SaaS Interviews with CEOs, Startups, Founders
How he Bootstrapped to $4m In Real Estate SaaS Space
28 Mar 2023
Chapter 1: How did Alex Simon start his journey in the real estate SaaS industry?
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 profits, which they keep 50% of that in the bank to grow their cash balance now over 600,000 bucks. He likes to see three to five months of expenses in the bank to stay safe.
Now thinking about capital allocation, what can he buy? Can he buy distressed assets to keep growing the company? He's got the team to do it. 35 folks, 10 engineers as they look to continue to scale in a bootstrapped way. Hey folks, my guest today is Alex Simon.
He's the co-founder of titlecapture.com, where they help US title agents, real estate agents, and loan officers provide hyper-accurate cost estimates to home buyers and sellers. The company was founded in 2013, 100% bootstrapped, and now doing almost 4 million in ARR. He's got personal skills and background, including product design and marketing. Alex, you ready to take us to the top? Yeah.
Chapter 2: What challenges did Alex face when transitioning from a service-based model to SaaS?
I'm really thankful for being on your podcast, Nathan. You bet. Did you start off sort of as a broker and said, you know what? I don't like this whole commission structure. Let me go build a SaaS company instead. No, no, no. The story is actually a lot simpler and not that glitzy. Me and my co-founder were developing software, basically outsource, getting projects and whatnot.
And at some point in 2013, we kind of got fed up of that business model. And then we decided, hey, let's build something that we own. And we sell a subscription instead of just constantly going back to step one with every new client. And so what happened was that we had a... we had a company who wanted us to build a rate calculator app for them. Right.
Chapter 3: How did TitleCapture secure its first major client?
And that's when we decided, well, hold on. Instead of actually selling it to them, let's find out more about this need and let's do some research because they're pretty big. And if they need it, chances are that the whole market might need something like this.
And we do the homework and we propose to them, Hey, you don't have to pay us hundreds of thousands of dollars, just pay us a thousand dollars a month, you know, going forward and we'll cap it lifetime deal and we'll build it. But we're going to own it. And they said, yes. And that was the start of what title capture. Are they still paying one K per month today?
Yeah, but they were acquired by one of the biggest title insurance companies in the country, First American. Did they cancel title capture after they were acquired or they're still paying and using it? No, no. The funny story is the acquiring company already had a solution, but the people that were using us, they sort of were activists and they didn't want to let go of it.
And so they kind of opposed canceling and we're still with them. Sounds like you need to write a book, The Activist Customer. Yeah, that's awesome. That would be a good customer success book. That would. So how did you structure this in the early days? Because I have a lot of founders listening that are launching their first product. Someone has told them, yes, we're willing to pay.
But making the leap from someone verbally saying yes to actually signing a DocuSign and maybe actually wiring via Stripe the first down payment is a whole other issue. So how did that work for you? Well, I mean, we were pretty fortunate. What happened in the, well, here's another funny story. We were supposed to be three partners, right?
I was kind of on the design side and we had a programmer and then my co-founder who was doing sales and business development, right? And when we decided that we were going to build this thing, we also in parallel booked a booth at the annual convention in West Palm Beach called Alta One, like Alta being the American Land Title Association.
The problem was that three weeks or four weeks before the trade show, our programmer kind of went missing in action.
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Chapter 4: What is the current customer base and revenue model for TitleCapture?
Like, forget about it. We didn't have any code. We didn't have anything. So I had some background in computer science, and I did figure it out on my own. So obviously our V1.0, I don't think it was very functional. It looked great. It was something to show people at the trade show.
Obviously, we pivoted and we made it work the coming weeks, but we went at the trade show and our go-to-market strategy was practically non-existent. We got lucky because one person at the trade show who was the national sales rep for a large title insurance company
uh loved it right and our customers are the title agencies right they're the resellers for title insurance policies the title insurance company is they're like the brokers the middleman right and so every title insurance company has tens and hundreds and thousands of title agencies that they do business with so this guy saw our product it was like dude i would love to put it in front of all my title agencies because i'd love to
Why, though? I mean, I don't want to disrespect you, but you weren't our developer. How are you able to build something that this guy's never seen before and you're not even a developer? I mean, why hadn't someone else done this thing yet? It's a slow, non-tech-savvy industry. Back in 2013... There weren't many solutions. And the ones that existed looked like they're from the 90s. I see.
So when we came in with a responsive, modern looking thing that was easy to use, then, you know, I mean, we had background in creating products. So it was obviously superior. And what we added as a nice touch was that we branded it. We basically made it a white labeled web app for each and every single customer.
So that when they put out this rate calculator, it was representing them and it was nicely branded and all that. So it won with ease of use and aesthetics. So fast forward to today, how many customers are you working with? We have signed up of 1500 title agencies thus far, the market in total is 13,000.
Um, you know, so it's with competitors and everything, we're pretty, uh, you know, satisfied with how, how far we've come. What did each of those 1500 pay per month on average?
the the acv is about four grand so that's annual value per year right so it's a slightly above 300 a month um average but we have customers in the thousands a month so can we take the 1500 customers times four grand acv that would put you at like a six million run rate today but you said in the bio you weren't four million no there's yeah we've signed up we've signed up 1500 and
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Chapter 5: How does TitleCapture maintain profitability and manage cash flow?
when you take out the trend companies, um, I don't know, we're about around the thousand active. Okay. So a thousand active at four grand a year puts you at a 4 million run right today or about 330,000 a month in revenue. Yeah. And where were you exactly one year ago? One year ago we were, um,
six percent less because i remember the growth in 2022 was six percent um the real estate market definitely took a bit of a hit towards the end of of the year last year we have seen a bit more churn than usual our churn is normally at about point
6.7 percent month over month um but in the sort of last couple of months of 2022 we did see it up to 1.7 1.8 um people got scared a lot of title agencies decided to kind of cut costs across the board because they didn't know what was coming you know so they take took all this sort of pre-emptive action um but it has come back down since then.
So people are starting to get a little more confident about where the market's going. But there's been kind of three, four months where our net new MRR was negative. Okay, so 313,000 a month a year ago would be 6% up to 333 today. Take us back one more year. What'd you finish 2021 with MRR wise? Do you remember? 280, something like that. 280, okay.
So, I mean, this is the definition of like, you know, people say overnight success, but no, you're just plugging away 5% to 15% of your growth for the past 7, 8, 9, 10 years, right? Yeah. And Hollywood straps. It's actually... totally bootstrapped.
And what's actually now becoming very evident is that growth is tapering because of the fact that we're going higher into the sort of market share quota. And because you have other competitors, because whatever, you've already signed up the people who are tech savvy and, you know, They want to use technology.
It's getting increasingly difficult to grow or to maintain stable growth by sheer new customers. So now what really becomes a necessity for us strategically is to start looking at building more product to increase that ACV. So, for example, our product is a rate calculator.
But the next step of the process is a full-on settlement software, which helps the title agency manage the whole transaction. You own that product.
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Chapter 6: What strategies is TitleCapture considering for future growth?
You upsell that product. We don't have that product yet. There's another competing company that came along in 2016 that disrupted that market. Why don't you buy it? Why didn't you build it? Yeah.
do you mean well why didn't you go buy if you know that's the next upsell why haven't you guys built that internally to start upselling yourself or or why have you not gone and bought that bought that competitor we just didn't get around to making that definite decision right so it's it's it's because of internal decision making um that's slightly slower and um but
we definitely have to start moving either buy or build whatever, because that's a 40,000 ACV product. It's a 10 times. So if you want to grow from this point on, you have to really start going out there and building more value. Alex, what's the team size today? How many folks? 35 to 40 people. Oh, wow. Okay. How many engineers? Um, Up to 10, not more than 10.
Are they all full-time or do you use sort of outsource development shops? They're full-time. I think our DevOps engineers are outsourced. You're what? Okay. So what, like five, 10 of those or no?
no it's about two people two or three okay interesting um very cool and then i guess talk to me i mean this is a great bootstrap story it's not every day you hear a bootstrapper going up to four million bucks in arr so i want to focus a little bit on that um are you running it sort of right at breakeven or do you guys have profits every month oh no the company's highly profitable it's 33 profit margin
Okay. So you guys will do that in about $90,000 a month in profit on your 330,000 of top line. Yeah. Yeah. What do you do as a capital allocator?
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Chapter 7: How does Alex prioritize capital allocation within the company?
As a capital allocator, what do you do with that 90 grand each month in profits? Do you pay it out as dividends? Do you reinvest it? What do you do? We pay it out right now, but again, we're also, um, making sure the cash is there to kind of sustain whatever might happen. Right. So we've taken all kinds of, uh, you know, good financial, you know, safety measures. So what makes you feel safe?
It gets distributed. How much cash in the bank makes you feel safe? Three months worth of expenses, you know. Which is how much for you? Well, it should be about half a million, 500, 600, 100,000. Okay. Interesting. That's a good target to get to. Yeah, as a cushion, just to make you feel safe, that makes sense. Now, how do you structure the $90,000 in payouts each month?
We had Bridget on with You Can Book Me who had a whole profit-sharing plan she does each month. How do you guys think about distributing? We just make it half-half because we have two partners, 50% each. And, well, we don't take it all, right? We kind of limit it to the point where half stays in cash, you know, just adds to the cash every single month.
So 45 K of the 90 K would stay in the business. So your cash balance is now 650,000 and you guys each take whatever 20, 30,000 a month. You split the rest. Yeah. Yeah. Pretty much.
Chapter 8: What advice does Alex have for aspiring entrepreneurs in the SaaS space?
And that's your salary or is that on top of your salary? Yeah. No, that's, that's basically what we pay ourselves. Um, you know, um, I see. That's great. I mean, I love this model. Now, if we look at personally what maybe you would make on the company over time, like 25 grand a month from the dividends times 12 months, I think is like $300,000 per year.
And the reason I set that context is if someone came to you and offered you and your partner to buy the whole company for, say, 10 million all cash upfront today, do you sell? It's a tough question. That's a tough question to answer. We're definitely open to an exit opportunity, but at the same time, we know that there's room because of my conversations with all our customers.
There's a lot of opportunity. And on one hand, there's more we can build and grow the company. On the other hand, when comparing a financial buyer's offer with the existing bigger sort of settlement software or insurance company, the value of our customers that we have today to them is a lot higher than what a financial buyer would offer. Right? We were actually doing the math.
I'm not going to name any names. But we realized that for one of our partners, a buyout would be in the range of 60 to 80 million. You know, that would be
fair value to them actually that would be a discount you know so that would be really i mean look i see a lot of deals in today's market that would be a premium exit valuation so why are you not signing and taking that immediately because we didn't get the offer yet
We don't have any offers because we haven't been as proactive as we should have in networking and just being in front of all the potential strategic acquirers. So we have to do a lot more of that. That's my take on it. Well, so what are, so focus too much on the work, you know? Yeah. I mean, so how are you thinking about the business, I guess, moving forward?
You know, it sounds like you're very comfortable and this is not a bad thing, by the way. I'm not, this is not a discus being comfortable. This is a, it's a compliment. You're in a very comfortable spot. So you can keep doing status quo. No problem. I don't know if you're competitive. You play varsity sports back in the day. Maybe you want to go build a billion dollar company.
That would be a different model. Or maybe say, you know what? I want to go build a family and get out of operating and free up my time and sell the whole thing. Which of the buckets do you fit in or a different bucket?
would i would be in the second because i always want to challenge myself and build a bigger thing and more so the way i see it it's you know this is an asset so i need to grow its value or build more assets if i can't do this it doesn't matter right we've the sky's the limit and no matter how small the niche is if you dive deep in it you'll find opportunity everywhere we've actually discussed
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