Factor Technology Revenue (2023)

[00:00] Guys factor technology helps folks, especially consultants in the well and drilling industry understand how to map these wells at scale, right? Using a different kind of technology. They want to focus on getting more wellbore in the pay zone as Hugh said it. He's there working with six customer, half dozen customers. They bootstrapped, which we loved, loved launched in 2017, hoping to break a million bucks in revenue next year. We'll see what happens. Hey folks, my guest [00:24] today is Hugh Winkler. He is trained as a geophysicist and experienced in web architecture. He invented a technique for well positioning using machine learning technology. With two partners, he founded factor technology to commercialize this technique. They acquired their first early adopters in 2022. And he previously founded Wellstorm, which is acquired by Enverus, which is drilling info in 2012. Hugh, you ready to take us to the top? [00:46] >> You bet. [00:47] All right. So I guess tell us about this technology and why do people care about what is in a well? [00:54] >> Well, everybody's drilling horizontal wells since, you know, for the last two decades. And, [01:02] >> you know, for the last twenty years, people have been kinda using an ad hoc sort of heuristic method to position them. So you drill it down two miles, and then you drill it across two miles, and you wanna stay in the in the formation that you're targeting. And they've got various methods for keeping it in the formation while they go two miles lateral. [01:25] What's the most popular formation before what you've invented? The popular formation. Sorry, not formation, technique to stay in no formation. So you're going down two miles and across two miles. What's the most popular? [01:37] >> Geosteering. They call it there's directional drilling and geosteering is what guides directional drilling. And so the geo steer is usually trained in geology, reads measurements that they take down hole. And he uses his intuition and his knowledge and historically uses some desktop computer assistance, but also the seat of his pants to keep the well in the target formation. And this has worked pretty great for the last twenty years. It's not that it's failing, but [02:16] >> it turns out that it's a big stress on an individual having to do this job. And so every twenty minutes, you get some new measurements in and you've gotta [02:30] >> read some wiggly lines on a screen that are measurements and figure out what that means as far as the geology. And then if you make a wrong decision, you've steered your wellbore out of the productive zone and possibly into a hazard that could cause you to you know, a very expensive sidetrack. So it's a high stress [02:53] >> decision that people have been making. And [02:57] you've got Sorry, Hugh, just to dumb this down for folks that don't know the well in drilling drilling business, you know, you know, really well. So ExxonMobil is drilling something new. They're fracking whatever in Texas. They'll they'll pay someone to go out and do this drilling to understand what the economic opportunity is before they spend all the money to actually do the drilling. Is that it was that what's at stake here? That's what you help with? [03:17] >> They're actually this is actually during the doing the drilling part. [03:21] Ah, okay. [03:21] >> They're exploiting the field and they're drilling all these horizontal wells and they've gone out and made a map of what they think the target zone looks like, but nobody you you can't see what's 20 10,000 feet down under the surface. So they're blind. And and as they're drilling along, they try to use these electronic measurements down hole to determine where they are geologically. [03:48] Interesting. And what, forgive me for my naivete here, but if you know, if you go down to two miles, you're gonna hit, you know, a slice, right? That is, I'm gonna make this up, 300 feet deep of, you know, frackable oil or whatever. Why do you need to know what the pattern is? The left, right? Why can't you just keep sucking from the same spot? [04:08] >> Why do you have to go to the Horizontally. If the more wellbore that you can expose to the formation, the more oil you produce out of there. [04:20] I see. [04:21] >> Because the kind of formations they're producing in Texas mostly now are no longer the rich flowing ones, you know, with gushers. That that doesn't happen much anymore. What happens now is that they have to they have a little trickle coming in after and only after they fracture the well. So you drill this two mile horizontal hole through that pay zone and hopefully your whole well bores in the pay zone. [04:50] Interesting. So your argument is pay for our software. We're gonna help you make more money by spending less money as you exploit, you know, these, you know, much smaller pay pay zone areas. [05:03] >> There you go. You'll have more wellbore in the pay. [05:07] Interesting. [05:08] Oh, 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 [05:31] your 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 [05:56] get 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 [06:18] not built 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 [06:43] going 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. Alright. We're gonna go back to the YouTube video here in a second, but if [07:05] 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 the [07:32] interview. So who's using you? I mean, mentioned ahead of the call that you're selling like financial institutions. Are you is this more a research tool for hedge funds or is it actually being used in the field by, you know, ExxonMobil or someone like Exxon? [07:43] >> No. This is all about, these are for operators and and their consultants. I see. Yeah, so we've got one top 10 US company using the software and several smaller [08:03] >> consultancies. So a lot of these big companies outsource this function because it's a [08:11] >> person has to stay up all night watching screens and they don't like to do it themselves. So they outsource the job to workers who work in shifts, watch the screens, take the measurements and guide the wells. And so that's the way it's been done historically. And now we're trying to convince people that instead of outsourcing it, this menial sort of, all night work, you can automate the process by feeding the data directly into our software, sending [08:49] >> alerts. We compute the answer instead of just, you know, nobody has to make a lot of judgment calls. You're [08:56] using What are what are you billing against? Like, are you billing against number of miles tracked, size of payload area? Like, how do you bill? [09:05] >> Similar. It's like it's a day rate. Okay, every day you use the software, you you pay a certain amount. [09:13] Okay, what if I am cheap and I want to take advantage of your software as much as possible? So I just do all my work in one day that I'm done. [09:23] >> Well, that's possible and I encourage you to do that, but you can't. I mean, if you're if you're for instance, if you have a well that you wanna know what happened to it retrospectively, you drilled it last week and you wanna know whether it's in zone or out of zone, you could do that. But while you're drilling the well, you want constant updates. So pretty much a user is gonna, use it while they're in the lateral [09:51] >> and pay us per day as you extend the well. So that could be five to ten days. [09:58] So is it just per day rate or what if I'm using you daily across 10 wells? Do I also pay a per well rate? [10:05] >> We have a enterprise edition as well that doesn't work on a day rate, it works on a package. Then we sit there with the this is for the majors and large US oil companies and they'll you know, they know what their drilling program is gonna be for the next quarter, for the next four quarters, really. [10:27] Measured by what though? Do they know that? They forecast that based off number of wells or what's the unit measurement? [10:31] >> They have leases they have to exploit within a certain amount of time because they're they have to drill these leases once they've leased them, to keep them under lease, actually. So they know and and they have to contract with the drilling contractors ahead of time. So they're able to come to us and say, you know, we're going to drill 40 wells as next quarter. You know, what's the, what's our package? [10:57] And do you charge everybody no matter the customer the same day rate? [11:02] >> The enterprise has a different rate. I see. Enterprise gets a lot more service. They have the regular day rate people are willing to stick their credit card in and [11:16] Okay, it is a credit card sale. It's like $10 a day or something like that. [11:19] >> Well, it's yeah, it's like, well, it's $90 a day, but [11:23] it's $9.00? [11:25] >> 90. Yeah. [11:26] Okay. Okay. [11:27] >> Yeah. And that's suitable for these consultancies that are, [11:34] >> They don't have a lot of bureaucracy. They're not public companies. But if you're a public company, you're asking a lot more of us. One of the things you're asking is compliance. So we're SOC two type one and type two compliant. Additionally, [11:57] >> as a big enterprise, you have a bunch of automation in the field so that unlike the small consultancies, you've got continuous data feeds coming in. So you're running the software not intermittently, but continuously. [12:11] And How many folks are on your team today? [12:14] >> There's six of us. [12:16] Six of you. Okay. And how are you the engineer? [12:18] >> Three founders, three founding partners, and an advisor and a couple of programmers and an intern. [12:26] Do you program? [12:28] >> Oh, yeah. [12:30] Alright, so three engineers including you, you're one of the two, the three co founders. Were you guys nice at the beginning, you just split equally or what? [12:39] >> At the beginning, yes. Now we've been self funding for the last several years. So the ratios have diverged a little bit. [12:47] I see. So can I decode that if you decide to put in your own money, you might get more equity because you put in more of your own capital to fund? Sure. I see. I see. Okay, so you are bootstrapped today. 100%. I love that. Why'd you make that decision? A lot of people choose to raise. [13:06] >> Well, at first we were, we did go out and pitch everywhere and we got a lot of response and then COVID happened and then oil went to minus $40 a barrel And nobody wanted to talk to us about anything for a while. And we wanted to keep the company going, so we just decided to keep it going and we would maybe change it into a little Instead of being a big vision company, we did This technology [13:39] >> is pretty unique in the industry and I just don't think it's been [13:44] >> understood yet, I mean, by many, but we do have people who understand it. [13:51] >> But I think it'll eventually prevail so that in five years nobody, nobody's manually doing geosteering the old way. [13:58] Yep. [13:58] >> They might be, might not be using our software, but I think in five years people will all be doing it in this computed automated fashion that we're pioneering. Understood. So we're gonna leave it. We couldn't leave the company and we decided to keep it going and we nursed along a couple of little tiny customers, consultancies and [14:26] And you how many how many how how many customers are you working with today? Is it still like a handful? One, two, three? [14:32] >> Yeah. A half a half a dozen. [14:34] Half dozen. Okay. And we never asked, we never asked actually when you wanted [14:39] >> one of the giant, you know, $20,000,000,000. We do have a giant $20,000,000,000 company. So I feel good about that. [14:45] When did you launch the business? What year? [14:48] >> '97, '97, 2017. [14:51] I was supposed to say holy All right. So 2017. Oh, startup. Yeah. Six customers. And I guess how do you, you know, one benefit of SaaS is you have predictable revenues so you can hire knowing you can pay salaries, but if you're charging a day rate, I guess I imagine it's really hard to predict if someone's gonna use you, you know, next week or not. How do you try and create predictability in your revenue stream? [15:15] >> Well, we haven't really had to, that hasn't been, you know, we're not profitable yet. So we're not, you know, we would like to just have a revenue stream first and I'll worry about predictability after that. [15:29] Well, I mean, don't you potentially have to change your pricing model? That's I mean, that's sort of my right? 90 a day, if people can turn off or on so easy, it's really hard to build a recurring stream. [15:39] >> Well, don't you? Yes, of course. But don't you love it as a customer? The ability to pay for just what you use? [15:45] Well, I think if that was the case, you'd have more than six customers. [15:48] >> Yeah. Well, I think you have to What we're doing is you have to adopt So we're gonna transition We're hoping to sell more of these enterprise systems, but [16:05] >> know, that was sort of our strategy as we crossed the little COVID chasm. Yep. Was to just keep the company going and just try to get users and we don't care how we get them. [16:17] Yep. How did you get your last customer? Can you tell me the story? [16:23] >> We went out and recruited a consultancy that we talked to pretty closely. You know, I go and visit them. I didn't get them through the internet. Now, actually, I did if you mean my my very last I mean, you know, every few days we get a new trial. And I think that our software requires a sort of a change of of workflow for a lot of these consultancies. So they need a high touch experience with us. [16:59] >> And so far, we're really you know, one one thing I would say, the arm's length approach is not giving us that ability to go in and coach them and, bring them along. So I think we lose customers through not understanding how to use the software. [17:15] Understood. I mean, what are your goals? Do think you can break a million dollars of revenue this year? [17:21] >> No. [17:22] What year do you have a plan for? [17:23] >> Was sort of what year are targeting? [17:24] Next [17:25] >> year. [17:25] Next year. Okay, cool. Cool. And well, we're rooting for you. We hope it works. I love a niche. I love a niche product like this, especially bootstrap. So on that note here, let's wrap up with the famous five. Number one, your favorite book. [17:41] >> God, this is the one I just read. How about that? I just read Julian by Gore Vidal. [17:46] >> Okay. [17:47] Number two, is there a CEO you're following or studying? [17:51] >> Oh God, no, but my favorite CEO in the world was Allen Gilmer, the CEO of Enverus. [17:59] Interesting, Enverus. Okay, number three, what's your favorite online tool for coding? [18:06] >> Oh, well, we're, you know, I hate to say visual studio code, but you know, that's sort of the [18:15] That's fact that fair. Hugh, number four, how many hours of sleep do get every night? [18:20] >> Sleep. How many hours of sleep? [18:22] >> Six. [18:23] Six. Okay. And situation, married, single, kids? [18:26] >> Married, no kids. [18:28] No kiddos. And how old are you? [18:30] >> 65. [18:31] Last question, something you wish you knew when you were 20. [18:36] >> It's all gonna work out. [18:39] Guys factor technology helps folks, especially consultants in the well and drilling industry understand how to map these wells at scale, right? Using a different of technology. They wanna focus on getting more wellbore in the pay zone as Hugh said it. He's there working with six customer, half dozen customers say bootstrapped, we loved, loved launched in 2017, hoping to break a million bucks in revenue next year. We'll see what happens. Hugh, for taking us to the top. [19:04] >> Thank you, Nathan. [19:05] One 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 [19:30] p. M. Central. Additionally, remember these recorded founder interviews go live. We release them here on YouTube every day at two p. M. 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 [19:51] an acquisition, a big fundraise, a 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 [20:13] people are saying. Sign up 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. 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