SaaS Interviews with CEOs, Startups, Founders
1500 BullHorn Sold 60% Early On, Now $200m in ARR, E50+
02 Sep 2019
Chapter 1: How did Bullhorn achieve $200 million in ARR?
Bullhorn.com, founded in 99, raised $4 million early on, basically sold 60% of the company before going on, having a lot of success now, over $200 million in ARR, up 30% year-over-year. Essentially, their E40 metric is about E50, 25% EBITDA margin, 25% year-over-year growth.
At this scale, obviously pretty impressive, 1,000 folks on the team, 7% annual gross revenue churn, 8% expansion as they look to drive more expansion revenue over time with more acquisitions now that they're part of the Insight family. Hello, everyone. My guest today is Art Papas. He's the founder and CEO of Bullhorn, the global leader in software for the staffing and recruitment industry.
He was the original architect of Bullhorn's flagship customer relationship management system, which now helps more than 10,000 companies around the world run their business. Art, you ready to take us to the top? Yeah, let's do it. All right. So you were early on to the game. So tell us first off, when you launched this company, what year and what are you working on today?
Yeah, so we started Bullhorn in 1999. And we were Originally, we were an online service, kind of like if you've ever used or seen Upwork or Fiverr, we were an online marketplace. And specifically, we were focused on creative talent. And it was really too early for that business model. So it wasn't too early to get people to come online and build profiles and upload examples of their work.
But it was really hard to get companies to hire those people over the Internet to do freelance work, which now that seems like really common. And I think it was just we would go to sit with companies and they'd either a say we don't have Internet connection in the office. which in 99 was like shocking, but okay.
Or they would say, I just don't trust the internet, which is ironic because what we pivoted to become was one of the early SaaS platforms. And I convinced people to put their business data on the internet, which arguably should have been harder. But I guess in the sort of year or so subsequent to us pivoting away from the marketplace and becoming a staffing software provider.
The views changed, or I just got better at convincing people to trust the internet.
With that, now what I'm going to do is I'm going to get where you're at today, and then the rest of the show, we're going to fill in the whole story in between. Okay, sound good? So today, first off, you guys on track to do the 175 that you predicted? We beat that. Okay, good. So what do you think? I know you're trying to get to, I think you said 220 by 2022 or something like that.
What's the goal to end this year at?
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Chapter 2: What challenges did Bullhorn face in its early days?
There's probably something to that. Now, this company has gone through many deals. We'll talk about your conservative approach has given you leverage in those deals, your historical deals to date. But first off, one other data point from today, how many customers are you now serving? 10,000. Okay, wow. And that's not like a fluffy duffy number. That's 10,000 paying customers.
10,000 paying customers, majority are in the United States and EMEA. And then we also have, I'd say Asia's emerging for us. So that's still a sort of a growth area for us.
So 10K customers into 200 million in AR, fair to say average ACV is about that 20 grand mark. Yeah, that's right. Okay, let's fill in the backstory now. So it was the first line of code written in 99?
Yeah, I wrote the first line of code in 99 in my apartment in Cambridge.
Yeah, that was it. Okay. Apartment in Cambridge. And do you remember how much total kind of, however you quantify it, how much you put into building the MVP before your first dollar of revenue?
Yeah. So we spent about a year and a half and I probably coded every day for like at least 60 hours a day, six days a week. Sometimes I would take Sundays off, I think, but like, yeah, it was pretty intense for a long time. And a lot of that was just wasted work trying to come up with products that people didn't want to use.
What's interesting is one of our investors introduced me to our first customer.
And he said, you had investors on day one.
We did.
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Chapter 3: What was the pivotal moment for Bullhorn's growth?
And they were like, how big can software to the staffing industry be? That business sucks. We are not investors. And not only that, if you raise money, we have an anti-dilution clause and a full ratchet.
So just to be clear, this was with the pension general electric pension fund for 628,000 bucks.
You said it.
This is back in the day. This is 2002. 2002.
Yeah. And we did a very small, like 700 K round. at a 50% haircut to the prior round.
Ouch, ouch, ouch. Now we did that. Did the prior folks ratchet up? Did they, did they go ahead and buy their pro rata? They did. Okay. So then that was extra dilution.
So we got obliterated. So if fun exercises go plug that scenario into like a full waterfall, you know, with a full ratchet, it's just, it was just horrible. I was, I couldn't understand. It took me like a week to get my head around, like technically what was happening in the cap table. But once I did, I was like, well, look, I actually really believe in this company is going to be a big company.
And we had I had our first customer saying, this is amazing. You should sell this to every staffing firm in the world. We all have the same challenges. We all need an Internet based system. And so dilution hurt. But ultimately, we weren't really doing it for the money.
Yep. How old were you at this point?
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Chapter 4: How did Bullhorn's customer base evolve over time?
With your package, let's get you real equity. in terms of options. And I'm so glad they did that because that had a pretty transformative effect.
Oh, huge, Art. I mean, I'm doing the math on your full deal history. I'm going, something had to have happened here for him and his folks to stay incentivized because there's no way they would have stuck. So kudos to General Catalyst and Highland Capital Partners. You typically see this.
They know damn well if they're coming in and a founder owns less than half the company that they're going to be diluted to like nothing, lose interest. They said, you know what? Let's create an option pool post round. Obviously, all the equity will probably vest. And they didn't give it to you immediately, did they?
No, no, no. It was tied to a destiny.
Can you share what size that pool was? Obviously, it didn't all go to you guys. There's probably some for employees, but you're talking like 20%, 30% option pool?
It was a 20% option pool.
Okay, fair enough. So investors at this point were back down on a fully diluted basis, something like 40%. There was 20% up in the air that you guys could earn over a couple years.
We're still 60%. We really got hammered.
Okay, so fast forward to 2012. Tell us what happened then.
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