Sramana: What is your average deal size for your various target segments?
Colin Day: There is a one-time fee and then there is a monthly fee. We can work some on the one-time fee but we are fanatical about the monthly fee. Contracted monthly revenue is a big deal for us and that is where we get 97% of our revenue. A very small business may only pay a couple of hundred dollars a month. A small business might pay around 800 dollars a month while a mid-market pays up to 5,000 dollars a month. The largest of companies will pay close to 80,000 dollars a month. The risk of the business is spread across all industries and business sizes. When we look at risk we are heavily dependent on North America.
Sramana: What was your revenue ramp like as you built the business?
Colin Day: It did a bit of a hockey stick but once we figured out the model and how we were going to run the company it has been a lot more consistent. We have doubled every year. We did a million, 2 million and then 4 million. We are just north of 40 million today with a 25% growth rate.
We have been in business for 12 years and we are starting to hockey stick again. That brings us to the most recent development which was the decision to bring on external financing. We realized that we were not the leader in our space, primarily because the companies who lead in this space have been burning a ton of money and are not necessarily profitable. I did have to sit back and evaluate why we were not being a bit riskier here. After 12 years of being an organic, risk adverse company we decided to undergo a liquidity event.
We sold 35% of the company which was used as liquidity for original shareholders with the agreement that we would get a lot more aggressive after that. We agreed to stand up the R&D and investment to allow us to become our own funding partner. Instead of running at 35% PTI we are running close to 8% now. All of that money is getting pumped back into the marketing machine now.
Sramana: What has been the impact on your business?
Colin Day: We are having a breakthrough year. Bookings year over year is up 67%. We have had an exceptional year and I expect it to create another hockey stick effect. When it came time to take money into the business we were able to show that we have turned our business into a mathematical equation. We know the marketing spend, conversion rates, and renewal rates. We knew what our profit margins would be and exactly how much more money would be plugged back into marketing which would result in a finite number of opportunities and wins. The result has worked out to a tee. We are going to come in at 101% of the budget that we laid out a year ago.
Sramana: You made some very smart decisions. How do you see this future forecast?
Colin Day: We are now aiming for 100 million dollars. We built a strategic plan to get there by 2015. Most people say that if you want to be a highly attractive SaaS that you need to have growth in excess of 30%. We are not necessarily shooting for an IPO but if the market was timed well it could be possible if we hit 100 million dollars.
Sramana: That is exciting. You are in a very strong situation with strong leverage. You can go many directions because of this.
Colin Day: I think that is the lesson. If you can bootstrap in the early days do it. If you make it through and get to profitability then the payout on the backend is a lot better.
Sramana: If you are willing to put in the years it puts you in a completely different negotiating position down the line. Congratulations and best of luck as you continue forward.