Proposify Revenue & Funding (2024)

[00:00] Kyle has built proposed by up to $8,000,000 in ARR. He's gonna dive into how he's done it, tactics that work, tactics that didn't over the next twenty minutes. Please tell me, welcome to the stage, Kyle Racky. [00:14] >> Hey, [00:20] >> everyone. It's been so inspiring to hear all these great stories from founders who grew from 0 to a 100,000,000 in, you know, two years, five years, ten years. I'm gonna share a story that's a little bit different than maybe some other ones that we heard because I'm gonna be very raw and vulnerable and share a lot of my fuck ups. And hopefully, you'll if if you're before you know, if you're pre 8,000,000 revenue, you can avoid [00:45] >> some of these pitfalls, and I think some of these can still happen even when you're a little bit further along. So to to kinda set it off, I wanna start with a story about two years ago. It was the fall of twenty twenty two. I was in a state now for a couple of years where I was really checked out of my business. I was really bored. I was frustrated. Things weren't going terribly well. Our rate [01:07] >> of growth had been declining year after year. And when the SaaS market changed around 2022 is when we actually started to decline for the first time really since we found product market fit. And I had been going through this M and A process where we hired an M and A banker and had strategics and PE firms lined up to to sell the company because I was just trying to offload it. I was trying to hit the [01:28] >> escape hatch and get out while the while the getting was good. But everything kind of happened around the same time. The SaaS market kind of crashed in 2022. Investors and acquirers started getting nervous, and suddenly I had this, you know, what was this big list of potential acquirers all pull out, not get a single LOI from anyone. And it was at that moment where I I really didn't know what to do, and and I was in [01:54] >> front of my board when they asked me, like, Kyle, do you have the the stomach to keep going? I shed a tear for the first time in front of them and said, I don't you know, I think so. I don't know. But how did I get here? And that's really what I wanna share with people today is some mistakes you can recover from pretty quickly and other ones can you may not even feel the effects of [02:13] >> them for a long time. How did we get here? So when Proposify got off the ground, it was around 2014. We started finding product market fit. We started to scale. Things were really fun. You know, it was a kind of a new and emerging space, proposal software, online proposals, interactive quotes, e signatures, that kind of thing. And we were one of the first, like, SMB players in the market who were doing what we were doing with [02:37] >> these highly visual interactive proposals. And then, you know, people entered the space, PandaDoc, Quiller, and some other ones. But, you know, for a time, we were really leading in our category, and, you know, it was at that time growth really felt easy. We were selling to digital marketing agencies. We were very niche down in that, in that market and had a very strong PLG motion self serve trials that was going really well. So around 2018, my [03:06] >> co founder and I closed our first round of actual major investment capital. We take 1,000,000 each in secondaries, put 3,000,000 on the balance sheet. It was it was a really fun time. And I think what we started to do was we made the mistake that I think a lot of founders have made once they raise money, which is they try to grow too quickly. They feel this real or perceived pressure to hire headcount and scale and [03:34] >> build a sales team and go after the enterprise. And we completely fell into that trap. So, you know, we hired enough people that we were eventually around 100 people or so and for, you know, at the time, I think only a 5 or $6,000,000 business. We went after the mid market before we really were ready. We didn't even really know what they wanted, and I'm going to share what started to work there. But I think one [04:00] >> of the biggest issues that we had was the speed at which we moved in the early days to build features and ship started to it started to slow down. We started to kind of buckle under the weight of technical debt and legacy that I didn't have an experienced engineering leader who really knew how to scale us past that. [04:21] >> But I'll get there. I'll get back there in a second. What I want to share here is, you know, what started to work for us as we moved up market because we had the problem that a lot of companies have. I think we talked, you know, heard Adam Robinson earlier say talking about the 10 churn. You know, we didn't have churn that was that bad, but as with all self serve, you know, small businesses, free trial [04:42] >> motion, churn starts to eat away at your growth overall, right? Even if you're at a two or 3%, you really want to get that down low, but it's tough when they're small businesses and it's a low price point. So when we started to experiment with building a sales team and having going after larger businesses, we I made also the mistake of basically just like hire a team and a VP of sales to figure it out instead [05:05] >> of trying to learn that myself and try to sell deals myself. But after a few false starts, what started to work for us is, you know, we realized that the product had to change significantly. So larger businesses were mostly interested in like, how does it integrate with Salesforce and do you have SSO and what's your security policy? We we had to check a lot of boxes in order to win deals, and it took us a while [05:30] >> to get there. The other big thing was our positioning. You know, we heard, Eric talk about that in terms of Pendo, like how they'd position against competitors, And what we realized was that the customers who bought Proposify to send beautiful proposals and get faster sign off, that messaging didn't really resonate with the mid market because they're like, we have cool PowerPoint decks, like we know how to send proposals. What they really wanted was control. Right? Sales [05:56] >> reps using the wrong materials, sending out proposals with mistakes, the management team not really having any visibility into what's going out the door and getting in prospects'hands, that's what they were buying. And so once we shifted our positioning to that, sales became a lot easier. And then the the third really big thing was pricing. So we did, again, the classic startup mistake of like, put everything on the enterprise plan, give it all away. And so [06:20] >> we were just capping our ability to sell larger deals. Once we were, you know, moved to a per seat price, that also became easier and we went from, you know, being able to sell at most a $3,000 a year ACV contract up to now where we have a couple in the 6 figure range, but average would be more ten, twenty, 30 k deals. So that started to help us. And when you look at this graph, what [06:43] >> you notice is this is the black lines, the total ARR growth of the company. The orange was the small self-service segment, which grew and was, you know, the majority of the revenue for a long time, but then that started to decline and the, you know, the other graph ended up being like stuff that came through the sales team. The mid market deals started to almost reach the same amount in terms of ratio of revenue. [07:10] >> But you know, what was happening was because we raised, we didn't raise a massive amount, but we raised enough and we deployed it too quickly. We were at a point where we were just burning a lot of cash, but still not growing fast enough. We weren't moving quick enough from a product perspective and there was just friction between every department, like sales was pissed that engineering wasn't delivering things faster and customer success were frustrated with products. [07:35] >> There was a lot of internal friction happening. [07:40] >> As I mentioned, our growth was pretty good during the early days, but really we noticed the rate of growth started to decline and we got to the point where because we weren't moving fast enough on product to stay competitive, you know, Nathan said just before this, it's a competitive space contracts. We didn't feel the effects of it right away, but we were starting to feel this this compounding of really not changing our product a whole lot. [08:10] >> You know, we were sort of in this game of like whack a mole where, you know, you we were just in maintenance mode. The engineers were just keeping the lights on, but we weren't innovating anymore. There was no quick way to fix this for for a number of reasons. [08:24] >> It felt like the more people we added to the company, the slower we got, and I think we were acting a lot more like a big company than we actually were. Right? We had too many layers of management. We had managers with like one or two reports. Like, we we were just buckling under the weight for how small we still were. And so this is the burn chart where you see in 2021, we raised our that [08:47] >> was the last time we raised a round of investment and we were just like, okay, let's let's add more people to the company because that's how we're going to move faster. And you can see at one point, we were actually burning 400 k a month, which, you know, it depends on your size. Right? That might not seem a lot if you're a 100,000,000 ARR, but if you're under 10,000,000, that's a lot of money to be burning. [09:06] >> You know, the other thing that happened here with with growing headcount too quickly was really like the organizational debt. We talk about technical debt, but organizational debt, cultural debt starts to build when you're not winning and there's all of this misalignment between departments. And what we realized was like our values weren't really serving us anymore. The values that worked in the beginning were, you know, people were reluctant to have tough conversations. People didn't like to hear [09:32] >> the word performance or accountability. Right? It was kind of an overly positive culture where people got used to losing. Right? And so we wanted to fix that. [09:45] >> Finally, in 2022, so, you know, around this time, actually in 2021, I brought on a COO and CFO, Kathy, who's who's really amazing, and she kind of looked at what we were doing. We had this huge burn rate. She looked at the growth and she's like, you're running off a cliff. Like, you're gonna be dead in nine months if you don't change something. Had to make one of the toughest calls, but also one of the easiest [10:08] >> and most logical calls, which was we had to reduce head count quite substantially. So January 2022 is when I had to cut a quarter of our staff and announce that. And obviously this helped us, you know, longer term just be able to survive and keep cash in the company. But what it also started to do was serve as an organizational shift, if you will. You know, we obviously had less people, so we had to do more [10:35] >> with less, but it also meant that people who didn't wanna who weren't on board with that approach, we're gonna move on and we weren't gonna backfill them. And managers moved on. We, you know, we didn't we weren't quick to fill seats because we knew that we wanted to get to break even cash flow and eventually profitability, but we we had to fix a lot in the company first. So we introduced new values. You know, that's easy [11:01] >> to say on paper, very hard in practice to model them and actually change behavior within an organization, but we started to get back to our scrappiness that we had at the beginning. Now fixing the product was still very difficult and we still had a lot of technical debt. And really our engineers had gotten into this state where, you know, it was so hard to change things in the product that, you know, you'd spin your wheels for [11:25] >> a few cycles, come out with not really a working solution, and just move on to the next thing because you did like, I don't want to invest any more in this. So we had to get out of that. [11:35] >> But this is where we get to the point where I started at the beginning, which was at this point, I was so checked out, you know, and I was so demoralized that I just started to kind of, you know, get interested in other things and I didn't really have my head in the business as much. [11:51] >> And then, you know, when it when all the doors closed, so when I tried to sell my company and nobody would buy it, and basically I was trying to hit the escape hatch, I got to this point where, you know, there was no other doors to to go through. There was one only one door in front of me, which was like, you've got to fix the business. This is the only path in front of you. And [12:09] >> I think in hindsight, that was probably the best thing that ever happened to me because what it did was it reinvigorated me. And, you know, I think a lot of founders who wanna sell their business, you know, they think about what they'll do with that capital in the future. Like, I'm gonna buy a bunch of other businesses and help them improve and help them push through growth challenges. And I just thought, how could I do that [12:30] >> for somebody else if I can't even do it for my own business? Right? Like, do I actually develop those skills and get that experience? So I started to become grateful for the challenges. And I thought what better place is there to work fixing an 8,000,000 ARR business rather than starting over from scratch or starting with a much smaller business. So only this week we've been talking about founder mode. I know we weren't calling it that before [12:56] >> this week, but that's essentially what I started to do is I started to get my hands dirty again. My VP of product quit. My VP of marketing quit. I didn't replace them. I just got in and started running product and marketing again, just like in the early days. So I was just starting to get my mojo back. And then in 2023, we went from burning millions to actually being profitable. Mind you, not by very much, about [13:19] >> 58 ks in profit, but still not burning, which was a good place to be. We didn't have to raise more money. We knew that we at least survive indefinitely if we had to. [13:33] >> Now we had to fix the cultural debt. So I talked about we formed new core values. We started to, you know, make radical candor and actual value. Like, we have to have tough conversations. We have to be able to challenge each other. We We had to build the plane while flying it, right? So we engineers want to model the perfect solution that takes two years to build. No, we had to figure out the shortest path to [13:54] >> value. We had to start experimenting more. So we started to try to create a more nimble culture, but my you know, the problem was I still didn't really have the right engineering leader because I had had my early CTO who was just a good developer and hadn't managed anyone before who kinda got us to this place, but then I swung too far on the other direction and hired an engineering leader who was much more of a [14:17] >> middle manager and really didn't know how to get in there and affect change. And I also let those people stay way too long at the company. Right? Like, when I knew it wasn't working out, I kind of avoided making that hard call. But I did know we had one developer who had come in and he was really different than everyone else. He's from Quebec. His name's Matthew. And he was just able to like we were losing [14:43] >> deals because we didn't have single sign on. And every you'd go into Jira and you'd find this ticket a mile long with all these comments of like, it's so hard and we can't do it and there's too much technical debt. And he just comes in and like in a week, he's just like, here's your working proof of concept. It works. We're like, how'd you do that? He was like, I just got it done. So he started [15:04] >> unlocking things within the product. And eventually I was like, Matt, who trained you? Who was your boss before? He goes, oh, you should talk to him. His name's Marc, Marc Lecon. He's also a French guy from Quebec. And he had worked like MindGeek and like worked at scale before, but also worked at startups. And I had a couple conversations with him and I quickly knew that like, oh, that was the missing piece. I just didn't have [15:27] >> the right engineering leader. So I brought Mark in, said goodbye to my old VP, and he's only been at the company a year, and it's had a transformative effect. So, you know, one of the things that he did was he he brought this, you know, mentality of shortest path to value. Right? It's like it's become his catchphrase. He's got a little Slack icon for it. It's really just helping the developers go like, okay. What is the [15:53] >> shortest path to solve the customer problem? And then we can go and figure out how to add to it and make it more secure and scalable and all that kind of stuff. Very easy to say, very difficult to change and coach that mindset within your whole engineering department. The other thing he brought was a technical vision. So engineers were always complaining. We can't change the product because there's too much technical debt. There's too much legacy. He [16:14] >> was able to say, okay, here's what we're gonna do. We're gonna break certain things out into microservices. We're not gonna get too We're not going to add too much complexity. We're going to use event driven architecture. Like he actually knew what scale looked like, and he was able to find opportunities as we rebuilt our product to bring that new engineering mindset, but also technical architecture to the product. Knew that we weren't going to just stop building [16:39] >> features and just start addressing technical debt. Knew that we had to continue to ship value to customers. So it wasn't overnight. It wasn't like everything changed, but very quickly we started to make progress. We started to ship faster and we started to notice the improvement. And so just about a month ago, we launched the version three beta of our product, which has completely rebuilt the front end from the ground up. And it addresses a lot of [17:04] >> long standing issues we've had about product stability and ease of use. Now, I would love to say we're completely out of the woods and we're skyrocketing to 100,000,000. We're not quite there yet. In fact, the last two years have been 2023, we declined a bit. We've been flat this year. But I am confident that we have I have a bigger vision now than I had about five years ago that I believe could take us to a [17:31] >> 100,000,000 if we can execute it, and I feel like we've got the right team and the right leader to be able to do so. [17:37] >> So I know I've only got a couple of minutes left. I just want to share a couple takeaways because I know my story wasn't like how we grew to 100,000,000 in five years. It was much more of that long slog of building a SaaS company and being sort of bootstrapped and sort of funded. But really, of my biggest unlocks was solving for your biggest constraint. Like how often do you know what really is holding you back [18:03] >> from growth and it just feels like it's too difficult or it's too hard to fix? So we tend to go to other things, and we go to things that feel easier and feel productive instead of staring into the abyss directly, you know, and attacking the biggest problem that's that's holding us back. And if we're in SaaS, you know, you hear people say, oh, product is, you know, it's so easy to build product now. AI can write [18:25] >> your product. It's all about sales and marketing. I don't believe that for a second. I believe that if you're in the SaaS business, you're in the product business. You know, you can't out market or out sell a weak or a mediocre product, especially when you're in a competitive market where other competitors are innovating at a fast rate. And, you know, leaders are your leverage, right? Like, if you're not if your department isn't functioning, [18:50] >> oftentimes we hold on to people too long or we hold on to leaders and think, maybe in another quarter, they'll have figured it out. And, you know, I've just learned this lesson. I have the scars to show it time and again is that you know when it's the right leader because within ninety days, something will change. They will pick broken glass off the floor. Right? You know, some changes are more systemic and take longer to action, [19:12] >> but a great leader is gonna make is gonna do something within the first ninety days that show you that they're the right leader for where you're at in the business. And then finally, you know, as we know, SaaS is a marathon and not a sprint. And when we look at these founders who grew to a 100,000,000 ARR, a lot of times there was five years of zero, you know, revenue or sub 5,000,000 in revenue. And so [19:32] >> that's what I'm embracing now is I'm not trying to fast exit. I'm not trying to get to a certain revenue mark and flip the company. I'm really building for the longer term. And if you as the CEO aren't the biggest cheerleader in the business, if you're not the most passionate, your team will feel that too. And I realized that when I wasn't passionate, I was letting the whole company down, and I was expecting somebody else to [19:56] >> figure out instead of taking the reins myself. And I think you have to do whatever it takes to get your head back in the game like I did. So I wanna thank you guys. I hope you got something valuable from that, and love to chat with you.

Introduction hello everyone my guest today is kyle rackey he's the co-founder and ceo of proposify a software as a service company based in halifax nova scotia canada which currently serves more than 10 000 customers worldwide he started his first business a web design company at age 24 and sold it after five years he's blogged extensively about his journey through the ups and downs of entrepreneurship as the author of free trials and tribulations how to build a business while getting punched in the mouth kyle you ready to take to the top i'm ready so speaking about getting punched in the mouth i mean i remember we before kobe hit we were in person at an event and you were mentioning hey we're going to try and get a round done and then kobit hits give us an update what happened did you get the deal done we got a deal done that's great and so so what were you looking for and for people that are not familiar with proposal 5 from your last episode let's give a quick overview on the product sure so our product essentially helps sales leaders in scaling sas teams get sas sales teams get more control and visibility into their sales documents so what we we typically do is we help sales teams that are growing who you know it's sort of chaos and every rep is sending proposals and quotes and contracts through you know pdf and word and all these different tools we basically uh tighten that up uh create a more consistent user experience and buying experience and and offer insights and analytics into how prospects are interacting with the documents so that's what we do as a company uh now you asked about the round so i mean we had um uh previous and investors um who essentially we we got in touch with cbgf which is the canadian business growth fund who uh their back their lps are like td bank and sort of large national banks and um you know we were sort of going through the process of of them doing a partial or a full buyout of the existing investors and putting some uh capital on the balance sheet so we were able to get that deal done in march of of last year finally closed around may yeah that's great so explain to me explain me the strategy there so there's a lot of people listening that have raised a little capital and they're going some investors want out how do i recap them you did this it sounds like sorry give me the extra context there sure yeah i mean i have to be a bit careful about how much information i give out just out of respect to the investors but i mean essentially we had a group of investors who you know for one reason or another wanted out and and they wanted their money back cbg came to the table with essentially a a proposition that would enable them to be bought out a hundred percent get get out completely and put uh put about jesus almost forget now three million on the balance sheet Raised so what was the total round side three to the balance sheet and how much to early folks um i had agreed i would not disclose that information i have to keep that close to my chest that's fine that's fine okay got it so prior to that round though you would raise about 3.5 million correct yeah in 2019 and 2016. okay great and and so moving forward you have 3 million an extra operating capital on the balance sheet now it's march 2020 where are you investing that capital last year to grow the business so i think you know obviously for everybody there was a lot of unknowns around march and and moving forward in last year people just didn't know what was going to happen um so i think the initial strategy and what our investors wanted was essentially just sit on the cash don't spend it keep it in the bank in case you know everything goes to and you need the money what we actually found was that even though growth was slowed overall there was modest growth and it was actually exceeding kind of our investors expectations so we were able to allocate some of that capital into growing the team investing in product and sales but overall um we did not spend you know even close to the amount of capital that we raised so now that we're kind of heading into 2021 where we're looking to really invest is mainly in the product and engineering team flesh that out for me today what how many engineers are on the team we have about uh 40 probably split between devops qa and what's their total team size kyle um company just passed 100 or so employees oh got it okay so that's up about 25 since i interviewed you back in late 2019. um sounds like most that growth came from engineering do you have do you have any quota carrying sales rep these days we do we actually have um three quota carrying reps and then sort of the bdrs and support team around them and so one thing that we kind of want to do as we get in further into this year and see how things are going is essentially looking to scale up that sales team so three quota carrying and then the whole sales organization together is how many uh it's about ten ten okay and and again context here lasting on the show you had just broken about 4.5 million in arr and you've Monthly recurring revenue scaled now to about what so we ended the year at uh 564 000 in mrr usd got it okay so we saw 20 growth in 2020. it's healthy so the story of this podcast is really how you went from about four and a half million in terms of run rate up to about a seven million dollar run rate by adding 10 engineers bring on some quota carrying sales reps let's talk about the reps for a second that first sales hire is always tricky how did you decide what to set their initial quota at yeah i mean this has been an evolutionary process for about two three years now um you know we had raised the first time we had raised the round we kind of did the classic mistake where you know you go and hire a vp of sales with big company experience they go and hire you know 10 20 reps very quickly without much of our go to market or our positioning and figured out so i think we had already made that mistake and taken the team back to a very small size um the team has been led for the last year and a half by daniel hay bearer and really like in terms of setting quote i think it's like we're always adjusting that process we're even going into 2021 with with you know essentially a new comp plan for the reps um but essentially you know what it looks like now moving into 2021 is like as opposed to resetting the commissions and the quotas every month it's more of looking at annual targets and then accelerators once they surpass the uh the sort of baseline target for the year so essentially everything after that point becomes much more lucrative for the reps so i if i was if i was joining proposified today and i was on this new comp plan you've put together what are you going to tell me that my quota in my annual quota is um these are one of the some of the numbers i did not quite prepare for so off the top of my head if you were joining today i mean so one of the things that we've adjusted is there's actually a bit of a variation from up to rep so some reps who want kind of a bit more of their percentage in salary and others that want a little bit more in commission depending on where they're at in life and you know family commitments and whatnot so we've actually provided a little bit of flexibility so it's not just complete boilerplate from rep to rep but essentially you're looking at a um it could this is a little bit talking talking about you know what but ten percent roughly of the gross sales within accelerators that closer to get closer to the 20 mark after you've hit a certain amount of quota okay so i mean is that quote amount like they need to land you know there's three of them so if you want to add 3 million in arr and they they would each have you know an average of a million dollar quota i mean is this sort of the range you're looking at sure yeah what we could do is uh if you if you wanted to cut this out of the interview when you when you uh launch it i can just look up the numbers really quickly yeah no that's that's okay yeah take your time doing that i mean the reason i'm asking is because you when you came on last you talked to us about sort of average price point i mean you're not yet at least from what i can tell an enterprise motion i mean your average is like a 45 to 50 a month sort of deal and sure you might sell a lot of seats um but but walk me through that i mean how do you manage the low acv but still be able to have enough deal flow and volume to compass sales rep appropriately right so maybe what i'll do is i'll kind of dig into our two segments because i think this will answer a lot of your questions maybe even more so than the the compensation part of it which is that we've been in the process of moving up market now for a couple of years and last year we've seen a large amount of growth on the larger segment so when you look at our total numbers as a company of it all blended in it looks a certain way but once you start breaking it out into two segments which is the 300 plus mrr group and the anything under 300 mrr which usually typically would equate to self-serve customers those two groups look drastically different and so what we're doing is we're focusing more on the high-tech segment because that that actually doubled last year so if you look at the ar mrr from that high-touch group that grew 98 in 2020 whereas the self-serve segment grew about 7.2 percent and in terms of net new revenue in terms of total mrr including expansion yeah yeah okay yeah so net new revenue yeah yeah so just to be clear you're talking about 300 a month plans so you're talking like minimum these are like four thousand dollar acv accounts and higher is where you're focused on incentivizing the sales team to go close more deals well actually when i say 300 plus all i mean is that is sort of the starting point of where we start breaking up that segment but the actual arpa from that group is 789. oh wow we're looking about a 10k ish deal size we've got a handful of customers that are above 20k and acv some one in particular uh closer to the 50 mark but that's where we've been going as a company as far as sales targeting those accounts bringing them on board and cs expanding them that healthy segment is it only makes up 20 of our total arr but it's actually two percent of our logos so we're fine yeah it's it's uh i mean the the logo churn on it is under one percent a month the the net mrr churn is negative 2.3 percent um the ltv is 85k so you know that segment is the one that we're essentially putting all of our effort towards and just like i say just to be clear when you say two percent logos on your 10 000 so you've got about 200 of these enterprise like accounts with around a 10 000 acv or higher and that's where your three sales reps are focused on driving growth absolutely 228 customers in that segment versus 10 day total right yeah that's interesting okay and and walk me through a little bit the experimentation you've done about how to add more value to that very tight segment are you upselling just number of seats if not is there a product base up so that's working really well what's working yeah so i mean the the way that we get the logos in the door essentially is with the salesforce integration um that's kind of the starting point for that 7k acv essentially if you're a sales team that's of any kind of growth happening in it you know you're using salesforce and you need a tight integration with like a managed package or or whatnot plus the service component of professional services onboarding configuration getting your account set up that's where we're starting to find those those larger high-touch customers what they want and what they're willing to pay for as far as expansion it typically is seat sizes so one of those accounts might come in with about 10 or 20 seats that they want to start with and then throughout the year cs will will expand or even go into other divisions or other parts of the company where they can resell proposify into it interesting so so i'm looking at your pricing page right now um you've got the user limits uh you've got what else workspace so it's talk to me about like workspaces uh workspaces is i mean it's not actually as big a draw as as you might think i mean it's it's very dependent on the account like one of our largest accounts is uh is a franchi a cleaning franchise so you know they might they actually need several accounts or you know i think they're at 40 or 50 separate accounts that's kind of where we get into workspaces but it's not a huge driver as much as roles and permissions salesforce complex approval products and price books all those kind of features single sign-on security and so forth those get get more on the enterprise plan when do you start dedicating engineering resources to developing new enterprise products so that you can add to your current seat based upselling your current feature based up selling with salesforce integration i feel like there's a missing third there which is your ability to sell them another 10 000 acv contract for another product you know they need tangential two proposals so if i if i understand your question correctly like how do we assign engineering resources essentially like we've changed our our pricing our positioning uh over the last couple years in particular last year nailed down our positioning so essentially the whole company is aligned around this higher touch segment we don't you know we don't break out engineering teams or product teams to say well you guys go after the low segment and you go after the high one everybody is building for the high segment and if some of those improvements to the product also bleed down and help the smaller customers that's great but every team is essentially aligned around our target customer and the market that we're going after what's the next big product release you guys are working on um so the big thing that's going on right now is a complete redesign of our pricing tables um the you know the sort of limitations customers have run into especially when they get into complex pricing has been like being able to add multiple columns being able to use um formulas and whatnot sort of like in excel and be able to be able to import that from salesforce and feed it back so if the customer selects certain products or services that gets fed back into the salesforce reports for the financial teams so that whole workflow of building pricing how it gets displayed to customers how it feeds into your pricing catalog that's that's probably the one of the biggest ones that's that's coming this year and then talking about again growth and aggressiveness moving forward i would argue you guys have been pretty darn capital efficient with about you know called a one-to-one ratio of equity raised to ar that you've been able to generate so your guys are i would look at you and say you're great capital allocators last time you came on in 2019 uh you said you were burning about a Profits hundred thousand dollars per month in terms of your bank decreasing that much are you guys profitable today or or break even or where are you i'd say we're depending on the month we're around the break-even mark some months we're cash flow positive um you know other other times we essentially have the same amount in the bank that we that we did when we raised the money so we've kind of gone down periodically and then gone back up depending on the months yep okay interesting any acquisitions you're looking at doing uh not currently no interesting and if someone came to you i mean an offer do you you know you know buy you at a healthy valuation how would you guys think about an acquisition offer on your table um we would look at any you know anything that made sense for the business i think you know what we really want to do as a company is um this this segment that we're going after we're seeing the high growth the the huge need in the market the traction that we're starting to build around our positioning that's really exciting to us and we want you know i think kevin and i are my co-founder we want to see that through like we want to get to the point where we're doubling ar total you know in a year's time um so i think when that happens let's say one to two years out we'd probably be in a better position to look at acquisition offers today um i'd say it would have to be pretty pretty healthy for us to want to look at it last question before we wrap up with the famous five your seo game is very strong you rank for over 29 400 organic keywords you're getting over 37 300 organic clicks per month according to ahrefs is which firm are you guys working with on the seo side or is it in-house we do it all in host oh wow how many people are dedicated to that um we don't really have anyone dedicated to seo but our marketing team sort of factors seo work into into all the work that they're doing it's about a 12 12 person marketing team wow okay let's wrap up here with the famous five number one favorite business book um i just finished reading inspired by marty kagan about how to create high-tech products customers love and it's uh fantastic number two is there a ceo you're following or studying ceo um i don't want to go with a cliched answer here you know who i really like is nathan barry yep i agree just had him on and the way that he does profit sharing with employees is remarkable we've got the interview coming out actually it'll be probably a day or two after years kyle so it'll be close together number three what's your favorite online tool for building uh proposal hi um i'm i'm you know currently in in the process of falling in love with game site px number four how many hours of sleep to get every night say seven to eight and situation married single kids uh married second time for both of us uh and three kids we we just had our first together a year ago so he's about 13 months congrats it's exciting and uh how are kyle i'm sorry how old are you uh i will be 38 in september this year 38. last question what's something you wish you knew when you were 20. pretty much everything that i've learned in the last 20 you know 17 years um that's man that's a hard question i think i don't know i'm stuck you got me stuck on this one well think about where were you when you were 20 what were you working on what's something you wish you knew back then i had no idea that i even wanted to be an entrepreneur i didn't think i did and i've been doing it now 13 years or something like that so i mean i people is the biggest thing like it's sort of a cliche but uh it's all about people finding the right people coaching them you know you can't build a company by yourself and that's something everybody takes a long time to figure out guys there you have it proposify helps you get your proposals done they've got a larger and larger enterprise segment it makes up just two percent of their logos but over 20 percent of their revenue which topped 564 000 a month last month that's up almost 20 percent year over year very capital efficient they've raised about a total of seven million bucks recently around in march of 2020 where three million went to the balance sheet and some other amount went to buying out earlier investors they're scaling their team up to 100 people 40 engineers 10 sales employees three quota carrying reps net revenue retentions above 100 percent again a lot of the healthy economics you see from the high-growth sas companies kyle is trying to see a proposify we're rooting for you ma'am thanks for taking us to the top thanks nathan 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 pm 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 want you to miss breaking news in the sas world whether it's an acquisition a big fundraise a big sale a big profitability statement or something else i don't want you to miss it additionally if you want to take this conversation deeper and further we have by far the largest private slack community for b2b sas founders you want to get in there we've probably talked about your tool if you're running a company or your firm if you're investing you can go in there and quickly search and see what people are saying sign up for that 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hello everyone my guest today is kyle rocky he's the co-founder and ceo of proposify a software as a service company based in halifax nova scotia canada which currently serves more than 8 000 customers focused on creating beautiful proposals and helping folks close more deals kyle you ready to take to the top i'm ready i love this okay so this is also a very hot space but super fragmented i mean how are you carving out your kind of space in the niche yeah you're right there's a lot of competition much more than when we started i think we're the way that we position ourselves now is that for companies that are looking to increase the efficiency of producing sales dogs across their team without sacrificing the the beauty and the professionalism which you know a lot of the competitors don't do too well we really hang our hat on still presenting an amazing experience for your customers and better control over your brand okay and so um i mean help me understand pricing wise this is pure play sas correct yes okay so so take me back to kind of day one when did you when did you write the first line of code uh that would have been 2013 okay 2013. and do you remember how long it takes your first dollar revenue after that it wasn't too long i think it we took four months to build our mvp and then we started selling pretty shortly thereafter although we stagnated around like 10 paying customers paying out 20 a month for like 17 months product market fit until kind of late 2014. yeah that's how that work okay so i want to dive into that so actually let's take where you are today first then we'll work backwards so today what's the average customer paying per month uh if you look across all of our customers the arpa is 45 but uh we've in the last year and a half started moving up market selling to larger customers so the numbers are really all over the place when you start segmenting into small media large yep and how many customers have you scaled to today so we're just over 8 000 paying customers 82.52 at this moment in time yep 82 i love it see he came on the show once and he's like nathan i've got all my numbers ready to rock and roll so this is great all right 82.52 45 bucks a month that means you're doing about 371 300 per month or something like that that sounds right yeah where were you a year ago [Music] um so we usually track everything in canadian and i actually switch them to us for you for the purpose of the show to keep everything consistent uh so if i look back a year ago we ended last year at about uh 456k canadians so i'd have to run the conversion on that okay do you remember though what you grew you've grown revenue by year over year the past 12 months yeah we're we we were just about 50 growth last year which was actually not where we wanted to be we were slower growth last year okay why was that it was really that kind of shift to move up market required a lot of changes to product how we position ourselves building a sales team and just kind of looking at new marketing channels that stopped working as well as we moved up markets so there was a lot of there's a major pivot that really happened in the business last year yeah okay so 300 you know if you go from quite 325 000 bucks a month to 370 000 a month that's about caught 50 percent a little less than 50 uh growth um was most that coming from historical kind of like customers upgrading or brand new customers all together uh a combination of of both we one of the big changes we made last year was we adjusted our pricing per seat worked with price intelligently on a strategy for that so at the beginning of this year is when we launched our new pricing and that almost instantly had a positive effect on our overall ltv and retention um because we were now we prior to that our sales team really couldn't sell big plans because we just limited ourselves with our pricing but now we've been able to close you know 50 60k a year acv deals just by adjusting the pricing all upselling based off number of seats or are there other upsell metrics you use yeah the primary lever is seats we we used to sell by number of proposals that were active we stopped doing that changed into perceived and then we also have key features like salesforce integration that are only available on the enterprise plan i see yep that makes a lot of sense okay so uh uh 8 000 customers today you mentioned some changes in churn with the pricing updates over the past 12 months what was revenue churn on a gross basis yeah on a so on a month-over-month net mrr basis our churn was looking uh much higher than we wanted to be usually in the two and three percent mark uh since changing our pricing really over the last four to four to five months we've seen our net mr return rate go to under two percent consistently so about 1.8 so if you look though at at uh gross revenue churn so not dent numbers but gross revenue trend over the past 12 months was that something like 20 30 40 percent uh i'd have to look at what the gross numbers were so you mean don't don't factor in expansion exactly yeah um so yeah i've got i mean i've got the hard numbers and i don't have the percentage in front of me with that what's the hard what's the hard number i can convert it real quick sure so uh so it's been kind of around 15 to say 15 to 16 000 a month in just gross uh uh church numbers canadian canadian dollars over the last five in canadian dollars yeah okay so that's about 180 000 canadian dollars or about 135 000 united states dollars you're currently doing again over 350 a month or about four or five million run rate so we can divide that and get kind of a gross turn metric i'm sure you can i uh can i didn't do this with with math skills no no no it's totally good so yeah you're basically at somewhere around like three three percent gross turn annually i mean that's that's actually really really good for this price point so expansion you mentioned expansion has just really taken off with the new price points do you yet know predictably what you're going to expand these accounts to you over here yeah i mean so when we look at our customer base and we see that before when we had grandfathered these plans we had customers on 10 20 30 seat plans that were essentially paying about a thousand dollars a year to use the product so obviously there's a major price difference that has to happen and that's been a big function of the customer success team is reaching out to these customers and figuring out a transition plan to get them on to the per seat uh without you know 10xing or 20x in their pricing so yeah we we plan to do a mass upgrade by the end of the year which we predict will will at least add about two or three uh million in arr to our to our run rate yep what's a team size today how many people uh we're about 75 okay and how many are engineers we have about i'd say 30 people in product and engineering okay yeah and how many of the 75 are quota carrying sales folks we actually currently have um only three account executives that are quota carrying and then two inbound sdrs do they carry quotas well they do um kind of a combination they close smaller deals but they also have a quota on essentially how many sales accepted leads they're handing off to sales yep so two sdrs three aes that makes a lot of sense how what do you set your ae quota at um are the current quotas that the 80s are looking at is but 30 000 a month in gross sales okay that's that's them adding 30 000 every month in new ar or a new mrr uh it's actually just total sales so that would even include one-time services but but generally we have our sales reps looking at closing annual only deals got it yeah so if i closed one 30 000 a year deal a month as an ae that would be me hitting my quota it would yeah okay and as we sort of figure out that sales model and get it more predictable and more efficient then we'll increase that quota so what do you if i do close my 30k new air quota every month that means i add about 360 000 a new arr per year to the business what will my fully earned kind of comp be on that like plus you know base plus commission yeah so we generally aim for that 5x comp so um yeah i mean if if ideally the goal to get to would be 500k in gross sales per rep per year with about one-fifth of that being uh so you're aiming for kind of 5x salesperson profitability currently you're a little less than that but you'll increase your quota and obviously pay will then go up a little bit as well absolutely yeah interesting and where did you learn that from or is that just you kind of you put it together yourself no i've always really struggled with this it was it was not a function of the business i knew very well we uh we made a great hire earlier in the year somebody named daniel hey bear who uh began running the sales team just about three or four months ago and really put that together and kind of came from a sales enablement background but is running the team okay and now have you raised additional capital since we last spoke or how much is in the company today yeah so we um we raised at the beginning of 2018 about three well three million dollars canadian in uh in funding and that's where we grew the team size and and that was sort of as we transitioned up market where we invested a lot of those dollars so you've total but prior to that you'd raise about 250 grand right so 3.2 total yeah interesting okay and so i mean obviously you're driving growth i imagine you're burning how much are you burning per month right now on a net basis we burned about about 500k a month does it keep you up at night or you're cool with that you can sleep no we're good i mean our every month our um you know the burn rate is going down we're we're narrowing that gap and so um we we may look to raise additional capital before the end of the year um but we're looking at a number of options right now just to be clear that 500 grand that's not your total expenses that's what your bank's going down every month by 500 grand oh yeah no no that's just total expense okay i was about to say that would be like you'd be in trouble then so 500 grand is total burn but you're making each month in revenue about 350 so net burn is called 100 grand a month 150 grand a month yeah that's that's pretty close yeah yeah yeah okay yeah i was gonna say i'm like oh my gosh they're gonna be out of money here shortly um okay if you do raise additional capital how much would you raise uh you know it's it's it's hard to tell at this point i actually between my co-founder and i he uh generally looks at the financing side more than i do as i kind of work on running the team so there's a number of different avenues that we can go from debt uh from actual debt to you know dilutive capital um you know probably wouldn't be a massive raise could be anywhere between one and five million which you know is a pretty broad broad range yep have you taken any debt to date we have uh we have a bit of debt now there's a an organization here where we live in canada called koa which is atlantic canada opportunities agency and we've historically leveraged them for uh some debt financing but it's like zero interest kind of government almost like a government loan okay guys you haven't done like espresso lighter sas capital any of these folks correct yeah okay well i mean would you consider those for your next round of financing absolutely yeah what would make you say yes to those kinds of offers oh man it's it's really it's really hard to say i don't know um probably shouldn't say in a public forum just because uh we may be talking to some of these people already so i'll kind of leave it at that okay uh or the flip side to that is in two minutes you talk to 20 people at once versus 20 you know 30 minute calls so you save a ton of time i guess what i'm asking you is when you look at the structure of how you might raise debt do you want like revenue based financing or like a term loan a fixed interest rate i think more and more um loans are becoming more attractive which is quite different than even a few years ago with sas companies where everything was venture capital maybe growth equity um there's there's companies like espresso like firepower that are offering some some pretty great terms without taking any of your uh you know and your actual equity yeah i mean these guys so i've negotiated terms with all of them so i know most of their mo i can say without getting you in trouble right so i mean espresso sas capital lighter capital you know lighter on a revenue-based financing perspective will take anywhere between three and eight percent of your grocery sheets monthly on a 1.4 to 1.8x repayment cap over three to kind of six-ish years that capital you know the effective interest rate though whether it's that or someone else that takes a little bit of warrant coverage or covenants the effect of interest rates on these things are still like 22 23 kind of 24 are you kind of is that generally what you're seeing those same ranges that that's a little bit higher from what we've seen but uh even at like 15 that's you know we've seen interest rates at that level which are still quite high with the amount of money that you know with no covenants with no covenants or warrants correct yeah yeah that's pretty good um good all right so that's helpful to understand debt is uh obviously guy's a really attractive option i consider you to all of you guys to look at it if you're looking at raising um talk to me about cac so to get a new 45 a month customer what are you paying to get them yeah so again that is all over the board if we look at just a strict average across all it's looking at 216 in cac um ltv is 14.96 1496. now of course that changes significantly it's uh for a company that comes in through sales at that larger seat deal uh the cac is considered bigger actually so it's actually more like two thousand dollars cap if they come through sales taking into account the the commissions um but the ltv of course is much higher on those plans so on our larger segments we're looking at uh uh you know crazy like fifty thousand dollar how the regardless of the cohort though uh is your payback period usually about 12 to kind of 14 months or is it higher i know it's about 12 months about 12 months okay so to get a new 45 a month customer generally speaking you'll pay call it again about what is that 540 bucks to get them uh no it's actually a little bit smaller like uh you just told me 216 is that oh right so if you do the math on that to convert to us it's whatever that is yeah that's only the reason i'm asking is that's only a five month payback but if you told me 12 that's obviously different right do you know what it is what i don't know how to do math no no it's okay by the way my goal is not to trap you here it's just to get the accurate information so don't feel like i'm not trying to trap you i just want to understand so regardless of the cohort it could be a 100 000 contract or a 10 a month contract people tend to have the same kinds of payback periods across cohorts you're generally seeing a 12 month payback across most your cohorts um i i think that is probably closer to what you said there about five months i'm to be quite honest i don't really track the payback that that closely so that's okay let me let me ask a different question how did you calculate your ltv so we i mean we take into account the the churn uh and the arpa and the amount of months that customer stays active we use chart mobile for our metrics what do you use uh chart mobile oh yeah which pulls in from work early yep yep um no it's good uh okay yeah so you're essentially assuming 33 months of lifetime value at 45 bucks a piece that gets you the 2100 lifetime value yes yeah yeah yeah okay good that's helpful all right let's wrap up here with the famous five number one what's your favorite business book [Music] uh i just read trillion dollar coach which was really good yup that was a good one bill campbell story um number two is there a ceo you're following or studying um ceos i'm in a really good coaching group right now with uh with dan martell and a lot of the ceos in that group are very inspiring um yeah i to be more specific i guess um from click funnels okay russell brunson number number three what's your favorite online tool for building your company um i mean right now we're living in like salesforce land i wouldn't say it's my favorite tool but it's where i spend a lot of time so uh that works number four how many hours of sleep you get every night you aim for about seven okay and how old are you 35 a situation married single kids uh remarried last year and have uh two boys and a third on the way oh that's exciting how and i mean that's extremely exciting when's the when's the third one come on november you're a busy guy he got four four startups absolutely all right last question kyle what do you wish your 20 year old self knew to probably aim higher than uh than i thought was possible i might be a little further ahead but i think we limit ourselves by thinking now we'll never be able to do that and uh yeah just aim higher than you think you could guys 8 252 customers use proposify to create beautiful proposals they pay 45 a month on average they're doing 370 000 a month right now in revenue up from 245 000 a month just a year ago so over 50 year-over-year growth rate they're burning about 500 000 a month on that's net on total expenses about 500 000 3.2 million raised looking at raising soon caught somewhere between 1 and 5 million 75 folks on the team 30 engineers five quota carrying reps uh again healthy payback periods and caught the six to 12 month range as kyle looks to scale into more enterprise level plans kyle thanks for taking us to the top thanks david