How FirstHive Reached 29 Enterprise Customers on Less Than $500K Raised (Interview with CEO Aditya Bhamidipaty)

Introduction and Background

Nathan Latka

00:02Hello, everyone. My guest today is Aditya Bhamidipaty. He's the CEO and co founder of FirstHive, the company co founder with his partner in 2009. He acquired his engineering bachelor's from JNTU and postgraduate diploma in management from another university and then began his career with Procter and Gamble and soon moved into a leadership role where he was responsible for the Southern region. He turned around a loss making region into a profitable one in record time and also

00:25the highest growth area for P and G. Also He's worked with iGate in London before moving back to India to set up eSmart solutions and jump in to FirstHive. Aditya, are ready to take us to the top?

Aditya Bhamidipaty

00:36Yeah, absolutely. Looking forward to this conversation, Nathan.

What FirstHive Does

Nathan Latka

00:39Alright. Tell us about FirstHive. What does the company do and are you a pure play SaaS company?

Aditya Bhamidipaty

00:44We are a pure play SaaS company. FirstHive is a product that we launched in 2016. It's about thirty months since we launched and we're very, very excited about what we're doing. It's essentially a customer data platform. We go to large consumer marketing companies like banks, financial services companies, retail CPG organizations, and what we're doing is we're helping them take control of their marketing. If you're familiar with the marketing landscape today, the number of tools out there

01:15that enterprises have to deal with have exploded, along with the interfaces that have exploded. And with all of this, what has happened is consumer data today in a typical consumer marketing company is just thrown all over the place in many different platforms. And we all see the result. I mean, most marketers today struggle with a typical conversion rate of less than 2%, which probably makes this the only trillion dollar industry with a 98% failure or a

01:42leaky bucket. And that's what we're helping these enterprises take control of and solve.

Enterprise Pricing and Contract Size

Nathan Latka

01:48And so help us understand if there's an enterprise listening right now, what's an average enterprise is going to pay you per year to use this this technology you've built?

Aditya Bhamidipaty

01:59It depends on the scale of marketing intensity that we handle for these enterprises. If you look at a typical large enterprise which has presence across multiple geographies,

02:10a few tens of millions of consumer interactions a day, and a lot of international content, and maybe anywhere from 30 to 200 different systems where they have consumer data sitting. And it is that dispersed. When FirstHive comes in, we connect it to all of these channels, and then we are actually the world's first machine learning layer to build that unified entity. So there's a lot of compute that happens, which is directly linked to the marketing intensity.

Nathan Latka

02:39Mhmm.

Aditya Bhamidipaty

02:39The pricing therefore varies anywhere from, I would say, about a $150,000 all the way up to a couple of million dollars. Depends on the intensity of integrations

02:51and these events.

Nathan Latka

02:54Okay. Now, Jay, again, there's a big range there, but just because we're short on time, mean, you say a 150 per year is a fair average or you think it's probably closer to $250,000 or $500,000?

Aditya Bhamidipaty

03:04I would say that a typical large enterprise, the average would be closer to the 250,000 at a couple of million events a day.

First Customers and Go-to-Market Origins

Nathan Latka

03:11Okay, so $250,000 a year and which comes out to call maybe $20,000 a month, something like that.

Aditya Bhamidipaty

03:11Yeah.

Nathan Latka

03:11Okay, very interesting. And then you said you launched in 2016, right? Tell us the story of how you got your first one or two customers.

Aditya Bhamidipaty

03:25Oh, absolutely. I mean, I'm an expert myself and therefore have some familiarity with this space working inside one of the original marketing companies of the world. And then when I moved out and I moved to iGate, was selling to companies like that, selling analytics solutions and technology solutions to them. And then I came back and I started a firm that I ran for six years, which was in the marketing services space. So I got a very,

03:51very interesting perspective into marketing and the opportunities that we saw, both being inside an organisation, selling tech to these organisations, and then servicing marketing campaigns. And a lot of it was really born out of the opportunity that I saw in the data that getting generated, not necessarily getting leveraged. Most marketing campaigns end up being expensed out at the end of the campaign rather than looking at that as a data asset on customer and on customer behavior,

04:19customer experience.

Nathan Latka

04:20So do you sorry, just to be just to be clear, your first... What I'm looking for is your first couple customers and FirstHive. It sounds like you had a marketing agency for six years prior to this. Were your first customers and FirstHive the software from the marketing agency?

Aditya Bhamidipaty

04:32Yeah. Absolutely. Yeah. Because I had relationships with customers there and therefore I had access to a few CMOs. My first customers therefore were from relationships that I had built in the past. And, and that's how we we got rolling on this.

Customer Count and Verticals

Nathan Latka

04:47And then how many over the past three years, how many customers have you... Are you now serving today?

Aditya Bhamidipaty

04:52We are now at 29 paying customers as an enterprise.

Nathan Latka

04:52Okay.

Aditya Bhamidipaty

04:52These are large enterprises which are, you know, across these two primary verticals that we mentioned that we focus on, which is banking financial services and then manufacturing, CPG and retail.

Team Size and Structure

Nathan Latka

05:10Okay. And what's the team that you built around you? What do they look like? How many people?

Aditya Bhamidipaty

05:14We're a 40 member company today, largely engineering. As you can imagine, this is a heavy engineering product with 27 engineers led by our CTO and VP Engineering. And then we have a product management team that's, again, around ad tech and martech. So that's that's really the core of the team. And then we have a client customer success team, which helps our customers leverage the product.

Bootstrapping and Funding History

Nathan Latka

05:38And then Jay, have you decided to bootstrap the company or did you decide to raise capital?

Aditya Bhamidipaty

05:43A lot of a lot of FirstHive has been built bootstrapped. And I'm actually very excited in the way we've we've done this because while we did raise a small angel round early on as we started FirstHive,

05:59core of the company was actually bootstrapped initially. But we've done a really, really tight ship here, and then we

06:08hit cash flow positive within eighteen months of launch of the product. And then...

Nathan Latka

06:12So sorry, just to get the funding number. So total funding into the company to date is about how much?

Aditya Bhamidipaty

06:18Marginal. Less than $500,000.

Nathan Latka

06:21Okay. Less. Okay. That's great. No, that's wonderful. Look, I like... I love kind of bootstrap stories. This is great.

06:28Say that again.

Aditya Bhamidipaty

06:29Largely bootstrap.

Nathan Latka

06:30Yeah. Yeah. Well, let's you're either bootstrapped or you've raised capital. There's not like largely bootstrap. So you've raised very little money is how I would say it less than 500,000.

Aditya Bhamidipaty

06:30Yes.

Nathan Latka

06:30Yeah, very good. Okay. And then and then so so less than $500,000 raised, you turn cash to a positive early on. How did you fund kind of the early creation of the technology? Did you raise early on? Or did you use like professional services stuff to

06:55fund the growth?

Aditya Bhamidipaty

06:56No. The the initial amount of it was bootstrapped, and then we we funneled some of our... Because of the marketing services company, we had cash flows, and therefore we funneled that into the product in the initial days. And then we switched over to the product completely.

Nathan Latka

07:11Okay. Yeah. That makes sense.

Aditya Bhamidipaty

07:13That was when we raised the little bit of capital that we raised. Then initial

Revenue Growth and US Expansion

Nathan Latka

07:1829 customers today at that price point you told me earlier, you said an average of about $20,000 per month. I mean, that would put you about $580,000 per month right now in revenue. Is that correct?

Aditya Bhamidipaty

07:29That's not... That is not correct. Is not all our deployments are in that scale. The typical scale that that we are at is closer to about a third of that number.

Nathan Latka

07:41Okay. Got it. So so maybe closer. So maybe more like $7,000 per month or $24,000 per year kind... Sorry. 70... Or sorry. $84,000 per year kind of contracts. Yeah. That... And that would put you at about $200,000 per month today in revenue. Is that more accurate?

Aditya Bhamidipaty

07:56That is closer to the actual

Nathan Latka

07:58Okay. Still... By the way, still great considering a bootstrap company three years in. Still a great story. What's growth look like? So if you're at 200 a month today, where were you exactly a year ago? Do you know?

Aditya Bhamidipaty

08:08We grew about... We doubled in terms of number of customers over the last year. And revenue also kind of reflected a very similar number.

Nathan Latka

08:18Okay. So revenue about revenue about doubled as well?

Aditya Bhamidipaty

08:22Revenues doubled as well. Revenues slightly less than doubled because we are going in for a little more aggressive POCs at this stage. And therefore, you know, the revenue is less than doubled, but then the number of customers have doubled. The exciting thing for us is what's happening in the future. We just launched our operations in The US. We started in Bangalore for the last, you know, thirty months, and then last month, we set up our US

08:48office. And so, yeah, we're really excited. We're hoping to kind of hit like a six to eight x growth in the next twenty four, twenty eight months. So we're quite excited about where we are... What we are seeing right now in terms of the early days on the

Nathan Latka

09:04Did you say in the next six to twelve months, you want a six x?

Aditya Bhamidipaty

09:08No. Twenty four to twenty eight months. Yeah.

Nathan Latka

09:11So over the next two years, you wanna take 200 a month or 2,400,000 a year and get up closer to 12,000,000 or 13,000,000 per year run rate?

Aditya Bhamidipaty

09:1912,000,000 run rate is what we wanna get to in the next two years.

Nathan Latka

09:22And where do you see... What's your best guess today in terms of where that growth is gonna come from? Upselling your current 30 customers or landing new customers altogether?

Aditya Bhamidipaty

09:32No. Landing new customers is going to be the biggest growth accelerator.

Nathan Latka

09:36Do you say that why do you say that so definitively?

Aditya Bhamidipaty

09:39Because while... Because of two things, I think. The market is... This is a very early market in that sense for a customer data platform, and therefore, this this is just very, very wide and open. And therefore, the new customer acquisition growth is what I expect to be very rapid. For example, we expect to quadruple the number of customers in the next two years. So that's going to be a very, very important part of the growth. Having

10:09said that, also expansion of the existing customers into new geographies is going to be an important second component of that growth. But the first one is definitely gonna be the leading one between these two.

Churn, Expansion and Net Revenue Retention

Nathan Latka

10:21Yeah. Because also I mean, you mentioned you mentioned Eric early on in the interview when you looked at their s one. 40% of their new revenue came from expansion, not new customer ads. So, mean, they can be a very... Especially especially at at your ACVs, expansion can be very critical. Do you know what that number is to date? Do you know what your historical year over year expansion has been on contracts?

Aditya Bhamidipaty

10:37It it is about 40% for us.

Nathan Latka

10:39Four zero?

Aditya Bhamidipaty

10:40Yes.

Nathan Latka

10:40Okay.

Aditya Bhamidipaty

10:40Our return here is also about 40% today, and we've seen very, very little churn. We've seen less than 3% churn in the last two years.

Nathan Latka

10:49That's that's per month or annually?

Aditya Bhamidipaty

10:49Annual.

Nathan Latka

10:49Okay. So it's about 3% gross revenue churn per year, 40% expansion, right, on revenue. That puts you at about a 137% net revenue retention annually. Is that accurate?

Aditya Bhamidipaty

11:02About a 100... Yes. 137 to a 140% is what our our incremental revenue is as well from customers. And and therefore, customer acquisition is... While new customer acquisition is a really important thing, existing customer growth is is going to be an equally important thing. But the new customer becomes a little more important because we're also getting into new geography, and therefore, we're to get access to, you know, a a new market, and therefore, that's that's going

11:27to be our number one objective, followed by revenue retention or revenue growth expansion revenue from existing.

CAC, Payback Period and Sales Motion

Nathan Latka

11:33How aggressive are you being in terms of getting the customer in the first place? And specifically, if someone's going to pay you $84,000 for a year long contract, will you spend that full amount to acquire them?

Aditya Bhamidipaty

11:44No. Our LTV to CAC ratios today, I would say are very healthy. We have an upwards of eight on that number today.

Nathan Latka

11:57Okay. Just to be clear. So I wasn't... LTV is is is is something that is kind of extrapolated over time and can be a weird number to look at. You're just pure... You're pure CAC to get a new $84,000 contract is what?

Aditya Bhamidipaty

12:09If you look at a payback period, then our sales payback period is closed close to about 4.5.

Nathan Latka

12:14Okay, four and a half months. Okay, which means yours what you're spending about $20,000 to get a new customer.

Aditya Bhamidipaty

12:19Correct.

Nathan Latka

12:20Yeah, that's gonna pay you $84,000 for a year. That's great. I mean, you be more... So you said you had a team of 27 out of your total team of 40. Do you have a sales motion built yet? How many salespeople do you have on your team?

Aditya Bhamidipaty

12:31We have about four people in our sales today. So the sales has actually been something that we've we've done more inbound, and most of our acquisition has been inbound or or referrals, customer referrals, or through the different awards that the platform has won, and therefore, we've got inbound interest from customers. The sales motion is something that we've just set up in the last four months, and that is what we are kind of hoping will start a

12:57lot more acceleration and therefore the aggressive numbers on the next two years.

LTV to CAC and Lifetime Value

Nathan Latka

13:01Mhmm. You mentioned your LTV to CAC, you said was about eight. So if you're spending 20,000 on CAC, would put your LTV caught a 160,000. Where are you getting that number from?

Aditya Bhamidipaty

13:12The LTV to CAC ratios is the 160 number because typically today what's happening is we are seeing about one and a half to two year history on our customers. And we've not really played out on all the contracts. It's still early days, like you said, for us to be able to put an LTV to CAC.

Nathan Latka

13:12Yeah.

Aditya Bhamidipaty

13:12But this is the existing history. And this is an evolving number as go forward.

Nathan Latka

13:35Yeah. Was going say if anything, you have the opposite problem, which is if you extrapolate your gross churn data, the average customer you could argue would stay with you for four hundred months, which we know is a very stupid number to plan around because right now you're just dividing. But that would put your LTV at like 2,800,000, right? Which is again, ridiculous to plan around, but that's the numbers say. So you're saying our historical data shows,

Plans to Raise Capital

Nathan Latka

13:56call it $2.50 ish is more accurate. $250 is what our most expensive customers paid. Yeah. Interesting. Okay. Very cool. What about any plans to raise capital or no?

Aditya Bhamidipaty

14:07We do plan to raise capital later this year, but that's going to be once we kind of get the initial velocity in The US market. And we're about six weeks into The US market.

Nathan Latka

14:07Okay.

Aditya Bhamidipaty

14:07So I think in six months from now, we would have landed our first few customers in The US market, and that's when we are going to be looking at raising our CVC.

Nathan Latka

14:28And what do you think the right amount of money to raise would be at that point?

Aditya Bhamidipaty

14:32I cannot put a number on that right now.

Nathan Latka

14:35A range is fine. Mean, are we talking like 5,000,000 or a million or 10,000,000?

Aditya Bhamidipaty

14:39Yeah, I think it'll be maybe in the ballpark of the 10,000,000 round that we'll be looking at as we get... Because this is going to be to fund our next next growth post from a series standpoint. And therefore, I I suspect that's what it's gonna be like.

Nathan Latka

14:52Yeah. So so... And then, I mean, do have a general sense? And again, this is very speculative at this point, but do have a general sense of of what valuation you'd like to raise on six months from now or twelve months from now?

Aditya Bhamidipaty

15:02I think that's a little premature right now for me to answer.

Nathan Latka

15:02Okay.

Aditya Bhamidipaty

15:02Because the way I look at this is that the the capital is really coming in to help us grow, and I think we'll get a much better sense of the velocity and the valuation that the product deserves as we look at the market in the next three to four months. How quickly are we able to land that first with customers? What kind of velocity

15:23we are able to build in the pipeline? The last six weeks has been incredibly encouraging. We've already seen phenomenal response on our lead pipelines in the last six weeks. We are very excited about what we've seen with very, very limited inputs that are all... That have gone in from our side so far. But I think four months from now, we'll have a much better handle on what is a fair valuation for us to go in. But

15:45you... I'm I'm sure you know this. I mean, valuation is just one of the many metrics that are gonna go into making our choice on who we

Nathan Latka

15:45Yeah.

Why Raise vs Stay Bootstrapped

Nathan Latka

15:52I just mean, I just wonder why a guy like you wants to raise it all. I mean, you've bootstrapped really effectively at this point, and you raise money, especially if you raise $10,000,000 Right? Right now you're doing $2,400,000 in ARR, right? Let's say six months from now, you get that up to 3,000,000. If you're going to raise 10,000,000, you'd have to I mean, your valuation, you'd have to look at raising if you want to only give

16:10up 10% of the company have to raise it a $100,000,000 post money, right, which is you can do the math on 3,000,000 ARR, what what x that is, right? That's gonna be hard to get that kind of deal. So you're gonna take a lot of dilution if you raise $10,000,000. And I just wonder why a guy like you wants to raise versus trying to stay bootstrapped.

Aditya Bhamidipaty

16:27See, I think part of it is driven also by the the... Most of our acquisition, like I said, so far has been inbound and organic. We've not really spent on marketing. And I don't think we will be able to fund the kind of marketing that that the product deserves for us to get to the number. And there is always a time to market. If you look at FirstHive, we were actually the world's first full stack customer

16:51data platform with a machine learning layer on identity building. And we still continue to be the only full stack customer data platform with the machine learning on the identity building. Although there are a couple of other products which have come up on the machine learning on identity building, but they are not full stack.

Nathan Latka

16:51Yeah.

Aditya Bhamidipaty

16:51So there is the time to market for a product. And given the reception that we've seen, we've been incredibly encouraged by how

17:13the time to market advantage we have because of the feature set that we're bringing into the market.

Nathan Latka

17:18Yeah.

Aditya Bhamidipaty

17:19And a little bit of dilution, but then if we are able to grow the pie and then capture market, I think that's gonna be a much larger objective for us than maybe an incremental dilution at this stage.

Nathan Latka

17:31Yeah. You're talking to a lot of VCs because that's the story they sell you.

Aditya Bhamidipaty

17:36No. Not yet. I've not not yet begun talking to a lot of VCs.

Famous Five Rapid Fire

Nathan Latka

17:39I'm just... I did. Yeah. I'm just giving you a hard time, man. I just think you've done a fantastic job bootstrapping, and I wanna congratulate you on that. Alright. Let's wrap up with the famous five. Number one, what's your favorite business book?

Aditya Bhamidipaty

17:51I just read Horowitz, The Hard Thing About Hard Things last month, and I really loved a lot of those insights that he gave. I could relate to a lot of those small nuggets of pieces that he referred to. Loved it.

Nathan Latka

18:05Number two, is there a CEO you're following or studying right now?

Aditya Bhamidipaty

18:11No, I don't have one CEO. I'm following a lot of different people and I do a lot of different blogs.

Nathan Latka

18:17Pick one.

Aditya Bhamidipaty

18:18Difficult to do that.

Nathan Latka

18:19Okay.

18:20Number three, what's your favorite online tool for building your company?

Aditya Bhamidipaty

18:23Online tool. My favorite tool is FirstHive. I love what we do at FirstHive.

Nathan Latka

18:28Besides your own.

Aditya Bhamidipaty

18:30Right. Well, Zoom. I absolutely love what Zoom has done. I think it's such a seamless experience. Love it. Having said that, I also love another tool in the same video space, which is Appear. We use that a lot. I absolutely love the ease at which we were able to do it. So I really love the way these tools are done. I love Intercom. Intercom is an interesting, beautiful

Nathan Latka

18:52Number four, how many hours of sleep are you getting per night?

Aditya Bhamidipaty

18:55I'm sorry?

Nathan Latka

18:55How many hours of sleep per night?

Aditya Bhamidipaty

18:58Oh, that varies. With all my travel, I don't think my body knows which time zone I'm in right now. So I would say, you know, between six to eight.

Nathan Latka

19:07Okay. And what's your situation? Married, single, kids?

Aditya Bhamidipaty

19:10Married with two kids.

Nathan Latka

19:12How old are you? How old are you?

Aditya Bhamidipaty

19:14I'm 39.

Nathan Latka

19:15All right. Last question. What do wish your 20 year old self knew?

Aditya Bhamidipaty

19:22I should have probably gotten married earlier.

Nathan Latka

19:26Guys, there you have it. FirstHive, 29 customers paying on average $84,000 per year doing about $200,000 per month right now in revenue. That's up from a $100,000 per month just a year ago. They've only raised $500,000 to do this. They are cash flow positive team of 40, 3% gross churn annually, 40% expansion for one hundred and thirty seven percent net revenue retention annually, spending $20,000 to get a new $84,000 per year customer. A healthy payback period there

19:51of three months as they look to scale. Again, channel B2B customer engagement and marketing automation product. Aditya, thank you so much for taking us to the top.

Aditya Bhamidipaty

20:01Thank you, Nathan. Wonderful talking.