SaaS Interviews with CEOs, Startups, Founders
891 SaaS: Lessonly Hits $6m+ ARR for Internal, Non-HR Solution for Team Learning
01 Jan 2018
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.
Chapter 2: What is the main focus of Lessonly's team learning software?
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 Max Yoder. He lives in Indianapolis, serving as the co-founder and CEO of Lessonly.
Max and Lessonly are focused on building and delivering team learning software that helps people do better work. Every day, he's grateful for being cut from the basketball team two years in a row. Max, are you ready to take us to the top?
You nailed it. Hey, thank you for having me. It's great to be here. How tall are you? It's 6'1". It wasn't that I was not tall. It was that I was not athletic. You can be tall and not athletic, and I was that.
Okay.
Chapter 3: How did Lessonly grow from $600 to $60,000 in revenue?
So you go from basketball to Lessonly. Tell us what Lessonly does and what's your business model. How do you make money?
Sure. So we come into businesses, usually customer support teams or sales teams. They generally have a lot of people on that team who share a similar title and have similar objectives. And we help all those people understand the common playbook that binds them from the trusted techniques that they need to understand to the actions they need to take to close that deal or to drive up an NPS score.
We help them document best practices, share them, give feedback on them and keep them alive over time.
And so give me an example of one of your customers.
Sure. Let's see. Houzz is a great client of ours. We started working with their sales team. If you guys have never used Houzz, they do a really great job helping you understand how to decorate and add great furniture and living spaces to your house and home. We work with their sales team to help them understand what is the Houzz way of getting things done.
Every company has their own spirit and their own way of getting things done, but they generally don't document it. It's usually inferred. So how's the sales team picked this up? And they found a really great success. And now we're across their entire company, not just their sales team, which happens, happens quite a lot.
So Lessonly kind of helps organize like training material and things like that internally at companies so that, you know, all the sales people are using the same playbook or all the marketing people have to access all the documents or things like that.
Yeah. So it's, it's, yeah, like I said, it's like sales and customer support for sure. We are like the non HR learning software. So HR, HR is not our buyer. Uh, we go into these frontline teams who have a lot of evolution on them and we help them keep up with that evolution.
And Max, what's your business model?
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Chapter 4: What is the business model of Lessonly and how do they generate revenue?
Yeah, sure. So launched in 2012. The idea was I started a business with three other guys, and one of them had started and sold three businesses at the time. And he had never invested in learning software. He had thought about it, but he thought, hey, it's expensive, and it seems to not ever do the trick. So let's think about building our own version of learning software.
software that maybe does do the trick. And that was the push that we needed. Started selling to, the first business we sold to was a spa, small spa that had ambitions to grow into a chain. And they have since grown into a chain. They grew in a big way with us and that was super cool. But now we've really focused on those sales and support teams because we just find that
they have metrics that matter a lot and we can help them get to them consistently. Do you remember what year one total revenue was? Oh yeah, it was nothing. So if we think about 2012, total revenue would have been $600.
Okay, wow.
And I mean that seriously, from July to the end of December, $600.
Okay, so give us, I guess, your first real year, 2013. Do you remember total sales then? Yeah, good question. Yeah, 2013 would have been, I think, 60K. Okay, good. And that's cashflow, not like MRR in December of that year.
No, that would have been, that would have been at the end of the year, we were doing $60,000 in annual recurring revenue.
Got it. So December, December, 2013. Yeah.
Yeah. That was a, and that was a big difference, you know, from that 600 that we started.
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Chapter 5: Who are some of Lessonly's notable clients and what success have they achieved?
Huge, huge, huge, huge. Yeah. So fast forward to today, what's your team size?
We are 80 people, mostly all out of Indianapolis, Indiana.
That's great. I love stories where it's like, you know, it's not Silicon Valley or something like that. So what's the breakdown among those 80 people?
Sure. We have about 15 in product, 20 in sales, maybe 25 in sales now. And then, you know, marketing and client experience, taking care of our clients and making sure people understand who we are on the marketing side.
And have you guys made the decision to bootstrap this company or have you raised capital?
We've raised capital. We've raised $6 million to date, and we've been really efficient with that capital. We still have a lot of it left. Our goal is always to make sure that if we're going to burn a dollar of cash, it's going to create more than a dollar of annual recurring revenue, and we've done that ever since.
Was $6 million all in one round? If not, when was the last round?
Last round was, so it wasn't all in one round. We did 5 million last March, March of 2016. And then before that, we really cobbled together, you know, a million over the initial four years.
Okay, so a little over a year and a half ago is when you raised that 5 million. You said that you liked if you're going to burn a dollar, you want that to drive at least a dollar a new ARR. How have you set up attribution mechanisms to track that and stick to it?
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Chapter 6: How does Lessonly differentiate itself from traditional HR learning software?
Okay, okay, that makes sense. And now once they come to you, walk me through some of the economics. Are they sticky? What's your logo retention annually?
Oh, yeah, sure. Yeah, we're outpacing 100% on the dollar side, and that feels really good. I mean, what I always say to the team is we don't want 20% of our clients to leave every year, but I think the 80-20 rule holds pretty strong. The Pareto principle around 80% of people are going to find what they need, and they're going to buy more to make up for a loss if there is the 20%.
We've outpaced that 20% in certain quarters and fallen short of it in others. Uh, but I, I think it's kind of healthy for people to not agree with our philosophy in some small portion, because that means we have an opinion and we have a direction. And, you know, I like that 80% of people are, are falling along with that. And 20% of people might not be the right thing for them.
I think that's, that's okay.
If I decode that. So are you on a logo basis, you're churning about 20% of your logos each quarter or each year?
Yeah. On the, that would be on the year side. That's it kind of, you know, it varies quarter to quarter, but that's, that's the benchmark of us. I think doing a good job and we're doing a good job right now.
And then just to be clear, going back to the principle you just talked about, your logo churn might be 20%, but your net revenue churn is negative.
Right, exactly. Yeah, the clients who stick around, they grow, and they grow significantly to cover any losses.
Yep. Now, walk us through how you're driving that expansion revenue. Is it upselling additional products or seat value? What other utilitarian value are you increasing?
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Chapter 7: What is the significance of customer acquisition channels for Lessonly?
Last question. Take us back nine years. What do you wish your 20 year old self knew?
It's going to be okay.
You're quick, you're quick, I love it. Guys, it's going to be okay from Max. Founder of Lessonly, they founded it back in 2012. First year revenue was a whopping $600. They grew in 2013, December 2013, up to 60,000 bucks in MRR. They're now well over 560 grand in MRR across 450 customers who are paying them. It's the kind of internal non-HR solution, right?
For getting the sales and these teams ramped up. Healthy, healthy, well, I wanna say healthy churn, but healthy expansion revenue year over year, based in Indianapolis with their team of 80, trying to make this easier for everyone. $5 million, $6 million raised. Max, thank you for taking us to the top.
Thank you. It was a great time and have a great day.
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