Bootstrapping a RegTech Venture to $20M: PerformLine CEO Alex Baydin (Part 4)

Sramana Mitra: Expand on that limited exclusivity. When you do deals like this, you’re almost developing the software for their use. How do you get out of the limited exclusivity and go from a services business to a product business where you can sell that to other people?

Alex Baydin: I got lucky. This customer was rooting as much for me as he was for having a viable solution for his business. It might have only been 9 or 12 months of exclusivity but we were soon free to bring other customers onto the platform.

Sramana Mitra: It took you that long to build the software anyway.

Alex Baydin: Yes, they contributed resources to help us bring this to market.

Sramana Mitra: What was the amount that you got from this project?

Alex Baydin: A quarter million dollars.

Sramana Mitra: That’s good seed money.

Alex Baydin: Yes, and we had a customer that would help us bring it to market. It was a very impactful partnership.

Sramana Mitra: We have a track called bootstrapping using services which is exactly the kind of strategy that you’re talking about.

Alex Baydin: That’s exactly what we did. We’re out of this exclusivity period. We had to learn how to go from being media people to software people. We really liked this online education space as a sandbox to learn how to do that. It was almost like playing in the minor leagues at first. It wasn’t that big of an industry. Maybe there were 10 meaningful customers there.

We could go to two conferences a year and meet everyone we had to meet. They had a lot of impending events. There was a lot of pressure on them to get control over their sales and marketing. That was our entry point. Within a few years, we were at $2 million ARR. We had 70% of the top 10 tier two and tier three online schools.

We really learned what’s important. It’s not just important to sell them your software; it’s important to retain them. It’s important having multiple stakeholders. How do you get through a global MSA? We learned how to do contracts. We needed to sell to multiple stakeholders and clear the InfoSec hurdles. We just focused on the education vertical until we had the confidence to expand into Financial Services and beyond.

Sramana Mitra: What was your pricing model? What did you pin that pricing on? Was it the volume of ads being monitored?

Alex Baydin: Here’s what we knew we didn’t want to pin it on. We didn’t want to be a per-seat license because the compliance teams were small. We knew that wasn’t going to work for us especially because it looked like we were going to be self-funded. We built a capacity-type pricing model that is still in existence today.

Let’s scope out what your footprint on the web looks like based on how many partners you worked with, and what their average amount of URLs per partner is. That’ll be the capacity. If you want to build in some growth capacity, we’ll be happy to sell you that as well. Our customers would buy a minimum amount of capacity.

Sramana Mitra: $2 million in revenue within the education space?

Alex Baydin: Yes, just doing web compliance. Maybe in year two, we were with one of our education customers. We’re in a meeting. One of our users comes in and says, “Sorry, I was dealing with an issue in the call center.” I said, “What do you mean you’re dealing with a compliance issue in the call center?” They were building a QA team in their call center. These are the folks that handle enrollment questions. I said, “How many of your leads come through the call center?” He said, “Quite a bit. We actually buy live transfer leads from some of the same people we buy web leads from.”

They were using Y connect. I started looking at my phone and searching for Y connect. I asked if it was software. She came back with headphones with a Y shape and said that that was Y connect. When their agent is on the phone, she sits next to them, plugs it in, and takes notes. It was the standard. A random sampling of maybe 1% of the calls.

This segment is part 4 in the series : Bootstrapping a RegTech Venture to $20M: PerformLine CEO Alex Baydin
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