As the SaaS industry consolidates, Whatfix wants to use the current environment to beef up its adjacent offering. At its core, Whatfix is a digital adoption platform that helps enterprises support their employees by providing in-app user guidance for applications they use. Its co-founder and CEO Khadim Batti talks to Ayanti Bera about his growth plans, advancements in AI, and more. Excerpts:
Q: After raising $125 million in Series E funding last year, acquisitions were a major focus for Whatfix. What was the rationale behind this funding round?
A: There were three key reasons for the fundraise. First, we aimed to drive inorganic growth by acquiring companies in adjacent spaces. Second, we wanted to provide exit opportunities to some of our early investors and employees. Finally, the funds were also meant for strengthening our technology and expanding into new geographies. We see the current market conditions as an opportunity to rapidly expand through acquisitions. Conversations with several companies are ongoing, but nothing has been finalised yet.
Q: What types of companies are you looking to acquire?
A: Our approach depends on the stage of a company. For early-stage companies, we are primarily looking for strong teams and innovative technology. If a company is in a later stage, with annual recurring revenue (ARR) of around $10-20 million, we look at customer traction as well as strategic and cultural synergies. Having alignment in team values and company culture is also an essential factor for us.
Q: How has Whatfix performed across different markets in terms of organic growth?
A: Approximately 70% of our sales come from the US, with Europe, mainly the UK, Germany, and France, accounting for around 25%. We are aggressively expanding in other geographies, such as West Asia, Southeast Asia, Australia, and India. In these newer regions, we are targeting an annual growth rate of at least 80-100%. Currently, sales from outside the US and Europe contribute only about 5%, but we want to increase that to at least 15% over the next two years. Overall, we have more than 700 customers globally, and our expansion strategy is focused on increasing that number significantly.
Q: What’s in your product pipeline?
A: Our main focus right now is on integrating AI deeply into our platform. We are rebuilding our tech stack to make Whatfix an AI-first digital adoption platform while also enhancing our existing products with AI capabilities. In the past three years, we have launched multiple new products, which have allowed us to cross-sell and up-sell more effectively. Products introduced in the last 18 months now contribute more than 10% of our revenue. Two notable additions are our analytics product and Mirror, a simulation-based training tool.
Q: How has Whatfix’s growth been in 2024, and what is your path to profitability?
A: We have been consistently improving our bottom line, and we expect further improvement this year. Our goal is to reach break even within the next eight-to-nine quarters. However, we do not want to rush into profitability at the cost of growth. Our approach is to maintain our current growth rate while optimising efficiency. Once we break even, we will consider strategic options such as a public listing, likely around 2027. I would like the company to achieve at least $150 million in revenue before we go public. In 2024, we have grown close to 30% in terms of ARR and around 37-38% in revenue.
Q: What are your thoughts on outcome-based pricing in SaaS?
A: We may experiment with outcome-based pricing models, but it’s still early for our category. This model works best in SaaS (software as a service) sectors where value delivery is clearly measurable. While outcome-based pricing could be an option for us in the future, we need to establish well-defined metrics for productivity across sales, employees, and other key areas before adopting it.
Q: Do you expect further consolidation in the SaaS industry?
A: Yes, consolidation is inevitable. Between 2020 and 2022, a lot of funding flowed into SaaS startups. While some of these companies achieved product-market fit, many struggled with distribution and failed to reach their expected growth trajectories. Companies like Whatfix, which have scaled successfully, are in a strong position to leverage this environment and acquire promising startups to expand our adjacencies more rapidly.