Mar 22, 2018 · 22m · top-founders
971 How Namely Passed 1000 Customers and $40m in ARR
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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 Namely founder and CEO Matt Straz about scaling the HR and payroll SaaS platform past 1,000 customers, $40 million in ARR, and $157 million in venture funding. Straz breaks down unit economics, pricing strategies, the power of sticking strictly to the mid-market, and the journey toward an eventual IPO.
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 33.6% of the talking time here. How this is scored →
Nathan as informed peer 5.6 Guest teaching 3.4 Guest disagreement 1.1 Nathan pushing back 3.3
speaking balance: gold is Nathan, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 10:31 Challenging host's assumption about IPO ambitions
Straz immediately disputes Latka's claim that a creative founder wouldn't care about an IPO, defending why enterprise trust demands public standing.
Hardest push from Nathan ▶ 9:08 Demanding exact revenue and customer figuresLatka refuses vague statements about early and current scale, pressing Straz to provide hard customer and ARR figures.
Biggest teaching moment ▶ 16:04 Correcting SaaS margin expectations for payroll platformsStraz refutes Latka's presumption of 85-90% gross margins by explaining the inescapable high-touch customer support required in mid-market payroll.
Nathan holds their own ▶ 17:30 Calculating implied CAC range in real timeLatka synthesizes Straz's stated 1-to-2 year payback period with his $40k ACV to immediately deduce an implied $40k-$80k customer acquisition cost.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Nathan as informed peer | Guest teaching | Guest disagreement | Nathan pushing back | Why |
|---|---|---|---|---|---|---|
| Introducing Matt Straz and Namely's Team Growth | 5 | 2 | 0 | 2 | Latka guides the conversation through Straz's background and early angel round mechanics, establishing the context of Namely's founding and total fundraising. | |
| Market Opportunity in Core HR and Payroll | 6 | 3 | 1 | 3 | Latka draws parallels to competitors and SaaS pricing expansion strategies, while Straz details their 200-employee mid-market positioning and $40k ACV. | |
| Sticking to the Mid-Market Strategy | 7 | 2 | 1 | 5 | Latka presses Straz on board pressure to move upmarket and extracts the 1,000 customer count, immediately doing the math on air to estimate $40M+ ARR. | |
| The Value of Going Public and Enterprise Trust | 5 | 5 | 2 | 3 | Latka assumes Straz wouldn't care about an IPO due to ego, but Straz counters by explaining that enterprise trust against 50-year legacy giants requires public transparency. | |
| Churn Metrics, Expansion, and Net Retention | 6 | 4 | 1 | 4 | Latka drills into retention and churn specifics, prompting Straz to explain how customer growth and organic seat additions drive net negative churn rather than cross-sell upsells. | |
| Gross Margins, Support Dynamics, and Payback Timeline | 6 | 7 | 2 | 4 | Straz corrects Latka's assumption of typical 85-90% SaaS gross margins by highlighting the human support component in payroll and HR, citing ADP's ~40% margins. | |
| The Famous Five Rapid-Fire Questions | 4 | 1 | 1 | 2 | Latka runs through the Famous Five questions and banter, closing out with an analytical summary of Namely's operational metrics. |
Statements from this episode (24)
Namely employs over 400 people nationally
“The, we, the team nationally is over 400 employees, and I think we got a few dozen employees in Austin, and that office is one of our fastest growing.”
Namely targets midsize companies with dozens to thousands of employees
“We're a SaaS company, and we provide HR payroll and benefits software and services to midsize companies. So we focus on companies with anywhere from a couple dozen to a couple thousand employees.”
Namely raised a $1M angel round at a $4M pre-money valuation
“I priced it myself. I priced it at a four million dollar pre.”
Namely has raised over $157M in total capital as of 2018
“We've raised over a hundred and fifty seven million dollars today.”
Core HR and payroll breed multi-billion dollar companies
“Multi-billion dollar companies tend to be created in the core payroll and benefit space because those are the number one and two things that That businesses spend money on.”
Founders shouldn't set pricing because they are too hypercritical of their products
“I think the number one advice I can give is don't let your founder set your pricing. We tend to be terrible at pricing because we always are hypercritical of our own product and don't aren't always aware of how bad the competitors products can be, or at least …”
Namely's average ACV is around $40,000 per year
“Our average ACV at this point is around four 40,000 dollars a year, which is a good place to be. It allows salespeople to hit their OTEs.”
Namely's average customer size is around 200 employees
“Our average customer size is around 200 employees.”
HR software companies must choose their target market size early
“I think you have to do that in this space. The product needs are very different for a small, medium and large business. So you've got to decide really early on what swim lane you're going to get going to be in.”
The mid-market is the last white space in HR and payroll software
“Well, I think it's probably the last remaining white space left in the HR payroll benefit space.”
Namely prioritizes expanding within the mid-market over moving upmarket
“Every year at the end of every year, I asked myself and our team, do we want to go up market or do we want to sell more things to the same, same customer? And we always decided on the latter because we're just so passionate about midsize companies.”
Namely processed $7 billion in payroll as of 2018
“And I think we're today processing seven billion dollars of payroll when people hand you one of their, yes.”
Going public is a realistic midterm business goal for Namely
“And it's one of the reasons why our midterm business goal a realistic midterm business goal would be eventually to be a public company.”
Mid-market HR software industry ARR churn tends to be around 20%
“Industry-wide you know, for our segment, churn tends to be around 20% a year. Logo? ARR.”
Namely maintains negative net churn driven by rapid customer expansion
“And in fact, we're, we have negative net churn. So our expansion is growing faster than people coming off the system.”
Seat additions drive Namely's expansion more than product upsells
“Seats. Actually we thought that upsells would be a big driver of that, and there's some element to that, but it's actually people just adding more seats to the product.”
Customer churn is the ultimate win-loss record for a software business
“Churn really tells you where you're at, ultimately tells you where you're at. So you can do all the customer data you want, right? And you can find out sentiment and all that. But ultimately at the end of the day, churn tells you whether, whether, how you're d…”
Incumbent competitor ADP has gross margins in the 40% range
“No no, because actually if you look at companies in our sector ADP is in, has gross margins in the forties.”
HR and payroll SaaS requires heavy high-touch service support
“Because there's a service component to HR payroll benefits business. The hard part of the business is not necessarily doing any one of these things. It's doing all three of these things well together in a coordinated way with a level of touch that may not be l…”