CEO of Zapier, Wade Foster: Hitting 100k Customers, $50m in ARR, Eye on Doubling YoY with Partners

Hello everyone, my guest today is Wade Foster. He's the CEO and co-founder of Zapier, a workflow automation tool used by over 3 million people to connect the work apps they use every day. Before the company, Wade worked as a customer development lead for the IdeaWorks Inc. in Missouri. He's an alumni of Y Combinator and has degrees in industrial engineering and business administration from the University of Missouri Columbia. Wade, are you ready to take us to the top?

Yeah, let's do it.

All right, man, so I think a lot of people listening to this show have probably heard of you for some, or the company for some reason or another, but for those who have not quickly, what do you guys do and how do you make money?

Sure, Zapier helps people be more productive at work by helping them connect all the business tools that they use. So if you use things like Slack or Gmail or Dropbox or Mailchimp or QuickBooks or Salesforce or any number of 1,400 apps you might be using in your work, we help you build automations and connect them easily. And it's a freemium service, so you can get started for free, and then we have monthly subscriptions. So that is roughly how we make money.

That's great. I want to talk more about— you announced recently you passed the $35 million $35 million run rate. I also know last time you were on, you were really effectively executing a strategy related to launching additional landing pages, 25,000 or so. So I wanna talk more about kind of the growth strategy ideas, you know, blossoming in Wade Foster's head for 2019, and hopefully have a good show. Let's start obviously with the revenue number. So you did announce, I believe, you passed about $35 million in AR. That was in September of 2018?

We passed $50 million.

Oh, it was $50.

I was supposed to say this one, Anthony, yeah.

Okay, good, so $50 million, and most of, help me understand, most of that revenue, are you starting to see more enterprise-level accounts coming in, or this is still kind of low-touch, low ARPU or, you know, kind of model?

Our— yeah, we still have very much a product-driven sale. Uh, you know, we drive folks to the product, they sign up, and then they upgrade with their credit card. And we accept credit cards, PayPal primarily is the mode of payment. We do have customers across the Fortune 500 broadly, so we have lots of enterprise usage, but it's very much a bottom-up, bottoms-up product-driven sale.

Do you see, because of that, do you see, you know, most people see churn where people are canceling because it's, you know, it's too expensive. And so they're churning and finding kind of cheaper alternatives. Many people could argue you're actually at the base of a lot of these other companies. Then you look at enterprise levels like, you know, SnapLogic, MuleSoft, etc. Do you see actually people churning you once they hit some very aggressive amount of usage?

[Speaker:WADE FOSTER] You know, not really. I think most of that's because, you know, once you get started with Zapier, it's so simple, easy to use. The product scales really well with you too. Like we have a lot of robust error catching. We have a lot of sophisticated features that helps folks scale their usage as well. So we see folks go pretty far with us. And very rarely, I can't even think of a time when someone said, you know, I'm stopping using Zapier, I'm gonna go start using something like a MuleSoft.

This might— let me give a better example. Do you ever hear conversations like this? Wade Foster, I love you guys. I'm using you for like 10,000 like zaps a month, but like I need X, Y, and Z built. Can your engineering team do this? And you might go, eh, not on the roadmap. We recommend you go use X enterprise competitor. Do those come up?

You know, that comes up all the time. You know, of course, customers always have feature requests that they're looking for more sophistication. I think every software company runs into this. And a lot of times, you know, it ends up being like, yeah, I think you probably need to go hire an engineer to build this on your own. You probably need to start using tools like AWS to like set this up on your own. But most of our customers aren't like that. Most of our customers aren't engineers that are building their own things. They're looking for something they can do it with off the shelf.

Yep. Our ARPU is still about $20 on average.

Yeah, we've raised it quite a bit, so we're doing a little better than that, but in the ballpark.

Okay. Was that intentional or kind of accidental raise?

You know, I think as you start to get more, as you age, as companies tend to age, ARPU tends to go up if you have a good mechanism where people start to use the product more. So those older cohorts start to use the product more, get more value out of it, they upgrade to bigger plans, and they start to pull your ARPU up just as a business as a whole. So that's usually how that happens for companies, and certainly Zapier's no different.

Back in October 2017, when you were last on the show, you articulated you passed about 60,000 customers on the platform, where are you today?

We have over 100,000 paying customers today.

That's okay, that's great. And what you said, one of the big drivers, and I don't know if this was in the moment thing back in October 2017, but you cited specifically the Airtable partnership as driving a lot of new folks into your platform. Does that continue to perform well and what other partnerships are performing for you?

You know, Airtable definitely has been like a standout new application, I think. We release our fastest growing apps list every year This past year we were seeing companies like Front, like Discord, which is kind of like a Slack for, for like gaming community primarily, really popular. Squarespace opened up their ecosystem quite a bit. And so we have an integration with them now. Those have all been important new apps that have been added to Zapier in recent history and have performed quite well. I think, you know, a lot of folks use those tools and so naturally they need to connect connect those to other things that they're using. Yep.

And 100,000— north of 100,000 customers and $50 million in AR. I mean, that would put your kind of ARPU more like $40 or $50 a month versus $20. I mean, you said slightly more, but that's like doubling. Is that accurate?

Yeah.

Okay. I mean, that's— you're not giving yourself enough credit here, right? You're a humble guy. But I mean, that's like doubling ARPU is a big deal over just 18 months. Okay. Interesting. And walk me through any other kind of growth levers that kind of surprised you last year. You talked a lot about your landing page strategy and your partnership strategy in the last show, so we won't go deep into those, but any other growth tactics you're trying?

You know, the thing that's most important for us is we want to have ubiquity in the apps that people use. And so we spend so much of our time focusing on how can we make sure that we have coverage across all these different apps that people are using at work. As new apps are launched, as new products from existing companies are launched, we really just focus on trying to have that ubiquity because When we support the things that people use, then Zapier becomes useful for them. If we don't support the tools that they use, then Zapier is not useful for them. And so I think that's a big, big piece of it. You know, of course, we've also invested a lot in an area that perhaps surprised me. We've invested a lot in our internal apps. So this is kind of a thing that once— users don't come to Zapier for these things, but they stick around for them, which are things like our filters, our formatter, our code steps, our delay steps, our scheduler, our email parser. They're these little utilities. You could almost think of them as like a modern Excel macro.

Yeah, it's like a V— it's like a VBA kind of macro kind of thing.

Yeah, yeah, but they're easier to use, they're more accessible, and they help folks kind of extend what they're trying to do with a lot of these applications because sometimes APIs can sometimes be messy. Under the hood, we're using APIs, and so the end user needs a way to configure a little bit. It's like, well, I have a first name and a last name here, but I really just want the first name. Our formatter can help you say, well, I just want the first, split at the space and just give me the first name. These little utility functions help people just get more out of these tools that they're looking for, in a way that's pretty accessible to kind of your average worker.

What do you look for in terms of signals for new up-and-coming apps that you see are doing well but are not on your platform yet? I'm sure you have a very sophisticated approach to kind of trying to find these signals and acting on them as quick as possible.

You know, I think it's not too different than perhaps like a VC might approach things. You know, you're trying to pay attention to, are they hiring more people? Is, you know, is there traffic going up? You can look at like Alexa rankings and stuff like that. Are there— did they raise some money? Obviously, that's not always a signal, but you're just trying to piece together all these like little public bits of information to figure out like, hey, is there someone that we should be talking to that we're not talking to? So it does look very similar to, I think, like what VCs would do when they're on the hunt for, you know, trying to invest in a company that's growing.

Wade, I'm a bit shocked. I never thought I'd hear you compare yourself to a VC when you're so contrarian on the whole VC and funding model. Let's go into that branch of the business now. So you've raised very little capital, less than a million, correct?

Yeah, yeah, right at a million.

Are those folks still on the cap table or have you kind of done the whole Wistia approach and bought those guys out?

No, they're still on the cap table.

Okay, you sound kind of happy, and you're, you know, you're happy with status quo there.

Yeah, yeah, of course. I think our investors are, um, solid. You know, we went through YC, a big stakeholder for us, one of the larger stakeholders for us, and they continue to just provide a lot of useful value even at the stage that we're at. Um, so, you know, while I think there's a lot of bad actors in venture, I do think there are very good folks out there as well that can truly live up to that value-add pitch that you hear so often.

And what's team size today? How many folks?

We're right at, uh, about 200 people.

200 folks. And what's the breakdown on that when you look at kind of onboarding, marketing, sales, support, engineering?

Uh, about a third is in engineering, uh, about another third is in customer support services, onboarding, things like that. Customer enablement. And the rest is kind of like a, you know, marketing partnerships probably makes up a big chunk of the rest, product design, HR, finance, that sort of stuff.

And all remote or all in San Fran?

We're 100% remote, still no office.

That's great. That's good. Saves on your expenses, right?

Yeah, I mean, a little. We— not as much as you might think. I— we The big benefit you get out of remote is you have access to a global talent pool. So you can hire anywhere, and then your retention rates, you know, especially if you invest in your culture, you invest in your values, you invest in the type of company you are, the retention rates are really high. You know, of our first 10 employees, 8 are still here.

And you were founded back in 2011, right?

Yeah, 2011.

What do you do? So a lot of people when they say I want to go remote for all the reasons Wade Foster just described, but Nathan, like, I'm a micro manager and I don't know what my team's doing at every moment of the day, but I can't look over their shoulder. I mean, how do you— do you basically just tell your team, listen, we don't care where you work or when you work, but here are the objectives for this month, and as long as we make progress, we're good to go? Is that kind of how it sounds like?

Yeah, more or less. You know, I think the whole— the thing that— so the folks that are like, I'm a micromanager, I can't see people sitting down, I actually think they might enjoy a remote environment even more so, especially if they're good communicators. Because in a remote environment, it's less about, you know, did the person show up and smile this morning or say hello at the water fountain? Yeah, yeah, totally. Sorry about this. I gotta—

you okay?

Something just went crazy.

What, like noise or—

Yeah, like a bunch of music just started playing.

You're not sure where it's coming from? Well, here's the big question: what kind of music is it?

It was a bunch of country music just started playing. Sorry about that, folks. I think my wife like had the, uh, my headphones hooked up to something in the other room. Just funny.

Well, look, I'm a country music fan. A little bit of Garth Brooks never hurt anybody, so that's good.

If it's country music, it had to have been my wife. So, um, anyway, sorry about that.

So it's okay.

So we're saying, um You know, micromanagers, remote managing those teams. I think the most important piece there is that when you're in a remote environment, a big part of what you're trying to do is ask people, set the objectives, and then set the deliverables. And so if you pay attention to what those deliverables are, you can see, are they doing the work in the timeframe which I expected? So if you think about customer service, it's, are they replying to customers? You can go look into your you know, your, your ticketing software and track the numbers and see like, hey, are they actually performing at the, the level that I think is representative of what we should be performing at? For an engineer, you go look at their commit messages, look at the code. Is the contributions there what I expected? For product managers, do they have stories and specs written out and do they understand the users really well? And those logged in your project management software. So like, in a remote environment, there's these little artifacts that are existing in all these different tools that you're using to help you see, are things getting done? And if you don't see those things, you ask a question. You say, hey, what's going on? I thought we were, you know, I thought we'd agreed that this would happen. And if you don't see it, it poses a question. Doesn't mean necessarily like something's going wrong, but you know to ask a question about it. So I actually think that that when you're in a remote environment, it kind of strips away all the like, ornaments of being in an office where you kind of kid yourself that you're doing a good job at management. Where you're like, oh, I see him sitting there, I smiled at them, I gave a compliment over lunch, like all's good. Yeah, yeah. It makes you feel good, but like, are you really truly measuring the progress of what's happening in your company or not? Ah, I'd argue probably not.

Wade Foster, let's shift from employee retention to customer retention. Last time you were on the show, you said less than 5% logo churn per month. Are you still sub-5%?

Yeah, that's right. More or less. Yeah.

Okay. And you guys, I'm a customer, by the way, so I've been able to reverse engineer a little bit of lifecycle emails. You guys have gotten more aggressive on, I believe, on the lifecycle emails like, hey, this zap stopped working, you should log in and like check it out or something might be wrong here. What are you doing to keep churn low?

I think a lot of it is things like that. You know, one of the things that is so powerful about a tool like Zapier is that we can help you with so many different types of problems that you might you might be experiencing in your business across different types of spaces. So we can help you with marketing, we can help you with sales, we can help you with customer support, we can help you with engineering, we can help you with operations, we can help you in a lot of different ways. But because we can help you in a lot of different ways, it's sometimes hard when you come into Zapier to go like, "Well, what should I use this for?" And so those lifecycle emails, if we do a good job, we get to know what you are using Zapier for, and we're able to propose better recommendations for you, or better able to serve up content that might resonate with you. Now, I don't think we're doing a good job at this. I think there's a lot more we can do to improve on this over time, but that's definitely a thing that we've invested in, and I think it helps with longer-term retention, is if we're introducing you to— well, if we're just helping you solve more problems over time, you're happy to keep using us.

And then Wade, shifting back to you, right? People might look at Zapier as a company and go, okay, there's 3 founders, there's 200 people on the team. They're all remote. They're not beholden to anyone. They raise very little money relative to their ARR. Everything's working for them. A guy like Wade Foster is only going to keep doing this if he sees opportunities to, like, learn new things fast and go after big new challenges. If they don't see what you're going after, they might go, something fishy is going on here. Why is he still in this? So the question to you is like, what are you learning every day? What are you looking forward to learning over the next 12 months?

You know, I think the thing that is constantly fun for me is the opportunity we have to serve our customers at scale. Like, we've seen so many folks come into Zapier and say what kind of impact it's had on them from a work perspective, but also from a personal standpoint. We've had people tweet pictures of them and their family at, you know, Disney World saying like, thanks for Thanks Zapier, I get more moments like this because of you. Those kind of moments are fuel. It's just like, wow, how can we create more of that? The excitement part of me is I want more of that, but then the learning aspect is, okay, we're at 200 people. Okay, well, what do we got to do? 200 people, 100,000 customers. Well, what do we got to do to get to 200,000 customers? What do we got to do to get to 2 million customers? Because all those customers represent, you know, someone with their family, their kid at Disney World who's happy about Zapier existing. And along the way, there's all sorts of challenges that you're dealing with, and the challenges change in scope and size. Also, the people you get to work with change over time as well. The different skill sets that you want to bring into your org change as well. And so that all that stuff just kind of keeps things fresh. And it keeps you energized to keep trying to create more moments like that for your customers. If I could meet, you know, a customer every day, in fact, like if I could meet a customer of every hour of every day, like I would do it because it's just so energizing to hear the success that we're able to bring for them.

Wade Foster, you said your wife was in the other room playing country music. What's her name?

My wife is Chelsea Foster.

If you came back tomorrow and said, Chelsea, just wanna let you know, me and the boys and the team, you know, we had all team on hands deck, we turned down a billion-dollar offer to go ahead and sell to Salesforce yesterday. Did she kill you?

So my wife has started to use Zapier herself. She's a consultant for small businesses.

It's an important customer to have, by the way.

Yeah, she used to be a teacher, and you know, when we started Zapier, she's a teacher, and I was like, well, you know, she probably never will understand quite what we do. She'll get it, like, you know, the concept. She'll get the elevator pitch. But like, she won't ever be a user. But now I hear in the other room coaching, you know, her clients on how to use Zapier, teaching them how to use Gmail, teaching them how to use Asana and all these different tools together. So she hears we're selling, she's probably like, what am I gonna do for my own customers, Wade? She's like, are you guys, like, is Zapier gonna keep existing? So I'm sure she would be a little, a little, a little on the fence if that came through.

[Speaker:WADE] Yeah, well, the reason I'm asking is, I mean, there are so many people right now going after just companies where there's data being exposed to some degree? And I'm sure you guys have an amazing engineering team and everything's locked down. But for example, YC's an investor. If they're able to see some of your backend and see which apps are actually taking off from in terms of how many zaps per month, that allows them to make better investment decisions. And maybe there's soft information being shared there, even if it's just you mentioning, hey, we're about to release our top app list. Here's— here it is to you before everyone else gets it. I mean, like there's stuff like that. I mean, do you worry about kind of data and specifically kind of governments going after companies that deal in these pipeline kind of businesses?

You know, I don't worry about that too much. Um, nah, it's not something that we, we think, you know, is a concern from us for a competitive threat or from, um, you know, market risk. I think for us, our goal at the end of the day is let's solve our customers' need. And if we keep chasing after our own customers and keep trying to meet their needs, um, we'll always be in a good position. The world is too short on companies that care deeply about solving for the customer's problems that if we can be one of the few that does that well, um, we'll be fine.

All right, Wade, on that note, let's wrap up with the Famous Five. Number 1, what's your favorite business book?

Oh, what's my favorite? Let's see, I'll share one I read recently. Um, I don't know if it's this underrated book about a manufacturing facility in Springfield, Missouri that practices open book management. So they share all their accounting statements with the whole company and they allow their employees, these are factory workers, to help make critical investment decisions because they've taught them how all to use the accounting.

Wade, what was the name of the book?

It's The Great Game of Business is what it's called.

The Great Game of Business. Interesting.

Yeah.

All right. Number 2, is there a CEO you're following or studying right now?

Let's see, I think Jeff Bezos and Patrick Collison are two of the better, modern CEOs out there that I like to listen and read anything that they put out.

And number 3, are you built on top of Stripe, by the way?

We do use Stripe.

Very good. What's your personal favorite online tool for building the company?

Let's see, we use Slack and Zoom are still super critical parts of operating a distributed team for us.

Number 4, how many hours of sleep do you get every night?

8 hours.

That's great. And obviously married, Chelsea, any kiddos yet or no?

No kids.

No kids.

We got a dog though.

All right. And how old are you, Wade Foster?

I'm 32.

32. Last question, what do you wish your 20-year-old self knew?

Oh my gosh. What do I wish my 20-year-old self knew? You know, I think I wish that my 20-year-old self was a little more open to hearing the advice from others. I think, uh, you know, you mentioned my— I'm a bit of a contrarian at times. Uh, I think, uh, my 20-year-old self probably took that a little too far, uh, and I probably could have done a better job at listening.

Oh, come on, Wade, you also know those angles give you beautiful spots in the press, which helps drive growth. It helps be contrarian.

Yeah, I think so. But, um, there are certainly best practices have become best practice for a reason. If you approach things with sort of a first principles sort of thinking mentality and break things down a bit, try and understand the root cause, you know which best practices are there for a reason, and then you know which ones are kind of just BS and they exist to, you know, serve some other purposes. Chesterton's fence is one of my favorite, like, logical things.

Wait, what's it— what's this called? I haven't heard of this.

Chesterton's fence. It's just like a good way to think about decision-making. So I think some US policymaker introduced this concept and it's, um, if you move into a neighborhood and there exists a fence that you don't like, an ugly fence, uh, and you want to take it down before you take it down, you should figure out why the fence exists in the first place. If you understand the reasons for why the fence existed in the first place, then feel free to go take it down. But if you don't understand yet, you should probably not take it down quite yet. Uh, and so I think it's a really powerful way to think about decision-making is if you're proposing something, if you're proposing to stop, do something, you really should understand the reasoning behind it first. And once you do, feel free to make whatever— you can draw whatever conclusions you want from that and go whatever direction you think, contrarian or not. But until you reach that point, you might want to reserve judgment.

Adding on to that, just some on the Wikipedia article now. Research its history, the fence's history first. You may find out why it was created and perhaps understand that it still serves a purpose. And if you believe the issue it addresses is no longer valid, frame your argument for deletion in a way that acknowledges that. Yeah, I love that. Very cool. I will link to that in the show notes. All right, guys, there you have it again. Wade Foster, Zapier, past 100,000 customers, $50 million in ARR back in September. 2018. They've doubled the ARPU over the past 18 to 24 months, up to about $40 per customer. Profitable, 200 people now, all fully remote, still less than 5% logo churn. As he looks and doubles down on how, how to go from 100,000 customers to 200,000 customers, less than a million bucks raised. Wade, thanks for taking us to the top.

Yeah, thanks, Nathan.