Allstacks Revenue, Valuation & Funding (2024)

[00:00] Hey, folks. My guest today is Hersh Tapadia. He's the co founder and CEO of allstacks, the first software delivery intelligence and predictive forecasting platform, helping engineering teams predict and quantify team productivity. He's led teams like this across SaaS, pharma, medical device, supply chain, and previously was co founder of several ventures, including Ravioli Labs, an ML driven consulting firm, CertiRx, an anti counterfeiting solution for supply chain, and MedCount, a medical device for infectious disease diagnostics. He's living [00:26] in Raleigh and is a graduate from Duke and NC State. Hersh, you're ready to take us to top? Yeah. Absolutely. Alright. Where so where did you experience this problem? Was it when you were at, you know, Ravioli Labs or CertiRx? Where did you find this problem? [00:38] >> Yeah. It was it was everywhere, actually. So I was running product engineering teams. I think the the health care background created the exacerbated version of the problem because you have two layers of translation. Mhmm. So when you look around your organization and you see marketing, sales, customer success, everybody's really instrumented, really data driven, and engineering's not. And then you have to further explain it to somebody who has maybe more of a healthcare science background. You're going [01:08] >> through two layers of translation without any data. And it was just always a point of frustration for me, which is like, how do I help quantify this in a way that actually helps me advocate for my teams? Why are my teams actually doing really well? What does really good look like? Yeah. [01:25] For my for my audience listening, this is the use case of there's that annoying Trello card that has been sitting in the doing this week for the past six weeks. And for the business person, it looks like no momentum's happening, but everyone on the dev side knows there's a bunch of work happening. So you are able to basically get insight into that. [01:43] >> Insight into that and then help you understand when is that actually not happening as well. So both the positive and negative outcome. We're doing all the work that we should be doing, but there's other externalities that are causing it to go off track as well. Maybe it's really a lot more complicated than it is normally. And so being able to highlight all those outcomes so then you can make a decision. Your business counterpart can say, Hey, [02:07] >> I understand that this is going differently than it normally does. I'm gonna make different decisions now. And so one of the things we think about a lot is how do we give agency back to all your stakeholders? [02:19] Yep. No, this is great. And it helps engineers communicate progress to a sales team because the sales team is used to communicating things like quota and quota target and percent of Yeah. Quota So help me understand how you're breaking this down. I'm just going off the screenshot of your homepage, right? So when you say like you have a couple of things, there's a progress bar, there's velocity per week, and there's scope remaining. What do you set [02:38] first? Like, do you set a number of points per scope? [02:42] >> Yeah, so we use the data that's already being leveraged in tools like Jira, for example. So somebody's defined, call it an epic, some body of work, and they've either created a bunch of tasks inside of that, or they've added story points, whatever process that they use. And then what we've done is we've looked at your historical data to say when something like that materializes, how does it typically go from start to finish? And then we start [03:09] >> tracking work against that. And what we do is we look for deviations from that normal. And normally it takes maybe a day to review code. This one's taking four days to review code. Why is that? Right? Oh, the code's really complicated. It was rewritten a bunch of times. Seven people wrote it instead of one person. So it's hard to review. And each one of those has a historical factor that said last time something like this happened, [03:34] >> this thing got later and later, or it got earlier and earlier. And that gets worked into a forecasting model, this machine learning algorithm that we developed that then predicts three things. When do we think it's gonna get delivered? How is that date changing? And how is the change changing? So was it getting later faster? Is it getting earlier slower? Basically, what we're trying to explain to folks is, are we confident in what we're saying we're gonna [04:00] >> do, or are we losing confidence in what we're saying we're gonna do? [04:03] Because that that [04:05] >> second derivative explanation is how humans make decisions with each other. [04:10] Mhmm. Tell me about pricing here. You you're you're really clear on your pricing page. Everyone starts at $400 a month, but I imagine your average, like, ARPU is probably much higher than that. What's the average customer or team paying you per month? [04:22] >> Yeah. So it's it's about the size of the company. Right? So how big is the technology organization? We call them contributors, The people that are working towards delivery. So what we look at is kind of development teams starting around twenty, thirty developers and going up from there. So simple math. Right? We're looking at kind of 12 k, 30 k, 50 k or like our typical starting bands per year. [04:49] >> Yep. [04:50] Oh, per year? [04:50] >> Mhmm. [04:51] Okay. Well, 12 oh, oh, it's $400 per year per month? [04:55] >> Per year per year per month. [04:56] Per year. 400 I per year per year. [04:58] >> I was [04:59] gonna say, holy crap. This gets big very quick if you got a thousand people on one team paying $400 a month. That was a yearly price. [05:05] >> That was a yearly price. [05:06] I got it. Alright. Take me back to day one. When'd you launch the business? [05:10] >> So we started the business you could really call our genuine kickoff with Techstars in Austin, Q one of twenty eighteen. So Jeremy, my co founder and I, we've been working together since 2008, straight through thirteen years now. [05:24] So were you guys nice? You just split fiftyfifty at the start? [05:27] >> Just split fiftyfifty at the start. It was our first fourth time working together. And we said, let's kick this off. And so we incorporated the company just before that, got into Techstars, drove down to Austin and kicked this thing off right in January 2018. [05:46] Why Austin? Why not I imagine there's a Techstars in Raleigh, right? [05:50] >> There wasn't a Techstars in Raleigh at the time, actually. The Techstars in Raleigh started a year later, and it was in partnership with MetLife. We were deciding between Austin and Boulder, And we looked at ourselves and said, you know, what are we really good at? We're really good at product, really good at engineering technology type stuff. And so we wanted to go to a program that was shaped around go to market. [06:13] Mhmm. [06:13] >> And the MD in Austin, Amos, he's a real go to market guy. And that's where we felt like we would came the most. And so we ended up going to Austin. We met our first employee there, hired him on our last day at Techstars. We got our first round of funding there with a really great partner, and we actually have now a third of our team in Austin in in conjunction with Raleigh. [06:39] Oh, that's super cool. Okay. So give me a little bit of funding history here. So you're not bootstrapped. How much did you raise back right on day one in 2018? [06:46] >> So Techstars, you know, it's the standard 100 k 100 k deal. So in 2018 in total, we raised about a million bucks as like our pre seed. And then we've had subsequent rounds in 2019 and 2021 of a seed and a seed two. So in all, we raised about $8,000,000 [07:04] And And tell me more the obviously, it's a little dated now because this is back in 2018. Well, I mean, today, standard seed rounds. I mean, I've seen ones as small as five caps. I've seen ones as high as like 50 caps on a convertible note, like a safe. It's been all over the place. But back in 2018, what did you do? Like a one on five sort of deal? [07:21] >> Yeah. We we what we typically saw in the market was like a three to five three to five cap on a seed. We were right in the of that. [07:28] Yep. Yep. Okay. Got it. So maybe like a one on a four sort of deal. And I forget, what was the standard Techstars deal back then? How much equity? Was it was it 7%? [07:36] >> It was 6%. Six. Yeah. [07:38] Yep. 6%. Change that? [07:39] >> I don't think it's changed at all since since it started. They've been they've been the same. They've been they've actually been very consistent. I know YC switches around a little bit. I think Techstars have been very consistent. [07:50] Yeah. Do you compete with your friends that maybe went through or applied to YC and just just to make sure that you made the right choice with the Techstars? [07:56] >> Yeah. It's actually cool. We we had a bit of bit of lineage there. So there's a local program in North Carolina called NC Idea, which funds equity free grants. It's an economic development thing for startups. And we went through that program and there was another company sitting next to us and they went through Techstars in Austin the year before us. And then we went through Techstars in Austin on their recommendation. And then we actually share an [08:21] >> office with a company here that went through Techstars in Austin a year later with our recommendation. So we've been able to really propagate this Raleigh Austin pipeline. [08:31] You've seen it all. Yeah. You've seen it all. That's very cool. Alright. Take me back to the first customer in 2018. Where'd you find it? Like, can you name who it was? Do you remember? [08:39] >> Yeah. So the very first customer was actually a small company called FarmShots. They're a satellite imaging company. They ended up getting bought by a big agriculture company called Syngenta. And so in that time, there was a there was a handful of these seed stage ag tech satellite imaging companies, and each one got bought by a different big ag tech. So one got bought by Monsanto, one got bought by BASF, and FarmShots got bought by Syngenta. And [09:07] >> they actually have been our customer ever since, continue to be our customer. [09:11] I was gonna say, so that's great for you because Syngenta probably has more engineers. That means more contributors. That means higher ACV for you and net dollar retention. [09:18] >> Absolutely. So that's the strategy, folks. [09:20] You heard it here first. Go invest in companies that are small, likely to be acquired, and that is how you get into bigger, bigger teams, more seats. [09:26] >> We actually we actually really believe in the land and expand motion. You know, our net dollar retention is 173%. [09:32] Woah. That's really I mean, look, I've inter I've done almost 3,200 interviews. That's, I would say, top, like, 5% that I've ever heard. So either you're operating off a very small base or you're killing it. [09:42] >> We have a we have a phenomenal customer success team, and we have a model where what we do is we we work with a small part of the org, we train them, and then we expand out to multiple parts of the org. And it gives us two two advantages. One is we really learn how the org works and we can really make them successful, but we create layers of experts within the org. So when the next [10:04] >> set of people come on board, they don't just have us to work with. They also have their peers who they can be really intimate with. And we work with them through Slack and Microsoft Teams and all these chat tools. So we've really become an integrated part of their team. And so our you know, one of our core values is that we can always help. And what's important to that is we can always help doesn't mean it [10:27] >> has to be just with the product. We are a resource to our customers. We try to be partners to our customers. [10:33] And how many now today? FarmShots was number one. How many today? [10:37] >> We're at 45. [10:38] 45. Okay. Great. [10:40] >> Mhmm. [10:40] And and tell me more about the CSM structure. Everyone structures a bit differently. How many customer success managers do you have currently? [10:47] >> We have three customer success managers. [10:49] Okay. [10:50] >> Each one handles about a million and a half of quota. [10:53] Yep. And Hold on. [10:54] >> What is that quota? [10:56] Is that the [10:57] book of business they start with and they have to expand that against a target or that's they have to expand the quota to over the year? [11:03] >> That's that's how much they have Start with. To start with. Yeah. And, you know, if they expand beyond it, you know, we might reshuffle. But what we find is that with that amount, they can provide a a really tight relationship with their customers, a really healthy degree of support. [11:22] So will you say, I mean, you're setting goals right now for 2022. Will you say to one of your CSMs, Hey, here's your 1,500,000 book by December of next year, 2022, our expectation is that you expand this by a 100 or 70%. And if you do that, here's a commission? [11:38] >> Yeah. So we actually structure it slightly differently. Right? So we're talking about, this is how much we think they can support because what it proxies into is number of users, number of size, how many accounts, things like that. It allows us a really flexible delineation to say, here's kind of how many humans you can support. Now, when they scale the thing, part of their commission is based on how they scale the accounts and how they renew [12:06] >> the accounts, but the other part of the commission is other objectives that help make customers successful. So So we actually compensate our CSMs not just on renewals, but also on methods, techniques, programs that make customers successful that can be broadly applicable. [12:22] Give me an example of those. [12:24] >> So for example, we had an initiative recently with a customer where there was a particular topic around code review that they really wanted to build like a template around. I said, wanna be able to template this into all of our teams. And so our customer success manager was responsible for building out that code review best practices program and then rolling out within their customer, but then marketing that to all customers so that any customer that was [12:53] >> interested in that program could enable it within their work. And so the successful delivery of that program is part of the objectives and that it gives them a non monetary pure customer success driven objective that really can both align the incentive, right? Because the customer success team has to be aligned to the success of the customer, right? It's in the name and you don't want just the revenue to become combative to the success of the customer. [13:22] >> So we want we wanna be able to incentivize them to make the customer successful and drive revenue, but not at the expense of one another. [13:29] So what portion of a CSM salary at allstacks is basically something they have to earn its bonus? In other words, if I'm gonna make I'm gonna make this a $100,000 there in Raleigh or Austin to be a CSM rep, what what what can I earn on top of that if I hit all these targets? Renewals, these techniques, programs? [13:43] >> Yeah. It depends depends on the seniority of the person, but, you know, it could be 20%, could be 40%, could be 50%. [13:50] So definitely a percentage, but not like a sales rep, not where you're like gonna double your base. [13:54] >> Yeah. You're not gonna double your base. We wanna compensate you appropriately so that the success of the customer is paramount. Right? [14:02] Interesting. And how many humans are to to your using your word, across 45 customers, how many humans do you have across this that you have to manage with these CSM reps? [14:10] >> Yeah, so it's actually a really interesting question. So from the perspective of contributors, people generating platform data, it's over a quarter million, but from the perspective of actual users of the application, you know, we're in the kind of hundreds of out of thousand. [14:32] Okay. Interesting. So call like 8900 today. Is it hold on. What's the because obviously you don't charge all quarter all 250,000 $400 a year. Right. [14:41] >> Yeah. Yeah. So it's it's based on the the people who are consuming the data versus the people who are generating the data. [14:49] Oh, got it. [14:50] So quarter million consuming, 900 ish generating. [14:54] >> The other way. The other way. Quarter million generating, 900 ish consuming. [15:00] Okay. But you own and you only what do you bill against? You don't bill against the quarter million, do you? [15:04] >> We don't bill against the quarter million. We bill against the addressable part of the organization. So we usually add more data than we're billing for because the way the systems work is we acquire the data and then the users are only working with a subset of the data, But because we're a data platform, you know, we're incentivized to work with as broad of a footprint as [15:29] I see. I see. What's the total team size today? [15:32] >> My team? Yeah. We're 31. [15:35] 31. Okay. So you guys are growing growing nicely. And then look. Can I do backwards math here? 45 customers at a thousand dollar monthly ARPU. I think this is probably too low, by the way. You guys are doing like $45,000 to $50,000 a month right now in revenue? [15:48] >> A little bit higher. We're we are we've crossed a million. [15:52] Congrats. $83 k a month. That's exciting. [15:55] >> Yeah. Crossed a million at the end of q three. We're doing we're doing about $1.05 million at the end of q four. That's great And so that'll be a a four x on the year. [16:07] Well, not just that, but in the last quarter, I mean, you've grown 33%. That's incredible. Where's that growth coming from? Is it expansion or new customer additions? [16:17] >> Both. [16:18] Wow. That's impressive So round out the funding situation where so like a million on a four ish back in 2018, and then what you did 4.7 in 2019? [16:28] >> So that was rolled into the the million was rolled into the four to seven. So the four to seven was the the total equity. [16:37] I see. I see. That was a seed. What do you call that? [16:40] >> We call that our seed. [16:41] Seed. Okay. And then fast forward to just I think this year, right, you ray what? [16:46] >> You raised [16:47] 4,000,000, 5,000,000? [16:49] >> Yeah. We call that our seed two of 4,000,000. [16:51] What the hell Hersh, what is a seed two? Come on. [16:54] >> Yeah. It's it's nineties a. [17:01] That's hysterical. Okay. Seed seed two round, you raised the four. Again, most people in that round are selling like 10 to 15%, maybe 20% of the business. Were you sort of in that average or did you do something super unique? [17:13] >> Just straight in that average. Basically, we're we're from a from a terms perspective, we try to be as vanilla as possible, not doing anything anything crazy. And then, you know, we're gonna go for a the the proper series a in q one. [17:28] Yep. Yep. Yep. Got it. So you this is we're talking like sort of like a four on a thirty five, forty million dollar valuation, that sort of range. [17:36] >> Mhmm. [17:37] Why q one? What do you think [17:38] >> you have to hit [17:38] in to do a competitive, you know, series a in q one? [17:42] >> I think we wanna have our best foot forward. We have a lot of capital in place. What we're seeing is that the market so just to give you an example, the market is blowing up. All the analysts are writing about us. We're getting written up in Forrester and Gartner and Giga, you know, all those all those guys, our inbound pipeline went from zero to about 40% of our pipeline in one quarter. We're coming into competitive deals [18:10] >> and winning them. We're seeing that we don't have to educate the customer on the market and the problem anymore. They know what they They know they need something, they have budgets, they have mandates to buy. All that to say that we see receptivity to the dollars that we can spend, which in previous years, we were still building the category, building the market. Now the market's ready to receive the money and it's time to go put some [18:35] >> fuel in the fire. [18:36] And where if you're at about a $100,000 a month right now on revenue, where were you [18:39] exactly a year ago? [18:41] >> We were about $450 k ARR a year ago. [18:47] Yeah. So you're talking that would be about $30,000 to $36,000 a month in revenue. So three x year over year growth. That's a great growth rate, man. Very exciting stuff. Thanks for making time for me. Let's wrap up here with the famous five. Number one, favorite business book. [19:01] >> Boys in the Boat. It's not a business book, but I think it's absolutely applicable to business and team formation and team building. [19:08] Number two, Hersh, is there a CEO you're following or studying? [19:12] >> You know, I shy away from celebrity CEOs. You know, obviously I read about them and everything. There's a couple people in town that I look at as like the pragmatic leaders that I really admire. There's Bill Sproul, runs a company called Global Data Consortium. Jason Massey runs a company called industrial.io. Those two people have been mentors of mine for for years and and and friends. And so I keep them in mind quite a bit. [19:45] Number three, what's your favorite online tool besides your own for building allstacks? [19:52] >> One thing that I've really gotten to enjoy of late is Figma. [19:57] Yep. That's a big one. Number four, how many hours of sleep do you get every night? [20:02] >> Six to eight. [20:03] Okay. And situation, married, single kids? [20:06] >> Married, two dogs, no kids. [20:08] No kiddos. How old are you, Hersh? [20:10] >> 34. [20:11] >> 34. Last question. [20:12] Something you wish you knew when you were 20. [20:16] I [20:19] wish that I knew [20:23] that everything was gonna be totally fine. [20:29] Guys, allstacks. There you have it. 2018 launch. They help you measure your development success, velocity, status points, etcetera. They're doing about $30,000 a month a year ago. Now doing about $110,000 a month. Incredible growth rate. Just did their seed to raise about $4,000,000, they call it like a 30 to 40,000,000 valuation, ramping up their team thirty one between Austin and Raleigh, hoping to get a proper series A done in maybe Q1 next year. Meantime, again, 45 [20:52] enterprise customers continuing to scale using the tool to measure their development teams and the attribution there. Hersh, thanks for taking us to the top. [20:59] >> Thanks, Nathan. Really nice to meet you. [21:02] 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 [21:27] 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 [21:48] 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 can go in there and quickly search and see what [22:10] 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. 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