How Inflectra Reached $10M Revenue and 5,000 Customers as a Bootstrapped SaaS Company (Interview with Founder and CEO Adam Sandman)

Introduction: Adam Sandman and Inflectra's Origin

Nathan Latka

00:00Hey 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 the company's CEO and is responsible for product strategy, technology innovation, and business development. The company helps you manage the entire software life cycle. Adam, you're ready to take us to the top?

Adam Sandman

00:16>> Sure, absolutely. So Inflectra was founded really in 2006 to help companies of all sizes, you know, improve their quality of their software development software testing. At that time in the market there weren't many products focused on the smaller and medium sized businesses, lot of tools for large companies, not a lot for the mid size and again startup companies. So started the company in 2006 to provide that missing solution in the market and as the market evolved,

00:43>> 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.

Nathan Latka

00:53So who are some of those customers, Adam?

Target Customers: Defense, Insurance, Healthcare

Adam Sandman

00:55>> They're customers from large defense contractors, you probably won't know the names, supply chain companies, banks insurance companies, people like Cincinnati Insurance, people like Northrop Grumman, Lockheed Martin, healthcare systems, hospitals, supply chain, food retailers, people importing bananas.

Average Contract Value and Pricing Model

Nathan Latka

01:15Adam, what are these folks paying on average per year to use your technology?

Adam Sandman

01:19>> The average deal size is about 10,000 a year. And we do a mixture of, and when we say SaaS, it's a mixture of on premise and cloud based, but it is recurring revenue. So we maintain both a traditional self hosted option, but it's still subscription based as well as a cloud based offering.

Nathan Latka

01:34And when you look at your total revenue from 2021, what percent was on prem versus SaaS in the cloud?

Revenue Mix: Cloud vs On-Premise

Adam Sandman

01:39>> Total revenue was 60% cloud, 40% on prem. New business is more like seventy-thirty, but we do retain and anticipate retaining a significant on prem business.

Nathan Latka

01:50Very interesting. And take me back to 2006. Do you remember the year you landed your first customer?

First Customer and Sole Founder Story

Adam Sandman

01:56>> Yeah. Well, the business was founded 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

Nathan Latka

02:05version You're the the sole founder?

Adam Sandman

02:06>> I'm sole founder, correct.

Nathan Latka

02:07You still own 100%?

Adam Sandman

02:09>> I do.

Nathan Latka

02:10Oh, wow. That's rare. That's incredible. Congratulations.

Adam Sandman

02:13>> Well, thank you. And, you know, those nine months from January launching the first version to the first sale in September was the most nerve wracking probably in fifteen, sixteen, whatever his years.

Current Customer Count and User Base

Nathan Latka

02:21Amazing, I would probably agree with that. Okay, so how many customers are you serving now today?

Adam Sandman

02:26>> Currently today, 80,000 users across 5,000 paying customers.

Nathan Latka

02:315,000, are they all paying at $10,000 a year?

Adam Sandman

02:34>> No, no, that's the average. It goes from like the 1,000 a year small customers up to the $150,000 a year larger customers, 200,000 year type customers.

Revenue Today and Growth Rate

Nathan Latka

02:43Well, I mean, but if I multiply 5,000 customers times 10,000 in ACV? You're doing about 50,000,000 in annual revenue?

Adam Sandman

02:50>> No. I would say it's not any because again, it's not an the average is not weighted. So it's our revenue right now is just under 10,000,000.

Nathan Latka

02:57Okay. That's still fantastic. Okay. And if revenue today is 10,000,000, what were you doing about about exactly a year ago?

Adam Sandman

03:03>> It was about oh my goodness. Eight point something last year.

Nathan Latka

03:07And 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.

Two Growth Channels: Online and Partner

Adam Sandman

03:12>> Really, two two main channels. The online channel, which has been our traditional channel direct sales, online SEO, all the stuff we do online. And then we recently launched our partner channel and this is something I would recommend anyone look at doing. As a small company where you don't have a huge sales force, launching a partner channel where you can bring in off balance

03:30>> sheet sales folks is really important.

Partner Channel: Consulting Firms and Freelancers

Nathan Latka

03:32Who is the partner?

Adam Sandman

03:34>> Well these are partners. We're consulting firms for the most part. Because 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

03:53>> freelancers and then consulting firms that need tools and are evangelists for us.

Nathan Latka

03:57Oh, 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 Founderpath. Check this out. I'll show you how you can access this in a second. But you log in, you connect

04:21your 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 Founderpath dashboard, this is all free by the way, is because depending on who's doing the buying of your SaaS company, you're gonna

04:45get 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 you sold the whole thing outright. Now what's cool about this is this is

05:07not 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 are a bunch that have been acquired the valuation and the multiple. Maybe you're

05:33going 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 Founderpath. And we're thrilled to bring it to you. All right, we're gonna go back to the YouTube video here in a second, but

05:55if 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 right inside the platform. I hope to see you there. Alright. Let's jump back into

06:21the interview. Adam, you mentioned SEO was critical for you. Name a keyword that's driven you a bunch of great customers and traffic.

SEO Strategy and Keyword Selection

Adam Sandman

06:28>> Requirements traceability is probably the number one.

Nathan Latka

06:30Say it again?

Adam Sandman

06:31>> Requirements traceability.

Nathan Latka

06:33Interesting.

Adam Sandman

06:34>> It's sufficiently long tailed, but it's not like testing software that everyone goes for, but it's not so obscure.

Nathan Latka

06:40Yeah, 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 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 for to get free traffic?

Effective Spend: Paid Search and SEO Agency

Adam Sandman

06:55>> So first of all, would recommend what we did is do AdWords, do paid search, find which keywords you rank for, find the competitiveness of those keywords on paid search, and then translate them over to content writing in organic in the SEO search. Write articles, write blogs, see what starts to rise, and then write more of them and ultimately bring in an SEO firm. We did a lot of it organically ourselves, but at some point you will

07:14>> need to bring in an expert who can help you deal with the technical and, you know, links and the structure side of things.

Nathan Latka

07:20Adam, what's the name of the SEO firm you used?

Adam Sandman

07:22>> Effective Spend based in Austin, Texas.

Nathan Latka

07:25Effectivespend.com. Yes. Correct. And they were good?

Adam Sandman

07:29>> They are good. They do paid search. We've used them for paid search for many years. We brought them onto SEO a couple years ago.

Nathan Latka

07:35And when you say paid search, they start off at like, how much are they managing per month for you?

AdWords Spend and Agency Relationship

Adam Sandman

07:39>> They're managing about 13,000 a month in AdWords spend. Typically, I don't wanna disclose their fees, that's probably not allowed. But they've charged a percentage of that which is typical in the industry.

Nathan Latka

07:52Very interesting, yeah. 10 to 20% is usually pretty typical.

Adam Sandman

07:55>> Yes, yes. They're on the lower end of that range.

Nathan Latka

07:58It's hard, know, a lot of founders listening right now, they go, wanna find an SEO firm, but all the agencies they've tried are trash. So it's hard to find ones that are really good. What have you done? Like what assets have you given effective expenses Effective spend, yeah. Yeah, effective spend where you think you've set them up for success.

Adam Sandman

08:15>> Oh, that's a good question. I I think working very honestly with them and being very transparent with them, they did it for an index of our website, they spent a lot of time researching and analyzing it, looking at 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. I think also we spent a lot of

08:36>> time looking at the content on the pages and doing some partnership work. They would suggest pages that needed improving, we would write some of the content. The problem with an SEO vendor, especially in B2B, is they don't know your industry as well as you do, so they're not going 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

08:54>> some organic writing resources combined with an SEO firm is paramount. You can't just 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.

Nathan Latka

09:07If you're not gonna spend at least 5,000? Yeah.

Adam Sandman

09:10>> A firm that's not charging you at least 5,000 probably isn't gonna make any difference to your ranking.

Nathan Latka

09:15Very interesting. Okay. What year did you start working with Effective Spend?

Adam Sandman

09:19>> For paid search, it's about seven or eight years ago. For SEO, only two years.

Nathan Latka

09:24Wow. That's incredible. You rarely see relationships this long. You've been using with working with them for seven or eight years.

Adam Sandman

09:29>> Mhmm. Correct.

Nathan Latka

09:30And how small were you in terms of revenue when you first started working with them?

Adam Sandman

09:34>> Must be 2 or 3,000,000 a year.

Nathan Latka

09:36Wow. Okay. Very interesting.

09:40Very interesting. Did you How long did it take you for you to go, oh, man? Because the 2,000,000, spending $5,000 a month, you might be

Adam Sandman

09:45>> like, oh, this is Oh, we 10 did though, that was the paid search. The paid search was only 10%, the lower range of your range percent, just kidding. Yeah, 10% of the adword spend also has gone up. So back then we were already spending about 4 to 5,000 in adword spend. They were managing that and then we've now grown up to I guess thirteen, fourteen thousand in AdWords spend. So a vendor like that

10:07>> is great because you can scale your spend with them as your AdWords builds up. And then once we hit a certain size, we're now able to afford an SEO service that really was out of reach back then.

Nathan Latka

10:17And how did you find them out of curiosity?

Adam Sandman

10:19>> It's an interesting story and it was we were working with another vendor called Gary LSF. They were doing our AdWords and some early SEO work and they went out of business And we found out that they'd actually outsourced 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 out the middleman.

Nathan Latka

10:36That's hysterical. Okay. Very interesting. And take me back. You launched in 2006, first customer What in 2000 and year was your first million revenue?

Adam Sandman

10:46>> Would it have been around, my goodness, 2010, 11, something around that. I have to go back in our records. And it was very hard to break that million. I mean, that was, I say, hardest thing is to break the first million. I think then five is probably the next. But I think that breaking the 1,000,000 mark is the hardest of all because I think what happens is you have to change everything you're doing. Can go from,

11:09>> know, everything can be online, it can all be self-service, you can have online trials. Once you get to a certain point, your customers will expect more handholding and as a founder you're used to doing everything, being kind of the jack of all trades, you've got to start specializing. So hiring a customer success person, a partner person, people who do demos that aren't me, you know, that was a big change. And you're going from basically the brains

11:29>> of the builder to being the manager and the coach.

Nathan Latka

11:31Yeah, very interesting. How many folks are full time on the team today?

Team Size and Engineer Headcount

Adam Sandman

11:35>> Full time today or full time equivalent, 50 full time equivalents, about 40 full time plus some part time.

Nathan Latka

11:41Sorry, say that one more time, 40 full 40

Adam Sandman

11:43>> full time plus 10 other, you know, part time is the

Nathan Latka

11:46I see. Out of the 40, how many are engineers?

Adam Sandman

11:53>> 15 to 20.

Profitability and Reinvestment Philosophy

Nathan Latka

11:5415 to 20. Do you print money from this business?

Adam Sandman

11:57>> Sorry,

Nathan Latka

11:58Do you print money from this business?

Adam Sandman

12:00>> At a company level, yes, but we reinvest most of it to grow the company. So as a personal level, as much as I could, but I want to grow the business and build a long sustaining business with a with a with a great culture. So I'm actively reinvesting everything we can apart from what I need.

Nathan Latka

12:16Yeah. So what what do you need? How low have you kept your living expenses?

Adam Sandman

12:20>> We, you know, we we have a we have a 2006 Subaru. One of the oldest cars on the team. I took the bus to work. Not the, actually mainly because I like to work on the bus and get things done. But I, you know, I've found a middle class existence. Haven't, know, we've got a kid going to college, shout out to USC in a few months. I gotta pay enough to cover that. But my wife worked full

12:40>> 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.

Nathan Latka

12:47What's the largest M and A deal you've turned down?

Adam Sandman

12:51>> Oh, to buy the for us to buy us?

12:55>> Honestly, we haven't pursued any. We've had a couple of come close to talk to us about, you know, generally buying the company. The problem is that we don't really want to sell the company at the moment. And so we haven't gotten, just to 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 where we've just on the table really.

Nathan Latka

13:14What kind of number would have to be out there where it's worth your time to be distracted to pursue the deal?

Adam Sandman

13:19>> I think at this point, probably 50 to 100,000,000, something that we'd want to be at point where this was going to be, they're going to help 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.

13:35>> We'd have to be able to do that at scale. If we just can roll them into a large BMS that's for other companies, we don't wanna do that.

Nathan Latka

13:42Would you be open to something that's like 75,000,000 where 50% is cash, 50% is stock and you keep running this thing and growing it together?

Adam Sandman

13:48>> Yes. Yeah. That'd be great.

Nathan Latka

13:49Very interesting. I think you might get some calls after this interview.

Adam Sandman

13:53>> We'll see.

Bonus Pool Structure and No Sales Commissions

Nathan Latka

13:54Okay. So again, just to be clear, totally bootstrapped today. You still own 100%. Any co founders?

Adam Sandman

13:58>> Nope. My wife and I, I mean, technically is a part owner just to keep our marriage straight but she doesn't really work in the company. I've got a leadership team but you know no one has any equity. 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 found a company? Want to reward people long term. The

14:17>> problem with giving us stock when you're private and you're not, you know, investor backed is it's lot of legal complications dealing with that, giving away private stock. So we have a good cash based compensation. We have a team bonus. We do things that are encouraging

Nathan Latka

14:29Wait, to coach teach me about that. 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. How do you do it? What's the calculation?

Adam Sandman

14:36>> 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 allocation of the bonus pool, and then at the end of the each six month period we say if say we're going

14:54>> to make x thousand dollars in revenue, sorry in profit, and we made it, everyone gets their full bonus for six months that they had in their pool. If we made 50% of our target, everyone gets 50%. But we have actually, and one thing, we have no sales commissions. Everyone, even salespeople, are all on salary and everything is a team bonus that the company makes as a whole. And for us that's really important. Encourages that we work

15:14>> together as a team or sync to the team.

Nathan Latka

15:16So last year in December when you looked at this sort of six month thing, what was the profit pool at the end of twenty twenty one?

Adam Sandman

15:22>> I can't give you the dollar number but I can say we fully funded it for the year and for that six months period. And for I see.

Nathan Latka

15:28I mean, are we talking like a million bucks or more like $500,000 you're splitting up?

Adam Sandman

15:32>> A little bit lower number, yeah.

Nathan Latka

15:33In the Okay, lower. So just to run the math with hypothetical numbers. Your target is $500,000 in profit last six months of last year. You hit it. Congratulations.

Adam Sandman

15:41>> That's correct.

Nathan Latka

15:42You didn't take $500,000 divided by 40 people on the team.

Adam Sandman

15:46>> It's not a straight because some people, 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.

Nathan Latka

15:57So that's I'm saying, how do you decide the multiplier or the percentage of the bonus pool that each person gets? What are these inputs?

Adam Sandman

16:03>> Yeah, primarily it was, 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.

Nathan Latka

16:12And so if I'm making $100,000 as a senior engineer at Inflectra, might say, okay Nathan, you're eligible for 5% of $100,000 in the bonus pool. Five ks.

Adam Sandman

16:21>> Probably more like 10 to 20, honestly.

Nathan Latka

16:22Okay. So there's 10 k. And then I've been there for how do you how do you decide the tenure multiplier? Is it ten years is one thing, five years is another?

Adam Sandman

16:30>> It's not as formal as that being small. It's more like we when we do a pay raise, we'll say, okay, you've had a great year. We're going to raise your base by x and guess what your bonus will go from say 10,000 a year to 15. So it becomes more step function, not like a smooth graph. As get bigger and more formalized with HR we probably will do more of that but right now it's been very

16:47>> much a you know you did a great year, you've achieved above and beyond, we're gonna raise your base. We're also gonna, because we want to incent you to work hard for the company, we'll raise your bonus pool by five ks, 10 ks. But it's definitely more lumpy than probably it would be in a larger company.

Nathan Latka

17:01Really, really interesting. Okay, this is great. Let's wrap up here, Adam, with the famous five. Number one, favorite book.

Adam Sandman

17:08>> Oh my goodness. Favorite book. I read so many books, I love them all. My mind's gone blank. Can you come back to that one a second?

Nathan Latka

17:18I don't think I would ever get you with how this interview gone, your mind going blank, I think I've won the interview.

Adam Sandman

17:24>> Man, yeah, I just love so many books. My last favorite one is Hatching Twitter, which I'm sure a lot of have read. I love that book. I read The Guest List, which is a great thriller set on an island in the West Coast Of Ireland. It's a lot of fun. So I love all kinds of books.

17:40>> You go.

Nathan Latka

17:41Number two, is there a founder you're following or studying?

Adam Sandman

17:44>> Oh, love Richard Branson. I've always had a soft spot for him.

Nathan Latka

17:48Number three, what's your favorite online tool for building the business?

Adam Sandman

17:53>> Oh my goodness.

17:57>> I do love Canva, I will say. That's one of my favorite little side hustle. Love just doodling around with it.

Nathan Latka

18:03Number four, how many hours of sleep do get every night?

Adam Sandman

18:06>> Eight.

Nathan Latka

18:07And what's your situation? Married, single kids?

Adam Sandman

18:09>> Married, two kids, one in college, one finishing college.

Nathan Latka

18:12That's excite Well, and one's going into USC.

Adam Sandman

18:14>> One's going to college and one's just finished college. One's finished Yeah. So I'll be an empty nester in about two months.

Nathan Latka

18:20That's exciting. Okay. And how old are you?

Adam Sandman

18:22>> 47.

18:23>> 47.

Nathan Latka

18:24Last question. Something you wish you knew when you were 20.

Adam Sandman

18:27>> Oh, it will You'll have time for all of it. Don't worry about the order.

Nathan Latka

18:32Guys, there you have it. Inflectra launched in 2006, 2007 got their first customer. Last year broke $8,600,000 in revenue. This year breaking 10,000,000, growing almost 50% year over year. As a bootstrap SaaS company, Adam owns 100%, super rare. This guy's my kind of unicorn, right? This guy's my kind of unicorn. Profit sharing with the team, 40 people full time, 10 contractors. Using paid search, all this stuff you sort of expect to scale nicely. And then

18:56just recently launching relationships with partner networks. Again, helping you bring harmony to your software life cycle. Tools for managing and testing all those applications. Adam, thanks for taking us to the top.

Adam Sandman

19:06>> Thank you very much. Nathan, have a good one.

Nathan Latka

19:09One 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

19:34p. M. Central. Additionally, remember these recorded founder interviews go live. We release them here on YouTube every day at two 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 SaaS world, whether it's

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20:17people are saying. Sign up for that at nathanlatka.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 and 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

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