SaaS Interviews with CEOs, Startups, Founders
1167 How FloQast Grew 300% YoY to $8m ARR Selling to Accounting Teams
04 Oct 2018
Chapter 1: What is the story behind FloQast's founding?
founder of Flowcast back in 2012. Go figure it out. You'll make it happen. They're doing really, really well, scaling 300% year over year over the trailing 12 months from about 3 million in AR to somewhere around 8 million in AR today. That comes from serving over 400 teams of accountants, about 10 per team. Again, helping them with closing out the books, reconciliation, things like that.
They're spending on average 16 grand to acquire these customers, getting it back quickly. He
focuses more on dollar to acquire a new sorry money to acquire a new dollar of ar and he's happy to spend a dollar to dollar 50 on that if it's annual up front they're scaling quickly 33 million bucks raised with their team of 95 on the west coast this is the top entrepreneurs podcast where founders share how they started their companies and got filthy rich or crash and burn
Each episode features revenue numbers, customer counts, and other insider information that creates business news headlines. We went from a couple hundred thousand dollars to 2.7 million. I had no money when I started the company. It was $160 million, which is the size of many IPOs. We're a bit strapped. We have like 22,000 customers.
Chapter 2: How did FloQast achieve 300% year-over-year growth?
With over 5 million downloads in a very short amount of time, major outlets like Inc. are calling us the fastest growing business show on iTunes. I'm your host, Nathan Latka, and here's today's episode. Hello, everyone. My guest today is Mike Whitmire. He's the co-founder and CEO of a company called Flowcast.
Prior to that, he was the fifth accountant hired at Cornerstone On Demand to help prepare for their IPO. He began his career in audit at Ernst & Young in LA, and he holds a bachelor's in accounting from Syracuse University. Mike, are you ready to take us to the top? Yes, I am. You seem pretty hip and cool to be in anything related to accounting.
I guess it's the Southern California vibe here, being born and raised in L.A., growing up in kind of the entertainment town. And then, yeah, going to accounting. I don't know. I really maybe shouldn't have majored in accounting, but it's what I what I ended up doing because I was decent at it.
Chapter 3: What unique challenges do accounting teams face?
All right. All right. Fair enough. Tell us more about Flowcast. What do you do and what's your revenue model? How do you make money? We built, so at Flowcast, we built closed management software. And what's unique about us is it's by accountants for accountants. So as you just mentioned, my background's in accounting. So it's software that's built out of our very own pain point.
And we're a classic software as a service model. So we bill our clients annually for our software. They pay us up front and pay us every year for it. Very, very classic SaaS stuff. And is it, I mean, is it a pure play SaaS, no professional services, anything like that built on top?
Chapter 4: How does FloQast's software address common pain points?
We do a small setup up front. So it's not an implementation. It's a small fee that comes along with about a two week setup process. From there, it's often running with software fees and some light support on our end, but really nothing on top of the software fee. That's more of like, hey, to reduce churn, we got to get them set up kind of thing versus a true revenue stream. Yeah.
That's like, let's, let's make sure they're getting off on the right foot and they're going to be happy and adopt this software within the first month. Totally. All right. So tell me more about what it actually does. Can you talk about a customer actually paying you today and how they use it? Yeah. So, um, what we'll do is we'll get in touch with the customer. We'll understand their pain points.
There are generally three or four really common pain points around the month end close.
Chapter 5: What is the revenue model for FloQast?
So those are going to be around challenges with collaborating. So a lack of visibility, um, a lack of understanding where different team members that you're dependent on stand in the process. And then an inability to communicate. There's really no good tools for email or for accounts to communicate today other than email or G chat or whatever.
And then some manual work on the back end that's referred to as reconciliations. So the reconciliation process. So those are the pain points we see. We help with all three of those. So we'll onboard a customer. And what we do is our application is built, the foundation of our app is on a folder structure.
So it's really where documents get saved and it's organized in a way that accountants already work today. So they take a look at it, they log into the application and navigating it's a piece of cake. It's how they've already been working historically. So adoption's really, really easy. And then by integrating with those storage providers, like Dropbox recently had their IPO, right?
Chapter 6: How does customer acquisition work for FloQast?
They're one of our integration partners. We're able to access their Excel workbooks to help automate this reconciliation process. And then on the other side of our software, we integrate with accounting systems like Oracle and NetSuite are one of our bigger ones, Intact, Microsoft, all those ERPs out there.
We integrate with them, pull data over from that side as well, and help compare that data to do the reconciliations. that's the big kind of automation piece on the back end. And ultimately what happens is by helping with all three of these pain points, our clients are able to cut time off their close. They cut about 30% off their close time.
Executives get financials faster and they're more prepared for an audit. And give me a sense of the size of companies you're working with. I mean, from a pricing perspective, what's the average customer paying you per month? Our average customer, so we think about things annually and our average customer has 10 to 15 accountants is roughly the size of the department.
And so that's going to work out to... $15,000 to $20,000 contracts with prices inching up every quarter as we grow out our solution. So just to be clear, the different pricing levers you'll use, number of seats is obviously one of them. What other kind of utility-based metrics do you use to drive expansion revenue?
Chapter 7: What strategies does FloQast use to reduce churn?
It's really, it's a number of seats. And then we have a couple of modules that are priced a little separately. So we have kind of your classic tiers of business, enterprise, and then platinum or whatever we call it. I'm not sure what the name is, which has some different feature sets within it. And then there's one outside line item.
So that's referred to as closed analytics, which is something that, you know, it provides a lot of value for customers after they've been using the application for, say, three to six months. So we parse that out separately and they buy it as an additional line item. And that's price as a percentage of the contract value. So not necessarily on a per user fee at that point. Interesting.
Pseudo per user fee, if you think about it, though. Yeah. Is there any, though, like a hard number where expansion driven on, for example, I'm making this up like, you know, you know, revenue you're processing from last year's like statements or is there any like value based metric? the, it, there's nothing based on like a transaction volume or anything like that.
It's more of the savings or it's a soft saving sell.
Chapter 8: What advice does the guest give to aspiring entrepreneurs?
So, Hey, what's it worth? What's it worth for you to have accounts working less, hopefully less turnover, get your financial statements faster. It's more of a soft ROI discussion. Not so much a, you have X million transactions you're booking. We can save you three seconds per transaction as X minutes kind of thing. Yeah. You're probably doing it in a much better way.
It would be very minute to, to tally up all those things. All right. Give us, give us more of your backstory, man. When did you launch the company? So we started the company and I left my job at Cornerstone in late 2012. So that was when I had the idea and it was just me kind of running around trying to make this happen. I met with a startup accelerator in Los Angeles in December of 2012.
They're called Amplify L.A. So they're down in Venice. And I met with them. It was just me and a PowerPoint. And I was showing them, walking them through everything. And they go, you know, this is great. We love your background. We'd love to have more SaaS companies in the portfolio. But you need a co-founder and you need a product and a customer before we can even think about giving you money.
I was like, okay, that's a very fair point. So I went out and made those three things happen. So fun fact, I met my CTO co-founder, Cullen, on a founders dating website where you post a profile of yourself. And so I was scouring through this website to find CTO candidates in L.A. Only in L.A. would that happen. Only in L.A. Yeah. Right.
And I think we might be the only success story to come out of it. But but hey, it worked for me. So I had lunch with like 20 or 30 different engineers and Colin and I really hit it off and we were working really well together. So we decided to move forward. What was the name of that app, by the way? What was that? What was the name of that app? So the app we were using was called CoFounderLab.com.
They were subsequently acquired by Founderdating.com. So funny. Okay, good. So Founderdating didn't even try to get around the name. They just went for it. No bars. That's good. All right, so 2012. And give me a sense of where you were at financially in your head. Did you build up a cushion before you quit so you knew you could take some risk?
Or did you just say, I'm quitting with nothing in the bank. I have to make this thing work. Otherwise, I'm screwed. I had built up a little bit of a cushion. So I had gotten a very small option grant when I went to Cornerstone, which ended up being worth, I'll just tell you numbers, like 25 grand or something to that effect. So I'm like, okay, I have a little bit of money now.
So yeah, I just jumped ship and quit and wasn't making anything. I was very fortunate. My wife is in sales. She was a VP of sales. And so she was making enough to support us as a family while we were going through that. So we were kind of like paycheck to paycheck as we were going through that.
And actually she ended up getting crazy stressed out as she started to make more money and then Flowcast started to do a little bit better. And we were all of a sudden both working all the time. We were both crazy stressed out and, and something had to give. So she actually left her job and then I, and now she's, so we kind of flipped, flipped places there. That sounds like a good marriage to me.
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