Inflectra Revenue (2024)

[00:00] InFlexure was launched in 2007. They serve customers like large defense contractors, supply chain companies, mix of on prem and cloud solutions. They'll do a million dollars per month in revenue, up from 830,000 a month just a year ago. So nice growth serving 5,500 customers. Many customers pay have several 100,000 per year, which is great. Nice expansion there. And he's done this all bootstrapped was incredible by Adam. He owns a 100% of the business company will profit [00:24] call it 5% this year as he looks to continue to scale. We'll see what happens next. Hey folks, my guest today is Adam Sandman who founded Inflectra in 2006. He's been a programmer since the age of 10. Today, serves as the company's CEO. He's responsible for product strategy, technology, innovation and business development. He lives in Washington DC with his family. Adam, you ready to take us to the top? [00:46] >> Yep. I'm ready. [00:47] Alright. So Inflectra helps customers deliver quality software. What does that mean? [00:53] >> Oh, an engineer would say quality is fitness for purpose. But for us, what it means is keeping the world running. I mean, that's what our team does every day. That's what our passion is. We work with companies that are in the biospace, utilities, energy companies, literally every sector of the economy that you rely on to get to work every day, to have power in your house, to clean water. We work with those kind of companies to [01:13] >> make sure all of the IT systems they have work as they should and going forward in the future anticipate risks that might come so that, you know, as the world evolves and changes, they're ready to address those risks. So that's what we're that's what we're here for. [01:27] And we spoke back in May 2022. You told me your biggest customers are large defense contractors and supply chain companies, a mix of on prem and cloud. Is that still the case? [01:36] >> Yep. That is definitely still the case. A lot of bio companies, I think, have added into the mix, but definitely a lot of aerospace. When I see a defense, a lot of aerospace companies, but also maritime and but large platform companies are making big hardware as well as companies working in the supply chain manufacturing space, automotive aerospace, but also general manufacturing as well, IoT and those sort of sectors. [01:59] Let's sort of fast forward the past twelve to eighteen months. I want to talk about sort of how you thought about product. Obviously, we're in a very different economic climate today than we were in May 2022. Curious how you've changed or pivoted, I guess. But first, have you decided to sort of expand with the current customers you had back a year and a half ago? You had about 5,000 of you told me, or have you focused [02:18] on expanding into new accounts? [02:20] >> That's a great question. And we've done a bit of both, but a lot of it has expanding into adjacent buying points in the same customer as well as referrals and partnerships. So finding working with partners at Broadus Deals and finding more deals with them, and then obviously looking at larger customers and finding adjacent buying points or following referrals where, you know, oftentimes people are consultants. They move from organization to organization, and they bring us in into [02:44] >> those organizations. And that's been a large part of the, you know, direct sort of sales as well as partnership sales. And then, of course, we're still looking for new buying points that fit our ideal target client. One thing I think we've done a better job of in the last eighteen months has been defining our ideal client. We we spent a lot of work this year on messaging and message development, and our website is still in the [03:03] >> midst of that transition if you go to it. So it's you'll see it's in evolving state. But really trying to hone down what is our ideal customer, what is our USP at a much more at a much more deep level. Not just the technology that sells, you know, quality software, but what is our client trying to do? Which clients do we find resonate the most? And then putting our resources into those clients rather than chasing everyone [03:22] >> under the sun. Mhmm. So I think when it comes to the new sales, really hoeing down obviously, we'll be opportunistic if someone comes to us, but not spending resources and not prospecting and not, you know, focusing outside of that core as much as we might have done, you know, eighteen months ago. [03:35] So I'm curious how much you've grown over the past eighteen months, and then I wanna drive deeper into how you decided what ICP to go after because you had a huge bucket of customers to choose from. Right? So what has growth looked like the past twelve to eighteen months? [03:45] >> It's been about a year of a period of a period about 25%. So we would hope to be actually higher about, I think, 35%, I may have said. So it's been a little bit lower than we'd we'd hoped. But what we the reason for that number one reason has been [03:59] Well, just to be clear, Adam. Sorry. Just to give everyone a number. So you said I think you were about $10,000,000 run rate last time we spoke. Would put you at about twelve, thirteen today. Is that right? [04:06] >> That's right. That's right. That's right. So we were hoping for a little bit higher, but I think what we found is that the sales cycles this last this year, particularly, a little bit less than last year, have extended. Typically, our sales cycle is sixty to ninety days. A lot of deals are taking thirty to sixty days longer than that. And mostly it's not in the buyers. It's the procurement. It's the legal and the compliance. A lot [04:29] >> of those stages are taking just incredible amounts of time. [04:33] >> The client says, Yes, we want to buy the tool. We've, you the CTO, the CIO, the VP of engineering, whoever the stakeholders has said, Yes. All the bureaucracy now takes another sixty days longer than it did a year ago. A lot of it's budget. A lot of it's also compliance, security, cyber, GDPR and privacy. A lot of things just seem to be taking longer, and it's hard to move those wheels of bureaucracy. Also, as I you [04:56] >> know, we're dealing with these large regulated industries where it's much harder to exert pressure on them because they have a cadence for buying software and validating it and doing all the, like, the compliance stuff that you can't really accelerate. [05:06] So what does that mean for today? Still serving up 5,000 customers or slightly more? [05:10] >> More yeah. More than that. I think it's about 10% more than that. [05:13] Okay. [05:14] >> Because, obviously, we've got we've added a lot of existing, you know, deals and cross selling into our other customers. [05:20] Oh, what's going on there, YouTube? Good to see you guys. Now imagine this. You love watching these interviews with SaaS founders, but imagine if we took all of the valuation data out from over 2,807 interviews I've done manually. Saves you a lot of time. Well, we've done this. We've built it into the beautiful interface inside of Founder Path. Check this out. [05:39] >> I'll show you how [05:40] you can access this in a second, but you log in, you connect your Stripe account, you see your valuation real time, you can see what it changed over the past eighty eight days and even set goals for valuation this year. Now the secret evaluation is there's many different ways to value a SaaS business. So the reason you're gonna see three or four different valuations inside of your Founder Path dashboard, this is all free by the way, [06:03] is because depending on who's doing the buying of your SaaS company, you're gonna get a different valuation. A VC is gonna pay a different valuation, Private equity firm is different. If you're gonna do a minority sale, that's different. And if you sell the whole business, that's a different valuation. You can see all those when I hover over here. Right? So the teal is what a VC would pay. Yellow is what private equity And red is if [06:25] you sold the whole thing outright. Now what's cool about this is this is not built off random data. Again, you guys hear these interviews on YouTube. All these datas are built from real time valuation data points founder share with us on the show. So traction, 1,200,000 seed round, 3.7 raise. They sold 22% of their business. Go in here and filter by the event. Maybe you only wanna see companies that have sold the whole business. Well, here [06:50] are a bunch that have been acquired the valuation and the multiple. Maybe you're going out right now and you're raising your seed round. We'll go in here and look at all this recent seed deals that went down, what they raised, what valuation they raised at and what percent that they sold. There's never been a larger dataset of SaaS valuations than what you can get now inside of Founder Path. And we're thrilled to bring it to you. [07:15] All right, we're gonna go back to the YouTube video here in a second, but if you wanna check this tool out, if you wanna jump in and sign up, you can check it out for free to get your valuation at this link, this link, founderpath.com/products/valuations. Or if you go to founderpath.com and hover over products, click on get your valuation here, and go ahead and sign up to give it a whirl. Again, all that valuation data live [07:40] right inside the platform. I hope to see you there. Alright. Let's jump back into the interview. Yep. So caught Futtman be 5,500 today. Now, again, there's a lot of people right now sitting on a customer base of a 2,000, but they want less customers that pay more. What process did you go through to figure out what customers you wanna serve? A lot of people would say, just download from Stripe. I sort from which customers have paid [08:00] me the most to the least, and then I go find more that pay me the most. [08:03] >> So we what we've done, did we've done a two factors two factors. One is we have some older clients that were on older pricing that we've been ratcheting up, and that by natural attrition, we'll we'll do that. The second thing is we found that we wanted clients that would have a longer LTV with us, Customers that are going to be with us for five to ten years because of the onboarding time takes time, the training. It's [08:22] >> a wealthy complex suite, and that we find that customers after the first year will stay with us for five to six years, but if the first one or two years are rocky, they'll leave. So we want to find customers that really align with the with the com with the product, and not just the the product they might buy, but the product suites they can upgrade. And what we found is if we look at the sectors and [08:40] >> the types of customer, it's customers that have a degree of compliance needs, but yet also need to be agile. So we we looked at the world in two lenses, which is the agile DevOps fast paced technology companies. We look at these industries that are very traditional with lots of compliance needs. And we find the cases where the clients are trying to make a move for a digitized future, but they have these regulations. These are our most [09:01] >> qualified clients. So think of a life science company that's got a a relatively new medical device that they wanted to deliver in a very agile way and take the market by storm, but they've got to get FDA approval in three years, five years, whatever it is. So they they have to have a well defined software system like ours. They can't just wing it together using spreadsheets or, you know, other tools. So that's a great example of [09:21] >> a client that we we would now proactively target. And then similarly, clients in the manufacturing space that, again, they want to digitize their future. They want to be able to deliver software defined vehicles, software defined manufacturing. So they want to be agile and differentiate, but they also need to follow all the process they already have. Whereas a client that's never gonna change, we don't want them as much. Or a client that's just, you know, is IT [09:43] >> company that's just gonna release software, change tools every year. They're they're they're not gonna be a long term customer with us, or they're certainly not gonna expand and grow and be the reference that we would need. Want clients that only want to be a customer, but evangelize to other customers for [09:56] us. And so when you look at your concentration at the top of your book today, like, obviously, I don't name who they are, the logos, but your top customers say, do you have anyone paying the $500,000 per year? What's the top cost what's the top group of customers paying? [10:07] >> Yeah. So the largest defense type companies are probably paying I have to get the numbers. Somewhere in the I guess, if you look at across all their buying points, a couple $100,000 a year, that will be and then mostly the large defense companies or aerospace companies. And then from there, you're gonna go down into the large biotech, large IT companies, manufacturing that are paying 50,000, $6,070,000 a year. And there's a large there is a there is [10:30] >> a large tail of the people paying 12 to 15,000, 15,000 a year, which obviously forms the base of the pyramid. [10:37] So you're not a sales guy, but if you wanna go target the folks paying $1,012,000 per year and get them up to $5,060,000 dollars per year, what does that look like? Are you putting another product in front of them? Are you asking them to buy more seats in the same in the same business unit? Or how does that look? [10:49] >> It's both. It's first of all identifying additional personas in this that use that in their organization that would use additional features. And that's why we actually have three flavors of our product. So we don't just even though it's really one product, we sell it in three distinct flavors, which target different personas. [11:03] What are the three? One, two, three. [11:05] >> Oh, sorry. SparoTest, SparoTeam, and SparoTplan. One product. One's for QA audience. One is for a, like, an agile engineering team. One is gonna be for a PMO, program management, risk management team. You sell to the QA team first. You can then expand it to the dev team, to the wider the team that's using the tool, and then you can go up the ladder to the PMO, this managing team of teams, that and way you're expanding from [11:28] >> 15,000 a year to, you know, 75,000 a year. Mhmm. Then we have a second product, which is an automation suite, more specialized. We don't go into that to try and sell to customers as standalone because the cost of sales is much higher. The type of POC's, all of the the things you have to do to sell is much more complicated. But we've when you've got a qualified client on our primary platform, we can cross sell that [11:47] >> very effectively. [11:48] How do do that, Adam? Do you have a sales rep that is dedicated to the customer that is responsible for upselling product two and product three, or is there an a different sales team per product line? [11:57] >> We do we we used to do it per product. We changed it to per industry. So when you sign up for us because of the discontinuity. So what happened is you bought product one. I I get to know you, know your problems, hand you off to product to person two, hand you off to customer success. So we've gone to an account management model by industry and by region. So if you're in North America and in aerospace, [12:15] >> you'll get one person. If you're in North America, in health care, you get someone else. If in Europe, you get someone else. [12:19] Across all of those. So then your sales team has to be well educated in all three product lines. They can't be a specialist That's in right. [12:25] >> Now, obviously, we do have pre sales engineers who can, you know, augment their knowledge. But, yes, they have to know all the products, and they have to know at least two or three industries. We're not big enough to have one person in the industry. As we get bigger, you would expect to be of an industry, know, knowledge as well. So we're taking so our salespeople have to be technically smart, know sales, and also understand the industries [12:44] >> they serve, which is quite a big ask. Mhmm. [12:46] Interesting. Do you when you recruit sales reps, do you recruit them from the specific industry that you want them to then sell to, or do you just go find the best salesperson you can that knows how to hit quota? [12:57] >> We've most of the latter, and then we find the industries that they will fit best with. And and that seems to work best. Some of com [13:04] Okay. Just to clear, you find great sales reps [13:06] >> and teach them more about the industry. We're not hiring a finance person. Yeah. We're not hiring a bio person. We have somebody who knows these kind of products is really good, good at communication, good at closing, good at following through, and then they'll learn the industry stuff. [13:18] I see. How many folks are full time today? [13:21] >> Right now, about fifty, fifty five, I think. [13:24] How many carry a quota? [13:26] >> We don't don't carry individual quotas. We have a t we have a company quota, and we everyone's paid salary. We don't do any commissions. That's one unique feature. [13:33] So how many are on the sales team? [13:36] >> Of the 55, including if you exclude customer success and you exclude partnerships, I think it's about 15. [13:44] Okay. One five. And how many are actually writing writing pushing code every month? Engineers? [13:48] >> Oh oh, sorry. Code. Team size across both the two platforms. That's five plus five fifteen to about 20. [13:57] 20. Interesting. Yeah. So did I hear you I hear you're doing the math. Did you sort of put five engineer do engineers work on all three products or do you put five engineers on product one, five on two, three? [14:06] >> Five is on product one and there is another fifth 10 to fifth 10 on the other core product. And there's another five that do like add ons extensions and, you know, the [14:14] But you let them specialize in that same product. They don't switch between products once and once. [14:19] >> Yes. That's correct. That's correct. 100%. [14:20] Very interesting. Okay. Why no quotas? [14:24] >> Team colla we found that team collaboration is the key. We we did try it years ago, and what we found is that my deal or your deal, we're not gonna work together. And because the the products are complicated and the industries often intersperse, and we have multinational companies, we if you got a sales team in the EMEA who's working with a sales team in North America sorry, salesperson in North America, we want them to collaborate. We [14:43] >> don't wanna fight together who's gonna get the target, and that was the main reason. [14:47] Very interesting. You last year, you were bootstrapped. Are you still bootstrapped today? [14:51] >> We are. We've had many offers, and we've we've talked to companies. We're not in the market yet, maybe [14:56] What's what's what's the most interesting offer you got? Don't name the company, but what was the price? Like, would they say, wanna buy you for a $100,000,000 or what? [15:02] >> There's ones that wanna do probably less than that now because the evaluations are down a bit. Ones that want to merge one is interesting. One that wants us to be part of a manufacturing, very, very industry vertical approach. Other ones want us to go, you know, very horizontal across all industries. [15:18] What was the highest offer you got, though, Adam, that you rejected? [15:21] >> We honestly, we haven't got to a firm firm offer. So that they're they're all talking, you know, six x, eight x, I would say, but we hadn't got [15:27] into So 60,000,000, 80,000,000, Yeah, yeah, something like Right, exactly. So who someone's listening right now, they really love you. They really wanna partner with you or buy or whatever. What is the right partner for you? What are you looking for? [15:39] >> For a partner, it will be a a firm that that has a service offering, a consulting firm that wants to expand their business, that wants to be able to extend their range of services, and is willing to not just sell a product, but also build an offering at their company around that service. [15:53] I see. And you would consider something between an 80,000,000 and a $100,000,000 all cash offer today? [15:58] >> Oh, sorry. When you say partnership, I think you meant to partner with the company to acquire us. Strategic alignment and cultural alignment is number one. And then the other stuff, yes. We can negotiate on equity or cash. I have to say the number one thing is cultural alignment. Yep. All the people here would wanna work it has to be someone that we all wanna work for or at least hand over the company to. [16:16] I don't [16:17] >> wanna How much [16:18] equity does the team own today? What's the ESOP pool you've set up? [16:20] >> 10%, 15 No. [16:21] >> Actually, none. It's there's no I'm a solo owner. [16:24] That's awesome. Okay. So you own a 100%. Do they have like Phantom shares or anything? [16:27] >> We'll we will do that when we if we if once we start yeah. The plan is once we get near an offer, an actual offer, we would do that. Exactly. That's exactly right. We do a Phantom stock plan. [16:35] Adam, this is very sensitive, but you are very rich on paper. Right? Do you already have some exit where you're able to go buy the house you want, build a family vacation when you want? Like, how do you diversify your net worth out of your SaaS company? A little bit. [16:46] >> Yeah. Great. I mean, I will be I have first of I have rental I have real estate rental real estate, which is great because it's a nice cash generating asset that's low lower growth, but very, again, very safe and gives you that diversification. [16:57] How many beds how many beds do you have in your in your real estate portfolio? [17:01] >> Three three single family houses. [17:03] Okay. Great. [17:05] >> Plus my own house. We live in a house that we love. The kids have gone are in college, almost finished, so that's all paid for. So there's not a ton I need. It's more it's more the fun of the chase. [17:14] There you go. [17:15] >> He he keeps his expenses low and makes some money off his real estate, which is great. That's nice nice nice position to be in. [17:19] Now are you guys do you operate right at breakeven, is the company 10% profitable today? 20% profitable? [17:24] >> Depending on the year, zero to 10. Some year to 10%. Some to some years, we close to breakeven. [17:29] What do think this year will be? [17:32] >> I would say around five percent just because we Okay. The rate rate's a bit lower than we'd hoped. [17:36] I mean, still 5% profit on 13,000,000 AR. I mean, that's $500,000 of profit this year. [17:40] >> That's pretty good. Right. Right. Right. And that that's good. You know, we we want to reinvest it. We don't want sit on cash. That makes sense. [17:44] Yep. Yep. Yep. Very cool. If you do, you just go buy another investment home. Right? [17:49] >> Yeah. I don't know. Yeah. My my wife's nice. She she wants to go to California, so who knows? [17:52] Get out [17:53] >> there to rent out and then move there up because it's gonna fall California. Who knows? [17:56] That's awesome, Adam. Alright. Let's wrap up here with the famous five. Number one, a book you're reading right now. [18:01] >> Oh, I just finished reading it's called The Glass Hotel. I forget the name of the author. It's a New York author. She also it's really, really good it's a really good book. I I really enjoyed reading it. I'm also reading another book by David Mitchell called oh god. It's about Utopia Avenue. It's about a rock a fictitious rock band from the nineteen sixties, which is just a great read. He's a great writer. He did Cloud Atlas, [18:23] >> did Bone Clocks. I love all of his stuff. [18:25] >> Amazing. [18:26] Number two is there a CEO you're following or studying? [18:30] >> Oh, jeez. I always like Richard Branson Yep. Just because he's but think I said that last time. [18:35] That's okay. You can say it again. Number three, what's your favorite online tool for building the business? [18:40] >> Right now, instantly. I love instantly. We just started using that to cold emails and prospecting, and it combines the best of Apollo and ZoomInfo and a bunch of tools, so I love instantly. [18:49] Guys, if you wanna hear the Instantly story, search Latka instantly on your podcast app or on YouTube. We had them on the show. They went from 0 to $2,400,000 run rate very quickly, starting off as an agency model moving into SaaS. Really cool story there. Glad you glad you liked that, Adam. Number number four, how many hours of sleep do get every night? [19:04] >> Eight. [19:05] Okay. Good. And six [19:06] >> When I was jet lagged. Except when I jet lagged. Came back from Dubai, I was wake sleeping and waking two in the morning. Sorry. [19:10] Do you have customers in Dubai? [19:12] >> Yes. We do. We just closed our first one a week after the conference, actually. [19:15] Wait. What was that like? I mean, is it same sales process as in The UK or The US? [19:20] >> Small customer well, small companies in Dubai, like anywhere, they'll buy with a credit card easy. Large companies, you gotta have an office there, a presence there. You gotta do a lot more of in person. [19:28] What's the what's the inflection point? Anything below 10,000 contract value, credit card? [19:32] >> Yeah. Sounds about right. And also, is it is it a government enterprise or is it like a private small like, a lot a lot of firms, are Indian companies that have set up shop there or or or of other companies. Those private companies, easy to sell to you. 10,000, 15,000. Government entity that's building out a large part of the infrastructure, that's a whole different beast. [19:48] Interesting. Okay. So married, two kiddos, they're off college. I believe you had a birthday, so you're 48 now? [19:54] >> December 4. So coming up. Not yet. Almost. [19:57] Okay. So still 47? [19:58] >> Mhmm. [19:59] Alright. Very good. So 47 years old. Last question. Something you wish you knew when you were 20. [20:05] >> Raising kids is a bit of pain, but we love them. [20:11] >> Don't don't worry about what other people think of you. Do what you do what you enjoy, do what you love, and don't let people tell you can't do it. That's why, yeah, that's what I would say. [20:19] I love that guys. And Flexure was launched in 2007. They serve customers like large defense contractors, supply chain companies, mix of on prem and cloud solutions. They'll do a million dollars per month in revenue, up from 830,000 a month just a year ago. So nice growth serving 5,500 customers, many customers pay have several 100,000 per year, which is great, nice expansion there. He's done this all bootstrapped, which is incredible by Adam. He owns a 100% of [20:43] the business. Company will profit, call it 5% this year as he looks to continue to scale. We'll see what happens next. Adam, thanks for taking us to the top. [20:50] >> Thanks so much, Nathan. Have a good one. [20:52] One 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 1PM [21:17] Central. Additionally, remember these recorded founder interviews go live. We release them here on YouTube every day at 2PM Central. To make sure you don't miss any of that, make sure you click the subscribe button below here on YouTube, the big red button and then click the little bell notification to make sure you get notifications when we do go live. I wouldn't want you to miss breaking news in the SaaS world, whether it's an acquisition, a big [21:39] fundraise, a big sale, a big profitability statement or something else. I don't want you to miss it. Additionally, if you wanna take this conversation deeper and further, we have by far the largest private Slack community for B2B SaaS founders. You want to get in there. We've probably talked about your tool if you're running a company or your firm if you're investing. You can go in there and quickly search and see what people are saying. Sign up [22:01] for that at nathanlakka.com/slack. In the meantime, I'm hanging out with you here on YouTube. I'll be in the comments for the next thirty minutes. Feel free to let me know what you thought about this episode. If you enjoyed it, click the thumbs up. We get a lot of haters that are mad at how aggressive I am on these shows, but I do it so that we can all learn. We have to counter those people. We got [22:21] to push them away. Click the thumbs up below to counter them and know that I appreciate your guys'support. All right. I'll be in the comments. [22:27] >> See you.

Introduction hey folks my guest today is adam sandman he founded inflectra in 2006 and has been a programmer since the age of 10. today he serves as a company ceo and is responsible for product strategy technology innovation and business development the company helps you manage the entire software life cycle adam murray takes the top sure absolutely so inflection was founded uh really in 2006 to help companies of all sizes improve their quality of their software development software testing at that time in the market there weren't many products focused on the smaller medium-sized businesses a lot of tools for large companies not a lot for the mid-size and against start-up companies so started the company 2006 to provide that missing solution in the market and as the market evolved uh basically we've grown the company now to focus a lot more on more complex regulated industries and more complex business problems providing quality reliability and compliance to customers in various different industries so who are some of those customers adam um like customers from large defense contractors um you probably don't know the names large supply chain companies uh banks insurance companies uh people like cincinnati insurance uh people like northrop grumman lockheed martin healthcare systems hospitals supply chain food retailers uh people for bananas what are these folks paying on average per year to use your technology uh the average deal size is about ten thousand a year um we do and we do a mixture of when we say sas it's a mixture of on-premise and cloud-based but it is recurring revenue so we that we maintain both a traditional self-hosted option but it's still subscription-based as well as a cloud-based offering and when you look at your total revenue from 2021 what percent was on-prem versus sas in the cloud total revenue uh was uh 60 cloud for 40 percent on-prem uh new business is more like 70-30 uh but we do retain and anticipate retaining a significant uh on-prem business very interesting and take me back to 2006. do you remember the year you got landed your first customer yeah well the business was found in 2006 the first customer didn't actually land until september 2007 so 2006 you found the company start writing the software released the first video you're the founder i'm so founded correct do you still own 100 i do oh wow that's incred that's rare that's incredible congratulations well thank you and you know that those nine months from january launching the first version to the first sale in september was the most nerve-wracking probably in 1516 wherever it is amazing i i i would probably agree with that okay so how many customers are you Currently serving 5000 customers serving now today uh currently today uh 80 000 users for 5 000 paying customers 5 000 are they all paying at 10 000 bucks a year no no that's the average i mean it goes from like the you know 1 000 years more customers up to the you know 150 000 a year larger customers 200 000 a year type customers well i mean but can we can we multiply 5000 Monthly recurring revenue customers times 10 thousand dollars in acv you're doing about 50 million in annual revenue no i would say it's not only because again it's not that the average is not weighted so it's uh our revenue right now is just under 10 million okay that's still fantastic okay and if revenue today is 10 million what were you doing back about exactly a year ago um it was about oh my goodness eight point something last year and so where's that growth coming from this is fantastic you found a way to drive growth without having to go give up a bunch of equity uh really two main channels the online channel which has been our traditional channel direct sales online seo all the stuff you do online and then we recently launched our uh partner channel and this is something i would recommend anyone look at doing uh as a small company where you don't have a huge sales force uh launching a partner channel where you can bring in they call off sheet balance off balance sheet sales folks is really important who is the partner uh well these are partners we're consulting firms for the most part because we you know our software is used for development and testing so companies that will do software testing and project management they need tools they're going to bring in clients to us and so bringing in partners that can bring in the product and a lot of times independent consultants who move from client to client they will sell the tool for us but they're not actually employees they're just simply freelancers and then consulting firms that need tools that are evangelists for us oh what's going on there youtube good to see you guys now imagine this you love watching these interviews with sas founders but imagine if we took all of the valuation data out from over 2807 interviews i've done manually saves you a lot of time well we've done this we've built it into the beautiful interface inside of founder path check this out i'll show you how you can access this in a second but you log in you connect your stripe account you see your valuation real time you can see what it changed over the past 88 days and even set goals for valuation this year now the secret evaluation is there's many different ways to value a sas business so the reason you're going to see three or four different valuations inside of your frowner path dashboard this is all free by the way is because depending on who's doing the buying of your sas company you're going to get a different valuation a vc is going to pay a different valuation private equity firm is different if you're going to do a minority sale that's different and if you sell the whole business that's a different valuation you can see all those when i hover over here right so the teal is what a vc would pay yellow is what private equity and red is if you sold the whole thing outright now what's cool about this is this is not built off random data again you guys hear these interviews on youtube all these datas are built from real-time valuation data points founders share with us on the show so traction 1.2 million seed round 3.7 raised they sold 22 percent of their business go in here and filter by the event maybe you only want to see companies that have sold the whole business well here are a bunch that have been acquired the valuation and the multiple maybe you're going out right now and you're raising your seed round well go in here and look at all this recent seed deals that went down what they raised what valuation they raised at and what percent that they sold there's never been a larger data set of sas valuations than what you can get now inside of founder path and we're thrilled to bring it to you all right we're going to go back to the youtube video here in a second but if you want to check this tool out if you want to jump in and sign up you can check it out for free to get your valuation at this link this link founderpath.com forward slash products forward slash evaluations or if you go to founderpath.com and hover over products click on get your valuation here and go ahead and sign up to give it a whirl again all that valuation data live right inside the platform i hope to see you there all right let's jump back into the interview adam you mentioned seo is critical for you name a keyword that's driven you a bunch of great customers and traffic uh requirements traceability is probably the number one say it again requirements traceability interesting it's officially long tail that it's not like testing software that everyone goes for but it's not so obscure yeah that's super interesting i'm curious right now i'm gonna look it up requirements traceability okay interesting cool okay so yeah you're number three this this makes a lot of sense interesting and this was intentional right so how do you go find other words like requirements traceability to go rank four to get free traffic so first of all i would recommend what we did is do adwords do paid search find which keywords you rank for find the competitiveness of those keywords on page search and then translate them over to content writing in organic in the seo search write write articles write blogs see what starts to rise and then write more of them and ultimately bring an seo firm we did a lot of it organically ourselves but at some point you will need to bring an expert who can help you deal with the technical and you know links and the structure side of things adam what's the name of the seo firm you used uh effective spam based in austin texas effectivespend.com yes correct and they were good they are good they do paid search we've used them for paychecks for many years uh we brought them onto seo a couple years ago and when you say paid search like they started off like how much are they managing per month for you uh they're managing uh about 13 to 13 000 a month in adwords spend um typically whatever i i don't wanna slow their fears that's probably not allowed but they they've charged a percentage of that which is typical in the industry uh very empty yeah ten to twenty percent is usually pretty difficult yes yes they're yes they're on the lower end of that range it's hard you know a lot of founders listening right now they go i want to find an seo firm but all the agents they've tried are trash so it's hard to find ones that are really good what have you done like what what assets have you given effective uh effective expenses yeah where you think you've set them up for success oh that's that's a good question i don't um i think working very honestly with them and being very transparent with them we you know they did it for an index of our website they spent a lot of time researching and analyzing it looking at the what was ranking they also were our paid search vendor so they knew which keywords were affordable and profitable and a good roi already so it was actually easier bringing them in um i think also we spent a lot of time looking at the content on the pages and doing some partnership work but we would they would suggest pages that needed improving we would write some of the content the problem with an seo vendor especially b2b is they don't know your industry as well as you do so they're not going to write such good content potentially but you can write good content you don't know what to write where to write where to structure it so having i think having some organic writing resources combined with an seo firm is paramount you kind of say here's my website seo it that's i think unrealistic and if you don't spend at least 5 000 a month on seo it's not worth spending anything so if you're not going to spend at least five thousand yeah yeah a firmware's not charging at least five thousand probably isn't gonna make any difference to your uh ranking very interesting okay what year did you start working with effective spend uh for paid search it's about seven or eight years ago for seo it's only two years wow that's incredible you rarely see relationships this long you've been working with working with them for seven or eight years correct and how small were you in terms of revenue when you first started working with them uh must be two or three million a year wow uh okay very interesting um very interesting did you how long did it take you for you to go oh man because the two million spending five grand a month you might be like oh well that was it that was yeah that was the paid search the paycheck was only 10 the lower range of your range percent just kidding uh yeah ten percent of the the outward spend also has gone up so back then we were probably spending about four to five thousand in an adwords spend they were managing that and then we've now grown up to i guess 1314 where i said a thousand in nse and an adwords spend so and that's a vendor like that is great because you can scale your spend with them as you your adwords builds up and then once we get a certain size we're now able to afford you know an seo service that really was out of reach back then how did you find them out of curiosity it's an interesting story and it was it was we were working for another event called with another vendor called gary lsf they were doing our adwords and our uh some early seo work and they went out of business and we found out that they'd actually outsource all their work to these guys and so we inherited them because they were the ones doing the work anyway we're like let's cut the middle man that's hysterical okay very interesting and take me back you launched in 2006 first customers 2007 what year was your first million in revenue um was it being around oh my goodness 2010 11 something around that i have to go back in the records and and it was very hard to break that million i mean that was i think the hardest the hardest thing is to break the first million uh i think then five is probably the next but it's it's that i think that breaking the one billion mark is the hardest of all because i think what happens is you have to change everything you're doing um you can go from you know everything can be online it can all be self-service you can have online trials once you you get to a certain point your customers will expect more handholding and as a founder you're used to doing everything but you know being kind of the jack of all trades you got to start specializing so hiring a customer success person a partner person people through demos that aren't me you know that was a big change and you're going from basically the the brains of the builder to being the manager and the coach mm-hmm yeah very interesting how many folks are full-time on the team today uh four times a day or something equivalent uh 50 full-time equivalence about 40 full time plus some part time uh sorry say that one more time 40 full time uh 44 10 plus 10 other you know uh part-time is that i see out of the 40 how many are engineers um 15-20 15-20 do you print money from this Profits business so so would say do you print money from this business uh at a company level yes but we invent we reinvest most of it to grow the company um so as a personal level not as much as i could but i want to grow the business and build a a long sustaining business with a with a great culture so i'm actively reinvesting everything we can apart from what i need yeah so what what do you need how low have you kept your living expenses uh we you know we have a 2006 subaru as one of the oldest cars on the team uh i take the bus to work uh actually mainly because i like to work on the bus and get things done um but you know i've stayed in middle class existence i haven't you know we've got a kid going to college uh shout out to usc uh in a few months so i gotta pay enough to cover that but my wife worked full time which really helped she when i started the company she works for the government so that really helps having a working spouse who can you know let you follow your dreams what's the largest uh m a deal you've turned down oh to buy the for us to buy uh to buy us um we honestly we haven't we've we haven't pursued any any we've had people come close to talk to us about you know generally buying the company the problem is that uh we don't really want to sell the company at the moment and so we haven't gotten just to just avoid distracting us we haven't gone too far down that path so we've talked to some people but nothing's gone to the point right whether we've been on the table really what what kind of number would have to be out there where it's worth your time to be distracted to pursue the deal i think at this point probably 50 to 100 million something that you know we want to be the point where this was going to be they're going to take us to the next level as a company that we can't do ourselves we're growing 50 year-over-year we're making good revenue we've got a strong culture we'd have to be able to do that at scale if we're just going to roll them into a large bms that's you know for other companies we don't want to do that would you be open to something that's like 75 million where 50 is cash 50 of stock and you keep running this thing and growing it together yes yeah that'd be great very interesting i think you might get some calls after this interview we'll see um okay so Bootstrapped again just be clear totally bootstrapped today used to 100 any co-founders uh uh nope my wife and i i mean she technically is a part owner just to keep our marriage straight but uh she's just really working the company i've got so i've got a leadership team but you know no one has any equity uh if we ever decide to go public or something we obviously figure out what to do with that so that's something to think about is what do you do when you've rounded a company you're gonna you know you want to reward people long term the problem is giving out stock when you're private and you're not you know investor backed is it's a lot of legal complications dealing with that giving away private stock so we have a good cash based compensation with a team bonus we do things that are uh encouraging teach me about that so many bootstrappers go nathan how do i set up a bonus for my employees and i go i don't know i've never done it what how do you do it what's the calculation uh what we do is we put every year we look at the profit target for the year for the company we divide it by the number of employees we obviously allow how much we want to retain and then we say that funds the bonus pool look at the number of employees give everyone based on their role uh a allocation of the bonus pool and then at the end of the each six month period we say if if say we're gonna make x x thousand dollars in revenue that's right in profit uh and we made it everyone gets their full bonus for six months that they had in their pool if we made fifty percent of our target everyone is fifty percent but we actually on one thing we have no sales commission so everyone even sales people are all on salary and everything is a team bonus that the company makes as a whole that and for us that's really important encourages that we work together as a team more synced as a team so last year in december when you looked at this sort of six-month thing what was the profit pool at the end of 2021 i can't give you the dollar number but i can say we fully funded it uh for the year and football for that six months period and i see are we i mean are we talking like a million bucks and we're like like like 500 grand you're splitting up uh a little the lower number yeah more okay so just just to run the math with hypothetical numbers yeah five your target is 5000 bucks in profit last six months of last year right you hit it congratulations for check smart didn't take 500 grand divided by 40 people on the team it's not a straight because some people uh you know people make more money and have been longer potentially have a higher because when we give raises we might give a raise in base we might give a raise in bonus pool so it's not as simple as everyone gets exactly so that's what i'm saying how do you decide the multiplier or the percentage of the bonus pool that each person gets what are the templates i yeah primarily it was it's the primary one is actually base salary it's sort of a rough percentage of that but it's also tenure so it's a combination of those two factors i would say and so if i'm making 100 grand as a senior engineer at flextra you might say okay nathan you're eligible for five percent of 100 grand in the bonus pool so 5k uh probably more like 10 to 20 honestly okay so there's 10k and then i've been there for how do you how do you decide the 10-year multiplier is it 10 years is one thing five years is another uh it's not as formal as that being small it's more like when we do a pay raise we'll say okay you've got a great year we're going to raise your base by x and guess what your but your uh your bonus will go from say 10 000 a year to 15. so it becomes more step function it's not like a smooth uh graph as we as we get bigger and more formalized with hr we probably will do more of that but right now it's been very much a you know you did a great year you've achieved above and beyond we're going to raise your base we're also going to because we want to incent you to to to work hard for the company we'll raise your bonus pool buy from 5k 10k but it's definitely more lumpy than probably would be in a larger company really really interesting okay this is great uh let's wrap up here adam with the famous five number one favorite book oh my goodness um you give uh favorite favorite book i read so many books i love them all uh my mind's gone blank um can you come back to that one a second i don't think i would ever get you with how this interview is gone your mind going blank i think i've won the interview man yeah i just love so many books um i can't win this i love it my last favorite one is hatching twitter which i haven't shared a lot of red i love that book um i read the um the guest list which is a great thriller set on an island in the uh uh west coast of ireland it's a lot of fun so i love it all kinds of books but those there you go number two is there a founder you're following or studying oh i love richard branson i was i've always had a soft spot for him number two uh three what's your favorite online tool for building the business oh my goodness uh i i do love canva i will say uh that's one of my favorites little side side hustle i love just doodling around with it number four how many hours of sleep do you get every night eight and what's your situation married single kids uh married two kids one in college one finishing college that's exciting uh well and one's going into us one's going to college and one's just finished college finished yeah so i'll be an empty nester in about two months that's exciting okay and how old are you 47 47 last question something you wish you knew when you were 20. oh um it will you'll have time for all of it don't worry about the order guys there you have it inflector launched in 2006 2007 got their first customer last year broke 8.6 million bucks in revenue this year breaking 10 million growing almost 40 50 year over year as a bootstrap sas company adam stone's 100 super rare this guy's my kind of unicorn right this guy's my kind of unicorn uh profit sharing with team 40 people full time 10 contractors uh using paid search all this stuff you sort of expect to scale nicely and then just recently launching uh relationships with partner networks again helping you bring a harmony to your software life cycle tools for managing and testing all those applications adam thanks for taking us to the top thank you very much one more thing before you go we have a brand new show every thursday at 1 pm central it's called shark tank for sas we call it deal or bust one founder comes on three hungry buyers they try and do a deal live and the founder shares backend 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 1 pm central additionally remember these recorded founder interviews go live we release them here on youtube every day at 2 p.m central to make sure you don't miss any of that make sure you click the subscribe button below here on youtube the big red button and then click the little bell notification to make sure you get notifications when we do go live i wouldn't want you to miss breaking news in the sas world whether it's an acquisition a big fundraise a big sale a big profitability statement or something else i don't want you to miss it additionally if you want to take this conversation deeper and further we have by far the largest private slack community for b2b sas founders you want to get in there we've probably talked about your tool if you're running a 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