Auren Hoffman, CEO and Chief Historian of SafeGraph, joins Cross Screen Media CEO Michael Beach to share his business growth principles and thoughts on the critical investments you need to build a successful company. Watch our latest Screen Wars Thought Leader Interview here and read the full transcript below!

Michael Beach: Auren, thanks for joining us today.

Auren Hoffman: Excited to be here!

MB: Excellent. Well, we’ll start you off with the softball here that we ask all our guests, what was your first job and what learnings did you take away that you applied to your career?

AH: My first job was frozen yogurt at TCBY. I initially got paid minimum wage, which was $3.75 an hour at the time. I had recently turned 14 and I started working 40 hours a week in the summer, got two raises, got to $4 an hour, and then got to 4.25 an hour. Then I quit because the store owner did not want to make me an assistant manager, which is probably reasonable, given I was 14.

MB: Yeah. That’s probably a reasonable expectation. What was the hot seller back then?

AH: Oh, the Oreo milkshake was definitely the hot seller. If you worked there, you could make just a little bit more and then you could have a little bit yourself.

MB: Nice! How’d you end up on the quick path where you are today?

AH:  After TCBY, I started a temp firm for high school students, which ended up paying for my first three years of college and then enjoyed the entrepreneurship life.

MB: Excellent. Obviously many successes there. Obviously, we’ll get into LiveRamp and other areas, but can you give our community a little bit of a background on our current company, SafeGraph? What challenges are you solving for, the business model, and go-to-market strategy?

AH: SafeGraph sells geospatial data; data about physical places. So if you want to find out about that local McDonald’s on 555 Main Street, we have data about that, including the basic data, like the store hours and things like that. And that’s it. We just sell data and we don’t do visualization. We don’t have a UI and don’t sell core services on top of it. We don’t predict things. We literally just sell facts about physical places.

MB: I’ve listened to a couple of your recent podcasts. You’ve done both World of DaaS, among others. You talk about the fidelity and accuracy of location data. It’s just a lot tougher of a challenge than people think. Can we get background on that?

AH: Before we started, we had a different business and we were trying to buy data about physical places, these “points of interest” data. We found the data was maybe 30 to 50% accurate when we were trying to buy it. So, the information was relatively inaccurate but  accurate enough for the use cases they were selling to. The two use cases they were selling to were marketing or real estate. With marketing, you might want to send a direct mail piece to all the Thai restaurants in New York City or something like that. They also sold to real estate brokers to then turn around and sell to individuals. Then the individual could disambiguate the facts themself. We were trying to buy it for data science and machine learning purposes. In which case, you can’t have humans looking at every single fact, you have to trust the facts and you’re building models off those facts. If you’re 50% accurate, it completely doesn’t work. Even if you’re 90% accurate, it doesn’t really work that well, because if you start multiplying 0.9 against each other a lot, you get to a pretty small number. So you need a very high-level accuracy, least in the mid-nineties and often in the high nineties for data science or machine learning use cases.

MB: Just curious, what impact did the pandemic have, especially store hours and openings and closings? I’m sure that was just a unique challenge.

AH: The pandemic really accelerated our business at SafeGraph because data was already changing a lot. Obviously, if you think of the death of a place, let’s say a restaurant, had a roughly 1% death rate per month pre-pandemic, and they’re already changing things like store hours, pretty regularly, and stuff. But post-pandemic, things started really rapidly changing. You went from 1% a month to three to 4% a month. You went from changing store hours every quarter to every year to sometimes every day. So just the rate of change was dramatically different. That really helped our business because the need for really accurate data, data that wasn’t just accurate a year ago, but it’s still accurate today, went up quite dramatically.

MB: Interesting. Well, our theme this season, our third season of the podcast is part business models and part investing. We’re looking at this both from operators that are starting companies to individual investors, funds, and corporate development, obviously, you’ve covered all these areas throughout your experience. But, I’m curious about SafeGraph. I know you recently did a series B, but even looking back to the series A from 2017, you had more than a hundred investors. Was that intentional from the start?

AH: Yes, it was. We thought it’d be really great to have these 120 or so folks rooting for our success. Time will tell whether it was a smart move or not, but it was definitely an experiment to do something like that. And so we got a lot of interesting people on our account table and because we sell data and we sell data to diverse industries, we also got people with very, very diverse experiences on our cap table as well, who could help us think through many different challenges.

MB: That’s interesting. Looking back to then, and even to today, going through the series A and series B, what’s different about the market today and both on the business model side and the investment side versus when you started LiveRamp?

AH: Well, I think a lot of things are different today than 10 plus years ago. It is much easier to raise money today; it’s way more entrepreneur-friendly. It’s much clearer what you do with the money, the metrics are clearer. So there’s a common language that people use, whether it’s like CAC to LTV or just even the word ARR didn’t exist when we started LiveRamp. So there are just a lot of best practices that exist today, even just the customer success function didn’t even exist back then. The “how” to running a business is much clearer today and it’s much more standardized. Obviously, you can deviate within companies, but generally, they’re much more accepted best practices today. Whereas let’s say 2006 to 2012 timeframe, it was making up as you go.

MB: When we started Cross Screen Media in 2016, at the end of the year, it was pretty obvious that recurring revenue was the name of the game for us. That had to be our core product to help remove unpredictability from the business. Today, I counter your point of the customer success function, obviously, net revenue retention just seems like a much bigger metric even today than just pure contracted committed revenue. Is that something you’re seeing out in the market today as well, or what trends are out there?

AH: Well, ARR, this annual recurring revenue is really nice because it makes it super easy to plan, right? So I know what my revenues will be next month exactly. Basically to the penny. And I know what my revenues will be in two months, let’s say within one or 2%. And so it’s really, really nice. It makes it easy, you don’t have a lot of complications with your finance, running your books is pretty simple, etc. But the fastest growing businesses right now are not recurring revenue businesses. The fastest growing businesses are some sort of transaction or API-based transaction businesses like Stripe, Twilio, Shopify, Marqeta, Plaid, Checkr, those types of businesses. So there are probably a lot of things you can do to accelerate your business if you get yourself a little bit out of the ARR framework.

MB: It’s definitely interesting. It seems like some combination of the two where you’ve got a customer base, even a Shopify charges a nominal fee every month, and then drives the majority of the revenue through the transaction.

AH: Correct.

MB: You recently tweeted about the ad tech, TAM being much larger than people think. And I think you used Amazon and Walmart as examples. What are your overall thoughts on the ad tech and MarTech market and how people are looking at it? What is your thought behind thinking that TAM’s so much larger?

AH: Well, I think there’s this trope that the ad tech market is dominated by Google and Facebook and there are, and all the money flows into them. There are maybe a couple of other players here and there, like The Trade Desk or something. It turns out it’s an extremely fragmented market. Companies like Walmart have over a thousand vendors that they use. Many of these companies are very, very good companies that are doing extremely well. And they’re spending money in all these different places.

And then within companies like Walmart, they themselves have an ad tech unit. In their specific case, it makes 1.5 billion dollars annually. That’s billion dollars annually, which is a lot more than most of these ad tech companies make. Amazon has over 31 billion dollars that they make annually from their ad tech unit. So there’s a lot of advertising that happens in all these different places. It’s quite diverse where you can advertise. And if you think of it as probably most of the listeners here are like a B2B type of listener. You probably already understand that because you probably have all these different MarTech stacks. You probably have all these different ways of reaching customers. You probably don’t have any one dominant thing where you’re spending most of your marketing dollars. In fact, most of your marketing dollars are probably spent on people inside of your company doing things. So marketing’s just extremely diverse.

MB: It’s interesting because going heavy into the video market five years ago, we’ve seen the same thing. You’ve got YouTube with digital being a huge play area. But when you look in the overall video market, they’re only about 6% of the spend in the U.S. And so to your point, there’s a ton of fragmentation across the remaining 80+ percent that does not go to one of the bigger players in areas. Google’s a dominant part of search, which gives them a large share of digital. But when you look into individual pockets, it’s different.

AH: If you think of a TV, so rather than like a phone, but if you think of a TV, in phones, there are two players that base two operating systems that control all of the phones. And let’s say in the U.S., they have 50% market share each in, if you think of TVs, there are tons of different TV manufacturers. Plus there are places like Roku, plus there’s Opal TV and other types of things that are out there. So there are so many different operating systems that are underlying when people watch TV. So even that is just way more diverse than mobile.

MB: I’m actually interested to get your thought on that because you take that one step further. You’ve got the OEM of the TV and then you’ve obviously got the ability to plug in a third-party device, whether it’s a Roku or Fire TV or a gaming console, which you didn’t have in mobile, how much fragmentation do you think you could have there? Because people, they replace their TVs every seven years on average, less than mobile, but you’ve got more players. Is that a good thing or a bad thing?

AH: Well, I think it’s generally a very good thing on almost every level. So you’re going to have different TV manufacturers, which will experiment with different ways of advertising. You’re going to have different platforms like Roku, which has been just incredibly successful in just how they’ve been experimenting with different ways of advertising. You’ve got from LG to Visio, to all these different other players like Samsung that are thinking about advertising in a different way. So I think it’s generally good. You’re going to have a lot of experimenting. And then it also really means you have to spread your advertising out. There isn’t any one player where you can use where you can reach your audience. And so if you really want to have some sort of one-to-one advertising, you have to do it over many, many different platforms.

And so in many ways, these different platforms are not competing with each other because if you think of it, they’re almost cooperating if you’re a buyer like Proctor and Gamble, you have to buy across all of them. And so they have to make it easy for you to buy across all of them. Whereas, on the internet that a lot of platforms would be more competitive because they could say, Hey, you could just use us and we’ll reach everything let’s say on a mobile device or RTB so it’s more interesting on TV.

MB: I want to get into your investment thesis as a personal investor in a minute, but one more question on the business front. I saw the other day you posted that SafeGraph’s hiring a CRO and that’s the first C-level position that you’ve added. I think that’d be surprising to a lot of people considering that your successful business has had two rounds of funding and is just now expanding its executive team. One thing I’ve always found really fascinating about you is your ability to build a bench and how successful people are, even when they start out really young, in your companies and they’re all over the industry now. What do you think about growing talent in-house and is there a ceiling or how should other entrepreneurs be looking, thinking about this?

AH: Well, every once in a while you get lucky and you hire somebody who’s a 10xer and who’s just growing. Essentially they’re growing faster than the company is growing. And if you have a person who’s growing faster than the company is growing, then you can give them more and more responsibility. If the company is growing really fast, then you’re just going to have fewer people in your company who are growing faster than the company is growing. Then you’re going to have to bring on more executives from the outside. If the company’s growing super slow or negatively, then you’ll have tons of people in your company that are growing faster than the company. Then you’ll have more ability to grow on the bench. Even when the company’s growing incredibly fast, there will be some people in your company that are still growing faster than the business. The key is how do you give those people more responsibility over time?

MB: How do you look at that last part, because I think that’s obviously a good problem/opportunity to have. When you settle in, you’ve got people that maybe have more experience, that are director-level or VP-level of your company. But, when people are growing faster than the company’s growing, do you hesitate to just leapfrog these people around?

AH: 2. You have to make room for the people that are growing incredibly fast because they are the most valuable employees in your company. If you don’t make room for them, they will leave and they might go start their own company. They may go join another company or will leave if there’s some sort of impediment to their growth. For most people who grow rapidly, the number one thing they’re optimizing for is growth. If all of a sudden you say, “Hey, you’re not allowed to grow so fast anymore. You’re growing at 50% year over year, whatever. And now, we’re going to cap your growth at 20%,” they’re going to be upset and they’re going to leave, even if you pay them more money.

You need to figure out ways to get these people to grow. And that doesn’t necessarily mean they have to leapfrog their boss. There could be another area of the company they could operate. You could give them more responsibility, but you probably have to give them even more responsibility than their resume would suggest.

MB: Excellent, I love that as a thesis here – it’s definitely, something that we try to put into practice at Cross Screen and I love the idea that if they’re growing faster in the company and you don’t give them that opportunity then they’re obviously going to have many options. Llooking at your personal investing, what’s your investment thesis? Are you just look at seed-stage companies? And, what type of companies today and industries are you most excited about?

AH: I get excited about companies that have an opportunity to get to over 50% market share in their niche. That eliminates most great companies. Most great companies are in a very competitive industry and the market leader maybe has 25% market share. Often, the number two has 20% and number three has 15% and all three are probably really good companies to invest in. I’m actually interested in more of a niche company that has some reason where they can dominate their particular niche. And that niche might be really small at the time of investing. And if it is small, then you’re either making a bet that they’re going to dominate that niche and the niche is going to grow dramatically, or you’re making a bet that this team is very, very smart. And once they’re no longer growing at a hundred percent year over year, they’ll find an adjacent niche that they can move into and dominate.

There’s some sort of reason they can do that. And if you think of LiveRamp, my last company, it still has a 75% market share in its niche. And it’s a really nice niche. They have not really been able to move into adjacent niches yet, unfortunately, but at least that niche is really, really great. If you think of companies like Marqeta, which is probably one of my best investments, they really dominate this niche of creating credit cards – It’s an incredible niche. They’re definitely the most dominantby far, and certainly have over 50% market share in their niche. They went public about a year ago; a fantastic company. If you look at tons of other companies, if you look at plaid, which is one of my favorite companies that are out there, they clearly dominate their niche.

If you think of Carta, which is cap cable management, they really dominate their niche. So those are the company, types of companies that I’m like super excited to invest in. I tend to invest later stage mostly because it’s a little bit easier to know that once somebody let’s say hits three or 4 million dollars in revenue, that they’re going to hit their niche, then when someone has $0 of revenue. I prefer to see a few cards flipped over and am so happy to pay a higher price to do that.

MB: Absolutely. How do you think about niches? Is it a vertical inside of an industry or is it more like the LiveRamp example and where you have identity and data onboarding?

AH: It could be any niche. A niche can be very, very small. If it is small, then you have to either think it’s going to grow very, very fast or that there’s some sort of adjacent niche that you can easily move into. Therefore it’s often a bet on the team that the team is smart enough and good enough to move to an adjacent niche. We had about a million dollars in LiveRamp’s first-year revenue and the total niche that we were going after was maybe 20 million dollars. This is really, really small. Second-year, we had 9 million with a total niche near 25 million in revenue. Third-year we had 20 million in revenue with the niche was probably around 40 million back then. Then we had 40 million and the niche, maybe 60. So, the niche was growing, but LiveRamp became a bigger and bigger percentage of it.

MB: One question we ask everybody is, give us three predictions happening a year from now that nobody’s talking about.

AH: I don’t know of any super non-cheeky prediction. My most cheeky prediction is your podcast would be the number one podcast in your category and maybe World of DaaS, the podcasts I host about data might be in the top 10 in the technology category. So it’d be more cheeky ones. My last cheeky one might be just a very simple prediction, the number of technology vendors has grown. Let’s say that a given company let’s say a Walmart or Home Depot uses, has grown roughly 20% a year for the last 20 years. And it’s just continued to be growth rate very, very high. And every year, everyone says there’s going to be consolidation, and every year it hasn’t happened. So my prediction is in the next year, companies won’t consolidate their technology vendors and will still grow at around 20%. If a company has a thousand technology vendors today, a year from now, they may have somewhere near 1200.

MB: I remember right before the pandemic, you gave a talk at SaaStr in San Jose, that we had a couple folks from our team at, and there was a part where you mentioned using vendors to create leverage in your business when you’re small and how growing the business is the focus, not necessarily growing headcount. An interesting thesis stemming from that was, the more vendors a person can manage at a time is now an important skill within a business that was less important, maybe 10 or 20 years ago. Can we get your thoughts on how cunning younger companies should be thinking about that?

AH: Yeah. Almost every company, except the largest in the world, have more vendors than people. More vendors than employees, right? And in many cases, you’ll have 10x more vendors than employees that are out there. So these vendors are extremely important. I think if you were taking an MBA class in 1980, the most important thing they could teach you was how to hire, develop, manage talent, right? Today, if you take an MBA class, they still teach you how to hire, manage, develop talent and they still think that’s the most important thing, but the most important thing you could learn today is how to hire and manage your vendors because your vendors are really, truly the DNA of your company. There’s no MBA course on it that I know of. There’s no book on it that I know of, there’s no way to really learn how to do it, except by doing it. And there are very, very few people who are good at it.

MB: Sounds like we got a book coming here, this holiday season.

AH: Yeah, absolutely.

MB: Last question here, I know we’ve covered a lot of ground here today but what reading recommendations do you have for our audience to keep up both on the area that’s SafeGraph focuses on and the investment business model thesis we talked about?

AH: Well, it’s a good question. I think it’s always good to read things that are been around for at least a couple of years and have stood the test of time. Most people consume somewhere between 80 to 99% of their media consumption with information made in the last 48 hours. That should be inversed. You should have somewhere between 80 and 99% of your media consumption created more than a few years ago because that’s something that’s more likely to have stood the test of time.

It doesn’t have to be thousands of years ago, which I know a lot of people because sometimes reading some of those things is quite hard to read and doesn’t flow as well. Or there’s no movie or something like that from thousands of years ago, but at least a couple of years is probably pretty good. I wouldln’t suggest people read my most recent things if they want to read something I wrote; I’d reccommend the DaaS Bible, that I wrote  a few years ago that’s at least of the test time and is something that is probably more likely to be true rather than like my most recent tweet is probably not worth spending time on.

MB: All right. Where do we put the napkin graphics in this spectrum?

AH: Yeah, exactly. So just skip my napkin graphs. Don’t worry about my napkin graphs until I get the napkin graph coffee book out, and then you can buy that coffee book, and then just wait a couple of years to look through it.

MB: Absolutely. Auren, I’m grateful for your time and you know, we’ll have a ton of your writing to link to and other areas, but thank you for joining us today.

AH: Yeah, absolutely. Michael, thank you so much for having me.

See the rest of the Screen Wars Thought Leader Interviews here!

Auren Hoffman is CEO of SafeGraph. SafeGraph is a geospatial data company focused on understanding physical places.
He is the former CEO and cofounder of LiveRamp (NYSE: RAMP) — the largest middleware provider in marketing technology.
He is the founder of the Dialog Retreat and investor in over 160 active technology companies. He is also a GP in Flex Capital.
Auren holds a B.S.E. in Industrial Engineering and Operations Research from UC Berkeley. Twitter: @auren

Cross Screen Media is a marketing analytics and software company empowering marketers to plan, activate, and measure Connected TV and audience-driven Linear TV advertising at the local level. Our closed-loop solutions help brands, agencies, and networks succeed in the Convergent TV space. For more information, visit CrossScreenMedia.com.