FunctionFox Revenue & Funding (2024)

hello everyone my guest today is karina ludwig she's an accomplished senior executive advisor and board member with more than 30 years of success in business tech and advertising now for the past 21 years she's led function fox a global leader in time tracking and project management she also sits on the board for women in science and tech and the innovation and the advanced technology and entrepreneurship council karina are you ready to take it to the top let's do it yeah so you were one of the you're one of the sas ogs 21 years huh yeah it was before dial up around that time broadband people weren't even doing online banking so you know to have a sas company at that time it wasn't even sas it was like asp now what is your story in terms of the founding team at function fox were you one of the founders or were you brought in afterwards uh brought in before it even was an idea so ceo founder is mary lynn and she's still around today there's four of us we all started 20 years ago and we built it for ourselves she had a suburbia studios which is an ad agency and thought you know we really need something to track our time manager projects uh and there wasn't really anything in the market and so we built it for ourselves and thought hey this is actually pretty cool put it out to a few other people and they said yeah this is really great and so we built it into a business it was not uh on the onset to go hey let's build a big business it was build it for yourselves which is always i think the best and uh 21 years later we're still selling globally so what happened where did it go from an internal project where you're eating your own dog food to custody to new people going wait what is that thing you just used i want to use that time tracking too and you actually spin it out on a separate cap table and launch it yeah so how it worked was we were looking for ourselves we did lots of research we called around we really couldn't find anything there was clients and profits at the time um you know was installed really expensive and so we called about 300 agencies in the us and said hey what are you using and people are like oh excel pen and paper and we're like there's there's a need here um you know when it's working for us and so we shared it with a few of our local agencies and they're like this is really cool we would use it so we're like okay do you guys want to try it and beta tested it um and then we thought you know what there's something we've got here so we did a launch sort of locally and and said hey anyone interested come and see we had a huge turnout um and from there we thought okay let's build a website and they'll come i mean that we thought no demo no trial we'll just launch a website and they'll all come and buy and no that wasn't the case at all so yeah we built a demo and um slowly started to put it out to people that we knew and got them to beta test and give us feedback and built in sort of feature by feature as people needed things and requested them and we've built you know onto that ever since so officially launching it was about a year later where we said okay let's actually build a team and bring it together and it was very organic and it's been organic you know for 20 years and i there's a lot of folks listening right now that are building uh like tools inside of the company that they're stuck at that make their life easier and they might go i want to spin this out but they don't know where to start they don't know if they should give their their current employer a part equity if they spin it out they don't know if the employer actually owns part of the tech because of their employee contract they don't know how to necessarily fund it per se how did you work through all these things as you guys spun function fox out of the agency yeah we didn't know ourselves right it was just kind of trial by fire and we like built we didn't know about really a cap table and how to build it we we went out to friends and family we have more shareholders than we wish to admit um and so we spun it out and kind of said okay well if it's working for us and we built all of the tools that we need so at the time there wasn't like the sales force or the hub spot we built all that stuff internally so today to run our business we use nothing but our own internal tools so not just function fox but we have our own sms system sales management system crm system we do all of our own billing and tracking and anything that we need for our system we built and so there's 20 other products that we probably maybe even more that we actually could sell um and it's just a matter of staying focused so yes we could do all those other things but we said you know what this is the bread and butter this is what we believe in and this is what's you know making an impact in other people's lives so that's what we've stayed true to how much did you bring in in that first year from friends and family all that to really like kick this thing off i mean are we talking like a hundred grand or like a million no not even so it was uh half a million five hundred thousand for friends and family one was a big chunk from sort of one investor that was really a family friend and we haven't raised money since so for 20 years we've really you know based on our own profits we're a very profitable company we're very different than a lot of other companies out there they're you know 35 million or they're in their third round or whatever it may be we've never done that we've just kind of said okay this is where our growth is going to be this year we're profitable we want to have this as a lifestyle business and if we need more injection of cash we raise revenue in a different way so we'll put out you know price increase or we'll do a feature an add-on or do upgrades that kind of thing and then we'll build naturally and organically and that's worked very well for us and very different than a lot of other players in the market i love profits i love capital efficient founders i love getting creative with getting cash from customers instead of vcs when you say very profitable what does that mean to you well i mean you can say okay there's you know the big players out there and uh they're playing with big money we're in the smaller pool we're small fish and a big in the big scheme of things and we're canadian company which is also very different we're playing in a u.s market as a canadian subscriber so profitable for us means huge dividends for all of our shareholders every year you know they're like wow if i got these kind of dividends from all the other investments i'd be doing really well um you know so they've they've won their money 20 times over in some cases wow um you know really really happy for them and for us it's it's a great business can you put brackets on that i mean again we don't want to disclose information you can't disclose but over the past 21 years do you i mean have you paid out more than i don't know 10 million in dividends to all your investors would you say oh yeah definitely much more than that more than 100 yeah i you know what it's private right but okay i won't push if you can't share it but that's incredible yeah it's been you know people have done extremely well one of the questions i imagine they ask you before you're about to give a dividend payment is is there a way to use this in the company to keep growing the company how do you decide like whether to pay up 10 millions and millions in dividends versus use it to build more tech internally yeah good question and so we look at cac ratios and we look at you know where is it going to be really profitable and so we can say okay we'll spend x on marketing um what are we going to get in return for that and you know if we have a big idea or we want to launch something new we'll set that money aside obviously to do that yeah and then pay the rest out in dividends but we've been paying dividends ever since we've been profitable which was like year four or five wow okay i love this story do you remember what um in 2000 take us back to that first year in revenue first year in business do you remember how much revenue you did in 2001 how small was it oh yeah it's not even it's not even worth mentioning honestly um we did projections in our first year and you know we were really optimistic we thought we'd do really well and i think we hit those projections maybe in year 15 so wow we were a bit out to lunch in terms of our projections um but you know looking back it was like in the first couple years it's like can we make payroll can we hire people um you know are we going to keep this company afloat for another month or two right so it was a lot of hard work and um you know i was putting in close to 20 hours a day and and just work right and her whole team was and so we've come a long way wait how optimistic were you guys with your bright and shiny eyes like in 2001 what did you were like we can hit this much revenue this year how optimistic were you yeah we were you know we were millions right we thought oh yeah we can do that like build the website and they'll come five million five million no problem no problem right so um yeah no it's uh it's been an interesting journey a really good learning experience and um you know happy that we're still around 21 years later and we've got a bright future so i love that tell me more about the team how many folks full time these days so we're 18 strong right now really uh senior team so large majority of the senior members have all been there for 21 years then there's a good chunk that's over 15. more than half the team is over seven and uh so yeah pretty much everyone's over five years and we just hired two new people wow how many are purely engineers of four four and um we haven't talked about function fox pricing but is the pricing large enough where it makes sense to have an internal sales organization or do you not have sales quota carrying reps yup so we have a sales team we have a service team uh marketing as one and then the dev teams of our engineers and they do cross-platform so like qa and development and um seo and that sort of stuff as well and so we have an internal sales team and yeah it does make sense in terms of pricing we have a free product so there's a lot of users there and then it starts at 35 well we have a light product for 20 bucks a month uh that's just for one user freelancer sort of gig economy and then we've got uh a classic premiere and in-house and they start at you know 35 plus five dollars for each additional user and then uh 50 so it's it's really priced affordably and really can grow with you know users can grow with the system you probably have a massive range but if you look at like your sweet spot sort of average would you say it's maybe like a three or four person team and a hundred bucks a month or what would you say your sweet spot is yeah sweet spot's about 10 users so we've got uh one user companies all the way up to 500 uh user companies so there's you know some big name players in there um banks large banks and in-house marketing departments for our in-house groups um a lot of the larger clients i can't mention online but you can look on our website and there's some there that you can see um and so the internal marketing departments they average about 10 so the sweet spot is anywhere between 8 to 25 with the bulk being at the 10 user but it does fluctuate from the one user up to the 500 users got it yes so 10 and what 20 bucks a month you're talking like 200 ish per month but you have some that are way bigger and some that are one person gig economy sort of workers uh anywhere from like a thousand to 4 700 sort of you know annual revenue from those who do you enjoy more the the gig worker who it's a stay-at-home mom you're changing her life with with your software or like the bank with 10 000 users yeah they all have their pluses and minuses uh you're a politician as a diplomatic answer the uh the uh the one user companies you know we really have a big impact on their business going from paper or something you know that's ad hoc um the the middle ones where they really know their business and they want to improve their business that's where we make the biggest difference and we can actually double their profits which they've shared with us which is really cool and then the larger ones you know they've gone from lots of different systems we bring it all into one place and they see huge improvements in terms of profitability and efficiency so you know there's when you see the payoffs that they're getting that's where the real impact comes from but you know they're all fun helping them all in a different way yeah yeah now you told us you got your first hundred customers you said you cold-called locally agencies and got them signed up and you met had a big impact in their lives um how many customers are you serving now today well uh thousands so it won't give ex exact number but thousands and you know over a hundred thousand users uh we're in about 120 countries with the large being in the us so it's you know it's not a it's not small meat and potatoes yeah no this is great um and and you know it's always interesting to think about like small versus large i just think about like happiness or not right there's plenty of people with a 5 million company with a million profits per year and they're super happy they don't want to be big uh you guys seem like you're really enjoying what you're doing yeah we love it i mean i love coming to work every day the whole team does right i think it speaks volumes in terms of the tenure of the staff we've even had you know people leave the company over the years and we've had 10 or 11 employees ask for their job back so that you know always rings true to me that there's we're doing something right yeah and um we're not uh pushed by big investors that are looking for you know this or that we kind of say this is what we want for our customers and this is what we want for our staff and if it's works for the company it works for our team and it works for the individuals it's a yes from us a lot of people i don't necessarily agree with this but a lot of people will try and hit sort of bootstrap founders and go oh yeah but you can't grow really fast without raising vc how have you guys done the past 12 months in terms of growth rate percentage wise yeah so i mean after 20 years it's hard to grow double-digit numbers right um but we've seen growth since we started and even in the recession even like.com like we launched right after the dot-com bust and even with covid you know we've seen profits every single year and i don't think there's a lot of companies that can say that so very proud of that yeah yeah so when you say hard to hit double digits you're talking like you've seen pretty consistent growth past couple years between maybe five and ten percent yeah we've seen growth since we've started i mean i think the the later years have been you know more stable growth yeah covert obviously has had an impact but uh you know we're we're happy with our growth every year churn many people argue turns really hard to manage in this space what do you guys see in terms of churn these days yeah so it depends if you look at the gig economy there's lots of turn there um just you know on the one user side because their projects are very unstable so that raises the numbers up quite a bit if you look at the companies that have been with us for for more than three months um then the turn's very stable right so it's under nine percent um but it fluctuates depending if you're looking at the really small ones versus the big companies under nine percent annually or monthly annually annually yeah that's great i mean look that's great uh that's i would say that's world-class for those price points that's that's great stuff now do you have a playbook to sell your time tracking software and then upsell one of these other 19 products you guys have built internally is there real expansion revenue there or no uh we don't sell those other ones internally i mean we use them for ourselves and we've really stayed focused there's opportunity for growth there for sure if we want to you know branch out and take those features and you know have another team develop those but for us we've just stayed really focused and small and stable and it's it's worked for us as a trying you know instead of trying to be everything for everybody and today as you look for you know to grow in 2021 what would you say the top growth channel is it must be very low touch because you only have one person on marketing yeah i mean the marketing you know it's subjective right you can you can put yourself out there on captain software advice and some of the other channels i think the channels have changed over the years for sure it used to be you know direct mail and we still do direct mail these days because no one else is doing it right yeah um when we have to be creative with our marketing dollars you do things that other people don't do so that you touch them in ways that others don't like you know outbound calls that's something that we still do and is works very well for us um if you look at some of the other players in the the you know industry they're doing a lot of digital advertising we're not um so you just do it in a different way and then our outbound sales team is amazing you know they're not true they're true sales people but not in a salesy way they're just really helpful and um consultative and advisory and helping people not just use the product but actually help them increase their profitability and efficiency within their in their company yeah you're growing you're doing it in an economically efficient way for both you your shareholders and just happiness of you and your customers are you competitive i mean do you see a path where this can you know get above you know caught maybe 15 million in terms of runner in the next year or so or is that something where you don't really focus on oh yeah yeah yeah no problem at all um it's just a matter of you know where do we want to be so for us money hasn't been the driver um of course you want to be a profitable business but at the end of the day you know it's being having a good happy business and having happy customers and that's really what's led us to where we are today you know 21 years later i feel like i'm searching for a needle in the haystack i'm dying to find a company that has broken a million dollars in revenue per employee right so for you guys at 18 that would be 18 million run rate um i assume you guys are probably higher than the average we see across other companies which is about 150 000 in revenue per employee because you're not backed and you're very profitable but i'm rooting for you i hope you can get i hope you can get to a million bucks in revenue per employee quick and just keep supporting all these folks yeah awesome all right green let's wrap it here with the famous five number one what's your favorite business book never split the difference number two is there a ceo you're following or studying not at the moment number three what's your favorite online tool function fox besides your own [Music] uh good online direct communication zoom in the last year i guess number four how many hours of sleep to get every night as many as possible yeah what is it usually uh ranges some nights it's like two or four and other nights it's 15. wow okay that's a big range that's maybe the biggest range i've heard okay great and what's your situation married single kiddos married three great danes and a cat wow okay so no kids and may i ask how old you are i think you're at your five questions but 46 46 okay uh and then wrap up here take us back 26 years what's something you wishing you knew when you were 20. wish i would have said yes more say oh say yes more interesting elaborate a little bit well i think you know i was i was 20 right i was 25 and i was like you say no and you're like oh i don't know if i can do that and you're uncomfortable and you're like i don't know if i'm in the right space and you you second guess yourself i think if you say yes and be uncomfortable you can get a lot further than i think i would have at the time so i'd say yes more guys function fox one of the ogs in the sas space time tracking they built it to serve their own agency needs only raised 500 000. this was back in 2001 quickly grew to 100 customers now serving thousands of customers and over 100 000 users they pay on average call it 200 to maybe 500 bucks per month depending on the size but again this all profitably get this they've paid over 10 million dollars in dividends over 21 years i wish more sas companies paid out dividends what a crazy concept karina we're rooting for you thanks for taking us to the top sounds great thanks so much for 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