SaaS Interviews with CEOs, Startups, Founders
From (almost) bankruptcy to $20M ARR / $2M profit within 3 years
27 Jul 2023
Chapter 1: What is the main topic discussed in this episode?
I'm very excited to share this recording with you guys, which happened at our conference, sasopen.com, with over 100 speakers, all founders of B2B SaaS companies. We have a very high bar for what speakers share on stage, so you're going to enjoy this episode where we dive deep into revenue graphs, real tactics, and real growth metrics.
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.
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So yeah, quick story about our past four years. It's been, as always, a bit of a bumpy ride. Many of you here are founders, so you certainly know what I'm talking about. I'm pleased to share some of the learnings that we had, because I think some of it can be beneficial for any of you raising money or facing a bit of a challenging situation. So that's what I'm trying to share.
First, I'll start with how the fundraising almost killed us. And that's literally what happened at that moment. We raised money, we were super happy, but actually it turned out not to be the best choice in our life. Surprisingly, and this may have happened to some of you, how COVID actually saved us.
So in the early days of COVID, we were very scared, but actually it turned out to be more of a positive. And then sharing a few lessons learned from that experience. So first about the company evolution. It's quite an old company, if we could say so. It's a 12-year-old company founded myself with three other colleagues. For many years, we haven't been doing much. iterating quite a bit.
I used to work for Apple for five years at the very beginning of iTunes. And the genesis of Kling was actually to put iTunes as a white label. So the intent was really to provide the solution of selling your digital content, providing customer care, managing the payment. That was really what we were providing. When we launched, we were multimedia.
And in end of 2014, we started to focus on the video space. That's where it started to improve quite a bit. In 2018, we took a pivot to concentrate purely on subscriber management within the video space. So if you think about Peacock here in the US, Netflix-like type of service, that's basically the type of services that we would power.
And then, well, you see the recent growth and the acceleration. So the story for today is starting here in 2018. We had decent growth for four years. So finally, we were able to raise some money. This is really what we did in 2018. Raised 5 million euros, which was very substantial for us. Prior to that, we only raised 1.5 million, so a fairly small amount. We were largely bootstrapped.
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Chapter 2: What challenges did the company face during fundraising?
Or do we stop the company? And to show how serious we were about stopping the company and how risky that time was, this is a mail that I wrote to... or accountants, because in Europe, there's a bit of regulation associated with bankruptcy, especially if you are a founder. And you write your accountants, OK, what happens from a pure liability standpoint if you crash the company?
I can tell you this is very painful. And I wish that none of you have to experience this, because you really realize that, OK, you've been putting about eight years of efforts. My wife is a co-founder in the business. And you feel like, OK, potentially in three weeks, all of this will be over. And I will have to carry that legacy in the future.
So it really turns back to the fundraising into a situation that was a bit shitty. The investor says, you know what, actually, we have an offer on the table to acquire the company for 14 million euros. And all of them are saying, well, actually, this is a pretty good deal. You guys should take it, because anyway, the company is crashing.
But then we do the math, and we see that for the four founders that we were, that's more or less what we would end up with. Luckily, working through Apple and a few other activities in my life, I did make a bit of cash before.
Chapter 3: How did COVID-19 unexpectedly benefit the business?
So I said, no, this is not a good deal. You know what? If we crash the company, we crash it altogether, and that's it. So the investors were a bit taken by surprise because they felt like, no, no, let's do it nicely and so on. I said, no, I'm the CEO. I'm still owning 22% of the organization.
with the rest of the founders and the friends and family, we were close to 50% and we are close to 50% today. So we said, no, either we crash altogether or we continue altogether. And actually that paid off because they re-injected a little bit of cash just to help survive for the remaining six months. But they told us, okay, it's the last time that we do this and you'd rather take an exit.
That's where comes the second chapter of the story. When we got that offer at 14, this was like in March 20, and suddenly COVID kicks in. We cannot do the due diligence because we were outside of Europe. So all of this is slowing down. Everybody also was in doubt what would happen to the industry and how many companies would react. So the process is slowing down.
Chapter 4: What was the company's evolution over the years?
We were also doing everything we could to slow it down. We start to optimize our business, and it's very similar. I don't know if some of you saw the preso of Jill earlier, metadata.io. Very similar process to look at our P&L and then show some of the examples of what we did. how you can optimize your OPEX and cost, and how did we actually reaccelerate the business after that. So...
Here, you see basically the two key metrics, I guess, that you monitor as a business. One is revenue. One is OPEX. One is RMR and OPEX. And you realize, actually, running a business is fairly simple. These two lines need to be at the same level. Or ideally, the revenue is higher than OPEX. So you see more or less a gap between these two.
Clearly, the red one, September 19, is way higher than the blue one. This is March 20, so this is the COVID period. And you see basically that the two by September 20, it starts to be at the same level, i.e. we become breakeven at that moment. So how did we do? And that's maybe the main part of the price zone. I realized I could have split this in a bit further slides.
We really did it in three main programs. But it's that simple almost to improve greatly your runway as an organization. First, and this was driven by COVID, and personally, I've been managing teams for quite a while in many different types of organizations. I would never have thought that we could work in a fully remote model.
We were fairly loose and open as an organization to let people work a day, potentially two a week from home. But at no point, I would believe that it would be possible to run a business 100% remote. But luckily we had teams in, so I'm based in the Netherlands, Our main R&D center is in Poland.
We have a large team in Manila in the Philippines for all the sales qualification process and some of the customer care processes. And we have a distributed team in the US. So we were already largely working remote. We didn't fully realize it, but we were on Google Workspace. We were using Dropbox. We were using, let's say, all of these kind of tools of Skype and chat and the rest.
So we were largely already operating as remote. But the moment you decide to move from you are largely operating remote to you go 100% remote, you can save so much money. Honestly, if you guys need to save money, this is the largest part potentially of the saving that came from you cancel all travel instantly. And at that time, we are just forced to do it.
But all the little trips that everybody is doing here and there, you do save a lot. It goes pretty fast. We stopped renting office. So a lot of people were not going at the office, and we were still carrying the office. We said, why don't we keep an office? Let's stop having offices. So we only kept here. We have an office on 115 Broadway. But it's an office for two people.
Largely, we use it as a mailbox, and we can still use the WeWork card to go in different locations. But we don't anymore, let's say, pay for the heavy office. So this was quite substantial. No more perks, like the food. Everybody, the HR team was always, yeah, well, it's important. The fridge is always full, and so on.
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