How Knapsack CEO Chris Strahl grew Knapsack to $5.3M revenue and 80 customers in 2024.

hey folks my guest today is chris strahl he's an entrepreneur and serial founder startup ceo and podcast host he's excited to see how knapsack his current company is going to change the way we think about building applications using a pattern based approach he lives in and loves pacific northwest formerly a river guide professional dungeon master and believer in always looking for your next adventure chris you ready to take us to the top yeah sounds great all right so like what dragons are you battling right now at knapsack then yeah i mean everything comes back to d and d in the end um let's see uh uh dragons well i mean there's a lot of pressures on startups right now and um a large part of it is is related of course to things like like runway and funding and um finding the right people on your team and so you know the place that we find ourselves is having some some great early stage traction as a company and now looking at like how we accelerate into that next step um how do we hire the right team how do we find the right venture partner um how do we keep making awesome software and growing the company in a way that's responsible in an environment of of uh venture capital funding that has been completely bonkers for the last two years so my understanding of the product right you know we just spent a small fortune with our design team they have these beautiful layouts on sigma they design these like one pages with all of our fonts and colors and then we basically modularized all of the different chunks of the landing page design it looks like if we import all that to knapsack i can have someone that has no idea how to design or code create their own new landing pages using old elements we've already done is that basically how it works yeah exactly so you take uh uh and you rally around patterns so patterns can be any solution to a commonly recurring problem so that can be a color system it can be a spacing system it can be all those styling elements that exist inside of figma or it can actually be like bits of ui things like like buttons or cards or navigation um and then what you can do in knapsack is you can define what variables you can send to these things and create different variations so the whole point of this is you should eliminate a bunch of wasteful rework instead of maintaining hundreds of different possible buttons maintain one bit of button code and one bit and bit of button design and then define a set of allowable variations from there yep that makes a ton of sense okay tell me what are companies paying you on average to use this tech yeah i mean it's it's about uh so for we have two different price interiors we have uh uh our team plans which anybody can sign up for they're their 25 dollars per user per month and then there's our enterprise plans which are 50 per user per month um and those tend to be to to larger organizations but but ignore the per seat pricing when teams get going i mean are they onboarding 5 000 seats what's the average logo paying you per month yeah so we kind of go all over the place we have um some smaller customers that that um you know are just getting started because people aren't used to buying software for design systems there's not like a whole host of different sas solutions for this there's there's a handful of them um and so most of the time when this gets used initially it's with a team that really believes in the design system concept it's five to ten people um and so that represents you know like three to five thousand dollars um a year right yeah a year and then and then what we do is we have uh uh customers that that get really big and we want one customer that's a little over 700 seats um and they pay your biggest customer yeah our biggest customers is a little over 700 seats they pay about 200 000 a year a year yeah that's great yeah so that's nice so this what that tells me i think you're pretty early stage in terms of like age right you've found it i think in 2020 but you have a clear path to driving serious expansion revenue yep exactly and so last year or last month was our one year anniversary um which is pretty exciting that's awesome and and uh yeah you know we we really focus on that expansion sort of go to market motion right we want to land with that initial team get them to really love our products show the value of it because there's not like a million case studies about why design systems are valuable right now um and then get them to to work with other teams inside of their their organizations to grow that and and to make that something that that makes them successful and makes us successful i don't usually ask this with the company that's under like two years old but it sounds like you've got a good pulse on this what's your guys's net dollar retention over the past 12 months yeah it's uh it's about a hundred and ninety percent uh yeah so super i figured it was gonna be high yeah it's like we're pretty happy with that that's that's the number that we need to really focus on for the next year uh to really you know continue to make this an awesome company well why though i mean that's already world class the real question is can you keep that at scale exactly and so that's why i mean that we need to focus on it is like got it you know it's going well right now it needs to keep going well and so let's let's keep that up yep that makes a ton of sense okay got it take me back to day one so you founded it i guess in 20 last year 2020 did you bootstrap a raise yeah so we we came out of an agency we had a company called basalt um that was an agency that built um these design systems in this sort of this bespoke diy manner um so we built large custom technology platforms for big enterprises people what was the url for salt basalt.io assault.io yup uh so that agency doesn't exist anymore um we we basically were working with a bunch of large enterprises um building these things for millions of dollars and we went to go look in the marketplace to see who who was doing some sort of platform solution here because the way you grow an agency is you find a product that you can repeatably deliver over and over and over again and we found nothing um and so or nothing that really worked for us um because there was everybody was focused on either the design use case or the engineering use case nobody was really focused on the collaboration between those people um and what happened is is you know uh positively or negatively uh uh coveted hit um and all of our work as an agency just evaporated like however the agency pre-covered total revenue biggest year uh like 1.1 1.2 million okay so meaningful i mean that hurts yeah right yeah and so so we went from we went from like 800k in bookings to like less than 200k in bookings like overnight um and so we took a ppp loan like pretty much every company did how big was that for it was like almost 400 grand um and and with that we kind of had like took our bench time that we had an abundance of and we started taking the tooling that we built up building these things custom and turning that into a sas product um we didn't know it's going to be a sas product at the time we just needed something to do and then summer rolled around and and we got really excited about what we had built on the tooling front and we had this this crossroads like do we become an agency that has a product that helps us sell services or do we actually take this and make it a sas product and and become a product company and folks were a lot more interested in the latter than the former and so we and who are the folks how many were how many were on the team making the decision uh so there's i mean we talked to the whole company of about 12 people but the leadership team was was really the ones that were like super aligned on let's be a product company and which is five people um so the way there's five co is that the way five co-founders the way to think about it it's me my co-founder and then we have a head of customer success uh had a sales and marketing and i had a product okay so did you guys actually shut the agency down launch a new cap table where you and your co-founder own 50 50 each and you scale from there that's exactly right and so we shut that down and shut the agency down in september reincorporated as a c-corp in october um and then started looking for funding that's amazing okay so you raised last year this year yeah so we raised this year we started looking for funding in october and it's it's tough to pull together funding in less than three months and so we we had term sheets and stuff in in november december and did a you know small seed pre-seed round in january um with like one or two customers and like 11k and annual revenue and uh uh you know uh have grown it a lot since then yeah so how much money did you end up taking uh a little over two million two point over two two point three yeah my notes say two point three so that matches um very cool that was yours okay so precede round there and and so what i guess i guess the question i have there is why do you need funding to do this i mean you already know how to generate revenue with your agency work why not just close a couple customers and let them prepay for you then go build the sas so you keep equity yeah i mean that's an option i think that the hard part is is that there's um sort of this this rising tide right of of design systems we view this as a step change in the way that people think about building product and that market opportunity window is pretty small um and so we could grow it organically but it would take us four or five years um to even get to the point that we're at today where you know we have a substantial base of large enterprise customers and a whole host of smaller customers how many total customers today so uh it varies a little bit because we have a self-serve offering in the enterprise offering we have you know about 15 enterprise customers and then you know a couple dozen smaller customers got it so call like under 100 maybe like 80 80 customers all in something like that yeah something like that yeah yeah yeah interesting um okay cool yeah and you already sort of painted the picture of what the enterprise 200 000 year contract looks like people can get started as cheap as 25 bucks a month right exactly and so full spectrum then yeah and the folks that like you know the the rules of sas are essentially like you know remove as many barriers as possible from people touching and paying for your product and so that's that's what we do with the the 25 a month thing is like hey you want to try knapsack you want to have an account so that you actually get things like support and help um to get yourself onboarded and so that's where that offering comes in and that's largely about getting people interested in the product um there are tons of people though that just use it every month and they pay their 25 and are happy with it um and then you know that that ultimately is intended to lead to folks converting to enterprise where they say like my team has tried this for a couple months we love it we want to um take the next step get a bigger group of people on board get another team on board and that's when people move into that enterprise space it makes sense and i know averages are hard here because you have such a wide range but you said earlier call it six thousand dollar average acv across 80 customers that would mean you guys are doing what about 40 000 bucks a month right now in revenue yeah right around there up from like 900 bucks a month a year ago yeah exactly incredible growth i mean this is this is this is great growth so you rate with that kind of growth when you raise the 2.3 i mean what valuation did you target yeah so 2.3 we raised that uh uh seven and a half post money um gosh that feels so lucky ass investors that feels so cheap to me based on your growth rate yeah i mean like you know frankly we uh uh we were in a situation where where um you know we didn't really we had a product that was in market technically but like i said we had about two customers and so it wasn't it wasn't really um they invested before the growth then yeah exactly it wasn't really a thing then right like last january like we had no idea if we were gonna get this to work and and what's interesting is is our initial plan was to target larger accounts we were looking at more like a you know 30 to 60k acv um and finding out that people just weren't used to buying this as a sas tool was a big realization for us and it took us a couple months to figure that out it was really may or june that we we sort of changed go to market tactics where we said hey you know um our customer acquisition strategy for these larger accounts it's slow it's cumbersome um you know people are are concerned about buying from a startup in in this space because there's not a lot of of um like i said case studies and stuff here and so we made that shift to go from let's sell to big enterprise plant let's sell these big enterprise plans to let's sell these smaller individual team deals and really focus on getting that first five users in the door yep top of five that'll open up the top of funnel exactly and that was revolutionary for us like that that totally opened the floodgates now are you spending money do you know what your cac is due in a 25 month seat yeah i mean it's kind of all over the place right like it's it's a it's still a little too early for that to be a meaningful metric for us um you know i would say that that um you know it's it's in that five to ten k range as well um but the expansion is what makes it worth it which is why that net dollar retention is so essential for us yep yep yep so you'll spend 5 000 cactus 6 000 customer payback is still fine but again that's that's a cohort there the sample size is very small you're still sort of editing exactly how many people on the team today uh there's there's 12 of us and and two contractors okay got it so you said there were 12 last years well have you not made any highers over the past 12 months well we sort of changed out the team um you know we uh we had an agency team that was very focused on how um to consult and so we needed to build a company that was focused on a sas product and so um you know it's it's something that i wish we could have kept more folks from the agency side um but only really four rolled over um so it's eight new folks and four existing folks yeah and then you've only association days and you've only taken i mean i guess you said seven point five was post money right yeah yeah so you still caught 30 percent of the business so you and your co-founder still own call whatever 30 40 between the two 40 each effectively um you keep growing here do you have any plans to raise uh again in the near future yeah we're actually we're we're sort of probing right now um you know with our our traction we've got um a lot of kind of interest in in doing a non-traditional raise before the end of the year before we move into a more traditional like uh uh you know c plus series a kind of thing in in q1 of next year what would a non-traditional race look like you know in the next 60 days so somebody that's looking to to preempt to get in now that that wants to be a part of this and and we're basically saying like what would be the best investment partners that we could work with and we're picking that like top 20 list and and targeting those folks as hey these are the folks that we really want on our cap table we really want to be a part of our team let's talk to them now um if we get a term sheet out of that awesome if not we have plenty of runway to to do this in q1 and a more like standardized like let me go have 40 meetings in a month kind of thing yeah yeah 12 on the team how many engineers uh there's um uh three dedicated engineers one designer one had a product and um uh one contractor engineer very cool system is working let's wrap up here chris with a famous five number one favorite book uh let's see my favorite book has got to be hitchhiker's guide to the galaxy number two is there is i had a feeling that was gonna be your favorite book uh based off your bio uh number two how is there a ceo you're following or studying uh yeah um uh so melanie from canva has has done some really incredible stuff and it's uh uh uh you know i i had the opportunity to listen to her speak at this um really uh sorry i'm sort of stumbling um let me try that again so melanie perkins is who i'm i'm watching right now uh her work with democratization at scale is something that we really aspire to inside of knapsack and so um kind of somebody that that proved that democratization story it's been awesome to see the success the canvas yep number three what's your favorite online tool for building knapsack besides your own my favorite online say that one more time favorite online tool oh my favorite online tool uh my favorite online tool right now um gosh i've been playing a lot with um figma i mean you know this is an obvious choice for us being a design organization um but being able to experiment and and prototype in design has been pretty exciting for me um and basically seeing what they're continuing to do with things like version control has been awesome yup number four how many hours i sleep to get every night oh man i have two young kids that is a very low number uh probably between five and six hours okay fair and uh uh are you married with two kids yeah yeah i have a a wife and a three-year-old and a one-year-old oh man okay and how old are you i'm 40. 40. last question something you wish you when you were 20. something i wish i knew when i was 20. uh that i wouldn't be a father until i was 37. you would you'd want to be earlier or later i mean i think that like you know you you frame so much of your your life around the relationships you make and the connections you make with other people and you know i spent a lot of time basically uh uh trying to find the right partner in my life and i have that now and that's awesome and and you know my wife is an amazing partner for me in this journey um i struggled for that for a very long time and uh it was a huge source of anxiety and stress for me for a while um i think there's a lot of pressure on young people to get married especially they come from you know more traditional families and so knowing that it was going to happen for me um would have maybe made me more patient guys there you have it knapsack again helping you take design elements coded elements and reuse them faster more effectively without me to spend so much time redoing the same stuff they went from nothing to 40 000 bucks a month in revenue in under 12 months raised to 2.3 million pre-seed earlier this year at 7.5 post money evaluation now scaling up with their team of 12 supporting 80 customers chris thanks for taking us to the top hey thanks so much nathan it's great to meet you 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 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 1 p.m 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 company or your firm if you're investing you can go in there and quickly search and see what people are saying sign up for that at nathan lacka dot com forward slash slack in the meantime i'm hanging out with you here on youtube i'll be in the comments for the next 30 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 to push them away click the thumbs up below to counter them and know that i appreciate your guys's support all right i'll be in the comments see ya