SaaS Interviews with CEOs, Startups, Founders
Look Back: UserZoom Eye's 2022 IPO, $100m Run Rate in User Experience Management Space
04 Sep 2022
Chapter 1: What is the main topic discussed in this episode?
I mean, I'll give you the basic, the numbers in terms of run rate and for the year. I mean, we're looking at clearly surpassing the $80 million run rate because we grew, when we spoke to you, we were growing at almost like, I would say 45%, 40 to 45. We're now growing at 55.
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. Hey folks, my guest today is Alfonso De La Nuez.
He's building a tool, you've probably heard of it, called UserZoom.com, the experience insight management company that helps businesses gather and manage the insights they need to design and deliver an exceptional digital experience. They've raised over $150 million and backed by Silicon Valley investors, Sunstone Capital, and Owl Rock. Alfonso, are you ready to take us to the top? I am.
Thank you for having me again. So, hey, real quick for people that missed our last interview from April, where you shared, I believe that you had just passed out an $80 million run rate and a thousand customers, correct?
Correct. Yeah.
So help me understand, you know, this is a very frothy space, like user feedback in general. How are you positioning yourself? I mean, there's a clue in your bio where you used a very specific word, right? Experience insights management platform. Is that what you're trying to brand and own?
correct yes we are um to be honest with you experience insights management is is a little bit of a visionary uh way of positioning ourselves in a market where right now there's a bunch of companies specializing in ux and a bunch of companies specializing in cx and then there is other companies that are talking about experience management such as the case of Qualtrics.
There's Momentive, which is the new SurveyMonkey, also providing feedback. There's a lot of survey tools out there. And then there is others like UserZoom, which focuses on the product experience. And user research and user experience research usually takes place in the pre-production stages.
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Chapter 2: What is UserZoom and what does it offer?
But that's more analytics and what's happening. the visits, the monthly active users, like activities that we call cold data. It is very important, but that's different than user research, which is when you actually engage in a conversation and you ask people to complete certain tasks and you record everything they're doing.
So we're not just saying what, we actually focus a lot more on the why and the how they do what they do. Yeah. So very, very compliment. Very much.
It is. It is. It just it feels so like you feel so close to Pendo and you both feel so close to like hot jar and smart look. I just I wonder why there hasn't been a mass sort of like merger between all.
It's happening. Nathan is happening. Look, tell me about it. Just well, let me tell you. So first of all. I consider the whole thing this product experience, digital experience market. I see that as a digital product cloud and research insights cloud. That's the category I can see. That's why we call it experience insights management for digital.
There are more of what we call passive insights, which is analytics, those that will collect information and data, cold data, once the product is live. And then there's others, including UserZoom, that are more active research platforms. These are products that allow you to connect to your users. and ask questions and probe them and have conversations.
So one is more analytics, the other is user research. And as I said earlier, customer experience is all about feedback management and asking people once you go live. The other one, user experience research is more about design and understanding how to build a digital experience, a digital product. All of these guys right now, all of these vendors, all of these solutions are kind of separated.
And there's little categories for each. But what's happening in the market, and I can see it happening, is that there's going to be convergence. So, for instance, ContentSquared just acquired Hotjar. I think the news hit this morning, right? Then you see...
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Chapter 3: How is UserZoom positioned in the user experience management market?
uh you know you see the qualitative and you see customers i talk to customers all the time that think that qualitative and quantitative they need to be paired up and they don't look at customer experience user experiences two different completely different uh categories they actually like to see it as an experience category right uh you see uh qualtrics which is one of the leaders if not the leading company is doing you know uh brand research and market research and
And they're also doing product and design research as well. We offer a whole lot of UX tools, UX solutions for user testing and user experience research. But we also offer surveys for more marketers and e-commerce and quantitative analysis. So I think what we're seeing is that over time, we're going to see convergence.
We're going to see that you're not going to have separate teams working on separate things. but everything is going to be about the experience that end users have.
How much revenue do you think Hotjar had?
You know, the press release this morning actually didn't say, you know, they didn't specify the terms of the deal, which kind of leads me to believe that it was a fairly small deal. I don't know, maybe wrong, but so don't quote me on that. But, you know, clearly under 100 million, right?
Based on what I knew and the fact that Hotjar was much more focused on SMB, you know, I think they probably were somewhere in the 10 to 20 million is my guess. Were you looking at the deal at all? No, because Hotjar, again, is analytics. Hotjar would be the basic tool that you need to understand what's happening with your website.
So you have Google Analytics, you have Pendo, you have Hotjar doing some things and some behavior with heatmaps as well. So they wanted to kind of take it to the so-called advanced analytics, just a little bit more. but they're not really in the user research space the way we are positioned.
Again, you're not having direct conversations with users, and you're not using Hotjar before it goes live, before the product goes live. So that's why we were not looking at that.
People will use you as they're doing product research before they launch the product to do testing.
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Chapter 4: What methodologies does UserZoom use for user research?
And so what we did is we have the pricing models, and then we have the different products. In our case, we actually have even different products. So if you go to our site, you'll see there's a users in Go. which is the former Validately that we acquired two years ago. This was a very simplified, kind of like a light version of our enterprise solution.
And it's cheaper, it's more affordable, it's easier to use, and it's less feature-rich. All those things are there. And so we use a tech touch approach or semi tech touch approach where we have a team of people that will sell that type of license and that type of product with a pricing model. It's still an annual subscription, so we still have
the same in terms of how we engage with customers, but it's going to be the starting point. And we assign a team of people in marketing as well to work on those opportunities. And then we have the enterprise team that works on higher deal, higher value deals. And they often work together, of course.
I mean, we're seeing, that's actually one of the things that I like the most about, and our CRO speaks about this, talk about an escalator, right? And we see that we have a lot of companies that started in UC Go are actually moving up because they're maturing or they want more or they want more capabilities, et cetera, et cetera.
And you mentioned last time you had 50 quota carrying reps. What is their quota annually, right? I like most of the reps. I'm sure there are some that are just starting where their quota is smaller, but when they're at full capacity, what is the quota target?
I think we're at 1.4 million or so, somewhere around that, yeah.
And how do you handle giving your CSMs, your customer success managers, a book of business? Do you give them like a million and say you're responsible for hitting 25% expansion in this? Or how do you do that?
Yeah, very good question. I'll answer the question telling you where we came from and how we're doing it now. So we used to have a leader in customer success and a leader in sales for new sales. And they were both reporting to me. And to be honest, they tried really hard, but it didn't really work that well. The retention wasn't where I wanted it to be.
And they didn't talk to each other that much. Keep in mind that most of our business is high end, high value, high touch. So what we discovered is that the CSM is more like an account manager. and work and should work together with the account executive that sells the deal and should be kind of like in the same team. I felt like what we needed there is a consultant.
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Chapter 5: How does UserZoom differentiate itself from competitors?
Switch out. Turn your AirPods off. Can you hear me now? Bluetooth off. You should be able to hear me, Alfonso, if you turn your AirPods off. There you go. Can you hear me now?
I can hear you now.
Sometimes if AirPods die in the middle of an interview, that happens. No big deal. But my question to you is going to be capitalization-wise, is the last $100 million you raised, do you think that's the last you'll need to raise pre-IPO or should we expect another round from you in the next six months?
One of the things that we did in these last few months since we spoke to you is actually generate more profit and more EBITDA than we needed or we wanted. The reason why is because it's hard to hire, you know, and it's hard to hire at the speed that we want.
So we actually have more cash than we need, or not that we need, but that we expected, you know, and we foresee not needing any additional rounds.
Okay, okay. Of that $100 million, how much went on the balance sheet? I know a lot of it was secondary.
Yeah, I know we talked about it a little bit. I can't comment, though. Okay, that's okay. Yeah, some of it was, but I can't comment on the details.
Tell me more. I'm always curious when founders are preparing to go public. You look at Henry Shuck, who was able to give you about 10% of Zoom info. There's others like Aaron at Box. He only owned like 2%, right? And then there's some like Eric at Zoom who owned 35%, 40%.
You sold, I believe, the majority of the business back in 2015 when you did the $34 million round out of $50 million valuation. How much equity do you still own and how do you keep your team incentivized with the extra partners, financial partners?
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