How SPIDR Tech Reached $2M ARR with 60 Law Enforcement Agency Customers Before Being Acquired (Interview with CEO Rahul Sidhu)

Introduction and What SPIDR Tech Does

Nathan Latka

00:00Hey, folks. My guest today is Rahul Sidhu. He's known as Silicon Valley's expert on policing, currently works with over 50 local law enforcement agencies across the continent on police reform initiatives. He's the CEO and co founder of SPIDR Tech, spelled s P I D R. He created the world's first automated customer service platform for public safety agencies. Rahul, are you ready to take

00:19us to the top?

Rahul Sidhu

00:20>> Sure I am.

Who Are the Customers of Law Enforcement Agencies

Nathan Latka

00:21All right, what does that mean? Who are the customers of policing agencies?

Rahul Sidhu

00:25>> Well, I mean, anybody who is interacting with a police officer or deputy sheriff at a local law enforcement level is essentially a customer. If you're paying taxes or you're basically, whether you're getting, you call 911 because you need help or you're a victim of crime, or even if you're getting pulled over because you're basically paying for them to keep the road safe too, you're technically a customer of that agency.

Who Pays SPIDR Tech and How the Platform Works

Nathan Latka

00:46So who's paying you then?

Rahul Sidhu

00:47>> Well, the

00:48>> agencies themselves. So the cities and counties pay SPIDR Tech for the software that allows them to provide better customer service. And that customer service comes in the form of automated texts and emails that go out to the customers of that agency to keep them informed, let them know what's going on with the status of their case, their now one call, traffic collision, etcetera. But it also goes out in the form of mobile friendly surveys that are

01:12>> being sent to people who are interacting with those police officers so that those agencies can gather feedback every time someone interacts with them that can better improve their operations. Why they need to

Why Agencies Need SPIDR Tech Over Generic Tools

Nathan Latka

01:23use you for this versus sort of an instant of Twilio's SMS texting API?

Rahul Sidhu

01:28>> Well, in order for this process to be automated, you need to have a basically all in one system that integrates with the data systems that they're using today. For our platform to be able to send out a survey to someone who just recently interacted with a police officer because they called 911 or they're a victim of crime or whatever the circumstances, we need to be able to intelligently connect to the dispatch systems that they have or

01:52>> the records management systems that they have so that those messages can go out. And that every single survey that comes back can be attached to an interaction, which we have a record of. So all those surveys, for example, we have a plan of action because we know it's in reference to this officer, this not one call, this report, whatever the circumstances, this traffic stop, because we have that integration in place. And you can't just do that

02:16>> with, let's say SurveyMonkey or Twilio by itself. You have to build a platform that works for these configurations and then use those integrations to do this automatically.

Pricing Model and Contract Structure

Nathan Latka

02:26Understood. And what are these agencies paying you per month on average to use the technology?

Rahul Sidhu

02:31>> Well, do yearly contracts and in some case, multi year contracts. The pricing is based off of how large the agencies are in terms of their sworn size is the term. Sworn size would be how many police officers or deputy sheriffs they have work in the fields, etcetera, to be able to get a sense of how much data is going to go in and out. How many customers are they likely interacting with on a daily basis? They

02:53>> pay an annual fee based on that, and that covers the entirety of the platform, or they can purchase it of a la carte module by module. They can decide we only want to send messages to nine eleven callers or crime victims, for example. They can decide that they want to specifically do surveys or they want to have a module on their website, which allows people to go and track the status of their case directly from the

03:13>> police website. They can pick and choose or they can take the old platform. And that's what basically how we set up the annual fee.

Nathan Latka

03:19So I'm going to force you

03:21on an average year old just to help us stay focused. What would an average contract be for the year?

Rahul Sidhu

03:25>> Well, I guess you'd say at a smaller agency of 100 folks, could be somewhere between 10,000 to 40 ish thousand dollars a year, depending on how much of the platform that they wanted.

Nathan Latka

03:37Okay. So you upsell based off number of seats, there's also a feature based upsell and then also just utility based upsell based off number of customers in that jurisdiction?

Rahul Sidhu

03:44>> Yeah. And it's not necessarily seat based because they can't go, Oh, we're only going to give this to 10 cops or 100 cops. It's based on the entire size of their agency. So they

Nathan Latka

03:52can't just buy it and test it with 10 cops? It's all or nothing?

Rahul Sidhu

03:56>> We do do pilot programs for larger agencies that have 500 to 1,000 plus cops where we'll do like a three month kind of custom based trial period at a lower cost. But generally speaking, no, it's based on the size of the agency because the amount of data is going to be the same either way.

Nathan Latka

04:10I see, I see. Okay, what's the backstory here? When'd you launch?

Company Backstory and Founding in 2015

Rahul Sidhu

04:14>> Well, we started the company in 2015. My background is in public safety. I formerly worked as a paramedic and also police officer on the East And West Coast. So I had a better understanding of what it was like to be a police officer and how to provide that type of customer service. I also had the technology background, having a startup in high school that kind of helped pay my way through college. So I combined my love

04:34>> for technology and public safety in 2015 with two co founders, one who was also in policing and another one who was on the technical side of things. We launched for our first customer in 2016 and ever since then we've been growing considerably.

First Revenue Years and Early Lessons

Nathan Latka

04:47And tell me about first year revenue. Do you remember how much

Rahul Sidhu

04:50>> you did in 2016? Yeah, I can tell you wholeheartedly. It was a big fat goose egg in 2016 because in the beginning we had to have law enforcement agencies to take a chance on us, they weren't willing to pay. It wasn't until 2017 that we started seeing any revenue and it was just a couple of contracts.

Nathan Latka

05:06What was 2017 revenue? Your first year revenue, was curious.

Rahul Sidhu

05:10>> It was less than 100 ks a year.

Nathan Latka

05:12Okay, less than 100 ks. What did you learn from that first 100 ks? Were you too cheap, too expensive, sales motion longer than you thought, shorter? What surprised you?

Rahul Sidhu

05:21>> Well, I mean, focus on doing a couple of things really well, I think is the life. I mean, just everyone knows this lesson, but it was just really shown to us that doing a couple of things really well is more important than doing a bunch of things kind of okay, just to try and catch as many customers as you can. I wouldn't say that pricing was necessarily an issue. It was more so just making sure that

05:42>> we found that what we were doing was really good for those particular customers and then trusting that that referral process and the network effects of that, especially in regional gov tech, will work out as intended. That's essentially what ended up happening.

Current Customer Count and Scale

Nathan Latka

05:55So first customers twenty seventeen, you learn from them. How many customers are you now working with today?

Rahul Sidhu

06:00>> We have over 60 different agencies across The United States and Canada.

Nathan Latka

06:04Okay. And how many paid seats are there for officers?

Rahul Sidhu

06:09>> I couldn't give you the most recent sworn number off the top of my head, but I can say it's in the tens of thousands.

Nathan Latka

06:17Tens of thousands. Okay. Now, can I multiply that? Can I take those 60 customers times call it like a $2,000 a month average contract size? You guys are about $120 a month right now

Rahul Sidhu

06:26>> in revenue, something like that? It's certainly a little bit more than that.

Nathan Latka

06:30A little more than that. Okay. Have you guys broken a $2,000,000 run rate at this point, or is this something you're focused on doing this year? We have. Yes. You have. Okay. Okay. So a couple of questions on capitalization here. There were two years that you were essentially pre revenue. You started in 2015, first customer was 2017. How'd you fund yourself?

Funding History: Pre-Seed, Seed, and Inside Rounds

Rahul Sidhu

06:45>> We actually went through the Techstars program in late twenty fifteen, Techstars New York. It was the horizontal program with Alexis Gold and KJ Singh. From there, we did a pre seed round of about $1,000,000 with Winklevoss Capital and a couple other folks, buddy Greg Troy, Taylor Adams, no name- What year was that million? 2016. Okay. And then in 2017, towards the end, we raised a proper seed round of about $2,500,000 It was priced with Alphabet,

07:12>> Sidewalk Labs, Birchmere Ventures, Stage Ventures, Heartland, and a few other more institutional sized funds with repeat investors and a couple of strategic angels as well. From there, we just started raising inside rounds to continue our growth.

Nathan Latka

07:26In 2017, that 2,500,000, that was your first price trend.

07:29What valuation did you negotiate?

Rahul Sidhu

07:31>> I can't actually mention that right now.

Nathan Latka

07:34That was like five years ago, man. Come on, you can't talk about the valuation from 2017?

Rahul Sidhu

07:38>> Well, what I'll tell you this is, we were recently acquired actually about a month and a half ago. I'm still constantly figuring out what a can and can't say.

Nathan Latka

07:48I see. Okay. That explains things. Okay.

07:54Let's talk pre acquisition here for a second. So the total you raised pre acquisition was about 3,500,000 or

Rahul Sidhu

07:58>> you did another inside round before that? Pre acquisition was about 3.5 plus another about 1,000,000. So it was close to about 4.5 in total money in.

The Decision to Sell and the Versaterm Acquisition

Nathan Latka

08:05Okay. That's a big moment to decide to sell. Why did you decide to sell?

Rahul Sidhu

08:09>> We got a couple offers and we didn't really want to sell. And I basically told the folks that we were talking to, here's the only way we would do a deal. It would have to be structured in a way that allows us to have upside to continue moving forward in the business, etcetera, so that we can all, including all of our shareholders, enjoy this growth now that we're at this inflection point. Lo and behold, the buyer

08:33>> of the company said, Okay. And they put something together that actually made sense and was what we asked for. And then they never changed the goalposts. We've gone through processes like that in the past where potential buyers come up with an interesting deal and then, Okay, we might entertain this. Then down the line that ends up changing considerably. This was a class act buyer, strategic. I can tell you right now, it's a public safety company called

08:58>> Versaterm. Stuck to their words and said, Hey, this is what we'll do. It was what we asked for and that was it.

Revenue Run Rate and Growth Discussion Post-Acquisition

Nathan Latka

09:06Now, if you were doing or you're north of 160 a month today in terms of revenue, where were you exactly a year ago so we can calculate a growth rate?

Rahul Sidhu

09:13>> Well, about a year ago, we were in the throes of kind of coming out of super scary municipal budgetary impacts of COVID. And we're starting to realize, okay, you know what? We can still make things happen and we can still sell. We had a major customer come on board, a major city that doubled our revenue, almost doubled our revenue overnight in Q1 of twenty twenty. And then coming into Q3 of twenty twenty, we saw continuous growth

09:44>> that was a little bit more quarter over quarter than we had seen previously in the year before, and we think it would have been better without COVID, of course. But then that's when we started realizing that from a municipal standpoint, which is where we make most of our money, we going to be okay. These cities are not going bankrupt. In fact, in some cases, have surpluses of cash. They over are competent from a budgetary standpoint, plus

10:08>> the stimulus was coming. We realized that in Q4 with how the election turned out that some these cities are going to have a little bit more money than they know what to do with, and that changed things for us a little bit more. So we've just been growing pretty much steadily quarter over quarter, and I will say that the years prior, we had 5x year over year growth pretty easily.

Nathan Latka

10:27Oh yeah, I mean, those are sort of numbers. That was a very long answer to a very simple question. If you're doing 160 like today, what were you doing exactly a year ago in this same month, right? Did you double year over year or something different?

Rahul Sidhu

10:36>> I just can't provide, I have to act like a politician. I can't provide you a simple question where I'm kind of stuck post acquisition of what I can and can't say on behalf of those numbers.

Nathan Latka

10:44Well, you just share that you're above $2,000,000 in revenue. I imagine if you can share that, can share a growth rate. You got

Rahul Sidhu

10:49>> to pick and choose how much of a range you're willing to give before you get in trouble.

Profitability and the VC vs Organic Growth Debate

Nathan Latka

10:52Okay, fair enough. Got it. So you can share that you're above a $2,000,000 run rate, but you can't share what growth was over the past twelve months. Tell me a little bit more about capitalization. Mean, typically once you raise, especially that 2,500,000 in 2017, you've got to go, I mean, you're on the VC track. You're not raising every 18 months, another institution around, that's a bad signal to the market. Guys didn't do another traditional round after

11:14that. Raised from insiders. I mean, was this an acquihire? Was this a flash sale?

Rahul Sidhu

11:18>> No, no. In fact, we had the potential of competing term sheet. We had a term sheet for series A. Mean, we actually ended up turning things down because we felt like this was a very, very rare type of acquisition that we could have easily walked away from. We had reached profitability last year as well. We didn't necessarily need venture money to continue growing. Of course, we wanted venture money if we were going to grow at a

11:42>> pace that we felt like would keep us optimized, but it was Well, have no choice.

Nathan Latka

11:47That's the problem with raising VC. If you're not growing fast, you'd made that choice the second you took your first dollar of outside revenue. So even if you're profitable, if you're not growing as a VC backed company, you're still cooked and you've got to take an exit like this to get out of a bad situation.

Rahul Sidhu

12:00>> Well, I think I pushed back on that a little bit. I think it's a couple of variables that basically make that happen, that pressure happen. It depends on the type of VC money you took. If you take VC money from micro VCs and angels and folks that are pretty much reasonable, how they expect the returns and when they're going to expect the returns and give you that flexibility, then it's a little bit less pressure. If you're

12:22>> kind of stuck in this, we got big institutional VCs, and this is what it's going to take to make shareholders happy, we've given up this amount of control, this is what the expectation looks like, then the pressure actually ends up building. But for us, we got to a point where we'd taken a couple rounds of funding, we had very flexible and reasonable venture capitalists who knew they got into a GovTech company, and they were willing to

12:45>> kind of go both ways. Of course, the pressure comes to, do you want to optimize? We didn't have to take an exit. We could have gone the VC route, and we were growing fast enough with the money that we had that we could have continued to organically grow and still see growth rates of two to three X year over year. But if we wanted to spend that money upfront to basically instead of double our sales force

13:07>> to triple, quadruple it, go into like, let's say a fire vertical or court vertical, of course, there's no way to do that without venture capital. And ultimately, the other aspect for what we're doing, going organically at the time versus basically going the VC route was some things you can't necessarily do faster. In government, we were able to hack the sales cycle quite a bit, but were there certain things we just had to wait out with COVID

13:34>> and budgeting, etcetera, etcetera. So it did delay when we were going to raise, but it didn't have as much of an impact on our decision as you're suggesting.

Famous Five Rapid Fire Questions

Nathan Latka

13:43Got it. Fair enough. Let's wrap up here with the famous five. Number one, favorite book.

Rahul Sidhu

13:49>> Sapiens.

Nathan Latka

13:50Number two, is there a CEO you're following or studying?

Rahul Sidhu

13:53>> There are many, but I don't think I can tell you one that I find to be more interesting than the others.

Nathan Latka

14:01Great. Number three, what's your favorite online tool for building the business?

Rahul Sidhu

14:06>> Just your standard Google collaboration tools, I think get you 80% of the way.

Nathan Latka

14:11And number four, how many hours of sleep did you get last night?

Rahul Sidhu

14:15>> About seven.

Nathan Latka

14:16Seven. And what's your situation? Married, single, kiddos?

Rahul Sidhu

14:20>> Single in the sense that I'm not married, but happily in a relationship.

Nathan Latka

14:24And okay, so no kids.

14:25And how old are you?

Rahul Sidhu

14:26>> I'm 32.

Nathan Latka

14:2732. Last question. Something you wish you

14:29knew when you were 20.

Rahul Sidhu

14:31>> That it was going to take me longer to get to where I am today and I should be okay with that and trust the journey.

Nathan Latka

14:37Guys, there you have it, SPIDR Tech working with police municipalities to help and make sure they stay close to customers, the folks living nearby that they're protecting. Launched in 2015, pre revenue for two years, did $100k in sales in 2017. Also raised a $2,500,000 seed that year, ended up raising about $4,550,000 before exiting here last month in 2021, north of a $2,000,000 run rate as they look to continue to scale with their new partner. Thank you

15:02for taking it Rahul, thank you for taking us to the top.

Rahul Sidhu

15:04>> You got it.

Nathan Latka

15:07One 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 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 1PM

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