How Proposify Grew From Zero to $8 Million ARR Then Almost Lost Everything: Kyle Racki's Survival Playbook

This article was written and sourced from Kyle’s keynote presentation at Founderpath’s last event. The images embedded below are from his slide deck. His keynote recording is here.

When Proposify CEO Kyle Racki took the stage at SaaSOpen 2024, he delivered a keynote unlike any other. Instead of the typical hockey-stick growth story, Racki, a designer by trade who spent years toiling over proposals as an employee, freelancer, and agency owner before selling his web design agency to focus 100% on developing Proposify, shared something far more valuable: a raw, vulnerable account of how his company got stuck at $8 million ARR and nearly died.

“I’m going to be very raw and vulnerable and share a lot of my fuckups,” Racki told the audience, “and hopefully if you’re pre-8 million revenue, you can avoid some of these pitfalls.” What followed was a masterclass in SaaS survival, resilience, and the hard truth that companies are making new money, but they’re losing more of it than before because customers are leaving more, with churn’s revenue impact now at an all-time high.

The Playbook: Kyle Racki’s 5 Hard-Won Lessons From Near-Death to Recovery

1. Your Biggest Constraint Is Killing You – Face It Head On
Racki’s biggest unlock came from solving for the company’s biggest constraint rather than working around it. “How often do you know what really is holding you back from growth and it just feels like it’s too difficult or it’s too hard to fix?” When Proposify’s engineering velocity ground to a halt, instead of focusing on easier wins, Racki finally faced the technical debt crisis directly.

2. Leaders Are Your Ultimate Leverage
After cycling through engineering leaders who couldn’t deliver, Racki learned a critical lesson: “When it’s the right leader, you know within 90 days because something will change. They will pick broken glass off the floor.” The wrong leader can destroy years of progress; the right one can transform everything in months.

3. Product Still Wins in SaaS
Despite the hype around sales and marketing, Racki remains adamant: “If you’re in the SaaS business, you’re in the product business. You can’t outmarket or outsell a weak or mediocre product, especially when you’re in a competitive market where other competitors are innovating at a fast rate.”

4. Founder Passion Is Non-Negotiable
“If you as the CEO aren’t the biggest cheerleader in the business, if you’re not the most passionate, your team will feel that too.” When Racki checked out mentally, the entire company suffered. His attempted escape through an acquisition that fell through became the wake-up call that reignited his commitment.

5. SaaS Is a Marathon, Not a Sprint
Looking at successful founders who reached $100 million ARR, Racki noticed a pattern: “A lot of times there was five years of zero revenue or sub-five million in revenue.” Building for the long term, not the quick exit, became Proposify’s new north star.

2014: From Agency Pain to $1 Million – How Two Designers Built Proposal Software

Proposify took years to find product-market fit, with the founders struggling to keep the lights on while trying to build a product people wanted. They sold their agency and went all in on Proposify, and once they raised outside funding, they only had ten months of cash to turn it into a business. The breakthrough came when they focused on a pain point they knew intimately – the nightmare of creating proposals.

Racki and co-founder Kevin Springer had experienced the proposal hell firsthand. As Racki described it in the keynote, they were “one of the first SMB players in the market” doing highly visual, interactive proposals with e-signatures – a relatively new concept in 2014. Their initial focus on digital marketing agencies proved brilliant. These agencies desperately needed professional proposal software but couldn’t afford enterprise solutions.

The early traction was explosive. After four months of iterating, their revenue started to double every month, with MRR growing from under $1K to $50K in one year. They had found their niche and their product-market fit was undeniable. The highly visual, interactive proposals resonated perfectly with creative agencies who wanted to showcase their work professionally.

2018: Hit $5 Million ARR and Made Every Classic Mistake

By 2018, things were going so well that Racki and Springer made their first major strategic move. As Racki explained in the keynote: “My co-founder and I closed our first round of actual major investment capital. We took a million each in secondaries, put three million on the balance sheet. It was a really fun time.”

But this is where the wheels started to come off. “We made the mistake that I think a lot of founders have made once they raise money, which is they try to grow too quickly,” Racki admitted. The company ballooned to around 100 employees – far too many for a $5-6 million ARR business. They had managers with only one or two reports, creating unnecessary layers of management that slowed everything down.

The push to move upmarket before they were ready proved particularly damaging. Racki confessed: “I made also the mistake of basically just hiring a team and a VP of Sales to figure it out instead of trying to learn that myself and try to sell deals myself.” Without understanding what enterprise customers actually wanted, they were shooting in the dark.

How Proposify Finally Cracked Enterprise: Control + Visibility Positioning

After multiple false starts with enterprise sales, Proposify discovered three critical changes that unlocked larger deals. The transformation began with repositioning. As Racki explained, small businesses wanted “beautiful proposals and faster sign-off,” but that messaging fell flat with larger companies who responded: “We have cool PowerPoint decks, we know how to send proposals.”

The breakthrough came from understanding what enterprise buyers actually feared: “Sales reps using the wrong materials, sending out proposals with mistakes, the management team not really having any visibility into what’s going out the door.” Once Proposify repositioned around control and visibility – essentially becoming the enterprise’s proposal police – “sales became a lot easier.”

The second unlock was completely overhauling their pricing model. They had made “the classic startup mistake of putting everything on the enterprise plan, giving it all away.” Moving to per-seat pricing transformed their economics, taking them from a $3,000/year ACV ceiling to landing multiple six-figure deals with averages in the $10-30K range.

Finally, they invested heavily in enterprise features: Salesforce integration, SSO, SOC-2 compliance. As Proposify’s proposal software integrates effortlessly with most major sales, invoicing, and CRM platforms, with an integration library available, these capabilities became table stakes for winning larger accounts. But building these features while maintaining their self-serve motion would soon push their engineering team to the breaking point.

2021: Burning $400K/Month While Growth Stalled – The Perfect Storm

By 2021, Proposify had become a case study in how success can breed failure. Despite raising their last funding round, the company was hemorrhaging cash at an alarming rate. As shown in the burn chart Racki presented, they were burning $400,000 per month – an astronomical amount for a sub-$10 million ARR company.

The product had essentially frozen. “We were sort of in this game of whack-a-mole where engineers were just in maintenance mode, keeping the lights on but we weren’t innovating anymore,” Racki revealed. The technical debt had compounded to the point where developers would “spin their wheels for a few cycles, come out with not really a working solution, and just move on to the next thing.”

Meanwhile, the organizational culture was rotting from within. Departments were at war with each other – sales blamed engineering for slow delivery, customer success was frustrated with product, and everyone was misaligned. The company had developed what Racki called “cultural debt” – values that worked in the early days but now prevented tough conversations. “People didn’t like to hear the word performance or accountability. It was an overly positive culture where people got used to losing.”

Making matters worse, Racki himself had mentally checked out. “I was so demoralized that I just started to get interested in other things and I didn’t really have my head in the business.” The combination of founder apathy, cultural dysfunction, and technical paralysis created a death spiral that would soon force dramatic action. This aligns with broader industry trends where SaaS companies saw growth challenges with funding drops, though the overall industry still grew 19% annually in 2023.

January 2022: The Day Kyle Racki Cut 25% of Staff and Saved the Company

The intervention came from an unexpected source. In 2021, Racki had brought on Cathy as COO and CFO. Her assessment was brutal but accurate: “You’re running off a cliff. You’re going to be dead in nine months if you don’t change something.”

January 2022 became one of the defining moments in Proposify’s history. Racki had to cut a quarter of the staff in a single day. “One of the toughest calls but also one of the easiest and most logical calls,” he reflected. The immediate impact went beyond just extending runway – it fundamentally reset the company culture.

The layoffs served as an organizational shock treatment. Employees who weren’t on board with doing more with less voluntarily left. Managers who couldn’t adapt moved on without being replaced. The company introduced new core values centered on radical candor, scrappiness, and building the plane while flying it. “We had to have tough conversations, we had to be able to challenge each other,” Racki explained.

But fixing the cultural debt was only half the battle. The technical debt remained crippling, and Racki still didn’t have the right engineering leadership to solve it. Little did he know, the answer was already working at the company – a developer from Quebec named Matthew who could ship in a week what others claimed would take months.

Fall 2022: M&A Doors Close, Kyle Racki Hits Rock Bottom, Then Finds Fire

By fall 2022, Racki had reached his breaking point. For two years, he’d been mentally checked out, frustrated, and desperately seeking an exit. He hired an M&A banker, lined up strategic buyers and PE firms, and prepared to “hit the escape hatch and get out while the getting was good.”

Then the SaaS market crashed. Every potential acquirer pulled out. Not a single LOI materialized. In a moment that defined his leadership, Racki’s board asked if he had the stomach to continue. “I shed a tear for the first time in front of them and said I don’t know.”

But this crushing disappointment became Racki’s salvation. With no escape route, he faced a stark reality: “There was only one door in front of me which was like you’ve got to fix the business. This is the only path.” The realization sparked an epiphany – why would he want to buy and fix other businesses in the future if he couldn’t even fix his own?

Racki underwent a complete transformation. He started seeing Proposify’s challenges as opportunities to develop the exact skills he’d need as a future investor or serial entrepreneur. “I started to become grateful for the challenges,” he reflected. “What better place is there to work on fixing an 8 million ARR business rather than starting over from scratch?” This shift from victim to student changed everything.

2023: Back to Founder Mode – How Getting His Hands Dirty Changed Everything

With renewed passion, Racki did something radical – he fired himself from being a traditional CEO and went back to being a founder. When his VPs of Product and Marketing quit, he didn’t replace them. Instead, he rolled up his sleeves and started running product and marketing himself, “just like in the early days.”

The impact was immediate. In 2023, Proposify went from burning millions to achieving profitability – albeit a modest $58K profit. “Not by very much, but still not burning, which was a good place to be,” Racki noted. They didn’t need to raise more money and could survive indefinitely.

This return to founder mode allowed Racki to see problems he’d been insulated from. He discovered just how broken the product development process had become, how demoralized the engineering team was, and most importantly – that they had a diamond in the rough.

The Matthew Effect: How One Developer from Quebec Changed Everything

The transformation started with an observation. Proposify was losing deals because they lacked single sign-on (SSO). The engineering team had created “a ticket a mile long with all these comments about why it’s so hard and we can’t do it.” Then Matthew, a developer from Quebec, delivered a working proof of concept in one week.

“How’d you do that?” Racki asked, amazed. Matthew’s response was simple: “I just got it done.”

This led to a conversation that would change Proposify’s trajectory. Racki asked Matthew who trained him, leading him to Mark Lomé, another French Canadian who had worked at scale with companies like MindGeek but also understood startups. After a few conversations, Racki knew he’d found his missing piece.

Mark brought three transformative changes. First, his mantra of “shortest path to value” became embedded in the culture, complete with its own Slack icon. Second, he provided actual technical vision – breaking things into microservices and implementing event-driven architecture without adding unnecessary complexity. Third, he showed engineers how to rebuild while shipping, addressing technical debt without stopping feature development. The results were dramatic and immediate.

September 2024: Version 3 Beta Launch Signals Proposify’s Renaissance

One year after bringing in Mark Lomé, Proposify launched its Version 3 beta – a complete front-end rebuild that addressed years of accumulated technical debt and usability issues. This wasn’t just a cosmetic update; it represented a fundamental transformation in how the company built and shipped products.

The numbers tell a sobering but hopeful story. Proposify generates $11M in revenue, has raised $12.4M total, and operates with 58 employees – a much leaner operation than their peak of 100+ employees. After declining in 2023 and staying flat in 2024, Racki believes they’ve finally turned the corner.

Today’s Proposify serves businesses looking to maximize efficiency with proposal software that provides real-time insights, streamlines sales, and helps close deals faster. The platform has evolved far beyond beautiful proposals to become a comprehensive solution for enterprise proposal management, with features spanning from advanced analytics to complex approval workflows.

Most importantly, Racki’s vision has expanded. No longer seeking a quick exit, he now sees a path to $100 million ARR. “I have a bigger vision now than I had about five years ago

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