How LMS365 Grew From $18M to $30M ARR With 14 Geographic Sales Hubs

Guys, LMS365 launched in 2003 as a side project by dentists at a local library. They finally said, well, this can be SaaS. And in 2016, they broke a million revenue in 2018. Today, over $30,000,000 in terms of run rate up from, call it, 18,000,000 a year ago. So call it 50% year over year growth. They're serving 2,000 paying customers. They help those customers be more productive in the micro... Microsoft ecosystem. Those customers have

over 2,000,000 seats on the platform as Rasmus continues to scale. He joined the company as CEO two years ago, did a 20,000,000 series a at a five to six x multiple. He's now growing here with a team of two sixty engineers and 14 sales hubs attacking each geography. We'll see what they do next. Hey, folks. If we haven't met yet, my name is Nathan Latka. I launched and sold my first software company back in 2015 and

went on to write a book about it, which you guys made a Wall Street Journal bestseller purchasing over 30,000 copies. Thank you so much for that. After the book, I launched this show and went on to create founderpath.com. I raised a large fund to do non dilutive deals with B2B software founders. So far, we've invested in over 400 software founders totaling $150,000,000. Here in 2024, we're doing three to four new deals per week. So if you're

looking for capital and don't wanna give up equity, go sign up at founderpath.com for free to get your offer. Alright. Let's jump into the interview. Hey, folks. My guest today is Rasmus Holst. He is the chief executive officer at LMS365 launched it a little over two years ago based in Denmark. Before that, he was CRO at a group called Wire for over four years, and before that, COO at a group called Huddle. We'll jump into LMS today. Rasmus, you ready to take us to the top?

Absolutely. Good to hear. Good that you wanted to have me here, Nathan. I'm excited.

I'm excited to have you. You know, it's so hard to get employee performance management right. You have all these sort of personality tests and you have people to try and build software for it. How do you fit into this space?

We historically come out of a learning background. So this means that actually for longer than I've been here, we've been building a learning management platform built into Microsoft Teams because we believe that learning should be where you actually meet where you are at every day. But then, as we kind of grow with that ambition, we don't just wanna provide learning. So essentially, what we've done is we've elevated the way we think about the platform to human

success. And then you'll ask, what's human success? It's basically performance, it's engagement, it's learning, it's your skills, all underpinned by AI. And note that I deliberately used the word success rather than human resource because what we really believe is happening here is you used to have a customer support type of team that dealt with customer support, but it became customer success and it became centric to the organization, how you actually dealt with that. And we feel

like people is almost the same. Like, why do you wanna be a human resource? I should actually, as the CEO, invest in your success. Whether you're successful here or in the next company, you start by reading out the couple of companies I've been at. That my journey to here should be successes, maybe not all successes because we'll not all be successful at everything we do, but successes along the way that bring you along the journey and

allows you to move further and further up the ranks. So that's how we think about the product, that's how we think about it, and we actually think there's a category to be created for human success.

Compliance training, Microsoft three sixty five adoption, tracking and reporting, these are some of the solutions that you guys offer. Now the company was launched all the way back in 2003, I believe, and you joined as CEO more recently. We'll jump into that story first, but give me a sense today, can you tell me a customer story and give me a sense of what on average your customers are paying you to use your full platform per year?

Yeah. Our core market is core to upper mid market, so 250,000 to 2,500 users, often traditional industries, so often manufacturing, logistics, healthcare, financial services, services industries, those types of things. So typically, people with a strong Microsoft installed base. And they typically pay us around 15,000 for a solution. That's the average. We do last per year. And and one of the... And just just

to be clear on that, Rasmus. Sorry. If someone's paying you $15,000 per year, how many seats are they likely paying for? A couple 100?

Yeah. In the three four hundreds.

Streetwarners. Okay.

And then one of the gross pieces that we put in place here is that last year, at the end of the year, we acquired Weekly10. So we basically acquired... We set up the human success narrative and acquired into that by acquiring an engagement performance platform from Weekly10 out of Rexam. So essentially, what we did was to buy our way into building a broader platform, but obviously also with the the view that we can scale more

broadly and get a bigger share of wallets with with our customers as it stands today. Because we can see the market is consolidating. You wanna offer more to the clients that you have so that it becomes a suite more than a single trick pony that you are offering.

Mhmm. Tech.eu reported that quote Danish learning platform, LMS365, buys Weekly10 for €4,500,000. Was that correct?

That's that's in that range. It was bought half in cash and half in share, so the number is is there or thereabouts. Yes.

I love seeing a company... You know, look. This is this is an American host and a European founder, but so many times when I talk to Europeans, they just feel like they don't want to talk about his numbers and be as aggressive as their American counterpart CEO. So I love that you guys were aggressive. You went out and got this deal done. What feedback do you have for maybe other CEOs based in Denmark or Sweden or the European looking to be aggressive with M and A?

Remember, am Danish by origin, but I spent seven years of my life in San Francisco.

There you

I work with Robin Daniels on a daily basis. He spent twenty years of his life in Silicon Valley and I worked with Henrik Jebberg. He spent ten years of his life in Silicon Valley. So there is a bit of DNA, and I will say it's a great question because I've often been... Had been invited to ask... Answer that question actually at the the Danish Embassy in Silicon Valley when you had founders come over, and I still play a part in that also in the sassiest community where we will meet next week.

And trying to say, hey, often we are a little bit timid. There's a little bit of a glass ceiling in in The Nordics. We're super good at longevity building businesses, but the burst and the window of opportunity that Americans see and that they cherish and, hey, I have the opportunity now, we often forget here, and thereby it becomes more of a long stable growth rather than these burst sprints that you're able to do with US. And

also, think perspective on that is failure in The US is a different kind of beast. If you're taking off the football team as wide receiver, and you have to go to junior varsity and try to come back to varsity. You're celebrated more if you make it back to varsity because you endured, you fought, you got back. In Europe, it's especially in the Nordics, it's a lot like, hey, you failed and that's a stigma. More than it

is an opportunity to come back and get better and I know that Nathan took my spot as wide receiver, I want that back, I I I'll fight for it. And and and that mentality we can we can apply a little a lot more in The Nordics to compete with our US counterparts. You're on mute.

Sorry about Erasmus. So we're running short on time here, but I do want to talk about capitalization for a second because I believe, correct me if I'm wrong here, that when you joined the company was bootstrapped and then you guys did a series A in April last year. Is that correct? And if so, how much was the The series a

series a was 20,000,000. So it was actually under the premise that we have a world class cash flow engine. When you sell to Microsoft customers, they're used to paying upfront. So that made us bootstrapped all the way up to $18,000,000. And when they raised... Yeah. Yeah. Of ARR, I should say.

You did that. You hit 18,000,000 last year?

18... We hit 18,000,000 in 2020... Early twenty twenty three, and we came out of last year with about 30,000,000. Oh, wow.

Wow. Okay. So you grew almost a 100%.

Half 50%. We ended shy shy of the 20 mark and ended at 30, so around 50% growth mark.

I got it. I was going $1,515,000,000 to 30. I was gonna give you the 100% number, but 50% year over year is good too.

Around around the 30,000,000 mark and 50% growth was last year for us. But, yeah, we did it under the the the belief that we could actually... While everyone was struggling with 2021 valuations, by taking in more capital, we would be able to grow faster through this. And if you look at our publicly traded competitors like GetTube or Cornerstone, we certainly outgrew them. And, obviously, we also wanted to be part of this consolidator play. We didn't wanna

be consolidated and just get bored. We actually wanted to to create the category of human success because we do believe we have a... There's a higher value to what we do and there's a higher purpose to the mission we have.

But, Rasmus, so these these founders that launched the company in 2003, I mean, it sounds like they were bootstrapped. They were... It sounds like over 10,000,000 of ARR at the point when they brought you in. I mean, they have all options on the table. Why did they make the decision to replace themselves? Why why did they bring you in?

The original founder was a dentist in northern part of Jotuni. He's had, for a long time, not been associated with the company. So essentially, it was a bunch of... Or a group of of highly wealthy individuals who ran the company. Nothing to do with SaaS industry. It's actually their bakers, and one is shipping and shipping and all kinds of stuff. But they... We did have some... Our chairman was from Navision, which is the first ever Danish

unicorn, a 2,500,000,000 exit to Microsoft, who went back and said, this does not belong in a slow, steady growth phase. We can actually give it the burst, and therefore, I was brought back from Silicon Valley to come here and give that that burst. So that ties a little bit back to our storytelling here. And that's what we've done. We've given it a bit of injection of this. Hey. We can do stuff. We can be world class.

We can be category leading. We can be category creation. We can do all of the things you believe you can do in Silicon Valley because we have the financial underpinning of it. We have distribution that was world class. And then we can essentially build that burst of energy that it needs to get up into to world elite.

What pricing were you able to negotiate? You still wanna manage dilution even though the company's boot strap and the cap table was super clean before the series a round. Did you raise the traditional sort of sell somewhere between 1015% of the company?

We raised that around between five and six x is what I'll give you.

Okay. So it's about a 100,000,000. It's around a 100,000,000 valuation.

Yeah. And and I'll I'll say this. The reason here was against to keep account cap table. We have a situation where we'd obviously grown bootstrap, and there's lots of stuff that's not right when you grow bootstrap. And we had, hey, do you have all these financial things? No. We don't. And do you have this? So the company was running immensely well, but for a $20,000,000 round, we had outgrown the, oh, we've done it on a spreadsheet. But that was what we had.

Yep.

So the deal was basically with Blue Cloud Ventures. They trusted us to be able to deliver exactly what we promised them, and we trusted them to come in and help the business. And it was a... I was with all the VCs that I've worked with over the year, that's a lot. I think I've raised capital seven times. I've been part of four exits into my career. This was the most gentleman agreement type of of arrangement. And

the great thing about it is Blue Cloud Ventures are far in the money already. My existing investors are far in the money, which means it makes decision focus on the right things and not everyone's... Who's underwater, who's not underwater, all those types of things.

Rasmus, just just to cut that up real quick. There's a lot there's a lot... That is a I wanna unpack there just very quickly. So 20,000,000 series a round at somewhere around a 100,000,000 valuation. That was a five x on a 20,000,000 ARR, which is what you were at when you raised. You said that... First off, was the full 20,000,000 going on the balance sheet or was part of that secondary?

Yeah. And that was... Yeah. All all balance sheet.

All balance sheet.

Then that was that was the trade off. Right? You wanna take money in to be able to grow. Blue Cloud Ventures understood this, and you didn't wanna sell out secondaries at at that rate. And again, it's been a good deal for for everyone. We turned down a number of of $50,000,000 term sheets with a lot of secondaries in there, but then it was like, hey. We don't want that valuation. So this was the perfect deal for us at the perfect time.

So just to be clear again, you say they're in the money because since the raise, you've added about $1,012,000,000 dollars of new ARR. You're at about 30,000,000 run rate today. Correct? Yeah. What do think you'll finish this year at? What's your goal?

Just north of 40.

40? And so how do you get there? Is it expanding current customers or adding net new logos?

We've been super good at increasing our NRR last year. It grew about seven percentage points.

So what was it last year? A 100 and something?

Yeah. Late... Just shy of... Yeah. A 108.

108 net revenue retention last year. Okay.

So we've been good at that and then...

But why Rasmus? Why why is that? I mean, teach the audience. Right? Or is it upselling more seats per plan? Is it cross selling in new products?

It's it's it's upselling new seats. It's upselling new plans largely last year because the acquisition of Weekly10 was so late that it basically didn't have an impact on last year. It had a very very limited impact on on the business last year. Mhmm. And then it's actually the fruit of an investment we did two years ago, which was to start building a customer success team. We didn't have any. So it was the second round of of

renewals that we did with a full customer success team. By now, they understood. The first year we spent putting in place NPS, customer focus groups, all of those types of things. Actually, learning how to do this and all those. And you saw the the... Because you can then calculate our NRR was just around the 100 the year before if we grew 7%. So it wasn't fantastic, but the team then stepped up to the second round of

that, and then started to be actually understanding what the task really was and what they wanted to achieve... What they needed to achieve.

You flesh that out for us today. What's the total team size today?

200 people.

And how many are in CS?

So... 18, I think. Something like that.

Interesting. And what about how many engineers?

60.

60. Something else I see founders really struggle with, and so any advice we can get here is helpful, is how do you hire your first 10 reps? What quota do you give them? How how long do you give them to ramp up? What is your quota carrying rep based like today? How many people total, and how did

you set their quota? Our quota philosophy is attainable. So that's probably more Nordic than it is American. And that meant that we we run 14 hubs, which is essentially SDRs and business managers as a hub. And of the 14 hubs that we run, 13 of them made quota or above last year.

What was quota?

Quotas in...

I think that one I'll keep to myself. Okay. Just just just for the sake of of Why is it... But we we...

Is is that because each quote... Each each hub has a different quota? Or is that like... Oh, I see. See.

It... Quote... Quotas are distributed according to hub and and all of that. So I think the generalization would give a wrong picture of what this is. But it's targeted towards the market you sell to and all of that.

And... What is... Just to be clear, that the hub is made up from one SDR, one AE, and one BDR? What's the ratio?

It it could it could be multiple SDRs to one AE, or it could be one to one relationship. It depends again on on the market set opportunity

sizes. So if you go into The UK, for instance, The UK market is a coherent large size... US coherent large size organization. We have a market model where we understand how many of the various vertical companies exist in that region. So we basically staff according to our market model, and therefore, some of the the account executives are able to to run a larger territory with the support

of a couple of SDRs and thereby carry a larger number.

So Rasmus, just to be clear, you're splitting these hubs, they target individual geographies. You don't split them by contract size or SMB or mid market, they're split by geographies.

Geography, yes.

I see. Makes a lot of sense. Okay. This is great. Now, you've got a lot of systems in place. You came in. You really operationalize business. You capitalize business. How many paying customers are you working with today?

2,000 ish. 2,000. About... Just north of 2,000,000 users.

Which would be 2,000,000 seats across the 2,000 paid logos. Yes. That's wonderful. Well, this is great. Is there anything that we should have touched on that I didn't ask about?

No. I think the fact that we wanna be our own best case study for human success is is the last piece. It's absolutely amazing to be the CEO of a company where the product you deliver has to do with people, and there's no way around being your own best case study. I think that's, at least for me, as a CEO, where you can tie together the mission with the product we deliver, with the value we deliver

to customers is absolutely exceptional. And and it's a shame it took me so long in my career to find something that has all of these elements, but I'm very, very happy with where I'm at today.

Can you flush out the revenue growth? Do you remember what year the company passed a million of revenue and 10,000,000 of revenue?

10,000,000 would be 2021.

K.

And 1,000,000 was all the way back in 2017.

Oh, wow. So the company was stuck under a million of ARR between 2003 and 2017?

Twenty eighteen twenty eighteen would be the million. Yeah.

Wow. So there were fifteen years where the company was really stuck under 1,000,000 of revenue, then something happened where it took off.

No. No. No. 2016, 2018. It's 2018 we were a million.

Yeah. Yeah. But the founding year was 2003 according to Crunchbase. Is that Yeah.

But... So the story here is is crazy because it's... For the longest time, it's a dentist who decides to quit his job, write a learning system for the local communal library. And that's the first ever LMS system that ever existed. And from there on, it comes along as a SharePoint consulting company for the longest time. A couple of people joined, including our CTO. In 2016, it's the birth of the the company as it is today, because

Freddie Bang, who's still our CTO Yeah. Comes and says to the board, I will rebuild this for Azure and for Teams. And they give him 50,000 Danish kroner, so $7,000. He spent $70,000 rebuilding it. And if it wasn't for that decision, the company would never be here today. Wow. And then the the the timeline between '16 to '18 is what it takes to get to a million. And then from '18 to today is what it's taken to scale from a million to 30,000,000.

That's amazing.

On the same on the on the same business model.

Harassin, super exciting story. Let's wrap up here with the famous five. What software tool do you spend the most money on?

I like that. Do I... Every... Everything Microsoft. My largest contract is with Microsoft surprisingly.

Fair enough. Number number two, is there a CEO you're following or studying?

I think that everything that Sachin Adela does is absolutely spectacular. I think the way he's transformed that business is is is fantastic. And the way he does it with grace and and humanity on top is is something to behold.

Number three, is there a book that you're studying or reading?

Yeah. I'm actually reading one now. The Hot Thing is about hot things, which is CEOs... It's a CEO journey of of what is really... When things are hard, how do you actually get through those.

I love that. I love that. Good one from Ben Horowitz there. Number four, how many hours of sleep do you get every night?

Eight. That's good in situation. And at at at an average sleep score of 84. So I'm good at sleeping.

Do you... You're an Oura Ring guy?

I'm a Garmin watch.

Garmin watch. Fair enough. And what's your what's your situation? Married, single, kids?

I've loved and been married to the same woman for over twenty years. She's traveled with me to Luxembourg to to San Francisco and back here. She's my support in everything I do every day. Two lovely kids, 21, a girl studying engineering, just like her mom and dad, and a son still finishing up high school. So that's that's cool. That's set up. And then a dog and a horse.

We'll count that as another kid together. And last, something you... Sorry. How old are you today? And then what's something you wish you knew when you were 20?

50 today. When I was 20. Take

it easy. Everything doesn't actually go as fast as you think it will. And and and that... That's probably very true. I still run at a way too high pace, but I've learned that things don't change as fast as I think they should.

Guys, LMS365 launched in 2003 as a side project by dentists at a local library. They finally said, well, this can be SaaS in in 2016. They broke a million revenue in 2018. Today, over $30,000,000 in terms of run rate up from, call it, 18,000,000 a year ago. So call it 50% year over year growth. They're serving 2,000 paying customers. They help those customers be more productive in the micro... Microsoft ecosystem. Those customers have

over 2,000,000 seats on the platform as Rasmus continues to scale. He joined the company as CEO two years ago, did a 20,000,000 series a at a five to six x multiple. He's now growing here with a team of 260 engineers and 14 sales hubs attacking each geography. We'll see what they do next. Rasmus, thanks for taking us to the top.

Hey. Thank you for the time.