Badger Mapsrevenue, valuation & funding

just got done editing this interview you guys are gonna love it before i do that though i want you to know that i'm going to be in the comments for the next 30 minutes or so answering your questions if there's additional questions you want me to ask the ceo next time i interview them leave them below or if you're just loving the data points i get ceos to share click the thumbs up button below that's your way of telling me you're loving this stuff and i'll get you more of it additionally again i'll be in the comments answering any questions you have all right for 30 minutes enjoy the interview hello everyone my guest today is steve benson he's the founder and ceo of badger maps after receiving his mba from stanford he was google's enterprise top sales executive in 2009 you can tell because he has perfected that wave in 2012 steve founded badger maps a software company that helps field sales people optimize their routes and schedules to save time and be on time so they can sell more steve you're ready to take us to the top let's do it all right i'm not going to beat on the bush or anything here right so last time you came on the show you shared you broke about 3 million bucks in arr you know you were serving 7 500 customers i believe those are actual sales people inside of companies so those are your total that's your user base but it's to help them do field sales no one's driving around doing field sales right now as a software ceo how are you responding the virus well um you know so i think that we're one of those companies that will be affected by this because of the service that we provide um you know helping field sales people go and meet their customers um so dentists for example right now aren't uh they're they're probably not buying a lot of new fake teeth or new tools or new medical devices and so our customers the people that go and sell that dentist that type of stuff they probably don't they're not getting meetings they're not out in the field uh so um some software companies will be impacted differently than others i mean obviously if you were zoom then more people need your stuff right now but for us definitely uh you know there's there's going to be there there's there's going to be a downtrend in in demand for our products at least for the the short term here and so so many ceos right now are thinking about things like how much cash driver in the bank relative to my runway if i get no new revenue uh should i plan for three months is gonna be a quick turnaround or should i plan for like seven or eight months is it gonna be a little bit longer than everyone expects what are your thoughts well um i think that the more cash you have on hand right now the better off you are and uh you know just hunker down and make the product great for when you come out on the other side um and kind of turn the the focus to that on the sales and customer success side i would say people at least what i'm thinking about is how do i make the customers that i have more successful how do i keep them extremely happy and and how do i find new customers who maybe are in a slightly different area than i was working with before the before the crisis started so can you can i pivot to a slightly different customer set that uh that is going to have great needs going forward for this or even short-term needs while while this is happening so an example there for us is doctors who doctors nurses other services that go to people's homes helping them organize what they're doing on a map so they're not you know historically we helped sales people do this but we've had we've run into companies like this before where a hospital group is doing a bunch of home visits and so they'll they'll have their doctors or their nurses organized using our tool so that's where we're gonna be looking for to pivot towards things like like that and bring in new business from that instead of uh to make up for the lost business in other places so when you did come on last that was october 29th of 2018 pre-virus so three four weeks ago what did you go your customer base to um well and and nothing's not a lot has changed for us um i think we've lost about a grand in mrr so far um but the uh we're at about 355 right now in mrr so and how many how many customers whatever that is um probably eight thousand nine thousand okay um i don't yeah i i don't tend to count the absolute numbers we we're in an interesting position because we have kind of like a b to c business on a b to c b to b and b to c which is a little weird because an individual can use us for their job um and so they behave very much like b to p to c customers but then a lot of our customers are it's a large company or a team that is using us for their entire sales team and so they they behave obviously much more like a a b2b customer yep so the the the absolute mrr is much more important than the absolute number of customers well yeah still still good growth right about a year and three months ago again you had about 250 000 an mrr you've added a hundred grand a new mrr since then or 1.2 million in arr you know if you're up to 9 000 seats now that's 9 000 seats you know field sales reps paying you know 40 bucks ish each per month so it's nice growth um as you're thinking about so i mean one of the things if i was in your shoes that i would be considered making plans for is will i see a massive cancellation spike or massive like hey steve you like emails can we pause our account for three months we love you but can we pause for three months while we figure out what we're doing like how are you are you getting those and if so how do you handle that so i'm i'm expecting those i haven't gotten many yet i mean it's still early right i mean i i don't know when this will publish but it's march 17th right now yeah um so like san francisco was just locked down and you know kind of people aren't supposed to go to restaurants or bars as of as of yesterday um so uh that's kind of where we're at right now so i haven't seen a ton of that yet um i think so i just had a conversation with my vp of sales about this um this morning actually is how do we how do we respond to those those calls of people quitting and we haven't had many but i i think that the what we landed on was when an individual calls we should we should offer them half off for three months uh if they call to quit um offer them half off for three months and then um and then and uh and see if they do that instead of quitting and i think the reasoning there is then you know their stuff's not all deleted it's still in the system it's it's uh they don't have to reset anything up we don't have to reset them up which is which is good for us so it's kind of a win-win for everybody um for for larger companies i think you know i don't think what we would feel like the beat of the b2b side of the business um which is bigger than the b2c uh i don't think we would do that because you know company you know just like we just like we're gonna you know just like we have to batten down the hatches that other businesses need to too so um but i think that's the key question right that's the key question is when everyone has this internal dialogue of what their version of batten down the hatches means you hope that and whoever's listening you hope that your piece of software is one of the things that makes like that that makes the cut that is critical that they can't do without exactly right and that's the question is what's critical and what's not yeah well i mean and and i don't know how how deep people are gonna have to cut right i think i think when businesses get in situations like this they make a series of cuts they they trim off a little a little flesh and then they go a little deeper and they go a little deeper and eventually they hit bone but um you know it's uh it it'll likely be a fairly painful process for for a lot of businesses in the world i mean some are already you know in in deep trouble immediately obviously yeah you're a bar bars or if you're a bar in san francisco the bars are closed yeah your revenue just dropped to zero let's give more people more color on how you've built the business to date so they can figure out kind of hey am i in steve's shoes as well so so you're a bit unique here in that you've done i think a great job scaling a company you know basically bootstrapped right so so to date how much equity have you raised um i think we did about a eight percent convertible note and this is you know eight eight years ago seven years ago we did this so but no other equity other than that so we've sold eight percent of the business and in convertible notes but no no professional money and no and that was like for eight hundred thousand dollars something like that um i i think more like 450 if i recall okay 450. and you've also since then uh used debt uh to scale again i would argue fairly effectively um walk me through that process you know this debt product over the past two years has become more and more popular as more firms offering it for people for software ceos specifically that have raised debt especially if it's not debt that is paid back four to eight percent of your gross monthly receipts right so debt that is fixed that even if you have to give your customers half off and your revenue drops you still owe a fixed amount how are you thinking about that and how do you recommend other founders with the same structure should think about it um i think it's a great time to take on debt because this doesn't last forever right this is a this is likely a a shorter term bump is it is it a three month problem is it an eight month problem i'm not sure but um it's certainly not a two-week problem and it's certainly not a two-year problem so i think you know there there are a lot of fantastic debt providers out there that have have really gone after the sas space um you know and and i think that that uh i mean there are there are 40 of them and and you know some of them are better than others but they're i think i haven't run into any i haven't run into any terrible ones i've run into it and i haven't run into any amazing deals or anything it's it's relatively expensive capital but um but i think it's a great time for people to look to to bring debt into the business uh and and kind of get through this period of time mm-hmm yeah i mean so you know i am and full disclosure for you guys listening i i've i've put some debt money into into stephen badger uh along with another firm but like one of the things that i'm recommending for anyone coming to me right now for feedback is debt is a great option if you can't raise vc right now because all debt is great but you should try your hardest to negotiate that debt where there is no prepayment penalty and max prepayment penalty you know maybe interest for a year because all you're trying to do is get enough cash in the bank to outlast your you know it's not two weeks it's not two years just to outlast this you know disaster and then what you can do uh is a couple things you can just pre-pay it all right once everything's safe again or if you then go raise equity you can pay off you know the debt with the equity once the vc markets open up again so this is something i'm definitely telling all the founders i speak with to look at i think it's a really good i mean if you haven't tapped that before i would ask you why you haven't done that before but but uh well you're unique though steve a lot of people haven't they're they're not i mean especially being in california right i mean people don't some people don't know it exists and others just don't understand how it works what would you say are some of the gotchas people need to watch out for if they do raise debt in this time frame specifically oh i've got a whole dock on this i'm teeing you up softballs here yeah i don't know if i'll be able to find it that quickly just give like the top two or three and we'll link to the doc in the show notes okay um so things to watch out for uh uh offers that uh well first of all it is relatively expensive money but some are extremely um expensive money so you know there are there are lenders business lenders business businesses aren't protected like consumers are protected from from lenders so there's not like uh laws meaning there are rules around how much you can charge a consumer for in in interest there are no such rules around uh around for businesses so there are there half the lenders out there just charge egregious rates what's a great 40 percent i i i'd say anything over 22 is egregious and 22 sounds sounds high but if you're you know making 500 grand a year as a sas company they're taking a fair amount of risk and but and if you're growing fast and you feel confident in the business 22 is not that much money because if you sold equity that's you know that could be a hundred or a 2 200 return for for the investors or even more right so um but as you get larger i think the the prices come down to more around 17 16 17 18 um and and that's that i think that's much more reasonable for for a more mid-sized best company you know if you're over three million dollars like you could you start creeping into that area um gotchas include uh other than the price obviously the lender being able to call a loan back on this at their discretion so them being able to say oh that 500 grand you borrowed um we need that we need that back let me get back now and that's obviously a problem because you probably took that money so you can spend it and invest it and you probably don't have it laying around so then being able to call the loan backs a problem um liquidity covenants you see this a lot with banks like uh they'll tell you hey we want you to have uh you're borrowing a million dollars from us and we want you to always have at least 500 grand in the bank with us at all times well so then you actually only just borrowed a half a million bucks because the other half million you can't touch is just a pretty number on a piece of paper that you can never do anything with um so that's a silly thing that some lenders will do um i mean you'll see you'll see lenders say oh here's a million dollars we have to have a million dollars in the bank and you're like well i mean that's that's crazy what's the point um so uh covenant the whole covenant section is all negotiable and all to be looked at with a with a fine tooth comb so like speeding up your payback if something changes or changing your changing the interest rate if something changes like if your revenue slows or contracts or any term they want really if you lose a key employee they could they can put whatever they want in a covenant section so watch for tricky things like that where they change the terms or the loan fundamentally changes if something happens um if your ebitda goes down for example you'll see that one a lot like oh if your ebitda drops meaning your profitability drops then your interest rate goes up um early payback penalties you mentioned that's a that's one you see a lot where they even a lot of the good lenders will say oh well but if you want to pay it back early then you owe us this penalty and that's that's negotiable i mean because you should be able to if if you could go if you're paying someone 22 and someone else offered you 17 you should be able to just take that take the loan for 17 pay back the loan for 22 and now you're you're in a better place but if they put a big penalty in there and you'll see some companies put a penalty around like oh well you have to pay uh you you have to pay the interest that you would have paid if you had kept the loan the entire time as a penalty if you pull them if you pay back early um they they'll block you from getting other loans that's a that's a common a common one so that you'll see like okay well great like and it's like write it first first refusal or something like that yeah that nature um yeah these are these are full block or full block yeah yeah these are all these are all because they want you to keep their money because they keep making that high interest rate right they don't want you to be able to go you know get get leverage and compete against them and get cheaper money so yeah because those are all great things um to look out for steve dude i appreciate you making time to jump on and kind of talk through how you're thinking about this is assassin how debt is good or bad in this scenario and congratulations 7 500 to 9 000 customers extra 100 grand in mr over the past 12 months man i'm rooting for you let's wrap up with the famous five number one favorite business book um fame um i mean it's it's trite to say this but impossible to inevitable was you know and and and all the articles that made it up were were critical for me number two in this company is there a ceo you're following or studying a ceo i'm following or studying right now um not really okay number uh yeah there's not much on your face not money to follow right now unprecedented times number three favorite online tool for building the company um aws i mean can't that's that's been key number four how many hours of sleep to eat every night um well you know the first time i came in your show which i think was probably 2014 yeah or something a long time ago yeah the answer there then was probably like four and a half five but now it's it's probably seven to seven and a half that's good that's been that's been a big change that's happened in the last few years is now that i i'm actually able to uh to get a little sleep and married single kids which is a situation um i've got a fiance oh good any kids run around no kids no kids all right how old are you i am 42 42 last question what do you wish your 20 year old self knew um i guess uh if i could give advice to my 20 year old self it would be to not work at big companies sooner so i learned a ton working at big companies but i could have trimmed that by about a decade and started working for small companies um much quicker or just always work for small companies like i've watched people that work for me at badger um just develop so much faster than i was able to because they they're able to have so much more responsibility like a a person on a marketing team at a ten person company is the only person on the marketing team and they're in charge and have real responsibilities of important things whereas if you're on the marketing team at facebook you know you just you own such a tiny slice of of such a big thing that it's it's hard you don't get the same learnings i don't think so i i guess i would tell myself to work at big companies for a very short period of time or to always work at small companies guys there you have it badger maps they've added about a hundred thousand dollars in mrr over the past call a year and a half doing 350 000 per month in revenue but they sell to field sales reps and reps are not selling right now because of the virus and we're worrying about cash in the bank and burn and steve has done a good job raising some debt capital to make sure that he's able to kind of get through this time also planning for when customers email in and ask for things like you know pause the account or even cancel the accounts and what's response times look like so far over the past call it week two three weeks only about a thousand dollars an mrr loss out of this 350 000 a month base so still healthy still good we'll stay up in touch steve we're rooting for you man thanks for taking us to the top thanks nate it's great to uh great to chat again these ceos rarely give these kinds of interviews i hit them hard i get the data and i want to do it more so if you want to get more of this stuff make sure you subscribe up here and then additionally go check out one of my other ceo interviews right now