Agilence Inc. Revenue & Funding (2023)

[00:00] Agilence was launched way back in the day, call it 2006. Russ came in in 2008 and moved it from a hardware company servicing, call it the restaurant, retail, grocery industries, moved it into more of a SaaS play in 2013. And today, it's really vertically integrated into those three sectors, doing things like incident management, human capital management. That's what they're looking to expand in. They already do operational analytics, merchandising, etcetera. They're doing $35,000,000 in ARR, or right [00:23] around there, up 17% year over year. The first $10,000,000 year was 2018, first million dollar year, 2014. He's doing this in a capital efficient way powered by the war chest. That is the private equity firm, Cuadrilla Capital, as he looks to scale potentially inorganically with acquisitions moving forward. Hey, folks. My guest today is Russ Hawkins. He's building agilence. That's agilenceinc.com, which helps reduce, shrink, and improve margins across retailers, restaurant operators, and grocers to increase their margin [00:50] by reducing preventable loss across the business. Russ, you ready to take us to the top? [00:55] >> Sure am. [00:56] Now, Russ, are you an ex grocer? Did you own your own grocery chain before this or what? How'd you learn about the product? [01:00] >> No. 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 founder. So this is my third company. Prior to that, I was fifteen years with what came to be known as Lucent Technologies in the telecom business. [01:22] Of course. Of course. Now this particular company, agilence, give us the backstory. What year did it launch? [01:28] >> 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 [01:44] >> 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. [01:57] Sorry. What was it between two thousand and eight and twenty thirteen if it wasn't SaaS already? [02:02] >> 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 agilence to visually verify. So a very video centric company. The idea was [02:40] >> to enable an analyst sitting in headquarters to be able to review transactions across a 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 [03:00] Wait, Russ, hold on. That's big deal. It started off as hard There was an upfront hardware installation required. [03:05] >> Originally. Yeah. [03:06] Oh, wow. Interesting. Okay. Got it. And and you came in and said, now did you come in because, you know, current investors weren't happy with the founders and they said we gotta bring in Russ, or how'd that happen? [03:15] >> Yeah. So my 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. 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 [03:48] >> 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. [04:01] Yeah. I want to flesh out all the years between 2008 and 2013 and 2013 to 2023. But before we go fill that backstory, tease us a little bit with where you're at today. Give us a story of how customers currently using you here in 2023. [04:15] >> Yeah, 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. We came out with a minimum viable product in 2013 and we have evolved pretty significantly [04:43] >> 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 [05:15] >> data. [05:17] Oh, what's going on there, YouTube? Good to see you guys. Now imagine this, you love watching these interviews with SaaS founders, but imagine if we took all of the valuation data out from over 2,807 interviews I've done manually. Saves you a lot of time. Well, we've done this. We've built it into the beautiful interface inside of Founderpath. Check this out. I'll show you how you can access this in a second, but you log in, you connect [05:40] your Stripe account, you see your valuation real time. You can see what it changed over the past eighty eight days and even set goals for valuation this year. Now the secret evaluation is there's many different ways to value a SaaS business. So the reason you're gonna see three or four different valuations inside of your Founderpath dashboard, this is all free by the way, is because depending on who's doing the buying of your SaaS company, you're gonna [06:04] get a different valuation. A VC is gonna pay a different valuation. Private equity firm is different. If you're gonna do a minority sale, that's different. And if you sell the whole business, that's a different valuation. You can see all those when I hover over here. Right? So the teal is what a VC would pay. Yellow is what private equity and red is if you sold the whole thing outright. Now what's cool about this is this is [06:26] not built off random data. Again, you guys hear these interviews on YouTube. All these datas are built from real time valuation data points founders share with us on the show. So traction, 1,200,000 seed round, 3.7 raise. They sold 22% of their business. Go in here and filter by the event. Maybe you only wanna see companies that have sold the whole business. Well, here are a bunch that have been acquired the valuation and the multiple. Maybe you're [06:52] going out right now and you're raising your seed round. We'll go in here and look at all this recent seed deals that went down, what they raised, what valuation they raised at and what percent that they sold. There's never been a larger dataset of SaaS valuations than what you can get now inside of Founderpath. And we're thrilled to bring it to you. Alright. We're gonna go back to the YouTube video here in a second, but if [07:14] you wanna check this tool out, if you wanna jump in and sign up, you can check it out for free to get your valuation at this link. This link, founderpath dot com forward slash products forward slash valuations. Or if you go to founderpath.com and hover over products, click on get your valuation here, and go ahead and sign up to give it a whirl. Again, all that valuation data live right inside the platform. I hope to see [07:39] you there. Alright. Let's jump back into the interview. Russ, with that idea, you know, the operational analytics, merchandising, organizing SKUs, all the data exhaust managed under your platform today, what's the average grocer gonna pay you per month or per year to use your technology? [07:54] >> Well, it really depends on the size of the grocer and there's differences in the grocers versus retailers and versus restaurants. So today, we have a couple of 100 customers, more than a couple of 100 customers across those three groups in The US. On average, they pay us around 125,000 a year, but we have some that are close to 1,000,000 and some that are smaller. [08:21] Interesting. Ed, do you have anyone paying your biggest customer? Don't name them, obviously, but anyone paying more than 1,000,000 per year all in? [08:27] >> No. We have three right close to that, but not, nobody nobody yet. Although most likely through expansion sales, all three of them will be over that threshold within the next year. [08:39] It's one of my favorite metrics when you read all the s ones from the SaaS companies going public is go down to the customer section buried on page 60 and see how many million dollar plus customers they have. That's always a nice metric to see if you have healthy net dollar retention, etcetera. [08:52] >> Yeah. Originally, we were focused more on the mid market and we kind of worked our way up to supporting larger companies. Along the way, we've learned a lot. Now [09:04] >> we're really considered the leader in this space. [09:08] Sorry, just to put a tighter range on this. When you say a couple 100 customers today, we're talking like 400 or 500 or closer to a thousand? [09:16] >> No. We've got closer to 300. [09:18] 300. Okay. [09:19] >> They're across all three markets, but all in The US. Well, US and Canada today. So we've avoided for now bringing the platform outside The US, mainly because I've done that before. 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, we sold the company to a private equity firm about eighteen months ago. And one of the things that they've enabled is [09:50] >> 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. [10:03] 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 then wanna try and get a general sort of size of the company. How many folks are full time today at the business? [10:16] >> We're 70 people. [10:17] 70. Okay. And how heavy on engineering? How many engineers? [10:21] >> About 27, 28. [10:23] Okay. Twenty seven, twenty eight. And you must have a well [10:28] trained sales team if you've got accounts that are paying up towards a million. How many are CSMs or AEs or BDRs, etcetera? [10:35] >> So the sales organization today is around 10 folks. Okay. That's a combination of bag carrying salespeople, BDRs, we have technical leads, people that do solutions. They basically do architecture and that's- [10:52] Solution selling. Yeah. Interesting. Of the 10, how many are carrying the bag? Using your words, how many are quota carrying? [10:57] >> Five of them are bag carriers. [10:59] Interesting. How do you split up the deal flow? Is it geo based? Is it industry based? How do you split that up? [11:05] >> A little bit of both. So we make a delineation between retail and restaurants. The use cases are significantly different in restaurants. And even there's sub segments in there, right? In restaurants, there's quick service restaurants, but there's also table service restaurants. So the use cases can vary significantly. On the retail side, we have a segmentation around [11:33] >> grocery, specialty, drugstores. Those are the three segments. And we're starting to do more with convenience stores now as well. But basically we break it down. The salespeople are assigned. It's account assigned. So we spend our energy today with the largest accounts in terms of account executives. And then outside of the sales organization, we have a marketing team that looks to get people to self identify in the mid range. And we do a little bit at the [12:03] >> low end, but most of it is in mid range size companies. [12:05] Russ, can I ask you for one of those five fully ramped AEs with a quota? What is that quota you want them to hit annually? Is it a million ARR? [12:12] >> Right around a million ARR. Yep. [12:14] Yeah. Yeah. Interesting. Okay. Very cool. Alright. More on the backstory here because you you know, when you look at actually the the funding history of the business, you're you're actually fairly unique. And I say unique, and it's a compliment. I it looks like you've been very capital efficient because you've smartly used debt. You joined in 2008. I think only maybe a million had come into the company at that point, maybe a little more. But how have [12:33] you thought about building the capital structure over the past ten years, fifteen years? [12:37] >> So we started with with venture capital. You know, I mentioned that we sold the company about eighteen months ago. I think of that as kind of a graduation. We graduated from the venture world to the private equity world. But prior to that, raised, several rounds of venture capital, and [12:56] >> put in debt also as we went along when we [12:59] Russ, can you sum those just so you understand how you're thinking? What was the total equity in versus the total debt in the business? [13:06] >> So the debt varied. We paid things off and paid things down out of cash flow over time. But probably at the height of it, it's probably only 5,000,000 in debt and about just a little short of 30,000,000 total equity raise. [13:23] Okay. So you still I mean, one thing I always ask, especially operators like you coming in, you're managing a cap table, obviously. You're managing an ESOP pool for employees. I imagine, obviously, the founders on the majority before you came in in 2008. How did you just make sure to keep good control of your cap table so there was always room for you to go recruit a great new revenue leader like you just did? [13:42] >> Well, you mentioned earlier about being capital efficient. So I'm a little bit different, think, than some people running small startup companies in that. I've always been very conservative. I don't like to get ahead of my skis in terms of hiring. Even though I am chasing growth, I try to keep a balance. I never wanna be in a desperate situation where I have to raise money because I have to. So we've tried to take a very methodical [14:07] >> approach over time, raising money really before we need it on an incremental basis. I made mistakes, people do, but lately, so the last eighteen months, we had more debt. We've leveraged up with debt because that's kind of the part of the PE playbook. And so the equity to debt ratio right now is about sixty-forty in the plan, in the business. [14:33] Yeah. Yeah. Okay. That's helpful to understand. The I guess going back to the backstory here a little bit. So again, good good good use of debt, good use of equity. You then engaged with Accel KKR, I believe, before before the deal with the private equity firm. Is that accurate? [14:49] >> It is. So I pitched AKKR at one point out on did Silicon Valley Road show. And [15:01] >> they remembered me and actually AKKR decided to enter into the debt business. And I think I might've been the first deal that they did in the debt business. So I worked with them. [15:13] Was that out of their publicly traded BDC, the FSKKR BDC? [15:17] >> No. I don't believe so. [15:19] It okay. So it was a private it was a private debt fund that they managed? [15:22] >> It was. Yep. [15:23] Interesting. Can you are you able to share like, lot of founders don't even know that debt is an option. So anytime I get someone like you that is experienced, that's done it, I try and get as much information as possible. How do these debt deals work? What can you share? [15:35] >> Well, they changed over time. I mean, a wide, wide kind of census of debt providers in there, and they're all over the from banks to private debt providers. Early on, we were paying fairly hefty rates, so they're getting good returns usually. [15:55] What's hefty, Russ? [15:56] >> You're talking like seventeen, [15:57] >> eighteen, Low [16:00] >> Low teens. Teens and, you know, a little bit of equity in there as well [16:04] as it's Like two to 3% warrants? [16:06] >> Yeah. Smaller, actually, in most cases. One to two has been my experience. [16:12] >> And [16:14] >> as our revenues have gotten more predictable, we're able to do better on the interest rates. [16:21] >> Now we have basically a bank as the lead debt provider and then they are subordinating it to some of the historical [16:32] >> debt financing companies. They're not really banks, they're just more risky providers, I guess. [16:38] They're And who lined that facility up? Was it you or Cuadrilla Capital? [16:43] >> Cuadrilla. It's Cuadrilla and yeah. They they did this one and they're [16:46] pretty These good at [16:47] >> guys are, you know, ex Marlin guys for the most part. [16:50] So so just to be clear, it was not a unitranche deal. There was an a piece and a b piece, the a piece was like the PNC Bank, and the b piece was Hercules on top of that. Something like that. Something like that. Yeah. Okay. Interesting. Yeah. Guys, this is a huge model. You know, no one talks about it, but it's a great way to preserve equity over time. So Russ is clearly doing that, which we [17:07] love. Now Russ, why was the right time to sell last year to Cuadrilla Capital? What made it the right time? [17:13] >> Well, it wasn't Or I guess it [17:14] was 2021, 2021. [17:15] >> It wasn't the right time to sell. I I don't think we should have sold, to be honest with you. But [17:20] Why'd you do it then? [17:22] >> Because the investors and the owners of the business decided that they wanted to do it for their own reasons, which is a problem. It's a problem from my perspective with multiple venture investors that have conflicting objectives within their own funds. [17:40] >> I think we sold the company short to be honest. [17:44] And still I still I mean, when you say short, can you quantify that? Like that you sold for example, like a five to 10x multiple and you thought it should have been 15x, something like that? [17:51] >> That's right. It was more well, maybe not 15 x, but, yeah, we sold sub five, and I think we should have gotten more like eight. [18:00] Interesting. And the and the investors you had on the equity side just weren't being patient enough to to wait it out. [18:05] >> Well, so they weren't all equal, right? The initial money that I raised back in 2008, that particular investor was very supportive and very, very interested in continuing to do what [18:22] >> needed to get done. And then in subsequent rounds, we brought in additional voices and additional We [18:28] got to give them credit, the way, Russ. Anytime you say good things about VC, we got give them credit. That was Granite and Nextstage back in 2008. Correct? [18:34] >> So Nextstage was the the original investor in the business before me. The other guys had basically hired me. And then I brought and then I brought Nextstage I brought, Granite in. [18:44] I see. But they're the ones you're getting credit for being patient, good, long founder friendly, [18:48] >> supportive and and so forth. And then, you know, the the later the the later people, one was a kind of a family office, had a different different set of perspectives. And then the And last one to join was the one that wanted to move more quickly in terms of an exit. [19:11] Fair enough. We won't put them on the spot here, but it's good to understand the patterns. Now, Russ, I'm actually [19:16] >> with them anyway, so I'd rather not [19:19] Okay. Well, I mean, was that Welling? Are we talking about well are we talking about are we talking about Wellington? [19:23] >> No. No. No. Wellington was a debt provider. So [19:26] Are you talking about Arrowroot or Aster? [19:28] >> Arrowroot. [19:29] Arrowroot. Okay. Yeah. We we you know, I'm I'm very familiar with their capital structure, and you're right. It's a family office. They have a short term fund life typically. Why didn't you surface some of these risks with their capital structure ahead of time before taking their money? [19:43] >> Well, because I, I guess I just blew it. I mean, I I didn't do it. I I [19:50] >> misinterpreted what they were at the time, and they told a good story about what they were and what their what their whole period was and what they wanted to do. And, you know, maybe they just grew tired of the business. I I don't I don't really know. All I know is that, they forced our hand and, it was not, not what we wanted to do. [20:08] All right. Let's end with the last two minutes here looking forward. So the company today, you told us about 300 customers. You mentioned earlier average ACV, something like 125 k. Russ, is it appropriate to multiply those together to back into sort of your revenue range, would that math not be accurate? [20:21] >> That's reasonably close. [20:23] Okay. So that would put you at about $37,000,000 of ARR today. Is that accurate? [20:26] >> Little bit less than that today. [20:28] Okay. And where were you one year ago so we can calculate growth rate? [20:31] >> The last year we grew at 17.3%. [20:36] Okay. Got it. So you're at like, something like, 31,000,000 ARR one year ago. [20:41] >> Something in that range. Yeah. [20:43] Okay. Okay. So this isn't this is I mean, look, this is good, controlled growth. You mentioned inorganic growth of the private equity fund behind you today. What kind of acquisitions are you looking for? [20:53] >> Well, we're looking for adjacent technologies. [20:57] >> We're all about data analytics, as I mentioned, primarily in the retail space. This is enterprise customers. My average customer has 600 locations. So we're not talking about small businesses here. [21:10] >> I have an interest in a couple of different areas. I'm very, very interested in incident management and task management. I'm interested in frontline human resource, human capital management in retail environments. [21:26] >> We do some good things around e comm, but I'd like to get more real time. We're forensic in that. We basically can tell you what happened up until yesterday. So I'm interested in going in that area. We've got some interest and already some use cases in the supply chain management, the distribution management. So there's some things in there. What else? On the restaurant side, that's a smaller part of our business. I think there's some interesting add [21:59] >> ons we could do in the restaurant tech area. [22:04] >> And then one other thing would be just general geography, picking up competitors that can give us a foothold in additional geographies. I've tried to do it on a greenfield basis and it's just expensive and takes a long time. So I'd like to look at some of those things. [22:21] How do you manage concentration risk in terms of your concentration at Cuadrilla? From what I can tell, they've only bought three companies. You're one of them, maybe one of the bigger ones in addition to Chartbeat and InfoDesk. Is there any risk for you being such a large position in their fund? [22:37] >> Well, I think they're pretty well funded, first of all, and I think they've got [22:40] Is that public? How much have they raised? [22:42] >> That, I don't know. Well, that I'm I'm not and I'm not if I did know, I wouldn't be able to share it. [22:47] Fair enough. [22:48] >> But we were there. We were actually their first investment. They've been extremely supportive. Love these guys. They're doing a great job with me because they're transparent. They tell me what they want and we talk about it. Then I execute on it. And they're essentially investing in my vision of where I want to go here. Which is- Yep. [23:07] And this is Jonah Sulak and Vikram Abraham, just to give them credit. [23:10] >> That's correct. Yep. Yep. Vic is not the point on the deal, but Jonah and Vic work very closely together. [23:16] Marlin Equity in their blood. That that is the tree they came from. So good good group of guys there. Now what's the process, Russ? You find a great deal in the incident management space that you wanna buy. Let's say it's doing 5,000,000 in revenue. You have negotiated high level with the founder. You're gonna pay a two x multiple for $10,000,000, of which 8,000,000 is cash up front, 2,000,000 earn out in stock. What do you need from [23:34] that group you're gonna buy to take to Cuadrilla to get the deal approved and unlock the capital? [23:39] >> It's a more interactive and collaborative in terms of what we do. I I I've produced, kind of a roadmap of acquisitions of directions that I wanna go. And my initial list of names, there's been some of them that fall into the category that you described where I've had developed a relationship with these companies. But [24:04] >> there's a team of people, Cuadrilla has a team of people that help me. Do outreach. [24:08] Oh, nice. [24:09] >> They do outreach and they help me. [24:12] >> And then as far as the actual details of the acquisition, I'm primarily using their money. So the divisional labor is I come up with the strategic ideas and run the companies and they work the details on the financing. [24:27] Interesting, interesting. Well, that makes a lot of sense. As we wrap up here, Russ, we didn't get a lot of the backstory in terms of other revenue milestones. What year was your 10,000,000 year? When did you pass 10,000,000? [24:38] >> That was, I don't know, six years ago, five years ago, something like that. [24:43] Okay, so call it 2018. And what was your first million dollar year, if you remember? [24:47] >> Oh, boy. [24:50] >> Well, in the new platform, it was [24:54] >> probably 2014. [24:58] >> We stopped selling the older platform as soon as I made the pivot in 2013. But we had hit a million dollars with that product back in, let's see, 2009, I guess. Yeah, 2009. [25:11] All right. Very good. Let's wrap up with the famous five quick answers. Number one, favorite book. [25:17] >> My favorite book? Yep. Confederacy of Dunces by Toole. [25:23] Number two, is there a CEO you're following or studying? [25:29] >> No. [25:30] Number three, what's your favorite online tool for building agilence? [25:36] >> My favorite online tool for building agilence? [25:38] Yes. [25:42] >> Well, [25:45] >> I've got a lot of ones that I'm not happy with. Let's see. What's your what are [25:48] the that a better question. [25:49] >> I guess at Salesforce, I mean, I I I mean, it's our CRM and we get a lot of value out of it. [25:55] I should start asking that question. What's the last software contract you churned from? You terminated. [26:03] >> Wait. Wait. In terms of what what is it you're looking for? [26:06] I'm just joking. You're saying ones you're not happy with. I'm saying ones you're no. [26:11] >> I'm not definitely not mentioning that. [26:13] >> Yeah. Want I want you do that. [26:15] Number four, Russ. How many hours of sleep do get every night? [26:20] >> About I get five in two in two tranches, I guess. [26:26] Alright. Fair enough. And what's [26:27] >> for the bathroom in between. [26:29] What's your situation? Married, single kids? [26:31] >> Married, four kids. [26:32] >> Just had my first grandchild. [26:34] Oh, congratulations. That's so fun. How old are you, Russ? [26:38] >> I'm, 64. [26:39] Last question. Something you wish you knew when you were 20. [26:43] >> Oh, [26:47] >> how important the decisions that you're making every day are. [26:50] Guys, there we have it. Agilence was launched way back in the day, call it 2006. Russ came in in 2008 and moved it from a hardware company servicing, call it the restaurant, retail, grocery industries, moved it into more of a SaaS play 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 in. They already do operational analytics, merchandising, etcetera. They're doing [27:13] $35,000,000 in ARR today or right around there, up 17% year over year. The first $10,000,000 year was 2018. First million dollar year, 2014. He's doing this in a capital efficient way powered by the war chest that is the private equity firm, Cuadrilla Capital, as he looks to scale potentially inorganically with acquisitions moving forward. Russ, thank you for taking us to the top. [27:31] >> Alright. Well, thank you, Nathan. [27:33] One more thing before you go. We have a brand new show every Thursday at 1PM central. It's called Shark Tank for SaaS. We call it deal or bust. One founder comes on, three hungry buyers, they try and do a deal live and the founder shares back end dashboards, their expenses, their revenue, ARPU, CAC, LTV, you name it, they share it and the buyers try and make a deal live. It is fun to watch every Thursday one [27:58] p. M. Central. Additionally, remember these recorded founder interviews go live. We release them here on YouTube every day at two p. M. Central. To make sure you don't miss any of that, make sure you click the subscribe button below here on YouTube, the big red button and then click the little bell notification to make sure you get notifications when we do go live. I wouldn't want you to miss breaking news in the SaaS world, whether it's [28:19] an acquisition, a big fundraise, a big sale, a big profitability statement or something else. I don't want you to miss it. Additionally, if you want to take this conversation deeper and further, we have by far the largest private Slack community for B2B SaaS founders. You want to get in there. We've probably talked about your tool if you're running a company or your firm if you're investing. You You can go in there and quickly search and see [28:41] what people are saying. Sign up for that at nathanlatka.com/slack. In the meantime, I'm hanging out with you here on YouTube. I'll be in the comments for the next thirty minutes. Feel free to let me know what you thought about this episode. 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