How HRForecast Grew 50% in 2020 Without Raising Capital (Interview with Christian Vetter)

Introduction and Background

Nathan Latka

00:00Hey, folks. My guest today is Chris Vetter. He founded hrforecast.com in 2014 as his cofounder. Before joining the company, he gained interdisciplinary industry experience in various financial and planning roles. He brings with him comprehensive cross industry experience in solving problems in complex, fast moving environments and studied business administration at a technical university at Ingolstadt. Alright. Chris, you ready to take us to the top?

Christian Vetter

00:21>> Yes. Let's do it, Nathan.

What HRForecast Does

Nathan Latka

00:22Alright. So HRForecast is playing sort of the people analytics SaaS space. Help me understand how a customer is using you.

Christian Vetter

00:29>> Sorry. Can you repeat that question?

Nathan Latka

00:31Yeah, help me understand how a customer is using you guys.

Christian Vetter

00:34>> Ah, okay, sure. So, well, in the end, HR people, they love to work with people, and we teach them how to also work with data. So basically, our whole business model is around

00:46>> enabling our clients to use their data that they have collected about their people, and also combining that with the data that we bring in from the outside, which we have collected about their people, their

Nathan Latka

00:58industries, their competitors, etc. Combine that and then basically there are many many use cases how they can use it. Interesting. And are you enabling HR managers to give their teams personality tests and things to understand how to manage them?

Christian Vetter

01:11>> Not really, that's not so much our space, we're more working on skills, so we would consider ourselves a skill company. We basically provide algorithms so that they can explore what knowledge they have on board from all that unstructured data they have lying around. We also bring in algorithms that tell them what skills will be required in the future, what kind of jobs they would need for the business model. It's more about connecting the business side of

01:44>> things with the human resources dimension, combining that, translating it, so what skills, what jobs does my business model require, and then looking inside where are the people located right now that have this knowledge, or how can I train them, how can I teach them, and where can I find them if I don't have them on board?

Pricing and Contract Values

Nathan Latka

02:05Understood. And what's a company going to pay you on average per month to use this technology?

Christian Vetter

02:10>> It really depends, because we don't have one SaaS product, but we have two of them, and we also have a kind of different revenue model where they get access to our data platform. So when they We usually talk about yearly revenues rather than monthly revenues, and it would be between

02:30>> 20 to 200,000 per company on average.

Nathan Latka

02:34So your largest customer is paying about $200,000 a year?

Christian Vetter

02:37>> Actually more, but just like 90%.

Nathan Latka

02:41It sounds like you have a massive distribution. There's a lot

Christian Vetter

02:44>> of really,

Nathan Latka

02:45really big ones. How big is the biggest? Don't name them obviously, but are we talking like a million dollar contract?

Christian Vetter

02:50>> No, unfortunately no, it's €300,000.

Nathan Latka

02:53Okay, fair enough. And you're upselling across three separate product ideas and product lines, which is people analytics services, strategic workforce planning, and then the talent marketplace platform, correct?

Christian Vetter

03:04>> Exactly, and we call it knowing the future, which is the data platform where we bring in our external insights, planning the future where it's about combining that external data with the strategic workforce plan, and then building the future where it's about making sure the employees they have are equipped with the right skills. Knowing, planning, building.

Founding Story and Bootstrap Journey

Nathan Latka

03:24Now when did you launch this company?

Christian Vetter

03:27>> Sorry again?

Nathan Latka

03:28When did you launch?

Christian Vetter

03:29>> 2014 was the founding date, it was me and my co founder Florian bootstrapped up until today, but the initial idea already started in 2010 when we were just finished with the university, coming from Siemens, which is the largest German corporate coming from the finance and controlling departments, we were all about numbers, then we realised HR people need to have some tools and hands to plan, to work with data, so that's how we all got into this

03:58>> HR domain. Took us four years to figure that out, and then in 2014 we finally got our first paying client, so we decided let's make a living from that.

Nathan Latka

04:07Where did the first paying customer come from?

Christian Vetter

04:11>> That's a good question, it's a long time ago. I think it was just talking to people,

04:18>> advertising ourselves, and then it was like Sorry?

Nathan Latka

04:21Nothing specific than just your network, there was no campaign?

Christian Vetter

04:25>> Not really, back then it was kind of trial and error. We've been doing that for four years already then as a hobby, so we were looking into different clients here and there, doing some stuff for free, and then in the end it was like a project for €18,000 or so, so it was not too big, but it was fun, it was the first one.

Customer Count and Churn Explanation

Nathan Latka

04:45Yep, that's good. So that's your first customer now, how many customers are you serving today?

Christian Vetter

04:49>> Well, so far we've served over

04:55>> 500 clients, I would say right now around 100.

Nathan Latka

05:01The 400 that have churned, why have they left?

Christian Vetter

05:04>> They didn't really churn, but they are not in our SaaS model, so they would not just come to us here and there on demand, so the data platform, so if they are not in our SaaS model or they don't have these continuous yearly plans with us, they basically would do it on demand, so they didn't really churn, I mean some of them for sure did, but most

Nathan Latka

05:26of them they come back from time to time. Now that makes sense. Now you mentioned you raised capital, how much have you raised?

Christian Vetter

05:32>> No. We have not raised capital.

Nathan Latka

05:34Okay. Great. Well, that's even better. So I thought you said you were bootstrapped until today. So what you meant is you are still Still. Still. Yeah. Okay. I love that. Now now can I take a 100 customers on your SaaS platform at, like, that $20,000 ACV? That's the minimum. And you guys are doing north of 2,000,000 in revenue at this point?

Christian Vetter

05:54>> Yeah. Yeah. Yeah. That's true. What what do you

Nathan Latka

05:56think you can break this year? What's, a stretch goal for this year?

Christian Vetter

06:04>> Three and a half, four, let's see.

Nathan Latka

06:06You think you'll hit it?

Christian Vetter

06:08>> It's a good it has been really good for us this year.

Nathan Latka

06:14So you're on track?

Christian Vetter

06:19>> So it's difficult to plan, but since, as you know, the bigger deals, if the big deals comes in, then it might be just right. So

Nathan Latka

06:29if we're at sort of around that 2.5 to 3,000,000 run rate today, help us understand growth. Where were you exactly one year ago?

Christian Vetter

06:36>> Minus 50%.

Nathan Latka

06:37Oh, wow. So you've gotten 50% year over year growth. How are you getting new customers?

How HRForecast Acquires New Customers

Christian Vetter

06:42>> Yeah, that's a very good question. Actually we know that. It's about seventy-eighty percent of success management, so we work mostly with really large global companies, and obviously if you have one touch point, can get many many more, right, are global, different locations, different business units, so most of them we just build from the inside, so that's around seventy-eighty percent of new clients, even though they come from existing client companies, and then we do a lot with

07:12>> partners here and there, so big consultancies that would buy our services to make a tool based what they do, and then some also come from Google Ads and congresses, though they're virtual nowadays, so these are the four main sources. And of course word-of-mouth is also very important.

Nathan Latka

07:29Do you incentivise the consultants that sell your product with a commission?

Christian Vetter

07:34>> Depends, mostly actually no. We are open, we are very flexible on how to do business, but mostly no because they have their traditional business model and we bring in the tools where they can build their consulting around, because we are not scalable,

07:53>> it's not our core business, so we bring the tools later to consulting, so the pie is usually large enough that we both can have plenty of fun.

Nathan Latka

08:00Tell me

Team Size and Engineering Headcount

Nathan Latka

08:01more about your team, Chris. How many folks?

Christian Vetter

08:04>> Roughly 50, like 48, 49, I would have to look it up.

Nathan Latka

08:07And how many engineers?

Christian Vetter

08:11>> Thirty, thirty five.

Nathan Latka

08:13They're pretty very heavy engineering then.

Christian Vetter

08:15>> Yes, we love inventions and innovations. Yeah. It's all what we really love to do.

Sales Reps and Quota Structure

Nathan Latka

08:22And how many quota carrying sales reps?

Christian Vetter

08:25>> Three. Well, myself, 3.5. But two of them we just hired actually in April, so they're still in the onboarding phase.

Nathan Latka

08:34Well, tell me more about that. This is something SaaS founders struggle with, is how to incentivize their first sales hire. Do you give them a quota?

Christian Vetter

08:41>> Yes, we do.

Nathan Latka

08:44Can I ask, what's the quota, like a million dollar quota in the first year or something else?

Christian Vetter

08:48>> It's a little lower, it depends on the experience level, so junior senior. For senior it would be around 750,000. That's the first year. Yeah, exactly. And

09:02>> it would be like a 50% recurring, 50% we call it project based, which is like the data model. They will not be churned, but they would be coming back and ideally jump into a SaaS model later on. Fifty fifty.

Customer Acquisition Cost and Cost of Sales

Nathan Latka

09:15And and, you know, you mentioned consultants, Google Ads, your inside sales team, you add up all these expenses to come up with your CAC to get a new customer, what are you spending to get a customer?

Christian Vetter

09:31>> A lot of time for sure. So I mean it's easy for Google Ads to calculate this number, but maybe what helps is our cost of sales are around 15%.

09:45>> But I think what's even more critical is not the spending, because getting a client, to be honest, is really easy with the stuff we do, because everybody wants to know what are the future jobs and skills, but getting them really in our recurring model with the SaaS, that's more challenging, and the biggest challenge is time rather than the money. Of course, time translates into money, but it does take easily over one year sometimes to get a

10:10>> big account because they are just global companies with very long decision cycles.

Churn and Retention Metrics

Nathan Latka

10:15And what's your churn, Chris? Revenue churn?

Christian Vetter

10:19>> We don't measure that, to be honest. I mean, we have around 70% of the clients that we do business with, they would come back. A bit more I think now.

Nathan Latka

10:30Yeah, got it. So maybe 30% churn annually, again we're just talking about your SaaS product because you have the other on demand product.

Christian Vetter

10:36>> Yeah,

10:38>> for SaaS it's yeah, let's keep it like this, really we didn't really measure that hard yet. Since we are bootstrapped and we kind of have our own metrics in place.

Nathan Latka

10:50What are some of your own metrics?

Christian Vetter

10:52>> Well, the most important metric is the overall sales, because for us sales is the most important value, then other metrics we have is the customer net promoter score, how they like it, because we think more like an ecosystem, so if they buy one product from us, would most likely come back some later time. So our tracking isn't too professional yet when it's about monthly recurring revenues churn, but mostly how happy were they, how many projects have

11:28>> we done with them, and in the end are they on

11:33>> a limited model, like that we risk losing them for a certain period of time, or do we have them already on a continuous model?

Nathan Latka

11:41Does your expansion revenue in your bigger accounts more than make up for the 30% annual churn?

Christian Vetter

11:48>> Yeah, so far yes. I mean, we have grown 50% last year, so

Nathan Latka

11:53But that includes new customers you've added, so

Christian Vetter

11:57>> Yeah, exactly. I mean, as I said, most of the new customers, a lot of them come from existing clients, since they are huge global companies, so I You're would say

Nathan Latka

12:07new customers, you're expanding into different departments.

Christian Vetter

12:11>> Yeah, yeah, also. Interesting. It's like a combination.

Growth Breakdown and Industry Expansion

Nathan Latka

12:16What percent of, like you grew 50%, how much of that came from expansion versus bringing on brand new customers altogether would you say?

Christian Vetter

12:23>> I think last year was a lot of new customers, because we got really strong in the pharma industry, so if you asked me one year ago, we had one pharma client, now we have I think the five biggest pharma companies in Germany are probably our clients. So we kind of go industry by industry and I think it's kind of when they are ready for these kind of questions they would look around and see who can support

12:44>> them. So it

12:47>> has been a lot of new industries and therefore a lot of new clients last year, but typically I would say it's around fiftyfifty.

Nathan Latka

12:53Yep, that makes sense to me. Now, would you consider raising capital or do you like staying bootstrap?

Christian Vetter

12:59>> Never say never, I mean, let's see, it's not our we are not pressured to do so, we're doing really good, but I mean, always keeping the eyes open.

Profitability and Reinvestment

Nathan Latka

13:09Are you profitable today?

Christian Vetter

13:11>> Yes, yes. We have been profitable ever since because that's how we grow.

Nathan Latka

13:18Do you pay dividends out to your team members from monthly profits?

Christian Vetter

13:22>> No, we try to keep as much as we can in the company and we invest it. Even the founders, we try to keep as much as we can in the company.

Founder Equity and Co-Founder Structure

Nathan Latka

13:32How many founders are there?

Christian Vetter

13:34>> Originally we were four of them, when we were still at Siemens, and in the end two of us ended up at HRForecast, the other two stayed at Siemens in 2014, and they are still there when we are still here.

Nathan Latka

13:47Were you able to get their equity back in the company or is it they still have equity but they are not operational?

Christian Vetter

13:53>> The latter one, yeah.

Nathan Latka

13:54Why is that? Mean would you buy them out if the opportunity presented itself?

Christian Vetter

13:59>> I mean, we four are best friends, so we don't really talk about that too much, but I mean if it's time to talk about it, guess since we're good friends, we'd go to a beer garden, have a few beers and talk about it.

Nathan Latka

14:10There's nothing wrong with making your friends rich, I mean that would be a good one.

Christian Vetter

14:14>> That's what nobody would really then fight about, yeah.

Nathan Latka

14:19Out of curiosity, you're growing fifty-sixty or 100% year over year, you're at the 3,000,000 run rate today, what would you value the company at?

Christian Vetter

14:31>> I better don't judge. Hard to say.

14:36>> Really hard to say.

Nathan Latka

14:37What makes it hard?

Christian Vetter

14:39>> Well, these sums that you hear from investment volumes you see and the calculated values of companies here nowadays, it's kind of extreme, it's a bit crazier. So I don't really believe in these valuations. I think the true values sometimes are really exaggerated, so I mean I would be happy to go with those high valuations or valuations, but I wouldn't judge.

Famous Five

Nathan Latka

15:07Alright Chris, let's wrap up with Famous Five.

Christian Vetter

15:09>> Let's say more than 1,000,000.

15:13>> Plenty more.

Nathan Latka

15:15Number Let's see,

15:18one, what's your favorite business book?

Christian Vetter

15:20>> I don't have a favorite business book.

Nathan Latka

15:22Number two, is there a CEO you're following or studying?

Christian Vetter

15:27>> Not really. Here and there.

Nathan Latka

15:29What's your favorite online tool for building HRForecast?

Christian Vetter

15:34>> I would say it is actually

15:39>> virtual collaboration tools. Teams, Skype, talking, that's what you need.

Nathan Latka

15:44Is there a particular tool you use? Skype, you said?

Christian Vetter

15:47>> Well, our whole company runs on Microsoft software, so it's not the best one, but it works.

Nathan Latka

15:53Alright, number four. How many hours of sleep do get every night?

Christian Vetter

15:56>> Really depends, I would say between six to seven.

Nathan Latka

15:59Okay, and what's your situation? Married, single, kids?

Christian Vetter

16:03>> Am single, to be married soon, no kids. One dog.

Nathan Latka

16:07And what's the last one?

16:10How old are you?

Christian Vetter

16:11>> That's nineteen eighty seven, so must be 33. Yes, turning 34 soon.

Nathan Latka

16:18Last question, what's something you wish you knew when you were 20?

Christian Vetter

16:23>> Take it even faster, not enjoying life too much when I was a student, and looking back at it already has been seven years with HRForecast, maybe we could have done it in a little bit shorter time.

Nathan Latka

16:38Guys, hrforecast.com, HR managers use it to keep track of their team and help their team improve. They did 1,500,000 in run rate about a year ago, they've grown out a 3,000,000 run rate. They've done this all bootstrapped, serving a 100 north of a 100 customers. They're profitable. Team of 48, heavy engineering, 35 engineers as Chris and his co founder that stayed on look to continue to build the business. Chris, thanks for taking us to the top.

Christian Vetter

17:00>> Thank you very much for having me.

Nathan Latka

17:03One more thing before you go. We have a brand new show every Thursday at 1PM central. It's called Shark Tank for SaaS. We call it deal or bust. One founder comes on, three hungry buyers, they try and do a deal live and the founder shares back end dashboards, their expenses, their revenue, ARPU, CAC, LTV, you name it, they share it. And the buyers try and make a deal live. It is fun to watch every Thursday, one

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