Aug 10, 2023 · 21m · top-founders
How Cyber SaaS Hit $2m ARR and 190 Customers So Fast
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this interview, host Nathan Latka speaks with Carbide co-founder and CEO Darren Gallup about transitioning from bootstrapping festival logistics platform Marcato to building a venture-backed cybersecurity compliance SaaS. Gallup shares key insights on scaling Carbide past $2 million ARR across 190 customers, negotiating Series A fundraising terms, and balancing capital efficiency with venture growth.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Nathan holds 33.1% of the talking time here. How this is scored →
Nathan as informed peer 5.9 Guest teaching 3.6 Guest disagreement 2.4 Nathan pushing back 4.4
speaking balance: gold is Nathan, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 15:12 Rejecting bad macro fundraising premise
Gallup directly challenges Latka's assertion that compressed venture markets make it a bad time to raise, arguing that dry powder actively seeks companies exceeding plan.
Hardest push from Nathan ▶ 11:38 Pressing on confidential acquisition multiplesLatka refuses to move on from confidential deal terms, quoting specific 5x to 12x private equity multiples until Gallup confirms the range.
Biggest teaching moment ▶ 15:12 Contrarian capital allocation dynamicsGallup explains counter-cyclical fundraising dynamics, explaining why venture firms with dry powder aggressively chase outlier performers when peer companies flatline.
Nathan holds their own ▶ 18:21 Clarifying liquidation preferences versus dilutionLatka demonstrates sharp term sheet mechanics by correcting Gallup's framing, pointing out that participating preferences govern downside payout rather than percentage dilution.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Nathan as informed peer | Guest teaching | Guest disagreement | Nathan pushing back | Why |
|---|---|---|---|---|---|---|
| Carbide Core Use Case and Market Differentiation | 5 | 3 | 2 | 3 | Latka immediately frames Carbide against known market player Vanta. Gallup clarifies that Carbide goes beyond quick SOC 2 audits to handle complex multi-framework compliance. | |
| Pricing Strategy, Feature Tiers, and Upsell Vectors | 6 | 3 | 2 | 6 | Latka drills into pricing mechanics, refusing to let vague answers slide and pressing whether there are non-seat utility pricing vectors. Gallup acknowledges token-based AI quotas are being implemented. | |
| Founder Backstory: From Touring Musician to Marcato | 4 | 4 | 1 | 2 | Gallup recounts his background transitioning from professional touring musician to founding Marcato and growing it to $2M ARR bootstrapped. Latka listens attentively to the founding story. | |
| Bootstrapping vs. Venture Capital Governance Dynamics | 6 | 3 | 2 | 2 | Latka validates the bootstrapped approach over venture capital, noting how many VC-backed founders end up broke. Gallup details the friction of managing venture boards and preferred share terms. | |
| Marcato PE Roll-up Acquisition and Capital Efficiency | 7 | 3 | 3 | 7 | Latka benchmarks PE roll-up multiples against industry data like Vista comps to pin down Marcato's confidential exit valuation. He also probes Gallup's use of non-dilutive Canadian government grants. | |
| Series A Fundraising Strategy in a Down Market | 6 | 6 | 5 | 6 | Latka challenges the logic of raising a Series A during a venture market compression. Gallup counters with contrarian logic, highlighting dry powder, outperforming conservative targets, and cash-flow positive fallback plans. | |
| Current ARR Benchmarks and Customer Milestones | 7 | 3 | 2 | 5 | Latka checks current ARR trajectory toward $4M and separates participating liquidation preference terms from equity dilution percentages before wrapping with the Famous Five. |
Statements from this episode (16)
Carbide Focuses on Clients With Complex Multi-Compliance Needs Over Vanta
“Now I would say that in, you know, we definitely do end up competing with Vanta in, in, in the SOC two example where we generally focus our energy and where we have more you know, success with customers is when their needs are more complex than just simply get…”
Carbide's Customer Contracts Range From $7,500 to $30,000 Annually
“Yeah, it ranges anywhere from 7500 to about 30,000 dollars. We do have an enterprise grade package that can climb north of that substantially, but we're still working primarily with SMDs.”
Carbide Plans Token- and Quota-Based Pricing for Upcoming AI Features
“I expect there'll be some more stuff like what you're referring to as we launch more and more of our AI-based features because there are sort of per-quota token Costs associated with that, so I would expect that we'll start rolling out more of that type of stu…”
Marcato Was Profitable With $2M ARR and 14 Employees When Sold
“Yeah, it was a profitable company at two, at a little over two million dollars in an ARR. A small team, like there's 14 people. We had like 300 events around the world that use some form of the platform and we sold that in 2018.”
Gallup: Bootstrapped Exits Can Yield Equal Returns to Large VC Exits
“I think I like the bootstrap approach. I mean, you could sell the company, have a much smaller exit, but it could end up being just as big or just as good for yourself as like a much larger exit when you've got, you know, all kinds of different classes of prep…”
Latka: I Know Way More Broke VC-Backed Founders Than Bootstrapped Ones
“I know a lot of, I know way more broke VC back founders than I know broke bootstrap founders.”
Marcato Was Acquired in an Eight-Company Private Equity Roll-Up
“It was a PE roll-up company that bought another company, and then they had some big PE money rolled into it, and they rolled up eight companies, and there was some pretty strict terms around disclosure of deal terms you know, associated with that”
Marcato Exit Successfully Returned All Investor Capital Plus Profits
“Yeah, you got it. But that, that kind of game, right? So, you know, it was a life-changing, it was a successful exit. Everybody that put money in got money back, and then some”
Marcato Leveraged Only $1.5M in Total Capital Over Its Lifetime
“You know, all in all, we probably put about a million and a half into that business you know, over its time, but you know, pretty bootstrapped.”
Carbide Tracks Toward Cash Flow Positive by Early 2024 Without Series A
“At the end of the day, if we didn't do the Series A, we're, we've got road to break, you know, cash flow positive, you know, by later in the year.
[993] Nathan Latka: End of the year.
[994] Darren Gallup: I would get it.
[994] Darren Gallup: Yeah.
[995] Darren…”
Carbide Serves Approximately 190 Active Customers on Its Platform
“Yeah, we got about a 190 customers on our platform right now.”
Carbide's Annual Recurring Revenue Has Crossed the $2 Million Mark
“It's quite a bit north of that. Yeah, it's north to two.”
Gallup: Carbide Expects to Hit $3 Million ARR Next Quarter
“We have eyesight on on three in this quarter, in this next quarter.”
Gallup Calls 2x and 3x Participating Preferred Liquidation Terms Predatory
“When you start seeing things like two acts participating and stuff like that, I think those become, you know, and I'm hearing stories of people being sent these two and three acts participating sort of terms, which kind of remind me of the olden days before, y…”