SaaS Interviews with CEOs, Startups, Founders
Bootstrapped Employee Performance SaaS hits $3.6m ARR, Up from $2.4m, Valued at $40m
26 Feb 2021
Chapter 1: What is the main topic discussed in this episode?
So if I were to look at 2016, for example, our ACV at that time was more like 4,000 per client. And right now our ACV on an incremental basis or a critical basis is roughly around, you know, 11, 12,000 per client.
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Now look, I never want money to be the reason you can't listen to episodes. On the checkout page, you'll see an option to request free access. I grant 100% of those requests, no questions asked. Hello, everyone. My guest today is Sri Shalapa. He's a passionate entrepreneur and leader in building high-performance organizations that care about their people.
He spent over 20 years in leading organizations in software development and consulting in the U.S. With a unique background in technology, people management, health IT, and film writing, Sri brings a diverse set of experiences across industries and specialties to build high-performing, highly engaged organizations at his new company, Engagedly.com. Sri, are you ready to take us to the top?
All right. So what is Engagedly.com?
Well, Engagedly is the SaaS product, essentially a solution for organizations that are looking to build high-performance teams. So we really focus on aligning organizational objectives with people because people have aspirations. They want to go somewhere in their career. They want to learn. They want to develop. They want to have good management.
And organizations have an objective of higher revenue, higher profits. an engaged workforce. So our platform helps connect the two by providing tools to align their goals, align their performance objectives, provide training programs internally for employee development, career growth, and engagement tools to really engage.
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Chapter 2: What is Engagedly.com and how does it help organizations?
What percent of new signups, like last month, signed a deal that was more than one year?
Um, like 70%.
Okay. Wow. So the majority are, you know, one and a half, two year sort of concept contracts.
Yeah. Some of them are four or five year contracts.
Why is someone willing to pay you for, you know, sign up for a contract five years out? I mean, they have no idea what you're gonna be doing five years from now.
Well, five years is an exception. I'm doing some of them. Here's the thing. This is an enterprise software. When you're implementing an enterprise software that affects everybody's life, it's not a sales software that only sales team uses or a payroll software that only HR uses.
When you're implementing an enterprise software, it takes about three to six months to really realize the full value because there's a lot of change management that has to happen in an organization. If you're looking at a product like, let's say, I'm going to give an example, like Workday or SAP. We are the same segment, except we play on the lower end of the segment, right?
I mean, their implementation cycles can anywhere from six months to a year just to implement the product and roll it out. And typically that for enterprise-wide, enterprise-scale products, a one-year deal is generally a minimum.
Do you have automatic accelerators as the customer moves from year one to year two, year two to year three, where the ACV will increase by five or 10% fixed in the contract?
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Chapter 3: How much do organizations typically pay for Engagedly's services?
Yes.
No, no, no. So I said 12,000 a year, 12,000 a year. That's the incremental. Our current average is right around 9,000, if you look at the historical. So what is MRR today? MR is right around 3.6, roughly, at this point.
So you're doing 3.6? No, no, I'm sorry, ARR, ARR, 3.6. Okay, great, 3.6 annually. So you're doing about $300,000 per month right now in revenue.
Right.
So you said you had one customer paying $100,000 per month. That's a lot of customer concentration risk. They make up 30% of your total revenue?
100. Okay. No, no, 100,000 a year, not 100,000 a month, but 100,000 a year.
You said earlier that customers pay $5 per seat, my question. And then you said we have some customers that don't.
So that's the average, right? So the outlier in that case, they're paying like $2 or $3 per seat. So that's more like the $150,000, $200,000.
So you do have a customer with 20,000 seats, but you give them a group discount at about $1 or $2 per seat. Correct. I see what you're saying. I see. Okay, very cool. So how are you doing? Those are obviously outliers, right? And we have to make special pricing for them.
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Chapter 4: What was the journey to acquiring the first customers?
Did you, have you exited a company before?
Yeah. Yeah. We had an exit, you know, for another consulting company that we did that got acquired by a private equity. What would you value your business at today? Yeah. It's hard to value, man, because the valuation metrics are so all over the place. You can say I'm 10x revenue or 20x revenue, depending on where you are.
I mean, I would suspect today it's probably in the 30, 50 range, depending on who's buying it. Is they buying it for strategic reasons or if they're buying it for purely cash?
Now I hear you. Hey, last few questions before we wrap up. Churn is critical in a SaaS business. What's your revenue churn over the past 12 months?
Our net revenue churn, well, the past 12 months was really bad because of the COVID. A lot of our lower-end customers, a lot of them went out of business or cut their staff dramatically. But we ended up still doing pretty well. I think we ended up with a net revenue retention of a little over 90%.
Okay. And can you peel that back for me? What was gross churn and then what was expansion?
So the gross churn was in the low 80s. So not 80s, 80s retention, gross revenue retention was in the low 80s. And the rest of it was expansion.
Got it. So you churn it for 10, gross retention was in the 80s. So flipping that gross churn was about 20% expansion.
17, 18% actually.
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Chapter 5: How does Engagedly handle customer acquisition costs and marketing?
I'm talking dollar churn.
Yeah. Dollar gross churn is probably better.
Wow. about 18% churn. And then you've got, it sounds like about 8% expansion and that's where you get 90% net revenue retention.
Right. That was for the year. And now I will say the Q4, we actually had a 105% revenue retention for Q4.
So the market is definitely behaving at this point. That's great. What are you paying to acquire a new customer right now? I know you have a six to nine month payback period, but what are you paying?
What am I paying?
Who? CAC, customer acquisition cost, all in, fully weighted.
Okay. About six to 8,000 per deal.
And where are you spending that money besides salespeople commissions?
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