How Stackify CEO Matt Watson grew Stackify to $2M revenue and 900 customers in 2024.

hello everyone my guest today is Matt Watson he's the founder and CEO of stack a 5 he has been a developer in hacker for over 15 years and loves solving hard problems with code while working in IT management he realized how much of his time was wasted trying to put out production fires without the right tools all right stack if I'm mad are you ready to take us to the top I'm ready let's go all right tell us about the company what do you guys do in how do you make money um basically we help software developers find why their code sucks mm-hmm and it's like reinforce QA or sauce labs or automated testing or no it's not testing it's more debugging and troubleshooting applications that are in production so you know maybe a good example will help so let's say you're on Pizza Huts website you're trying to order pizza if for whatever reason their website is slow it gets an error it's not working you're gonna go to Domino's you're gonna go somewhere else in order pizza right well pizza needs to know when that happens they need to know when their application is slow and they need to figure out why they need to know why as fast as possible so tools like ours which are APM products application performance monitoring products are used to do those sort of things found it ok and walk me through kind of revenue structure are you pure-play SAS company yep we're a SAS company we have almost 900 customers all over the world that just pay us a monthly subscription for using our tools ok and what do they pay on average per month um it's all of the board I mean we have a lot of customers that pay us 2 or $300 a month and we have customers that pay us thousands that are bigger just to avoid going on every cohort though I mean what would you say the average is 2 or $300 a month ok 200 or 300 thats great so I mean let's assume a conservative 200 bucks a month times 900 I mean that puts it about 180 grand a month right now in revenue yeah yep and what does growth look like where were you a year ago um we've grown about 80 percent year-over-year ok so I've got a hundred grand a year ago yeah something like that I don't member the exact numbers yeah what's driven most of the growth is it kind of adding new customers or expanding customers you already had mostly new customers for sure so we we definitely do see a lot of expansion so a lot of our customers are software companies of course so when their companies grow they need more licenses our software so that that drives growth that way but yeah we sign up a lot of new customers every week so so I want to try and capture how you're doing on expansion as best I can and usually the best question to capture that is what your net revenue or retention looks like annually I assume it's maybe above 100 percent what is it we have negative turn so when I've looked at it before our year-over-year expansion is like 20 percent okay and what is your gross revenue churn per year I'm not sure okay well how asked differently how how negative are you net negative revenue churn it's about negative it's about 20 percent negative 20 percent yeah okay so that wouldn't so how does that work so if you're because if you're if you're expanding 20 percent on the current cut on the customer cohort that it would be impossible to get to net negative 20 percent churn unless you're gross churn with zero yeah I don't know I may be losing you on the numbers here that's not Mike no no do you know do you just know what your churn is in general I mean it's a fairly sameen how many logos are you losing per month or per year or how much revenue are using losing per month per year yeah so an actual customer base we probably retain 85 to 90 percent of the customers and then the ones the ones that stay all grow yeah and so the ones that stay spend more money than the ones that we lost yep yep 90 percent logo retention per year again those logos that stage like you just said the expansion on those makes up more than the lost revenue which is why you have net negative revenue churn yeah there we go good stuff yeah oh that is confusing no no that's okay it's one of those key things let me ask you as kind of the as kind of the technical co-founder how do you use numbers like this I imagine when a guy like me asked you these questions you go like off I don't need to know all these numbers like who handles that at the company I mean a lot of those numbers aren't numbers that we really think about at all unless it's time to talk to some investors on a day-to-day basis they're not really KPIs that we think about honestly how do you so when someone signs up for stock if I on day one what do you have to get them to do to make sure they stay sticky and they don't cancel install our software actually use it does that mean that what does actually use mean well for us they have to install our software on their servers so we want them to get it installed and then have one of those kind of aha moments you know learn something about their the performance of their software they didn't know solve a problem they didn't know you know something like that that gets them to that aha moment as fast as possible mm-hmm and and what is that I mean what is that so I imagine you have a lot of people who download this the thing they install it and then they you log on the Meccan you go oh my gosh I haven't all gone in like a you know a month yeah right yep so like those people are hi candidates for churn that's why turn is usually important is because it's a way to track if people are gonna keep paying you based off activation metrics right sure so how do you reengage those people that install the software then never actually get value from it because they never actually use it yeah usually though they're just trials that don't convert so you know we we're doing hundreds and hundreds of trials a month and you know 10% of them or less will will decide to pay the ones that do decide to pay usually stick around but yeah there's a lot of people that sign up for trial that just never do anything yeah let me ask you another question about kind of you know economics here customer acquisition costs what is it all in honestly don't know what the number is off top my head it's a few hundred dollars but we don't we don't do really paid advertising so it's not a number that we really focus on we talked about your team with your team size we have about 20 people in our office in a Kansas City and then we have about 20 more in the Philippines Kansas and okay so so 40 total yeah okay and break those folks down for me how many of our sales and marketing it's about five people and sales marketing okay so how do you let me ask you a question someone that you hire for sales how do you measure if they're performing or not performing just based on the number of potential you know leads and customers that they handle and how they're how they're doing with them so our our whole model is inbound we get about 800,000 people a month on our website from our content marketing and stuff that we do and that drives a lot of our trials and interest in our so keep keep going down the funnel for me that's valuable 800,000 views how many trials per month about it's been seven eight hundred a month okay and then about how many new customers per month about ten percent of those um it it ranges from forty to fifty usually okay okay so that's pretty healthy so so going back if you have a sales person right that you're those eight hundred new trials that you're getting per month let's say they do two hundred demos like do you track how many the demos they convert like how do you know if they're good sales person or not yeah we track all of those things I don't know what the numbers are off top of my head because I'm not in charge of sales but we definitely track those things ignore what the actual number is but that's why I was trying to figure out like customer acquisition costs obviously on a fully diluted basis would count that person's salary and you know based off what you pay them they've got to bring an X amount of new revenue to make it you know a profit Center for you so I was trying to figure out if you it sounds like you maybe don't run that part of the business but those numbers are things your what VP of Sales is looking at yeah I mean we since we don't do paid advertising we just kind of get the number of leads that we get and our it's really the efficiency of how many of those we close we just now are starting to do more outbound and hired our first like a sells development representative and so that'll all be much more trackable on that and the number of like net new leads they create and how much we pay them versus how many leads they created and stuff like that the the rest of our team traditionally has just been more sort of order takers right it's like these are all the people that start at a trial we're just trying to get them to to buy what do they do though I mean do they get on a call with them is there any sales skill required or no it's all no touch yeah no it is we I mean we do demos and stuff like that but for us a lot of it is more customer service it's people who...