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Jun 13, 2018 · 17m · top-founders

1054 We Cut Our Customer Base In Half But Grew Revenue to $30m

Raj Aggarwal · 9m spoken Nathan Latka · 6m 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, host Nathan Latka interviews Localytics co-founder Raj Aggarwal, who details how the mobile analytics and engagement platform navigated the 2008 financial crisis, raised $60 million, and achieved cash flow breakeven at over $30 million in ARR by cutting its customer base in half to focus on high-value enterprise accounts.

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 39.7% of the talking time here. How this is scored →

Nathan as informed peer 6.3 Guest teaching 3.8 Guest disagreement 2.7 Nathan pushing back 3.8
05100:0010:000:49–3:05 · Nathan as informed peer 6/10 Introducing Raj Aggarwal of Localytics Nathan drills into the business model and revenue structure, prompting Raj to dismiss app downloads as a vanity metric in favor of active user tiers. Nathan immediately clarifies whether pricing figures represent monthly spend or annual contract value.3:06–5:11 · Nathan as informed peer 6/10 Bootstrapping Through the 2008 Financial Crisis Raj recounts launching right before Lehman Brothers collapsed and bootstrapping for two years. Nathan tests his understanding by walking through a concrete user tracking scenario to verify how data is utilized without ad network selling.5:11–8:04 · Nathan as informed peer 6/10 Venture Capital, Market Saturation, and Reaching Breakeven Nathan expresses mock disappointment over the company raising sixty million dollars and asks pointedly how that much capital was deployed. Raj admits that the industry became oversaturated in 2015 before they self-corrected to reach breakeven.8:06–13:21 · Nathan as informed peer 7/10 Sponsor Break: Acuity Scheduling Promotion After an ad read, Nathan explores the economics of cutting lower tier customers and pushes Raj for forward revenue targets. Raj holds his ground with a noncommittal response when pressed on whether the company will hit fifty million in ARR.13:21–15:47 · Nathan as informed peer 7/10 Team Structure, Support Hierarchy, and SaaS Unit Economics Nathan probes support team headcounts, lifetime customer value, and payback periods. Raj outlines how their mobile engagement consultants function and explains their net expansion trajectory.15:48–17:14 · Nathan as informed peer 6/10 The Famous Five Rapid-Fire with Raj Aggarwal Nathan runs through the standard rapid-fire questions and concludes with a concise recap synthesizing the company's financial and operational metrics.0:49–3:05 · Guest teaching 5/10 Introducing Raj Aggarwal of Localytics Nathan drills into the business model and revenue structure, prompting Raj to dismiss app downloads as a vanity metric in favor of active user tiers. Nathan immediately clarifies whether pricing figures represent monthly spend or annual contract value.3:06–5:11 · Guest teaching 3/10 Bootstrapping Through the 2008 Financial Crisis Raj recounts launching right before Lehman Brothers collapsed and bootstrapping for two years. Nathan tests his understanding by walking through a concrete user tracking scenario to verify how data is utilized without ad network selling.5:11–8:04 · Guest teaching 4/10 Venture Capital, Market Saturation, and Reaching Breakeven Nathan expresses mock disappointment over the company raising sixty million dollars and asks pointedly how that much capital was deployed. Raj admits that the industry became oversaturated in 2015 before they self-corrected to reach breakeven.8:06–13:21 · Guest teaching 5/10 Sponsor Break: Acuity Scheduling Promotion After an ad read, Nathan explores the economics of cutting lower tier customers and pushes Raj for forward revenue targets. Raj holds his ground with a noncommittal response when pressed on whether the company will hit fifty million in ARR.13:21–15:47 · Guest teaching 4/10 Team Structure, Support Hierarchy, and SaaS Unit Economics Nathan probes support team headcounts, lifetime customer value, and payback periods. Raj outlines how their mobile engagement consultants function and explains their net expansion trajectory.15:48–17:14 · Guest teaching 2/10 The Famous Five Rapid-Fire with Raj Aggarwal Nathan runs through the standard rapid-fire questions and concludes with a concise recap synthesizing the company's financial and operational metrics.0:49–3:05 · Guest disagreement 3/10 Introducing Raj Aggarwal of Localytics Nathan drills into the business model and revenue structure, prompting Raj to dismiss app downloads as a vanity metric in favor of active user tiers. Nathan immediately clarifies whether pricing figures represent monthly spend or annual contract value.3:06–5:11 · Guest disagreement 2/10 Bootstrapping Through the 2008 Financial Crisis Raj recounts launching right before Lehman Brothers collapsed and bootstrapping for two years. Nathan tests his understanding by walking through a concrete user tracking scenario to verify how data is utilized without ad network selling.5:11–8:04 · Guest disagreement 3/10 Venture Capital, Market Saturation, and Reaching Breakeven Nathan expresses mock disappointment over the company raising sixty million dollars and asks pointedly how that much capital was deployed. Raj admits that the industry became oversaturated in 2015 before they self-corrected to reach breakeven.8:06–13:21 · Guest disagreement 4/10 Sponsor Break: Acuity Scheduling Promotion After an ad read, Nathan explores the economics of cutting lower tier customers and pushes Raj for forward revenue targets. Raj holds his ground with a noncommittal response when pressed on whether the company will hit fifty million in ARR.13:21–15:47 · Guest disagreement 2/10 Team Structure, Support Hierarchy, and SaaS Unit Economics Nathan probes support team headcounts, lifetime customer value, and payback periods. Raj outlines how their mobile engagement consultants function and explains their net expansion trajectory.15:48–17:14 · Guest disagreement 2/10 The Famous Five Rapid-Fire with Raj Aggarwal Nathan runs through the standard rapid-fire questions and concludes with a concise recap synthesizing the company's financial and operational metrics.0:49–3:05 · Nathan pushing back 4/10 Introducing Raj Aggarwal of Localytics Nathan drills into the business model and revenue structure, prompting Raj to dismiss app downloads as a vanity metric in favor of active user tiers. Nathan immediately clarifies whether pricing figures represent monthly spend or annual contract value.3:06–5:11 · Nathan pushing back 3/10 Bootstrapping Through the 2008 Financial Crisis Raj recounts launching right before Lehman Brothers collapsed and bootstrapping for two years. Nathan tests his understanding by walking through a concrete user tracking scenario to verify how data is utilized without ad network selling.5:11–8:04 · Nathan pushing back 5/10 Venture Capital, Market Saturation, and Reaching Breakeven Nathan expresses mock disappointment over the company raising sixty million dollars and asks pointedly how that much capital was deployed. Raj admits that the industry became oversaturated in 2015 before they self-corrected to reach breakeven.8:06–13:21 · Nathan pushing back 6/10 Sponsor Break: Acuity Scheduling Promotion After an ad read, Nathan explores the economics of cutting lower tier customers and pushes Raj for forward revenue targets. Raj holds his ground with a noncommittal response when pressed on whether the company will hit fifty million in ARR.13:21–15:47 · Nathan pushing back 3/10 Team Structure, Support Hierarchy, and SaaS Unit Economics Nathan probes support team headcounts, lifetime customer value, and payback periods. Raj outlines how their mobile engagement consultants function and explains their net expansion trajectory.15:48–17:14 · Nathan pushing back 2/10 The Famous Five Rapid-Fire with Raj Aggarwal Nathan runs through the standard rapid-fire questions and concludes with a concise recap synthesizing the company's financial and operational metrics.

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

0:00 · Nathan 50.3% · guest 49.7%0:00 · Nathan 50.3% · guest 49.7%3:00 · Nathan 26.4% · guest 73.6%3:00 · Nathan 26.4% · guest 73.6%6:00 · Nathan 40.7% · guest 59.3%6:00 · Nathan 40.7% · guest 59.3%9:00 · Nathan 37.2% · guest 62.8%9:00 · Nathan 37.2% · guest 62.8%12:00 · Nathan 35.2% · guest 64.8%12:00 · Nathan 35.2% · guest 64.8%15:00 · Nathan 49.1% · guest 50.9%15:00 · Nathan 49.1% · guest 50.9%
Sharpest disagreement ▶ 13:08 Refusing to project fifty million ARR

Raj resists Nathan's persistent cajoling to forecast hitting fifty million in revenue, firmly repeating that it remains to be determined.

 Hardest push from Nathan ▶ 5:31 Challenging venture capital raise

Nathan directly challenges Raj on why a company would need sixty million dollars in venture equity instead of staying lean.

 Biggest teaching moment ▶ 2:05 Dismissing download metrics

Raj corrects Nathan's assumption about charging per download by explaining that download volume is a vanity metric compared to monthly active users.

 Nathan holds their own ▶ 11:48 Synthesizing churn economics

Nathan deduces and models the math behind shedding low-tier customers while keeping total revenue neutral through enterprise expansion.
the scores for every segment, with the reasoning behind each
ChapterTopicNathan as informed peerGuest teachingGuest disagreementNathan pushing backWhy
Introducing Raj Aggarwal of Localytics 6534 Nathan drills into the business model and revenue structure, prompting Raj to dismiss app downloads as a vanity metric in favor of active user tiers. Nathan immediately clarifies whether pricing figures represent monthly spend or annual contract value.
Bootstrapping Through the 2008 Financial Crisis 6323 Raj recounts launching right before Lehman Brothers collapsed and bootstrapping for two years. Nathan tests his understanding by walking through a concrete user tracking scenario to verify how data is utilized without ad network selling.
Venture Capital, Market Saturation, and Reaching Breakeven 6435 Nathan expresses mock disappointment over the company raising sixty million dollars and asks pointedly how that much capital was deployed. Raj admits that the industry became oversaturated in 2015 before they self-corrected to reach breakeven.
Sponsor Break: Acuity Scheduling Promotion 7546 After an ad read, Nathan explores the economics of cutting lower tier customers and pushes Raj for forward revenue targets. Raj holds his ground with a noncommittal response when pressed on whether the company will hit fifty million in ARR.
Team Structure, Support Hierarchy, and SaaS Unit Economics 7423 Nathan probes support team headcounts, lifetime customer value, and payback periods. Raj outlines how their mobile engagement consultants function and explains their net expansion trajectory.
The Famous Five Rapid-Fire with Raj Aggarwal 6222 Nathan runs through the standard rapid-fire questions and concludes with a concise recap synthesizing the company's financial and operational metrics.

Statements from this episode (9)

Assertion Not checkable as stated
Aggarwal: Localytics average ACV is $50,000 to $100,000
“The average tends to be in that 50,000 to a 100,000 dollar range.”
Raj Aggarwal Jun 13, 2018 ▶ 2:39
Assertion Not checkable as stated
Aggarwal: Localytics' largest customers pay over $1 million annually
“Our biggest customers are well over a million dollars, and that, that's increased a lot over the past five or six years as we started probably more SMB mid market and really moved up market over the past, particularly over the past three or four years.”
Raj Aggarwal Jun 13, 2018 ▶ 2:47
Assertion Not checkable as stated
Aggarwal says pre-2008 funded mobile startups mistakenly pivoted to ad networks
“The companies that did raise money before then, you know, all had to shoot off into the wrong direction, trying to grow fast, and most of them try to become ad networks.”
Raj Aggarwal Jun 13, 2018 ▶ 3:30
Insight
Aggarwal: 2015 VC funding oversaturated the mobile analytics market
“And particularly because of the amount of money that went into the space and the amount of money, therefore, that went into sales and marketing we oversaturated the space. And pretty much all of us had to do some level of sort of correction.”
Raj Aggarwal Jun 13, 2018 ▶ 6:32
Disclosure
Aggarwal: Localytics Eliminated Lower Tiers to Set $10K/Year Minimum Price
“Since then, we've actually, you know, sort of basically disbanded those lower tiers so that the starting point today is about 10,000 dollars a year.”
Raj Aggarwal Jun 13, 2018 ▶ 10:15
Disclosure
Aggarwal: Localytics Upgraded 25% of Discontinued-Tier Customers at 3-4x Price
“Yeah, now the real numbers are probably closer to 75% we lost, but the 25% that we upgraded, we were able to not just double their price, but, you know, more like triple or quadruple.”
Raj Aggarwal Jun 13, 2018 ▶ 12:14
Assertion Not checkable as stated
Aggarwal: 40% of Localytics Support Volume Came From Bottom 10% of Revenue
“It was 40% of our support volume was coming from the 10% of revenue, the bottom 10% of revenue.”
Raj Aggarwal Jun 13, 2018 ▶ 12:30
Assertion Not checkable as stated
Aggarwal details how Localytics expands enterprise accounts up to $500,000
“A typical customer, a large enterprise customer, we may start with them at 50,000. The next year we're at 200,000. Next year we're at 500,000. So, you know, we're well over a hundred percent on, on net retention.”
Raj Aggarwal Jun 13, 2018 ▶ 15:13
Disclosure
Aggarwal stepped down as Localytics CEO to hand off harder work
“Nowadays since I hired a CEO to take over the harder work, I get like seven.”
Raj Aggarwal Jun 13, 2018 ▶ 16:26
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