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Oct 23, 2018 · 23m · top-founders

1186 Why Assembla Sold to Venture Equity Firm, Using GDPR to Hit 60% yoy Growth

Paul Lynch · 11m spoken Nathan Latka · 8m spoken
0:00 / 0:00

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In this episode of The Top Entrepreneurs, host Nathan Latka interviews Assembla CEO Paul Lynch about how venture equity firm Scaleworks acquired the mature software company and revitalized its growth. Lynch details how restructuring operations, expanding enterprise ARPU, and capitalizing on GDPR compliance propelled the business to 60% year-over-year growth and nearly $12 million in ARR.

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 42.3% of the talking time here. How this is scored →

Nathan as informed peer 5.7 Guest teaching 3.9 Guest disagreement 1.7 Nathan pushing back 3.0
05100:0010:0020:001:32–6:03 · Nathan as informed peer 6/10 Introducing Paul Lynch and Relocating to San Antonio Latka explores Assembla's core value proposition by comparing it to testing and CI tools like Sauce Labs and Bugsnag. Lynch explains that their primary wedge is source code repository hosting combined with security and static code analysis.6:03–9:10 · Nathan as informed peer 6/10 The Venture Equity Model and Assembla Acquisition Lynch outlines the venture equity model of Scaleworks for companies between $3M and $10M ARR that fall between VC and traditional PE. Latka compares this to Vista Equity's playbook approach, which Lynch gently reframes as an oversimplification.9:10–12:09 · Nathan as informed peer 5/10 Post-Acquisition Restructuring and 60% YoY Growth Lynch details the immediate post-acquisition changes, including centralizing sales and leadership in San Antonio and pivoting from pure product development to go-to-market execution. Latka notes the difficulty of driving 60% YoY growth on a bootstrapped legacy asset.12:12–14:20 · Nathan as informed peer 7/10 Monthly Profitability and Enterprise Version Control Positioning Latka attempts to calculate monthly revenue by multiplying new logo ARPU ($500) by total customers (3,500) to arrive at $1.7M MRR. Lynch corrects him, noting legacy customer ARPU is lower, and Latka drills down to confirm current revenue is just shy of $1M MRR.14:20–16:59 · Nathan as informed peer 6/10 Customer Success Structure and Net Negative Revenue Churn Latka inquires about net negative revenue churn and presses Lynch on the exact tactical compensation structure for customer success reps. Lynch explains the tiered model combining individual targets with team-wide expansion bonuses.17:00–20:30 · Nathan as informed peer 6/10 Enterprise Go-To-Market Strategy and Payback Period Lynch explains why paid search fails for enterprise deals and outlines their reliance on vertical conferences and C-level security buyers. Latka does the math on their six-month payback aspiration to infer a fully loaded CAC exceeding $3,000.20:31–22:58 · Nathan as informed peer 4/10 Capitalizing on GDPR Regulations and European Data Centers Lynch explains how Assembla is capitalizing on GDPR by spinning up dedicated EU cloud instances in Frankfurt to serve international customers. Latka finishes the interview with the standard rapid-fire Famous Five sequence.1:32–6:03 · Guest teaching 4/10 Introducing Paul Lynch and Relocating to San Antonio Latka explores Assembla's core value proposition by comparing it to testing and CI tools like Sauce Labs and Bugsnag. Lynch explains that their primary wedge is source code repository hosting combined with security and static code analysis.6:03–9:10 · Guest teaching 5/10 The Venture Equity Model and Assembla Acquisition Lynch outlines the venture equity model of Scaleworks for companies between $3M and $10M ARR that fall between VC and traditional PE. Latka compares this to Vista Equity's playbook approach, which Lynch gently reframes as an oversimplification.9:10–12:09 · Guest teaching 2/10 Post-Acquisition Restructuring and 60% YoY Growth Lynch details the immediate post-acquisition changes, including centralizing sales and leadership in San Antonio and pivoting from pure product development to go-to-market execution. Latka notes the difficulty of driving 60% YoY growth on a bootstrapped legacy asset.12:12–14:20 · Guest teaching 5/10 Monthly Profitability and Enterprise Version Control Positioning Latka attempts to calculate monthly revenue by multiplying new logo ARPU ($500) by total customers (3,500) to arrive at $1.7M MRR. Lynch corrects him, noting legacy customer ARPU is lower, and Latka drills down to confirm current revenue is just shy of $1M MRR.14:20–16:59 · Guest teaching 4/10 Customer Success Structure and Net Negative Revenue Churn Latka inquires about net negative revenue churn and presses Lynch on the exact tactical compensation structure for customer success reps. Lynch explains the tiered model combining individual targets with team-wide expansion bonuses.17:00–20:30 · Guest teaching 4/10 Enterprise Go-To-Market Strategy and Payback Period Lynch explains why paid search fails for enterprise deals and outlines their reliance on vertical conferences and C-level security buyers. Latka does the math on their six-month payback aspiration to infer a fully loaded CAC exceeding $3,000.20:31–22:58 · Guest teaching 3/10 Capitalizing on GDPR Regulations and European Data Centers Lynch explains how Assembla is capitalizing on GDPR by spinning up dedicated EU cloud instances in Frankfurt to serve international customers. Latka finishes the interview with the standard rapid-fire Famous Five sequence.1:32–6:03 · Guest disagreement 1/10 Introducing Paul Lynch and Relocating to San Antonio Latka explores Assembla's core value proposition by comparing it to testing and CI tools like Sauce Labs and Bugsnag. Lynch explains that their primary wedge is source code repository hosting combined with security and static code analysis.6:03–9:10 · Guest disagreement 3/10 The Venture Equity Model and Assembla Acquisition Lynch outlines the venture equity model of Scaleworks for companies between $3M and $10M ARR that fall between VC and traditional PE. Latka compares this to Vista Equity's playbook approach, which Lynch gently reframes as an oversimplification.9:10–12:09 · Guest disagreement 1/10 Post-Acquisition Restructuring and 60% YoY Growth Lynch details the immediate post-acquisition changes, including centralizing sales and leadership in San Antonio and pivoting from pure product development to go-to-market execution. Latka notes the difficulty of driving 60% YoY growth on a bootstrapped legacy asset.12:12–14:20 · Guest disagreement 2/10 Monthly Profitability and Enterprise Version Control Positioning Latka attempts to calculate monthly revenue by multiplying new logo ARPU ($500) by total customers (3,500) to arrive at $1.7M MRR. Lynch corrects him, noting legacy customer ARPU is lower, and Latka drills down to confirm current revenue is just shy of $1M MRR.14:20–16:59 · Guest disagreement 2/10 Customer Success Structure and Net Negative Revenue Churn Latka inquires about net negative revenue churn and presses Lynch on the exact tactical compensation structure for customer success reps. Lynch explains the tiered model combining individual targets with team-wide expansion bonuses.17:00–20:30 · Guest disagreement 2/10 Enterprise Go-To-Market Strategy and Payback Period Lynch explains why paid search fails for enterprise deals and outlines their reliance on vertical conferences and C-level security buyers. Latka does the math on their six-month payback aspiration to infer a fully loaded CAC exceeding $3,000.20:31–22:58 · Guest disagreement 1/10 Capitalizing on GDPR Regulations and European Data Centers Lynch explains how Assembla is capitalizing on GDPR by spinning up dedicated EU cloud instances in Frankfurt to serve international customers. Latka finishes the interview with the standard rapid-fire Famous Five sequence.1:32–6:03 · Nathan pushing back 2/10 Introducing Paul Lynch and Relocating to San Antonio Latka explores Assembla's core value proposition by comparing it to testing and CI tools like Sauce Labs and Bugsnag. Lynch explains that their primary wedge is source code repository hosting combined with security and static code analysis.6:03–9:10 · Nathan pushing back 2/10 The Venture Equity Model and Assembla Acquisition Lynch outlines the venture equity model of Scaleworks for companies between $3M and $10M ARR that fall between VC and traditional PE. Latka compares this to Vista Equity's playbook approach, which Lynch gently reframes as an oversimplification.9:10–12:09 · Nathan pushing back 2/10 Post-Acquisition Restructuring and 60% YoY Growth Lynch details the immediate post-acquisition changes, including centralizing sales and leadership in San Antonio and pivoting from pure product development to go-to-market execution. Latka notes the difficulty of driving 60% YoY growth on a bootstrapped legacy asset.12:12–14:20 · Nathan pushing back 5/10 Monthly Profitability and Enterprise Version Control Positioning Latka attempts to calculate monthly revenue by multiplying new logo ARPU ($500) by total customers (3,500) to arrive at $1.7M MRR. Lynch corrects him, noting legacy customer ARPU is lower, and Latka drills down to confirm current revenue is just shy of $1M MRR.14:20–16:59 · Nathan pushing back 5/10 Customer Success Structure and Net Negative Revenue Churn Latka inquires about net negative revenue churn and presses Lynch on the exact tactical compensation structure for customer success reps. Lynch explains the tiered model combining individual targets with team-wide expansion bonuses.17:00–20:30 · Nathan pushing back 4/10 Enterprise Go-To-Market Strategy and Payback Period Lynch explains why paid search fails for enterprise deals and outlines their reliance on vertical conferences and C-level security buyers. Latka does the math on their six-month payback aspiration to infer a fully loaded CAC exceeding $3,000.20:31–22:58 · Nathan pushing back 1/10 Capitalizing on GDPR Regulations and European Data Centers Lynch explains how Assembla is capitalizing on GDPR by spinning up dedicated EU cloud instances in Frankfurt to serve international customers. Latka finishes the interview with the standard rapid-fire Famous Five sequence.

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

0:00 · Nathan 73% · guest 27%0:00 · Nathan 73% · guest 27%3:00 · Nathan 17.6% · guest 82.4%3:00 · Nathan 17.6% · guest 82.4%6:00 · Nathan 25.8% · guest 74.2%6:00 · Nathan 25.8% · guest 74.2%9:00 · Nathan 61% · guest 39%9:00 · Nathan 61% · guest 39%12:00 · Nathan 40% · guest 60%12:00 · Nathan 40% · guest 60%15:00 · Nathan 29.9% · guest 70.1%15:00 · Nathan 29.9% · guest 70.1%18:00 · Nathan 37.8% · guest 62.2%18:00 · Nathan 37.8% · guest 62.2%21:00 · Nathan 54.7% · guest 45.3%21:00 · Nathan 54.7% · guest 45.3%
Sharpest disagreement ▶ 8:11 Rejecting the standardized playbook framing

Lynch rejects Latka's assertion that Scaleworks simply runs a rigid Vista Equity-style playbook, emphasizing that applying a single template oversimplifies complex founder-led companies.

 Hardest push from Nathan ▶ 16:06 Pressing for actionable CS compensation details

Latka refuses Lynch's generic explanation about Rackspace customer success culture and interrupts to demand the exact compensation breakdown so listeners can replicate it.

 Biggest teaching moment ▶ 13:40 Correcting new logo ARPU vs blended ARPU

Lynch educates Latka when the host calculates monthly revenue at $1.7M, explaining that the $500-$1,500 ARPU applies strictly to recently closed enterprise logos rather than legacy customers.

 Nathan holds their own ▶ 20:10 Reverse-engineering customer acquisition cost

Latka quickly connects Lynch's disclosed $500 monthly ARPU floor with his six-month payback target to deduce a blended customer acquisition cost of over $3,000.
the scores for every segment, with the reasoning behind each
ChapterTopicNathan as informed peerGuest teachingGuest disagreementNathan pushing backWhy
Introducing Paul Lynch and Relocating to San Antonio 6412 Latka explores Assembla's core value proposition by comparing it to testing and CI tools like Sauce Labs and Bugsnag. Lynch explains that their primary wedge is source code repository hosting combined with security and static code analysis.
The Venture Equity Model and Assembla Acquisition 6532 Lynch outlines the venture equity model of Scaleworks for companies between $3M and $10M ARR that fall between VC and traditional PE. Latka compares this to Vista Equity's playbook approach, which Lynch gently reframes as an oversimplification.
Post-Acquisition Restructuring and 60% YoY Growth 5212 Lynch details the immediate post-acquisition changes, including centralizing sales and leadership in San Antonio and pivoting from pure product development to go-to-market execution. Latka notes the difficulty of driving 60% YoY growth on a bootstrapped legacy asset.
Monthly Profitability and Enterprise Version Control Positioning 7525 Latka attempts to calculate monthly revenue by multiplying new logo ARPU ($500) by total customers (3,500) to arrive at $1.7M MRR. Lynch corrects him, noting legacy customer ARPU is lower, and Latka drills down to confirm current revenue is just shy of $1M MRR.
Customer Success Structure and Net Negative Revenue Churn 6425 Latka inquires about net negative revenue churn and presses Lynch on the exact tactical compensation structure for customer success reps. Lynch explains the tiered model combining individual targets with team-wide expansion bonuses.
Enterprise Go-To-Market Strategy and Payback Period 6424 Lynch explains why paid search fails for enterprise deals and outlines their reliance on vertical conferences and C-level security buyers. Latka does the math on their six-month payback aspiration to infer a fully loaded CAC exceeding $3,000.
Capitalizing on GDPR Regulations and European Data Centers 4311 Lynch explains how Assembla is capitalizing on GDPR by spinning up dedicated EU cloud instances in Frankfurt to serve international customers. Latka finishes the interview with the standard rapid-fire Famous Five sequence.

Statements from this episode (12)

Assertion Not checkable as stated
Lynch: Assembla increased monthly ARPA from two figures to $500–$1,500
“We bought the business and would have had an ARPA sort of a low, you know, two-figure kind of ARPA. Now we're up to, say, you know, between five, 515 hundred per month would be our sort of sweet spot.”
Paul Lynch Oct 23, 2018 ▶ 4:50
Insight
Mid-sized 10-year-old software companies are stranded between VC and PE
“You've got a business that's doing, say, you know, three to ten million. Private equity aren't interested in them, in that they're too small. Venture, venture capital aren't interested in them, in that, you know, if they're 10 years old, if they haven't hockey…”
Paul Lynch Oct 23, 2018 ▶ 7:01
Assertion Not checkable as stated
Lynch: Assembla had 32 staff and was profitable when acquired
“I think we bought the business. There was 32 staff, and it was doing a couple of million bucks. It was making money.”
Paul Lynch Oct 23, 2018 ▶ 8:42
Assertion Not checkable as stated
Lynch: Assembla has 3,500 customers and is tracking 60% annual growth
“So we have about three and a half thousand customers. Month on month growth is about between three and five percent. We're tracking, we did 60% last year. We're tracking the same this year.”
Paul Lynch Oct 23, 2018 ▶ 10:19
Assertion Not checkable as stated
Lynch: Assembla has generated a profit every month since March 2016
“And since we took this business, which was March, 2016, we returned a profit every month. We've not lost money in a single month that we ran it.”
Paul Lynch Oct 23, 2018 ▶ 12:26
Prediction Not checkable as stated
Lynch predicts Assembla will hit $12M ARR by the end of 2018
“I do.”
Paul Lynch Oct 23, 2018 ▶ 14:01
Assertion Not checkable as stated
Lynch: Assembla monthly logo churn is around 1%
“We have it. It's significantly less. I mean, it's about one percent maybe, maybe a little bit higher, but.”
Paul Lynch Oct 23, 2018 ▶ 14:27
Disclosure
Assembla triggers customer success team bonuses based on net negative revenue churn
“There's a specific base salary that the guys come in on. There's a incentive scheme around their individual KPIs and targets. And then there's a bonus at the end of each month. If we see, you know net, net negative revenue growth across the whole team.”
Paul Lynch Oct 23, 2018 ▶ 16:21
Opinion
Lynch: Pay-per-click ads fail to drive new enterprise customer growth
“In, in, in terms of, like new logo growth, in terms of, you know, PPC, it doesn't work. I mean, there's so much noise out there in the market right now. The only people making money out of PPC are, or Google.”
Paul Lynch Oct 23, 2018 ▶ 17:23
Opinion
Developers ignore SOC 2, leaving enterprise white space that GitHub misses
“GitHub is a great company, but it's a developer company. It's a developer tool loved by developers. You show me a developer that's concerned about SOC two or GDP or you know, I'll buy a bottle of Dom Perignon. They just aren't.”
Paul Lynch Oct 23, 2018 ▶ 18:20
Disclosure
Assembla isolates EU data on Frankfurt AWS instances for compliance
“So we call it a data center, but it's large instances that we're running in Frankfurt, completely separated from the, from our US data which are targeting specifically into the EU base.”
Paul Lynch Oct 23, 2018 ▶ 21:01
Assertion Not checkable as stated
Lynch: 54% of Assembla's business is US-based and 46% is international
“54% of our business is in the U.S., 46% of it is international, and that, you know, you take Australia, the rest of it's pretty much in the U.K. And Europe.”
Paul Lynch Oct 23, 2018 ▶ 21:38
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