 16,000 seats that, you know, each business is about like 1.5 seats or something. Again, because you have a huge cohort where it's just one and then some of there are 10,000. Yeah, that's right. Okay, interesting.
So we'll have a lot of solopreneurs that set up with us, and that kind of is a big part of it, and then a big long tail of large enterprise.
How do you manage emotions on your retention, your team focused on retention, when, look, those single-use sign-ups, like they go out of business nine out of ten at a time. You have no control over it. So those numbers maybe don't look good some months. How do you manage the emotion of that, specifically your retention team, when they're dealing with logo churn on the SMB space? Right.
Well, you know, it is just that. I mean, I think that at the end of the day, you're kind of playing, you're trying to beat your own numbers. And so the good thing is with large numbers, you don't see huge sways one way or another, you know, based on, you know, economy or industry trends. You just kind of are very predictable.
And so what, you know, our team's trying to do is incremental percentage change, you know, on a month over month basis. So I don't think that they are hugely emotional. I mean, I think if they hit a gold vein and they find something that results in huge retention, that is fantastic.
But they've turned over a lot of stones and they just continue to kind of, you know, with persistence and patience, look for other opportunities to change the slope of the line.
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Chapter 6: What unique challenges did Hootsuite face in its early days?
Um, I, I love creativity Inc. It's about Pixar. Yeah.
Good one. Number two, is there a CEO you're following or studying right now?
I follow so many of them. Uh, you know, I really have been enjoying watching Microsoft's transition and transformation, uh, following Satcha quite a bit. And, and I love what he's doing. Uh, Elon also, man, I, you know, I hope he saves some, some, uh, big moon shots for everybody else. Cause he's, he's, uh, racking a few up.
Uh, you know, Microsoft is moving into social. He obviously did a deal there with LinkedIn. If they came to you today and offered you, you know, a check for, you know, uh, I make this up three and a half billion dollars. Do you sell?
Well, look, I've got shareholders, and I'm one of them, but I also have a number of different shareholders in the business, and I have to be accountable to them. My team, everybody's a shareholder in the business. So any offer we have to consider, and right now I'm having a ton of fun. building the business.
Um, that being said, you know, I, I, we'd, we'd have to be thoughtful on any offers that head our way and, and take it to the board and, and, you know, go from there. But, uh, right now that the TAM of what we're doing and the, and the market size is, is pretty awesome. So we're excited about that.
Number three, Ryan, besides your own, what's your favorite online tool?
Uh, you know, I, I'm, um, I've, I've used so many and, and they're all kind of, I would say, you know, um,
somewhat boring tools i use i use skype a lot i use you know for we're using it right now and i love how you still have your your username i won't say it out loud but i love how it is references something from your past it shows kind of the history of where you've gone
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