Although SpotMe lost between $6 and $7 million as the first few months of the COVID-19 pandemic stunned the globe, the events software company recovered quickly. As of fall 2020, SpotMe was on track to make $12 to $13 million in annual revenue.
The secret? SpotMe’s pivot from software to SaaS.
“This COVID thing is actually, for us, just perfect,” says SpotMe CEO Pierre Metrailler. “I hate to say this, because it’s terrible for a lot of people, but for us it’s just perfect because it pushes us, and it pushes our costs more towards SaaS, anyway.”
SpotMe operates as an end-to-end platform for events. It manages, launches and runs events, providing the tools to create a website, mobile app and social network without any need for customers to code on their own. With the pandemic pushing more events online, the pivot to SaaS was a swift one.
Last year, SpotMe made $6 million in true ARR on $22 million in total revenue. In 2020, the company was on track to meet 100% growth in ARR.
That’s even taking into account the 50% churn in customers they experienced during those first few months of the pandemic. In 2019, SpotMe had about 250 customers. After losing about half from March to May, they gained about 160 customers by autumn and hoped to gain another 100 in the last quarter of the year.
SpotMe now has about 300 customers paying around $2,000 a month. It has close to 105% to 110% net retention with 10% churn. Its CAC is around $11,000, or about a six-month payback.
Source: GetLatka
Another consequence of the pandemic: Downsizing. Before the pandemic, SpotMe employed about 140 people. Now it has a team of 100 individuals, including 26 engineers and 15 quota-carrying employees.
SpotMe raised a relatively small sum of capital — somewhere between $2 million and $4 million — through a combination of debt and equity around 2012, when it made the switch from hardware to software. That took the company from a $4 million business to $22 million in annual revenue, with a 15% to 20% EBITDA margin.
“Being very cash flow efficient, that’s great,” Metrailler says. “It doesn’t allow you to make some big bold moves, but the big thing is that if you have a history of being cash flow efficient, when you go and talk to banks that’s a really, really easy discussion” — not unlike a high credit score.
SpotMe is no longer at that EBITDA margin, Metrailler says, as the company is investing a lot into things like customer acquisition. As of fall 2020, SpotMe was burning about $100,000 to $200,000 per month.
But, ultimately, SpotMe isn’t going to dig a giant hole in cash flow. Looking forward, Metrailler says, the goal is to become profitable in 2021.
What is SpotMe’s annual revenue?
In 2020, SpotMe generated $12 million in ARR.
What is SpotMe’s monthly revenue?
In 2020, SpotMe generated $1 million in MRR.
Who is the CEO of SpotMe?
Pierre Metrailler, age 41, is the CEO of SpotMe.
Transcript Excerpts
Focus on profitability instead of going all in on burning cash
“Maybe it’s a European thing, but one thing that I’ve learned is, even if I invest like right now … the sales cycles are super short right now. I think the acceleration can be fast. And I don’t think we need to dig a big hole in cash flow for doing so. I don’t think it’s healthy, anyway.”
The advantage of raising money through equity and debt
“We did a really small round where equity and debt were actually tied together, because the way it works with banks is that if you do raise some equity, you can then leverage some debt after that. So we did that at the moment to change from hardware to software, because that was a pretty big investment. We had to rewrite the software from scratch.”
Set simpler quotas for account executives and managers
“We used to have a super scientific way of setting quotas. We’ve got an account executive just for a quick new customer acquisition. And that’s just a function of how many outbound you’re supposed to do, and what’s the inbound rate and conversion, et cetera … And we also have account managers who are managing existing accounts and expansion during expansion with those accounts. And that is a little bit more of a question mark. We’ve actually simplified this, because we see huge traction. We’ve just divided it by what we think is the booking goal, and that’s what we set as quota.”
The big challenge: Will the pivot pay off after the pandemic?
“The one number I’m looking at is how many customers I’m talking to who are using our platform just as a plug because of COVID and how many actually are going to invest long-term into online events. Of course, every guru is going to say, ‘Hey, digital sales is the future.’ And I believe so, right? Our target customer is enterprise, more than 1,000 employees. And they are very traditional and quite conservative, and a lot of them are talking of going back in person. And we’ve burned our ships, we’re not going back to that … But what I’m really interested in is making sure that every customer who is joining now is going to be fascinated by keeping the events online in the future. And that ratio, like how many just do this as a band-aid versus how many invest long term, that’s the big question.”
Full Transcript Nathan Latka: Hello everyone, my guest today is Pierre Metrailler. He joined SpotMe in 2001 as a software engineer. In 2004, after a research position on a distributed algorithms at NTT Japan, he returned to SpotMe and led the pivot from proprietary hardware to SaaS, with SpotMe becoming the leading pure play event engagement platform. Pierre is a graduate from INSEAD and the Swiss Federal Institute of Technology. Pierre, are you ready to take us to the top? Pierre Metrailler: Absolutely. Thanks for having me [inaudible 00:00:24]. Nathan Latka: You bet. Thanks for coming on. So the obvious question is, anyone that sells into the events world is going through a lot of change right now, what is SpotMe selling right now and how have you been impacted by COVID? Pierre Metrailler: Yeah. So we are a… What most people will call us, they will think of a VaultPress for events, right? So we are an end-to-end platform for launching, managing, running your events. And of course, it happens today that most of these events are actually online, right? So we provide all the tools to create a website, a mobile app, a social network, livestream, and a community. And you can do this in few clicks without having to code. Nathan Latka: Mm-hmm (affirmative). Pierre Metrailler: Now what you’re saying is, yeah of course COVID, huge change. Lot of people in the industry were focused on end-person. They were doing a lot of stuff on [Reg 00:00:01:15], on checking people in and payments, and none of these things happened, right? And all the focus now is on engaging online, is on streaming and that’s actually something we had. We had a product before because one of our clients actually asked us few years ago. And so we were quite ready to pivot extremely quickly. So yeah, business was pretty tough the first two months from March to I think May, and starting June, we went up very, very strong. Nathan Latka: About how much monthly recurring revenue did you guys lose between March and May? Pierre Metrailler: That’s a great question. I think we’re still trying to figure this out. We had about 900 cases with customers. Who are trying to pull back their contracts, but we do think overall we’re going to lose between three to four month of recurring revenue. And here we’re talking potentially a lot of churn, because some people immediately went to some other providers. And there’s also a big potential now to win those clients back, so still a question mark, but overall going very strong. Nathan Latka: What does that mean, losing three to four months of revenue? Can you quantify that in dollars? Pierre Metrailler: Yeah. So last year we had… Our top line revenue last year was about $22 million, right? And one of the thing we did last year, in that we’re accounting about six million AR, right? And so we were in the process of transforming that 22 million into AR because the year prior we had zero, right? 2018 [crosstalk 00:02:50]
Nathan Latka: 2018 you had no revenue? Pierre Metrailler: We had no recurring revenue. Nathan Latka: Oh, okay. Pierre Metrailler: And we transformed that into AR. Okay? So three month, that will be something like two million a month, so probably about six to seven million. Nathan Latka: Okay, got it. So you think you’ll lose between six and seven million in sort of contracts that you had, a combination of recurring plus sort of setup fees from canceled events? Pierre Metrailler: Correct, correct. Plus services and upsells that didn’t happen. Nathan Latka: Yeah. Okay. So this is a fascinating story. I love stories where it’s sort of a consulting, set up business that is sort off slowly transforming to SaaS, because just SaaS is better from evaluation perspective, et cetera, planning perspective. So this year, where do you think you’ll finish? What’s your just pure run rate today on the SaaS side? Pierre Metrailler: Yeah. So on the SaaS side, and this COVID thing is actually for us, just perfect. I hate to say this because it’s terrible for a lot of people, but for us it’s just perfect, because it pushes us and it pushes our costs more towards SaaS anyway. So I think we’re going to be hitting 12-13 million, so more than 100% growth in AR. Nathan Latka: Okay. And what are you at right now? Last month, what was the monthly recurring revenue? Pierre Metrailler: Yeah, it was about 9.5. Nathan Latka: Okay. Yeah. That’s great. I mean, it’s not bad. So you’re still up from six million last year, even with COVID. Pierre Metrailler: Absolutely. Nathan Latka: Yep. Now, will overall revenue in 2020 take a hit because you won’t have so much of the setup fees and all that? Pierre Metrailler: Yeah. Nathan Latka: Yeah. Okay. Pierre Metrailler: Well, We don’t know yet, right? Because the business is growing very strong. We’ve acquired I think about 100 new customers from May till September, and now we’re going probably 100 just for the last quarter, right? So probably, anywhere between 16 to 20 million is probably where we’ll land, on top line. Nathan Latka: This year? Yeah. Pierre Metrailler: Mm-hmm (affirmative). Nathan Latka: But what’s nice about that is you’ll go from being about 30% true SaaS revenue to almost 65, 70% true SaaS, which while it stinks that your top line revenue declines, you’re now more purely SaaS. Pierre Metrailler: That’s right. The flip side though is that we’re not bootstrap business, we did get investment in the early years, like 20 years ago when we were a hardware business and it was a single digit investment. But since then, we’ve been purely from cash flow and debt, in bank debt, right? Pierre Metrailler: So we’ve got to manage cash flow very carefully, if you lose four to six million revenue, that’s not a small hole. And if one thing history did teach me here is that, if you manage the company a little bit like a household it works, right? And things like COVID can happen and you can still pivot the business and still have a bit of a safety net to grow. Nathan Latka: Now, something someone listening right now might be going, “Oh, this is great. Pierre seems cool and hip,” but you guys are an old company. When was the company launched? Pierre Metrailler: So the company was actually founded in 2000. I’m not even the founder, I’m a joiner. I joined a few month after the company was founded. And there’s actually none of the original founders on the company anymore. They’re still invested, some of them, but the company has completely changed in 2012 into software, and then later on into SaaS. Nathan Latka: Yep. So there’s debt and equity involved, has there been an equity raise that happened while you’ve been at the company? Pierre Metrailler: Yeah. We did a really small round with actually equity and debt were actually tied together, because the way it works with banks is that if you do raise some equity, you can then leverage some debt after that. So we did that at the moment to change from hardware to software, because that was a pretty big investment, right? We had to rewrite the software from scratch [crosstalk 00:06:42]
Nathan Latka: What year was that, Pierre? Pierre Metrailler: 2011, 2012. We launched 2012. Nathan Latka: Okay, got it. So 2012 is when you took the equity plus debt deal, and about how much did you take? Pierre Metrailler: Oh, very little by US standard. Nathan Latka: Okay. Got it. Let’s say like two, three, four million? Pierre Metrailler: Yeah. Nathan Latka: Okay. You seem shy about that. Pierre Metrailler: Well, we have a culture of secrecy in my home county in Switzerland, so… But that’s about that, right. Nathan Latka: Okay. Fair enough. So I would say it’s still pretty impressive that the company has only really raised, call it two million or so to go from where you were to where you’re at now, very capital efficient. Pierre Metrailler: So we went, 2012 we had a four million business, to went to 22 and 20 actually 19. And all of this were 15 to 20% EBITDA margin. So being very cash flow efficient that’s great. It doesn’t allow you to make some big bold moves, but the big thing is that if you have a history of being cash flow efficient, when you go and talk to banks that’s a really, really easy discussion. Nathan Latka: Yep. It’s almost like a credit score kind of, right? You have a lot of history to point to. Pierre Metrailler: Exactly. Nathan Latka: Yeah. That’s great. Now, are you still today about 15 to 20% EBITDA margin? You’ll think they’ll do that in 2020? Pierre Metrailler: No, with losing four to six million, no. And plus we’re investing crazy. So this year we’ll take a big dip in cash flow. We are just now, I was just talking to my CFO, we are anticipating to be break even next month, back to break even next month. [crosstalk 00:08:22]
Nathan Latka: Oh, that’s pretty close Pierre. So you’re only burning net burn then, call it 100 grand, 200 grand a month right now? Pierre Metrailler: Yeah. We’re going to be going, this month we’ll be booking about North of two million. And most of this is collected upfront, so that’s a solid cash flow. Nathan Latka: Yep. So, okay. Got it. So you see clear path on a cash flow. I mean, you’re going to be cash flow positive this month, on a cash basis. Pierre Metrailler: Absolutely. Nathan Latka: Yeah. And now if you divide the two million collected upfront by 12, you might need another month or two to get to true break, even on an MRR basis. Pierre Metrailler: Which we have a high on full cash flow positive for 2021. And even there, because now the beauty of this new COVID situation is that it’s very clear how you can acquire a ton of new customers, right? And we’ve established a clear CAC and so [crosstalk 00:09:10]. Nathan Latka: Wait, tell us about that? Pierre Metrailler: Yeah, so it’s very simple. We have two products, there’s one platform, but it’s packaged into two offerings; one is one-offs for people who not quite sure yet if they really want to go online and virtual events, and the other one is, and the one-off actually includes at some basic level of services, which means if you don’t want to play your shows, run your shows like you do, we’ve got someone to use is going to help you. And the average ticket price on this is about 17,000, right? Pierre Metrailler: And then we’ve got the enterprise offering, which is full recurring. And that I think is about 50,000 in average. I think it started at 25 and it ends high. And so the combination of that is, I think 24,000 is the average, is the ACV that we shooting for this year, right? CAC is vaguely around 11 000, right? So I think five, six month payback. So here, we’ve just established that, it’s been stable now for two months and now we going full on with new customer acquisition. Nathan Latka: That’s great. And what’s the team size today? How many people? Pierre Metrailler: It’s about 100 people. We had to go to a downsize. We were about 140 pre-COVID. We had to go to a downsize, and about a hundred people now. Nathan Latka: How many engineers? Pierre Metrailler: I think 26. Nathan Latka: Pierre Metrailler: 15. Nathan Latka: One, five. Interesting. How do you set quota? Pierre Metrailler: We just did today so I’m not sure. I’m not sure I want to answer that question, but we used to have like a super scientific way of setting quota. We’ve got account executive just for a quick new customer acquisition. And that’s just a function of how many outbound you supposed to do, and what’s the inbound rate and conversion, et cetera. So we show them that’s the number you get. And we also have account managers who are managing existing accounts and expansion during expansion with those accounts. And that is a little bit more of a question mark. We’ve actually simplified this because we see huge traction. We’ve just divide it by what we think is the booking goal, and that’s what we set as quota so [crosstalk 00:11:13]
Nathan Latka: Do you give your CSMs and account managers a quota? Pierre Metrailler: Of course, everyone’s got a quota. Nathan Latka: So they have an expansion quota? Pierre Metrailler: Yes. Nathan Latka: Yeah. That’s super interesting. And do you generally, whether it’s an AE or an AM, what’s the… I won’t dig deeper here because it’s obviously getting a little personal, but what do you generally set the full on target earnings to quota ratio? Is it sort of a five to one ratio or something different? Pierre Metrailler: It’s pretty… Just trying to think, for AE’s it’s a little smaller. I think it’s about annual, right? It’d be about six plus, yeah. Nathan Latka: Six X. So just be clear, if someone makes, if an AE hits their quota and they make 100 000 per year, or let’s say 200,000 per year, the quota they hit is six times that, about 1.2 million in new AR that they brought in? Pierre Metrailler: Well, I do expect AEs to do about 1.2 million a year now. Nathan Latka: Oh, I guessed right. Perfect. Pierre Metrailler: Yeah, you can also guess how much they make, but yeah. Nathan Latka: Yeah, fair enough, fair enough. Okay. Well, this is great. I mean, I love the fact that you sort of done this and you’ve gone through obviously COVID, which is really, really tricky. How many customers now, today are paying for the SaaS product? Pierre Metrailler: Well, so everyone is paying first, we don’t have a free version. So we had a base of 250 customers from 2019. It’s totally unclear how many have actually churned and how many are still on the way on their way back. But let’s bank for 50% churn. We’ve acquired 160 customers since now, since the beginning of COVID, since April, and we on track for probably 100 plus more till the end of the year. Nathan Latka: So you’ve got 250 from last year, 50% churn. So you’re down to 125, but then you added another 100 since COVID [crosstalk 00:12:57]
Pierre Metrailler: It’s going to be about… Probably plus, probably net plus 300 average customer. I mean the [inaudible 00:13:04] was super high, 22 million with 250 customers, that’s nothing 80,000 plus, right? So it’s not going to be that high, but we increasing the number of customers and that’s great because one thing we know how to do well is expansion. Nathan Latka: Yep. So what actually, can you break that down for me? What does your expansion revenue annually look like on the historical cohorts, on a percentage basis? Pierre Metrailler: Yeah, so we had, I need to rethink this. So historically we had, I think 105, 110 net retention, right? And I think we had about 10% churn. The industry is usually on 20%. I think everyone who’s come on this show has said 20% churn, right? But we more on 10 and I think that gives you a 15 also expansion if I’m correct. Nathan Latka: Yeah, 15 to 20%. Yeah. Very good stuff Pierre. This is great. It’s interesting to me that you just said, you just had a chat with your CFO and you’re looking at being profitable next month, because if you use COVID like an opportunity for you, you want to be investing a ton right now because there’s so much change happening in [inaudible 00:14:16] world. You want to be on the customer acquisition spree, maybe burning cash even to drive growth. Why the focus on profitability right now? Pierre Metrailler: Well, look, maybe it’s a European thing, I don’t know. But one thing that I’ve learned is, even if I invest like right now, which we investing a ton, right? We’ve just decided two weeks ago, we going to… 50% more on customer acquisition budget, right? And so if I see those returns and I should be able to see those returns in a month, right? Because it’s very short and the sales cycles are like super short right now. I think the acceleration can be fast. And I don’t think we need to dig a big hole in cash flow for doing so. I don’t think it’s healthy anyway. Nathan Latka: Yeah. What are you most concerned about right now? Pierre Metrailler: Hey, great question. The one number I’m looking at is how many customers I’m talking to who are using our platform just as a plug because of COVID and how many actually going to invest long-term into online events. Right? Of course, every guru is going to say, “Hey, digital sales is the future.” And I believe so, right? Our target customer is like enterprise, more than 1000 employees. And they are very traditional and quite conservative, and a lot of them are talking of going back in person. And we’ve burned our ships, right? We not going back to that. We can do hybrid. But what I’m really interested in is making sure that every customer who is joining now is going to be fascinated by keeping the events online in the future. And that ratio, like how many just do this as a band-aid versus how many invest long term, that’s the big question. Nathan Latka: Pierre on that note, let’s wrap up with the famous five. Number one, what’s your favorite business book? Pierre Metrailler: Great question, Crossing the Chasm. Nathan Latka: Yeah. That’s a good one. Number two, Jeffrey Moore. Number two is our CEO you’re following or studying? Pierre Metrailler: Yeah, it would be David Cancel from Drift. Nathan Latka: Number three, what’s your favorite online tool for building the company? Pierre Metrailler: A very boring Salesforce. I’ve been a very early customer from 2002, so yeah. Nathan Latka: Number four Pierre, how many [inaudible 00:16:25] every night? Pierre Metrailler: Five, but working on getting a little bit more. Nathan Latka: Fair enough. And what’s your situation, married, single, kids? Pierre Metrailler: So married and expecting our first one in December. Nathan Latka: Oh, congratulations. What an exciting time for you. Pierre Metrailler: Thank you. Nathan Latka: And how old are you? Pierre Metrailler: I’m 41. Nathan Latka: Pierre Metrailler: Yeah. Great. I think I thought it was very important to be super clever, but I think I’ve learned that it’s more important to be kind and then clever a little bit later. Nathan Latka: Guys SpotMe serving the event industry. They were founded in 2000. They hit four million dollars in revenue in 2012, but that was pure sort of setup fees and things. They started the pivot to true SaaS in 2018, 2019 with a major pivot with Pierre coming in, they did six million and true AR in 2019 on 22 million in total revenue. This year they’ll do 9.5 million in true SaaS revenue on-call at 16 to 20 million top line. They’ve got 300-ish customers paying on average $2,000 per month. They are burning right now, but very close to cash flow profitable. They’ve raised very little amount of capital to build this team over time. A 100 people on the team right now, 26 engineers, 15 folks carrying quota, and 110% net revenue retention, which is impressive for a company that sells to event organizers in a period like we’re in right now. Pierre, thank you for taking us to the top. Pierre Metrailler: Thanks, Nathan. Nathan Latka: One more thing before you go, we have a brand new show every Thursday at 1:00 PM. Central. It’s called Sharktank for SaaS. We call it Deal or Bust. One founder comes on, three hungry buyers, they try and do a deal live and the founder shares backend dashboards, their expenses, their revenue, ARPU, CAC, LTV, you name it, they share it. And the buyers try and make a deal live. It is fun to watch every Thursday, 1:00 PM Central. Additionally, remember these recorded founder interviews go live. We release them here on YouTube every day at 2:00 PM Central. To make sure you don’t miss any of that, make sure you click the subscribe button below here on YouTube. The big red button and then click the little bell notification to make sure you get notifications when we do go live. I wouldn’t want you to miss breaking news in the SaaS world, whether it’s an acquisition, a big fundraise, a big sale, a big profitability statement or something else. Nathan Latka: I don’t want you to miss it. Additionally, if you want to take this conversation deeper and further, we have by far the largest private slack community for B2B SaaS founders. You want to get in there. We’ve probably talked about your tool, if you’re running a company or your firm, if you’re investing. You can go on there and quickly search and see what people are saying. Sign up for that @nathanlatka.com/slack. In the meantime I’m hanging out with you here on YouTube, I’ll be in the comments for the next 30 minutes. Feel free to let me know what you thought about this episode. And if you enjoyed it, click the thumbs up. 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