SaaS Interviews with CEOs, Startups, Founders
This founder hit $90m ARR last week, took $30m secondary in last round for Document Management SaaS
18 Dec 2022
Chapter 1: What is the significance of reaching $90 million ARR for M-Files?
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, mfiles.com, they help you with document management. They help you share files not only internally, but also with your customers so you can collaborate together.
They've got over 5,000 paying customers, many of which or some of which pay over a million dollars per year. They've grown 25% to 30% year over year for the past several years, just breaking $90 million in ARR today, up from $75 million a year ago when they closed their Series C. around $80 million USD.
He was nice enough to show that $30 million of that was secondary, which is great for liquidity for early employees and investors. Now 600 folks on the team as they look to build conservatively moving forward and break that $100 million run rate early next year.
Chapter 2: How did Antti Navala's background influence the founding of M-Files?
Hey, folks, my guest today is Antti Navala. He's the founder and CEO of a company called M-Files, a global leader in information management. He started the M-Files business in Tampere, Finland, and currently lives in Austin, Texas.
The mFiles metadata-driven document management platform enables knowledge workers to instantly find the right information in any context, automate business processes, and enforce information control. Antti, you ready to take us to the top? Absolutely. So Finland was the start. Now, what year did you launch this company in Finland?
Well, it's actually a long history starting with my father's company in the architectural engineering business way back. But let's say for me, the start was something around 2002 when we started developing the mFiles products.
Chapter 3: What challenges did M-Files face in its early years?
I asked because my research team had two different dates, 1987 and 2005. So it sounds like you came in in 2002-2005 timeframe. Exactly, yeah. Interesting. And this was something that your father had built to use internally at his architecture firm before then?
Well, that's how I got into business. I was watching my father run his AEC consulting company, and I did software as a hobby, and I was very interested in just finding ways to apply my software development skills to real-world problems. And that's how I landed on this idea of of how to make document management, especially in complex construction projects, more efficient.
So that got me into developing mFiles.
Chapter 4: How does M-Files differentiate itself in the document management market?
And when you guys look at your customer cohorts today, do you still have a massive concentration around folks in the construction and architecture and engineering fields?
Not really. I thought we would be targeting that vertical initially, but pretty quickly we went to kind of more generic business document management. And we have a good number of engineering companies as our customers, but it's not our primary vertical.
I see. Okay, so give me a little bit of the story today, right? Tell me the story of a customer who's using you and exactly how they use you.
Well, our ideal customer is a knowledge work company. So companies in the professional services vertical, especially companies like management consulting firms, accounting firms, tax advisors, audit firms. Companies that deal with a lot of information, they typically provide expert services for their clients.
Chapter 5: What is M-Files' customer acquisition strategy and target market?
And for such companies, mFiles is really the operating system for them to run their business. They take information in, they apply their expertise to produce work outputs. for their clients.
And then they, well, they use our platform to manage all of that in an organized fashion and in a secure fashion, but they also use our platform to share those work products with their clients and to collaborate.
Interesting. So are they paying, like if one architecture firm has 10 clients, will they pay for a seat for each client? And that's a key to you driving expansion revenue?
We're actually charged by the seat of the employees in the firm. So let's say a tax advisory firm. So the tax experts would be the mFiles users and we basically let them serve any number of external clients.
Chapter 6: How does M-Files structure its pricing for different customer segments?
We don't charge by that.
I see. I see. Okay. So when you look at your ideal, sort of your sweet spot customers today, what would you say they're paying on average per month or per year for M files?
I'd say in the ideal customer segment, it's probably on average about 50,000 in ARR. So on an annual basis, we have a pretty broad range of smaller and larger customers, but that would be the average.
I'm curious what averages are dangerous. What's min-max? What's cheapest someone can start with you and what's biggest customer?
Chapter 7: What role do reseller partnerships play in M-Files' growth?
Yeah, we have quite a lot of business through our reseller partners. And in that kind of partner business segment, the typical annual prices would be a few thousand dollars, let's say 5K. And then we go up to our enterprise customers who pay well over a million per year.
Oh, this is great. So you already have individual customers paying more than a million per year?
Yeah, similar.
This is great. This is one of the big things I see founders that are like 10, 20 million bucks in AR struggle with. But in order to get to 70, 80, 90, 100 million, you've got to figure out how to get a couple customers paying that much. How did you do that?
Chapter 8: What insights does Antti share about future growth and market challenges?
It's been a fairly natural evolution for us, but I think part of it has definitely been getting to know our customers through business problems better and understand where we offer the most value. So we continue to be on a journey of becoming more and more specialized and really serving those knowledge work companies well, because that's where we provide the best value.
And those are the companies who can also then afford to pay most because of that value.
When a reseller sells M files for say 5k a year, do you own the relationship with the end customer? Or do you have to go to the reseller?
um yeah that's an interesting interesting question um not sure there's a kind of a one straight answer we let the reseller partner um kind of own the commercial relationship with the customer as as much as they can and want we obviously have a direct subscription agreement with the customer too but for us the partners are the front-facing
communicated to the customer, they provide the first level support. And we want it to be that way because that's how we can be efficient for that higher volume of smaller customers.
So you own sort of the credit card payment with them. The credit card payment doesn't go through the reseller.
No, it does go. So we do, we invoice the reseller, the reseller handles payments with the customer.
I see. I see. Interesting. Okay. So if a reseller sells M-Files to their users for 5,000 bucks, how much of that 5K will the reseller keep versus it flows through to M-Files U?
So I'm not going to disclose the specific percentages, but something like 30% would be kept by the partner.
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