How Pitchly CEO Ryan Gerhardy grew to $3M revenue and 30 customers in 2024.

hello everybody my guest today is ryan gerhardt he runs a business database solution platform mainly because they're broken he co-founded his company pitchly to solve this problem as the ceo he draws from tens of years of investment banking and venture capital experience to scale the business data platform of the future he saw firsthand the lack of trusted technologies to make the information within a corporation accessible and useful to employees and founded pitchly to be the ultimate single source of truth for business ryan you ready to take us to the top yes i am all right so break this down a little bit for me your xvc when you say business data what exactly do you mean yeah so information that employees want to use in their job that they currently don't have access to like what give me an example so for instance they might want to know the administration team might want to know what services they provided a client or they might want better access to statement of work information that they don't have because they don't have a salesforce subscription or they don't have access to the file server that it's stored in so it's really kind of giving access to those employees that don't have information like that that's our purpose so are you essentially storing all like all these documents and email threads and google drive files and salesforce leads and making them all searchable for the entire employee base yeah so we aggregate digital data sources so like you mentioned excel you can upload excel and create a base in our product and then have that and then you can connect an sql database or salesforce integration or postgres database or etc and then create this web of tabular data that then if certain employees with permissions can access okay um walk me through uh walk me through pricing i assume you're a pure place sas what do people pay on average per month yeah so we had some so we launched the product in a beta or an earlier early access program in 2017 and then really launched in june 2018 so historically customers pay about a thousand dollars a month for our service um in from that discounted period uh going forward kind of since june 2018 we're looking at about twenty thousand a year so about fifteen hundred sixteen hundred a month okay 2018 was launch date officially yeah june 2018 we rely on the public product so we were testing a very close set of customers and limited configuration but then june 2018 we launched kind of a scalable product okay and how many customers have you scaled to today yeah so we have um about well less than 30 i should probably say to be accurate um yeah so can i i mean can i take the 30 times a thousand you're doing north of 30 grand a month right now it's approximately right um once you exclude the discounts yeah yep okay what do you mean once i exclude the discounts yeah so when we signed contracts to the early access to get some of the big logos we got um we provided so a three-year contract and provided discounts year one maybe year two but then year three they started to roll off that so we're starting to see the benefit of that now i see so that'll increase over you it's almost like how when someone pays rent and they're assigned a three year lease there's a natural accelerator built in right except you do it in the form of a discount so so what are you actually doing per month right now like 20 grand something like that yeah about that okay 20 grand and what does growth look like so if i go back a year ago were you doing none per month at that point a year ago we were doing not none um but less more than none but less than 20. okay but like i mean i'm talking like a grand a month 10 grand a month yeah so in our customers from 2017 grew at about four and a half times okay so about five grand yeah interesting is so when you say your customers grew do you basically have the same customer card you had a year ago and you just up sold them a bunch or have you added new logos we've added new logos as well um but like kind of our expansion revenue if you will um grew about 300 with that interesting okay i want to talk more about how you draw that expansion revenue but first you know everyone getting their first client is the hardest walk me through how you put together this initial test group and then how you convince them to go from hey you're my friend you're using it because you like me okay now pay me a grand a month yeah it was actually it wasn't with friends so i was doing it part-time while in venture capital which you mentioned earlier and so it was very much kind of building a product that people wanted people want something to automate document creation from data that they have and it took us about 18 months to figure out the problem was much bigger we started with an early product for investment banks that's what i knew very well i see um we started with the creation of investment banking tombstones if you've ever seen them where you put them in a powerpoint document and you show a prospect nathan i know how to sell your business because i've sold 10 like it and here's an example of those tombstones interesting okay all right so so that makes sense but so the vc firm that you are inside of that was one of your first kind of trial accounts along with some banking customers they worked with uh no so none of the vc not the vc and not their customers so there were customers that found our landing pages and found our material um that became our test customers so they weren't relationships of mine um it was really only in the last six months that i've started you know i went full time in june 2018 with pitchley and so it was really since that time um we started using relationships and a bigger approach with our public product okay interesting all right and then and then how did you go from initial test group you can write a bunch of them how are you adding customers today what's the growth channel look like yeah so i founded the company kind of in early 2014 after leaving corporate finance at grant thornton and banks and accounting firms as you mentioned um and i know that our user base spent a lot of time on linkedin and so linkedin was our primary method of kind of attracting a customer um it's relatively expensive compared to other channels but it spoke to the exact titles the industries the people that had the problem that i solved while i was at grant thornton deloitte and commonwealth bank so it was a nice uh easy way to generate some early traction ryan go deeper there for me so what would you search on linkedin to find these people literally literally would you type in the search bar yeah so we would actually create kind of sponsored posts so we'd create a post saying use pixley to aggregate data to produce powerpoint documents and so we would create a sponsored post with a nice gif showing how easy we can make it and then we would search targets based in the us uk australia with titles of business development analyst associate vice president in the investment banking law firm's accounting firm so very kind of focused uh which was about half a million individuals in those three markets and so we would really target those and um actually got a lot of good traction with that so what would you spend then i love this approach so just be clear you posted just a regular post on linkedin with a nice gif you know he creates your pitch checks easy you then sponsor that with targeting being us uk with titles of bd vp and in the sectors of law firms investment making accounting there's about 500 000 that fit this kind of account based marketing approach when you sponsored that post what did you what i mean what did you spend would you say to get a new customer via that post yeah so we spent about for each dollar we spent we got about thirty dollars in pipeline um and that's really because it was about ninety dollars to get to a demo if you will yeah and then about one in three demos would lead to a real opportunity created at that point and so this was really in early 2018 we were doing a lot of this okay um and then so we raised money um in june or in july 2018 to kind of scale this approach so how much total have you raised uh so a little over a million we've raised total okay and why'd you so let me ask you because you know the investing kind of space well you were a vc did you do that from a traditional vc or angels or venture debt yeah i i've had this question a few times and i know um nathan you like to hear bootstrap so i'm interested to debate with you do you listen you listen to the show yeah absolutely good wait hold on let me i gotta i wanna hear real quick why do you listen to the show i just like that you get to the real numbers and you challenge the entrepreneurs and they're great stories okay so let's so let's go in why the hell do you raise a million bucks well i think someone actually asked me on the street in des moines knowing that i was from venture capitals he's been bootstrapping for three years why are you raising and i said i think i'm i think i'll be good at it and i think i know how to leverage um the vcs i have in my roller decks now you know i know how how they want to work for their companies but a lot of startups are kind of scared to leverage them um so i put my vcs to the test and they do my dashboard and they help me review slides and contracts and employees and all sorts of things so so what was the form factor was like a safe or not or what or priced uh so we did a price and we've opened up an extension note round as well so we've got a note round going on now really interesting usually you hear that the opposite way usually it's a note and then you do a priced how do you when the evaluation is already set via the price round how do you decide what cap to put the note at well so the note was really to take advantage of the we kind of released a new website pitchley.com has our new properties on it and it speaks to a much bigger audience than our current website of pitchly.net um and one of the reasons for the note was we won some very large pilot opportunities and saw a way to invest further in the product um and so that was it wasn't by any design of it i think it's also the midwest attitude and the midwest is more conservative a price ground helps um we got three vcs in that round um and then a subsequent vc and a note to help support that would you price it at though i mean when you're so early it's so difficult i mean you you undercut yourself a little bit what'd you price it out early on yeah and it's it really is an art and not a science so we haven't released the pricing but it's it's a pretty typical seed round um you know you're selling between 15 and 25 percent of your company for about that million bucks okay so you're talking like four or five pre-rep pre-money million yeah yeah yeah and interesting okay and then the convertible note um you've opened that up how much do you want to raise on the note uh so we've got it open for about a million um we've raised about a third of that in the last six weeks um and so we're chasing that down now and so it's a nice to have um it's something that lets us hire a little bit earlier and get some more engineers in um we're seeing a big demand to build out our enterprise suite of allowing so we release developer tools in 2018 so that our larger customers could actually build custom applications using the data in our product and the reason they do that is we've got a normalized data set with user permissions already engaged we've got a normalized structure of data so it makes it really easy to work with and we're trying to test if we can save 50 or 60 of the time taken historically to build a custom enterprise application by building on pitchly and by connecting data sources to us and so let me ask another question so both both things you've done so far in terms of raising capital are dilutive these you know you know price drawn dilutive now and then convert convertible dilutive later why not go like the venture debt route we didn't really venture debt's tricky there's kind of a minimum price to pay for that um and you can you can raise about 25 percent of your ar in venture debt roughly thereabouts um and it wasn't going to move the needle it was an option um but the other benefit of bringing vcs in they have a lot of contacts that they've helped us connect with to get customers a lot of employees and different options that they bring so i think it is a calculated risk you know we're looking at getting the money in to grow grow a bit quicker and get on that growth growth curve that we need to to sustain vc would you consider on the back of like let's say you raise it you did the million let's say you raise another million when the note would you consider then going out and raising another let's say you're doing 30 grand a month times four right so would you go out and raise another 120 on venture debt just to have it or no it's not worth your time we might look at that towards the end of this year um at that stage it gets attractive yes um what stage at about that kind of 150 adventure debt plus yeah yeah i think i think that would make sense interesting okay obviously you're burning cash today i imagine right because you've raised so much okay how aggressive are you being like are you burning 100 a month ten grand a month yeah so we were we were profitable until we raised the money um and it was again as a calculator risk and most of our spend is in paid acquisition and it's a variable in that regard so we can dial it up and down we're trying to break into profitability probably the first quarter of 2020 at the current rate and that's by adding a few more heads as well we've got about 10 employees now we want to add a few more this year in 2019. okay um and then reached that kind of break-even point um in early 2020 so totally understand that it's variable marketing and you can totally control this but you're being aggressive right now what are you burning per month yeah so it varies based on what channels we're using and what the expense are but it's anywhere between um about 40 to 60 a month cool that's helpful to understand considering kind of the route the ratio of what you've raised to what you're burning and especially if it's variable it's totally totally you can turn on and off if you need to so i get it uh ten people today are you guys remote uh no so we have an office here in des moines iowa which is where i'm sitting we have one employee in kansas city and one in europe um but the other eight of us are here and we also have a few contractors as well so in that burn number again it's it's varying based on some marketing contractors for instance um so things that we can turn up and down or business development reps in the sales team so that can set appointments and then talk to me about churn today yeah so we've been um about 12 percent a year or less than one percent a month um is our current gross dollar churn logo turns not really valuable at this point yeah dollar turn less than one percent um and then we've grown that base substantially as i mentioned before so that cohort it's turning twelve percent in terms of dollars but how many dollars is that same court adding each year yeah so they're adding about five dollars for every one dollar that's what they added in 2018 so we expect that to kind of reduce so what is that like 30 expansion 40 expansion it's like 430 percent so i think the our customer base grew 4.7 times from 2017 year end to 2018 years just to be clear but you're not including new customer additions you're only including revenue increases from old customers correct yep okay but that's that's obviously not sustainable though right correct yeah that's necessary yeah yeah interesting okay and then do you have a fully weighted cac at this point i know you gave me the numbers earlier i think you said it cost you about what 270 dollars for a real opportunity one in three demos leads an opportunity it's 90 bucks a demo yeah so we've got so i do have a kind of our fully weighted cac is about 17 000 a new customer added last year um and we charge about i think 2019 is about 20 grand on average arr per new customer 12 month payback yeah yeah that's right that's the target and where besides like linkedin sponsored posts are you spending at 17 grand uh so it's in head count so it's about half half half head count and half um paid spend but also events we spend events on linkedin mostly in 2018 2019 we're trying a lot of different channels um because we've got more aggressive growth assumptions and we're looking more into communities and different avenues like podcasts for instance yeah and things like that yeah well this is good by the way you know we charged 20 grand uh per month minimum of three months for sponsorship so consider this a great use of 20 minutes of your time right yeah there you go but organic placement is way way better all right let's uh let's wrap up here ryan with the famous five number one what's your favorite business book so i haven't heard this one mentioned before built to sell i think it's a great read number two is there a ceo you're following or studying yeah we kind of follow aaron levy pretty closely because he's building the platform for business like we're building a platform for business compared to dropbox which is building for individuals and prosumers and we think airtable is doing the same so we like aaron number three what's your favorite online tool for building the company uh so i in with my finance background i spent a lot of time in sas optics but my sales team spends a lot of time in gong which is a really good tool okay sas optics and gong how do you use sas optics i never really understand exactly what they do is it like a service or is there a piece of software there yeah it's a sas product where you connect it with quickbooks and connect it to your bank account and it automates invoicing and revenue recognition uh for sas products so it's like they you almost use them so you don't have to spend money on a cfo exactly right yeah interesting interesting and what do you pay what's that like right like a thousand bucks a month something like that on it's less than that i think it's um about four or five hundred a month you can get the one of the best things about is the avalera add-in where you can put tax on your invoices for different states because that's a pain in the butt for sas companies what's it called uh avalera is the add-in through sas optics um so avalara says like in boston you charge eight percent sales tax in new york it's 9.25 but in um iowa it's less interesting all right number four how many hours of sleep to get every night try to get eight and what's your situation married single kiddos uh married with two little kids a two and a half year old and one year old and how old are you i am 32. 32. last question ryan what was your 20 year old self knew uh 20 years um i would say start coding and that was the year i met my wife so mario quicker start coding guys launched pitchly back in 2014 really got it going though in 2014 uh now servicing a lot of different businesses but ultimately helping them build a database that employees actually use to access this information quicker it's got about 30 customers paying a grand a month some of them were discounted early on so doing actually about 20 grand per month right now in revenue that's up from five grand a month just a year ago so healthy growth they raised about a million bucks priced round at four or five million pre-money now raising another million on a convertible note they're burning about 40 grand per month in cash right now all variable expenses though team of 10 between iowa and remote locations 12 gross dollar churn annually in terms of growth they're spending about 17 grand to get a new customer that pays them 20 grand a year so less than 12 month payback a lot of that happening through sponsored posts on linkedin with a nice channel set up ryan thanks for taking us to the top thanks nathan