How DataStax Grows 40% Year-Over-Year With 110% Net Revenue Expansion

Nathan Latka:

Hello everyone. My guest today is Billy Bosworth. He is responsible for strategy, growth, and day-to-day operations at DataStax.

Nathan Latka:

He’s got 20 years of experience in the database industry and roles ranging from DBA to senior executive. Before DataStax, he spent six years at Quest Software, which many of you are familiar with.

Nathan Latka:

Under his leadership, the industry-leading Quest database business grew from supporting traditional relational databases to a portfolio that now includes tools for the cloud and many other scenarios and situations.

Nathan Latka:

Prior to Quest, Billy led product teams for Embarcadero Technologies’s database productivity solutions, and he serves as the director of Tableau Software.

Nathan Latka:

He holds a Bachelor of Science in computer science from the University of Louisville.

Nathan Latka:

Billy, are you ready to take us to the top?

Billy Bosworth:

I am. Thank you for that great introduction.

Nathan Latka:

Am I hired?

Billy Bosworth:

You’re on.

Nathan Latka:

All right.

Billy Bosworth:

You’re on the team.

Nathan Latka:

I’d be fired in about two seconds. I’m a horrible employee.

Nathan Latka:

We talked earlier. You go from football coach to databases to now DataStax. You raised over $190 million bucks. Take me to the story. The company was launched. You were not a founder. You said you joined when they were 20. Walk me through that story, and then let’s hear about DataStax and what you do.

Billy Bosworth:

Yeah. At Quest Software, where I ran the database business, we could see that the trend of the relational model was, was starting to flatten, and we saw this new class of databases start to emerge. Many of them were around this open source technology. Ours was founded in a technology called Apache Cassandra.

Billy Bosworth:

I partnered with the company when they had just formed, and I got to know him over the next 10 months, at which point they asked me to join as CEO. I knew these guys from the day they started the company and then I joined a company [crosstalk 00:01:39]-

Nathan Latka:

Because you were a customer at Quest?

Billy Bosworth:

A partner. We were doing was, we were a ecosystem player, so what we would do is look for the new technologies that we would build tools to then support.

Nathan Latka:

Okay. Now, dive into that. How did they ask you? Was this an email? What was the subject line? Or, was it a phone call? How did that work?

Billy Bosworth:

They were in Austin, and I was living in Dallas, and so it was a nice, easy drive down there. Got to know them and the team, and as we started talking about how we might be able to help them with tooling and such, it just naturally led to conversations about the market, and, “Where are you guys going? How are you developing?”

Billy Bosworth:

The technical founder and semi-technical founder who was doing the CEO work, and it was [Matt File 00:02:23], who was the semi-technical founder, who came and said, “You know, I think I could learn all this stuff, but I’m not sure I should learn it as fast as I could, which would be best for the company, and so I think you would be a great fit if you were interested,” and the rest is history.

Nathan Latka:

Were they seducing you or were you secretly seducing them?

Billy Bosworth:

I think it was a mutual love affair [crosstalk 00:02:43]-

Nathan Latka:

It was a mutual seduction.

Billy Bosworth:

We liked each other. It was we really liked each other from the start. I tell you, for a founder to give up the CEO title is a non-trivial event. That is a very, very mature move by Matt. Matt stayed with the company for another six years. He was with us for a long time, just moved on last year [crosstalk 00:03:03]-

Nathan Latka:

What year, by the way, was this? It would have been 2011 when you joined?

Billy Bosworth:

That’s correct. May of 2011.

Nathan Latka:

Okay. Without getting into too much detail here, cap table wise, how did they actually structure that? I imagine they give you a big chunk. They were early, they were pre-funding, right? Were they pre-revenue?

Billy Bosworth:

Pre-revenue, but not pre-funding. They had just raised a Series A. I came in, my first assignment was actually to go raise the Series B, which was tough because we were still coming out of the nuclear winter. It was in 2011, still not a great fundraising environment. We put significant effort into raising the Series B and then the subsequent rounds got easier after that.

Nathan Latka:

Yep. Then, total, today you’ve raised about $190 million. Is that accurate?

Billy Bosworth:

That’s right, through Series E, as in “echo.” Yeah, through those five rounds of funding, we’ve raised almost $200 million.

Nathan Latka:

Okay, we’ll jump more into that in a second, but I want to take a step back. Tell us about the product. What does DataStax do, and what’s the business model? Is it Pureplay SaaS, or is it pay-as-you-go based off your usage?

Billy Bosworth:

Yeah. DataStax is a leader in data management for cloud applications, which we’ll talk about, have a whole different kind of scale and set of requirements for the database. The way we make money is we sell our flagship product, DataStax Enterprise, on an annual subscription basis.

Billy Bosworth:

You can consume that either as a service where we have a main service that we’ll do for you, or you can consume it where you manage it, and you may decide to run it in the cloud, or you may decide to run it on-prem, but we have about 60 to 70% of our workloads are already being run in the cloud, either with us managing it or our customers managing it.

Nathan Latka:

Generally, the ACV on these on average are what? Are we talking about $10,000, a hundred grand, a million, $10 million?

Billy Bosworth:

Closer to the hundred grand. We service enterprises and we stay very focused on enterprise class problems and enterprise class customers.

Nathan Latka:

That’s fair. Walk me through the story in terms of customer acquisition. If my business listeners are going, “I always find it difficult to sell to the CTO.” CTOs listening are saying, “Oh, it’s so easy, because we speak the same language.” Who are you selling to in organizations, and what’s your acquisition strategy?

Billy Bosworth:

That’s actually a fabulous question because it’s a little bit of a surprise to a lot of people, but many of our entry points inside of organizations do not start with the centralized technology teams. They actually start with a line of business and the lines of business are the ones who are tasked with moving very fast to either gain market share, or stop the erosion of market share. They have to move quickly. Often they will come directly to us, and then eventually after two or three projects, we make our way into the centralized team.

Nathan Latka:

Interesting. It’s a “land and expand” approach. Okay, how does that first person inside one of these lines, these teams that represent on of these lines, how do they find you?

Billy Bosworth:

Our primary persona with whom we engage is a role called a data architect, and this is the person who’s responsible for fitting together the entire data strategy of a set of applications or a given application. That person generally knows.

Billy Bosworth:

Right now, I think that among similar-minded people in the industry, there’s a very good agreement that Cassandra, which is our core technology, is the de facto scalable industrial grade performance database. They know that to begin with. Then, because we are the company who essentially built Cassandra, if you look at the amount of contributions we gave to open source and all the marketing we did, then that’s a very natural path to us.

Nathan Latka:

What are you paying to acquire these data architects as a customer? What’s your CAC on average, would you say?

Billy Bosworth:

We don’t reveal CAC in that manner, but I can tell you that it’s a combination of a couple things. One is the open source trail, which by the way, you can’t really draw a direct monetary line to, because the whole point of open source is a lot of times it’s all about come and get things without having a direct connection.

Billy Bosworth:

In other words, you don’t want to be [pastured 00:00:07:03], Nathan. You want to be an open source person. You want to be anonymous. You want to go grab the open source code.

Billy Bosworth:

Then you find us through many things that we do on our training. DataStax has a site called DataStax Academy, which provides free world-class training. Many people find us through that, as an example. You can’t really measure the CAC directly in that way, but we also have a direct sales force who also goes after direct enterprise accounts as well. It’s combination of the two.

Nathan Latka:

Tell me about the sales force. What’s your total team size today, and how many are on the sales team?

Billy Bosworth:

We have in the company north of 450 people. About half of those roughly are in product and engineering, and in about half of those are in the sales and marketing organization. We blend those two together, and then some remainder, 10% or so, is in the GNA team. That’s our general breakdown.

Billy Bosworth:

We have pretty standard model of enterprise sales manager teamed up with a SE, teamed up after the fact with the customer success team. There’s a whole value chain along that whole customer journey.

Nathan Latka:

I speak with CEOs that have done more, or they’ve been doing more than $100 million in ARR, they typically talk about metrics a little differently than somebody at the $50 million or even $5 million range. When you look at what you like to optimize your payback period for, that’s maybe a better question then CAC, how quickly do you like to keep your money velocity coming back to you?

Billy Bosworth:

Yeah, it’s all about how fast we can get those first projects to success. To give you an idea of our size, by the way, our revenues exceed $100 million in ARR. We have over 75% gross margins. We’re very much a software company. We have a very, very clear and close line of sight to cashflow positive, so our cash is in our control [crosstalk 00:08:50]-

Nathan Latka:

What does that mean? Can you quantify that? What do you mean “in your control” or close to it?

Billy Bosworth:

It means that we have need to raise more money. We have a complete control over our future in terms of whatever we want to do next, in terms of timing, whether that’s… I always get asked, you’re going to ask me at some point, “Are you going public? When are you going public?” [crosstalk 00:09:06]-

Nathan Latka:

Billy, come on, let me do it [crosstalk 00:09:07] Billy, I have a big question for you. When are you filing [crosstalk 00:09:10] when are you filing to go public?

Billy Bosworth:

Shocking. I’ve never heard that one. I’m sure you’ve never heard the answer. We don’t talk about those kinds of things. We don’t reveal those futures, but what I can tell you is because our cash is in our control, then that that creates a ton of optionality for us. We don’t have to worry about racing the markets to get money.

Billy Bosworth:

What that does mean is we’re also very efficient in the way that we look at our unit economics or around our accounts. For us, this is partly why we focus so much on enterprise. Number one, the use cases lend themselves much better to our technology in big, hairy problems in enterprises. But number two, the unit economics are infinitely better than SMB. We stay very focused on getting that land very efficiently, but then making sure very quickly, how fast can we make that first project successful?

Billy Bosworth:

What we find is once that first project is successful, the expansions happen much, much faster. Now, the inverse of that is true as well. If we don’t get that first project right, it can really retard the progress on, on expansion because this is still new, Nathan. A lot of these technologies are still new.

Billy Bosworth:

There’s a lot of eyeballs in the company, in the customer company, that are waiting to look at that first project to say, “Should we double down on that? Or should we stay away a little longer?”

Nathan Latka:

Yep. Sub-12, 12 months, in user payback? Is that fair?

Billy Bosworth:

Well, it depends on the payback model you’re using, because again [crosstalk 00:10:31]-

Nathan Latka:

Tell me what you use.

Billy Bosworth:

We look at how fast we expand and what the expansion rate is inside the accounts. What we want to see is expansion rates, net expansion rates, over 110%. That’s kind of the [crosstalk 00:10:43] standard.

Nathan Latka:

Annually?

Billy Bosworth:

Yeah. What we want to say is, “Okay, if we’re doing well, if we’re efficiently growing inside of our enterprise accounts, we should see net expansion rates, which includes churn and then also expansion over 110%,” and we see a well beyond that at the moment with our enterprise class accounts.

Nathan Latka:

You obviously just did that kind of altogether at the company level. At your individual customer, a hundred grand first year ACV level, what do you know you have to drive expansion level to, or what can you actively predict ACV is going to grow to in year two? Is it, 120%, 20% growth, or something different?

Billy Bosworth:

It depends again on the nuance of what project they’re implementing. As an example, sometimes customers will start… We have two very large buckets of use cases. One bucket is around customer experience. This is a set of use cases like customer 360 recommendation engines, fraud detection, personalization.

Billy Bosworth:

Many times what they’ll do is they’ll start very granular with one of those projects, and that expansion might take a couple of years, to really get that first project off the ground, get it solid, and then move on to the next one.

Billy Bosworth:

Another class of applications we have is around enterprise optimization. These are things like supply chain, inventory management, asset management, security, access, all those things, internal to the company. Those tend to happen much quicker. That project could be a big project initially with a very rapid expansion.

Billy Bosworth:

I see what you’re trying to ask me, but unfortunately, it really does kind of blend into the overall company metric because there’s too much bespoke activity per account, depending on what project they’re trying to take on.

Nathan Latka:

Look, what you’re telling me is what most CEOs at this level tell me, which is, “Nathan, we’re a mature company. We really have a good handle on individual cohorts and every cohort performs economically different, and we tweak those cohorts to make them work depending on speed of onboarding and things like that.”

Billy Bosworth:

Yeah. Then they blend together. I will tell you there’s an emerging category that is more important than I would have imagined five years ago, and that is the role of the customer success team, is part of that expansion and part of making our customer successful.

Billy Bosworth:

I used to think six, seven years ago, “customer success” was just a nice title for services. It’s not, Nathan. It is a real discipline that is new and has changed and is evolving very rapidly. We have invested very heavily in our customer success organization and will continue to do so.

Nathan Latka:

You keep talking about the initial project being successful. Is there a professional services component upfront for these folks to get them onboarded, or is it just a Pureplay SaaS model?

Billy Bosworth:

No, there is a professional services model. One of the advantages of my background, which fortunately you made me five years younger than I am, I’ve actually been 25 years, believe it or not in the industry.

Nathan Latka:

Just trying to help you, Billy. We help each other.

Billy Bosworth:

Yeah. It makes me feel good. One of the challenges is I lived through the mainframe to client server transition, so when I came out of school, Oracle was still considered largely a potential toy, off to the side. I chose my career path on that direction, but what people forget is how long that transition took in in the market, from mainframe to client server.

Billy Bosworth:

Therefore, what you require is some initial hand-holding with your customers because they’re still thinking on old relational paradigms, and when I say “relational,” that’s Oracle, SQL server, Sybase, those kinds of things, and you got to get them transitioned into this new way of thinking in these distributed databases.

Billy Bosworth:

That’s a people issue. Even if it’s a SaaS product, even if we’re managing the ops side, I still have to work with you to help you understand how to do this new world.

Billy Bosworth:

Services is a very critical part of what we do.

Nathan Latka:

Yeah, and now what are you at today in terms of total customers you’re serving?

Billy Bosworth:

Our total customer count I believe is around 500, but I’ll have to give you that more specifically but I think it’s [crosstalk 00:14:36] side of 500.

Nathan Latka:

He’s squinting, looking at the data.

Billy Bosworth:

Yeah, squinting, trying to remember. I do know this, we have them in over 50 countries, so we have a lot of good geographical distribution right now.

Nathan Latka:

The math I was doing, Billy, was take your $100 million ARR, divide it by 12, puts you at $8.3 million in MRRs.

Nathan Latka:

You’re probably well north of that, but then your ARPU in terms of your ACV first year is a hundred grand, which is about $8,300 a month. You need about a thousand customers at that ACV to hit over a hundred million in ARR.

Nathan Latka:

I won’t make you put a really specific cap on this, but generally, can we say between $100 and $200 million in ARR, or are you well north of $200?

Billy Bosworth:

Yeah, no, between $100 and $200 million in ARR.

Nathan Latka:

That’s fair?

Billy Bosworth:

Yeah.

Nathan Latka:

Okay, good. Obviously it’s harder to grow large numbers. Over the past year, what was your growth rate? What’d you grow at?

Billy Bosworth:

Yeah, we continue to have our models, even our three-year business model, we’re projecting still being in a hyper-growth category, which generally people at our size would define as 40% or higher. Even as we look out the next three years, we believe we can stay in that hyper-growth category.

Nathan Latka:

Yeah. Just to be clear, did you hit that or beat that over the past 12 months?

Billy Bosworth:

Yeah. Our growth rates have been really strong, ever since I got here.

Nathan Latka:

That’s great. Okay, good. A lot of people, we touched on this earlier, we’ll look at a company that has raised as much as you have and said, “You know what? If they don’t keep raising year after year, it means one or two things. They’re not growing as fast and they can’t raise capital at the valuation they want, and they don’t want to do a [down-on 00:16:05] because it looks bad,” or they’re not strong enough to IPO.

Nathan Latka:

You’ve countered that and said, “No, we just have control of our cash. We don’t need to raise.” That being said, early investors, yourself included, on the cap table, especially common holders, start to get maybe antsy at some point, and they want some kind of return. Was any of the capital that’s gone in the company secondary, or was it all going directly to operations?

Billy Bosworth:

That was almost all going to operations. There were some very, very minor “rounding error” type of secondaries early on, but that goes all to operations.

Billy Bosworth:

I have to tell you, maybe this is one of the differences… Where you are talking to an old football guy, or talking to a guy from a steel town outside of Pittsburgh. I didn’t come from the Valley and I’m not a Valley person in that respect, and what I mean by that is I still believe in really good fiscal management of an organization, because I think that when markets turn, and they will, and you know they will, you know what’s going to happen.

Billy Bosworth:

As soon as that happened, everybody is going to get cash crazy, and they’re going to start asking you, “Do you have control of your cash?”

Billy Bosworth:

I’m thrilled with the bull market we’ve been experiencing. I’m thrilled with the access to capital we’ve had. We’ve leveraged it. We’ve taken advantage of it, but I’m sorry, I’m not going to get silly with it. I’m not going to treat it like it’s a free water because it’s not [crosstalk 00:17:23]-

Nathan Latka:

What I mean, Billy, though, is a guy like John Vrionis, back in, what would that have been, 2010, maybe? Your seed round. I think you were there. Or, no, you were in charge of the B round, so I guess they just raised the A round from Calacanis, Sequoia, and John.

Nathan Latka:

But $2.7 million, those guys at some point, we’re approaching 10 years on that money going and at some point they start to get antsy. They’re never going to pressure you because you’re growing and it’s a success, but if Lightspeed wants to go raise their next fund, or Sequoia, or Jason, or whatever, it’s nice to be able to point to you guys as a case study where they’ve gotten money back somehow.

Nathan Latka:

Have you figured out a way to create liquidity for early shareholders by replacing them by new investors, so you can keep their story a good one?

Billy Bosworth:

Yeah. Great question. We’ve been very blessed in this regard. That anxiety that you mentioned is also directly tied to the success of the funds that you’re already in. In our early investors, their funds are performing extraordinarily well.

Billy Bosworth:

We don’t have that pressure from them. They are not on my back saying like, “Geez, when are we going to get this thing going,” because they look at the health of the company, they see that it’s on the right trajectory. They see that we’re growing well at a material number. They see we have optionality ahead of us, and they don’t want to rush it and do something silly now that you’ve gotten to this point.

Billy Bosworth:

That’s really nice when you have investors that have had success in their funds, that they don’t feel that pressure necessarily I think as much from their LPs, because their funds are performing so well.

Billy Bosworth:

We’ve got a really high class lot of investors, and the truth is I do not feel that pressure from them.

Nathan Latka:

Last set of questions on this topic before we wrap up with the famous five. I understand the argument that you make about investors, but you also have early employees who you used equity as leverage to get them to join, take lower salaries as you recruit them from Rackspace or other companies.

Nathan Latka:

At some point they’re going, “I’d like a return. I don’t think Billy’s going to IPO because they just raised $109 million.” That basically was an IPO in terms of cash, and they’re wondering, “When am I ever going to actually have these things be worth anything? When can I get liquidity?”

Nathan Latka:

If those questions come up, and maybe they don’t get asked but they’re being thought, how do you address them?

Billy Bosworth:

Oh, we know they’re being thought. Everybody’s human. Everybody’s thinking that way. What we do about that is I’m pretty much a freak on communication and transparency inside the company and so [crosstalk 00:19:35]-

Nathan Latka:

I was very nervous what you were going to say there for a second. A “freak” on…

Billy Bosworth:

You have to really be maniacal about communicating the vision and communicating the company’s progress. If you don’t do that, then you do have employees who are very nervous about the future, and is this, “Did I make the right bad? Am I in the right company?”

Billy Bosworth:

It’s up to me, really, to make sure that that communication of our vision is being prosecuted effectively, people understand the progress we’re making and they know they’ve made a good bet. Then they’re willing to be patient.

Billy Bosworth:

If they ever feel like things are too ambiguous or vague, or they don’t see where we’re going, that’s where you’re going to get people that are going to get squirrelly, but we try very hard to be very clear, transparent, and open with our company.

Nathan Latka:

Are you in the process right now of making any big acquisitions?

Billy Bosworth:

No. We have done two though, which I think for a company our size is good, because I think you should build that DNA early. We acquired a graph company and we acquired a cloud company, a managed service company, and those have been really good learnings for us. I think that develops that muscle because I am a believer in “as you grow.” I am always looking for the right fit for things to fall in.

Billy Bosworth:

Now at our size, it’s usually not an incremental revenue type of acquisition. It’s more about a portfolio acquisition. Do you need to fill some gaps that you could do faster through acquisition? We’re always on the lookout, but I don’t have any in progress.

Nathan Latka:

And if Bezos brings $1.5 billion check to your board, do you sell the company or no?

Billy Bosworth:

Yeah, like I’m going to answer that, Nathan [crosstalk 00:21:08]-

Nathan Latka:

I’m reading your smile. It tells me everything I need to know, Billy.

Billy Bosworth:

Yeah, we always are prepared, like I told you, for any eventual outcome. But here’s what I believe. I believe that that old cliche is actually very accurate, that great companies are never sold. They’re bought. As long as we take care of our business and stay focused, then we’ll look at every option we have to make sure that we’re growing the company effectively to service our customers. Right now, we don’t have to worry about external parties to make that happen.

Nathan Latka:

All right. Famous Five. One word answers here. Favorite business book?

Billy Bosworth:

The Advantage.

Nathan Latka:

Number two: Is their CEO you’re following or studying right now?

Billy Bosworth:

Brad Smith at Intuit.

Nathan Latka:

Number three: What’s your favorite online tool besides your own for growing the business?

Billy Bosworth:

Slack.

Nathan Latka:

Number four: how many hours of sleep you get every night?

Billy Bosworth:

Six.

Nathan Latka:

What’s your situation? Married? Single? Do you have kids?

Billy Bosworth:

25 years, married.

Nathan Latka:

I thought you were to going to say 25 kids. Whew!

Billy Bosworth:

25 years married, three kids.

Nathan Latka:

Three kids, and Billy, how old are you?

Billy Bosworth:

48.

Nathan Latka:

Last question. What do you wish your 20 year old self knew?

Billy Bosworth:

Don’t be so arrogant and obnoxious, and go learn from your betters.

Nathan Latka:

Did you guys think he was arrogant? Billy, I thought you were great. You were a trooper. You came on, you were super transparent.

Nathan Latka:

Launched his company back in 2011 with two co-founders between Austin and Dallas. It was a “mutual seduction.” That’s what we’ll call it: a mutual seduction. Billy ended up joining as part of the company first round of business getting the Series B closed. They have since raised $190 million bucks, helping over 500, 600-ish customers really understand their data.

Nathan Latka:

The company is on a tear growing 40% year over year, north of a hundred million bucks in ARR right now, but south of $200 million, about 110% net revenue, expansion annually, so the economics look healthy.

Nathan Latka:

Billy, thank you for taking us to the top.

Billy Bosworth:

Thank you, Nathan. Have a great day.