How Condeco Reached 1,200 Customers and 122% Net Revenue Retention with Just $30M Raised (Interview with Founder Paul Statham)

Introduction and Company Overview

Nathan Latka

00:02Hello everyone. My guest today is Paul Statham. He is the CEO and founder of a company called Condeco Group. He has established several successful and innovative businesses helping shape the relationship between real estate and technology. He's established Condeco as one of the foremost providers of workspace management technology and leading the company through a successful $30,000,000 Series A round. He was previously managing director of one of The UK's largest electronic security companies. Paul, you ready to take

00:27us to the top?

Paul Statham

00:28Yeah, I am indeed.

Revenue Model and Business Structure

Nathan Latka

00:29All right. Tell us about the company, specifically what you do and what's your revenue model? How do you make money?

Paul Statham

00:34Right. We are software primarily a software business. We run a subscription software solution that we supply to the enterprise corporate market, which is to provide scheduling and reservation system management and workspace utilization.

Nathan Latka

00:55And walk me through the revenue model. So is it kind of a pure play SaaS model or is there a consulting professional services mixed

Paul Statham

01:00in No, that run, we have three parts of our business. We run a SaaS element. We run our services and consulting element, and we also run a proportion of hardware. We make we actually manufacture our own digital signage that goes outside of people's meeting space and on people's desks. So we manufacture that as well. So it comes in three different levels.

Nathan Latka

01:24And break this over the past twelve months, break down the revenue percentages of each of those. Which one is, you know, 50, 60, 70%, etcetera?

Revenue Breakdown by Segment

Paul Statham

01:31We do about 45% of our revenue is now through our subscription. About 20% is through services and the rest is through hardware.

Hardware Lock-In and Retention

Nathan Latka

01:43Got it, interesting. Now does the hardware obviously once you get installed, does that create some nice lock in so that your retention numbers kind of go up through the roof?

Paul Statham

01:50Yeah, it's you know, we're very we had great retention. We're a sticky product. Once people have invested capital into the hardware, you find that they you know, they stick with you, but they even the guys that don't use our hardware, you don't have to use the hardware. You know, we still have a 95% retention rate, which we're very pleased with.

Nathan Latka

02:11And is that that's 95% gross or net retention?

Paul Statham

02:14That's logo retention.

Nathan Latka

02:16But gross gross or net?

Paul Statham

02:18It's gross.

Nathan Latka

02:20Okay. Annually?

Paul Statham

02:22And our our net retention is about a 122%.

Nathan Latka

02:26Okay. And that's on a, I guess, revenue basis.

Paul Statham

02:29Okay. On a revenue basis. Yeah. Yeah. That's great.

Nathan Latka

02:32And that's annual? Yeah. That's great. Congratulations. Let me let me just... I wanna dial back up from the numbers for a second. So when people go into like a a WeWork and they see kind of the signs outside of each meeting door that are like electronic and you can use an app to kind of book them and stuff. Is that you behind that?

Paul Statham

02:49We we we... That's what we...

02:54There there are others on the market, but we are considered to be one of the first and one of the market... The principal providers in the market.

Customer Pricing and Contract Sizes

Nathan Latka

03:02And give me a general sense. I know you probably have a lot of different cohorts of customers, but on average, are one of these companies paying you? Let's just focus on the SaaS revenue. So on a monthly basis.

Paul Statham

03:13We varies wildly. We have our probably our smallest SaaS is paying us around a couple of thousand dollars a month, and our largest could be paying us $30,000 to $40,000 a month.

Nathan Latka

03:24And what's the difference between the two? Is it just number of locations or what makes the difference?

Paul Statham

03:28Our revenue, our subscription model is based on the number of rooms and desks that we have managed within our system.

Nathan Latka

03:37Okay. And so let's go micro for a second. So what do you charge per room or per desk?

Paul Statham

03:43It varies wildly, but depending on the size of the scale, but somewhere in a few hundred dollars, it starts at a few hundred dollars a year. So it can start as low as $30 to $40 a month. If you have it with all of the additions with signage and screens, can go up to maybe $700 to $800 a month a year.

Nathan Latka

04:02Okay. So just I wanna make sure I understand this. Let's say I'm like a solo... I'm a single company and I have two offices in my in my building and there are three desks in each office. I'm gonna pay a couple of hundred, hundred a couple... It sounds like I could pay maybe grand or $2,000 just to manage those two offices for a year. Is that accurate?

Paul Statham

04:20If you had three three meeting spaces and you wanted signs and to manage those rooms, those meeting rooms, it would cost you around for those three meeting spaces, would cost you about $900 for the year including the hardware.

Founding Story and Product Launch

Nathan Latka

04:32Okay. Okay. Got it. That's that's okay. That's reasonably priced. Great. And and walk me through the backstory here. Let's put us on a timeline. When did you launch?

Paul Statham

04:39We launched in 2005. So we've been about for a while.

Nathan Latka

04:43And and where were you personally at that point? Or did you join the company at the series a level?

Paul Statham

04:47No. I was the founder of the business. I founded the business back in 2000 when we were doing... We weren't... We we were doing software development, and we developed the Condeco product in 2005 and launched it. So I'm being with the business since the get go.

Nathan Latka

05:05So from 2000 to 2005, I mean, you running essentially an agency and outsource dev shop? And then you said, oh, a lot of people have this problem. Let's go all in.

Paul Statham

05:13Precisely. Absolutely. That's exactly what happened. We were, you know, we came across the problem on a number of times. We built a great solution. And when guys, this is a winner. And we pushed on in 2005 and dropped the bespoke stuff that was going on at the time.

Nathan Latka

05:32Good for cash flow, but a distraction once you have a SaaS company.

SaaS Transition and Business Model Evolution

Paul Statham

05:36Totally and completely. You know, we started life back in the day as a perpetual license company. We migrated in 2015 to entirely SaaS. We've never looked back painful times, but it's it's a... SaaS is a great place to be.

Customer Count and Sales Organization

Nathan Latka

05:49And what have you scaled to now today in terms of total customers using you?

Paul Statham

05:55Our total customer base is around 1,200.

Nathan Latka

05:57Okay. Got it. So so is it a note? And is the sales process no touch or is it pretty high touch? You have a big inside sales team?

Paul Statham

06:04No, have over in our total sales team, sales and marketing accounts for about 100 people within the business. We have a 10 man inside sales team. We have a 35 man outside sales team. We have channel teams. We have marketing teams. So we we we got quite a big organization behind our sales and marketing.

Nathan Latka

06:22What's total team size?

Paul Statham

06:24400. 400 Everyone in London? No. We've got London accounts for about 120 of our members staff, our team. We've got a large development and implementation center that is in Google in India. And we have offices. We have 11 other offices around the world. We've got offices in California, in New York, across Europe, Singapore, Australia. So we've got we've got a wide range of... We cover globally.

Growth Rates and Capital Raised

Nathan Latka

06:54And give me a sense of kind of at this at this scale you're at today. What are you growing at year over year?

Paul Statham

06:59We're growing around just under 30% year on year. And our SaaS revenue is growing at around 40% year on year.

Nathan Latka

07:05That's great. And and you said you raised capital. So how much have you raised to date?

Paul Statham

07:10We raised 30,000,000 with Highland. That's the only capital? Yeah, that's the only capital. We bootstrapped for the first sixteen years of our life. And we then because of our expansion was just getting so great that we took on some capital from Highland Europe. And that's been a great addition to our business.

Nathan Latka

07:34You turned to the dark side, you couldn't resist it,

Paul Statham

07:36I turned to the dark side, but I tell you what, love every minute of it now we're there. Makes our growth even stronger. So it's a great place to be.

Nathan Latka

07:44Did they pursue you or did you pursue them?

Paul Statham

07:48They firstly pursued us, we then ran a process through KPMG and we selected actually selected Highland who had approached us previously because they really understood our business, a small, relatively small business, a company in based in Europe and really, really, you know, got to know us quite well over the period. And yeah, as I say, it's been really good. Often people reference the dark side, but we found it to be most certainly very, very insightful.

Nathan Latka

08:17That's good. Now Paul, if I take that 1,200 kind of customer account you gave me and you said your minimum contracts are caught in the 3 couple thousand range. I mean, I take $3,000 times 1,200, that'll put you around $3,000,000 to $4,000,000 per month right now in revenue. Is that generally accurate?

Paul Statham

08:31Yeah. We have about... It's about $4,000,000 in revenue.

Nathan Latka

08:34Per per month?

Paul Statham

08:35Per month. Yeah.

Nathan Latka

08:36That's great. What... When you... That's... It's pretty... Actually, I wanna take that back. When did you raise? What was the month?

Paul Statham

08:43We raised in June 16, June 2016.

Nathan Latka

08:46And what was revenue at the point that you raised?

Paul Statham

08:48About $15,000,000 $12,000,000.

Nathan Latka

08:52Oh, wow. So you've almost three x over the past six... Over the past sixteen months or so with the money.

Paul Statham

08:57Yeah. Yeah. It. We've grown... We grew quite rapidly during that phase. So yeah. It's probably about $15,000,000 back in in the day.

Nathan Latka

09:05Yeah. I wanna... I... So there's two things I wanna get here. One is that's incredible growth, right, bootstrapped to get to 15,000,000, but it's also incredible how you've been able to... You know, a lot of people say, yeah, give me capital. I can use it to drive growth and then the pro formas never check out. You, it sounds like you're able to spend it and the pro formas are checking out. I wanna talk about both. So

Pre-Funding Operations and SaaS Run Rate

Nathan Latka

09:22how are you, you know, pre funding days, how are you operating the company in terms of team size, in terms of what your sales organization looks like, and how you've thought about CAC and payback on your new customers?

Paul Statham

09:33Okay. Prefunding, we were running very tight. You know, we were investing everything back. We were running our prefunding. We were still running through perpetual license days. So you were it's a high profit, lower recurring revenue. And therefore we were still able to focus on customer satisfaction. We ran about a team of probably in the region about 70 people, maybe people. And it's, we were still, you know, client size, we were probably only around three or 400

10:12clients. And then suddenly, obviously we've expanded and the company's grown significantly.

Nathan Latka

10:17Yeah. Now that was 2015 or sorry, 2016, about 15,000,000 AR. Today, you're at, you know, north of 45,000,000 in AR. It sounds like take me back to the year. So in July 2017 or August 2017, what run rate were you at?

Paul Statham

10:32Don't know the exact figures, but let's put it somewhere in the region of around 8,000,000 annual run rate of recurring... Of annual recurring.

Nathan Latka

10:42Okay. Wait. I'm confused. I thought you said a year before that in June 2016, you were doing 15,000,000?

Paul Statham

10:47Revenue. The total revenue.

Nathan Latka

10:49Oh, I see. I see. What was what was just SaaS revenue in in 2016 run rate?

Paul Statham

10:54Oh, SaaS revenue in 2016 was probably around the...

11:00Probably $6,000,000 to $7,000,000.

11:01$6,000,000 to $7,000,000.

Nathan Latka

11:02Okay. And then a year later, you grew that to eight?

Paul Statham

11:05Yeah. You know, a year later, we grew that to... We doubled it. We grew it to 12.

Nathan Latka

11:09Okay. That's... Sorry. That's what I just asked. So so sorry. June '20... So June 2016, 6,000,000 pure SaaS AR run rate. A year later in June, July 2017, I thought you just said 8,000,000, but no, you're saying it's 12.

Paul Statham

11:21Yeah. No. That was 12. You said in August. You said August 16, which was just after the the investment in June. So My fault. Yeah. So July 12. Yeah. July was then... It then ran. And we've been growing, now our run rate is in in in dollar terms is is, yeah, is running just south of 30,000,000. It... We're running at the moment.

Nathan Latka

11:43And that's just SaaS revenue?

Paul Statham

11:44That's just recurring revenue, subscription revenue. It. So that comes out.

Nathan Latka

11:48That's about 2,500,000 a month. You're doing 4,000,000 total per month. So you still have a significant portion call it 1,500,000 a month coming from these other lines, hardware or professional services. Yeah. Do you... Did the... The... Did when you... Did Highland beat you up over that? Did they say, hey, Paul, we can't give you the valuation you want so much of your revenue is professional services and that's crappy margin.

Paul Statham

12:06They... Professional services were discounted, but the hardware, because we manufacture it ourselves, and it's got some unique properties within it. Our gross margin on our hardware is fairly much quite close to our gross margin on our software. So they were very happy with us in the hardware market.

Nathan Latka

12:25Well, that's great because most most software margins are call eight gross margin, 85 ish range. If you can do hardware at that at that rate, that's a healthy production cycle.

Paul Statham

12:32We're not quite... We're we're close, but we're not quite there. But it is... We we we got a good gross margin on them.

Hardware vs Software Cohort Retention

Nathan Latka

12:37Tell me more, you know, we've had a few people on that have a hardware plus software component. One's that come to mind are Eero, which is obviously home Internet plug ins into the things. Another is a Purple WiFi. There's a WiFi install in the airports and there's a software service on the back end of it. Talk to me right now, what is your or how has that affected your churn and retention rates? In other words, if

12:56you take a cohort that has the hard... Your hardware versus doesn't have your hardware, when is that possible to have... Not have your hardware and still use your software? And if so, what's the difference in the retention of those two cohorts?

Paul Statham

13:10It is possible to have our software without our hardware. Only

13:1550% of our clients use our hardware, the rest of them are just software. And our retention is similar on both. We have a similar position on both. Yeah, the soft is the software drives this hardware as opposed to the hardware driving the software. So people buy our product because we're a software company, which is Condeco software. Our hardware is an add on. So the value is that we produce, you know, one of the best and well

13:43respected products on the globe that does scheduling for meeting space. So people come to us because we've got that reputation.

Nathan Latka

13:53Is there anyone that uses your hardware but does not use your software?

Paul Statham

13:58No. We don't sell our hardware without our software offering that's to run because our software runs our hardware. So it's... They come as one of the same.

CAC and Payback Period

Nathan Latka

14:08Last few economic questions, CAC, what's it costing you fully weighted to acquire a new customer?

Paul Statham

14:14It's calculation that we're currently reworking on because of the different calculations. Our CAC is running into around the way we calculate it, we end up with around CAC of about 1.2.

Nathan Latka

14:321,200? Yeah. Okay. To acquire a $3,000 a month customer?

Paul Statham

14:38No. No. No. To... It's it's... Because it breaks down. We're now breaking our CAC down for our enterprise customers cost us more. So it averages. So if you break it down on a cost per acquisition for each room, it's around for a $300 a year room, our cost of acquisition is coming out around $200.

Nathan Latka

14:56200, okay got it. So your pay... What's your payback period then? You you put it at what? Nine months, ten months?

Paul Statham

15:01Eight months.

Nathan Latka

15:02Eight months. Yes.

Paul Statham

15:02Eight months.

Nathan Latka

15:03That that's healthy. Now has that generally grown? That's gotten longer since you raised capital? You're getting more aggressive?

Paul Statham

15:11It's, yeah, it's probably a little bit longer, but it's not hugely longer, but a little bit longer yet. I think we were, as I say before the capital, we were very perpetual based. So it's a different payback because the payback significant a lot quicker. Yeah.

Nathan Latka

15:26Do you see that payback period is the same across all your cohorts? So if someone's paying you, you know, $3,000 a month, you're spending about $3,000 times the eight months. So about $24,000 to acquire that customer?

Paul Statham

15:43If someone is is... It's it's not linear. No. If someone has got a thousand rooms, then our payback is is actually considerably better than if you've got one or two rooms because although it takes longer to do it, value is significant.

Famous Five: Books, Tools, and Personal Life

Nathan Latka

15:59Yep, makes good sense. Let's jump in here Paul and wrap up with the famous five. Number one, what's your favorite business book?

Paul Statham

16:06Famous business book is The Second Machine Age, think is really relevant to our business and it's it's... It was... It came out in 2016 and I think it really set the tone for where we're going with robotics and AI and it's it's fun that I've I've probably many times over the last two years.

Nathan Latka

16:23Number two, is there a CEO you're following or studying right now?

Paul Statham

16:27No. I don't. No.

Nathan Latka

16:29Number four, what's your favorite online tool for building your business?

Paul Statham

16:33I have two tools. I'm an old school, so email still is the center of my world, but Salesforce is driving our business unbelievably. So that would be my number one, but I do love email as field, so.

Nathan Latka

16:43Number four, how many hours of sleep do get every night?

Paul Statham

16:46Seven and a half.

Nathan Latka

16:47It's pretty good. And what's the situation? Married, single kids?

Paul Statham

16:50Married. Yep. Yep. I've got... I'm two years old. I'm married. I have been for for for almost twenty five years and got three children.

Nathan Latka

17:00Three kiddos. Okay. Last question. What do wish your 20 year old self knew?

Paul Statham

17:06To buy as much Apple stock as I could have done at the time would have been the first thing I'd have done. But now in a business perspective, I think to actually be more strategic and less tactical back in the day. I think you start off life very tactical in the way you do things. And as you get bigger and grow, you realize that the strategic is the way to grow. And I think that's the thing

17:29I would learn to be more strategic.

Nathan Latka

17:32Be more strategic and less tactical. In 2000, he started basically ramping up kind of a dev shop in the agency format doing kind of one off projects then realized, wow, a lot of my customers have this problem with managing their rooms and managing their office space. So in 2005, formally launched this product Condeco. Today they serve over 1,200 customers. All their rooms right managed with a piece of hardware. In many cases about 50% of the customers

17:56buy the hardware. Each customer pays, call it, 3 ish grand per month. They're currently doing about 2,500,000 per month in pure SaaS revenue, 4,000,000 per month in total revenue. So healthy numbers there. Growth rate, about 40% year over year growth. A year ago today, their pure SaaS revenue was about $12,000,000. Again, that's now up... Or sorry, about 1,000,000 a month, now at over 2,500,000 a month. Retention metrics, super healthy, 95% annual gross retention, net revenue retention,

18:21122% annually. Again, building a soft route with a team of 400 between London, India, and other remote locations. Paul, thank you for taking us to the top.

Paul Statham

18:30Thank you very much.