How Physna CEO Paul Powers grew Physna to $9.8M revenue and 30 customers in 2024.

hello everybody my guest today is paul powers he's a forbes 30 under 30 award winner successful serial entrepreneur in b2b technology development and sas companies he's got a law degree from the university of heidelberg in germany and a member of the national small business association's leadership council now working on a company called fizna in the cad search engine space paul are you ready to the top all right thank you you bet all right what is a cad search engine what's that mean so fizna is best thought of as like an auto fill for 3d design so if you're in the process of designing something fizma will try to guess what you're designing and search throughout your database um be it through cad or plm or whatever you use to see if you've designed something similar to that in the past so you don't design things from scratch interesting this is kind of like when people use gmail and gmail auto completes your emails when you're typing kind of the same thing absolutely interesting very interesting okay uh walk me through the business model how do you make money sure so we're a sas platform so the way that we work is that you know we work with engineers and manufacturers they pay us an annual subscription fee to use the software typically fsn is either used as an integration into whatever cad software plm software they're using but you can also use it as standalone and we keep it real simple we don't care if it's used on the cloud or if it's an on-prem server that they're using it's always the same fee all the same arrangement so they pay a one-time fee or we have an annual fee per user per year okay and and help me get a sense on average what's the company going to pay you per year to get access to this it really depends on how many people they have so to put it into perspective um we did some uh some studies on what what we were saving the average customer we saved the average customer um thirty seven thousand four hundred and forty dollars per user per year that they're with us um but the average cost per user is gonna be twenty five hundred so it's a fifteen to one ratio of savings to costs okay and how i guess what i'm what i'm really asking is when an org signs up typically how many seats are they signing up with are these is this for teams of three or 300 oh it's all over the place so we have people signing up for you know a couple licenses they're companies that have 30 000 engineers and there are lots of them that we're seeing that have maybe anywhere between 50 and 500 i would say it seems to be the average number but you know it really does scale okay you said 50 to 500 might be a good average i would say that's probably the average size that we talked to yeah okay fair enough good so i want to make sure i got this right so so if you have a team of if i'm if i'm running a team of 50 right now right let's say it's an architecture firm and i sign up for you it's going to be 2500 bucks per user per year correct okay so about 125 grand for the year right okay very good if you look at how much you'd save you'll be savings no no by the way i'm not shocked by that number i get i get i listen i was architect major in in college so i get it i mean there were so many times where i was copying and pasting like groups of lines and symbols i mean i totally get what you're building it makes perfect sense to me um put this on a timeline for me when'd you launch the company what year 2015. 2015. and i mean where were you were you an engine on the engineering side or the architecture side how'd you get the idea i had i was on the the nothing side i was on the legal side i have a law degree from germany my focus is in intellectual property law and i was writing a dissertation about what's the biggest problem we're going to have with technology in an ip law and the answer was 3d you know we had we went through this with the last test but we kind of adjusted the market adjusted we have itunes we have netflix uh when it comes to 3d the problem is that uh no one can really protect intellectual property so we thought okay we can't just track a file down we have to actually know what a file is of what it's similar to what's in it etc so we have to actually understand what 3d models are and we looked at all the technology that was available and we realized uh bless you uh we realized we realized that nothing was actually built to understand 3d from a 3d perspective everything was just a 2d technology like point cloud or whatever trying to understand 3d so we actually created something that would identify ip theft and then we brought it to market 2016 we showed it to a bunch of companies and they came back saying well that's great and all but my god we could use this in engineering we've used this and seeing if we can manufacture something because it's all pattern recognition basically exactly yeah really interesting okay so how many how many users have you scaled to today how many folks using it that's a great question so uh there are quite a few licenses out there being used and the reason it's hard for me to put an exact number on is because we have some institutional agreements with like uh fizna the us based on rocket center nasa spacecam and you know in that the latter's case they have um you know 300 000 people a year coming through who have access to it so i don't know how many people are actually utilizing at any given time in the case of purdue they have 1400 people who can uh use it at any given time too so it's hard to say how many are actually using it any one time i could look it up but maybe okay let's do a simple i was gonna say let's do a simpler number how many organizations not seats but how many organizations are using the tool that's a good question so i would say uh right now we're probably talking around uh if you add between the non-gover governmental and the governmental and the testers versus the actual customers rolling around uh 50. we ruled this out around why do you say only by the way that's totally respectable for an enterprise kind of company well i say only because we started uh selling it about a month or two ago actively we didn't have a sales force two months ago okay okay we got it so we just added one on so the numbers aren't as exactly where i think they'll be in about a couple of months in january february we're expecting to start to see a lot of scaling yeah well i mean if i take 50 organizations and then you just told us a second ago if we assume the lower side of your average of 50 seats at 2 500 bucks a month i mean or 2500 bucks a year i mean that would put you right now i think at what like a 500 grand a month run rate something like that is that accurate well most of those companies i included were ones that were using the or uh they're using fisma some of them are testers like purdue and nasa and stuff we've said okay instead of you paying us we wanted active feedback you know from these people tell us what are your users experiencing what would you like to see differently you know let's have a lot of dialogue going on and we decided not to charge them so you know i see yeah so the paying customers there's uh earl and maybe a third or under a third of that okay and um yeah so i would say that next year our goal for next year is to add on probably about i would think we'd get to maybe another 100 to 200 paying customers that's great so a third of 50 we'll call maybe 15 or something i've converted from free to paid is that accurate sure and i mean is that the model you kind of give them a free usage get them addicted and then they have to pay and if so like what's the what's creates the forcing function to move them from free to paid uh we don't typically go free to paid with companies we do that um those were these are earlier uh deals that we had signed up or alliances that we have formed essentially with these companies who had unique perspective into the software with larger companies sometimes we'll do a trial or they'll be able to try it out for you know 30 days maybe even 60 days or something with some users and see make sure that it does what we say it's going to do and it does but typically um you know it's it is a pay-to-play thing you do pay for receipts um but we have demos we're willing to let people play around with it and make sure that you know it really does have the effect that they think it will that's great that's great okay so i mean 15 instead of 50. that would put your your monthly recurring somewhere closer like 150 grand a month is that is that more directionally correct well we're looking it's not 2500 a month that's 2500 a year um that we charge our users and we have um so the best number for me to give you is going to be that is the 2019 numbers uh because those are pretty well i think we're pretty uh exact with what we're going to have next year we should be at least at about five million uh recruiting annual revenue um by the end of 2019. and how much growth would you have to drive to actually hit that though what are you at today uh we would have to go uh well some of our some of that's from customers converting from non-paying to paying right totally it's kind of hard to figure that out you know i'm talking i'm talking i'm talking just i totally get that i'm talking yeah yeah i'm talking like double triple uh i mean that's probably four x or more okay we'd have now yeah got it well five million run rate is about 400 grand a month so i mean i mean have you guys broken a million yet in arr are you flirting with it uh we have not broken it as far as it actually received in the bank i see i see so a lot of the stuff is uh it takes place later it's a little bit further out right yeah you've got pipeline yeah right makes good sense let's um let's move on to some other some other questions here about the company so team talk to me about your team how many folks today where's everyone based we have 15 people they're all in cincinnati ohio um they uh the majority of them are on the tech side um we have a team of i guess come to be eight um including our cto did you say 15 paul 15 yeah okay one five not five oh yeah one to five one five and oh and everyone's in ohio that's great yeah everyone's actually here in the office that's that's great how have you capitalized the business boots dropped or raised we raised that's oh we started off kind of a semi bootstrap at the beginning where it was kind of an experiment but then we raised a little bit then when the technology started working we started we raised money and we've actually raised about two million dollars today um all of that's been with high net worth individuals who are you know just privately invested together how did you get connected to them is there just a strong kind of angel network there in ohio uh i wouldn't say this ohio is necessarily any stronger or weaker than the average state what it is is that you know you meet somebody they they really like it they invest and they talk to their friends who um you know co-invest with them on other things and then they talk to their friends and it kind of naturally grows naturally as long as your company is you know doing well and picking up traction um that can happen that's kind of what we've been going through also a lot of the investors have reinvested yeah that's great okay good so 2 million race date 15 in ohio um hoping to get to 5 million are by the end of next year somewhere a little less than a million bucks right now at least you have vision to that what did you grow at over the past 12 months so where were you exactly a year ago so up until um end of august this year um we were primarily focused on proving out all the different uh software applications because we had switched from ip protection to engineering so we had all these companies switch over test it test it make sure we can integrate it and then also we were going through with some very very large companies some of the largest companies in aerospace uh et cetera manufacturing uh medical devices and whatnot we're working with them on you know proving out the concept going through one layer at a time and working our way up to like the c level in each of those companies and so to do that we said we were primarily focused on not adding on too many small those come smaller customers at the time because our concern was uh since we were so small our support staff was our development staff and so he said let's think long term here so we didn't uh we wouldn't allow any more we kind of cut we kind of kept the lead list quiet we kind of said we're not going to be trying to actively sell too many of these people until after that happens and then after uh august and september we start we said okay now we can open up the channels now we can actually start to have the sales happen and so we started recruiting for our sales team so sorry is that so well does that all translate to it was zero revenue per month a year ago yeah pretty much i mean there's no actual revenue yeah that's great and and so landing the first 15 customers you've talked a little bit about how you've run some pilots and how it's kind of manufacturing stuff talk me through how you got the first paying customer what channel did you use direct sales so we met with typically the way that we get leads is that we actually meet with people at um events or they hear about us online um they read about us on the paper or something so which event did your first customer where'd you meet them that would have been out of an uh an event up in chicago an imts event interesting imts event imts in chicago um and walk me through that how that happened did you have a sponsor booth or how did you get the connection going we did so we actually paid money for it to have a booth there set up um and you know being a new company with new technology that's not really paralleled by anything else they weren't even sure where to put us so they kind of put us in the wrong aisle but that ended up working out okay too we met a lot of people uh we got a lot of leads out of it and um some people you know the smaller companies are really a lot easier to work with they're faster than the larger ones right so the large companies we've been selling to them for months and we're still going through that process the small companies they can turn around say hey let's do this so we so in exchange we kind of cut them a little bit of slack and some of them who started off really early they got a little bit of a deal i mean a little bit less but now things are starting to normalize and are you burning capital or profitable no no we're definitely burning yeah yeah that's what i figured considering you've raised and you're trying to drive some growth um insurance critical in a sas business have you lost any customers and if so kind of what's your annual revenue turn would you say uh well since what's so new of the you know the actual sales side of our business we have luckily you know knock on wood not lost any customers um but has anyone downgraded they paid a grand a month and went down to 500 a month uh not to my knowledge no that's not happening okay that's great um yeah i would say it's probably too early to look at most of that stuff but even even right you don't even have a good sense of cac this early do you uh no i think i think it's really hard to make any i mean i could guess that a lot of things but i don't feel like it's really helpful yeah i know i agree okay very good paul let's wrap up here with the fame oh wait actually before we wrap up i mean have you looked it was all the 2 million been equity yes have you looked at you know using like venture debt so that you don't have to keep taking dilution we've looked at it um you know we've kind of this is a great debate we've been going back and forth on this entire entire time do we do it now or do we keep on going with equity um you know with the people being uh high net worth individuals who are investing we've kind of chosen to kind of keep it simple and uh equity seemed to be the simplest option um it's a straight-up common uh stock yeah but it's still it's still i mean of course yeah i totally get that it's dilutive yeah that's something it's a trade-off it's got you know there are pros and cons of both sides so this just ended up being the way that we'd ended up going where is there is there a point in time where you feel like it would make good sense for you to use venture debt or what do you not like about it yeah i think what we're going to do is uh probably look at doing that for the next round so we've finished up everything that we would consider seed this two million and then now we're looking probably doing a larger raise around may um that'll be more of a series a type race and for that we are considering doing it yeah that's interesting um okay yeah yeah very good let's wrap up with the famous five number one what's your favorite business book that's a great question uh i actually would say that one of my favorite books is the happiness advantage i think it's a great book to read yeah number two is there a ceo you're following are studying right now uh i that's a good question there are a lot of ceos that i follow on linkedin the one i've read a lot from bill gates i think he's a great person to model a lot of the practices after so i've read some stuff from him and i've been kind of trying to incorporate that into my work schedule number three what's your favorite online tool for building the company it's a great question uh i would say uh right now my one of my favorite tools is actually trello uh which is kind of funny because it's not one that we pay for um it's just uh it makes it really easy to know what everyone's up to and where things are the process simplifies things a bit for me number four how many hours of sleep are you getting every night um that varies quite a bit um i would say i probably average around six maybe five to six okay and situation paul married single kids i've been dating my girlfriend for eight and a half years so we might as well be married wow yeah not marriage so no kids no kids and how old are you i'm 29 29 last question what do you wish your 20 year old self knew my 20 year old self [Music] ah that's a great question what did i um i guess if i knew more about how the markets were going to perform in the future and what things i should focus on more but i really can't look back and say i wish i had known that back then i kind of feel like um i'm kind of glad that i made all the mistakes that i made in my life because i think that's kind of what helped me get where i am right now so i wouldn't go back and try to prevent them guys fizzna launched 2015 making architects engineers anyone using cat their life simpler started off trying to make sure and trying to prevent essentially copyright uh or fraud or you know ip protection essentially now in a much different space 15 enterprise customers doing about you call pushing a million bucks per month or per year sorry in revenue up from nothing a year ago they've just really pivoted to this space they are burning capital they raised about two million bucks a date 15 people in ohio as paul looks to scale the company paul thanks for taking us to the top thank you nice talking to you