Antti Nivala successfully found a way to use his software development hobby to solve a real-world problem with a spark of inspiration at his father’s architectural firm. As M-Files begins its third decade, the founder and CEO is looking at crossing the magical $100m run rate target.
Founded in 2002, M-Files is now the global leader in metadata-driven document management. It allows knowledge workers to find information in any context instantly, automate business processes, and enforce information control.
Founder and CEO Antti Nivala recently shared his insights with the GetLatka team on the purpose of last year’s $80m Series C round, the company’s surprising customer pivot, the role of resellers, and what scaling now looks like for the growing knowledge management SaaS.
- Team of 600 with 150 engineers and 50 quota-carrying sales reps
- 5,000 paying customers
- $90m ARR, up from $75m a year ago
- $80m Series C closed in 2021
Roots in Finland predate 2002
M-Files originated as an internal software solution to help Nivala’s father with his workflow. “I saw the need to help make document management more efficient in complex construction projects,” explained the CEO.
The market, however, dictated other plans. Instead of focusing on the construction and architectural engineering vertical, Nivala discovered that M-Files was better suited to delivering document management to a more general business market.
M-Files customers average $50,000 ARR in 2022
“Our ideal customer is a knowledge work customer, like management consulting firms, accounting firms, audit firms, and tax advisers,” clarified the CEO. “Those companies deal with a lot of information and offer expert advice. They take in information, apply their expertise, then use our platform to manage that information internally, as well as share and collaborate with their clients,” he added.
Enterprise customers in targeted space see value in $1m ACV
CEO Nivala confirmed that M-Files currently serves multiple enterprise customers who deliver at least $1mm ARR. Latka questioned how he closed those customers, noting that many founders who reach $10-20m struggle to scale to $70-80m because they lack million-dollar enterprise customers.
“It’s been a natural evolution for us. We’ve gotten to know our customer’s true business problems and made sure our solution provides the best and most value,” the CEO explained.
Reseller partners deliver $5,000 ARR customers
Nivala shared that reseller partners represent an essential part of the M-Files network. “We have a broad range of large and small customers; our reseller partners typically serve customers with an ACV of $5,000. They are the front-facing communicator to those customers,” Nivala noted.
Resellers keep roughly 30% of invoiced totals
Nivala explained that the reseller keeps roughly 30% of the invoice total. He doesn’t worry about getting undercut. “We don’t enforce pricing. If a reseller values some other service and wants to compromise margin, it won’t change things for us,” shared the founder. He added, “We take a partner-first approach. If our sales team is working on the same prospect as a partner, we will support the partner in winning the deal. There are plenty of customers out there.”
5,000 paying customers
Currently, M-Files serves over 5,000 paying customers. While 80% of those customers come from reseller partners, the CEO confirmed that the higher ARPU deals, about 1,000 enterprise customers, come direct from M-files. “The channel sales represent about 1/3 of the revenue,” noted Navala.
M-Files team of 600 split between Europe and North America, focused on hitting $100m ARR
The M-Files team of 600, comprised of 150 engineers and 50 quota-carrying sales reps, is split between Europe and North America. Latka asked Nivala to share his strategy for scaling his sales team. “We don’t want to hire new reps right now. We are instead focused on improving the efficiency of the existing sales team. I believe that over time they can close more ARR. So we are focused on how to do that, whether investing in more marketing, brand awareness, or sales initiatives. We are looking to get to bigger deals,” shared the founder.
Focused on 25-30% growth, not burning cash
Nivala revealed that M-Files hit their target of $90m ARR in 2022, up from $75m in 2021 and $50m in 2020. “Being at plan in 2022 was a win. We’ve never been a supergrowth company. We focus on 25-30% growth, not burning cash,” clarified the CEO. He noted that when they began in 2002, they were bootstrapped, thanks to some funding he had available from earlier developments.
Reached $9m before raising $8m Series A round
In 2013, Nivala raised $8m in Series A funding as the company sat at $9m in revenue. He added $36m in Series B funding in 2016. They did a debt financing round of $31m in 2018. Finally, they closed an $80m Series C in 2021.
$30m of $80m Series C in 2021 funding goes to secondary
Nivala shared that $30m of the $80m raised in Series C went to secondary funding. “We didn’t need the extra funding. It went to our balance sheet. We got the extra liquidity for our early investors, cofounders, and employees who’ve moved on. We didn’t need the capital,” clarified the CEO.
Focused on Fair Market Valuation
Latka pressed the Nivala on his valuation, but he refused to speculate. “We will leave that to the market,” he replied. The CEO shared his valuation philosophy: “Generally speaking, we don’t do anything at a high valuation. We want a clean structure and terms and fair market valuation. We want the value to increase as the business grows.”
Favorite Book: Founder and CEO Antti Nivala shared that Good to Great by Jim Collins was one of the first business books he read and is still his favorite.
CEO he’s following: Antti doesn’t really follow other CEOs regularly.
Favorite online tool: As a software engineer, Antti noted that “nothing beats Visual Studios.”
Balance: The forty-four-year-old sleeps a full 7-1/2 hours each night. Antti is married with two children—9 and 11.
What does he wish he had known at 20? “I was very product and engineer focused. I wish I had known there is so much more than building a product you need to do.”