Formstack Revenue, Valuation & Funding (2023)

hello everyone my guest today is chris byers he's the ceo of a company called formstack a versatile online form solution that streamlines processes for capturing and managing information his mission is to empower business professionals through simple and elegant tools that remove complexity from everyday business processes formsteck is committed to pursuing that via sustainable growth he works with a leadership team to advance the community's initiatives including its culture code and vision which focus on relationships results and the community chris are you ready to take us to the top absolutely so i've always wanted a tool like you right when google releases google forms tools like you still grow and people still use them and people still you know don't churn and expansion revenues there how have you kick us off and kind of tell us what you do and then tell us specifically how you've competed with kind of the google forms threat yeah so i think the uh you know if you go back to the early days uh back in 2006 it was you uh excuse me needed a developer to build a web form and get it on your website and so if you weren't a developer and you wanted to collect a lead we kind of made it easy to get that done roll forward a few years that's kind of baked into every software that you've got crm email etc and so it kind of transitioned to collect data and then get it into what is now one of 50 kind of native integrations because really you want to get it into those back-end systems that are really important to you to send an email or start your you know kind of relationship with customer process payment something like that and as we've kind of gone forward we've really started to think about and built out this kind of collaborative moment around data collection so we're all living in these much more collaborative environments and so you can imagine a time where you need multiple people to kind of input along a form kind of to get the right data and so imagine something as simple as a reimbursement form you go travel somewhere you need to fill that out your manager needs to actually see that data via they get in an email or something pull up the form they see what you filled out and then they say oh yeah i need to add to that i need to code it to this project and then it passes on to the ap department who says okay i paid this paid it on this date it notifies you realistically that's just one big form but you need to kind of assign parts to different people and so if you think about what google has done they've served the audience really well of just basic data collection get it into a google sheet at the end of the day and they do that cleanly it's easy to use it's free um but it sticks with that use case it's just i need to an an internal use case often where you don't care about brand as much you don't care about styling it as much and so we definitely have i'm sure we lose business to them but we don't hear it much because people are really starting to automate a process when they're thinking about formstack versus just quick data collection quick form collection so in 2006 you said it was your one is that right yep that's right and then and then walk me through i want to hear kind of where your head was at in 2006 but first like when a customer signs up for form stack on average what are they paying per month would you say on average 60 70 80 bucks a month okay and is that per seat or that's kind of the logo the brand is paying 60 70 yeah the brand is paying and often you'll start to add users and so that's what's going to drive your price up you can start as low as 19 bucks a month but you know often people will start with about five users because they want to have multiple people be able to get in and see the data or maybe again use approvals or workflow or something like that got it so three four five users that's where you get your 60 70 80 buck arpu on average okay interesting so take me back to 2006 where was your head at that point did you just you know you know quit your corporate job because you're frustrated back against the wall no money had to make this work what were you thinking yeah so i'm in an interesting scenario where uh an old business partner of mine and i we had a software company uh what is nearly 20 years ago now and he actually started formstack and uh then started a second business in 2009 and i had helped him kind of raise money and was an early product user and so i said hey in 2009 i said i'll come in and run the business for six months and find somebody to run it long term and then i never left so uh you know the in the early days it was all about how do we just empower other people i mean here's the thing you're an entrepreneur you know how to solve most of the problems that you're trying to solve you just don't always have the technical capability to get it done and so where we can give you software to get that done because you don't really need to go pay a custom you know for custom development or something like that where we can kind of give you those assets in your hands all of a sudden you've got a power that you didn't have beforehand and uh you know can kind of get the job done so it from day one was about making people's lives easier in some way i understand the product i want to dive more kind of into the growth and how you've gotten to where you've gotten so just to be clear though in terms of looking at the company if i looked at the cap table would it be very clear you're a co-founder or were you added for like you know one or two percent equity as a ceo in charge at 09. yeah i mean i i've kind of both had been an early investor and then uh kind of have grown equity over time and so okay our founder was uh you know really controlling investor for a long time but from day one he gave me complete autonomy to go build the business that i felt like i needed to build which which was amazing and so um yeah that's kind of roughly how that uh that's great and what do we scale to today in terms of total customers using you so we're about 16 000 customers okay and those aren't like free and paid those are the actual paying customers yep that's exactly right so we get you know probably 4 000 people coming to try the product every month and then you know some few hundred of those sign up but uh yeah i've grown this kind of sixteen thousand and there were about a hundred thousand active users sitting on top of those paid accounts guys so 16 000 logos 100 000 kind of people inside of each of those logos together yep that's right and can i mean can i multiply that times the 70 rpo and you guys are north of a million a month at this point is that accurate yeah that's a good uh good way to think about it okay and i mean what does this kind of space look like in terms of how have you guys guys been growing year over year so if you're out north of a million today 12 months ago were you at 500 where were you yeah i mean we've kind of been in the 30 to 40 growth range probably for the past few years and as you grow you know as you grow business one of the things that gets obviously more challenging is i mean realistically the core in initial market uh forms let's say it's just it's not going to grow to 100 million dollar business sure and so we had to add elements like workflow and beginning to automate process uh so that we can start to think about oh it makes sense for me to add 10 users or a thousand users or 10 000 users because i need them to be a part of this process whereas in the beginning i said oh i like my one marketing person needs to have access to formstack to collect leads and so uh and then we also have done an acquisition we did an acquisition late last year with a product called fast forms where they were really deeply embedded into the salesforce app exchange and we're doing a really amazing job of collecting data in that kind of ecosystem but you start to see where you have to add other elements to the business to kind of keep growth rate uh going yeah no it's a really smart product decision obviously to drive expansion revenue give us a sense of that i mean how it sounds like if your price point starts at 19 bucks and your average is 70. you've done a great job growing seats and adding additional features etc but can you quantify that for us like maybe in terms of you know net revenue retention annually yeah so i mean i guess the best way i'd say it is if you rolled back three four years we were probably three uh you know three percent gross churn on a on a monthly basis but then even that turn was not much better that maybe you're talking logos or revenue uh revenue churn they probably look the same yeah yeah and one of the things as we've really gotten better at going up market and expanding with customers we've driven that kind of we're not at a regular negative kind of churn rate but we are pretty flat and so that means when we do go at least acquire customers and bring them on we're being much more efficient about keeping them around uh long term but yeah that's a hard problem to solve well especially your price point two smbs are notorious for churn but let me just re-articulate what i think i just heard you say which is your expansion revenue annually about equals revenue you lose so you're about flat which is actually it sounds weird saying flat because usually if you don't want to hear flat that means bad but in this case flat is actually good yeah absolutely yeah yeah that's exactly that's great and so and so give me more i mean the 16 000 customers obviously a lot of customers walk me through when you join an o-9 how many customers existed when you joined and how did you drive the next thousand after you joined yeah we were probably in the few thousand range at that time and you know i'd say i'd look at three probably different phases the first phase was just we got to get inbound presence we built a great brand and people would come try the product or use it free and get some natural virality there and that grew us those first say five thousand maybe even six seven eight thousand customers and over time we realized there's actually a group of people out there who they can get the job done but they need a little bit of hand holding and so we actually put it was the beginning of sales for us we had not talked to a customer really ever until in a kind of a sales oriented way until about four or five years ago and so we started to interact with them and we saw you know you've actually got a lot of larger brands who come in and use the product and they did a lot more handholding or they need a contract or something like that and so we just began to think about what does it take to serve that customer and so we built something that for us at the time was kind of ugly we didn't want to deal with sso something very enterprisey we didn't like the word enterprise we still don't love it sure i started to entertain those conversations and that's where we really started to see our poop grow and go from say 20 bucks a month to 40 50 bucks a month because we were getting some big deals so chris just to be clear sorry so you use kind of powered by form stack right to get kind of natural viral coefficient stuff going to six seven eight thousand users you then said let's hire some sales people to go land next well you've already landed to expand in these accounts that are already using us is that accurate yeah i'd say that and then we married together with that a product we had never had a product manager and we started to introduce product management into the organization so started to exp you know forever it was me just saying i like that and i heard a customer say it so let's go build that feature and eventually it's like oh no we need to go really understand customer problems and be built toward those and what's team size today we are about 115 and how many of those are sales people or onboarding yeah sales is about 20 and that grew dramatically last year so we had had an inbound sales team who deal with the kind of 4 000 trials a month uh for like i said four or five years and last year we really started to see some traction in up markets specifically health care we got our product hipaa compliant and which kind of became this gate that helped us really have very different conversations with customers so we actually started to hire some more upmarket sales people and that's where we've grown a lot lately and are seeing some really good success and so now we have an inside sales team plus i assume you probably do some paid spend tests what is your fully weighted cash and what do you like to optimize your payback period for yeah cac is probably i'd call it a thousand bucks per kind of acquisition we love to run in the under 12 months range we've always we've always run a fairly conservative organization in terms of spend so we've we took some capital back in 2008 and 2009 and then did not take capital again after that we just how much have you raised so far total i mean that was like a million bucks or a little bit less than that back in 089 so i mean you can argue relative to your si i mean the fact that you've raised there's a one-to-one ratio between your mrr and how much you raise it's pretty healthy most people don't have one-to-one ratio in terms of ar to what they've raised um great okay good so so thousand dollar cac 70 rpoo or 80 rpu again payback there on you know aiming for 12 months and then this is a tricky question and i'm always curious how ceos use this number uh so how do you use lifetime value um and and secondly what do you think it is right now at a minimum yeah that's a good question for a long time we tried the ltv to cac ratio and i mean i guess we think about lifetime value as using current churn rate to calculate it and so you're always stating obviously you're assuming a bunch of people are going to stay around um we we actually went back to the 12-month payback because it a is simpler for people to understand it's actually a little bit more conservative because you can get pretty crazy in terms of keeping a say three ltv to cac uh ratio you could be spending a lot of money and especially if we go close let's say a 100 000 a year deal all of a sudden you're kind of making these leaps about oh i could spend a hundred thousand dollars to acquire a customer which those people come in from time to time but it's not like we actually know how to turn that around and spend that kind of money to acquire one customer so we've probably avoided actually using we've reported on it every month we don't actually use it to make many decisions these days that's that's usually what i hear so what do you typically report like are we talking like a four thousand three thousand two thousand dollar ltv typically yeah probably in the four thousand range yeah yeah it's always interesting like people want that number because they want the lgbt cac ratio but you're exactly right it just seems like for ceos payback period is so much more instrumental kind of instructional and useful yeah absolutely and it just keeps you more grounded in terms of making smart decisions and and using your own cash to run the business versus needing to always raise money that's right uh last few questions here team where are you guys all based uh so we're actually a pretty remote team we started in the office years ago but we opened the door to remote in 2012 and at this point on a monday in indianapolis where headquarters is you might only see three four people in the office and even even though we've got say 20 people in the city but we're spread from as far west as california as far east as poland canada down to argentina so we've got people all over a lot of very exciting companies in india you got demand jump doing very well their growth rate was incredible in 2017 a lot of other a lot of other folks there there's something in the water huh absolutely yeah the the exact target story helped uh push a lot of things uh forward in this were you part of his accelerator did you guys go through that uh we didn't we um we did actually kind of raise capital from a local kind of angel fund that was going in those days but uh nothing nothing formal it was just them uh you know putting some capital in the business yeah but i assume since your last race was 809 you're now running kind of a break even or cash flow positive yeah that's exactly right yeah and he plans to raise capital near and you know the next year um no plans right now i think we're uh we're in good shape right now and looking to kind of just keep growing the business as is and look for uh potential acquisitions where where it makes sense and where you get the cash to fund it i was gonna say alternatively if google came to you and offered you call it forex arr so somewhere around 40 50 60 million do you sell the company how do you make that decision yeah i think at this point we're still trying to grow a really large enterprise and i think we're trying to figure out how do we get to 100 million dollars in revenue and so of course we're always going to be entertaining you know an offer or something like that but realistically we want to see if we can build something pretty big and long lasting makes good sense chris let's wrap up here with the famous five number one what's your favorite business book uh you know good degrade is an easy win there good number two is there a ceo you're following or studying right now um i have been reading a book called uh outsiders it's about it warren buffett would be one of many stories but about thinking about asset allocation and building a big business i just finished that book it's basically the top eight public ceos in history in terms of stock returns capital cities is in there a lot of these great companies are in there yep teal white and black cover good one number number three is their favorite online tool you have for building your business um i mean we just for paying attention to the business we use a tool called rj metrics for dashboards and things like that but that's uh that's just making sure we know what's going on and how to make smart decisions number four how many hours of sleep to get every night oh i get a solid eight hours that's good and what situation married single you have kids uh married with uh kind of teenagers so how many uh two kids two okay that's good and how old are you uh i am 40. 40. okay chris last question what do you wish your 20 year old self knew hmm 20 year old self i think uh you know take more opportunity to build your own vision for your life and not let someone else build it not let not look to somebody else and say oh i want to be like them there's something inside of you that you know in my world view that you know god made us to be and so there's a purpose in there go find out what that is and go drive short it guys there you have them chris own your own vision joined formstack back in 2009 after one of his friends who created in 2006 started seeing some traction he joined for a six-month kind of part-time role to find a new ceo ended up never leaving the company now has 16 000 customers paying on average 70 80 bucks a month so north of a million bucks per month in revenue zero percent net revenue churn annually so expansion equals obviously lost revenue growing 30 to 40 percent year over year only a million bucks raised so so i love that obviously great ratio they're a team of 115 people uh based in many many remote remote locations from you know india all the way the west coast all the way back into the northeast as well super healthy economics as well thousand dollar attack 12 month payback period chris we're rooting for you thank you for taking us to the top thanks so much