It’s been nearly two years since SEMrush raised over $40 million in funding from venture-capital firms Greycroft, e.ventures, and Siguler Guff. To many executives, competing for capital is more exciting than the business they are actually in. But not so with SEMrush, according to Eugene Levin, the Chief Strategy and Corporate Development Officer, who joined the firm four years ago.
Eugene Levin, Chief Strategy Officer
Levin spoke with me about his journey and the strong 2019 performance at SEMrush. In addition to making investors happy, their results, being announced later today, prove the company is satisfying customers. Lots of customers it turns out since the company increased its user base by 45% in 2019. And not just any customers, as SEMrush now claims to work with 25% of the Fortune 500, and 7 out of 10 of the world’s top advertisers.
VC Operating Partners know how to read the tea leaves
Levin has unique experience that has helped fuel growth in his current role. He had a fast and broad early career becoming (an incredibly young) partner at the Russian VC firm. There he helped portfolio companies implement strategies to scale and sell or to go public. He even took time off to build a gaming company, but it, unfortunately, operated as a lifestyle business, when Levin clearly had more competitive ambitions. Besides, he was too young to retire.
Once back in the VC game at Target Global, he helped them expand their first growth fund in the United States. Again he worked with companies from seed to pre-IPO, including more mature businesses on building their pipelines. He oversaw investments in marketplace businesses that combined technology, software, and consumer marketing savvy like ridesharing and restaurant delivery hubs.
But Target Global’s continued investment in the U.S. was getting harder as many valuations skyrocketed and got too rich for their blood. Levin wanted to find a portfolio company with unlimited, untapped opportunity, with a fair valuation, and all the right bones to make an amazing success. Easy, right? He looked right in front of himself, at the products he actually used, which is where SEMrush came in.
Levin used SEMrush not for marketing but to conduct competitive intelligence. Potential portfolio companies would tell him they had no competitors, and the software would say differently. He could pull up search results and analysis around relevant keywords and get an entirely different perspective on the competitive space.
He thought, “Why not go speak to SEMrush about an investment?” It was a growing firm, that made a product he valued and fit many of the criteria for a great portfolio business. He approached them multiple times about investing in their business, and despite saying no repeatedly, they eventually made him an offer he couldn’t refuse.
KPIs that suggest an untapped opportunity
Levin recognized key performance indicators of untapped opportunity that he wanted to affect. When looking at the Customer Acquisition Cost several years ago, he saw that SEMrush was getting their money back in less than a month. He says that pace is too fast and is an indicator that the company isn’t investing enough in growth.
According to Levin, “The company was growing successfully and profitably, but they were actually too profitable. Companies that achieve early profitability often do not want to part with their capital, and so they underinvest in growth.” That was nearly four years ago before Levin convinced them to trade a little of their profit to enable faster growth.
Investment for growth and experimentation
Among the things Levin got to work on were fundamentals that most companies focus on, like increasing top-line revenue, better governance, and bringing in more investors. There was low-hanging fruit that the organization collected to increase sales, but Levin was focused on the future buyer.
New capital was focused on the most significant future opportunity—investing in product innovation and improving retention to increase the customer’s lifetime value. He helped build a sales team that focused on growing the average revenue per customer and then invested in the product in ways that increased value for those key accounts.
In an environment like search, where algorithms constantly change and impact significant advertising investments, it is important to experiment. Many Fortune 500 companies pour good money after bad in a day-to-day effort to move the needle with Google Ads but lose sight of the new ways customers engage and buy online.
Levin has used VC investments to chase consumers on behalf of his customers into every pocket of the internet. He looks at major marketplaces like Amazon and Badoo as search landscapes of their own with unique requirements and algorithms. Many see these places as red ocean territory where the customer is already transacting. SEMrush recognizes them as blue oceans where a search can affect a tremendous amount of research and consideration.
As buyers and businesses, we haven’t found the end of the internet yet, but we keep searching. Levin is counting on us to continue that journey and is learning from us to unlock more untapped opportunity.