How Appknox CEO Harshit Agarwal grew to $4M revenue and 76 customers in 2024.

hey folks my guest today is harshad agarwal he's the co-founder and ceo of appnox and is also a tech enthusiast he's a serial entrepreneur and is also part of several startup communities his several years of startup and tech experience set the way for him to co-found the company in 2013. the company focuses on being the world's most powerful plug-and-play mobile app security testing solution used by enterprises around the world harshly you ready to take it to the top okay so when you say mobile security mobile app security testing is this literally a mobile app that does security testing or enterprises use this to test the security of their mobile apps so it's a later uh enterprises companies use our platform to secure their apps on regular business i see and so i guess help me understand i guess pricing model what are they paying an average month to use your technology yeah so it depends on per app majorly we target enterprises that have got outputs of 10 20 or even 100 of mobile apps and uh for them the majority of challenges that every app is going out for releases and the release cycle is reducing nowadays to even a week and with that kind of release cycle it becomes difficult to test every app and with that big enterprise they cannot uh let it go without security testing that's where we step in we automate we speed it up we make sure that it can be part of their normal development life cycle and the app can go secure well that makes tons of sense but so i guess give me an average or a sweet spot so between 10 and 100 mobile apps what's the average customer pay you per month to manage whatever the average is 50 apps 30 apps whatever average is 20-ish 20 000. no so yeah per customer it's roughly around twenty thousand dollars but uh when i said 10 200 i mean number of apps so there are enterprises who have got efforts of 100 apps i'm talking about fortune 500 companies we've got multiple brands internal external apps then there are some of the companies who are very much focused on single uh vertical for them it would range from five to ten apps so pricing for us varies for these companies starting from seven to eight thousand dollars can go up to fifty thousand dollars a per year per month per year got it so starting point is sort of seven eight thousand a month but your biggest customers will pay you know or sorry seven eight thousand dollars per year and your biggest customers might pay what over a hundred thousand a year if they have hundreds of apps yeah okay is that accurate do you have customers paying more than a hundred thousand dollars a year we have a customer who's paying us efforts of 250 000 a year wow can i don't obviously don't mention who they are but can you share how many apps they manage on your platform 600 mobile apps ah okay and is this like can you sort of describe who they are without naming them is it sort of like a restaurant brand with like a bunch of local apps it's it's an fmcg world's biggest fmcg brand what is that unilever i can name it uh so they have office of 600 mobile apps that that is spread across the globe uh and they have applications focus on region specific and different places so yeah that's very interesting okay put the stuff on a timeline for me when'd you launch the business what year so we started in 2014 our product was launched in 2007 uh 16. it took us almost two years to build a product and bring it up to a speed where customers could use it and we have been in business since 2016 so two years to build the mvp pre-revenue you've got to pay yourself somehow did you have a bunch in savings or did you raise a bunch of capital or how did you fund your growth or your so we raised the uh capital uh we had raised our initial round in 2000 uh around the end of 2014 itself we had raised 750 000 dollars a precedent round from singapore based venture capital uh and that's the only round we have raised suppose that i think you have been revenue positive we have been going on revenue oh what's going on there youtube good to see you guys now imagine this you love watching these interviews with sas founders but imagine if we took all of the valuation data out from over 2807 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 founder path check this out i'll show you how you can access this in a second but you log in you connect your stripe account you see your valuation real time you can see what it changed over the past 88 days and even set goals for valuation this year now the secret evaluation is there's many different ways to value a sas business so the reason you're going to see three or four different valuations inside of your frowner path dashboard this is all free by the way is because depending on who's doing the buying of your sas company you're going to get a different valuation a vc is going to pay a different valuation private equity firm is different if you're going to do a 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than what you can get now inside of founder path and we're thrilled to bring it to you all right we're gonna go back to the youtube video here in a second but if you want to check this tool out if you want to jump in and sign up you can check it out for free to get your valuation at this link this link founderpath.com forward slash products forward slash evaluations 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 you there all right let's jump back into the interview so you haven't raced since then no yeah that's awesome uh most folks in their precede round are selling you know 20 to the business what valuation did you raise the 750 000 at roughly around 4.3 uh mil valuation that was roughly around the seminary free money or post money post money okay so something like sort of a 3.5 million pre something like that yeah interesting and looking back would you have done the same thing again was that a fair amount the fair valuation i i i personally feel that at that time it was not really really required for us to raise funds uh uh we could have delayed it a little further and trace that better valuation overall uh because majorly i think we had to test our mvp and all of that we could have done it a lot cheaper and a lot earlier basis i think that is the learning we had over a longer period uh after two years also once we released the product it was not really focused on right customer segment and that that whole thing happened after 2018 when we hit a roadblock where we didn't have funds we were about to shut down and we had to go back to our drawing board and go go and go and understand everything again so so from that whole learning experience if i would have done it again i would have not raised funding that i would probably have raised a little later when i had clarity on what metrics i could grow on with that fund how could i use it and uh get the maximum roi well tell me what happened in 2018 how low did the bank account get uh we only had a one month runway and how much money was that though that was roughly around thirty thousand dollars uh in our bank account and uh we had a team of roughly around 22 members and we were clueless on what we should do we we just went to our blackboard we had account receivables of around one to two months but but again that's not in the bank so next month we don't know how we'll pay salary what was revenue in 2018 do you remember we're roughly around 220 000 uh dollars 220 yeah per year oh yeah okay got it so doing about 19 18 thousand dollars a month in mrr yeah interesting so so so the good point was that we had paying customers who are paying us roughly around that eighteen thousand dollars so the next good thing same thing we did was we just had to relook at the team and just have team members who are very very critical and we brought down our cost to 17 18 000. from there we have grown organically we have made sure that we don't we are overall not revenue negative uh sorry the cost negative overall it's it's on positive side uh whatever we are doing and then slowly we've grown now we have a decent runway plus everything sorted things are really growing we are investing we are investing more than what we should but all on the revenue so yep things have turned so how many cos how many paying customers today so we have roughly 76 paying customers okay okay okay and i mean can i multiply that times sort of like a 10 000 acv average you're doing about seven hundred and eighty thousand bucks a year right now on runway uh no so we are doing a lot more than that uh so yeah we are currently at one point seven mil okay an arr in error uh and uh i think uh we are growing at two weeks uh year on year since last three years uh so we are focusing on the similar growth pattern uh well sorry just to be clear harshit so if you're doing a hundred one point seven million ar today that means you're doing about 140 000 in monthly recurring revenue what was your monthly recurring revenue about one year ago you were roughly at uh around 65ish wow okay this is great and you didn't raise capital double your year right yeah you have no idea that's great so so how did you i mean what did you do in 2018 and that set yourself up to now be growing so fast without requiring more capital i think we started focusing on a lot of right metrics back then uh one of the key thing that we were like doing earlier was that we are releasing product features and all without understanding what really customers want uh one of the key differentiator in that was that we were not really defined our icp and all also that well so we focus on creating the icp first if i uh go back on 2018 we started focusing on enterprises before that we were focusing on smbs smaller companies any new company that used to come out we used to start focusing on them but the issue was that these companies again are fighting their own struggles they don't want to invest in security so early so it's not something that was scalable for us when we started focusing on enterprises it was not a leaky bucket retention has never been a problem for us since then uh so what is retention what's net dollar retention today so we are at roughly around 98 uh retention that's that's gross or net does that include expansion revenue no it does not so our nr not net uh dollar retention is efforts of 100 we are roughly 103 okay net dollar retention uh so uh overall i think enterprises was one of the key move that changed that we did from smb or startup focus to enterprise uh followed by uh we started when when it comes to product development and all it was more led from customers feedback and all focusing on the enterprises what value they would get from it the other thing that we changed was uh definitely on investment investing on marketing and all we are very very uh like you can say miser in initial days but now we have started investing a lot of places but but one of the good thing that we were doing since day zero was we used to write a lot of blogs so we always had that seo traffic so we leveraged on that seo traffic and made sure that we retargeted to enterprises write content specific to enterprises and that that led to a lot of these fortune 500 companies also signing up on our website till today one of our major lead lead gen source is inbound followed by other paid marketing channels that we have i love this okay so how much did you spend on paid marketing last month uh roughly around four thousand dollars for and is this on like facebook linkedin google where do you spend it google and uh linkedin okay and so you obviously know it sounds like what is your customer acquisition cost you know to get a new ten thousand dollar your customer what do you pay roughly seven thousand dollars it's a tax okay interesting so you still have what do you guys consider your payback period to be right now how many months so it's roughly around eight to nine months but most of our engagements itself are for one year uh these are annual engagements paid up for end topic on quarterly basis so we uh that that is ideally on good side for us that okay customer space in advance and we have covered and do you include sales reps commission in that 7000 cac yeah we do okay so how many sales reps today carry a quota on the team so there are roughly six sales rep but we have we have a split we have channel plus direct so direct is a small team of three members channel is another four members did do all of them have quota though yeah all of them have quota okay so ignoring the channel right the four that are direct how did i mean hiring your first four sales reps is not easy right what did you set their quota at when they started initially when we hired someone we generally set a quota roughly around 50 to 60 thousand dollar quarter again it's it's on quarterly basis we set the quotas and as as they move forward it increases to 150 to 180 thousand dollars which also they're able to achieve over like it takes around one to two quarters for them to come up to speed and so just to be clear and a starting sales rep is expected to close in their first year about 250 000 of new ar 50 000 a quarter yep um wait hold on i did that that's too many fifty thousand a quarter will be two hundred thousand a year right and your your goal is to scale them up in one to two months to the point where they can close 150 or 200 000 per quarter in new arr yeah interesting what are what are the challenges with that i mean you're doing this right now with your for sales reps are they all hitting that quota or what are the challenges definitely not all are hitting the quotas uh because uh it's not very outbound driven as i mentioned majority of leads are inbound driven so uh sales rep also are not really doing that and we are we're trying to open other channels of legion so lead uh the top of the funnel is always a problem uh i think they're not getting enough leads that they can try uh the second challenge that i found is our platform is very very technical so at times they have those issues of understanding how like what exactly to interact or tell to the end customer so that he gets convinced so so i think i've seen that it takes around two to three quarters for anybody to get 100 clarity on what exactly the customer is looking forward to so that that that is the second challenge that we have faced in this particular uh so these are two challenges that we see uh now answering your second question on how many of them are really hitting so uh i i think uh roughly around fifty percent of the uh reps are able to hit their quotas the rest of the two or three right so so so uh but still they are able to achieve roughly around 60 to 70 percent of the quotas below 50 is unacceptable if we get that then we really look at it and try to understand or probably look for replacement but yeah uh we have seen at least 60 to 70 percent of quota is hit by that understood in heart sheet how big is your total team how many total full-time employees so we are roughly 42 member d 40 oh 42 42 okay and how many of those are engineers oh engineers are roughly around 11. okay pretty okay so heavy engineering so 11 engineers six quarter carrying reps that's only 17 of the 42 what's everybody else do we have a separate security team that is another nine member team so our engineering ideally is a 20 member team if you include security in it and we are a security focused uh company uh and marketing is another five member team and rest is customer support uh and so product team has got three members in it and customer success uh and support has got around four members in it got it you have notes you are prepared you're ready to go right yeah i have my i love it i love it i'm like how does he know all this so quickly he took all these notes it's great okay i love this story you raised a little early you had to go through pivot in 2018 now you're growing really fast year it sounds like your pr how much do you profit every month so uh overall our gross margin is roughly around seventy thousand dollars uh while our operating profit is roughly around ten thousand dollars we have invested in last three months heavily under growth i think we have gone from roughly around 28 members to 14 last four months itself so we are going heavily and i think we'll be upwards of 50 members by end of this quarter so so we have we invested little uh ahead of time with the new members joining in i think we'll be overall uh operationally negative overall but i think that the difference is uh comparatively is not very high that we need to worry about and hershey will you stay are you planning to raise more capital you plan to stay sort of bootstrapped moving forward uh that is something that we're still evaluating but ideally i think sorry for that in our kind of uh vertical we need to add so the challenge is in uh upselling and for that we need to add more different product layers and for that i think we might have to re-look at raising funds because with current uh model it will take its own time and uh i think we cannot afford to lose time if you are looking at adding more uh verticals to a product so uh fun fundraising is one of the thing which can be either in depth or equity is something that we are still not sure on very cool it's a heck of a story and we're out of time for today let's wrap up the famous five heart sheet number one favorite business book uh so favorite business book is i i mean we can say no we'll skip that one number two is there a ceo you're following or studying is there a founder that you're following or studying yep yeah i think there are a lot of indian uh started to sell like fresh works garish is there uh he has done a brilliant job on overall growing uh apart from that uh there are other founders over here like for example if you have heard about imoka uh they've recently raised 14 million dollars they're also doing brilliantly i think i speak with amit whenever i face any uh struggle i just reach out to them because they've gone through what we are going through right now number three what's your favorite online tool for building app knocks favorite online tool for building apnox i think we are heavily relied on overall google data studio google cheats and all but hubspot is another thing i think i love hubspot the way it integrates our sales marketing we use it for our customer success support and everything so that is one of the goal which i really love and the way they have upsell other things so we started with marketing then we moved the sales scene our customer success product guide everything is in oxford so so i think i really love the way they have right number four how many hours of sleep to get every night seven hours and what's your situation married single kids i i'm married i don't have kids for now okay and how old are you harshit i'm 32 32. last question something you wish you knew when you were 20. something i wish i knew i think one of it is like i always wanted to start a startup but but uh from whatever journey we had uh i think experience was something that uh i never valued a lot until 2018. so if i would knew that okay learning about how to do things in right way right format by getting into a good company learn and then start would have been really really great uh we did it the harder way by uh hitting those bottlenecks ourselves but in that way it could have been a lot faster and a lot easier compared to what we went through guys there you have it harshi with appnox launched in 2014 they raised 750 000 at a 4.3 million post money valuation to get going and build the mvp they only had 30 000 left in their bank in 2018 doing about 18 000 bucks a month in mr with a team of 22. almost had to shut down and they re-pivoted they got profitable they started growing they did 65 000 a month one year ago now they're doing 141 000 a month in revenue that's a 1.7 million run rate they profit 10 000 per month so super healthy they haven't raised additional capital they've got 76 paying enterprise customers that use them to make sure they're all their mobile apps stay super secure super tight no intruders we'll see what happens next rasheed thanks for taking us to the top thanks nathan thank you one more thing before you go we have a brand new show every thursday at 1 pm central it's called shark tank for sas 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 1 pm central additionally remember these recorded founder interviews go live we release them here on youtube every day at 2 p.m 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