How Assembla CEO Paul Lynch grew to $10.8M revenue and 3.5K customers in 2018.

hello everyone my guest today is paul lynch he's the ceo of a company called assembla he's responsible for driving the strategic direction of the company before assembly he held multiple executive roles within cloud businesses where he drove revenue growth and international expansion paul's a marketing degree from from dublin city university and is fluent in spanish paul are you ready to take us to the top yeah that's great all right so dublin is is like a cool hip space and now you're in san antonio tell us how that happened so i came into assembler in uh in late 2015. uh you're right it's uh i i traded the uh i traded the green fields of ireland and dublin for the oppressive texas summers it's not that bad though right i know i love i love it here nathan it's great it's like i always say you know the the party's not over for guys like me but it's a different kind of party yeah the idea staying until three in the morning at a nightclub is a horror show so san antonio has exactly what i need for me and my kids you have no options to stay out until 4am except maybe the emma on a good night right that's that that's it and uh hey i mean saying at the end of till 4 is probably a good thing that's probably good yeah all right let's tell me more about the company what's assembler do and how do you make money yeah great it's a assembler is in a source code management so you know in in terms of you're building a website you're building an app you need to put that source code into a place that's secure and safe i mean in the current environment and climate around source code breaches and around data breaches and your echo faxes there's a huge there's a huge sort of onus now in terms of securing source code so we take your source code we keep it and we give you the scaffold to build your app or your website or whatever it is you're looking to design and develop and is this more about version security kind of in the cloud and version controlling the cloud along with kind of cyber security or is it more like rainforest qa qa symphony like a testing kind of ci kind of tool um look i don't think you can talk about source code not talk about security in the current climate uh so it's a marriage between the two okay um the business started off purely around source code hosting source code uh managing source code and and managing the the your get your subversion and your perforce kind of repository types for you to build your software but like in today's day and age uh source code is is the key valuable ip content in most businesses you can't talk about source code you can't talk about hosting without talking about security so look it's a it's a marriage between all those three things okay so there is some element of a sauce labs a bug see like there is testing automated testing built in yeah we we at a low level i mean at a low level this automated testing i mean i i would say you know at a at a higher level we would do static code analysis in terms of people committing code back into the repository so you know we would we would would scan code in terms of looking for known vulnerabilities prior to that going back into the core production um workflow now we would look for stuff like you know credentials or amazon passwords um et cetera et cetera within the code that we're hosting so we're looking to secure it and make it safe as it's developed peer play sas model or you have other revenue streams professional services built in 100 sas uh it's a beautiful place huh yeah absolutely i mean like professional service is another and every week to focus that's right and give me a general sense of kind of customer size here what's the average customer pay per month for this kind of tool so i mean i i think we've gone sort of up market if you like over the last two years we bought the business that would have had an arpa um sort of a low you know two-figure kind of art but now we're up to say you know between five five hundred and fifteen hundred per month would be our sweet spot yep 500 per month and these are typically i mean why will someone pay 500 1500 are you upselling based off number of seats or a feature set or some combination yeah it's some combination i mean it's based on a on a seat like user basis um there's different tools and there's different features that customers will buy from us if they require additional security or additional slas additional customer support etc etc uh also like with the likes to say per force um that's a that's a that's a paid licensing tool property to perform so there's licensing costs around that and and lastly if you look at the the key specific customer requirement around performance if they're pushing larger file sizes if they've got compliance issues or compliance requirements or security requirements we can get into sort of dedicated solutions for those guys around private cloud around single instance and then geo specific stuff so if if you've got a gaming studio say in australia their their performance is not going to be great if they're if they're hosting on our infrastructure in aws and san fran so we'll fire them up local instances in sydney or local instances and wherever they are you know and now this uh when was that well first off tell me when the company the original company was launched and then i want to talk about kind of how this is is not your original baby and how you got involved yeah uh business was launched in 2005. so i mean assemble is a very mature company um we acquired it from its uh it's its founder in 2016 um early in in in the year and who and whose we give some people some perspective on what you're building there yeah so effectively ascend was owned by a venture equity fund by the name of scale works um they're san antonio-based i mean their their tenant is that venture equity venture capital rather works very well for for for businesses that are looking to give away a small amount of their equity um and drive growth private equity works very well for larger businesses that are looking for an exit um private equity will come in they'll take they'll take dividends and distributions out of those businesses but there exists nothing in the middle so you've got a business that's doing say you know three to ten million private equity aren't interested in them in that they're too small venture venture capital aren't interested in them in that you know if they're 10 years old if they haven't hockey sticks yet they're not gonna um so where do they go um so we buy businesses that are product focused and uh we then we we turn on our sales and marketing engines and we drive growth and the only just to be clear so venture equity i mean they're not you know you buy the company for x amount of money you're not trying to pull cash out of the bottom line to get a return there you're just building it and then if you sell it that's how everyone will get a return that's exactly it yeah interesting very cool okay same time i mean when we'll never take money out of businesses but um you know solid business practices are our key to our business model yeah we talk about profit and reinvestment as opposed to you know fire hosing money at sales and marketing and and creating a giant big black hole of debt strategically i mean i think about a vista equity right i mean they are so well known for their playbook which they guard like crazy i've seen some of the agreements they make everybody sign about not sharing that you basically get killed if you share anything on the playbook i mean is that what you're building and that's what they're building kind of at scale works you've got kind of you know a playbook you run on the company right when you buy it and three or four tactics will work out and grow it um look i think a playbook is probably oversimplifying it i mean every business is different every founder is different i mean there are certain um characteristics in the businesses that are required typically you're looking at a ceo found or led business um you're looking at the ceos when you've been running this company for like six or seven years and they're getting tired um it hasn't happened for they were whatever a lot of them are bootstrapped however i mean there are businesses we required that would have raised a large amount of assembly was though bootstrapped right assembly was very much yeah i mean this business you know i think we bought the business there was 32 stuff and it was doing a couple of million bucks um it was making money um the the the issue of course was that he was 12 years old i mean the the founder wanted to do something different he needed an exit he took it to market and uh he didn't like the numbers that were they were given to him initially in that you know businesses like vista are looking for growth yep that's right and it's very hard to raise vc if you don't have doubling year over year right 12 years is too long absolutely so what are the first three things you did on the company when you took over so our tenants are pretty much the same i mean you assembler the ceo andy singleton of assembling famous great guy but very product focused so we need you know you need to shift these businesses around you need to move away from you know specific product focus into focus on sales marketing um if you're if your business isn't marketing right it's not going to be selling right uh the sort of business needs to pivot its mentality away from building pretty things into building functional things that customers want to buy um we we have a strong belief in centralized teams and companies like this um you know i want sales i want marketing i want products sitting together so what's the first things we did we centralized the team and we built a leadership structure within san antonio so everyone's in san antonio now pretty much we've got two offices all leadership is in san antonio we have a technical team in selena gore in poland yep uh where we have like maybe 15 coders uh and what's total team size paul i think we're 45 right now okay so 30 and they're in san antonio 15 over overseas yeah okay very good and what have you what have you been able to scale the company to in terms of total customers now so we have about three and a half thousand customers um month-on-month growth is about between three and five percent we're tracking we did we did sixty percent last year we're tracking the same this year um so yeah we're very happy with it i would say sixty percent year-over-year growth and this is a company that didn't just go raise 20 million bucks from andreessen and you're plowing money into google ads or something i mean this is you're running a playbook you're optimizing an asset that already existed and you're able to drive 60 60 year over year growth that's impressive and since we took this business which was march 2016 we would return to profit every month that's incredible we've not lost money in a single month that we ran out that's great now and again these are solid businesses that we're looking at i mean we're not we're not buying you know these are not hail mary passes we three and a half thousand paying customers we've got eleven thousand free users and assembler yep um this is a this is a we got a really strong product um really what the business lacking we acquired it was the sales and marketing focus and they they got a bit lost in terms of what category uh that they wanted to be and so you know we defined the category as enterprise cloud version control our tenant is that businesses want to move their source code out of their on-prem um comms rooms they want to put it in the cloud but there's no one out there to deliver that service that's right they either need compliance requirements that aren't delivered by github uh they need security requirements that aren't delivered by git lab we we put the security wrap around around the source code we have the compliance standards around sock 2 or ngdp or around you know sas 16 and so we offer a safe environment for that source code to exist in the cloud i want to come back to gdpr here in a second because i imagine you're seeing a lot of growth specifically because of that but you mentioned earlier rpoos were between 500 on the south side and 1500 on the north side i mean paul if i multiply that the minimum 500 times 3 500 customers i mean that puts you at like what is that one seven a month is that generally accurate uh no it's less than that don't forget i mean these are the figures that we're we're we're winning new logos at however the legacy business we acquired would have had a lower arpa because you because the first thing you did is try and drive upstream yes okay are you can you share this are you north of a million a month or no lower a little lower okay you think you'll break it this year i do there we go baby paul's gonna be popping champagne does the other christmas at the holiday party at the end of this year okay good stuff so um and and you said again if you're if you break a million bucks by the end of the year in terms of monthly occurring revenues that's 12 million obviously an ar and you said you bought it at a couple of million in ar i mean that's where you start to get into the 60 year over year growth rates right yes very good absolutely tell me about churn in this space uh we don't have a huge issue around turn in the business um we we have it it's it's significantly less i mean it's about one percent uh maybe it may be a little bit higher but that's gross logo turn monthly so i don't we i don't have a major issue measuring around logo uh as you drive upstream um there's a there's a certain amount of right sizing within the business right sizing within the customer base um you know we're selling ferraris at 500 to 1500 a month if somebody wants to buy a beaten up old dodge charger uh we're probably not the best business for them you know um so like in terms of the business is growing on a local perspective month every month nathan but i mean there is i mean as always there's always sure i believe let me exactly let me ask a better question which is probably more relevant because you're moving into the enterprise space have you hit net negative uh revenue churn yet uh yes oh great uh we do have a negative revenue turn is is is yeah it's there i mean we incentivize our customer success team very strongly around that um how do you do that how do you do paul people struggle with that how do you do that it's literally just a better comment it's better of a commission structure yeah it's a better commission structure or ncs so if you're if you're trying to hire me to bring in and you're going to put me on that team what are you pitching me in terms of employee agreement look i mean customer success is key don't don't forget like you know the the scale works model is is defined by lou mormon as the ex-president of rackspace i mean fanatical support is in the guy's dna so we we have access in san antonio to superb customer success guys guys that that have really they they've had their feet to the flames in rackspace they've learned from the best um you're coming in here there's a there's a huge incentive within my customer success teams to drive growth in the installation can you but what i'm trying to get though is a specific way you're doing that so anyone else listening that wants to implement this plan on their cs team can do it i mean is it literally there's there's you know call your typical base structure on a on a customer success person and then there's also a commission structure on expansion there's there's there's a specific base salary that the guys come in on there's a incentive scheme around their individual um kpis and targets and then there's a bonus at the end of each month if we see you know um net negative revenue growth within these summits actually across the whole team across the whole team i see two different commission structures that we sit above the uh the baseline i was gonna say a lot of people struggle with implementing these kinds of ideas because it's very difficult to track expansion revenue attribution per cs rep so what you've done it sounds like if you've you set a goal for the team if the whole team hits it your cs team divides the bonus by however many cs people there are that's well yes i mean it's a fixed bonus but yes yeah interesting very cool um what about cac i mean how are you acquiring these customers what are you spending to get them that's the tough thing you know i mean like we've changed the whole model i mean i'm not a big believer in ppc to be honest um and there's so much noise out there i mean i i love stuff i love podcasts it's a great way to get your message out to the market nathan so thank you but you know in terms of the i want to tell a 10 cut of all revenue you get from this right now i'm just kidding in terms in terms of like new logo growth in terms of you know people say it doesn't work i mean there's so much noise out there in the market right now the only people making money out of ppc or or google so like in terms of driving new growth as we've moved upstream we've driven into the enterprise space we go to a lot of conferences that you know nothing beats pressing the flesh you know we take boots at stuff like you know gdc we we've separated out our industries by vertical in terms of where we're targeting that new business you know as you drive upstream you start looking at you know compliance standards i mean it's not very difficult to target those customers to be honest i mean you're a small developer that's that's working out of an or viva and you know 60 kilometers set in austin is not interested in gdpr you can care less about it so you go however the cio of bank of america this is something that keeps them awake at night um you know this is why you know when i talk about a category enterprise cloud version control moving source code to the cloud is a white space okay google is sorry github is a is a great company but it's a developer company it's a developer tool loved by developers you show me a developer that's that's that's concerned about sop2 or gdpr um you know i'll buy a bottle of don perignon they just aren't um so in terms of how we target our clients we we got a target who's going to require from us we've got to target potential consumers who are interested in in in in the features that we're building yeah these guys typically live at a sea level when you analyze and you kind of pull you maybe you're fully deluded cac all in right you do some math division there ask differently how quickly do you like to get your money back out in terms of payback period three months six months 12 months look i mean we aspire to six months okay it's an aspiration yeah yeah yeah that's good what i mean as a ceo that has the aspiration to get to a six-month payback and you're a little north of that now i mean do you actually care about hitting that or that it really won't move the needle for you decreasing that number you're picking up on me nathan sorry paul what i was saying is i mean sure yeah as a ceo focused on trying to get to a six you know a six-month payback period i mean is that really a meaningful lever in your business driving payback period down or it's not something you're hyper focused on it it no it's not something that i'm hyper focused on it changes month a month yeah you know and don't forget like the reason why we're growing is because we're constantly optimizing we're constantly testing um i'd love to say that every time we we shoot an arrow we hit the target but we don't um this is part and parcel of scaling businesses um there's certain sort of conferences we go to that they're enormously successful for us there are others that aren't there's you know certain campaigns that we'll run that will be enormously successful and there's so there's a fall flat in their face uh as long as you're optimizing testing and learning i mean you know that's your path forward yep as i said with new logos you're bringing on now you said earlier minimum rp is 500 bucks and if you're aspiring to a six month payback period six times that 500 puts you at north of three grand cac right now that fair to say i mean generally speaking um again it it it changes month to month so but like yeah i mean that's that's you're in and around that like yeah yeah that makes good sense all right very good um last few questions here so so in terms of product obviously gdpr is huge we watched facebook ceo kind of get grown over this over congressional hearings i mean are you seeing significant growth specifically from leads coming in going we need to be gdr compliant can you help yes yeah in short um and what have we done about it like we've just opened up our our first sort of instances in the eu um so we're running a dc out of frankfurt now on aws what's it what do you mean a dc uh data center so we call it a data center but it's it's large instances that we're running in frankfurt completely separated from the from from our us data um which which are targeting specifically into the eu base i mean it's it's a really interesting area at the moment um you look at brexit and heading out of the eu zone you look at gdpr compliance we're privacy shield certified uh we'll we'll see i mean i i think you know may 28 is very very soon i mean there's a they said there's an awful lot of work left to be done for a lot of customers to become gdpr compliant in the intro that's right we're seeing more and more and more leads coming through we we have a responsibility to our customers as well i mean 54 of our businesses in the us 46 of it is international and that you know you take australia the rest of it's pretty much in the uk and uh and europe paul okay good and guys those of you listening right now wait he just said may 28 this episode of us is going live after may 28th so all these things are in full effect they're you know paul's probably seeing increased growth now that this is actually in effect but paul good stuff let's let's uh let's wrap up here with the famous five number one what's your favorite business book uh play bigger play bigger number two is their ceo you're following are studying right now um i mean the the the gold standards your elon musk's of the world yeah number three what's your favorite online tool for building your business i couldn't live without slack number four how many hours of sleep are you getting every night five five okay and what's your situation married single you have kiddos married three kids under town three did you by the way when you did the scale works deal did you move them all here to san antonio certainly did they're in the texas public school system do they kick and scream or they like it now they're used to it uh they kicked the screen initially but they look they love it now that's good we've had we've had a brutal winter in ireland the weather here is lovely yeah that's good all right and how are you paul i'm 42. last question what do you wish your 20 year old self knew uh keep trying keep trying keep trying keep improving guys there you have it from paul keep trying he his buddy ed teamed up with another friend lou they created a company called scale works they then bought a company called assemble a couple years ago which had basically you know it was a healthy company a lot of legacy but just wasn't growing fast enough to be interesting for vc or a big exit to a private equity firm so scale works bought it ed blue brought in paul he's now leading the company they focused on going upstream increasing our proofs from call at 200 100 bucks a month up to now 500 up to 1500 bucks per month they're seeing significant growth based on gdpr regulations currently serving 3 500 customer customers in terms of version control in the cloud cyber security and a little bit of uh testing built in churn super healthy a little south of a million bucks a monthly occurring revenue right now growing 60 years over there with our team of 45 people paul thank you for taking us to the top nathan come on see you bye