SaaS Interviews with CEOs, Startups, Founders
1681 Why This $5m Legal Compliance Software is Looking for a $5m Bridge Round
01 Mar 2020
Chapter 1: What is the main topic discussed in this episode?
joined Legasys back a couple, we'll call it a couple months ago. Now they've got about 500 customers doing about 5 million bucks in terms of run rate. They are basically flat year over year because of Indian compliance updates. Their whole team of 100 is based in India. It's essentially compliance software.
Chapter 2: What is Legasys and what services do they provide?
It's a healthy business that only 2 million raised, founded many years ago, did a big acquisition in 2016, 12% north or north of a 12% EBITDA margin as they look to scale and ideally raise a $5 million bridge round sometime in Q1 or Q2 2019. Hello, everybody. My guest today is Jaideep Kelramani. He is the CEO of Legasys, a market leader in legal and compliance solutions.
He's an executive program graduate from Stanford University and repatriated to India in 2012. He has 21 years of experience and has held leadership positions with organizations like Thomson Reuters. He holds a patent in AI and is a hobby macroeconomist.
Chapter 3: How does Legasys generate revenue from their compliance software?
Jaideep, are you ready to take us to the top? Yes, Nathan. Let's get it going. All right. So tell us about the company. What does Legasys Services do and how do you make money?
It's pretty simple. Legacy Services offers solutions in the compliance management space to companies that would want a sophisticated system to manage all their compliances, right from regulatory compliances to internal compliances. And we offer a software that allows them to track all the compliances that they have to adhere to.
as one part we kind of go in and help them with the regulatory mapping it could be across 3000 laws not that all laws are applicable to every business and then our software allows them to track it on a regular basis with the right kind of intervals and the notifications and then we continue our services with regular updates on any regulatory changes so that the business doesn't have to worry about new
or new updates on the law. So we offer them a full package and we charge them on a one time basis or on a subscription basis.
Chapter 4: What is the current revenue breakdown between SaaS and one-time fees?
We've got two billing models.
So when you look at your revenue over the past 12 months, what percent is from pure SaaS versus one time?
So at this stage, the markets that we operate in are primarily operating on a one-time model, and we are witnessing a significant shift towards the SaaS-based model. as the new economic companies are embracing our solutions. So in the last 12 months, I would say the breakup is roughly between 85% one-time and 15% SaaS, but the number is going to shift towards the SaaS model in the coming years.
Got it. And so let's just talk about the SaaS model for the rest of the show, just because that's what my audience is really focused on. When we just look at the SaaS company, What are people paying on average per month to access this technology, the software that you've built?
So we've kept the model very simple, roughly about, say, $9 per user per month. And we do not distinguish between the type of users. So whether you're a general counsel or a company secretary or a regular compliance user or someone who's just kind of reporting the compliance of the system, it doesn't matter. It's one price across all user types per user per month.
And when did you launch the company? What year? So Legasys as a business has been around for the last 12 years. But last year we acquired this SaaS based company, which is called Comply Global. And that's been around for two years now. And I'm the CEO for both Legasys and the company that we acquired.
Okay. So since 2016, again, just the SaaS side of the business, how many folks are now paying for that service or that software?
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Chapter 5: What are the growth prospects for Legasys in the coming years?
We've got about a dozen clients. And on an average, each client would have a user base of 20 users. depending on the size and the nature of the business that they have.
Okay, so 12 organizations using you with 20 seats each, of which they pay $9 per seat. That would put you at about $2,000 per month right now in revenue just on that software business. Is that accurate? That is correct. Okay, and that's 15% of your total revenue.
So you can multiply that times about seven to get your full kind of services plus SaaS revenue of about, call it 15,000 bucks a month or annualized about 180 grand. Is that accurate?
Well, no, because the one-time fee also follows up with our annual maintenance contracts. So that's the component that's not in your maths. And when we add all of that up, the revenue is significantly higher than what you have because the traditional business that we've had has accumulated a lot of annual maintenance contract over the years. So that has become a substantive part of the revenue.
Okay.
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Chapter 6: How much capital has Legasys raised so far and what are their future fundraising plans?
When you told me 15% earlier is pure SaaS, you did not include the services, the annual renewal services in that?
No, I answered that question from a sales perspective. So we still have the AMC business sitting on top of that.
Got it. So when you add your recurring revenues, whether it's a maintenance contract that renews annually or they're paying for your software platform, you know, we know the software is two thousand bucks a month. Add it all up, though. What's the total recurring revenue?
Well, I could give you a range. We are somewhere between five to six million dollars all put together each year.
Okay. And that, just to be clear, I don't want to include any one-time licenses, not that revenue. But if that license you then upsell a recurring annual fee, what I'm trying to understand is how much of the revenue is actually recurring.
So if you're telling me you're doing about five, you know, north of 5 million bucks a year, that would mean that, you know, monthly you're doing about $400,000 in recurring revenue between the SaaS platform and the annual maintenance agreements. Is that accurate?
Yeah.
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Chapter 7: What challenges has Legasys faced in the Indian compliance market?
That number would be accurate. Okay. So you have significant kind of, uh, uh, maintenance contract revenue then, you know, four or 5 million.
Yeah.
Okay. And, and what are you servicing there? So what are people, if you have kind of call it, you know, you said you had 20 customers, right? So if you have 20 customers, uh, and, and, and again, that kind of revenue per month, that means they're each paying you maybe like 15, 20 grand a month for maintenance. What kind of maintenance are you doing?
No, no. Um, So we have a very wide customer base. Our solutions are not that expensive. When it comes to the one-time fee, the annual maintenance could be about 20% to 30% of the one-time fee. But we have a wide customer base that we've acquired over a period of years.
Chapter 8: How does Legasys differentiate itself from competitors in the compliance space?
So that kind of adds up. It's a very cost-effective solution.
You said you have 20 customers, though, right?
on the SaaS solution. All put together, we have about 500 customers in India, which is the primary market we serve today. And we also serve customers in 44 other countries, but they have strong links back to India as their primary market.
I see. Okay. So 20 pure SaaS, that line does about 2000 bucks a month, but then you have another call it 480, 500 customers where they have all paid one time fees, but they have a very strong recurring component of maintenance contracts. And that act, which is about, you know, 5 million a year or 400 grand a month, 400 grand a month divided by the 500 customers.
They're each paying you about 800, 900 bucks a month for maintenance, not 20 grand a month. I see. OK, very good. All right. More about your backstory. So you launched it in 20. Well, you acquired the company in 2016. Were you also running the prior company as well?
So I joined this business about three months ago. In fact, it's exactly 100 days today. Congratulations. Thank you. Prior to that, I was associated with this business as a client and prior to that as a partner. So I've been familiar with Legasys since its inception. And Comply Global, the company that we acquired, we kind of knew about them even during their inception stage.
I mean, the market in the compliance solution space and the emerging economies is very, very small. So there aren't too many players. Most of the players set themselves as a niche player, so we know each other. We knew Comply Global from the time they conceived it. When we felt the moment was right to have a conversation, we kind of sat across the table and it was a very, um, uh, easy one.
We had the domain expertise and they had the SAS platform. So it was an easy marriage.
What does growth look like? So if you're doing $400,000 a month today, which is about a $5 million run rate, where were you exactly a year ago?
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