SaaS Interviews with CEOs, Startups, Founders
1328 Can AppDirect with $245m in Funding Actually Go Public?
14 Mar 2019
Chapter 1: What is AppDirect and how does it operate in the cloud commerce space?
have conviction your vision keep going he learned a lot from his furniture company in terms of buying software and the difficulties with it back in 2011 after he graduated teamed up with his buddies had his sights out for a big multi-million dollar first deal hit the ground running and learned the hard way it wasn't going to be so easy but they've had success they've scaled the company now over 650 people at app direct basically doing what a you know a hubspot might do for marketing and sales they're doing for e-commerce four core products
many more or sorry beachheads many products under each of those beachheads again measuring kind of gross market volume or gross transaction volume across their customers using those products super healthy economics 245 million bucks raised millions of paying customers 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 of 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 Dan Sachs.
He's president and co-CEO of AppDirect, the only end-to-end cloud commerce platform for succeeding in the digital economy, which he co-founded in 2009 with his partner. He and his co-founder dreamed to someday build a business worthy of the Inc. 500 list.
Since starting his entrepreneurial journey, Dan and his co-founder officially launched the company in 2011, raised over $245 million in venture financing, and reached a company valuation of more than $1 billion. The AppDirect ecosystem now powers millions of cloud subscriptions worldwide and connects channels, developers, and customers to simplify the digital supply
All right, Dan, are you ready to take us to the top? Yeah, let's do it, Nathan. All right, very good. So let's just jump in kind of to day one. Tell us first off, before we get to that story, kind of what AppDirect does and how you make money. Is it pure play SaaS? Yeah, so AppDirect helps businesses find, buy, and use cloud services.
And we generate revenue both from a share of the transaction fee or the rev share, as well as a platform fee for those that use our services to make money in the cloud. Yeah, and I mean, today, when you break down revenues, there was more of it coming from essentially the referral fees or more coming from just the flat SaaS fee to use the platform?
A combo of both, but definitely the platform fee was the lion's share of the initial product. And then we see a really, really high growth in the transaction fees as well. So it's similar to a billing platform in that we run kind of a SaaS subscription as a white-labeled marketplace and developer ecosystem that helps businesses of all types, large businesses and small businesses.
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Chapter 2: How did the co-founders of AppDirect come up with the idea for their business?
And it was, you know, just really the height of the recession. So businesses around the world were struggling. My family actually had a furniture store in Niagara Falls, Canada on Main Street. And, you know, grew up in the store. My great grandparents started it. It was really the pride for us in the community. And, you know, when the recession hit, we had to shut it down.
And that really kind of, you know, marked me in saying, you know, the opportunity for entrepreneurship, you know, in the early 2009, 2010 timeframe was really bleak. On the other hand, I came to visit my co-founder, who at the time was a gaming company in San Francisco, and we kind of saw the opportunity that cloud services could bring to really help empower business owners around the world.
And the biggest gap that we saw in the market is that, from my family experience, I remember that buying software was a major decision and that we knew the people who sold us the software. I still remember the person's name who sold my family the ERP solution. His name was Rickster. And he knew the furniture vertical really well. So...
We really sought to build this global network that connects the developers of applications with the end businesses. And thus, you know, we've become this ecosystem for distributing services around the world. And what have you scaled to today in terms of total customers using the platform? Yeah, so we reach now over 35 million customers around the world.
So super excited to have such a wide business footprint, you know, from starting in an apartment like that. Yeah. When you say 35 million, are we talking like seats per logos or give me tell me exactly what that means. That's our reach. So that would be the customer customers of our customers that we have reached to. But we do have millions of paid business users. Got it. Got it.
So we'll just I'll just put a minimum and say you have definitely more than a million. And those those obviously then touch, you know, on average, 35 each. Right. If there's 35 million with a minimum of a million. Uh, sure. Something like that. You have network effects. That's the easy way to say it, right? That's a network effects. Yeah.
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Chapter 3: What challenges did AppDirect face during its early days?
Um, walk me through for that first year. So who was your first customer and how'd you land them? Um, yeah. So our first customer was actually Dell Canada in Canada. And, uh, it wasn't the furniture company, huh? I know. There we go.
Chapter 4: How does AppDirect generate revenue from its platform?
Yeah. Um, but that was the, that was the idea close to home, but the, um, there were two people, um, We were two people in an apartment at the time, and the idea of enabling this massive company was definitely a daunting task. But we really believed that if we could empower a company that has big reach over a country or an area, then that would have the biggest impact.
So instead of going door to door and selling directly to small businesses, we sought to partner with people who had millions of business customers. So Bell had over half a million business customers at the time in Canada, and we really wanted to enable them to have early access to SaaS solutions. So we went and we aggregated relevant services for the Canadian market.
And that was our first footprint. And then because of Dell, we got George Telecom. What was that first sale, though? I mean, what was the size? I'm curious. Can you share since it was so long ago? Yes. So the funny thing is that we went in with this idea that. okay, we're going to propose this, we're going to get budget, and it's going to be millions of dollars.
And early days, we kind of thought because the project value was so big, we'd get a lot of that. But one of the things that we realized is that while we approved Nearmark, the project had a lot of money, they didn't have a lot of budget for us ourselves. So we had to think creatively about how we help them to support the business case and get to market.
So this is usually an embarrassing number, but I'm curious. Do you remember what first year revenue was, 2011? Yeah, I mean, it was in the, like, hundreds of thousands. A couple hundreds of thousands. Okay, good. And did you bootstrap or did you raise before you even had a product? So we bootstrapped as long as we could, and then it started to ramp up, and we saw growth.
But we had very early partners, so the idea for that first launch was that it was a nine-month sales cycle. And once we had the letter of intent from the company, then the investor said, okay, we'll give you the first seed money to make this happen. And what have you raised to date? Yeah. And what have you raised today, Daniel? $245 million. $245.
And so this is obviously fairly aggressive, right? A lot of people are arguing that you can actually stay private now with so much kind of VC money out there. Is that generally the plan for you guys? You're kind of out of the, I mean, you'd have to do some very drastic things, I imagine, to prepare yourself to go public and get out from under kind of liquidation preferences and things. Yeah.
So we've always had a long-term approach to the business and have, you know, clean terms from investors. So, you know, I think for us, it's really about when the market opportunity makes the most sense. And for now, you know, we're seeing a lot of growth and trajectory in the private markets.
But at the same time, we do see it being more attractive and there's a bigger opening than ever for enterprise companies of our profile to go public. So I think that we're, you know, investing ahead of the curve and, you know, hopeful that we continue to focus for the long term, whether that means private or public down the road. Yep. And what do you have today in terms of revenue?
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