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Malcolm Lui:
Welcome to the High Value Sales Show of Eversprint.com. I'm Malcolm Lui, the Managing Member of Eversprint, and today we're speaking with Nick Heddy, the Chief Revenue Officer of Pax8, a company that helps managed service providers achieve more with the cloud. Welcome to the call Nick.

Nick Heddy:
Thank you for having me Malcolm

Malcolm Lui:
Nick, you grew your company's revenue 4,393% from 2014 to 2017 and in 2018 you grew revenue by another 400% YoY as well. Before we talk about you grew your company so fast, can you briefly share what your company does beyond my quick intro, and how your company differs from the competition?

Nick Heddy:
Yes. So Pax say is cloud distribution and what I mean when I say that is we feel like the market has been evolving over the past decade and that there is a convergence right now where more and more people are looking for cloud applications and softwares in order to move their business to the modern workplace and well legacy distribution is very good at shipping a box from point A to Point B. We feel like they are lacking when it comes to all of the subtle nuances when dealing with cloud business. And so we focus on MSD who primarily focus on the small to mid-sized market and we help them achieve more through cloud technology. And there are lots of distributors in the market and I think we stand out because of the wing man experience that we're providing and when I say that it means there are oftentimes a gap within an MSP business and whether it's marketing or delivery of services or support whatever that may be. Tax rate has teams trained up and during your onboarding call we would identify what those gaps may be and we look to fill those with the packs a wingman to enable your MSP to grow fast

Malcolm Lui:
Ok now some of the terminology is new to me and a measure might be new to people who are listening as well. Can you again describe maybe in layman's terms what a cloud this distributor does

Nick Heddy:
Yes. So as a cloud distributor we believe the days of hardware are waning and you can build a pure cloud play and fully support your end user customer. But it is complex to integrate lots of vendors together and deliver a fully baked solution to your end user. And so tax rate is focused on making consumption of cloud easy

Malcolm Lui:
Kiki give a simple example of how like how packs does that

Nick Heddy:
Yes. So Patsy has a technology that we call x 8 stacks. And this talks to the stack of technology that you take to your customer which may include Office 365 some backup products like maybe a VM a dado or an interest scale and then security products like a web root of Symantec and iron scales and many others. We allow you to build that package to give one bill from PAX a and integrate all that technology together as it's being delivered.

Malcolm Lui:
Ok. And the MSP that stands for managed service providers. What did they do for their clients and how do they use taxi services to deliver their service

Nick Heddy:
Great question. So the average small business oftentimes will not have a budget to have a fully staffed I.T. headcount within their organization if they are less than twenty five users. We have found that to be kind of the tipping point where they do have some in-house staff instead of bringing on a full headcount. They'll oftentimes outsource that to a managed service provider. We'll make sure that all the technology is always up and running and meeting the business needs of that small business. And so the example would be Microsoft and other products bundled together being consumed by a small business. They'll actually manage all of those services for you

Malcolm Lui:
Right. OK. And so whatever services you need the managed service provider they will turn to PAX eight to help deliver that

Nick Heddy:
As a small business you might not know what package from Microsoft you need as they have forty thousand skews out there or what security product is the new leading technology that will keep you protected. You want to focus on your core business which is going out and getting new customers and they rely on that trusted consultant. That meant a service provider to give them and deliver them the right products

Malcolm Lui:
Right. And so the main service providers. What else did they do other than a mean one to use Pax eight to deliver the service and then their job going forward. Just make sure everything's running properly is the MSP would be

Nick Heddy:
Yes so they had to add value in a lot of areas areas. Security is typically a focus for them but they are constantly managing the endpoints within an organization to make sure that you are protected from any and all threats.

Malcolm Lui:
Ok great. Got it. Now your growth was a tremendous over the past few years. Right now over 4000 percent from 2014 to 2017 and then you guys kind of slacked off a bit. You only had 400 percent growth last year. So now you know before we talk about how you did this though I can I guess we did already talk about this but can you share with the three biggest drivers were of that amazing growth.

Nick Heddy:
Yeah. So for PAX say Microsoft is actually absolutely the cornerstone of what we do but Microsoft can be complex to deal with directly. And so our go to market strategy is very much in line with with Microsoft's. And over the past quarter Q4 we were notified that we added more net new customers to Microsoft than any other distributor in the world. So I would say Microsoft is absolutely a piece of that we have a lot of technology that makes the sales and marketing easier through packs 8 stacks which is RBI tool. It is always looking at what every end user is consuming which is underneath of our man and service providers. And it is helping them to decide what to sell next. It is comparing companies within the same industry or niche and giving a security score and making sure that those customers are are always in line with what our industry standards. And then the third biggest driver would be the wing man experience which is whether you are a vendor a partner a customer you can always know that you are going to be treated as is you treat others. And so it is that that golden rule that helps us grow best

Malcolm Lui:
Ok. Can you recap again the top three drivers. Because I think I got a little bit lost there trying to follow all the terminology. So the first one I know you mentioned is Microsoft. You have a similar go to market strategy as Microsoft. I think I think I need some clarification there. The second one I think you talk about you make it easier to sell your services on a marketing and sales front. Again I think I may need some more elaboration there. And then the third one wing man experience that I get the sequence right or wrong here.

Nick Heddy:
Yep those are the three

Malcolm Lui:
Okay great. Can you recap a bit more on the first one then the your Microsoft go to market strategy

Nick Heddy:
Yep. So Office 365 is the fastest growing SAS product ever in history and within the US Microsoft has said that only twenty one percent has adopted Office 365 and they believe that sixty five percent of that remaining 79 percent is going to be moving in the next 18 months. So there is this tidal wave of opportunity for those who can make Microsoft easier to consume and that is the cornerstone of what Pax eight does. We make Microsoft easier to consume for managed service providers and that's absolutely number one biggest growth driver.

Malcolm Lui:
Right. OK. So make it easier for four companies to MSD to offer the Microsoft platform to their clients.

Nick Heddy:
Exactly

Malcolm Lui:
Right. And the reason why you make it easier is because Microsoft as fee. How many thousands of seat of S.K. used you mentioned. So you make it easier to package up what the end is need for their client using the Microsoft products.

Nick Heddy:
Exactly

Malcolm Lui:
Got it. And number two making it easier to sell the services. Can you elaborate on that again

Nick Heddy:
Yeah. And I apologize for using very technical terms every interview I do is usually super technical. So Microsoft being the cornerstone of the offering for our managed service providers. We then use a business intelligence tool that tells our partners what to sell. Every single customer that they have. So based on what they're consuming today it will say Mr. MSP you should be selling this product next to this customer based on their industry. How many employees they have and what other technology products that they are consuming and so often times in MSP doesn't have the time to comb through Excel spreadsheets. We bring those solutions rate to the forefront and give them the marketing collateral in order to make it easier to sell next.

Malcolm Lui:
Nice. OK. So they just have to do a simple survey of sorts. What industry they're in. I mean employees they have maybe have a quick discussion is that what kind of services they're using now and what they might need. And then your tool offers up optimal configure or what they think is the best configuration to start with

Nick Heddy:
Yes so all of that is automated. So we are looking at the industry they're in we know how many employees they have. Some of these are the basic data points that we gather to turn somebody on to Microsoft. So if you think about how many e-mail licenses do I need what type of license do I need. All of these things tell us a lot about an end user customer. And we take that information and pick the next product that makes the most sense.

Malcolm Lui:
Right. And then the benefit here is that it just makes it really easy for the MSP and I mean easy but even very fast right for them to assess what their potential client may need and giving them a quote or proposal quite rapidly as well

Nick Heddy:
Exactly.

Malcolm Lui:
Awesome. Now how much longer does it take your competitors to do something like that

Nick Heddy:
They don't even have that capability today and it would be somebody who is doing a manual look up. So if you think about a person having to look at every customer and what they're consuming and what industry they're in and how many employees they have and then to make a recommendation that could that could take an hour. Well we do it constantly for 40000 customers.

Malcolm Lui:
Forty thousand is a good number. I just. Your systems essentially allow you to handle 40 thousand customers. How much do you have any taken on how many customers the other cloud the super does have or can have given that they're more manual

Nick Heddy:
Yes so we are absolutely the small fry the newcomer. Our competitors are all in that 50 billion dollar range. When we think about the people we are actually going head to head with this MSP space. And so with our small revenue mark that I shared earlier where we're not scratching the surface I would imagine they have a hundred times more customers than we have.

Malcolm Lui:
Right. They doing it all may or much more manual process than you.

Nick Heddy:
I don't work for them but I would I would guess that they do

Malcolm Lui:
Right. Okay. Got it. And the third one. Your wing man experience. You talk a bit more about that.

Nick Heddy:
Yeah. So if you think about companies that provide great experiences out in the marketplace in general across all industries you think about companies like a Nordstrom's or a Patagonia that you want to do business with them because they treat you well. Packs say describes this as the wing man experience and or our managed service provider partners trying to get their customers from an on premise scenario to the cloud can be complex. And so you need a wingman when helping your customers make that move and Pax aid is there to fill any gap that you might have within your managed service provider business and make that is an easier transition as it

Malcolm Lui:
Can you give some examples of how the taxi in man helps out

Nick Heddy:
Yeah. So you see if I can give an example without being super technical

Malcolm Lui:
Here.

Nick Heddy:
There is an infrastructure as a service provider out there. Microsoft and their cloud platform is is your. And if you are somebody who is consuming a piece of hardware and need to architect your new infrastructure in the cloud but do not have somebody on staff to help you to do so to quoted out to estimate what those costs are going to be moving forward so that you can then in turn send a quote to your customer. That is one example we will take a look at your infrastructure and we will provide you with those quotes and estimate those usage numbers so that you can serve your end user

Malcolm Lui:
Right. Okay so it's outside their area of expertise then they have taxi available to help them. If if at all possible

Nick Heddy:
And anytime you're selling a new customer maybe your focus is on continuity or security and so those products that are outside of your specialty your you're not up to speed on what we can help you to sell those position it. Bill your go to market stacks so that it all makes sense

Malcolm Lui:
Right. Okay got it. So when you said yes forty thousand customers is that 40 thousand businesses that are using the pax 8 products or 40 thousand in this piece

Nick Heddy:
Forty thousand businesses that are using the pax 8 product

Malcolm Lui:
Ok. And how many MSP is with without typically translate into in terms of

Nick Heddy:
Yet we are approaching 6000.

Malcolm Lui:
Ok so you have the six thousand MSP who are servicing 40 40000 customers. OK great. Can you share a bit on what your 2019 plans and objectives are. What's the biggest opportunity that you see in 2019.

Nick Heddy:
Yeah so we're hoping that we continue to grow at that 400 percent rate year over year. We are planning on expanding internationally. Today we serve us and Canada. We are planning on moving into the UK and Australia this year and we are also planning on expanding who we make our services available to. So expanding our past market to include telco agents. So right now it's ninety eight percent made as service providers but for those telco agents who also have a customer base they just operate in a little bit different business model. We're planning on making some updates to our very flexible platform to also serve them.

Malcolm Lui:
Okay can you ask me share with me what the telco agents would do exactly in layman's terms not exactly

Nick Heddy:
So typically a telco agent are a group of great salespeople but typically do not have the in-house expertise to support their end users directly on the products or to handle the billing or those products. And so we are updating a module within our our cloud platform that allows you to select x 8 will bill on your behalf impacts 8. We'll do 2 1 support for your end user customers. So therefore the end result is enabling these agents to take Microsoft to market and sell it to their end users who are normally only consuming telco cars connectivity type of products.

Malcolm Lui:
So you'd be selling potentially the Office 365 suite of them

Nick Heddy:
Absolutely

Malcolm Lui:
Okay. Right. Because they already have the relationship with the business owners. So now it's a it's a nice way for them to add more revenue to their business and everyone wins.

Nick Heddy:
Yes sir.

Malcolm Lui:
All right. Got it. So again I'm still a bit shocked and stunned by your numbers. How were you able to so rapidly get six thousand in this piece to use tax rate to help forty thousand businesses over the past four years

Nick Heddy:
Yeah I think that the MSP community is a tight one and everybody talks to each other so word of mouth is a huge driver for PAX. And what that means is whether someone is a hundred million dollar managed service provider or a Five hundred thousand annual revenue service provider every one of them is connected to many managed service providers within the ecosystem. And so we provide the winning man experience that Nordstrom like experienced through every single partner no matter the size and we're able to do so because we have automated everything we can through our platform and so it makes those touches when we get to get on a phone and get to talk to our partners very high value and not spending time clicking around and setting things up. We have automated all of those types of

Malcolm Lui:
Ok. So you make it really easy to do business with you now. How did the MSP beyond word of mouth how did they hear about you. I see that you have a fairly decent size paper to campaign running. Is that your your source of lead generation outside of word of mouth or are there other sorts of sources of needs

Nick Heddy:
Yes. So we have seen the most success in our field marketing and so we are running anywhere from 60 to 80 field events where we are hosting them ourselves and getting together our partners we are going to third party events like the channel company or datacom or VM. On all of these guys who are interacting with with managed service providers and we're going to those shows and talking about what it is we do. And again there are approximately one hundred thirty seven thousand MSP is in the US albeit many of them small but we have just begun to scratch the surface and I think we have about 11 percent of the active cloud service providers of Microsoft on net using us. So there is still lots of potential growth

Malcolm Lui:
So you're turning 60 to 80 events a year and meeting with an MSP. OK. Now

Nick Heddy:
Some.

Malcolm Lui:
Do you find out to be a bit limiting though because it's kind of tough to scale that sort of hiring more people to attend more events right

Nick Heddy:
So we've got a multi touch marketing approach so field sales is where we see our heart highest our ally. We've also got lots of digital marketing campaigns and this is driving a good portion of our our new partners that are signing up with packs a and then we also view it as our marketing automation which is how do we help our partners find new customers and sell more to their existing customers. And so when I think about our marketing efforts it's around our field our digital and our outbound call center that we have here in Greenwood Village. But then it is also marketing automation for those who have already signed up with us to help them get more wallet share.

Malcolm Lui:
All right. He shared a bit about your digital marketing campaigns and what you're doing there.

Nick Heddy:
I do not have that information at my fingertips.

Malcolm Lui:
I mean broadly speaking what what channels are you using digital marketing wise.

Nick Heddy:
I mean we do have a couple. I'm going to jump in and you can take me out but it's just so I can kind of talk. We do have a comprehensive digital marketing strategy that we have a digital marketing leader that has a team Who deploys various agencies that we work with Admiral and the create asset pieces that are gated in order to generate new leads. We are very targeted. We get a lot of lists when we go to these events throughout the year and we get the exact email addresses to be able to directly target those. The ideal customer for us. The is. So those are a little bit of mixed Nick can repeat it in his own words but that's that's a big driver for us that digital. So we are recruiting about 300 new partners per month and a lot of that is attributed to our digital marketing strategy

Malcolm Lui:
No need for Nick to repeat himself. I mean you want introduce yourself to everyone

Nick Heddy:
Hi I'm Amanda Lee I manage public relations for Pepsi

Malcolm Lui:
All right. Fantastic. And thanks for sharing details on your digital marketing campaigns.

Nick Heddy:
Yeah. So I can expand a little bit. So we use five or six different vendors. Some of them are for prospecting and in retargeting we're running packs 8 ad placements on third party sites. Obviously we're in Google ads so online s it SVM again highlighting packs 8 Microsoft in that link yep we are doing paid social advertising we're doing digital demand generation. And as Amanda alluded to we are creating unique pieces of collateral that are in high demand that we sometimes gate and we are collecting a service provider leads that that route as well.

Malcolm Lui:
Fantastic. Now these are your marketing campaigns both offline and online. Are they all integrated together. Where are you. For example through your paper click advertising you'd be able to determine what messages what ads are converting best and then pushing that out of your marketing

Nick Heddy:
Yes. So we use a lot of the same tools I would imagine other products like Marketo or we can take all of our digital marketing feeds and plug that in and then we are creating those interesting moments based on how engaged somebody is with us. And it has been rolling over and creating tasks within Salesforce so that our cloud solutions advisors can reach out to those prospects

Malcolm Lui:
Right. Fantastic. Now in case I think maybe I missed this and maybe you've we talked about it but just to recap again. So right now you're working with six thousand MSP. Your market is huge. Right. Because you said there are one hundred thirty seven thousand MSP is out there. Do you have a target for how many more MSD you want to get on board get that for about year in

Nick Heddy:
At the end of this year we're hoping to have 10000 and we are growing today by three hundred fifty new partners per month signing up with us and that number continues to increases. Word of mouth gets out and as we continue to double the amount of events and continue to double down on our digital advertising we can in volume grow

Malcolm Lui:
Right now it will. Is it safe to say that your revenues can grow linearly with the on average number MSP easy onboard.

Nick Heddy:
Hopefully exponentially as people begin to use us. It's typically just for one product and as they see that we met experience that they get they're typically going to market with four point six vendors on average and so it should be we're testing Microsoft with you. And then we see them go to market with almost five different vendors and so we are seeing it exponentially grow not not linear

Malcolm Lui:
Very nice. Now are you. Are you tied to the hip with Microsoft. Could you also use your technology to provide cloud services on a different platform like do those platforms for example

Nick Heddy:
Absolutely we could. We are seeing that Microsoft and specifically the email suite of products. So you're Office 365 your m 365. Those are among the fastest adopted and so we are making sure to lead with those editors as that becomes are. Our Trojan Horse into that that partner and that customer. But it's. Not the only. Way we get into a new partner there are lots of security products that are the first ones that are being consumed. We try to. Pick those cloud products that are. Widely adopted but we also try and find New up and comers who maybe haven't hit the market yet. And so as we take one of those. Companies and. Plug it into our eco system. I don't want to. Give away the name but we dropped into. A new vendor about three weeks ago and we have seen. Two hundred and twenty six partners buy it for the first time. In a three week period.

Malcolm Lui:
In an relative to pass new product offerings that's a big change.

Nick Heddy:
Yes so I mean it all depends on on the market. And when you pick something that is not a replacement. Meaning I've got to go and uninstall something and install this if it is a greenfield opportunity. Those types of products you're seeing a much higher adoption rate.

Malcolm Lui:
Right. Okay so what you see is her biggest challenge in 2019.

Nick Heddy:
Yeah. So I would say we have an amazing feedback loop with our partners and we want to provide that we met experience. We're doing releases on our platform twice a week. We'd like to get to once a day it would be just to make sure that we stay focused on our targets and not try to do too much at once. We've got a lot of big plans this year but we will not lose focus that the goal is to make cloud consumption easy for managed service providers. There's a lot of cool things we can do but we want to make sure we're always delivering on that that core focus.

Malcolm Lui:
Right. How about marketing and sales front any particular challenges there that you see that you need to figure out before the year's up

Nick Heddy:
We've got our our unit metrics and the amount of time it takes for a headcount to become effective down to a science. I would say our constraint there is we brought recruiting in-house and it's that person finding enough new headcount for me new salespeople for the four.

Malcolm Lui:
So you can look for more sales people

Nick Heddy:
We need more sales people we've been hiring 20 salespeople every other month for the last year and a half. And so it is it is beginning to expand on itself. We just moved into a new space in October of 18 and it is a seventy five thousand square foot facility and we are expecting to grow out of it sometime in Q3

Malcolm Lui:
Okay. Now can you explain the role that your sales people play in bringing onboard a new MSP

Nick Heddy:
So we have our sales positions broken down into a couple that drive our business. We have our cloud generation specialists. These are our outbound recruiting new partners and getting new partners active. We then have a cloud solutions advisor and their job is really completely focused on Microsoft as that is ninety five percent of the time the first product that's being consumed is the new partners being on onboard and then we have our higher level account managers are cloud solution consultants and it is their job to upscale cross-sell find that go to market stacks that a managed service provider is going to want to standardize on and then help them take that to market with their customer base. So those are really the three key positions it's a lead gen type position a onboarding. And then a account manager. But all three of those people are dedicated to an account. So I made a service provider will have any one of those three that they can reach out to at any time and they also cover for each other. If somebody has a question and it's not a call or out to lunch then somebody can make sure they jump on it immediately.

Malcolm Lui:
Right. It sounds like once they are found and sign up your platform and onboard it the interaction between NSP and your team from human to human perspective isn't too high so they give a lot automate systems in place

Nick Heddy:
We automate as much as we can. And we've got our sales process broken down into we call it Doi apps discover order implement Bill support and typically that loop comes full circle. Any time it's time to discover a new vendor that they want to make a part of their stacks. And so it's very high touch for sales 1 through 3 and then or through 200 can be touch lists on a vendor.

Malcolm Lui:
Right. But your team is available whenever they need to talk to someone which is cool

Nick Heddy:
Exactly

Malcolm Lui:
All right. So I guess three last questions for you. Who are your ideal customers. It sounds like your customers really are your MSP. And I should know. Let me start over and jumped the question number two Jeff the question number one. Say you have a billboard on the freeway and most people only have six seconds to read a billboard. What is the billboard message or your company

Nick Heddy:
In terms of our 6 second billboard message when it comes to cloud. You need a wing man. We are distribution simplified

Malcolm Lui:
Right. Okay got it. And my final two questions. Who are you. Your ideal clients and the best way to reach them.

Nick Heddy:
Yes. So our ideal ideal clients are any managed service provider whether it be legacy and heavily sold on prem or hardware in the past. Those who are transitioning now and need to optimize as much as they can or those MSD who are pure cloud players and want to become as efficient as possible. So any main a service provider looking to make a transition to cloud

Malcolm Lui:
And the best way for them to reach 18

Nick Heddy:
Yeah. Packs 8 that come in the top right hand corner there is it become a partner button you can sign up right there there's no minimums or quotas to hit and you will have an onboarding call scheduled typically within an hour or so

Malcolm Lui:
Would you mind spelling out your euro

Nick Heddy:
Yeah you are all at PAX 8 dot com is P A x the number eight dot com

Malcolm Lui:
Plastic now. How were you guys able to score that four letter four digit alphanumeric domain name

Nick Heddy:
We've actually had a as John Street R our business leader who has been doing this time and time again he's got a formula he uses and I know I'm going to forget some of these but it needs to sound like a verb if you put a number at it you are L is oftentimes available do you plan on expanding in Asia it is a lucky number so he's got a whole rule in fact it's eight rules but he uses this anytime he is forming the name of his business so his first company was telephone Express and he found that it was very difficult to get that company name on a t shirt or a hat as it was too long

Malcolm Lui:
Huh.

Nick Heddy:
It's

Malcolm Lui:
Right. Didn't think about

Nick Heddy:
Started

Malcolm Lui:
That.

Nick Heddy:
He started going with things that sounded like verbs and when it's got an eight in it we have found that we can stick eight into innovate elevate celebrate and so it's been helpful as we said our core values as a company to have that date in there as well

Malcolm Lui:
Okay great. Not as PAC state means something in the tech world.

Nick Heddy:
So

Malcolm Lui:
Okay. But it's easy to remember

Nick Heddy:
Hence the U.R.L. was available.

Malcolm Lui:
Yes that's though. I mean it's four letters for alphanumeric characters is fantastic very hard to find ones that make sense.

Nick Heddy:
Pax is Latin for peace and

Malcolm Lui:
You

Nick Heddy:
If

Malcolm Lui:
Know

Nick Heddy:
You

Malcolm Lui:
That.

Nick Heddy:
Get eight over it turns into the affinity symbol and so we are everlasting peace and the chair

Malcolm Lui:
Good. All right. Thanks for joining us today Nick. In sharing how you accelerate your company's high value sales

Nick Heddy:
Thank you very much I appreciate it.

Malcolm Lui:
We've been speaking with Nick Heddy, the Chief Revenue Officer of Pax8, about his company's rapid growth. For interviews with other fast growing, high value sales companies, or to learn how we can accelerate your firm's high value sales through automation, visit Eversprint.com.

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