Secrets to Scaling and Growth in an Unpredictable Market with monday.com's Co-founder and Co-CEO

We are in for a treat today. We have one of my favorite founders and I think one of the SAS leaders that I think is one of the most interesting, luckily, to study in 2023. Now, Iran is a Saster annual veteran. You were here in 2017?

Yeah.

Yes. You weren't even called Monday back then, were you?

Yeah, we were. Let me tell you a story about that.

Okay.

Yeah, yeah. So I went to my first saster in 2017. I think it was February 2017, dead of winter. Yeah, yeah, it was in the city. And when you registered, you had like, a pin or a badge that says, how much ARR do you have?

Oh, yeah, we do have those.

So it was like $5 million. AR 1 million, 10 million. And I remember, I think we had seven back then. Yeah, it was six years ago. We had 7 million. And I thought, should I take the 5 million or the 10 million? So I don't remember what I took, but I just want to say thank you, Jason, because it's been such an amazing conference back then, and the community has grown so much. And I'm sitting here today. For me, it's a kind of a closure as a founder, because I was in the audience, like all of you right now, and I remember that we have 7 million. And, you know, it was very hard to imagine the future. I'm here now, which is amazing. So maybe some of you will be in the next Sastra speakers in a few years.

Some will be. Well, can we put these slides up for a second? So 7 million in 2017. Let's look here. Yeah. Because you hit 2011 during the year.

Yeah.

So I want to talk about this slide in a second, but let's just think about the sheer power of compounding revenue for a minute. I mean, Monday is an outlier. I mean, it's one of the best. But 7 million when you came in 2017, and today you're coming up on 700, right? Yeah, 640. Last quarter, over 700. So that's a hundred. Let's just slow this down. Let's enjoy the moment. A little bit of respect here. I mean, did it feel like in 2017 you could be 100x bigger? I mean, even though you were growing like we did, you really feel you could be 100x bigger in that amount of time? It's six years, right? Is that six years? It's crazy.

Well, I remember you had a phrase that says one to ten is improbable.

Yeah.

So ten to hundred is inevitable.

Inevitable. You're inevitable.

How much is it from 100 to a billion. Like it's.

I don't know that. That we didn't. We. I don't think there was a SaaS company that. A billion at that time. So we have to. Yeah. I think it's in more than inevitable. I don't know. You got to. I think you got. I think the. I think it gets less pithy because it's like you got to go multi product. Yeah, Inevitable. Super inevitable. If you go multi product. If not. So a hunt. Yeah. Force of nature. And what we'll get into a Monday's NRR today is roughly what even from SMBs, it's almost 120. 115 something.

Yeah. 115. Yeah.

And what. Just think about this. This craziness of the 100X. Right. Do you remember what it was back in 2017 selling to SMBs?

Well, the NRR.

Yeah. No, that. No, the rev. The NRR. How much of a boost did we get of this NRR? Do you know? What was it over 100.

How much our NRR was in 2017? Yeah, much less. I don't remember exactly how much it was, but maybe around the 90s.

90S.

Yeah.

Be my guess.

Yeah.

So, okay. There's a bunch of stuff I want to talk about on Monday. It's so interesting and the title is presentation, which I unskillfully fast forward, but I think it was steering, not turbulent times, because that's not the Monday story. Unpredictable times. Is that what it is that we're going to get into? Monday has. You've had your challenges the last few years, but we really, as we'll talk about, we haven't really missed a beat. The growth is epic. So. But before we get there, I was thinking about this. Monday's got to be the SaaS company that more people think they know about that don't. Between YouTube and the super bowl, everyone thinks they know what Monday does, but they actually probably only understand part of the suite. And so give us just. In a couple minutes, give us a sense of where it started and everything that Monday does today just so we can triangulate on where you're at. Coming up on a billion in revenue.

Yeah. So as you can see, ever since we've been in Saster, we had hyper growth since 2017. And I think your segment is pretty much correct. I think a lot of people probably saw an ad about Monday or read about it, but I feel a lot of people don't understand the full depth of what the platform is. If I ask like a random person, even here in the audience, what is Monday? You're probably going to get a variety of answers anywhere from project management, work management, maybe some will say CRM. But in essence, if you can see the graph and all the features that we added from day one, we built a platform and a platform and the deep meaning of that, which is a software that's very flexible, not rigid, allows everybody to build kind of their own solution. And the first use case that we kind of focused on was project management. And that's what you saw most of the ads. The reason behind it was that nobody went on Google and searched for flexible software to manage my business. Right. Like nobody does that. People search for project management, they search for CRM. So we had to change from like there's the company vision on one hand, but there's the go to market on the other hand and you need to balance the two. You need to understand what people are searching for, what their intent is and what is the product you're building on the other hand. So Monday has always been a platform and now we, as you mentioned, we transition into multi product. So we launched Monday CRM, we launched Monday dev. But that's an evolution of our platform. It's all built on one platform.

And how thinking through that, now that I hear you say it again, you know, question is when you have something this rich to, especially to SMBs, how do you communicate that? Right. Now the Google search is an interesting example, right? Because how do you communicate this depth? It's so much functionality. How do you do that without overwhelming or how do you expose a small business to it?

Yeah. So I think the main point that we've done, which I think is important, you don't need to tell the whole story from the beginning, especially when you sell to SMBs, I think that we focused on giving them value as soon as possible. So if you were searching for project management or CRM, we wanted to serve them a CRM or a project management. Don't need to explain the whole depth of the platform and then as they scale the product and use it more and more they're exposed to all the features. So we call it like gradual discovery. Don't overwhelm them, don't tell them the whole story because it's confusing. Especially when you're an SMB, you want to understand what you're buying. So that was our focus from day one.

Is there some sort of metric you guys use in terms of how much of the product portfolio folks use over time? Do you track percent of features or functionality do you think about that?

Yeah. So one thing we've done since the beginning of the company, we actually built a BI tool called Big first year.

First year.

First year. I'll tell you a story. We were seven people in the office, literally seven people, including Ray, myself, my partner. So I think like three developers. And that was back in 2014. And we built a BI tool called Big Brain. Back then it was a major investment for that size of a company. But from day one we said we can't fly blind, like we have to know what's going on in the product. So we built this tool, like internal tool that help us track revenue, marketing expense and also usage of the product. So from day one we focused on engagement and usage because otherwise people will churn, people won't recommend to the product. So that was a big focus for us. And until today, Big Brain is a major part of the company.

Yeah. And even like I think you said, Even in year one selling SMBs, the customer lifetime value was highly instrumented. Right. And I think you had like an eight month CAC you and Roy targeted and you had it sort of targeted down to the last decimal point or something like that.

Yeah. So when we started a company, you know, back then in 2014, you know, there wasn't a lot of money that you could raise as a startup. Maybe similar to today. I think our first round just, you all know we raised 1.4 million in 2 million pre. Okay. So that was.

Let's not think about the math of dilution there. Let's not even think about that math.

For about 30% of the company. 1.4 million for 30% of the company. That was our seed round. So money wasn't in abundance. We had to measure everything, we had to track everything been doing. And I think it stuck with us, this efficiency. We always think about expenses and we think about how do we measure things. And I think it's very healthy for companies to do that.

Yeah. So I want to dig in more to some of the interesting things about money. But just on this history, the one thing that I don't know is as you guys started to take off at that 7 to 70, what was the 10x feature like? What was the magic thing at the software level that Monday did that others didn't do? If there was a 10x feature, what was that, what was that aha thing?

Yeah, so initially it was the boards, which is kind of our Monday database if you like.

Yeah.

But I think every time we made a leap in terms of product features, it wasn't because of feedback we got from customers. I always like to talk with customers, but actually the major leaps was things they didn't expect. So for example, Automations was a huge driver of growth. We added Automations even though not a lot of customers asked for it. Yeah, but just automate manual work, that was a huge game.

That's everything today. But that was way ahead of its time, right?

Yeah, yeah, yeah. Now it's, it's very common. But back in the day and how we built it was very unique.

And did they. But so they're doing the Google search for project management software, which isn't even all of Monday. You're getting them into a trial. What, what, what got them to convert in the early. Like what was there? It wasn't just that the. Maybe it was the automation. But what would get them to convert when there are more vendors out there?

Yeah. So I think Roy and myself, my partner are kind of unique because we're both engineers. Okay. So none of them is like the business person. And to be honest, since day one I didn't like selling to customers. Like it's something I'm not good at, you know, like I always felt it's not my skill. I'd rather write like a hundred thousand lines of code than to pick up the phone and cold call somebody.

You know, there's probably a few in the room that have felt that way.

Yeah. So maybe, you know, it was a coincidence, but it just forced us to build a product that kind of automatically converts because we're product people and we wanted the customers to become paying customers without talking to anybody. You know, just use the product and pay for it. That's the best way. So we put so much focus on user experience. We ab tested everything and we made the product very simple to start with. Again going back to that principle of gradual discovery and then you discovered the depth of the product. But I think that's a great way to build a company if you want to focus on product led growth. Because thinking in retrospect, let's say we had an amazing salesperson in the company, even though we had in the beginning like a shitty product that person might be able to sell. And then you get a wrong signal. You get a wrong signal. And because we didn't have a salesperson and people have to convert and sell the product by themselves, I think just create a very healthy product market fit. Not all product market fit are equal. So that's, I think one benefit that happened because of that.

Yeah, I mean there's. And we'll talk a little bit about, I mean Monday has gone up market. 50k customers are your biggest growth area. But if you can start with a true self service motion, your product can be magically better. Right. Versus having humans bridge the gap. It's the nature of bigger customers enterprise humans become the gap fillers. It's not all bad, but you can never go back I think is the thing. All right, so that's a good background. Let's talk about this for a minute. Obvious to you but it'll set the tone for the next pieces. I just pulled that 70% of our customers are in non tech, real estate, banking, journalism, construction, two engineers that didn't want to talk to customers. How'd you get into non tech? How did you make this? How did you get out of tech by the way?

Don't get me wrong, I love our customers.

No, I know you do love. You don't like selling. I miss. I misspoke that you don't want to sell.

I love talking and getting feedback.

I get it. Yeah.

Okay, so I think that that's an important point. When we started the company we said that we want to sell the product not just for tech companies. Right. I think a lot of startups focus on tech and it makes sense you come from that industry. But I think if you can again maybe some tech products can but if you can expand to like non tech industries, that's a major benefit. Major benefit. From day one, 70% of our customers were non tech and non tech. I mean you can see here like real estate, banking, construction, even churches were using us back in the days and now and for me that's like the real world, that's like real businesses and we're probably going to touch it in a few slides but I think that's one of the things that made us very resilient as a company even you know, in what we see now because I think a lot of companies are overly exposed to tech companies took a big hit compared to others. So that, and by the way, this was always also a coincidence because you know, the fact that Monday is so flexible it allowed us to enter into other verticals that we didn't have experience in. Like have no experience in banking or real estate or construction but our customers do. And because the platform is very flexible they could use it and to their own needs.

And was it, was this, I mean you said this was from year one or day one, but was this strategic? Did you say it's less competitive in these spaces or was it your own DNA or how did you make these, these decisions?

So it was a little bit random in the beginning. So when we started, we ran a bunch of Facebook ads. Yeah. And I remember the original banner, it was manage your startup or something like that. And we had churches signing up and we have construction companies sign up and it's not a startup, but they've been using it and they love it and we can serve those customers. So let's strategically choose that path. So it was kind of random, but just seeing what they were doing with the platform was mind blowing back in the days.

So you used, I mean, Facebook ads are an effective way to reach those industries as we know that sell that. So you hacked it, you ran a bunch of Facebook ads and the ones into more traditional industries were easy to convert and you ran with it.

Yeah, we had also a lot of tech companies, but we also had a variety of other industries as well.

Yeah, yeah, that makes sense. It's interesting. Okay, so let's. For folks, let's slow down this slide. And I'm not saying everything for the last two years for Monday's been easy, right. There have been some macro impacts. Overall, if we squinted, we could see one quarter was better than the other. But let's just step back for a minute. And this is just out of their actually very, very good public analyst stuff. Go to just do a Google search for Monday analyst. A lot of public companies start shrinking the amount of data they share. Not Monday yet. So it's a gift. That's why I write it up on Saster. But look, whatever has happened in parts of tech, parts of sales and marketing, whatever other speakers here will tell you the world ended last year and we're in the worst downturn since the 14th century. Right. Since the bubonic this or whatever. But maybe not if you sell to real normal businesses. Right. Because there is a little bit of impact here. Right. But overall, this is a pretty consistent. Actually that's the term consistent. Right. So what did you learn through this macro last 24 months? Summarize it for all of us. What did you guys learn?

Yeah, so definitely, I guess all of you have felt it. What happened in the last year and a half? We also felt it, but you're right to a lesser extent. I think there's a few reasons for that. There's things you can control and things you can control. But as I mentioned, the fact that we're not 100% tech focused was a biggish, big, big thing. Because like I said, a lot of non tech companies were not Affected by the economy. So that's a benefit. If you can sell into non tech companies, that's a great way to expand the company. It was very, you know, it was great to sell to tech companies back in 21 because they were growing like crazy and it created like great growth. But I think that real businesses, if they can, should sell to multiple verticals. So that's one, number two, which I think we've done. Right. And if you have a startup right now, I think that's something you can do is performance marketing. What I saw when the economy changed was that a lot of companies cut performance marketing entirely. It's the easiest thing to reduce because let's say that you want to reduce the burn. What's the first thing you're doing? Not let people go or reduce expenses. You stop doing performance marketing.

Yeah, just cut it. All right. Variable cost.

But in my opinion it's a big mistake because right now, not only we kept doing it, but we actually scaled it. And right now we have like the lowest bids that we ever saw as a company because everybody pulled back. A lot of companies reduced spending and we're more aggressive than ever. But I think, you know, in retrospect, why they've done it is that we had big brains, so we had the confidence that every campaign we're spending on was bringing the results. I think a lot of companies, you know, back in 21, 22 just spent money on performance marketing. They saw the ARR grow, so they said, okay, it makes sense. You know, it's a good ratio, but they know how to attribute the campaign to the result. And we knew. So my tip to you is two things. One, if you can try and do performance marketing again because it's very cheap right now, you should do it. You should get new customers on board. So that's one. And number two, if you can try to measure how each individual campaign affects ARR, it's not that complicated to do it. It's very easy to attribute that. And it just gives you so much confidence and ability to scale.

Yeah, I think when times were really good, you know, marketing budgets inflated and just certain amounts are just thrown at performance marketing and too much was thrown and just cut to the bone. Right? Just literally cut to the bone. Okay, one more question on this. Looking at this fresh and then we'll move on. But I have studied Monday a lot and I'm a super fan. What? I don't. I think I understand why Monday has grown so quickly, but it's really grown quickly and we can look at other companies that are, you know, top, top, top, best of all time, maybe a handful like Microsoft have grown faster. But for B2B, where you. It's subscription revenue and you do need to do. I'm missing a little bit of the story about why Monday grew quite as fast as it did. Not why it's getting to a billion. But what am I. What was the thing that really blew Monday up?

So. So I think it's a combination of few things. Not like one thing that I could put my, my hands on, but a combination of performance marketing, which is very efficient. You probably saw our ads on YouTube on.

I think we all saw them.

Yeah, we hopefully.

But they worked.

They work.

But they work.

They work. And that's the point. They work and we know they work. Okay? So that's one thing. Second thing is again, a lot of verticals. So that really helps you. Because one thing that helped us reduce the marketing span was, let's say you focus just on one vertical, say project management. At some point you exhaust the inventory and then the incremental dollar you put is not as efficient as the first one. So the fact you can go multi vertical is a hack in a way because you can bid in each industry and be very efficient in that. So that was one engine to really help us. Second one is the product. Okay. We allow our customers to use it so they don't have a lot of feature requests. We almost didn't get a lot of customer feedback or anything like that because we gave them the ability to customize their own product. So it's not like a million of feature requests that we had every day because we gave them that freedom in a way. So I think it's not just one thing, but a combination of a few things that truly help us grow the company that quickly.

On this multi vertical thing, that is, I think, a bigger insight than I realized or folks realized. Do you staff it? Do you have like a mini GM of different verticals? Thinking about how many of these, how many of these verticals have like a PM or a gm?

Yeah. So right now we really scale that. So we have Monday sales CRM and MondayDev, which is a complete organization within our company. But back in the day we had a team working on each one of those verticals. And again, each one of those verticals was born because we saw our customers using them. So they viewed it for a bunch of things we learned from them and then we packaged that into a product.

And I tend to think of when you're trying to look at the data, I tend to typically think of 10% as material. Like if 10% of your customers in an area lean in on it because you're doing verticals, was it smaller? If you saw 5% of your customers from churches or banking, was there a number that was material to lean in and invest in more to vertical?

So the way we verticalize it wasn't the customer but the usage. So you have churches doing fundraising and you have churches managing. I don't know what. But there's a lot of use cases each company uses and we actually saw what they're using it for. And this is how we package the product for different use cases.

Got it. Okay. Super, super interesting. Okay, this, let's slow this down. I have written a lot of this on Saster and boy, this is the story of the year. Monday's not the only one, but maybe one of the most visceral. For folks that don't have to worry about things like operating margins or free cash flow because they're just running their businesses. This is like night and day. So walk me through this around. In Q2 of 22, Monday was hyper, fast growing. Right. And so you were burning some cash. It's okay, right? That's what, that's what scale ups and startups and you know, rate. How much would you raise in your ipo? A couple hundred million. You can spend a little bit of it. Right. And it was great. And the growth was incredible. In four or five quarters you go from not that unprofitable, but unprofitable to wildly profit. I mean, I guess this is free cash flow, but plus 26% in five quarters, you were burning 16 cents for each dollar that came in. That's not bad. That's a pretty low burn multiple. Now 26 cents of every dollar is going to cash flow. So we're going to talk about this a little bit, but this is night and day, isn't it?

Yeah. So a few interesting points about this one. Now the company has over 1 billion in cash. And I think the important part is we actually celebrated a few months ago.

Billion in cash.

Well, not just billion in cash, but something that we had more cash in the bank than we ever raised from VCs and the public market. So in the board meeting, we asked.

Them Freedom day if we can give.

Them the money back and get the shares.

But there's a moment in time when you really want to do that. Right?

They didn't agree. They didn't agree. Yeah. I think what happened was that, look, we focused on cash Flow from day one. Day one. And I want to tell all of you something. I think there's something a bit misleading in how we measure SaaS companies. And if you take one thing from this session, this will be it. Okay? All the metrics that you're using, you know, LTV to cac, CAC return rate, all of them. Don't take cash into account. Okay? It's not cash. It's not cash. ARR is not cash. CAC is not cash. Ltv. Well, I don't know what it is, but, yeah, it's a bogus metric. But that's definitely not cash. That's not anything. So the point is, nobody measures cash. What is measuring cash? I want to explain. When we started the company, what we were religious about was to see the cash return. So we would spend money, as I mentioned, on Facebook and YouTube and Google. So we would measure when the cash left the bank. Literally left the bank. Okay. And that's when we marked it. And then we measured when the cash came back into the bank. Okay. From those customers. So we would buy a cohort of customers, and we see when the money goes back into the company. Now imagine that you have 5 million in the bank. 7 million in the bank. One way to think about it is I can spend 5 million on performance marketing. This is not what we've done. When we had 5 million in a bank, we spent 25 million in performance marketing. Now, how do you do that? Because we recycle the money super quickly. We would spend, let's say, 300K on performance marketing. And then after one month, we saw 50% back from that campaign. So 150 back. Okay. And then we saw 70% after three months. And five months, we tracked every penny, how much, when it goes out, when it comes in. And this is how we optimize the product, the pricing, everything. Okay. So you can think about it like we raise money from our customers. Usage. Okay. VCs are not the only resource. If you don't think about it, then you can say, I'm gonna raise more money. But if you focus on cash efficiency, you can make your business super efficient and just scale much faster as it. As a team.

Yeah. And just to. And we'll dig in a little bit on this in a second. But just to take another pause on this, I think, you know, until fairly recently, we really weren't sure if B2B companies could be efficient. Right. We had kind of bought into this Amazon, like, model when Salesforce went ipo, that, yeah, we could spend a ton on sales and marketing, but our customer lifetime value is 70 years. So at Terminus, it all works out and we all. And then I remember at the first SAS annual, Aaron Levy came one week after box ipo, and I asked him, how did Wall street buy into this, Molly? He's like, well, not really. It's tough. And then everyone. And then sas, the multiples got big and people bought into this. Right. But what we've proven, and Monday's a great case study, is that, look, even if maybe you give up a little bit of growth and it's not clear that we do, you can be. If you can't have it all, it's not easy, but you can actually have a very efficient model. It's software. Right. Write once, ship a million times, and you can do it. And you can do it. Spending a lot of marketing. Right.

The only thing that happened here during those four quarters was that we slowed down hiring. That's the only.

Yeah, we'll hit that one on the next slide. Slow down hiring.

We've done. But you have to be efficient from day one. Because if you're not efficient from day one, you don't measure that. Even if you stop hiring, that's not going to happen. So we slowed down hiring. That part of what drove the free cash flow, we became more efficient. But a big part of it was that we were efficient from day one. We measured everything and we stayed efficient. It's part of the company DNA. Now we have to do it from day one. Change it. Once you scale, it's really hard to change.

Really hard, right?

Really hard. Yeah.

Yeah. So I think we'll touch on the headcount on the next one because it's interesting, but just, I think the one thing just for founders, I want to stay focused on Monday, but a lot of folks have grabbed me here already on day one and said, my investors, my board told me I need to get profitable. Okay. And that's. And Iran, feel free to editorialize this. That's the wrong lesson. You do need to get efficient. Getting profitable will get you nowhere, though. Right? Getting profitable and growing 0% or 3% does not build a Monday. You've got to do what's even harder. You've got to find a way to grow more efficiently but still grow. Right. And I think there's a lot of bad advice out there.

Yeah. Overall, VCs give a better advice.

That's a lot of.

Some of them. Some of them. Some of them, yeah.

A little bit of whiplash on this, but I agree.

I think you Know, P and L profitable is not a way to optimize your company. And free cash flow is much better because this is something that you can do things with it. And I think a lot of investors and I talk. You talk a lot about this, about being efficient, meaning, you know, managing your cash and burn multiple that you mentioned a lot of, a lot of time, you know, PNL wise, I wouldn't focus too much about it, especially when you're a young company.

Yeah. Okay, so this one we might have the, the employees. The next one I do want to hit it. This one soup. There's a lot of interesting going on here, but I want to talk about this one. High NRR from SMBs. Right. And I almost know the secrets from Monday, but I actually don't know. I think this is one of the most important things to talk about for anyone that's conquered SMBs. And we can see on this first chart actually there has been some NR impact from macro. Right. No doubt about it. If you look at 125 to 110, that's macro. That's getting harder folks hiring fewer people, scrutinizing more. Still epic though for SMB. What, what's the secret? How do you get over 100 for SMBs? Because I think organics like 90, like you talked about a 70. Right. If you don't do something, I don't think you crack 100.

Yeah. So like Jason mentioned, part of the macro we saw was that our pricing is based on seats, meaning how many people you have in your organization. So what happened was that some companies reduce hiring and that was the impact that we saw. And I think a lot of SaaS companies saw that. I think in some respect it shows the disadvantages of having a seats model. Yeah, yeah.

It has a downside to it has a downside to it.

When everybody's hiring and growing, that's a great thing. But it has downside. And we saw some companies which are most more consumption based that weren't as affected. So one thing we think about is maybe we should have like a mixed model, you know, both seats and consumption to an extent. So that's another thing that we're thinking about. But I think first of all for us, we always try to optimize NRR and gross retention. So both gross retention and net retention, again, we measure it from day one, we have gross attention around mid-80s, something like that on all customers. But obviously it's much greater on enterprise. Something that really drove NRR was definitely going up market. That's something we've done late in the game, only around 2018.

Yeah.

So going back to me telling that I'm an engineer, my partner is an engineer, I think we, at some point we said we're never going to have a sales team. Well, we were wrong. We have a huge sales team right now. But that was a good lesson because what I found, I always said I want to build the most amazing product. What I found is that the most amazing product for enterprise companies is to have a person talking with them. You know, it's like they want to talk with somebody. They have security issues, they have governance, they need help. And this is just a better product. So that's how I think about it. So building a sales team was a great growth driver in terms of NRR and bringing more accounts. So the more customers you have, the more NRR is important. That's one of the things what happens like when you a young company, you focus a lot on acquisition. That kind of drives the ar. You always acquire more company, more companies than you have. But think about Monday right now, 90%, 85, 90% of the revenue is from existing customers. That customer that I didn't know it was that high.

85 to 90%. Yeah.

That's customers that have been with the company for more than a year now. Think about it. You have that many customers and as you scale, even though you do performance marketing, you do the super bowl, you do whatever you want, that increment is going to be insignificant compared to the subscription revenue you already have. So let's say you want to grow 30%, 40%. How do you do it? Only with NRR, that's eventually the company growth will become its NRR because that's the majority of the customers that you carry with you, that's the majority of the revenue. So that's why it's so important to focus on that. My tips for increasing NRR was first measure it. Maybe it sounds intuitive, but a lot of companies don't do it. We build a customer success team. We measure everything. We have people in charge of making this number grow. So that's tin number one. And tip number two is, you know, instead of my intuition was always, oh, we need a higher nrr. We need to improve the product. Now nobody knew what to do with this information. Okay, we're improving the product all the time. Like what specifically do we need to do? So over time we added more things we can sell because eventually if you create more value and you create more sales opportunities, that helps drive the NR go up. So multi product Add ons, enterprise features, anything that can give customers more value while giving you more revenue as a company. It's a great way to increase the ndr.

And I should know this, but today, do you know what percent of your revenue is? Sales driven or sales assisted? Sort of sales led versus pure premium.

We have the 50K segment. So that was almost nothing like three, four years ago. Now it's almost 30%.

30%?

Yeah.

All right. So the majority is still mostly self service, but from nothing to 30 in the last.

That's the main growth engine for us.

And so I think it doesn't seem like you went upmarket too late because the growth was pretty linear. But should you have done it a little bit earlier? Did you sequence it right? What's the learning?

Looking back on it, yeah, definitely. Always great to start earlier. 2017, 2016. I can say that our investors were right. They always said at some point you didn't have a sales team, but they were patient with us.

Well, you did just fine.

Yeah, yeah. But definitely was a game changer. We actually, the first sale that we ever done was a guy from our customer success team. He said, trust me, let me sell to a customer, I can do it. So he just did it. We got like the first 50k deal and I was like, whoa, like you've done it in a few days. That's amazing. We need to build a team. So a lot of credit to him.

There's more of those on the self serve folks. There's more of those stories where someone said, let me just go sell it. That's a pretty common story actually. Okay, I think we hit this one. You're right, we did hit this one. Whoa. Finish Q2 with 63% year over year increase. So it's good you went up market.

Yeah, yeah. Look, it's amazing to see the growth of that segment and the enterprise customers.

Yeah, yeah. Oh, sorry. We did hit this one. 29%. Let me talk about. Oh, maybe we didn't have the head count one. I thought we had it. There is a slide that maybe isn't in here, but let me imagine it for the audience so I don't skip too many. I think for about four quarters roughly, you kept headcount about flat. Right. So that's how you went from negative cash flow to epic in four quarters. And then I think it grew a little bit last quarter. Right. I think you're hiring again. So did we get too efficient too? So this is the meta question for 2024. 2020, can we stay as efficient as we are today. Are we too efficient? Are we mortgaging a little bit of our futures because our sales teams are too lean or everything? Or can we sustain this level of efficiency?

Yeah, so it depends. So, yeah, first of all, we're back to hiring. We're going to add another 500 people next year. So that's the plan.

So how many employees today?

Now we have about 1800. So we're going to be 2300 next year.

Okay. So hold on, let me just. I wish I had that slide, but you're 1800.

Yeah.

So basically you kept it roughly 1800 for five quarters. Okay.

It was, I think 1600 in the beginning of the year. So we increased like 200.

But now something. Sometimes my math gets worse in the afternoon. Help me. Because you're. You're the real engineer, but you're gonna.

I know the numbers.

You're gonna add 25% to the headcount next year. Yeah, so. So that's re. Accelerating, right? Less than. But less than revenue, right?

Yeah, but. But the free cash flow is going to remain the same percentage.

So you're going to talk. So, okay, so if, if they're roughly equal, you'll maintain the free cash flow and you'll. You'll stay stable by putting that money back into hiring.

Yeah. So, so basically what happened was that we reduced hiring because the demand was not growing as we expected, even though I've mentioned that we kept performance marketing, but the demand went a little bit lower than what it was. So we just adjusted the sales and we measure everything. The sales team as well. So now we see a trend where we see more demand, more customers. So we have the confidence that we can continue and hire more salespeople, more R and D people. So we're gonna re. Accelerate hiring. We already been doing that, but I think what happened was very healthy for the companies. We got rid of a lot of fat that we had. Not a lot because we were very efficient, but every company has fat. So we took the fat out and also improved a lot of things. So we're committed to stay free cash flow positive, roughly the same percentage, while continue to grow the headcount next year.

Yeah, I think we all had some fat. Right. If you did well, what are the. What are the things? Are there some things you're not going back to? Are there some practices that change so you can stay fitter or less fat or more efficient? Have things changed?

Look, I think what happened in 2021 and 2022 was very deceiving because if the Economy is growing like crazy. You don't know what is it that you're doing that makes you successful? Okay.

Yeah.

It's like everything works. Everything works. But not. It wasn't like really the case. Okay. Like, when everything is growing up and to the right, everything looks good. You feel like everything you're doing is like, wow, amazing. Like such an amazing idea. But when the economy changed, suddenly not everything looks as shiny. So, you know, we had so many initiatives, so many things we wanted to build, like five, six years from now. And at some point when the economy changed, we said, okay, we need to focus, we need to do what's working, we need to reduce what's not working. And I feel that's very healthy for a lot of companies. I think we got confused that we attributed the success to ourselves as opposed to understand that there are micro trends for better and worse. Right. That we ride it on in order to be successful.

Yeah. The more you go through hyper growth, actually, sometimes the less you're sure. Why. Right.

That's the problem.

And did you. One thing that I know a lot of people are thinking about and struggling with about when you got fitter, how did you help the sales team adjust? Right. A lot of fat gets into the sales team too. Right. And how do you. How did you. Did you think about metrics differently, Attainment differently. Did it change the type of rep you were looking for? Because that's something a lot of folks are struggling with.

Yeah, we kind of re. Optimized the quota for salespeople.

Lower, higher or just different? Higher, higher.

Again, you set a quota, you have expectations from salespeople and, you know, like, you can control how many leads they're getting. What's your expectations for them? So we increase the quota, make them more efficient, reduce some of the, you know, helping teams that help them sell, but wasn't as efficient, you know, SDRs, optimize some of those teams, CSMs, account managers. Just when you grow and everything up to the right, like, you keep hiring and you say, oh, I'm not sure it's working, but let's hire more people and scale that. And we went back to the drawing board and optimized some teams and started to measure things we haven't done before. And, you know, once you've been proactive about it, it's really, you can optimize a lot of things in the company. I think, you know, with sole economy change, instead of thinking, okay, we stuck in this situation, we're gonna have a shitty quarter, we're gonna have a Shitty year. Just like Covid, in a way. We said, let's do something about it. Let's change, you know, let's. Let's try to be proactive. Let's take control. Something I heard from one of the founders, which I admire, was that in downturn, the greatest companies are forged, and I understand it now, because if you are resilient through a downturn and are able to change your company and pivot quickly, instead of just stepping yourself on the back and saying, oh, we're going to pass through that, I think it shows resilience and it kind of gives birth to the best companies going forward.

All right, one last one on this efficiency one. I know I've got a lot, but it's so good to have you on because I do think this is the theme of the next couple of years, Right. Samsara just in their last quarter, they had a great quarter and they said we didn't have enough sales capacity. Samsara actually had some big macro impacts, but it was earlier than others. I think it was three or four quarters ago. They had a hit one and then boom. And they were just like, we just don't have. We literally don't have enough. We're hiring like mad. Right. Did you learn anything about sales Capacity is complicated. Did you learn about anything from going from fat to skinny to higher quotas? Do you have enough capacity now or any evolution in that learning?

First of all, things happen just organically. It's not always the salesperson that closes the deal. Some things happen just because they happen. Customers want to upgrade, they want more seats, they want more use cases. So you discover throughout the process that you can do more with less people. So I think that's one discovery we had, and we started to measure that more and to make sure that we never go back. You know, always.

Never go back.

Never go back. Always try to optimize more, because the less people you have, the more quickly you can move and react and change as a company. I think having a lot of people has a huge down downside to it, especially when you're a young company. So I think that was a good learning for us, and we're committed to continue with that going forward.

Okay, that's good. All right, last one. We'll be out of time, but can we put this slide back up? I think we lost them. Just for fun. I know we hit this already, but if we can. Okay. I know we already hit this and you already answered this question, but just for fun. So a lot. The Super Bowl, I Don't even know if that's performance marketing. Maybe that's brand marketing. And literally it seemed like Monday everywhere on YouTube. But I think you're gonna tell me the learnings on the left is it all worked, right? These endless YouTube ads worked. Any quick summary there and then tell us about the super bowl and then we'll break.

Yeah. So we had our first, maybe last. I'm not sure Subaru will add maybe last.

Is that what you said?

I don't know. We'll see. Look, it was great. It was a great experiment and we've done it at the peak of the bubble, I would say beginning of 2021. And I think for me it was an experience. Look, we had billboards before, even here on the 101. And we had subway ads. But we could always measure them to some extent because we saw the uplift in traffic. Again, we try to measure everything. With super bowl was more tricky because it's like one day, one event, one commercial, the uplift wasn't worth it. I'll tell you what did happen. Something that in almost every sales call, one of the customers mentioned that they saw us during the super bowl ad. Now, how do you measure that? What's the value of that? I'm not sure.

You sure it didn't work then?

Well, I don't know.

I mean, multi touch. I mean, I don't know how multi touch you go, given your efficiency. But it doesn't sound like it hurt the deal.

Yeah, it didn't hurt the deal. Was it worth 8 million? I'm not sure.

All right, I know it's an interesting one. Right? Okay, but so you think it was ROI negative, But it came up in a lot of deals, so hard to say. Right. All right, but the YouTube's ROI positive from day one. Right. Anyone that thinks it didn't work doesn't know performance marketing. Right?

Yeah. We measure not just clicks, but actual views that people view the ad. And we can see a funnel where people sign ad and then go on Google and search for money.com and we see the whole journey of a customer through big brain. And we know how much you attribute to each channel. So again, make it very efficient and it's very targetable.

So if you saw it, it's not like every single person, United States saw that ad. You are being targeted.

Definitely. Everybody here.

Everybody here has for a while. All right, this was great. Thank you so much for the time. Thank you.