How Dakota Grew to 402 Customers and 115% Net Dollar Retention with a Bootstrapped SaaS Database (Interview with Founder and CEO Gui Costin)

Introduction and Business Overview

Nathan Latka

00:00Hey, folks. My guest today is Gui Costin. He's the co founder and CEO of Dakota, where he leads a team that has raised over 40,000,000,000 of investment since 2006. He's led the expansion of Dakota's offerings into software and data to enable investment salespeople to sell more efficiently. Gui, you ready to take us to the top?

Gui Costin

00:15>> Absolutely.

Nathan Latka

00:16All right. So let me understand what is the business model here? Is it a marketplace and you take kind of

00:21what you raise or is there a software SaaS sale here traditional?

Business Model: Outsourced Fundraising and SaaS Database

Gui Costin

00:24>> So it's actually, it's really counterintuitive, but you'll get it instantly. We founded our firm in 2006. Investment firms hire us to be their outsourced sales and marketing team, which means we raise capital for their investment strategies. We raised over $40,000,000,000 since that time. In order to do that, we built a database using salesforce.com of investors all across the country, primarily The US, a little bit in Canada. We made the decision in 2018 to create a business

00:55>> around that and sell access to our data, to our industry colleagues. And it's the only content and database that is built by fundraisers for fundraisers. And we now have over 400 investment firms and growing using our data to set up meetings to raise money.

Nathan Latka

01:11That's incredible. So your database is really, what is it, like a rich list of wealthy LPs that are writing angel checks or LP checks?

Gui Costin

01:18>> No, it's actually different than that. It's like big state pension funds, foundations, endowments, banks, broker dealers. There's a whole ecosystem of investors that will invest in professional money managers. In your world, you can think kind of venture capital. It can be growth equity, private equity, but they're calling on Harvard and Yale and the state of California and those pension funds because they have a ton of money they need to invest in funds just like that. Our

Database Size and Target Customer Avatar

Gui Costin

01:44>> data set is about 4,500 different accounts and about 13,000 contacts. We have a ton of more data as well focused on serving one avatar, which is somebody who gets up every morning and has to raise money for their venture fund or private equity fund.

Nathan Latka

02:00It's a hell of a job. That's a hell of a life. Call, call, call, close, close, close. All right. So what do these investment firms pay you to access the database and the software on average?

Pricing: Annual Licenses and Seat Structure

Gui Costin

02:10>> It's 12,500 for two user licenses and then $1,000 for each additional user.

Nathan Latka

02:16Monthly or annually?

Gui Costin

02:18>> Annually.

Nathan Latka

02:19Got it. So 12,500 base and then 1,000 per seat after.

Gui Costin

02:23>> Yep.

Nathan Latka

02:23Interesting. Okay. Do most people just stick with one seat or do they go up to four, five, six, ten seats?

Gui Costin

02:28>> No, we've had 27 seats. I mean, a lot of people go up and the main reason is it's a super small investment. So if you think about the value proposition, again, it's really simple. Salespeople need to be making sales calls and setting up meetings. If they're spending time researching websites, messing around, or don't have a complete dataset, right? So for instance, if you go to Boston and you only know 40 potential investors in Boston when there's

02:51>> actually 175, you now only have maybe a quarter of the total addressable market covered. We give you a TAM, we give it updated, so your salespeople can be much more efficient focusing on what they exactly should be doing, not wasting time doing meaningless research and such.

Nathan Latka

03:08So, Gui, ignoring seats for a second, how many unique logos paid? Is that the 400 number?

Gui Costin

03:13>> Yeah, about four zero two.

Nathan Latka

03:14About four zero two. Okay. And how many seats does that make up?

Gui Costin

03:17>> About a 20 right now.

Nathan Latka

03:19Okay. Wow. So call it one and a half, well, two, two and a half, two and a half average seats per account, something like that. Yep. Interesting. Okay. Take me back to customer number one. That's always a fun story. When did it happen?

Origin Story: Failed Platform and Pivot to Database

Gui Costin

03:30>> Well, do you want the really funny story?

Nathan Latka

03:33Yeah.

Gui Costin

03:34>> The really funny story is we had a platform that we spent two years building. It was the exact opposite of this. We built a platform so investment firms like venture capital, private equity, could put their PDFs and their pitch decks and everything on our platform, and they could drive their investors to our platform. We launched it June 2018. 14 paying customers paid us $5,750 a

Nathan Latka

04:01June of what?

Gui Costin

04:02>> June of 'eighteen.

Nathan Latka

04:03Okay.

Gui Costin

04:04>> So we launched it and they all said, Where are all the investors? And we said, well, we thought you were going to bring some. Well, essentially they were not happy. So as the summer went on of eighteen, I finally looked at our investment sales team. We're eight people strong. We have a weekly meeting. I said, what if we just invite all those 14 firms and their salespeople to listen to our weekly sales call? And our sales

04:27>> team was like, wow, it's kind of weird, but okay, cool. Yeah. And we'll share all this information. Great. I said, well, they are paying us. We'll just share some information. So we did that. We invited a bunch of prospects as well. Well, everyone loved the call, so we did it again the next Friday at 11:00. This is like 08/24/2018. So we did that. But what we did is we brought on an allocator from like Harvard or

04:48>> from the state of California and interviewed them. You'd learn all about their platform. We then covered a city. We'd cover Boston or Chicago or New York. Go through all the investors in that city. We then cover a key account. Again, it could be JPMorgan Private Bank who's got, you know, a trillion and $0.5 under management, and we help people navigate. Well, it was a total grand slam. We actually were selling licenses to that call. Like, we

05:13>> made it into, like, The Tonight Show, like a true webinar. And it's so industry specific, we're sharing, like, this deep, deep level of information that's ideal for a salesperson. Well, what they said is they said, hey, can we have all that information, names, phone numbers, email addresses of all the people you're talking about? We're like, wait a second, that's our database. That's the goose that's laying the golden eggs. And I finally looked at our team and

Customer Number One and Launch in April 2019

Gui Costin

05:35>> I said, listen, I don't think the first content platform that we built was going to go anywhere. What if we sold access to our database? It'll make our data better. We'll be able to hire a data team. They can improve it, so it'll be great for our sales team because we'll use the same data. Customer number one, we launched on 04/01/2019, was a health care firm, Plavati. And thank goodness they did it. They got us launched.

06:01>> Now, right, two and a half years later, we're growing really quickly. And so, you know, I'd say the most important thing is not so much that we're growing quickly, which is cool. And I think it's a it's a great business. We're adding tremendous value to our customers lives and their business lives. So what was

Pre-2019 Revenue Model: Commission-Based Fundraising

Nathan Latka

06:17if 2019 was the first said you found us in 2006. How did you make money between 2006 and 2019?

Gui Costin

06:23>> We raised $40,000,000,000 and we get a percentage of what we raised on the $40,000,000,000

Nathan Latka

06:26What percent usually?

Gui Costin

06:28>> It kind of ranges from 7% to 20%.

Nathan Latka

06:32You take in seven to 20% of $40,000,000,000 raised?

Gui Costin

06:35>> No, no, of the fees off of 40,000,000,000.

Nathan Latka

06:38I don't know the fees. What are the fees?

Gui Costin

06:39>> Let's say the fees could be 50 basis points. So that would be, let's say, 200,000,000 and then we would get a percentage of the $200,000,000

Nathan Latka

06:48I see. Okay, got it. So you would get 7% to 20% or 10% to 20% of the $200,000,000 right? So about 20,000,000 to $40,000,000 something like that.

Gui Costin

06:56>> And it's paid.

07:00>> We get paid on the come, right? It's commission based deal. So if we generate the revenue, then we get paid a fee. And that's standard in the industry. It's where the industry works. So if you deliver a thousand dollars as a salesperson, you get paid a percentage of that thousand dollars.

Nathan Latka

07:19Totally understood. Yes. So that was the model pre 2019. Then you launched platform for '19. Now there's 400 firms paying for that platform at twelve, thirteen thousand ACVs. Do you still take a 20% of the fees on money that you raise?

Gui Costin

07:33>> No. So two completely separate businesses. One

Nathan Latka

07:36is We still run both.

Gui Costin

07:38>> We still run both.

Nathan Latka

07:39So how much did you raise in my COVID year, 2020?

Gui Costin

07:42>> About $4,000,000,000

Nathan Latka

07:44Was it higher or lower than 2019?

Gui Costin

07:48>> It was probably about the same.

Nathan Latka

07:50That surprised you at all or was that what you expected?

Gui Costin

07:53>> No.

07:56>> Listen, if you're in the right strategies during COVID, like what did really well in COVID, all the growth stocks, right? Asset Light, Zoom, all of that stuff did great. The Googles, the Amazons, everything, all the tech companies, the traditional value businesses, energy, airlines, all of those cyclical type businesses got annihilated. It just really depended, You did really well and raised a lot of money if you just happened to be in the right end of the market.

Nathan Latka

08:22Interesting. And how much do you think you'll raise this year?

Gui Costin

08:27>> Probably a little bit less than that, just because that, in some ways, kind of goes in lumps, if you will. And I would say we'll probably raise between 2,000,000,000 and $3,000,000,000

Nathan Latka

08:39Okay. So that business is slowly declining while the other one is growing.

Gui Costin

08:44>> Right. But it's still on a big base. It's still on a big base and growing, and hopefully we'll have that business for the next twenty years. We love that business. The other business, though, is completely independent. It's software licenses to data, and we're growing that business. It complements the other business, but they're completely separate. Obviously, one complements the other.

Customer Growth: 200 to 402 in One Year

Nathan Latka

09:06What did that database business do last year?

Gui Costin

09:11>> I think we doubled in size, so we went from 200 this time last year to 400.

Nathan Latka

09:16Per month?

Gui Costin

09:18>> No, no, no, no. I mean, in total contract signed.

Nathan Latka

09:22Got it. 200 customers last year to 400 now today. Now, but if I take 400 today times that ACV you mentioned earlier of 12.5, right? What is that? That's like a $5,000,000 run rate on the database business. Is that right?

Gui Costin

09:33>> Yeah.

Nathan Latka

09:33Today?

Gui Costin

09:34>> Yep. Exactly.

Nathan Latka

09:35Anyway, it was up to $2,500,000 run rate about a year ago?

Gui Costin

09:38>> Yeah. I wouldn't say a little less than that, but yeah.

Nathan Latka

09:40Okay. I mean, that's obviously great growth. Where is the growth coming from? Is it expanding seats on historical accounts or adding new accounts altogether? Adding new accounts. Where are you finding them? What's the process look like?

Growth Channels: Outbound and Dakota Live Webinar

Gui Costin

09:51>> We just built up a really great database of investment firms that we call on.

Nathan Latka

09:56So outbound?

Gui Costin

09:57>> Yeah, it's a lot of outbound. It's a very difficult business to do inbound. But the Dakota Live call that I mentioned to you, that call still goes on today, and that's really how people find out about us. And the word database in our industry is a really dirty word because most data stale. And so to establish your credibility, people come on the Dakota Live call and it establishes our credibility. And so from there, they're like, oh,

10:22>> okay. Wow. What you guys are doing around content creation is really strong. I'd love to talk to you and see what else you guys are doing.

Team Size, Engineers, and Sales Rep Structure

Nathan Latka

10:28What's your team size today? How many folks?

Gui Costin

10:31>> 45 total employees.

Nathan Latka

10:32How many engineers?

Gui Costin

10:36>> One. Do

Nathan Latka

10:37you give your salespeople quota or no?

Gui Costin

10:42>> No. We're targeting five demos a week. It's kind of where we sort of handicap it. And then we have

Nathan Latka

10:48And how many of those people do you have?

Gui Costin

10:50>> 11.

Nathan Latka

10:50So they're doing 55 demos a week, something like that?

Gui Costin

10:54>> Yeah. Ideally, it's not we're not quite this

Nathan Latka

10:57You're scaling to that?

Gui Costin

10:59>> Exactly. Exactly.

Sales Rep Targets

Nathan Latka

11:00Yeah. Interesting. Okay. And so what is there? Like, you've modeled this if you have 11 that you're it's a repeatable process. Like, how much new ARR do you want a sales rep closing new per year?

Gui Costin

11:10>> I would say it has to be between seventy and one hundred contracts.

Nathan Latka

11:15Which is equal to about $70 a month to $100 a month of new MRR.

Gui Costin

11:19>> Yeah, exactly.

Nathan Latka

11:20Yeah. Or about 1,200,000 in ARR per year.

Gui Costin

11:24>> Yeah.

Nathan Latka

11:24Interesting. That's great. Now, have

Bootstrapped and Not Yet Profitable

Nathan Latka

11:26you done this bootstrapped or raised?

Gui Costin

11:28>> Totally bootstrapped.

Nathan Latka

11:29How anti what you're building? I mean, you are the raised guy and you've done this bootstrapped.

11:35That's hysterical.

Gui Costin

11:36>> Yeah. Well, yeah, you would laugh. Like, partner When you raise money, you change the complexion of your business and your company.

Nathan Latka

11:43Right? Right. It's just a totally different discussion.

Gui Costin

11:46>> It's not But would

Nathan Latka

11:47you value the business at today?

Gui Costin

11:50>> Oh, jeez. We're not quite making money right now, which is fine. Our whole goal is to maintain their product quality. So if you're in the data business, it's a really sharp knife because people get on the demo and they ask questions about certain accounts. If you don't have that information or it's missing, you lose all your credibility. We just want to make sure that we have the right construct in place to support the product because if

12:12>> you think about it, all we want to be able to do is be that engine that salespeople rely on on a daily basis to set up meetings with potential investors. So it has to be complete and has to be accurate and has to be updated every day, every second.

Churn and Net Dollar Retention

Nathan Latka

12:24So bootstrap. Okay. What about churn? How do you think about churn?

Gui Costin

12:28>> You know, to tell you the truth, churn is kind of weird because the investment industry, like people do close their doors and good investment firms, people just don't want to manage money anymore. They leave. So the churn has been mostly through other mergers or through, we've only really had one firm to say, you know what? I don't want to renew. And they make a comment and you're like, okay, your data isn't complete. We're like, listen, as

12:55>> I always tell our team, no matter what you do in life, there's always haters, right? You just got to put a smile on your face and just go find new.

Nathan Latka

13:02But what's the number, though? Like, what's the can you quantify churn?

Gui Costin

13:05>> Oh, yeah. It's like probably like 3%.

Nathan Latka

13:08Per month or per year?

Gui Costin

13:09>> Year.

Nathan Latka

13:10Okay. Got it. That's not bad at all. And do you have more than three percent expansion? So your NDR is above 100%?

Gui Costin

13:14>> Yes. Yeah. Yeah. As we renew, we're adding additional user licenses.

Nathan Latka

13:20That's where are you way above 100% in terms of net dollar retention?

Gui Costin

13:22>> Probably 115.

Nathan Latka

13:24Okay. Got it. So you're expanding 18% to make up for that 13% hole and get to 115 net. Very cool. Interesting. Hey, great model here. What's next? You're going stick with this product for a while or anything on the pipeline?

Product Roadmap and Salesforce Integration

Gui Costin

13:34>> No, we're sticking with this and it's working on integrations. Like we've got a great integration with Salesforce. We're adding a bunch of additional data sets. We have a few other products in the pipeline, but nothing that I don't want to get too distracted right now. Our biggest thing is just making sure we're serving our existing membership base so they're getting value, right? Because if they're not getting value, then we're not going to go anywhere.

Nathan Latka

13:57Of course. Do you own a 100% of the business? Right now, yes. Oh, wow. That's incredible. Okay. Own a 100%. No co founders. I love that. It's rare.

Gui Costin

14:04>> And it's been fun now. Now we're very collaborative as a team. Like, we're probably as team based as you can imagine. Now I end up making, you know, someone has to make the final decisions, but culture is by far and away the most important thing that I deal with every single day and making sure it's an amazing place to work. People like coming to work, they feel challenged, they feel like they can grow. That's been the

14:26>> case since 'eight when we first started hiring people.

Nathan Latka

14:28If PitchBook comes to you today and offers you $40,000,000 all cash out front to sell the business, do you sell?

Gui Costin

14:34>> No. No. Even one guy made a comment like, the thing that makes the product great is that we're in it and using it. And it's like this culture right now. So no plans to sell right now, but exactly, PitchBook would be like a direct

Nathan Latka

14:4840,000,000 all cash upfront is a lot of money for 10x multiple.

Gui Costin

14:53>> I know, but right now, we're super content with growing because I still think there's a lot of growth ahead and I think there's a lot of value that we deliver. And it's one hell of a fun business to build. And when your customers really like, because we get such great feedback, makes it you feel good. And I think we've got a lot more room to run and a lot more value to add.

Famous Five and Closing Advice

Nathan Latka

15:12Yeah. All right. Let's wrap up with the famous five number one favorite business book.

Gui Costin

15:16>> Oh, gosh. I read so many. Goodness. Know, I'll say Good to Great.

Nathan Latka

15:22Number two, is there a CEO you're following or studying?

Gui Costin

15:26>> Chris Lockhead, most favorite guy on the planet.

Nathan Latka

15:29Number three, what's your favorite online tool for building a business besides your own?

Gui Costin

15:33>> Salesforce.

Nathan Latka

15:34And number four, how many hours of sleep do get every night?

Gui Costin

15:38>> About six.

Nathan Latka

15:39Okay. It's not bad. What's your situation? Married, single kids?

Gui Costin

15:43>> Married, a 20 year old, a 19 year old, and a 17 year old.

Nathan Latka

15:45Busy guy. How old are you?

Gui Costin

15:47>> I'm 54.

15:48>> 54.

Nathan Latka

15:49Last question. Something you wish you knew when you were 20.

Gui Costin

15:53>> Best line I've ever had around hiring. Okay. Guy goes, I can deal with no breathing. I just can't deal with bad breath. Okay? The most important thing, the right seats, that whole thing on the bus, you just need to have people that are on team Dakota and are aligned with your values and have no one that's not. If knew that earlier, it would have changed everything. We finally got that concept and things like are so much

16:19>> more fun.

Nathan Latka

16:20Guys, dakota.com, we have 400 customers paying about a thousand dollars per month for their database of over 400 oh, sorry, over 4,500 accounts and 13,000 contacts across pension funds firm and firms in their database. It's the ultimate tool to help you go if you're raising capital. And a lot of folks are using over a 1,200 seats on the platform. Sorry, they went from a $2,500,000 run rate a year ago to $4,800,000 run rate today. Totally bootstrapped.

16:42Gee, the Founder owns a 100%. They're right around breakeven. No plans to sell the business. 45 people today as they look to continue to scale. Gui, thanks for taking us to the top.

Gui Costin

16:51>> Yeah, thanks so much. Nice to see you.

Nathan Latka

16:55One more thing before you go. 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 Central.

17:21Additionally, remember these recorded founder interviews go live. We release them here on YouTube every day at 2PM Central. To make sure you don't miss any of that, make sure you click the subscribe button below here on YouTube, the big red button, and then click the little bell notification to make sure you get notifications when we do go live. I wouldn't want you to miss breaking news in the SaaS world, whether it's an acquisition, a big fundraise,

17:43a big sale, a big profitability statement or something else. I don't want you to miss it. Additionally, if you want to take this conversation deeper and further, we have by far the largest private Slack community for B2B SaaS founders. You want to get in there. We've probably talked about your tool if you're running a company or your firm if you're investing. You can go in there and quickly search and see what people are saying. Sign up

18:04for that at nathanlatka.com/slack. In the meantime, I'm hanging out with you here on YouTube. I'll be in the comments for the next thirty minutes. Feel free to let me know what you thought about this episode and if you enjoyed it, click the thumbs up. We get a lot of haters that are mad at how aggressive I am on these shows, but I do it so that we can all learn. We have to counter those people. We

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