SaaS Interviews with CEOs, Startups, Founders
1458 Why He's Aiming for 20% FCF+Growth As $30M ARR Private Equity Owned Company
22 Jul 2019
Chapter 1: What is the main topic discussed in this episode?
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Founded in 2003, really got things cranking in 2010 with his perpetual model and then selling maintenance contracts on the back end. Just recently launched the SaaS model, passed 30 million bucks in ARR, raised about 50 million bucks up through 2016 before he sold to Marlin in 2017. Today serving over a thousand active customers.
And that's a blend between perpetual licenses on maintenance contracts and new just kind of pure SaaS revenue products. Scaling nicely, economics healthy, net revenue retention, 110%. Peel back that onion. There's gross revenue churn under that of about 90%. So expansion kicking in nicely. In terms of aggressiveness on customer acquisition, spending about a dollar to get a new dollar in ARR.
Folks in Ukraine, the UK, NDC, 140 strong. 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 Stephen Schneider with more than 20 years of technology leadership experience.
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Chapter 2: What is Logi Analytics and how does it generate revenue?
Okay, so 2003 really got things going in 2010. And then fast forward today. So bootstrapped or be raised capital?
So we raised venture capital in, I think, well, our first round series, a small round was in 2008. We did additional rounds in 2010, 2013, but we were actually acquired by a private equity firm last year. Actually one year anniversary was on Friday.
Well, okay. So it's, but okay. So let's keep talking about before that acquisition. So pre-acquisition total raise in the company was how much?
About 50 million.
Okay. Five, zero, 50 million bucks there. And then you sold in 26 or 2017. So take us through that story. Why, why sell?
Well, so the company had gotten to a point where we had grown a decent amount and we had started to bake the track towards profitability in 2017. And it just made sense for us to get new investors that were more aligned to kind of how we intended to grow in the future. A lot of our earlier investors were venture investors.
And as you probably know, when you're talking to a lot of VC oriented companies, those companies are about grow, grow, grow, grow, grow up into a certain point. It's more of a roulette wheel type model. We were at the point now where we had grown to a certain amount.
Our growth had frankly slowed down a little bit and we were oriented to profitability and we wanted to just start growing in a different path. Also, we saw an opportunity to potentially do M&A in the future to grow faster and new investors made sense for us at that point.
Yeah, just to be clear though, I mean, private equity, obviously, they might not be looking at growth, growth, growth, but they're looking at cashflow, cashflow, cashflow, right? So walk me through the private equity firm that came in and bought you guys. I assume they took, you know, usually they're taking majority stake or buying 100% of the company. Did they buy the whole company?
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Chapter 3: What customer stories illustrate the use of Logi Analytics?
Well, so first off, you know, I come to work every day, not necessarily for that reason. I come to work to build things and grow things. And like any other, like a private equity firm coming in is really just another investor, right? So when you talk to a private equity firm, You establish what is the story? What is your growth path? How are you going to grow the company?
And we firmly believe here at Lodging, and I believe, that there's this new evolution of a product stack emerging. If you think about 10 years ago, marketing was, maybe 15 years ago, marketing was trade shows and collateral. Now there's a whole industry that sells to marketing around marketing automation and marketing technology and lead optimization.
I believe that product managers, which frankly didn't exist 20 years ago, is a new industry that's emerging. And people nowadays aren't going to build products completely from scratch. They're going to go out and get best of breed components to get to market faster and assemble those, those things into a modern product stack that they deliver. You saw it happen in infrastructure.
I agree with that. I can totally agree with that thesis. I mean, this is why SAS is taking off.
And we believe that our next evolution is to go after that space. And we needed, frankly, a partner with bigger pockets that could help us assemble that product stack faster. So that's the vision I'm here, still here and executing.
And this was Marlon, by the way, right? Yeah. Interesting. Okay. Very good. So give me a breakdown team size. So where are you guys at today in terms of total team?
Yeah, we're about 140 employees. We have a team in the, a small team in the Ukraine and a small team in the UK and Ireland. And then the rest are...
Yeah, here in DC. Okay, DC, Northern Virginia area.
Tyson's Corner.
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Chapter 4: How does Logi Analytics measure customer pricing and contracts?
We want to deliver the best engaging product experience. And we're the only company of scale that focuses on that use case. Most of our competitors in the space go after direct use cases, go after wide industries. They go after any kind of operational type improvement use case they can.
We're the only ones out there that really focus in on the product managers and application teams and how do you embed it within an application. And that requires a different product stack, it requires a different licensing model, it requires a different go-to-market.
Sure, the effectiveness of that, just because most of these are words until you actually figure out how to actually measure these things, right? So the measurements that would articulate, yes, What you just said is actually true and it's working as you look at churn and you say, is it really, really low? So you said 1900 customers since 2010.
You said earlier an average price point of called 100 grand per year and you're doing about 30 million AR. That would put you at about 300 customers today. So what happened to 1600 customers over the past 10 years?
Well, so keep in mind that is true if you had a SaaS model with reoccurring business. Again, remember, until two years ago, much of our business was perpetual. And so in perpetual, you're not necessarily getting that full recurring revenue, right? You're only gonna get a percent of it.
So when I talk to you about a typical ASP today, those are new business deals that we're doing, not deals that we did 10 years ago for 10,000, 15,000, whatever.
Sorry, my question was just active today. Active customers paying you monthly today.
Sure, it's about a thousand.
Yep. Okay, but even that, if I multiply a thousand, if I multiply a thousand times that ACV you just gave me, that puts you way, that puts you at like 90, 90 million in ARR.
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Chapter 5: What challenges did Logi Analytics face before acquiring venture capital?
And that's something we do a lot to try and help them get into production. But the reality is, you know, sometimes priorities change at organizations, sometimes people leave, sometimes projects get killed. And so those are the typical reasons.
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So when you look at your fully weighted CAC, right? And let's say your first year ACV, you said is about a hundred grand right now. What are you willing to spend to acquire that kind of account?
Well, so we look at it in terms of payback. That's how we kind of think about it. You know, I, CAC and LTV, I've seen five different calculations and I've talked to multiple different investors on that. And we tend to find that metric is confusing and requires an allocation of marketing spend and all that sort of stuff that is subjective.
So we look at it as how much do you spend in sales and marketing and how much ACV do we get and what's our kind of rate of return on that? If I look on new ACV that we get versus how much we spend in sales and marketing, it's about a one-to-one ratio.
Okay, so you're spending a dollar to get a new dollar of ARR.
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