Milestones to $25MM ARR SaaS – Vishal Sunak


Vishal H. Sunak is the CEO & Co-founder of Linksquares. He built a $25M ARR SaaS and raised 5 rounds of funding, most recently a series C of $100M. Peter and Vishal discuss the key milestones on the way to a $25MM ARR SaaS as well as benchmarks SaaS founders can expect on their journey to $25M ARR. Vishal packs a lot of info in fifteen minutes, check it out!


[00:00:03] – Peter

Okay. Hello, I’m here with Vishal Sunak for another episode of SaaS Founder Interviews. Vishal, thank you so much for joining us. Do you want to spend a moment just introducing yourself and telling us a little bit about your company, Linksquares?

[00:00:15] – Vishal

Yeah, vishal, I’m the CEO, one of the founders of Linksquares. We play in the legal technology market specifically today in contract management. So we have an amazing end to end contract management platform. We work with in house legal teams, over 600 of them now, and I founded the company in 2015. And I live in the Boston area with my two daughters and my wife.

[00:00:42] – Peter

Fantastic. Okay, so you’ve raised venture capital. You’ve done five rounds, right, of funding. So you’re on your series C, the last round, I think you raised $100 million, if that’s correct. And I just thought I’d ask you, we were discussing that there are a few misconceptions on exactly what venture capital is, so I thought I’d ask you about your experience of what venture capital is doing, these rounds that you’ve raised to date.

[00:01:11] – Vishal

Yeah. So taking money from real venture capital is different than raising through, like, high net worth people or angel investors, right? Angel investments are different. They’re done on mostly convertible notes and you don’t price around, you don’t establish a price. Typically, venture capital, it’s a business, it’s money that people have borrowed from other people. So VC funds, you typically raise capital. Right?

[00:01:38] – Vishal

Like I raise capital as a founder, they raise capital as venture capitalists. They borrow it from people that have lots of cash on hand, like insurance companies, higher education, like universities and schools, endowments and trusts. Then they have usually like a ten year fund cycle, right.

[00:01:57] – Vishal

So they have ten years to take out, let’s say they raised 100 million dollar fund. The first part of the ten years, they’re finding companies like mine. They’re vetting them, they’re pushing it out, they’re pushing out the money into companies. They’re taking ownership of companies and then they’re continuing to see which ones are doing really well and putting more money in it. So the ultimate goal is the people they borrowed money from, they promised some return. Like, you give me a dollar, I’ll give you $5 back in ten years, which is actually really great. I mean, probably beats the stock market these days for sure. It’s really important to know that they’re running a business too. Right.

[00:02:35] – Vishal

They operate on what’s called two and 20. They take 2% of their fund and management fees. That pays for their salaries and office space and supplies and travel. And then they take 20% of the profits that they earn out of their fund. So if they make a ten x return, they take 20% of that for themselves. They cut it up through all their team and then they give the rest of the money back to what they call limited partners.

So it’s really much like a business model and understanding that when you take this money, they make a lot of decisions fiduciarily about how much they’re going to put more into the company. If the company is going well, they want to put a lot more into it. If the company is not doing so well. That’s how you hear about how companies end. So that’s kind of the roots and nuts and bolts of it.

[00:03:18] – Peter

Fantastic. Okay, so that’s really good because I think it clears up exactly where the money comes from and how it’s managed, what happens with it for SaaS founders haven’t yet been on that journey. Now, you guys have got to the stage of around $25 million ARR, right? So I thought it would be interesting if you could share with us some of the benchmarks and milestones that you hit throughout that journey.

[00:03:46] – Vishal

Yeah, the first milestone, the biggest milestone is to get one customer to pay you. And for us, that was a company in Boston. They paid us $12,000 a year, so that’s $1,000 a month. We had no idea how to price Linksquares, and it was definitely not as sophisticated as it is now, five to six years later.

The second milestone that I really thought about is like, how do you get to ten unaffiliated companies or companies that didn’t do you a favour? Your cousins, brothers, uncles, son doesn’t work there or [have stakes in the company]. They’re completely new to you. They don’t know who you are, you don’t know who they are, but they bought your product, they found the value. Once you get to those ten customers that didn’t have any reason to buy, they bought because your product is doing something that they need solved inside their business. From a B2B perspective, the next real milestone is how do you keep going and growing to a million of ARR?

No one is really on the clock on the clock of being benchmarked against all the other SaaS companies. So you’re at a million of ARR. Once you’re at a million of ARR and through that process, you’re learning about go-to-market, strategy, right? Channels. What channel is working? Cold email works really well for us. And no one emails the general counsel of a company that had a lawyer for anything good.

Other channels, you have to kind of use that zero to 1 million to experiment with channels that are working. Maybe event marketing is working really well. Or maybe pay per click advertising is working really well. It’s all about doing things really efficiently because you don’t typically have a lot of cash on hand. Paid advertising can be very expensive for very low returns. So I would say stay away from that until you have more of a bankroll, a bigger bank account to do so. But find the channels that work. Track where these opportunities are coming from. Double down on the source that’s working the most. Try a whole bunch of channels.

[00:05:47] – Vishal

And then when you find a channel that’s working, you’re finding your buyer. You know who your buyer is, you know you’re solving the right problem for them. Then the other piece of it is then scaling the product side, right. Which is the more features you make, it makes it easier for people to say yes to get more value out of the product, the more likely to stay with you.

[00:06:04] – Vishal

So that journey to one million is really important. If you’ve been able to make it to 1 million, I think it’s like 4% of all companies who try can make it to a million or something like that, then it’s really thinking about how do you continue to go pretty fast.

[00:06:21] – Vishal

And the good news is there’s so many benchmark reports out there on what is like elite growth or just okay growth, or kind of like slow, bad. Kind of growth, right?

[00:06:32] – Vishal

Best Summer Venture Partners probably does it the best with their State of the Cloud presentations that they do annually. Key bank has great resources on just benchmarks of companies. So when you start to think about like, okay, it’s really working, we can continue to go faster. Going one to 10 million arr in two years, between two and three years, like under 36 months, that’s like the world class benchmark.

[00:06:58] – Vishal

And in order to do that, you’ll obviously need more bodies, you’ll need more people. You may be raising capital to support it, or you have great cash flow coming in. That’s the other thing about venture capital. Venture capital is like rocket fuel. You put it in your rocket so you can go way faster. That’s the expectation, right?

[00:07:17] – Vishal

You don’t typically raise capital to sit on it for like, ten years. It’s usually like 18 to 24 months of capital that you’re really using to rocket boost whatever you’re doing that’s working. The hypothesis that you’ve generated is coming true. You’re using money to continue to further the hypothesis. Once you can make it to 10 million arr, then you’re really starting to think about things like retention, gross and net.

[00:07:43] – Vishal

Having over 100% net retention is very attractive, especially in these times. Focusing on the efficiency of your business, especially on the go to market side, like, how much are you spending to acquire a customer? What’s your CAC payback? Sub twelve months cash payback is really attractive. That means that customers are actually profitable based on what you’ve invested to find them in under a year, which is typically like a B2B renewal cycle.

[00:08:07] – Vishal

You think about things in a year basis, right. Past 10 million ARR. Then you’re looking at things like gross margin. You’re looking at cost of goods sold, which factors into gross margin. You’re just looking at the overall kind of burn efficiency. Like you’re burning money, you’re spending a dollar and how much arr can you get out of it, right. And then a lot of the science then goes into scaling it 10, 20, 30, 40, 50, 100 million ARR and onwards.

[00:08:30] – Peter

Yeah. So many aspects to consider on that journey. Vishal, two questions spring to mind. One is as you’re at the stage post 10 million ARR, all of this optimising, are you really gearing up to get profitable or is that way down the line?

[00:08:57] – Vishal

Yeah, every business is different. I can only really speak on kind of how I run mine, other people run theirs differently. Right now with the opportunity that we have to sell our product into legal teams that really don’t have anything we are just investing in, just trying to capture market share as fast as we can. Be the brand that people associate with when they think about buying contract management technology.

[00:09:22] – Vishal

To that end, it’s really the ratio of how much did you burn in a year to how much your ending ARR is. The pundits will tell you that like a one to one we burned $30 million. So that’s cash coming in, expenses and then that’s whatever is left is burn. So I burn $30 million and I’m going to end this year at 30 million ARR. That’s really good. One to one. Then as you kind of think about the journey ahead, like 25, 50 million, 100 million ARR trying to want to make that ratio get better.

[00:09:56] – Vishal

You try to burn $50 million and then make it to 100 million in ARR. Then it’s like getting really great. You’re like fifty cents to a dollar. And then in the years to come, as you think about your company is very large. Probably now your company is going to get very large very soon you start thinking about can we maintain the same burn rate and continue to grow? And continue that’s like efficiency of growth. Eventually, Peter, there could be an inflection point where your expense structure is not massively increasing every year.

Your burn is not continuing to go up, but your ARR is going way higher. And then just through free cash flow you have the opportunity to be profitable. But in the early days you got to think about it like one to one is really good. Like fifty cents to one dollar is really amazing. That’s like very elite. Somewhere in there you understand that the business is actually running very efficiently. And that’s what kind of later stage investors look for.

[00:10:59] – Vishal

That’s what bcde investors, they really look for. That scaling. Like, can this thing make it to a billion ARR? If this thing was doing a billion or 100 million or 250,000,000 at ARR, how much money would it be consuming to make that happen?

[00:11:16] – Peter

Got it. So your efficiency on return and your burn rate is kind of you’re looking for that to go up as you the return you get on your burn rate as you scale and scale. The other question that sprang to mind was you were talking about hypothesising on the route to market that works for you and the customer fit. Have you experienced that changing throughout this journey and how has it changed if so?

[00:11:43] – Vishal

Oh, totally. It’s like an onion, right? You start the company and it’s like a whole onion. You don’t know what’s in the middle. So every month and every day and every week you continue to learn more, right? So many people I’ve seen just jump into like, we built a product and now we’re going to go try to find a buyer. And that’s like, absolutely the wrong way.

To get started, right. You should really think about, I have a problem now, and let me go talk to a whole bunch of people who are the potential buyer of a product that can solve this problem. Instead of going, Let me go build software and then go to the customer later and say, look what I built. And they’re like, Well, I don’t really like this, or it doesn’t work with how we already work or already use something that does something like this. It’s like problem customer, then go build the solution. Instead of problem solving, then I’m going to go attack the customer. That is usually a recipe for disaster.

So really, knowing who your customer is and we’re refining it constantly, right? For us, it’s like, is it bigger companies, like publicly traded companies with 10,000 employees? Or is it smaller companies? Is it companies in the United States, or is it companies elsewhere? Is it companies in one of 20 industries or every other industry that a company could possibly work in? And you’re just constantly using data to say, we’re having really good success in whatever, like 1000 to 5000 person companies in these 25 industries. Okay, great, let’s not do anything stupid. Let’s keep doing this. Now we can experiment on other stuff, but you’re not like risking your revenue number every quarter, right?

Every year on experimental go to market hypotheses, you can experiment with it, but hopefully by the time you’re at five, 6710 million arr, you know, kind of like how that foundation of predictability, how are you going to make your number every quarter? That’s the other thing with taking money from VCs. It’s like, what have you done in the last 90 days?

[00:13:38] – Vishal

Like, we live and die every 90 days. We’re coming up on quarter end here in June, right? It’s like another quarter. Q one is gone. Q Four last year is gone. Now we just think about Q Two and Q Two will be over. We’re on to Q three. Q three is over. We’re on to Q four. It’s all about making sure, you know, you can make it and then how you build your models based on actuals I have actual science behind how much I think my reps can produce a year.

We’ve trended it for years and years, and we’re not trying to x that number and be hopeful. There’s no hope that can go into Excel spreadsheets. It’s more or less the truth and try to dial it down a little bit, be more conservative. And you can then show up with better numbers and make everyone happy.

[00:14:19] – Peter

Yeah. So in the earlier days, there’s more experimentation. You’re peeling off more layers of the onion, but as you get to say, six, seven, 8 million ARR you’ve got a better idea? You’re experimenting less and you’re being able to predict and forecast more accurately.

[00:14:34] – Vishal

Yeah, we do 80/20. Like 80%. We’re doing exactly what we always do 20% of the time, where we can experiment to learn something, and maybe some of that 20% goes into the 80%, then you’re experimenting on the next 20%.

[00:14:50] – Peter

Yeah, got it. Hey, Vishal, this has been awesome. Thanks so much for the chat. I think you packed in so much in just under 15 minutes there. So I wanted to thank you for your time. And then also, how can people follow up if they want to learn more about link squares or more about your own story and your journey?

[00:15:06] – Vishal

Yeah, sure. Cheque me out. That’s the company. Follow me on LinkedIn. Feel free to add me on LinkedIn.

[00:15:15] – Peter

Awesome. Well, thanks for joining us, Michelle.

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