How Safety Evolution Reached $648K ARR and 155 Customers by Acquiring a Competitor Without Cash (Interview with CEO David Brennan)

Introduction and Company Overview

Nathan Latka

00:00Guys, Safety Evolution broke $54,000 a month just recently up from $18,000 a month a year ago. A lot of that growth came from acquiring $450,000 of ARR when they bought their smaller competitor called Safety Tech, which which they gave 40% equity in the combined company in order to get that deal done. It was a non cash deal, which is great. He's proven if you have an enterprise motion, they've got their biggest customer already paying $55,000 per

00:22year, which is currently about 8 percent of their total ARR. He's obviously gonna look to continue with that motion as they look to break a million dollar run rate. Hey, folks. My guest today is David Brennan. He's an experienced CEO, SaaS cofounder, and safety professional. He's driven by a passion for technology. He's focused on creating user centric software that is disrupting the safety industry. He's passionate about building and creating high performing teams at safetyevolution.com. Alright. You

00:45ready to take us to the top, David?

David Brennan

00:47>> Yeah. Let's do it.

Who Safety Evolution Serves

Nathan Latka

00:48Alright. So so what does this mean? Say safety for who, and how is the software?

David Brennan

00:54>> So it's our ideal customer profile is oil and gas service and construction contractors. So we focus in on that 500 to a thousand employee range. And so that gives you a little bit of an idea of where we're going. But we really, look at safety as a as a function of your business. And so we have spent a lot of time digging in to better understand how we can change safety from compliance to an actual tool

01:26>> that that helps your bottom line and protects your workforce and is proactive in what it does.

Nathan Latka

01:32So oil and mainly oil and gas companies?

David Brennan

01:36>> Oil and gas service companies and construction companies.

Nathan Latka

01:40Interesting. What kind of service companies?

David Brennan

01:43>> So so what we do is the the differentiation for us and the way we narrow it down is there's a lot of companies that are the prime contractors on a job site. And so what we actually do is we provide software for the companies that service them and build their projects. So construction companies would be like the electrical company, the plumbers, the the, form, you know, companies, carpenters, that type of stuff. Oil and gas would be

02:12>> like wireline, frac companies, you know, anybody that's servicing the main players in the industry.

How the Software Works in the Field

Nathan Latka

02:19Interesting. Okay. So I run a service company that dispatches plumbers to fix toilets in a certain ZIP code in Austin, Texas. And one of those plumbers took the thing off the top of the toilet, dropped it on his big toe, and, like, broke his toe and is now wanting to, like, sue me. If I had safety evolution, you prevent that, or tell me how you fit in.

David Brennan

02:41>> So, that's a great example. So think of it this way. When we build, so when whenever we have employees, we need to make sure there's there's three major things that stop events from happening. The first one is that they're, trained, that they have experience, and that you verify that they have experience. So your safety program does all that, plus then it gives the tools to the worker. And I think this is the big change is, like,

03:07>> so many times workers would fill out a document because they were doing a compliance document just to protect the company. And what we're doing is we're moving companies away from that to where the worker's filling out that document for them. And so that process is really designed for them. And and so there's so many constraints with things like, with with paper and those type of communications that you can't actually see what's happening in the field. So

03:34>> I'll give you a little bit of a story on, like, how this kinda comes into play on a on a major project, if that's cool with you, Nathan.

Nathan Latka

03:41Yeah. Yeah. Give us context first, on, tell us what the average customer is paying per month and then tell us that story.

Average Contract Value and 2020 Baseline

David Brennan

03:48>> Okay. Perfect. So right now, our average annual contract value is about $4,400. So annual contract values is

Nathan Latka

03:57We have to talk about that because that's up signif that's up over two x from twenty twenty when we last spoke. So let's make sure to talk about that.

David Brennan

04:03>> That's climbing fast, Nathan, just so you So we pulled some if you want the business side of it, there's some really, really cool things that we've learned in the last two years.

Nathan Latka

04:12Of course, I want the it's a business show. Of course, I want it.

David Brennan

04:15>> Okay, man. Well, let's give you the let's give you the dirt. So

Nathan Latka

04:18Yeah. So so just just for everyone as context, who's listening. When when we spoke in 2020, you were doing you had about 43 customers at a $170 per month. You were doing about a $100,000 a year in revenue. Right? Yeah. Oh, what's going on there, YouTube? Good to see you guys. Now imagine this. You love watching these interviews with SaaS founders, but imagine if we took all of the valuation data out from over 2,807 interviews I've

04:43done manually. Saves you a lot of time. Well, we've done this. We've built it into the beautiful interface inside of Founderpath. Check this out. I'll show you how you can access this in a second. But you log in, you connect your Stripe account, you see your valuation real time, you can see what changed over the past eighty eight days and even set goals for valuation this year. Now the secret evaluation is there's many different ways to

05:08value a SaaS business. So the reason you're gonna see three or four different valuations inside of your Founderpath dashboard, this is all free by the way, is because depending on who's doing the buying of your SaaS company, you're gonna get a different valuation. A VC is gonna pay a different valuation. Private equity firm is different. If you're gonna do a minority sale, that's different. And if you sell the whole business, that's a different valuation. You can

05:30see all those when I hover over here. Right? So the teal is what a VC would pay. Yellow is what private equity and red is if you sold the whole thing outright. Now what's cool about this is this is not built off random data. Again, you guys hear these interviews on YouTube. All these datas are built from real time valuation data points founder share with us on the show. So traction, 1,200,000 seed round, 3.7 raise. They

05:54sold 22% of their business. Go in here and filter by the event. Maybe you only wanna see companies that have sold the whole business. Well, here are a bunch that have been acquired the valuation and the multiple. Maybe you're going out right now and you're raising your seed round. We'll go in here and look at all this recent seed deals that went down, what they raised, what valuation they raised at, and what percent that they sold.

06:19There's never been a larger dataset of SaaS valuations than what you can get now inside of Founderpath. And we're thrilled to bring it to you. Alright. We're gonna go back to the YouTube video here in a second, but if you wanna check this tool out, if you wanna jump in and sign up, you can check it out for free to get your valuation at this link. This link, founderpath.com/products/valuations. Or if you go to founderpath.com and hover

06:44over products, click on get your valuation here, and go ahead and sign up to give it a whirl. Again, all that valuation data live right inside the platform. I hope to see you there. Alright. Let's jump back into the interview. How did you take those customers? Are they the same customers paying more, or did you fire those customers and just bring on more mid market enterprise accounts?

David Brennan

07:04>> So those customers are still there, and so they are still significantly, keeping the average down, I'll say.

Nathan Latka

07:13But since

Current ARR, Customers, and the Safety Tech Acquisition

David Brennan

07:14>> we last since we last talked, currently, we've got a 155, companies. We're at about 650 in annual recurring revenue. We purchased one of our competitors, Safety Tech, rolled them in in June, and, did about a 180 degree pivot in our product and went from a very rigid, system to now that was very designed for those smaller companies. That's why the contract value is so low to now where, you know, putting out proposals and and and signing

07:52>> contracts that are anywhere from, you know, 20 to 60,000 a year.

Nathan Latka

07:58David, what's your biggest customer pays today? Not contract you have out, actually closed customer they've paid you already.

Biggest Customer and Enterprise Motion

David Brennan

08:03>> Closed customer is is 55,000.

Nathan Latka

08:07Wow. Okay. Got it. So you have your biggest customer makes up almost 10% of your total revenue. So this is a pattern that you've built technology that does have enterprise motion. You just need now need to get more of the $55,000 of your customers. How are you doing that?

David Brennan

08:19>> So we have it's been really interesting to see because there was, like, a lull, a COVID lull where companies were really I think they were just kind of worried about, taking on new technology. And so what we've seen here in the last probably six months is a significant shift in those companies that are, we'll say, contract value anywhere between 20 and 40,000 a year. Mhmm. They they pretty much make up about 80% of our pipeline now.

Pipeline Shift Toward Larger Contracts

David Brennan

08:50>> And so it's been really, really amazing to see I mean, we've we've had to go from a demo closed process to now it's full discovery demo proposal, and we're selling into a very what we're selling enterprise process or or flow, really. And so we're seeing that in the contract value. So that's that's where we're seeing the shift, and and we're we're really, seeing a big pickup there in that in that, vertical.

Nathan Latka

09:20And if you're doing about $54,000 a month today, which is a $650,000 a year run rate, what you just shared with us, do you remember what your run rate was exactly one year ago today?

David Brennan

09:33>> I think it was about

09:38>> $150k, $180k.

Nathan Latka

09:43Yeah. That's you told me via email 200. So right right on the money. Right? So you you're doing you're about doing $18,000 a month in revenue exactly one year ago, now up to 54,000. So this is significant growth. Tell me about this acquisition. I mean, most of my listeners right now who are under 1,000,000 in ARR, they're going, wait. You can acquire a competitor with under $1,000,000 in revenue? You did it. How'd you do it?

How the Safety Tech Acquisition Happened

David Brennan

10:03>> Well, it's an awesome story. Actually this is the power of your network. K? I walked into, Dan Martell's SaaS Academy, and I sat down at my table in October of last year. And I did my perfect intro. And the lady across the table stood up and said, hey. You need to call Brian Quering with Safety Tech. They're selling he's selling the company, and I think it would be a great fit for you. I followed up with

10:32>> her a week later and said, hey, can you get me the introduction? And had a couple meetings with Ryan, and it just was a perfect fit for us. They had they had experience where we needed it. Their product was developed where we we wanted to go in certain spots, and it was just it was just a match made in heaven. And and the funny thing is everyone's like, well, how how did you swing it from a

Non-Cash Share Deal Structure

David Brennan

10:54>> cash standpoint? Because we were bootstrapped, Nathan, the whole time, we just did a share deal with them. And so there was no cash involved. So you can do anything if you want it.

Nathan Latka

11:05So so what percent of the company did you give the Safety Tech team?

David Brennan

11:08>> 40%.

Equity Split and Valuation Logic

Nathan Latka

11:10Okay. And and how did you guys value each entity? Obviously, you have to value each entity to decide how much equity they'll own when you merge.

David Brennan

11:18>> So what this is kind of, like, I guess, the backwards way of doing it, Nathan, is saying, hey. We don't really care about what you think your value is because you're a startup, and really, there's you know, you can play value metrics all you want. And unless you have EBITDA, you don't really have anything that you can truly value off of. So we just said, we'll give you 40% of safety evolution, and and this is what

11:42>> What the deal

Nathan Latka

11:43was their what was their MRR when you acquired them?

David Brennan

11:46>> They were at

11:49>> 450,000.

Nathan Latka

11:51Wow. Interesting.

David Brennan

11:53>> So Sorry. Their ARR was $450k.

Nathan Latka

11:56Yeah. Yeah. Yeah. Well, still that's big. Right? So if you're at a 600,000 run rate today and the acquisition you did was $4.50, right, you basically drove so much I mean, you drove the majority of your growth over the past twelve months was what we call inorganic growth through this getting this deal done.

David Brennan

12:10>> 100%.

Nathan Latka

12:11Yeah. Now they had more revenue than you did. How did you get away with giving them just 40%? Didn't they ask for, like, sixty, seventy? They'd say, David, we have more revenue than you. We have we deserve more of the company.

David Brennan

12:21>> They could have said that, but I think that, again, this comes down to the opportunity for them was to come into a really strong team, and they saw the potential and well, they they knew what product we have, and so there was a lot of there was a lot of incentive for them to join because of that. And so it just it made sense. There was there's there was a strong cofounder aspect of it that that

12:51>> Ryan was gonna be able to have that support. We had the product that our product was quite a bit more comprehensive than theirs. And so so there was that side, and and they just saw I mean, everyone all the way through their shareholders saw that there was so much more upside to joining the company that the valuation of of, you know, a 400,000 or Yeah. So more money was not that much.

Nathan Latka

13:18Are you still bootstrapped today?

Funding History and Bootstrap Journey

David Brennan

13:20>> Yes. I think we're like, Safety Evolution has raised, like, 90 k in. 90

Nathan Latka

13:26k total. When was that? Like, back in 2016?

David Brennan

13:31>> Yeah. No. No. We did. Wade and I Wade and I, like, funded it ourselves. And then in 2019, we raised a little bit of cash, but but it's been pretty much bootstrapped the whole way.

Nathan Latka

13:43Is that on a convertible note?

David Brennan

13:45>> That was just just shares. Just just straight shares.

Nathan Latka

13:48Any any interest in buying out those investors?

Pricing Model Shift to Annual Contracts

David Brennan

13:54>> I I think well, I'll tell you this. We the really cool thing is is we study pricing, and so we used to go to a monthly pricing model. And what we and that, of course, really was pushing us down the idea that we needed to raise capital, Nathan. And so what we realized about nine months ago looking at some of our competitors pricing is what they were doing is signing companies up on an a reduced annualized

14:18>> annual contract. And when I saw those numbers, I realized that we could get an them to sign up on a contract, maybe 7,500 is on the low end and then going up to,

Nathan Latka

14:31like David, my question is just do you regret my question is do you regret raising the 90 k?

David Brennan

14:35>> No. Not at all.

Nathan Latka

14:37So so if you have the ability to buy out those investors and get the equity back, you today, you wouldn't do it?

David Brennan

14:42>> I think I'd rather use the money for for growth at this point.

Nathan Latka

14:46Yeah. Interesting. The reason I this is the number one use case we see at Founderpath right now is is our folks that raised a little bit going, man, I wanna give those investors 1.5 x their money, but buy back 20% of my equity. And and we fund it with with, obviously, with debt. We're big fans of Dan Martell. So

David Brennan

15:02>> Well and I've looked at that, Nathan, but I think it's one of those things for us. It's probably a solid eighteen months, twenty four months away before it's a consideration. Why? Because I also, you gotta think I've got 40% on the cap table. We got multiple VCs on our cap table now because when we bought Safety Tech, we got VCs.

Nathan Latka

15:20Why does that impact your ability to use debt?

David Brennan

15:22>> No. I just mean, like, those I would wanna buy them all out at some point.

Cash Burn, Grants, and Team Size

Nathan Latka

15:27Oh, I see. I see. Yeah. Yeah. Yeah. Yeah. Well, I mean, now is a great time to do it though because everything is compressed. Right? Next year, if everything's not compressed again, no one's gonna wanna sell. Right? So the the the scrappiest bootstrap founders today who are sitting on cash reserves or, like, for you, we gave you $300,000 of debt against our 650,000 in ARR. You could use that 300 k and ideally buy back some of

15:45those shares, but it's complex. It's distraction. It's not product building, and it does have to do with your customers. So I get it. All that being said, you are profitable today. Right?

David Brennan

15:54>> Right now, we're actually a little

Nathan Latka

15:59Burning a little.

David Brennan

16:00>> About $20k a month under. But we get getting that money from it here? Stuff like that.

Nathan Latka

16:05Where are getting that? Ah, grants. You're getting grants. Okay. Interesting. And what's team size today? How many people?

David Brennan

16:11>> 11.

Famous Five Rapid Fire

Nathan Latka

16:1211. Very cool. Alright, David. We're out of time here. Let's wrap up with the famous five. Number one, favorite book.

David Brennan

16:17>> Favorite book right now, The Five Dysfunctions of a Team.

Nathan Latka

16:20Number two, is there a CEO you're following or studying?

David Brennan

16:24>> Oh, tons of them. I watch Dan a lot, Martell.

Nathan Latka

16:29Yeah. He's he's good. Number three, what's your favorite online tool for building safety evolution?

David Brennan

16:36>> ClickUp.

Nathan Latka

16:37Number four, how many hours of sleep do you get every night?

David Brennan

16:41>> Six and a half.

Nathan Latka

16:44It depends on the night And what's your situation? Married? Single? Kids?

David Brennan

16:49>> I have a beautiful girlfriend who we're gonna have to get her married up here pretty soon.

Nathan Latka

16:55That's awesome. Alright. So no kids. And how old are you?

David Brennan

16:58>> 44.

16:59>> 44.

Nathan Latka

17:00Last question. Something you wish you knew when you were 20.

Closing Reflections

David Brennan

17:07>> I wish I knew that everyone doesn't think the way I think, And so I could give them a little bit more room to be who they are as human beings.

Nathan Latka

17:17Guys, Safety Evolution broke $54,000 a month just recently, up from $18,000 a month a year ago. A lot of that growth came from acquiring $450,000 of ARR when they bought their smaller competitor called Safety Tech, which which they gave 40% equity in the combined company in order to get that deal done. It was a non cash deal, which is great. He's proven if you have an enterprise motion, they've got their biggest customer already paying $55,000 per

17:39year, which is currently about 8% of their total ARR. He's obviously gonna look to continue with that motion as they look to break a million dollar run rate. Hopefully, David, in the next year, man, we're rooting for you, and thanks for taking us to the top. Thanks, Nathan. One more thing before you go. We have a brand new show every Thursday at 1PM central. It's called Shark Tank for SaaS. We call it deal or bust. One

17:59founder 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 alive. It is fun to watch every Thursday 1PM Central. Additionally, remember these recorded founder interviews go live. We release them here on YouTube every day at 2PM Central. Make sure you don't miss any of that, make sure

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