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Jul 19, 2019 · 19m · top-founders

1455 How Groove Scaled To 400 Customers, $5M in ARR on $3.8M Raised

Nathan Latka · 9m spoken Chris Rothstein · 7m spoken
0:00 / 0:00

gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions

In this episode of The Top Entrepreneurs Podcast, host Nathan Latka interviews Groove CEO Chris Rothstein to explore how the enterprise sales engagement platform scaled to $5M in ARR across 400 customers while raising only $3.8M in venture funding. Rothstein breaks down Groove's self-taught technical origins, inside sales pod structure, organic upsell model, and competitive focus on Account Executives.

How this conversation actually went

Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Nathan holds 55% of the talking time here. How this is scored →

Nathan as informed peer 4.6 Guest teaching 1.4 Guest disagreement 0.3 Nathan pushing back 1.6
05100:0010:000:00–2:32 · Nathan as informed peer 0/10 Nathan Latka Announces Wall Street Journal Bestseller Solo host monologue featuring book promotion, preview metrics, and intro clip montage. No guest interaction takes place.2:33–5:03 · Nathan as informed peer 5/10 Introducing Chris Rothstein and Groove's SaaS Model Latka introduces Rothstein and probes Groove's background, seat scale, and founding team history. Rothstein answers cooperatively and clearly.5:04–7:29 · Nathan as informed peer 6/10 Revenue Growth, Bootstrapping, and Metric Clarifications Latka calculates run rate assuming a monthly average and spots a math discrepancy before Rothstein clarifies the $13k was annual ACV, correcting the 5M ARR figure. Both align collegially on unit economics.7:30–10:17 · Nathan as informed peer 5/10 Pricing Architecture and Product Add-On Expansion Latka breaks down the pricing architecture and add-on structure before delivering a mid-roll advertisement for Monday.com.10:19–14:13 · Nathan as informed peer 6/10 Retention Dynamics, Payback Periods, and Customer Acquisition Latka explores net churn, customer acquisition costs, and payback periods, then digs into SDR/AE pod structures and gamified incentive plans.14:13–17:01 · Nathan as informed peer 5/10 Team Distribution, Growth Strategy, and Fundraising Outlook Latka attempts to pin Rothstein down on a hypothetical valuation multiple and fundraising target. Rothstein avoids committing to precise numbers.17:02–19:19 · Nathan as informed peer 5/10 Product Differentiation and Strategic Focus on Account Executives Rothstein shares product differentiation targeting account executives followed by the standard Famous Five rapid-fire closing questions.0:00–2:32 · Guest teaching 0/10 Nathan Latka Announces Wall Street Journal Bestseller Solo host monologue featuring book promotion, preview metrics, and intro clip montage. No guest interaction takes place.2:33–5:03 · Guest teaching 1/10 Introducing Chris Rothstein and Groove's SaaS Model Latka introduces Rothstein and probes Groove's background, seat scale, and founding team history. Rothstein answers cooperatively and clearly.5:04–7:29 · Guest teaching 4/10 Revenue Growth, Bootstrapping, and Metric Clarifications Latka calculates run rate assuming a monthly average and spots a math discrepancy before Rothstein clarifies the $13k was annual ACV, correcting the 5M ARR figure. Both align collegially on unit economics.7:30–10:17 · Guest teaching 1/10 Pricing Architecture and Product Add-On Expansion Latka breaks down the pricing architecture and add-on structure before delivering a mid-roll advertisement for Monday.com.10:19–14:13 · Guest teaching 2/10 Retention Dynamics, Payback Periods, and Customer Acquisition Latka explores net churn, customer acquisition costs, and payback periods, then digs into SDR/AE pod structures and gamified incentive plans.14:13–17:01 · Guest teaching 1/10 Team Distribution, Growth Strategy, and Fundraising Outlook Latka attempts to pin Rothstein down on a hypothetical valuation multiple and fundraising target. Rothstein avoids committing to precise numbers.17:02–19:19 · Guest teaching 1/10 Product Differentiation and Strategic Focus on Account Executives Rothstein shares product differentiation targeting account executives followed by the standard Famous Five rapid-fire closing questions.0:00–2:32 · Guest disagreement 0/10 Nathan Latka Announces Wall Street Journal Bestseller Solo host monologue featuring book promotion, preview metrics, and intro clip montage. No guest interaction takes place.2:33–5:03 · Guest disagreement 0/10 Introducing Chris Rothstein and Groove's SaaS Model Latka introduces Rothstein and probes Groove's background, seat scale, and founding team history. Rothstein answers cooperatively and clearly.5:04–7:29 · Guest disagreement 1/10 Revenue Growth, Bootstrapping, and Metric Clarifications Latka calculates run rate assuming a monthly average and spots a math discrepancy before Rothstein clarifies the $13k was annual ACV, correcting the 5M ARR figure. Both align collegially on unit economics.7:30–10:17 · Guest disagreement 0/10 Pricing Architecture and Product Add-On Expansion Latka breaks down the pricing architecture and add-on structure before delivering a mid-roll advertisement for Monday.com.10:19–14:13 · Guest disagreement 0/10 Retention Dynamics, Payback Periods, and Customer Acquisition Latka explores net churn, customer acquisition costs, and payback periods, then digs into SDR/AE pod structures and gamified incentive plans.14:13–17:01 · Guest disagreement 1/10 Team Distribution, Growth Strategy, and Fundraising Outlook Latka attempts to pin Rothstein down on a hypothetical valuation multiple and fundraising target. Rothstein avoids committing to precise numbers.17:02–19:19 · Guest disagreement 0/10 Product Differentiation and Strategic Focus on Account Executives Rothstein shares product differentiation targeting account executives followed by the standard Famous Five rapid-fire closing questions.0:00–2:32 · Nathan pushing back 0/10 Nathan Latka Announces Wall Street Journal Bestseller Solo host monologue featuring book promotion, preview metrics, and intro clip montage. No guest interaction takes place.2:33–5:03 · Nathan pushing back 1/10 Introducing Chris Rothstein and Groove's SaaS Model Latka introduces Rothstein and probes Groove's background, seat scale, and founding team history. Rothstein answers cooperatively and clearly.5:04–7:29 · Nathan pushing back 4/10 Revenue Growth, Bootstrapping, and Metric Clarifications Latka calculates run rate assuming a monthly average and spots a math discrepancy before Rothstein clarifies the $13k was annual ACV, correcting the 5M ARR figure. Both align collegially on unit economics.7:30–10:17 · Nathan pushing back 1/10 Pricing Architecture and Product Add-On Expansion Latka breaks down the pricing architecture and add-on structure before delivering a mid-roll advertisement for Monday.com.10:19–14:13 · Nathan pushing back 2/10 Retention Dynamics, Payback Periods, and Customer Acquisition Latka explores net churn, customer acquisition costs, and payback periods, then digs into SDR/AE pod structures and gamified incentive plans.14:13–17:01 · Nathan pushing back 3/10 Team Distribution, Growth Strategy, and Fundraising Outlook Latka attempts to pin Rothstein down on a hypothetical valuation multiple and fundraising target. Rothstein avoids committing to precise numbers.17:02–19:19 · Nathan pushing back 0/10 Product Differentiation and Strategic Focus on Account Executives Rothstein shares product differentiation targeting account executives followed by the standard Famous Five rapid-fire closing questions.

speaking balance: gold is Nathan, purple is the guest (3 minute bins)

0:00 · Nathan 88.8% · guest 11.2%0:00 · Nathan 88.8% · guest 11.2%3:00 · Nathan 42.9% · guest 57.1%3:00 · Nathan 42.9% · guest 57.1%6:00 · Nathan 57.5% · guest 42.5%6:00 · Nathan 57.5% · guest 42.5%9:00 · Nathan 65.5% · guest 34.5%9:00 · Nathan 65.5% · guest 34.5%12:00 · Nathan 32% · guest 68%12:00 · Nathan 32% · guest 68%15:00 · Nathan 40.2% · guest 59.8%15:00 · Nathan 40.2% · guest 59.8%18:00 · Nathan 55.4% · guest 44.6%18:00 · Nathan 55.4% · guest 44.6%
Sharpest disagreement ▶ 16:37 Rothstein demurs on specific valuation targets

Rothstein softly resists Latka's leading question about taking a five on thirty-three valuation, noting it depends on the investor and market norms.

 Hardest push from Nathan ▶ 5:30 Latka questions revenue metrics versus capital raised

Latka points out the apparent anomaly between Rothstein's initial monthly ARPU framing and funding ratio, testing whether the numbers add up.

 Biggest teaching moment ▶ 6:55 Rothstein corrects ACV vs MRR confusion

Rothstein clarifies that the 13k figure was annual contract value rather than monthly, correcting Latka's $60 million run-rate projection down to $5 million ARR.

 Nathan holds their own ▶ 11:50 Latka calculates unit payback speed on the fly

Latka immediately translates an $8,000 CAC on a $13,000 ACV into a nine-month payback duration and probes cohort consistency across deal sizes.
the scores for every segment, with the reasoning behind each
ChapterTopicNathan as informed peerGuest teachingGuest disagreementNathan pushing backWhy
Nathan Latka Announces Wall Street Journal Bestseller 0000 Solo host monologue featuring book promotion, preview metrics, and intro clip montage. No guest interaction takes place.
Introducing Chris Rothstein and Groove's SaaS Model 5101 Latka introduces Rothstein and probes Groove's background, seat scale, and founding team history. Rothstein answers cooperatively and clearly.
Revenue Growth, Bootstrapping, and Metric Clarifications 6414 Latka calculates run rate assuming a monthly average and spots a math discrepancy before Rothstein clarifies the $13k was annual ACV, correcting the 5M ARR figure. Both align collegially on unit economics.
Pricing Architecture and Product Add-On Expansion 5101 Latka breaks down the pricing architecture and add-on structure before delivering a mid-roll advertisement for Monday.com.
Retention Dynamics, Payback Periods, and Customer Acquisition 6202 Latka explores net churn, customer acquisition costs, and payback periods, then digs into SDR/AE pod structures and gamified incentive plans.
Team Distribution, Growth Strategy, and Fundraising Outlook 5113 Latka attempts to pin Rothstein down on a hypothetical valuation multiple and fundraising target. Rothstein avoids committing to precise numbers.
Product Differentiation and Strategic Focus on Account Executives 5100 Rothstein shares product differentiation targeting account executives followed by the standard Famous Five rapid-fire closing questions.

Statements from this episode (14)

Assertion Not checkable as stated
Groove customers pay an average of $13,000 per month
“The average is probably around 13,000.”
Chris Rothstein Jul 19, 2019 ▶ 3:16
Assertion Not checkable as stated
Groove deployments scale from 30 seats up to 8,000 seats
“We really focus on 30 and above, but we scale up to our largest customer has about 7000 seats. And then we have our 8000. Now we have a bunch of above a thousand.”
Chris Rothstein Jul 19, 2019 ▶ 3:26
Assertion Supported
Google is a paying customer of Groove
“They're a customer as well, so.”
Chris Rothstein Jul 19, 2019 ▶ 4:09
Assertion Not checkable as stated
Groove has secured over 400 paying customers
“Today we're a little over 400.”
Chris Rothstein Jul 19, 2019 ▶ 5:09
Disclosure
Groove has raised a total of $3.8 million in funding
“So 3.8 million in funding.”
Chris Rothstein Jul 19, 2019 ▶ 5:27
Assertion Not checkable as stated
Groove reached profitability and $1M revenue on just $800K raised
“We built up and with that eight, our first 800 K we became profitable. We had over a million in revenue with that.”
Chris Rothstein Jul 19, 2019 ▶ 6:05
Assertion Not checkable as stated
Groove's revenue growth splits evenly between account expansion and new logos
“It changes month cause we still get large deals here and there. But almost always it's 50, 50. Almost exactly.”
Chris Rothstein Jul 19, 2019 ▶ 6:42
Assertion Not checkable as stated
Groove currently generates $5 million in annual recurring revenue
“Five million ARR.”
Chris Rothstein Jul 19, 2019 ▶ 6:57
Disclosure
Groove maintains a net negative monthly churn of 2.5% to 3%
“On a monthly basis, we're like our net churn is like negative two and a half, three percent per month.”
Chris Rothstein Jul 19, 2019 ▶ 10:28
Disclosure
Groove calculates its average customer acquisition cost at roughly $8,000
“When I calculate it, it's about 7.9 K. So around eight K, let's say.”
Chris Rothstein Jul 19, 2019 ▶ 11:29
Disclosure
Groove pairs one SDR with one AE in dedicated sales pods
“We have basically a one-to-one pair of SDR and AE. So like a pod structure it's now called. And they, we give them a target list and they just work on capturing those accounts where we know we can provide value.”
Chris Rothstein Jul 19, 2019 ▶ 12:16
Insight
Groove uses a weighted point system to compensate its SDRs
“SDRs have a meeting goal, and we use a point system, which I think is the way to go. Basically, if they, if there's certain competitors that we think we could win against more, we go after them, and they get more points or certain sizes, or they get a top 10 l…”
Chris Rothstein Jul 19, 2019 ▶ 13:21
Assertion Not checkable as stated
Groove operates with a team of approximately 35 employees
“Yeah, we're at about 35 today.”
Chris Rothstein Jul 19, 2019 ▶ 14:16
Assertion Not checkable as stated
Groove differentiates from competitors by focusing on AEs rather than SDRs
“We focus more on AEs where a lot of the space focus on the sales development area. So I think that is one thing different.”
Chris Rothstein Jul 19, 2019 ▶ 17:22
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