How Howwe Moved From $5M Revenue in 2018, About Half of It Services, to 98% Recurring Revenue (Interview with Founder and Chairman Ulf Arnetz)

Introduction and Company Overview

Nathan Latka

0:01Hey folks, my guest today is Ulf Arnetz. He was born in 1962 and founded Integrated Office Systems at 26 years old before selling it to Cambridge Technology Partners in 1994. He went on to do many other businesses. He's been around the block. He knows what he's doing. He now focused on a company called Howwe, which sells something he calls enterprise execution software. Ulf great takes to the top.

Ulf Arnetz

0:26Thank you, Nathan. Thank you for having me here.

What Howwe Sells Today

Nathan Latka

0:29You bet. Okay. So before we dive deep into sort of your launch story, tell us what you're selling today. What's the product?

Ulf Arnetz

0:37We have an application for CEOs, very much to increase revenue and profit according to the plan or the strategy. What's unique is that it's totally AI-based. So it's the first AI enterprise role-based application for strategy execution in the world, actually.

AI-Based Strategy Execution Platform Explained

Nathan Latka

0:59What what exactly does that mean? there's a lot of folks, I think about, you know, Ninety.io in the US. There's traction, there's Rockefeller habits. There's a lot of like systems for folks to track KPIs. So what do you mean you're the first in the world?

Ulf Arnetz

1:13So a lot of things we are first in the world. First of all, if you look into the business problem, this has been for many, many years. Also, before you got this increased disruption with AI and wars and tariffs and logistical problems, right? So about 10 to 30 percent. Of all strategy executions have been successful, including using Excel or OKR or strategy execution applications, right? So that's the fact how it has been. And if you look into what happens now is that with AI, you could have the plan. You know, if you're a CEO, you have a plan, you have a strategy, call it whatever you want, but that is digital. and maybe you have forgotten something, maybe it's not 100% correct. And they are using AI in order to very much give you ideas as the CEO and the executive team. have you thought about this? And then you could choose. Then it's integrated to the execution part. And the execution before have been very difficult when it comes to the onboarding. The people have Haven't really liked to have something they need to do on top of the ongoing business. But with AI and role-based AI, then the CEO and of course the executives and all the way down could drive top-down but also bottom-up. And that means that each role, as well, you know, the CEO as well as someone who is employed also get the how from AI. So it's prompted based on what type of company your role. What you're trying to achieve. So you get the financial goals, you have the initiatives with support from AI, and you also all the way down to the activities. And you said something very important, Nathan, before. You said, you know, follow up KPIs. That's exactly what customers have done before. But let's say that you're following up KPIs and you are late, you're behind, you don't get people to change, you don't get people motivated and aligned. What do you do then? So the difference with this type of more business critical application is that you could drive and adjust. So nowadays, versus just three or four years ago, you have some sort of change or this disruption happen, you know, maybe in the strategy, but for sure in the execution, every second week. And then you must have an application which could adjust for different roles and order cross-functional. So the business values very much to shorten the timeline from that you decide something. Until you have achieved those financial goals according to the plan.

Why Not Just Use Claude or Generic AI Tools

Nathan Latka

3:53I think most of my audience listening right now is listening closely to what you're saying. They're reading your website where you say, quote, advisory method and intelligent software in one solution. And many of them are, I mean, they're just using Claude directly for this, right? They've built project files, they have their critical metrics connected, like QuickBooks, their Gmail, their calendar, their goals, their targets. They've got heartbeats scheduled in Slack that tell them every Friday what they missed, what they're lit on, and what they beat. Why do people need to use your software?

Ulf Arnetz

4:21It it's the enterprise problem. So it's not coming from us but it coming from McKinsey and MIT that 70 percent of the potential improvement is coming from cross-functional improvement. So until today, it has been very common. That you have CELOS or PLs and you have people using AI as you know within different functions or as me as an individual. But when it comes to the enterprise, how can we as a company improve? then AI is not good enough yet if you don't have what we have built combined with AI. So, for example, if you are doing something which is a cross-functional improvement. you can't really solve that with with those types of tools you mentioned before. And AI, as you probably know, it's a lot of investment in AI today, but most of it is for functions or doing something a little bit better or faster and so on. But what we are doing is very much that the whole company internally would like to do more with AI as a company, not just individually and not only bottom-up. And the second thing is that they would like to win market shares based on AI, the whole company, not just some departments of people.

Pricing and Average Contract Value

Nathan Latka

5:41Mm-hmm. So I think what I'm hearing you say is your argument is is you're you're really built more for enterprises that are more complicated than a 10 person startup. So if that's the case, I would expect that your pricing would reflect that. When we look at sort of what the average customer is paying you today, is it above that, you know, hundred thousand per year range? Or what's the ARPU or ACV, would you guess?

Ulf Arnetz

6:00Yeah, it starts it starts like that. in the US it's a little bit higher, so the ARPA is quite high. And the and still the return of investment is between eight to twenty-five times already within twelve months.

Nathan Latka

6:15So just to be clear, your average customer today is paying you over a hundred thousand dollars per year. Did I hear you correctly?

Ulf Arnetz

6:20That's great.

Nathan Latka

6:21And how do you upsell? Is it based off number of seats or product based upsell or a usage based upsell?

Ulf Arnetz

6:28It's a it's a combination first of all, The customer is not normally rolling out this to the whole you know all countries in the same time. So it normally starts with the CEO and the executive team, and maybe one country or one region, and then next year more countries and so on. So that's that's one way. The other is that we have prompted and used AI. So it's our our methodology, but also our know-how in different industries in different departments and roles. And and we charge on top. that we charge also for how they use those AI content in the application.

Nathan Latka

7:08Can you get without sort of using the sort of industry buzzwords we all hear every day, can can you list a real example of a customer that used you and what they got done?

Ulf Arnetz

7:20yes, absolutely. you take one one example is is a bank in five countries and they merged with another bank. it's a very simple example, but when you merge, you very much have two of everything, right? So when you merge it's it's very much about how can we get one one system, one aligned organization, rules, et cetera, et cetera. And what you do then, what you do then is that you put that in, what would we like to do? what do we like to achieve? And then on top of that, it's all always financials, right? Increased revenue and EBITDA. And then the initiatives, you know, which initiatives are going to drive this? And one one very important initiative of of several Is in this case that two becomes one of different platforms, processes, et cetera, et cetera. And when you have put that in, then you get milestones, you get activities, you get that role-based, and everyone knows what they have to do on top of what they were doing before on the ongoing business. And then this is combined with a 15-minute acceleration meeting per week, starting from the bottom with the team leader and the employees. And then fifteen minutes later this team leader is moving up to an acceleration meeting with his or her boss, and then it goes all the way up to the executive team. And take for example, if you're on the bottom in an organization or quite further out in the organization, you don't really know the focus, you're not 100% aligned. So if I and my team can't commit to something, then it's not sure that my boss could solve that problem because it's a cross-functional problem. And then it moves all the way up, and sometimes it's moves all the way up to the CEO and that CEO will then instead of having an executive meeting talk with two or three different managers who are involved in different CEOs, make a decision, and then come back with you know to this team which is further out or down in the organization. And before this took about three months from a problem to solve. And now it it takes about two days. So what happens then is that the employees' fees, yeah.

Nathan Latka

9:45for real quick, sorry, I I don't mean to cut you off, but I think my audience is gonna get lost. I think what they're thinking right now is they can't figure out if you're a consultant or if there's software, right? When we go to your website, I don't see any software screenshots. It's a one-page landing page. So it like it doesn't it's not, you know, it doesn't look like most enterprise software websites that that we interview on the show. So and then I asked you for a specific example for a bank, but then you went on sort of describing pretty general stuff after you used the word merger at the bank. So I just want to give you another opportunity to really help us understand what you do in in a quick, concise way.

Ulf Arnetz

10:16Sure. what we do is how you use the software is is that's what I s told you before. But this if you take

Nathan Latka

10:25Where where is the software though? I don't see like any software screenshots. There's nothing on your website that shows a software UI or UX anywhere.

Ulf Arnetz

10:33No, but it's it's a place there where you could get a demo, ask for a demo, and we sell it we're selling to CEOs. CEOs are measured on increasing revenue and profit according to the plan or the strategy. They're not interested to see screenshots. we actually took away the screenshots just two months ago. And if someone wants to see the application, we do it in a demo so we could do it based on their business need and then show it.

Team Size and Engineering Headcount

Nathan Latka

11:03I see, I see. Okay, so how many folks are full time at the business today? And then we'll go back and get your launch story, your background a little bit.

Ulf Arnetz

11:09Yeah, fift fifteen.

Nathan Latka

11:11One five?

Ulf Arnetz

11:12Yes.

Nathan Latka

11:12And how many of those folks are engineers?

Ulf Arnetz

11:16nine.

Nathan Latka

11:17Okay, so you have nine today. And when when most of them, when you look at their day to day, are most of them focused on maintaining your integrations that you list on your website, or is it some other kind of product development?

Ulf Arnetz

11:25No, everyone is working with I mean it's a traditional, right? You have front and back end and then working we are totally working with AI. so we are we are you know total modern with AI. And then when it comes to integrations, we are working through a third party company, which is only focused on integrations.

Nathan Latka

11:47Mm-hmm. There's a lot of these third party iPaths today, whether it's pipe drive, cobalt, salt edge, codat, teller, composer or composio. Is that what you mean when you say you're working with a third party?

Ulf Arnetz

11:59Yes.

Customer Count: A Little Over 30 Customers

Nathan Latka

12:00Okay. got it. And how many, you have a team of 15 today. How many customers are you serving with your team of 15 today?

Ulf Arnetz

12:07We have a little bit more than thirty customers today.

Founding Story and the Services-Only Start

Nathan Latka

12:10Okay, thirty folks. Okay, now take us back to the backstory here. Why did you launch the business and and how'd get your first customer in that first year?

Ulf Arnetz

12:18We very much the idea from the beginning was that companies have a lot of s you know, they do the strategies, they use consultants and so on, but it didn't exist as software. For helping the the CEO to really accelerate the execution, make it happen in reality. And you have probably read a lot of that to do the strategy is quite easy, to to be successful with the execution is more difficult. So we we wanted to do an application just focusing on this. And it's important because you said before that yeah.

Nathan Latka

12:51sorry, can you just anchor us first? What year did you launch the business?

Ulf Arnetz

12:56two thousand fourteen. Yeah.

Nathan Latka

12:57Two thousand and fourteen. Okay. And were you quitting a high paying job before that, or were you a consultant at McKinsey? Where did you come from?

Ulf Arnetz

13:05It came from now. We started the company very much with the business idea to help CEOs to grow according to the plan. So what we did in the beginning was to only offer services for this. So we we have very much been selling and delivering the same thing since then, but we have built in more and more know-how and intelligence in the in the application. So our revenue has gone from you know 30 percent MRR to ninety-eight percent MRR and the services have of course then decreased.

Nathan Latka

13:40Y you mean per percent of what? Percent software versus services?

Ulf Arnetz

13:45Yes.

Nathan Latka

13:46Okay. So that first year you're saying it was seventy percent services, thirty percent software?

Ulf Arnetz

13:52Yeah, it was not even that. It was probably 10% software and then 90% services. But we only did that. We never asked the customer for what's the problem. We always sold it like the only solution we have and the only know-how we have.

Revenue History: $5M in 2018

Nathan Latka

14:08Mm-hmm. And what do you remember going back to twenty fourteen what total revenue was?

Ulf Arnetz

14:16it was not so high, maybe maybe three. I I don't remember exactly, but I remember that our revenue two thousand and eighteen was five million dollar, which is higher than it is today.

Nathan Latka

14:30Mm-hmm.

Ulf Arnetz

14:31and that is that you know the the the MRR is is growing and the service is is decreasing.

Nathan Latka

14:38Well, thanks for the vulnerability, by the way. Most founders wouldn't come on and admit, hey, revenue's going down because we're pivoting. So you said five million was your peak in 2018. What percent of that was software versus services?

Ulf Arnetz

14:50during that time it was about 50-50 and then and then from 2019 then it started to pick up the MRR and you can't really You can't really get the same MRR not at not as fast. We also Sweden is used as a development and test country very much. So we have invested much more in development than in sales. And you asked us about how many we are in development. And I would say that is today with AI, right? We have been about 20 employees, or more than double as many developers before. And now when we are so much into AI since four years back, we get more done, but with less developers.

Nathan Latka

15:44Mm-hmm. Well, mo my because you're in Sweden, so this stuff is all public, I can just share it to allow you to tell the story. So if twenty eighteen was around five million, that would obviously have been before twenty twenty, but the most recent filing in twenty twenty four has you around thirty eight, I believe that's million SEK, which I think converts at today's exchange rate to about four million of ARR. Is my math right?

Ulf Arnetz

16:04Yes, that's great.

Nathan Latka

16:05Okay. So so walk us through the story here, like along the revenue curve. So twenty eighteen or twenty eighteen was your high point and then it shrunk down. Was this your low point, the twenty nine million SEK?

Ulf Arnetz

16:16Yes.

Nathan Latka

16:17Okay. Okay.

Ulf Arnetz

16:18And and and if I bring you if you bring you just how to look there. if I bring it through yeah, if I bring it through we are in generation three of the application nowadays and

Nathan Latka

16:23Is this better? Whoops, let me Mm-hmm.

Ulf Arnetz

16:32When I have started my company, I've always started with services as well, because if you sell and do an application which which haven't existed before, it's a new type of application, you can't develop that application without working very close with the customers. So in the beginning, you it's not the revenue you get via services, it's a must-have in order to develop a business critical application. You can't just sit in in the office and believe that you have the know-how which is similar as the customers. You have to do it together with the customers in the beginning. And then it's a tough time when you move from high portion of services to MRR. But that's something we have to go go through. And and that is that strategy which we have had since since then is for sure working.

Nathan Latka

17:26As you pivoted in twenty eighteen, did you stay profitable?

Ulf Arnetz

17:31yes, we were profitable then, and then we have then we started to bring in money and invest more in the product because we could see that the guess we did 2014 was correct, and we started to have customers' reference data and so on. So then we developed version two, and then one and a half year ago we we released version three, so which is you know. Very very not different but even more advanced with AI and much more business critical, what you could measure and so on versus before.

About $14M Raised and Why Howwe Took Outside Capital

Nathan Latka

18:11And you mentioned you brought an outside capital. How much total have you raised to date?

Ulf Arnetz

18:15We have raised about fourteen million dollars.

Nathan Latka

18:18A one four and that's USD raised.

Ulf Arnetz

18:19Yeah. It's mostly it's in in Europe, Sweden and Europe.

Nathan Latka

18:27S sorry, that's fourteen million USD raised, right?

Ulf Arnetz

18:30Yes, my i in converted, it's one hundred and forty million Swedish.

Nathan Latka

18:30Like you Yep. Yeah. Okay.

Ulf Arnetz

18:34Yeah.

Nathan Latka

18:35So I think most people when they hear services business, they don't think, let's go raise capital for that. Most investors won't touch services business because the margins are typically lower. So why'd you make the decision to raise?

Ulf Arnetz

18:47Because we made a decision before that to be a product company, which was actually the the idea from the beginning. So when we start to raise money 2020, we already have proofs for MRR, growing MRR, customers' references, etc., on the on the product, the version one of the product. So we d no one wanted to invest in us as as a solution company. They invested in us for the application and what this could become. You should know that in a company Everyone, I mean the CFO, the head of sales, and other executives, they have a business critical application, right? The CEO is measured on the strategy execution and you know how to change the company. and they are normally using Excel or some software which is only for as a dashboard, it's nothing where you could drive the company. So the CEO is not connected to the rest of the of the company, and that's what what we are trying to solve.

Growth Rate and Investor Expectations

Nathan Latka

19:51Of I guess where I was trying to go with the funding conversation is once you raise VC, the expectation is you're gonna grow, like grow fast, right? It's fifty to a hundred percent year over year. when you look at your growth rate, you mentioned the first external capital was in twenty twenty. I see you going from twenty nine million Swedish krona up to thirty two. You've sort of averaged about ten percent year over year growth, which by most VCs would would not call that something that they would invest in. So I mean, are you getting pressure from your board today? How are you managing this storyline?

Ulf Arnetz

20:20I think no, I I don't I'm not stressed by the the investors. It's the same investors as you know, everyone had participated every time. they still they believe because it's also about what I told them 2020 when I started, right? So if I would have promised a big growth, then it's different. But in what we have promised is that this is going to become a big trend. but And we have said what we need to be successful with in the US as well. So I think it's different if you if you have like the 23rd CRM application or something, but we actually first doing this. so I think everyone understands that this could become something really, really big, but it's also very difficult to predict exactly when when the trend is coming. so I yeah, I am not stressed by the by the investors yet, at least.

Nathan Latka

21:17Mm-hmm. Well, I guess what I'm asking is you're you're saying you told them, hey, we're planning to grow 10% year over year when you raise from and they said, Yeah, we'll sign up for that. Here's $14 million. I mean, most people are not telling that story when they're raising VC. They say they're saying raise money and then we're gonna grow 100% year over year. but what you just said is you set expectations. It sounds like on day one when they funded that you weren't planning to grow big. You were only projecting call 10 to 20 percent year over year growth. Am misunderstanding something?

Ulf Arnetz

21:44Mm, yes and no. we didn't we didn't raise money based on on only the financials. We didn't say that we were going to grow a hundred percent because we couldn't do that. We were so early in the market. It's it's we rather we raised money for what this could become. not really how how much we could grow in Sweden because Sweden is not our our main goal. Our main goal is is to be the number one software within this area worldwide. So otherwise I think no one would have continued to invest in the company.

Nathan Latka

22:23I guess I don't understand, right? If you you took investment in twenty twenty, you know, I think it's pronounced CRADES as one your investors, right? They're in a good a great investor in Europe. They're not investing in companies where they think the growth plan is ten percent year over year. You took money from them, it sounds like three or four years ago, and the growth has been ten percent year over year. But you're telling me you're not they're not pressuring you in the board to say, Hey, where's the growth? Where's when's the growth gonna happen?

Ulf Arnetz

22:45No, I think no, they're not. Depends on what you have sold in. It depends on their I mean they invest in companies which are are doing great growth, but it depends also what type of technology and software you have as well.

Nathan Latka

23:02I guess I've just never met a VC that's excited about ten percent year over year growth. And I'm trying to give you an opportunity to talk about how you're managing your board where growth hasn't met expectations because there's a lot of people that have raised VC and not hit their growth projections. But it sounds like you're not feeling this. This isn't something you think about.

Ulf Arnetz

23:20I think about it. Think about it. But what we have I mean right now it's the market is about six percent of CEOs. You're trying to do this enterprise what I spoke about before. so it's it's very much based on on the trend. so it's what I have sold in is very much that this is going to become a big trend, but it's very difficult to say exactly when it starts. If you look at my previous companies that have grown very rapidly, like two or three hundred percent before I sold them to Nasdaq listed companies, we have a unique technology. That's what we could have in Sweden. We don't have billions of dollars, but we could have the best technology. What happens then when this type of role, a special type of role starting to say, hey, I should have this type of software? When that is happening, then we are losing more in percentage, but we get more opportunities to sell. And normally that trend is driven by someone of the big brands. So in in our industry, it's McKinsey, from you know, that's number one. They are educating the CEOs that they have to change the behavior for how they worked before and how they have to work nowadays when you have so much disruption and changes going on. In my previous companies, then it had been Microsoft once time once it was also at Oracle. So it it you know we can never drive the trend. The trend is coming from somewhere else. But what we could do is to guess that this is probably going to become a big trend.

Proprietary Data and AI Differentiation

Nathan Latka

24:54Mm-hmm. Yeah. I get I I found actually just in research while we're doing this, I found a screenshot that you guys did release back in 2024, right? And you describe yourself as the first solution for driving cross-functional strategic initiatives. And this is what the dashboard that you release. There's a lot of people arguing in the age of AI, the UI in the UX does not matter anymore. the alpha is actually the data and the connectivity, et cetera. what proprietary data are you sitting on that that your customers can get value from?

Ulf Arnetz

25:24It's as I said before, the role-based data. So you have like adaptive AI together with that role, together with that industry, together with what the customer is trying to achieve, which is called you know different initiatives that they need to improve. And you don't have any similar out there. If everyone should work just with AI, for example. Then everyone would do it differently. And what's very important when it comes to strategy execution is to focus on what's the most important. And that's why it's top-down and then bottom-up, versus how it has been have been very much bottom-up, or people have done something in different functions, but the CEO and the executive haven't really made their decisions what they should focus on and so on, because they haven't been integrated to the rest of the organization.

Revenue Today Versus 2024 and the $10M Hope for 2027

Nathan Latka

26:22You broke four million of ARR in twenty twenty four. We're obviously recording this in twenty twenty six. Is revenue higher or lower today?

Ulf Arnetz

26:30Higher.

Nathan Latka

26:31And what's the growth plan going into twenty twenty seven? Do you think you can break ten million of ARR?

Ulf Arnetz

26:38Yeah, that's what we have hoped for. And my job here in the US is to work with partners, management consulting companies that have before done these strategies or analysis and plans, but now with our software that could also help the customers to execute those plans faster, more measurable. So if that happens, then we will reach more than 10 million next year.

Nathan Latka

27:04Okay, very cool. And are these are these screenshots, like you've got a bunch of listings on these review sites, are these screenshots still accurate in terms of what your UI looks like inside?

Ulf Arnetz

27:15yes and no. I mean it's a lot of of changes as well. And one reason why we took away the screenshots, Nathan, is also that it doesn't say so much. If you look on other software, they also have something similar. The difference here is that we could measure the activities all the way up to the financial numbers. so it's it's it's very much what get measured get done. so I think that some of the screenshots is are look dis similar, but of course we have version three now, and that is from version two you just showed me.

Where to Follow Howwe Online

Nathan Latka

27:51Great. Well, hey, if folks wanna follow you online as you continue to chase that ten million ARR number off, where can people find you online?

Ulf Arnetz

27:59I'm at howwe.io. H-O-W-W-E dot io.

Nathan Latka

28:03Howwe, guys, launched in 2014 almost purely as a services business, did somewhere call it 200,000 to 300,000 bucks of revenue, grew by 2018 up to five million dollars of revenue, where 50% was software, 50% was services, and they were profitable. They saw enough traction on their software product, they decided to go raise capital starting in 2020. Today they've raised 14 million dollars, but revenue actually declined from 2018 because they started purposely churning off their agency and services revenue. To move more towards a pure play software business. Revenue hit twenty in twenty twenty-four, four million dollars, and they're north of that today. Part of that growth has been fueled by the version three release in 2025. They are playing in the space where there's software that helps management teams hit their goals across multiple sectors, categories, and geographies. It's a big organizational problem, a KPI problem. All we're rooting for you, and thank you for taking us to the top.

Ulf Arnetz

28:59Thank you, Eva. Thank you. Bye.