How Datalab Reached €15M Revenue with 500 Farm Customers and a €20M Valuation (Interview with CEO Andrej Mertelj)

Introduction and Datalab Background

Nathan Latka

00:00Hey, folks. My guest today is Andrej Mertelj. He's a lifelong IT nerd and founder of Datalab, the ERP leader in Southeast Europe. He then did the IPO and caught interest for farming and started development of farm management information systems, now building datalab.eu. Andrej, are you ready to take us to the top?

Andrej Mertelj

00:16>> Sorry?

Nathan Latka

00:17Are you ready to take us to the top?

Andrej Mertelj

00:19>> Oh, yeah. Well Alright. Yeah. Sure.

The Ljubljana Stock Exchange IPO

Nathan Latka

00:22Alright. Very good. So just to be clear, Datalab IPO'd or your prior company IPO'd?

Andrej Mertelj

00:28>> No. Datalab IPO'd, actually.

00:30Okay.

00:30>> We were the first techno technology IPO on the Ljubljana stock exchange. It's rather an essence market or a very sleepy market, so we did not get the bank the bank from the listing that we that we hoped for. This is a this is

Nathan Latka

00:47a stock exchange in Slovenia that you IPO ed on.

Andrej Mertelj

00:50>> Why did you want all the pressure of being a publicly traded company? Why not stay private?

Why Go Public: Employee Stock Ownership

Andrej Mertelj

00:57>> Well, we firmly believe in employee stock ownership, and it was very problematic to do it under the local legislation. Basically, the only way to really put it properly in place was to to go to get listed I see. When we were there. So that was our that was our main, actually, goal. Not so much raising capital, but establishing value of the company.

Nathan Latka

01:25So when did you guys IPO?

Andrej Mertelj

01:28>> 06/30/2008. So 2000? Yeah. Three months before everything going down. So

Nathan Latka

01:36And and what was revenue back in 2008? Do you remember?

Andrej Mertelj

01:41>> I would say 4,000,000. Something like that.

Revenue Growth to €15M

Nathan Latka

01:44And what have you grown it to today?

Andrej Mertelj

01:47>> So today, we're close to 15. And One five? One five. Yeah. And we're stepping up we're stepping up extremely in the last two years. So we hope that we'll be getting in the 50 in probably two to three years.

Nathan Latka

02:06Now before we go too deep on the economics, tell me who's buying this. Is it small farm managers or folks managing thousands of acres of farmland?

Andrej Mertelj

02:17>> Mostly, we were successful with the large farms. What What we found in farming is that it's the basic business principles that are extremely hard to make because you have such a variable environment. You see, when you think about factory, you have a predictable environment, you have everything that's under control, while if you go planning for the farm, you've got all these variables and very complex processes and stuff like that. And that's what we actually wanted to

02:51>> to to simplify, to really get an overview of all the resources in the farm and to help you plan, basically to help you manage your farm the way an industrial production would be managed.

Nathan Latka

03:04And so how many farmers do you pay for you today?

Customer Base and Largest Farm

Andrej Mertelj

03:09>> So I would say that we have roughly 500 farms, but our I think our biggest is 120,000 hectares. So sorry about

Nathan Latka

03:20That's your largest. And so what the largest customer, what do they pay you per year?

Andrej Mertelj

03:27>> We we price our software per per asset. So basically, you would be paying us per per cow or per flock of sheep or per hectare of of land or orchard or something like that.

Per-Asset Pricing Model

Andrej Mertelj

03:45>> We're charging depends on the market where but where would we would be charging from 1 to €1.8 per hectare per per month.

Nathan Latka

03:55Oh, what's going on there, YouTube? Good to see you guys. Now imagine this. You love watching these interviews with SaaS founders, but imagine if we took all of the valuation data out from over 2,807 interviews I've done manually. Saves you a lot of time. Well, we've done this. We've built it into the beautiful interface inside of Founderpath. Check this out. I'll show you how you can access this in a second, but you log in, you connect

04:18your Stripe account, you see your valuation real time. You can see what it changed over the past eighty eight days and even set goals for valuation this year. Now the secret evaluation is there's many different ways to value a SaaS business. So the reason you're gonna see three or four different valuations inside of your Founderpath dashboard, this is all free by the way, is because depending on who's doing the buying of your SaaS company, you're gonna

04:42get a different valuation. A VC is gonna pay a different valuation. Private equity firm is different. If you're gonna do a minority sale, that's different. And if you sell the whole business, that's a different valuation. You can see all those when I hover over here, Right? So the teal is what a VC would pay. Yellow is what private equity and red is if you sold the whole thing outright. Now what's cool about this is this is

05:04not built off random data. Again, you guys hear these interviews on YouTube. All these datas are built from real time valuation data points founders share with us on the show. So traction, 1,200,000 seed round, 3.7 raise. They sold 22% of their business. Go in here and filter by the event. Maybe you only wanna see companies that have sold the whole business. Well, here are a bunch that have been acquired, the valuation and the multiple. Maybe you're

05:30going out right now and you're raising your seed round. We'll go in here and look at all this recent seed deals that went down, what they raised, what valuation they raised at and what percent that they sold. There's never been a larger dataset of SaaS valuations than what you can get now inside of Founderpath. And we're thrilled to bring it to you. All right, We're gonna go back to the YouTube video here in a second, but

05:52if you wanna check this tool out, if you wanna jump in and sign up, you can check it out for free to get your valuation at this link. This link, founderpath.com/products/valuations. Or if you go to founderpath.com and hover over products, click on get your valuation here, and go ahead and sign up to give it a whirl. Again, all that valuation data live right inside the platform. I hope to see you there. Alright. Let's jump back into

06:18the interview. So can we take a 120,000 hectares times 1.8 times 12? The biggest customer pays you 2,500,000.

Andrej Mertelj

06:27>> Well, it was the first customer, so it's quite discounted.

Nathan Latka

06:32Ah, I see.

06:33>> Yeah. So

06:33so, I mean, do you have anyone paying you more than 1,000,000 per year?

Largest Contract Value

Andrej Mertelj

06:36>> No. We don't have anyone. So the largest largest invoices, we have projects that we're that we're making are 100,000 per year or something like that.

Nathan Latka

06:46Okay. Okay. Got it. That makes sense. And and any I mean, you're now public. Any plans to go private again? Are there any advantages to going private?

Plans to Go Private

Andrej Mertelj

06:55>> Yeah. Just just in the process of of taking the company back private.

07:01>> And gotten some investors and then scaling up.

Nathan Latka

07:07How much do you have to raise to take the company private?

Andrej Mertelj

07:11>> 4 to 5 would be the

Nathan Latka

07:134 to $5,000,000?

Andrej Mertelj

07:16>> Yeah. It was 4 to 5,000,000 plus

07:19>> what we have spare actually for the stock buybacks. We would be able to remove almost the complete free float from the market and delist the company.

Nathan Latka

07:31I see. So and how much cash do you guys currently have on the balance sheet?

Andrej Mertelj

07:37>> I can only tell you. I don't I can't tell you currently, but I think in the last quarterly report, it was 3.5 or something like that.

Nathan Latka

07:46Okay. So 3.5 of your own cash plus raise 4 or 5,000,000, then you could use that money to take the company private?

Andrej Mertelj

07:53>> Yeah. With with with this.

Nathan Latka

07:55Interesting. And so what I mean, why why do that? You went public for a reason. You don't like it. Now you wanna go private. What didn't you like about being public?

Andrej Mertelj

08:05>> Well, first first of all, being public on on a backcountry market is not the way to go. And we thought that the the financial markets will consolidate, and we basically hoped to get the backboard to also to some larger stock exchange, that either the Vienna Stock Exchange will buy, that's the Ljubljana Stock Exchange, and we would be automatically listed in stuff like that. Unfortunately, by after 2008, everything went south, and those plans did not materialize. We

08:41>> did not establish full potential. We were stuck on an illiquid market, and that became a hurdle to our raising capital because, again, being public in an unknown foreign market with unknown legislation decreases your enterprise value.

Bootstrapping and the 2010 Raise

Nathan Latka

09:00Mhmm. When did you start the company? What year?

Andrej Mertelj

09:04>> '96.

Nathan Latka

09:051996. Wow. So you you you did you bootstrap it from 1996 to 2008?

Andrej Mertelj

09:15>> 1996 to 2008, we were we were working on ERP systems for small and mid medium sized businesses, carry a lot of similarity for with the Yeah.

Nathan Latka

09:25My my question, though, was did you bootstrap or did you raise capital in that time?

Founder Equity and Ownership Structure

Andrej Mertelj

09:28>> No. We we completely bootstrap. Actually, I went bankrupt in '94 with my previous company. So, actually, we were not even credit I I was deemed not credit worthy. So it was basically the last paycheck, a garage to computers, and and a lot of will.

Nathan Latka

09:48Why'd your last company go bankrupt in '95? What was the name of the company?

Andrej Mertelj

09:52>> We we did wholesale of computer chips, and and as it was fashion that day, we assembled PCs, personal computers, importing from Taiwan, assembling and selling the fixed computers.

Nathan Latka

10:08And what why go bankrupt?

Andrej Mertelj

10:12>> We then well, 70% of our revenues came from brokerage of computer chips. We just loaded up for the Christmas season, and then Hyundai and Samsung are announced a new factory of chips and the price went the price halved while our chips were on on the on the flight. That that was the tip of the iceberg. But, basically, we were much too leveraged.

Nathan Latka

10:41I see. I see. Interesting. Okay. So you launched a new company in 1996. You boot strap it. And then how much did you raise when you IPO ed?

Andrej Mertelj

10:49>> We did not raise we we raised zero on IPO. We we simply listed because we wanted to have this valuation. But we did in 2010, we we raised the first million for the farming. So first, we raised it by the Swiss private investors, and with them on board,

11:12>> we we raised it via secondary stock offer.

Nathan Latka

11:16Interesting. So do you I mean, do you personally still own the majority of the business then?

Andrej Mertelj

11:23>> I'm the biggest shareholder here, but I don't own the majority.

Nathan Latka

11:26Why not, though? If you didn't raise any when you IPO ed, and then you only raised 1,000,000, and you're now doing 15,000,000 in ARR, I mean, shouldn't you as the founder own 95% equity?

Andrej Mertelj

11:37>> No. I actually well, first of all, 30% was given to to my colleagues, the employees that helped us bring to to this. And then you have roughly a 10%. You have you have outside investors. And so I was basically on 60, then I truncated that spin off

12:05>> of a philanthropic foundation. I was quite active in that one, and there went another 20%, and so I'm with 30 something.

Nathan Latka

12:17Okay. Well, that's that's not that's not terrible. Yeah. Yeah. So okay. So you you now when you take this back private, you are you're are you buying out the investors right now that own 10% and replacing them with new investors? Is that how that works?

Andrej Mertelj

12:32>> Probably. I would probably buy a lot of also a lot of employees and ex employees.

12:41>> And

12:44>> the small the smallholders. And also, we our shareholders are basically a banking fund that needs to exit if we exit the stock exchange and we cease to be a public company.

12:58I see.

12:58>> So this this is the pool of of of shares.

Nathan Latka

13:01How many folks are full time at the business today?

Andrej Mertelj

13:05>> Roughly 200 directly.

Nathan Latka

13:07200. Okay. How many engineers?

Andrej Mertelj

13:11>> Development would be 95.

Team Size and Reseller Network

Nathan Latka

13:13Okay. Wow. That's a lot. How many salespeople?

Andrej Mertelj

13:20>> 20 something, but we have a strong reseller network.

Nathan Latka

13:26Tell me about that.

Andrej Mertelj

13:28>> Well, we we we're partnering with with anybody that brings value. So our natural partners would be accounting services, then the subsidies agencies.

Nathan Latka

13:39How do you find accounting services that specialize in farming?

Andrej Mertelj

13:44>> Well, first, you go to the rural areas. There that's where it happened.

13:53>> We were we were quite known from within the accounting community by our small business ERP, and so it was easy to speak to them.

Nathan Latka

14:02I see. Okay. That makes sense. Very interesting story here. Okay. So go to market is that way now. When when an accounting firm resells your products, what kickback do you pay them on the 30,000 a year contract? Do you pay them 10%, 20%?

Andrej Mertelj

14:17>> It's a bit

14:20>> It's somewhat more in the first year and a bit less in the second and third year, and then it ceases.

Nathan Latka

14:31Does it ever stop or does it is it go on forever?

Andrej Mertelj

14:33>> Yeah. No, no, no. It stops. Perpetual perpetual commissions are are a killer for the business because they sooner or later, your partner will

Reseller Commission Strategy

Andrej Mertelj

14:47>> start treating that investment as a pension fund and will lose incentive to to sell more, and it's a death spiral.

Nathan Latka

14:55Mhmm. So just to be clear, you stop kickbacks in year three?

15:01Yeah. Yep. Yep.

Andrej Mertelj

15:04>> Year year one or year three, it it really depends on on on deal to deal. It also depends on the uptake. You cannot or usually you don't implement our system in a big bank. You would start first getting the materials under control, the quantities, then go into the fixing ordering, then HR and stuff like that. So you it it would be an onion. And depending on that onion, we would also give you a commission plan.

Nathan Latka

15:39What's the company valued at today?

Andrej Mertelj

15:44>> Stock exchange value is, I would say, in the low twenties.

Nathan Latka

15:49So if someone offered you $20,000,000 all cash upfront today to sell the whole business, would you sell?

Andrej Mertelj

15:55>> No. Absolutely not.

Nathan Latka

15:57And why not if that's what it's valued at right now on the stock exchange?

Andrej Mertelj

16:01>> Because well, several several things. First, I I believe that the the business is worth much, much more.

16:11You look

16:11>> at we our

Profitability and Growth Rate

Andrej Mertelj

16:13>> have a 3.5 mil after tax profit on a 5 mil cash flow, which is seriously cool numbers. We're growing 30%, so 15% to 30% year on year, and we plan to really

16:33>> put the pedal to the metal in the future years. That would be I simply believe in the strength of the company and on the possibility to really revolutionize this. I've not seen many solutions like ours in the market.

16:51>> Are more second The dirty details that that we're capable of handling are really what I think that makes the progress of the software. And also, would not be selling the whole company because frankly, I do not know where to invest.

Nathan Latka

17:08Mhmm.

Andrej Mertelj

17:10>> Mean, you have a you have

Nathan Latka

17:11a you have a philanthropy. Right?

Andrej Mertelj

17:13>> Yeah. Mhmm.

Nathan Latka

17:14I mean, if someone sells you if someone offers you 30,000,000 all cash upfront today. Right? 20% of that's gonna go to your philanthropy. All your investors get a great exit. Your employees get money. That's great. That's 30% there. You personally make 30% of the 30,000,000. Would you sell for 30,000,000 all cash upfront today? No. What's the number?

Famous Five: Books, Tools, and Life

Andrej Mertelj

17:37>> No. That that I I think I would I would be violating a lot of regulations if I would give the major the major shareholder would tell you their market.

Nathan Latka

17:49You're

17:50probably right.

Andrej Mertelj

17:52>> I'm I'm really sorry about

Nathan Latka

17:54Let's wrap up with the famous five here. Number one favorite book.

Andrej Mertelj

17:58>> My number one favorite book, The Mars Trilogy.

Nathan Latka

18:03The Mars Strategy?

Andrej Mertelj

18:05>> The Mars Trilogy. Red Mars and Green Mars. Would say that.

Nathan Latka

18:11Number three.

Andrej Mertelj

18:12>> And number two, is there a CEO you're following or studying?

18:17>> Used to. Now, frankly, I would I would rather go reading and following philosophy or something like that than the CEOs.

Nathan Latka

18:25Number three, what's your favorite online tool for building Datalab?

Andrej Mertelj

18:30>> My favorite online tool for building Datalab? Jesus. I would be so nineteenth century if I told Excel. Mhmm. That's okay. But I I think, you know, I I'm a fan of our models, and I I love my Excels. Sorry.

Nathan Latka

18:47Number four. How many hours of sleep do you get every night?

Andrej Mertelj

18:52>> Up until three years ago, so last twenty five years. Last twenty years were hundred hours a week. The last six, seven years are, I would say, seven. Seven. I I really scaled down. And The company is so

Nathan Latka

19:11No. No. How many hours how many hours of sleep do you get per night?

Andrej Mertelj

19:15>> Sleep. I would say seven.

Nathan Latka

19:18Okay. And what's the situation? Married, single, kids?

Andrej Mertelj

19:22>> Divorced, but single father.

Nathan Latka

19:25Any kids?

19:26>> Single.

19:26One kid?

Andrej Mertelj

19:27>> Two, actually.

Nathan Latka

19:29Two kids. Okay. And how old are you?

Andrej Mertelj

19:34>> Oh, ancient. 52.

Nathan Latka

19:35That's not ancient. You're young. Alright. Last question. Something you wish you knew when you were 20.

Andrej Mertelj

19:40>> Something? I'm sorry?

Nathan Latka

19:42Something you wish you knew when you were 20 years old.

Closing Remarks

Andrej Mertelj

19:46>> How to get my temper under control.

Nathan Latka

19:49You have a temper?

Andrej Mertelj

19:51>> Oh, Jesus. Huge.

Nathan Latka

19:53I haven't seen it. Alright. Fair enough. Guys, there you have it. Datalab.ch launched in 1996 after his first company went bankrupt in 1995. He learned a lot. Datalab is helping farmers manage their hectares, their orchards, their cows, their sheep. That's what they price off of. One of those units of measurement. The average farmer pays him $36,000 per year. They're doing $15,000,000 in revenue today, from 12,000,000 a year ago, and up from 4,000,000 back in

20:142008 when the IPO'd on the Slovenia Stock Exchange. He's now raising 4 or $5,000,000 to try and take the company private so he can unlock additional value. He thinks the company's worth way more than $30,000,000. We'll see what happens next. Andrej, thanks for taking us to the top.

Andrej Mertelj

20:28>> Nathan, thanks for having me. Goodbye.

Nathan Latka

20:32One 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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21:41up for 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.

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Andrej Mertelj

22:07>> See you.