SaaS Interviews with CEOs, Startups, Founders
Cognism Prospecting Tool Hits $10m Revenue, 40% Of Last Round Was Secondary
14 Oct 2020
Chapter 1: What is the main topic discussed in this episode?
That was at the end of 2019.
Chapter 2: What led Cognism to achieve $10 million in revenue?
We were 7 million and now we've just gone over 10 million. You are listening to Conversations with Nathan Latka. Now, if you're hearing this, it means you're not currently on our subscriber feed. To subscribe, go to getlatka.com. When you subscribe, you won't hear ads like this one. You'll get the full interviews. Right now, you're only hearing partial interviews.
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Now look, I never want money to be the reason you can't listen to episodes. On the checkout page, you'll see an option to request free access. I grant 100% of those requests, no questions asked. Hello, everyone. My guest today is James Islay. He's the CEO and founder of Cognizant, a B2B SaaS company, which was recently voted one of the top 25 startups in the UK by LinkedIn.
Before founding Cognizant, James was employed as an algorithmic trader. James has a Master's of Engineering in Information Systems Engineering from Imperial College of London. James, ready to take us to the top? Yes, for sure. Thank you. Thanks for inviting me to the show. You bet. Algorithmic trading.
So did you get like super rich, you know, carving milliseconds off of trades by installing hardware close to the stock exchange? Not quite. I was at a Swiss utility when I was doing the algorithmic trading. So I was doing kind of a bit more slower stuff. But it was good fun. Initially, I thought it was my dream career.
But then I realized that it was sitting behind a desk all day long, which I'm a bit more of a social person. So it wasn't for me, really. So what is Cognizant? So Cognizant, we help businesses find and engage new business in the B2B space. So we're providing global contact data, so mobiles, direct dials, B2B emails, and then the tools to engage that data to create new business.
And we've also just recently acquired a business in Germany called Mailtastic, which is an email signature marketing platform. And that really ties back to getting those prospects engaged to help increase conversions. When I hear about an acquisition like that and the space you're in, what I really hear is it's a data play. It allows you to make sure you have enriched contact data, etc. Exactly.
So that's part of it. When we're looking at acquisitions, what we're also looking for are tools that help us to inform our data asset and to improve our data quality. And that acquisition was done back, I believe, on May 11th of this year. So fairly recently. How did you meet the founders? Tell me how the acquisition went down.
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Chapter 3: How did James Islay transition from algorithmic trading to founding Cognism?
I think in Europe in particular, there's a lot of great product companies that have, you know, don't have the capital to grow. and have, you know, like generally weak, you know, don't have the investment in the sales team. And also in their home markets, it's usually a little bit tougher than, say, in the UK or US markets, both of which we have access to.
So just to be clear, you finished 2019 with a run rate of $2 million and you've just recently passed a $7 million run rate. But we've just got, yeah, that was at the end of 2019. We were 7 million and now we've just gone over 10 million. That's great. Okay, so I got my math wrong then. You finished 2018 with 2 million, 2019 with 7 million, and now you're passing 10 million, 830 grand a month.
Yeah, yeah, yeah, yeah. So this month we did about 750K of net new business. So we're kind of getting back. Yeah, so we're getting back to kind of just where we were pre-COVID. We had a little bit of a hit, you know, with the worrying that happened with COVID for one month. But we've consistently grown and consistently hit our targets every month. Walk me through what happened in COVID again.
2018, you're 2 million. 2019, you hit $7 million run rate. December, that's, you know, call it 8, 9, 10 months ago. COVID then sort of hits. You've only added about 2 million over the past 10 months. What impact did COVID have on that growth? Um, so, well, I suppose, yeah, we were kind of at 3 million, right?
I guess the, um, what really happened, um, churn, I guess, like customers that we had that, um, were in the recruitment and the event space in particular got really heavily hit. I think, you know, in particular in the UK now, you know, those types of, you know, we've had a complete lockdown and then we've gone back just recently in the last couple of weeks into lockdown.
So, you know, those businesses are heavily hit. So I suppose like when we had started in 2017, We, you know, we had like a focus on SMB businesses. So, of course, SMB businesses have been particularly we've been moving up consistently, you know, away from the smaller companies up to, you know, larger employee companies.
But, you know, that was part of like a large part of our customer base and that part of that customer base has been hit particularly hard as well. And a lot of that. It's like a portion of that is coming back. But, you know, that was the main hit. And then it was also just the disruption of going from in office to work from home.
And so we've made that transition now of actually being able to effectively manage a remote sales team. But initially, you know, that was a bit of a shock to our system of actually, you know, because we had like a great office culture and, you know, great, great team in office. Yep. No, it's a tough thing to balance, obviously. The nice thing is you're still getting growth.
And yeah, to your point, call it two and a half, 3 million in new ARR over the past, call it 10 or so months. Um, you've raised capital obviously along the way. Tell us about that. So yeah, we've raised in total about 23 million from a mix of European and US investors. Um, so we still got a very healthy cash balance from that. Um, but yeah, um, you know, it, it initially we, um,
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Chapter 4: What services does Cognism provide to B2B businesses?
Yeah, and that was a mix of primary and secondaries, yeah. Tell me, some folks don't understand what secondary means. How does that work? So basically, it's existing employees or existing investors selling their shares for a small discount to... to an investor. So it's a great way to get liquidity and it's becoming a bit more common.
So if you want liquidity in an earlier stage, that's actually becoming an option now, whereas from my understanding, it wasn't much of an option even just a few years ago. But now funds are getting more used to offering it.
And why would folks on your team do that if they know you're a financier and see you're growing so fast, especially considering the tax consequences of cashing out a portion of their shares? Yeah, I mean, speaking to some of my angel investors, especially from the UK, a lot of their angel investments have just died.
And so actually getting any sort of money out of an investment is great, you know. So they're ecstatic to actually see any sort of return from a seed stage investment. I think, you know, just generally, you know, everybody in the team is pretty much a first time in startups. Like none of us are experienced startups. um, entrepreneurs.
Um, and so just getting some liquidity to, to get a lifestyle balance, um, you know, was, was, it was, it was a great opportunity to, you know, um, I, I suppose like get cash, get a bill of cash and, uh, and buy some of the things that you wanted in life. Right. Yeah. About what portion of the 12 mine ended up going to secondary? Uh, totally. It was about 5 million. Okay. Okay.
So not, not, not joke. Was that 30, 40, 40%, something like that? Yeah. Okay. Not bad. And the rest of that, obviously just sort of infusing the company. You mentioned healthy cash balance today, buy yourself some runway during COVID. Obviously it was probably a main priority. Help us understand what team looks like today. How many folks? In total, we're 179 people.
So it's a very large number, but we have a lot of people in the Balkans. So, you know, we have like a large data research team in Macedonia. And all our engineers are in Croatia, in a place called Zadar and somewhere in Zagreb. And then our sales and marketing team are in the UK. And then we've got a small office in New York and one person in Vancouver.
What's the total monthly expense for just the team in Macedonia? Just so we get an idea. Um, oh, uh, in terms of expense, I mean, I would say it's not, I mean, typically, um, like we're paying about, um, you know, 500 euros per person that into like an average for, you know, so that's kind of the average price I'd have to. Yeah. Per month. Yeah.
It's very, I mean, when we, when I looked at it, it was cheaper than having higher say in India. Um, and you know, they speak, they're on the same time zone, uh, like every fluent in English.
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Chapter 5: How did Cognism's recent acquisition of Mailtastic unfold?
Okay. Great. Great. Great. And now help me understand this. So there's a crunch base says you guys have raised 50 million. That's obviously not accurate or I'm missing something. I asked that to be corrected. Yeah. There's like a double count there. I'm like, they've gotten a series be counted like 20 times. Um, got it. Cause then I was going to give you shit.
I was going to say, you've only built a $9 million company and you raise like 60 million, six X that that's not really capital efficient, but you're much more capital efficient than what that shows. Yeah, yeah, yeah. So I asked that to be corrected, but it hasn't. I'll chase them. No worries. We got the right story here. Now that's all that matters.
So 60 people in those locations, 179 on the team total. And so how many engineers would you consider on the team? We have like 15 coders and we have 24 with DevOps, which includes QA as well. Like 24 with DevOps and QA. Okay. And how many folks in our team carry a quota? Um, uh, I would, so I would say like carry a quote carrying quota. Um, uh, I would say that's around about, um, 12 right now.
So guys, up until April of this year, I used to pay a full-time designer $3,000 per month to handle things like blog images, podcasts, logos, slide decks, and things of that nature. And then a guy named Russ Perry came on the show. You And it shocked me when he told me he's basically bootstrapped to 18 million in revenue, serving 3,000 customers.
What it is is they set up a Slack channel for you full of designers. You post design projects and boom, you get results. They do designs for you. In fact, it is also way cheaper than having someone full time. I now happily pay for the past three months for Design Pickle. I pay $1,000 per month.
And they're so quick turning all my keynotes around, blog posts, featured images, logos, you name it, they do it very quickly. So I said, Russ, we've got to give a deal to my audience. What can you do? And he said, well, Nathan, we saw so many downloads from the show. We'll give your folks 50% off for a limited time. That's $200 in savings. But again, the offer does expire.
So if you want to try... To get basically a full-time designer, but for just $200 per month, go to nathanlockett.com forward slash design pickle right now. Again, that's nathanlockett.com forward slash design pickle. And James, should I dig deeper here at the top of the show? You said one of the things you feel like you're very good at is your sort of revenue motion.
I mean, should I dig deeper on how you built the sales team? Sure. Yeah. So how'd you, so how'd you build it? Right. So let's just start with like a number and then work backwards. Right. What do you set quota at relative to their full on target earnings, baseball's commission? Um, so, so in terms of the, the actual quote, I mean, um, right now, uh, uh, uh,
So in terms of the actual BDMs, or I guess you call account executives, they have like a minimum target of around about $8,000 of quota that they're meant to be bringing in per month. And then in terms of commission, we're just about to change our commission model right now. I've been told it's very generous. Um, and, and we, we kind of set targets.
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Chapter 6: What impact did COVID-19 have on Cognism's growth?
He's about to go raise more capital. Well, yeah, we always have like a deck ready. But, you know, I'm just quite solid on our metrics. And then the other thing is that we're aiming to increase our ACV. You know, it was at 11K. Now it's at 14K. And, you know, the aim is to get it towards the 28K.
And we're releasing like, you know, we know what we need to do in terms of product strategy to get there. Yeah, that makes a lot of sense. And how much are you burning per month right now? Actually, only right now at the moment, it's only about 200K per month that we're burning. That's net burn, right? Yeah. Yeah, that's, that's net burn. Yeah.
That's not, that's actually not that, that's not that bad. So, I mean, you're that money that you raised, I mean, you've got, you know, call it 10 million basically. Well, 5 million of the 12 was secondary. So you've got what, six or seven still sitting in the bank. Yeah, yeah, yeah, yeah, exactly. Interesting.
And so we were doing, you know, I think COVID actually helped us get way more efficient. So we didn't need an office anymore. Like, you know, it slowed our kind of headcount growth. So there was a lot of positive effects, I'd say, from COVID and just making us more efficient in terms of how we worked. So, and, you know, we really have an engine now where we can just put more money into
head count in terms of SDRs or into marketing and then get more growth. And so it's just really a question of like, you know, how much we want to put the foot down on the pedal at the moment. Yeah, I won't push you harder than this sort of high level question, because it's obviously sensitive information. But when you did do the $12 million round, did you guys break $100 million valuation?
Or do you think that'll be your next round? Oh, yeah, I think that'll be our next our next round. Got it. So you had to been flirting with it, though. You got to been pretty close on the $12 million. fairly close. Yeah. Yeah. Yeah. Very good. All right, James, let's wrap up here with the famous five. Number one, favorite business book. Um, the hard thing about hard things by Ben Horowitz.
Number two, is there a CEO you're following or studying? Yeah, of course. Uh, Henry Shook, um, from, um, I just, I like that they have an incredible revenue machine and also just their path to IPO through organic and inorganic growth is, uh, something to be studied. It's a heck of a story in the use of debt when you look at the ZoomInfo acquisition and how they pulled that off. It was incredible.
Number three, what's your favorite online tool for building your company besides your own? I say Gong. I like Gong. I also Slack, actually. Gong and Slack. Number four, how many hours of sleep do you get every night? About six. Okay. And situation, James, married, single kids? Yeah, married. Two girls, 13, 11, and one boy, three years old. Oh, wow. And how old are you? I'm 42, 42. Take us home.
Last question. What do you wish your 20 year old self knew? Oh, new. Um, I, I would say actually, um, like, uh, the, doing a startup, you know, like actually, uh, taking more risk, um, away from, you know, I suppose like when I graduated, it was the, the, the path was to go into investment banking, which is what I did. And then I became a developer trader.
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