SaaS Interviews with CEOs, Startups, Founders
How he grew 400% by acquiring his smaller $450k ARR competitor without using cash
04 Dec 2022
Chapter 1: What is the main topic discussed in this episode?
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. Guys, Safety Evolution broke $54,000 a month just recently from $18,000 a month a year ago.
Chapter 2: What strategies led to the 400% growth of Safety Evolution?
A lot of that growth came from acquiring $450,000 of ARR when they bought their smaller competitor called Safety Tech, which they gave 40% equity in the combined company in order to get that deal done. It was a non-cash deal, which is great.
He's proven if you have an enterprise motion, they've got their biggest customer already paying $55,000 per year, which is currently about 8% of their total ARR. He's obviously going to look to continue with that motion as they look to break a million dollar run right Hey folks, my guest today is David Brennan. He's an experienced CEO, SaaS co-founder, and safety professional.
He's driven by a passion for technology and he's focused on creating user-centric software that is disrupting the safety industry. He's passionate about building and creating high-performing teams at safetyevolution.com. All right, you ready to take us to the top, David? Yeah, let's do it. All right, so what does this mean? Safety for who and how is the software?
So it's our ideal customer profile is oil and gas service and construction contractors. So we focus in on that 500 to 1000 employee range. And so that gives you a little bit of an idea of where we're going. But we really look at safety as a as a function of your business.
And so we have spent a lot of time digging in to better understand how we can change safety from compliance to an actual tool that helps your bottom line and protects your workforce and is proactive in what it does. So oil and mainly oil and gas companies? Oil and gas service companies and construction companies. Interesting. What kind of service companies?
So what we do is the differentiation for us and the way we narrow it down is there's a lot of companies that are the prime contractors on a job site. And so what we actually do is we... provide software for the companies that service them and build their projects. So construction companies would be like the electrical company, the plumbers, the form companies, carpenters, that type of stuff.
Oil and gas would be like wireline, frack companies, anybody that's servicing the main players in the industry. Interesting. Okay. So I run a service company that dispatches plumbers to fix toilets in a certain zip code in Austin, Texas. And one of those plumbers took the thing off the top of the toilet, dropped it on his big toe and broke his toe and is now wanting to sue me.
If I had safety evolution, you prevent that or tell me how you fit in. So that's a great example. So think of it this way. When we build, so whenever we have employees, we need to make sure there's three major things that stop events from happening. The first one is that they're trained, that they have experience and that you've verified that they have experience.
So your safety program does all that. Plus then it gives the tools to the worker.
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Chapter 3: How did Safety Evolution acquire a competitor without cash?
And I think this is the big change is like so many times workers would fill out a document because they were doing a compliance document just to protect the company. And what we're doing is we're moving companies away from that to where the workers filling out that document for them. And so that process is really designed for them.
And so there's so many constraints with things like with with paper and those type of communications that you can't actually see what's happening in the field. So I'll give you a little bit of a story on like how this kind of comes into play on a major project, if that's cool with you, Nathan. Yeah, yeah.
Give us context first, though, to tell us what the average customer is paying per month and then tell us that story. Okay, perfect. So right now our average monthly is about $400. So annual contract values is... We have to talk about that because that's up over 2x from 2020 when we last spoke. So let's make sure to talk about that. That's climbing fast, Nathan, just so you know.
So we pulled some, if you want the business side of it, there's some really, really cool things that we've learned in the last two years. Of course I want the business, a business show. Of course I want it. Okay, man. Well, let's give you the, let's give you the dirt. So just for everyone has context. When we spoke in 2020, you were doing, you had about 43 customers at $170 per month.
You were doing about a hundred thousand bucks a year in revenue, right? Yeah. How did you take those customers? Are they the same customers paying more? Or did you fire those customers and just bring on more mid-market enterprise accounts? So those customers are still there. And so they are still significantly keeping the average down, I'll say.
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Chapter 4: What is the ideal customer profile for Safety Evolution?
But since we last talked, currently we've got 155 companies. We're at about 650 in annual reoccurring revenue. We purchased one of our competitors, Safety Tech. Rolled them in in June and did about 180 degree pivot in our product and went from a very rigid system to now that was very designed for those smaller companies.
That's why the contract value was so low to now we're, you know, putting out proposals and signing contracts that are anywhere from, you know, 20 to 60,000 a year. David, what's your biggest customer pay today? Not contract you have out, actually closed customer they've paid you already. Closed customer is $55,000. Wow. Okay. Got it.
So your biggest customer makes up almost 10% of your total revenue. So this is a pattern that you've built technology that does have enterprise motion. You just now need to get more of the $55,000 of your customers. How are you doing that?
So we have, it's been really interesting to see because there was like a lull, a COVID lull where companies were really, I think they were just kind of worried about taking on new technology. And so what we've seen here in the last probably six months is a significant shift in those companies that are, we'll say contract value anywhere between 20 and 40,000 a year.
Um, they, they pretty much make up about 80% of our pipeline now. And so it's been really, really amazing to see. I mean, we've, we've had to go from a demo closed process to now it's full, uh,
discovery demo proposal and we're selling into a very well we're selling an enterprise process or flow really and so we're seeing that in the contract value so that's that's where we're seeing the shift and and we're we're really um seeing a big pickup there in that in that uh vertical and if you're doing about 54 000 a month today which is a 650 000 a year run rate what you just shared with us do you remember what your run rate was exactly one year ago today
I think it was about 150, 180. Yeah, you told me via email 200. So right on the money, right? So you're doing about 18,000 bucks a month in revenue exactly one year ago, now up to 54,000. So this is significant growth. Tell me about this acquisition.
I mean, most of my listeners right now who are under a million in AR, they're going, wait, you can acquire a competitor with under a million bucks in revenue? You did it. How'd you do it? Well, it's an awesome story, actually. This is the power of your network, okay?
I walked into Dan Martell's SaaS Academy and I sat down at my table in October of last year and I did my perfect intro and the lady across the table stood up and said, hey, you need to call Brian Queering with Safety Tech. He's selling the company and I think it would be a great fit for you. I followed up with her a week later and said, hey, can you get me the introduction?
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Chapter 5: How does Safety Evolution differentiate its services in the market?
Yeah. Now they had more revenue than you did. How did you get away with giving them just 40%? Didn't they ask for like 60, 70 and they'd say, David, we have more revenue than you. We have, we deserve more of the company. They could have said that, but I think that, again, this comes down to the opportunity for them was to come in to a really strong team and they saw the potential and
Well, they knew what product we have. And so there was a lot of incentive for them to join because of that. And so it just, it made sense. There was the strong co-founder aspect of it that Ryan was going to be able to have that support. We had the product that our product was, quite a bit more comprehensive than theirs.
And so, so there was that side and, and they just saw, I mean, everyone all the way through their shareholders saw that there was so much more upside to joining the company that the valuation of, of, you know, 400,000 or so more money. Are you still bootstrapped today? Yes. I think we're like safety evolutions raised like 90 K and, Got it. 90K total. When was that? Back in 2016? Yeah. No, we did.
Wade and I funded it ourselves. And then in 2019, we raised a little bit of cash, but it's been pretty much bootstrapped the whole way. Was that on a convertible note? That was just shares, just straight shares. Any interest in buying out those investors? I think, well, I'll tell you this. The really cool thing is we studied pricing. And so we used to go to a monthly pricing model.
And that, of course, really was pushing us down the idea that we needed to raise capital, Nathan. And so what we realized about... Nine months ago, looking at some of our competitors' pricing is what they were doing is signing companies up on a reduced annual contract. And when I saw those numbers, I realized that we could get them to sign up on a contract.
Maybe 7,500 is on the low end and then going up to like 20, 25. My question is, do you regret raising the 90K? No, not at all. So if you had the ability to buy out those investors and get the equity back today, you wouldn't do it? I think I'd rather use the money for growth at this point. Yeah, interesting.
The reason this is the number one use case we see at FounderPath right now is our folks that raised a little bit going, man, I want to give those investors 1.5x their money, but buy back 20% of my equity. And we fund it with obviously with debt. We're big fans of Dan Martell. Well, and I've looked at that, Nathan, but I think it's one of those things for us. It's probably a solid 18 months.
24 months away before it's a consideration. Why? Because I also, you got to think I've got 40% on the cap table. We've got multiple VCs on our cap table now because when we bought SafetyTech, we got VCs. Why does that impact your ability to use debt? No, I just mean like... Those, I would want to buy them all out at some point. Oh, I see. I see. Yeah, yeah, yeah.
Well, I mean, now is a great time to do it though, because everything is compressed, right? Next year, if everything's not compressed again, no one's going to want to sell, right? So the scrappiest bootstrap founders today who are sitting on cash reserves, or like for you, we give you 300,000 bucks of debt against our 650,000 in ARR.
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Chapter 6: What role does employee training play in Safety Evolution's safety programs?
Uh, 11, 11. Very cool. All right, David, we're out of time here. Let's wrap up with a famous five. Number one, favorite book, favorite book right now, five dysfunctions of a team. Number two, is there a CEO you're following or studying? Oh, tons of them. I watch Dan a lot. Yeah, he's good. Number three, what's your favorite online tool for building safety evolution? ClickUp.
Number four, how many hours of sleep do you get every night? Six and a half hours. It depends on the number. And what's your situation? Married, single kids? I have a beautiful girlfriend who we're going to have to get her married up here pretty soon. That's awesome. All right. So no kids. And how old are you? 44. 44. Last question. Something you wish you knew when you were 20.
I wish I knew that everyone doesn't think the way I think. And so I could give them a little bit more room to be who they are as human beings. Guys, Safety Evolution broke $54,000 a month just recently from $18,000 a month a year ago.
A lot of that growth came from acquiring $450,000 of ARR when they bought their smaller competitor called Safety Tech, which they gave 40% equity in the combined company in order to get that deal done. It was a non-cash deal, which is great. He's proven they have an enterprise motion. They've got their biggest customer already paying $55,000 per year, which is currently about 8%.
of their total ARR. He's obviously going to look to continue with that motion as they look to break a million dollar run, right? Hopefully, David, in the next year, man, we're rooting for you and thanks for taking us to the top. Thanks, Nathan.
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