Interview
How FusionAuth Reached 50 Paying Customers in Its First Year with a Bootstrapped Hybrid SaaS Model (Interview with CEO Brian Pontarelli)
- Interview Date
- October 9, 2019
- Interviewee
- Brian PontarelliCEO
Company Metrics at Interview Time
Paying Customers (2019)
50
Sales and Marketing Spend
$600,000
Team Size (2019)
6
Historical Snapshot
These numbers were reported by Brian Pontarelli during the interview recorded in October 2019 and are a historical snapshot, not current figures. See FusionAuth’s current numbers.
Key Takeaways
- 01FusionAuth launched in September 2018 and had 50 paying customers by October 2019
- 02Average contract value was between $6,000 and $10,000 per year per customer
- 03FusionAuth was totally bootstrapped, funded by its sister product CleanSpeak
- 04FusionAuth was burning between $30,000 and $50,000 per month at interview time
- 05The team consisted of 6 people, including 4 engineers and 2 in sales and marketing
- 06FusionAuth had approximately 200,000 total downloads and around 10,000 new downloads per month
- 07About 2 to 3 percent of downloads convert to active running instances, roughly 300 new instances per month
- 08All hosting customers were retained; two customers churned only because they went out of business
- 09The company invested approximately $600,000 in marketing, ads, conferences, and sales salaries
- 10Developer-focused events and marketing channels were identified as the most effective growth tactic
Company Metrics at Time of Interview
| Metric | Value | Source |
|---|---|---|
| Year Launched (FusionAuth) | 2018 | Interview, Oct 2019 |
| Paying Customers (2019) | 50 | Interview, Oct 2019 |
| Avg Contract Value (2019) | $6,000 to $10,000 per year | Interview, Oct 2019 |
| Team Size (2019) | 6 | Interview, Oct 2019 |
| Engineers (2019) | 4 | Interview, Oct 2019 |
| Monthly Burn (2019) | $30,000 to $50,000 per month | Interview, Oct 2019 |
| Total Sales and Marketing Spend (excl. Engineering) | $600,000 | Interview, Oct 2019 |
| Total Downloads (2019) | 200,000 | Interview, Oct 2019 |
| New Downloads per Month (2019) | 10,000 | Interview, Oct 2019 |
| New Active Instances per Month (2019) | 300 | Interview, Oct 2019 |
| Download-to-Active Conversion Rate (2019) | 2 to 3% | Interview, Oct 2019 |
Growth Breakdown
Revenue
FusionAuth launched in September 2018 with essentially zero revenue. By October 2019 the company had 50 paying customers at an average contract value of $6,000 to $10,000 per year, with revenue split roughly equally across hosting, professional services, and support contracts.
Customers
Of about 200,000 total downloads, around 1,500 active running instances were in production (he also put the number at 1,200), and about 50 customers were paying. FusionAuth had no mechanism yet to track conversion or push free users toward paying; the website relaunch that let customers buy hosting directly was its first revenue strategy, and with the pipelines and funnels now built, Brian said it would be able to start measuring.
Team
The team stood at six people: four engineers and two covering sales and marketing. No one carried a quota; all acquisition was inbound and marketing-driven.
Funding and Profitability
At the time of the interview FusionAuth was totally bootstrapped, with its sister product CleanSpeak paying the bills. Taken on its own, FusionAuth was burning between $30,000 and $50,000 per month, and about $600,000 had gone into its growth: ads, conferences, and marketing and sales salaries, not counting engineering salaries.
Growth Strategy
Developer-Focused Live Events
Brian credited developer-oriented conferences and shows as the most effective growth channel. Developers found the product easy to download, integrate, and champion internally to executives who could authorize paid support contracts.
First Customer From a Third-Party Article
FusionAuth's first customer had ruled out Okta, Ping and Auth0 and kept digging until it found a single third-party article about FusionAuth as a new player taking on the big guys, published on a comparison site Brian could not name for certain. The customer then got in touch, said it loved what the team was doing and wanted to support it, and asked to pay.
Free Download Model
By making the software free to download and run anywhere, FusionAuth built a large base of active instances with no sales friction. The strategy prioritized brand building and developer trust over near-term revenue conversion.
Website Self-Serve Purchasing
At the time of the interview, FusionAuth had just relaunched its website to allow customers to purchase hosting directly online. Brian called it the company's first revenue strategy and said it would help get rid of some of the barriers to buying.
Funded by Sister Product CleanSpeak
Rather than raising outside capital, FusionAuth was funded by CleanSpeak, the company's older, steady product, which Brian said had been paying the bills. He said the team likes to call CleanSpeak its Series A, and asked whether FusionAuth was bootstrapped outside CleanSpeak, he said it was totally bootstrapped.
Best Quotes
“It's different. So we are calling it like a hybrid SaaS or a downloadable SaaS. There's a lot of different terms we're kind of playing around with, but basically it's a SaaS, but you can run it anywhere on any server in the world.”
“It's not open source, but it is just free for developers to use. The only thing you pay for is if you want us to do hosting or do any professional services or you need any type of support.”
“On average, that's a good question. I would say somewhere between $6,000 and $10,000 for a year.”
“We officially launched FusionAuth September of last year. So we've been going for just about twelve months.”
“Totally bootstrapped. Yeah. So it's like, it just keeps funding us, which is great. And that's the thing is like, I think with the growth that we have with how many inbound we have right now in our pipeline, we should be able to overtake CleanSpeak next year.”
“I think we get about 10,000 downloads a month.”
“That's about two to 3%. So about 300 new active running instances every month.”
“I wish the 20 year old self knew to just get started right away, right? I jumped around working corporate jobs, not enjoying what I was doing for far too long. And, and it took me a long time to like, just dive in and go.”
What Happened Next
At the time of this interview in October 2019, FusionAuth was about a year past its September 2018 launch, totally bootstrapped and funded by its sister product CleanSpeak, and, as Brian Pontarelli put it, almost not focusing on revenue yet while it built the brand. It had just relaunched its website so customers could buy hosting directly, which he called its first revenue strategy, and with the pipelines and funnels now built he expected to start measuring conversion. These figures represent a point-in-time snapshot of the company as Brian described it on tape. Visit the FusionAuth company profile for current numbers.
View FusionAuth’s current profile and metricsFull Transcript
Chapters
- 0:28Introduction and Guest Background
- 0:41Business Model: Hybrid SaaS Explained
- 1:49Pricing: Free to Use, Pay for Hosting or Support
- 4:06FusionAuth Launch Date and First Customer
- 5:20Why Customers Choose FusionAuth Over Okta and Ping
- 6:05Customer Count: Downloads vs Paying Customers
- 7:28Conversion, Churn, and Retention
- 9:17Team Size and Go-to-Market Approach
- 9:59CAC and Marketing Investment
- 11:30Burn Rate and CleanSpeak as Internal Funding
- 12:14Download Funnel and Conversion Metrics
- 13:08Famous Five: Books, Tools, and Habits
- 13:53Advice to Younger Self
Nathan Latka
00:00Just got done editing this interview. You guys are gonna love it. Before I do that though, I want you to know that I'm going to be in the comments for the next thirty minutes or so answering your questions. If there's additional questions you want me to ask the CEO next time I interview them, leave them below. Or if you're just loving the data points I get CEOs to share, click the thumbs up button below. That's your
00:18way of telling me you're loving this stuff, and I'll get you more of it. Additionally, again, I'll be in the comments answering any questions you have. Alright. For thirty minutes. Enjoy the interview.
Introduction and Guest Background
Nathan Latka
00:28Hello, everyone. My guest today is Brian Pontarelli. He's a successful technology entrepreneur currently focused on solving login registration and user management challenges at his company fusionauth.io. Brian, you ready to take us to the top?
Brian Pontarelli
00:40Yeah, absolutely.
Business Model: Hybrid SaaS Explained
Nathan Latka
00:41All right. So what is the business model on the company? Is it a pure kind of SaaS model?
Brian Pontarelli
00:46It's different. So we are calling it like a hybrid SaaS or a downloadable SaaS. There's a lot of different terms we're kind of playing around with, but basically it's a SaaS, but you can run it anywhere on any server in the world.
Nathan Latka
01:00Okay. Actually on the server or you spin up a private cloud?
Brian Pontarelli
01:06Either. You can spin up a private cloud, we can run in our cloud, we can run in your cloud. So it's that sort of like hybrid approach, but it adds a lot of flexibility. One of the main differences between like a normal downloadable product and what FusionAuth does is a lot of the downloadable products like require a ton of configuration. They're like a lot of development, a lot of code to just even get working. We feel more like
01:30a SaaS where you log into a web interface and you do everything, you know, there.
Nathan Latka
01:34Yeah. Okay. So let me ask you a question. If I pay you and I and I and I take the software and I install it in my own servers. And then, you know, a year, you know, comes up. Do do I have to pay you again an SLA, a service license or something? Or do I have it, you know, for life for that one payment upfront?
Pricing: Free to Use, Pay for Hosting or Support
Brian Pontarelli
01:49You can not pay us ever.
Nathan Latka
01:49Okay.
Brian Pontarelli
01:49So it's similar to like MySQL model or any of those. It's not open source, but it is just free for developers to use. The only thing you pay for is if you want us to do hosting or do any professional services or you need any type of support.
Nathan Latka
02:08Okay, so you pay for hosting and support. So I guess let me ask you a question. Over the past twelve months, when you look at your total revenue, which of those three things you just mentioned makes up the majority of your revenue hosting support or professional services?
Brian Pontarelli
02:21They're about equal right now.
Nathan Latka
02:23Oh, okay.
Brian Pontarelli
02:24Yeah. They're like, you know, it's a pretty good blend. We have a lot of people paying for ProServe, helping get features out, got a bunch of hosting contracts, and then we're starting to, you know, get some pretty good size support.
Nathan Latka
02:36Okay. Well, guess then let me ask you a question. If I forced you into giving me an average, like a sweet spot, what would you say the average customer pays you per year to use the technology or the professional services or the hosting?
Brian Pontarelli
02:47On average, that's a good question. I would say somewhere between $6,000 and $10,000 for a year.
Nathan Latka
02:53Okay. Maybe something.
02:55Kind of 500 to $1,000 a month, something like that.
Brian Pontarelli
02:58Yep.
Nathan Latka
02:59Okay. Now what year did you found the company?
Brian Pontarelli
03:02So the company has actually been around for thirteen years. We have another product, it's been paying the bills. It's steady.
Nathan Latka
03:02Which one?
Brian Pontarelli
03:02It's called CleanSpeak. It does profanity filtering and moderation. And so we work with a lot of game companies, a lot of really big brands, you know, that's it's a pretty turnkey solution.
Nathan Latka
03:20Is that a SaaS model?
Brian Pontarelli
03:22It's the exact same. Sort of hybrid. And so one of the reasons that we sort of approach the entire industry this way, if you think about data like users, user chat, user information, like anything that's around users, anytime you're dealing with that, have to be able to deploy on premises, right? Because you might be in Germany and German finance laws require that customer data is housed in Germany. So a pure SaaS play, it won't work. So
03:52that's why we go with this hybrid approach. And it works on every industry, finance, construction, retail, e-commerce, gaming. Everybody has different requirements. So we figured why why limit ourselves?
FusionAuth Launch Date and First Customer
Nathan Latka
04:06So what year did you officially launch FusionAuth?
Brian Pontarelli
04:08So we officially launched FusionAuth September of last year. So we've been going for just about twelve months.
Nathan Latka
04:14Okay. And how'd you get your first customer? Do you remember?
Brian Pontarelli
04:17So the first customer, found us. So they were digging and digging. They didn't want to use Okta. They didn't want to use Ping. They didn't want to use Auth0. And they just kept digging. And then finally, they found us, you know, we didn't have a name back then, contact us and said, hey, we really wanna support you guys. We love what you're doing. Let us pay you.
Nathan Latka
04:36Okay. And I mean, how did they find you? Did you have like an SEO page set up? Was it a search keyword? They knew you personally? What was it?
Brian Pontarelli
04:42I think what ended up happening is we had one article that was basically like, hey, there's a new player out there that's trying to, you know, take on the big guys. And because they were looking for, you know, one of those names, they found the article and they're like, hey, I've never heard of this. Clicked on it, found us.
Nathan Latka
05:01Where was the article published?
Brian Pontarelli
05:03It was on... I think it was one of those like comparison sites, like AlternativeTo or like ProgrammableWeb. I can't remember exactly which one, but it was they had done a write up of us.
Nathan Latka
05:14AlternativeTo, interesting. Okay, very cool. And why didn't they like Ping?
Why Customers Choose FusionAuth Over Okta and Ping
Brian Pontarelli
05:20So, you know, interestingly, a lot of the other solutions just have problems when it comes to some of the features, right? So it's either you can't run it on premises, right? So that's a big one with like, you know, Okta and some of the others. Ping, you can run on premises, but it's also pretty heavy. In order to get like all the components that they needed, they were gonna have to buy like four or five different
05:41individual products, stitch them together. And that's a huge endeavor. With FusionAuth, again, we try to make it look like a SaaS, right? It's like, it's one simple product. You fire it up, you click, click, click, and you have everything from single sign on into like, you know, two factor. You have it all. There's no bolt on packages. You're not getting in the guts and like trying to figure out how to configure plugins.
Customer Count: Downloads vs Paying Customers
Nathan Latka
06:05So that's the first customer, that article. And how many customers have you scaled to today just on this
Brian Pontarelli
06:10You know, that's a good question. I think we have about 1,500 total customers.
Nathan Latka
06:15Okay. Not including CleanSpeak, just on FusionAuth.
Brian Pontarelli
06:18Just on FusionAuth. We were at... I think we're at about 200,000 total downloads.
Nathan Latka
06:22200,000 total down. Okay. Wow. Impressive. Now, I mean, can I take 1,500 times that sweet spot of 500 a month? I mean, that puts you at $750,000 a month in revenue just on this product. Is that accurate or overstated?
Brian Pontarelli
06:36So we're actually not ready to share revenue yet. We're getting ready to ramp up and let's check back in six months and see where things are at. But the 1,200 number or 1,500 is total active running instances in our production environment. Is sort of what our metric is, right?
Nathan Latka
06:52What we're doing Brian, right
06:54sorry, I don't mean to jump in. This all the time I get people come on that. And I don't think you're this kind of entrepreneur because you're not in San Francisco and you haven't raised a $100,000,000 and with some crazy valuation. But so many CEOs come on all the time and brag about customer numbers, which are not customer numbers. They're installs or like users. So I guess my question is, it's amazing on twelve months that you've
07:15got 1,500 of these people, you know, installed actively using it. But like that first customer, how many have you actually converted to paid?
Brian Pontarelli
07:22Oh, how many paying customers? Gotcha. I think we probably have about 50
Conversion, Churn, and Retention
Nathan Latka
07:28Okay. Paying And what makes people convert? Why don't they just stay on the free plan?
Brian Pontarelli
07:33I think it's really when you trust an external system to do your login, if that goes down, nobody can use your app. So while yes, they could manage it and do everything themselves, provide their own SLA. And you know, if something comes up, try and debug it themselves. I don't think a lot of companies are like, you know, like to play around like that, right? Like the gamble.
Nathan Latka
07:55Yep. Okay. And then in terms of growth, I mean, were you at basically zero revenue exactly a year ago or 1,000, 2,000 a month, something like that?
Brian Pontarelli
08:01We were essentially at zero revenue on FusionAuth a year ago.
Nathan Latka
08:05Okay. And then now 50 customers at $500 a month, you're somewhere around twenty, twenty five thousand bucks a month in revenue?
Brian Pontarelli
08:11That's a pretty close, yep.
Nathan Latka
08:13Okay. What about churn? Has anyone started paying and canceled?
Brian Pontarelli
08:17We... I mean, that's kind of the nature of professional services. It's kind of how it goes.
Nathan Latka
08:21Just look at the SaaS part though. So like the stuff that should be sticky, like hosting.
Brian Pontarelli
08:25Yep. Nope. All of our hosting customers are still here. We've had two customers go out of business.
Nathan Latka
08:32Okay.
Brian Pontarelli
08:33So they just shut down the whole system and didn't need login anymore.
Nathan Latka
08:36So even though it's not your fault, if you look at churn over the past twelve months, would you put it at like 10% revenue churn or 20% or 50%?
Brian Pontarelli
08:43Oh gosh, it's probably way less than 10%. Right? So so the people that fold are the small ones. So, you know, we work with a few billion dollar businesses. They actually generate much more than, you know, a thousand dollars a month in revenue. So they're actually pushing our numbers up quite a bit. You know, 10,000,000 users, those kinds of user sizes. Those guys are sustainable. And they're gonna be able to push and push even if the
09:07product that they're using us on doesn't immediately make revenue. For small guys, they'll use us. They might have a thousand users. They'll push and push for a year. And if they don't make any revenue, they they have to close the doors.
Team Size and Go-to-Market Approach
Nathan Latka
09:17Yeah. And who's we? What's the team size today?
Brian Pontarelli
09:19So there's, there's six folks.
Nathan Latka
09:21How many engineers?
Brian Pontarelli
09:23There's four engineers.
Nathan Latka
09:25Okay. And then there are other two are kind of admin?
Brian Pontarelli
09:27Sales, marketing, mostly.
Nathan Latka
09:29Okay,
09:30are any of those folks carrying a quota?
Brian Pontarelli
09:33No quota yet. We're doing everything is inbound. It's all marketing based. We're not focusing on any outbound. And actually, we're almost not focusing on revenue yet at all. We really want to build the brand. We just happen to have customers that really want to pay us to like support them. Totally happy to do it. But on the flip side, it's like, we also just want to continue to build up our base.
CAC and Marketing Investment
Nathan Latka
09:59Yep. So when you take in the salaries of the two people doing kind of sales and marketing, plus any Facebook ads, Ben conferences, etc. What is your fully weighted CAC look like to get a new $6,000 account on FusionAuth? Do you know?
Brian Pontarelli
10:11Yeah, that's a I mean, that's a really good question because we've just been pouring so much money into it without the need to like sort of get revenue.
Nathan Latka
10:21Well, how much have you poured into it from the other company?
Brian Pontarelli
10:23I would say we put about 600,000
Nathan Latka
10:27Mostly engineering salaries?
Brian Pontarelli
10:30No, like that doesn't include engineering salaries. That's basically like ads, conferences,
10:36marketing salary, sales salaries, you know, just basically growth.
Nathan Latka
10:40Yep. Yep. Okay. Good. So so you put that money and it's generated again out, you know, call it $300,000 a year in terms of revenue. So, yeah, not crazy. And you're in the early stages. Are any of those channels working better than the other ones?
Brian Pontarelli
10:54Yeah, so we're actually, we just did a website revamp. We just made it so that you can go to the website and actually purchase hosting, right? So that'll like help, you know, get rid of some of the barriers. And what we're finding is that when we go to developer shows or we're like really hitting developer oriented marketing avenues, that tends to net out really well.
Nathan Latka
11:16Okay.
Brian Pontarelli
11:17Developers love the product. It's easy to download. It's easy to get up and running. It's easy to integrate. And they don't mind just, you know, saying like, hey, let's run this up the chain and see if we can get the executives buy some support
Burn Rate and CleanSpeak as Internal Funding
Nathan Latka
11:30and ignoring CleanSpeak, right and revenue it does. If you just look at FusionAuth in a microcosm by itself, all your expenses and the money it's making, are you guys is it profitable today? Or is it still burning cash?
Brian Pontarelli
11:41It's burning cash for sure.
Nathan Latka
11:43Like how aggressive you're talking like $100,000 a month or $10,000 a month or
Brian Pontarelli
11:46Oh, probably not that much. Probably like somewhere between 30 and 50.
Nathan Latka
11:50Okay. Fair enough.
Brian Pontarelli
11:53And that's okay. We always like to call CleanSpeak our series A.
Nathan Latka
11:56I was gonna say, are you bootstrapped outside of CleanSpeak?
Brian Pontarelli
11:59Totally bootstrapped. Yeah. So it's like, it just keeps funding us, which is great. And that's the thing is like, I think with the growth that we have with how many inbound we have right now in our pipeline, we should be able to overtake CleanSpeak next year.
Download Funnel and Conversion Metrics
Nathan Latka
12:14How many downloads, new downloads are getting per month?
Brian Pontarelli
12:16I think we get about 10,000 downloads a month.
Nathan Latka
12:21And how many actually install and start using?
Brian Pontarelli
12:24That's about two to 3%. So about 300 new active running instances every month.
Nathan Latka
12:31Okay, and then of the 300, again, about 10 of those convert to paid?
Brian Pontarelli
12:36Yeah, that's where we're driving towards. Again, right now we don't have any mechanism to track it or to actually push people that direction. Because we stop everything right after download. We're like, thank you for downloading. If you need support, we'll take it. But like you're fine just running with this as is. So this... That website launch that we just did allow people to buy the hosting directly. That was our first sort of revenue strategy.
Nathan Latka
12:36Great.
Brian Pontarelli
12:36And
13:03now we have all the pipelines and, you know, the funnels built. So we'll be able to track and actually start measuring.
Famous Five: Books, Tools, and Habits
Nathan Latka
13:08Good stuff, Brian. Let's wrap up here with the famous five. Number one, what's your favorite business book?
Brian Pontarelli
13:14That I love Start With No.
Nathan Latka
13:17Start With No?
Brian Pontarelli
13:18Yeah.
Nathan Latka
13:18Number two, is there a CEO you're following or studying?
Brian Pontarelli
13:23I'm a huge Elon Musk fan. Number I have two Teslas.
Nathan Latka
13:28I love that. Number three, what's your favorite online tool for building your company?
Brian Pontarelli
13:32I use HubSpot religiously.
Nathan Latka
13:34Number four, how many hours of sleep do you get every night?
Brian Pontarelli
13:38Eight to ten.
Nathan Latka
13:39Okay. That's great. And what's your situation? Married, single kids?
Brian Pontarelli
13:42Married, three kids, a dog, couple houses, two Teslas.
Nathan Latka
13:48How old are how old are you?
Brian Pontarelli
13:50I'm 43.
Nathan Latka
13:5243.
Advice to Younger Self
Nathan Latka
13:53Last question, what do you wish your 20 year old self knew?
Brian Pontarelli
13:55I wish the 20 year old self knew to just get started right away, right? I jumped around working corporate jobs, not enjoying what I was doing for far too long. And, and it took me a long time to like, just dive in and go.
Nathan Latka
14:12Guys, fusionauth.io launched sixteen months ago now fifty, five-zero, customers paying on average $500 a month. So $25,000 a month in revenue up from again, nothing about a year ago, They've put about $600,000 into marketing and selling a thing, generating tens of thousands of downloads. It's downloadable SaaS for identity and user management. Now looking to scale burning about 50,000 per month. Team of six, four engineers is about 10% gross revenue churn over the past or the
14:37first twelve months. Again, now putting gas on the pedal... Gas... Sorry, in the car, pedal to the metal trying to drive growth. Brian, thanks for taking us to the top.
Brian Pontarelli
14:45Absolutely, man. Thanks a lot.
Nathan Latka
14:48These CEOs rarely give these kinds of interviews. I hit them hard. I get the data, I wanna do it more. So if you wanna get more of this stuff, make sure you subscribe up here. And then additionally, go check out one of my other CEO interviews right now.