How Leadfwd grew to $900K revenue and 100 customers in 2019.

hello everyone my guest today is bill kalert he's a technology sales and marketing visionary strategist and organizational leader who conceives develops and markets game-changing products and services that deliver rapid revenue growth for b2b and b2c clients right now building a company called inbox 25 and a new product forward dot io bill you ready to take us to the top sure all right let's talk about the oldest thing first and then your new stuff later so what is inbox 25 and what's the revenue model how do you make money sure uh inbox 25 is a marketing automation platform uh so we compete directly against firms like marketo pardot act on firms you've firms you've probably heard of a revenue model is a sas based business uh integrates well in the smb to mid-market enterprise space it's primarily b2b um and uh we integrate with uh salesforce sugar suite very nice have you picked one specific app exchange that's driven most of your growth or has it been really kind of you're all over the place uh the initial growth was through uh sugar uh it's kind of like a trial uh but now we're uh pivoting and transitioning over to salesforce obviously because it's a much larger pond to fission okay so sugar crm integration drove a lot of your early growth correct yeah interesting did you have an exclusive partnership with them or did you just happen to rank really well in their ecosystem uh we just happened to rank really well in our ecosystem just just due to our uh the way we integrated the data in it was uh it wasn't a traditional list-based approach we went in at the cell level of the record of about 13 different modules of data okay this isn't this isn't by accident though i mean it takes a certain skill set besides just timing to rank really high in any of these app exchanges so so obviously you just touch on some of the product features but tactically you know does and i'm not familiar with sugar so forgive me do they have is it a review based ranking system for inbox 25 to be at the top of the app exchange i know um sugar's app exchange is very uh it's uh very unsophisticated okay so uh so they're modeled there is there's no algo that that that moves you to the top of the bottom it's just it's just the relationships that you've been able to develop inside of their reseller ecosystem interesting interesting okay so i mean give me a general sense of how effective this was for you in the first year of the sugar serum integration how many new users did you get from the platform uh geez we uh pivoted to marketing automation about four years ago so in the first year we probably had about 150 users or customers users okay cool and you know customers i'm i'm not counting them as a one-to-one model users and customers it's the same thing in my mind we could have i mean i could have a customer with more than one users in it but we don't track revenue that way because our model is solely based on the number of active targets so if your acne industries you could have one user or 50 internal users and our business model doesn't unchange so you do not upsell based off seats you only upsell on a usage-based model which is number of active targets correct interesting many would say that's a disadvantage that you're leaving revenue on the table uh not in our space in the crm world where it's at where it's based on seats correct but in our space where it's based on database size um that's the that's the sole driver because the database size drives the amount of traffic that we see and the amount of calls replacing through the through the apis interesting um you put you said you launched this four years ago so what 2014 was launch date seems like a long time ago yeah probably 2014 2015 i'm trying to think yeah around that time frame okay and you've bootstrapped the company or did you decide to raise capital bootstrap i love that very good how did you fund early on yourself where'd you get money from american express that's an expensive apr yep sure is yep what do you need the money for like why did you have to you know grow up some credit card debt there in the early days to to get going uh well we've been cash flow positive everyone since which is which is good and bad you know it's good and that there's no there's no debt it's bad because things that would normally take 12 months take 18 right because we don't because we don't have the velocity and the capital to go bring in you know instead of three developers you know if you brought in six not that you know you can compress it in half but you can accelerate stuff yeah what's your team size today how many people um we're privately held so i really can't disclose a whole lot of data i want to but i can't but if you go on linkedin you can go find out um we're under 15 people okay under 15 that's fine i'm just i guess i'm just more curious as a follow-up to your prior question which was like how many developers do you have uh we have uh again you put me on the spot you don't have to share by the way i'm just i'm just following up to the question you asked uh no we have under 10. okay got it so so you feel like you have grown slower because you haven't been able to accelerate your kind of developer sprint cycles absolutely yeah interesting what's frisco like are you hiring kind of talent in frisco are you hiring from all over the place uh talent can be from anywhere as far as as far as i said we're concerned our main office is in staten island uh new york okay i work uh remote so if you have so if there's any talented people that are in the midtown area the staten island jersey area we'd love to talk to you yeah yeah you've i mean a quick quick linkedin search you've got kind of uh gabi and romania and then you've got look like some dev folks on the mainland here you know i've got danny a junior applications engineer and other people actually based up there in new york so you're paying some you're having to pay some big salaries to have developers in new york or at least big relatively speaking to romania and no comment no i mean you don't really have to comment on that one it's pretty it's pretty common knowledge developers are expensive in those areas um okay very good so less than 15 people today uh you're working remote again playing in the sugar crm space you launched this in 2014. um help me understand you said you're a sas pricing model based only on database size and active targets i mean give me a general sense are we talking enterprise here smb is it 10 bucks a month or you know 10 grand a month typically yeah um what it okay so we typically uh run off a second annual agreement okay so let's say that you have a database of uh 20 uh 20 000 records sitting in uh sitting inside of your crm uh that might be ten to fifteen thousand bucks a year okay um wait sorry for how many uh let's say 20 000 rappers interesting okay now so it's almost a dollar a record annually say that again it's almost a dollar or record annually you say yeah i like at that level but if you but if you go up to say 100 000 records it's not a linear scale so it's not a hundred thousand bucks a year it would be great if it was but it just isn't yeah well you don't need to you're going to be highly profitable anyway it's software yeah so like it's like it's a very flat um it really flattens out yeah do you have a large split kind of the pareto principle eighty percent of your customer twenty percent of your customers make up eighty percent of the revenue or are you pretty kind of flat there's a flat average you're all mid market oh no eighty uh the 80 20 world just completely applies yeah yeah and it's weird in this space in that there's really no correlation between employee size and database size and you would think that a larger company with 5000 employees would have a bigger database than 50 employees or 100 000 employees would have more than a thousand employees but i have not found that correlation to be true at all i wish it was but it just isn't well maybe a bigger database is what allows small teams to compete and stay small maybe uh which is potentially interesting um it also explains why you don't price on a per seat model there's not a direct correlation there the value of the database um just because we don't have time to go on every customer cohort i mean would you say that 15 to 20 000 per year is a good average or you think it's north of that um for us it's that's a that's a solid average okay it's like that's that's your sweet spot right there in the middle 20 thousand active context annually okay and can you can you paint the picture of is there a customer that you have permission to talk about just so we can really visualize who the kind of person using you um i can i can give you a great idea let's say you're a mid-market firm you're b2b uh you have a small marketing team may be you know a handful of people um you do you have a crm um and you need to do some digital marketing and you have a database of 20 to 100 000 records per year and you do you want to run some automated campaigns you want to be able to run some workflows you want to be able to provide a holistic customer journey view after you're out to your sales reps and you're tired of doing everything piecemeal and that would be kind of a typical customer that we face and we end up and we end up interfacing with people that are in the marketing team that are in it that are in sales that are sitting in the c-suite because we have to help them to realize what their what this marketing vision and their strategy is yeah most things that we most firms that we speak to you'd be shocked they don't have a strategy they have tactics but they don't they don't have an overriding strategy yeah and just to truly put a face on the customer because the description you gave is great but actually seeing a customer and hearing a name is more powerful you've got people listed on your website like the onion prudential stubhub university of southern california etc yeah exactly yeah very cool okay talk to you about how aggressive you're being in terms of driving customer growth so it sounds like your early customers are coming from sugar crm uh today i mean what channels are you actively playing in uh well since we're a marketing automation platform and we're big into the digital space um we're big into uh digital of digital marketing so ad so ad retargeting um ppc spends um and uh just doing some outreach and partnering cold outreach lukewarm outreach which leads me to my next product which is uh or the newest platform that we have which i met which everybody has it's called lead forward and i'm and bringing this in just because most every everybody in the b2b space has a lead generation problem that super top of the funnel stuff turning suspects into into prospects and nobody wants to do just straight cold cold calling there has to be a reason or some interest level right so this is where the lead forward has come in um you know lead fwd dot um io which you explained earlier uh which is a um which is a platform that allows you to look at your existing web traffic and it and it analyzes that and it identifies companies but it goes to the next step down and it and it allows us through affinity data and technographics to learn about those organizations and then to identify people in various titles and silos organizations and then to do automated outreach to those people based on how they're engaging with you at that time bill how is this unique though i mean there's a lot of companies zoom info just gobbled up by discoverorg that i mean they do a lot of the same stuff you take the web i p address you then can find the domain name the technographic data on that website in terms of things they've installed or or uninstalled recently or javascript snippets i mean what are you doing that's different than everybody else ah so i've got a great slide well don't show me a slide just explain it okay something on the website ready so uh yeah so there's that reverse ip ip lookup as well as some other technologies that we're bundling in but where a lot of these are falling down and set it's that engagement step right so they'll identify companies um but they won't identify the people at the companies they won't necessarily allow you to learn about the people of the companies so that's a i'm peeling back the onion and they won't take it the next step to allow an automated engagement path yeah by the way your web guys if you're confused what he's doing the website does do a really good job at kind of explaining this with some with some good graphics in terms of how you're doing this it looks like you're put you're i don't know what you're using in terms of once you get the ipa draft okay okay we know this is microsoft okay you're then pulling in uh titles of people and emails and obviously going directly into an automated email the job titles though are you i mean most people can't use linkedin for that because they are so strict with with their api and kind of web scraping how are you getting job titles uh we have a number of proprietary sources on these people and right now we have we have our our total database is about 400 million records and it just grows oh so when somebody uses your key product inbox 25 and they put 20 000 targeted people in in your system no no no no no we're not taking data from marketing automation well where are you getting 400 million contacts from uh we've we've contracted with some other various sources to provide affinity data okay so just to be clear though you in no way shape or form when someone uses inbox 25 and connects their database you are not doing anything even if it's anonymizing the context they're putting in to to learn from things they're giving you to then better predict emails of new people using your lead forward product correct okay that's good there's a walled garden i think i find like that is a very tempting walled garden not to jump over i'm impressed if you've truly figured out a way to keep that completely separate which is uh yeah which is why it's taken us as long as to get there because they're two different entities yeah inside of our company yeah let's go back real quick to inbox 25 you mentioned ppc adwords things like that i wanna get a sense of how aggressive you're being so you mentioned kind of first year average contract size you know 20 grand might be a good average are you willing to spend the full first year ac the full 20 grand to get the customer for a 12 month payback or are you less aggressive less aggressive than now okay what do you aim for a six-month three-month one-month payback uh probably about a six month payback and why is that i mean is that just a temperament kind of thing or how did you get that number budget we're uh bootstrapped are they are they more than that are they pulling it i mean are they paying up front though on the annual plans uh yeah trying trying to some customers we offer aggressive discounts if you if you if you can't pay if you can't pay up front yeah we're noticing the business the business environment's changed the past six months we're seeing um a lot of uh firms uh pulling back wanting to do quarterly payments monthly they're not willing to spend okay what's happening right now um i'm seeing some you know things happening on like you know 12 months out that i'm seeing some of my other friends larger firms that are it's it's giving me pause yeah we're running out of time here bill so let's wrap up quickly last couple questions here turns critical in any sas company what does your annual kind of gross turn look like for the past 12 months our churn yeah we have about a 94 retention rate okay that's on a revenue basis i'd say no uh no it's no it's on an account basis but are they do they basically mirror each other sometimes yeah i mean like not not every account is equal obviously right you know i mean you know so so sig and that's annually correct right so six percent annual revenue or logo churn now do you expand that same cohort by more than six percent so net revenue retention is greater than 100 yes yes so how aggressive is your expansion 20 year over year 30 year over year on just historical cohorts uh it's tough for me to give specific data but let's just say it's it's it's north of 20 no good answer so you're so 20 expansion you lose six percent so net you're at about 114 percent maybe north of that depending on how conservative your estimates are you that you were giving me so good that's obviously healthy that's a healthy muscle in terms of expansion revenue um uh just to summarize make sure i got everything here so again launched in 2014 again scaled early on relying on sugar crm now you've expanded to not only multiple platforms but also now multiple product lines launching leadforward.io as well how many total customers today now are you serving four years in uh we're roughly again can't give an exact number but let's just say we're north of three thousand okay three and then just be clear these are all paying customers not like free users that aren't paying anything to a certain extent yes well they're it's not a certain extent they're either paying you or they're not paying you there's no black and white there uh a lot less of those are paying versus say not paying okay got it so so 4 000 so 4 000 total are kind of touching or using you in some way and you said three 300 or 3 000 are actually paying i can't get i wish i could tell you nathan i so i can't get into that honestly well you can you can give her i'm just trying to get a sense if we're talking like five enterprise accounts or like 500 min market kind of accounts you can give a range if you want yeah yeah you know yeah let's say we're in like the hundreds okay got it so we'll say north of 100 customers right but less than 3 000 which is fair and if we say north of 100 right at a 20 000 ac that means you're doing north of 150 000 per month at this point that's would be a night that's a fair estimate yeah maybe maybe well north depending on again how conservative that was and then growth wise are you growing kind of 50 100 year-over-year what's growth look like uh growth uh growth for us is slower than that okay just because you know we're about bootstrap so we have to make investments you know that when you when you have a small pie of investment money you really ought to prioritize what are we so less than 50 year over year growth but again you're bootstrapped you own the thing so that's fine you can get you can get rich paying dividends oh yeah you know that uh well that's the plan yeah very good all right let's wrap up here bill quickly with the famous five number one what's your favorite business book um oh my goodness sakes emotional intelligence 2.0 number two is there a ceo you're following or studying [Music] what's that is there a ceo you're following or studying um not a ceo i'm just a big fan of guy kawasaki number three what's your favorite online tool for building your business besides your own don't have an answer number four how many hours of sleep you get every night uh i try to get uh at least six okay and what's your situation married single kiddos engaged okay congrats any kids uh kids are all uh two of them graduated college one of them's uh going to be a sophomore very cool okay three kiddos and gage and how old are you bill i'm 54. last question what do you wish your 20 year old self knew um oh my goodness thanks what do i wish my 20 year old self would have known uh that the crash of 1987 was about to happen and that the internet was right around the corner guys internet is there inbox 25 over 100 paying customers paying 1500 or about thousand dollar first-year acvs they are bootstrapped which i love and profitable team of about 15 people again helping folks understand how to manage an outreach to their database with their inbox 25 product and lead forward dot io product growing less than 50 year over year but that's totally fine again bootstrap turning six percent of their revenue annually but expanding 20 for net revenue retention of 114 no debt on the books they're focused on scaling started on sugar crm ecosystem and now expanding to other ecosystems as they continue to drive growth bill thank you for taking us to the top thank you appreciate it