The is what makes software companies so valuable.
Episode Stats
Words per minute
249.58194
Summary
In this episode of the podcast, I sit down with the CEO of Slack, a company I've been a long time customer of, and we talk about how he bought a company, why he bought it, and how he plans to buy more companies.
Transcript
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first thing that we do as soon as we buy a company, put the prices up. Let's say they have
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a thousand customers. There are some people that are willing to pay a lot more for a different
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level of service. If you pay for Slack, they have this beautiful business model where you start very
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cheap, sometimes free. A year later, all of a sudden you're paying 300 bucks a month for it.
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You're like, whoa, what's happening? Well, you added more seats. You added this extra feature.
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You wanted integration with this tool. So we're always looking for products that have not optimized
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those areas of their business, but they have strong retention. Then I know how to come in
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and fix the packaging, pricing, and what's called the value metric
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to make sure that we increase the net revenue retention.
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Because if we can go from net revenue retention of 80%
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to a number that's gold standard is 130%, that is an annuity.
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Every year that those same customers stick around,
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even if some of them leave, the rest of them that stay spend more,
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then over time, that's what makes software companies so valuable.