SaaS Interviews with CEOs, Startups, Founders
911 SaaS: Instapage passes $10m+ ARR Competing with Optimizely, Unbounce
21 Jan 2018
Chapter 1: What is Instapage and how does it optimize landing pages?
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.
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Chapter 2: What challenges did Tyson Quick face when starting Instapage?
Hello, everyone. My guest today is Tyson Quick. He's a digital marketing whiz who's focused on perfecting the landing page optimization process. He founded Instapage in 2012 after seeing how marketers were losing money in wasted ad spend. His vision then has been to create a landing page platform that maximizes returns through advertising personalization.
All right, Tyson, are you ready to take us to the top? Absolutely. So where would you like me to start? Well, start first. Tell us what Instapage does and what's your business model.
Chapter 3: How does Instapage's business model work?
How do you make money? Yeah, absolutely. So what Instapage is really building is what we're now calling the advertising conversion cloud. What that is, is we realized that there's a gap between ad tech and mar tech. There's a spot right in there in the middle, what we're calling conversion tech.
It's really everything that you would need to maximize your ad spend and turn more ad clicks into conversions. mostly to solve the problem around the average conversion rate from ad to on-page conversion is only about 5% across multiple industry verticals. And what we're really doing is trying to solve that problem and make that more of a standard like 20% to 30%. And that's really our goal.
We're trying to make micro-targeting at scale mainstream. And what's your business model? Is it pure play SaaS? Yeah. Yeah. Well, I wouldn't say pure place SaaS. We do have an enterprise option now. However, that's still, you know, an annual subscription, but the vast majority of our business today, 98% actually is all self-serve SaaS. Um, and we're building on an enterprise component now.
That's great. And then I don't want to just to avoid talking about every individual kind of customer, what's the average customer would you say paying you per month?
Chapter 4: What strategies did Tyson use to increase conversion rates?
Yeah, right now, the average customer per month pays us just over $100. Okay, good. Okay, so now that I understand the business and kind of a price point and more of the model, you launched this thing in 2012. Get us into your head at that point. Why'd you jump into this space? Yeah, definitely. So before Instapage, I had a startup called Jounce.
And we got to the point where, okay, the product that we had built is not a viral product. It was still in the B2B, B2B product category. And we had to start paying for digital advertising to get the word out and try to attract new customers.
And we were able to drive really effective top of funnel ad campaigns thanks to Facebook and Google technologies that have really made targeting people much easier than ever before in history. But what we saw is we were sending all this traffic and then wasting about 95% of our ad budget. And we're like, what's the deal here? I mean, these people are already interested, already targeted.
They already clicked on our ads. Why are they converting at such a low rate? And our assumption was that we were spending all this time making the ads relevant, but then dumping them all on the same generic kind of page. And we said, okay, let's run a few experiments here and try to boost the relevancy from ad to page.
And we did so for a couple of campaigns and saw immediate jump from about the 5% to just about 20%. And then we said, well, this is awesome.
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Chapter 5: How has Instapage achieved significant growth in customers?
Can we push this higher? And we implemented some A-B testing technologies and tested the different versions of the page and pushed it to about 30%. And we said, this is phenomenal. Why are more people not doing this? And we realized that this process took a couple of weeks and we had almost eroded all the value from the increased conversions.
due to an opportunity cost, you know, and more time spent doing this was resources and time. And we said, you know, maybe this is a better problem to solve. We weren't getting the traction that we wanted on our original concept.
And we said, let's look at this and let's, maybe there's an opportunity here to make micro targeting, you know, at scale easy enough for anyone to do so that you can truly have a page for every promotion. So what'd you do with company number one? Did you, did you flash sale it or just shut it down or what?
Oh, we, we, we just basically, you know, shut it down and, and just, you know, moved our focuses to Instapage. And at the time we, we had done a small seed, seed round for the company prior to Instapage. We, we pivoted to, it was a $600,000 seed round. We pivoted with only about 75,000 in the bank. Oh my gosh. And then we had to, we had to make that work for the next two years from 2012 to 2014.
We just, you know, just heads down in code and, um, you know, bootstrap for a couple of years there before we got the product to market.
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Chapter 6: What is the average customer acquisition cost for Instapage?
And then when we did, and we saw immediate traction, um, around this particular, um, you know, problem that we were solving mostly because people are sick of spending, uh, you know, ton of money on ads and then getting so little return. Right. I mean, people, I get the product. I think we get the product for sure. There's a huge, there's a huge need here.
So did you boot, have you bootstrapped it since from that 75 grand or have you raised additional capital? So for all intents and purposes, like if we were looking at, you know, the traditional Silicon Valley model, um, we would be considered bootstrapped. That said, we have raised, including this, the the seed round about three and a half million dollars.
And we've deployed only about $2 million of that to grow the company, um, to, you know, over 10 million, well over $10 million in ARR. Yep. Got it. And what are you guys at today in terms of total customers using the platform? So right now we're just about 16,000 customers and growing zero or one six. Yeah. $16,000. $16,000. Yeah, it's hard to tell if you were saying $16,000 or $60,000.
Yeah, no worries.
Chapter 7: What unique marketing tactics did Instapage use to grow?
Got it. So, I mean, look, you said that on average they're paying you $100 a month. That's $1.6 million in MRR right there. So that puts you well over that $10 million mark. I mean, will you guys break the $20 million ARR mark this year, you think, or no? That will probably come at some point next year. Okay. And then give us a sense of growth. Can you take us back to December 2016?
What was MRR in that month or run rate in that month? Yeah. I mean, we're, we're growing. What I will say is we are growing well over a hundred percent year over year for the past three years. Um, and I'll leave it at that. Okay. Well, I mean, if I just reverse backwards, so, so you were at least 5 million in ARR at that point, if you're above 10 now, right? Yeah. Right around that range. Yep.
Okay.
Chapter 8: What future plans does Tyson have for Instapage?
Good stuff. And what is the, uh, tell me more about your team. How many folks are on the team and where are y'all based? So Instapage has three global headquarters, or not headquarters, three global offices with headquarters in San Francisco. We're about 125 people today, and we're adding about two to three new people per month. And cash flow positive at this point?
Right now, if we turned off one or two things, hiring or ad spend, we would be profitable almost immediately. That said, we're still investing in growth, so... we're not profitable at the current investment in growth right now. But like I said, you know, we can make that happen. Yeah, totally.
So, so what are you, I mean, you're a guy I can tell that really gets optimization and, and you help your customers acquire new customers. So I'm sure you've dialed in your own CAC. What are you spending to acquire customers? Right now we're spending about one third of our total lifetime value, um, that we get. So it's about a 350% ROI. Okay.
And what do you assume lifetime value is right now in dollars? Right now, and it's constantly going up, it's over, it's about $1,200 per customer. If we look at all 16,000, but if we look So that's in 10,000 plus range. Totally. Yeah. Yeah. So, so at a minimum, this is just your, your small business or meet mid market space.
You're spending about one third of the 1200 on, on acquisition over out 360 bucks. They're paying a hundred bucks a month. So you also have optimized your payback period for about less than four months. Is that accurate? Yeah, absolutely. And it has really everything to do with the fact that we're using our own product to grow.
And because of that, we're able to turn about one third of every visitor from our ad campaigns into a signup. And then the product does the rest because we've spent a lot of time investing in the quality of the product over the past four years. That's a damn good conversion rate. What did you spend last month just on paid spend?
So last month I would have to look at the, the balance sheet, but I know that per year we're spending about a million and a half to $2 million in, in PPC advertising. Yep. Okay. And so most of that has gone through Google. Most of that goes to Google. We do have some investments in Facebook and a few other ad networks that we're experimenting with. Interesting.
What's the weirdest thing you've done to acquire customers? Something like not outbound, not organic content, not paid spend, something weird. Yeah, I would say maybe the weirdest thing is, and I don't know how weird it is, but at the very beginning of Instapage, we were bootstrapping. And so we took a pretty aggressive approach
strategy by, you know, targeting our competitors and saying like, you know, don't try X competitor until you've tried Instapage. But what we had in mind is like, of course, this wasn't going to be a long-term strategy for us, but can we create, you know, a million dollars in ARR, like just by siphoning off some of the relevant products in the space. And that worked for us really well.
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