How Outreach CEO Manny Medina grew Outreach to $300.8M revenue and 6K customers in 2024.

hello everybody my guest today is manny medina he's a ceo of outreach the leading sales engagement platform medina joined amazon's aws team as an early employee and helped microsoft drive the mobile division from launch to 50 million in annual revenue he has an mba from harvard business school and a computer science master's from the university of pennsylvania manny ready to take us to the top let's do it all right come on in the bio your team says the leading sales engagement platform you know i have to push you on the fluffy stuff so how do you know you're the leading one um you know we have a good sense of the market and we know you know we always know who's buying who we are in a in a very privileged position in which we are creating a new category so if the category is getting created people engage are talking to all of us to everybody in the category so we have visibility into who is doing what at all times so we track very closely they went to the losses and the sizes of each of those and expansion opportunities and so forth so we know by the numbers that we are the one that with the most accounts and the most money yeah you know because we're also growing we're also racing and you know we're close to silicon valley and everything we hear the feedback from investors telling us that we are the leading so it's both um you know the feedback loop and the market itself telling us so when you were back on the show last in february of 2018 uh you said you had about 250 employees at the time you raised i think 60 million in funding is what you said give us an update on those two numbers what's team size today and have you raised additional capital uh we haven't raised additional capital uh but we are you know we're always talking to investors so don't be surprised as news come out uh we are at 315 employees right now we actually just we're in brand new offices right here in seattle and um we are hiring a fresh new batch of uh the sea level suite so we have a new cro and um and what else well manny hold on hold on new cro this is usually like one of the first like signals i'm looking for for anyone that i think might be pushing 100 million in arr in terms of hey we're looking at going public so who was the cro and have they taken up a company public recently no so right all right so um no we had our cr we hired mike mooney from centrify yeah and he was involved in growing you know north of 300 million with uh hp and uh and then uh within perva he took him to almost 800 million in arr and then um and then recently he joined centrify but that got acquired by toma bravo so he's looking for he's looking for a clean slate something to take from zero to public himself uh well you're not exactly at zero anymore i mean maybe more like 60 to public right six into public and you know the public numbers are a moving target right so you can you know 200 is a new 100 so you can it's no longer is that right is it is is that it it's really you got to hit 200 million an arr to have have a good ipo that's why goldman is selling everybody it's interesting why why why i mean why do you think that is is the the amount of liquidity in the market is just stupid at this point so you can stay private for longer stay private for longer um funds are playing both sides now funds are playing funds that used to be public funds hedge funds and so forth they're playing the private markets now too because you can write a 50 to 100 million dollar check and invest it all like that whole thing into one company and then let that right out so if you have a 600 million allocation for a particular company you can start making bets early on and just capture the upside as the company goes from you know growth stage to public would you is you're in the back your head you're kind of like wow the whole team is kind of lined on we'd love to go public one day or do you think there's a path to actually staying private you know up to four or five six hundred million bucks in arr um i think that we have to go public now the accountability is different yeah the liquidity is different the liquidity the ability i want to do what amazon is doing which is they pay their they pay their theirs their salaries fairly they're fairly low but the the each employee is capturing the entire upside of their execution because of the market reward you see what i mean exactly it's a beautiful position to be in which you sort of cap your your base but the market is paying your employees you know their bonuses and their and their and their salary increases so it's it's an incredible position to be in and i want to i want to be the uh the amazon for for for sas enterprise yeah you see it as a way to potentially attract talent but save your cash flow use the equity value and the liquid markets to you know build a rockstar team exactly and it's it's like the market is paying the employees a bonus for performance yeah so we all oh alignment there's no better alignment than that yeah all right manny for people that don't know the rare person that doesn't know what outreach is what do you guys do so if you were to think of sales engagement means that if you were to think about what a rep does every day they wrap calls and emails and follow-up and book calendar appointments and documents linkedin etc that whole thing needs to be orchestrated for you to be able to measure it and prove it so in outreach it creates a single pane of glass where you can live and take all those actions so what we do is we're separating the crm layer which is where the data is stored to the system of action where the data is acted on so we by by creating a layer where the system is acted on you actually get better performance because you have visibility to what the rep is doing at all times and it's not working it's not getting what you need out of the wrap to move the deal forward yeah last time you were on again february 2018 you said you had about 2 500 customers what are you announcing sorry 2200 customers what are you now today 3 100. and so where is manny where's most that growth coming from what's the what's the tactic that you've been testing outbound inbound content what is it so we have been heavily abound we actually i used to pride myself of being you know called outbound engine for the longest time uh we bought we bought a company sales hacker since last time we talked yeah max by the way by the way i was like in the middle of trying to work a deal with him to like buy the conference somehow and i'm like he's not replying to my emails he's working on something big and then i see the news i'm like god damn it manny get out of my way man no max is a great guy and he has a book out too how's that going so far oh it's blowing up it's blowing up because again we're redefining what what sales means like sales is no longer bravado long cowboy do whatever it takes to win some people win some people lose sales is becoming a very scientific game in which you need to optimize the time of the rep and the activity that they take to get the most use out of that transaction yeah so and it create and sort of like it matches both empathy sort of um empathy science and and obsession into one package and that's what we're that's what the book is it lays out the groundwork for what sales engagement will be but to to get back to your question so we bought sales hackers so that we can actually have access to educating the community what we figure is that our our impediment to long-term growth was education was educating the market that any of the stuff that we're doing is actually possible yeah and every time we release something from the machine learning team and we tell the market that we just did this the market is like oh my god how is this even possible i don't believe you you said i mean and and because we are you know we're true to our seattle like roots in which we do what we say we're going to do you know we never market a head of capability we needed the ability for us to have analysis to tell our story and that's what we both sell soccer and that's what brings us here so heavy outbound give me give me the ratios real quick because i'm sure you've tested this um you're you're in kind of inside sales team so what's the ratio from kind of like sdr to ae right now oh it's less than one to one so last time we talked i think it was you know over one to one one one one and a half or so sdr per ae and now we're dialing that down significantly to less than one sdr and we're going to get to one scr for 280s okay for two a's what has allowed the sdrs to get more efficient outreach what outreach well your tool okay got it can you be specific though i mean i know it's your tool you build it in but but what actually is it is it higher higher response rates on the cold emails i mean what is it so it is it's because we've been as we are non-stop testing so we have a we have a team actually internally that what they do is they test language and they as we break down by persona right so we figure out what person are we reaching out and then for each of those personas we break it down by segment you see what i mean so you have you know personal market persona enterprise persona blind how many personas do you have by the way um on the sdr team i think we're testing about uh 15 give or take and then go down one more layer you said each persona has segments how many segments so each so we have four segments so we have four segments and about four personas so four by four is 16. so there's a few that are non sort of that just non-performing for us so we have about 15 sort of sequence types that is addressing each of this persona market uh uh dot in the matrix right and so for each we have a sequence and then we test everything that goes out to them so to make sure that we are every every performance improvement of like 100 percent of connection rate or one percent on on on reply rates one percent of connect rates on linkedin creates a downstream effect on the amount of funnel that you can create per ser that's a really valuable thing i'm gonna go deeper there real quick you just mentioned cold outreach on linkedin again testing maybe the subject line and the first like the first sense of the inmail or like the cold email what are like two or three other like first touches you're experimenting with besides email and linkedin outreach um packages what do you mean i i feel um direct mail so yeah so sending you something ahead of the call sending you something ahead of the email has has incredible ability to move the needle so and then so you so when you the way you think about your your entire go to market program is that you have an efficient frontier of what is sdr generated versus sales respected by the aed figure that out versus what is the number that you're solving for in your pack and your payback time and then your margin and then you sort of like draw a line and then you figure out what is the right combo first per segment based on your acv and basically your time to close so that you can actually get to the right economic unit for that for that for for that persona you see what i mean so so what we're constantly doing is constantly saying okay so my ser is going to perform all these activities and i'm going to get all this juice out of it while we're abming we're doing an account-based marketing program against the same persona meaning the moment you're reading something the moment you get a package you also get another linkedin you're also getting and then you when you click on that and you see something on the website you're also getting retargeted and at the same time you're getting and then it then we see you know what do you spend time on and then we have a call outbound going to you saying hey i noticed you did this you want to talk about it so the ability to create that that surrounding of the experiencing is that what gives us the ability to measure what is efficient and what is that man give me the inputs again you said cac payback what are other things that change depending on which segment persona combo you're at yeah the deal the uh so payback the acd okay and then how long does it take to land that deal you see i mean because if you're running a party if you if your team isn't prospecting against a deal but it takes six months to land a ten thousand dollars that's not very efficient i mean so you wanna you wanna figure out what is the right acv cac deal uh len sort of uh length combination to figure out the right the right program for that for that is there any single metric you are normalizing across all your segments like you never want payback to be longer than eight months you never want payback to be longer than 20 months okay gross marketing adjusted payback so when you say gross when you say gross margin adjusted just be clear you're taking your acv uh you are that your first year acv you're then taking your cac and then you're multiplying times whatever 87 84 whatever your margin is nicely what is your margin um i think it's in the 80 right now okay got it good okay most sas companies will have roughly like assuming there's nothing weird right like you don't have a big component of like you know uh professional services etc like assuming all that you're you're you know a good healthy um sas company should be running margins in the end there's somewhere between you know 80 to 70 65 even if you're growing really fast because the majority of it is support in amazon web services or google cloud or whatever you're using finish the kind of sales stack you're using right now so less than one sdr per two aes once an ae closes that deal are they passed off to consumer a customer success person or does the ae own the upsell expansion as well that's a great question so the moment you close a deal for us in particular adoption because we're an engagement we're a system of action adoption is our true north so the moment you close a deal then it gets passed on to what we call the implementation manager an implementation manager takes that entire account the seat so if we somebody bought 100 seats that deal comes to the implementation manager and we need to assure that 70 of those seats have daily usage like measured by logins or a number of messages sent measure but we call we call them self-positive motions so the ability for you to use use the application manually like you're doing something in the application that creates an opportunity creates a meeting creates a reply creates a follow-up whatever is creating something that is moving the deal forward we measure and we need to get 70 of the seats doing daily positive motions and that's when we graduate into a csm and then the csm gets into the business of educating that account as opposed to getting to adopt okay break it down who your typical implementation manager is on account on these accounts for about how long does that take a month or a year it depends on the length of the deployment so if it's again a hundred percent account deployment it usually takes about a month a month to two months to get everybody to learn and to use it at a scale in such a way that you're that that it doesn't become a problem downstream of adoption etc okay so this is you're like this is your tactic to get month one to month two churn as low as you possibly can right precisely we managed to have our our net retention is in the 140s right now because of that by the way manny you know i do a lot of these interviews i mean i would consider that world-class net revenue retention yes and but that's how you do it it's like you solve for the user activity but in by by by attacking that that user activity upfront well the deal is hot but there is engagement and you have the champion you know you know the the ink is still wet on paper that's when you attack the the adoption problem so that you don't have to deal with that you know later on when you're trying to do your renewal upsell cross-sell or whatever how many implementation managers per ae um depending on the size of the the size of the a but we usually have um we have at this point we have one to one okay got it so i'm gonna i'm just gonna summarize up to the csm less than one sdr is is is keeping two aes busy those two aes are closing and all the things those 280s close one implementation manager can handle over you know a month to four months however long it takes to onboard 70 measured by sales process motions once the implementation manager hits that 70 seat usage it's passed off to a csm and called month 456 somewhere in that time frame how many csms per implementation managers uh raise it's a little lower because at this point implemented the csm is working on it or education programs meaning he doesn't the csm she doesn't have to worry about adoption anymore she has to worry about education so we already have dashboards for all of them to see how um how sophisticated they are in the platform meaning are they using a b testing are they are they are they using persona triggers do they have their inbound workflows capturing outreach as opposed to the outbound workflows and if it's not then go capture that other workflow then capture the account executive workflow so the csm is already trained to see for opportunities to capture additional workflows and bring them into outreach so it's like the implementation manager is going wide 70 seats the cms says go deep correct yeah interesting okay um here's a big question this is a big debate right now amongst other companies in the 100 million kind of ar range are your csm's quota carrying on base of expansion revenue that is a hot topic yeah they are not quota carrying per se meaning they don't get fired if they don't hit a quota but they do have a renewal target okay but there's there they get no personal upside if they hit it other than like maybe a bad performance review they do so they do so that you have you get the upside but you don't get the downside so quarter carrying in my mind would mean you get fired if you don't hit quota yep you get the upside if you're the headquarter oh so they are there's a commission yeah they do have a commission program yes oh okay can i ask like a minimum commission in here that's like ten percent five percent two uh it's less than ten okay that is more than five i i it could be ten but i don't recall that yeah we're getting we're getting really in the weeds but i'm just i'm just curious so if a csm i think it's important so this is the part that is tricky right like this is why it's a hot debate is that i am far more concerned about maintaining that 70 user adoption and and acquiring new workflows and um we have proven here internally that by doing that you hit expansion triggers yeah i mean but i cannot explain like if you were to ask me why or like how does that work i won't be able to explain well this is why this is me this is why i'm not just trying to blow smoke up your ass if you understand if you pry if the process works the outcomes will just happen you're investing in the golden goose and you know the golden eggs will just come out faster right so i'm far more concerned about the leading indicators as opposed to the lagging individual 100 okay so 2014 launched 3100 customers today you've added you know that's up from 2200 about 18 months ago um acv you know average customer paying about what these days uh we're up to i think it's somewhere between forty and sixty thousand dollars per year per year okay good so we'll say forty thousand bucks per year minimum there that's about three thousand three hundred per month let me see that's up yeah that's up your poo a year and a half ago you told me it was about 2 400 bucks so you've that that's testament to you've driven expansion revenue right it makes a lot of sense yeah not only that but we also move quite a bit of market and when you move a market then you the levers of negotiation kind of change a little bit right because they want you know they want a lot of security they want a lot of governments they want they want all these other things that are you know way more expensive and they either have it or they don't you mean it's not like a an smb account can you know trade them off yeah and in a big enterprise account like um i don't remember what they said i make it in a big enterprise account there's a lot of things that you that are non-negotiable now manny i have to do the math because you gave me the number so correct me if i'm wrong but 3100 customers 40 000 acv that would put you north of 10 million bucks a month right now on mrr is that accurate uh we're not quite there yet but we are we i can tell you the following and i i don't have permission to do this so this is an exclusive this is great we passed the 10 million dollar quarter mark last last year so we're now adding over 10 million a quarter every quarter in new bookings in new bookings yeah and and that is actually that is the metric a lot of the most advanced kind of investors and vcs and pe firms will look at is actually new bookings per quarter so congratulations on that um growth year over year uh we are we're north of 100 still even at these even at these kinds of big numbers i mean because last time you by the way last time you came on again february 2018 you told me i mean you were north of five 5.3 a month right so you're pushing it sounds like getting close to 10. i mean that's impressive at this scale it's uh so the good news is that because so we just we're the size of the market is just enormous right we're deploying against install base for crm so we're now we're just mopping up everybody who has salesforce or dynamics doesn't have a layer of engagement yeah so everybody's working on spreadsheets or out of somewhere outside of crm so that entire market is available to us and that's an 80 billion dollar market so for us it's literally a capacity problem and an education problem yeah the more i educate the market this is why we both tell soccer the more we have and then all i need is capacity to go delivering so this is why we need to you know to my earlier point is what we need to sort of address that that that need with the right effective approach for that particular segment and as long as we do that you know we it's all the way to 80 billion dollars so there's no there's no strength will you pass 10 million a month you think this year at some point oh we have to yeah yeah okay good what can you tell me the goal by the end of the year by 2019 what would be like a stretch goal um like 140 150. so the stretch goal is to get to about i think it's like 17 adding 17 million dollars a quarter before the announcement so you're measuring everything really this is interesting to hear you talk you're really measuring everything in terms of velocity right so you're saying 17 million in new bookings per quarter right it's just interesting i asked the question and you give that response versus what most people would say is we want to break 150 million bucks in ar just it gives me a little it gives me a you know into your psyche it's input metrics right like i think about input metrics like what capacity do i need to generate that kind of money and everything else takes care of itself you see i mean yeah i'm thinking about the output metric then you know i sort of forego a lot of steps in the middle yeah no that makes a lot of sense okay um it sounds like you're talking or thinking about funding right now don't tell me obviously what you're actually negotiating but for where you're at right it sounds like you have passed and i do think this is a critical point when ceos get to the point where their arr is greater than the amount they've raised right you now have leverage again versus the other way around which is you've raised way more than what your arr is so you have really i believe any options you want on the table what is the right next move for you in terms of capitalization so the the the way the broader way to think about this is is play it all the way out to cash flow positive or to to some kind of like give you that number and then figure out how much money do you need to get there and then double that yeah and then that's your new minimum are you are you casual positive today no no no no no okay and then we're in a tricky situation that we're because we're so sales driven we have to buy the capacity at the beginning of the year ramp that capacity make it productive and then that delivers a double so every time we double we have to sort of execute the same trick now that all becomes sort of like so self-sustaining in about a year or two and that's not even including international that may put an end to the whole plan manny we have to wrap up i just realized we lost track of time but i mean can you give me a general sense of scalar are you burning like a million net per month or 2 million net per month where are you generally north of two million per month right now okay but south of three but it's south of three okay between two and three good that gives me just give me a good general sense of kind of where you're at let's uh let's wrap up here with the famous five number one what's your favorite business book oh i still think fast and slow that's a good one number two is there a ceo you're following or studying right now oh always be invasive bezos yep by the way real quick you're in seattle obviously amazon is up there henry is getting very aggressive with his nice pe from behind him just took out zoom info are you in any acquisition talks with them this would be a nice natural add-on uh no henry i i take notes from henry you know what i mean when i when i grow up i want to be like henry well he gave me the same process i asked you and i'll write a big post on comparing your process with his in terms of sdr to ae to csm all right henry henry's a genius because he has sdrs doing his expansion no i know you know something else too he has employed and he doesn't talk about this a lot he has employed actually external firms to run a lot of his engine and i've interviewed a few of them and so when you add them all together it's like little mini swat teams running different tests that's right makes sense number number three manny what's your favorite online tool for building your company besides outreach um i would still say google docs like i'm still very relying on google docs for everything and number four how many hours i'll sleep in every night how many what hours of sleep do you get every night six and what's your situation married single kids marry with three kids three kiddos how old are you i am i am 45 45 last question what do you wish your 20 year old self knew uh that starting a company is not that hard it's just a lot harder than it looks is it it looks a lot harder than it is guys it looks harder than it is coming from manny again uh uh outreach growing fast 3 100 customers uh bookings per quarter now they passed last year 10 million in new bookings per quarter hoping to break 17 million new bookings per quarter by q4 of 2019. that that'll put them past 10 million dollars per month in revenue they're still growing 100 year over year even at their scale 60 million raised maybe a big announcement on the way in terms of funding we'll see what happens burning caught between two and three million per month right now which again is allowing to drive so much growth 350 folks on the team in seattle 145 net revenue retention super impressive less than one sdr for two aes then one implementation manager and then again uh csms that are incentivized uh by with commissions to drive expansion revenue interesting model manny thanks for taking us to the top