SaaS Interviews with CEOs, Startups, Founders
901 SaaS: Bootstrapped Enterprise Marketing Maropost Passes $36m ARR
11 Jan 2018
Chapter 1: How did Ross Paquette start Maropost from scratch?
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 of 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 Ross Paquette.
He's the founder and CEO of Marlpost, ranked as one of North America's fastest-growing tech companies by Deloitte. After starting the company in 2011, he's grown the company from a one-man operation as an apartment to an international business valued at $160 million in just under six years. Ross, are you ready to take us to the top? I am, for sure. All right. First off, I'm a numbers guy.
So when I see 160 in the bio, obviously I like numbers. It turns me on.
Chapter 2: What is Maropost's revenue model and how does it generate income?
Was that like your last valuation or where'd you get that value from? Yeah, that was our last valuation that we did. I brought in a couple of partners last summer, two private equity firms and two family offices. So that was really what they came up with.
So I want to, we'll dive in that more in a second, but before we do that, tell us what the company does and what's your revenue model, how to make money. Sure. Yeah. So essentially we're an email service provider. So we started off in the email space. delivering campaigns, marketing automation.
And we've moved very quickly into kind of mobile marketing, social marketing, acquisition campaigns and such as well. And walk me through like the business model. I assume it's pure, is it pure SaaS? Yeah, it's pure SaaS. So everything is monthly recurring revenue, you know, 12, 24, 36 month agreements. So very much focused on a recurring customer base. Yep.
And I'm sure you have loads of different cohorts, but I want to avoid kind of getting in the weeds too much. In general, what's the average customer pay you per month? It's about 90,000, so 8,000 or just under 8,000 or so. US dollars. Got it. So about eight. Okay, that's really helpful to understand.
Now, I also want to dive into you mentioned 2436 months, you're a frickin wizard if you're closing people on three month deals. And it will really impress me if you say it's paid all up front. So we'll get to that in a second. But but $8,000 monthly ARPU on average, what year did you launch it in? It would have been 2011. 2011.
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Chapter 3: What challenges did Ross face while bootstrapping Maropost?
Okay. I just want to confirm that from the bio and like, where was your head? You were a one man show in your apartment. Why get into this space? Uh, I came from a email background. So I was working for companies selling kind of mid markets, uh, products at the time did really well in a company called campaigner and another one called knowledge marketing.
So nothing that you might be familiar with today. Um, the first one was, uh, acquired a couple of times and is now by J2 global, which is a $3 billion company that product is EFAX. I will never hear from them again. Yeah, exactly. Yeah. Yeah. But the main component that it brought was they had a really great product.
And this is nine years ago now, but they had a really great product that had, you know, at the time, some cutting edge features. So it really gave me some insight into, you know, going out on my own and potentially just having a lifestyle business, which was the original, you know, five to 10 customers. And then, you know, look to grow from there. Now, are you a developer?
I mean, did you build this initial prototype yourself? I have a chief technology officer and we're kind of the perfect combination. He is he's a great builder and I'm great at kind of the product direction and just general kind of ecosystem that we're looking to build as well.
So how did you incent him or her in those first few months to like code the thing when you had no track record yet to convince them? I was actually still working at customers or him. No, no, your technical, yeah. So with that, I was still working for Oracle ERP. So I was selling construction software, neither of which I know anything about.
But while I was working there, I was funding the development of Merrill Post. So it gave me a kind of unique upstart in that it wasn't like we had to go out and raise capital. I'm very much against that process. The focus has always been to just, you know, kind of grow by customer acquisition, not
acquisition so you chose to kind of you know just live within your means keep your personal expenses low so you could reinvest all your extra salary into this engineering kind of guy now does does that person have equity or are they strictly just does yeah okay got it so he was a true co-founder uh at the time he wasn't but obviously you made it we built this business on being the right you know the right partners and he's the closest person to me in the company so it's uh
It's great that we are going down this path together. You could have been selfish and said, no, gosh darn it, I funded all this money. It could have failed, and then I would have taken a huge hit, so I should get the upside too. Why were you a nice guy? Why did you give him equity?
I think the focus is always that money is irrelevant if we're looking to build the type of organization that we're building. You know, percentage points here, dollars there are somewhat irrelevant to, you know, to what it's going to mean to him at the same time or our other partners for that matter. So you put in your own capital.
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Chapter 4: How did Ross manage to keep his team motivated without external funding?
Yeah. So last summer was merely or purely a secondary round that's public. So it's not like I'm sharing anything that wasn't available. Um, so really it wasn't, I can't even put a dollar figure on it.
It was maybe a hundred thousand, uh, you know, worst case scenario because we were able to bring in a couple of customers early on with, you know, with kind of a basic product and those customers inherently sort of help fund the growth. Not that they knew they were, um, but effectively they were at the same time.
So you bootstrapped this, you obviously were majority shareholder all the way up through this deal. Last year, you had this additional co-founder. I imagine you probably had an employee, probably option pool as well. Yep, we do. We do as of last year. I mean, we always had a pool that would have been allocated, and we finally got to do that about 12 months ago.
So educate us on what a secondary offering means. When these guys put in capital, what do they put in and how does that capital work? Correct. A secondary offering means that they're not putting money into the business for business growth. Thankfully, we have a great profile where the company is not burning through cash, I guess you could say, for growth.
And so that money would be utilized for the actual shareholders themselves. Yeah. So just to be clear, I mean, a lot of people, founders do this, like the only exit is not selling your company or an IPO. You can do what what what Ross did here and basically say, hey, we'll sell 10 or I don't know what your number was, Ross, but 10 or 20 percent of the company to second, you know, new investors.
Now, is it can you share that? Is it public? The percentage you sold? That wouldn't be. But but needless to say, it was a minority state. So you're still in control. Yeah, and they're really just here to support our journey and our path.
And that was one of the things I realized is that having those individuals, while long-term it doesn't make sense to, again, sell off whatever it is, 10%, 15%, 20% today, long-term it's going to be beneficial to have them there, whether it be for guidance, whether it's because we're wanting to purchase another company or merge with another company or go public, all the things that somebody like myself has never gone through or done before.
Yeah. Now, one of like the things that like my, my early investors, my first company always told me, they said, Nathan, like once you make somebody rich, it's really hard to, to, to motivate them and get them working for you.
Now, if your investors believe that they would have never done this deal because I assume they probably generated enough wealth for you where it wasn't, you know, you were basically set. So how do you keep yourself? I mean, honestly, how do you keep yourself motivated? I really, uh, I mean, right now, right. By the way. Yeah, definitely.
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Chapter 5: What strategies does Maropost use for customer acquisition?
So that does motivate me and now I can focus on some of the areas that move beyond the platform we have today. So we are launching a new platform. It's called Maripose Sales Cloud and it's a CRM, e-commerce, sales automation, service and support.
So if you want some names that that would relate to, think of that as like Salesforce mixed with Zendesk, mixed with Magento or Shopify, mixed with a Pardot or Eloqua, if you're familiar with those platforms. And we're sort of looking to do the same thing, but complement our current platform.
Now, where I'm going with this is that one of the big components that we're going to be building in conjunction to that is a nonprofit version of that. So taking our technologies and not just saying, you know, we're going to sell these to major corporations and organizations looking to market and sell to their customers, but also verticals that don't necessarily have the best technologies.
And not that that's, I would say, our way of giving back. It is and could be perceived as that way. But it's how do we help industries or verticals at the end of the day that
don't necessarily have the ability to spend you know money on oracle and salesforce and uh and ibm you know level solutions even though they need them and how many customers are you serving today uh we have 380 customers today okay 380 customers now like out of curiosity so like when you're deciding how much of the company to sell in the secondary offering which by the way i'm reading on my research here as we're talking i think it was public actually right they put in 37 million
It is, yeah. Yeah, okay, got it. Yeah, so they put in 37 million, which if you're, I think we quoted 160 valuation. You can do the math. Yeah, yeah. You still call it like 22, 21%, something like that. If you're gonna cash out, why not just cash out everything? How do you decide what percent should you cash out?
I mean, realistically, most of those individuals do not want to purchase an entire company of our size. They're really just looking for that growth potential, excuse me. So that option isn't even on the table, I guess you could say, in most of those situations.
Now, in terms of cashing out in general, I wouldn't want to do that because there's still, again, a lot of things that I want to accomplish within the company. I don't fall within what I determined to be the serial entrepreneur, which is that we want to start a company and then another company and then another company. I would rather build additional products within the company we already have.
And hopefully someday, you know, we're talking on this podcast and, you know, we have five different products and we're a $10 billion company. Not because that was our goal, just because that's the path we went down. Is it fair to say today you're around this size? I mean, you have 380 customers. We talked earlier about ARPU, eight grand. I mean, you're over 3 million a month in MRR.
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Chapter 6: How does Maropost ensure customer retention and low churn rates?
I mean, their focus, I guess you could say is that, um, They're not necessarily planning for a sale. Obviously, at the end of the day, these people want to exit. They do want to get a return on their investment.
But I think if I had to guess as to what maybe their plan was today, it would be that the company continues to grow in the method I said, and whether it remains private or goes public is another story. But it comes to a stage where they just say either they want to increase their participation in some ways. Maybe we do another secondary round. Anything realistically could happen.
But there's one of two directions. They could increase their participation or they could say, hey, the company got to a billion dollar valuation. Why don't you buy us out? Or maybe somebody else buys them out who wants to be a part of the next stage of the growth. Yep. It makes good sense. Some of the economics around a company like this, right? Unit economics, we've seen all SaaS companies.
Like, how are you thinking? I mean, obviously, you are, in terms of everyone I've interviewed, I mean, you are, I imagine, higher touch, but much higher ACV than we'd say the average. So you probably look more, I would imagine, at revenue churn versus logo churn. Which one of those do you care more about? I'd say it's honestly both.
I mean, because of the way the company started, I value our customers. Obviously, I appreciate the fact that they were there when we were smaller. In many cases, I appreciate the ones that are coming in now when we still have a very similar, I guess you could say, relationship profile with our clients. I guess from answering your question standpoint, I don't know. It can be both. It can be both.
Yeah, it can be both. Do you mind me asking, I mean, what is your logo churn annually? It's less than 1%. Logo churn is less than 1% annually or monthly? Yeah. Correct. Annual. Oh, wow. Okay. That's incredible. Yeah. So, I mean, you don't lose customers. Sorry.
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Chapter 7: What are the future plans for Maropost's product offerings?
Sorry. No, it's closer to 3%, actually, if I'm giving you the exact numbers. Okay. But you still really don't lose customers, even at three. And just because that's annual, not monthly. Correct. Yeah. No, that's great. So, the difference between the enterprise space and sort of what you were referring to and some of these lower ACB spaces is that
They're not building a close relationship with their customer, mainly because they can. It's more of a self-serve product. And while we are self-service, we do include a lot of, you know, or a heavy amount of support. Everything is 24 hours. You have account managers and client success. What's your team size, Ross? We're about 158 people. So Ross, you have 158 team members.
Break that down for me. Support, marketing, engineering, et cetera. So support is around 30 people. Dev is around 45 looking to go to 100. Sales is around 22, 23 looking to go to about 50 as well. And then client success is 15. And then what else do we have in there? I suppose you could say the other kind of smaller teams, finance, HR, marketing, and so on, make up the rest.
Okay, so that's impressive, right? You're down at like basically 0% churn. I imagine you have a well-oiled machine in terms of driving expansion revenue. I mean, so what does that look like? If someone pays you 100 grand in year one, what do you pretty predictably grow them to in year two?
It's about 100, sorry, so I would say it's not year over year, but it's about 152% growth over a two-year span. Okay. So pretty significant. So year one, if it's 100 grand, that's going to be about 220 grand by year three. Give or take, yeah. Yeah, that's remarkable. And what levers are you pulling to drive expansion revenue? Is it just seats or is it additional features or what?
No, it's literally just customer volume. So as their businesses are growing and they're acquiring more customers, their volume is growing on the email side of things, which is our primary revenue driver today. That makes a lot of sense. What are you willing to spend to acquire these guys, these customers?
Everything we do is direct sales, so we're not acquiring customers, say, for the most part through partnerships or even any kind of active marketing programs. One of the unique things that we've done is we've been significantly focused away from marketing, not on purpose, just because of the direction of the company.
So now, I mean, our lead acquisition costs are definitely higher, higher being they might be $500 as an example.
uh as of our recent goals it's to start to bring those numbers down become much more strategic as we as we bring new customers on board or acquire them if you include kind of your sales and marketing people in that cac number so you get like a fully weighted number i mean what is that still under like sub 5 000 bucks For sure, yeah. Oh, wow, okay. So, I mean, let me ask you a question.
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Chapter 8: What lessons does Ross share for aspiring entrepreneurs?
Look, if you're running a business in an Excel sheet, which you're not doing, it'll lie to you because it'll say lifetime value is infinite because you barely turn anybody. So how do you keep those CAC numbers in check? Like, what do you use to gut check those against? To be honest with you, everything we focus on is...
typically tailored around profitability and what the dynamics of the business look like at that level, as opposed to things like customer acquisition, as opposed to things like lifetime value. Just because of, again, the size of customer, it's not like we're thinking about a $200 or even a $500 a month client, what we had to acquire them for, and then how long we're going to retain them for.
That's sort of the difference between our business and some of those more self-service models. If we ever got to a point where we had to start to review those numbers, I think the business would be in, you know, have to be in a tight or tough spot.
Whereas today, those aren't even relevant because the numbers are so either low or high, depending on how you're looking at it, that it becomes beneficial for us to focus on other areas from a financial modeling. It's not even worth pulling your focus right now because they're so healthy. Exactly. Okay, Ross, let's wrap up here with the famous five. These are one-word answers.
Number one, what's your favorite business book? I am not a reader, actually. That's good. Okay, number two, is there a CEO you're following or studying? Elon Musk. Number three, besides your own, is there a favorite online tool you have? Google Drive. Number four, how many hours of sleep do you get every night? I'd say eight or nine. Okay, and what's your situation?
Married, single, you have kids? Married. And no kids yet? No kids. All right, and how old are you? I am 34. All right, last question. Take us back 14 years. What do you wish your 20-year-old self knew? Move faster. Even coming from a guy that built $160 million company. He says, move faster. Look, I'll tell you what I love about Ross's story.
Guys like bootstrap, the thing found an exit at work for him where he still actually maintained, maintained control on future upside of the company. Uh, it makes a lot of sense. They're now serving over 380 customers. Uh, Again, on Marlpost, they're really expanding, obviously, their product base.
It's obviously focused on the enterprise, going across web, social, mobile, email, a lot of personalization and automation. Built in, again, $37 million deal a couple of years ago, which was a secondary offering. Continuing to grow from there. Ross, thank you so much for taking us to the top. Yeah, thanks so much.
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