UserZoom is a user experience insights solution company that allows companies to make user-focused digital product decisions and to track progress in the customer’s digital experience over time. Its data informs everything from tactical design questions to higher-risk strategic product decisions.
The SaaS company has grown exponentially since its 2007 founding and is expecting to launch an IPO in 2022. The company currently has:
- An ARR of $80,000,000
- 1,000 customers
- A team of 300 employees, including 80 engineers, 50 sales staff, and 17 marketing employees
The company earned its success through an unusual route, which is an interesting story.
How UserZoom Grew from $1m ARR to $80m in 10 Years
UserZoom’s core product is a complete experience insight management (XIM) solution. It also has a lower-end product called UserZoom GO. The company has grown differently from many companies because it started with an enterprise solution and went downmarket later, rather than the other way around. It also has experienced revenue growth from upsales to higher-end subscription plans, including customers who began with the lower-end product and later moved into the core product.
UserZoom has been aggressive about growth, raising a significant $150 million in capital to fund expansion. Its two investors are Silicon Valley-based Sunstone Capital and Owl Rock.
The company also has undertaken an aggressive acquisition strategy to add tools to broaden its product capabilities, and much of its investment capital was used for these acquisitions. UserZoom’s acquisitions include EnjoyHQ, WhatUsersDo, and YouEye, all research tools. The company will continue to look at other acquisitions that add tools to its software, Co-Founder and Co-CEO Alfonso de la Nuez says.
UserZoom’s revenue growth has progressed as follows:
- 2011: $1,000,000
- 2015: $12,000,000
- 2020: $52,000,000
- 2021: $80,000,000
How UserZoom Expects to Hit a $100m Run Rate by Q1
To gain a strong valuation and launch a successful IPO, the company must be able to show growth in both expansion dollars and new bookings, according to de la Nuez. To do that, the company has fine-tuned its organizational structure to better encourage communication between customer success and sales.
When the company first started out, its organizational structure included a leader of customer success and a leader of sales, both reporting to de la Nuez. “That didn’t work well,” he said. The two didn’t talk to each other well. The company’s business is primarily high-end, high-touch, so the lack of communication between the two departments caused retention to drop.
The company later reorganized so that the sales team and the customer success experts for those accounts all report to the same CRO. Communication and customer retention has improved under this new structure.
The company also has divided its teams so that it can pursue strategies to grow both the enterprise business and the business to lower-end clients. One team handles the high-end, high-touch enterprise business. The second team handles lower-end, high-volume accounts, many of which initially subscribe to UserZoom GO, a less-expensive and less-feature rich version of its enterprise software. The two teams communicate regularly with each other, and this structure has helped UserZoom obtain new customers as well as retain and upsell its current customers.
How UserZoom Boosted Client Numbers to 1,000
The path of co-founder de la Nuez and UserZoom is interesting and illustrates de la Nuez’s vision and willingness to take calculated risks.
De la Nuez originally founded a company based on the agency model, which he grew to more than $2 million in revenues. Realizing the potential for a larger company, he had the conviction to let that go and found a new SaaS company.
He previously worked for Dell computer and quickly began to monopolize the Fortune 500 space with clients in the technology, e-commerce, financial services, insurance, and health care industries. UserZoom retained its Fortune 500 clients while expanding its client base by offering a variety of subscription plans for its core product, including single platform, unlimited seats, enterprise-level security, and a partnership plan that includes consulting services. Those clients who use the consulting services, as well as the software, have the highest retention rate, de la Nuez says.
The development of UserZoom GO has enabled the company to increase customer volume and broaden its customer base. UserZoom GO is designed to be easy to use and to provide the data smaller businesses require for quick decisions.
What Goes Into UserZoom’s ARPU of $6,600?
As UserZoom has scaled, it has developed a broad range of clients. Some clients spend $150,000 a year, while many others spend less than $12,000.
The business has 10 clients with an annual contract value (ACV) of $1m or more.
UserZoom Has a Net Revenue Retention of 125%
UserZoom has an NRR of 125%, which is considered good for enterprise Saas companies. Most Saas companies that sell to small and medium-sized businesses have an NRR of about 90%.
The Founders and Team Own 30%
UserZoom remained bootstrapped until 2015 when Sunstone closed on about $35 million in financing. In 2021, Owl Rock led a $100 million funding round. Owl Rock and Sunstone together own about 65 percent of UserZoom Technologies. The team and founders own the remaining 35 percent.
“The managers and founders still own enough of the company to be effective,” says de la Nuez, although he is unable to comment on how much he still owns.
The company does not expect to seek any other capital before launching its IPO, and de la Nuez saying that its EBITDA is higher than he and the team expected it to be after the last funding round. “We won’t need another round,” he said.
UserZoom will stick with Gregg Hampton, its current CFO, right through the IPO, although it is seeking to hire a CMO, he said.
What type of valuation will UserZoom obtain and how many shares will it offer, and at what price when it launches? And, what other acquisitions will the company make with its new capital? Watching this company and discovering the answers to these questions will be exciting.
