How I hit $5m ARR, kept control using 3 different debt providers

Sep 2022 Founder500 Steve Benson Founder / CEO of Badger Maps I Used 3 Debt Providers for $6 million in Debt over the last 10 years … here’s what to watch out for

Over the next 20 minutes: Took $2.25m from Founderpath over 6 loans. I’m going to show you CURRENT DEBT WATCH OUT FOR DEBT $0-5M ARR Pay back on 48 month term APR is 16.3% Short payback period Covenants (can restrict business) Penalties and fees (prepayment, draw fee) Sales motion first, then debt to accelerate My first debt deal was RBF back in 2016 My second deal was term loan in 2018

Badger Maps - MRR Growth This is pretty Smooth, why get debt?

Badger Revenue Growth Not So Smooth - Annual and multi-year deals, covid, seasonality. Debt smooths out the bumps and you make payroll in December.

Badger Revenue Growth Pre-Sold $300,000 Deal Founder always has to be first sales rep! 2012

Badger Debt History Debt from Lighter 2016 Borrowed $888k over 2 years in 4 tranches. This was an RBF loan. interest rate worked out to about 18%. Had a term that we had to pay back all interest that we would have paid if we had kept the loan the whole time to refi them out. Did another traunch and renegotiated the term out. Then Refi’d to Scaleworks They would loan to about 4x MRR Debt from Scaleworks / Element Finance 2019 Borrowed $1.5m over 3 traunches Straight Line, 4 year, Loan at 17% APR I switched from Lighter because Scaleworks was cheaper debt and they would loan to 6x MRR

Badger Debt History Switched to FounderPath 2021 Borrowed $2.25m over 6 tranches. Straight Line, 4 year, Loan at 16.3% APR They would loan to 8x MRR (I think, Daddy Warbucks - Nate hasn’t said no yet) Very fast and painless because they built it all to connect with all our data, so they can make decisions right away

My Founderpath Dashboard

Take $ whenever I want … always know how much I have available My Founderpath Dashboard

Debt Terms to Watch Out For Liquidity: Make you keep $.5m in bank whole time? Debt “gotchyas” COVENANTS EBITDA and MRR min growth covenants Can they demand you pay back faster? PENALTIES Early payback penalty can be huge (negotiate this removed) Short term is dangerous. Go for 36+ months. Use of proceeds: Make sure you can actually spend the money where you want ! Terms Matter. Make sure No prepayment penalties There is a lot of BS in fintech and lending today. Just convert a loan to an APR to compare. Ultimately this is all good for the space, it’s a good time to be a revenue generating SaaS company PENALTIES TIPS

This is not a job. Successfully founding a meaningful company will likely take away most of your bandwidth to be a good friend, a good son / daughter, a good mother / father, be in good shape, participate in extra-curriculars or your community. You should probably forget about all your hobbies and what you think is fun. Ruthlessly prioritize and account for your time. You can still get your highest personal priorities done - so decide what those are. Identify the things that really matter, and do only those things. Now is Not a great time to have work life balance. Getting the Train out of the Station is hard, but once the Train is in motion, it’s Unstoppable. getting Real about your life as a Founder

Sepr 2022 Steve Benson CEO of Badger Maps

My Non-Obvious Learnings Bootstrapping to $5m in ARR over 10 years

My background / biases / perspective Steve’s LinkedIn Steven Benson is the Founder and CEO of Badger Maps, an App for field salespeople for routing and mapping. CEO of Badger Sales University. After receiving his MBA from Stanford, Steve was named Google’s top sales executive globally in 2009 Hosts the Outside Sales Talk a podcast for Outside Salespeople where he interviews industry experts on their top sales tips, and is currently President of the Sales Hall of Fame.

Sales starts with a founder Before the product is built You shouldn’t hire your first sales-person But eventually you have to build a process and let go - but not completely If you don’t have this founder, you need to get them onboard. But they have to think like an owner, not an employee (which is harder than it sounds - most people are too entitled and don’t have the stamina to be a true owner)

Debt before Equity In SaaS, VC’s generally want to see some traction before they invest. If you have traction, you can get debt, you can use that debt to grow more before you bring in VC. So always do that. There are several great debt providers to SaaS companies. I used Lighter Capital first, then switched to Scaleworks (debt product now called Element) because it was a better deal, then switched to FounderPath because it was a better deal. Most SaaS businesses are not a good fit for VCs because of their business model. There is a lot of BS in fintech and lending today. Just convert a loan to an APR to compare. Length matters.

Outsourcing Eng vs Hiring Domestic vs Foreign In-House Any can work, can be combined, and there are Tradeoffs here that guide what’s best for a company Outsourcing is fast to get going, but probably hard to get the same quality / people caring / true ownership as you do in-house Domestic in-house is very expensive, so don’t do it if you are bootstrapping. Foreign in-house can be hard to set up, but very high quality and cost effective. You have to have someone awesome on site managing it.

A non-obvious secret to reducing churn Pick a country with an inexpensive labor market that has a lot of people that speak solid english, even if it’s often with a serious accent. (South Asia, Philippines, Africa, South and Central America) Build a Customer Service team there. Treat them really well. Meaning health care even when its not standard, pay at the high end of the market, have a career path etc. 90% of your customer questions, complaints, requests, etc are the same 50, questions that you can answer in writing. Often it will be 2 or 3 of these questions in one request. Have this team answer those questions with an SLA of 10 minutes. Eventually staff up to do this 24/7/363 (no christmas and nye). Expand into phone support, phone outreach to existing and prospective customers, support your sales and CSA teams..

Non-obvious HR / hiring learnings Fact: SaaS has grown at an unreal rate and so has its need for people Fact: every VC is risk averse (because they’re smart. We as founders aren’t risk averse enough) and encourages their investments to hire for experience - because they are smart and know it reduces risk.

Non-obvious HR / hiring learnings You can’t hire for experience without lots of cash, and they probably won’t stick around forever anyway. Don’t hire job hoppers, it takes a while for employees to get good at their job, and job hoppers are gonna hop. A lot of young people care about experiences more than value creation - they think that’s where personal growth comes from. They either regularly hop because they are always searching for the next thing, or because they keep getting pushed out. Both are bad

Non-obvious HR / hiring learnings Empower people even if they don’t have the experience and haven’t earned it - take the risk and hire inexperienced people. Right out of college or new to the role and industry. Some of my best hires would never have been hired by a VC backed firm. What most people base their hiring decisions on is only weakly correlated to success on the job. If you were a quantum computing company you might need the Stanford PhD who spent the last decade at Google to win. If you are a SaaS company, you are rarely revolutionizing the world with technology, you are usually solving a real world problem by combining and implementing existing technologies.

Non-obvious HR / hiring learnings Fire Perfectionists. They have no place in a startup. A lot of straight “A” students that went to great schools are not cut out for startups because They do “A” work when “C” work would get the job done Startups can be too much of a grind where they want to be creative geniuses There is too much much risk of failure staring them in the eye - people who have never failed don’t like staring failure in the eye.

Non-obvious HR / hiring learnings A startup founder and everyone in the organization needs to 80/20. Know when something is good enough to get the job done. Good is the enemy of Great, but a lot of things don't have to be Great, they have to be fast, cheap, and done. Know when something needs to be Great and adjust accordingly.

Some non-obvious early hires Around hire #10: Hire a HR / Recruiter / Office Manager / Administrative Assistant. Eventually you can hire someone else to split up the role with them, but this can all be rolled into one at first. Hire a lawyer who doesn’t want the big law career. This is easy because its a job that isn’t for everyone that goes to Law School, and there are a lot more Lawyers than there is work for Lawyers. They can do a ton of the operational and legal work and act more like a COO than a lawyer, but because of your saved legal bills this basically pays for itself. At least a legal intern from day 1 is a worth its weight in gold.

Solve medium sized problems VCs will tell you that you are wasting your time if you aren’t solving Really Big exciting problems. This is likely because these are the only problems that make their economics work out. This has created an overinvestment in solving big problems and silly things that have great ad revenue. These are very competitive markets and there will often only be one winner - probably a bad place to bootstrap.

Solve medium sized problems There are a lot of medium sized problems and a ton of small problems that no one has even started to try to solve. A lot of them won’t be a billion dollar business in 7 years like VCs need them to be. But they might be in 15 or 20 years. A lot of them the founders will walk away with $25 or $50 or $100 million dollars - or maybe they’ll just throw off 10 million a year in cash for a decade or so. These are outcomes that VCs consider a loss, but still make founders very rich - but only if they didn’t bring VCs onto the captable.

Focus your efforts Focus on your Ideal Customer (ICP) until you have meaningful traction there. Think hard about their sub-industry, size, buyer profile, geography etc. Until you are pretty big: Don’t build an android version - people with androids don’t buy things Don’t market to Europe or Asia - let them find you In general, pay attention to where your CAC to LTV ratio sucks and don’t spend money marketing there

Focus your efforts You could go after several ICPs, and often there will be some disagreement who that is, and it will certainly change with time. Look at your usage rates and play with price points. Look at who is using your product most, giving most referrals, has the lowest churns and best LTV, etc Use current customer data (demographic/psychographic, usage stats) to create a profile of hobbies, interests, influencers, etc that will help your marketing messaging Identify “High Value” customers - easiest to upsell/best retention rate. Over time they will make up majority of your revenue

Build business processes Think about every area of a company as a process that has measurable results and can be improved. Write how to do things in Google Docs and make it so the process can be passed cleanly from person to person. There is a lot of passing around when you are growing fast, so get good at it.

Over the last 20 minutes, I showed you: Be cheap, not stupid I’m going to show you ACQ. FOR PLG SECTION 2 SECTION 3 Be cheap, not stupid Be cheap, not stupid Bullet 1 Bullet 2 Bullet 3 Bullet 1 Bullet 2 Bullet 3