How Workpath CEO Johannes Mueller grew Workpath to $3.5M revenue and 8 customers in 2024.

hello everyone my guest today is johannes mueller he studied business and technology management at lmu in munich germany in columbia and new york he didn't work in marketing and sales for a bit and then consulted various established enterprises with agile transformation and introduction of new management approaches he didn't work in venture capital for a u.s fund and german early stage vc in berlin mainly investing in machine learning cases he then founded his current company work path in 2017 to provide enterprises a new strategic operating model that helps them transforming into agile network organization driving focus alignment customer centricity and continuous organizational development johannes you ready to take us to the top yeah yeah all right so that's a mouthful that's a bit of a mouthful a simplify it for us what's work path to and what's your revenue model how do you make money yeah it's a i think a very traditional software as a service business uh we're selling to larger enterprises which pay usually for two to three years contract on a subscription base and then we call it a strategic operating model for for the company i think companies approaching us they come from a place where they're managing and trying to activate strategies along reporting lines and very slow and and rigid structures using powerpoint excel or some some old erp solutions um and they realize that the world they're operating in is is way too fast way too complex for for doing this and that's sort of what we we started work as an answer for and help me understand on average you know what i'm sure you have a lot of different cohorts but on average what enterprises pay you to use your technology per year per month it's usually six digits uh annual contract values okay so you're very much in the enterprise space yeah yeah we're starting with with pilots that might be a bit smaller um but it's usually at least a couple of hundred leadership leadership teams or leadership people in the pilot and then from there it's being rolled out step by step um as as the core idea of work path is really supporting the network organization usually just grows really fast into into um the organization from from a smaller pilot we're always going for six-digit contracts okay so just to be clear if you look at your current customer base and you take an average they're all north of a you know call it six digit contracts at this point yeah as i said not not all the pilots are there but they all have the potential to be to be uh in a significant digit yeah no i'm just talking average i know obviously probably start some some lower than that but ultimately you expand them yeah wait wait so when did you launch you said in 2017 exactly yeah and what did you when did you write the first line of code same year yeah yeah absolutely so we tried to be really fast um we came from from an environment where like thomas my co-founder and our cto he was the cto at freeletics a company that started really small and then scaled really fast so we basically wrote the first line of code just a couple of weeks after after starting out and i think we launched the mvp just uh four months after after starting which then was really a small pilot in in one of the leading um uh holiday or travel businesses here in germany and europe at trivago so we started out there with the first few paying pilots and i think it was until uh 2018 mid mid end of 2018 that we started to scale into really enterprises um where we could set all the you know enterprise readiness check marks so how much so what i was asking there is how much total did you spend on your mvp before your first dollar revenue [Music] we basically bootstrapped the beginning we put some of our money in and it was just three or four people uh developing on this for for i'd say three and a half months you so you had a same question you had to pay those people you put in your own money what did you spend total to build the product before your first dollar of revenue i i'd have to i'd have to calculate yeah it was it was a three founders of us um i don't know really 50 60k okay money okay okay so you did it pretty scrappy yeah okay and then um put this um well i guess some other stuff here so you mentioned bootstrapped are you still bootstrapped today or have you raised capital we just raised capital actually we're it's not uh not this close yet but we were able to bootstrap quite comfortably in the first one and a half years because we had larger contracts from from the beginning on um and then right now we are we realized okay we are the point where we've proven the business model we've proven the the case in itself uh we've proven also the sales process process which is i think a bit more complex and i mean it's normally an enterprise that you have longer sales cycles but there are a few things that we wanted to validate before giving in um outside capital yeah so johanna is this one go live until later how much total have you raised um as i said it's not this closely we're still in the process could still be still good so it i guess what are you targeting it's not done yet what are you targeting yeah it will be about 2 million 2 to 3 million and why is that the right amount in your opinion i think it will just get us where we need to get uh until until next year yeah um we have significant cash flow from the existing businesses we're working with customers like sap or maybe just to be clear your cash flow your cash flow positive or your burning capital i mean if you're i think if you're a cash flow positive you're not growing aggressive enough and fast fast enough yeah but but it's just this amount is i think what gets us until mid of next year connected to and combined with with the revenues we have um from the existing customers was just was just the right combination i think we were rather looking for the right kind of partners there were able to go to the mile like the the entire journey with us and basically this is where we where we ended up then deciding on i'd say this is the the amount we're getting sorry what i'm trying to get at is going if the race isn't done yet but going into the raise have you been operating the business basically a cash flow break even reinvesting everything or have you been burning cash and making up the hole with founders putting in more money no we put in as i said as founders we put in some money but i think over the last year most of the time last year we had more cash flow than we could spend we couldn't hire like really good engineers and sales people with the same pace that we had the cash flow from the larger enterprise contracts yeah okay if you had so much cash coming in then why on earth would you go raise now and give up equity um i think just right now it's you know in enterprise i think what my experience was over the last year um it is a bit slower in the beginning and then at one point if things work out you have to go really fast from like a thousand users there and to ten thousand users and from uh just two or three of these companies to several of these companies that's the point where you realize you you just cannot like it's customer success people that we didn't need at that scale before uh we just had to invest that kind of money now okay but you just told me you had way more cash coming in over the past 12 months than how you've been able to spend it so you wouldn't go raise capital unless you were going to increase burn that's what i'm trying to understand you're in vc so you should understand this really really really nicely right i'm trying to understand where if you have so much cash coming in why would you go take the dilution i think i was talking about a different phase in the company right so last year as i said 2018 was entering the first enterprise pilots with these larger companies where we we mainly focused on just building the product building out the end uh the mvp investing in enterprise readiness uh and and doing some sales uh but really focusing on these making these pilots successful and i'd say we we entered a new phase now we realized we need more customer success now it's getting out of the mvp phase and scaling this um and then you are certainly in a situation where you cannot pay that from cash flow anymore if you want to grow as fast as you want yeah that that makes sense that's helpful um how many customers are you serving now today it's about 40 customers but i'd say you know really as i said six digit contracts where we have the the the user size already that we are going for it's about eight nine customers that we're really focusing on tax companies like sap and and the others are other you know rather in the mid-sized uh segment or uh pilots that there are planned to grow in that size so johanna sorry you have eight customers that are at the enterprise level the six-figure contract values which are have already moved out of the of the pilot phase yeah and and are i'd say you know and up and running okay so you're doing you're doing you're doing about a million dollars a year right now in terms of run rate then about 83 000 bucks a month yeah like we don't report on on the exact numbers there but that's about the ballpark and so if that's ballpark where were you about exactly a year ago oh like mid of 2018 yeah so july uh one year ago as i said like we don't don't report the exact numbers there uh...