How Archivesocial CEO Anil Chawla grew to $3.6M revenue and 1.5K customers in 2018.

hello everyone my guest today is anil chavla he's the founder and ceo of a company called archive social the technology ensures that organizations can maintain legal records of their social media and is most often used to wrote transparency in government in 2017 archive social collaborated with the obama white house to launch the first ever archive of presidential social media and neil are you ready to take us to the top i sure am thanks for having me all right why is this kind of concept important well we look at something like social media it gets a lot of attention even now uh certainly in the early days grabbed a lot of attention and that was just a part of how we communicate how we interact in society and we pay attention to the here and now how you make money with it and so forth but anything that becomes that integral to how we operate also has this other side of policy and legal concerns particularly for your business and that side has to be addressed and so walk us through how your software addresses that sure so our typical customer is is actually an organization that tends to be a regulated environment a lot of the work that we do is with government agencies and so as they're communicating as the city might communicate and put out information about a local crime or during a disaster uh these tweets and these facebook posts are or government record they're important communications that could lead to inquiries in the future through public records uh requests or through litigation and so our software is a sas based offering it's a cloud-based service that automatically captures that content keeps legal record in the background and then helps these agencies produce that information if and when they need to do so and give me a general idea i don't want to go down every customer cohort but on average what's an agency paying you per month for this kind of tool we're fairly inexpensive overall the majority of our customers sit under 5 000 annual okay got it got it that's fair good so 5 000 annual and then give me a give me a bit of a background by the way that would be what is it about 400 500 bucks a month something like that that's right yeah do you bill only annually or their monthly options we we do present a monthly option but again most of the work that we do is with government and uh it's a great vertical for the other entrepreneurs out there who may not think of government as a sexy market they actually do tend to pay upfront annually most of the time so the vast majority is annual just more efficient right absolutely all right give us more the back story here when did you launch the company so i started working on it in 2011 it really came out of my interest of building apps on the social networking apis i built a twitter app and facebook app and i was experimenting and uh had this idea a set of ideas around keeping social information until i uh one day i stumbled upon compliance and as as aspiring entrepreneur trying to come up with a good business idea nothing seemed better than going into a space where you have to do it and so compliance definitely has a lot of a lot of importance and value there for for agencies and it's a great uh area to build a business because you can build a very very sticky product and so i put together that interest of of building social networking apps and applied it to this problem domain of compliance and ultimately land on archive social and what have you scaled to today in terms of total agencies paying you so so the number we put out there we put out nearly 1500 government agencies those are agencies we work directly with ranging from cities and counties generally but include law enforcement federal agencies as well and have you built this kind of from the ground up bootstrapped or have you raised capital so we took a small amount of seed funding last funding we took us to 2015 but but under half a million in cash so the vast majority of what we've done has been bootstrapped and why so so why why take a little like why why only like dip your toe in the pun like either you don't get in the pond at all or like you cannonball in why just a little bit so when the company first got off the ground i was a solo founder and my first funding was through an accelerator program and so that that initially started the seed funding and and when you're in accelerator program uh the market of success is how is raising more money which is ridiculous it is so we ended up not raising more money but ended up taking cash here and there when a strategic opportunity lends itself a good example would be steve case's rise of the rest tour came to town uh and it seemed like a smart idea to to get steve uh involved with the company uh and we thought we could use the cash at the time so we took these we dabbled in in those seed funds but ultimately we had revenue from day one and and getting the annual paycheck up front from almost all of our customers put us in a position where we really didn't need that funding and haven't needed it since yeah i mean and i can do the math i mean if you take 1500 agencies times a 400 per month price point that puts you at about 600 grand per month or if you do them only annual that's about you know over 7 million annually are those numbers generally accurate so we hold revenue revenue close to our chest um and certainly we have customers that sit at various price points but okay well yeah i mean look i'm just multiplying your numbers the first question i asked was what's average revenue and you said five and then i said how many customers you said fifteen hundred so which one of those numbers is not accurate well the majority of our customers uh fall under five thousand but but the average is is elsewhere so that's one of the things that we hold close to our chest i don't understand what you mean by that because an average is typically the average so so talk me through why that's different and why it's lower than five grand yeah so so this is kind of a common dance with uh outside inquiries and so when i get asked the average question i actually just say well most of our customers pay us under 5 000. so not really our average we have cohorts look at other price points we have we have larger customers like the new york cities of the country that that have that drive a lot more revenue yeah so we hold the revenue close chest but you know happy to share that customer let me the reason so actually the reason i ask is if there's people listening right now that want to try the platform that maybe are inside of a government agency they know the the least they can spend to get started so maybe that's a better question do you have a freemium product or what's the least they can spend to try it uh they can try for free for 30 days we have a sample your archive feature and then the actual lowest price point is about 2400 annual okay and what do they get for that and so they get full access to the platform what we do at our various pricing tiers we base it base according to the volume of social media you generate so are you generating a thousand records or ten thousand records we put you in the right tier and that tier is the lowest tier of a thousand records a month yep good listen i won't push you harder on this outside of just saying 1500 times that minimum price point puts you north of you know 3.6 million annually is it fair to give you credit there and say you're just north of that i'll leave it at that sure okay all right let's move on uh churn a lot of other companies that i've interviewed that sell directly to governments like seamless docs comes to mind uh tell me their churn is just so low because once you get through the long long sales cycle you're in do you see that same pattern we do we do a great benefit of government and then on top of that having again a compliance product adds to the stickiness yep so so can you i mean can you share that what what is your you know churn annually yeah it's approximately under half a percent a month and so annually you know the five to six percent is where we end up and you you measure logo churn or revenue churn both ways and so the variance is actually between the two so sorry there there is no variance they're about equal uh they're they're in that same range of five to six percent whichever way you measure it and walk me i hate focusing on the negative but i'm curious the people that do churn why do they churn you know it's uh most often times it comes down to well uh you know it's a compliance requirement we're not using social media as much or budgets being constrained it comes down to that we do have competition in our space as well so between those two things if there's price pressure from a from a competitor for example it may lead to some turn i see okay and and then walk me through this that what that sales cycle looks like what's your team size stay and how many of those folks are focused on sales we're over 50 people and more than half of the team is in sales oh wow uh and so we employ standard sdr ae model um so we have folks reaching out um to set up the meetings now again core to what we do and this is this is really helpful in government is that we do take that first call as a uh consulting type call of let us inform you of the issue we don't sell the product whatsoever uh try to try to work with that prospect to get them to agree that it's actually an issue they care about and if not that's okay we'll revisit in the future uh but after that first call if they say yes this is a need the way we're using social media is valuable there is legal risk there's a legal requirement we would like to look at your product then we have that second the second step and uh and then from there we work through the various steps of getting internal buy-in that's certainly certainly a part of the complexity of selling the government is that there's multiple stakeholders uh and then we try to simplify the purchasing process as much as possible so we we predominantly sell to government so our so all of our processes set up to make it easy for them and and having a low price point also helps keep the sales cycle uh uh much shorter than you typically see in in this industry where is the team based is everyone in uh north carolina we are 100 durham north carolina oh great that's very good that little research triangle down there [Music] are you in that research triangle we are we're in downtown durham actually just just down the street from duke university okay yeah it's a good spot so you have a nice probably little recruiting engine coming right out of the university you know we tried the research triangles you know you know how this place is named there's so many companies around here but but certainly a lot of town in the area yeah you mentioned sales cycles are sometimes shorter because of the lower price point walk me through how you think about the economics between cac and and your cac payback what do you spend to acquire customers and and how patient are you in getting that money back like a lot of sas bills businesses we follow the the rule of thumb of of payback in under one year uh obviously without us raising outside funds that's that's uh especially important uh since we do not operate on a burn um and and so it is very important that we stay lean and how we operate um with a low price point there definitely has to be an efficient system in place and so something that we certainly pay attention to so now what do you peg your cac to today it it's it's right around that sort of one-year type mark we try to keep it right right there well that's interesting i mean so look at the bootstrap company that's that's even that's tough to even wait 12 months so to get that back i mean how how are you i guess a lot of it the cash is actually coming up front even though the deferred revenue it would give you a 12 month payback right that's that's exactly right we really pay attention more to the cash flow than anything else yep yep and and that 2400 bucks you're spending on cac which is one year of acv is most that going towards kind of sales people commissions are you doing a lot of paid spend you know the mix is changing uh you know for for the early part of our company we were very very sales oriented but as you scale uh you need to find the efficiencies and so certainly we're investing more on the marketing side and the paid acquisition and then another question here you seem like a very rational guy but when you take your churn which is very very low if you just do the usual kind of lifetime value economics you could make a rational argument that they're going to stay with you for a very long period of time call it 200 months at a 200 like price point you could per month you could say that's worth 480k and lifetime value which is obviously irrational um how do you use lifetime value as a as a guiding metric um and make sure that you don't lie to yourself on accident i really like the way that you put that uh it becomes becomes kind of silly when you when you look further on now that there's a truth to it but it's also something that you don't uh you don't bank on and so we still pay attention to the cost of acquisition and the here and now the lifetime value makes us feel a little bit better if we're pushing up against uh you know the 12-month period um it helps in in some of the broader decision-making of certain customer cohorts are they worth it going after certain big fish ultimately they'll have that long lifetime so it helps in that broader decision making but for the operational aspect of the business it's managing that cash yep very good last question before we wrap up with the famous five what's growth look like today what are you growing at your every year so we keep our growth kind of high double digits okay got it so you're talking like north of 50 but less than 100 year over year right okay very good all right let's wrap up with the famous five number one what is your favorite business book my favorite business book is high output management by indigrove number two is there a ceo you're following or studying right now it's funny i'm actually reading another book by peter drucker kind of an old one but the effective executive is a book that i just picked up and it's uh been really good to hear is very actionable guidance so is there a ceo that you're currently following or studying i wouldn't say i mean like elon musk is in the news the time and i'm a fan all right number one number three what's your favorite online tool for building your business favorite online tool for building my business i'll keep it simple get a web presence wordpress workforce good number four how many hours you sleep to get every night you count in hours yeah probably about between four to six four to six okay not bad so we'll say five there and then what's your situation married single kiddos i'm married with two young children two wow okay so um okay the five hours of sleep makes a little bit more sense there and anil how old are you i am going to be 36 36 okay last question what do you wish your 20 year old self knew oh my goodness yeah i i think my i wish my 20s 20 year old self knew how much responsibility you get later in life and to maximize each day in and out both on the fun side and on being able to uh to really develop your skills and abilities for the future guys start early when you have less responsibility you heard it here from anil again launched company in 2011 called archive social now serving over 1500 customers paying on at a minimum 2400 bucks per year healthy economics six percent gross logo churn per year getting paid back in under 12 months on a deferred basis almost instantly on a cash basis because it's all paid up front again selling into governments helping them stay legally compliant with their social media posts via their archiving feature basically bootstrapped raised 500 grand early on 50 to 100 year-over-year growth today with this team of 50 people based mainly in durham north carolina and neil thank you for taking us to the top all right thank you