SaaS Interviews with CEOs, Startups, Founders
856 SaaS: How Brightfunnel CEO Replaced Himself After Hitting $2m+ ARR, 45 Employees
27 Nov 2017
Chapter 1: How did Nadim Hossain transition from CEO to Chairman at Brightfunnel?
founded bright frontal back in 2013 now he says look once we get to 45 50 people maybe it's i'm not the right guy to scale this thing so he did a great job bringing his ceo chris who we interviewed back in episode uh 791 if you want to listen to that company doing well less than 10 million bucks in arr but growing fast uh 10 million dollars raised uh healthy churn economics based off chris's uh childhood serving over 70 customers again helping them very much in the kind of ad tech space
This is The Top, where I interview entrepreneurs who are number one or number two in their industry in terms of revenue or customer base. You'll learn how much revenue they're making, what their marketing funnel looks like, and how many customers they have. I'm now at $20,000 per top. Five and six million. He is hell-bent on global domination. We just broke our 100,000-unit sole market.
And I'm your host, Nathan Latka. Many of you listening right now don't have time to listen to every B2B SaaS CEO that I've interviewed. If you want to get access to the database I've created with year-over-year growth rates, customer accounts, margins, and many, many other data metrics and data points, you can go to getlatka.com. Here's the thing, though. This database... I keep it to myself.
It's so freaking valuable. And to preserve the quality of the data and make sure that the people that have access to it have a true advantage, I'm only letting 10 companies on each month. So we're full this month, but you can go to getlatka.com to get on the waiting list for next month. And look, there's big people on the waiting list. I mean, the biggest VCs you've ever heard of.
You've probably heard of them. They're big, private equity, billions and billions under management. So it's an impressive waiting list. Go get on now at getlatka.com. Hello, everyone. My guest today is Nadeem Hussain. He has over 17 years of experience in building, marketing, and selling cloud applications.
Prior to founding BrightFunnel, he was VP of Marketing at Power Reviews, paving the way for a $170 million exit. He was also a marketing executive at Salesforce.com from 2007 to 2010, and he has a BA from Cornell and an MBA from Stanford. Nadeem, are you ready to take us to the top? Absolutely. All right.
So guys, if Nadim and Brighton Funnel sounds familiar, it's because we recently had Chris Mann on a couple episodes ago, back in episode 791. Nadim, help us understand the relationship between you and Chris. Yeah, great question. So Chris is someone I've known for a long time as an advisor to the company and I decided to bring him in as the CEO and he's doing a fantastic job.
So I founded the company in January 2013 is when we incorporated, kind of build the platform, achieve product market fit. We raised over $10 million in capital. And then now we're really at a growth phase, the sales and marketing execution, product execution. And it was a good time for me to hand the reins to someone new to take us to the next couple of years.
Now, is that your total capital in is about $10 million or have you raised additional capital? That's right. Our total capital is about just over 10 million. We are planning to raise more capital and the company is doing very well. So we need fuel to accelerate that growth. And you asked about my role. So now I'm chairman of the company. So I've given myself, I guess, a little bit of a promotion.
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Chapter 2: What factors influenced Nadim's decision to bring in a new CEO?
We can back into a minimum MRR of somewhere around 300 grand. Is that generally accurate when you say things like the size of our company? Yeah. I would think of it in terms of single-digit millions, so it's a pretty broad range, but that gives you a good sense. In ARR? That's right. Single-digit millions, ARR.
We're a typical company raising a Series B. I think that's probably the best guidance I can give you, and we're going to be 50 people by the end of the year. How much are you guys trying to raise in the Series B?
um probably a typical series b let's let's leave it at that well but you're in just to be clear like i just got off the phone of a guy who's like building a sass company in north dakota and he uses him he said oh well we're gonna raise like a pretty normal like series a and i said well what are you doing and he goes well it's like this husband and wife who's like our neighbor that like wants some cap table and they want to invest over the next five years i'm like that is not normal so like typical is different for different people so i'll give you maybe you're asking for more so
I would say our capital raises have been fairly old school in terms of maybe the better word is classic, right?
classic real seed round of two and a quarter million dollars then we did a series a of six million dollars um so you know series b you know eight to fifteen you know eight to ten that's the kind of range you see in the valley um and that's kind of what we're what we would be likely looking to raise so it's pretty broad range but it's it's fairly typical here that makes good sense and and don't obviously talk about maybe what you're going to end up at but in general what percentage of of the company are people who do series b raises giving up
You know, I think the best guidance I've heard is that, you know, in every round, you know, think of it as a 30% dilution event because your investor is, you know, they want to own a certain percent of the company. That's usually about, you know, again, people give ranges at the Series A level about they want to own 20% after, you know, after they invest.
You've got to create an employee option pool. You're going to hire a bunch of people. So that's going to take, you know, 10% to 15%, depending on how much money you're raising, how long it's going to last, and how many people you already have on board. So those are the two big things that are going to cause dilution, the investors and the employee option pool.
And every round, every round that's going to happen. So just to be clear, like if you're if you're looking like a typical series B to raise between eight and 15, let's do 10 because it's easy numbers. And you don't want to give up more than obviously what the average maybe series B raises of 30%.
You got to figure out how to basically shoot for valuation of, you know, above the $30 million mark, right? Yeah, I'd say that's typical. So every time you're raising more money, it has to be a reasonable valuation.
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Chapter 3: How much capital has Brightfunnel raised and what are their growth plans?
At the Series B level, the ownership expectations might go down a little bit. We'll find out. But I think if you're at this stage, the expectations might be a little bit lower, again, depending on how much capital and all that kind of stuff. And when you get into the Series C and beyond, it's really less ownership expectations. And are you and Chris dividing and tackling here?
Like, will you let him focus on the operations while you go do the capital raise? Or how do you kind of block and tackle tasks like that? Well, for a fundraising, I mean, if I was putting my own money into a company or if you were doing that, you know, the CEO is the captain of the ship.
So that's the person you want to look in the eye and you want to really trust them to take your money and run with it. So absolutely, Chris is the guy that the investors are going to be looking at as we're raising money. But, you know, I've been doing this for five years. I'm you know, have a good reputation.
I'm certainly helping a ton as we get prepared for the fundraise in terms of, you know, network relationships, you know, helping Chris out however I can. But really, there's only one guy in charge at any given time. Otherwise, things get really, that's not a good idea. Well said, very well said.
Last few questions here in terms of kind of capital utilization before we wrap up with the famous five. So in an average month, you know, it was funny, Chris gave us a good example about how you guys were using capital. He said Marketo Conference sponsorship did really well because you guys brought in dogs and puppies and those brought new leads like you wouldn't believe.
So like where else, give me a sense of like, what are you spending strictly on paid acquisition per month or a range is fine. Yeah, well, you know, it's funny. Now that I've handed the reins and I'm not operational, it is nice not to think about those things every day. I'm not going to lie to you. When did the transition happen, by the way? How long ago? June 1st. June 1st, okay.
I brought him in before that beginning of the year, and then we made the official transition after that. I would think of it, I think of the business maybe more at one level above that, rather than sort of the monthly budgets and things like that. At an aggregate level, in terms of the CAC and the payback,
So we want to be able to, and this is not just for us, I think in general my advice for any company, you want to be able to acquire in SaaS a customer that's going to pay back over time. 12 months, ideally. At this stage, a little bit earlier, we're under 10 million, as I mentioned, ARR.
So typically, if you're 12 months, you're doing really well, given how fast we're growing, you'd see more that closer to 18 months, that 12 to 18 month payback. So that means, obviously, we're the average customer, let's just say it's 50K ARR, we'd be happy to spend 50K to acquire a customer. And that is broken. So then it becomes that 50K per new account. How is it?
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Chapter 4: What is the significance of the CEO-founder transition in startups?
So it's probably not high quality sleep. So probably more like six and a half to eight hours if I'm really lucky, somewhere in that range. So I'm not one of those ones who deprives myself in a big way because I already have kids. That's good. Two kiddos, married, and how old are you, Nadim? I'm 40. All right, last question. Take us back 20 years. What do you wish your 20-year-old self knew?
Um, what do I wish my 20 year old self would do? You know, I've been pretty happy with my career decisions and all that kind of stuff. But, you know, just be clear, it's not a regret. It's just something you wish you knew. I would say, you know, I wish I knew that I should, you know, Not a regret, but like, hey, invest.
While you're building your career, also find ways to invest in public stocks, things like that. Because if you're an expert in a field like technology like I've been, it's like, man, I should have gotten in on some of these IPOs. I'd say that's building my investor track. So diversify a little bit. Yeah.
I'm kind of saying more concentrate, but in a way diversify as far as your career versus your portfolio. I want to make sure I understand that. You're saying you wish maybe you would have taken some money you were making from your startups and put it into some public stocks, get some exposure there. Is that what I'm hearing? That's right.
I guess my thesis is if you're building an expertise in a domain, in my case it's SaaS and generally enterprise software, you probably know more about it than the vast majority of people. So while you shouldn't randomly be day trading, you probably have good instincts if you're an expert at something about public equities as well. Oh, of SaaS companies? That's right. Oh, got it.
As I've looked at companies I've admired, so let me pick one. So I really admired HubSpot early on, even when they were private. And now I'm I'm looking at companies that I do admire, and I'm putting some money behind it. Oftentimes they're still private, so it's hard to make that play, but if they go public, I'm making sure I sort of follow my instincts.
I would say trust your instincts, at least a little bit, when you're investing.
to kind of you know prove my my uh acumen not just with startups but with uh other domains there you guys have from nadine putting his money where his mouth is founded bright frontal back in 2013 now he says look once we get to 45 50 people maybe it's i'm not the right guy to scale this thing so he did a great job bringing his ceo chris who we interviewed back in episode uh
$7.91 if you want to listen to that. Company doing well, less than $10 million in ARR, but growing fast. $10 million raised, healthy churn in economics based off Chris's childhood, serving over 70 customers. Again, helping them very much in the kind of ad tech space. So thank you very much, Nadim, for taking us to the top and good luck. Thank you. Take care.
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