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Feb 22, 2019 · 16m · top-founders

1308 Salesforce for Lawyers Passes $3m in ARR, Basically Bootstrapped

Michael Chasen · 8m spoken Nathan Latka · 5m spoken
0:00 / 0:00

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In this episode of The Top Entrepreneurs Podcast, host Nathan Latka interviews Lexicata co-founder and CEO Michael Chasen on how the legal CRM platform bootstrapped to $3.6 million in ARR. Chasen details the company's strategic pivot from Lawkick, sub-2% monthly logo churn, and highly efficient customer acquisition economics across 3,000 law firms.

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 35.8% of the talking time here. How this is scored →

Nathan as informed peer 4.5 Guest teaching 2.2 Guest disagreement 0.7 Nathan pushing back 1.7
05100:0010:000:00–2:13 · Nathan as informed peer 0/10 Executive Summary and Key Performance Metrics Solo intro and summary monologue by Nathan covering high-level metrics before welcoming the guest.2:14–5:08 · Nathan as informed peer 5/10 Product Overview and SaaS Pricing Model Nathan inquires about selling to lawyers and asks about the cap table mechanics following the pivot from Lawkick. Chasen explains their SaaS pricing and why they rolled investors over ethically.5:08–8:09 · Nathan as informed peer 6/10 Customer Scale, Run Rate, and Growth Trajectory Nathan presses for specific customer numbers when Chasen initially gives vague estimates, then does quick mental math on MRR, growth rate, and payback period.8:10–10:52 · Nathan as informed peer 6/10 Retention Dynamics, Churn, and Lifetime Value Nathan probes logo versus revenue churn and expansion mechanisms. Chasen clarifies that solo practitioners drive the majority of logo churn due to business closures rather than dissatisfied switching.10:52–12:59 · Nathan as informed peer 7/10 Cash Flow Positivity, Valuation, and Funding Outlook Nathan evaluates Chasen's $8-15M valuation estimate against typical 3-5x ARR SaaS multiples. Chasen contextualizes the metric with legal tech industry dynamics.12:59–15:00 · Nathan as informed peer 3/10 The Famous Five Rapid-Fire Questions Standard rapid-fire questions covering favorite book, CEO mentor, SaaS tools, sleep, and advice to a 20-year-old self.0:00–2:13 · Guest teaching 0/10 Executive Summary and Key Performance Metrics Solo intro and summary monologue by Nathan covering high-level metrics before welcoming the guest.2:14–5:08 · Guest teaching 3/10 Product Overview and SaaS Pricing Model Nathan inquires about selling to lawyers and asks about the cap table mechanics following the pivot from Lawkick. Chasen explains their SaaS pricing and why they rolled investors over ethically.5:08–8:09 · Guest teaching 2/10 Customer Scale, Run Rate, and Growth Trajectory Nathan presses for specific customer numbers when Chasen initially gives vague estimates, then does quick mental math on MRR, growth rate, and payback period.8:10–10:52 · Guest teaching 4/10 Retention Dynamics, Churn, and Lifetime Value Nathan probes logo versus revenue churn and expansion mechanisms. Chasen clarifies that solo practitioners drive the majority of logo churn due to business closures rather than dissatisfied switching.10:52–12:59 · Guest teaching 3/10 Cash Flow Positivity, Valuation, and Funding Outlook Nathan evaluates Chasen's $8-15M valuation estimate against typical 3-5x ARR SaaS multiples. Chasen contextualizes the metric with legal tech industry dynamics.12:59–15:00 · Guest teaching 1/10 The Famous Five Rapid-Fire Questions Standard rapid-fire questions covering favorite book, CEO mentor, SaaS tools, sleep, and advice to a 20-year-old self.0:00–2:13 · Guest disagreement 0/10 Executive Summary and Key Performance Metrics Solo intro and summary monologue by Nathan covering high-level metrics before welcoming the guest.2:14–5:08 · Guest disagreement 1/10 Product Overview and SaaS Pricing Model Nathan inquires about selling to lawyers and asks about the cap table mechanics following the pivot from Lawkick. Chasen explains their SaaS pricing and why they rolled investors over ethically.5:08–8:09 · Guest disagreement 1/10 Customer Scale, Run Rate, and Growth Trajectory Nathan presses for specific customer numbers when Chasen initially gives vague estimates, then does quick mental math on MRR, growth rate, and payback period.8:10–10:52 · Guest disagreement 1/10 Retention Dynamics, Churn, and Lifetime Value Nathan probes logo versus revenue churn and expansion mechanisms. Chasen clarifies that solo practitioners drive the majority of logo churn due to business closures rather than dissatisfied switching.10:52–12:59 · Guest disagreement 1/10 Cash Flow Positivity, Valuation, and Funding Outlook Nathan evaluates Chasen's $8-15M valuation estimate against typical 3-5x ARR SaaS multiples. Chasen contextualizes the metric with legal tech industry dynamics.12:59–15:00 · Guest disagreement 0/10 The Famous Five Rapid-Fire Questions Standard rapid-fire questions covering favorite book, CEO mentor, SaaS tools, sleep, and advice to a 20-year-old self.0:00–2:13 · Nathan pushing back 0/10 Executive Summary and Key Performance Metrics Solo intro and summary monologue by Nathan covering high-level metrics before welcoming the guest.2:14–5:08 · Nathan pushing back 2/10 Product Overview and SaaS Pricing Model Nathan inquires about selling to lawyers and asks about the cap table mechanics following the pivot from Lawkick. Chasen explains their SaaS pricing and why they rolled investors over ethically.5:08–8:09 · Nathan pushing back 3/10 Customer Scale, Run Rate, and Growth Trajectory Nathan presses for specific customer numbers when Chasen initially gives vague estimates, then does quick mental math on MRR, growth rate, and payback period.8:10–10:52 · Nathan pushing back 3/10 Retention Dynamics, Churn, and Lifetime Value Nathan probes logo versus revenue churn and expansion mechanisms. Chasen clarifies that solo practitioners drive the majority of logo churn due to business closures rather than dissatisfied switching.10:52–12:59 · Nathan pushing back 2/10 Cash Flow Positivity, Valuation, and Funding Outlook Nathan evaluates Chasen's $8-15M valuation estimate against typical 3-5x ARR SaaS multiples. Chasen contextualizes the metric with legal tech industry dynamics.12:59–15:00 · Nathan pushing back 0/10 The Famous Five Rapid-Fire Questions Standard rapid-fire questions covering favorite book, CEO mentor, SaaS tools, sleep, and advice to a 20-year-old self.

speaking balance: gold is Nathan, purple is the guest (3 minute bins)

0:00 · Nathan 75.3% · guest 24.7%0:00 · Nathan 75.3% · guest 24.7%3:00 · Nathan 23.3% · guest 76.7%3:00 · Nathan 23.3% · guest 76.7%6:00 · Nathan 20.3% · guest 79.7%6:00 · Nathan 20.3% · guest 79.7%9:00 · Nathan 22.7% · guest 77.3%9:00 · Nathan 22.7% · guest 77.3%12:00 · Nathan 15.4% · guest 84.6%12:00 · Nathan 15.4% · guest 84.6%15:00 · Nathan 97.9% · guest 2.1%15:00 · Nathan 97.9% · guest 2.1%
Sharpest disagreement ▶ 4:45 Chasen defends maintaining a clean cap table through a pivot

Chasen firmly rejects the idea of wiping out early angel investors during the pivot, calling such moves dirty.

 Hardest push from Nathan ▶ 5:18 Nathan drills down on vague customer numbers

Nathan refuses to accept the vague 'few thousand' answer and presses Chasen to specify whether it's 1,000, 9,000, or more.

 Biggest teaching moment ▶ 8:36 Chasen explains structural churn in small law firms

Chasen educates Nathan on why small business legal SaaS experiences high logo churn due to solo lawyers retiring or taking full-time jobs rather than churn to competitors.

 Nathan holds their own ▶ 12:17 Nathan contextualizes valuation against ARR multiples

Nathan instantly converts the founder's valuation expectations into revenue multiples and benchmarks it against standard bootstrapped SaaS metrics.
the scores for every segment, with the reasoning behind each
ChapterTopicNathan as informed peerGuest teachingGuest disagreementNathan pushing backWhy
Executive Summary and Key Performance Metrics 0000 Solo intro and summary monologue by Nathan covering high-level metrics before welcoming the guest.
Product Overview and SaaS Pricing Model 5312 Nathan inquires about selling to lawyers and asks about the cap table mechanics following the pivot from Lawkick. Chasen explains their SaaS pricing and why they rolled investors over ethically.
Customer Scale, Run Rate, and Growth Trajectory 6213 Nathan presses for specific customer numbers when Chasen initially gives vague estimates, then does quick mental math on MRR, growth rate, and payback period.
Retention Dynamics, Churn, and Lifetime Value 6413 Nathan probes logo versus revenue churn and expansion mechanisms. Chasen clarifies that solo practitioners drive the majority of logo churn due to business closures rather than dissatisfied switching.
Cash Flow Positivity, Valuation, and Funding Outlook 7312 Nathan evaluates Chasen's $8-15M valuation estimate against typical 3-5x ARR SaaS multiples. Chasen contextualizes the metric with legal tech industry dynamics.
The Famous Five Rapid-Fire Questions 3100 Standard rapid-fire questions covering favorite book, CEO mentor, SaaS tools, sleep, and advice to a 20-year-old self.

Statements from this episode (13)

Insight
Chasen: Lawyers are difficult software buyers lacking business and tech skills
“They're very argumentative and they are very educated in their craft. However, they're not as educated in like ways of running a business or technology.”
Michael Chasen Feb 22, 2019 ▶ 2:33
Disclosure
Lexicata charges $50 to $1,000 monthly plus setup fees
“We started about 50 bucks a month for a single user and we go all the way up to like, you know, a thousand bucks a month, depending on the size of the firm. And then you can do an annual plan plus the, you know, at least a couple of hundreds per setup up to a …”
Michael Chasen Feb 22, 2019 ▶ 3:09
Assertion Not checkable as stated
Lexicata's average customer pays approximately $100 per month
“Average customer is about a hundred bucks a month.”
Michael Chasen Feb 22, 2019 ▶ 3:24
Disclosure
Lawkick pivoted to Lexicata after nearly exhausting its initial seed funding
“So when we first started the company that was Lawkick, we raised a few 100,000 dollars, And we basically were close to out of money and that's what kind of like forced the pivot. And since then we've been completely bootstrapped off the status.”
Michael Chasen Feb 22, 2019 ▶ 4:24
Disclosure
Lexicata used a DBA to retain Lawkick investors without resetting equity
“And yeah, we just rolled those investors and we just kind of do a DBA for Lexicata.”
Michael Chasen Feb 22, 2019 ▶ 5:03
Assertion Not checkable as stated
Lexicata serves approximately 3,000 law firm customers
“Like in the, like the low thousand, like 3000.”
Michael Chasen Feb 22, 2019 ▶ 5:24
Assertion Not checkable as stated
Lexicata has doubled revenue year-over-year for several consecutive years
“So I'd say we've more than doubled like year over year, pretty much for the last few years.”
Michael Chasen Feb 22, 2019 ▶ 5:54
Insight
Chasen leverages partner channels because law firms resist direct online marketing
“Really we've been getting a lot of our a lot of our acquisitions through partner channels. So it's a lot harder to just like market to law firms cause they're not really a huge online business. Like you know, like a fast company would be, or an enterprise comp…”
Michael Chasen Feb 22, 2019 ▶ 6:13
Assertion Not checkable as stated
Lexicata maintains a customer acquisition cost of roughly $50
“Like it's in the, like, you know, 50 to hour range mainly because we don't do a ton of marketing because it's just hard to like Find these people.”
Michael Chasen Feb 22, 2019 ▶ 7:02
Assertion Not checkable as stated
Lexicata's $400 onboarding fee makes customer acquisition immediately profitable
“We have like a minimum, like about a 400 onboarding fee. So we're pretty much, you know, making money on people immediately.”
Michael Chasen Feb 22, 2019 ▶ 8:03
Assertion Not checkable as stated
Lexicata reduced monthly logo churn to the mid-1 percent range
“Historically it's been about two, two and a half percent per month. And right now we're dropping sub two now. So we're like the mid one.”
Michael Chasen Feb 22, 2019 ▶ 8:17
Assertion Not checkable as stated
Lexicata calculates customer lifetime value between $5,000 and $10,000
“Our LTV right now is somewhere like North of five K somewhere five to 10, obviously that'll change over time. And then in terms of months, like it's going to be somewhere probably between I think it's something we need like 16 to 20 months, something in that r…”
Michael Chasen Feb 22, 2019 ▶ 10:35
Assertion Not checkable as stated
Lexicata has operated cash-flow positive since its inception
“Yeah, we always have been. That's always run the business.”
Michael Chasen Feb 22, 2019 ▶ 11:02
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