How Bullhorn CEO Art Papas grew Bullhorn to $13M revenue and 11K customers in 2008.

hello everyone my guest today is art pappas he's the founder and ceo of bullhorn the global leader in software for the staffing and recruitment industry he was the original architect of bullhorn's flagship customer relationship management system which now helps more than 10 000 companies around the world run their business are you ready to take us to the top yeah let's do it all right so uh you you are early on to the game so so tell us first off when you launched this company what year and what are you working on today yeah so we started bullhorn in 1999 and uh we were originally we were a online service kind of like if you've ever used or seen upwork or fiverr we were we were an online marketplace and specifically we were focused on creative talent and it and it was really too early for that business model so it wasn't too early to get people to come online and build profiles and and uh upload examples of their work but it was really hard to get companies to hire those people over the internet to do freelance work um which now that seems like really common and uh it i think it was just we would go to sit with companies and they'd either a say we don't have internet connection in the office which in 99 was like shocking but okay uh two um or they would say i just don't trust the internet and um which is ironic because what we pivoted to become was a one of the early sas platforms and i convinced people to put their business data on the internet um which arguably should have been harder but i guess in the the sort of year or so subsequent to us uh pivoting away from uh the marketplace and and becoming a staffing software provider uh you know that the views the views changed or i just got better at convincing people to trust the internet so with that i want to i want to fit now what i'm going to do is i'm going to get where you're at today and then the rest of the show we're going to fill in the whole story in between okay sound good so today first off you guys on track to do the 175 that you predicted uh we beat that yeah okay good so what do you think i know you're trying to get i think you said 220 by 2022 or something like that what's the goal to end this year at yeah we're way ahead of even that already okay good what's driven what so so just to be clear you're north of 200 million bucks in terms of ar run rate today what drove the accelerated growth you were making predictions as recently as a year and a half ago that it you know take it till 2022 to hit that number um well we uh we continue to grow really really quickly uh and i am conservative and so i tell somebody to do something i like to do it and so i want to make it i want to make it such that i i don't have an interview and somebody says oh did you do what you said you're going to do and i said well not quite let me explain why yeah no you it's uh there's probably something to that you now this company's gone through many deals we'll talk about your conservative approach has given you leverage uh in those deals uh your historical deals to date um but first off one other data point from today how many customers are now serving ten thousand ten okay well and that's not like a fluffy duffy number that's ten thousand paying customers ten thousand paying customers um majority are in the united states and uh and emea and then we also have i'd say asia's emerging for us so that's still still uh sort of a growth area for us so 10k customers into 200 million in ar fair to say average acv is about that 20 grand mark yeah that's right okay what it is let's fill in the back story now so 1999 you remember uh when the first was the first line of code written in 99 yeah i wrote the first line of code in 99 uh in my apartment uh in cambridge yeah okay apartment in cambridge and do you remember how much total kind of however you quantify it how much you put into building and the mvp before your first dollar revenue yeah so um i we spent about a year and a half and i probably coded every day for like at least 60 hours a day uh for six days a week sometimes i would take sometimes i would take sundays off i think but like yeah it was pretty intense for a long time and a lot of that was just wasted work trying to come up with products that people didn't want to use um what's interesting is once so one of our investors introduced me to our first customer and he said you had investors on day one we did oh wow how much did you raise on day one uh our initial angel round um was 1.4 million okay so you were just like a smart guy that could really tell a story and that's what allowed you to get that money early i really couldn't tell a story my co-founder could he was amazing uh his network was amazing and he was an incredible salesperson and he very smart guy and uh he and i went to pitching investors and um you know these were people who were like his his uh boarding school friends and they were um like one was a hedge fund manager and they had well you're talking about barry or roger which one was there at the beginning barry okay very hinkly um and roger came along later uh because we realized with 1.4 million we needed somebody to help like actually figure out like how are we going to like spend this money and how are we going to manage it and we should probably get incorporated and all that so it was uh yeah so it was a good trio like barry was really roger was like a co slash cfo barry was like super salesperson and uh and then i was really the product lead and i really did most of the coding up until uh up until we had revenue yep so what year was first dollar of revenue 2 000. okay so you spent about 12 months kind of coding learning uh did you guys spend any of that uh angel money on on the mvp as well do like can you quantify how much you spent on mvp we blew all the angel money like blew all the angel money on the first marketplace idea okay so 1.5 million on mvp yeah worse um then we we raised like nine nine months in we raised uh four million dollar series a which was promptly blown um on the original marketplace idea all right this must have been like extremely dilutive oh it sucked i mean can you how bad was it like you're selling like 30 of the company between those two rounds back then um because you're pre-revenue yeah it was like 30 of the company yeah however that it ended up being like 60 because we had to do it down round so so we pivoted with about a million dollars left in the bank and dramatically cut our expenses and then we got our first dollar revenue and we went to our investors and we're like we actually have revenue and they were like how big can software to the staffing industry be that business sucks we are not investors and not only that if you raise money we have an anti-dilution clause and a full ratchet and so we did we did a down round so just to be clear this was with the pension general electric pension fund for 628 thousand bucks you said it this is back in the day this is 2002. 2002 yeah and we did a very small like 700k round at a 50 haircut to the the prior round ouch ouch now we did that did the prior folks ratchet up did they did they go ahead and buy their pro rata they did it okay so then that was extra dilution so we got obliterated yeah so if fun exercises go plug that scenario into like a full waterfall for a uh you know with a full ratchet it's just it was just horrible i was i couldn't understand it took me like a week to get my head around like technically what was happening in the cap table um but once i did i was like well look i actually really believe in this company's going to be a big company um and we had i had our first customer saying this is amazing you should sell this to every staffing firm in the world we all have the same challenges we all need an internet-based system and so we didn't we didn't the dilution hurt but it didn't ultimately we weren't really doing it for the money yep you know well how old were you how old were you at this point yeah i was 20 uh 25. okay so you're caught well like 42 ish today 43 yes yeah so okay so let's fast forward to 2008 you've taken 26 million from general catalyst highland what was revenue at that point um we were and a half trailing okay and so that last uh little bit we raised um ge came along in 2005 was like you guys are doing great you need some more money they give us um so so it's funny like the business they thought was horrible like they were like oh actually it's really great well yeah but you had four years there to turn around right uh so so we raised one and a half then we didn't spend that and then we got to 13 million and we were always profitable after 2003. so that one five was that that was not another haircut that was at a better valuation i was at an up round yeah and uh and then um and then hyland and general catalyst came along and said let's recapitalize the business so um so ge was able to get out and then so part of that was secondary yeah...