For this next startup in the The Sales Wiz Review series, I will move outside of the ML/AI industry, and explore the company Retool.

Make no mistake, however, even if Retool does not fall into a “sexy” or cool category, it is very much a platform that was created intentionally with the needs of developers in mind.

As you will see, this deep focus on the developer experience has made Retool into the startup success that it is today.

But, you are here to understand what the selling environment at Retool looks like. So, let’s get into it.

Financials and Funding

Retool is a Series C2 (in the founder’s words) startup, founded in 2017. In 2022, they raised their C2 round of $45M at a $3.2B valuation. So, Retool is definitely in scaling mode, and investors have high expectations for this company if they are giving them money at multibillion dollar valuations.

In total, the company has raised $141 million in capital from an impressive roster of investors – individuals like the Stripe co-founders and a former Github CEO, as well as VC firms like Sequoia Capital.

From an investor standpoint, Retool has raised money from top names. What’s more, these investors have all led Retool’s Series A, B, C (and C2) rounds! It is really impressive that Retool has been able to consistently raise from the same investors, and it signals that the company’s leadership and its investors are in alignment around Retool’s vision, goals and execution.

What stood out to me the most wasn’t how much or from who Retool raised money from though.

Rather, it is this article written by Retool’s CEO David Hsu titled “Raising less money at lower valuations” that caught my eye. In it, Hsu talks about how he and Retool have taken a different approach to fundraising – rather than maximizing valuation or capital raised, he has been careful to minimize dilution of shares, to ensure that the company founders and employees have more favorable outcomes in a liquidity event like an acquisition or IPO.

Hsu, mentions three priorities he valued during raising Retool’s Series C:

1. Raise at the right valuation, not the highest valuation possible

2. Raise the least amount possible to achieve our goals

3. Align with investors who put the team first

Not every company can set terms like this, but Retool can. It is a testament to the negotiating power they have, presumably driven by their revenue metrics – both net new and expansion, as well as product-market fit. It also shows that their CEO is trying to optimize outcomes for not only the founding team and investors, but the employees as well.

Finally, looking at point #3, Hsu is very keen on aligning himself with the right investors. This is easy to overlook in good times – like 2021 was – when Hsu wrote this article. It is in the tougher times, like we are going through now, where the best investors shine and work diligently with their portfolio companies.

The fact that Hsu had this balanced view in a time where valuations were skyrocketing, and massive rounds were being raised, makes me think he is a strong and thoughtful leader.

According to private market research tool Sacra, revenue-wise, Retool hit $30M in annual recurring revenue (ARR). $82M was the estimated ARR in 2022, likely this is an estimate and the exact figure is a bit harder to locate, or is not widely available.

Assuming a 3x revenue increase from 2020 to 2021, and at least a 2x from 2021 to 2022, Retool is showing best-in-class ARR growth for cloud-based SaaS platforms. Even with the macro headwinds in late 2022, Retool is well above average in the revenue growth it has demonstrated YoY since 2020.

This is really impressive and is not only a reflection of strong execution of the go-to-market (GTM) engine that the company has built, but Retool’s strong product-market fit as well, which we’ll go into next.

Product and Market Fit

Some may look at companies like Retool, with ARR growth charts like the one above, and assume it is a rocket ship whose product simply sells itself. This may be true, but I would be careful not discount the deep work that CEO and founder David Hsu put into adapting his vision while navigating product-market fit early on in the company’s history.

Early on in Retool’s journey, Hsu had a hypothesis that internal tooling is a big hurdle for developers in accomplishing their day-to-day tasks.

He experienced this personally while building side projects in college. Him and his friends constantly would spend time on internal tooling rather than building the external facing product.

Building the vision and ICP

From these experiences, Hsu realized that helping developers build internal tools like dashboards and customer support applications faster would be his mission with Retool.

Hsu went in with an initial hypothesis about his ideal customer profile (ICP) early. This is so important for a founder to lead with. If there is no clear ICP hypothesis, it is difficult to focus the product early on to adequately serve a need. Think of the ICP as a compass for the company’s initial product features and early founder-led sales strategy.

Hsu had to iterate a lot on his ICP hypothesis through research and calls with potential users. He was deeply involved with the initial cold email campaigns that went out to prospects and early customer calls.

Once the team found the first ICP that really resonated with what Retool was building, Hsu laser focused the team’s efforts on serving 100 happy customers.

As an example of this initiative, they built analytics in-house that would ping the team on Slack anytime a user was in the product. The Retool team could watch real-time what the customer was doing, and jump in proactively if a customer experienced an error while in the product.

Reading this anecdote, it is clear that Retool was actually customer obsessed. Many companies claim to be “customer-focused” but their actions paint a different story.

If as a salesperson, you interview with a company that has a roadmap not clearly tied to customer needs, if they are not clear on their ICP, and if they don’t have this customer obsession and it reflects in their yearly churn rates – say no thank you and run. Retool has done a great job of getting these pieces right early, and it is paying off for them today.

It’s clear that Retool has found product-market fit, within a big market. Any company with developers that are tasked to make internal tools can be a Retool customer. I am not sure what the exact total addressable market (TAM) is here, but Retool already boasts customer logos from enterprises like Mercedes-Benz and Amazon, to high-growth startups like Brex and Plaid.

For some companies at Retool’s stage of revenue, the typical customer may still fall into a certain category from small business (SMB) to mid-market (MM) and finally enterprise.

Retool seems to have good coverage across these categories, and more importantly, they are enterprise-ready as evidenced by big logos on their website. It is not easy to get a company like Volvo to agree to put their logo on your website, so if Retool has it, they have delivered immense value to this company’s development teams.

Furthermore, if Retool has successfully sold into the enterprise, they can always move down market. They are still early in their journey, and this company has room to grow. But it is promising that they have a robust set of logos and a good path to continued and sustained growth.

This is possible because of Retool focusing on the right things for an enterprise from a product standpoint.

As an example, their security story is strong, as they know the platform will be handling customers’ internal data. Retool boasts certifications like SOC 2 and ISO 27001 which increase the likelihood that you can get a deal through a customers’ IT teams.

Getting key enterprise careabouts like security right is often overlooked by startups early on in their journeys. What it leads to if not addressed correctly is very long security reviews, back and forth discussions with IT teams, even just to get small deals over the line with a large enterprise.

Speaking from experience, this can be very painful as a salesperson, so the fact that Retool has a lot of this already covered, is great. Check out Retool’s docs for more info on their security features.

Outlook on growth

As of today’s blog (March 2023), Retool is hiring for several account executives and sales engineers across enterprise and mid-market. I would imagine they are projecting at least 2x ARR growth this year, and you need sales people to do that!

They are also heavily hiring product managers and designers and platform engineers. This signals to me a strong emphasis on continued customer obsession around user experience – this is a good thing for Retool’s sales teams as well.

I don’t think Retool’s headcount growth plans are unreasonable. In the last 6 months, they have increased headcount by around 16%.

With Retool’s growth prospects, I am not concerned that the company is growing too fast and risking layoffs later. As a salesperson, ultimately you will be judged by how close you are to hitting quota and the behaviors that got you there. If you are doing this, I wouldn’t worry too much about a company like Retool having to cut headcount just to show fiscal responsibility. They are growing and if you are producing as a salesperson, there is only upside here.

Should you join Retool?

Disclaimer: This is not career advice, please do not take it as such. 

Funnily enough, I recently applied to a sales position at Retool. Unfortunately, I got rejected.

At least they let me down easy.

Some may look at Retool and say that this company doesn’t have much upside left from a sales perspective to join and exceed quota in Year 1 and 2.

This may be true – the salespeople who were at Retool from 2021 until now have probably done really well. That being said, now Retool is clearly positioned in the market, and it is outranking its competition on G2.

You may not see the highest on-target-earnings (OTE) as possible joining Retool, but that is because they have already figured out a lot of the hard parts of GTM early sales.

There will probably be good training, there will be a strong sales playbook, you will have SDR and sales engineering support resources. But most importantly, you will have strong leadership who is customer-obsessed. Don’t discount this – it will make your job of selling easier.

Finally, if given the choice, I would think about indexing less on base salary or OTE, and I would instead seriously consider weighting your compensation a bit heavier on the equity side.

I hardly ever would give this advice to a salesperson joining a startup. In fact, in most cases you should take the higher base and negotiate a solid commission rate on your quota. But, if given the choice between a different startup offering a higher OTE vs a lower OTE + Retool equity, I’d go with Retool.

In Retool’s case, the CEO David Hsu has put a lot of emphasis on making sure the company is raising capital responsibly, and setting clear expectations with the company’s investors. His goal is to minimize dilution during fundraising and not get into ego games like raising at high valuations.

This type of leadership is not common – Hsu is very intentional and he ultimately seems to want a good outcome for himself, Retool’s leadership, investors, and its employees. If Retool is able to exit or IPO at around a $1.4B valuation (10x its current total capital raised), it will be a good outcome for its investors and employees. But, I think Retool has bigger potential than this.

This is speculation, but this company is probably very close, if not already, at $100M in ARR. With these numbers, there is a good chance for Retool to go for an IPO over the next couple of years. It is just a matter of the market conditions becoming friendlier, and multiples returning to a more favorable place.

An acquisition isn’t out of the question, but I don’t think Retool would have to go this route right now.

If you are exploring becoming a seller at Retool, I would say seriously consider joining. I would first be sure to understand their growth plans, your quota, and the sales support systems you will have.

Finally, I’d talk to a product leader to ensure they are as customer-obsessed as Retool’s founding team is. If these elements all look positive, and the compensation is good, I would say you have found a great opportunity!

Retool is a company with strong product-market and customer fit and they are on a growth trajectory, while balancing growth with intention. This is a rare combination, so if unlike me, you can get an interview with Retool, go for it!

Resources

• Retool’s Path to Product-Market Fit by First Round Review

• TechCrunch on Retool’s C2 fundraise