How ServiceMax CEO Neil Barua grew to $150M revenue and 400 customers in 2022.

hey folks my guest today is neil brewer he's the chief executive's officer at service max and a member of the board of directors he's got an extensive background in the tech industry and improving track record of growing businesses previously he was a ceo of ipc systems and during his tenure sold the company and led assassinated transformation of the company more recently he served as an operating partner at silver like the global leader in technology investing earlier in his career he was part of john legere's a leadership team that helped transform global crossing through consistent growth neil you ready to take us to the top let's do it nathan you're before my time what was global crop i was born in 89 what was global crossing oh you're you're a young one i'm actually turning 45 so now i've become the old guy in the room but uh global crossing was a very infamous telecom company that actually the world is benefited by now they laid undersea cables by which internet was able to go across continents and it was one of the hottest startups by the way i think the fastest to get to 15 billion dollars a market cap at the time startup that was formed by a founder called gary winick and uh i actually came to global crossing the day uh the company was declared bankrupt so that was my first day was the dot-com boom happened and uh the bust happened and global crossing had its financial issues and the ceo that i became part of john ledger ultimately also the ceo of t-mobile who did a great job over the last number of years uh him as well as the leadership team which i was part of we restructured the company and ultimately sold it to level three about eight years later so um it's part of the it was a little ahead of its time but uh you know we we got it back on its firm footing and uh it's doing great things for the world right now well congrats on that i wanted to obviously now shift back to service max i want to congratulate you but my research is a little confusing there was a pr up piece put out september 10 2021 that says it was announcing your second quarter fiscal year 2022 results but i don't know how you have a press release before 202 but you broke 100 million dollar run rate effectively in that release so i want to congratulate you but where am i wrong why is my timing messed up you know in the saz in the enterprise scale sas world that we're in like salesforce when they when they put out their earnings release the fiscal year is actually a year ahead because our fiscal ends january and the january and so it's a little clutchy but we didn't get the math wrong it was within calendar year 21-22 so uh we are very happy about the progress of the company for sure and way above 100 million dollars right now as i look at the arr as well as we currently are at the company uh at service facts what when was the last thing you guys disclosed publicly in terms of revenue run rate you know we were we were getting very close to going public at the tail end of last year in december and fortunately we've got great investors we're all as i said by silva lake who owns about 80 or some a large percentage of the company as well as ge and then salesforce ventures and we create a process to go public thank god we didn't go public because of what we're watching in the marketplace and as a private company we're able to still stay focused on customers and our employees versus all the mayhem that's going on with public companies but uh um i think the last disclosure we made was we were approaching 150 million dollars plus of arr so um really when was that as well as getting operating profit and free cash flow positive as well it's a big point of differentiation that we've done over the last three and a half years as a standalone company coming out of ge now that is that is impressive when did you announce that you passed 150 million run rate do you know i think uh november of last year november okay interesting exposure yeah now it's obviously hard to grow you know companies most companies dive on are doing 10 20 30 million bucks in ar they're venture backed they need to be grown 100 100 year over year it's hard to grow 150 million bucks to 300 year over year what's something like you target in terms of your growth rate you know our q1 run rate we're private company but i target it as 30 plus on organic and uh organic growth that we've been getting out of the business so we've been doing a 20 to 35 is kind of the the kind of vicinity where at scale it starts to make sense plus then you know view around profitability and free cash flow which we've been really focusing on as well in addition to the growth uh nathan oh what's going on there youtube good to see you guys now imagine this you love watching these interviews with sas founders but imagine if we took all of the valuation data out from over 2 2807 interviews i've done manually saves you a lot of time well we've done this we've built it into the beautiful interface inside of founder path 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 it changed over the past 88 days and even set goals for valuation this year now the secret evaluation is there's many different ways to value a sas business so the reason you're going to see three or four different valuations inside of your frowner path dashboard this is all free by the way is because depending on who's doing the buying of your sas company you're going to get a different valuation a vc is going to pay a different valuation private equity firm is different if you're going to do a minority sale that's different and if you sell the whole business that's a different valuation you can see 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 founders share with us on the show so traction 1.2 million seed round 3.7 raised they sold 22 of their business go in here and filter by the event maybe you only want to 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 well 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 there's never been a larger data set of sas valuations than what you can get now inside of founder path and we're thrilled to bring it to you all right we're going to go back to the youtube video here in a second but if you want to check this tool out if you want to jump in and sign up you can check it out for free to get your valuation at this link this link founderpath.com forward slash products forward slash evaluations or if you go to founderprep.com and hover over products click on get your evaluation 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 all right let's jump back into the interview and that makes sense considering your pedigree coming on a silver like which we'll get two more in a second but first let's like jam out on product here for a minute what is service max doing who are you selling to and what are they getting this is the best part of the conversation in my opinion so company was formed 15 years ago by much smarter people than me founders athani and hari uh built the company actually and was one of the hottest startups which ultimately got sold to ge i think in 2016 nathan for close to a billion dollars so did a phenomenal job with answering a question which is what we still do 100 focused within the field service management marketplace where in essence a product so i'll give you a real example i think this will kind of resonate with all your viewers and yourself phillips healthcare which basically does most of the medical equipment when you and i our parents go to the hospital mo a lot of the equipment is actually built by phillips healthcare right so phillips healthcare is a great customer of ours they procured our sas offering by which they have their technicians that fix those products and those medical equipment in those clinics or hospitals our software allows the technician to actually get scheduled route the right technician to the actual appropriate hospital it needs fixing get to the equipment and within the equipment nathan we within service max allow the technician to see what part to fix what's actually covered by warranty when do you actually close out the job by which the customer gets notified when do you actually then come back and maybe do uh additional maintenance plans beyond the standard maintenance plan so gives phillips healthcare an ability which is very important to have that service revenue resilience and customer satisfaction to that clinic or hospital by which if one of us or your parents or family members goes hospital that equipment actually works right and that's what our our product does from on a sas platform as you know um and a very compelling piece that we're the leaders in the marketplace six times magic quadrant leader uh for this specific niche which is an awesome niche to be in particular what's going on in the world who's who's in second and third place so i you know i don't even care about second and third place i'm focusing such a good such a politician that's such a good no free marketing for your competitors their rear view marinade then you can find them in some random podcast but uh that's funny we're so it's it's actually awesome you got me on my soapbox like carrier right a big company that does all the hvac for commercial units plus also cargo ship cooling so unbeknownst to many people the cargo ship cooling industry is huge right on transporting goods around the world our software nathan allows for the uptime of those ships by which with all the subtitles you then know that the cooler is actually working a huge complex piece of equipment used by servicemax by the technicians to figure out what ships actually can actually transport the foods that we all need particularly in this very trying time that the world is in so really great stuff and an honor to be the ceo of the company given the importance of the software and what it does for our customers get help help my founders learn here 2016g buys a company obviously bullish on it 915 million a billion whatever you want to call the number but then it's just two years later right they're now selling a major truck majority stake back to silver lake so did ge just deciding noah this is a sort of a distraction we want to sort of get rid of it it's still valuable i mean what why buy it and then sell it two years later yeah they continue to be an investor in our company right a minority investor but ge as you probably fall went through a lot of stuff they continue to go to a lot of stuff right three four ceos went through uh that game during that time frame and they were divesting significant portion of their company to generate and gather cash right and focus back into their niche of what actually created g what what was 100 years ago so servicemax was a very uh tip of the sphere for them to be a digital software company and you know as we've seen they've reverted back to their industrial roots having a software company of our scale of our expertise made sense to be in another company and that's why they engage with our current owners to figure out how can they get cash on their balance sheet and also let us do the things that we are currently doing quite frankly we're a big provider of many ge kind of business units their ultimate utilization of our software for their field techs as well nathan so a real win-win at the time and a great deal struck by our investors quite frankly yeah so how did ge keeps ten percent i think silver like the silver silver like the sole buyer the other 90 or their other financial backers here salesforce ventures came into the uh into the business as well uh i bet i think two and a half years ago interesting okay now explain how you you know we talk about founder product fit right how do you end up inside of service max now it sounds like you were at silver lake first yeah so i i've spent uh a small amount of time at silverlake as an operating partner i ran ipc actually was owned by silverlake um initially and i became the ceo of that company when silva like was the majority owner of that company we then transformed that businesses was able to transact and sell the business to uh another buyer and i then came back to you know the homestead in uh it's silver lake and ultimately got involved in another number of deals and i raised my end said put me in coach i see you guys were able to strike this deal with service max you need a new executive team i want in the game i like running teams nathan i don't like you know uh being in anything other than the environment that i'm in and i said look if the opportunity exists put me in and let me run the company because it's something very unique that i hadn't seen previously in my career so um i really wanted in to make a difference in the company and for the last three and a half years this team's done a remarkable job so far you know running service max so i'm pretty proud of the the price how many folks are on the team now today got like 580 people okay how many engineers engineers are 250 of that okay interesting now you're not a pushover and you're talented and you have a lot under your belt so you're asking for equity coming into this deal how's a guy like you you know trying to negotiate a position in a thing like servicemax how much equity did you come in and ask for yeah i'm not going to tell you the equity piece it's actually something i've forgotten quite frankly it's uh i like the i'm 40 as i said i'm going to turn 45 in a month or so and i'm at the position my life where i've i've been lucky to have been in very significant positions before service max i kind of started a little early and i'm now really focusing on how could i scale this team how could i ensure that our team is actually getting all the things that i got for the last 20 years and the mission of what we do nathan for our customers it's it's really the thing that gets me up at night so this isn't uh go make money and figure out how to transact this is for me and this is why i said put me in coach this is a company that's going to make a difference for a long time i don't want to leave for a long time this is a company i want to quite frankly if i can retire at and you know there's so much runway for the business that we're doing so that's how i looked at nathan versus the the dollars and cents behind it fair enough you're a nice guy how many uh how many customers now today we've got over close to 400 now enterprise customers all enterprise b2b and you know large enterprise to give you context in the press release when uh silverlight came in it also said 400 customers that was several years ago so you either you've sort of maybe churned lower rpo and added higher sort of ac folks or you've expanded in the accounts to grow revenue sort of which one was it yeah we've done a great job um around our our uh retention rates are in the mid to high 90s right so we do a phenomenal rose or net uh gross uh are we actually put a press release off our net retention our net retention is in the in the 115 121 range right so it's a it's a very nice and what we've done as a team extremely well is we went to the philips health cares of the world carrier who predominantly fascinating by the way nathan is those customers many times even those huge logos still are doing manual processes for the thing that i talked about as the workflow so we've done a phenomenal job growing the wallet share of the existing customer base and quite frankly some of the customer count right as you've seen other companies we look at the quality the customer count and of those 400 initially three and a half years ago we've created a lot of new logo impetus too to make up for the kind of customers that we quite frankly didn't really address in the manner that we think we could grow into so within that underneath it is great retention great upsell into the existing base but we've done a really nice job on new logos as well to get the right customer set to grow into over the next three five ten years so moving forward let's say you let's just for the sake of a demonstration here you add no new customers but you want to keep growing and so you need to build product to upsell and add more value to your current base what products would you go build what are you thinking about so one that we just released that we're you know is not seeing the material revenue upside yet but we will and we're seeing the current bookings occur we created so that example i gave to you around the technician going to phillips healthcare's hospital where they install the equipment right we provide the software by which the technician sees on their mobile app and knows what to fix when to fix and how to fix it right we now created a release product called engage where that same functionality nathan it was born out of the pandemic where technicians couldn't safely go to the end site we are now given the clinic the same utilization and the same ui to do a self help and self-fix the asset versus a technician going out there or route using our collaboration tool to the experts that are remote at philips to actually do a remote fixing of the actual asset so one of the things we're doing again phillips is actually deploying this now to their end customer so phillips is the customer record they'll procure licenses to give to those clinic clinic or hospital staff that could do some of the self-help we see that as a big impetus for the company in an area that again like you said we're creating a larger wallet share a real need for our customers by developing very innovative solutions which the r d team's done a great job doing the philips technician just to be clear you're not a marketplace that technician isn't employed by you and you're matching them with phillips and they need it right it's the phillips badge employee okay so yeah that they're they are a full-time employee at phillips yep so our model the reason why you get such resiliency if you create a great ui create the right workflow those technicians the licenses are procured by phillips healthcare the head of service head of i.t is cfo right not the technician and we're not a marketplace for the most part complex assets nathan for what it's worth since you opened that question and we love this space to to serve a complex asset you need a skilled technician to do that right and and most of the time eighty percent of the time that's a badge employee twenty percent of time by the way they will train third parties and certify them they'll just procure the same sort of licenses from service packs as they would um they'll manage their workforce we'll give them the licenses to do that interesting how many individual technicians across your service providers are managed right now seats sort of across your 400 customers yeah there's um there's at least 7.8 million technicians wow 8 million technicians around the world to give context of why that your question around that 400 customers how much they could continue to grow only uh three to four hundred thousand or thereabouts are technicians that are using service facts the predominance of so you're asked like you might say well who's using the 8 million it's actually not our competitors right it's a very we have smaller competitors most of it is still manual processes you put these guys and gals out in the field and they're using their spreadsheets or their clipboards to figure out how to solve an issue so 7.8 million is the market you haven't captured it you've got about 300 000 right now absolutely yep oh i see i see okay gotta say 7.8 million across 400 customers is almost 19 000 technology that's why the runway is so long here is those technicians aren't actually using a competitor tool they're using pen and paper excel yeah that's still big though if you've got 300 000 seats across 400 customers that's still an average of 750 service providers per logo you're managing today yeah that's great that that's uh it sounds healthy to me interesting um i love how you talk about economics and profitability and free cash flow rule of 40 is obviously a popular metric and publicly traded sas i imagine you thought about this back end of last year where are you guys at right now or last part you disclosed it where are you in terms of rule of 40 yeah we we balance the since we're a private company and we're growing at the pace that i'm talking about we've been uh fortunate enough as we've been scaling into free cash flow positive the pinpointing for a wall street analyst to get at the end of q2 a rule of 40 or rule 50 rule of 60 is not the theme that we push on right ultimately it's the progress of the business we have very much in our line of sight how do we get to 40 50 60 and if you look at those types of growth rates it's just a small inflection of free cash flow margin that we got to create to get to it but right now you could hit that this year you think you hit 40 this year i'm not gonna commit to any number at this current time but what i will say is that a private company as we look at the long term and the runway there is a real path for us to feel really good about feeling like uh get in achieving numbers and the rule of 40 plus yeah yeah that's definitely in our line of sight yeah yeah i mean you already gave away one one part of the equation which is 20 35 growth the question now is can you that be close to profitability which would be sort of a rule of 20 rule of 35 and then if you can generate free cash flow obviously you break rule of 40 pretty quickly so interesting to watch you guys yeah nathan the good thing is like as every boardroom is doing is how do you balance up a company that's growing this space that at this pace with still free cash flow positive do you do you create more investment opportunity or do you do something in a piece wall street this current time we're we're thinking through the the dynamic as everyone is right now quite frankly space is getting awesome finally bringing sanity to it yeah historically speaking service max has not been a highly acquisitive company liquid frameworks and zinc really only the two ones i know about uh backed by private equity firm you'd think you guys being the hub there'd be many more spokes you're bringing under your umbrella especially right now when you could argue software companies are cheap or cheaper to go acquire any m a on your on your roadmap you know i we we uh we bought liquid frameworks our biggest uh m a deals since the company was formed it's in the oil and gas renewable energy space industrial services and my theory the reason why you're not going to see the constant drum beat of just buying companies acquiring them integrating them particularly when it's a mission critical application like this nathan the headline of buying a company doesn't do any difference it's actually creating value for the customer and as you know it's easy to do a deal it's within a deal structure it's much harder to make sure the customer is really happy with now the combined entity and we're focused in on that i will say we're watching the market very closely we have a m a filter and a target list that we take uh very seriously and if things continue to get rational the way that we're starting to see in the private markets this is going to be a great opportunity for the strong to get stronger but right now we're focused on organic growth and uh and making sure we run the business efficiently it's a big part of um what i think we're proud of over the last three and a half years of doing nathan that was 148 million deal price back in november obviously you want to keep talented folks around typically there's cash plus earn out plus stock are you able to share what portion that was cash versus you know stock or earn out no i'm not right you guys haven't talked about that publicly i don't think so okay fair enough um let me see here did you do um a lot of the press around what you guys were doing ended last year and you guys were talking about like spacks and stuff which i would argue is just like from a disciplined perspective i mean now you look at specs and you go well are these things like a big gimmick what's going on here i mean why even waste your energy and time even thinking about that at the end of last year you know it was um i think it was a great uh there's two things that actually was the value of doing it number one is we're public company ready right and creating all the infrastructure brought in a general counsel uh chief accounting officer having the hygiene and discipline to be thinking like a public company is actually of real value in addition to obviously having the private equity backed mentality public companies go through different types of scrutiny and that whole foundation laying is i think long term a really good thing who knows when the public markets open up again what we will have is the ability to actually execute on whenever that opens up in the next year two years three years four years but that hygiene and foundation laying was really important and i think accelerated some of the strength of the foundation to do things like m a over the next number of years to actually continue to think about the trade-off of organic growth versus profitability and i think that discipline was awesome so i look back at it we chose not to go down and execute on the spec at the end by the way to be clear but the all the work that we did was huge 100 plus investors that never knew about service max being able to talk to them like we are with you nathan and going into the guts is always a good thing and now we're seeing the value of that of people investors that wanted to invest in the company as a public entity now looking at it saying hey there's an m a target that same seems really interesting the service factor i learned about it why don't you go talk to these guys so i think the more people learn about service max yourself your viewers included really fall in love with the the actual business and then the economic model is very alluring and so more people know about it the better and i think that's the value looking back at it of course what's happened in the stock market you'd be like man but we didn't know that 2020 yeah hindsight but we gained a lot from the process nathan for sure yeah that makes a lot of sense i mean last question here before we wrap up i mean i would argue i don't know how you feel about this but if you guys were listening to the list today i don't know how to be super strong listing because look you're seeing massive valuation range on net dollar retention i mean i understand 120 is fine but like best in class public you're talking 135 140 150. um and so like you know and they're sometimes even growing and they're growing at fast rates and 25 to 30 you know year over year right so like how do you how do you think about sort of that balance and do you i mean do you think you would do well today would you trade at more than 1.4 billion valuation if you ipo today in your opinion yeah you know right now with what's going on in the world the best thing i'm telling my team myself when we wake up keep running this business the progress that we've made over three and a half years we continue that path we're serving our customers really well the options exist for the company whether it's public whether we continue on the journey privately uh whether we team up with another partner just keep focusing on these customers and we're doing a bang-up job and if we if we just think about a single moment of valuation metrics you kind of think in a way that's very short-term and we have the luxury thinking uh longer than that so i believe that that focus is gonna reward the shareholders extremely well and i think we'll create a great company that will be a very one that we'll all be proud of neil let's wrap up here with the famous five number one favorite book favorite book you know i've got a lot of biographies that i like i don't really like when you read the last one i read was uh the jeffrey immelt book actually uh which was interesting um and uh yeah i don't really have a favorite book i'm a big reader of like nonfiction um so all magazines if you want any magazine description i have probably have subscripted all of them and that's uh and the print version by the way nathan so i'm the only one remaining like it's the print version that's awesome we'll have to send you i don't have any copies laying around here right now but we've got a version that is only sas here we go only sas focus we'll have to ship you a copy right number two ceo you're following or studying ceo i'm following you know i got to meet brad smith that ran into it um a couple weeks ago and i was just blown away so i've been doing a lot of following of brad smith and what he did it into it and had the option to spend a number of hours with them so look him up great great ceo and someone that you know is paving the path for people like us number three favorite online tool you use to build service max favorite online tool you know we've got my commercial we've got an awesome tool called zinc the collaboration tool that our engineers use our sales people use get zinc and allows you to run a more efficient company particularly in this world that we live in where it's a hybrid approach number four hours of sleep each night what's the average six five and a half last last night four last night before the the kids got up i got a nine and seven year old and a puppy so oh wow and a ceo job with everything going on so it's uh it's fun married married two kids and neil how old are you i am gonna turn 45 in july take us home something something you wish you knew back when you were 20. it's a long long road and the quick wins are good at the moment and uh but it's the journey that matters it's truly in the relationship you make guys service max launched back in 2007 ge bought for about a billion dollars in 2016 then spun it out in 2018. that's when neil came into the picture now focused on driving consistent responsible growth here they're not burning crazy amounts of capital you know north of 100 million dollar run rate today serving 400 customers focused on providing them more value he serves and right now believes there's about 7.8 million technicians in the world this is the technician phillips might recruit to go fix a piece of equipment at their physical location right now only 300 000 on service max a lot of expansion opportunities there right now net dollar retention 120 125 so again room to expand there as well building a discipline company here with about 580 employees 250 engineers we'll see what neil does next neil thanks for taking us to the top thanks anthony appreciate the time one more thing before you go we have a brand new show every thursday at 1 pm central it's called shark...