How Atlatlsoftware grew to $5M revenue and 250 customers in 2018.

hello everyone my guest today is mark murphy with over 20 years of experience in the technology industry he's helping to revolutionize manufacturing sales enablement technology as part of the global industry 4.0 movement his company and lateral software offers a portfolio of disruptive software solutions that are most efficient way to transform sales prospects and opportunities into customers while driving revenue in a matter of minutes mark are you ready to take us to the top i am thanks okay thanks for having me on you bet so um my audience is usually uh kind of more kind of streamlined sas products you're in a very niche space so i want to quickly try and tie that gap so my audience can follow along should they think about you kind of like salesforce for manufacturers very vertically focused um sas product yes okay all right so go deeper there tell us more about the product so we're essentially a sales automation sales enablement platform but you know what we're doing differently is we're using the unity gaming platform so you know think of a very rich user experience based on visual content in augmented reality to create a really unique sales experience for buying and selling complex products so so you know in an industry in manufacturing that was very based on physical products catalog sales showroom we're now moving that into a really visual platform a visual experience and now extending it with some really unique ar technology and you're talking about selling like bulldozers and things like that yeah big big non-sexy uh manufacturing products but there's a lot of them in the uh massive yeah look i don't mind non-sexy that usually means less competition people are looking past it so maybe you've struck a gold mine here um okay good so so uh i'm a manufacturer i'm i'm caterpillar is caterpillar the person paying you or is it the buyer uh the manufacturer the oem is the person paying us and you know they'll they'll pay for their uh sales people so our tools in the hand of their sales people so they'll pay for the license or push it down to their dealers and their distribution network was which is where we are really excited because that's where the sas kind of network effect starts and they'll pay for the dealer's license as well uh all in an effort to sell more of their products quicker okay but if i literally looked at all the credit cards in your system all your current customers it's gonna be like the caterpillar it's gonna be the manufacturers of the world and they're paying for seats for their dealerships absolutely yes interesting interesting okay um hone that in for me a little bit what would you say the average kind of manufacturer's paying you per year for the software so it's an enterprise piece of software so you know we have kind of a dual revenue model where we are doing some implementation and setup on a services-based model um mainly because the visual effects take some time to set up and then it's a typical sas model running anywhere from about 250k to 500k to the larger you know seven figure ar deals so okay so as as sas products go uh it's b to b so it's some healthy revenue yep would you say 250 000 in terms of first year acv is pretty average for you though yes okay very good and and what is the ratio between your step implementation fee relative to first year acv so it's about a one to one carry we try to keep it about about that you know for customers that have a lot of models it it may tip the scales to about two to one but you know as we are really focused on connecting to their bottom line these are very long-term relationships so the payback period for us is pretty quick as it relates to you know a typical sas company yeah so just to be clear on a 250 000 year one kind of software contract you might charge you know 250 grand just to get everything kind of set up and rocking and rolling that's right that's right that's great so what is it to acquire that customer are you basically spending the setup fee uh we've been pretty efficient and you know i know this won't last forever but this this idea of the industrial revolution industry 4. 4.0 has really created demand so right now we're really just inside sales and taking inbound calls for our technology so i know that that won't last forever but we're being pretty efficient on our sales costs and keeping our cac um pretty honed in right now what would you say cac is on that kind of an account it's ranging from about 90 to 100k okay yeah so you're getting paid back then immediately because of the setup fee it yeah absolutely and you know we're we're probably under spending and marketing right now due to market demand and you know that'll change over time as the market gets more competitive but you know we're out in front with this visual technology uh we're creating a category all our own so we're taking full advantage of that right now yeah uh put this on a timeline for us when did you launch so you know we we had a early version of the product prior to me getting here um but you know i always feel like we're about a two-year-old company we spent uh about the first year i was here rebuilding the platform for scale um you know took an early version of the product that was created by a founder and rebuilt it for scale we've been our market about 18 months now and you know experiencing some pretty early success so early 2017 is really when you got in the company and restructured it i got there late uh mid 16 started restructuring um you know mainly on the product side and we relaunched uh about a year after that with the product that's out in the market right now and when did the original founder launch the original company uh 2014. and help me understand that transition this happens with a lot of original founders a guy like you comes in and it's a good decision for everybody so what happened there was it flat did you come in with a vc round uh non-institutional capital um an investor family office investor that saw the technology was very interested in the power of the technology saw a vision for the market and uh you know came in uh for the early funding and you know we've really kept us funded today just to be clear though they were an investor before they brought you in were unhappy with the growth brought you in invested more to restructure yeah you know i think it's a scenario you've probably seen before where the founder you know reached an inflection point where um you know his experience and background just couldn't take the company to the next level so between him and the board they decided you know they needed some new leadership and you know i think a lot of good companies realize that and and change some companies don't realize that and and suffer yeah nothing nothing not normal there happens all the time so how much how much is the company raised to date uh non-institutional investor so about 12 million okay and when you say non-institutional you're just referencing it's a family office not like a sand hill road yeah exactly okay and and since you've come in so you came in kind of mid-2016 there's a restructure that happens additional funding it sounds like what have you scaled to in terms of total customers today so we have 250 customers sitting around 15 to 1600 licenses um and those seats basically that's the dealerships seat cost right a seat license okay so i mean look i mean 250 customers though out of at a you know 250 000 acv that puts you i think at like five million ish per month in revenue is that accurate no we're we're at about five we're we're going to close in um at about we should close 19 at about 5 million in revenue arr and this year will be about what this year yeah you said you're going to close 2019 at 5 million what about closing 2018 uh i'm sorry closing out the year at this year 2018 at 5 million oh i see i see i see okay so that would put your monthly revenue at about call it 400 500 grand per month um which would mean if you've got 250 customers making up that revenue they're each paying about a grand or two grand per month is that right yeah that's about right yeah and there's some you know legacy licensing before i got there that you know we just kind of accept right now on our on our book but going forward we're getting some consistency in the licensing costs is that kind of code for again there's grandfather people you want to keep happy lower price point but moving forward your first-year acvs are really all in the 250 000 range that's that's right you know we're we're experiencing what we call some good churn right now is to try to kind of sunset some of those uh early customers that really weren't a fit um as we as we look to continue restructure for success if you called up today all those 200 customers or email them the 200 early ones you got 50 let's say yeah 50 new ones at the higher price points if you call up all the old grandfather 200 people and say hey guys unfortunately we're increasing price front point from you know 24 000 acvs to 10xing that's a 250 000 acvs would you ever do that and how many of them do you think would actually take the new pricing because there's so much value there i i think you know contractually um and legally i've looked into that and you know there's some restrictions on how those contracts were structured before i got here um but you know we've had we've had value-based discussions with a handful of them and upgraded them to new paper and our new platform based on the new capabilities we're building in the new product so um you know i think uh and we will continue to do that you know i'm going to continue to look for opportunities to bring legacy customers onto our new platform based on new features and value yeah um and you know i want to retain the ones that want to be on the platform and you know offer them new features and development and with 5 million bucks in kind of run rate today where are you exactly a year ago october 2017 uh we were at about 1.7 oh wow okay i mean pretty significant growth then yeah it's market demand and you know the size of those contracts as you can imagine we're able to build up revenue um fairly quickly you mean adding the new customers on the new price point right yeah no that makes sense but i mean you're basically going from about 150 grand a month up to 400 grand a month i mean again really good growth there very good growth and we and we expect you know 2019 2020 we're going to start continue to experience that kind of growth that kind of percentage growth again mainly driven by you know the power of the technology and being a category leader talk to me about churn you mentioned some good churn but what i'm hoping you say is your logo churn is higher than usual but your revenue turn is really low because they're low rpu accounts that that's exactly right um and you know they they high high customer service um touch uh you know so i think there's there's a lot of the good turn concept made a lot of sense to the board it made a lot of sense to me and you know the outcomes hit us in a couple different areas where you know we're not spending a lot of customer service time on low revenue customers um and you know we're eliminating and streamlining some legacy platforms mark what's the delta there so so what is if you measure on logo turn what is logo turn per month uh you know we've we've contained it to about two percent okay and if you then change that to revenue churn what is it uh it's it's pretty low because of the price point those customers were paying uh one percent per month yeah absolutely right in that range yeah interesting um i don't think you have yet a year of cohort data but do you have any sense yet on if you're going to be able to drive net revenue retention above 100 uh so you know i think so um like as you said we don't have the game footage quite yet um you know the way i look at it is we are so connected to the customers bottom line uh you know when a customer commits to moving their product catalog into our visual platform you know we are literally selling their bottom line through our platform so there's there's a high level of stickiness if if we do good cs and you know produce a good product with innovation i think these are going to be long-term relationships with very little churn i think in fact we're going to see opportunities uh to push more and more of our seats into their sales channel um as they see success with our platform yeah uh what's team size today how many people 45 everyone based in north carolina or south carolina yeah fortunately everyone under one roof which is really uh really exciting we have an outsourced team um that's doing some qa and model development but other than that all 45 are under one roof that's great any plans right now to raise additional capital we're we're experiencing we're going to experience a really great fourth quarter and uh you know i think that's going to be my indicator for for how much gas we can put on this thing for growth so you know i'd like to see um a new round in first or second quarter um really based on acceleration mark would you ever consider just to preserve some of your equity would you ever consider venture debt uh yeah i think that's that's certainly on the table um you know i think there's there's such growth in this space such um interest in this manufacturing tech space um you know we're going to get a lot of looks at different ways to structure this yep have you done have you used venture debt before any other past companies i i have not just you know pure equity and you know we had an exit in my last company as well yeah interesting okay very good let's uh let's wrap up with the famous five mark number one what's your favorite business book uh hard things about the hard things and number two is there a ceo you're following or studying right now uh you know ceo i follow is um g2 crowd coderdable um he's built two successful companies in my space um i think he's done a great job in g2 crowd number three what's your favorite online tool for building your business hands down slack and number four how many hours i sleep to get every night uh so we're in a major go live right now so it's close to zero um based on stress but uh typically six six and a half okay and what's your situation married single kiddos uh i'm married with three girls three wow full house how old are you uh 47 47 last question what do you wish your 20 year old self knew take risks only when you can bet on yourself guys take risks as long as you're betting on yourself atlatl software launched or really relaunched 2016 2017 today doing about 5 million bucks in terms of run rate or about 400 grand per month that's up from 150 grand per month just a year ago 12 million dollars raised about 250 customers in the manufacturing space helping them really close deals faster really by selling to the oem or the manufacturer the manufacturers buying seats for other dealerships two percent logo term per month less than one percent revenue term per month spending 90 grand to acquire a new customer so quick healthy payback period especially because of setup fees they charge up front about 45 people based in south carolina building this thing out mark thanks for taking us to the top nathan it's great being on thank you