Long Road to Product-Market Fit: Allan Wille, CEO of KlipFolio (Part 7)

Sramana Mitra: Eventually, where did you raise money from?

Allan Wille: The Series A lead was from Canada. That was from OMERS. OMERS, of course, has a big history with Hootsuite and Shopify. They know that space very well. Our seed round had both Canadian and US investors. I don’t know if you know Maya Hayman at Converge?

Sramana Mitra: I don’t.

Allan Wille: She’s amazing. She was instrumental in helping us get the seed round together. She participated in all of our follow-on rounds. Just recently in January, we announced our Series B, which was fantastic as well. We closed a $12 million round. It’s a story of a lot of perseverance and listening to the market but now we finally have something where money can properly accelerate the business.

Sramana Mitra: What are you seeing in terms of metrics from a business point of view? How many customers? What kind of revenue level? How are you growing?

Allan Wille: MRR is probably the most important one, certainly at our stage. Investors are looking for a minimum of 2x. If you have a 3x, your really going to get top valuation metrics. Even a 1.5x to 3x is definitely inside of scope. I don’t know if you have heard of Brad Feld’s Rule of 40. It’s a great little number. Have you heard of that one?

Sramana Mitra: Yes. Go ahead and explain that. It’s a good one actually.

Allan Wille: It’s a nice one to understand as to how your profitability and growth rate relate to each other. What Brad is suggesting is that you take your annual growth percentage. Let’s say you’re growing at 100% to keep the number simple. Let’s say your EBITDA profit margin is minus 60%. You take 100%, subtract 60%, and you get to your 40%.

The opposite may be true. Let’s say you’re growing 20% annually but you have an EBITDA of 20%. Again, you end up at 40%. It’s a really nice way of assessing a company and seeing where you fall in the spectrum. All of the other unit economics like the churn and lifetime value are important. I think if you’re a company looking to raise money, you need to have one really stellar metric. Then you can’t have any terribly scary metric.

Sramana Mitra: I think the metric that people are looking for if you’re trying to raise money is velocity. That’s the only thing actually that matters if you’re trying to raise money. If you can’t show evidence of velocity, you shouldn’t really get your company funded by VCs because it’s going to get caught in the next round. The entire venture-funded model is built around velocity.

Allan Wille: I categorize things differently. As a startup, I generally say, “Pay more attention to your product metrics.” How many active users do you have? Even net retention is a nice product market fit metric. Then you get into the growth stage where it’s all about velocity. Once you get beyond the growth, it starts to become about efficiency metrics. I think you need to segment or stratify what group of metrics you’re looking at at each stage.

Sramana Mitra: What revenue range are you at right now? You can say whatever is comfortable with you.

Allan Wille: We’re doing about $7 million in annual recurring revenue right now. We had super growth for the past couple of years hitting between two and three times multiples.

Sramana Mitra: Wonderful. The kind of journey that you described is, in a lot of cases, going to be the journey of a lot of entrepreneurs. It takes time to find that spot. Your story is one of perseverance.

Allan Wille: It is. You know that diagram? I’ve seen it in many presentations where the outside view of growth is a straight line up. What really happens is a squiggly line that has so many ups and downs. It is so true.

Sramana Mitra: It’s absolutely true. Thank you for your time.

This segment is part 7 in the series : Long Road to Product-Market Fit: Allan Wille, CEO of KlipFolio
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