The Exchanges

Q buying and growing small B to B SaaS companies. That's www.thetopinbox.com. Totally free to try and use. www.thetopinbox.com. Economics around this space. So I, I want to ignore your enterprise sector. Oh, actually, are you comfortable splitting the, do you see an 80, the Pareto principle, 80% of your revenue coming from 20% of your kind of customer base, and that's really the four, the 800 or the fortune 1000?

A Uh, not, not particularly. We think about it like a flywheel model. Um, uh, Tomas from Redpoint wrote a great piece a little while ago on flywheel. Uh, for those of you, your listeners that know what is great, those of you that don't go check it out, it basically is that all of our leads are generated through our freemium signups, our pro signups, our self-serve signups. They come in through those channels. So we get, you know, 30,000 signups a day. And, uh, we look through those signups to see, you know, who we can help out, who, who may be signed up for a free product. They're kind of kicking the tires and learning about what we do and, and where should we be having conversations? And so we think about it as a continuum, not as a hard bucketed line around self-serve versus, uh, versus enterprise.

AI assessment note: “Uh, not, not particularly. We think about it like a flywheel model.”

Q obvious trend. I mean, I have a lot of these interviews I've done is similar story. The tipping point is always the agencies doing, you know, 1,000,002 1,000,005 million. How do you decide when to turn off the low margin, high touch agency work and go all in on the product? So tell me in 2008, give me a general size of the agency, 2,000,005 1,000,010 million. What was it?

A So, so we were, we were in the two million range. We had 30 employees. Uh, I started the year with, um, with three people working on Hootsuite, and they worked for a year. By the end, we had seven, actually, sorry, we were at 30 at a peak. We, we actually downsized a little bit. We were about 21 people at the time we did Hootsuite. We had a different product that kind of blew up and then, and then collapsed. And so therefore we were at 30 and then down to 21. Um, and, and so we had started with three. We ended the year with seven, seven people on a 21 person team working on a zero revenue product. So you know how that looks. It doesn't look very good. And so, you know, six months in, uh, we started looking for some financing to help, um, to help keep the lights on for this hungry baby. And we could see the, you know, the usage and the growth was fantastic when you were really onto something. And so we continued to, to, uh, invest into it, you know, bankrolling it off the credit cards. And, and you're right. Agency is an incredible place. I, when I talk to young entrepreneurs that are, you know, they, they feel like I want to do a business. I don't know what it is. Uh, you know, I, I often will tell them, you know, go do, go do services work for a while. Somebody is going to bring you a billion dollar problem. And, and when you, when you hear the problems that people bring you, …

AI assessment note: “So, so we were, we were in the two million range. We had 30 employees.”

Q So tell us about Hootsuite. What is it doing for people not familiar with it? Kind of what's your revenue model? How do you make money?

A So Hootsuite is a SaaS business. It's a subscription model. We have, um, over, um, over, um, they use us to connect with, uh, with their customers on social. So they use us for social marketing, social customer support, social selling. And, um, you know, we help, uh, small, medium businesses all the way through to big enterprises. You mentioned over 800 of Fortune 1000 use us. Uh, we recently won the Forrester wave that talks about, you know, enterprise use of social. And so it's really just helping brands to better connect with their customers, uh, through kind of engagement on social, through customer support, through listening to what's going on. ROI measurement, social advertising, everything to do with social, we help manage and make it easier for brands.

AI assessment note: “Hootsuite is a SaaS business. It's a subscription model.”

Q One, six, five pre, and what's to date?

A Yeah. Yeah, to date, um, I, you know, it's north of 200. You can go to our crunch base and track it all down if you're that curious, but, uh, you know, I would say that a big chunk of the, you know, we, we got to cashflow positive, uh, very quickly. Um, you know, it was important for me to start driving revenue out of the business. We want it to be a tool for, for businesses. It wasn't a consumer play. A lot of, you know, products we see out there are consumer plays, and they don't really have a path to monetization. They're just, their, their, their model is to get acquired. That wasn't us. Our model was to, to build a cash generating, revenue generating business. So, you know, we continued to, to move on. Um, a big chunk of the, um, fundraising that we did do, uh, was for secondary liquidity for early investors. And so we, we, uh, changed out investors, but you know, in terms of, uh, where the business has gone, we've, we've been able to, to build a great cashflow positive business.

AI assessment note: “to date, um, I, you know, it's north of 200.”

Q Uh, you know, Microsoft is moving into social. He obviously did a deal there with LinkedIn. If they came to you today and offered you, you know, a check for, you know, uh, I make this up three and a half billion dollars, do you sell?

A Well, you know, look, I've got shareholders, and, uh, and I'm, I'm one of them, but I also have a number of different shareholders in the business, and I have to be accountable to them. We are my team. Everybody's a shareholder in the, in the business, so, um, you know, any, any offer we have to consider, and, and, um, you know, right now, I'm, I'm having a ton of fun building the business. Um, that being said, you know, I, I, we'd, we'd have to be thoughtful on any offers that head our way, and, and take it to the board, and, and, You know, go from there, but, uh, right now, the TAM of what we're doing and the market size is pretty awesome, so we're excited about that.

AI assessment note: “any offer we have to consider... and take it to the board”

Q What's the kind of average customer paying you per month, would you say?

A Well, it's a real spectrum, you know, because we have a, a freemium model even. So we have, we, we give it away for free and we let people play with it. They, they get in, they use it, they grow with it. And, and then, you know, they can also start day one with a paid model. If they have a large team, they want to get on board credit card and go, we don't bother them with a, you know, a sales force. If they don't want to talk to a sales agent, they don't have to, they can get in self-serve And then as they grow, and this is the real beauty of the model, is that when their needs get bigger and bigger, when they want, you know, customer support, when they want a dedicated account manager, when they want, you know, other features that enterprise businesses demand, we have that there for them. And so we really work with our customers through their whole journey. And, um, as they mature, as they bring in bigger teams, we're absolutely able to help that. We have teams of tens of thousands using our product on a daily basis, uh, to, to, Help connect with their customers, and so, uh, the model matures, so we, we go from, uh, tens of dollars to millions of dollars in terms of the spectrum of our customers.

AI assessment note: “Well, it's a real spectrum, you know, because we have a, a freemium model”

Q Yeah. You're, you're super unique in that. I mean, you have a data set nobody else has, so maybe don't talk about your Specific business, but you also analyze other businesses businesses. You've done a lot of kind of M&A stuff. What do you like to see churn be for this kind of market?

A Uh, yeah, you know, I, I think there's a lot of industry numbers out there. You know, you want to see, um, you know, annualized. Some of the numbers that you mentioned, constant contact, that's a very high churn, and you're right, you will go to the market if you're at scale. So, you know, at lower scale, you can have a little bit more churn. At higher scale, um, it really becomes risky, and you want to think about the lock-in. I think one of the things that we're focused on with our platform strategy is thinking about, you Um, how we can create better benefit to our customers, and ultimately, once you become embedded into this ecosystem of solutions, your lock-in is quite high. So we, you know, we think about, we've got over 200, ah, different partners built out in our app directory so far. We have millions of installations of apps in our app directory. Every time we see an app install or an API integration, we know that that customer is more likely to stay with us because we're, we're more connected, more meshed into their overall marketing and customer support stack. So if you think about things like Marketo, um, HubSpot, Salesforce, we do integrations into all of those. And once you're kind of tied into all of that stack as a, you know, a small, medium, and even enterprise business, the lock-in is pretty, pretty valuable there. The data also that we're generating for our cu…

AI assessment note: “one of the things that we're focused on with our platform strategy is”