SaaS Interviews with CEOs, Startups, Founders
The $30m ARR Battle: How 1 VC Forced a 5x Exit When Restaurant SaaS CEO Wanted to Keep Building
04 Sep 2023
Chapter 1: What is the background of Agilent and its transformation?
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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Russ came in in 2008 and moved it from a hardware company servicing called the Restaurant Retail Grocery Industries, moved it into more of a SaaS plane in 2013. And today is really vertically integrated into those three sectors, doing things like incident management, human capital management. That's what they're looking to expand. And they already do operational analytics, merchandising, etc.
They're doing $35 million in ARR today or right around there, up 17% year over year.
Chapter 2: How did Russ Hawkins transition Agilent to a SaaS model?
The first $10 million year was 2018, first million dollar year He's doing this in a capital-efficient way, powered by the war trust that is the private equity firm Cordera Capital, as he looks to scale potentially inorganically with acquisitions moving forward. Hey, folks. My guest today is Russ Hawkins. He's building Agilent.
That's agilentsinc.com, which helps reduce, shrink, and improve margins across retailers, restaurant operators, and grocers to increase their margin by reducing preventable loss across the business. Russ, you ready to take us to the top? Sure am. Now, what are you, an ex-grocer? Did you own your own grocery chain before this or what? How'd you learn about this product?
No, not at all. No, no.
Chapter 3: What challenges did Agilent face during its growth?
Actually, I'm kind of a serial startup guy, but not a founder. I've been, in most cases, the first outside manager to come in working with the original founders. So this is my third company. Prior to that, I was 15 years with what came to be known as Lucent Technologies in the telecom business.
Of course, of course. Now, this particular company, Agilent, give us the backstory. What year did it launch?
So the company was founded way back in 2006 and originally had a completely different approach and a completely different technology that we were using. I got recruited in around 2008 and basically changed the model of the company to be a recurring revenue model. And then in 2013, made a major pivot to strictly a data SaaS company, SaaS software company.
Sorry, what was it between 2008 and 2013 if it wasn't SaaS already?
Chapter 4: What role did venture capital play in Agilent's journey?
So the company was originally in the loss prevention business, but it was about visually verifying suspect transactions. So the way the product was deployed was in a server, and we were largely focused on grocers at the time. So basically, the companies would use... a printout or a file out of their POS system or their exception based reporting system.
And then they would turn to Agilent to visually verify. So a very video centric company. The idea was to enable an analyst sitting in headquarters to be able to review transactions across the chain of grocery stores. essentially visually determining whether there was something amiss in those transactions. But it was a hardware-oriented business.
I tried to make it a recurring model by providing- Wait, Russ, that's a big deal.
It started off as there was an upfront hardware installation required. Originally, yeah. Oh, wow. Interesting. Okay, got it. And you came in and said, now, did you come in because current investors weren't happy with the founders and they said, we got to bring in Russ or how'd that happen?
Yeah, so my prior company was a high-performance computing company, and my controller was married to a venture capitalist in the Philadelphia area. So I had gotten to know him, and when I sold that company successfully, he asked me if I would consider running one of his portfolio companies.
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Chapter 5: How does Agilent manage customer relationships and pricing?
I actually looked at three of them. And this was the one that I thought had the most interesting technology. And to me, it was a great technology with poor go-to-market and poor marketing. And so that's what attracted me there. The value was in the software, but it was delivered in a piece of hardware. We put servers out at each grocery store, essentially. Yeah.
I want to flesh out all the years between 2008 and 2013 and 2013 to 2023. But before we go fill that backstory, you know, tease us a little bit with where you're at today. Give us a story of how customers currently using you here in 2023.
Yes. So the major shift that we made in 2013 was to focus really more on data analytics and be less video centric. We thought we could do a better job than what was being done in the marketplace at the time with a technology called exception based reporting, which was being used by many, many large retailers. And right now, we've proven that.
Chapter 6: What factors influenced the decision to sell Agilent?
We came out with a minimum viable product in 2013, and we have evolved pretty significantly since then. Originally, the use cases were all around loss prevention, but now 80% of my customers use it for operational analytics, merchandising, marketing. Even the finance organizations use it for a variety of things.
So today it's all about data management and making the data exhaust that all the systems that are operating in these businesses. We pull them all together and we create value or give the users the ability to create value out of all of that data.
Russ, with that idea, the operational analytics, merchandising, organizing SKUs, all the data exhaust managed under your platform today, what's the average gross you're going to pay you per month or per year to use your technology?
Well, it really depends on the size of the grocer and there's differences in the grocers versus retailers versus restaurants. So today we have a couple of hundred customers, more than a couple of hundred customers across those three groups in the U.S. On average, they pay us around $125,000 a year, but we have some that are close to a million and some that are smaller.
Interesting. Ed, do you have anyone paying your biggest customer? Don't name them, obviously, but anyone paying more than a million per year all in?
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Chapter 7: What future growth strategies does Agilent have?
No, we have three right close to that, but nobody yet. Most likely through expansion sales, all three of them will be over that threshold within the next year.
It's one of my favorite metrics when you read all the S1s from the SaaS companies going public is go down to the customer section, bury it on page 60 and see how many million dollar plus customers they have. That's always a nice metrics to see if you have healthy net dollar retention, etc.
Yeah. Originally, we were focused more on the mid-market and we kind of worked our way up to supporting larger companies. And along the way, we've learned a lot. Now, we're really considered the leader in this space.
Sorry, just to put a tighter range on this. When you say a couple hundred customers today, we're talking like 400 or 500 or closer to 1,000?
Chapter 8: What lessons can be learned from Russ's experience as a CEO?
No, we've got closer to 300. 300, okay. They're across all three markets, but all in the U.S. Well, U.S. and Canada today. So we've avoided for now bringing the platform outside the U.S., mainly because I've done that before, and I know it takes a lot of energy, and you really need to have patience to make that work. One of the things we're considering now ā
We sold the company to a private equity firm about 18 months ago. And one of the things that they've enabled is potential acquisitions. And so I'm looking at a couple of acquisitions right now that would give us a structural platform to bring our solution to other geographies.
It's great to have someone like that behind you, especially in a world where valuations are tighter. You can maybe get better deals than you did a year ago. So let's talk more about that here in a second. I do want to try and get a general sort of size in the company. How many folks are full-time today at the business? Uh, we're 70 people. 70. Okay. And how heavy on engineering?
How many engineers?
Uh, about 27, 28.
Okay. 27, 28. And you must have a well, uh, trained sales team. If you've got accounts that are paying upwards of a million, how many are like, you know, CSMs or AEs or BDRs, et cetera?
Uh, so the, the sales organization today is around 10 folks. Uh, that's a combination of bag carrying salespeople, uh, BDRs and, uh, We have technical leads, people that do solutions. They basically do architecture.
Solution selling. Yeah. Of the 10, how many are carrying the bag? Using your words, how many are quota carrying? Five of them are bag carriers. Interesting. How do you split up the deal flow? Is it geo-based? Is it industry-based? How do you split that up?
A little bit of both. So we make a delineation between retail and restaurants. The use cases are significantly different in restaurants and even the sub sub segments in there. Right. In restaurants is quick service restaurants, but there's also table service restaurants. So the use cases can vary significantly on the retail side. We have a we have a segmentation around restaurants.
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