SaaS Interviews with CEOs, Startups, Founders
Big brands, manufacturers with raw material (oil plastic) where going factory to warehouse.
31 Jul 2020
Chapter 1: What is the main topic discussed in this episode?
What I'll say is this, because it gets touchy with revenue as a private company. We were actually very healthily on the track for Series B. And I think you can call out generally what those metrics look like. I don't know, actually. I mean, what would you say those are? Five to 12 million of ARR. You are listening to Conversations with Nathan Latka.
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My guest today is Adam Compain. He's the founder and CEO of ClearMetal. Before ClearMetal, he spent five years at Google launching their geocommerce technology and 19 years as the executive director of Send, a nonprofit he started. He holds five technology patents, two degrees from the University of Michigan, and an MBA from Stanford. All right, Adam, you ready to take us to the top?
Yeah, let's do it. All right, so what is ClearMetal doing? What's your guys' revenue model? How do you make money? Sure. We are an enterprise SaaS company, so pure SaaS revenue model.
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Chapter 2: How does ClearMetal's revenue model work?
But just to be extra clear, there is no customer we have today that does not pay a fixed platform fee for all the services we provide. Got it. Okay, that's helpful. That's helpful. Okay, let's get your backstory here. When did you launch the company? Or when was the first line of code written?
Chapter 3: What challenges do global supply chains face today?
Sure. At the turn of 2015. So call it 2015 is when we founded the company. Okay. And when did you get your first dollar of revenue? Let me think. Actually, right about that time. So we were kind of lightweight prototyping, incorporated the company because we had our first trial customer at that point willing to pay dollars and we couldn't have been personally reliable.
We needed a corporation behind it. Okay, wait. So just to be clear, you wrote the first line of code in 2015 and actually collected in your bank the first dollar of revenue in the same year for a complex piece of technology like what you guys had to build to make this work? It's correct. I mean, it's certainly not as complex as it is today.
But yeah, we were under a commercial contract with first dollars collected within the first year we wrote code. Yes. Okay, that's pretty great. I mean, that's great. So I mean, have you been able to bootstrap this then? Or have you guys raised capital? We've raised capital. In 2015, we were actually founding the company out of Stanford's business and engineering schools with my two co-founders.
We were bootstrapping at that point for probably nine months, close to a year, before raising our first round of capital. We've now gone through three rounds of capital with a total investment of around $25 million or so. Adam, that's a lot of dilution. Why did you have to raise so much? Honestly, for what we're building, I don't see it as that much. Everyone would say that.
No, in all seriousness, why couldn't you keep being scrappy, keep pulling contracts forward, keep pulling annual pricing forward? Why did you have to sell part of the company? A couple of reasons. First, what we're building is complex. It requires a lot of investment. We're solving a 30-year-old problem that hasn't been fixed yet.
That requires high-caliber talent in the data science world and some very sophisticated folks on the commercial side. The second reason is we're selling into some of the most complex and largest organizations on the planet.
And so we have to invest to build and develop what is proven to be valuable prior to really expanding our... No, but that's not true because you got your first customer with nothing. That's why I asked the question. Yeah. I see what you're saying. I mean, the reality is we're... I think here's really the root of it. We're trying to build a very big company.
And while we could have, to your point, simply gone about it the same way when we were bootstrapping before capital, we have experienced faster growth as a result of taking in more capital. And I think there's a larger valuation in company as a result. Yeah. Yeah. By the way, I'm pushing here. Cause this is always a balance, right?
I just, I, it drives me crazy when people, uh, when, when people discredit bootstrappers by saying, I think I'm building a bigger opportunity. Therefore I'm raising, I think there's a, you have to bet and hope that the money you raise does actually drive growth. Otherwise you end up as the next blue apron, right? Totally. Yeah. And I think this is a great point.
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Chapter 4: Who are the primary customers of ClearMetal?
Okay, 40. And what's the breakdown? How many engineers? About half the company is in the development side. Okay, and how many quota-carrying reps? Quota-carrying reps, we've got today between five and 10, and we're hiring actively right now. How'd you figure that model out? How'd you get your first sale hire done? What pro forma did you put them on? What was kind of the new bookings ARR target?
Yeah, I think, you know, typical for our kind of stage in size SaaS, you know, as we move forward, you know, reps carry anywhere between a million or two million per year. We figured, how did we figure that out? Some experience, some advisory, you know, following pretty typical SaaS models in our view. Yep.
And will their full earnings at OT be something like 250 grand or about one fourth of the kind of the ARR target? You're asking pointed and great questions. Yeah, we're pretty in line with typical SaaS rep. Yeah. Then obviously looking for quota to, or sorry, coverage to quota, or...
quota to coverage of about three, four X, what we're looking for in terms of, uh, what we're looking to hit revenue wise. Yeah. Yeah. Some people call it salesperson profitability. Some people call it, you know, OT, you know, to, to ARR ratio, whatever you want, coverage ratio, whatever you want to call it. Um, but that math works, right? That math works, which is important. Um, okay.
Uh, tell me about the first customer. So how'd you have an inside scoop with him? How'd you get them to commit to paying you money up front when you had nothing? Yeah, sure. So the company actually evolved quite a bit. We started, uh,
selling our software to the logistics providers themselves prior to us evolving the business to sell to the brands and suppliers whose goods are being carried by those logistics providers. Think of big companies like Maersk that have ships and containers. That's where it started.
We evolved to the biggest companies you know, just as an example, a company like Nike or Home Depot or big physical businesses. Anyway, the company was founded after some time I spent over in Hong Kong at one of these logistics providers during business school.
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Chapter 5: What factors determine the pricing of ClearMetal's services?
I came back with a general insight and understanding of a problem space they were experiencing about moving assets around the world with low predictability. Then my two co-founders and I went at the problem to really address it and see what we could solve. We had built up...
general understanding of the problem through interviewing folks in the industry, gained a good vernacular and understanding of the underlying dynamics of the problem, and had basically a lightweight prototype hypothesis on how we could solve it.
So through relationships, really cold calling, we found our first customer to work with and work with them on an early prototype, first lines of code, little mock-ups, and see if we could technically solve the problem before we then determine whether this is a nice-to-have or a big strategic need. Yeah, no, that's, I mean, that's obviously a good way to do it.
So that was your first customer back in 2015. And then update us today, four years later, how many customers are you working with? Yeah, so we're working, we have dozens of customers I'll share. They are across 10 verticals, industry verticals, and actually sit across four continents.
And again, some of the largest kind of Fortune 500, or if you look at, you know, Gartner's top 25 supply chains, we're engaged in working with about 25% of those top supply chains. Sorry, Gartner's what? What's it called? Yeah, Gartner has a listing every year of the top 25 supply chains in the world. Oh, okay.
And if you look at that list, you know, big companies, Apple, Unilever, Procter & Gamble, folks like this. And, you know, we've evolved quite a bit of evidence being not only did Gartner name us a cool vendor and AI supply chain, but...
quarter of all those top supply chains have actually engaged us for further help on digitizing their their supply chain good well i mean that's six or seven right there a quarter of 25 and if you say a couple dozens we'll assume a north of 24 is fair today correct that's correct yeah that's good now can i multiply that times that that rpu gave me earlier 300 000 a year that puts you at about 600 000 a month in revenue or north of that today i'd say uh yeah we um
What I'll say is this, because it gets touchy with revenue as a private company. We're actually very healthily on the track for Series B. And I think you can call out generally what those metrics look like. I don't know, actually. I mean, what would you say those are? I'd say companies around Silicon Valley and SaaS, we're seeing anywhere between...
you know, five to 12 million of ARR annual recurring revenues per year is typically that striking point of a series B, which would be, you know, 20 to 40 million of additional capital. Should you want to grow the company with that new trajectory? So, I mean, we have what, two, three months left in this year. I mean, do you feel good about breaking the 5 million mark by the end of this year?
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