Chris Federspiel recounts Blackthorn’s bootstrapped growth in event management, including its payments revenue and an acquisition. He explains how debt financing supported the transaction while preserving ownership.
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Fund an equity purchase while bootstrapping
“with me and for context this was 2018 so you were sub you said sub a million of were 300K 300K of AR yeah okay got it so I mean so you were able to buy the how much equity did you have to buy that did they own 60 something okay so it's a lot I mean so we talking like a 100 Grand or like a million you had to come up with closer to 100 closer to 100 yeah but remember this is like bootstraps like to my name I had like 130k yeah well midpoint there is 600k so if we say closer to a million it be lower end yeah I'll tell you whatever”
“strategy there you know percent of gmv um our like okay so we're we're coming up on 17 million we've got like 16.9 now our stripe Revenue share is like million and a half AR um but of that customers don't see any of that that's that's just from us processing card volume and we Salesforce world is used to sorry sorry when you say 1.5 you're saying 1.5 million is what you paid to stripe as no no that's what they pay us okay that's what your customers”
“contractors fulltime so there's about 100 currently and we're adding another like five six seven now something like this very cool well it's it obviously scales one of the ways you've scaled and added critical talent to the team is through you know opportunistic m&a uh walk us through when you did your first m&a deal and you were kind enough to actually share the real Loi or at least a chunk of it the real Loi when you acquired a company called PCY why this company uh it was a single developer company he was a friend when you have a payments app being PCI compliance”
“was cheaper than what it would have been to go out and raise a big Equity round yeah I mean how did you do that analysis so so I still have 60 2% of the company and employees have 15% and then friends and family 5% and the rest is with some big stuff um but the reason I wanted to dive deeper there that there was some heartache uh Jason calak says 5% I went through the launch accelerator okay I understand it let's move on I they were”
we found Blackthorne a while ago competing in a very competitive space sort of the event management space quietly bootstrapped his way to 16 million bucks of Revenue over the next 20 minutes we're going to hear his full story so please tell me welcome to the stage Chris CEO at Blackthorne come on up Chris thanks for being here great intro yeah look I just I try and roll with the punches I just go when was the last triathle on Saturday see I told you I told you how did you do uh the second
half of the run I got pretty tired but I came in 35th out of 70 was a half Iron Man and uh Lake George very fun okay well as long as you feel good we got a round of applause for 35 out of 70 right that's a good thing right good good thing all right very cool well let's jump into the story so a lot of people when they think event management they think sort of the players that have raised a bunch you hear about in the news all the time they don't maybe find themselves sort of down a cave in the Salesforce app exchange and describe what Blackthorne does relative to what these folks understand event management
software to be yeah um I'll take it back a little bit okay so so event management is is a is a little bit of a accident uh we had up to nine or 10 apps at one point and the earlier time in the app exchange about 10 years ago where we started nine years ago that graph is uh very Nic looking but we were crap for the first four years it took us like four years to reach a million AR and um we had a payments app we had like a billing app
we had an event management app we had we had apps for everything we went for like a web-based invoice app it was a disaster and we had all these leads coming in for event management from all these sectors that are not popular like health care and education and nonprofit and government right like things that you don't really think about event management and are app did very very well in those spaces so we flipped it all around and more or less pushed all the other apps into this like non go to market and now we're just Fielding
against that space so this graph here this this image or whatever you call this thing infographic this thing is uh like 2 years old and Salesforce they you know if you have any product of Salesforce they'll say you're a customer but it's it's at least like 1500 schools that they they have um but when you say you have a school Harvard for example has 83 Salesforce orbs and we're in like two of those Orcs so each one of these has like a very wide way that you can take the applications so give before we get to your metrics more I want to make sure we ground everyone in what the
product does tell us like the last event that you use Black Thorn to run it and specifically what what that event did with your app what was the event name yeah so so um it's it's actually a little bit different so so if you're a school you'll run all of your campus tours through our application through like recurring events like uh our customers 90% of their events are free so you wouldn't really hear about it as like a like a Cen or bizbo or Splash kind of kind of application if you're Healthcare and you want to educate the community on your services you'll have
tons of free applications Wounded Warrior uses us for their donor engagement but you'll never hear of any of the events CU they're all free and anybody can participate in these so we're we're sort of like event infrastructure that you'll never really hear of so take us back you said it was four years the first million you were testing all these different product lines is your DNA engineering or sales more non developer nerdy I guess uh I I I I'm very anal with um product stuff
and I'm more a Salesforce admin databas e but I could write code when I was younger I I really don't like it and I'm not particularly good at sales a sole founder or did you have a a second or third I had two co-founders that I bought out in 2018 um I wanted to go after payments um one of them wanted to go after events and then we made lots of other things and ended up just going after events so so why did you have to buy them out if you ended up on their Vision anyway if you wanted payments and they wanted events it was more personality conflict I guess I would say we we operated in different ways wanted
different things um how much would you have to pay them to buy them out I don't know if I've ever even I've told maybe five people this no one's recording it was it I I'll say this I I I I used uh the majority of my savings I showed up at my aunt's door in Manhattan crying because I had no other path to go and she helped me out by like wiring the rest and she didn't knew nothing about this after I asked I I pitched so many investors no one wanted anything to do
with me and for context this was 2018 so you were sub you said sub a million of were 300K 300K of AR yeah okay got it so I mean so you were able to buy the how much equity did you have to buy that did they own 60 something okay so it's a lot I mean so we talking like a 100 Grand or like a million you had to come up with closer to 100 closer to 100 yeah but remember this is like bootstraps like to my name I had like 130k yeah well midpoint there is 600k so if we say closer to a million it be lower end yeah I'll tell you whatever
the number was it was very half life this a couple more times we'll be right on the number it's very unenjoyable time let's say that okay okay but you did the work I mean thank you for being open about that I I mean I won't ask people to raise hands but I can tell you you know at founder path we analyze and we get cap tables and data rooms every day and we look at hundreds and hundreds and there there's very rarely a company that does not have co-founder conflict like even today there are companies doing at your stage where we see these random
names on the cap table that still own 20% of the business but left like six years ago yeah and the company was like on tenen the size yeah I'm I'm in a Founder group in in Manhattan and it's almost all founders below a million AR are there's like 300 people and there's just like almost unlimited amounts of stories with uh founder conflict well again we have open program this afternoon there's tables downstairs just like get together talk about this just to Spur some of those conversations if you're comfortable sharing raise your hand if you have successfully bought out non-operational equity on your cap table
raise it high because people will want to find you at lunch look around these are the people right if you've done it look around try and find him at lunch okay so that is a move right that is hard to get done you get that done in 2018 fpath could do that too right we could do that we do that a lot thank you for that appreciate it uh we do do that a lot it's a big use of capital for us um but you got that done in 2018 now did you own 100% of the business at that point uh close I mean I I I gave my aunt some some some funds my my friend threw
in 50k I gave him some and now they still own two and a half and 3% respectively their 50k is worth few million each and they they did pretty well I'm very happy they did that because they invested in a a dog turd so of a business uh well you're still hoping hopefully getting together for Thanksgiving so Thanksgiving 2021 you're at about 5 million bucks of ARR today you more than 3x that you're north of 15 million of ARR what drove most that growth would it be a fair statement to
say the majority of your strategy has been to dominate the Salesforce app exchange for critical keywords around events yes I mean our our our average AR now is about 30k and we have some customers up in the two three 400k range largest customer 400k a year yeah currently our our average ACV has really pushed up we we went more up Market because in the Salesforce space you can't really like use it without someone helping you that's why the SI the system
integrator industry is is so big so it ends up being a bit more more Hands-On but once you get the thing stood up it ends up being very sticky I think our grr is somewhere around like 92% and people just just stay on by a cohort basis our higher-end customers we we've never had a customer over 60k a trit so before we talk about that ACV expansion which is I think a lot of people in the room are thinking about I forgot one thing I wanted to go back to because when you did that co-founder buyout 300K of annual revenue 2018 you shared with
us at about 86% of that revenue or 83% fiscal year 2018 was actually Professional Services which I would say you're basically you were an agency effectively with a sort of software side project I would I describ that as would you agree with that or is that false yeah yeah it's um so being bootstrapped you have to come up with money from somewhere what we did is a lot of services projects for people that were in the the technical space we wanted to get into we knew it was going to be payments and events but not the verticals so we we built out those apps
while maintaining the IP doing the services project so we would do Services projects for [redacted phone]k the the key there is being able to get the services project which is not always like the easy thing to do but if you can and you can keep expenses low you can spread that out while building the IP for a product that you can resell so today when folks look at this graph the Top Line This is basically breaking down your current Revenue uh composition fiscal year 2023 78% was events and payments when did you really go hard into payments and was the monetization
strategy there you know percent of gmv um our like okay so we're we're coming up on 17 million we've got like 16.9 now our stripe Revenue share is like million and a half AR um but of that customers don't see any of that that's that's just from us processing card volume and we Salesforce world is used to sorry sorry when you say 1.5 you're saying 1.5 million is what you paid to stripe as no no that's what they pay us okay that's what your customers
pay you and then you take a percent of the 1.5 million you have to pay to stripe no so customer our customers are processing the numbers are almost even but customers are processing about a billion and a half of payments now through predominantly through stripe stripe then gives us a kickback of the margin which allows us to charge our customers less and stripe benefits from us sending more uh customers their way it's everybody wins in that conter a billion annually about one and a half billion annually yeah so this year
you'll think you do about a billion and a half it's kind of weird our our our payments volume isn't growing because our our model has pivoted um heavily towards events so of our of our 17 million events comprises about 12 million of that and that's the one that's really growing yeah but but uh slightly would you say lower margin than the percent of gmv because percent of gmv is just well the gmv we get from events is is almost zero because almost all of our Customer Events are free and if they have paid events it's such a small portion of of what they're doing I
see I see how many of you guys you to call this a SAS plus business model right SAS plus payments how many of you guys are actively experimenting are already well on your way to a SAS plus business model just raise your hand out of curiosity raise it high so people can see okay is it mainly like Pro proposed by is it is it gmv is it payments SAS plus payments yeah I mean the biggest the big pluses that we're sharing today in terms of the most sustainable companies are you know
SAS plus iot so install a small piece of hardware for a 100 bucks and then pay the monthly recurring fee forever popular examples are like a waste management company you attach the hardware to the dumpster the dumpster tells the pickup when the dumpster is full and you charge a SAS fee and the data fee on the back side of that the other big ones we see are SAS plus Professional Services which is what you start as before going more into sort of payments and events um but these SAS plus models are popular we we we have and don't have that like Alina was
saying how how they like uh chopped up their their path into a few apps when you use our Events app you can also use our text messaging app and our payments app so we charge like levers on that so out of this one deal we get like a few different angles of money so far we've touched we're about halfway through we've touched on Revenue stream we've talked on product strategy we talked about some co-founder you know disputes let's talk about sort of team and functions now today how how many direct reports do you have currently well we just hired a new VP
sales so my direct reports went from like 30 to like five which is oh which was like very helpful 30 direct I thought you going to brag about you seem excited about going from 30 to 31 no so so so our our when interest rates Rose nonprofit deals disappeared um Salesforce won't say this publicly but they do very few new nonprofit deals right now and nonprofits are like frozen so when that also happened a lot of other sales and leads happen all of our SI Partners significantly reduced all
the leads they were getting because they live by salesforce's new deals so we've been going through like a uh like in sports like a rebuilding year so uh five or six of our sales leaders we did a sales reorg are no longer there and now we've been rebuilding a new bdr manager we promoted someone to be head of CSN on boarding we got a new VP sales and we shuffled things around so this whole thing has uh changed a bit we no longer have a COO and instead we have I I have
reporting to me head of uh Marketing sales uh we have one person who runs all of our software which is product uh support QA and Engineering so she reports to me um with some of our this is not a question you ask some of our best people have started as support reps and now they're on the exec management team so they they've like done very well we we love that so what what do you think Total Team size will be at the end of the year this year uh we have about 80 full time plus another 20 or so
contractors fulltime so there's about 100 currently and we're adding another like five six seven now something like this very cool well it's it obviously scales one of the ways you've scaled and added critical talent to the team is through you know opportunistic m&a uh walk us through when you did your first m&a deal and you were kind enough to actually share the real Loi or at least a chunk of it the real Loi when you acquired a company called PCY why this company uh it was a single developer company he was a friend when you have a payments app being PCI compliance
important so you can quer your data and make sure you're PCI Compliant this is a failed acquisition this one we've sold like three Deals since I bought it we paid it out over time and this thing didn't really work still friends with the founder like the guy but didn't really work no no look there's a lot of there's a lot of deals to be had out there right now from folks that have raised a bunch maybe you have a competitor that raised 10 million bucks of equity they only have a million of Revenue the founders are checked out the VCS have already written off and maybe you guys are sitting here going huh I've been disciplined for the past six years I should go a couple of those companies
how do I get it done without paying 300K of legal fees right so there's still some lessons to be had here why did you structure and quote This Way the purchase price will be equal to 850,000 bucks structured 200,000 bucks paid to the seller in cash on closing date and then um and then contemplated thereafter what is that 650,000 earnout yeah so uh as a small company not sitting on millions of VC um we wanted to spread the money so we did a a initial single
payment that was a bit higher and then we did a ramp so we tried to align it with like SAS builds so later on you have more money so we want we did like less money and then more money towards the end over a two-year period and with the other purchase I did the same thing we uh got funded some of the the funds through um uh another service that was before you guys were ramping you can name it who well your debt story is pretty long that was with cap chase you
and then you moved to level Equity uh so yeah so so so with cap Chase we got up to like four four and a half million of debt something like that which in November we'll have fully paid off which is great and we've had three months now of EA deposit which is very excited Round of Applause for dep positive we love this this is great with debt servicing including debt payments yeah and then then we did a a debt facility with level equity and RF partners that started as 14 million it grew to 20 million and then we have a balloon that's due mid 26 I I I do want to give that Benchmark to everyone because there's a lot of Founders in the room
that are right around your stage there are are a lot of these companies like level Equity that are perfect for you guys if you're trying you know if you're between 10 and 20 million bucks of Revenue they will do a blend of equity plus debt and so to the degree you can just let's be specific with this deal what was the total amount of capital level Equity made available to you via debt yeah so so for anyone who doesn't know with with debt you get a a a leverage ratio and when you do like this secured kind of debt when they're first
in line to get paid when they take uh warrant points when they had this a lot of stuff we we got up to uh about 1.3 so for example if you're at 10 million of Revenue you can take 13 million from a facility that's why they call it a facility and and and not a loan that someone's just giving you so we started at 14 million at the time we had eight or n million and they they had a leverage ratio there then we wanted to get more money over time what was the cost of capital on the first 14 million do you remember Barry's going to kick my
ass if I tell you no he won't he will uh really I I'll I'll I'll I'll say that the the structure was that it's a 4-year uh interest only uh loan with a so so from the start to the end it's four years even though it's grown that hasn't changed and then there's a a balloon that's at that's a 20% balloon maybe he won't mind me going over this one and how was that work the 20% balloon we borrowed 20 we pay back 24 so in order to do that we have to sell a chunk in the company or we can restructure it
through senior debt if we're if we're significantly EA dep positive or level in RF have said that they're willing to like Shuffle some stuff there and extend that if we want to do something so you have some optionality so I'm I'm having him do this so you can talk to him in the hallway later or during lunch but the tldd is you made some calculation in your head that if I get some money to go buy texd to go buy PC to go do what I want to do in Drive growth you would keep control and you made the decision that all the interest payments any warrants any headache of doing the debt
was cheaper than what it would have been to go out and raise a big Equity round yeah I mean how did you do that analysis so so I still have 60 2% of the company and employees have 15% and then friends and family 5% and the rest is with some big stuff um but the reason I wanted to dive deeper there that there was some heartache uh Jason calak says 5% I went through the launch accelerator okay I understand it let's move on I they were
yeah so but anyway though so so um uh what was that now I don't remember I know he does that to me too he just lose track of everything you're thinking just comes through the computer at you and you're like oh my God unlaunch ah so here's why it's not just about numbers it's about uh politics I know one founder that enjoys having a board I know unlimited Founders that don't like having a board so we had uh about 55 uh growth VCS that reached out that
wanted to write us like a 20 million check and I said do you need a board and they said yes and I said no to all of them except one of them wanted to do it at a 7x and I'm like I I don't like that so then we did this debt facility so the the benefit of doing the debt facility is that they now have like I don't know the exact number it's shuffled a little but like 5 to 6% uh versus doing round is like 20% uh give or take if you go so so being being um uh if you I don't know where our ER is at the time because it
kept changing but maybe 15 million and you got 20 million of of money to spend if you want to do that you have to give up more than 5% so that's that's one of the reasons I wanted to do it and my ego tends to be a little uh annoyingly large and I didn't want to have to like get forced into a decision so it was nice going with the the the debt route that like changed the Dynamics there and you used that to fund the texd acquisition yeah that that so that funded uh texi this this was the same thing so it was like any of these deal terms surprise you guys just as you scan it while you
talk yeah a big thing that that that 2 million over 24 months um so we never actually reached the 24 months because when we did the de facility texi refused to be second in line so we ended up paying them out but by that time it was like a million we had left paying but the initial payments was like was like I don't know 150k the first quarter or something like that so like it it ramped up with the rest of our Revenue this this acquisition has worked out very well both in in ARR and strategy because doing the the event management everybody wants to do SMS and the ARR has kept
growing here a wrapping up we got about a minute left just so you guys can get a visual I mean this is what I mean this effectively is your top of funnel right it's the position in the app exchange with a lot of reviews around certain keywords so actually the app exchange now kind of stinks uh for getting new leads okay good that's good to know years ago it was very good now it adds uh credibility to you our our biggest source of leads are system integrators so we work with um in in the Salesforce world there's about 2,000 of these SI
and we work with this mid- tier if you have like a 100 to 500 employees they get these projects where someone's like I want to do event management and then they bring us into the deal so there's no like real public facing thing about that that's heavily uh relationship driven you have to go to events you have to do a lot of meetings you have to you know get getting good with them yeah yeah know that makes a lot of sense so summing all this up this is revenue growth what do you guys think you'll finish this year at AR wise upwards of 18 upwards of 18 well guys there you
have it you should talk to me about buying out uh non-operational Equity or if there's friction with your co-founders grab them talk about that at lunch talk about what works and how to do micro Acquisitions and what worked well what didn't work well how to use debt uh most importantly how to grow and keep control you know you plus employees plus family still owning over 80% of the company he's doing it the full control way as we say valuation is temporary control is forever give it up for Chris at Blackthorn and I I'll say
um if you do have any questions just email me yeah there you go it's Chris Blackthorn doio um if you're 15 million or below I can help if you're beyond that you can help me uh so I'm happy to to talk to anybody awesome Chris thank you so much again
