SaaS Interviews with CEOs, Startups, Founders
400 Firms pay $1k/mo For This Investor Database, Growing 100% YoY Bootstrapped
24 Aug 2021
Chapter 1: How do investment firms raise capital effectively?
And how much do you think you'll raise this year? Probably a little bit less than that, just because that, in some ways, it kind of goes in lumps, if you will. And I would say we'll probably raise between $2 and $3 billion. You are listening to Conversations with Nathan Latka. Now, if you're hearing this, it means you're not currently on our subscriber feed. To subscribe, go to getlatka.com.
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or bootstrap founders like Vivek of QuestionPro. When I started the company, it was not cool to raise. Or Looker CEO Frank Bean before Google acquired his company for $2.6 billion. We want to see a real pervasive data culture, and then the rest flows behind that. If you'd like to subscribe, go to getlatka.com.
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He's the co-founder and CEO of Dakota, where he leads a team that has raised over $40 billion of investment from since 2006. He's led the expansion of Dakota's offerings into software and data to enable investment salespeople to sell more efficiently. Guy, you ready to take us to the top? Absolutely. All right. So let me understand, what is the business model here?
Is it a marketplace and you take kind of what you raise or is there a software SaaS sale here, traditional? So it's really counterintuitive, but you'll get it instantly. So we founded our firm in 2006. Investment firms hire us to be their outsource sales and marketing team, which means we raise capital for their investment strategies. So we've raised over $40 billion since that time.
And in order to do that, we built a database using Salesforce.com of investors all across the country, primarily the US, a little bit in Canada. We made the decision in 2018 to create a business around that and sell access to our data to our industry colleagues. And it's the only content and database that is built by fundraisers for fundraisers.
And we now have over 400 investment firms and growing using our data to set up meetings to raise money. That's incredible. So your database is really what is it like a rich list of like wealthy LPs that are writing angel checks or LP checks? No, it's actually different than that. It's like big state pension funds, foundations, endowments, banks, broker-dealers.
There's a whole ecosystem of investors that will invest in professional money managers. In your world, you can think kind of venture capital. It can be growth equity, private equity, but they're calling on Harvard and Yale and the state of California and those pension funds. because they have a ton of money they need to invest in funds just like that.
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Chapter 2: What unique features does Dakota's investor database offer?
So as the summer went on at 18, I finally looked at our investment sales team. We're eight people strong. We have a weekly meeting. I said, what if we just invite all those 14 firms and their salespeople to listen to our weekly sales call? And our sales team was like, wow, it's kind of weird, but okay, cool. Yeah. And we'll share all this information. Great. I said, well, they are paying us.
We'll just share some information. So we did that. We invited a bunch of prospects as well. Well, everyone loved the call. So we did it again the next Friday at 11 o'clock. This is like August 24th of 2018. So we did that. But what we did is we brought on an allocator from like Harvard or from the state of California and interviewed them. So you learn all about their platform.
We then covered a city. We cover Boston or Chicago or New York, go through all the investors in that city. We then cover a key account. Again, it could be JP Morgan Private Bank, who's got a trillion and a half dollars under management. And we help people navigate. Well, it was a total grand slam. We actually were selling licenses to that call. We made it into the Tonight Show, a true webinar.
It's so industry-specific, and we're sharing this deep, deep level of information. It's ideal for a salesperson. What they said is they said, hey, can we have all that information, names, phone numbers, email addresses of all the people you're talking about? We're like, wait a second. That's our database. That's the goose that's laying the golden eggs.
I finally looked at our team and I said, listen, I don't think the first content platform that we built was going to go anywhere. What if we sold access to our database? It'll make our data better. We'll be able to hire a data team. They can improve it. It'll be great for our sales team because we'll use the same data. Customer number one, we launched on April 1st, 2019.
It was a healthcare firm, Pavati. And thank goodness they did it. They got us launched. And now, right, two and a half years later, we're growing really quickly. And I'd say the most important thing is not so much that we're growing quickly, which is cool. And I think it's a great business. We're adding tremendous value to our customers' lives and their business lives.
So what was, if 2019 was the first, you said you found this in 2006. How did you make money between 2006 and 2019? Yeah. We raise $40 billion and we get a percentage of what we raise on the $40 billion. What percent usually? It kind of ranges from 7% to 20%. You're taking 7% to 20% of $40 billion raised? No, no, of the fees off of $40 billion. I don't know the fees. What are the fees?
So let's say the fees would be, they could be 50 basis points. So that would be, let's say, $200 million. And then we would get a percentage of the $200 million. I see. Okay, got it. So you would get 7% to 20% or 10% to 20% of the $200 million, right? So about $20 million to $40 million, something like that. And we get paid on the come, right? It's a commission-based deal.
So if we generate the revenue, then we get paid a fee. And that's standard in the industry. It's where the industry works, right? So if you deliver $1,000 as a salesperson, you get paid a percentage of that $1,000. Totally understood. Yeah. So that was the model pre-2019. Then you launched the platform 2019. Now there's 400 firms paying for that platform at $12,000, $13,000 ACVs.
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Chapter 3: How much do investment firms pay for access to the database?
And it complements the other business, but they're completely separate. But obviously one complements the other. What did that database business do last year? So if we did, you know, I think we doubled in size. So we went from 200 this time last year to 400. Per month? No, no, no, no. I mean, in total contract signed. Got it. 200 customers last year to 400 now today.
Now, but if I take 400 today times that ACB you mentioned earlier of 12.5, right? So that's, what is that? That's like a $5 million run rate on the database business. Is that right today? Yep, exactly. And it was a $2.5 million run rate about a year ago? Yeah, I wouldn't say a little less than that, but yeah. Okay. I mean, that's obviously great growth. Where is the growth coming from?
Is it expanding seats on historical accounts or adding new accounts altogether? Adding new accounts. Where are you finding them? What's the process look like? We've just built up a really great database of investment firms that we call on. So it's outbound? Yeah, it's a lot of outbound. It's a very difficult business to do inbound.
But the Dakota Live call that I mentioned to you, that call still goes on today. And that's really how people find out about us. And the word database in our industry is a really dirty word because most data is stale. And so to establish your credibility, people come on the Dakota live call and it establishes our credibility.
And so from there, they're like, okay, wow, what you guys are doing around content creation is really strong. I'd love to talk to you and see what else you guys are doing. What's your team size today? How many folks? 45 total employees. How many engineers? One. Do you give your salespeople quota or no? Um, no, we're, we're targeting five demos a week is kind of sort of handicap it.
And then we have, how many of those people do you have? 11. So they're doing 55 demos a week, something like that. Uh, yeah, ideally it's not, we're not quite this. You're scaling to that. Exactly. Exactly. Yeah. Interesting. Okay. And so what is there, like you've modeled this, if you have 11 that year, it's a repeatable process. Like how much new ARR do you want a sales rep closing new per year?
I would say it has to be between 70 and 100 contracts. Okay. Which is equal to about 70 grand a month to 100 grand a month of new MRR. Yeah, exactly. Yeah. Or about 1.2 million in new ARR per year. Yeah. Interesting. That's great. Now, have you done all this bootstrapped or raised? Totally bootstrapped. How anti what you're building?
I mean, you are the raised guy and you've done this bootstrapped. That's hysterical. Well, yeah, you would laugh. When you raise money, you change the complexion of your business and your company, right? It's just a totally different discussion. What would you value the business at today? oh, geez, we're not quite making money right now, which is fine.
I mean, our whole goal is to maintain their product quality. So if you're in the data business, it's a really sharp knife because people get on the demo and they ask questions about certain accounts. And if you don't have that information or it's missing, you lose all your credibility. So we just want to make sure that we have the right construct in place to support the product.
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