How Casebook PBC Reached $200K MRR with 200 Customers and No Outside Equity (Interview with CEO Tristan Louis)

Introduction and Tristan Louis Background

Nathan Latka

00:00Hey, folks. My guest today is Tristan Louis. He's a serial entrepreneur who's built and taken five technology companies from idea to exit. He also served as the global chief innovation officer for HSBC and global head of mobile and Internet for Deutsche Bank. His writing has appeared in The New York Times, Forbes, and many other publications. He currently serves as president and CEO of casebook PBC, a government technology software company. Tristan, you ready to take us to

00:22the top?

Tristan Louis

00:23>> Sure. Absolutely. I mean, pleasure meeting you.

Nathan Latka

00:26Pleasure meeting you. I have to ask you real quick about that year time at HSBC. What years were you there? When did you leave?

Tristan Louis

00:31>> So I was at HSBC from 2001 to 2008. Mhmm.

00:37>> Interesting time in the sense that when I joined the company, did not even own the name hsbc.com on the internet. I actually had to go and purchase that from the Holland Schoolboy Choir and built up basically all of their Internet infrastructure over over that seven year period.

Nathan Latka

00:58Did you do any SaaS debt at that time or was it too early?

Tristan Louis

01:02>> It was way too early. At that point, really, just getting people organized around the concept of APIs and hosting things outside of big data centers was a little early. Now, at Deutsche Bank, I managed to do some of that.

What Casebook PBC Does and the Human Services Market

Nathan Latka

01:20Very cool. Okay, tell us about casebook. What's the company doing? How are you guys making money?

Tristan Louis

01:24>> Okay, interesting problem space that we started identifying is the human services space. So, services, what people generally think of as social services, so child welfare, juvenile justice,

01:40>> domestic violence, which is like sexual abuse or domestic abuse, anti recidivism, which is generally people getting out of jail, those types of programs. And what we've identified is that it's a huge, huge space. $24,000,000,000 is spent on software in that space by the US government in state and county's level, and yet there isn't a platform for this particular space. As we've grown, we've also identified that there was an adjacent portion of what we're doing, so

02:15>> we shifted a little bit from just being a purely government focused organization to also servicing the nonprofit sector because there's about 40,000 human services organization that employs 3,200,000 people in the country and deliver services to one in five Americans.

Nathan Latka

02:30So Tristan, who are you selling to? Governments

Who Casebook Sells To: Government and Nonprofits

Tristan Louis

02:32>> or We're selling to both nonprofits and government agencies in that space because what we've identified is that the size of the problems that they have is very similar. The type of problems are very similar and the type of data that they need to handle is very similar. And the enemy that they've got or the competition that we're dealing with is very similar. It's pen and paper.

Pricing Structure and Average Seat Cost

Nathan Latka

02:53So what are they paying on average per month to use the technology?

Tristan Louis

02:57>> So on average per month, it depends on the size of the team. What we've done is that we've created a product that has, just like every other SaaS company, three different product tiers, $29 $49 and $69 depending on the features that they're using. The $29 is organized really as a way to

Nathan Latka

03:15Hold on Tristan, sorry. Before we go deep on all the what's the average first?

Tristan Louis

03:18>> The average is about 49, maybe 50, call it 50.

Nathan Latka

03:22Okay.

Tristan Louis

03:23>> 50 per seat or per company, per nonprofit, Per seat.

03:25>> Per And generally, we're looking at Our average customer has about 15 to 20 seats. So yeah, still relatively small numbers. It's the law of aggregating a lot of small numbers, which is why we need to find a market that had a lot of actors in it.

Nathan Latka

03:45So 50 per month on average, 20 seats on average, each nonprofit or government's paying about $1,000 a month.

Tristan Louis

03:51>> About $1,000 a month, but most block contracts tend to be twenty four month contracts. So they're actually, you know, it's nice from a retention standpoint and from a churn standpoint because we don't have to worry quite as much about controlling churn on a month by month basis.

Nathan Latka

04:04Is your net revenue retention above 100%?

Tristan Louis

04:07>> Way, way. I mean, I think net revenue retention is yeah. I mean, year on year, our gross is probably 50x, 60x, but remember again, we love small numbers, we've been in the market only a couple of years, this is our second year in the market, and our revenue retention is yeah, well over 100%. We actually I don't like to talk about churn that much because our churn numbers are ridiculously low in that we've had one customer

04:40>> churn out and that was because the organization we were dealing with actually ran of money and so it couldn't pay us anymore.

Nathan Latka

04:45If a churn doesn't make sense for you, you were founded in 2019, so two years ago, but your contract minimums are two years. So there hasn't there hasn't been a chance for people to

Tristan Louis

04:52>> churn Yeah.

Nathan Latka

04:54Is the opposite true? There hasn't been a chance for people to upgrade yet? How do

Tristan Louis

04:57>> you get people to upgrade you're

Nathan Latka

05:00on a two year contract?

Tristan Louis

05:01>> That's actually kind of the interesting thing is that the opposite has not turned out to be true. Initially, our initial assumption was that your average customer was going to be there and then we would, when contractor negotiation came up, we would start increasing the number of seats. But what we've seen is that actually a number of our customers are now asking us how do we go about increasing seats on top of the contract that we already

05:24>> have.

Customer Count and the Foundation Contract Origin

Nathan Latka

05:25And how many customers are you working with today?

Tristan Louis

05:29>> Know, low hundreds is really what we're seeing in terms of our logos.

Nathan Latka

05:34Got it. So call it like 200, something like that?

Tristan Louis

05:36>> Yeah.

Nathan Latka

05:37Okay. And did you guys bootstrap this or you decided to raise?

Tristan Louis

05:40>> So it's one of those crazy things where we neither decided to raise nor bootstrapped it. It has to go to the foundational story of the company. We found the Annie E. Casey Foundation, which is one of the biggest child welfare foundations, and they needed to get a sense of how many children were in the child welfare system. Along the way, they ended up developing some technology that kept them managing systems for one state, and so they were like,

06:10>> well, can you take this contract from us? We turned that contract into a profitable contract and we've been basically bootstrapping off that profitable contract to help us build out a

Fundraising Round and Valuation

Nathan Latka

06:21So, you have not raised external capital to date?

Tristan Louis

06:23>> We have not really raised any external capital to speak of. We're actually about to go into market right now to raise just a small round.

Nathan Latka

06:31What's a small round?

Tristan Louis

06:32>> How much? 6 to $8,000,000.

Nathan Latka

06:35Okay. And what valuation do you think you'll be able to raise on?

Tristan Louis

06:38>> I'm trying to keep it tight right now. So I figured, you know, based on where the market's sitting and on numbers that we're doing and figuring something in the 16 to $20,000,000 range. Pre

Nathan Latka

06:53money? Or post?

Tristan Louis

06:55>> That's gonna be in the post post money.

Nathan Latka

06:58Got it. So you raise it like a 14 pre raise 6,000,000 for 20 post?

Tristan Louis

07:01>> Yeah. Exactly.

Nathan Latka

07:02Interesting.

Tristan Louis

07:03>> Part of reason is that, you know, my view is that we have a fairly long trend. I don't want to signal a very high valuation at this early stage in the game because I'm looking at eventually raising other rounds further down the road.

MRR and Growth Over the Past Year

Nathan Latka

07:18200 customers at a thousand dollar ARPU we just talked about, $50 a month, 20 seats on average, that puts you at like $200,000 a month in revenue. Is that about right?

Tristan Louis

07:25>> That's about right, yeah.

Nathan Latka

07:26And where were you one year ago?

Tristan Louis

07:29>> One year ago,

07:33>> we were at 50,000 in ARR last year.

Nathan Latka

07:36So just to give you

Tristan Louis

07:38>> a sense of how big the ramp has been this year, it's been a pretty incredible year.

Nathan Latka

07:42Oh, so I don't know what 50,000 in ARR means because I don't know what month you're multiplying what, but like in December of last year, what was your MRR?

Tristan Louis

07:48>> So our MRR in December of last year was sitting around $11,000

Nathan Latka

07:55Okay, got it. So yeah, you've weighed more than 10x, which is great. Where's the growth coming from? Why so fast?

Where Growth Is Coming From

Tristan Louis

08:00>> So a number of things. One is we've identified the right product market fit this year. We've identified the right markets to target. We've also noticed that there really wasn't that much competition for what we were doing. The interesting thing is that the market is mostly dominated by system integrators. There hasn't been a software package that's really doing what we're doing. We've also priced it right and maybe even priced it low, but that was by design. I

08:30>> wanted to make sure that from an operational standpoint, we could operate at the lowest possible price point in the market so that it would be very difficult for any competitor to come in and come in and under price us. There's always room to grow ARPUs from a low point, but there's very few opportunities to lower ARPUs when you're in a particular market. So it was really key to what we were building to make sure that we

08:58>> could operate at a profit on a very low ARPU level.

Profitability and Burn Rate

Nathan Latka

09:02Are you profitable today? We

Tristan Louis

09:04>> are not profitable because we're still investing in R and D, but our burn rate is in the very, very low six figures. I mean, I'd say, when I'm saying very low six figures is that on high spent month, I'll probably be breaking 100,000 to $120,000 But usually we tend to sit below that.

Nathan Latka

09:24That's net burn or gross?

Tristan Louis

09:27>> That's net burn.

Nathan Latka

09:28Got it. So after that means if you add back 200,000 of revenue to $120,000 in net burn, your total expenses monthly are $320,000

Tristan Louis

09:36>> No, because remember that I mentioned that we're working off the back of a large system integration contract that we've been using to fund this. So really, total burn, if you were to take out the contract, is sitting closer to $600,000 to $700,000.

Nathan Latka

09:55Monthly?

Tristan Louis

09:56>> Monthly.

Nathan Latka

09:59How

The $7M Services Contract Explained

Nathan Latka

10:00big was that contract and what year was that closed in?

Tristan Louis

10:02>> That contract was a $7,000,000 contract and that was closed in 2010, 2011. We still had another year plus on it, and so we're basically using it as our outside investor from our standpoint, right, is that we've been working on building a SaaS business and growing a SaaS business on the back of

10:28>> a very, very lucrative contract.

Nathan Latka

10:30So the story is getting a little loose here, I need to ask questions to tighten it up. Right? Yep. So that was launched in 2010. You guys were launched in 2019. So you basically picked up that contract four or five years in. Okay. And how much of the 7,000,000 contract is now being up are you applying to the $200,000 a month revenue dollar figure you just told me about?

Tristan Louis

10:48>> Oh, so so so that's zero. I mean

Nathan Latka

10:50Got it. So you're doing $200,000 a month in revenue. That has nothing to do with the $7,000,000 contract.

Tristan Louis

10:55>> Exactly.

Nathan Latka

10:56Yeah. Okay. Got it. And you're spending $650,000 a month on all these expenses right now when you add

Tristan Louis

11:01>> that to 200 using that contract to fund the difference.

Nathan Latka

11:05Got it. That's lot of money to be spending for a company that's at a $2,400,000 run rate. Where is that money being spent?

Tristan Louis

11:12>> That money is being spent on a substantial amount of R and D because what we've identified is that we've identified a 12,000,000,000 to $24,000,000,000 opportunity that's largely greenfield.

Nathan Latka

11:23So How many engineers, though?

11:25I mean, can you quantify the R and D spend?

Team Size and R and D Investment

Tristan Louis

11:28>> So we've got 36 people in the organization. I've got six in sales. Everything else is in product management and engineering. So I'd say, call it 20 plus I mean, I could give you the exact number, but 20 plus engineers and product managers, and then the rest is customer success and sales. We're actually at relatively young stage in terms of building our sales infrastructure. Our sales team is relatively new and we keep hiring on that.

Nathan Latka

11:58It's just it's still high burn with 36 people and $650,000 a month and burn, you're burning like almost $20,000 in burn per employee. I mean, that's a lot for a startup.

Tristan Louis

12:07>> That is a fair amount for a startup.

Nathan Latka

12:09What happens when the contract stops? I mean, you really have to go raise this equity round. Otherwise, you're gonna have to cut your burn a lot.

Tristan Louis

12:15>> Absolutely.

12:16>> Yeah. Yeah. And that's exactly why we're looking at at raising some money right now because it's gonna take us another couple of years to get to the point where we're filling that gap.

Nathan Latka

12:26Yeah. Are you a 100% owner of the business today?

Tristan Louis

12:29>> Yeah. Got it. You own a okay. Good.

Nathan Latka

12:31So so how did you I mean, imagine a lot of people were fighting to take over the $7,000,000 contract. How did you get it?

How Tristan Acquired the Services Contract

Tristan Louis

12:39>> It's a weird, weird type of story. 2016, the election has happened. I'm on the losing side of it. I'm trying to figure out shit. How do I get involved with technology that actually can have a positive impact on the world instead of the previous startups that I've built. And I get connected to this foundation and they're like, we don't know what to do with this. They've got a largely unprofitable contract at the time because it's not

13:06>> being managed like a software management contract. And so I started looking at that, I started looking at the space and was surprised that there were a number of dynamics in the space that were interesting. One was that there really weren't any standardized software packages to address some of the problems that were there. Two was that there was a tremendous amount of money that was flowing into that space to system integrators. And so I figured, Okay, let's

13:35>> take those contracts, let's right size them in terms of how you're servicing them, and then let's leverage the revenue that is generated by the profit that is thrown off from there to actually build a proper SaaS package.

Famous Five: Books, Tools, and Advice

Nathan Latka

13:52That makes a lot of sense. Let's wrap up here, Tristan, with the famous five. We're out of time. Number one, favorite book.

Tristan Louis

13:58>> Favorite book on leadership. It's a history book about five different presidents that, are stuck at a particular moment of crisis and how they went through that particular crisis.

Nathan Latka

14:10Number two, is there a CEO you're following or studying?

Tristan Louis

14:13>> Is there a CEO I'm following? I mean, Satya Nadella is probably one of the most interesting CEOs right now in terms of, what he's doing with Microsoft and how he's transformed.

14:23>> No.

Nathan Latka

14:24Number three, what's your favorite online tool for building a business?

Tristan Louis

14:27>> Favorite online tool for building a business? HubSpot. I pretty much live and die by the numbers still sitting in there.

Nathan Latka

14:33Number four. How many hours of sleep do get every night?

Tristan Louis

14:36>> Eight. I try to make sure that, you know, it's really important to me.

Nathan Latka

14:39And situation, married, single kids?

Tristan Louis

14:42>> Married, one kid.

Nathan Latka

14:44That's great. And how old are you?

Tristan Louis

14:47>> Just turned 50 this year.

Nathan Latka

14:49Happy birthday.

Tristan Louis

14:50>> And well, not today, but, yeah, earlier this year. And so that's why the eight hours of sleep. I mean Great. Ten years ago, and it was four.

Nathan Latka

14:59Yep. And take us home here. Something you wish you knew when you were 20.

Tristan Louis

15:03>> Something I wish I knew when I was 20 that you spend too much time in your head. You should really focus on the problems that you've got in front of you and on what you can actually impact.

Nathan Latka

15:16Guys, casebook.net founded two years ago on the back of a big professional services contract. Now they're pure SaaS, 200 customers paying on average $1,000 a month, $2,400,000 in terms of run rate, up from just $132,000 in terms of run rate in December of last year. Incredible growth, raising 6,000,000 on a $14,000,000 pre right now. We'll see if Tristan can get it done as he looks to scale with his team of 36 to support these governments and

15:37nonprofit organizations. Tristan, thanks for taking us this off.

Tristan Louis

15:40>> My pleasure.

Nathan Latka

15:43One more thing before you go. We have a brand new show every Thursday at 1PM Central. It's called Shark Tank for SaaS. We call it deal or bust. One founder comes on, three hungry buyers, they try and do a deal live and the founder shares back end dashboards, their expenses, their revenue, ARPU CAC, LTV, you name it, they share it and the buyers try and make a deal live. It is fun to watch every Thursday 1PM

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