SaaS Interviews with CEOs, Startups, Founders
935 How to Reset After Raising $27m and Hiring Too Fast
14 Feb 2018
Chapter 1: What is the journey of InsightSquared from startup to growth?
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 Fred Schilmover.
He's the CEO and co-founder of Insight Squared up there in Boston. He's helped grow the sales intelligence company from a single spreadsheet into one of Boston's premier tech startups. Fred, are you ready to take us to the top?
Uh, excited to be here. Thank you.
All right. Boston's hot. So many good companies up there. Yes. Where many, many others at Wistia, a lot of, uh, you know, all kinds of guys. What, uh, what does insight squared do and what's your business model? How do you make money?
Yeah. Uh, so the, the way I like to describe insight squared really simply is we provide all the reporting that for whatever reason, Salesforce doesn't, um, you know, we focus in areas around helping companies with forecasting, getting the most out of their pipeline, doing data back rep coaching and preparing for, you know, board meetings and QBRs and that type of thing.
So basically specialists in the sales operations realm.
And what's the business model? Is it pure SaaS?
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Chapter 2: How did InsightSquared raise $27 million in funding?
Yeah, it's a subscription service, pure SaaS.
And can you give us a sense generally of customer size or SMB enterprise or bigger? What do they pay you on average per month, would you say?
It's really a range. We started with SMB and as our product matured, we're working with a lot of small enterprises. We've got publicly traded companies like Bizarre Voice. We've got great brand names like Gainsight and Pendo that are still privately traded.
But really across the gamut, the way I like to describe it is if you have Salesforce.com and you have salespeople, you should probably be using Insight Squared.
Okay. And if I forced you to pick an average, what would you say the average customer is signing up for annually or monthly?
Yeah, I'd say that the sweet spot for us is sort of 25 to 200 employees is where the majority of our customers are.
And what does that typically translate to in terms of ACV?
So, you know, we don't share our pricing publicly, but happy to have that conversation with anyone who gives us a call.
Why don't you do, I mean, you have a plans page. Why don't you put out some of the pricing and stuff publicly?
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Chapter 3: What challenges did InsightSquared face with rapid hiring?
Yeah, no, I, I appreciate it. I think, you know, what, one of the things we do is, is, is historically business intelligence has been this absolutely Herculean effort in terms of cost and the amount of service it takes to support it really pricing out the vast majority of our customers and, So we pride ourselves on being really affordable there.
Again, Fred, people don't know what that means. Give me an underprice if that's easier, like under a million people can get started, under 100,000? Give me some range.
Yeah, I appreciate you asking the question. But yeah, certainly we don't charge the millions. Our customers can afford that.
Yeah.
Okay, got it. That's helpful to understand. People don't have the context you have, right? So it's my job to kind of get that out. So okay, we understand that we understand a little bit there about pricing. Tell me more about the growth story. What year did you launch the company in?
Yes, we launched the company right in January of 2011.
Okay, and have you decided to bootstrap the company or raise?
Yeah, no, we've we've raised we raised venture capital right from the beginning. So we have fantastic investors here in Boston. So we raised a million dollars in venture capital coming out of the gate and have raised $27 million in total.
And why out of the gate did you do that? I mean, did you have an exit before this that made it easy for you to do that? So you said other people's money makes more sense?
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Chapter 4: How does InsightSquared differentiate itself in the sales analytics space?
quite frankly, they had fantastic opportunities that they were in and families to feed. So, you know, we needed to raise money out of the gate.
Okay. I mean, a lot of people would hear that and go, well, listen, we had the same problem, but we figured out a way to make it work and bootstrap for the first two years and then went out and raised, you know, 100 million bucks.
We just had the guys actually at Qualtrics on right before you and they bootstrapped for 10 years for a family of four before hitting, you know, 50 million in revenue to do that. So, I mean, it's Give me some more detail there. I mean, is there another reason? And if so, how were you actually able to get that check right out of the gate?
Yeah, so I think two things. One, there's a trade-off you have to make in terms of growth so that if you raise money, you're able to build a team more quickly and grow more quickly. It also depends on individuals' personal means. So it's fantastic for those guys to have gotten that far without raising money.
Certainly amazing from them from an individual dilution perspective and puts them in a real position of strength when you have substantial revenue and you go to raise your first institutional capital. It depends on, I think, individuals' personal situations and the team that we had and what we wanted to build. So that wasn't an option for it.
On the flip side, you mentioned being bootstrapped for 10 years. So part of the trade-off of not raising venture capital is you're not able to make these big investments. We made a pretty big investment in R&D for the first number of years of Insight Squared that fundamentally we wouldn't be able to do if we were bootstrapping.
Interesting.
Um, it's hard to convince the 10 person engineering team to, to come join and, and, and work for work for sweat equity alone.
Yeah, no, it makes, it makes, it makes a lot of sense. Um, take us through to where you are today. So you started with three of you guys, uh, back many years ago, where are you at today in terms of team size?
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Chapter 5: What is the business model of InsightSquared?
you doubled headcount in 2015, which was after your latest round of funding in 2014, and then moved into a bigger space and laid people off, according to some sources, Boston, etc. I don't want to talk about strategically why you did that, because you have obviously good reasons for it. But from an emotional perspective, other founders listening manage layoffs all the time.
I'd love to hear from you how you manage that from an emotional perspective in terms of communication with the team.
Yeah, really good question. And definitely, you know, there was a point in time there when we got a little bit over our skis in terms of rate of growth. And ultimately, that responsibility lies with me. And, you know, of course, disappointing people is a really difficult decision. I never want to get that LinkedIn flag that says, you know, you're great at layoffs.
That's not a skill I want to have. But at the same time, you know, part of our core values are treating, you know, I want this to be the best place any of our team has ever worked. I say that to people at every All Hands meetings. We've won You know, every single year since founding, we've won Best Place to Work Award, and that extends to the people who are no longer here.
So I think we treated people with a lot of respect and sort of made an adjustment there where We were a little bit ahead of our skis, and eventually companies need to be profitable, and we've been really focusing on how do we grow the business in a sustainable manner.
And I think the fact that we've been able to grow for this long without raising additional capital is probably a good external indicator of that.
Why do you say that? Some people look at that same thing and say, hey, if you raise capital on day one and you've raised 27 million cents, you better be on a track where you're raising significant capital almost every, you know, 16 or 12 to 18 months and IPM because there's a time bomb on it. So some would argue they haven't raised in a lot. They're actually struggling. I argue the counterpoint.
Yeah, I mean, I think it probably depends on your investors. If the investors are putting pressure on you to get their capital back, that certainly may be the case. You know, we've got an amazing set of investors who are patient and see the huge opportunity here. So, you know, there's a correction point that we've had to make and
I'm pretty proud of the business growth that we've had over the last couple of years and want to continue that.
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Chapter 6: How has InsightSquared adapted its customer base over time?
I know it was only a year or two after you founded, but why not sell then?
Yeah, I'm not sure. So it's really interesting. Your comment brings me back to some conversations I've had in my career with venture capitalists when they say, you know, like, oh, the analytics space, that's a really crowded space. And it's like saying, well, you know, software, that's a really crowded space. Those companies you mentioned, I don't see a lot of interconnect with us and them.
Like we straddle two categories. One is analytics, business intelligence more broadly. And the other is, you know, because we're the only sales analytics company or the only analytics and BI company that's sort of picked a major and said, we're going to be subject matter experts in a particular area, our area is sales. I think we also straddle this other category of
sales enablement, sales intelligence. So none of those companies fit into those categories. But what I will say is, over the past few years, we've seen a huge growth in sales-oriented technology. And that's because sales is going through a similar shift maybe 10 years later than marketing went through, going into digital. And you saw this explosion of marketing technology companies
I think you're seeing a similar explosion in the opportunity to create efficiency in sales. So that's a trend that I think we're still early in.
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So Fred, tell me more about why you see yourself as kind of the only one in the kind of this space where you said you've kind of picked a focus and gone all in. There's other companies like Mattermark, which, you know, she, Danielle came on recently and they were started as kind of BI stuff only, and now have really moved only to kind of sales and sales data.
And now they're playing pretty aggressively in the space. So, so, and the reason by the way she shared is it's the whole attribution thing. It's easy for you to justify your price when you can tie it back to a salesperson and attribution.
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Chapter 7: What strategies does InsightSquared use to manage layoffs?
Yeah, exactly. We focus a lot on the quality of our data. We have an account-based market and an account-based sales strategy. which means that the quality of our database has to be really high. So we have a lot of work going into that. There's all sorts of lead routing and we use tools to do account-based scoring.
So if I look at just at Insight Squared, like the amount of sales tools we use has exploded over the years since we've been founded. And that, I think we're early in that market. And I made the, I don't know if the audio came through, I made the connection back to marketing technology.
I think sales is sort of five to 10 years behind marketing in this revolution that we're seeing and how sales can be done, the move from field sales to inside sales. This consumerization of IT where software that used to be millions of dollars is now hundreds or tens of thousands of dollars and is being able, is sold over the phone or through video.
We're talking over Skype, we use Zoom, we use Chorus to do coaching and machine learning and around the things that are being said. So there's a lot of optimization that's happening in sales. And I think we're early in the lifecycle of that.
You launch in 2011, obviously, no customers there. When you get going, what have you grown to today in terms of total customers using your platform?
Yeah, so we're over the 750 mark in terms of customers.
Okay. And would you categorize most of those as kind of mid-market or enterprise or more SMB?
I'd say our sweet spot now is mid-market. Obviously, our roots, we started in SMB, and I'm pretty passionate of rooting for the underdog. But over time, as the power of our platform has increased, we've worked with a lot more enterprises, a lot more publicly traded companies.
That's great. Have you passed the $15 million ARR mark yet?
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Chapter 8: What lessons has the guest learned about decision-making in business?
How many kids?
Uh, two kids, two and four. Oh, wow. I try to get, I try to get out of the house before anyone's awake, uh, and be home for dinner.
And how old are you? 41. All right. Last question. Take us back 21 years. What do you wish your 20 year old self knew?
Um, how... I wish my 20-year-old self knew that decisions weren't based on data. Decisions are all emotional. And it's not just about the merit of how hard you've worked or how good your product is or what it says on your resume. Everything is done based on relationships. And being an analytical guy starting an analytics company, obviously, I value rationality. Human beings are not rational.
There you guys have it from Fred. Remember, don't lie to yourself. Human beings are not rational. He founded his company back in 2011 with a million bucks in initial capital.
He's since raised 27 million bucks, got a little aggressive a few years ago, did a reset about a year and a half, two years ago, now at about 135 people all there in Boston, playing again in the sales and sales enrichment space specifically. They've passed 750 customers, mid-market and really enterprise-focused, growing aggressively. Fred, thank you so much for taking us to the top.
Pleasure to be here. Thank you.
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