SaaS Interviews with CEOs, Startups, Founders
Agiloft Founder Feels Good About $50m Run Rate In Next 12-24 Months
27 Sep 2021
Chapter 1: What is the main topic discussed in this episode?
Obviously, you now have additional capital on the balance sheet to drive additional growth. Do you see a clear path to breaking a $50 million run rate in the next 12 to 24 months?
That is certainly our goal, yes.
Does it feel reasonable or does it make you a little uncomfortable? It feels like a stretch goal. I think it's reasonable. You are listening to Conversations with Nathan Latka, where I sit down and interview the top SaaS founders, like Eric Wan from Zoom. If you'd like to subscribe, go to getlatka.com.
We've published thousands of these interviews, and if you want to sort through them quickly by revenue or churn, CAC, valuation, or other metrics, the easiest way to do that is to go to getlatka.com and use our filtering tool. It's like a big Excel sheet for all of these podcast interviews. Check it out right now at getlatka.com. Hey, folks. My guest today is Colin Earle.
He's a software industry veteran with 25 years of experience as a developer, product manager, and CIO. He worked at IBM, General Electric, and three startups before founding Agiloft. They're a leader in contract lifecycle management, and they've been featured many times in the Gartner Magic Quadrant. Colin, are you ready to take us to the top? Sure.
So you first have to tell people, what does that mean? What does contract lifecycle management mean?
it just refers to the creation and management of contracts, typically contracts between B2B organizations. And to kind of set the stage for this, Negotiating and agreeing upon one of these contracts can well cost well in excess of $100,000 in attorney fees. So it's not a small issue.
Of course, the entirety of business is focused around contracts and those define the relationships between the companies.
Now, this is fun for me, Colin, because the last time you came on was back in 2017. So you were one of my first interviews. We're now almost 3,000 interviews in and the world has changed significantly since when we last spoke. So let's get sort of the updated story here. What kinds of customers are paying you for your contract lifecycle management software?
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Chapter 2: What is contract lifecycle management and why is it important?
So how many total customers are paying you at least a dollar?
I won't answer that directly, but I will say that growth over the past year in terms of new sales has been more than 50%, and the prior year was about 40%.
Okay. Now, when you say year-over-year 50% growth in new sales, do you consider upselling a current customer a new sale?
Yeah. Actually, it's more growth in revenue, I should say.
Yeah, I got it. So you may not be adding a bunch of new customers, but if you're expanding wallet share across the current base, you can still get great revenue growth.
Yeah. And of course, we are adding a lot of new logos, but we're also getting a lot of demand from the existing customer base.
I mean, is the general thesis... When HubSpot went public, they made a very intentional thing to say, guys, listen to the analysts. Our average RP is going to decrease because we're going to open top of funnel. We want to... Net will drive ARPU expansion over time. It's a very intentional decision. How are you guys thinking about customer growth over time?
Are you happy with just maximum 2,000 customers and driving wallet share and ARPUs up? Or will you ever really open top of funnel and have a self-service $100 a month tool?
We don't anticipate having a $100 self-service tool. And the reason for this is that Agiloft was really designed to meet the needs of sizable enterprises. Organizations with complex requirements, complex workflows, demanding loads, etc. And that level of sophistication necessitates a certain level of sophistication in the product itself. It just isn't a great fit for the extreme low end.
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Chapter 3: Who are Agiloft's typical customers and what do they pay?
So applause to you to one startup here. But do you remember, can you take us back, do you remember the year you passed a million-dollar run rate?
Yeah.
What year was that?
It was back in 80, I think it was 89. It was, sorry, it was not 89, 2000, 2001. It was quite a while. And the reason for this is that if you bootstrap an organization, you have to develop some working capital. And we develop that by providing consultancy services.
We then use that money to fund development of our first product and then use the money from that product to fund development of the Agilof suite today. So it takes a while. And if I had to do it again, maybe I'd raise capital at the beginning.
Now, are you the sole founder or how many founders are there? I'm the sole founder. You are the sole founder. Okay. So you kept 100% equity all the way up through the beginning of, I guess, 2019, 2020.
Oh, no. The equity was shared with the employees. And I think it's part of the Agilof culture that every employee gets some piece of equity. And when we had the investment from FDV, millions of dollars went to existing employees, as well as, of course, a fair chunk to myself.
Yep. Before we get to the FTV stuff, because that was obviously a big decision you made in the lifecycle of the business, there's a lot of bootstrap founders that listen to this show. And one of the things they struggle with is when to set up that employee stock option pool, or should they just stick with dividends and use free cash at the end of the year to incentivize them?
How did you make that decision when to set up and incentivize employees with equity?
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Chapter 4: How does Agiloft differentiate its pricing for different customers?
And yeah, we more than doubled the equity pool.
And then you obviously made capital decisions in 2020 with bringing FTV in. Can I ask how much equity you still own today?
I'm still the larger shareholder.
Good answer. All right. So you still own more than 50%. Why did you make that decision? Why not sell a majority to FTV? Why did you want to keep more than 50%?
Well, to be clear, I didn't keep more than 50% of the stock. I'm the largest shareholder. Oh, I see. Got it. But there are other shareholders as employees, as FTV, et cetera. And we bought in FTV because we felt it was time to accelerate the growth of the organization. CLM is an extraordinary and rapidly developing and evolving market. And it's nice to take some cookies off the table.
How much of the $45 million was secondary?
enough that I don't have to worry about money.
That's more dependent on expenses than how much they take in secondary. If you keep your expenses low, you can live on nothing.
Well, yeah. And I don't have expensive tastes, but it was nice to buy a nice house. I'm delighted to say I now live in the house that was previously owned by the inventor of LDAP.
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Chapter 5: How has Agiloft grown over the years without external funding?
So to do that, you need to pull in investment capital. You need to build the balance sheet. But if you want to be comfortable doing it, you also need to pull in enough secondary so that your retirement is taken care of. And that is how I think about it or thought about it and how I recommend others think about it as well.
That's really helpful. Thanks for that. Rounding this out, obviously, you now have additional capital on the balance sheet to drive additional growth. Do you see a clear path to breaking a $50 million run rate in the next 12 to 24 months?
That is certainly our goal, yes.
Does it feel reasonable or does it make you a little uncomfortable? It feels like a stretch goal. I think it's reasonable. Okay. Very cool. Yeah. And the reason I asked 50 million instead of something else is I take your, you know, more than a thousand customers today at around a $2,000 ARPU puts you at 3 million a month and annualize. It's about 36 million.
If you keep growing at 50 to 60% year over year, that gets to that 50 million here fairly rapidly.
Right. But one of the things that happens is when you get to a certain point, you become well-known in the market. And we achieved that with both the number of customers and the Gartner Magic Quadrant. And then it begins to build on itself pretty rapidly. Getting to that point is a lot tougher than exploiting it once you get there.
Well, yeah. I mean, Colin, I appreciate you sharing this, but it took you 10 years to get to that million-dollar run rate, I believe, correct? Yeah.
Yeah.
Right. So that's the grind. That's, that's the, that's what it's all about is the grind. How long did it, can I ask you how long it took you to get to 10 million run rate?
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Chapter 6: What strategies does Agiloft use for customer growth and retention?
Agilof took them 10 years to boot you up to a million bucks in revenues. They transitioned from an agency to a products company, broke $10 million in terms of run rate in 2015. Now they have over 1,500 customers. They are serving in the contract lifecycle management space with their team of 200. He decided last year in 2020 to go ahead and raise $45 million. from a private equity firm, FTV.
A portion of that went to incentivize and celebrate early employees who took equity early on. And obviously, a portion also went to Collin. But now they're doubling down on growth, growing, call it, 40% to 60% year over year with plans to break that magical $50 million run right here in the next 12 to 24 months. Collin, thanks so much for taking us to the top.
Thank you, Nathan.