How Gsx CEO Antoine Leboyer grew to $7.5M revenue and 250 customers in 2019.

hello everyone my guest today is antoine liboye he is the uh founder and president of a ce and ceo of a company called swiss software editor gsx he's seen information technology from all sides by working on vendor for vendors of all sizes after 12 years in sales and marketing decisions at ibm he started the european indirect operations of candle corporation and has worked for startups in software distribution and mobile phone billing software his most recent position is senior vice president of baracoda the leading pro producer of bluetooth industrial devices all right antoine ready to take us to the top i'm ready to do that and i just have to add one little thing i was not the founder of gsx but that's a small point okay so when did you what year was it launched and when did you join i it was launched 20 years ago and i acquired it 11 years ago in 2008 so i'm part of these entrepreneurs which didn't start a company and some people are able to start a company i knew that i was not the sort of this sort of entrepreneur but i was looking for a company to acquire i found gsx and i used some of my own uh money to buy the company and bring in a private equity investor who's been with me ever since and there are actually many people like me who are now looking at entrepreneurship not by starting a company but by saying can i actually um come in buy a company and and add value when i can add value yeah and that's what i have been doing so sorry it was founded in 2000 and you bought it in 2008. absolutely okay so in so what first off where were you in life in 2008 where you said you know what i have some money i want to go buy a company um i first i was in france i'm calling you from geneva right now and i spent a year and a half doing some consulting uh co-writing a book because everyone wrote a book in my family i understand you wrote a book as well nathan and i visited a number of software companies because given the experience that i've had i knew a number of people and i wanted to be able to run a company and i started narrowing to a number of them then i went to visit the founder of gsx i had worked at candle in in the sort of industry i was impressed by the technology and i thought that i could be adding value and we agreed and this is uh how things uh got started in february of 2008. now this was like 10 years ago so what kind of scale was the company at that point were they bootstrapped so um so what we did is that uh so first we did the acquisition uh we did this um doing uh an lbo but ever since 2008 we actually we are totally bootstrapped we've never raised any funding well no i'm sorry sorry i want to get contacts before you started operating so when you found the company when you went in 2008 and had your first conversation what size was the company at that point how much in revenue had it done um the company was about six six million and something in euros so basically uh seven in dollars okay and that was in 2008 now and that was a sas platform back then or on-prem or what no no it was uh it was a platform that was doing uh monitoring of ibm platforms so i was knowledgeable of the industry and i thought that it was a very very creative technology which could have a lot of application so i could see that i could be improving a number of things in sales and marketing and this is why i thought that it would be a good match in between the strengths of the companies and what i could be bringing okay how did you guys all agree on an acquisition price we uh make a pro we made a proposal he was okay with this and then i looked for a private equity player and we secure financing interesting okay so what did you offer him seven million or some multiple of seven million i wish i could tell you oh come on that was like 10 years ago uh fair enough so we gave him about um [Music] we gave him about 120 percent of revenue okay good so so somewhere called between kind of seven and 15 million bucks you bought it for about 10 11 million dollars something like that something like that yeah okay but you know it's a long time ago now what's very interesting is that uh we had to spend time remember you know professionally the company we had to spend time also um reimbursing the debt but by the time this was done the market in which we were in a way was gone and my investor and i we decided that we had to look at the company not as a sort of lbo candidate but as a growth company and we decided to take the technology and port it not from the ibm world into the microsoft world it took us two or three years to do that and then the cloud started appearing and all the customers started moving their um collaboration tools to rp365 so we had to do two transitions and the strengths of the technology and the uniqueness is that we're able to do this transition and and this is something which is you know we start moving by being and would say company with classic type of tools on um probably what people would look at outdated applications and what we've been doing in the last 11 years was actually transitioning it into a company which can have leading edge into what is the biggest market today for sas monitoring of sas application which is the monitoring of official microsoft office 365. i don't understand what that means what do you mean monitoring office 365. so um so you guys know if it's 365 this is microsoft collaboration platform it's probably the the the platform which in term of package sas has got the the biggest amount of the gross they are adding 30 million of users you know it's huge i get it i'm just understand where you fit in what do you mean by monitoring office 365 we are pro if you want to monitor the performance of a sas application you need a new set of tools which give you information on how the service is being delivered and how the elements that are your own responsibility are affecting the performance okay it's a totally new business it's a totally new type of technology and this is uh where we have a lot of leading-edge capabilities and we think that on this market we got the best uh we have a very very competing community product uh and and we have a lot of experience on on on these things so antoine help me understand the average customer today that then is using your platform to monitor office 365 what are they paying you per month or your per year to do this so what we do is that we have you know microsoft has three packages z1 in three five we got the same thing we have three packages which are dollars per year six dollars per year eight dollars per year according to the workload that they want to be monitoring uh we focus on the large customers so the average size customers that we have got something like 16 000 user we got about uh 250 customers which correspond to three million seeds and out of the three million seeds i would say that one half of them which is the this is the one that we have on office 365. okay so so let me unpack that for a second instead of talking about on a per seat level talk at a talk at an actual a cut a business level so when it with the average business that signs up with you how many seats are they typically purchasing uh let's put something like 10 000 seats and the average price that i have is usually um five and a half uh per a year so we are talking about uh deals which could be uh 50 000 in average the biggest customer however that we have is uh customers with 350 000 seats and we got some which are smaller but the average one would be five fifty thousand uh dollars per year on a subscription basis yeah so that'd be about 4250 per month or something like that somewhere around that do they are they always paying annual upfront antoine uh you know that's correct and we have even some which uh are uh taking advantage of the fact that we offer multi-year discounts so that they don't have to uh to repeat these the year after yeah and and very interestingly you know this is characteristic the we still have a remnant of some old business but it's going smaller year after year whereas my office 365 business has doubled three times in a row and my estimate is that this year we are going to be more than doubling and you said today you have 200 250 customers three million seeds two five zero customer um half of them are totally on office 365 the rest they are on um mixtures of on-premise and uh and um you know have what people call a hybrid platform yep so can i can i use those numbers then to kind of back into revenue so 250 customers at a 50 000 acv you guys just passed 12 million bucks in ar no not quite because some of the customers are actually customers that would transition from an old license and and maintenance model okay so which one of those numbers is lower the average acv of 50 grand or you have less than 250 customers we have 50 we have 250 customers but the uh average revenue that we would get if you take the mix in between the new customers which are subscription model as well as the customer which we would be having in uh you know in a maintenance type of model because they are on the system we probably would be more something like half of what you've been saying okay got it so something like maybe like two thousand five hundred dollars per month when you combine the two different streams 250 you know 2500 bucks a month across 250 customers would put you at like 600 grand a month right now in revenue is that more accurate um something like that okay uh okay very good and then help me understand growth so if you're around that today where were you exactly 12 months ago do you remember um if you look at the office 365 business specifically um we were half of that and what we have right now hold on sorry i need to make sure i understand that if you're doing 600 grand ish today in revenue and and you're saying you were half of that a year ago so 300 000 a month if you step back i have an old business which is declining and i have a new business with it growing very fast i know i'm asking for the blended average of both of them together not i don't want to hear only the story of your good stuff right because everyone has other stuff and that's what we learned from so your whole business all together a year ago about how much was it doing per month look it is very simple we've been flat as a whole with one going down and one going fast i see good fair enough by the way i thank you for sharing that and being transparent about that so you've been flat year over year one's declining and the other's growing if we only look at the one that's growing what's that growing at you every year like 100 50 100 3 years in a row and what we are focusing right now is that it's going to be probably even a little bigger okay very good now after you raised that it caught 11 million bucks in 2008 to buy out the company did any of that stay in the company for operations or did it all go to the earlier team um it stayed in the company i mean we well sell hold on we use the proceeding to pay uh the founder who left and uh and then we uh run the company as normal like this is this your question yeah so did you my question is did you raise additional capital after the first 11 million to buy the company we we have not raised we have not raised any capital so you're profitable today we are breakeven and what we are trying to do is the following what we're in a situation where the company has is is in a situation where we have no technical debt and this is something which is going to be probably happening middle of this year we've made a lot of progress but we wanted to reduce the dependency on old technology and make these uh uh you know uh a totally uh uh scalable product and and this is something which we've uh which we've done progressively and in the same time we knew that this was a very big market so we tried to look and say we want to make sure that we are growing the business and we are rebuilding a set of customers so so as not to lose opportunity so i have this agreement with my investor which is that we don't want necessarily to start you know we don't want to be losing money of course but we want to make sure that we are growing the business and rebuilding the customer base with new office 365 clients as well as invest in the technology and what's total team size today there's 45 people okay and when you look at some of the economics like churn right what's your total and now obviously you have two very different profiles but the company as a whole revenue churn annually is about what if i look at well once again i need to differentiate um both businesses if i look at the office 365 business my channel last year was 96. i kept 96 on my revenue yeah if i look at my old you know what i would call the legacy business it's um it's been decreasing by 50 okay now the 50 churn that happens on the legacy is that more that's more than made up by the expansion on the other side of the business or no um right i think that we will get ex we will it's right now balancing my belief is that we will have uh more than this in 2020. yeah yeah it's tricky to measure but but i i mean it makes sense you it's very clear one's declining one's growing and you're managing it that way let's for this question let's just talk about your new business so the new business where people are coming on signing up at four or five thousand dollars per month for the platform how aggressive are you being in terms of acquisition cost um [Music] it's tricky to say because the the because of two reasons the first one is that we are trying to develop multiple channels we got people calling us directly we are trying to develop um an oam channel because we got specific technology that interests number of players and we are trying to go and develop also system integrate on msp on top of that um the cell cycle that we have can be long uh we've however been investing in um you know in we we have a platform that is running on hubspot we're one of the very early customer of hubspot and we've been uh looking at investing this for for a long time so when i talk to my peers who are into the b2c business they talk about customer acquisition that they can measure but for me um if you take the customer that has uh 350 000 seats it took us 16 months to actually acquire them from start of discussion until the end the smaller customers we go a little faster but this is not a question cac is not a question about sales cycle speed it's a question about ratio between kind of year one acv and what it cost you to get the customer so all i'm asking you is how aggressive are you willing to be to get a customer will you pay first year acv to get the customer what do we invite cv annual annual contract value i would need to think on that but i think that most of our operational margin is coming from the renewal whereas if i look at my if i were to balance the cost of acquisition from sales as well as technical sales it should balance the the cost of acquisition so i would say that my my recurring business is definitely very profitable my acquisition business is probably break even yeah again it's okay it's not a question about profitability or not it's just a question of how you're getting new customers and what it's costing you to do that whatever the channel is but we'll skip past that for now um last question here before we wrap up with the famous five are you looking at raising capital for the company now or no um we want to make sure that we're in a situation where we have the technical debt completely out and we will be and we have we are recovering more customers than we are losing so probably next year we'll think about something right now i'm just focusing on the execution this year yeah so maybe raising q1 or something in 2020 probably yeah why are you doing this like do you do you have enough equity from when you did the deal with the private equity firm on in 2008 to actually make this worth your while to be doing it 10 20 years later um i would say yes because we are still in business i'm doing this because that's you know i wanted to buy a company i wanted to run a company i like the technology i love my team i like the topics in which i am and i'm tap dancing to the office every morning that's a good thing mr warren buffett let's start off here number one with your favorite business book um can i give you two businesses so i read 20 years ago crossing the chasm and i think that i read this every two years um i am aware that uh jeffrey moore is adding new examples uh which makes it well twice but every time that i read the book it makes me step back and and and i love i love what i'm reading so this is great there's another book which is something that i've booked that i've read many times it's called denial i don't know if you've heard of this it was written by richard tedlow um who is a harvard a retired harvard business school professor who teaches taught business history and he took a business story at the business school and he's been looking what a number of companies have been when things were happening in denial situation and why some were able to actually react when things were happening it's fascinating and this is so close to everyone's business it's a great business book that i really recommend i've given it to to many people it's fabulous book okay number two is there a ceo you're following or studying quick answers here because we're out of time no sir i'm very impressed by what he's doing number three is their favorite online tool you have for building your company um linkedin and also something i like which is fiddly which gives me a lot of rss feed in an aggregate manner is the successor of google reader publish to feedly is a good one number four how many hours of sleep do you get every night uh probably seven but i'm big fan of cat naps so people know in my uh company that at two o'clock when my door is closed from two to two ten that's because i'm sleeping number four how sorry what's your situation married single kiddos uh married two kids fabulous 20-23 if they're listening to me hi and how old are you uh i've been 25 for the last 27 years i love that there you go so we'll call it 52 years old or something around there right last question 25 plus 27 is not 52 but i take it if you want 20 you said 25 plus 27 yeah sorry 25 plus 22. so 2057. that's if i was let's say twenty five plus twenty two that's a little different uh that's four that's wait 25 plus 22 would be forty seven so thirty two yeah i get okay i thought so fifty seven sleep yeah there you go 57 all right um last question uh antoine what do you wish your 20 year old self knew i wish that i had started working to small companies much earlier they are much more fun than loud ones guys there i have i bought a company for 11 million bucks back in 2008 called gsx monitoring ib platforms back ibm platforms back then now today the company is monitoring office 365 big market to play in they've got about two uh 250 customers paying 2 500 a month so 620 grand ish in monthly recurring revenue they've been flat you over a year as they pivot to serving a different business model so the churn product is more than being made up for by the the new revenue and the new product uh they are bootstrapped uh their breakeven right now team of 45 as they look to continue to scale antoine thanks for taking us to the top thank you nathan