SaaS Interviews with CEOs, Startups, Founders
1186 Why Assembla Sold to Venture Equity Firm, Using GDPR to Hit 60% yoy Growth
23 Oct 2018
Chapter 1: What is the main topic discussed in this episode?
Keep trying. His buddy, Ed, teamed up with another friend, Lou. They created a company called Scaleworks. They then bought a company called Assembla a couple years ago, which had basically, you know, it was a healthy company, a lot of legacy, but just wasn't growing fast enough to be interesting for VC or a big exit to a private equity firm. So,
Chapter 2: What led to the acquisition of Assembla by Scaleworks?
scale works bought it ed blue brought in paul he's now leading the company they focused on going upstream increasing our proofs from call it 200 100 bucks a month up to now 500 up to 1500 bucks per month they're seeing significant growth based off gdpr regulations currently serving 3500 customer customers in terms of version control in the cloud cyber security and a little bit of uh testing built in churn super healthy a little south of a million bucks a monthly recurring revenue right now growing 60 you're over there with a team of 45 people
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. 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 Paul Lynch. He's the CEO of a company called Assembla.
He's responsible for driving the strategic direction of the company. Before Assembla, he held multiple executive roles within cloud businesses where he drove revenue growth and international expansion. Paul is a marketing director from Dublin City University and is fluent in Spanish. Paul, are you ready to take us to the top? Yeah, that's great, Nathan.
So Dublin is like a cool hip space and now you're in San Antonio. Tell us how that happened. So I came into Assembla in late 2015. You're right. I traded the green fields of Ireland and Dublin for the oppressive Texas summers. It's not that bad, though, right? No, I love it here, Nathan. It's great. I always say, you know, the party's not over for guys like me, but it's a different kind of party.
The idea of staying until three in the morning in a nightclub is a horror show. So San Antonio has exactly what I need for me and my kids. Yeah, you have no options to stay out until 4 a.m., except maybe the Emma on a good night, right? That's it. Hey, I mean, staying in the Emma until 4 is probably a good thing. That's probably good, yeah. All right, tell me more about the company.
What's Assembla do and how do you make money? Yeah, great. Assembler is in source code management. So in terms of you're building a website, you're building an app, you need to put that source code into a place that's secure and safe.
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Chapter 3: How has GDPR influenced Assembla's growth strategy?
I mean, in the current environment and climate around source code breaches and around data breaches and your Equifaxes, There's a huge sort of onus now in terms of securing source code. So we take your source code, we keep it, and we give you the scaffold to build your app or your website or whatever it is you're looking to design and develop.
And is this more about version security kind of in the cloud and version control in the cloud along with kind of cybersecurity? Or is it more like Rainforest QA, QA Symphony, like a testing kind of CI kind of tool? Look, I don't think you can talk about source code and not talk about security in the current climate. So it's a marriage between the two.
The business started off purely around source code hosting, source code managing source code and managing your Git, your Subversion, your Perforce kind of repository types for you to build your software. But like in today's day and age, source code is the key valuable IP content in most businesses. You can't talk about source code. You can't talk about hosting without talking about security.
So it's a marriage between all those three things. Okay, so there is some element of a Sauce Labs, a Bugsy, like there is testing, automated testing built in. Yeah, at a low level. I mean, at a low level, there's automated testing. I mean, I would say, you know, at a higher level, we would do static code analysis in terms of people committing code back into the repository.
So, you know, we would scan code in terms of looking for known vulnerabilities prior to that going back into the core production workflow. Now we would look for stuff like, you know, credentials or Amazon passwords, etc., etc., within the code that we're hosting. So we're looking to secure it and make it safe as it's developed.
PurePlay SaaS model, or you have other revenue streams, professional services built in? 100% SaaS. It's a beautiful place, huh? Yeah, absolutely. I mean, like professional services is not an area we should focus. That's right. And give me a general sense of kind of customer size here. What's the average customer pay per month for this kind of tool?
So, I mean, I think we've gone sort of upmarket, if you like, over the last two years. We bought the business that would have had an ARPA, sort of a low, you know, two-figure kind of ARPA. Now we're up to, say, you know, between $500 and $1,500 per month would be our sort of sweet spot. Yep. $500 per month. And these are typically, I mean, why will someone pay $500 versus $1,500?
Are you upselling based off number of seats or a feature set or some combination? Yeah, it's some combination. I mean, it's based on a seat user basis. There's different tools and there's different features that customers will buy from us if they require additional security or additional SLAs, additional customer support, etc., etc. Also, like with the likes of Perforce, that's a
That's a paid licensing tool proprietary to Perforce. So there's licensing costs around that.
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Chapter 4: What services does Assembla provide for source code management?
We centralized the team and we built a leadership structure within San Antonio. So everyone's in San Antonio now. Pretty much we've got two offices. All leadership is in San Antonio. We have a technical team in Salina Gora in Poland, where we have like maybe 15 coders. And what's the total team size, Paul? I think we're 45 right now. Okay, so 30 there in San Antonio, 15 overseas. Yeah.
Okay, very good. And what have you been able to scale the company to in terms of total customers now? So we have about 3,500 customers. Month-on-month growth is about between 3% and 5%. We did 60% last year. We're tracking the same this year. So yeah, we're very happy with it. I, like you guys, have never been able to find a project management tool that I love.
You know, my blog writers like one thing, my developers like one thing, my designers like a different thing, and it's so difficult to get them all on the same page. So when I had Roy Mann, the CEO of Monday.com on the show, I was pleasantly surprised at what he told me regarding his traction and his growth.
Chapter 5: How does Assembla ensure security and compliance for its customers?
And I said, maybe I should try this thing. So we now use monday.com. I started with the magazine. We've launched the Latka magazine, solely dedicated to SaaS founders. It's the only magazine focused on SaaS. And my content writers and my designers worked beautifully together on that project using monday.com for project management. I then said, well, let me give it a real test.
Let me see if I can use this for sprints and product cycles with my developers using it as well. And so we did that for Git Latka on our last release. It worked like a charm. Never before have I been able to find one tool that my developers, my designers and my writers and myself can use and be happy with.
You know, for me, I do most of my work waiting on the boarding deck about to get on a plane. I have to be able to access this stuff on my mobile device and it works beautifully. We've been using it for several months now. And I said, Roy, I'd love to introduce this to my audience, but you got to give me a great discount. Make me a great offer. He said, Nathan, OK, fine.
If your folks sign up and try it today, we'll give them 10% off all plans if they use this link, nathanlaca.com forward slash Monday. So you can go there, try it for free, and if you decide to start paying, you'll get 10% off. Again, that's nathanlaca.com forward slash Monday.
I was going to say 60% year-over-year growth, and this is a company that didn't just go raise $20 million from Andreessen and you're plowing money into Google Ads or something. I mean, you're running a playbook, you're optimizing an asset that already existed, and you're able to drive 60% year-over-year growth. That's impressive.
And since we took this business, which was March 2016, we returned a profit every month. That's incredible. We've not lost money in a single month that we ran it. That's great. Again, theā These are solid businesses that we're looking at. I mean, we're not buying, you know, these are not Hail Mary passes. We have 3,500 paying customers. We've got 11,000 free users in Assembla.
We've got a really strong product. Really, what the business lacked when we acquired it was a sales and marketing focus. And they got a bit lost in terms of what category that they wanted to be in. So, you know, we defined the category as enterprise cloud version control. Our tenant is that businesses want to move their source code out of their on-prem comms rooms.
They want to put it in the cloud, but there's no one out there to deliver that service. That's right. They either need compliance requirements that aren't delivered by GitHub. They need security requirements that aren't delivered by GitLab. We put the security wrap around the source code. We have the compliance standards around SOC 2 or NGDP or around you know, SAS 16.
And so we offer a safe environment for that source code to exist in the cloud. I want to come back to GDPR here in a second, because I imagine you're seeing a lot of growth specifically because of that. But you mentioned earlier, ARPUs were between 500 on the south side and 1500 on the north side.
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Chapter 6: What is the average revenue per customer at Assembla?
You know, the Scaleworks model is defined by Lou Mormon as the ex-president of Rackspace. I mean, fanatical support is in the guy's DNA. So we have access in San Antonio to superb customer success guys, guys that have really ā they've had their feet to the flames at Rackspace. They've learned from the best. You're coming in here. There's a ā
there's a huge incentive within my customer success teams to drive growth in the install base. Can you, but what I'm trying to get those is a specific way you're doing that. So anyone else listening that wants to implement this plan on their CS team can do it. I mean, is it literally there's, there's, you know, call it your typical base structure on a, on a customer success person.
And then there's also a commission structure on expansion revenue they drive. There's, there's, there's a specific base salary that the guys come in on. There's a incentive scheme around their individual, uh, KPIs and targets. And then there's a bonus at the end of each month.
If we see, you know, net negative revenue growth across the whole team, across the whole team, I see two different commission structures that we sit above the base. I was going to say a lot of people struggle with implementing these kinds of ideas because it's very difficult to track expansion revenue attribution per CS rep.
So what you've done, it sounds like if you've, you set a goal for the team, if the whole team hits it, your CS team divides the bonus by however many CS people there are. That's well, yes. I mean, it's a fixed bonus, but yes. Yeah. Interesting. Very cool. Um, what about CAC? I mean, how are you acquiring these customers? What are you spending to get them?
That's the tough thing, you know, I mean, like we've changed the whole model. I mean, I'm not a big believer in PPC to be honest. Um, and there's so much noise out there. I mean, I love stuff. I love podcasts. It's a great way to get your message out to the market, Nathan. So thank you. But yeah, in terms of the, I want to tell him a 10% cut of all revenue you get from this, right?
No, I'm just kidding. In terms of new logo growth, in terms of PPC, it doesn't work. I mean, there's so much noise out there in the market right now. The only people making money out of PPC are Google. So in terms of driving new growth, As we've moved upstream, we've driven into the enterprise space. We go to a lot of conferences that, you know, nothing beats press in the flesh.
You know, we take boots and stuff like, you know, GDC. We've separated out our industries by vertical in terms of where we're targeting that new business. You know, as you drive upstream, you start looking at, you know. compliance standards. I mean, it's not very difficult to target those customers, to be honest.
I mean, you're a small developer that's working out of an RV van, you know, 60 kilometers south of Austin, is not interested in GDPR. He doesn't care less about it. However, the CIO of Bank of America, this is something that keeps him awake at night. You know, this is why... When I talk about a category, enterprise cloud version control, moving source code to the cloud is a white space.
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