How Distro Reached Just Under $1M Annual Rake Run Rate Helping SaaS Companies Hire Engineers Globally (Interview with CEO Chad Ingram)

Introduction: Chad Ingram and Distro

Nathan Latka

00:00Hey, folks. My guest today is Chad Ingram. He's had two successful exits. His last one was called Jump, a customer engagement application acquired by reputation.com. He quit school during his final semester to become an entrepreneur, and he's never looked back. He's the founder and CEO today of a company called distro.io. He's got two kids and an incredible wife. He's an off road race car driver and loves to solve problems using technology. Chad, you ready to take

00:21us to the top?

Chad Ingram

00:23>> Yeah. Yeah, for sure. For sure. So are

Nathan Latka

00:25you a software engineer by trade or no?

Chad Ingram

00:27>> No. So when I when I quit school, I immediately started teaching myself, time YouTubing and just buying books and, quickly learned, like, though I could do it, I was slow and it just wasn't for me. So I hired so I hired developers.

What Distro Does: Global Developer Marketplace

Nathan Latka

00:42Interesting. So what is Distro and what are people paying me, paying you for?

Chad Ingram

00:46>> Yeah. So Distro is essentially a marketplace for American tech companies, now American tech companies to, to hire qualified software developers around the globe and to be able to pay them. So Distro itself is a marketplace where you could find and hire. And our technology is really based around the payment infrastructure to be able to issue payments to other countries.

Customer Example: Hiring Developers Through Distro

Nathan Latka

01:11Okay, so tell me, give me an example of a customer using you and how they might issue payments to other customers.

Chad Ingram

01:15>> Yeah, so let's say a customer is a VC backed tech company and they've got a team of 10 software developers and they're struggling to keep them, they're struggling to afford them, they're struggling to find anybody to apply here in The US and so, but they also don't want to hire a dev shop. See, we're the alternative to a dev shop. So their only option is, you know, before Distro is to go hire a dev shop. And

01:40>> so, but you know, that comes with a lot of disadvantages like, you know,

01:46>> lack of control, you don't know who you're hiring, they're not, you know, they're not like in your team infrastructure, they don't really understand the purpose of the products they're building, things like that. And so anyway, let's say you want to hire five more developers. So you would be able to use Distro and to, you know, do your own interviews and decide if a team member is the right team member for you. And once you make a

02:07>> hire, that hire is placed through Distro. We don't have any like long term agreements, just a user agreement. And so you would simply hire five developers after you've interviewed them and found that they were a good fit for your team and they work directly for you. And so we

Nathan Latka

02:22And how do you guys make money in this model?

Business Model: Rake on Developer Payroll

Chad Ingram

02:24>> So what we do is we take a rake off of the payroll number. So when a developer is introduced to one of our customers, they just see one, you know, automated number to say like, all right, this is the cost of this developer. And that's the all in cost. And so they don't have to worry about like a subscription fee or payroll taxes or anything like that. So they just say, all this is the, you know,

02:47>> the one person and this person is, let's say 11,000 a month and they've got Is that the average

Nathan Latka

02:52of the jobs you've placed? Is it about $11,000 a month?

Chad Ingram

02:55>> I would say, yeah, between 11 and 12, you know, depending on experience. So these are some very high quality people, you know, like we just recently had, you know, a tech startup that hired somebody who was working for Coinbase, but through a dev shop.

Nathan Latka

03:10And so how much of that 11,000 will you keep?

Take Rate and Geography

Chad Ingram

03:14>> So we'll end up keeping it, it depends on the geography. So usually Asian countries and India, can take a little bit more, but it really just depends on the geography, but we try to get to 25% generally.

Nathan Latka

03:29Okay. Okay. So you're taking about, you know, maximum three K on an $11,000 a month person that's a developer or someone hired through the platform?

Chad Ingram

03:37>> Per developer per month. Correct.

Nathan Latka

03:39On forever and perpetuity?

Chad Ingram

03:41>> Perpetuity. Yeah. That's a lot.

Nathan Latka

03:43Do people mean, so it kind of is a subscription fee in that sense that it doesn't end or do people only hire these developers for three months and they stop?

Long-Term Full-Time Placements Only

Chad Ingram

03:50>> Great question. So we only do long term full time work. So if your intention is to find somebody for two months to do a quick widget or something, then we're not a good fit. You know, these developers are willing to leave because these are incredibly high quality people. They're leaving a great career where they're working

04:11>> you know, but they, you know, solving for the developers, they really wanna work directly with the tech company in The US. They don't wanna go through a project manager, you know, in their country at a dev shop. They want to learn from the CTO.

Nathan Latka

04:23Oh, 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 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 your

04:47Stripe 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 get

05:11a 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 not

05:33built off random data. Again, you guys hear these interviews on YouTube. All these datas are built from real time valuation data points founder 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 going

05:59out 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 if

06:21you 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 the

06:47interview. So how how many companies today do you actively have at least one developer, you know, inside of?

Customer Count and ARR Run Rate

Chad Ingram

06:54>> I think we're 11 or 12.

Nathan Latka

06:57We started

Chad Ingram

06:58>> so I we founded the company last fall and so we're less than a year out and then we started selling like earlier this year And it's going really well. So we're just a hair under 2,000,000 of ARR currently.

Nathan Latka

07:12That's great. So let's just reverse engineer that math, right? So 12 folks, how many live developers do you have right now into those 12 companies?

Chad Ingram

07:19>> Good question. So we are 25 or so, 25 or 26. Okay. 25 or 26.

GMV vs. Rake Revenue Distinction

Nathan Latka

07:26And so I guess you're getting that run rate because you're taking 26 times, you know, 2,500 per each one. You're doing $60,000 to $70,000 a month

Chad Ingram

07:35>> That would be revenue, top line. So that's the full marketplace charge. So like the full salaries and everything. So the way we recognize revenues, we take the whole thing in.

Nathan Latka

07:44Oh, that's GMV. Yeah.

07:48A little on the edge. But meaning, it's look. If you're if you call yourself a marketplace, the the term for that is obviously GMV. But your cut, your rake is you're doing about you're almost at a million dollar rake run rate.

Chad Ingram

07:58>> Yeah. You're exactly right.

Nathan Latka

08:00Yeah, yeah.

Chad Ingram

08:01>> It's just been kind of an interesting conversation with some VCs that we started to meet with about, you know, how GAAP plays into this. Like, do we, you know, because we don't escrow the whole money, we actually receive everything. And so because of that, technically we do have to, you know, recognize the whole thing, but then that plays on valuations, like how does that mess with the valuation? If we look at the entire gross number, you

08:26>> know, as revenue versus the take on everything. So we'll see how it shakes out, you know, as we haven't raised institutionally.

Nathan Latka

08:34What valuation numbers are folks throwing in front of you?

Chad Ingram

08:38>> That's a good question. I don't know if I should answer that question because we're in process right now, but

Nathan Latka

08:45Well, it's only gotten worse over the past three months. Mean, I'd be shocked that it's gotten better.

Valuation Conversations and Fundraising Plans

Chad Ingram

08:49>> You know, yes, but I would say it got the worst a month ago. Everyone was the most spooked a month ago. Right now, everyone's like kind of, well, all right, the market has stopped really falling and we're just kind of sitting and waiting. And then most of the early stage investors are saying, well, it's affecting the late stage guys. It's not affecting us so much, but I will say this, multiples are down. We all know that.

09:13>> So multiples are down. So, you know, I think that it's gonna settle, you know, somewhere between 15 plus at this stage.

Nathan Latka

09:20How much is 15,000,000 — post-rev, post-money?

Chad Ingram

09:24>> Pre money. Yeah.

Nathan Latka

09:25Pre money. How much are you looking to raise?

Profitability and Team Structure

Chad Ingram

09:28>> So that's a good question. So we think that three will get us to where we need to go. We could definitely take a smaller number because, know, a little bit more context, we're profitable right now.

Nathan Latka

09:41You know How profitable, if you don't mind me asking, how much goes to the bottom line monthly?

Chad Ingram

09:44>> So we'll net, you know, 15 to 20,000 a month right now.

Nathan Latka

09:47A month. Okay. That's pretty good.

Chad Ingram

09:49>> Yeah. So what like, well, one of the advantages that we have is that we can utilize our own infrastructure, you know, to save money with a global team. And so though we have a, you know, we've got a, you know, decent headcount here in The US for our size, it's like five or six of us, you know, one person's part time, but then we also have team members also, you know, offshore, near shore, know, through Distro.

10:11>> And so we can take advantage of those same economics. And so our payroll number is significantly lower than somebody else in our same, you know, phase.

Nathan Latka

10:21And so there's five of you full time today though?

Chad Ingram

10:23>> Yeah. Yeah. Well, in The US, and we have three

Nathan Latka

10:27How many total?

Chad Ingram

10:29>> So there would be eight of us so far. Eight.

Founder Equity and Personal Investment

Nathan Latka

10:32Okay. Are you the sole founder? You own a 100%?

Chad Ingram

10:35>> So I have two co founders and great co founders. Last company I founded, I owned I owned the whole thing initially, and that was a little stressful. I should have had co founders. So I've got two great co founders, CTO and a COO.

Nathan Latka

10:49You split equity evenly or that you have a little more?

Chad Ingram

10:52>> No, I have more for sure.

Nathan Latka

10:54Okay. You have more than both?

Chad Ingram

10:58>> For sure. So I initially funded the company, you know, I brought them in after, you know, kind of developing the idea initially, but they're really great people. And, you know, both of them were kind of at that point where they're like, I need to go do something that I've got ownership of as opposed to just joining the employment line. They've done really well. They've been

Nathan Latka

11:15How much have you put in, did you put in personally to the business? If don't mind me asking.

Chad Ingram

11:18>> So about $2.50 is what I said. Okay.

Nathan Latka

11:21How did you get so like, people are gonna be wondering, where did well, where did I get all this money from originally?

Chad Ingram

11:26>> For me? So I sold two companies prior to this.

Nathan Latka

11:30So you go.

Chad Ingram

11:31>> Yeah, racing isn't cheap either.

Nathan Latka

11:34Yeah, yeah, yeah.

Chad Ingram

11:35>> Yeah, yeah. So great lessons learned, you know, it had, you know, yeah, was great lessons learned, I, you know, we sold right before the pandemic and then like was forced to just kind of be at home. It was like, all right, now we're going to be home with the family. So great. Yeah, interesting. You know, we got really, really bored and I was like, no, we got to do this again. And I had this idea because,

11:58>> you know, so much of my network, they're just struggling so bad. I mean, you know, talking to a friend who, well, this is actually one of my co founder's friends, but he's founder of another company and he had a senior software developer. It wasn't even like crazy. He had like seven, eight years of experience and he was making like 150,000 and he got picked up by Twitter for over $300,000 to work remotely in the same geography.

12:21>> Like how do you, you can't compete with that. Like there's really nothing you can do about that and it's only getting worse.

Nathan Latka

12:26So how are you able to get those engineers? Just because you're going to India or Argentina or somewhere else?

Sourcing Engineers: South America vs. India

Chad Ingram

12:31>> Yeah, so we're finding so our first cohort of customers like earlier this year, we suspected it was gonna be more of a cost play. So we started going to India, you know, really seeding our database to get more applicants and developers. But what we found is that it wasn't a money thing. Though they're saving money, they were really concerned about, you know, just getting the right team members with the right experience and time zones. So we're finding

12:58>> that most of our customers right now are, and the ones who are in process to hire because we have more that haven't hired yet. There's like another six or seven right now we're working with on that side And they're focused on South America. So we've been really successful in South America, but it's more expensive for sure.

Nathan Latka

13:18Yeah. I guess, yeah, interesting. What I'm trying to figure out is like the way you describe the business, part, you're part remote.com, which we use, That's for managing our whole team in any country around the world. But they don't help us hire Yeah. But they don't help us hire and find engineering talents. Like the other side of your business is like part recruiting firm effectively. I assume you do onboarding and tests and you do like ERP

13:38related stuff or like applicant tracking systems, sorry, sorry stuff, right?

Chad Ingram

13:43>> Kind of like, so our product is getting

13:46>> like, we're in process to build some of that. So there's some like ATS, like basic features, but we're not wanting to build like a full CRM for that. Like it's, we're trying to keep it as essential and simple as possible. Like we don't want to chase a lot of different product, you know, themes. And so, you know, for us, like it's like, all right, nail the complication of hiring somebody, like getting an offer onboarding, that sort

14:09>> of thing, like nail that and also nail the payments, you know, but certainly you could go to Deel or Remote or something and try and do that if you knew how to gather the right candidates and assess them and that sort of thing.

In-Country Recruiters as Secret Sauce

Nathan Latka

14:22Yeah, I'm gonna ask you a strange question here. I'm gonna see how courageous you are if you wanna play ball or not. Yeah. Tell me how someone would go around you. If someone wants to use your playbook for finding engineers in Argentina, right, what would they do?

Chad Ingram

14:34>> Honestly, their only option right now is to go is to go to either Fiverr or Upwork and then try and circumvent them.

Nathan Latka

14:41That's what you're doing?

Chad Ingram

14:43>> No, that's not what we do.

Nathan Latka

14:45How do you do it?

Chad Ingram

14:47>> So we've figured out a pretty awesome way to hire in country native recruiters. And so who I didn't give you in our headcount, know, so we're much more successful in doing that than us like, okay, so one of our competitors,

15:11>> they started out right before the pandemic, they grew through the pandemic, which was, you know, great for them, you know, really lucky time, but they've really focused a different aspect of technology. They've focused on more the assessment side, and they're doing that because they are spending their way through, you know, marketing, digital marketing, you know, AdWords, Facebook, whatever, to gather applicants. But the problem is, is that only the less qualified people are applying. The really qualified

15:43>> people are happy where they are. They're being recruited, right?

Nathan Latka

15:47So Chad, how do you find that rockstar recruiter in Argentina who's gonna go find the best engineers? How are you finding the recruiter?

Chad Ingram

15:52>> So through our recruiters currently. So we have a small team of recruiters that are able to do it natively. The problem is, is if I was to do it here in The US and they see that I'm in The US.

Nathan Latka

16:05Yeah. It wouldn't work. It wouldn't work. How did you get the first one in so your answer to my question was, well, we already have a network and they bring in other recruiters, but how did you get the first one? Again, just use Argentina as an example or India, whatever you wanna use.

Chad Ingram

16:15>> I don't know if I wanna share. Okay.

Nathan Latka

16:17I didn't know if you would play ball for this.

Chad Ingram

16:19>> No. It's okay. It's okay. But but the funny thing is once you have a recruiter, they can get another recruiter.

Nathan Latka

16:24Right? Of course.

Chad Ingram

16:25>> You know?

Nathan Latka

16:26So how do you get the first one is the question.

Chad Ingram

16:27>> I know. I know. That's our secret sauce.

Nathan Latka

16:30Okay, fair enough. I don't think people are gonna go around you. There's a lot of work. They'll rather just pay you 2 or 3 K.

Chad Ingram

16:34>> It is, but there's another thing. So a lot of people, so all VCs I've talked to, even some customers that have asked us, like circumvention is your biggest problem, right? Well, we haven't had that happen yet. And at some point it might happen, but they always think about that from the American tech leadership perspective, which is, well, if I want that person directly, I can just go get them, right? And, you know, if I circumvent, you

17:00>> know, Distro somehow, but you're not thinking also about the perspective of the software developer, who needs stability, who has a very expensive lifestyle, because these people are making a lot of money for their countries, right? And so they need to be able to trust that they're working with a company who's not just going to disappear one night and not pay them. And so we provide like a lot of comfort and stability to them. So anyway, they

17:26>> don't want to circumvent. It would be very, very infrequent.

17:30>> Yeah. No, that makes sense to me. It makes a lot of sense.

Famous Five Rapid Fire

Nathan Latka

17:32Hey, look, we're out of time. Let's wrap up here with the famous five. Number one, last book that you read.

Chad Ingram

17:36>> Oh, the last book that I read. Actually, it's right here. Seth Godin.

Nathan Latka

17:40Ah, good one. Classic.

Chad Ingram

17:42>> That's a good one, yeah.

Nathan Latka

17:43Number two, is there a CEO you're following or studying?

Chad Ingram

17:47>> You know, this is gonna sound so cliche, but I love Elon Musk.

Nathan Latka

17:52Yeah, not cliche, that's cool.

Chad Ingram

17:53>> I'm Super, super cliche, but yeah.

Nathan Latka

17:55Number three, what's your favorite online tool for building Distro besides Distro?

Chad Ingram

18:02>> Right now I would probably say Semrush. We're using that, you know, as we're starting to get into digital marketing.

18:09>> Yep.

Nathan Latka

18:10Number four, how many hours of sleep do you get every night?

Chad Ingram

18:12>> Five usually.

18:13>> Five.

Nathan Latka

18:14Okay. And what's your situation? Married, single, kids?

Chad Ingram

18:16>> Married with children.

Nathan Latka

18:18How many kiddos?

Chad Ingram

18:19>> I've got two kids, a three year old boy and a two year old girl.

Nathan Latka

18:22Oh, man. You're a busy guy. How old are you?

Chad Ingram

18:24>> I'm 34.

Nathan Latka

18:2634. Last question.

Chad Ingram

18:27>> Excuse me.

Nathan Latka

18:28Something you wish you knew when you were 20. People's

Closing Thoughts and Wrap-Up

Chad Ingram

18:33>> opinions don't matter.

Nathan Latka

18:37Guys, there you have it. Distro launched just in the fall last year, specifically to help you find great engineers all around the world, hire them in their country, pay them, manage them all through Distro. He's got 12 companies using him right now who are actively employing 26 developers. He has found for them through the platform. The average salary there is $11,000 per developer. So the GMV going through Chad's marketplace is effectively over $2,000,000 run rate. His

19:01take rate is out. They try to get to 25%. So their take rate is about to cross about a million dollar run rate. He's hearing their evaluations of the marketplace, thinking about raising 3,000,000 on a 15 pre. We'll see if he gets it done, but profitable today, taking $20K to the bottom line every month he's been there. He's done this before, invested $250K of his own money in the business to get it going. We'll see where

19:18it goes next. Chad, thanks for taking us to the top.

Chad Ingram

19:21>> Awesome. Thanks, Nathan.

Nathan Latka

19:23One 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 one

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