Bootstrapping Using Services to $12 Million: Square Root CEO Chris Taylor (Part 3)

Sramana Mitra: What year did you start selling products as opposed to just services?

Chris Taylor: We started that shift in 2010. The journey was a much longer one that I expected. We were running at our typical parent consulting margins of 20% to 40% depending on the project and the year. We decided that year that we’re going to roll all the profits back in. We’re going to stop trying to make a profit and invest in product development thinking that that would be a year turnaround on that investment. That transition took three and a half to four years to really make for a lot of reasons.

One, is it is hard to change the DNA of a company that has been doing consulting into one that’s focused on product. It’s not impossible like some people say, but it’s very hard. Just getting the product market fit for the generic product took a lot longer. Half of our revenue was SaaS revenue in 2014. Now, we’re up to about 80%. It’s a highly customizable product. We still have a services arm that services our customer.

Sramana Mitra: You did it all in a bootstrapped mode?

Chris Taylor: We did. Today, we’ve never taken a dime of outside capital. It’s completely employee-owned.

Sramana Mitra: How did you product revenue ramp as you started to move more into product?

Chris Taylor: It’s a great question. We flattened for a couple of years because what we were doing was shifting where the revenue was being replaced by SaaS revenue. That transition was through last year. It’s really this year that we started to build the sales organization out and stopped shifting our customers to the new SaaS model. We flatlined then and we were in the 30% to 50% range in 2015. We expect that to go to as much as 100% now that we have finished the transition.

Sramana Mitra: You’re at about $5 million in revenue right now?

Chris Taylor: We did $12 million last year. It should be in a run rate to do $15 million to $20 million this year.

Sramana Mitra: Talk to me a bit about your business? Who are the customers? This $12 million worth of revenue, are these million-dollar customers? Are they $100,000 ARR customers?

Chris Taylor: We’re very large in enterprise. The average deal size is north of a million. We actually do have a small set of customers right now. We’re selling into C-level executives in the operations department. The field organization reports to a COO or a VP Operations. That’s who we are selling into.

Sramana Mitra: You have a dozen million dollar plus accounts basically.

Chris Taylor: Yes. We have customers who are paying us north of $5 million at the high end.

Sramana Mitra: What is the future of the business? Is that going to continue to be a very concentrated small number of customers business? What is the TAM? What kind of a market are you looking at in terms of growing this business?

Chris Taylor: The reason we have a small set of customers now is, we are really trying to keep up with the demand from a few very large customers that are growing very quickly. We didn’t really have a sales organization. We hired our first sales person in 2014. We just hired three more on the sales team in the last six months. The market is huge, but we’re focused just on automotive. There’s only 20 companies in automotive you care about. We just launched our retail vertical and there’s 2,000 companies in retail that have the exact same problem. We already have contracts with a couple of folks in retail. It’s a huge opportunity, and we’re finally investing in sales.

Sramana Mitra: Thank you for your time.

This segment is part 3 in the series : Bootstrapping Using Services to $12 Million: Square Root CEO Chris Taylor
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