Hey everybody, welcome to the Practical Founders Podcast where every week we hear an amazing story from a serious founder who built a valuable software company and did it without big funding. I'm your host Greg Head and this week my guest is Pervene Ganta, the co-founder and former CEO of Hidden Levers. He's the former CEO because there is a really big acquisition story in here for this bootstrap software company.
It's a really interesting story and I think a perfect lesson with the math explained why this company was not a good fit for VC investment. The market was too small yet they sold the company with just 25 employees for over a hundred million dollars. Pervene is a savvy founder and talks about the deep learnings he learned along the way. I think you're going to really enjoy this story and interview with Pervene.
And we're live with Pervene Ganta, the CEO and founder of Fraction at HigherFraction.com and the former CEO and co-founder of Hidden Levers which we'll be talking about more his bootstrapped growth and successful acquisition journey at Hidden Levers. Welcome to the Practical Founders Podcast Pervene. Well thanks for having me Greg. Great to be on. So we're going to be bringing up some of your ideas that you've talked about in your Profit 101 series. I'll have a link to that.
You also talk about the journey of bootstrappers out there like I'm talking about as well. So Pervene, why don't we just start with the end of the Hidden Levers story and then we'll go back to how you got that started in your early career and what you're doing now. But let's just reveal to people what happened in the end with the Hidden Levers. Your SaaS venture. Sure. So we rewind to 2020. At that point we were about a decade into building this business called Hidden Levers.
The name being a play on the idea that there are these hidden levers in the economy that move your investments. So what are those levers or factors? And we could have called it Hidden Factors. But all sorts of different variables in the economy and we built a system to analyze the relationships between those and investments that both financial advisors, but also retail investors by every day whether that's Apple stock or whether that's a particular mutual fund or other holding.
So we built this company over the course of a decade. Our principal client base were financial advisors. And by 2020 we had built the business up. We were at about an 8 million run rate and had bootstrapped it from day one. What happened in the end was we did decide in late 2020 to formally go to market. So we did retain investment banking firm, PJT partners. It turns out that one of our strategic partners was the number one bidder. So we did go through that competitive bidding process.
In the end they start out at sort of 10X revenue. We've got a bit of a competitive bidding process. So we sold at 16X rev. And wow. So that's over $100 million. We don't have to be. You've got pretty specific about it here, but that's between $100 and $200 million for this business that you bootstrapped. Yeah. So it was a great run from a bootstrap perspective. Congratulations on a strategic exit. You got started in the downturn and you sold on the upturn. I guess just the right time.
Do you consider there was a little luck in the timing there? Maybe if you hung on for a few more years. You wouldn't have sold it for such a premium. Well, absolutely. We can see that SaaS company multiples. They reached their peak in that early 2021 timeframe. And then if we just look at public companies, a lot of them are down 80% from those all-time highs. Of course.
I will say one thing that I'm proud of with that story and that exit is that I do feel that a lot of companies that sold in that timeframe, many of them had great technology. So they're great companies and they were growing fast. But they were lost making. They were bleeding cash. They had a burn rate. And so now you do see that some of their acquirers, in some cases, are writing that down or there may be a tinged regret.
Whereas in our case, the day we were acquired, it was, you know, in Wall Street, speaking it was accretive, meaning that we raised the earnings of our acquirer because we were profitable and they actually were not. And so I felt good about that. I felt good that our acquisition was actually self-financed, meaning that they went out to the markets and borrowed the money to buy us because it was almost, it was like a 90-something percent cash deal, some equity, but almost all cash.
They had to go borrow that money, but our profits paid the interest on that debt. So they kind of got the tech for free in a way. You didn't have to go build a billion-dollar company or a hundred-million-dollar company and take that risk yourself for that time. You said, this is our phase. This is our time. We'll take the premium, you know, we'll take it off now. Right. Yeah, you know, building all the ways. Certainly there's, there are lots of verticals in which a unicorn exit is possible.
I think that something that founders, and certainly something that we did was that we assessed our vertical and we looked at what was possible and we saw that, well, just concrete numbers wise, the largest exit that's ever happened in that wealth tech vertical space, so SaaS software is coming called Money Guide Pro and it's a public figure, it's 500 million. And so that was sort of the biggest number that has, and that's still true today.
So we knew that there's sort of a ceiling, you know, on what's possible within this particular vertical. And that's kind of below the floor for big VC funding to go raise five, then 10, then 20, then 30, and 50 million dollars series A, B, C, D. You raised a lot of money, 50 and 100 million dollars, like getting out at 500 million is the minimum success rate. Yeah, that's how considerate success. Well, that's an amazing story. Congratulations on all of that.
Let's go back to the beginning here because you bootstrapped this company and grew it for 10 years. It wasn't your first company. How did you get started with all of this software and technology and then entrepreneurship game? Well, if we go back, you know, in terms of how I got my start. So coming out of school, I had a computer science and then economics background. So from MIT. So this is a serious place and you were serious about it. And that was kind of 2000.
So that was finally when smart people from big universities were getting into software. They avoided it in the early 90s. But, you know, did you start in the software game or go work for a big consulting or a company? Well, so I lasted. So I got out 99 and I lasted six months at, at Capital One, actually, the card company, because they were tempting us in with dreams of building an e-commerce division within the bank. And I see.
But yeah, within six months, I realized like, wait a second, these big companies don't actually move very fast. All we've done is draw a couple of PowerPoint slides. And so yeah. So yeah, so then I left to start my first company thinking that, hey, this is a moment in time. Like it seems like everything's gangbusters. So let's jump in. Actually, I kind of started a pattern that I continued throughout my career, which is now kind of what I work on today.
But I started out fractionally or as a side hustle, if you will, I was still at Capital One started building my first company while still there before actually quitting and going all in on it, which is a very practical way to do it. And, you know, back then, it wasn't a very practical time. The internet was moving 2000. Stock market was up. It was kind of silly and crazy and all of that. But funding wasn't so huge as it is now.
So you said, I'm going to get in this big internet game and I'm going to go build something on the side. Because you're a coder. Did you code it yourself? Yeah. So the first thing is my first job out of school was not. It was actually on the finance side because I kind of had both of those backgrounds. But yes, I was a programmer. I had that background experience from school and from internships. Everything I had done previously.
So I did jump in and I also recruited some friends that had that background. So we started building the product first. And did it turn into anything or how did that go? So it was funny. This is an era where, well, at that time, coming right out of school and not really knowing anything about entrepreneurship, I assumed that, yeah, trying to raise funding is what you do. And so we built some software. We had some neat features. Didn't have any idea really how to sell or get customers.
But we thought, well, let's show our cool softwares and VCs and see if they like it. And the funny thing of it was that we actually were still sending faxes then, right? So we sent a fax or at least one of these, I want to say it was Edison Ventures. Somebody on the East Coast. We sent a fax to. New Jersey, yeah. So we sent a fax to them with our pitch.
And they didn't get back to us, but it turns out that they did hand that off to one of their portfolio companies, saying, yeah, these guys look like they're doing something cool. What ended up happening was really more of an aqua hire. We were bought by a company called Intro Links in New York that saw that we were building cool stuff. Hey, here's four young tech guys building neat software. They must know what they're doing or have some clue.
So they pulled us in to help build the next generation of their software. And we were sort of like, oh, wow, this is so amazing. Intro Links is going to IPO in three weeks. This is like June or July of 2000 at this point. And so we're like, Kings of the World, we moved to New York because they were based there. And the IPO never happened, needless to say, because it's July of 2000. No, the door slammed shut hard.
We saw the boom in bus to 2021 and afterwards and software, but it's nothing like the .com era where they didn't have steady SaaS revenues. And like 50% of tech IPOs were gone by the end of 2021. Yeah, there were so many that never happened. And then so many companies that sort of collapsed too. So did you stay for a while and then go start another thing or how?
So then I stayed at the acquiring company for not terribly long either when I realized that, you know, writing on the wall that now, Intro Links did eventually go public some years later. So they made it as a company, but my stock ended up being worse, I think, 300 bucks because they did such a dilutive downround, series of down rounds. Yeah, of course. Oh, okay. And I didn't, I could see that. You got to see that. In the end of that, I didn't feel bad for myself.
The original founder who actually of, of Interlinks, who had a lot on the table was diluted to nothing as well. So I think they, they got it much worse than me. But I was a young kid. I learned, you know, I learned some valuable lessons in that.
Chief among them was that the whole sort of funding game and system leaves you really exposed to these outside forces, whether that's, you know, these delusions that, you know, a board can, you know, force upon, you know, the original founders, say, of intro links, all of these things that are outside of your control. So I definitely saw something there.
And, but I went on for the next several years to work on Wall Street, sort of combining my dual skill sets between finance and, and computer science. And I was noodling on ideas, sort of, in the background in my head. And so then when I moved to Atlanta, which was like late 2004, I opened that playbook up and started getting back in town to worship again. You decided to leave corporate world and start, start your new venture.
Well, no, I, you know, I really leaned into this sort of side hustle fractional part time concept. I was, you know, from 2004 to 2010, I was working, first a company called BEA, which some folks might remember, it was acquired by Oracle. Oh sure. So BEA slash Oracle, I literally took that job because I knew that it was going to be easy enough that it would give me time to work on things on the side.
So I kind of took, you know, corporate job that was sort of just to paste the bills and spend some time working first on a travel expense management start up. They are made some progress with the software, tried to do everything myself, sell the software, everything, learned a lot of respect for how hard it sales is, but ended up folding that company up as I didn't have a co-founder or didn't have anybody to help me with, with that facet.
So then I just started consulting on the side and I still found myself bored. So I've got my full time job. I'm doing some consulting on this side, still bored. And so then I started noodling on the idea that becomes hidden levers around the time of the financial crisis. Ironically not because of it initially at least it was actually no more.
It was one of those things where you're sort of scratching your own itch, you know, a lot of, you hear that from a lot of founders, I think that they have a problem. So my problem was trying to figure out what investments, what stocks or energy stocks specifically are most correlated with oil prices. I couldn't find that information publicly out there on the internet. So I was like, well, I guess I have to write the code to do this analysis myself.
I realized from that, well, if I can analyze what stocks or correlated with oil, why don't I look at all sorts of correlations and not just that one thing that I happen to be interested in at that time. Well, the idea was simply to, if I had, at that time, if I had an investment thesis or idea that, okay, I think that energy prices are going to continue to rise or fall, but let's say at that time they were rising, what company should I be invested into profit from that is ExxonMobile.
In investment, it turns out it's not, it's not highly correlated with oil prices. Is some other, you know, accidental petroleum? Is that a good investment? Turns out it's a little more correlated with oil. But actually it turns out that there's a whole slew of, you know, drilling companies and exploratory oil companies that are much more leverage to oil prices. How do I find those? That was what I was looking to do.
And was it because you were playing this, I'm going to say day trading or stock trading, but like that was just a, was that a game or was that like a, maybe I'll get rich playing the game? You know, I was always managing and continue to manage my own money today. So that was something that I was doing.
I wasn't necessarily day trading, but looking for investments that matched a certain, you know, given my economics background, given a certain sort of worldview or macroeconomic kind of view, how could I find investments that matched that worldview? So this was kind of a, a technical guy scratching his own itch. Did you build something there? Then you went to the world and see if anybody else cared this kind of product first, find the solution looking for a problem. It kind of certainly was.
So I started out, I realized very quickly, you know, I'm building something narrow for myself, but let me go ahead and generalize this. I knew from my sort of Wall Street experience that the type of analysis I was doing was not terribly unique in itself. It's done every day by hedge funds. It's just that I as a retail investor didn't have access to that anymore. So I'm rebuilding it for my service. But I decided to broaden it out.
I realized it, oh, you know, if I have all of these kind of relationships in the economy, you know, between oil prices and then commodities that are metals, silver and gold, but also things like wireless, wireless phone sales, so smart phone sales or, you know, chip manufacturing and correlation. Any correlation, right. So I could analyze those and see what's related to what, what's that good for?
So yeah, it's good for maybe finding certain investments, but it's also good for asking the following question. What happens to my portfolio if, and then you can sort of create all sorts of what if scenarios around, well, what happens if, well, interest rates rise or if home sales fall or if, you know, home prices do something else and mortgage rates go in a different direction and so on and so forth. So that sort of what if scenario concept was what emerged from it.
And I thought was, I think this is an idea I could sell the folks. So I had a little product looking for a market, you know, still product in that sense. So then I realized, and an employee looking for his entrepreneurial adventure, his way out perhaps. Yeah, you know, and so I was still doing this on the side. This would be like mid 2009. And then I decided to phone a friend because I realized that from my past experience with the travel software, I need somebody to sell.
You know, I can build something that I need that co-founder who's compliments my skill set. And so my friend Raj who became the co-founder. So I had known him for about a decade, but he was coming from a sales and trading background on Wall Street. So he actually did that for a living and saw what I was working on, heard about it and was immediately interested because, and this was early days, you know, I had very scratch, not ready for purchase by anyone software.
And he saw the idea of what it could be and was like, yeah, let's do this. So we said a date. We said, I said, okay, Raj, let me go back to the lab. Let me get something together, formalize it a little bit. And January 2010, you go to the market and start trying to pitch this thing. And was he a side gig fractional guy? So he was at that point. Yeah, he actually had, he had gotten laid off in the financial crisis, but he was actually selling social media software at that time.
So he was already, he was kind of like adjunct attached to another company. And then he started, he started to get the idea of what it was like to be a social media startup at that moment. You built this thing. This is pretty common. A valley of death. A lot of people have a lot of ideas and how did you make it to the other side where we've got this hypothesis, this potential adventure. Did you go out in the first customer said, we'll buy it or did it take you a lot more tries than that. Right.
So we start, we start at the beginning of 2010. And we sort of gave ourselves informally, we said, let's give ourselves about 18 months to figure this out. Let's see if we can get somewhere. When we define, get somewhere, I get traction with real customers. Can we get people to actually pay for this software and get a non trivial number of people? I think a little bit later we decided we were fine and we settled on, let's get 100 customers. We set that as a goal.
But initially we said, let's, can we get anybody to pay for this software? And our, of course our naive thinking at the time was that, meaning this is January 2010, okay, we've got the software. It's so cool. Won't each rate or fidelity or Schwab, you know, one of these discount brokerages. Won't they just want to put it on their website and just like buy us for $2 million? Yeah, that'd be so great. That was sort of our, you know, the naive founders sort of vision.
So we so, so Rodge says about pitching into his credit, he gets meetings. We met with fidelity. We met with Scott Trade when that was a company. We met with each trade. Yeah. So we actually did pitch a lot of those, you know, they were, they thought it was mildly amusing, but it was clear there was no business to be had at least not at that moment. So the course of that year of 2010 was going around and sort of doing what in computer speak you would call a breadth first search.
So we were a shadowly exploring just like, okay, let's talk to audience X. Let's talk to audience Y, audience Z. And we bounced between those discount brokerages. We actually pitched the financial media. We had like a brief deal with CNN money. We and seeking alpha. So some of these sort of more media players. We tried to sell the software retail with retail investors be willing to pay for this. So lots of different exploration across the spectrum.
Yeah. Yeah. Yeah. We were just like, okay, is does anybody care? All the while, I still had my job at Oracle. So I was still able to pay the bills and for a kind of background context, I had a family at this point. So had actual bills to pay. So we continue on this journey. We're not making much progress. I think we have 20 retail customers paying us $20 a month. How long did it take you to get 20 little tiny customers? So we had gone on this experiment in the financial media space.
And we were thinking that like CNN money or some of these folks actually pay us money for the software. How naive. They were willing to give us, you know, to give us credit for some of the analytics that they put into some of their articles, which did lead to some traffic back to our website. So I guess it took us nine months or so and we get to 20 customers. All right. So $400 a month, then we realized pretty quick.
Yeah, we're going to go out of business pretty soon at this rate because that dawned on us when we actually got our stuff featured on some of these CNN money articles and the volume of traffic was high. But you know, most retail investors conversion was low. Yeah, most retail investors aren't going to pay for software to analyze investments. That's not, you know, a thing. And so we realized that's not going to be it. So what do we do next?
We had applied for them and accepted to present at a conference called Finnevate, so sort of a FinTech conference. I can't remember how much we paid to present there. Like you apply, you get accepted. It's still several thousand dollars. So this is sort of like a big investment for us since it's coming out of our pockets. And I think we initially between Raj and I capitalized the company with 10 grand. That was all that we invested.
And so it's probably half of that 10 grand, something like that. But I knew from that one of the things that I did learn from that travel startup that failed was it going to a major conference in an industry. It's a really good way to do a couple of things. One, you meet a lot of people. You sort of maybe see what's possible in the market. Two, it's a forcing function. We just put five grand down. California we're not going to be ready to present. Yeah. Right? We are going to get this software.
Yeah. In the best shape we can and we're going to work, you know, nights and weekends and get it be ready to be on stage. Did you walk away with orders in hand or some interest and off you went or how did that go? Not quite, but we walked away with a perspective on audience. So we get on stage, do the pitch, coming off the stage, it was a particular persona, you know, for whom this resonated.
And it was the representatives of private banks and wealth management firms, private banks being just another form of wealth management. So financial advisors basically. And they were coming up to us and saying, yeah, we saw what you had that looked pretty cool. Could you make it into a PDF report? Because that's how this world to this day actually, that's how the wealth management world works is.
It needs to be a PDF so they can actually in those days, then it needed to be a PDF so they could actually print it and actually show it on paper. Where you actually get traction was a subset of a segment that said, I see that that's interesting and all that. Was that the first signal that you saw where somebody approached you and said, this is really interesting, I might pay for it?
Well, we had seen other signals, you know, then we chased them and found that they were, you know, that seemed to be dead ends. But there's lots of folks found what we were doing interesting. It was a question of how much money would they put against it? And here what we were hearing from these financial advisors or from those firms was that, well, I could use this to answer questions from my clients.
And more importantly, I can use this in my prospect meetings because clients will come in with concerns or opinions. I can use it to sell. And that's where all of a sudden you're tapping into a budget that so many firms have that they're willing to spend. It's there willing to spend to grow themselves. And we hadn't realized that we thought, oh, yeah, it'll be used for risk management. We hadn't realized that it might be used as part of marketing. And that's what from, really from the get-go.
So we go back in the lab after hearing this feedback. We build the PDF reports that are being asked for. So we build these stress test reports where... And this is kind of an if, if this, then that kind of PDF. More specifically, it was a report where, okay, if financial advisor enters their, you know, prospective clients' info. So, you know, John Doe has, you know, $500,000 invested in these kinds of funds.
Run this stress test report and show, you know, what would happen to it in different scenarios. And so the scenarios were very topical. So for instance, at that time, we had one about this is sort of dating that era, but Greece was about to go bankrupt. So there was like a Eurozone crisis going on. So we had a Eurozone crisis scenario, for instance. You know, we had what if the housing market goes back into a slump kind of a scenario.
So it was really topical around what investors might be concerned about in that moment. With their hearing and their financial media, we had scenarios to cover those sorts of questions that advise you to speak to them. So that was a, in one of the segments you talked to, and there was one of the use cases that was pretty acute. When you sit down to sell to somebody and they say, why would I work with you to manage my wealth and stocks?
And they slide this thing across the table that says, your portfolio, given these risks that you're talking about, we understand them, we know how to manage them. It was a differentiation and a relationship value ad and something special. And that's where it all started, something like that. Absolutely. So that was a kernel of product market fit. So we really, now this is a year in. I should rewind to say that I finally quit my job right before going on stage.
It was like the week before going on stage at that conference. I thought, you know, I probably can't publicly represent this company and still be employed in case somebody sees me, essentially. So that's when I went all in. But that was like nine, ten months in out of if we say that we budgeted ourselves a year and a half for this experiment to see if we could make it or not. About half of that time I was working for someone else by day.
So now we're all in though and coming into 2011, the clock is ticking because we told us I was, hey, we're just going to shut down. We're going to fold the doors if we don't have, by that point, we thought, okay, we're trying to, we're going to try to sell them these advisors, these financial advisors. Can we get a hundred of them? Because that's enough to be a real business. At that point, we had this sort of clear objective that we had to hit. And I think that was very helpful.
Yes. Had six months to do it. Of course. We got there and just pitched and when we knew, I'll give you the anecdote and the memory about when we knew we were going to make it. This is probably March of 2011 with June of 2011, June, July 2011 being that deadline. We get on a webinar. We managed to get someone who's in the industry who makes websites for advisors. So he's got a webinar where he talks to advisors about technology tools. And so he's like, yeah, I'd love to have you guys on.
So he has 80 advisors on this webinar and we showed the demo of our software between that day and the following couple days, 16 of the 80 sign up. Yeah. A real conversion. Yeah, real conversion right now. We were selling at that point. We were saying that, well, this software is going to cost, you know, $250 or $300 a month in the long run, but you can get it today for just $30 a month. So the deep discount sort of angle.
We also told them that, hey, after the first year, you, as long as you stick with us, your lifetime price will be half off whatever the long term price is. We're investment advisors using it and giving you thumbs up saying this works. We like it because there's a difference between selling something and getting the order and then getting the thumbs up. Hey, this works. I'd like it. I'll continue to pay for it. We were getting the thumbs up in a sense. They liked the kernel of the idea.
We were getting feedback and bug reports and all of that. So at this point, it's still just Raj and I basically. I think we hired, you know, we had some summer, some free summer interns at one point. I think it was the summer of 2011. It's pretty summer interns, but essentially just Raj and I. And so I was both product dev and I was customer success. So the calls, like the support calls came straight to me. Yeah. Good for you. Good discipline. Hey, we're, we're bootstrapping it.
There's only, you know, just the two of us. So Raj was 100% all in on Biz Dev and just selling. He was selling and marketing. And he did a great job, by the way, of working the industry press. That was something that we realized that in these narrow, vertical niches, these folks need something to talk about. And if you've got some new software to show them that's interesting, you might actually get rid of it. No, you just call them directly. And that did work.
But on my side, I have a particular memory of being in the public. So public is a grocery store in the southeast. I was in the public's parking lot and I get a call from a financial advisor because they just came straight to my cell phone. So I pick up a call and he's having an issue on XYZ page and I'm just mentally thinking about it and what it probably is and guiding him through on my phone. You know, so that was definitely what we were doing.
We were taking the calls directly and just dealing with it and rolling that way. But we got the acceleration we were hoping for and we hit that 100 advisor mark somewhere in the May, June timeframe. So like a month, a month and a half before our self-imposed deadline. And we felt like, okay, we've got momentum here. Here's the interesting part. As we start selling, by the time we get to around 50 advisors, we actually raise the price from 30 bucks a month to 50.
And before we got to 100 advisors, we had already raised the price to $100 a month. And so we found, so we started really low, but we found that as we were raising the price, it was not slowing sales at all. So we were sort of doing this price discovery and we discovered that in that particular segment, financial advisors don't have a lot of price sensitivity until you hit 100. Because we kept raising the price thereafter. We got further into the year.
You get into this question of revenue maximization versus growth. And this was a serious debate for us. Do we want to just get more customers or do we want to revenue maximize right now? And we ended up leaning toward revenue maximization just because we were bootstrapped and this is the only money we have. This is your funding. This is our funding, yeah. So we went from 100 to 150 to 200 to 250 and we ended the year at $300 a month, which became our long-term entry price.
But we found that when we're sales so we'll slow it at that price point, they were, but it's triple the money. Did your proposition change? Did you solve a different problem and mature the product in a different way? Or was it the same problem of help you sell new customers with these kind of what if reports? That core problem. So if I, you know, then fast forward to where did I, how did our product evolve? That core problem was probably, that probably accounted for 50% of her revenue.
And then the other half was split between over time as we grew, we were dealing with larger firms, you know, that original risk management hypothesis was in there, probably around a quarter of our revenue. And then a big, the last big slug of revenue was actually monitoring risk for very large firms.
So proactively automated monitoring of risk and things like that, which was not something that we had a sense for at the outset, but that was once you start talking to firms where they're spending more than $100,000 a year with you already and they were, you know, they've got dozens or hundreds of advisors using your product. And now they realize that they've got, because they're such a large firm, they maybe have tens or hundreds of thousands of accounts.
So managing risk across all of that book of business becomes a real complexity. Yeah, and that's a different customer, a different use case, a kind of a different product market fit in this related space than selling individual advisors. How did you grow this business? You're in Atlanta and at that time, David Cummings in the growing VC community there was happening and little tech hub was growing. The cool kids were raising funding. Sass was starting, but you didn't raise funding.
Were you philosophically against it or you just thought, uh, Tam, is our market isn't that big? I don't want to play that game. Uh, the math doesn't work. So I always said that I wasn't philosophically against it. And I think, and I think technically I'm not philosophically against it. Now my, my own sort of personality, viewers toward the bootstrapping side anyway, but I will say that we did the Tam analysis and actually we did that way back in 2011.
Once we realized that financial advisors, okay, this is like, this is the market. We did the Tam analysis and we saw that, okay, there's, call it a hundred thousand, what I'll say are real financial advisors in the United States. Define realizing they really earn their living from that business, not just a credential that happened to happen. Right. And, uh, so that's our potential customer base.
And if we can charge them a couple thousand dollars a year, then, okay, that's a two or three hundred million dollar Tam in that core bit. And then there's other things we can sell these firms and so on. But you end up with a Tam that's probably not a billion. Maybe if you stretch it every which way you get to a billion, it's too small. Well, if you're pitching to VCs, you would talk about your total addressable market, your Tam, right?
In the biggest circles possible on this slide that says, oh, everybody and everybody went fast in every big version of it. You've got like, you are practical about your total addressable market. The only thing is when you're doing it for yourself instead of for VCs, so like the VCs version of the slide that we locate, we had that version. We'd occasionally sort of look at it. And I think we had it up to like six billion or something by tacking it. Oh, we'll sell the investment banks.
We'll sell everybody. But the realistic version, if everybody bought your stuff, the realistic version was just a couple hundred million dollar Tam, we felt like it would be dangerous for us to go and raise several million dollars because everyone's going to get disappointed. That was my fears. Everyone's going to be disappointed in the end. The VCs are going to be disappointed.
We're going to feel like it sucked because our exit, you know, we didn't actually get to keep all of the exit even whatever exit it might be. It seemed to us that that was not going to be a great idea. And then secondly, I also always said that if we somehow got to this point, I don't know where it is, like you could assign percentages. I felt like we got to something like a 90-ish product market fit. It was never perfect. Our churn numbers were pretty good.
We were growing within customers and had sort of that negative churn if we want to call it that or net revenue retention. They call it. So we were doing well on those metrics. But at the same time, it never felt like we were just pure order takers.
And I always told Raj, I was like, you know, if we were just order takers, if it was that easy, well, then yeah, maybe we would just, if we got to the point, we would just, if we got to the point where it was just add money and watch it grow, then you raise money. But I never felt like it was quite that easy. Like there was always some battle to fight. And it felt like, well, I don't want to go raise a bunch of money that I don't know how to spend correctly because we got a new problem to solve.
So organically, we just kept on solving those problems and growing with the money we had. A founder friend of mine in Phoenix, who bootstrapped in its, he's got a quite large company now. He's been running a long time. He calls this procrastinating funding. He wasn't philosophically against it, but he just saw the next milestone ahead and he got to that milestone and looked and said, well, I don't need to raise funding now. I'll get to the next milestone that made me write funding.
So you procrastinated it successfully all this time for, for right reasons. So this started growing in obviously you had fractional dev resources, I guess, that you were using. And you started adding staff and you went dot, dot, dot to eight million. How did this company change from you and Raj getting this thing started to how it grew in, you know, how'd you had a bigger team to where they all remote and how did this go?
And what's funny is that is in 2010, this was relatively uncommon, but Raj and I were remote. Now, we knew each other. So we had, we had sort of personal relationship, which, which maybe made that easier, but at the same time, we were remote. Now by the end, I think our team size was around 25. We never grew huge in terms of head count. And some of those folks were fractional because we did 25 people with eight million of ARR effectively.
And so that's where you do the math and that's where the profitability comes in, right? It's sort of revenue from the is a very much a key metric. In terms of how we grew the team, we definitely practiced this notion of, of hiring, and this maybe because we started out this way of hiring fractionally first.
So we would rather than asking a person to quit their job, we thought, well, if they think so much of our company, like they love this idea of what we're working on and want to do this in their spare time, and we'll pay them for that, then we'll have an opportunity to see if they're a great fit for the team. And they will too to see if they're willing to take the plunge. And so we found that that was a good way of sort of ramping up the team.
To differentiate from fractional, this isn't just gig workers, people working on a little project for a few weeks or whatever. This was your contractor, but this is really an ongoing relationship. Yeah, and that's and that's and you're part of the team. Exactly. You're part of the team. We didn't distinguish at all. And when I say we didn't distinguish when we started to be big enough that we had off sites, we invited the fractional folks too and then came. And so and that was a lot of fun.
So that they really weren't part of the team, they would just take a day off from their day job or day or two off and come as well. And a fractional person would work their 40-ish hours and bigger companies. I don't know how many people work the 40 hours or whatever, but these folks were working 20, 30 hours for you too. Right. Yeah, they probably have more fun doing that. I'm so call it 20 hours a week for us as well.
And we had one of our earliest hires who went on to build almost all of our software partner integrations, almost 25 of them. He worked with us for like nine years. So he did it for a long time. And we had other fractional folks who stuck around in that vein for one was six or seven years. One guy actually is at the acquire and so the clock is technically still taking. He's still still doing it fractionally. So yeah, that model worked out well first.
But of course the whole team in the end, I think we had a dev team of about a dozen folks of which five were fractional. So we certainly built a full-time team as well. Folks would start that way like the guy who went on to be our CTO started that way and became full-time in terms of remote versus in person. As we started to hire more, we had an office indicator in the Atlanta area. And so we did start to staff in offices as well.
We found that because we had these fractional folks who were relatively senior, career-wise, they had experience, that actually enabled us to hire full-time in office folks who were more junior. And that was leverage because those junior folks could learn from some of these more senior folks that sort of helped provide balance and at the same time from an expense perspective, your senior person is not full-time with you. So you're saving a little bit there.
So yeah, in aggregate, I mean, those were some of the things that contributed to the healthy PNL. Were you paying, let's say, the going wage for these fractional people, you just didn't pay them full-time, but it wasn't just about being cheap as you could get senior hardworking people and maybe of the all the senior people who have day jobs, maybe 10% of them want to put 20 hours a week into something else. So you're finding the serious hardcore folks and getting real productivity out of them.
But were you able to pay them cheaply for this or it's just you didn't have to pay them full-time? Interestingly, we were able to, because of the long-term nature, so there's lots of folks. I think everybody who's close to technology is familiar with the fact that it's accelerated not in the pandemic post-pandemic era. There's lots of folks who do gigs or do freelance work on the side who have full-time jobs. Lots of software folks do that.
But it turned out, in our experience, that when we engaged them on an ongoing basis, long-term as part of the team, what that alleviated for them was the hassle and nuisance of constantly interviewing for new gigs. So actually, running around. Yeah, and that's a big way off their shoulders. Actually, we were generally speaking, paying folks less than their base salary at their day job. And they were happy with that. Per hour. Right.
And actually, we were getting access to really high-quality talent at a discount. And it was working well for both sides. We sort of did the math for this developer that I was mentioning, the one who was with this for nine years. So he didn't participate in the exit, but he also got to keep his well-paid full-time job the whole time. And so when I sort of added up...
Speaking of opportunity costs that entrepreneurs face when they quit their big corporate jobs and then don't make money for five years. So he's the potential of a big exit. Yeah. So with zero opportunity costs, when I added it up, his outcome from being associated with him, leverage was about the same as if he had actually come in full-time as a employee number four or something like that. But with less risk. So actually worked out really well because he didn't...
What have we had gone out of business? So he didn't have that risk that the employees did. That's a really interesting way to think about it. What did the company look like? And customers and customer acquisition wise, that growth engine. How did it look different? You were starting to sell the bigger companies doing a little bit different things. And maybe your name was getting out there a little bit more and you have thousands of these investors or something like that.
But what was different about it when you were up above $5 million in your sales and market? An interesting aspect of the arc of growth if you had asked us like beginning of 2012. So we come in, we finish that first year out, got around 200 paying customers at that point. We are planning for that year and we're like, okay, yeah, we're going to be at a thousand paying customers by the end of the year. It seemed reasonable given the trajectory and everything.
Interestingly, when we sold the business at that point, say eight years later, we didn't go from 200 to 2,000 customers. We went from 200 firms paying at the beginning of 2012 to 450. So we barely grew. Interesting. We barely grew our footprint at all. Instead, our revenue per firm went up like 20X. You sold bigger firms and you got a bigger footprint inside each one. Right. Solder more things, I guess.
Yeah, it may be, I mean, and perhaps a fair way of looking at it is in terms of numbers of users. We went from one firm, one user was one firm in those early days. And so say we had 200 users at the end of that first year of growth. By the end end, we had 2000 users. And so we went up 10X in users across still not a huge number of firms. But in terms of revenue, we went up more than 40X. And so really a lot of that growth was growth in ACV, revenue per customer.
Did you have any services in there, which is typical for bootstrap founders and complicated stuff is you can help fill the holes in your crappy software product with custom services and fill the holes in your crappy bank account with services. Did you ever get on the services driver? Well, as much as possible, we tried to stay pure SaaS. What we would do is that a customer would ask for feature extra feature Y. And so a lot of those requests were just added to the backlog.
And if you hear of the same thing a lot, you work on it. But we also took the opportunity with some of the feature requests, build higher level features that then we would introduce a new higher price point. So we started out, we just had one price point. And then we ended up with basic pro and elite. So the elite plan has these new features that are so great. So that was one way. But another way was that we actually, we would just raise folks SaaS price.
We're like, okay, you're paying 1200 a month. Well, if you pay 1600 a month, we can build that random thing for you. You'd pay 2000 a month, we can build another random thing for you. We did it the very large. Once we got into true enterprise sales, an interesting thing happened. That was the first time we took actual consulting dollars. And that was because we got told by some of these large firms. Well, on our books, we need to be able to book this as CapEx.
So we need some of this to be professional services to you because then we can book it as CapEx. And it looks like we're investing in software that we own these enhancements, which actually, which means nothing, right? Because the enhancements don't work without the SaaS subscription. But from a... Accounting shell game. Yes, from an accounting shell game perspective. That was the only reason that we did it.
But we kind of, the way we would work it is that we would do those, do that professional services and then roll. And then in future years, there would be step-ups in the SaaS base fee to pay for the ongoing, you know, for those new features. Well, that's kind of a legacy of the old software business that you bought once. Yeah. Right. And had a little maintenance contract. This was pre-sat. So pre-2010, most software was like this. And pre-2015, most enterprise software was still like this.
You pay $3 million up front and then you start depreciating it and CFOs love that kind of thing. They don't have to pay more for it. But SaaS is now not a capital expense. CapEx, it's now operating expense. It just kind of runs with you. It's a little bit different game financially on the backend. And then that changed along the way. There. So when you got above $5 million, you were profitable the whole way. Your profits were increasing. You're starting probably to distribute to you and Raj.
We're taking some money out of the business and all of that. Did you think this could go to the moon and be a big company that was very profitable? Or do you think it will have, you know, take out a million dollars each every year? You know, ongoing. What did you think this could be when it would come to you? Yeah. Once we got into that middle point, you know, we, I think there were a couple of considerations that led to thinking, you know, about, you know, what the next step should be.
And then finally to to selling. And not all of them were financial. Part of it was, okay, we're, we've crossed this key milestone 5 million. Now we're growth stage or whatever, you know, the VC folks call it. Yeah. How big can we get? We realized that at some point, you know, as we're growing from there, which really wasn't a long run because really 5 million to 8 million. It's really like a year or a year in change. But we realized that to get to the next next stage, so get to get beyond 10.
So get it to 20 million revenue was going to require large scale enterprise sales, a larger organization. One of the things that that meant was that we were going to have to introduce middle management to a, you know, to a larger degree and to really have a structure of a company. And we were, you know, with you and Raj with 25 employees, they all reported to each of you. Something like that. We have too many managers.
Yeah. I mean, we had introduced some notion of management layers, but everybody was also an individual contributor. So there was a running joke at the company that we tried to hire a COO like three or four times and fired them every time. It just never stuck. And I think that we finally realized that, you know what, it's because we expect everybody to be an individual contributor.
And maybe we're not good or maybe we don't know how to run a company that's way larger than has a whole tier of middle management. And so that was one of the considerations too. Okay. We got a little hint of that. Yeah. What we had seen in our business was that we started by selling really SMB, meaning a lot of financial advisory firms in the United States have small firms. Yeah. Yeah. Yeah. They have five, ten employees. And that was our initial customer base. Mm-hmm.
As the business evolved, we were working with larger firms. And we got to the point in the last couple of years where one of our largest customers was publicly traded firm that was responsible for maybe 30% of our revenue. So a little bit of concentration risk there. But they were locked up until 2025 or something. So it was a great partnership we had with them. Focus financial partners was that firm.
And we realized we needed to capture more whales like that to really start to move the needle at that scale. So then we were thinking, well, are we doing to build an enterprise sales team and do all of these things? But we're at got funny and what really highlighted for us that we needed to think about strategic M&A. We go into some private equity growth capital pitches and we lay out our vision and we say, well, we want, I don't know, 40 million, 50 million, half for liquidity, half for growth.
And so they nod their heads and they're like, okay, well, let's talk about use of proceeds. The funniest part in those conversations is that my co-founder and I had never raised it. We still, neither of us have ever raised a penny in our lives. So we were actually, that was the funny part. We had so much confidence and swagger coming into these calls. I mean, how many, not many startups can say we grow at 60% by the way our profit margin is 53. So and I don't need you. Yes, I don't need you.
We're clearing, you know, multiple millions a year in profit. But at the same time, we had no answer for that question. Like we, what color is we, how do you go into a fundraiser conversation and not know what you're going to use the money for? The irony is that we knew what we were, we knew we were going to position going in, but still when it's not in your DNA to do that, you can sort of perform twerly answer the top level question.
Yeah, we're going to hire an enterprise sales team and we're going to do that. But the detail is lacking because you, you know, hey, we had done it. They smell that. And it's not really the way that we think. And so I'll give, I'll give private equity folks credit, you know, they're not dumb. So they can see that, you know, you don't really have a clear sense of that. And so yeah, so it was obvious to us that I was like, what would we do with $20 million?
I mean, then the question we have to ask ourselves is, I mean, I'm talking to my co-founder Raj, I'm like, you know, we're taking all this money out. We're quite profitable. Wouldn't step one be to reinvest that. And if we can't find it in ourselves to go in exactly. If we can't find it in ourselves to go and spend, I don't know, the two, three hundred grand, whatever it costs to hire that enterprise sales guy with the big Rolex.
If we're not willing to do that and that, like we don't need anybody else's money to do that, we can do that. So what are we stuck on? And if we're stuck on that, then maybe that's not the right path. That's very interesting. So and by the way, you didn't need like a lot of times to get to eight million and you've starved yourself for years as a very common story and haven't taken any money off the table and growth equity comes along and says, we'll give you a little money to spend.
You don't have to go crazy. But you'll take some money off the table, de-risk, win a prize and everything. But you guys are already been splitting the money. Right. Yeah. So you didn't really even need that. Right. And it's true. We had gotten to the point where in the last couple of years we were making, you know, I think that last year was around four million in profit. And then the year prior was, I don't know, two and a half maybe.
It accelerates of course, we're at the end, but we were making seven figures, you know, each for the last three, maybe four years. And so it wasn't a question of, yeah, we weren't even peanut butter anymore and living in that way. So it was kind of revealed that this growth game was kind of an odd thing. Did you decide to, you eventually sold a company in 2021, but did you decide to sell it and go shop it or did somebody, you know, strike first in that hot stock market?
With zero interest rates and everything else? Well, I would say that we, you know, being sort of students of the market since that's, you know, essentially the game that we were involved with, we certainly could see that valuations were at extreme levels there as we're getting into mid late 2020 and onward. So there seemed to be an opportunity, a moment in time, you see a lot of deals. And but also within our particular vertical. So what I'll call wealth tech.
So software, you know, SaaS software for wealth management. We saw that there was a whole cohort of companies that started around the time we did 2010 to 2012. And there were a lot of acquisitions going on then in that 2019, 2020 timeframe. So we started to see the peers fall. We also started to see, you know, eventually you do attract the attention of the big competitors. And so in our case, the big 800 pound gorilla would be BlackRock. How did you get to Orion?
They were on your list of M&A potential acquirers and you ran this process. Did they jump out ahead of everybody else and preemptively strike with a great valuation or was this a big negotiation to get them to more than $100 million exit? They were one of our software partners. So we had, like I think I said earlier, around 25 different software partners. So other firms within the wealth tech ecosystem, you know, Orion is a big name in that space. There's a company called InvestNet.
You had integrations with them and you would do things together with them. Right. So we had a relationship. We knew the CEO over there. You know, we knew some other key folks over there. And that was true going back a number of years. So there are two companies in the wealth tech ecosystem that are arch rivals. One is called Orion and one is called InvestNet. InvestNet ticker. So we'll be envy. You ran a process. How many companies were interested when the, your M&A advisor shopped you?
I think they reached out to like 40 or give or take. And we had conversations with maybe six or eight. And then I think we got three term sheets. So we didn't get like a huge, you know, number. But Orion was, you know, as a strategic investor, was most, seemed most interested of them. Maybe there was a fourth that was like a private equity firm, so pure financial offer. What happened from there? So now we're negotiating, of course, with, you know, the different, different potential buyers.
I think that that going through a formal process was helpful in that it created this sort of competitive environment, as opposed to say if we had gone directly because you asked yourself the question, like, well, what are we paying the 2% to the bankers for? And I, and I will say that I think that that was, was very helpful in creating that environment. In our particular case, Raj and I both tend to be fairly aggressive negotiators. So we actually didn't need someone to do that for us.
We needed the opposite. We needed a peacemaker. And that's actually the role our bankers played. And so they helped cool. Yeah, you were the bad guys. Yeah, yeah. They helped cool the room at times because it got contentious. The company that bought us has private equity backing and, and it felt a little odd at times because we're here negotiating with the sort of CEO and, and CEO of Orion. But they were like, oh, we need to take this off for the next board.
And it was sort of like, well, can we just talk to the B firm and sort of it's a weird kind of feeling that we had there? Yeah. In the end, well, what I would say happens is that you have the moment of maximum leverage before you sign the letter of intent. And then you get into this due diligence period where it's sort of like torture because you're getting asked for everything on the sun. And we expected that.
But, and this happens, I suppose, and like in most folks might have some experience with buying and selling a house and it's very similar in a way. If someone's going to like renegotiate, they'll do it right before their due diligence period expires. So one day before due diligence, oh, by the way, we found it. Oh, yeah. We're going to cut the price. So we definitely went through those hijinks a little bit.
And Raj and I had to sort of, and did they cut the price or did you say, no, we don't have to. Well, what ended up happening? There were some details in there and that we had a major enterprise deal, which we thought was going to close. And the pandemic ended up causing some issues because it was a Canadian company that couldn't come and visit and do their due diligence. So that got pushed out.
And so then they said, well, we've got to reprice because you have this huge deal, a $2 million per year deal that hasn't closed and you said it would. So we understood that. So there was some repricing, but there was negotiation back and forth. And what Raj and I ended up doing was we just agreed. We're like, this is our best and final number. And we're just going to put this in front of them. And that's it. So that was, you know, back and forth.
And then they came back and said, okay, and that's a pretty big number like between $100 and $150 million between two people. It is. Yeah. We've got a lot of BC's that we're going to take a cut over there like this is. Yeah, we had, you know, we had some money that we were paying out, of course, to early employees or well, actually to all employees, we handled that a little differently than most companies rather than having options because we didn't issue equity and options.
We just had a term and everybody's offer letter that said, if we get bought, you'll get at least a year of salary. And it basically said, and maybe more. And so we made good on that, of course, but that was your gift. But the weird thing I'll say about that was that it went down fine for the most part. I think that the only challenge there is that folks can make up in their minds whatever number they think it ought to be.
It's a little less clear than if you have an actual options plan and they can see it themselves. So that led to some tension, I would say, in terms of like, you know, squaring that up. But. Well, that was an issue for another one of your big bootstrap companies in Atlanta when MailChimp sold and they didn't, they had lots of employees, sold for $12 billion. And employees and leaders didn't have stock options. And there was a little grumbling that we didn't get our piece of this action there.
But there's always always that game that happens. How did it feel when you close the deal, whatever first chunk of money hits the bank account? Some people say it's the best day of their life when they show their spouse, their the bank account and the big check that just hit and the next day it's difficult because they sold their baby and don't have their team anymore. How did that occur to you?
You know, I would say that the due diligence process and period was probably one of the most stressful periods in my life. Because it's like, of course, we were basically asking ourselves, are we going to land this plane? Are we going to land this plane? Yeah. And so there was a feeling of relief that yes, we stuck the landing. It worked out. Yeah. And that's the real thing. That felt good.
I think that, you know, with many founders, I think that moment of getting, seeing the wire transfer hit, let's say, is of course, it's a huge deal. And it was a huge deal in our case as well. But the backdrop, I guess, was that we had pulled almost 9 million in profits out in the prior years. So we weren't broke anymore or anything like that. But so it still mattered.
The big no mistake, it was a huge, a huge deal, but a little less in that sense and more just that feeling of relief that he made it, we got to the other side. We successfully landed the plane. The hidden levers journey ended, you know, on a high note. And, you know, the team will get to be part of a large organization now. And I didn't feel like I always felt like, hey, yes, I built this software, but I just sold it. It's a transaction. It's not mine anymore.
So I'm going to do my best to get the team. You know, we had a one year, we had an agreement to stick around for a year. So in that year, I'm going to do my best to get them, get a transition and hopefully get them on the right path. But it's up to them. They own it now. Well, and some founder struggle with that, the old joke is, what do you get when you cross the acquired with the acquired rer? Like what do you get when you cross hidden levers and Orion? And some people say hidden Orion?
No, no, you get Orion. Yeah. That's what you get. That's what it is. They paid a premium and there's no confusion about it. It's part of their system now. Yeah, they rebranded it. They rebranded it just after Raj and I departed after the year. They rebranded it to Orion Risk Intelligence, which, whatever floats your belt, man, that is what it is. Yeah, that's right. Did you stop and do other things and take a year off or two or three or did you work on one of your 20 new ideas?
Yeah, the funny things, I've always had this spreadsheet of ideas that I keep and I just add to. Of course. And I think at last count, it was like 70. And most of them are bad, and I'm never going to do anything with them. Or they've long since been done by some better team. I, yeah, I guess I was restless and the time of taking it off, taking it a little bit easy was the time when I was at Orion.
And so I came out of the gate and I looked at a number of different ideas, wanted to try something different. I knew that I was going to leave FinTech and Wealth Tech, just wanted to do something different. And did you have a non-capitan? You couldn't play again. I haven't known I could be within that specific sector. It could have done something more broadly in FinTech, but frankly, I had no problem signing the non-compete because I just wasn't interested in staying in the same space.
I don't know. I've been doing that for 10, 11 years and it's time to try something new. So that fractional idea that we had used ourselves within Hidden Levers and helped us a lot was kind of stuck in my head and so I decided, you know, why don't I see if we can't build a business around that, around helping other startups and growing companies grow their team using this fractional concept?
And so this is now Fraction, which is up and running as a serious business and you have customers, revenue, team and the rest. This isn't just another gig-working site. This is, is it for software developers that want to do committed long-term fractional work like you used or what exactly is Fraction at higherfraction.com? Well, right. And I think you nailed it.
And our attempt at Core is to take the positive experience we had at Hidden Levers, you know, with working long-term with great senior developers. Our sort of tagline is that the best developers already have a job when I hired them fractionally. There you go. And so it's to take that experience. And it's not a gig. It's not a project. It's not a upwork. It's this. It's a agreement. And you know, serious developers don't want to relearn code stacks and teams and processes.
They want to learn that once and be super productive inside an organization. Is that kind of what you're leveraging there? Right. We think that that is what's possible in this model. And then the second aspect of that that we were able to leverage ourselves was that if you build this way, you know, as you're building your company, it actually enables you to hire more junior employees within the team as well, you know, full-time and help benefit from knowledge transfer.
But yeah, we think that it's a very efficient way to augment a team, particularly when lots of skill sets are hard to find, you know, in the current economy we've seen. Now we have seen layoffs in the tech sector, but big picture folks are still finding positions fairly easily. And when you get into things like machine learning and some of the new or cutting edge areas, it's hard to find good talent. And so we think this is a way to address that. Good senior talent. Good senior talent.
And this is a classic problem for bootstrappers is how do I need to I need senior help, but I can't afford a senior full-time person. How big is fraction now? Well, so it's interesting. I like to try to compare on an Apple's Tapples basis because coming from a SaaS background where your revenue and your gross margin are almost equivalent. So I like to look at gross margin and so on a gross margin basis, we crossed seven figures a couple of months ago. And so when less than a year.
So we sort of made some progress with the business. All along our hypothesis had been if we could tap into a virtually, we think, unlimited pool of high quality senior talent here in the US, could we grow this like a SaaS business? Could we also have pricing up pricing plans like a SaaS business and have it be month to month like a SaaS business and have all of those things make it as SaaS like as as possible, could we then grow like a SaaS business? So that's the thing.
And are you passing through the revenue contract value through your company? And that's the margin difference. You're charging a margin for the transaction or you're not just doing a one and done matching service. You're passing through and handling the payments.
Right. Yeah. And so we are charging a margin and some of that is that we also are adding a bit of a capability overlay in terms of PM and software architecture to make sure that, you know, that that's something that we learned in the early days of this new business was that not all smaller firms have actually the capabilities that they need from a PM and software architecture perspective. So it's not enough sometimes to just hand off the developer.
Sometimes that works fine, but but quite often that's needed. And so that's some of where we earn our key to them. So would you call this a services business or it's not, you know, there's software that powers all of this and I'm sure there's automated processes and so forth. But you have a different margin structure. But, you know, at scale, if you have thousands and thousands of people doing this, you're not in the services business. It's just a different margin structure.
Yeah, I feel like it's a tech that tech enabled services business, you know, so we try try to streamline and automate it as much as we can. At the end of the day, it is still, you know, I will say it is a human services business, but it's sort of a spectrum, isn't it? Because SaaS companies that on the one hand are quote unquote pure SaaS are still doing, as you had said, a certain amount of professional services quite often.
And so we exist on that spectrum, not as a pure professional services firm, but certainly not all the way on the SaaS side somewhere in between. And do you want to run this for another 10 years or get it to your 8 million margin and when you need a management team and hand it off to somebody else, Praveen, what do you do? It's funny and not to throw too much crazy and it's not there. No, but I've always got ideas percolating.
And so now I was hit, my goal is probably to become the fractional CEO of fraction in due time as the company gets on its feet. And yeah, I know I think there's lots of, there's some interesting clean tech opportunities I'm looking at. And so yeah, there's lots to do out there. Well, one of the ironies that I've seen as part of my conversion to the practical founder, being part of the VC-funded world in all those pitch competitions and so forth and Phoenix.
But often the most active investors in the richest guy in the room with all these pitch competitions and angel investors is the bootstrapper who, like you, sold that for a serious amount and split it with a co-founder and some of their employees. Do you do a lot of investing now? Do you play that game or are you in the markets playing your risk-adjusted stock market game? But do you invest in software companies and play a role?
So I've done a bit of angel investing, but I think I've also learned, I think in through doing that, you know, we all learn what our strengths and weaknesses are, hopefully. And I think that the early, particularly early stage investing is very much about investing in people because you don't know how much the business model is going to twist in terms of, you know, before it gets somewhere. And I know enough about myself to know that I'm probably not the best judge.
So I'm an optimist at heart and a glass half full person. And so I'll read people at face value and I think that that will lead to me being not the perfect judge. And so I think I probably stepped off the gas a little bit. So I think I've got seven or eight investments, you know, so I've done some, but I haven't necessarily gone whole hog into that, which you're right. A lot of times founders do, or successful exited founders will build up quite a portfolio.
Well, thank you for sharing your journey. The multiple companies hidden levers now fraction and all the things you're doing, some of the insights you've learned along the way. I'll share in the show notes at practicalfounders.com for this podcast, a link to your profits 101 set of blog posts, which kind of explains more of your philosophy and what's going on underneath there. And that's very useful. I found it very interesting.
Praveen, what other advice do you have for practical founders out there who are building SaaS companies all over the world and are kind of committed to staying off the big funding drugs and not playing that crazy game and doing it in their own way? You certainly did it in your own way. What advice do you have for them about how to play the game, you know, general advice for them about how to play the game and win on their terms?
Right. I mean, I think that two things that I certainly, I may have mentioned these in some of my blog posts, but I'll reiterate that I think that they're important from my perspective. One is that I do think that the startup ecosystem, if you will, tells you, you know, just were using that in general sense, they tell you that you've got to be all in.
And I actually push back on that and I say, no, I think it's perfectly acceptable to explore a business idea on the side as a side hustle or fractionally, as we say now. I think that's perfectly appropriate in the early days when you don't yet have product market fit. You don't yet know who your customers are. Just as the VCs don't put all their eggs in one basket. Do you really need to yourself? Right. Very good. And the side hustle just to prove it, I say, don't put your day job, right?
It helps you prove something until you know something and usually you don't know. But it's also proof if you can't add a side hustle onto your day job, the grind of building a company is good to be harder than all of that. For sure. So it's kind of a test to see if you're ready to do that. Any other thoughts there? Provee, what else?
I have the one other would be, and I say this as a career software developer who's been writing code for, I don't know, 25 plus years, I would use low code or no code when you're right getting out of the gate to try to both minimize the cost but also shorten time to market and just get out there and start experimenting. I think a lot of founders, particularly product and see. Yeah, product focus founders oftentimes they want to tinker in the lab and tinker in the lab and make it perfect first.
But the truth is that you got to get some feedback on it and low code, no code enable you to get that feedback much quicker, much more cheaply. And then if you're really onto something, then you can start to replace it with real code as you go. Is there anything you would have done differently looking back now to put all your wisdom and lessons learned? Is there, I'm sure there's a few things, but what is the biggest thing you might have done differently that would have created a better result?
I think with respect to that hidden leverage journey and bootstrapping, probably we could have invested. Once we knew that we were, well, this is probably midway through, say, five years in, we're producing cash flow. I think we could have more aggressively reinvested in the business itself. So if I think about this in terms of like an investment's perspective, that was a very high growth stock and we didn't put quite as much as we could have back on the table. Awesome.
Well, thanks for being for being on the Practical Founders podcast and sharing your story and all those lessons learned. Thank you. Yeah, interesting story. Great conversation. Great conversation. Thanks for listening to the Practical Founders podcast. I hope you found this interview interesting and well, practical and useful.
Please subscribe to the Practical Founders podcast and your favorite podcast app and stay tuned to hear amazing stories from successful founders who are winning their big prizes and doing it their way without big funding. You can visit practicalfounders.com to join the community and get my weekly email with deeper insights for practical software founders all over the world. And you can reach out to me directly on LinkedIn. Let me know what you think of this podcast or connect. Love to meet you.
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