The Exchanges

Q Interesting. Okay. Give me more of the backstory here. So when did you launch the company?

A Yeah, so, you know, started working on the company in, uh, 2009, uh, and it was a small team of us, myself, my co-founder, Ashu, who had built a lot of the search engine at Google, and we pulled a team of people mostly out of Google. It was a group of five or six of us, and the original pitch was, we can build a platform that you can plug any website or app into, and it's gonna Immediately generate highly relevant experiences for consumers. Wouldn't that improve the consumer experience and drive more revenue for whoever's publishing the website or app? And if we could build that platform, it would serve everybody. So we spent about a year, year and a half kind of an R and D built a machine learning system around that basic problem, prove that it could work by kind of 2010 started to approach a set of clients and really only launched the company publicly in 2012. Uh, or maybe it was end of 2011, and that was when we sort of began to take it to market.

AI assessment note: “really only launched the company publicly in 2012. Uh, or maybe it was end”

Q And what pricing levers do you use to drive expansion ARPU? Is it number of site locations like in Neiman Marcus or what are those utility metrics?

A Yeah, so there's a bunch of ways by which we grow. We grow because people, when they launch digital properties, websites and apps, they'll often do it in many countries. So they'll have different properties. They will own many brands. You mentioned Neiman Marcus. Neiman Marcus owns a selection of brands beyond Neiman. William Sonoma, another one of our clients, also owns Pottery Barn, Pottery Barn Kids. So they'll have multiple brands. And they'll pay us more, you know, when that's the case. Uh, and then, and then we'll charge them more as their page views grow. And as their traffic grows, you know, then they'll use more of the platform. And finally, they buy more products from us. That's when they buy more products. And that's an expansion in, in, uh, in the amount that we charge.

AI assessment note: “we'll charge them more as their page views grow. And as their traffic grows”

Q Okay. So obviously significant capital raising after that, um, was, you know, I want people to make sure they pull the right lessons from this interview. I mean, one of the reasons you were able to get five million early on obviously is because of your guys' backgrounds, right? It's not as simple as just saying, look, here it is. It's going to be a success. Boom. Right. Yep.

A So it was, you know, I, I'm a third time entrepreneur. I've done this before. Ashu was a well-regarded machine learning kind of guru out there. So it was our backgrounds. And I think we had a crisp problem statement that was pretty different. Nowadays, the use of AI and machine learning is popular. In 2010, 2009, we were very early in saying we're going to have every website and app in the world powered by that. And so it was a distinct message and a distinct proposition of, hey, we'll do something pretty different with this class of technology. Solve it in a different way with a different kind of team and with a fairly clear business idea that we were going to go after enterprises in a SaaS based pricing model. And so we were fairly clear what we wanted to kind of go about doing. And what's interesting so many years later is the mission of the company hasn't changed.

AI assessment note: “So it was our backgrounds. And I think we had a crisp problem statement”

Q first company where I turned down an acquisition offer that would have changed my life, but I'm like, you know what? I read that Mark turned down Yahoo for a billion and you know what? My dick's big too. So I'm going to say no. Right. And it was a huge mistake. So how do you manage when you take your wins and move on to the next big thing?

A Yeah, I think, I think, um, you know, there's no right answer to that question. One, it's a very personal question. Each individual, I think is in a very different spot in their life. And so one, I would, I think you got to ask yourself, you got to not be doing it for ego. You got to be doing it because it's what you really want in your life. No one will reward you for making a bad decision later, but just because you made a decision to satisfy your ego at the time. So know yourself would be the first thing I would say. The second thing is know your opportunity and be real about it. You know, I think every time you turn down one of these things, the, the moment that I've talked to every entrepreneur about is you have that. Oh shit moment after you say no, or something that happens in your life, man, I should have taken that deal. Right. And you got to know that's coming.

AI assessment note: “you got to not be doing it for ego. You got to be doing it”

Q Yeah. Um, how does that help influence what you're willing to spend on CAC?

A Yeah, I mean, I, I, I believe that CAC is about a few things. First, you can look at the lifetime value economics early in a company's life cycle. The reality is you actually don't know the lifetime value of your customers. They just haven't been with you long enough, so you can divide by churn and the Excel works, but you don't really know how long they're with you, and I think we're still early. So yes, I look at lifetime value as a ratio of CAC, but I also just simply look at risk. So if you, if you, where we are today, we, we tend to spend sales and marketing at a ratio of about a one CAC ratio. Right. Uh, a one year payback period basically. And that to me seems healthy for where we're at.

AI assessment note: “we tend to spend sales and marketing at a ratio of about a one CAC ratio.”

Q Yep. The ones that do churn, why do they churn?

A Yeah, I think it happens for a variety of reasons. You might have mergers and acquisitions and companies may, may get folded in. You might, some of them might go out of business, but the smaller businesses will go out of business. Some of them will use the platform and then decide, You know, they want to, they have a change of strategy. They want to build some of the software. Others might, a selection of them will go to competitors. At the scale that we're operating at now, where we're driving, you know, the number of accounts and the number of deals that we're doing, it could be for a variety of reasons. But what's interesting in our space is I think we are very much a challenger in an eight billion dollar market that is dominated by people like Adobe that have a 1.2 billion dollar software revenue stream in our market. So from, from the, from the market's perspective, We're sort of the fast growth challenger with a net new platform that's open and has, you know, machine learning and intelligence built in. It's much more cloud. It's much more subscription. All the sort of new software models that we in Silicon Valley take for granted is still not the predominant model in the industry.

AI assessment note: “mergers and acquisitions and companies may, may get folded in. You might, some of them might go out of business”