The Exchanges

Q Okay. And what different pricing, uh, kind of metrics are you using to drive up ARPU? Is it number of seats? Is it number of pages on the websites? Is it number of widgets included? What, what leverage points are you using?

A So for us, it's entirely functionality, right? Um, and you know, you get unlimited page views, you get effectively unlimited storage. Um, so there's no limits on those kind of things, but it's really just down to the functionality. So are you using a more basic, um, uh, website that's just kind of telling your story? That's probably in the four to eight dollar a month range. Are you starting to do some e-commerce and starting to sell online? Um, that's in sort of that 16 to 25 dollar price point. Um, are you really getting advanced with the e-commerce? You want to include our email marketing products? Um, You know, our Facebook advertising products and really start to grow your business and get found. That's where you get in some of those slightly higher price points.

AI assessment note: “So for us, it's entirely functionality, right?”

Q you'll have your online course launched and making sales. That's nathanlaka.com forward slash Thinkific. Okay, so 2006 to today, you've got a lot of growth coming from freemium. Uh, you have a board who's patient, which is wonderful. You've got nice core analytics in terms of being able to predict things like growth and conversion rates. What have you scaled to today in terms of total customers using the platform?

A Yeah, so we're over fifty million people, um, that are using Weebly. Um, the, the vast majority just are entrepreneurs. They have an idea. They're trying to get this online. They're trying to get access, right, to the digital economy and, and the economy more broadly. And, um, and, you know, of those fifty million people, the coolest stat for me is about three hundred twenty-five million people every single month visit one of those websites or online stores, uh, that were created, um, by those entrepreneurs. I think that's really cool. Um, that's a global number, just the US component of that represents about half of the US population. I think that's our coolest metric because that's a reflection of the success of the people on our platform.

AI assessment note: “we're over fifty million people, um, that are using Weebly.”

Q take the war to two separate spaces? And what I mean by that is on your website, there's a clear delineation right when you start, are you building a website or an e-commerce platform? And on both of those sectors, you have massive competitors, be it Shopify on e-commerce or Squarespace, Wix, and the other guys on the, on the, you know, website side. Why fight two wars at once?

A Sure. I mean, the space is huge. You know, I, I, I, a lot of entrepreneurs like to, um, pride themselves on saying we have no competition. If you have no competition, that's a bad sign. Um, you know, that's usually means you're in a small market. So, um, the market's absolutely massive. I think, you know, we, um, we go where our customers are and what our customers have told us more and more is that they're looking to start selling online. I think maybe 10 years ago, it was really about, you know, expectations were just a little simpler. It's like, hey, I just want to get found. I want to get that website online. That's Kind of our bread and butter. That's where we started. And there's a whole host of people are just looking to do that. Um, we're finding increasingly that our customers are trying to actually say, look, getting found is great, but I need to start transacting online. And that's where the magic starts to happen. That's where you go on vacation. Your business is running itself, right? That's where you're making money while you sleep. Um, and so increasingly that's what our customers are looking to do. And we listen to our customers and we offer what they're looking for.

AI assessment note: “we go where our customers are and what our customers have told us”

Q so I imagine you are fighting, your board meetings might sound something like this. These guys are going, David, spend more money, acquire more customers, grow, drive growth, growth, growth, growth. And you're going, I don't want to drive growth at the sake of the bottom line. I want to be cashflow positive. How do you keep pushing off the, the board's drive and desire for growth with keeping cashflow?

A You would be actually surprised. Um, that's not how our board meetings go at all. Um, they, uh, I think, I think the key is having the right investors, and we've been super, super lucky to have investors who are the best of the best, right? So it starts off with Y Combinator. Um, you then have, uh, Ron Conway, Steve Anderson, Mike Maples, um, you know, Iden, you know, the sort of best known angels. Um, uh, then, then, then of course, uh, Sequoia, um, and then most recently also Tencent. So I think, um, Uh, you know, having just a fantastic set of investors around the table, um, means that they're also long-term focused, and, um, there's no pressure for driving towards an exit or driving towards an outcome, um, that, uh, that isn't in the long-term. You know, as far as how we think about growth, um, you know, I think, uh, there's, you'd be, you know, what I've witnessed is a lot of very suboptimal decision-making as far as spending goes. Um, very common to get ahead of your skis, um.

AI assessment note: “You would be actually surprised. Um, that's not how our board meetings go at all.”

Q Yep. That makes sense. Now walk me through some of the growth. You've driven incredible growth. So where are you? I'm sure a lot of it is Free cause you have a freemium model, but when you do spend money to drive new customer growth, where are you tend to, where do you tend to spend that money? How are you getting new customers?

A Yeah. So, so, so I'll start by saying that, um, that we've had, uh, substantially all of our growth has been via word of mouth. And I think at the end of the day, if you build a fantastic product, it's not that you build it and they will come, but the core of all success of, of any company does come down to the product and does come down to having a, just a fantastic experience with the product. Um, I think, ah, you know, for us, a lot of that is driven by the freemium model that drives, ah, basically word of Works. If there's a couple of things that has to work, it only works. Number one, if it is driving word of mouth for you, it only works. Number two, um, if your marginal cost per additional user is low enough to sort of support the freemium model.

AI assessment note: “substantially all of our growth has been via word of mouth”

Q Why not then go all in on e-commerce and ignore the regular hosting? E-commerce is nice, too, because you have a direct attribution model. They can see a return.

A Yeah. I mean, look, uh, you know, we're, we're continuing to push, like I said, exactly where, um, where, where our customers are looking for value. Um, I think it's, you know, we've delineated website and e-commerce, um, sort of on our homepage. It's not quite so black and white a delineation. I mean, you might, you know, even if you're going to sell a physical product, you might get started by setting up a website. Um, you know, even e-commerce functionality is on a website, right? So it's not quite so black and white. I think for a lot of our customers, Um, you know, it makes sense as they're getting started to understand, are you selling today or are you going to sell later? That's kind of really the delineation. Um, and you know, I think over time, a lot of people are going to be upgrading to transacting online. It's just sort of the logical next step.

AI assessment note: “even if you're going to sell a physical product, you might get started by setting up a website”

Q Churn is obviously critical in this kind of company. Constant contact, for whatever reason, when it was public, was valued at, like, way lower in terms of a PE multiple than other folks because their churn was just insane. What did, and their SMB space, similar ARPUs to you. What's your churn today, and how do you manage it?

A Yeah. So I think I like to look personally, I do not like looking at churn as is defined. I know churn is sort of both a concept and sort of a, a, a defined metric. Um, I prefer to look at renewal rates by cohort, um, because churn is sort of this, uh, this, this sort of composite measure that, that, that I'm not as much of a fan of. Um, so, uh, you know, so, so, so our renewal rates are one of the steadiest metrics in our business. And I think if you, um, Uh, you know, if you have, um, a product that doesn't have product market fit, you're going to see really low renewal rates. If you have a product that has really great product market fit, you're going to see really high renewal rates. And I think that, um, that, that, that is a key sign for business on whether, you know, the product market fit is healthy.

AI assessment note: “I do not like looking at churn as is defined. I prefer to look at renewal rates”

Q So when you look at on an eight dollar per month average plan, you say maybe up to 15. What are you spending on? I mean, what's your cat? What's your own cat on these guys?

A Yeah, I mean, so that's obviously something that we look at very carefully. I'll say that, you know, the specific numbers, you know, for our business obviously are proprietary, um, uh, being a private company, but the things that we do really look at, I think the, the freemium model is really interesting because not only do you have your traditional sort of cohort cash flows over time that you would see in a SaaS business, you also have Time from a signup cohort perspective, right? So that adds like a really interesting layer, but what it does is it adds a lot of sort of historical momentum in the business. So, you know, for us, it's quite predictable how many of, uh, you know, the, you know, the patterns are basically pretty consistent of how many people come to the door and how they'll convert over time.

AI assessment note: “the specific numbers, you know, for our business obviously are proprietary”