How Detectify CEO Rickard Carlsson grew Detectify to $28.9M revenue and 350 customers in 2024.

hello everyone my guest today is rickard carlson he's the ceo and co-founder of detectify his background is as a geek with msc and applied physics went to management consulting but then back to technology again with again detectify from sweden is that's where he currently lives he lived in multiple countries including the us and india rickard are you ready to take us to the top i am of course good all right tell us about detectify what's the company do and how do you make money detectify what we do is that we crowdsource and scale security information so when a freelance hacker finds a new type of vulnerability they submit it to us we build into our engine and then we run that across our customer portfolio and our customers they integrate detectify in their security processes so more or less you're trying to more or less automate the bug bounty flat bounty world and how do you make money we're selling subscriptions to our customers uh so i mean they pay for our services anything for no 50 50 a month up to a few hundred thousand dollars a year okay is 50 bucks a month pretty average or no no average is about 160 euros i guess that's 180 or something a month is average that's right and who is the customer anything from you know their next door web agency with two three developers to king games spotify trello someone is the whole spectrum from small small smaller organizations to some of the biggest tech companies in the world so let's say trello pays you right there they're obviously paying 180 bucks now why would they need multiple seats or will they just pay 180 bucks it's a different i mean trello is a fairly small organization of course now they're part of atlassian but if you take as a case of spotify is that they have many hundreds of developers etc so every developer needs a seat yeah i don't understand why why don't they just buy one seat because they actually don't pay per seat they actually pay per asset that they want to do security testing on and then we actually don't care how many users they add to the to the platform so more or less they have for any domain or anything that you would like to do security testing on they buy a license how else do you define an asset besides just a domain uh it more or less it it can actually be this you can actually pay for the same domain twice if you want to run it with different settings so it depends if you want to run one authenticated mode where we maybe log into your application and run more or less deeper testing and one that we want to do unauthenticated just doing broad scale coverage and then we also have products for like general domain monitoring we more or less sweep your whole domain infrastructure we have some of them in the biggest dns infrastructure that we test here holds like i think is 80 000 entries so then we want to sweep that on every eight hour so did we have quite a it's a very different pricing for you know the small three-person agency and the big companies because they use the service in very different ways what year did you launch this company in uh we started building i mean first i guess first lines of code was written about four and a half years ago uh but i guess business develop business started i guess four years ago when it started to more or less formalize it as a product and then we started selling the product for real about the year and a half ago okay so between 2014 and caught 2016 before you started selling how are you financing the company are you bootstrapped or have you raised uh raced you raised so we yeah we brought in you know about two and a half million euros in seed funding and then five million euros now we're just recently in a serious a okay so seven million seven point five million euros are about eighty nine million dollars u.s raised yeah yeah and what is the so that initial seed funding right how did you convince people to give you a two-five you know pre-product pre-everything we had some product and we had and you know the early you know first few customers or users in and i think one of the first users was like tumblr or something uh starting to use it and of course that uh was to somewhat day i guess the proof of it but the whole the whole reason why we could do is that that the founding team behind that tactify some of the best white hats in the world so you know they've hacked facebook and google google and dropbox and spot to find clarinet skype and square everything is part of responsible disclosure programs and are some of the best white that's in the world and we say hey we take your knowledge and automate it and you need to believe in this and what have you scaled to today in terms of total customers uh we today we have about 700 paying customers okay uh we are at about one and a half million euro arr yep yep that makes sense right so if i take 700 times 180 i think that comes out to about 126 000 bucks a month which is 1.5 million in arr yeah and what's growth look like so go back a year in june of 2017 how much were you doing then uh it's about three and a half times yeah okay good so so you're doing about call it forty thousand dollars back uh a month back a year ago yeah yeah very good healthy growth where's my where is most of that growth come from is it from expanding you know current customers or adding new ones uh i would say both we have or i mean today on the total we have about if you if you look at the whole portfolio we have more or less a slightly negative churn okay uh if you look at the whole portfolio and then if then if you split it up between long term segment and enterprise segments then there's a slightly negative churn in the or slightly you know we're losing some money in the in the smaller segments uh but then beginning with substantial expansion in the larger segments are you talking like negative one percent negative two percent how negative um yeah in that range if you look at the whole portfolio so said differently we could say you have about a hundred and two percent net revenue expansion year-over-year yeah i got it and um are you uh do you look at a user turn at all are you just really focused on revenue churn we look to some at that use at logo churn but that's i mean on a month-to-month basis logo churn is about two percent two percent yeah that's great and where are you getting most the new customers um i mean if you think geography they are coming from more or less i mean we're selling mainly sweden u.s u.s is the biggest market in sweden and then well as rest of europe uh if you take a majority of our customers coming through inbounds today 80 of our revenues are inbound driven uh through mainly organic traffic we do some small amounts of paid but the majority is inbound on the organic i mean do you have a content team what what are they finding organically your blog yeah yeah we're building conte we have built quite a lot of content before and also we're fairly active in the security community writing about different topics both from and from a fairly technical point of view on a technical blog where we do security research where we find things that are important for the internet i mean our team a few weeks or a few months ago just completely broke let's let's encrypt and then of course we write about okay let's encrypt them what are the what's been and the interactions that we had with let's encrypt and how they fixed it etc and how they responded to things so that they do fairly really deep and advanced content marketing and also security you don't need to try to position your brand as being cool or you need to position your content being relevant because if you write about these things about i mean chrome extensions or slack tokens or let's encrypt media and other outlets will pick it up because it's actually interesting you don't need to try to fake it that you have content to being to spread so what's your team size today and how many of them are focused on content today uh if you're looking back at uh at the in january we were about 20 people today we're about 30 people um today we have two to three people work two people i would say working on content we have a marketing team about four people so when you look at your fully weighted cac including the salaries of those people you just mentioned plus any paid spend what's your fully weighted cat gap uh we haven't updated because we added quite a lot but historically it's in the range of 500 euros or something like that okay got it so you're looking at like a four or five month payback period something like that yes yeah um getting lot of customers pay you know fully up front then yeah then it's uh the annual upfront and then it's good cash flow coming in yeah what do you see time value is sorry what do you assume that your lifetime value is on these customers we don't know actually but today it's about fourth out today if you estimate it's 4 000 euros uh a year ago we estimated to be 2 000 euros uh so everything more it's growing yeah how are you how are you walk me through how you're running that estimation i know just an estimate but what are you multiplying how are you doing it it's just a basic third is 36 months weighted long time lifetime value with the average average order value and the current chart numbers yeah you're taking 36 times 180 a month rpoo gives you 6 thousand bucks plus multiplied by gross margin and then it goes down a little to five...