Founder Interview
How Bootstrapped Adapt.io Reached 200,000 Free Users and a Profit Margin Over 40% (Interview with Surender Nadarajan)
- Interview Date
- May 23, 2019
- Interviewee
- Surender NadarajanCo-Founder
Company Metrics at Interview Time
Free Users (2019)
200,000
Paid Customers (2019)
Fewer than 1,000
Profit Margin (2019)
Over 40%
Year-over-Year Growth (2019)
4x (300%)
Team Size (2019)
25
Historical Snapshot
These numbers were reported by Surender Nadarajan during the interview recorded in May 2019 and are a historical snapshot, not current figures. See Adapt.io’s current numbers.
Key Takeaways
- 01Adapt.io was founded in 2017 and had stayed bootstrapped from day one.
- 02The company reported over 200,000 free users on its freemium platform as of May 2019.
- 03Paid customer count was between 500 and 1,000 at the time of the interview.
- 04Adapt.io ran at a profit margin of over 40% and had become cash flow positive a couple of months after it started generating revenue, six months into the business.
- 05Self-serve ARPU was around $150 to $200 per month; inside sales deals ranged from $1,000 to $10,000 per month.
- 06The company grew approximately 4x year over year as of May 2019.
- 07The inside sales team consisted of 6 people: 3 SDRs and 3 account executives.
- 08Online self-serve monthly churn was approximately 8 to 9%; inside sales churn was approximately 1 to 2% per month.
- 09Customer acquisition cost was approximately $400, measured as two times the monthly ARPU for a self-serve customer.
- 10The entire 25-person team was based in Coimbatore, India.
Company Metrics at Time of Interview
| Metric | Value | Source |
|---|---|---|
| Free Users (2019) | 200,000 | Interview, May 2019 |
| Paid Customers (2019) | 500 to 1,000 | Interview, May 2019 |
| Profit Margin (2019) | Over 40% | Interview, May 2019 |
| Year-over-Year Growth (2019) | 4x | Interview, May 2019 |
| Team Size (2019) | 25 | Interview, May 2019 |
| Year Founded | 2017 | Interview, May 2019 |
| Self-Serve ARPU (2019) | $150 to $200 per month | Interview, May 2019 |
| Inside Sales Deal Size (2019) | $1,000 to $10,000 per month | Interview, May 2019 |
| Basic and Growth Plan Prices (2019) | $49 and $149 per month | Interview, May 2019 |
| Customer Acquisition Cost (fully weighted) (2019) | $400 | Interview, May 2019 |
| Self-Serve Monthly Churn (2019) | 8 to 9% | Interview, May 2019 |
| Inside Sales Monthly Churn (2019) | 1 to 2% | Interview, May 2019 |
| Qualified Leads Target per SDR per Month (2019) | 10 to 12 | Interview, May 2019 |
| Free Credits Before Paywall (2019) | 5 contacts | Interview, May 2019 |
| Sales Team Size (2019) | 6 | Interview, May 2019 |
Growth Breakdown
Revenue
Adapt.io made money from two segments. Self-serve customers bought one of two plans, Basic at $49 a month or Growth at $149 a month, priced largely by the number of contacts they wanted to buy, and Surender put the self-serve average at around $150 to $200 a month. The inside sales team sold deals of $1,000 to $10,000 a month. He did not give an average across the whole customer base. Adapt.io had grown 4x on the year before, and he said that growth came largely from inside sales.
Customers
The platform had over 200,000 free users and between 500 and 1,000 paying customers as of May 2019. The freemium model offered 5 free contact credits before presenting a paywall, and the company kept experimenting with that threshold to optimize conversion.
Team
Adapt.io had a 25-person team, all based in Coimbatore, India. The inside sales function was staffed by 6 people: 3 SDRs expected to generate 10 to 12 qualified leads a month each, and 3 account executives who carried revenue quotas.
Profitability and Funding
Adapt.io had been bootstrapped from day one. Surender said it started generating revenue six months into the business and became cash flow positive a couple of months later. At the time of the interview he called it "very much a profitable company," running at over 40% profit, and it had not spent anything on paid marketing.
Growth Strategy
Freemium Funnel with Paywall Experimentation
Adapt.io attracted users through a freemium model that gave 5 free contact credits before requiring a paid plan. The team had tested thresholds of 5, 50, and 100 free credits and was still experimenting with feature gating and daily or weekly usage limits to find the conversion point that delivered enough value to drive upgrades.
Inside Sales Team Build-Out
Surender said Adapt.io's growth came largely from inside sales. A year earlier the company did not have a full-fledged sales team and drove most of its sales online; the team of 3 SDRs and 3 AEs was put together in the few months before the interview. SDRs had quotas for meetings and qualified leads rather than revenue, while each AE had a goal for net new MRR each month that ranged from around $3,000 to $4,000 up to $10,000, depending on experience and the clients they handled. Deals ran from $1,000 to $10,000 a month, and the focus was largely on SMBs rather than expansion revenue.
CRM Integrations as a Pricing Lever
Adapt.io integrated with the popular CRM solutions, and those integrations were one of the axes that set the price, since some CRM integrations cost more than others. Some exports were not available to free users, who had to pay to get some of the integrations.
Capital-Efficient Customer Acquisition
Adapt.io had not spent anything on paid marketing. Counting the sales team and all sales and marketing expenses, Surender put the fully weighted cost of acquiring a $200 a month customer at "two times the monthly," or $400.
Focus on Data Quality Over Quantity
The founders came from the data industry, specifically business information, and set out to "give it a twist." Surender said the current providers focus on quantity, while Adapt.io focused on the quality of the data and on the change in data itself.
Best Quotes
“We started Adapt two years ago, as you mentioned, and we had a lot of experience in the data industry, specifically in business information, and we had an idea to give it a twist.”
“We've chosen to stay bootstrapped from day one. So we started generating revenue pretty early from six months into the business. And we have been we have been pretty much cash flow positive. You know, a couple of months later, we became cash flow positive.”
“No, we are very much a profitable company, very much cash flow positive. And we do we do over a 40% of profit.”
“So I'm not going to give you an exact number, but we have a few numbers short of thousand paid customers as of today. But we are a freemium product. So we have over 200,000 users using our tool, but we have now less than thousand customers who are paying us.”
“So interestingly enough, we've not spent anything on paid marketing yet.”
“So we have our own goals, you know, like we vary from from around 3,000 to 4,000 MRR, net new MRR added every month to 10,000 net MRR added every month. So so depending on their, you know, the experience and what kind of clients they are handling.”
“So the online model is is probably around eight to 9% month over month, and inside sales, you know, is probably a lot lower.”
What Happened Next
At the time of this interview in May 2019, Adapt.io was a bootstrapped, profitable B2B data SaaS company with over 200,000 free users, between 500 and 1,000 paying customers, and a newly built inside sales team driving growth. The figures on this page reflect what Surender Nadarajan reported during the conversation and are a point-in-time snapshot. Visit the Adapt.io company profile on GetLatka for current metrics.
View Adapt.io’s current profile and metricsFull Transcript
Chapters
- 0:00Introduction and Company Overview
- 0:25What Adapt.io Does and How It Makes Money
- 1:07Pricing Plans and Customer Segments
- 2:02Pricing Axes: Contacts, Seats and CRM Integrations
- 3:20Bootstrapped from Day One and Path to Profitability
- 3:41Profit Margin and Team Size
- 4:14Total Customers and Free User Base
- 4:58Freemium Paywall Strategy and Experiments
- 6:56Year-over-Year Growth and Revenue Trajectory
- 8:28Inside Sales Team Structure and Quotas
- 10:45Churn by Segment: Self-Serve vs Inside Sales
- 11:23Net Revenue Retention and Expansion Plans
- 12:00Customer Acquisition Cost and Marketing Spend
- 12:34Famous Five Rapid-Fire Questions
Introduction and Company Overview
Nathan Latka
00:00Hello, everybody. My guest today is Surender. And he he has over fifteen years of experience in the industry with over seven years of leadership leadership experience in the data industry. Adapt.io is his first entrepreneurial effort. He started his career as a developer, moved up the ladder quickly into leadership roles and co founded Adapt two years ago. On the family side, he's married for six years now and has a couple of lovely daughters. Surender, you ready
00:23to take us to the top?
Surender Nadarajan
00:24Absolutely.
What Adapt.io Does and How It Makes Money
Nathan Latka
00:25Alright. Adapt.io. So what's the company do and how do guys make money?
Surender Nadarajan
00:30Sure. So we started Adapt two years ago, as you mentioned, and we had a lot of experience in the data industry, specifically in business information, and we had an idea to give it a twist. So the current providers focus on quantity in terms of building a data, a river of data, while we focused on building the Delta, which focused more on the quality and the change in data itself. In terms of how we make our money,
00:59we are a typical SaaS product and freemium model, and that's how we get our paid users.
Pricing Plans and Customer Segments
Nathan Latka
01:07So... Okay. First off, interesting business. I wanna talk more about the technology and how you're building this. But on average, of what's the customer paying you per month or per year for the technology?
Surender Nadarajan
01:17So we have two segments basically. So becomes difficult to put an average. So one is the online, the self-serve model that users come in and use the product, test it out and purchase by themselves. And we have two plans, which is currently the basic, which is $49 and a growth that is $149 a month. And we also have an inside sales team doing the sales from their part, and the deals deal sizes of those deals
01:47are pretty are bigger than the ones that we get on the site.
Nathan Latka
01:50Like how much bigger?
Surender Nadarajan
01:53So we do deals that are $1,000 a month to $10,000 a month. It varies fairly.
Pricing Axes: Contacts, Seats and CRM Integrations
Nathan Latka
02:02Interesting. And what are the pricing axes you price against? In other words, why is someone gonna pay you $10 a month versus $49 a month?
Surender Nadarajan
02:09Largely, is the number of contacts that they would want to purchase from us. So our database is what drives the pricing.
Nathan Latka
02:18Interesting. Okay, so it's just number of contacts they want to purchase not like number of seats or like number of data fields per contact or anything like that?
Surender Nadarajan
02:27So beyond a certain number, the number of seats doesn't matter because the number of contacts is what drives the price. And we also have integrations with the popular CRM solutions. So some of the CRM solutions cost higher than a few others. Those are some of the axes that determine the price.
Nathan Latka
02:45So that's good. So understanding those two cohorts are valuable, but just for the sake of simplicity, if I did force you into an average, right, would you say maybe it's maybe it's like $3,400 a month across your entire customer base?
Surender Nadarajan
02:58Not sure if I can give a number across the entire customer base. Yeah. You know, in the online model, we would be around 150 to $200. But on inside sales, I'm not too sure if you can give a number there.
Nathan Latka
03:11Yeah, that's fine. That's fair enough. Okay, so around $200 a month on kind of your online self serve portal. You launched, you said two years ago in 2017?
Surender Nadarajan
03:19That's right. Yeah.
Bootstrapped from Day One and Path to Profitability
Nathan Latka
03:20And have you chosen to stay bootstrapped or have you chosen to raise capital?
Surender Nadarajan
03:24We've chosen to stay bootstrapped from day one. So we started generating revenue pretty early from six months into the business. And we have been we have been pretty much cash flow positive. You know, a couple of months later, we became cash flow positive.
Profit Margin and Team Size
Nathan Latka
03:41My kind of my kind of founder. I love that. Alright. And so now are you operating at like breakeven or no, you're taking 10, 20, 30% per month to the bottom line?
Surender Nadarajan
03:51No, we are very much a profitable company, very much cash flow positive. And we do we do over a 40% of profit.
Nathan Latka
03:58Wow, that's amazing. So over 40% EBITDA margins. That's great. Yeah. And what's your team size today look like? How many people?
Surender Nadarajan
04:06We have 25 members on the team.
Nathan Latka
04:08Okay. And where are they all based?
Surender Nadarajan
04:11We're all based in India Coimbatore.
Total Customers and Free User Base
Nathan Latka
04:14Okay. That's very good. Okay. So the team. Okay. So it seems to again, 25 folks, you've stayed bootstrapped, founded about you founded the company about two and a half, call it two years ago. What have you scaled to today in terms of total customers on the platform?
Surender Nadarajan
04:27So I'm not going to give you an exact number, but we have a few numbers short of thousand paid customers as of today. But we are a freemium product. So we have over 200,000 users using our tool, but we have now less than thousand customers who are paying us.
Nathan Latka
04:45Okay, sorry, you said less than a thousand or a thousand?
Surender Nadarajan
04:49Less than 1,000.
Nathan Latka
04:50Okay, less than 1,000. Cool. Now, I mean, can you put a bottom on that? So less than 1,000? But more than is 500? Fair to say?
Surender Nadarajan
04:56Yeah, 500 to 1,000.
Freemium Paywall Strategy and Experiments
Nathan Latka
04:58Yeah. Okay, that's good. All right, good. And then, and then so you are you said you're doing a freemium option, right? So freemium can be very difficult if you don't know where to kind of put that paywall. So how do you decide where to put the first paywall? What do you get for free and what do you make people pay for?
Surender Nadarajan
05:13Yeah, that's an interesting problem that we've been continuing to solve. So it's, so currently we offer five credits for free. So anybody who wants to test the product can come and use the product. We have multiple tools in which you can consume the data and you
Nathan Latka
05:28can What's a credit by the way? One credit equals one contact?
Surender Nadarajan
05:32That's correct. Yes. So one credit is one contact. And after five credits is when we show the paywall. But it's a constant experiment though, and we keep experimenting with that number. We try to move some of the other axes also and try to put a paywall that makes sense to customers so that we give enough value for them to convert.
Nathan Latka
05:51So once I hit 5 for free, then I'll see a pop up says if you want more, it's $49 a month, sign up now.
Surender Nadarajan
05:57That's right.
Nathan Latka
05:58Yes. Okay, interesting. What else have you tested?
Surender Nadarajan
06:03We've tested features, of course. So some of the exports are not available to users, the free users. So they'll have to pay to get some of the integrations that we have. We've tested this number quite a lot. We've done five, we've done 50, we've done 100 as well. So we are varying these numbers also. And we are also experimenting some features like limiting on a daily basis and limiting on a weekly basis, etc. So there are
06:29a number of experiments that we've been constantly performing.
Nathan Latka
06:32And why'd you land now on five? You said you tested five, 50, 100. Why five?
Surender Nadarajan
06:37Yeah, this gave us a pretty good number for at least a month in success. And so for a month, were able to get pretty good success from this particular number. So that's why we've stuck to this number for a while now. But we are still experimenting. You know, we could be changing in the next month to come.
Year-over-Year Growth and Revenue Trajectory
Nathan Latka
06:56And then Surender, mean, I can take your... Now these are gonna be minimums. I think you're probably doing more than this. But at a minimum 500 customers doing, you know, an ARPU of $200 a month. I mean, that puts you north of a $100,000 per month in revenue. Is that accurate?
Surender Nadarajan
07:09Yes, that's accurate. Yes.
Nathan Latka
07:10Okay. And where help me understand growth. I love bootstrapped folks that are obviously growing twelve months ago about where were you?
Surender Nadarajan
07:21We've grown four times compared to last year. 4x is our growth.
Nathan Latka
07:26Okay. You're doing about $25,000 a month a year ago?
Surender Nadarajan
07:32Yes, that was from the online sales. We were doing slightly higher on with the inside sales as well.
Nathan Latka
07:37Okay, fair enough. Yeah, yeah. But maybe we'll call it 30. 30 a year ago, now you're up north of a 100. So how mean healthy growth there? Is most that, first off, is that accurate? Did I get that right?
Surender Nadarajan
07:49Yeah, I cannot give you the exact numbers that but you're around there.
Nathan Latka
07:52That's okay. And as most of growth, I guess what I'm interested in is most most of the growth going from 30 to north of 100 today coming from your inside sales model or your kind of freemium kind of paywall 49 a month model?
Surender Nadarajan
08:06I think largely from the inside sales because last did not have... Last year, same time, we did not have a full fledged sales team in place. We were driving most of our sales through the online sales. So we did very little inside sales. And is... And in the last few months is when we put together a full fledged sales team that's pushing the inside sales.
Inside Sales Team Structure and Quotas
Nathan Latka
08:28How many people are on the sales team today?
Surender Nadarajan
08:31Six.
Nathan Latka
08:32Okay. And what's the split? Like, do you have, like, SDR to AE to CS rep? Or what do those people do?
Surender Nadarajan
08:39Yeah. We have we have three SDRs and three account executives. So that's the split right now.
Nathan Latka
08:43And it's a one to one ratio, one SDR for one AE?
Surender Nadarajan
08:50Sorry, Nathan, your voice is breaking.
Nathan Latka
08:51It's okay, sir. There are so is it one SDR for every one AE?
Surender Nadarajan
08:56Yeah, that's right. Yes.
Nathan Latka
08:57Okay. And help me understand, like, are the SDRs quota carrying or just the AEs?
Surender Nadarajan
09:04So it is the AEs that are quota carrying. The SDRs have, they have quota, but it's not revenue based. It's more on the meetings and the number of qualified leads generated.
Nathan Latka
09:13So let me ask you for one SDR in a month, how many qualified leads do you expect for them to generate and how many meetings?
Surender Nadarajan
09:21In a month, gen... We expect them to generate in the range of 10 to 12 qualified leads. That's that's number that we have right now.
Nathan Latka
09:29And is that mean that's also 10 to 12 demos for the AE they're representing?
Surender Nadarajan
09:34Yeah, ten, twelve meetings set up for the AEs after establishing the BANT.
Nathan Latka
09:39Interesting. Okay. And then for so each AE you basically expect them to have about 12 calls per month, 12 demos per month.
Surender Nadarajan
09:46That's right. Yes.
Nathan Latka
09:47Interesting. And how do you model how many you expect them to close? Do you give them like, you you need to be adding $100,000 of, you know, you know, new ARR every twelve months? Or how do you model it?
Surender Nadarajan
10:00So we have our own goals, you know, like we vary from from around 3,000 to 4,000 MRR, net new MRR added every month to 10,000 net MRR added every month. So so depending on their, you know, the experience and what kind of clients they are handling. So we we check the very that goal for each AE.
Nathan Latka
10:21Okay, so basically, each AE is generating anywhere between 1 and $3,000 in net new MRR per month.
Surender Nadarajan
10:30Yeah, that would be fair.
Nathan Latka
10:32Yes. Or 12 to $30,000 in new annual contracts sold each month.
Surender Nadarajan
10:37Correct.
Nathan Latka
10:37Yes. Yeah. Interesting. And that's just your inside sales model. That's not that's excluding all of your no touch website stuff.
Surender Nadarajan
10:44That's good.
Churn by Segment: Self-Serve vs Inside Sales
Nathan Latka
10:45Okay. Very cool. Churn's critical to kind of get this model working. Right? I imagine your churn in your inside sales model is very different than your churn on your web kind of portal side. So how do you measure churn?
Surender Nadarajan
10:56Yeah. So churn, we do measure them separately. And, yes, the inside sales churn is a lot lower compared to the online model. So the online model is is probably around eight to 9% month over month, and inside sales, you know, is probably a lot lower.
Nathan Latka
11:13Okay. Like, do you do you know what that number is? Like, 2% a month, 1% a month?
Surender Nadarajan
11:18Yeah. It should be one to 2%.
Nathan Latka
11:20Yes. Okay. So call it 12 to 20% annually?
Net Revenue Retention and Expansion Plans
Surender Nadarajan
11:23Yeah.
Nathan Latka
11:23Do your AEs also, are they responsible for driving expansion revenue?
Surender Nadarajan
11:29Right now we are focused largely on, you know, SMBs and not really focusing on expansion a lot, but we are looking to scale the sales team and then start focusing on expansion.
Nathan Latka
11:42So 12% gross churn annually minimum means your net revenue retention is about 88% per year currently best case scenario.
Surender Nadarajan
11:51Yeah, that's right.
Nathan Latka
11:52Okay, very good. But once you start getting expansion, then all of a sudden, you can get above 100%. If you start growing that rapidly.
Surender Nadarajan
11:58I think yes, yeah, that's right.
Customer Acquisition Cost and Marketing Spend
Nathan Latka
12:00Yeah. Interesting. And then last question here, how aggressive are you being to get a new $200 a month customer? In other words, are you willing to spend four months, five months, eight months of ACV to get them?
Surender Nadarajan
12:14So interestingly enough, we've not spent anything on paid marketing yet.
Nathan Latka
12:18Well, fully... I'm talking fully weighted. So include... Includes the sales team, includes all your expenses that are sales marketing related.
Surender Nadarajan
12:25Right. Yeah. So I think, you know, we we do two times the monthly. So $400 would be something that we would measure as of now.
Famous Five Rapid-Fire Questions
Nathan Latka
12:34Yeah. That's not bad at all. That's good stuff. Alright, man. Let's wrap up with the famous five. Number one, what's your favorite business book?
Surender Nadarajan
12:41It's The Speed of Trust by Stephen Covey.
Nathan Latka
12:44Number two, is there a CEO you're following or studying?
Surender Nadarajan
12:48Satya Nadella of Microsoft.
Nathan Latka
12:50Number three, what is your favorite online tool for building a company?
Surender Nadarajan
12:57Drift.
Nathan Latka
12:57Number four, how many hours of sleep do you get every night?
Surender Nadarajan
13:02Not a fixed number, but enough to keep me going.
Nathan Latka
13:05What do you think it is an average six, seven, eight?
Surender Nadarajan
13:08Yeah, six to seven.
Nathan Latka
13:09Okay. And what's your situation? Well, actually, I think I know you have kiddos, married, single, how many kids?
Surender Nadarajan
13:15Married with two daughters.
Nathan Latka
13:16Two. Okay. Very good. And how old are you?
Surender Nadarajan
13:19I'm 34.
Nathan Latka
13:2034.
13:21Last question. What do wish your 20 year old self knew?
Surender Nadarajan
13:27Just be open to more ideas and be open to exploring more stuff.
Nathan Latka
13:32Guys, adapt.io gets you contact data. Great for AE teams. They're currently serving over 500 customers at $200 a month. So north north of a $100,000 per month right now in revenue. That's up from call it 25 or $30,000 a month just about a year ago. So nice growth. They have a freemium model, 200,000 free users that convert to a $49 a month paid plan. And then also a very separate inside sales model where they have six
13:53folks, three SDRs, three AEs building that right now. Churns about 12% annually. That's gross churn. So net revenue retention about 88% annually right now because they don't have expansion revenue yet. In terms of onboarding, willing to spend up to two months of ACV to get the customer. So two month payback period there equals healthy economics. Surender, thank you so much for taking us to the top.
Surender Nadarajan
14:11Thank you, Nathan. It was a pleasure.