Pax8 CEO: My Top Challenge Is ‘Scaling As Quickly As I Can’
‘My biggest challenge is I’m a kid in a candy store and there’s so much to do. ... I do have the strength of my staff and our culture to really outplay the competition for years to come. If I could snap my fingers, I’d like to have all the stuff that we’ve laid out to go way faster, and we’re working on how to make it happen,’ Pax8 CEO John Street tells CRN.
After a successful inaugural show, Pax8 CEO John Street is confident about the future. In fact, his biggest challenge is growing too fast but he expects to double the Denver-based cloud distributor’s revenue every other year over the next 10 years.
“We’re very bullish, and I think we have an amazing future,” he told CRN. “I couldn’t be more proud, I feel like the proud papa because this show is just so cool. I get asked all the time, ‘Did you ever imagine it like this?’ I did because I wouldn’t start a business if I couldn’t do this.”
At Pax8’s Beyond conference this week, which brought out about 1,800 attendees, the company unveiled a revamped marketplace that will act as a customer acquisition engine.
Through a “buy now” button that most Pax8 vendor partners will have on their websites, end customers will be rerouted to Pax8’s marketplace and prompted to answer questions that will match them with an MSP if they don’t have one already.
MSPs must opt into the feature and also answer questions on what type of customers they’re looking for. If an MSP and an end customer’s criteria match up, they then get connected through Pax8’s matchmaking capability.
The move comes after Pax8 has seen that more and more end customers are buying direct and it wants to be a sales engine for its partners to help them scale their businesses.
“We’ve got all this capability around its provisioning. Let’s turn it up,” Street said. “So now you could just scroll through a marketplace and say, ‘I want to talk to that customer.’ The guys that are not capable of scaling up are going to either get there or their competition is going to do better.”
CRN spoke with Street about the success of the conference, the enhanced marketplace and how Pax8 aims to outpace the competition.
How do you think your first show went? What are you hearing?
It’s amazing. I have this sense of, ‘my little baby is all grown up.’ It was fun because we started this thing [with] the concept of [ConnectWise] IT Nation and [Kaseya-Datto] DattoCon. We thought we could do something. Nick [Heddy, chief commerce officer] wanted to do something—he’s the big driver. We booked this for June 2023, we booked like 500 rooms and I told Nick, ‘Let’s get some muscle [but] let’s not go too crazy.’
Did you think it was going to be this successful?
No, I didn’t. I envisioned that we could get to this level, but right out of the chute I didn’t. In 2020 we had this place booked and then the pandemic hit. Along the way Nick said, ‘I want to commit to the hotel and do this.’ I said, ‘No, you don’t need to go that big this time.’ And he kept picking up things to do and he was right. But he had one little curveball that was really helpful, which is Rob Rae [corporate vice president of communities and ecosystems joining the company]. We were already doing pretty well, but Rob showed up and things started going faster. I can tell you what I’m most proud about is who we are. We usually think pretty big and the level of professionalism of the company is just stellar. We’ve hired amazing people and we hire more great people and so there was this culture that was already strong and we’re just adding amazing people to it.
I’m very happy with the level of professionalism, and even though I’m a low-key guy I expect that a lot. People come through with it and I think this industry needs that.
I want to talk about the revamped cloud marketplace. What is your message to partners in terms of how this will help their business?
There are two things. One is the vendors themselves are pretty motivated to sell through the MSPs. This is a new thing that, all of a sudden, all kinds of vendors are saying, ‘What about this MSP market?’ There’s always pressure when you start a SaaS company but there’s good industry statistics that your product will do better if it has a service component to go with it. The cost of providing that service at the low end of the market is cost-prohibitive. So the new emerging SaaS companies, if they have the service layer already embedded into it, many statistics show that there’s five times the value of that customer sticking around forever if that product is part of their managed service stack. So the vendors themselves see the value of letting an MSP have [some of the] action, and that’s really important from a pricing standpoint. It’s OK to give some of the margin to the channel ecosystem because that end user now has their product and it’s well managed and well serviced through the ecosystem.
The second piece of this is we’ve spent a lot of time talking about the way channel partners grew out. Small business is all about transactions, so it’s top of funnel management for your traditional sales funnel. What we’ve envisioned is the prospect marketplace. Almost all MSPs grow their business through referral. But then you’re getting more competitive guys and we’ve asked our partners this question, ‘If you could just magically generate 10 new partners a year, could you do it?’ They said, ‘Sure, we could do it.’ Could you do 10 a month? ‘Well, maybe.’ Could you do 10 a week? ‘Maybe not.’ We started to look at the scaling and they won’t spend the money on the costs of acquiring new customers. What we know for the vendors is if it’s sold with a service component in mind, they’re going to do better. So we can service the vendors better by getting their products sold for MSPs, but they have a problem because they have a form fill. Just fill out your name and someone will contact you, but what invariably happens is about 80 percent of those leads are lost. Nobody works them. We’ve got all this capability around provisioning. Let’s turn it up.
So now you could just scroll through a marketplace and say, ‘I want to talk to that customer.’ The guys that are not capable of scaling up are going to either get there or their competition is going to do better.
The marketplace helps partners with their challenges, but what’s your biggest challenge?
My biggest challenge is I’m a kid in a candy store and there’s so much to do. The biggest challenge, honestly, that I have right now is scaling as quickly as I can. We’re doing well, but we’re not perfect. What I really am confident about is that we have a better vision. I do have the strength of my staff and our culture to really outplay the competition for years to come. If I could snap my fingers I’d like to have all the stuff that we’ve laid out to go way faster, and we’re working on how to make it happen.
You mentioned competition. What makes Pax8 different than competitors like TD Synnex and Ingram Micro?
I think they see the vision, the problem is they have so much legacy. They caught people the wrong way to incent them to do the right stuff in this environment. They’re very distracted cannibalizing their existing business to get to the next layer, and we saw that from the very beginning. If you’re going to do pure cloud the way we’re doing, you almost have to start with a fresh canvas. They’re trying to retool, and we don’t have any of that baggage. We think we’re already ahead of, maybe not TD Synnex, but pure cloud. We’ve been told by industry experts that we should probably, by the end of this year, be ahead of them at pure cloud. We were right in predicting that we could sneak in and be a real player by just focusing on the cloud. They have great businesses, but they just have so much stuff that they have to manage, and we call that keeping the lights on. Even in our own tech stack, the first-generation stuff we built, we’re almost through creating this whole modularized system so we can be super fast.
In the last year, Pax8 hit $1 billion in annual recurring revenue. What's the play to double that?
The star of that show is the total addressable market. We should be able to double every other year for the next 10 years. This is not very far-fetched. Based on our monetization we should have explosive growth for a decade.
When do you think ARR will be $2 billion?
By the end of this year. Maybe that’s a little soon but by mid-2024 we should be north of $2 billion. It’s still growing and we should see 60 percent growth this year.
Pax8 is doing a lot with AI, especially with the revamped marketplace. What are your thoughts on AI and how it can transform business?
The main thing I see with AI is, if done thoughtfully it’s fantastic. From a business opportunity standpoint, the growing threat from AI creates all this ability to generate revenue. I think one of our strengths around AI is the companies that really do well with AI are the ones that already have really smart humans. Because in the end, you have to train the AI and we’re already ahead of the curve there.
If you can speak to both your vendor partners and your MSP partners about the future of Pax8 what would you say to them?
I’d say we’re really the hub. We’re the cross connect between the vendors, the MSP community and the SMB. We were setting up the store, just go buy this stuff and we’ll take care of the rest.