All-in-one applicant tracking system (ATS) company Varbi’s churn rate went up to between 4% and 5% in 2020, but that didn’t keep the company from staying on track to $3.7 million in revenue.
That $3.7 million is up from $3 million in revenue last year, resulting in 25% year-over-year growth.
“We’ve been profitable since 2012. … This year, I would guess we will end up having about $400,000 profit,” says John-Erik Hassel, the company’s founder and chairman. “We’re quite OK when it comes to the pandemic and everything. We know that many companies struggle, and it’s really tough for them out there. We have been very blessed and had an opportunity to grow even in a year like this.”
When Hassel founded Varbi in 2007, an angel investor funded the startup with about $300,000. In 2009, the ATS company received another $300,000 from said angel to get the team through the economic downturn. Varbi hasn’t raised any more capital since, and that same angel investor now owns more than 30% of the company. Now a one-third owner, Hassle considers him more like a “third founder” at this point.
“We have a good financial situation,” Hassel says. “We are looking to work internationally more than we have done before. … And we do have funds to do these things. But if the right partner comes along, yeah, it might be an interesting idea to get funding to do that faster.”
Source: GetLatka
Varbi’s 22-person team — which includes seven engineers in R&D, eight in sales and marketing, and seven in customer success and administration — run a well-oiled machine that gets more than 2 million job applications through its platform every 12 months. Currently, the mostly bootstrapped company has around 550 customers, but doesn’t track how many candidates the platform has placed.
The SaaS company adds approximately five to 10 new customers every month, and has seen an upsell of its existing customer base. Hassel says if you look at the numbers Varbi got from each customer in 2017, they’re up at least 50% in 2020.
“We work a lot with LinkedIn, we work with webinars, of course, we do our own blog, we work with these standard things to reach out and create a dialogue with our customers. And then we have a sales team that are really good at hunting and calling. And we do a lot of relationship sales … both sales from existing customers and also new customers coming in,” Hassel says. “We’re working a lot with modules and we’re adding on third-party software in advertising solutions to add options for the customers.”
Hassel guesses that Varbi pays $2 for every dollar ARR in the company on average, but the company does a lot of tender processes. So when it gains a $6,000 customer, it’s using low-cost methods to obtain that customer, such as the aforementioned marketing or cold calls.
What is Varbi’s annual revenue?
In 2020, Varbi was on track to generate $3.7 million in ARR.
What is Varbi’s monthly revenue?
In 2020, Varbi generated approximately $308,000 in MRR.
Who is the founder of Varbi?
John-Erik Hassel, age 47, former CEO of Varbi, is the company’s founder and chairman and works alongside current CEO Magnus Mollstedt.
Transcript Excerpts
Diversifying the portfolio is key
“We are very diverse that way, we have customers from one employee up to 60,000 employees. So we definitely have a very diverse portfolio. So if you look at our numbers, the average customers are paying us around, say $6,000+ a year, and we have annual licenses with our customers. But our bigger customers, of course, are 10 times that. I would say that the biggest contracts are around $100,000 a year, where we have long contracts. We are very much into tender processes with our customers, especially in the public sector, the higher ed, the private customers, are more year-to year basis where they have an open end. They can cancel after the 12-month license that they purchase up front.”
You’ve got to work well with your investor
“So we started out in 2007 with a business angel. He funded our startup with about $300,000. And then in 2009, when the economic downturn came in, we ended up getting another $300,000 from our angel. And after that we haven’t raised any more money. … He’s like a third founder.”
If you invest in your product, your customers will be invested
“It took some time actually for us because we spent a lot of time developing this fantastic tool that we were thinking about. We were very product focused in the beginning. We had an idea of getting a LinkedIn type or Facebook type of system that had a back-end recruitment solution, which is what was actually built on HR and recruitment processes. So we tried to be very academic in the way that we were creating this tool. And the first 10 customers, we got them more or less like tryout customers. They were testing the system for us. And then some of them kept the tool working with us to develop it. And some of them moved on. And then we hired salespeople and started selling this tool. And when we started to grow in different areas … I will say that was in 2010 or 2011. We still have that customer with us.”
You know you’re in good financial shape when you’re expanding globally
“We are looking to work internationally more than we have done before. We are a Norwegian-Swedish company. We do have businesses in Denmark, and we now have an office in the Netherlands and are working our way into Belgium. And we are doing them the way that we’ve done before. So we’re taking one step at a time. But yes, we are looking at the U.S., we’re looking at the U.K. And we do have funds to do these things.”
Full Transcript Nathan Latka: Hello everyone. My guest today is John-Erik Hassel. He lives and breathes business internationalization, and entrepreneurship. He started out as a consultant, assisting Swedish companies abroad, founded, and co-founded three startups between 2005 and 2011. Sold the first company in 2012, second in 2019. And now he works with internationalization at Varbi, as well as being COB. Married with two kids. Jon Erik, you ready to take us to the top? John-Erik Hassel: Hi. Nice to meet you. Yeah, definitely. Nathan Latka: So what is, what does COB at Varbi mean? John-Erik Hassel: Chairman of the board. I founded the company in 2007 and I left as a CEO in 2010, to leave the CEO part to my colleague. And I actually, I’m more operating as chairman of the board, than normal. I work very much together with the CEO in order to grow this company. Nathan Latka: Does the company do, and is it pure SAS? John-Erik Hassel: Yeah. Varbi’s an ATS company. We deliver an ATS to faculty recruitment, public companies, authorities, municipal offices, and private companies. So we have three segments where we work. ATS company, meaning recruitment solution backend system for handling recruitment process. Nathan Latka: Okay. And so, talk me through what the average customer pays you per month and what do they get for that? John-Erik Hassel: So we are very diverse that way. We have customers from one employee up to 60,000 employees. So we definitely have a very diverse portfolio. So if you look at our numbers, the average customers are paying us around, 6,000 plus something dollars a year. We have annual licenses with our customers, but our bigger customers of course is 10 times that. Nathan Latka: Interesting. So what is your biggest contract? It’s got 200, $300,000 a year? John-Erik Hassel: It’s about, I would say that the biggest contracts are around a $100,000 a year where we have long contracts. We are very much into tender processes with our customers, especially in the public sector, in the higher ed. The private customers are more in an year to year basis where they have an open-end. They can cancel after the 12 months licensed that they purchased. Nathan Latka: I see. John-Erik Hassel: … up front. Nathan Latka: And when did you launch the company? John-Erik Hassel: We launched in 2007. We ran right into the economical downturn in 2009. And then from that, we started growing and we’ve been profitable since 2012. Nathan Latka: How profitable, like this year? How much will it take the bottom line? John-Erik Hassel: So this year, I would guess we will end up at having about $400,000 profits. Nathan Latka: That’s great. On how much revenue? John-Erik Hassel: About 3.6, 3.7 million. Nathan Latka: Okay. That’s super healthy. And have you bootstrapped this whole company or did you raise? John-Erik Hassel: So we started out in 2007 with a business angel. He funded our startup with about $300,000. And then in 2009, when the, as I said, the economic downturn came in, we ended up getting another $300,000 from our angel. And after that, we haven’t raised any more money. Nathan Latka: What valuation did you raise at in 2009? John-Erik Hassel: Oh, that’s a long time ago now. I would think we did around, I think around a million dollars. Nathan Latka: That angel owns about north of 30% of the business today? John-Erik Hassel: Yes, he does. Nathan Latka: Yeah. Okay. Wow. So hopefully it’s someone you really like. John-Erik Hassel: Oh yeah. He’s like a third founder. Nathan Latka: Okay. John-Erik Hassel: Yep. Nathan Latka: Fair. Okay, great. So $600,000 raise. That’s great. You’re scaling nicely. You said $3.7 million run rate this year. Where were you exactly a year ago? John-Erik Hassel: Oh, okay. We were about on the AR side, we have had just around 20%, 25% growth. We’ll see these numbers coming in in December. I think we can end up at 25% growth. We are quite okay when it comes to the pandemic and everything. We know that many companies struggle and it’s really tough for them out there. We have been very blessed and then had an opportunity to grow even in a year like this. Nathan Latka: And John Erik, do you remember how much revenue you did in your first year, 2007? John-Erik Hassel: Well, in 2007, we did probably none. There must’ve been $5,000 or something. We were building and developing this tool and we actually were more focused on getting the solution to the market than selling. So that was not much at that point. Nathan Latka: Where’d you get your first 100 customers from? John-Erik Hassel: First a hundred customers. Nathan Latka: Or 10, first 10 even? John-Erik Hassel: Yeah. Yeah, no, it took some time actually for us, because we spent a lot of time developing this fantastic tool that we were thinking about. We were very product focused in the beginning. We had an idea of getting a LinkedIn type or Facebook type of system that had a backend recruitment solution, which is what was actually built on HR and recruitment processes. So we tried to be very academic in the way that we were creating this tool. And the first 10 customers, we got them more or less like tryout customers. They were protesting the system for us. And then some of them kept the tool, working with us to develop it. And some of them moved on. John-Erik Hassel: And then we hired salespeople and started selling this tool. And when we started to grow in different area areas, actually, but then we won a tender and that was the starting point. I will say that was in 2010-11. We still have that customer with us. Nathan Latka: Interesting. So in 2010, how many salespeople were on the team? John-Erik Hassel: In 2010, I think we had two people that were selling for us. That was probably it. Nathan Latka: And what was the total team size in 2010? John-Erik Hassel: Four. Nathan Latka: Oh, wow. Okay. John-Erik Hassel: I include the CEO at the time and that was me. So we were trying. Yeah, we were three founders more or less, if I include the business angel and the other founder, Magnus, is the CEO today. Nathan Latka: And the team size today is how many? John-Erik Hassel: Today, we’re 22 people. Nathan Latka: John-Erik Hassel: Seven. I think I wrote it down. Yeah. Seven on R&D. We are eight and I’m in sales and customer, or sorry, sales and marketing and we are about the same, seven people in the customer success and administrator. Nathan Latka: That’s great. So, okay. Great story here. How are you getting customers today? What are your big inbound channels or just channels in general? John-Erik Hassel: Yeah, so we do a lot of marketing. We work a lot with LinkedIn. We work with webinars, of course, we do our own blog. We work with these standard things to reach out and create a dialogue with our customers. And then we have a sales team that are really good at hunting and calling. And we do a lot of relationship sales more or less. So both upsells from existing customers and also new customers coming in. So I would say we probably added approximately 5 to 10 new customers every month. We have seen an upsale of our existing customer base. If you look at the numbers that we got from each customer in 2017, I would say there are 50% up, at least in 2020. So we’re working a lot with modules and we’re adding on third-party software also, and advertising solutions to add up options for the customers to buy from us. Nathan Latka: Expansion from 2017 sounds something like 15% to 20% annual expansion revenue. To get to net revenue retention, we need the churn number. What’s annual dollar churn? John-Erik Hassel: Yeah. So, dollar churn. I would, I would say … I was looking into this because I knew you were going to ask about it. And we did about a 4% or 5% churn this year, and this was high, is high year for us. We have been lower than that. We have long long-term customers and long-term relationships that has been keeping us very busy for a long time, which is great. Nathan Latka: How many customers we are working with today, total? John-Erik Hassel: About 550. Nathan Latka: And over the past 12 months, how many employees have candidates placed? John-Erik Hassel: I’m sorry, one more time. Nathan Latka: Yeah. Over the past 12 months, you helped them with recruiting, correct? John-Erik Hassel: Yeah. Nathan Latka: How many candidates have you helped place? John-Erik Hassel: We have about two million applications running through the system, two and a half million applications running through the system each year. I don’t have the number of job posts has been rung in the system, actually, so I’m sorry for that. I don’t have that number. Nathan Latka: That feels like to me, that’d be a critical metric, right? John-Erik Hassel: No, because we don’t charge that way. We have an option for them where they can choose to buy advert, job posts advertisement through our system, but that is through third party. So that’s LinkedIn, Facebook, other job boards and stuff like this. But we charge for the license for using the system. So our customers are paying per user, more or less, or the size of the company, and rather than paying for each and every recruitment process they do. Nathan Latka: I see. I see. And what are you spending on customer acquisition costs to get a new $6,000 a year customer? John-Erik Hassel: Oh, the $6,000 a year, it’s not much. If you look at an average, I would say that we pay about $2 for dollar ARR in the company. If you’re looking at an average, but we do a lot of tender processes. We do a lot of three to six to nine months processes with some customers. But then again, we get contracts that are maybe five, seven, ten years. With a $6,000 customers, they are not a lot of money spent to get way because they’re coming either through our marketing processes or through cold call sales. And I wouldn’t say that we spend that much. We don’t spend $2 per dollar ARR there, we spend much less. Nathan Latka: And you know, you bootstrap to date, have you thought about raising capital? John-Erik Hassel: Yeah, we are well-funded. We’ve been profitable since 2012, which means that we have a good financial situation. We are looking to work internationally more than we have done before. We are a Norwegian, Swedish company. We do have business in Denmark. And we now have an office in the Netherlands and are working our way into Belgium. And we are doing them the way that we’ve done before. So we’re taking one step at a time. But yes, we are looking at the US. We are looking at the UK and we do have funds to do these things. But if the right partner comes along, yeah, it might be an interesting idea to get funding, to do that faster. Nathan Latka: Yeah. What would I be an interesting partner there? John-Erik Hassel: Oh, sure. Definitely. Nathan Latka: Okay. We’ll talk. We’ll talk. I have an idea. Let’s wrap up, John Erik with the Famous Five. Number one, what’s your favorite business book? John-Erik Hassel: Oh, that’s Crossing the Chasm, Jeffrey Moore, definitely. Nathan Latka: Yeah Number two, is there a CEO you’re following or studying? John-Erik Hassel: Yeah, I think I must say there that I’m going to go with a fellow Norwegian and I’m really I’m psyched about what 24/7 Office is doing in the US right now and [inaudible 00:11:51] and his team. And I think those guys, I really admire what they’ve done. So, I must say that. Nathan Latka: Number three, what’s your favorite online tool for building Varbi? John-Erik Hassel: For building Varbi, okay, yeah. For the system, for the group and the organization, I must say Slack. What a great tool that is now. For building the site, I have actually no clue because I have never done. I’ve never written a line of code. Nathan Latka: Yeah. Number four. How many hours of sleep are you getting every night? John-Erik Hassel: Oh, I’m trying to get to see at least six hours. Nathan Latka: Okay. Fair enough. And what’s your situation? Married? Single? Kids? John-Erik Hassel: Yeah. Married. Two teenage kids. Yes. Fantastic. The situation is perfect. Nathan Latka: And how old are you? John-Erik Hassel: I’m 47 now. Time flies. Nathan Latka: John-Erik Hassel: I was wishing when I was 20? Nathan Latka: Something you wish you knew when you were 20. John-Erik Hassel: Well, I was dreaming of building and creating businesses and that’s what I’ve been doing for the last 25 years Nathan Latka: Guys. There, you have it. Varbi is a tool that customers can pay for to help them understand and get job applicants. Over 2 million go through the platform every 12 months. The team has 22 people today. They are basically bootstrapped. They’ll generate $400,000 in profit on $3.7 million in revenue this year up from 3 million in revenue last year. So 25% year over year growth. Founded in 2007, as they look to continue to scale. John Erik, thanks for taking us to the top. John-Erik Hassel: Thank you so much. Nathan Latka: One more thing before you go, we have a brand new show. Every Thursday at 1:00 PM Central it’s called shark tank for SAS. We call it Deal or Bust. One founder comes on, three hungry buyers. They try and do a deal live. And the founder shares backend dashboards, their expenses, their revenue, ARPU, CAC, LTV, you name it. They share it. And the buyers try and make a deal live. It is fun to watch every Thursday, 1:00 PM Central. Nathan Latka: Additionally, remember these recorded founder interviews go live. We release them here on YouTube every day at 2:00 PM Central. To make sure you don’t miss any of that, make sure you click the subscribe button below here on YouTube. The big red button and then click the little bell notification to make sure you get notifications when we do go live. I wouldn’t want you to miss breaking news in the SAS world, whether it’s an acquisition, a big fundraise, a big sale, a big profitability statement or something else. I don’t want you to miss it. Nathan Latka: Additionally, if you want to take this conversation deeper and further, we have by far the largest private Slack community for B2B SAS founders, you want to get in there. We’ve probably talked about your tool if you’re running a company or your firm, if you’re investing. You can go in there and quickly search and see what people are saying. Sign up for nathanlacker.com/slack. Nathan Latka: In the meantime, I’m hanging out with you here on YouTube. I’ll be in the comments for the next 30 minutes. Feel free to let me know what you thought about this episode. If you enjoyed it, click the thumbs up. We get a lot of haters that are mad at how aggressive I am on these shows, but I do it so that we can all learn. We have to counter those people. We got to push them away, put the thumbs up below to counter them and know that I appreciate your guys’ support. All right, I’ll be in the comments. See ya.