How Backboneplm CEO Matthew Klein grew to $2M revenue and 200 customers in 2020.

hello everyone my guest today is andrew klein after four years at ralph lauren and another four years at tommy hilfiger as the menswear senior designer he gained affinity for improving processes having spent years working on various product categories and spending two years living in china part-time as well as managing production in south america he saw an immense opportunity in streamlined product design and development and decided to take action in 2014. he teamed up with his brother matthew kline to start to backbone plm and aims to revolutionize the product making industry andrew you ready to take it to the top yeah let's do it all right man so tell me about the company what do you guys do and what's your revenue model how do you make money awesome um so we help to streamline uh the complexities in the manufacturing process so um product development is it's pretty tough in terms of uh the physical prop creating physical products um and we have a sas model so we provide a platform and we charge by the user um and we have uh different plans from uh entry level uh like individual designers and freelancers all the way through um like small mid-sized businesses to enterprise okay so give me a give me a general sense um and i'll put this on a timeline in a second but on average what's the customer paying you per month for access to the technology um per month i would say we have um plans on average because i know there's a massive range but we can't talk about all of them so i'm just curious what the sweet spot is what's the average yeah yeah um i would say our our acv i know annually it's probably between like i like 30 to 50 000 so yeah yeah no do you have people so basically by the way 30 grand a year is 2500 bucks a month do most people pay annually up front yeah yeah we do a lot of pretty much annual contracts that's great and then look put this on timeline for me you and your brother when did you guys launch this thing 2014. 2014. okay and you had you were just frustrated working inside these bigger kind of clothing companies and said i'm going to go like what what was the last thing for you said okay i'm quitting i'm doing my own thing yeah no great question and um just a heads up matt matt is business development so he he really does handle like sales and pricing and things like that but um you know as a visionary for the product um that's a great question for me to answer um you know i was working at these uh you know sort of larger legacy um apparel companies the ralph laurens and tommies of the world great organizations really awesome processes i learned a ton but in terms of the supply chain in collaborating with the manufacturers the technology was just really clunky that that existed a lot of it was like either homegrown or um just really fragmented so um you know kind of growing up in this digital age um you know being you know one of the oldest millennials but i'm very used to just technology solving problems in in a really efficient way where i think those older companies just weren't forged in that fire so um i was like you know what there there's got to there's an app for everything um there needs to be an app for product development of like consumer goods so um in 2014 i i basically started to concept the idea i i was also i have a graphic design background so i was able to do a lot of wireframing and um just get the ball rolling which was which was helpful what's your go-to wireframing tool i use balsamic for any software design yeah balsamic's really cool we we did use balsamic in the early days i was using like just adobe illustrator it was got it easiest for me because it's was it just actually a design tool that yeah we go from like from like hand sketches in the like brainstorming session around the table to balsamic to then envision when there's some color put on the balsamic wire frame and then obviously to coding yeah yeah that's pretty much our process now that's cool that's cool okay so 2014 was launch date how many customers are you working with today so today we have about 100 brands um you know thousands of customers that are individual users so okay now where are you i know this is a tricky question because you have both but are you building like when you're making design and vision kind of decisions are you doing this for the hundred brands or for the 3 000 you know freelancers at their home yeah it's a good yeah great question um so what what's what's great about um the product development process is is regardless of the size it's one thing i noticed early on is that um you know whether you're two a team of two or a team of 2000 the complexity is the same i mean it's really just managing um those processes from concept through prototyping through your production order so um you know we definitely back our uh you know decisions around the product it's definitely connected to you know the revenue that we think it would produce come uh system wide but um we really do a great job at empathizing for you know users at all levels yeah okay very good and then how have you guys chose to capitalize the business are you guys bootstrapped or have you raised capital uh yeah we did go the vc route we were introduced to um a venture capital firm um early on through a buddy of ours and it was just it was it was a really awesome match i don't think we were aimed at at going to vc route initially but it was we looked at it as a really strategic partnership and it proved to be um they helped us open a lot of doors they helped us with early decision making and and um it was tremendous yep you're talking about like spider well yeah spider was one of them but uh the first or davis the first vc we we brought on was um uh beanstalk yeah yeah you have a lot of really i mean i i'm i'm close with davis smith of codepoxy i know he he got in on your guys's deal um i don't know the folks at peterson i i know them at spider but you guys have a great group of folks so you've raised how much to date um i want to say upwards of um i think 13 million sounds about right yeah yeah um that's that's great um and all that's been equity right you guys haven't done any weird debt stuff no yeah there was i mean i know it was um there was like some notes and things like that but i mean matthew really kind of heads that up and i follow his lead but no that's good that's good all right and what's the team size today how many people out there in boulder uh including paid interns we're about 30 deep i'd say it's nice that you pay your interns that's good yeah yeah all right so um is everyone in colorado uh prime pretty much we we do have some sales um in utah and then uh la and new york but um the core team is is in boulder and then help me understand kind of general size today so if you've got 100 brands obviously that you're working with that are paying caught 30 000 bucks a year minimum i mean that will put you guys you know around 250 grand a month right now in revenue as a minimum is that fair to say um we are i know we're we're coming up on uh um you know we we our early adopters did have some discounts so we're starting to renew those contracts but i know we're gold for 3 million in revenue this year which we're on on track to beat do you know what you beat last you know and what you finished with last year yeah we were we were um gold at a million and we beat it oh that's good okay so you're if you're if you beat a million in revenue last year and last year just ended it kind of a month and a half ago that means you guys were doing call it 80 45 grand a month yeah yeah yeah right that's good and where is as the visionary guy that's building a brand do you ever spend time now directly with customers or you leave that to the sales and marketing mostly yeah so um it really depends on the deal um but you know i definitely play the sales engineer road role at this point so um you know uh we recently um we're talking to movado in a major way and um kind of creeping up on um closing that deal with and uh so that's something that i was heavily involved in um upper baby uh peter millar golf so it really just i would say some of like the the larger deals i'll i'll definitely be involved in and what is your guys's growth kind of look like so if you finish this past year with a million bucks in ar what were you doing like a year before that do you remember yeah i would say probably half that okay so you're doubling your every year yeah yeah yeah we are exactly and we were and that was you know we weren't really revenue focused it was more about getting the product dialed in and um really honing in on on those things yeah so i'm going to ask you this question it's really a question for your brother but i'm curious how it impacts you and i'll use this as an opportunity to see how it impacts you um usually when i see like lopsided um ratios between how much you've raised and your arr it's usually saying to me that there's there has to there is definitely some pressure with the group of investors to be like why are we growing faster right so you raised 11 or 12 you're doing a million today that's pretty lopsided do you guys feel i mean how are you managing your investors when really you're not the one doing it directly you let that matthew handle that yeah i mean up until this point it's been um i mean you know we look at it as you know i've used the acronym sas but it's really like past like platform as a service so we're building something massive um you know we're working with the right guys we're really product focused early on so we're at a point now where um you know the capital that we raise which is really the chunk of that capital is pretty recent um it was like late last year we raised like something so yeah that explains it how to really propel the business so it's like we're at that inflection point where uh scale sales and scale these other um you know divisions of the business to propel the growth but up into that point it was really like matt and i going door to door so um so how are tell me about how you guys landed the first like five customers specifically what'd you do um so what we did was uh you know i was i was really working with our first um cto to build the product and matthew had the relationships um from his like trade show sales days so it was really a one-two punch in that sense and he helped um get the initial meetings uh so that we could demo the product and um it was really just being just going in very organically wait but what was his background how did he know these speci i would have thought you would have been wanting to know the people to sell to because you were this person that would buy this inside of tommy yeah absolutely the challenge with that is is getting the meetings with the brands to even be able to show them the product so matthew had those relationships because he was um a in in trade show sales so he worked on the um sort of wholesale side of the business i see and and actually uh working with some of the biggest trade shows um in the country when i don't what i'm not connecting is how the trade show relates to people internally at tommy doing product mock-ups so um so he had relationships with these like micro brands let's call them so he had all these fashion brands fashion brands oh these are trade shows these are like fashion trade shows trade shows yeah so he was like you can build he's like if you can build this software i can i can sell he also had pivoted into some doing some tech sales for like somebody who was essentially to um had built a technology solution to uh to streamline like order like writing management line sheets things like that that did you know the trade show that was most effective for you guys like do you remember one of the first ones the name of it you went to yeah so capsule trade show um we we actually uh had a booth there as being like um c-a-p-s-u-l-e okay got it so capsule allowed us to basically create like a little um presence uh activation with like a live demo and things like that so brands were going were walking past us and saying hey um you know they just sparked their interests and they wanted to do that who do you sell to so what's the title of the person that you know you have to get to today get that meeting with yeah great question so first we have to win over the end user so a lot of the meetings are like hey does it pass the design team so does you know once we get in a lead that's interested we'll you know we'll demo the product usually with like the design team or um it could be like the head of innovation it could be had a supply chain it could be like design director so um it kind of varies but it's definitely um you know like several stakeholders and who's buying usually um so you that that's usually like um i would i either like you know ceo like somebody within the c-suite of the business or um it could be like uh head of production something like that um or like a combination of like head of merchandising had a procurement some like a combination of a couple um last few questions here before we wrap up with the famous five do you guys do you know what your churn is today yeah like really low i mean i i think we've had like like one company churn who was like a really small company was like one user so almost no churn okay do you know what your expansion revenue looks like um it's okay by the way i know you're not the numbers guys so if any of these you're like i have no idea what the that is just tell me yeah um well how do you define that metric so expansion would be like of the customers you signed up a year ago let's say year one they paid 30 grand a year you expanded them into the year two contract up to 40 grand a year that means you'd have about 10 or sorry 10 grand in expansion revenue got it um yep matthew would probably be better do you know if that's an effective growth channel for you are you do you have a lot of expansion revenue we do because we've expanded the product offering so um it's something that you know we've always had sort of this land and expand um model in terms of you know offering companies today um you know an abbreviated solution and something later on that goes further up and downstream at more money i just don't know the exact percentage that we would be you know gold at or looking at very good all right let's wrap up with the famous five number one what's your favorite business book um behind the cloud probably yeah number two is there a ceo you're following her studying um i mean i i like larry ellison i'm kind of old-school yeah there's nothing wrong with that especially he has good taste in architecture we'll just put it that way uh number three what billing tool do you guys use um we use i'm not even sure that's okay what's your favorite what's your favorite online tool favorite online tool is um i really like let's see i i guess i don't envision is up there okay i think it's ambition's good we use it frequently all right number four how many hours of sleep to get every night probably like five or six maybe hours and what's your situation married single kiddos i am i got kids not not married not how many kiddos one oh okay last question uh how old are you i am thir i'll be 35 this month okay so take so take us back to your 20 year old self what do you wish he knew [Music] 20 year old self um uh i wish i would have gotten to tech earlier but you know i that's probably about it guys get into tech earlier coming again from andrew lunch backbone plm helping you know interior you know designers that managing supply chain and specs between the design houses of say a big fashion brand and a supply chain in china he's helping make that more efficient less bulky over 100 customers they just did about a million bucks in ar that's double year over year in terms of what they're doing last year they raised 11 million bucks to date 8 million just recently back in december of 2018 30 people in colorado as they look to drive expansion revenue and deeper offerings to these brands all right andrew thank you for taking us to the top thank you my man i appreciate it