SaaS Interviews with CEOs, Startups, Founders
He's 31, Doing $700k/mo By Automating The Sales Process WIth $8m Raised, EP 265: Anand Kulkarni
07 Jun 2016
Chapter 1: What is LeadGenius and how does it utilize AI in sales?
This is The Top, where I interview entrepreneurs who are number one or number two in their industry in terms of revenue or customer base. You'll learn how much revenue they're making, what their marketing funnel looks like, and how many customers they have. I'm now at $20,000 per top. Five and six million. He is hell-bent on global domination. We just broke our 100,000-unit soul mark.
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Chapter 2: How does LeadGenius determine pricing for its services?
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He went from a cleaning company at age 26 to a $14 million agency by his 42nd birthday.
okay top tribe good morning our guest this morning is anand kulkarni and he's really a special guy president and co-founder of lead genius backed by y combinator 500 andreessen and sierra ventures lead genius has raised over eight million dollars to pursue a combination of sales automation technology and anti-poverty social work in a previous life anand was a mathematician nsf fellow and phd candidate at berkeley where he taught entrepreneurship to undergraduates
Anand, are you ready to take us to the top? Absolutely. Let's do this. All right, let's do this.
Chapter 3: What milestones should entrepreneurs consider before raising capital?
So first things first, right before LeadGenius, were you teaching full time? I was and I was not. I was a researcher at Berkeley. In my spare time, I would teach classes as graduate students often do. I was drawn to entrepreneurship because that's where a lot of the fun was in teaching. Got it. So walk us through what LeadGenius does and how you make money. Sure thing.
So LeadGenius is AI for sales. We think of it as top of the funnel automation.
Chapter 4: What is the significance of net negative churn for SaaS businesses?
Companies come to us when they're looking to map out new leads in their market, people who are going to buy from them in the future. We automate the process of figuring out all the companies in their space, all the people who are decision makers at those companies, Figuring out how to contact those people.
And then we automate the email back and forth, going from our customer salespeople to the prospects that they want to speak to with those companies. So can you give a real life example just to really bring it home? A real life customer? Sure. So we've got a company who is right now using Lead Genius to map out every director of IT at a Brazilian company.
telecom company with the interest of selling them IT products and services. So they were interested in companies that were between $100,000 in revenue and about $10 million in revenue.
Chapter 5: How does LeadGenius manage customer acquisition costs and lifetime value?
So there's a finite number of those companies. That information is always changing. We use a combination of crowdsourcing and crawling to go out and find this information from a combination of public databases, company websites, as well as social networks, personal profiles, and so on. So the end result was
a set of companies that they wanted to sell to and an effective way for them to reach out and talk to them. Okay. And what do they pay you for this? So we generally charge between, um, 2000 a month all the way up to our biggest customers who give us up to a million a month. It really depends on how hard, how hard it is to find those leads in particular. Okay.
Chapter 6: What strategies does Anand suggest for effective fundraising?
So give us a sense of, first off, what year did you start the business? This was 2011, 2011. You started it and, um, give us a sense of size. So in 2015, what was total revenue? 2015, we got up to just about $8 million a year. Okay, $8 million a year. And you look at this as a SaaS business, right? We treated it fully as a SaaS business. That's right.
Okay, so it's fair to say you were doing about $650K in December, which forward-looking run rate is $8 million.
Chapter 7: What lessons can entrepreneurs learn from Anand's journey?
That's right. Okay, very cool. All right, and so let's first talk about unit economics, and then I want to flip back to the business. So on the unit economics side, how many current customers are you working with? And let's just use February 2016 as the month to take data from. Sure. We serve enterprise customers. And that's a segment where we're looking at about 200 customers and some change.
Okay. And average revenue per user is approximately what?
Chapter 8: How can listeners connect with Anand and learn more about LeadGenius?
Right now it's close to $40,000 per user. And that's annually or monthly? That's annually. Okay. $40,000 annually. And then do you, I imagine you have a lot of this data because you've been around a while, but in terms of a customer acquisition cost and churn and lifetime value, what do those look like and how do you think of them? Okay, good. So we have some of that data on hand.
So yeah, well, we've we've tracked it a lot. We think about things in terms of lifetime value to CAC ratio, because that's really the numbers that are interesting for us. So right now, we're averaging customer durations, we model it with about a two and a half year span. And we enjoy a pretty good CAC to LTV ratio. LTV to CAC right now is about 10.
So we are getting a pretty good return on investment. So just to be clear, you're modeling two and a half years in terms of lifetime value in months. So 30 months, the average customer stays with you, paying you on average $40,000 per year. And so your total lifetime value in terms of dollars is what? Um, I don't know that number off the top of my head. Is it about a hundred grand?
That's what the math comes out to. That sounds roughly right. You know, it's the tricky part is that we've actually been around for, on this product for just about three years. So a lot of these numbers are probably going to go up as we see customers stick with us. They're all extrapolations at this point. Yep.
So when you say your CAC to LTV ratio, again, lifetime value is approximately a hundred grand. You're saying you're getting 10 to one, which means you're spending about 10 grand to acquire a new customer. Is that accurate? I think it's probably a little more than that. If you bundle in full sales and marketing costs fully loaded, I'd say it's closer to 15. Okay.
And what percentage of your revenue is professional services versus pure SAS? So we think about everything as part of the software sale, but a portion of that is attributed to what we would consider the cost of data acquisition. So that doesn't mean professional services per se. We don't have any consulting teams that we send on site.
What we do have are a crowd of folks who help us get certain kinds of data that might be tricky to get using automated methods. So good examples might be gosh, the last time somebody changed jobs, which is data that you might find on the internet, but wouldn't really be able to crawl.
Or for example, information about the number of sales positions that are open at a company, which is a predictor of how often companies will buy sales products. That's information that for our customers, there aren't really a lot of solutions out there that'll provide, but which make a big difference in their purchasing strategies. That makes a lot of sense.
Real quick, flipping back to unit economics, you said you projected about a 30-year lifetime value in terms of months. Is that fair to say then you're looking at about a 3% monthly churn? That's about a 30-month, not 30-year. Sorry, 30-month. That's what I meant. Brain fart. Yeah, that's correct. That's roughly right on the gross level. On a net level, we're posting negative churn maybe. Great.
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