How Cognota CEO Ryan Austin grew Cognota to $900K revenue and 60 customers in 2020.

hello everyone my guest today is ryan austin he's an entrepreneur who spent over 10 years driving improvements in learning and development in his current role as ceo of synapse ryan is focused on developing innovative products to help learning teams increase productivity and create impacting impactful training at scale before this company served as senior vice president for world trade group an organization that levers offer that offers live events online products and training courses ryan you ready to take us to the top sure all right so just be clear the url is git synapse.com is it a sas company are you selling services too no this is a pure sas company 100 software notes okay and your baby you that you're the founder yep one of the uh the co-founders when did you launch um we launched it i guess officially in 2017 although we worked on the r d for about a year year and a half before that so launch 2017 i mean how much you spend sort of on the rnd and the mvp before your first paying customer do you remember um well there's a lot of different versions we don't have a direct competitor still in the market right now there's indirect incumbents so there was a lot of lessons learned in learning curves to do what we do and we spent probably about 50 grand to get the first kind of iteration out the door and uh and started to monetize it but then kept going from there raised a little bit of money after that how much have you raised about four million dollars do you regret that um don't regret it because we have some good uh some great institutional uh investors and uh early on we had some um angel investors who without them we wouldn't have gotten to where we are today um one of my first sas companies that uh really have taken to a point where we're you know really about to scale now which is exciting um would i take money on early again yes but you know you would have different limits on how you do things you learn as you execute so of course of course so sign your first customers up in 2017 i imagine how many customers are you serving today uh we have about 60 um on the platform uh 60 enterprises directly today and but we've just started to experiment with some channel partnerships one which we just did a press release on where um over the next two years they're going to onboard us to 11 000 clients of theirs which is exciting what did they get for that um it's just uh [Music] similar to how you would do kind of a wholesale retail relationship in a you know a traditional product it's similar to that so revenue split so what percent of the revenue are they do they get to keep like 30 50 percent more i can't talk about that specifically just because we have certain agreements in place but it you know it's a win-win scenario where we're we're both happy it's very balanced relationship can you share a range is it more or less than 50 percent uh it's around that yeah okay around that fair enough let's go back to your first 10 customers how did you get them oh being scrappy our fir our first client ever was uh a fortune 10 customer who uh um exxon mobil okay and um they basically read about us in the newspaper after coming out of an accelerator and um and uh asked to see the software where we we're like well we don't have software yet here's our plan and um it was a a problem for them that that they said well we'll give you a little money to help you develop this and that was really when we flipped the switch to um just really focusing on uh software as a service how much do they invest um it was in the six figures range and was it was it just like a customer payment or they actually get equity uh customer payment oh great that's that's the best way to do it very cool uh so that was your first customer you got them on board are they still paying today they are that's great so what is the average customer paying you per month to use sign apps it's it's interesting we just went through an iteration of of our pricing model as a seed stage company you know it's all about learning um uh our average price was about twelve thousand dollars in the past um and annually and increased from there based off a per seat model but we uh we actually just flipped the switch with kovid um to not having any minimums and pricing at fifteen hundred dollars a seat um to lower all barriers and we're we're seeing contracts come through at greater deal value than than before and so can i take 60 customers times a thousand dollar a month on average i mean you're doing about sixty thousand dollars a month right now in revenue uh no it's higher than that actually um some some clients are are paying us in the six figure range okay can you give me like a range of where you got are you north of 100 000 a month um so where i i guess i'll say it like this just because it changes daily right now nathan especially with the partnerships we just onboarded um we have not yet gone to series a and when we do uh our plan is to start um um working with seri series a partners at around two and a half million arr so we're not quite there yet but um you know we'll be there in about a year's time or or less i mean do you think you can break a million dollar run rate by the end of this year three months left oh yeah for sure okay got it got it so your plan is to break a million this year then double the next 12 months and then go to series a yeah i mean we will have over 100 growth this year um okay got it so if you're doing like call it 70 80 000 a month right now in revenue what were you doing a year ago um well a hundred percent less than that yeah so what was the number um so we we were um we were at uh a little over 400k in ar um less than a year ago yep yep yeah that's great growth where does most of that growth come from expanding customers who are already with you are getting new customers all together uh both so we have a transactional side to the business just like any other fast company and uh we call that internally kind of the the growth model and um with the partnership side of things we call that the scale model where we we partner with learning management systems that focus on specific industry verticals and um that that way we can service their clients with our technology and um they don't have to build what we offer what do you mean by transactional side of the business so transactional meaning you know we have a um a bdr and a account executive team who focuses on net new clients um you know we we find them through inbound and through demand generation and uh and outbound methods and then the uh the scale side of the business is just through the partner network i see i see how many quote carrying reps are currently on the team uh we just hired our second ae as of last week got it and your aes are the only ones with quota bdrs don't yeah cdrs are yep bdrs are incentivized on sales accepted leads or sales qualified leads and how many engineers are on the team about nine right now okay and what's a total team size um a little over 20. okay nice good stuff ryan it's very cool so so driving growth it sounds like channel partnerships is going to be a key strategy for you guys moving forward to drive growth you've raised four million currently are you still investing that capital to the point where you're your cash flow negative each month or you break even now or positive um there's a little bit of a loss still but we have a lot of runaway with with the money we've taken on as well uh when you say a little bit of lossy don't you mean you're doing like 10 grand a month in net burn or 100 grand or more no we're we're nowhere close to 100 grand in that burn but yeah got about more than 10. yeah okay fair enough fair enough when you took um you mentioned a lot of cash that you just that you raised is still in the bank when was that last race how long ago was it well we raised the majority of the money back in 2019 and we started experimenting with partners and very recently brought on three so the experiment ended up not being an experiment and we didn't want to take the money that we secured from the initial seed round and fuel into partnerships because it wasn't part of the plan um so we we just took on another million dollars in august okay got it okay so literally just recently you took on one five um you also chose to do i mean back when you did the round in in april i think it was of 2019 from generation i think you did 2.5 um in between that in the 1.5 you just took an equity it looks like you also did a little bit of debt is that accurate and if so help me understand how to use debt and sas company yeah so um the debt was really interesting actually so we uh we brought on some venture debt through comerica bank and it was mainly to really build the relationship early so that when we do our series a we can take about 30 percent of venture debt on top of that next round so this was just to get our feet wet build credibility uh build credit with the bank and uh so that we can use it as uh as a a non as a future um investment part or a future financial partner without taking on uh without giving away equity in the...