How PactSafe CEO Brian Powers grew to $9.6M revenue and 200 customers in 2019.

hello everyone my guest today is brian powers he's the founder and ceo of pact safe a and a licensed attorney brian leads the strategic vision of the company's high velocity contract acceptance platform before founding the company his law practice focused primarily on representing the transactional needs of tech companies brian you ready to take us to the top let's do it all right when you say transactional needs of tech companies explain what that means you're talking like m a or fundraising docs or company formation or what pretty much everything so i help them start up they helped them raise money i wrote their contracts they helped them sell their business so everything but go to court okay so at what point would this friction get like so large or you said you know what i'm gonna hire some contract developer labor try and build something to like solve this pain in-house yeah so it was a specific pain right so a lot of my tech clients you know they were e-commerce and sas businesses that had uh they're doing lots of click wrap agreements so think about i check a box i click a button i'm accepting terms views terms of service whatever they all had these massive contract stacks and pieces of software to manage every other type of contract in their business nothing to manage click wrap agreements so pacsafe was built to do just that right plug in make sure those things were enforceable manageable and at scale what what is a clickwrap agreement click wrap agreement is any agreement where i check a box or i click a button or it takes some action on a website a mobile app a device where i'm accepting some sort of legal terms so you you've accepted plenty of those every day right um when you're just installing an app or buying something online or using a new sas product yep so what you're saying is these things are not legally enforceable you built tech to essentially give them more more teeth make them more enforceable they can be legal enforceable without pacsafe but what we do is help make sure that it's manageable and enforceable at massive scale so a lot of our customers we're doing millions of agreements like that per day right so when we've done almost a billion agreements like that as a as a business already um so it's if you're just talking about one click wrap agreement a day for a very small company not a very difficult thing to manage and prove yeah but when you're working with like you know some of our customers are like the wayfarers and doordashers of the world that are doing millions of these it becomes a very very difficult problem to solve yep okay so how did you structure your business model is it a sas model yep sas model interesting okay so give me a general sense here i'm sure you have hundreds of different customer cohorts but we don't have time to go down all of them i mean what's the average customer going to pay you per month or per year to use this technology yeah well it's it's a pretty wide range right but i would say average deal size for us is about fifty thousand dollars a year okay some of the some of those deals go way way above that and some will go down right so on the very very low end it's about fifteen thousand a year to use pacsafe and then on the very high end you know those customers are paying north of 250 000 a year okay but you think that the 50 grand a year is a fair average it is it is especially for our bread and butter click wrap use case yeah okay so describe that customer to me they sign up for 50 grand a year about how many contracts are they signing per month like how do you in other words how do you price yeah so if we're doing somebody's paying us 50 000 a year they're going to get very simply right that's 15 million and down click grab agreements a year and then from there you know the the larger the business right there's there you pay for more click wrap agreements for us to track um so that's that's in a nutshell that's what fifty thousand dollars gets you about 15 million click wrap agreements a year anything any other value based metrics you upsell against like number of seats or feature-based upselling sure so there's a pretty strong transformational use case for our platform where people want to use click wrap agreements for more than what you would expect to see right so they want to use it for ndas that want to use it for high velocity sales agreements where they need lots of people and seats with the ability to send out some of these agreements instead of having it signed via esignature on a pdf they want people to just click a button to accept um so so that is a significant driver to get you know those larger deals that i mentioned that deal size typically involve lots of seats right that's where the price starts to go up quite a bit okay so would you say upselling based off seats and up selling based off number of arraignment signed per year are your two most effective upsell uh channels yes yes and then um i guess the third one there there are different we call them delivery channels impact safe where you know you can get a contract accepted and by checking in a box you can get it accepted message you can get it accepted inside of a chat bot things like that so the the more you want to have the more options you want for acceptance right that is probably the third cost driver around our platform fees okay interesting put this on a timeline for me so when'd you launch the when would you write the first line of code for the software first line of code was in 2012 2012 okay and now this might be a painful question how much did you spend on the nvp before your first dollar of revenue um not a whole lot and i know those numbers because i self-funded the whole thing i figured it was about seventy thousand dollars oh okay that's not bad actually so how did you do that where was the developer labor was it there in indiana or somewhere else or what yeah it was right here in indiana how did you find them uh just actually some people that i knew from practicing law in the tech world um yeah i mean what'd you tell them like what was that first email to them like hey i have an idea i'm willing to pay you like this kind of amount to get it done or what it sound like yeah that's exactly it you know they uh i gave them a little bit of equity um a tiny bit of equity and uh paid them cash and we built you know what essentially was just a prototype of uh our click wrap api um things have changed a lot since then yeah when you say little you're talking like less than five percent what's that when you say a little bit of equity you're saying like less than five percent oh yeah yeah yeah okay very cool so you get the mvp built and then when was your first dollar of revenue on the product uh probably about a year and a half after that and it but at the time this was just uh it was meant to be a self-serving sas product developer goes in can access the api and they can you know drop a little snippet of code on a website and now hey you have click wrap tracking but uh around 2000 end of 2014 we figured out that this was more of an enterprise type problem and so we stopped being self-service then i went out and found two really smart uh co-founders one was a product guy one was a full stack engineer from salesforce and then we spent the next year building an enterprise-grade product that could solve the same types of problems right but at a much much larger scale yep okay good so you scale you scale now besides yourself i want to know how you got your first 10 customers first 10 customers um so a lot of just hustling with people i know uh which that barely counts we we did a uh um we had really good seo so some inbound interest from blog posts and stuff like that and then uh we launched a uh i think it was called beta list where you know we had like 200 different developers sign up for our beta and some of those turned into customers as well okay on the seo terms you remember like your most effective early seo term the one that brought you the most traffic and signups monthly yeah click wrap best practices that exact that was where our first batch of enterprise interest came in they found a blog post that i wrote that was called was optimized for click wrap best practices yeah that's interesting so is this is this i'm not a lawyer so i don't know is this click wrap term like oh this is a legal phrase people like search their lawyers say do you have click wrap and it's like a term that they know to go search and research it is it is and it's it's it's either called click wrap click through agreement or click to accept um we deal mostly with legal personas so we've zeroed in on the click wrap term but we use all three in our sales and marketing yeah it's about a um you're talking about the one that that katie wrote right back in 20 2017 january uh no this one was before the blog post yeah the click wrap you guys have a good article on cl that's ranked number one right now for click best practices yeah it that might be it might be a recycled one but yeah it was probably that one yeah interesting yeah and maybe you're updating it but no okay it's cool to understand these terms so that was the big term driver for you and then beta list also drove a bunch of these early sign ups that's helpful to understand um so what i want to understand these are your first 10 customers what do you guys have today how many customers you're serving uh just over 200 okay and then walk it sounds like this is very much an enterprise sales motion what's your total team size today team size today is 32 um we'll be 40-ish by the end of the month so growing quite a bit right now yeah well growing expenses hopefully revenue's growing at the same pace right or higher i do much more it is it is we've we've had a good year so far that's good okay of the 32 folks that you currently have what's the breakdown between engineers and quota carrying folks um we're we've been so up until about three or four months ago we were a very very product and engineering heavy companies we had to be our product plugs into very mission critical places so we had to build out a decent sized engineering team um right now we are about 50 50 if you compare product and engineering to sales marketing um sales and marketing right now is growing a lot more than engineering and product what about specifically quota caring folks though quota caring yeah eight oh wow okay that's that's pretty significant so that that's not an easy thing to figure out most of that's new like in the past month okay when did you hire your first quota sales person first quote a sales person we hired about a year and a half ago okay and so how did you put a stake in the ground in terms of how to structure their comp plus you know basically base plus commission you have to set a quota target and things like this how did you put a stake in the ground there yeah well early days um we just kind of did that and just kind of made it up and figured out where we wanted to go um we have a much more sophisticated model now right like we have a very seasoned vp of marketing vp of sales that have been with us for about six months post raising our series a so you know initially the how we came up with quotas um was very very non-scientific very non-formulaic now all that's changed where we have quarterly and annual goals they're all driving our head count our quotas are on boarding all that stuff so assuming that average first year ac is like 50 grand how many like what what do you set quota at for like a first year or second year sales person is it like 500 grand in ar bookings over a year or a million or how do you set that it's it's about that right 500. yeah it's yeah it's about 500 it just depends we have we're still figuring a lot of that out where we look at um you know we've tried to bucket our customer base into enterprise mid-market and smb um with most of the focus being upper end of the mid-market lower end of the enterprise so the way that a quote is determined for any of those quota caring people is a little bit different and we're also still figuring out a lot about our pricing model our sales cycle you know the sales motions are starting to get more regular less lumpy um so you know it's it's much more formulaic but it's still a little bit of you know yeah what's going to work and what's not right you mentioned capital so it sounds like you've raised how much total have you raised to date eight million total uh through two different rounds and and why did you i mean and when was sorry when was the last one last one was about a year a year ago it was a five and a half million dollar series a okay so you're looking at raising right now then uh no no not yet uh probably raise again um sometime this probably this time next year but we've built a pretty efficient model um where we you know we don't raise to hit metrics to raise again we raise to grow a fundamentally sound business and then raise opportunistically so um so yeah but but likely to take advantage of the opportunity um we will probably raise again in about a year uh are you back to about break even now or are you still being aggressive and kind of burning capital right now we're being pretty aggressive um but you know we should be back to break even early next year okay so when you say aggressive i mean i'm comfortable what your number is where you can still sleep at night are you cool with like 50 grand a month burn or 100 a month burn where do you try and keep that at yeah i mean we try to keep it under 150 um and but that all adjusts every month based on what we're forecasting right how many people we've hired we're pretty disciplined about keeping hiring gates down even if our plan calls for adding more heads if we're not achieving where we think we need to be from a cash perspective um but you know i mean because we're venture back now we do have growth goals that that we want to hit in connection with our venture partners so um so you know it's it's it's a it's a healthy balance of uh remaining sustainable with you know incurring the the burn that you need to grow yup and look burn is totally fine especially if you know the product is sticky so let's talk quickly about that before we get more of your story um when you look at the past 12 months and you look at churn what what is your revenue turnover that period of time yeah so we're at about 115 percent net revenue retention which is really good well not back for me though so you have churn and expansion what was churn so we had a like three percent churn 18 expansion that's great yeah i mean i would look i would consider world class to be up in the like 140 range but based off your age and where you're at like when i compare it to the other you know interviews i've done i mean 115 is pretty darn good um how are you dr is most of expansion from what you told me earlier it's again number of signed contracts annually and then again uh feature-based upselling plus the seats pretty much yeah um and most of our most of our expansion has been purely organically we are just now to the point where you know we we have some of our account execs working accounts and strategic accounts you know and getting in to upsell some of those um so we've been pretty lucky in that sense we you know we have a small customer success team that is mostly focused on retention and most of our churn really is we we bucket all of our term by ideal and non-ideal churn you know you close a lot of business early on [Music] where you know you're closing every deal you can't we don't do that anymore so we have um you know there's quite a few use cases that came in that are not ideal for us now so we generally don't churn anybody that is that falls into that ideal churn bucket or right yeah and what are you paying on the front end to get these customers fully weighted is it you know full like 12 month payback period or 18 month payback period where you're at um it's less than 12 months yeah that's good so you're to get a new 50 000 a year account you're spending less than 50 thousand dollars to bring them in right now yeah yeah that's good are you are you generally pushing that up or down uh it's pushing up a little bit right now because we're we're a lot of our sales tactics and the way we're focusing on accounts is more enterprise driven now and to do that you know we're doing a lot of testing experimentation so um so that number is probably going up but uh but the goal is obviously at some point for it to normalize and bring it back down yep that's good okay now 2012 is lawn shipped to 200 customers today you mentioned 50 000 kind of acv on average that would put you at about 800 000 a month right now on revenue is that accurate um no is that is that a re so yeah what i did there's 200 times 4 grand a month right which is a 50 000 acv so so our um that is the average deal size over the past quarter and a half um and where we figured out like those are the deals that we can close and we can we can go through we can compress the sales motion the sales cycle and we can hit deals um at that size very quickly so pricing has been a bit of a struggle for us just because there's nobody else does what we do so coming up with a pricing model you know you have to base it on a mixture of what are the high volume api businesses like a twilio doing versus what are the people in the contract you know e-signature space like the docusigns of the world doing and we come out in a hybrid of that so um you know over the past year we've gathered enough data that we've been able to figure out pricing so um if we're talking any a year from now then the number you just threw out should be right if we if you you'll think you think you'll break 800 grand a year 800 grand a month in about a year from now yeah so if we operate to plan um we would be to that point about beginning of q4 of next year okay that's good and what does that have you doing like tripling you over here or doubling year over year or what that's tripling year over year so we'll we'll we'll end this year right around 3 million and then you know we'll need to just about just about triple that next year that's good and can i ask where you're at today how close to the 3 million are you yeah we're just we're just over 2 million that's great okay i mean that seems like a it doesn't seem like a crate you know a lot of founders they get on here they're going we're going to add like 300 over the next three months and i'm like yeah good luck buddy that seems like a pretty fair a pretty fair growth rate so if you're doing 2 million kind of ar today which is about about 160 000 a month where were you uh exactly a year ago uh a little less than half of that okay good okay good that's i mean that's great growth all right let's uh let's wrap up here brian with the famous five number one what's your favorite business book ooh um i guess one i just read profit from the core number two is there a ceo you're following or studying no number three what's your favorite online tool for building your company ooh slack number four how many hours of sleep we get every night six okay and what's your situation married single kiddos married with two kids 12 and 10 year old girls you're busy and how old are you i'm 44 44. last question what do you wish your 20 year old self knew um 20 year old self uh people of a process guys there you have it pacsafe uh built it for himself internally to help make click wraps more essentially easy to understand and manage they're doing about two million bucks in ar today hoping to be about 8 million bucks or 800 000 a month in about uh call it 16 to 18 months from now they're up from 80 grand a month a year ago so doubling year over year healthy economics about 8 million raised as they look to continue to scale pact safe again a high velocity contract acceptance platform brian thanks for taking us to the top thank you