SaaS Interviews with CEOs, Startups, Founders
1646 Why 900 SaaS CEO's Put $200m in ARR Through Him Every Year
26 Jan 2020
Chapter 1: What inspired Christian Owens to start Paddle?
launched paddle back many years ago and he was doing trying many different things in marketplace everything now really just all in on doing all these things critical for a sas company serving 900 customers that have processed over 200 million bucks in terms of transactions through him over the past 12 months taking about five percent of that so he's pushing about a 10 million dollar run rate today uh they've about three xd over a year they're burning cash but that's okay the economics look healthy net revenue retention 125 percent targeting a five-month payback period on new accounts 140 people in london again raised about 20 million bucks to fuel growth
Hello everyone, my guest today is Christian Owens. He is the founder and CEO of Paddle. Before Paddle, he created his first software business from his bedroom at the age of 14. Having grown the business to over a million bucks in revenue, he decided to quit school at 16 to focus on building startups and founded Paddle when he turned 18. Christian, are you ready to take us to the top? I am.
All right, tell us about Paddle. What's the company doing? What's the revenue model? So essentially, and kind of going to my background a little bit, started my first software company sort of really early. Through that process, I noticed how difficult it was selling software B2C and B2B all around the world.
And no one was really building the infrastructure around payments, taxes, operations, recurring billing, customer management, sort of optimization, like all of these tools specifically for software SaaS businesses. So I found that a reasonably interesting problem, started focusing on that, founded the company in 2012. And I've been kind of going from there.
Revenue model is that we work with SaaS businesses, so kind of recurring revenue, but we take a transaction fee on all of the sort of that kind of volume ARR that flows through our platform. Okay. So when you look over your past 12 months of revenue, what percent was pure SaaS, the flat rate SaaS fee versus your transaction model? So we don't charge a flat rate, right?
So we only charge a transaction model, but all of our transactions are on underlying recurring subscription rates. Yeah, so that's what I'm asking, right? Is how much is the underlying, is there a difference or is it all underlying recurring subscription?
So the underlying businesses of the volume that we're purchasing is all underlying like monthly annual subscriptions of which would take to the businesses. Yeah. So what I'm asking you is, so a lot of times people that follow this model, we've had a lot of other companies in the space on, they'll have a flat rate for a certain volume, right? So you're doing a million bucks or less than AR.
You're going to be a hundred bucks a month. Plus if you go over a million bucks in AR, you're going to pay us 2% of all your volume over that amount. Do you have that model or not? No, no. So we charge a flat 5% across everything. Okay. No matter what, if you do a dollar a month or if you do 500 million a month, you're charging 5%. Correct. Okay. I assume that doesn't work at scale.
If someone's doing 100 million bucks in revenue, they're not going to pay you 5%. So they do. So if you look at the aggregate costs of doing all of the functions that we provide, for example, payment processing across regardless of underlying payment method, dealing with foreign exchange and currencies, we take all of the liability for risk and fraud.
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Chapter 2: How does Paddle's revenue model work?
I'm like, I have zero interest in setting all this crap up myself. I'd much rather pay you 5%. But what I'm saying is like at some scale, like it may actually not, by the way, you might not have any interest in this customer segment, right? It seems like it's a harder decision to say, yes, let's pay 5%. I think there's like two aspects to this.
Like one, we had the initial exact same assumption when we started the business. So we started the business, we were building the product for people who look like us. It was like a couple of people in a bedroom starting the business. They don't really care how much it costs. And we always had the assumption sort of like,
probably around when we had the Series A, we still had the assumption that, okay, this is never going to be applicable to anybody who does $5 million, $10 million, whatever the number is.
And then eventually, every single time that we set one of those upper ceilings for ourselves, we found that willingness to pay was still there because the complexity and the amount of resource these businesses are spending on solving the problem increases with their scale as well. There may be a ceiling. We don't know what the ceiling is yet. We have
kind of inbound interest that we turn away from companies who are doing one just the dynamics the product is slightly different and we don't necessarily want to um kind of sort of go up market too quickly um and alienate existing customer base but sort of there is the demand there and it doesn't exist so when you look over the past 12 months like total total kind of volume through your platform and are you in the billions yet or what what's that number it's hundreds of millions hundreds of millions hundreds okay can we be a little more specific i mean is it like 400 million 500 million
Uh, it's less than 500 million. Okay. Okay. But, but north of a hundred.
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Chapter 3: What challenges do SaaS companies face in payments and operations?
Yeah. Okay. Very good. And, and walk me through. So 2012 was launch date. Did you pivot at all? Or was this always the concept from day one? So very early concept was a version of this, but it had a bit more of like a consumer aspect to it in terms of like a marketplace for also discovering SaaS products.
We persisted with that for like a year or so before we kind of shut down the B2C discovery aspect of it and focused all on the like backend infrastructure and tooling. And what's the team size today? What have you scaled to? We're 140 people. Oh, great. And where's everyone based? All in London at the minute. Oh, great. And bootstrapped or have you raised capital? So we've raised 24 million.
Oh, Christian. I liked you so much until you tell me you went to the dark side. You've raised capital, huh? Yeah. All right. Why raise capital? Why couldn't you stick it out and bootstrap? So we started the business. We raised like angel money, at least. We raised like 150K to begin with. And then in the first sort of
four years of our existence like we'd raise we raised less than a million bucks um and then we and it's kind of with this realization that this actually does scale with company size of like our ambitions got a bit bigger in terms of okay we got our first company that was doing a million bucks through the platform and paying us sort of like significant revenue does this scale and then we got to the point where we realized it does and then we were like okay
we actually think that there is an opportunity for somebody to build kind of almost sort of like the second most important piece of infrastructure that a software company buys, which is sort of like the business infrastructure to AWS's technical infrastructure. And that was sort of the motivation behind raising more money. Ambition kind of got a little bit bigger as we understood the market more.
And not a horrible thing. What have you scaled to in terms of total customers today? Uh, so it's around about 900. And walk me through like how you've gotten these folks. Obviously you have a great story because you essentially built the software for yourself. Um, that story I'm sure sells, but walk me through, I mean, how are you getting customers today? What's the growth channel?
Yeah, so first four years of the business, solely outbound sales and outbound sales in the loosest possible sense in terms of we basically just talk to people who we like their products or customers already. And the problem really resonates and then they buy it. So we've like scaled that as a process for about 25, 30 people in sales today.
Inbound marketing, sort of like all of that stuff is pretty new for us. Maybe 16, 18 months ago when we hired our first VP marketing, started to scale that team. It's about 10 people now. It's probably 20, 25% of new business goes inbound versus the rest outbound today. So you said 20% inbound? Yeah. Yeah. Yeah. So how are you targeting when you go outbound? Right.
I mean, are you looking at like PitchBook and Owler and kind of ARR ranges or how do you target accounts? So it happens in two dimensions. So, yeah, there's the size dimension of kind of the real time that SaaS companies, if they're sub a million, sort of they experience this problem immediately. If they actually go to market, then they're We wait for a trigger.
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Chapter 4: How has Paddle scaled its customer base over the years?
Burning money, investing in growth. And then in terms of scale, can you give me a general sense in terms of AR, what you guys are at today? Uh, we're just north of, uh, like 10 million. 10 million. Okay, good. So that's healthy, right? So, so 10 million, uh, that would mean you're processing about 200 million bucks over the past 12 months. 5% of that is 10 million. I'll leave you to do the math.
Yeah, sure. Well, I just, I just wanna make sure there's no other revenue models, right? It really is just that 5% plus 50 cents. We don't charge professional services. We don't do any of that stuff. Yeah. Yeah. No, that's great. Um, okay. Very good. And then in terms of growth, so if you're at kind of pushing 10 million today, where were you exactly a year ago?
Uh, we've roughly three extra revenue every year. Oh, that's pretty good. Okay. So we'll call it kind of 270, 270 grand about a year ago now doing 830, 840 grand a month. Uh, that's healthy growth. And most of that growth is coming from expansion or new logos to totally. Uh, so, so we have, so the 30% like expansion, um, has remained true pretty much at least for the last three years.
So the majority of the growth is coming from your revenue. That's great. Congratulations. Very good. Um, any plans to raise additional capital? Um, sort of, I think we're pretty well capitalized right now. Um, in the last like 12 months we raised like 20 million bucks of the 24 that we've raised. Um, so we're pretty well capitalized. Um, we're reasonably opportunistic about fundraising.
It's sort of like when there's a business case, we don't like doing it for the sake of doing it. Um, maybe sometime next year. And payback period real quick. I forgot. I skipped this. So like when you're getting out and going like going after a million dollar AR company, what are you willing to spend to get that customer? We target internally payback of about five months.
Okay, that's actually very healthy for a funded company. I know most people are pushing 12 months, so that's nice. Very good. All right, let's wrap up here with the famous five. Number one, what's your favorite business book? Hard Thing About Hard Things. Number two, is there a CEO you're following or studying right now? Jeff Bezos.
Number three, how many hours or what's your favorite online tool besides your own? Zoom. Number four, how many hours of sleep do you get every night?
five christian unhealthy man how do you do that i know i know it's crazy what's your situation married single kids uh single okay no kids no okay and how old are you 24 yeah see there we go there there everyone listening is older than 24 is going ah that's the reason all right and last question what do you wish you knew four years ago when you were 20 Focus. Guys, focus is key.
Launched Paddle back many years ago, and he was doing trying many different things in marketplace, everything now really just all in on doing all these things critical for a SaaS company serving 900 customers that have processed over 200 million bucks in terms of transactions through him over the past 12 months, taking about 5% of that. So he's pushing about a $10 million run rate today.
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