SaaS Interviews with CEOs, Startups, Founders
Look Back: Can Outreach beat Vista Backed Salesloft?
21 Mar 2022
Chapter 1: What is the main topic discussed in this episode?
3,100 customers, $40,000 ACV. That would put you north of 10 million bucks a month right now in MRR. Is that accurate?
Or near? We're not quite there yet, but we are. I can tell you the following, and I don't have permission to do this, so this is an exclusive.
You are listening to Conversations with Nathan Latka, where I sit down and interview the top SaaS founders, like Eric Wan from Zoom. If you'd like to subscribe, go to getlatka.com.
We've published thousands of these interviews, and if you want to sort through them quickly by revenue or churn, CAC, valuation, or other metrics, the easiest way to do that is to go to getlatka.com and use our filtering tool. It's like a big Excel sheet for all of these podcast interviews. Check it out right now at getlatka.com. Hello, everybody. My guest today is Manny Medina.
He's a CEO of Outreach, the leading sales engagement platform. Medina joined Amazon's AWS team as an early employee and helped Microsoft drive the mobile division from launch to 50 million in annual revenue. He has an MBA from Harvard Business School and a computer science master's from the University of Pennsylvania. Manny, you ready to take us to the top? Let's do this. All right. Come on.
In the bio, your team says the leading sales engagement platform. You know, I have to push you on the fluffy stuff. So how do you know you're the leading one?
Um, you know, we have a good sense of the market and we know, you know, we always know who's buying who. We are in a, in a very privileged position in which we are creating a new category. So as the category is getting created, people engage, are talking to all of us, to everybody in the category. So we have visibility into who is doing what at all times.
So we track very closely the wins and the losses and the sizes of each of those and expansion opportunities and so forth. So we know by the numbers that we are the one that with most accounts and the most money.
Um,
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Chapter 2: What is Outreach and how does it position itself in the sales engagement market?
And then recently he joined Centrify, but that got acquired by Tom Abravo. So he's looking for, he's looking for a clean slate, something to take from zero to public himself. Well, you're not exactly at zero anymore.
I mean, maybe more like 60 to public, right?
60 to public. And, you know, the public numbers are a moving target, right? So you can't, you know, 200 is a new 100. So you can, it's no longer. Is that right? Is it, is that it? It's really, you got to hit 200 million in ARR to have a, have a good IPO. That's what Goldman is selling everybody.
Interesting.
Yeah.
Why do you think that is? The amount of liquidity in the market is just stupid at this point.
So you can stay private for longer?
Stay private for longer. Funds are playing both sides now. Funds are used to be public funds, hedge funds and so forth are playing the private markets now too. because you can write a 50 to a hundred million dollar check and invest it all like that whole thing into one company and then let that right out.
So if you have a $600 million allocation for a particular company, you can start making bets early on and just capture the upside as a company goes from, you know, growth stage to public.
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Chapter 3: What recent growth milestones has Outreach achieved?
It's blowing up because, again, we're redefining what sales means. Like sales is no longer bravado, lone cowboy, do whatever it takes to win. Some people win, some people lose. Sales is becoming a very scientific game in which you need to optimize the time of the rep and the activity that they take to get the most juice out of that transaction. And it matches both empathy and
sort of empathy, science, and obsession into one package. And that's what the book is. It lays out the groundwork for what sales engagement will be. But to get back to your question, so we bought Sales Hacker so that we can actually have access to educating the community. What we figure is that our impediment to long-term growth
was education, was educating the market that any of the stuff that we're doing is actually possible. And every time we release something from the machine learning team and we tell the market that we just did this, the market is like, oh my God, how is this even possible? I don't believe you. You see what I mean?
And because we are, you know, we're true to our Seattle-like roots in which we do what we say we're going to do. You know, we never market ahead of capability. We needed the ability for us to have an outlet to tell our story. And that's what we bought CellSacker and that's what brings us here.
So heavy outbound. Give me the ratios real quick, because I'm sure you've tested this. You're in kind of inside sales team. So what's the ratio from kind of like SDR to AE right now?
Oh, it's less than one to one. So last time we talked, I think it was, you know, over one to one, one and a half or so SDR for AE. And now we're dialing that down significantly to less than one SDR. And we're going to get to one SDR for two AEs.
Okay, for two AEs. What has allowed the SDRs to get more efficient? Outreach. What? Outreach. Well, your tool. Okay, got it. Can you be specific though? I mean, I know it's your tool you build it in, but what actually is it? Is it higher response rates on the cold emails? I mean, what is it?
So it's because we are nonstop testing. So we have a team actually internally that what they do is they test language. And as we break down by persona, right? So we figure out what persona we're reaching out. And then for each of those personas, we break it down by segment. You see what I mean? So you have, you know, persona, make market persona, enterprise persona.
How many personas do you have, by the way? Um, on the SDR team, I think we're testing about, uh, 15. And then go down one more layer. You said each persona has segments. How many segments? So, so we have four segments. So we have four segments and about four personas. So four by four is 16. So there's a few that are just not performing for us.
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Chapter 4: How does Outreach measure its success and performance metrics?
What is your margin?
I think it's in the 80% right now. Okay, got it. Good. Okay. Most SaaS companies will have roughly, like assuming there's nothing weird, right? Like you don't have a big component of like, you know, professional services, et cetera.
Like assuming all that, you're, you know, a good, healthy SaaS company should be running margins and they're somewhere between, you know, 80 to 70%, 65% even if you're growing really fast, because the majority of it is support in Amazon Web Services or Google Cloud or whatever you're using.
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Again, both plural founderpath.com forward slash products forward slash valuations. Finish the kind of sales stack you're using with here right now. So less than one SDR per two AEs. Once an AE closes that deal, are they passed off to a customer success person or does the AE own the upsell expansion as well?
That's a great question. So the moment you close a deal, for us in particular, adoption, because we're an engagement, we're a system of action, adoption is our true north. So the moment you close a deal, then it gets passed on to what we call the implementation manager. An implementation manager takes that entire account, the seat.
So if somebody bought 100 seats, that deal goes to the implementation manager. And we need to assure that 70% of those seats have daily usage. Like measured by logins or number of messages sent? We call them sales positive motions.
So the ability for you to use the application manually, like you're doing something in the application that creates an opportunity, creates a meeting, creates a reply, creates a follow-up, whatever is creating something that is moving the deal forward, we measure. And we need to get 70% of the seeds doing daily positive motions. And that's when we graduate into a CSM.
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Chapter 5: What strategies does Outreach use to drive customer acquisition?
Correct. It's just interesting. I asked the question and you give that response versus what most people would say is we want to break 150 million bucks in ARR. Just, it gives me a little, it gives me a, you know, into your psyche.
It's input metrics, right? Like I think about input metrics, like what capacity do I need to generate that kind of money and everything else takes care of itself. You see what I mean? Yeah. I'm thinking of the output metric. Then, you know, I sort of forego a lot of steps in the middle.
Yeah, no, that makes a lot of sense. Okay. It sounds like you're talking or thinking about funding right now. Don't tell me obviously what you're actually negotiating, but for where you're at, right? It sounds like you have passed. And I do think this is a critical point. When CEOs get to the point where their ARR is greater than the amount they've raised, right?
You now have leverage again versus the other way around, which is you've raised way more than what your ARR is. So you have really, I believe any options you want on the table. What is the right next move for you in terms of capitalization?
So the, the, the, the broader way to think about this is play it all the way out to cashflow positive or to some kind of like give it that number and then figure out how much money do you need to get there and then double that. And then that's your new minimum.
Are you cashflow positive today?
No, no, no, no, no. We're growing too fast to do that. And then we're in a tricky situation that we are, because we're so sales driven, we have to buy the capacity at the beginning of the year, ramp that capacity, make it productive. And then that delivers a double. So every time we double, we have to sort of execute the same trick.
Now that all becomes sort of like self-sustaining in about a year or two. And that's not even including international. And that may put a dent in the whole plan.
Manny, we have to wrap up. I just realized we lost track of time, but I mean, can you give me a general sense of scale? Are you burning like a million net per month or 2 million net per month? Where are you generally? North of two million per month right now. Okay, but south of three?
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Chapter 6: What role does education play in Outreach's market strategy?
How many what? Hours of sleep do you get every night? Six. And what's your situation? Married, single, kids? Married with three kids. Three kiddos. How old are you? I am 45. 45. Last question. What was your 20-year-old self-new?
that starting a company is not that hard. It's just a lot harder than it looks. It looks a lot harder than it is.
Guys, it looks harder than it is. Coming from Manny again, outreach growing fast, 3,100 customers, bookings per quarter. Now they passed last year, 10 million in new bookings per quarter, hoping to break 17 million in new bookings per quarter by Q4 of 2019. That'll put them past $10 million per month in revenue.
They're still growing 100% year over year, even at their scale, 60 million raised maybe a Big announcement on the way in terms of funding. We'll see what happens. Burning call between two and three million per month right now, which, again, is allowing them to drive so much growth. 350 folks on the team in Seattle, 145 percent net revenue retention. Super impressive.
Less than one SDR for two AEs, then one implementation manager. And then again, CSMs that are are incentivized by with commissions to drive expansion revenue. Interesting model, Manny. Thanks for taking us to the top.
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