SaaS Interviews with CEOs, Startups, Founders
Pivot City! How we pivoted 6 times on our way to $20m in revenue
28 Apr 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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Check it out right now at getlatka.com. I'm gonna start with our obligatory up into the right graph. So we're at about 14 million ARR now. I've been doing this for seven and a half years. We've got 105 staff and we're a little unique. We're in 25 states and 15 countries. We've been remote since we started.
We have a big, well, I guess it's all relative 18 million debt facility, 14 of which we've drawn so far, but we have no board. It's just me. We have no VC and we plan to be breakeven. Well, 23 is not, it's the end of 2022. It's our fiscal 23. So soon. So over the next 20 minutes, I want to cover product market fit.
And then once you have that going a bit wider and then growing your ACV based upon this. So we're a pretty open company, so I'm going to have a lot of pretty open metrics during this. I hope you find that interesting. So the first thing is finding focus and how we went about this. So we sell apps on the salesforce.com app exchange in the payments and events realm.
And we initially thought, OK, we're selling infrastructure. It's payments and events. Anybody will buy this thing. Well, what we did is over time, we looked at all of the leads that were coming in and we saw most of them were from higher ed and nonprofit. At the time, we had no go to market. And I thought go to market was like this baloney term.
But this is a real thing for sales and marketing teams to really focus on. So what we did was that we flipped it over and we ended up focusing on higher ed and nonprofit. So with Salesforce, I asked, hey, you know, what are your metrics on higher ed and nonprofit? You can see some of them are quite small, but a lot of them are quite big.
So we didn't want to sell two, three, four or 5K subscriptions. We wanted to do 50K, 100K plus based subscriptions. So we had to go upmarket and find out where these different customers were. Same thing with nonprofit. It turns out a lot of nonprofits have really a lot of money and they have very sophisticated requirements.
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Chapter 2: What is the significance of product market fit in SaaS?
I never want to do this, but you can have our app. That's great. And he was selling his... app for his biggest customer, 6K. The first deal we did, we didn't change the product at all. We sold it for 60K, actually, because founders don't know how to do pricing. And I'll get into that. So that ended up being pretty good. But then all of our hired and non-profit customers, they wanted to send SMS.
So I looked on the app exchange, and I thought, who can we buy? Because we don't need to actually build this thing. We can bolt it on, where one of the benefits of all being on Salesforce is that stuff kind of all works together. It just doesn't exactly work that way, but sometimes you get lucky. So I tried some of the apps that looked appealing. And one of them was Texty.
And all of our customers wanted the app. So instead of building, we didn't need to do the integration work. So I went for it. This was another single developer company. So I reached out to Clint and he wanted to sell. And this really helped us with our NRR. So they were at 550K ARR. I said, hey, you know, what do you guys want to sell this thing for? They said 6X.
And I said, okay, that sounds fair. So it ended up being like three and a quarter million. And so we did 1.2 million down payment. We didn't have the money to do this. So we actually funded it through debt. The other two million were to be paid over 24 months, which we paid over our own cash flow. And they were going to be incrementing payments.
So they started small and then they grew with the size of our company. And they agreed with that. They ended up taking a senior position.
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Chapter 3: How did the company pivot to focus on higher education and nonprofits?
And when we got a debt facility, they wanted to pay the whole thing off. So that was a little twist of events. But we actually were able to buy this through debt without dilution. So something else that happened with Product Market Fit is just to be weary of partnerships. So we tried to do a lot.
We tried to integrate our payments app with two other AppExchange apps, and that took a lot of time and resulted in no revenue. A lot of payment gateways reach out to us, but none of them were going to bring us any business. They just wanted to integrate us to say, hey, we're on Salesforce. But they weren't going to bring us anything, so we didn't do them.
A lot of events applications, there's so many things you can do with events. They all want to integrate. None of them wanted to bring us business, so we ended up not doing any of those. And then a lot of people, they all want to have contracts and conversations and technical integrations, and it never became anything.
So the original thesis was to make a payments app on the Salesforce App Exchange that could integrate with Stripe. At the time, no one integrated with Stripe. Now, everybody knows Stripe. But we said, hey, why don't we have a revenue share, and we'll push everyone your way.
And now we're making somewhere in the vicinity of a million a year off of that partnership, where our customers don't get charged. It's a pass-through of revenue from everything that's processed by Stripe, and it works really quite well for everyone. And then our main source of leads is through system integrators.
So when you buy a big enterprise system, there's all these integration partners that build stuff. They can bring the customers to you. So they'll say, hey, we need to do events or we need payments. They actually bring us the deals. That's like 75% of our leads that we have now. So some other stuff that we do with partnerships is we give a fair bit of money away.
So we do 1% of our revenue goes to Stripe Climate. I think this goes into my own personal interest, but part of our building of our company culture. We've given away 120K to date and for a company that's not yet even break even, and maybe this is unique because we don't have a board or VC so we can do this, but it's been able to help the world a bit and people can relate to it.
We also do 3,000 a month to watsi.org. They fund surgeries in developing countries for people that really need the help. And these kind of concepts, they're not really politically charged or religion-based or something. So a lot of the team, no matter where they're from, they can relate to them. And it's been a nice benefit that everybody's gone for.
So these are off-to-the-side partnerships that have really helped the culture. So in terms of what it is that we wanted to build, Paul Graham sort of says, listen to your customers on what it is that they want to make. They're going to tell you. And that's true. Steve Jobs said, if everybody said, give me a faster keyboard, I never want to end up with the iPhone.
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Chapter 4: What challenges did the company face with their initial product offerings?
Our events app is now four times more expensive, but our average ARR was about 12K for the longest time. It's now up around 45K, because we started to land a lot bigger accounts, because the application's grown a lot more sophisticated. We have a bigger team. It's really doing a lot. So as we've gone on, we've increased the pricing there.
And just to give you an example of my insanity, I had 930 different prices that I looked in my Stripe product price book over the first three years. I had a unique price for every single customer. So basically, the pricing just never scaled at all. So this is George in Australia. I've never actually met George. I've been to Australia once. It wasn't then.
And I never even saw this booth, which was a really interesting kind of concept about scaling. Stuart Butterfield said, I never understood the size of our company till I saw an ad in the newspaper I didn't even know we were running. I didn't even know we were going to do this. That was a whole other different kind of thing. Anyway, that's the tangent. So play with packaging.
What we found is that within our target verticals of higher ed and nonprofit, they want to be told a story. They want to understand how to buy stuff from you. So once we had our ICP, our ideal customer profile, whatever that thing stands for, we then could find out who it is that we were talking to, what it is that they wanted to buy.
So we had multiple products, this payments, pay link, document link. No one knew what the heck all this stuff was. So we just combined it into one, and then we sold it as a story rather than as a feature, which was another big problem of founders, that they're technical. They just focus on the feature, not really the benefit.
So then within Hired and Nonprofit, we then started to tell the story about how you need events and payments and messaging. So we painted this vision for them about how they can go down this road to buy all of our products into this platform that people really want to then be able to use. You can buy from one vendor to get all this stuff instead of going to all these different places.
We're launching a storefront app next month, which focuses on continuing an executive education as sort of like a Shopify for Salesforce. That idea only came out of listening to customers. We didn't magically come up with this idea. It just came from them. And we have just crazy demand for this thing. So some key takeaways. We have about 630 customers.
We've processed about $3 billion through the app. And we sent 31 million SMS messages, which Twilio is the underlying technology here. And some big things I never really understood. It is far better to make a decision rather than making no decision. If you get stuck making no decision about what you want to do, it is way worse than making a wrong decision. Kill your weak product lines.
Kyle Porter of SalesLoft did some LinkedIn post about having a line that was making six to seven million ARR a year. And that's like a lot of people's businesses. That was our business for a long time. And he just killed it saying, I wanted to focus on this other thing that was doing really, really well.
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