How nQ Zebraworks CEO Bill Bice grew nQ Zebraworks to $2.6M revenue and 500 customers in 2024.

hey folks my guest today is bill bice he's the ceo at nq zebraworks which is tackling the challenges created by work from anywhere in legal organizations he started his first software company at 18 and has since been on the founding team or a seat investor in over 27 startups bill you ready to take us to the top absolutely all right very cool so jump into this nqzw.com so are you selling directly to legal firms we are okay and i assume did would you build this for yourself well no it's it's coming back to my roots that first company you mentioned i started when i was 18 was was in the legal tech vertical and i've kind of circled back around and come back into into that market and it's it's actually pretty exciting time to be in uh to be in this niche so we're having we're having a lot of fun going after it what are some of the issues that legal firms have when there is no central office and everyone's remote yeah sort of the issue that everybody's tackling but but law firms and legal organizations uh you know government agencies corporate uh law departments you know it's a pretty conservative bunch and the pandemic has been this outside force that has suddenly caused change to occur and so and i really don't look at it as a as a change agent it's more like an accelerator right it took things that were already happening and now instead of taking a year it's all you know 10 years it's all been compressed into one year so all these issues of of flexibility and hybrid work have sort of been forced on law firms where they really didn't have to deal with deal with them before and it's it's an environment where security is really important and being able to extend your infrastructure and and support work from anywhere is is is tough for them to do so that's that's what we've been going after interesting and when did you launch the business officially well so this this came out of a merger so the in cube portion was launched in 2003 i started zebraworks in 2019 and to get back into the legal market and so we we merged the two together last year and what helped me understand what firms are paying on average per month to use your technology well it's pretty cost effective so it's in the you know ten dollar per month per user kind of range and these these are typically pretty large firms with with large you know large user bases so instead of looking at it on a seat basis though what's sort of the average firm like so you basically have the average number of seats they're paying to start with are we talking like a thousand bucks a month or like 10 grand a month well all the above so we work with the largest firms in the in the world down to down to mid-sized firms so it could be uh 50 users at you know a firm you know firm down the street from you or it could be a firm that has you know several thousand users i know it's hard to do but if i did sort of force you into an average what would you say your sweet spot is what's the middle uh the middle is probably um you know hundred to two hundred thousand dollar uh annual recurring revenue projects okay okay fair enough hundred fifty thousand bucks a year and that's you know if a lot of the legal firms paying you 150 grand a year how many seats are they probably using uh that's in the several you know several hundred seats several hundred so how many law firms have several hundred folks that they could pay for sheets like what do you think the total total amount of legal forms you can sell to is well it is a nichi market so we talk a lot about the amla 1000 in the in the us which are sort of those firms that uh that gets you down to to about 200 attorneys roughly and most firms have about twice the staff of the number of attorneys that you see okay interesting so you launched this in 2019 you're obviously scaling nicely have you done this all bootstrap or did you raise capital uh no so part of part of the merger was uh was a capital infusion that uh let us let us go out and and grow like we want to i don't know that i understand the whole merger thing right so when did the merger happen and why did you merger well so we we did that in 2020 so we were out looking to raise the series a for four zebra work so we built our very first product and it was time to to go to market and the rat we ended up taking was was merging with a well-established legal tech company in queue and as part of that uh funding was was part of the deal so it was kind of a there's kind of a twofer but let's let's put more mass behind it and and bring the funding to the table at the same time i want to try and simplify this but we don't have tons of time right so you're saying nq at the time i was doing more revenue than zebra correct absolutely yes we're now leading though as ceo as the resulting organization right correct and so i mean from like a cap table perspective do they just own like 80 and you only own 20 or like how did you work for some of those economics well it was it was a little bit of a reverse merger in the sense that part of the attractiveness in doing it was the management team that we had had created with zebraworks so what we did when we put zebraworks together is we brought the original team of that that first company started when it was 18 was called pro law software and the genesis of zebraworks was to bring that management team back together you know we spent a ton of time in the legal market we know you know we know this area inside and out so it was that expertise that we were really bringing to to the table and we built a cloud platform we tied that to the existing on-premise technology that we have from ncu and you know it's kind of a joke in in the legal market that the way you be successful in this market is do things today that everybody else was doing 10 years ago so right now we're moving to the cloud and so that's that's sort of the logic of the combination yeah okay that makes sense to me but what what i mean i know you can't share a lot of this but like the cap table today is it basically like anyone that invested in nq sort of sits as one sort of spv on your cap table and then you have a portion and then you have an employee option pool for the rest of your people at zebra yeah it's even simpler than that because because nq had been uh bought by a company called retcon that is a publicly held company in australia so you have sort of one piece that comes from the rec on side and then the other piece from from zebraworks that publicly traded company owns a bit of your equity exactly i see i see and very interesting okay and how much what was the cash injection component of the merger how much so the the original goal when we were going to do the series a was was to do a five million dollar raise and although we didn't announce it we've we inherited the deal was was exceeding what we were looking for in in funding that's great what were you targeting valuation wise when you were going out for the 5 million uh so we were early stage so that was one of the attractive elements of this is that it was really good for everybody that was involved so our goal when when we were just raising the series a was was to get something in the eight to ten million dollar uh pre yep okay eight to ten pre which should put you out with like 12 to you know 15 posts something like that selling 30 of the business exactly and what you're saying is through this new deal you basically were able to get actually more than that plus a great new partner and plus a customer base that you can move from on-prem to cloud at zebra increase rpoo upsell the cloud cloud instance yeah we instantly went from from six people to 60 overnight with a really experienced team that you know lives in this market and so our ability to scale you know just put us in a different league you know day one fascinating okay now how many customers today total uh we've got about 500. wow 500 law firms and then add up all the seats how many attorneys across those 500 firms that's a great question i haven't actually added it up oh i thought you would be like tracking that number every day that's the exciting number well it is and and i know it better for the newer things so so we're also doing the transition from the traditional enterprise sale to subscription model so you know that of course that's a difficult thing for any software company to go through but it you know dramatically increases the value of the company to uh to do that so it i i don't have the same standard sas metrics because we're we're right in the middle of making that transition yeah what is the split so how many customers are on-prem customers only and how many are zebra cloud customers only well so the cloud products are brand new so you know that's that's not a that's not a ton of firms that we have sold only new but frankly really what firms want is that sort of bridge to the cloud you know the small firms have have migrated and you can find small firms that are 100 cloud but the rest of the market is is this sort of hybrid model between on-prem and and cloud and so if i asked you like what is your monthly recurring revenue today would you include all like the sll sla and maintenance agreements that came with the nq the the deal there i imagine that was their recurring revenue from as maintenance yeah absolutely okay and are they still pretty sticky i mean or no you i mean they're churning like crazy and all are moving to the cloud no one of the great one of the things that's really nice about legal is if if you do a good job of taking care of your customers you can have an extremely low turn right in this market it's it's a it's a very interesting vertical because companies coming from outside who don't understand legal often struggle for years to really get the value proposition here but if you understand it and you're really good at it then you can keep your clients you know essentially forever what is your turn today uh it it is um on a on an annual basis uh less than three percent on a revenue or a logo basis annually uh logo logo base okay i mean that's incredible now what's the expansion revenue look like i imagine you're way above 100 net dollar retention we are and and i i specifically look at logo retention because it is very deceiving to to look at the revenue numbers uh and that ability to hold on to firms and then and then have that client base to upsell in is is you know crucial to the whole strategy so do you know what your expansion is on the historical base past 12 months i don't but you know you're above 100 and a dollar retention yes okay so at least three percent expansion then to make up the three percent churn absolutely fair okay interesting all right very cool you mentioned 60 people today how many of those are engineers uh we've got 24 people in engineering and i imagine you probably have quota carrying sales reps of this acv we do how many uh sales team is uh 12. bill you've done this a ton a lot of first-time founders struggle with how to set comp structures for their first account executive right how do you structure that what's the quota target well it is tough particularly when when you're not totally sure you've got product markets yet you know we have a huge advantage here and that we know this market really well we're working with uh with sales sales team and the sales leader that so our our cro was uh was the sales leader at pro law that first company so it's such a huge advantage to come in with that knowledge of what it takes but i always build from the ground up and say okay well how many it's so it's so tempting to take the numbers and go into reverse we need this revenue we have this many sales people and we're gonna divide up the quota but that's really meaningless right i much prefer the ground up route of saying okay here's the activity that i know sales rep can do here's what that's going to translate into a realistic number of deals per month here's what that turns into revenue and that's what creates a quota and so what is that today so the the quota for sales rep is is and this this is this is based on multi-year uh deals so it's it's three to five year deals and depending on the on the region it's it's 600 to 1.2 interesting and let's say that you hired me six months ago and i'm on track to hit my 1.2 million dollar quota what will i earn full on target earnings face post commission so in this is a uh you're probably not gonna do that well if you're coming in from outside the market right this is a place where having the experience and the connections is is really valuable and so a good salesperson in this market is gonna is gonna make you know 120 on the low end and and uh 180 to 200 sort of the norm and a top performer can can hit uh 250 300 base plus commission yes yeah interesting okay very interesting okay cool let's talk about growth right so so when you look at obviously just like your revenue numbers past 12 months you know the merger happens all that what did would you grow by the past 12 months uh so we we will be at 12 months uh next month so uh we're we're we're at 11 months as we speak uh today 11 months and a handful of days uh and so with with the conversion from maintenance we're we're running at a at a about a 18 uh growth rate which we expect to accelerate coming into the year as we have more cloud products that that we're taking to market and so what does that mean i mean do you think by december this year you can break you know a two million dollar run rate uh we we're going to uh next year it's it's all about you know it's all about getting to the sas business model yeah yeah i mean do you feel confident about passing a million dollars in terms of revenue this year uh yes and the um the the beautiful thing about this market is if you're if you're really good at it it is it is a very strong referral market so that's that's one of the reasons i really like this market because there's such a great payoff to actually focusing on your clients and taking care of them like the the the core principles of the business really pay off yeah help me understand real quick i'm missing something here so you mentioned earlier 500 customers and you mentioned average acv is between 100 and 200 000. now obviously you and i can both do math that would put you at like a 50 or 60 million dollar run rate but you're at more like a million to two today do all those 500 not pay those bigger contract values yet is that is that what happened there well so you you it would be great if the entire history of the company were on the sas business model right because that's that's how it would translate so if you're making way more revenue than a million or two million did that's just the sas portion well it's the multiple factors it's the history of the enterprise sales so you're only getting the maintenance revenue from from those customers but it's it's the reason why everybody who ever built a sas company or a you know a software company 20 years ago wish they had built it as sas because of course the revenue and valuation today would just be uh completely different yeah yeah let me ask this differently what what what revenue do you think you have to hit to go out and raise a competitive series b uh so this may sound a little uh a little nuts given the economics of how sas businesses work but we we believe we can we can we have a long runway without having to go to a series b are you profitable today we are so how did you reinvest the 5 million cash injection you guys are all still sitting in the bank well we're we're still investing that that's the that's the beauty of having such a strong foundation it's why this made so much sense for us because we take a a great profitable business add the sas extensions to that so the investment's really building out the the platform well i guess that's my point is if you're taking in 5 million of capital that wasn't revenue right it was an investment you're spending it you're gonna be burning capital for a while are you invest but you just told me you're profitable yeah because we because we start with a very nice profitable base that gives us a found a foundation to to run off of so we we have quite a bit of investment scheduled for next year as as we build out the engineering team build out the sales team i think it's one of the core mistakes that that so many founders make which is you raise money and then you do everything at once at the same time and and you think about building an engineering team like one it's really difficult to recruit great people today but but two the the mythical man month issue has never been solved right we're not going to get twice as much product built because we go from 24 in you know a team of 24 to 50. that's just not going to happen so what we're doing is building all of the core platform with a really experienced uh senior team and once we have that then we can more effectively put money to work you might be burning next year at some point as you reinvest in growth once you're ready for it exactly right i see all right bill good stuff let's wrap up with the famous five number one favorite book uh my uh i i was literally just looking at the mythical man month because of this issue so i'm gonna i'm gonna take that as the all time because the mythical man months yes okay number two is there a founder you're following or studying uh to pick to pick one um i don't know let's go to the next question let me try to come up with uh something that seems semi-clever number three what's your favorite online tool for building zebra beside your own well it's i mean it's got to be linkedin uh i mean from uh i i know that that's not at all unique or special but but the fact that that's the lawyer answer that's what i would expect from a lawyer you know well the the but this is what's so great about going after niches is like you can get to exactly who you need right now in an amazingly efficient way yeah no i totally agree you have to if you can define them you're good to go um number four how many hours of sleep to get every night uh eight years every night that's great and what's your situation married single kiddos i'm married four kids wow how are you i'm sorry how old are you 52. 52 last question what's something you wish you knew when you were 20 wouldn't we all love to go back and and apply everything we know now to doing it then i mean my biggest mistake when i was 20 was thinking that i knew it all and not not being willing to accept help yep guys good stuff nq z w gen software for legal firms to manage now they're now newly remote teams did a merger last year which came with the cash injection this was a publicly traded company was essentially a spin out bill is now leading it with his great management team that has deep expertise in legal uh their cause sort of between and flirting with a million dollar run rate hoping to grow up to two million next year as they transition on-prem legal customers to cloud customers 500 customers today they are profitable being patient before reinvesting that five million that came with that merger bill thanks for taking us to the top thank 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 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