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Nov 2, 2018 · 22m · top-founders

1196 How CloudCheckr Drives 145% Net Revenue Retention Annually

Aaron Newman · 11m spoken Nathan Latka · 7m spoken
0:00 / 0:00

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In this episode of The Top Entrepreneurs, host Nathan Latka interviews CloudCheckr founder and CEO Aaron Newman about scaling a cloud management and security platform past $1.2 million in monthly recurring revenue. Newman breaks down his prior startup exits, cloud metadata security architecture, and how a 2.5% usage-based pricing model powers a remarkable 145% annual net revenue retention rate.

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 39% of the talking time here. How this is scored →

Nathan as informed peer 5.5 Guest teaching 1.8 Guest disagreement 1.2 Nathan pushing back 2.5
05100:0010:0020:000:00–5:27 · Nathan as informed peer 6/10 Episode Preview: Highlighting CloudCheckr's Growth and Metrics Nathan probes Aaron on the exact financial details of his past exits, demonstrating familiarity with valuation multiples by noting that selling a company with $100k ARR for $6M was clearly a technology play rather than a standard multiple purchase.5:27–9:51 · Nathan as informed peer 6/10 Transition to Cloud Infrastructure and the Core CloudCheckr Mission Nathan relates CloudCheckr's value proposition directly to his experience running Heyo and managing cloud server spend, analyzing the utility of percentage-of-spend pricing.9:52–12:34 · Nathan as informed peer 4/10 Cloud Cybersecurity Architecture versus Traditional Perimeter Defense Aaron educates Nathan on why cloud perimeter security requires software-defined metadata inspection rather than legacy IP pinging and data center firewalls, rejecting Nathan's playful premise about capitalizing on FUD.12:44–16:25 · Nathan as informed peer 7/10 Secure Configuration and Activity Monitoring Capabilities Nathan drills Aaron on retention figures, distinguishing between gross retention and net revenue retention after Aaron initially mixes up net and gross metrics.16:26–18:43 · Nathan as informed peer 7/10 Payback Periods, Distributed Teams, and IPO Trajectory Nathan quickly computes estimated customer acquisition cost based on Aaron's payback period and average contract value, highlighting standard venture benchmarks.18:43–21:21 · Nathan as informed peer 3/10 The Famous Five Rapid-Fire Questions with Aaron Newman Nathan conducts the standard Famous Five rapid-fire closing questions in a collaborative, lighthearted tone.0:00–5:27 · Guest teaching 1/10 Episode Preview: Highlighting CloudCheckr's Growth and Metrics Nathan probes Aaron on the exact financial details of his past exits, demonstrating familiarity with valuation multiples by noting that selling a company with $100k ARR for $6M was clearly a technology play rather than a standard multiple purchase.5:27–9:51 · Guest teaching 2/10 Transition to Cloud Infrastructure and the Core CloudCheckr Mission Nathan relates CloudCheckr's value proposition directly to his experience running Heyo and managing cloud server spend, analyzing the utility of percentage-of-spend pricing.9:52–12:34 · Guest teaching 5/10 Cloud Cybersecurity Architecture versus Traditional Perimeter Defense Aaron educates Nathan on why cloud perimeter security requires software-defined metadata inspection rather than legacy IP pinging and data center firewalls, rejecting Nathan's playful premise about capitalizing on FUD.12:44–16:25 · Guest teaching 2/10 Secure Configuration and Activity Monitoring Capabilities Nathan drills Aaron on retention figures, distinguishing between gross retention and net revenue retention after Aaron initially mixes up net and gross metrics.16:26–18:43 · Guest teaching 1/10 Payback Periods, Distributed Teams, and IPO Trajectory Nathan quickly computes estimated customer acquisition cost based on Aaron's payback period and average contract value, highlighting standard venture benchmarks.18:43–21:21 · Guest teaching 0/10 The Famous Five Rapid-Fire Questions with Aaron Newman Nathan conducts the standard Famous Five rapid-fire closing questions in a collaborative, lighthearted tone.0:00–5:27 · Guest disagreement 1/10 Episode Preview: Highlighting CloudCheckr's Growth and Metrics Nathan probes Aaron on the exact financial details of his past exits, demonstrating familiarity with valuation multiples by noting that selling a company with $100k ARR for $6M was clearly a technology play rather than a standard multiple purchase.5:27–9:51 · Guest disagreement 1/10 Transition to Cloud Infrastructure and the Core CloudCheckr Mission Nathan relates CloudCheckr's value proposition directly to his experience running Heyo and managing cloud server spend, analyzing the utility of percentage-of-spend pricing.9:52–12:34 · Guest disagreement 2/10 Cloud Cybersecurity Architecture versus Traditional Perimeter Defense Aaron educates Nathan on why cloud perimeter security requires software-defined metadata inspection rather than legacy IP pinging and data center firewalls, rejecting Nathan's playful premise about capitalizing on FUD.12:44–16:25 · Guest disagreement 1/10 Secure Configuration and Activity Monitoring Capabilities Nathan drills Aaron on retention figures, distinguishing between gross retention and net revenue retention after Aaron initially mixes up net and gross metrics.16:26–18:43 · Guest disagreement 1/10 Payback Periods, Distributed Teams, and IPO Trajectory Nathan quickly computes estimated customer acquisition cost based on Aaron's payback period and average contract value, highlighting standard venture benchmarks.18:43–21:21 · Guest disagreement 1/10 The Famous Five Rapid-Fire Questions with Aaron Newman Nathan conducts the standard Famous Five rapid-fire closing questions in a collaborative, lighthearted tone.0:00–5:27 · Nathan pushing back 3/10 Episode Preview: Highlighting CloudCheckr's Growth and Metrics Nathan probes Aaron on the exact financial details of his past exits, demonstrating familiarity with valuation multiples by noting that selling a company with $100k ARR for $6M was clearly a technology play rather than a standard multiple purchase.5:27–9:51 · Nathan pushing back 2/10 Transition to Cloud Infrastructure and the Core CloudCheckr Mission Nathan relates CloudCheckr's value proposition directly to his experience running Heyo and managing cloud server spend, analyzing the utility of percentage-of-spend pricing.9:52–12:34 · Nathan pushing back 2/10 Cloud Cybersecurity Architecture versus Traditional Perimeter Defense Aaron educates Nathan on why cloud perimeter security requires software-defined metadata inspection rather than legacy IP pinging and data center firewalls, rejecting Nathan's playful premise about capitalizing on FUD.12:44–16:25 · Nathan pushing back 4/10 Secure Configuration and Activity Monitoring Capabilities Nathan drills Aaron on retention figures, distinguishing between gross retention and net revenue retention after Aaron initially mixes up net and gross metrics.16:26–18:43 · Nathan pushing back 3/10 Payback Periods, Distributed Teams, and IPO Trajectory Nathan quickly computes estimated customer acquisition cost based on Aaron's payback period and average contract value, highlighting standard venture benchmarks.18:43–21:21 · Nathan pushing back 1/10 The Famous Five Rapid-Fire Questions with Aaron Newman Nathan conducts the standard Famous Five rapid-fire closing questions in a collaborative, lighthearted tone.

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

0:00 · Nathan 65% · guest 35%0:00 · Nathan 65% · guest 35%3:00 · Nathan 21.7% · guest 78.3%3:00 · Nathan 21.7% · guest 78.3%6:00 · Nathan 22.6% · guest 77.4%6:00 · Nathan 22.6% · guest 77.4%9:00 · Nathan 49.2% · guest 50.8%9:00 · Nathan 49.2% · guest 50.8%12:00 · Nathan 43.1% · guest 56.9%12:00 · Nathan 43.1% · guest 56.9%15:00 · Nathan 38.6% · guest 61.4%15:00 · Nathan 38.6% · guest 61.4%18:00 · Nathan 23.1% · guest 76.9%18:00 · Nathan 23.1% · guest 76.9%21:00 · Nathan 65.1% · guest 34.9%21:00 · Nathan 65.1% · guest 34.9%
Sharpest disagreement ▶ 9:59 Aaron rejects fear-based sales premise

Aaron dismisses Nathan's humorous suggestion that geopolitical hacking fears drive their customer acquisition, stating that they avoid selling on fear, uncertainty, and doubt.

 Hardest push from Nathan ▶ 15:10 Nathan presses on retention metric definitions

Nathan refuses to let ambiguous retention numbers slide, pressing Aaron to clarify whether 96% is logo, gross revenue, or net revenue retention.

 Biggest teaching moment ▶ 10:05 Aaron explains dynamic cloud networking security

Aaron breaks down how ephemeral cloud IP addresses and software-defined networks invalidate old-school perimeter scanning techniques.

 Nathan holds their own ▶ 15:38 Nathan synthesizes SaaS expansion mechanics

Nathan demonstrates mastery of SaaS unit economics by structuring Aaron's rough metrics into a crisp breakdown of 96% gross retention plus 45% expansion leading to 140%+ NRR.
the scores for every segment, with the reasoning behind each
ChapterTopicNathan as informed peerGuest teachingGuest disagreementNathan pushing backWhy
Episode Preview: Highlighting CloudCheckr's Growth and Metrics 6113 Nathan probes Aaron on the exact financial details of his past exits, demonstrating familiarity with valuation multiples by noting that selling a company with $100k ARR for $6M was clearly a technology play rather than a standard multiple purchase.
Transition to Cloud Infrastructure and the Core CloudCheckr Mission 6212 Nathan relates CloudCheckr's value proposition directly to his experience running Heyo and managing cloud server spend, analyzing the utility of percentage-of-spend pricing.
Cloud Cybersecurity Architecture versus Traditional Perimeter Defense 4522 Aaron educates Nathan on why cloud perimeter security requires software-defined metadata inspection rather than legacy IP pinging and data center firewalls, rejecting Nathan's playful premise about capitalizing on FUD.
Secure Configuration and Activity Monitoring Capabilities 7214 Nathan drills Aaron on retention figures, distinguishing between gross retention and net revenue retention after Aaron initially mixes up net and gross metrics.
Payback Periods, Distributed Teams, and IPO Trajectory 7113 Nathan quickly computes estimated customer acquisition cost based on Aaron's payback period and average contract value, highlighting standard venture benchmarks.
The Famous Five Rapid-Fire Questions with Aaron Newman 3011 Nathan conducts the standard Famous Five rapid-fire closing questions in a collaborative, lighthearted tone.

Statements from this episode (10)

Insight
Newman: On-prem management tools fail in cloud due to transient infrastructure
“When you move into the cloud, all the tools that worked over there, they don't work in the cloud because there's fundamental differences. You don't have IP addresses that are around for months. They're gone in hours. So how the tool interacts with it has to be…”
Aaron Newman Nov 2, 2018 ▶ 6:32
Assertion Not checkable as stated
Newman: CloudCheckr's average customer MRR is $2,000 to $3,000
“Our average price is maybe 2003 thousand dollars a month MRR.”
Aaron Newman Nov 2, 2018 ▶ 7:19
Insight
Newman: Optimizing cloud costs actually drives customers' total cloud spend higher
“We're trying to help you run it efficiently, but we never see a customer's actual spend go down. What happens is they run things so much more efficiently in the cloud that they move more workloads in. And so it may be more efficient, but your dollar spent, the…”
Aaron Newman Nov 2, 2018 ▶ 9:03
Insight
Newman: Organizations can achieve higher security in the cloud than on-prem
“You can really be very accurate, and you could be much more secure in the cloud because you can scan millions of ports and IPs and know exactly what's coming in and not.”
Aaron Newman Nov 2, 2018 ▶ 10:37
Disclosure
Newman: CloudCheckr raised $50M from Level Equity
“Last year, we took a fifty million dollar investment.”
Aaron Newman Nov 2, 2018 ▶ 14:16
Assertion Not checkable as stated
Newman: CloudCheckr generates well over $1M in monthly revenue
“Yeah, much higher than that, but yes.”
Aaron Newman Nov 2, 2018 ▶ 14:39
Assertion Not checkable as stated
Newman: CloudCheckr achieves 145% annual net revenue retention
“We actually have a 145% net retention rates.”
Aaron Newman Nov 2, 2018 ▶ 15:22
Assertion Not checkable as stated
Newman: CloudCheckr CAC payback period is 8 to 9 months
“So it's now in the eight or nine month range, and it does grow because we're investing to keep our growth up.”
Aaron Newman Nov 2, 2018 ▶ 16:47
Assertion Not checkable as stated
Newman: CloudCheckr grew 85% year-over-year in 2017
“Last year we grew about 85%. Okay, that's the year before we tripled.”
Aaron Newman Nov 2, 2018 ▶ 18:15
Prediction Not checkable as stated
Newman: CloudCheckr will reach $40M ARR by early 2020
“Forty million dollars will be early 2020.”
Aaron Newman Nov 2, 2018 ▶ 18:27
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