SaaS Interviews with CEOs, Startups, Founders
She Doesn't Want Your VC Check, $10m+ In Dividends Paid Out for Time Tracking Tool
02 May 2021
Chapter 1: What is the background of Karina Ludwig and FunctionFox?
Are you competitive though? I mean, do you see a path where this can, you know, get above, you know, call it maybe 15 million in terms of run rate in the next year or so, or is that something where you don't really focus on? Oh yeah. Yeah. Yeah. No problem at all. You are listening to conversations with Nathan Latka.
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My guest today is Karina Ludwig. She's an accomplished senior executive advisor and board member with more than 30 years of success in business tech and advertising. Now, for the past 21 years, she's led FunctionFox, a global leader in time tracking and project management.
She also sits on the board for Women in Science and Tech and the Innovation and the Advanced Technology and Entrepreneurship Council. Karina, are you ready to take us to the top? Let's do it. Man, so you were one of the SaaS OGs, 21 years, huh? Yeah. Yeah, it was before dial-up around that time, broadband. People weren't even doing online banking.
So, you know, to have a SaaS company at that time, it wasn't even SaaS. It was like ASP. Now, what is your story in terms of the founding team at FunctionFox? Were you one of the founders or were you brought in afterwards? Brought in before it even was an idea. So CEO, founder is Mary Lynn and she's still around today. There's four of us. We all started 20 years ago and we built it for ourselves.
She had a Suburbia Studios, which is an ad agency. and thought, you know, we really need something to track our time manager projects. And there wasn't really anything in the market. And so we built it for ourselves and thought, hey, this is actually pretty cool. Put it out to a few other people. And they said, yeah, this is really great. And so we built it into a business.
It was not on the onset to go, hey, let's build a big business. It was build it for yourselves, which is always, I think, the best. And 21 years later, we're still selling globally. What happened? Where did it go from an internal project where you're eating your own dog food to new people going, wait, what is that thing you just used? I want to use that time tracking too.
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Chapter 2: How did FunctionFox evolve from an internal tool to a business?
And we haven't raised money since. So for years, we've really, you know, based on our own profits, we're a very profitable company. We're very different than a lot of other companies out there. You know, 35 million or they're in their third round or whatever it may be. we've never done that. We've just kind of said, okay, this is where our growth is going to be this year. We're profitable.
We want to have this as a lifestyle business. And if we need more injection of cash, we raise revenue in a different way. So we'll put out, you know, price increase, or we'll do a feature and add on or do upgrades, that kind of thing. And then we'll build naturally and organically. And that's worked very well for us and very different than a lot of other players in the market. I love profits.
I love capital efficient founders. I love getting creative with getting cash from customers instead of VCs. When you say very profitable, what does that mean to you? Well, I mean, you can say, okay, there's, you know, the big players out there and, uh, they're playing with big money. We're in the smaller pool. We're small fish in the big, in the big scheme of things.
And we're a Canadian company, which is also very different. We're playing in a us market as a Canadian. So profitable for us means huge dividends for all of our shareholders every year. You know, they're like, wow, if I got these kind of dividends from all the other investments, I'd be doing really well. You know, so they've won their money 20 times over in some cases. Wow.
You know, really, really happy for them. And for us, it's a great business. Can you put brackets on that? I mean, again, we don't want to disclose information you can't disclose, but over the past 21 years, do you, I mean, have you paid out more than, I don't know, 10 million in dividends to all your investors, would you say? Oh yeah, definitely much more than that. More than a hundred?
Yeah, I'm, you know what, it's private, right? Okay, I won't push if you can't share it, but that's incredible. Yeah, it's been, you know, people have done extremely well. One of the questions I imagine they ask you before you're about to give a dividend payment is, is there a way to use this in the company to keep growing the company?
How do you decide whether to pay up millions and millions in dividends versus use it to build more tech internally? Yeah, good question. And so we look at CAC ratios and we look at where is it going to be really profitable? And so we can say, okay, we'll spend X on marketing, what are we going to get in return for that?
And, you know, if we have a big idea or we want to launch something new, we'll set that money aside, obviously to do that and then pay the rest out in dividends. But we've been paying dividends ever since we've been profitable, which was like year four or five. Wow. Okay. I love this story. Do you remember what in 2000, take us back to that first year in revenue or first year in business.
Do you remember how much revenue you did in 2001? How small was it? Oh yeah. It's not even, it's not even worth mentioning, honestly. We did projections in our first year and, you know, we were really optimistic. We thought we'd do really well. And I think we hit those projections maybe in year 15. So we were a bit out to lunch in terms of our projections.
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Chapter 3: What challenges did FunctionFox face when spinning out from the agency?
So very proud of that. Yeah. Yeah. So when you say hard to hit double digits, you're talking like you've seen pretty consistent growth the past couple of years between maybe five and 10%. Yeah, we've seen growth since we've started. I mean, I think the later years have been, you know, more stable growth. COVID obviously has had an impact. But, you know, we're happy with our growth every year.
Churn, many people argue churn is really hard to manage in this space. What do you guys see in terms of churn these days? Yeah. So it depends if you look at the gig economy, there's lots of churn there just on the one user side because their projects are very unstable. So that raises the numbers up quite a bit.
If you look at the companies that have been with us for more than three months, then the churn is very stable, right? So it's under 9%, but it fluctuates depending if you're looking at the really small ones versus the big companies. Under 9% annually or monthly? Annually. Annually. That's great. I mean, look, that's great. That's, I would say that's world class for this price point.
That's, that's great stuff. Now, do you have a playbook to sell your time tracking software and then upsell one of these other 19 products you guys have built internally? Is there a real expansion revenue there or no? We don't sell those other ones internally. I mean, we use them for ourselves and we've really stayed focused. There's opportunity for growth there for sure.
If we want to branch out and take those features and, you know, have another team develop those. But for us, we've just stayed really focused and small and stable. And it's worked for us instead of trying to be everything for everybody. And today, as you look to grow in 2021, what would you say the top growth channel is? It must be very low touch because you only have one person on marketing.
Yeah. I mean, the marketing, you know, it's subjective, right? You can, you can put yourself out there on cap terror and software advice and some of the other channels. I think the channels have changed over the years for sure. It used to be, you know, direct mail and we still do direct mail these days because no one else is doing it. Right.
When we have to be creative with our marketing dollars, you do things that other people don't do so that you touch them in ways that others don't like, you know, outbound calls. That's something that we still do and is works very well for us. If you look at some of the other players in the industry, they're doing a lot of digital advertising. We're not. So you just do it in a different way.
And then our outbound sales team is amazing. They're true salespeople, but not in a salesy way. They're just really helpful and consultative and advisory and helping people not just use the product, but actually help them increase their profitability and efficiency within their company. Yeah, you're growing.
You're doing it in an economically efficient way for both you, your shareholders, and just happiness of you and your customers. Are you competitive though? I mean, do you see a path where this can get above, call it maybe 15 million in terms of run rate in the next year or so, or is that something where you don't really focus on? Oh yeah, yeah, yeah. No problem at all.
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Chapter 4: How has FunctionFox maintained profitability without VC funding?
Not at the moment. Number three, what's your favorite online tool? Motion Fox. Besides your own? Good online direct communication, Zoom in the last year, I guess. Number four, how many hours of sleep do you get every night? As many as possible. What is it usually? Ranges, some nights it's like two or four, and other nights it's 15. Wow, okay, that's a big range.
That's maybe the biggest range I've heard. Okay, great. And what's your situation, married, single, kiddos? Married three great Danes and a cat. Wow. Okay. So no kids. And may I ask how old you are? I think you're at your five questions, but 46. 46. Okay. And then wrap up here. Take us back 26 years. What's something you wish you knew when you were 20? Wish I would have said yes more. Say yes.
Oh, say yes more. Interesting. Elaborate a little bit. Well, I think, you know, I was 20, right? I was 25. And I was like, you say no. And you're like, oh, I don't know if I can do that. And you're uncomfortable. And you're like, I don't know if I'm in the right space. And you second guess yourself.
I think if you say yes, and be uncomfortable, you can get a lot further than I think I would have at the time. So I'd say yes more. Guys, FunctionFox, one of the OGs in the SaaS space, time tracking, they built it to serve their own agency needs, only raised 500,000. This was back in 2001, quickly grew to 100 customers, now serving thousands of customers and over 100,000 users.
They pay on average, call it 200 to maybe 500 bucks per month, depending on the size. But again, done this all profitably. Get this, they've paid over $10 million in dividends over 21 years. I wish more SaaS companies paid out dividends. What a crazy concept. Karina, we're rooting for you. Thanks for taking us to the top. Sounds great. Thanks so much for having me.
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