The Exchanges

Q Yep. And I remember asking some folks working there, kind of how you guys codified that. And I believe the recommendation from the book perspective on that one was Rockefeller habits by, uh, by Vern, right?

A Yeah. So two, two major books, Rockefeller habits, And then, uh, one by Jim Collins called Beyond Entrepreneurship. It's like, nobody knows about that book because he's out, you always hear about good to great and built to last and great by choice and all those things. But for entrepreneurs, Beyond Entrepreneurship is amazing. And it's the first book he wrote. Like I read it and I didn't even know it was, it was like the Jim Collins. It was like James C. Collins when I realized, oh, that's But chapter two in particular talks about how to set vision, and we've been big believers in that for a long time, and our, our Everest BHAG was, was those, those 10 years, and now we're on the Mars BHAG.

AI assessment note: “Yeah. So two, two major books, Rockefeller habits, And then, uh, one by Jim Collins”

Q Yep. And I remember asking some folks working there, kind of how you guys codified that. And I believe the recommendation from the book perspective on that one was Rockefeller habits by, uh, by Vern, right?

A Yeah. So two, two major books, Rockefeller habits, And then, uh, one by Jim Collins called Beyond Entrepreneurship. It's like, nobody knows about that book because he's out, you always hear about good to great and built to last and great by choice and all those things. But for entrepreneurs, Beyond Entrepreneurship is amazing. And it's the first book he wrote. Like I read it and I didn't even know it was, it was like the Jim Collins. It was like James C. Collins when I realized, oh, that's But chapter two in particular talks about how to set vision, and we've been big believers in that for a long time, and our, our Everest BHAG was, was those, those 10 years, and now we're on the Mars BHAG.

AI assessment note: “Yeah. So two, two major books, Rockefeller habits, And then, uh, one by Jim Collins”

Q a chance to give you a microphone for it. People told me, and I unfortunately can't say who, but Source is very close to the company, ex-employees have said, when they brought in the CRO, he, you know, Keith's driving the business, Clayt is doing what Clayt does best, which is the front face. Do the podcast interview, Do the stage, do the interview. I mean, is that the case?

A Um, first of all, it's Terry, who's our chief operating officer, not Keith, who's the chief revenue officer. So what they were probably telling the, the wires got crossed a little bit. What they're probably saying is Terry as the chief operating officer is really driving the day to day of the business. And that's absolutely true. A year ago, I took my role and I broke it into two pieces and I took the public, I took the more public facing part of CEO and gave him the more internal part of it as COO. But Terry and I are on the same page. We work together constantly. Terry is a fantastic leader who Knows how to drive business, small business software companies at scale. And, um, I love what we're doing. I couldn't be more excited about it. So, um, no, I'm, I'm very involved. I'm sitting here in my office at Infusionsoft talking to you. I'm, I, I'm also not totally involved in every day-to-day decision like I once was. You're not going to find CEOs of large companies that do that. They're, they're wise and they hire great people and they empower them to go Uh, do what you've, you've hired them to do, and then the CEO takes a step back and does the leadership work on the outside that needs to be done, and I'm having a blast doing that.

AI assessment note: “Terry as the chief operating officer is really driving the day to day. And that's absolutely true.”

Q Yep. Let's go back real quick and get more of the backstory here. So what year was the company founded in?

A Well, we actually started in 2002, but it wasn't until we were a custom software company. It wasn't until 2005 that we said, Hey, let's, let's really serve. Let's do sales and marketing software for small business. And then it wasn't until 2007. So five years after we started the business that we decided we really wanted to go for it, raise capital, um, take the company public, build a multi-billion dollar company. That was That was not how we started. We started like every small business. We had no intention to build something big. We just wanted to stick it to the man and call our own shots. And that's how we created it. But once we started Using our software to grow our business. And we started seeing what customers were doing when they put sales and marketing automation in place. And then the last piece was we saw how Salesforce was moving upstream very quickly. That opened up the opportunity for us. And we decided why not be the QuickBooks of sales and marketing software.

AI assessment note: “Well, we actually started in 2002”

Q So is that true? I mean, early investors or people that still are on the cap table, they're okay with you building this into a lifestyle business that's just profitable and slowly growing.

A The people who are looking at that saying, wait, something has to happen. Yeah, when you're burning cash, something has to happen. When you're not burning cash, you have, you get to control your own destiny. So now there's a point, obviously, where investors are like, okay, well, when are we going to get our money? So there's, there's obviously a point, but I'm very grateful that I don't have investors that are pushing on me saying, come on, you gotta, you gotta deliver right now. Now, do they want a return? Of course. But what they also want is their, their Their equity to grow in value. And so when the company is growing and not having to go take, raise more capital to dilute the equity of the, of the shareholders, that's a good thing.

AI assessment note: “I don't have investors that are pushing on me saying, come on”

Q And you've also, though, processed, I, I, what was the number? I mean, billions, right? In transaction volume, 3.4 billion payments processed. Is that another, I mean, is that a significant amount of revenue for you guys in terms of a cut you're taking there or no?

A Yeah. You know, it, it's actually becoming a more important part of our revenue. It was, uh, for a long time, we didn't really, we just made a few basis points and it wasn't really much of a focus for us. Uh, our customers were using order forms and shopping carts and our software to, to, uh, you know, complete sales. Uh, but we really were not getting hardly anything out of that. Then we created our own payment solution, uh, about probably a little less than two years ago. And now that's becoming a growing part of our revenue and it's good, good high margin, uh, Business, and it's super awesome for our customers because it's not just another, uh, merchant account provider. It's an ability to do all kinds of awesome automation when you, um, swipe a card, if you use our mobile reader, or if you just, you know, process an order using our, our order forms or shopping cart using our payment solution. So the key is really not that it's just another payment solution. It's that it, it triggers all kinds of beautiful automation using our, our Infusionsoft payments. And, and yes, it does Create a nice little revenue stream.

AI assessment note: “it's actually becoming a more important part of our revenue”

Q Walk me through actually the dark days. Were those in 2005 when the pivot was happening? I mean, what would you consider your dark days?

A Uh, well, two times where we had dark days. First time was during the first three years where every day was a fight for survival every day. And it was just, we, we know the small business market because we, that was us. We understand it. Um, we didn't raise capital until we'd been going for years and we had a vision that we were going to, you know, we were going to go create something really big for small businesses. So those first three years were brutally difficult. I used to tell people all the time, man, I wouldn't wish this on my worst enemy, but in, in, in turn, it actually became the greatest thing for the company because it helped us just create Commendous amount of empathy for small businesses and apply to the entrepreneur, what they're trying to do and gives us all of our passion to, um, change the world for small businesses with sales and marketing automation. So that was the first period of dark times. And then the second period was when we got our product market fit off and our churn went way up and we.

AI assessment note: “two times where we had dark days. First time was during the first three years”

Q So how did you manage that? I didn't know. I didn't know it was possible at scale.

A Yeah, we made it possible for everybody that was, that had options prior to raising venture capital. So for all those brave souls who took the leap before we had any financial backing whatsoever, At the Series D, we gave them an opportunity to sell some shares, and I'm really proud of the fact that we had employees that took trips of a lifetime and bought a car and did different things because capitalism is awesome. I'm a, I'm a, I'm a great believer in conscious capitalism. So, um, to answer your question, yeah, you've got to have, you've got to have liquidity. There's got to be a liquidity event. That's either an IPO or some other kind of, uh, transaction. It couldn't be, there's really, you know, a few ways you can do it. You can go public, You can raise more capital and in that create an opportunity, like I just mentioned. Um, another way you can do it is if the company sells, that's not our ambition. That's not our intent. It's obviously the reason I'm having this conversation with you, but those are the, those are the generally the three ways that you're going to be able to create a liquidity opportunity for employees. As a CEO, I think about that. You know, I think about how do we help create an opportunity for our shareholders, including our employees, because we have hundreds of employees who own shares and that are options at least. And I want them to have that opport…

AI assessment note: “At the Series D, we gave them an opportunity to sell some shares”

Q Um, how many of those are paying plate customers?

A A hundred, 175,000 paying users. So, um, yeah, we, we don't, we don't report the non-paying users. In fact, we just, we just started our free trial work. And so, There's a bunch of, now there's, now we have free trial customers, but that's not really what we really focus on the paying users. So We've made a lot of progress. I think the key thing is that we, when we kicked off the new Mars mission, as we call it, and by the way, you, you said it very nicely to simplify growth for millions of small businesses worldwide. You know, that's the Mars mission. That's what we kicked off at the beginning of two, the beginning of last year, 2017, and that takes us through the end of 2030. So that's our, you know, our BHAG that we're working on. Um, you know, we, we see the opportunity to serve millions of small businesses and help them by simplifying their growth, helping them to Conquer the chaos that they live in, create order, automate what they do, and get the benefits of efficiency in their growth. So that's what we're up to. Uh, I think what you've seen in the rebrand and that work is much more, uh, around really focusing on CRM and helping, helping our customers deliver great service to their customers and build great relationships with them.

AI assessment note: “175,000 paying users. So, um, yeah, we, we don't, we don't report the non-paying”

Q you'll get 10% off. Again, that's NathanLacca nathanlacka.com forward slash Monday. Has anything drastically changed economics wise on your end since the last time we spoke besides profitability? For example, you ran a big test cause you had bad churn numbers back several years ago, and now you're down, I think you said two to three percent last time. Is churn still the same? CAC ARPU still basically the same?

A Yeah, churn's still the same. I think the big change that's happened for us since we talked is that when we jumped, when we entered into the Mars mission, it was really about, I mean, now, now we're talking about serving millions of small businesses, not just The early adopters who are marketing savvy, marketing enthusiasts, that sort of thing. That, that's where our, when, when 10 years ago we took our software to the market, it was, it was marketers who grabbed ahold of it and said, oh wow, I can see the power of this automation, and I can really, I can really, um, get a great return on my investment with this. And so that's really where we've been focused, is these savvy, um, small business marketers. We've now expanded that to not only include those savvy small business marketers, but serving, um, Regular everyday small businesses that, that aren't great marketers, but want to deliver great service to their customers. Well, if you're going to expand in that way, Then you have to make some major changes to the way that you operate the business, and this is what we've been doing over the last 18 months or so since the beginning of 17 and the Mars mission. It's really been a change in our, in our product, a change in our partner strategy and the way we go about that, and then, um, a, a pretty significant change internally in the way we operate to deliver for many more customer…

AI assessment note: “Yeah, churn's still the same. I think the big change that's happened for us”

Q That's great. And then, uh, how many customers are you serving here? Q one, 2017.

A Yeah, we've got about 135,000 users now, um, and so we're, you know, continuing to grow and add, and, and we've got, you know, the great thing is this, we've, we've just completed our ten-year Everest mission, which went from beginning in 2007 to the end of 2016, and that was basically the period of time when we caught the vision and said we're gonna go build You know, a really big, meaningful company to change the world for small businesses and the way they grow, and that we just completed that 10 years at the end of 2016, and we just kicked off our Mars mission, which takes us through the end of 2030. And, you know, we, we've got some really cool, exciting things that are coming on the horizon and product. And we feel like we just, we just are scratching the surface on what's possible to help small businesses grow more efficiently through automation.

AI assessment note: “we've got about 135,000 users now”

Q Um, how many of those are paying plate customers?

A A hundred, 175,000 paying users. So, um, yeah, we, we don't, we don't report the non-paying users. In fact, we just, we just started our free trial work. And so, There's a bunch of, now there's, now we have free trial customers, but that's not really what we really focus on the paying users. So We've made a lot of progress. I think the key thing is that we, when we kicked off the new Mars mission, as we call it, and by the way, you, you said it very nicely to simplify growth for millions of small businesses worldwide. You know, that's the Mars mission. That's what we kicked off at the beginning of two, the beginning of last year, 2017, and that takes us through the end of 2030. So that's our, you know, our BHAG that we're working on. Um, you know, we, we see the opportunity to serve millions of small businesses and help them by simplifying their growth, helping them to Conquer the chaos that they live in, create order, automate what they do, and get the benefits of efficiency in their growth. So that's what we're up to. Uh, I think what you've seen in the rebrand and that work is much more, uh, around really focusing on CRM and helping, helping our customers deliver great service to their customers and build great relationships with them.

AI assessment note: “A hundred, 175,000 paying users.”

Q you'll get 10% off. Again, that's NathanLacca nathanlacka.com forward slash Monday. Has anything drastically changed economics wise on your end since the last time we spoke besides profitability? For example, you ran a big test cause you had bad churn numbers back several years ago, and now you're down, I think you said two to three percent last time. Is churn still the same? CAC ARPU still basically the same?

A Yeah, churn's still the same. I think the big change that's happened for us since we talked is that when we jumped, when we entered into the Mars mission, it was really about, I mean, now, now we're talking about serving millions of small businesses, not just The early adopters who are marketing savvy, marketing enthusiasts, that sort of thing. That, that's where our, when, when 10 years ago we took our software to the market, it was, it was marketers who grabbed ahold of it and said, oh wow, I can see the power of this automation, and I can really, I can really, um, get a great return on my investment with this. And so that's really where we've been focused, is these savvy, um, small business marketers. We've now expanded that to not only include those savvy small business marketers, but serving, um, Regular everyday small businesses that, that aren't great marketers, but want to deliver great service to their customers. Well, if you're going to expand in that way, Then you have to make some major changes to the way that you operate the business, and this is what we've been doing over the last 18 months or so since the beginning of 17 and the Mars mission. It's really been a change in our, in our product, a change in our partner strategy and the way we go about that, and then, um, a, a pretty significant change internally in the way we operate to deliver for many more customer…

AI assessment note: “Yeah, churn's still the same.”

Q Small businesses are notoriously tough. Small ARPUs, high churn. How do you crank through kind of Infusionsoft's darker days and get to where you are now?

A Yeah, great question. Well, huge part of it is making sure that you've got the right target customer. When you serve small businesses, you know, there, there are twenty seven million in the U.S. on record. There are probably at least that many that aren't on record in the U.S., and then the numbers globally are, you know, even bigger than that. So a massive, massive market. You got to serve the right kind of small business customer, and I think that's probably been the biggest thing for us over the years, and we haven't always got it right. I mean, we got our ups and downs, and Challenges over the last 1213 years, particularly about six, seven years ago when we didn't get it quite right. And it just about killed us. So you got to get it right. You got to get the product market fit. You know, that's always critical. I think everybody, everybody has a SaaS product knows that it's just really, really tricky to get, to get that product market fit right in the small business market.

AI assessment note: “huge part of it is making sure that you've got the right target customer”

Q And can you give us an AR update last time you were, you said you were on a hundred. Have you passed twelve million a month yet?

A Yeah. So big, big thing that happened is we, uh, our, our revenue now is almost entirely subscription revenue. So, uh, we, I think when we talked at the beginning of last year, we were probably, you know, 90 10 down from about 80 20, meaning at one point we were about 80% subscription revenue, 20% service revenue. Early last year, we were probably, I think, I can't remember when we talked, it was about a year ago, but we were probably at about ninety-ten at that point. We're now at like 97% of revenue being subscription revenue. So we've kind of, um, pushed off, traded out some, some service revenue, which has caused the overall revenue growth rate not to be as high. But, but yeah, we're over the hundred million, uh, revenue rate at this point.

AI assessment note: “we're over the hundred million, uh, revenue rate at this point.”

Q And can you give us an AR update last time you were, you said you were on a hundred. Have you passed twelve million a month yet?

A Yeah. So big, big thing that happened is we, uh, our, our revenue now is almost entirely subscription revenue. So, uh, we, I think when we talked at the beginning of last year, we were probably, you know, 90 10 down from about 80 20, meaning at one point we were about 80% subscription revenue, 20% service revenue. Early last year, we were probably, I think, I can't remember when we talked, it was about a year ago, but we were probably at about ninety-ten at that point. We're now at like 97% of revenue being subscription revenue. So we've kind of, um, pushed off, traded out some, some service revenue, which has caused the overall revenue growth rate not to be as high. But, but yeah, we're over the hundred million, uh, revenue rate at this point.

AI assessment note: “we're over the hundred million, uh, revenue rate at this point.”

Q that infusion soft. And one of, one of the, the way you responded to that was Nathan, we raised this capital, you know, now you can kind of go public without going public. Cause there's so much private money out there. Um, is that still kind of the forecast you don't need private money anymore? And you're not thinking about an IPO because you have all the liquidity you need.

A Well, you know, there's always times where you want more liquidity for different things that you're doing. The, the key thing is, is a software company grows. Again, this is about state. This is about the stage of a software company. And that's why I prefaced everything I'm saying with, you gotta understand the stage that we're in. Um, a couple of years ago, we made a conscious decision. It was time for us. And so we did that. And that's over the last two years, we've made that, we've made that transition. And I, I'm going to tell you, Nathan, You will talk to very few software company CEOs who have made this transition. It is a freaking hard thing to do.

AI assessment note: “there's always times where you want more liquidity for different things that you're doing.”