8Baserevenue, valuation & funding

Introduction hello everyone my guest today is albert santillo he's a computer scientist and internet entrepreneur experienced in building high growth venture-backed technology companies he's the founder and ceo of eight base and formerly founded care cloud and avisena albert you ready to get to the top hey how are you nathan i'm well man so what are you working on now what is eight base eight base is uh a platform that accelerates the development of what we would call professional grade software it's that's either used typically by by founders especially non-technical founders or by larger companies in their digital transformation efforts now is there a no code low code sort of play or are you an agency that's building stuff for folks it's it's sort of a combination of the two so it's it's a low code approach and i want to focus on the low code meaning that it it is a product used by developers um the idea is that you can build comprehensive products it's not something you have to throw away and the focus is on the back end so the low code platform primarily is on the back inside all delivered through a very powerful api and then most of the time our customers are building front ends that consume the back end but we also as a services company we also do that work for customers as well so sometimes we do full stack development on top of our low code platform for customers for people that hear this interview and say i just want to use the platform and not pay for services how can they use the platform what's the what's the model yeah so they can go to ebay.com they can sign in begin using it they never have to talk to us they can start using it for free but they can also you know the the paid use starts at 25 a month and it scales up from there they get a fair amount of capacity with that 25 bucks a month measured by what by storage api calls serverless invocations so think of it as utilization of the different aspects of the platform um and then number of developers so the 25 plan is for a solo developer and then it scales up for there of those three sort of ways that you can upsell customers and drive expansion revenue which one's most powerful people have the developer element the fastest the api column with the fastest or the storage limit the fastest um which you're saying which one do they hit the fastest in other words your ability to drive enterprise accounts and move from 25 bucks a month to 50 to 100 to up you you've put these things in place to make people upgrade storage limits api calls etc which one of those is the most powerful for driving up sell revenue it's usually things like continuous integration like you you did the 25 plan you're not using ci cd capabilities uh again it's solo developers so once you're in a team configuration uh it goes up from there got it so unlock continuous integration tools uh when people pay you more yeah the more things that larger organizations or would call it more established organizations are going to want i see i see okay and again still ignoring services revenue we'll get to that in a second if you just look at folks that are using either your free tool or not free sorry they're paying you for your to use your platform but not talk to you on average what are these customers paying per month would you say is the 25 bucks a month yeah i would say on average it's higher than that um because we have on some of those developer plans we have 200 a month type users we also have larger like we have agencies that use the product some of those are paying in the thousands one of those is ibm global services actually uses eight base for work they're doing in europe so you know they're they're all over the place right i know averages are unfair Average revenue per user for this reason but because it's a short interview i try and hyper focus it what if i forced you sort of into an average is a thousand bucks a month better than 25 a month or where's your sweet spot no i'd say in the developer channel uh it's probably you know the developer and sort of self-service channels by 100 bucks a month got it so it's usually like a two-person development team sort of thing you know a little bit more api usage but not like an ibm of the world yeah i see okay what's your backstory Company launched in 2017 here when did you launch the company 2017 um i've been a founder in the lead role since 2001. i'm an engineer by background but i've been in all of my companies i i've been the product designer but not the developer and you know i just you know my last company raised over 100 million dollars of venture money you know which company was that air cloud yeah and you know i just felt like we could build these products faster better cheaper there was a platform opportunity and i just felt like you know founders should be given the opportunity to to bootstrap more own more of their companies and retain control and that's never gonna happen if you have to raise a hundred million dollars i was gonna say i'm looking at the funding rounds right now on care cloud 186 million dollars raised uh 10 investors i'm looking at the people going my gosh the dilution must be not so pretty over time but you argue it's a much bigger pie yeah yeah yeah and but but but you know that kind of money brings a lot of risk yeah no i hear yeah it's not for everybody not for every founder for sure so what was the break this company looks like it's still going today so you made a decision at some point to say enough is enough i'm going to leave and build this what was the breaking point for you yeah so so both of my prior companies are still around they've both been acquired so for me it was in 2016 leaving the day-to-day and uh wanting to pursue this a base was something that was on my mind for at least 15 years and so i felt like the time was right the the cloud-based platforms have had come of age the market was started starting to recognize that low code was actually a thing yep and i felt like the technology stacks had stabilized to the point where we could do this and that i could bootstrap it so i also just you know for eight base i just didn't want to raise a huge amount of venture money so you're bootstrapped today yeah we're we're you could call it relative bootstrapping Raised we we've raised three and a half million dollars it's all been from angels and seed funds well come on albert you can you can't this is very binary you've either raised a dollar of funding or you haven't it's not like a middle so you are you have raised but you feel like you're not on the track of like oh my gosh we raise 186 million bucks we better double you every year or we're gonna go to zero yeah no i mean compared to to how much money i've raised before and how that's gone this is very different besides the fact that the company is profitable so we don't we don't need money that's great what's the team size Team size of 30 today it's about 30 people and can you sort of give me the break down there how many are engineers uh engineers is probably 20 to 22. yeah yeah that makes sense and what the rest any quota carrying sales reps yes uh we have one quota carrying sales rep and we have we have myself and another person not quota carrying sales reps that surprises me so you there is a sales motion here at a high enough acv where it does make sense to put a sales rep sort of touch on it a 100 percent especially and this is recent i would tell you there's two there's two things the services side certainly has a high enough acv to have sales people okay but the other thing is that some of these platform opportunities in these larger companies these are our multi-hundred thousand dollar deals right they can be seven figure deals so that's not gonna happen with marketing efforts on the website right you gotta you can't just swipe a credit card on a website and close a million bucks man i wish we could you and me both and i want to p i get two percent all right that makes sense so just to understand too the nature of like sas versus your service business it sounds like they're both material potentially if you just add up all your revenue over the past 12 months how much would you say is service sort of revenue versus low touch software revenue yeah so those percentages are changing but call it 20 the platform 80 uh services but the idea is that the the service revenue feeds the beast in lieu of venture capital while we build up the recurring platform revenue you know the margins on the service side are pretty good but obviously not as good as recurring revenue platform revenue right so but you know if i'm having a conversation with a vc about this you know it's like look we get it the service side not as scalable but we are innovating in our services group so that we can do things in a more scalable way there are technologies that we're using there and that are evolving to make things go really fast really consistent and be able to handle a lot of projects at the same time yeah i mean you answered my question before i asked it right which is vcs will hit software founders all the time for any services revenue because they want the founder to be reliant on vc money and dilution for extra cash not closing services deals that's le that have less margin but ultimately what you and i know is that sometimes when you put high touch in the form of a service contract on a smaller sas plan the net retention on that sas plan goes through the roof because you did so much great work onboarding and customizing for the client oh my god yeah no it's it's it's extraordinary we have we have a really fun business you know one of the things i really love doing you know my passion is building these products and it allows me to get involved and sort of lead the design of them and then and then my team just does an amazing job building them and and all of our customers are really happy that's great but you know a vc would tell you man this service aside you know it's a lot of work and i would tell them managing you is a lot of water [Laughter] fair enough i love that and you can say that because you you've walked you've sort of walked that walk already all right i say that jokingly i have lots of friends or vcs we even have some call it seed bun fun venture capital investors yeah but i think you know what i'm trying to say right i get it there are series a and there and after entanglements which i would much rather avoid if i can't no i hear you okay so 2017 you get going on this thing how many customers are you serving today on Currently serving 1000 customers sort of the software side on the on the software on the platform side yeah man it's like uh somewhere approaching a thousand or so okay and can someone are they dependent on each other can someone can someone pay you just for services and not platform or i know they can do just platform that is a great question so we only get involved when we're using our platform okay yes so if they pay you if ibm pays you a million bucks for a service contract they have to sign a subscription plan as well on the back end of that they do um and in ibm's case by the way there is no service revenue it's only platform i see so they have their own team of developers that have built on eight base not without our help on the services side but an example would be you know like for instance we have some founders in austin that we've built their products right and so they run on the 8-base platform and we did the development work uh to build on top of it they paid us a service fee but then they pay us monthly recurring revenue for the platform it's not easy to get i mean to a thousand customers especially when it's a devops sort of sale right uh i mean walk me through you got your first 10 customers back in 2017. so in 20 we and we've we've done a little bit of uh call it experimentation so when we first launched the platform we launched it for free and we launched it for developers so we tried to go sort of bottoms up developers and then along the way said you know look this is great but it's not really a business you know even after we launched the paywall um the paywall was last summer uh late you know probably about a little over a year ago about a year ago and um we just we just realized like developers is we want developers to love the platform we want them to support it we want them to bless it but b2b is really where the money is and i'm not i'm not the type of ceo founder that founds an open source company uh you know for me nothing wrong with it it's just not me right and so for me i gotta have a commercial business and uh when we're talking to developers it's one sort of conversation when we're talking to business owners especially like i said non-techno founders they just absolutely love what we bring because we bring a platform built for them that can hyper scale if they're successful they never have to rebuild the product they're talking to people that have built digital products used by millions of people funded by you know hundreds of millions of dollars of silicon valley money uh and we come in we step in we probably we typically are more well qualified than a cto that they could get at their stage and we take them to the next level at which point they can take back the software development or keep us engaged well so when you launched the paywall in 2019 did you have to go out and recruit non-technical people inside of sas founders with budget for this or did you try and convert some of your free developer base into paid customers first yeah yeah it was more the paywall was directed at developers okay so did they convert or did they not convert it it sounds like they didn't yeah yeah they did some did but it's not you know look at 25 bucks a month right um and again it's freemium it's not a free trial at 25 bucks a month you're just not gonna get there without ten tens of million dollars of venture money that's right yeah so how many how many freemium did you have before you launched paywall that i don't remember that um okay like thousands or hundreds of thousands no no no it would be it would be between a thousand two thousand probably okay got it so one to two k using for free which also by me by the way that is not easy even to build up that sort of sort of wait list or freemium usage base so you launch the paywall for 25 bucks in 2019 you realize you have to do this in massive volumes to get any sort of scale and then so when did you start thinking about the higher price stuff we we were already there so when we launched the product even in 2018 our first b2b client showed up saying hey we really love what you have and we love your capabilities but we want you to build the product and and so we we decided at that point let's take the deal and we uh we we did the work we got paid well for it and the outcome was phenomenal we had good margins the client was really happy what's well are we talking like a 50 000 sort of type deal or more and that deal was a 200k deal okay got it i mean there seems to be margin nice margin there yeah complex product so this is a multi-tenant sas okay appliance management product a very complex product but yes um there was there was decent margins there and our margins got better as we sold more of those deals you know so sometimes we do do you know we do smaller deals than that for sure but you know we also do larger ones so that company that you did the 200 000 sort of setup for the initial all that initial work what did they what do they now pay in sort of the low touch platform model you know every month a customer like that is probably at about 500 a month i see okay good interesting oh yeah but then what they get the way to think about it is they they can operate with no technical people it's devops free and it scales automatically for them if the need comes and albert i mean i'm hoping you're going to blow me out of the freaking water here they don't churn because if they churn they essentially lose 200 grand worth of investment they made initially right no they look they first of all we haven't had churn but but they can churn and and and i'm proud of the fact that they can because one of the things you'll see you'll see is that we built everything any base is built with standards so it's not like they can just export and go to the next thing but but their code is written in javascript or typescript they're using react or vue.js or whatever framework on the front end their data is in my sequel one of the big innovations inside of eight bases the graphql api graphql is a standard most you know the graphql apis that exist out there the engines that exist are not as powerful as ours but nonetheless with a little bit of retrofitting it could work and then there's other things that are inherent in the platform like role-based security and things like that but the idea is that we're not you know we're not like salesforce right we're like trying to lock somebody in with proprietary languages and all sorts of exotic things we're basically saying look if you want to leave you can leave but the idea is why would you ever want to yeah right and the other the other part of that is you don't need specialized developers like like i'll give you an example if you build on bubble right bubble's a great platform but if you ever need to get off of it because it's not scaling or whatever you're gonna have to rebuild the whole thing you compete with bubble indirectly you know indirectly they they they do more of the front end development but you know and certainly some people will build their products on bubble but what we find is that you know there comes a point where the it just doesn't scale for them so and it makes sense like they've got the ip related to what they built and what it looks like but it needs to be built from scratch again somewhere else yeah yeah that's bubble.io interesting okay so a thousand customers on sort of your your platform approach you mentioned earlier in our we've called 100 bucks i Monthly recurring revenue mean have you guys broken that hundred thousand dollar a month target at this point or if not win on the recruit on the recurring side just platform i know you do a lot more on services yeah we're we're like almost there that's great so this year you think you'll pass it in you know if we didn't have a pandemic i'd say yes but okay all right just really getting the flywheel going on sales you know so so i'm really excited about that piece of it you know all of my companies have had very high velocity sales force before and we truthfully started this company with more of i call it a marketing cadence but i'm really excited about just turning the flywheel on the sales side it's it's like yeah i mean help me understand the flag again we're only talking platform here so all listens or listeners understand there is an agency kind of service model here that makes a lot of money in cash flow but just on the platform play right so if you're caught around 60 70 80 right a month today where were you exactly a year ago on that oh my god we were uh a year ago man we were like nowhere on that like like very you know like how much almost at zero like not even three or four grand a month maybe something like that okay interesting um okay so i mean nice scale there right i mean what it what's changed from a year ago for you to add 50 60 grand a new mrr on the platform side i would say founder-led sales um tweaks to the paywall and uh and driving you know that developer channel a little harder but uh a lot of it you know a lot of it has been sort of founder-led sales so you're profitable today right yeah have you already invested the 3.5 million or is that sort of sitting in the bank some has been in some has been used some is sitting in the bank how do you the reason i'm asking is obviously everyone changes plans with covid you want to sort of save more and have a longer runway how are you thinking about that relative to your cash position i love that question so the way i'm the way i'm i'm looking at that is you got to lean in harder on sales so i i'm actually increasing investment on sales and marketing meaning you're hiring people or launching facebook ads or what it's a little bit of hiring people it's doing different types of marketing campaigns different types of marketing spend but absolutely we're we're leaning into it in terms of we're not we're not becoming more austere we're being conservative about about uh spending that is not core to either product innovation or sales makes sense okay last question here i just realized we're out of time before we before we wrap up what is gross return right now Gross churn on a monthly basis on a revenue monthly basis oh my god it's almost non-existent okay so you truly have i mean i want to make sure we're not like you know just you know spouting here you really have zero percent revenue return per month across a thousand customers paying about 100 a month yeah no no so so there is some churn on the developer side usually it happens early and usually it happens in the free tier right so it's like if you look at no ignore free i'm talking revenue churn revenue churn we had like for instance the first time we ever had somebody dispute a credit card transaction i heard about it for the first time two days ago in my daily stand-up call and so it's like and i don't know why the guy disputed it because we would have just given him this money back right but but his credit card disputes i mean some people will try your platform they'll pay a hundred bucks for a month and they'll leave because it wasn't fit for them like that's what i'm asking right it's like what is revenue turnover on a monthly basis it sounds like it's pretty low it's less than one percent fair enough okay less okay got it so less than twelve percent annually on that which actually it's pretty impressive for that price point you think so okay no no not i think so i mean i can compare it to two thousand other sas ceos i've interviewed at that price point that churn is extremely low usually in that cohort you're seeing churn that's 20 30 percent annually three to three percent a month part of it could be that by the time they're paying they've truly sort of kicked the tires on the product because the free tier is pretty good the free tier what the main the main thing it doesn't do is it throttles the api yeah so so um you can use the full product it's just when you want to open up the api what's the limit how many api calls a month on the free tier i think it's just i think it's how many if i remember correctly it's how many api calls sequentially you can do i think it throttles every 10. got it yeah your free tier i'm reading off your your pricing page here a thousand per month graph of ql api calls a thousand database rows or a thousand per month sort of you have actually a lot of utility-based upsells 500 mb in base storage 10 gigabyte minutes for serverless execution requests like all these things drive people to upgrade that's right yeah developers you look at what they get at 25 at 25 it's super generous it's like 10 it's it's well yeah it's massive i could easily see why people go up for that yeah yeah interesting so there's there's like if you're a small team of developers you can do a hell of a lot with that with that 25 tier you can yeah no i understand that very cool all right let's wrap up here with the famous five number one albert what's your favorite business book my god that's a moving target um right now it's blitz scaling number two is there a ceo you're following or studying ceo i'm following a study there's a bunch of those um yeah i would say look elon musk is certainly something i'm somebody i really respect a lot but i'm not trying to follow his playbook right now number three what's your favorite online tool for building your company beside your own um that made that may also be a moving target um right now we're messing around with apollo number four how many hours of sleep are you getting every night 78 okay and what's your situation married single kids married and kids how many four wives i'm just kidding all right four kids and how old are you albert how old am i i'm 52 52 last question what are you wishing you when you were 20 what do i wish i was doing when i was 20. no something you wish you knew when you were 20. oh my god um i would say that uh you know fortune favors the bold that you have to you just got to put yourself in the game go after it and uh and good things will happen guys there you have it eight base profession helping power professional grade applications in a low code sort of format 20 of their revenue is pure sas right now 80 services but it's highly productized service the pure platform play is growing and hopefully we'll break a million dollar run rate here uh middle of this year late this year but again they power a lot of their growth from their high margin services revenue consulting contracts so in the 200 000 sort of range they funded the company 3.5 million raised but they are profitable today team of call it 30 people 22 engineers albert scales this bad boy down there in miami albert thanks for taking us to the top thanks so much nathan