Surefire Local Reached $26M on $6M of Equity and $11.5M of Debt

Chris Marentis has raised about six million dollars of equity in twelve years. He has raised nearly twice that in debt. Surefire Local reached $26 million in annual recurring revenue, and he still controls the company — which was the entire point.

Two things happen when you raise a lot of money early. One is you lose real operational control of your business. But two, you really own a small fraction of that business — and in all likelihood you’re going to continue to lose more of that business.

Chris Marentis, CEO, Surefire Local

He is not casting aspersions, and says so. The objection is structural. “The whole game in the VC world is: let’s get in and fund this company, get them to either fail fast, spend a lot of money, or if we see them spending money and getting traction we’ll put more money in. What does that do? That continues to dilute you. They’re not on the same operational plane as an entrepreneur.”

The ladder

Marentis describes the capital as a staircase rather than a round, and each step is tied to a specific thing he had just proved.

• 2010 · Managed services A marketing services company, funded by customer dollars. “The first six years was through managed services — use as much as you can customer dollars to build the product and test the product and get product-market fit.”
• 2016 · $1M debt From a venture bank, on low-cost terms, to grow the sales force just before launching the platform. “You can see we got a little bit of a spike in bookings when we did that.”
• 2017 · Software to customers Testing whether SMBs would use software at all — “and not only use the software, but use all the different pieces of it.”
• 2019 · ~$4.5M debt The second-generation platform, and the money to make a bet on new leadership.
• 2022 · $11.5M debt Against roughly $6 million of equity, and about $26 million in ARR.

The 2019 tranche is the one he defends most vigorously, because it was expensive and he knew it. “When I did that debt deal, we were hanging around $10, $11 million ARR. I can’t tell you how many people were telling me you’re crazy, I can’t believe you’re paying that much for debt. Okay — well, I quadrupled the valuation of my company for my investors and me.”

Latka supplied the counterfactual: “The debt might be at 19 percent interest, but you know how much the equity would have been worth if I raised and then quadrupled the valuation? It would have been way more expensive.”

Without that money, Marentis says, “we would still just keep growing 20, 25 percent a year.” They were growing 75 to 80 percent instead.

What to negotiate for

Latka role-played several term sheets at him. The answers amount to a short playbook for a founder without a VC sponsor behind the loan.

1. Never a personal guarantee. “You shouldn’t be signing any debt deals where you as the founder are signing personal guarantees.” Latka’s addition: if anyone asks, run — there are too many other good options.
2. Simulate the sponsor. Traditional banks want a VC standing behind the debt. Without one, go to a venture-debt provider first, use it well, “and then all of a sudden you make the other banks feel comfortable that you’re not that kind of a risk anymore.” Surefire did exactly this, then brought a bank in.
3. Push the payback period back. “It’s sort of like a balloon loan for a home — all of a sudden you’re just going to owe a bunch of money. As an entrepreneur you just want predictability for as long as you could get it.”
4. Prefer cash terms over warrants, but not absolutely. “I would rather not give up the warrants… but it depends on how big the warrants are and what kind of a partner. I wouldn’t say it’s off the table at all.”
5. Keep the cash in the business. On covenants and fees: “I’d rather have less cash going out the door so you’re able to create more value.”
6. Take it in tranches. “You could stair-step your debt ladder — you prove it, and as your ARR goes up you could get more debt. You don’t have to do it all at once.”

The condition underneath all of it: the debt has to be for sales. “The thesis here is that you’re using that debt to really accelerate sales. You’re not using it for product development.”

The model that wasn’t working

By 2019 Surefire had what Marentis calls “clearly the best product in the industry” and was growing 20 to 25 percent a year. The reason, he says on stage a year later, was that he had committed to the wrong go-to-market for three or four years.

I didn’t know a whole lot about SaaS, so I read Predictable Revenue like probably most of you guys did in the room and said, gee, I’m going to commit to that model. And I did that for three or four years and it wasn’t working.

Chris Marentis, CEO, Surefire Local

That model was inbound: SDRs, multiple steps, heavy Facebook advertising, and customer acquisition costs he calls “fairly high for what we were doing.” The fix arrived as a person. Marentis hired Mike, who had run a 200-person sales organisation and been a CRO through several SMB-market exits, and who proposed something narrower than a plan.

“He said: Chris, hire me and give me six people in Austin, and I’m going to show you what I can do.”

4xmonthly bookings, four months after switching to outbound

The new model is outbound-first and transactional — about 30 percent of revenue still comes inbound — and it demands a different kind of management. “That transactional sales model requires super high energy, really granular data at the salesman level, so you really know what they’re doing.” The KPIs run dials, demo sets, demos held, win rate, MRR, tracked by team and by vertical.

What Marentis flags as the mistake worth learning from is what he forgot to change. “We quadrupled monthly sales, but we didn’t change our onboarding motion or customer success motion at all.” They hired a head of customer success and rebuilt onboarding to match — and separately changed what the demo itself did.

“We went from talking about the mysteries of marketing and lead gen in today’s world to showing them a demo — here’s how you’re going to use the platform. Without even changing the back-end motion, all of a sudden we saw interaction with all of our new cohorts in the platform going up by multiples.”

The honest number

Marentis does not oversell his retention, which after everything above is notable. Asked whether net revenue retention is above 100 percent, he said simply: “No, we’re not above 100. We’re just below.”

That is a real improvement on where it had been — in early 2019 the same business ran 20 percent gross annual revenue churn against 6 percent expansion — but he did not round it up. Average customer spend is about $1,100 a month, which he also declines to flatter: “I would say that’s still sort of on the lower end of mid-market.”

The customers are the reason. Surefire sells an all-in-one local marketing platform to businesses that can only serve a geography — contractors, attorneys, home services. Latka’s example, endorsed: a painter in a small town in Georgia who can only sign up people within fifty miles.

“All the different channels and tools that you use to communicate with your customers and get new customers are all in one place,” Marentis said. “No more data silos. What we’ve become is a big data lake, and that data becomes super powerful in giving them insights into how to be more efficient and how to be more effective.”

The company he built it for was his father’s. Marentis started Surefire from a book he wrote in honour of his dad, an HVAC contractor: “I saw how technology could really change the game and give back control of marketing to these entrepreneurs, so they didn’t have to rely on agencies that were not very transparent and not really honest, or knit together a bunch of point solutions.”

A note on the record

Researching this piece turned up a wrong date on Surefire’s earliest interview. It had been filed as June 2015 — two years before the software platform launched and eighteen months before the acquisition it discusses. The tape’s own figures settle it: recurring revenue just under $1 million a month and a team of 56 match the profile’s February 2019 rows exactly. It has been corrected.

One more figure now carries an estimate marker. The $30 million recorded for August 2022 is a year-end target — “we’ll exit this year about 30 million ARR” — and three weeks later Marentis put the actual, on stage, at about $26 million.

Asked what he wished he had known at twenty, he gave an answer that reads as the same instinct that kept him off a cap table: “Take a long view of your life’s progression, and don’t be too impatient — because that’ll prevent you from making short-term decisions that might not be in your best interest.”

Sources — Chris Marentis interviewed by Nathan Latka, recorded 10 August 2022, and speaking at Founder500 in Austin on 1 September 2022, with figures from his February 2019 appearance as cited. Revenue, headcount and funding figures from the Surefire Local profile on GetLatka, with dates as recorded.