How Blackthorn.io Reached $14M ARR with 630 Customers Across Payments and Events on Salesforce (Interview with Founder and CEO Chris Federspiel)

Introduction and Revenue Overview

Chris Federspiel

00:00Hi, everybody.

00:04I always like to better understand who it is that's talking to see if it'll be of interest to me. You know, are they at 500 k error they are error, are they at a billion, whatever. So I'm gonna start with our obligatory up into the right graph. So we're at about 14,000,000 ARR now. I've been doing this for seven and a half years. We've got a 105 staff and we're a little unique. We're in 25 states

00:27and 15 countries. We've been remote since we started. We have a big well, I guess it's all relative. 18,000,000 debt facility, 14 of which we've drawn so far. But we have no board, it's just me. We have no VC and we plan to be breakeven. Well, '23 is not it's the end of twenty twenty two. It's our fiscal twenty three, so soon. So over the next twenty minutes, I wanna cover product market fit, and then once

Finding Focus: Higher Ed and Nonprofit

Chris Federspiel

00:56you have that going a bit wider and then growing your ACV based upon this. So, we're a pretty open company, so I'm gonna have a lot of pretty open metrics during this. I hope find that interesting. So the first thing is finding focus and how we went about this. So we sell apps on the salesforce.com app exchange in the payments and events realm. And we initially thought, okay, we're selling infrastructure, it's payments and events, anybody will

01:24buy this thing. Well, what we did is over time, we looked at all of the leads that were coming in and we saw most of them were from higher ed and nonprofit. At the time, we had no go to market and I thought go to market was like this baloney term, but this is a real thing, for sales and marketing teams to really focus on. So what we did was that we flipped it over and we

01:44ended up focusing on higher ed and nonprofit. So with Salesforce, I asked, hey, you know, what are your metrics on higher ed and nonprofit? You can see some of them are quite small, but a lot of them are quite big. So we didn't want to sell two, three, four, five k subscriptions. We wanted to do 50 k, 100 k plus base subscriptions. So we had to go up market and find out where these, different customers were.

02:06Same thing with non profit. It turns out a lot of non profits have really a lot of money and they have very sophisticated requirements. You can't just sell something really basic and they really need a lot of time. So there's a lot of business there in nonprofits, which I never really understood and it turned out being quite lucrative. So in order to figure out what it is that we wanted to do, we started with two products

Building and Killing Nine Products

Chris Federspiel

02:29to do payments and events on the Salesforce platform. We ended up building nine, products, which I really don't advise you to do. And over four years from about mid twenty fifteen till early twenty nineteen, I just one by one made products and killed them. And we initially had a form builder, which we call blackthorn documents, which had a lot of competition from Congit and Drawloop, and it turns out that this just didn't work. We had a

02:57big customer portal where if you're familiar with Google App Maker before they killed it, it was a multi tenant data normalizing portal where you could build stuff like contextual declarative. This is too many words and no one understood what the heck we were doing and it wasn't solving any problems. Then there was our billing app where Salesforce, had Steel Brick, which had to invoice it or invoice IT, and then that thing got really popular. Stripe released

03:21Stripe Billing, and we're like, okay, we need to kill this thing. And then we were going to do an e commerce app, and Salesforce bought Cloud Craze, so all these things didn't work. So what we did is we wound it down. So we initially were funding a lot of the business from professional services. You can see over the first few years, we were doing about 1,000,000 a year of ProServe that was paying for about 10 of

03:42us to work there and we had a few apps that we later killed. So a lot of our payments customers were nonprofits. They said, hey, give us a donations app. This thing doesn't work for us. We built it and and, unlike Field of Dreams, they they they came but they didn't come, because no one wanted to pay for this thing. So if you have to have a a go to market cadence where you're selling a three

Org Chart and Leadership Structure

Chris Federspiel

04:02k product, you can't scale your company. So we killed our donations app, we killed our billing app, our document link, our connect app, and then we focused just on events and payments, and some of our revenue comes from our Stripe revenue share, which I'll talk about. So this is our org chart. The reason I'm giving you some of this information is because there's a lot of things that I hate doing in the business. I really don't

04:23like selling and marketing and accounting and CS, and I I don't really like doing any of these things. So I I really like doing product and engineering. So what I did is I changed our org around, and I have just two people that report to me, which is going to be a third once we find our CTO. So if you know someone, we're hiring. But it's just going to be our COO, our director of products, and

04:46our CTO. And the reason I wanted to do this is because I don't really like managing people. I really like working with the product. So I took, two devs that have been there for a long time, and I said, we're gonna make some new stuff. So they formed like a little r and d team with me and we're bringing new stuff to market, which is what I really enjoy. If any of you have been on your

05:04path for seven, eight, nine years, it gets kinda boring. So if you can change it up, or at least it did for me, if you could change it up or go back to what you wanted to do, like that's been very rewarding for me. So after we found our product market fit with nonprofits, higher ed, and payments and events, we then said, how can we take this thing bit further? So I surveyed some customers that I

Acquiring PCIFi to Expand the Product Suite

Chris Federspiel

05:24thought were of interest to us, it was like 40 or 50 that I thought were our target. And I said, what is it that you need? And one of them that was of interest was a developer I knew who made this app called PCIFi. He said, let's partner and I said, why don't we just buy you guys? Were a 130 k ARR, we agreed on $8.50 k purchase price, we did a down payment, we paid over

05:48two and a half years, I think we still have a few more payments left there. He went off on his merry way, he's like, I hate Salesforce, I never wanna do this, but you can have our app, that's great. And he was selling his app for, like his biggest customer is 6 ks. The first deal we did, we didn't change the product at all, we sold it for 60 ks actually, because founders don't know how to

06:06do pricing, and I'll get into that. So that ended up being pretty good. But then, all of our hired and non customer nonprofit customers, they wanted to send SMS. So I looked on the AppExchange and I thought, who can we buy? Because we don't need to actually build this thing. We can bolt it on where one of the benefits of all being on Salesforce is that stuff kinda all works together. It just doesn't exactly work that

06:26way, but sometimes you get lucky. So I tried some of the apps that looked appealing, and one of them was texty. And all of our customers wanted the app, so instead of building, we didn't need to do the integration work, so I went for it. This was another single developer company. So I reached out to Clint and he wanted to sell, and this really helped us with our NRR. So they were at $5.50 ks ARR. I

Acquiring Texty for SMS Capability

Chris Federspiel

06:51said, Hey, what do you guys want to sell this thing for? They said, Six X. And I said, Okay, that sounds fair. So it ended up being like 3,250,000. And so we did 1,200,000 down payment. We didn't have the money to do this, so we actually funded it through debt. The other 2,000,000 were to be paid over twenty four months, which we paid over our own cash flow, and they were going to be incrementing payments. So

07:13they started small and then they grew with the size of our company, and they agreed with that. They ended up taking a senior position, and when we got a debt facility, they wanted to pay the whole thing off, so that was a little twist of events. But we actually were able to buy this through debt without dilution. So something else that happened with product market fit is just to be weary of partnerships. So we tried to

Partnership Lessons and What Did Not Work

Chris Federspiel

07:33do a lot. We tried to integrate our payments app with two other AppExchange apps and that took a lot of time and resulted in no revenue. A lot of payment gateways reach out to us, but none of them were going to bring us any business. They just wanted to integrate us to say, hey, we're on Salesforce, but they weren't going to bring us anything, so we didn't do them. A lot of events applications, have there's so

07:54many things you can do with events. They all want to integrate, none of them wanted to bring us business, so we ended up not doing any of those. And then a lot of people, they all want to have contracts and conversations and technical integrations and it never became anything. So the original thesis was to make a payments app on the Salesforce app exchange that could integrate with Stripe. At the time, no one integrated with Stripe, now

Stripe Revenue Share and System Integrators

Chris Federspiel

08:12everybody knows Stripe, but we said, hey, why don't we have a revenue share and we'll push everyone your way and now we're making

08:21somewhere in the vicinity of like 1,000,000 a year off of that partnership where our customers don't get charged. It's a pass through of revenue from everything that's processed by Stripe and it works like really quite well for everyone. And then our main source of leads is through system integrators. So when you buy a big enterprise system, there's all these integration partners that build stuff. They can bring the customers to you. So they'll say, hey, we need

08:44to do events or we need payments, they actually bring us the deals. That's like 75% of our leads that we have now. So some other stuff that we do with partnerships is we give a fair bit of money away. So we do 1% of our revenue goes to Stripe Climate. I think this goes into my own personal interest, but part of our building of our company culture. We've given away a 120 k to date and for

Charitable Giving and Company Culture

Chris Federspiel

09:04a company that's not yet even break even and maybe this is unique because we don't have a board or VC so we can do this, but, it's been able to help the world a bit and people can relate to it. We also do 3,000 a month to watse.org. They fund surgeries in developing countries for people that really need the help. And this kind of concepts, they're not really politically charged or religion based or something. So a

09:29lot of the team, no matter where they're from, they can relate to them and it just it's been a nice benefit that everybody's gone for. So these are like off to the side partnerships that have really helped the culture. So in terms of what it is that we wanted to build, Paul Graham sort of says, listen to your customers and what it is that they wanna make, they're gonna tell you, and that's true. Steve Jobs said,

09:49if everybody said, give me a faster keyboard, I never would've ended up with the iPhone, but in the world of enterprise, B2B, SaaS, just listen to them, they'll tell you what it is that they want. So we've more or less done that, and that's taken us down the right path of everything that people want to pay more money from. This is product board, and we just take everyone's information that comes in. We have an ideas portal,

Pricing Strategy and Raising Prices

Chris Federspiel

10:10and we just aggregate it all into this one platform. It gets voted up, and we assess what we wanna do based upon effort and the revenue that we can bring in. So after you have all this stuff, don't be afraid to raise your prices and tell the story and build the value. So founders suck at pricing. Everybody almost everybody I've met undervalues their product, particularly me. So they'll say like, oh, it only took me four months

10:37to make. Let's charge like $2,000, but this is not really how you're going to build a company. There's a big fear of losing a deal, so I discounted a lot. I don't come from an enterprise b to b sales background where I sold $5,000,000 deals or something, so it took me a while to to figure this out. So what we did was we just kept raising prices. I heard a great talk from Madhavan Ramanujan about how

10:58to do pricing and think about it. He worked with Segment to do their pricing where he said, raise the price when people tell you you're crazy, raise it again. When they say you're really crazy, you're almost there. When you say, we're really crazy, we're never buying whatsoever, then you know that you found your price and that's sort of what we did. What we what just to give you some examples, our payments app is now two and

11:18a half times more expensive, but the biggest customer we had for the longest time was 100 k a year. We recently sold one that's 1,000,000 a year for a really, really big deployment doing mobile payments. Our events app is now four times more expensive, but our average ARR was about 12 k for the longest time. It's now up around 45 k because we started to land a lot bigger accounts because the application's grown a lot more

11:42sophisticated, we have a bigger team, it's really doing a lot. So as we've gone on, we've increased the pricing there. And just to give you an example of my insanity, I had 930 different prices that I looked in my Stripe product, price book over the first, three years. I had a unique price for every single customer. So basically, the pricing just never scaled at all. So, this is George in Australia. I've never actually met George. I've

12:08been to Australia once, it wasn't then, And, I never even saw this booth, which was a really interesting, kinda concept about scaling. Stuart Butterfield said, I never understood the size of our company till I saw an ad in the newspaper I didn't know even know we were running. I didn't even know we were going to do this. That was a whole other different kind of thing. Anyway, that's a tangent. So play with packaging. What we found

Packaging and Telling the Customer Story

Chris Federspiel

12:27is that within our target verticals of higher ed and nonprofit, they want to be told a story. They wanna understand how to buy stuff from you. So once we had our ICP, our ideal customer profile, whatever that thing stands for, we then could find out who it is that we were talking to, what it is that they wanted to buy. So we had multiple products, this payments, pay link, document link, no one knew what the heck

12:48all this stuff was. So we just combined it into one and then we sold it as a story rather than as a feature, which was another big problem of founders that they're technical, they just focus on the feature, not really the benefit. So then within hired a nonprofit, we then started to tell the story about how you need events and payments and messaging. So we painted this vision for them about how they can go down this

13:08road to buy all of our products into this platform that people really want to then be able to to use. You can buy from one vendor to get all this stuff instead of going to all these different places. We're launching a storefront app next month, which focuses on continuing an executive education as sort of like a Shopify for Salesforce. That idea only came out of listening to customers. We didn't magically come up with this idea, it

13:30just came from them and we have just crazy demand for this thing. So some key takeaways. We have about 630 customers. We've processed about $3,000,000,000 through the app, and we sent 31,000,000 SMS messages, which is Twilio is the underlying technology here. And some some big things I never really understood. It is far better to make a decision rather than making no decision. If you get stuck making no decision about what you wanna do, it is way

Key Metrics: Customers, Payments Processed, SMS Sent

Chris Federspiel

13:58worse than making a wrong decision. Kill your weak product lines. Kyle Porter, SalesLoft did some LinkedIn post about having a line that was making 6 to 7,000,000 ARR a year and that's like a lot of people's businesses. That was our business for a long time and he just killed it saying, I wanted to focus on this other thing that was doing really, really well. So we've killed a whole bunch of stuff that was at 80 ks,

Key Takeaways and Closing Advice

Chris Federspiel

14:20100 ks, 150 ks ARR to focus on where stuff really mattered and now it's really working. You had to try stuff. I never would have bought the texting company if I hadn't bought PCIFi because it was easier to finance, it was more structured. Try to hike the pricing. For me, it was very scary early on until I hired some salespeople who understood the markets. They knew how to tell the story, and then they helped me understand

14:46how to hike the pricing. And try some partnerships. A lot of them won't really do anything, but some of them might actually be pretty awesome, but be quick to abandon. There's the hire slow, fire fast kind of thing. For people, is the same thing for partnerships. And listen to customers, especially if you're in B2B SaaS. They're just going to tell you what it is that you want to do. And sell your journey. The journey is everything

15:12about telling your story and making this all happen. So a few things, we started out with this thesis of doing payments and events and we kind of knew it was right, but we ended up buying us all this other stuff. So we went from two to nine apps and back to two, so just be weary of chasing shiny things. And once we had this focus, we then went a good bit wider and then we started to

15:33grow our ACV. So if you have any questions, I'm chrisblackthorn. Io. I'm here in the city. If you have anything, happy to help. Hope this was, helpful, enjoyable. Thanks.