How Logianalytics CEO Li Zhao grew Logianalytics to $30M revenue and 1K customers in 2018.

hello everyone my guest today is steven schneider with more than 20 years of technology leadership experience he's the ceo today of logi analytics prior to this role he served as both ceo and cpo at logic where he held both sales product and engineering marketing and customer success teams prior to this company was the founding partner of on-demand iq a hosting business intelligence solution and a practicing manager at leading web technology company proxycom all right stephen are you ready to take us to the top let's do it all right what is logic analytics and how do you guys make money sure so logi works with application teams typically product managers and the developers on their teams to embed dashboard reporting and analytics in their software application typically self-service reporting visualizations dashboard things along those lines and they typically come to us because the end users of their application are demanding it uh they're losing competitively so they need something to differentiate or they need to make sure to maintain the maintenance stream of an existing product that they have and they want to be able to get to market fast and they want something that is better than they can build it themselves okay so i don't understand give me a customer story a name name the customer and tell me how they use it sure motion soft they make gym membership management software they spent most of their original kind of software development effort figuring out how to make a software for managing a gym how people walk in and check how many people to staff that sort of stuff they then found from their customers that they wanted to have reporting on top of that to figure out what are their busy times how many people should i staff at specific times that sort of thing they needed dashboards to show key metrics across multiple gyms for some of their customers that had multiple gems they may want to embed things like how do i predict if someone coming to the gym is likely to churn for example so that they can take action when that person comes in to give them a free personal training coupon or something like that so this is all internal it's not the gym members seeing how many times they checked into the gym like in the consumer app so we we offer something to product managers that they embed in their software application and most of those software applications are b2b software applications because businesses want to run analytics on their on their businesses yeah i get that steven i just want to be clear though this is not people are not buying your tool to give their consumers applications they're buying your tool to get make their businesses smarter internally so we sell primarily to software companies that want to embed us in their software application that they then sell to other companies that want to improve their businesses yeah not to not to consume not to the gym member that's right so motion soft would sell to curves or gold's gym or you know uh 24-hour fitness or whatever it may be and they would deploy it across all their locations got it okay without going down every customer cohort i'm sure you have many give me a sense of what the average customer might pay per year for something like this so it varies uh i'd say on the low end it's about a half an fte from a developer standpoint on the high end it could be achievable hold on actually give us numbers here because my audience won't that'll lose them yeah yeah so it can range from maybe fifty thousand dollars per year up to a million dollars plus a year it really varies on the size of the deployment so a smaller company that is only selling to maybe 20 gems is going to pay something on the lower end a larger company is deploying it across hundreds of sites across the country are going to pay much higher i want to know your averages stephen like to what is your the perfect kind of customer for you and what are they paying per year is about 100 000 okay got it typical but it can vary got it so that would put it like 30 40 location kind of thing uh well again it depends so we offer to customers in a wide range of different uh verticals and different deployments so if you have a lot of deployments but those deployments are very small in terms of deal size like a thousand dollars a piece or two thousand dollars a piece then we're gonna need a lot of customers for in order for to make financial sets some of our customers for instance we have one that sells software to sovereign wealth funds they have 20 locations but each of those locations they charge millions of dollars for sure so we don't really need a lot location so it really varies got it okay put this on a timeline for us when'd you launch company so the company was founded in 2003 actually and it was founded as more of an application development framework in the kind of business intelligence space but it really didn't start growing until about 2010. okay so what were you doing before those seven years i mean was it more of an agency uh it was a bootstrap company it did not have a lot of resources to spend so it was you know three to five million dollars of revenue working with customers that came in through the web with very small transaction sizes five to ten thousand dollars okay and in 2010 that's where we really kind of found our niche of working with application teams so again principally software companies but often enterprises that look like software companies and that's when we started growing and now do it sounds like those the three to five million businesses between built between 03 and 2010 that was more though like a go hunt get a project do the project move on to the next customer like move a sale it wasn't a recurring sas model then yeah so so let's talk about that for a second so so we are not a sas business okay let's talk about what that means though we often work with companies that are sas companies to embed within their application but our software is deployed uh up until about 2010 and actually really until recently and really about the 2015 time frame about half of our business was perpetual so we'd sell it they'd package it within their software application and we'd get a maintenance stream but it was more of a perpetual model today we're 95 all term contract based okay like per year or something like that right yeah yeah so by the way why do you say that that's not i mean most people define sas as something cloud related and there's a recurring revenue stream annually and you're charging per seat per usage per whatever why do you say you're not a sas company well so to me the definition of sas is software as a service right and we don't host anything we don't have any devops we have nothing hosted on our own internal cloud that we manage um we we have software that we ship they deploy it within their cloud environment but we're not actually managing anything but they have to keep coming back to you every year it's not like they can keep doing it every year without you they have to come back and keep what renewing the license or something uh typically if they want to keep distributing it they would keep renewing the license and why do they have to do that if they own it um well so again if the way we structure our licenses is to allow them to deploy it to new customers so as long as the business is healthy and they're still getting new customers or they're still wanting to deploy new upgrades and things along those lines that they'll keep coming back to do you think do you make any money if you so if you deploy part a and they're using that for a year and they keep just using part a and yours twos threes and four you're saying they don't pay you for two three and four unless they add a part b in part two three and four so every contract we map back to their business model it's not like a traditional transactional software application where here's the price and this is how we price it we first have say how do you license your software is it per user per site per additional person is a term or perpetual and then we have a model that maps back to their model so it really comes back to how do they sell their software is how we will ultimately continue to generate revenue okay interesting um okay so 2003 really got things going in 2010 and then fast forward today so bootstrapped will be raised capital so we raise venture capital in i think uh well our first round series a small round was in 2008 we did additional rounds in 2010 2013 but we were actually acquired by a private equity firm last year uh actually one year anniversary was on friday well okay so but okay so let's keep talking about before that acquisition so pre-acquisition total raise in the company was how much about 50 million okay five zero 50 million bucks there and then you sold in 26 uh 2017 so take us through that story why sell well so the company had gotten to a point where we had we had grown a decent amount um and we had started to bake the track towards profitability in 2017 and it just made sense for us to get new investors that were more aligned to kind of how we intended to grow in the future a lot of our earlier investors were venture investors and as you probably know when you're talking to a lot of vc oriented companies those companies are about grow grow grow grow grow up into a certain point it's more of a roulette wheel type model we were at the point now we had grown to a certain amount our growth had frankly slowed down a little bit and we were orienting to profitability and we wanted to just start growing in a different path also we saw an opportunity to potentially do...