SaaS Interviews with CEOs, Startups, Founders
How he hit $1m with no FTE's (Fiverr contractors only)
01 May 2022
Chapter 1: What is the main topic discussed in this episode?
Founders, what's going on? You guys know I love in-person events and they are back. The recording you're about to hear is from our most recent event where we had hundreds of founders come together, share intimate details, templates, KPIs, OKRs about their business, and it was something special. Something special. We'd love to meet you in person.
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So we're going to focus today really based on Nathan's request on kind of a journey. And let me get this slide, figure this out real quick. Here we go.
Kind of a three-part story from being an operator, building a company, becoming a leader in the space, selling that company, kind of transitioning to an advisor investor, where I then invested through either directly or through some venture groups in about 400 companies.
sat on the boards of lots of companies, to be honest, got bored with that and wanted to move back into the operator space, kind of with the next journey, which is a pretty typical story for a lot of founders that are probably in this room, that once you're an operator, it's hard not to be an operator. And I also found that I wasn't a great advisor.
I was an okay advisor, but I always wanted to actually do the work, and the founders don't like that. They want you to advise, stay out of their business. I wanted to actually get in and do some of the work that was there. So to kind of kick things off, we're going to start with the story of a company called Archer Technologies. Archer was a company that I founded in 2001.
I'm going to share just some basics of the company with the products and the revenue to set the stage, and then we'll jump into kind of lessons learned, things that we did right, and then things we didn't do so good that I would have changed that's there. So from a growth perspective, what's interesting about Archer was that we were profitable in in the first year of doing business.
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Chapter 2: How did the guest transition from being an operator to an advisor?
One of those was Lehman Brothers that went out of business that was there. So we found that things were very sticky that was there. We sold the product as a SAS offering, but SAS wasn't really around in 2001. So we approached EDS, which was our first customer, with an idea and said, hey, we can come in and solve this problem for you. We're going to treat it as a process.
And oh, by the way, you're going to pay us the same amount of money every year. And they said, well, how much money is that? And I said, $800,000. And they came back and said, we'll pay you $1.1 million. And I'll share why they said that in just a minute. So they became our very first customer before we ever wrote a line of code.
So I went to EDS with a little 3 1ā2-inch diskette, for those of you that remember diskettes. Had an HTML version that basically was a PowerPoint that showed all the different screens and how things would look. And at the end of that presentation, they stood up and said, we need your product. How soon could you have it developed if we move forward with you? And I'm like, oh, my God.
Like, I don't have a developer. We haven't written a line of code. So I just shared it with them. I was just up front and said, hey, here's where we're at. It's an idea. I've got everything documented. We need to go build it that's there. And I'll share a little bit more in just a minute about that.
The next thing that we did, I told you in year eight, we raised capital for the first time in the organization. Not because we needed cash. You saw from the prior screen that we had a pretty good cash flow in the business. It allowed me to take some money off the table as a founder. And it really opened up to stop thinking about money every day.
Every day I would come in the office and the first thing I would look at is the bank balance, just to make sure that we were in a good position to pay everybody that was on the team. But it freed me from that, and it allowed us to really grow the business in the last nine months to 12 months after that investment from Bain.
And if you go out into one of my breakout sessions after this, I'm happy to share more information about what was so valuable with the Bain relationship that we had. And then what happened after the Bain investment was that in year, um, Bain came in and year eight and about seven months later, we were started getting approached by outside organizations about partnerships acquisitions.
Uh, we weren't planning on selling the company at that time. Um, but it just happened pretty quick. Uh, so we went from Bain came in and invested, I think it was a $70 million pre. It allowed me to take some money off the table. They bought about 20% of the company. They allowed the employees to cash out a portion of their stock options at that time. So it was kind of a good event for everybody.
Looking back, it wasn't a great event because then we sold the company for $200 million nine months later that was in there, which the employees would have kind of hung on to those options, some of them. So as Nathan was saying, when we found out that we needed to kind of start a process and people were looking at us, Bain Capital came in and said, look, we need to hire an investment banker.
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Chapter 3: What challenges did Archer Technologies face in its early years?
I don't remember their revenue, but We were their 51st acquisition. So they were a company that grew by acquisition. They had a team of 40 people on the acquisition team. That's all they did was go from company to company analyzing and then onboarding companies that were acquired by the organization. So this deck, this memorandum that we put together, allowed us to get an offer for $187 million.
But what was key, when when we got to the LOI here is that we also got to keep the cash that was in the business. So the deal was really north of $200 million because of that simple item. And the way we got to that point, and it's key for a lot of founders that I work with, is understand how much working capital the business needs.
Make sure that that is communicated in the memorandum so that you can negotiate through the LOI with, hey, here's what I need. And in this particular case, the business generated enough free cash flow each month to more than pay for the business needs. So it allowed us to sweep about 15 million additional money out of the company. So let's focus on here's what we did, right?
This is what I wanted to spend most of the time talking about. And I'm getting old and it's hard to actually read the monitor in front of me with the, with the items. But, um, The first thing that we did right at Archer was we listened to the customer. And what that really meant was the first year and a half of the business, I spent my time not in the office. I was at customer sites.
I was at EDS watching them and learning how they would use a product like this inside of an organization of 80,000 people. I thought I was a pretty big deal CEO of a company.
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Chapter 4: How did Archer Technologies achieve profitability in its first year?
They put me in a phone closet. That's where I sat. All the tech was in there. I had my little chair and my desk and I couldn't even do meetings in there. I had to walk out to meet with everybody. But I just sat there and watched and listened to how they would use it. I was on the phone back to our development team saying, add this feature, add this other feature that's in here.
And then I would quickly iterate back with the organization to say, hey, is this what you meant? And we did that then with Credit Suisse First Boston, with Lehman Brothers, with Goldman Sachs. That allowed us to really get the version one of our product to where it needed to be to sell to the remainder of the financial services companies.
The second thing that we did right was we really thought about who we were trying to sell to. And for us, it was the top 30 financial services companies in the US. And the reason for that was that those companies If we were in one of those companies, it was easier for us to go to a tech company, a telco company, or a healthcare company and say, Goldman Sachs is already using Archer.
Shouldn't you take a look at that, right? So we decided to focus just on those top 30. We broke it down into groups of 10, and we would only sell into those 10 one at a time. So the sales team, which was my wife, would come back and say, I've got this other opportunity. I'm like, is it in financial services? Is it one of those top 10? No. Forget about it.
Marketing team would come in and say, hey, we have an RFP. Forget about it. We're only selling into these 10. And people were frustrated with me in the first year and a half, two years. But what happened was we sold 29 of those 30 companies. And that's what launched us to sell to everybody else, right?
It was at the beginning, we were very focused on who we were selling to, why we were selling to them. And then it gave us the momentum to go to a Microsoft and to a Dell and to an eBay and with some credentials to say, hey, here's Citi, Goldman, Lehman, who's using the product.
With our product, what I didn't mention at the beginning was that we were one of the first no-code platforms ever developed back in 2000. Anybody remember who the first, sometimes I call them the second, no-code platform really was? Salesforce, right? Before that, there were,
Things that were kind of in that space, but Salesforce and Archer were the first two products that really took a no-code approach to solving a problem that related to a process. So every customer could go in and configure that process just a little bit differently, but it was one code base. So across our 100-plus customers that we had, every one of those were different.
None of them had the same UI look and feel branding, but they were all on a single code base that was there. So that was a huge advantage for us. From a people perspective, we found that the best people for us to recruit were coming from some of the big X accounting firms. And the reason for that was that, let's take Accenture as an example.
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