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In this episode we expose how unicorns such as Snowflake, Datadog and Asana drive hypergrowth. All revealed by reading their S-1s (IPO filings)
Creators & Guests
What is The Revenue Formula?
This podcast is about scaling tech startups.
Hosted by Toni Hohlbein & Mikkel Plaehn, together they look at the full funnel.
With a combined 20 years of experience in B2B SaaS and 3 exits, they discuss growing pains, challenges and opportunities they’ve faced. Whether you're working in RevOps, sales, operations, finance or marketing - if you care about revenue, you'll care about this podcast.
If there’s one thing they hate, it’s talk. We know, it’s a bit of an oxymoron. But execution and focus is the key - that’s why each episode is designed to give 1-2 very concrete takeaways.
[00:00:00] Toni: Hey everyone, this is Toni Holbein.
[00:00:01] You are listening to the Revenue Formula
[00:00:04] In today's episode, we are going to uncover what is very deep in I P O filings of companies like Datadog, Asana, toast, and Snowflake. We actually found three main items that are the same across all of these, and we're gonna break it down for you today.
[00:00:21] Enjoy. Mikkel. Nice, nice to be, uh, to be back in Denmark, back in the studio.
[00:00:32] After,
[00:00:33] I gotta say, we had it all planned out. Everything was perfect. I brought a super, uh, sophisticated weirdo microphone that you and Bart bought , um, and everything was there and I was, we were ready to go.
[00:00:48] Uh, but then I checked the wifi just, you know, a couple of days earlier and I was like, this is, this is not
[00:00:52] Mikkel: going
[00:00:53] Toni: work. This is not going to go work. Yeah. There's like, let's forget about it.
[00:00:56] Mikkel: it. I saw your Slack message Sunday. Yeah. It's not gonna happen. I can't even watch Netflix. And I told Lu, I was like, Netflix, what is, he's on holiday
[00:01:02] Toni: Yeah. So, um, I was really happy that Olfo could jump in.
[00:01:07] Mikkel: Yeah. He wasn't,
[00:01:08] Toni: no, he was, he was, he was kind of semi, he, he had like a His, his comment was, I did not perform
[00:01:20] Mikkel: Yeah. Pip. We should put him out a podcast pip. Exactly.
[00:01:23] No, it was
[00:01:23] Toni: Um, but, you know, happy, we could keep it up happy. We didn't, uh, miss the streak here of, of missing week and stuff, because that's not what we do. No. We are professionals and, uh, worked out so wonderful. Yeah. Uh, but also wonderful to start talking to you again.
[00:01:36] Mikkel: Yeah. I mean, we only recorded once when I was back from my long break paternity mm-hmm. . And so I was like, oh, you're already leaving. You don't wanna do this anymore. Yeah, no, but it's good. While you were kind of busy, I dunno what you were doing on your holiday. I'm imagining relaxing slash working, uh, slash kits.
[00:01:52] I was basically reading a bunch of stuff, which we're gonna get into today. Change, yeah. . Yeah. Never read. No, no, no, no. Um, I was reading S once.
[00:02:02] Toni: What is an S one? Mikkel
[00:02:03] Mikkel: and an S one is basically a document that a company creates when they want to go public. So they have to disclose a lot of information and basically what we're gonna do today is expose a bunch of the things I've learned.
[00:02:17] Through reading through this stuff in terms of how they grow their business, why they're operating, you know, as hyper-growth companies, what is it they've done?
[00:02:25] Toni: And you know, to be, uh, to be, to be straight, right? Everyone can access those. S-1s, they're public information. Uh, they're basically being created when you want to go public in the us So kind of, if you wanna file for an I P O initial public offering in the US you need to provide an S one document, where you have tons of information.
[00:02:46] about your business, and it, it provides you with an opportunity to also spin that information. It doesn't just give like your, uh, your annual statements and then borrowing stuff like that. It also allows you to, uh, show, uh, metrics that are not financially audited in that sense. you can, you can define those metrics in there, even kind of, you can do some trickery in this, but you can also, uh, spin.
[00:03:10] Story around it. Yeah. Uh, and it's basically, uh, a data, very data driven pitch. Usually it's written in a very boring way. Right.
[00:03:20] Mikkel: Well, it's kind of a sales pitch, actually. A very long sales
[00:03:23] Toni: to be honest, I totally know what an S one is. I've never read one though. Um, and uh, so that's why I was like, uh, tell us more.
[00:03:29] Mikkel: Yeah. Give me the cliff notes
[00:03:31] So
[00:03:31] Toni: if, if any of, if any of the ones listening are interested in S ones, you can, how, how do you, how do you find the S one for, so you just say S minus one and then company name? Yeah.
[00:03:40] Mikkel: Yeah. I, I literally did S one, snowflake, S one data doc.
[00:03:43] And you'll get it as the first result from the SCC s c.gov. Yeah. Uh, I think it is. Um, and it's, so it's a public document available to anyone.
[00:03:51] Toni: and SCC is the Stock Exchange Commission, I think, right? Yeah,
[00:03:55] Mikkel: So, wonderful.
[00:03:56] I think last point to make on the S one is they've, those go through rigorous auditing, so it's not, you can't.
[00:04:04] You know, treat trick your way around it? No. Uh, it's, it's p legit.
[00:04:09] Toni: Yes. And, and then kind of the, the alternative to n s one are the, uh, the, the quarterly earning calls, um, where you can basically, you can basically listen to the CEO of that company. . I mean, you can do that for Microsoft, you can do it for Google, you can do it for any, any company that's public in the us uh, that has to do quarterly earning calls.
[00:04:29] You can literally listen to the sound file. I'm not sure if people know that actually. it's also pretty boring because it's all super scripted and then it's a, uh, I've listened to some of those actually. Um, and it's a, it's a. , I mean, it, it is a phone call kind of setup. It's not, it's not, it's not as, yeah.
[00:04:47] Um, and you basically hear analysts, um, you know, then go online and ask one question, and then, you know, there's, anyway, so there's, there's a, a bunch of different cool ways of how we can actually. Figure out what's going on with some of those awesome companies. Uh, I think very few go through this lengthy process of actually listening to it.
[00:05:06] Yeah. Uh, but you did, so let's, let's,
[00:05:09] Mikkel: let's, and I, so I focus specifically on, on hypergrowth companies and the top, top, top performers. And just to give you a taste of what it looks like, they have 124%. Net dollar retention rate. So actually north of that, on average, they have 73% AR growth year over year. And pretty much I found they do the rule of 80, not the rule of 40, which is, which is crazy.
[00:05:30] Um, so, so they are growing at a very, very rapid pace.
[00:05:34] Toni: Yes.
[00:05:34] So 1 24 net dollar retention means you have, uh, $1 in revenue this year. Mm-hmm. . And by the end of the year you have $1.24 in revenue without quote unquote doing anything about it.
[00:05:45] Right. So this is the net dollar retention piece. Um, you didn't need to acquire. You kind of get it from your existing customer base. and then the rule of 40 and rule of 80, I don't wanna go into details with this right now, but it basically, um, you know, meshes together how, uh, profitable you are as a business and how much you're growing as a business.
[00:06:04] Yeah. Uh, tho those two things are basically baked together and it basically means if you are burning a. If you're very unprofitable, that's okay. As long as you're growing a lot. If you don't grow a lot anymore, you need to be way more profitable for this to make sense. Right. And the, the standard is like 40%.
[00:06:22] So you basically, um, uh, you don't burn any money, so you basically at zero then you still should be growing 40%. That's how this works. But these guys, you're saying, uh, you know, in the rule of 80, they're close to basically not burning anything. They're almost profit. And are still growing. Uh, 73, 70 5%.
[00:06:43] Right. Yeah,
[00:06:44] Mikkel: it's absolutely bons. So, um, disclaimer, this is not investment advice,
[00:06:51] this advice for, again? What's your,
[00:06:54] Toni: what's, your, master master line called
[00:06:56] Mikkel: Uh, innovation and business
[00:06:57] Toni: Development. Yeah. So it's not finance
[00:06:59] Mikkel: No, no. exactly.
[00:07:00] Toni: does know anything.
[00:07:01] Mikkel: anything. I don't know anything about that stuff. I basically try to distill between those companies like Datadog, Asana, to Snowflake, FreshWorks, all those really high growth hypergrowth companies.
[00:07:12] What are some core takeaways? Anyone who is a revenue operator, a revenue leader can take away and learn. Yep. It's not gonna be something you can just pluck and play. It doesn't obviously work like that. Yeah. But there are some really important takeaways that we're gonna get into now. And the the first, first thing I noticed, and this was across all of them, there were not one case where this was not happening. It was very clear that the business was structured to generate negative return.
[00:07:39] Toni: Yep.
[00:07:40] Mikkel: which is just, and I remember us having had conversations, uh, back in the day at, at falcon around, oh, should we focus on churn? Should we try to, you know, reduce the, the churn we have? But if I always felt like it was such a big mountain to climb and then seeing these companies that have negative churn, you're just like, why can't we do that?
[00:07:58] Um, and it's cuz they structured their business to achieve it.
[00:08:01] Toni: Yeah. And obviously, why is this so, so interesting again, right. So you wanna grow 75% year over year, which is basically their case. Um, but 25% points out of the 70. You don't need to acquire new, you don't need to have a sales team and a marketing team and dollars to kind of get all of that stuff.
[00:08:18] You get it from your customer base. Sure. There's still, uh, work you need to deploy in order to extract that. So don't get me wrong, it doesn't come for free, for free in that sense. But basically, um, the, the 50% growth that you need to do on top now is, is much, you know, it's much smaller, right?
[00:08:35] Mikkel: easier
[00:08:36] Toni: easier.
[00:08:36] No, but, but take this in comparison to someone that maybe has, um, net or retention of 90%. Yeah. Right. Suddenly instead of um, uh, you know, growing, um, 75%, uh, by only 50% new biz, you would now need to do, what is it, 85% growth in new biz in order to get to the same number. And that's like a much more expensive to achieve, you know?
[00:09:01] Mikkel: Yeah.
[00:09:01] So that was a, a, a huge takeaway. And, and I think the other one I noticed with the setup is then when you have negative turn, you can really focus on just landing accounts because you know, they're also gonna expand, which was really, you know, really cool to see actually that they've been very intentional.
[00:09:16] And this is very much the, the pricing and packaging. So when you think about even Asana as a, as a case, they have a freemium model and I get that's pretty. . Right. Um, but they've clearly structured their pricing and packaging in a way that would expand
[00:09:30] Accounts.
[00:09:31] Toni: Mm-hmm. . And I think some of, so this topic also very much coincided actually with, uh, some of the net retention hacking that, uh, you and Olafur actually talked about, right?
[00:09:40] Yes. And I think on the pricing and packaging, there really was this, um, finder, uh, easy way in like low acv and then build it out. Uh, that could either be based on, start with three users and then build from there. Yeah. Or it could be, start with an easy use case. For one department then expand into other departments.
[00:10:01] Right. And that's kind of both baked into, um, uh, you know, pricing and packaging and then obviously results in some of that, um, you know, awesome net dollar attention.
[00:10:10] Mikkel: Yeah. And I mean, they also have a strict focus, you know, on how can we expand our customers so they. build out motions to effectively do that.
[00:10:19] Right? So they, they will look at, can these customers adopt more of the same product? Mm-hmm. or can a different department at the same customer buy, you know, either the same product but, or even another product in some cases, which is just, um, pretty, pretty cool as well, right? So it enables different motions all of a sudden.
[00:10:37] That, that, at least for me, I've not experienced myself in this way.
[00:10:41] Toni: And so, so I didn't read these as once and I'm not sure if it's sometimes in there, but, um, so have you, have you noticed whether or not they're using, uh, m and a? So mergers and acquisitions, so buying companies in order to leapfrog some of those? Uh, you know, features and or products that they want to add on to their existing customer base.
[00:11:01] Mikkel: I mean, it hasn't been explicit that they wanted to or have made m and a in order to have another use case they could go and sell. But it's very clearly been been stipulated in pretty much every single S one that they wanted to use some of that cash for mergers and acquisition, and I'm pretty sure.
[00:11:16] When you've built your business model in this way, you will look for complimentary product to unlock these things.
[00:11:22] Toni: So, so one, one anecdotal story on the side. So ServiceNow, I'm not sure if everyone is familiar with them. They are massive. I think they're, you know, a billion dollars in a R or something like that.
[00:11:34] They're.
[00:11:36] they have a gross retention rate of 99%
[00:11:41] Mikkel: Think about
[00:11:41] this. Yeah, it's
[00:11:42] Toni: great. Um, so what they, so, so the reason I know is because, um, you know, I've been close to some of that, uh, before, but, uh, when they acquire a company, they obviously kind of do it with the intent to sell it into their. Customer set, right?
[00:11:57] you know what they do? So they, they buy, this company might be 10 million, 20 million, whatever, and revenue. They pay whatever money for it. and then they literally, churn all of those customers with the acquisition. They don't wanna have any of the baggage of this like 20 million. Who cares? Uh, they don't want any of that baggage.
[00:12:16] They want to have the product, the technology, uh, they're probably gonna tweak it a little bit, integrated with their own. and then they basically take that technology and sell it into the existing customer base. They only do this whole thing for upsell purposes. They don't do it for the 20 million or so that they're quiet in, in the process.
[00:12:33] It's, it's pretty insane. I think it's, you need to be big enough to af, you know, to be able to afford something like this. Um, but uh, this is, this is kind of what, what they're sometimes
[00:12:42] Mikkel: supposed do, but I think it's also just cool. Like if, if you go and read now, some of these as ones, they're gonna be three years old and obviously things has happened after, so you can go and look what acquisitions have they made, what products have they developed?
[00:12:54] And I think it's very clear, again, back to the whole point here being they've structured their business to do this. Mm-hmm. , it's, there's a lot of thought and intent behind it, which I think is, is is pretty cool.
[00:13:04] Toni: Yeah. And I think that that is, you know, breaking it down to the, you know, um, five to 50 million, uh, a r listeners that we might have here. Um, I think what, um, what. Tells me again. and, and, uh, Michelin actually recorded a podcast episode on this topic, but we never published
[00:13:23] it
[00:13:23] Mikkel: because
[00:13:24] Toni: we weren't unhappy about it.
[00:13:25] Um, it's um, it's that
[00:13:27] Mikkel: quality
[00:13:28] Toni: control. Yes. It's that net retention rate and churn. You know, a lot of people. , especially on LinkedIn trying to make this a, you know, marketing, sales and CS problem. And it's like, first of all, it's not a CS problem. You know, that's a boo boo. You're not allowed to say this anymore.
[00:13:42] It's, it's a sales problem, it's a marketing problem, and so forth. I think what it really is, is a strategy problem. Yeah. You know, and I think the way that these companies are attacking this is a, is a very clear, clean cut example that this is a strategy problem you need to tackle. Right. So really when you think about it, you will.
[00:14:00] If you're selling into specific segments or uh, departments, you will, you will get that industry inherent churn just out of, out of that, right? So for example, if you're selling to SMB companies, you will have a higher churn period, right? This is why, by the way, toast, they're selling to small restaurants and so forth.
[00:14:21] It's absolutely crazy that they have those net retention numbers. and you know, for example, if you're selling to teams like market, Marketing is, they buy a lot, but they churn a lot as well. Right. Or if you sell to agencies or if you sell to, you know, I don't know if you know another good example, but, but basically you get this inherent industry churn out of these things and the, the way to react is to be extremely strategic about it, right?
[00:14:44] So in, in the SMB case, uh, you need to be super smart about pricing and packaging, kind of how can you get people in and then, you know, have triggers and, you know, upsell them over time. I think that what Toast is really good at. Um, but then you have someone like Asana. Who basically started out the journey also in the SMB was a project management tool for smb right?
[00:15:03] In the very beginning. Right. Um, I think if I remember correctly, uh, the predominant amount of, uh, business for Asana. Yeah. Still freemium, but it's enterprise. They have like a big is BA Asana is BA in enterprise, uh, product and company today. Right. That came from somewhere completely different. And obviously if you make that strategic shift, Your net retention, your gross retention numbers will go with it.
[00:15:27] Right. Um, and that's why again, right, it. Uh, you know, tackling this net retention rate. I think tweaking it to go from 80 to 85, you know, on gross retention rate or go from 95 to a hundred, optimizing that stuff, I think you, you can achieve that by, uh, marketing, sales and CS excellence. Yeah. Like together, don't get me wrong, but I think, um, doing like, you know, uh, changes that are 25, 30% points.
[00:15:54] I don't think you will get this by just more aligned sales, marketing and cs, you know,
[00:15:58] Mikkel: and I, and the wave, I've heard it in the past. Maybe just the last point on this is to, oh, we need to make the product more sticky. Mm-hmm. Right? So Sure.
[00:16:05] Maybe Datadog and Snowflake, they are more sticky. Inherently, once you've really plugged it in, Asana's not.
[00:16:12] it's,
[00:16:13] not as sticky. Right. And I think it's just, again, you can focus on trying to make the product more sticky or you can try and make it more expandable
[00:16:20] Toni: Now, I mean there, there are thousands kind of different ways about it. I would argue that, um, if Asana has rolled out to more than 50 or a hundred employees in your organization, I think it's pretty sticky.
[00:16:32] I think it's pretty sticky. Obviously Snowflake, you build everything on top of that thing, so, you know, have fun ripping that out. Um, and Datadog is really a data observability, right? So I think, um, and you know, I recently was on the, on the website actually, and uh, went to the pricing packaging.
[00:16:48] Complete gibberish to me, by the way.
[00:16:50] But I think they have 30 different products.
[00:16:52] Mikkel: Yeah, they have . a lot
[00:16:54] Toni: So if you think about it, yes, you buy one, one product and then oh, you know, it's kind of there. Let's, let me add the other ones, let me add the other ones. And now you have five products deep. It's like, okay, I would need to replace this now by installing three or four different competitors to kind of get the same thing you, you have that stickiness
[00:17:13] Mikkel: Yeah. Okay. So that was number one. Pretty, I was, when I saw that connection, I was like, oh, this is pretty good.
[00:17:20] Yeah. So number two was actually also quite interesting. What I noticed was they all had multiple sources of revenue. Mm-hmm. , and I'm not just in this, in this case, I don't just mean, you know, oh, they have from Germany and they have from us, and they have no, no. They have very different segment. That they acquire revenue from, they have very different motions that they use to acquire revenue.
[00:17:42] So it's not just very one dimensional, you know, we have this one product for this one segment. They really build out their business to be able to attack in multiple
[00:17:51] places. Mm-hmm.
[00:17:51] which is pretty cool.
[00:17:53] Toni: Yeah.
[00:17:53] , I, I think what, what this means for me. Right. So, um, first of all, uh, multi segment, multi-product, multi geo, multi motion. Yeah. I mean, there might be another dimension we're missing here potentially, but what that basically means is every company stands as a single product company.
[00:18:13] and then when you, uh, this is what you have when you do pro market, right? You're high-fiving while we have one product that fits the market. Great. then you go through the next stage of, okay, how do we bring it to market? and usually you will, you know, if you achieve it, usually we'll have one channel, one motion that kind of works to one segment and so forth, right?
[00:18:33] and what, what these companies have done is to, add
[00:18:38] to this, you know, build out this matrix. Yeah, they did. They almost, you know, you basically have a matrix of segments. So smb, mid-market enterprise, you have a matrix of, you know, channels. You attack them by, you know, let's just say plg, inbound, outbound.
[00:18:52] Yeah. Whatever. Um, and then, you know, now it's the cube, uh, . Then you have, then you have, uh, what am I missing? You do different product lines. Yeah. You have your different product lines and so forth. Right. Um, and. Okay. each combination is one thing that we would call product market fit when we would be high fiving about this, right?
[00:19:13] So what, what this means is two things. Number one, none of these things, you know, you, you don't deploy them and suddenly it's a hundred million business again by itself. all of these things are S-curves.
[00:19:25] right? Uh, you start out, you attack a new, uh, combination of product segment, and channel if you will.
[00:19:33] Um, and you need to figure out how does it work, and obviously you can piggyback on some of the existing infrastructure you have. Um, obviously you have learned some things already. Um, obviously you have a brand that helped you and there are a couple of other things that make it easier than to have like a cold start prior market fit problem all the time.
[00:19:50] but it still also means that you need to invest and you won't receive the revenues from it immediately, right? Kind of. It's, this is the shitty part of the S curve. Um, but as you layer all of these things on top, you're basically gonna then get that, that acceleration going right? And I think. The opposite of that, so, okay, cool.
[00:20:10] Isn't everyone doing this? Well, the problem is that, uh, a lot of people either, uh, think that the one s curve that they have mastered. Is, uh, you know, the neck is a little bit longer than they thought it would be, of the s. Um, but it's, um, uh, sometimes it's just not true. Right. And then kind of you start tapering off.
[00:20:29] Yeah. Right. So what do you do then? And uh, and obviously you can then add another channel and you can, you know, all of that stuff. But basically you really need to, um, do all of these things again and again and again and very consistently, right? And what I think is extremely stunning is how good those companies got at that stuff, right? When you think about it, figuring out a version of product market fit. Go to market fit at an organization that is a hundred million a r for a tiny, shitty product that sits somewhere in the corner and then actually get it to be its own 50 million, a hundred million revenue line.
[00:21:02] It's pretty fucking insane. Yeah. Right. Uh, and again, kind of HubSpot recently saw a, uh, breakdown of their revenues. And Sure. The um, marketing automation piece of HubSpot is still like 800 million in a or something like this. Uh, the sales piece now is at 400. Yeah. You know, this was,
[00:21:21] Mikkel: Everyone
[00:21:21] Toni: everyone was laughing at the CRM thing a couple of years ago and basically, um, Uh, you know, it was tacked on for free to your marketing automation, uh, thing, right?
[00:21:31] Um, and then the CSP is now at a hundred million, and then they have this ops pieces. They don't disclose because it's probably at like 5 million or something kind of, you know, not good enough for the plus 1 billion in revenue that that HubSpot has, but that's how you do it. That's kind of how you add things on top.
[00:21:47] And that's, you know, the, uh, uh, HubSpot wouldn't have been able to cross the 1 billion. You know, think about it like this. Perhaps what wouldn't have been able to cross the 1 billion revenue line just with their, you know, market leading marketing automation solution, it wouldn't have done that, right? It needed to have the sales piece needed, the CSPs, and, you know, guess what?
[00:22:08] Uh, their churn probably plummeted whenever they were able to install the sales piece and the CSPs, and suddenly they got more sticky, harder to rip a replace and so forth, right? So these things then, you know, work really nicely together.
[00:22:21] Mikkel: No, I think it's super interesting. And I also heard, I think it was Jason Lemkin from Saastr talk about, so zoom they got the Covid boost basically.
[00:22:29] Yeah. And then what happened after that was not a lot of growth compare comparatively. Yeah, right. And why is that? And his point was, well they got propelled so, so much forward that they didn't have enough product.
[00:22:42] Toni: Yeah. you
[00:22:42] Mikkel: Ready to actually, you know, have another S-curve start to pick up, which is, you know, so I think it's, I agree, it's, having a platform play is what it ultimately becomes.
[00:22:52] And, you know, having a plan for building out these additional sources of revenue, not just how can I get more of the same customer, but how can I get the customer right over there? Or maybe it's another department making it that leap easier.
[00:23:03] Toni: And it's actually funny that you mentioned Zoom. So when, when Zoom started, I don't know when it was like six or seven years ago, I'm not sure what 10, I don't know. Basically was Z O O M. Right. And that was the logo. If you now look up the logo and, um, it's not everywhere. It's, I think you need to kind of start the product.
[00:23:19] Actually, it's now Zoom with like, uh, five or six or seven different os and each o has its own product icon in there and basically kind of, yeah, it's not just video, uh, video conferencing anymore. No. It's like 20 other pieces or six, seven other pieces here, um, that they basically kind of build out in order for you to kind of use it.
[00:23:41] Mikkel: Yeah. So multiple source of revenue, also a pretty good one. So the last. . Last takeaway I wanted to share surface is.
[00:23:50] They all had a plan for what's next.
[00:23:53] Toni: Mm-hmm.
[00:23:54] Mikkel: of course it's given when you do an S one and you want to potentially get investment, you need to talk about what are you gonna do with that money. So that was obviously very clear what a lot of them was gonna do. And there were some interesting findings. So Datadog, their penetration outside us.
[00:24:11] Tiny, the, it was very clear they had been strictly focused on us. I mean, sure they've probably focused on other markets, but not to the sheer degree that they had with us. So, huge opportunity for them to do something. And I'll bet you they had a plan back then for how were they gonna deploy that cash, whether they're gonna go, what were the requirements, if we go into, let's say DACH is, what does that mean for, for our business?
[00:24:34] Any kind of regulatory kind of things, right? So all of them, they had a plan for what was gonna be next. Mm-hmm.
[00:24:40] Toni: Yeah, and I think so. I mean, you, you, you mentioned already, and I think that's at the core of this one is. Hey, this is a pitch deck just written really shitty. Um, and, uh, and obviously the pitch deck needs to include where's growth gonna come from next, right? What is the awesome next opportunity? I think, um, you know, if you have, C level folks listening, I think the.
[00:25:05] Uh, this is an important pitch, obviously, for you next, funding round and so forth. Kind of what, obviously what, not only what I'm gonna use the money for, but on a strategic high level, where do you think, uh, revenue's gonna come from? Yeah. Right. and, um, And if you then think about, okay, how does that then land on the operational layer?
[00:25:24] Well, there's a lot of, you know, breaking down that needs to happen to figure out how to then actually, you know, achieve that in the end. And I think you and I talked about this a couple of times in like the, uh, top down, bottom up matching. Yeah. I forgot the, the episode. Maybe we kind of, you know,
[00:25:38] Mikkel: We'll cut it in
[00:25:39] Toni: we'll
[00:25:39] Mikkel: We'll cut it
[00:25:40] Toni: something.
[00:25:40] Um, and, um, I think the, um, what, what I think is, is cool operationally here is, already then
[00:25:48] started, to a degree, to say like, Hey, we will need to add another s curve here pretty soon. Yeah. That means we, you know, we, we will, we are looking forward to the nice inflection point of the s Yeah.
[00:26:02] To see the growth coming out. But we also know it's gonna take some time to actually get there. We also know that the investments. That we're gonna pull into this, we won't see the return of that immediately. It's gonna take some time to get to that point and basically kind of have a clear understanding of the delay that comes out of the, cash that's being expanded in order to achieve it with a clear hypothesis on how that's gonna, you know, come back and, and drive growth eventually.
[00:26:27] Right. I also would say that since all of those companies went public, A couple of years ago, you don't have this, um, at least in these S one s you don't have this strong pitch on efficiency and, and, and, and profitability potentially in there. I'm, I'm not
[00:26:44] Mikkel: That's shift. No, no. That's shifted
[00:26:46] Toni: after. Yeah. So it's very much, very much top line, uh, focused.
[00:26:50] Right. Um, so that's why also the story here usually then ends up being very top line oriented. Right. I think if there's one thing that, um, uh, that I think. You know, for those folks it's a little bit more second nature, um, for, for teams that are, you know, uh, smaller and earlier, it's a bit forgotten. And I mentioned it earlier already a little bit.
[00:27:12] It's really kind of to think about strategic m and a here. Um, and, um, had a cool chat with someone recently, um, that I think they had like 20 or 30 million. and he has kind of investment banking background, so that was, he was very.
[00:27:27] Yeah,
[00:27:27] of course m and a, right. That was like not a question. and, um, he was very, very pro and I was like, Hey, you know, the m and a that I've been doing and that I was, you know, I was sometimes the acquirer and the inquiry at the same time, the acquired something like that.
[00:27:43] Um, you know, it's pretty risky. . I mean, you have like a 50 50 of this thing working out on art and we are talking hundreds of millions of dollars sometimes that change hands and um, you know, would you really recommend that to early stage teams? Right. Um, even if they had the equity and the, and the cash to, to, you know, buy that stuff and he was actually saying, well sure you can do those big bat moves and stuff.
[00:28:07] Um, the way they have executed an operator and thought about it was, hey, we are really strong in the Nordics. We're really strong in Germany. There's a, let's just say quote unquote competitor in France. they're kind of doing the same thing, kind of a similar product, but they have a full sales operation set up in France.
[00:28:28] Yeah. And they're 20 people. Yeah. Um, you know, m and a is a big word. Yeah. For acquiring something with 20 people. But you know, at the end of the day, uh, he was basically, and, and I think operation that makes total sense. He was basically balancing out, okay, do I wanna buy this thing for probably, I dunno, 2, 3, 4, 5 million euros, half cash, half equity or something.
[00:28:48] Yeah. Um, or do I kind of wanna burn the same amount of money? With much more risk. Yeah. Trying to do, you know,
[00:28:56] Mikkel: trying to figure it out.
[00:28:57] Toni: out. You know what, try and even just open a, a bank account in France. Yeah. You know, try and do that. Um, and, and, and then you have the office, you have the hiring, you have the go tomography.
[00:29:07] You have, you need to kind of. You know, try and have your, your Danish sales leader listening to those French calls and, and, and help them.
[00:29:15] Mikkel: Yeah. good luck.
[00:29:16] Toni: It's not gonna, happen. So basically, I know he was then saying like, Hey, let's, um, we can use that money to just operationally buy another unit.
[00:29:23] Yeah. Basically. And then merge it in. There's still issues. Um, we talked about. Um, you know, the, the, the cultural issues around it and the, you know, how do you think about, you know, if the, if you as a company can even ingest that team. And he was like, well, it's super crucial and critical and they kind of scanned for this and yada, yada.
[00:29:41] But ultimately what, what kind of made super sense for me is like, yeah, we're also only looking for like teams that maybe 10, 15% of our FTE count. So it's like a very clear. ingestion instead of like a, a merger of equals or something like that. Right. So kind of that, that de-risk this a lot.
[00:29:56] Mikkel: And I think this is where it gets a little bit. Clearer because it's so obvious to say, oh, they have a plan for what's next. And when I say that, it's obviously, where's the next dollar gonna come from? And this is the whole conversation, right? So I think acquiring this company in France, you gain time, you, you gain access to so many things that propels you forward faster.
[00:30:15] And it doesn't have to be acquisitions. It can obviously be other segments. It can be. Other, other use cases and so forth, right? But they all had a very clear, hey, this is where the opportunity is. It's it's enterprise, or it's international, or it's, uh, use case. And I think it's just so clear to see that someone has clearly put thought into what are the moves we're gonna make that's gonna drive the revenue.
[00:30:39] Toni: No, absolutely. And I think kind of to kind of tie it back to some of the S one s, um, I, I would argue that these teams probably have put a lot of more thought into it than most of the, uh, folks listening potentially.
[00:30:49] Right. And I think that's, that's really the takeaway is, um, uh, are you, are you as a, and you know what, granted, this is not a, uh, director of revenue operations, maybe, you know, thought track, um, but have you thought as a cro. Have you thought as a CEO, founder, uh, are you thinking enough about, uh, you know, what's next?
[00:31:10] What, where's the next lack of the, uh, where's next growth curve gonna come from? Um, and, um, I think this is, this is where, where we can see where those companies, um, have been doing excellent job.
[00:31:21] Mikkel: Mm ooh. Some pretty cool stuff in here. I hope. I mean, you should try and Google some of these as ones yourself and try and read them. Yes. Uh, you can skip a lot of the financial stuff. There's so much information in there, but you can pretty easily find, uh, find a lot of information in there that's gonna be interesting to you.
[00:31:39] Yes, and I think especially now that these, these IPOs have happened, you know, a few years back you can see how did it actually unfold for some of these businesses, which is, which is cool. It's all there. It's all available. Yes. Um, and
[00:31:50] Toni: it just takes some time. Right. And that's usually what takes some time. What the problem is, I think, just to recap, right, uh, you checked out the S one s from Datadog, uh, Asana Toast. Snowflake. and, uh, you really found three main things that you know, uh, are common across those four crazy awesome, successful companies.
[00:32:08] One is their business is structured to generate negative churn, right? We talked about this being a strategic problem, not a. Not only marketing sales and CS alignment problem. they, you know, number two, they have multiple sources of revenue and are able to add and add, and add, and add more sources. And sources in this case is different products, different segments, different motions, right?
[00:32:31] And then the last thing really is around, um, that they have a clear idea. and it's a strategic piece, actually. A clear strategic but then tangible piece of, you know, how, what, what, what is gonna come next, right? How, how can we prepare the next S curve, uh, where's the biggest opportunity? Um, and then, you know, they have proven that they can execute on those s curves really well.
[00:32:52] So kind of really, uh, having, having a good approach to this.
[00:32:56] Mikkel: Totally.
[00:32:58] So
[00:32:59] good to have you back in the studio, my friend.
[00:33:01] Toni: Of course. I. That's just, that's just what it
[00:33:04] Mikkel: It's . You're blushing a bit.
[00:33:07] Toni: No, that's the, the
[00:33:08] Mikkel: Oh, yeah, yeah. True. Oh, they can't see it. If, I mean, you can watch it on YouTube, then you, you get the reference, then you get it.
[00:33:14] Toni: Wonderful.
[00:33:15] Mikkel: I think I'm gonna take a pause from reading s once now and do something more productive, but I hope this was interesting, insightful, and helpful.
[00:33:25] I
[00:33:25] Toni: think it was. Thank everyone for listening. Thanks for spending the time and, uh, thank you, Mikkel.
[00:33:30] Mikkel: Thank you, Toni. Bye
[00:33:32] Toni: bye.