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Mar 11, 2018 · 23m · top-founders

960 How SmartBear Passed $90m in ARR Helping 10,000 Customers Test Software

Justin Teague · 12m spoken Nathan Latka · 8m 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 interview on 'The Top Entrepreneurs,' SmartBear CEO Justin Teague breaks down how the company scaled to nearly $100 million in ARR across 10,000 customers through low-friction inbound sales, strategic M&A, and private equity backing.

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 40.4% of the talking time here. How this is scored →

Nathan as informed peer 4.7 Guest teaching 2.3 Guest disagreement 1.6 Nathan pushing back 3.9
05100:0010:0020:000:49–4:18 · Nathan as informed peer 6/10 Introducing Justin Teague, CEO of SmartBear Nathan digs into SmartBear's product positioning within DevOps continuous deployment and challenges Justin to reconcile pay-as-you-go pricing with a SaaS subscription model.4:19–6:54 · Nathan as informed peer 4/10 Company Origin and Executive Leadership Evolution Nathan inquires about the company's early roots in 2003, Justin's COO to CEO progression, and whether his arrival was tied to PE requirements.6:54–11:28 · Nathan as informed peer 7/10 Bootstrapped M&A and Global Innovation Centers Nathan immediately performs real-time revenue math on 10,000 customers multiplied by a $2,500 transaction size, identifying a $75M discrepancy that Justin clarifies as initial land contract value versus expansion base.11:31–16:56 · Nathan as informed peer 7/10 Sponsor Break: ProsperWorks CRM Nathan interrogates net retention, CAC payback dynamics, and immediately catches and corrects Justin when he mistakenly labels 80% gross retention as gross churn.16:56–19:04 · Nathan as informed peer 6/10 Private Equity Partnership Versus Going Public When Justin provides a diplomatic answer about building a great company rather than focusing on an exit, Nathan rejects the deflection and reframes the question directly around cost of capital and PE versus IPO path.19:04–22:51 · Nathan as informed peer 3/10 Global Team Footprint and Inbound Marketing Engines Justin details their distributed innovation offices and inbound demand generation spend before walking through the standard Famous Five questions.22:51–23:41 · Nathan as informed peer 0/10 Episode Conclusion and Executive Recap Host wraps up the interview with a concise summary monologue recapping the metrics, growth rate, and business model.0:49–4:18 · Guest teaching 3/10 Introducing Justin Teague, CEO of SmartBear Nathan digs into SmartBear's product positioning within DevOps continuous deployment and challenges Justin to reconcile pay-as-you-go pricing with a SaaS subscription model.4:19–6:54 · Guest teaching 2/10 Company Origin and Executive Leadership Evolution Nathan inquires about the company's early roots in 2003, Justin's COO to CEO progression, and whether his arrival was tied to PE requirements.6:54–11:28 · Guest teaching 5/10 Bootstrapped M&A and Global Innovation Centers Nathan immediately performs real-time revenue math on 10,000 customers multiplied by a $2,500 transaction size, identifying a $75M discrepancy that Justin clarifies as initial land contract value versus expansion base.11:31–16:56 · Guest teaching 3/10 Sponsor Break: ProsperWorks CRM Nathan interrogates net retention, CAC payback dynamics, and immediately catches and corrects Justin when he mistakenly labels 80% gross retention as gross churn.16:56–19:04 · Guest teaching 2/10 Private Equity Partnership Versus Going Public When Justin provides a diplomatic answer about building a great company rather than focusing on an exit, Nathan rejects the deflection and reframes the question directly around cost of capital and PE versus IPO path.19:04–22:51 · Guest teaching 1/10 Global Team Footprint and Inbound Marketing Engines Justin details their distributed innovation offices and inbound demand generation spend before walking through the standard Famous Five questions.22:51–23:41 · Guest teaching 0/10 Episode Conclusion and Executive Recap Host wraps up the interview with a concise summary monologue recapping the metrics, growth rate, and business model.0:49–4:18 · Guest disagreement 2/10 Introducing Justin Teague, CEO of SmartBear Nathan digs into SmartBear's product positioning within DevOps continuous deployment and challenges Justin to reconcile pay-as-you-go pricing with a SaaS subscription model.4:19–6:54 · Guest disagreement 1/10 Company Origin and Executive Leadership Evolution Nathan inquires about the company's early roots in 2003, Justin's COO to CEO progression, and whether his arrival was tied to PE requirements.6:54–11:28 · Guest disagreement 2/10 Bootstrapped M&A and Global Innovation Centers Nathan immediately performs real-time revenue math on 10,000 customers multiplied by a $2,500 transaction size, identifying a $75M discrepancy that Justin clarifies as initial land contract value versus expansion base.11:31–16:56 · Guest disagreement 2/10 Sponsor Break: ProsperWorks CRM Nathan interrogates net retention, CAC payback dynamics, and immediately catches and corrects Justin when he mistakenly labels 80% gross retention as gross churn.16:56–19:04 · Guest disagreement 3/10 Private Equity Partnership Versus Going Public When Justin provides a diplomatic answer about building a great company rather than focusing on an exit, Nathan rejects the deflection and reframes the question directly around cost of capital and PE versus IPO path.19:04–22:51 · Guest disagreement 1/10 Global Team Footprint and Inbound Marketing Engines Justin details their distributed innovation offices and inbound demand generation spend before walking through the standard Famous Five questions.22:51–23:41 · Guest disagreement 0/10 Episode Conclusion and Executive Recap Host wraps up the interview with a concise summary monologue recapping the metrics, growth rate, and business model.0:49–4:18 · Nathan pushing back 5/10 Introducing Justin Teague, CEO of SmartBear Nathan digs into SmartBear's product positioning within DevOps continuous deployment and challenges Justin to reconcile pay-as-you-go pricing with a SaaS subscription model.4:19–6:54 · Nathan pushing back 3/10 Company Origin and Executive Leadership Evolution Nathan inquires about the company's early roots in 2003, Justin's COO to CEO progression, and whether his arrival was tied to PE requirements.6:54–11:28 · Nathan pushing back 6/10 Bootstrapped M&A and Global Innovation Centers Nathan immediately performs real-time revenue math on 10,000 customers multiplied by a $2,500 transaction size, identifying a $75M discrepancy that Justin clarifies as initial land contract value versus expansion base.11:31–16:56 · Nathan pushing back 5/10 Sponsor Break: ProsperWorks CRM Nathan interrogates net retention, CAC payback dynamics, and immediately catches and corrects Justin when he mistakenly labels 80% gross retention as gross churn.16:56–19:04 · Nathan pushing back 6/10 Private Equity Partnership Versus Going Public When Justin provides a diplomatic answer about building a great company rather than focusing on an exit, Nathan rejects the deflection and reframes the question directly around cost of capital and PE versus IPO path.19:04–22:51 · Nathan pushing back 2/10 Global Team Footprint and Inbound Marketing Engines Justin details their distributed innovation offices and inbound demand generation spend before walking through the standard Famous Five questions.22:51–23:41 · Nathan pushing back 0/10 Episode Conclusion and Executive Recap Host wraps up the interview with a concise summary monologue recapping the metrics, growth rate, and business model.

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

0:00 · Nathan 47.7% · guest 52.3%0:00 · Nathan 47.7% · guest 52.3%3:00 · Nathan 22.4% · guest 77.6%3:00 · Nathan 22.4% · guest 77.6%6:00 · Nathan 31% · guest 69%6:00 · Nathan 31% · guest 69%9:00 · Nathan 49.7% · guest 50.3%9:00 · Nathan 49.7% · guest 50.3%12:00 · Nathan 61.1% · guest 38.9%12:00 · Nathan 61.1% · guest 38.9%15:00 · Nathan 31.3% · guest 68.7%15:00 · Nathan 31.3% · guest 68.7%18:00 · Nathan 34.8% · guest 65.2%18:00 · Nathan 34.8% · guest 65.2%21:00 · Nathan 46% · guest 54%21:00 · Nathan 46% · guest 54%
Sharpest disagreement ▶ 18:05 Guest pushes back on outcome architecture

Justin defends his stance against orchestrating specific exit outcomes and explains why private equity scale makes more practical sense than rushing to go public.

 Hardest push from Nathan ▶ 8:52 Host challenges revenue math discrepancy

Nathan halts the flow of the conversation to point out that 10k customers at $2,500 only equals $25M, demanding to know where the other $75M in revenue originates.

 Biggest teaching moment ▶ 9:03 Guest educates on land-and-expand revenue realization

Justin explains that $2,500 represents initial new customer acquisition ACV, demonstrating how developer expansion drives average realized revenue closer to $10,000 per account.

 Nathan holds their own ▶ 14:09 Host catches churn slip and computes payback window

Nathan instantly catches Justin citing '80% churn' instead of retention, corrects him on the spot, and calculates the exact 12-15 month CAC payback period implied by his metrics.
the scores for every segment, with the reasoning behind each
ChapterTopicNathan as informed peerGuest teachingGuest disagreementNathan pushing backWhy
Introducing Justin Teague, CEO of SmartBear 6325 Nathan digs into SmartBear's product positioning within DevOps continuous deployment and challenges Justin to reconcile pay-as-you-go pricing with a SaaS subscription model.
Company Origin and Executive Leadership Evolution 4213 Nathan inquires about the company's early roots in 2003, Justin's COO to CEO progression, and whether his arrival was tied to PE requirements.
Bootstrapped M&A and Global Innovation Centers 7526 Nathan immediately performs real-time revenue math on 10,000 customers multiplied by a $2,500 transaction size, identifying a $75M discrepancy that Justin clarifies as initial land contract value versus expansion base.
Sponsor Break: ProsperWorks CRM 7325 Nathan interrogates net retention, CAC payback dynamics, and immediately catches and corrects Justin when he mistakenly labels 80% gross retention as gross churn.
Private Equity Partnership Versus Going Public 6236 When Justin provides a diplomatic answer about building a great company rather than focusing on an exit, Nathan rejects the deflection and reframes the question directly around cost of capital and PE versus IPO path.
Global Team Footprint and Inbound Marketing Engines 3112 Justin details their distributed innovation offices and inbound demand generation spend before walking through the standard Famous Five questions.
Episode Conclusion and Executive Recap 0000 Host wraps up the interview with a concise summary monologue recapping the metrics, growth rate, and business model.

Statements from this episode (14)

Insight
Software Quality Testing Has Shifted Left to Developers
“The quality markets move from sort of traditional QA groups. Into now what you're talking about a DevOps continuous deployment environment where testing is shifting left into the developer world.”
Justin Teague Mar 11, 2018 ▶ 2:10
Assertion Not checkable as stated
SmartBear's Average Annual Contract Value is $2,500
“Our average transaction is about 2500 dollars. ... Annual. So that's an annual.”
Justin Teague Mar 11, 2018 ▶ 4:06
Assertion Not checkable as stated
SmartBear Acquires 7,000 Customers Annually
“We'll acquire about 7000 customers a year that way.”
Justin Teague Mar 11, 2018 ▶ 4:15
Assertion Not checkable as stated
SmartBear Drives 20 Million Downloads and 400,000 Inbound Leads Annually
“You know, we have twenty million downloads a year. For example, we process about 400,000 leads, people that raise their hand and say, Hey, I'm trialing. I'd like to buy.”
Justin Teague Mar 11, 2018 ▶ 5:46
Assertion Supported
SmartBear Was Acquired by Private Equity Firm Francisco Partners
“Yeah, so we just sold to Francisco Partners in, in the spring.”
Justin Teague Mar 11, 2018 ▶ 6:35
Assertion Not checkable as stated
SmartBear Scaled an Acquired Startup From $1M to $45M in Revenue
“So we acquired smaller companies along the way founder led one of them, for example, was as small as a million dollars. It's now about forty five million dollars of our revenue.”
Justin Teague Mar 11, 2018 ▶ 6:59
Assertion Contradicted
SmartBear Raised Only $1.5M Before Its Private Equity Buyout
“I think it was in a million and a half range.”
Justin Teague Mar 11, 2018 ▶ 7:54
Assertion Not checkable as stated
SmartBear Approaches $100 Million ARR With 10,000 Customers
“So we are going to be at 10,000 customers. Many, many more users, of course, hundreds of thousands of users and we're approaching about a hundred million dollars.”
Justin Teague Mar 11, 2018 ▶ 8:33
Disclosure
SmartBear Maintains Revenue Growth in the Mid-20% Range
“Yes, we were had been growing in the mid-teens. Before that, we were growing, you know, through, sorry, that's organic. Inorganically, we had been able to Grow faster than that. We're now in the mid twenties.”
Justin Teague Mar 11, 2018 ▶ 10:25
Assertion Not checkable as stated
SmartBear's Net Revenue Retention Ranges From 115% to 120%
“Our net retentions in the one 15 to one 20% range.”
Justin Teague Mar 11, 2018 ▶ 13:26
Assertion Not checkable as stated
Some SmartBear Customers Scale From $2,000 to $1 Million in Spend
“Some of our customers are million dollar up to million dollar customers and they started off with 2000 dollar spend.”
Justin Teague Mar 11, 2018 ▶ 13:30
Assertion Not checkable as stated
SmartBear's Gross Revenue Retention is in the High 80s
“We're in the right around high eighties. We're trying to get to 90.”
Justin Teague Mar 11, 2018 ▶ 14:12
Disclosure
SmartBear Targets CAC Below $1.25 Per $1 of New ARR
“So we think about acquisition in terms of What does it take us to acquire a dollar of new revenue or new ARR rather than a new customer? And our metric is we try to stay below a dollar 25.”
Justin Teague Mar 11, 2018 ▶ 15:03
Disclosure
SmartBear Spends $750,000 Quarterly on Paid Customer Acquisition
“We probably spend about a 750,000 dollars a quarter.”
Justin Teague Mar 11, 2018 ▶ 19:56
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