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 signed up for our product and they just have a question they're like yeah how do i how do I use dotnet with docker on AWS and whatever it's it's fairly straightforward customer service or stuff yep alright and put this on a timeline for me when you launch the company six years ago in 2012 oh wow okay and what kind of where was your head at that point what what what made you jump into it well was really just trying to solve my own problems from being the CTO of a previous company and there just really wasn't the tools out there that existed to do what I wanted to do so just had the crazy idea to actually to build it bootstrap torvi raise capital i funded all of it myself until recently we raised our first outside capital about a year ago how much total I'd rather not say okay I mean usually that's public because you have to file with the SEC I can usually look it up with a quick search I mean the the outside capital e we did was three million dollars yeah that's what I was referencing yeah so before that and that you say that was about a year ago in 2017 yeah so but you know previous to that you funded it all yourself I mean help me understand did you just save up a bunch before you put your corporate job and that's how you able to fund it or I had a company before I was the founder of that that we sold I saw I see and so I was able to use proceeds from that to get this off the ground got it no it makes good sense that you know you funding it yourself over four or five years explains why you've got a half a half drank bottle of pocket tequila behind your fireball behind John yeah right yeah that's right those are for those are for either the good days or there were the really good days or the really bad days right both well we do actually we do shots at fire shots at fireball at work about once a week when we have a good sales day that's good interesting you know something around here some people would say they do that when it's a bad day you say no it's a good day we take fire only in Kansas right yeah it's like yesterday we had five new accounts so it's like all right shots a fireball today that's great five new accounts at 200 bucks a month with such a grand a new monthly recurring revenue right well I mean like I said it's all over the board we have customers that pay us a lot more than that so yeah yeah do you run it so you don't run it on accounts that are maybe actually ask you your largest account in terms of a CV I mean are you breaching six figures yet or no yes yeah you know you do have some customers that pay you more than hundred grand per year yeah we do so on those accounts it's it's all inbound you don't have an outbound salesperson going after those leads no it's all inbound so we and about 70% of our business is international they all find us the same way like you know like we have somebody like Honeywell as a client but we don't call on the CIO of Honeywell try installing our software they find us the same way anybody else does they go to Google and search for different things and they run across our product so so let me ask you mean you bootstrap the thing we're in 2012 to 2017 to about a hundred grand a month in revenue right about 1.2 million per year and then you decide to go and raise capital what why'd you give in why did you need to raise capital uh my original goal was just to fund it to like the seed stage and then bring in some outside capital to help grow it so where where are you spending like how do you have confidence that three million agreeable to spend it to grow the company where where are you spending it I in product development sales and marketing I mean we're in Kansas City here and we don't do enterprise sales so I don't need to go hire a roomful of enterprise sales people at two hundred grand a year or like our competitors do that who are Sameer competitors just name one or two New Relic AppDynamics companies like that so they're all focused on the large enterprise accounts kind of exclusively and most of our customers are SMB the more mid-market companies yep yep interesting walk me through there's a bit of a discrepancy between what might what my team found in terms of funding versus what you just told me so they said they looked up and they said there was a five million dollar round and on January 1st 2015 what was that I mean I don't think any of that information that's out there is accurate so but it's taken directly for a minute it's taken it's taken directly from that is generated directly from an SEC filing did you do some weird like debt stuff early on Delp no cool no I'm not trying to be nosey by the way but I do want to if you came up with some creative strategy to raise capital in a non diluted way I want I want my listeners to know that so they can copy you know no I funded all of it until a year ago okay we did a three million dollar round then so that's all just misreporting it's all been your you have not raised twelve money you've only raised three million it was your own and it was just a year ago you did that yeah okay great very cool let's let's wrap up here with the famous five number one what's your favorite business book um you know I don't read a lot of books but there's one called a rocket fuel I don't remember what the the author was I really liked yeah I think I don't know if it was the base camp guys but yeah rocket fuel I've heard that one it's a good one number two is their CEO you're falling or studying right now you know not really I mean it's interesting to always follow Elon Musk and I'm sure people always give you that answer but his ups and downs right now are very interesting number three what is your favorite online tool for building a business um for building a business um I don't know if I have an answer for that honestly what tool do you use everyday jira slack divvy um Google talks yeah a lot of different tools yeah good and what's your actually how many hours of sleep are getting every night Oh probably seven to nine it's pretty good in what's your situation married single kids married with three little boys three Wow full house and how old are you I'm 37 37 last question what he was your 20 year old self knew that computer programming is in writing code is not the most valuable thing I can do then not not the most what it's not the most valuable thing I can do you know that's so interesting cuz every time I'm a business guy or gal on here you know what they say I wish I learned how to code earlier and almost every developer I've on says man I wish I knew sales faster yeah you know the most valuable part of it is the product a product division product management side of it writing the code is easy that's like assembly work like manufacturing work right almost it's the knowing what to write and how it's supposed to work that's the hard part yeah no yeah that's right very good guys there you have it Matt Watson stack if I launched back in 2012 solving his own problem bootstrap for the first several years recently raised three million bucks of capital serving over nine hundred customers paying on average 200 bucks a month so doing about 180 grand per month right now in revenue that's up eighty percent year-over-year in August 2017 he was doing just about a hundred grand monthly recurring revenue economics make a lot of sense ninety percent logo retention per year net negative revenue churn when they do spend money on an acquisition it's about 200 300 bucks couple bucks so payback is one or two months again team of 40 folks between Kansas City and the Philippines scaling Matt thank you so much for taking this to the top yeah absolutely thank you