Talent acquisition cloud software company iCIMS earned north of $8.7 million in monthly revenue in 2017 — now, it’s valued at more than $1 billion.
Former CEO Colin Day founded the company in 2000 when he was 23-years-old and working for a recruiting staffing firm. Inspired by the potential he saw in the proprietary system used and created by the firm, Day walked into the CEO’s office and stated, “This is going to sound crazy, but what if we buy the rights to your software, spin it out, [and] start our own company?”
Twenty years later, that company has become “the largest standalone provider” of talent acquisition software in the industry, serving its 3,500 customers an “enterprise software that you put in place to manage your recruiting operations” at various price points.
Customers pay as low as $500 per month or up to six figures, says Day, who also shared that iCIMS’s ACV is about $30,000 per year.
What the company pays to acquire those customers, however, varies on the segment it goes after. But, Day says, “taking the return of the [customer acquisition costs] list and [customer lifetime value], we typically break even on a deal in year two.”
Source: GetLatka
With a two-year payback period, Day says he manages the monetary gap the old fashioned way: “We literally just have to model it out to say a certain amount of cash is going to have to go out each year via marketing, so that is just modeled into the business.”
At the time of Day’s interview with Latka, iCIMS had 650 employees, with 90% working at the headquarters in New Jersey — a significant leap from the SaaS company’s humble beginnings, where Day recalls earning a bit more than $80,000 in the first year.
A $2 million loan funded by Day’s former CEO helped jumpstart the iCIMS journey. Since then, the loan has been paid back in full… with interest. And besides a secondary loan from a growth equity partner, iCIMS achieved its success entirely on its own.
What is iCIMS’s monthly revenue?
In 2017, iCIMS generated $8.7 million in MRR.
Who is the CEO of iCIMS?
Colin Day, age 41, was the CEO of iCIMS. He became the chairman in September 2019.
What is iCIMS’s valuation?
Today, iCIMS is valued at $1.2 billion.
Transcript Excerpts
How iCIMS measures itself as the largest standalone provider
“We do it by [the] customer base. You can take a look at revenue, you can take a look at growth rates. For us, it’s customer base — we get pretty good real-time data about who uses what in our industry. So, yes, we’re the largest standalone provider. We’re actually number two to Oracle, who bought a company called Taleo, but we’re feeling really good about our odds of, hopefully, surpassing them as well.”
A sustainable pricing structure that supports any customer
“We actually support customers of just about every size. We tend to see recruiting become really, really important after you hit 100 employees. We have seen some [with] below 100 employees, but I think after 100 employees, you start getting to scale; depending on your growth rates, you’re really thinking about the next level. We have price buckets that make sense for the smaller end of the market versus the mid-market versus the very high end of the market. It can start as low as $500 a month, and it can go up to six figures a month.”
Using its first $2 million in capital as a bridge to longevity
“It really was a loan over time. … I called them payroll loans, which is basically every two weeks I would call him up and I’d say, “Hey, here’s the staff we have and how much I need to pay.” I would joke that I’d sort of sweat bullets while I waited for the wire transfer and then walk out and tell everyone they were getting paid that week.”
Independent growth — iCIMS has been bootstrapped from day one
“We honestly like to say we’ve gotten to where we have with no one’s money really going into the business. That original loan was paid back in full with interest, then we’ve since brought in a growth equity partner called Susquehanna, but all of that was secondary; it was liquidity. We were growing really well and were able to say to them, ‘Guys, we don’t need the cash; we’re pretty profitable. But if you were to help with a liquidity event, we’ll ratchet up the risk and put more of the bottom line into the growth of the firm.’”
Follow industry trends or finetune a product that sells?
“Just try to stay focused. It’s probably been my greatest strength — I’m sure some people would say my greatest weakness, too. But I’ve been told for 17 years, ‘Hey, you got to get on, you got to expand. You got to move to the next. You got to follow the industry trends.’ We’ve always just said, ‘No. I feel like it’s the opposite. Be the contrarian, keep focusing, do what we’re doing better than anyone else.’ And I think we’ve proven that focus works.
Full Transcript Nathan Latka: Hello everyone. My guest today is Colin Day. He’s the chairman and CEO of a company called iCMIS, which he founded in 2000 with a vision to deliver applicant tracking software, emphasizing ease of use, and an unparalleled customer service. iCMIS is the largest standalone provider of talent acquisition software in the industry and stands among Forbes top 100 fastest-growing private cloud companies in the country. Colin, are you ready to take us to the top? Colin Day: I’m ready. Happy to be with you. Nathan Latka: I’m excited you’re here. So the largest standalone provider is a big word. You’re a measurement guy. How do you measure that? How do you know you’re winning? Colin Day: We do it by customer base. I mean, you can take a look at revenue. You can take a look at growth rates. For us, it’s customer base. So we get pretty good real-time data about who uses what in our industry. And so, yes, we’re the largest standalone provider. We’re actually number two to Oracle, who bought a company called Taleo, but we’re feeling really good about our odds of hopefully surpassing them as well. Nathan Latka: And where are you today in terms of customers on the platform or using the platform? Colin Day: So we’re a little north of about 3,500 companies. Nathan Latka: Okay. And tell us what that means for folks not familiar with the product. What are they using you for? Colin Day: You bet. So we sell something called a talent acquisition suite. TA is honestly just a really fancy word for recruiting. So we are enterprise software that you put in place to manage your recruiting operations. It usually starts with a… We sort of have a bedrock product that you put in first and that’s our applicant tracking system called Recruit. And then if you’re looking to get a little bit more progressive and not just do what a lot of recruiters do, which is the post and pray methodology, you can put in marketing automations and build up passive candidate, talent pools, you can put in onboarding components to complete the transaction. Nathan Latka: And should we think of your business model… I mean, is this a SAS model or is this you’re taking a percentage of first-year salary of placed folks? How do you make money? Colin Day: It is purely a SAS model. So actually, we started in ’99. We didn’t even know what SAS was. It wasn’t even called SAS. Nathan Latka: You invented SAS. Come on, Collin, just take credit for it. Colin Day: I will not take credit for that. No. I think probably Benioff gets way more credit for that. But no, we started pure SAS, one platform, one code, one version, and we’ve stuck to that all the way through. Nathan Latka: And so again, give us a sense. You said you’ve had many, many products. The product that most of them start with, is it the applicant tracking software? Colin Day: It really is. That’s the bedrock of recruiting. That helps you manage all your position openings. That sends it through approvals, gets it posted, brings in the point of application, schedules the interviews, and also handles a lot of the compliance around recruiting, tracking EEO data, et cetera. Nathan Latka: What’s EEO mean? Colin Day: It’s equal employment opportunity data. So race, gender, veteran status, et cetera. Nathan Latka: And I imagine you have a multitude of different price points for that, but on average, what does somebody pay to start using you through that software? Colin Day: It really varies. So we actually support customers of just about every size. We tend to see recruiting become really, really important probably after you hit a hundred employees. We have seen some below a hundred employees, but I think after a hundred employees, you start getting to scale, depending on your growth rates, you’re really thinking about the next level. So we have price buckets that make sense for the smaller end of the market versus the mid-market versus the very high end of the market. So it can start as low as, call it 500 a month, and it can go up to six figures a month. Nathan Latka: Got it. And then talk to me about… I want to learn more about the founding story now that we have a little bit of a context of what the business does. So you said you founded this and you said ’99? Colin Day: Yeah. ’99. Nathan Latka: That’s a hell of a year to found a software company. Colin Day: Yeah. Tell me about it. Nathan Latka: What was going through your head? Colin Day: So I always sort of say I fell into it ass backwards. There was a lot of luck involved. But I graduated from Cornell with a degree in psychology. I just wanted to do something entrepreneurial and I got pulled into a recruiting staffing firm as my first job. I knew nothing about technology, but they said, “All right, you’re going to be hiring developers, testers, DBAs for Bell Labs. So my first clients were here in New Jersey, which is where we are headquartered. And yeah, I worked as a recruiter. I was always antsy to try to figure out, “Gosh, how do I parlay this into starting a business?” And the reality is, and I think this is the case for many entrepreneurs, it was just staring me in the face. I was logging into this proprietary system that the company I was with had built. They were called Comrise, and their system was called Comrise’s Information Management System. So they called it CIMS. Colin Day: And yeah, one day just woke up and I said, “What have I been doing? It’s staring me in the face every single day.” So I think I was 23 at the time. And I went to their CEO and I said, “This is going to sound crazy, but what if we buy the rights to your software, we spin it out, we start our own company?” And he was totally on board. And that’s what we did. We threw a little red eye and dot com, and then as I’m sure you can imagine about three years later, we couldn’t drop the.com portion of it fast enough. Nathan Latka: Was ’99 the year you started up the company or the year when you were 23, when you negotiated to buy the company out? Colin Day: Yeah. So I started as a recruiter in ’97. I was 21 when I graduated. So I worked as a recruiter for a couple of years before I started iCMIS at 23. So I didn’t have a lot of knowledge to go on. I think that was probably a good thing. I think if I probably had more experience, I would have talked myself out of trying to do it because it’s just such a competitive market. It always has been. Nathan Latka: So Colin, first off, amazing story. I imagine there’s a lot of other 23-year-olds listening right now that are frustrated with the company they work in, but they see something inside the company. They would love to spin out. But they’re going, “I’ve only had a salary of 80K for two years. I’m still paying off college debt. I have no savings. How on Earth am I going to negotiate this piece of technology to spin out?” How would you do it? Colin Day: I look back and I wonder. I had someone who trusted in me. I would have said believed in me, but I didn’t have a lot of history with him to believe in. But the individual that ran Comrise technology, I could only imagine- Nathan Latka: The CEO. Colin Day: The CEO of Comrise, the technical staffing firm I was with. I can only imagine what must’ve been going through his mind when this sort of brash 23-year-old, walked in the room and said, “Hey, I’ve got an idea for a business.” Nathan Latka: Is that what you did? You just walked in the office and said, “Either fire me or let me buy this part of the company.” Colin Day: I don’t think it was probably saying “Either fire me.” I don’t think I was ready for that moment, but definitely said, “Hey, listen, I think we’ve got something here.” And my gosh, he was so supportive. Nathan Latka: How did you value it though? Talk to me about the economics of that deal. Did you pay him an amount of money for it? Did he just give it to you and keep a chunk for himself? Colin Day: Oh, there’s a crazy story behind that portion of it. But I didn’t even know how to, “Hey, make me a CEO, give me a CEO’s salary.” I didn’t negotiate for equity early on. It really was very much just, “I see an opportunity. I want to run for it. I will need to buy the software.” So we did that at a very… Where it created a very low value of the software to do that transaction. Nathan Latka: Did you use your own money or did you figure out how to raise money from other investors? Colin Day: We literally did it all through a loan. So I not only said, “Hey, I need to get the technology out, but I need you to give me all the money to buy the technology from you.” Nathan Latka: He loaned you the capital. You didn’t have to sign a personal guarantee with the bank. Colin Day: He loaned the capital. Nathan Latka: Oh wow. That’s great. Colin Day: So when you talk about really having a patron behind you, I mean, he really was. And then, yeah, I’m sure you can imagine, come 2001 and 2002, things turned a bit harrowing. Nathan Latka: Did you have leverage at this point? Was the business already feeling the ’99 bust? And you said “Before this thing goes bankrupt, maybe I can try and pull an asset out of it.” Or was that not the state of mind you were in? Colin Day: No, it was the opposite. We were in high times. So when I was working as a recruiter, we could not find enough technology people fast enough. They even sent me over to India to just recruit out of India and try to bring people back. So it was a heyday when we sort of spun out, and it was only after that, that everything started to sort of gloriously fail. Nathan Latka: And real quick, before we move and we fast forward to today, just so those young folks listening right now, in case they’re trying to maybe mimic your success inside their own companies. I mean, are we talking a loan amount that was above a hundred grand? In the millions? Or below 100 grand? I mean, what size risk were you taking here? Colin Day: So, I mean, it really was a loan over time. So, sort of think that the first two years of our existence, I called them payroll loans, which is basically every two weeks I would call him up and I’d say, “Hey, here’s the staff we have and how much I need to pay.” And I would joke that I’d sort of sweat bullets while I waited for the wire transfer and then walk out and tell everyone that they were getting paid that week. Nathan Latka: So you would tell him how… You didn’t actually get the cash. He would wire you money as you needed it. Colin Day: It was sort of bridged as needed. I would call up and get the cash. And it was to the tune overall, over about two years, of about two and a half million dollars. Nathan Latka: Okay. Got it. And besides just you being a nice guy, and there was some camaraderie there, I mean, what was he getting for this? Did he keep a portion of the company? Do they still own a part of the company today? Or was there interest or what? Colin Day: So, looking back, I did not negotiate equity upfront. We had to do that later on after we started seeing some success. So there’s probably a lesson to be learned there. But I was just thrilled, honestly, to be a 23-year-old CEO starting my own company with capital. Nathan Latka: In ’99. Yeah. Colin Day: In ’99. Nathan Latka: Do you remember what your first year… By the way, was it a monthly recurring business model back then? Or has that evolved? Colin Day: It was a monthly recurring business model back then. And it was really hard to get going because we didn’t have Amazon web services. We didn’t have all the- Nathan Latka: Stripe. Colin Day: Yeah. Oh gosh. Amazing resources that make it a lot more capital efficient to start. So yeah, a lot of it was building out a data center, all the things we knew we needed to do before we even got a customer. Nathan Latka: What was that first year revenue? Do you remember? Colin Day: It was pathetic. Nathan Latka: Tell me how pathetic. How pathetic was it? This will help other people get excited about doing their own thing. Colin Day: I think we were thrilled to have probably about… I don’t know. 80,000 or something. It was absolutely tiny. Nathan Latka: Hey that’s a great start.All right. So fast forward to today. What’s the team size there in New Jersey? Colin Day: Sure. So we are about 650 people, and 90% of them are in our headquarters in New Jersey, with the irony being that we are actually moving in November to the old Bell Labs headquarters. Nathan Latka: Oh, wow. Colin Day: Where I originally started recruiting for. So there’s a sort of come full circle story there. Nathan Latka: That is pretty funny. So about 650 folks based there in New Jersey. And besides that first about $2 million loan, have you raised capital or have you bootstrapped since then? Colin Day: So something we’re really proud of, and it took me a while to learn about raising capital and what kind of capital, and primary versus secondary, et cetera. We honestly like to say that we’ve gotten to where we have with no one’s money really going into the business. So that original loan was paid back in full with interest. And then we have since brought in a growth equity partner called Susquehanna, but all of that was secondary. It was liquidity. We actually, we’re growing really well. And we were able to say them to them, “Guys, we don’t need the cash. We’re pretty profitable. But if you were to help with a liquidity event, we’ll ratchet up the risk and put more of the bottom line into the growth of the firm.” Nathan Latka: Colin, I’m not following that. What do you mean? Do they actually put capital in for a percentage of equity? Help me understand that again. Colin Day: You bet. So yes. They took a percentage of equity, but all the capital went out. It went to liquidity. It went to the original owner and myself. Nathan Latka: Got it. Colin Day: So it didn’t actually go into the business. Nathan Latka: It wasn’t operational cash. Colin Day: It wasn’t operational. No. So we still like to make the claim that yes, despite the fact that we do have a growth equity partner, we feel like we’ve done everything using our own operating model. Nathan Latka: Got it. So all the money they put in, it was pure liquidity. None of it went in operations. Got it. I just have to highlight this real quick guys, because I don’t get the opportunity to do this a lot. There are so many ways to create wealth for yourself as an entrepreneur when you’re building a business and taking risks, besides selling to some big company. This is one way to do it. Where you get it outside investor and I’m making this up. I don’t know what Collin’s numbers are. Colin, I’d love for you to share them, but I’m going to guess you’re not. But let’s say the private equity folks put in 20 million bucks and he is going to say, “Okay, we’ll give you 10% equity for that.” But you’re actually buying 10% of my 60% that I own. Right? So Colin can pocket that. Is that how the dynamics worked Colin? Colin Day: You got the dynamics, right. And we actually did two bites of the apple. So Susquehanna, our partner, has come in six years ago with one investment and they followed it up last year with another. Nathan Latka: One of my things in life is like, you can’t expect someone to work hard for you after you make them rich. It’s kind of why earn outs rarely work and some of the things rarely work. It seems to be working for you. You seem excited about being there. You already made capital from this. How do you in your brain keep excited about going forward after you already have had a payday? Colin Day: Yeah, sure. I don’t know what it is. I’ve got this innate desire to win. And so I always try to create a… I never want to see a scenario where we say we’ve won. I always want to create a scenario where winning is three to five years further out. So I think we look squarely at the marketplace and we said, “What’s going on in our market is that recruiting, unfortunately, in many cases is getting thrown into an ERP suite as a afterthought of, ‘Hey, we’ll give you everything. And by the way, if you want recruiting.'” Our premise is that is too important to screw up to put through an ERP. I mean, that is your front of the funnel. You can’t hire people, you hire bad people you’re screwing with your business. So I think our mandate is to convince the world to be contrarian, not go get an add-on from your HRS payroll or ERP, but go get best in breed. So while we’re the number one best in breed vendor, we still have some enormous competitors in the ERP that we would love to dethrone. Nathan Latka: If Larry comes to you and writes you a $200 million check today to sell the business, do you sell? Colin Day: Only if I get his yacht as well. Nathan Latka: You are competitive. I like it. Colin Day: No. I’m kidding. I honestly, that would be a long, hard thing. We want to leave the company in a position where we say whatever it is, it will be the definition of winning the industry. Nathan Latka: Yeah. I mean, the question I’d have for a guy, like you, how old are you? Colin Day: I’m 41. Nathan Latka: Yeah. So you look at a guy like Elon Musk. He was really good at early, early creating momentum. He created an agency sold it, but no one ever talks about this, but that’s what allows him to go put that capital at risk going to space. So the risk for a guy like you is only time, right? The more time you spend trying to solve the recruiting problem, the less time you have to solve to take bigger risks with all the capital that you’ve made. And those could be really life-changing. I mean, hiring obviously is really important, but you could go after even bigger things. How do you manage that balance in your brain? Colin Day: Just try to stay focused. It’s probably been my greatest strength. I’m sure some people would say my greatest weakness too. But I’ve been told for 17 years, “Hey, you got to get on, you got to expand. You got to move to the next. You got to follow the industry trends.” And I don’t know. We’ve always just sort of said, “No. I feel like it’s the opposite. Be the contrarian, keep focusing, do what we’re doing better than anyone else.” And I think we’ve proven that focus works. You got to be, we call it the 10X factor is what people have written about. If you’re going to bite off a piece and say, “That’s what I’m focusing on,” you better do it 10 times better than anyone else. You can’t be two or three times better. Nathan Latka: Yep. Few economics questions here before we wrap up with a famous five Colin. What are you paying to acquire new customers? What’s your CAC? Colin Day: Oh gosh. It really will depend on the segment that we go after. So we’re taking different approaches. Nathan Latka: On average, what would you say? Colin Day: We have, taking the return of the CAC list and CLTV, we typically break even on a deal in year two. Nathan Latka: Okay in year two two. So you have about a 12 month payback period. And what’s the average annual contract size? Colin Day: When you average it all out, I would say that right now, it’s probably about 30,000 a year. Nathan Latka: Okay. So you’re spending, call it, 60 on the folks, 60 grand to get them, you get paid back in those first two years. That creates a pretty significant cash gap because the acquisition cost goes out I imagine all up front. How do you manage that gap? Colin Day: I think we’ve just had to do it the old fashioned way, because we’re not raising gobs of money that we can sort of spend through. We literally just have to model it out to say a certain amount of cash is going to have to go out each year via marketing. So that is just modeled in to the business. Nathan Latka: You always have a buffer that you know is larger basically than a two year buffer. Colin Day: That would be what we’re going for. Yeah. Nathan Latka: Yeah. Yep. Awesome. And then can I do… You said the average contract rate is about 30 grand. So again, if I divide that to 12, getting monthly it’s about 2,500 bucks. Can I take 2,500 times your number of customers to kind of back into MRR? Or is there any reason that math would be wrong? Colin Day: If you are good enough to do that multiplication realtime. Nathan Latka: It’d be about 8.7 million bucks monthly. 3,500 times 2,500 bucks per month. Colin Day: So we’re north of that. Nathan Latka: North of that. All right. Good stuff. Let’s wrap up here, Colin with the famous five. Number one what’s your favorite business book? Colin Day: I feel like it’s a little boring, but Good to Great by Jim Collins literally laid the foundation of our business. Nathan Latka: Number two is there a CEO you’re following or studying right now? Colin Day: I got to say between two I’m enthralled by Satya at Microsoft and the turnaround that he’s putting together. But I got to say, if you’re in SAS, you got to look at Benioff as the example of, how do you keep that growth going? Nathan Latka: Do they have a recruiting platform built into their system yet? Colin Day: They don’t. They’ve really stayed focused on the front operations of marketing and selling servicing. So I don’t know if they’ve done a deal with Workday to say, “You stay out of my world, we’ll stay out of your world.” But we haven’t seen them in recruiting. Nathan Latka: Number three, is there a favorite online tool you have, like acuity scheduling? Colin Day: I’m going to give you the most boring answer in the world, but I live in 365 from Microsoft, honestly, from task management and calendaring, email rules. Nathan Latka: You’re really positioning yourself for Microsoft exit here. You got your favorite CEO, your favorite tool. All right. Last few here. Colin. How many hours of sleep do you get every night? Colin Day: How many hours of sleep? It is getting a lot better. I have a five-year-old daughter, a seven-year-old son. And so I’m finding that I’m getting up to about eight hours, which I’m pretty proud of. It did not used to be that way. Nathan Latka: That’s pretty good. So just to confirm your situation. You’re married, two kids, 41 years old. That right? Colin Day: That’s right. Nathan Latka: All right. So the last question, take us back 21 years. What do you wish your 20-year-old self knew? Colin Day: I just think it’s trust your gut and trust your instinct. I feel like I’ve had 17 years of having people tell me what they think is happening in the industry, what they think the competition is doing. Don’t listen too hard to the outside forces. Trust the gut. Nathan Latka: There you guys have it from Colin, who he had the foresight back in ’99 when he was 23 to go to a CEO and say, “Hey, man, I want to spin this little hiring system we have out into its own company called iCMIS.” That was in ’99. And he did that on a $2 million loan that was funded by that CEO. Fast forward to today, their team is 650 people based up in New Jersey, working with over 3,500 paying customers, paying on average a $30,000 per year ACV, obviously, though, their cohorts and their segments of customers differ greatly. They’re doing more than about 8.7 million bucks a month in recurring revenue with about a two year payback period. Again, focused really on helping folks find talent, manage talent, and onboard talent in a cost efficient and effective way. Colin, thank you for taking us to the top. Colin Day: It’s been a pleasure. Thank you.