Bootstrap First, Raise Money Later: Criteria CEO Josh Millet (Part 3)

Sramana Mitra: You went after the startups because they were hiring a lot. Intuitively, it would strike me that the large enterprise market would be more conducive to hiring evaluation solutions. 

Josh Millet: Yes, we probably should have had you as an advisor back then. We would’ve figured that out quickly. When we looked at the market initially we thought that the enterprise market was pretty well-served.

Often with the assessment, they are sold as part of a consulting package. It’s a lot of effort to implement. We saw an opportunity to switch that process to a product approach and make it accessible to smaller businesses. Our approach was, “Hey, let’s take these services that Fortune 500 companies have been using for many years and make those types of products accessible to small businesses.”

Like so many companies, we got pretty good at that. Then after several years, we realized that enterprise customers are going to be great to have. The companies that can do this at scale, from a SaaS perspective, are valuable customers to have because they don’t churn at all. You can grow those accounts and those relationships over time.

About three or four years ago, we started concentrating on that enterprise market and that is where a lot of our growth has come from. 

Sramana Mitra: Who did you raise your first round of funding from?

Josh Millet: They were a growth equity firm out of New York called Level Equity. That was in 2015. Ironically, we didn’t feel like we needed funding at that point. We were getting a few inbound calls at that point.

There had been some M&A and IPO activity in our space of human capital management; so there was investor focus on our space. We thought that we had been committed to bootstrapping at that point. We were getting some inbound calls.

One of the interests was from one of our customers. We eventually decided that this would help us invest in the growth of the business and get help in areas that we are objectively under-resourced at that point. We had about 16 employees at this point, so it was small.

We decided to take outside capital. It was a great partnership with Level. They helped us build the business in some key areas. We partnered with them for four years and then did a bigger round with Sumeru Equity Partners in 2019. It’s been a great relationship with them. They helped us expand much further and move aggressively in the enterprise market. 

Sramana Mitra: Your business model is Software-as-a-Service?

Josh Millet: That’s right. We sell our service on an annual basis. The customer pays us a flat annual fee and they access the service through the web.

Sramana Mitra: What is the average deal size?

Josh Millet: That is one of the things that has radically changed in the last four years as our customer mix has shifted. When we did that first deal with Level, our average deal size was about $2,000 per year.

It’s now north of $5,000 a year because our mix of customers is changing. We are getting more midsize to enterprise-level customers who pay more for the service. In three or four years, we expect that to grow to an average deal size of $8,000 to $10,000. 

This segment is part 3 in the series : Bootstrap First, Raise Money Later: Criteria CEO Josh Millet
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