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Feb 4, 2018 · 25m · top-founders

925 How to Grow ARR 48% YoY from $17m to $28m in SMB SaaS Space

Brendan King · 15m spoken Nathan Latka · 8m spoken
0:00 / 0:00

gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions

In this episode of The Top Entrepreneurs, Nathan Latka interviews Vendasta CEO Brendan King to analyze how the Saskatoon-based SaaS platform scaled to a $28 million ARR run rate with 48% year-over-year growth. King shares insights into their B2B2SMB channel partner model, 18:1 LTV to CAC ratio, capital-efficient bootstrapping roots, and aggressive R&D reinvestment strategy.

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

Nathan as informed peer 6.8 Guest teaching 3.8 Guest disagreement 1.5 Nathan pushing back 4.8
05100:0010:0020:001:16–4:09 · Nathan as informed peer 6/10 Vendasta's Business Model and Revenue Streams Nathan drills into Vendasta's dual revenue model, verifying whether second-order channel revenue can legitimately be classified as predictable SaaS ARR. Brendan clarifies that subscription revenue is only one-third of the business while software resale drives the rest.4:09–11:01 · Nathan as informed peer 6/10 Growth Metrics, ARR Run Rate, and Team Scale Nathan clarifies GAAP revenue versus ARR run rate and questions whether Brendan is disappointed with 48% growth. Brendan explains hitting within 1% of budget and recounts founding the company during the 2008 financial crisis.11:02–18:49 · Nathan as informed peer 8/10 Unit Economics, Churn, and Customer Acquisition Nathan performs real-time math multiplying 1,100 partners by $1,000 ARPU and catches a multi-million-dollar gap against the reported $28M ARR. Brendan clarifies that second-order SMB usage fees constitute the missing volume, and details their strong unit economics and churn dynamics.18:52–23:35 · Nathan as informed peer 7/10 Mid-Roll Sponsor Break: SignEasy After the mid-roll ad break, Nathan questions why Vendasta is not highly profitable given an exceptional 18:1 LTV-to-CAC ratio. He pushes Brendan until Brendan admits their massive R&D team overhead is excluded from CAC calculations.1:16–4:09 · Guest teaching 4/10 Vendasta's Business Model and Revenue Streams Nathan drills into Vendasta's dual revenue model, verifying whether second-order channel revenue can legitimately be classified as predictable SaaS ARR. Brendan clarifies that subscription revenue is only one-third of the business while software resale drives the rest.4:09–11:01 · Guest teaching 3/10 Growth Metrics, ARR Run Rate, and Team Scale Nathan clarifies GAAP revenue versus ARR run rate and questions whether Brendan is disappointed with 48% growth. Brendan explains hitting within 1% of budget and recounts founding the company during the 2008 financial crisis.11:02–18:49 · Guest teaching 5/10 Unit Economics, Churn, and Customer Acquisition Nathan performs real-time math multiplying 1,100 partners by $1,000 ARPU and catches a multi-million-dollar gap against the reported $28M ARR. Brendan clarifies that second-order SMB usage fees constitute the missing volume, and details their strong unit economics and churn dynamics.18:52–23:35 · Guest teaching 3/10 Mid-Roll Sponsor Break: SignEasy After the mid-roll ad break, Nathan questions why Vendasta is not highly profitable given an exceptional 18:1 LTV-to-CAC ratio. He pushes Brendan until Brendan admits their massive R&D team overhead is excluded from CAC calculations.1:16–4:09 · Guest disagreement 1/10 Vendasta's Business Model and Revenue Streams Nathan drills into Vendasta's dual revenue model, verifying whether second-order channel revenue can legitimately be classified as predictable SaaS ARR. Brendan clarifies that subscription revenue is only one-third of the business while software resale drives the rest.4:09–11:01 · Guest disagreement 1/10 Growth Metrics, ARR Run Rate, and Team Scale Nathan clarifies GAAP revenue versus ARR run rate and questions whether Brendan is disappointed with 48% growth. Brendan explains hitting within 1% of budget and recounts founding the company during the 2008 financial crisis.11:02–18:49 · Guest disagreement 2/10 Unit Economics, Churn, and Customer Acquisition Nathan performs real-time math multiplying 1,100 partners by $1,000 ARPU and catches a multi-million-dollar gap against the reported $28M ARR. Brendan clarifies that second-order SMB usage fees constitute the missing volume, and details their strong unit economics and churn dynamics.18:52–23:35 · Guest disagreement 2/10 Mid-Roll Sponsor Break: SignEasy After the mid-roll ad break, Nathan questions why Vendasta is not highly profitable given an exceptional 18:1 LTV-to-CAC ratio. He pushes Brendan until Brendan admits their massive R&D team overhead is excluded from CAC calculations.1:16–4:09 · Nathan pushing back 3/10 Vendasta's Business Model and Revenue Streams Nathan drills into Vendasta's dual revenue model, verifying whether second-order channel revenue can legitimately be classified as predictable SaaS ARR. Brendan clarifies that subscription revenue is only one-third of the business while software resale drives the rest.4:09–11:01 · Nathan pushing back 3/10 Growth Metrics, ARR Run Rate, and Team Scale Nathan clarifies GAAP revenue versus ARR run rate and questions whether Brendan is disappointed with 48% growth. Brendan explains hitting within 1% of budget and recounts founding the company during the 2008 financial crisis.11:02–18:49 · Nathan pushing back 7/10 Unit Economics, Churn, and Customer Acquisition Nathan performs real-time math multiplying 1,100 partners by $1,000 ARPU and catches a multi-million-dollar gap against the reported $28M ARR. Brendan clarifies that second-order SMB usage fees constitute the missing volume, and details their strong unit economics and churn dynamics.18:52–23:35 · Nathan pushing back 6/10 Mid-Roll Sponsor Break: SignEasy After the mid-roll ad break, Nathan questions why Vendasta is not highly profitable given an exceptional 18:1 LTV-to-CAC ratio. He pushes Brendan until Brendan admits their massive R&D team overhead is excluded from CAC calculations.

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

0:00 · Nathan 46.9% · guest 53.1%0:00 · Nathan 46.9% · guest 53.1%3:00 · Nathan 35.8% · guest 64.2%3:00 · Nathan 35.8% · guest 64.2%6:00 · Nathan 10.2% · guest 89.8%6:00 · Nathan 10.2% · guest 89.8%9:00 · Nathan 27.1% · guest 72.9%9:00 · Nathan 27.1% · guest 72.9%12:00 · Nathan 39% · guest 61%12:00 · Nathan 39% · guest 61%15:00 · Nathan 28.9% · guest 71.1%15:00 · Nathan 28.9% · guest 71.1%18:00 · Nathan 41.7% · guest 58.3%18:00 · Nathan 41.7% · guest 58.3%21:00 · Nathan 30.1% · guest 69.9%21:00 · Nathan 30.1% · guest 69.9%24:00 · Nathan 73.4% · guest 26.6%24:00 · Nathan 73.4% · guest 26.6%
Sharpest disagreement ▶ 22:39 Brendan defends intentional R&D burn over instant profitability

Brendan counters Nathan's premise that they have an uncontrolled cost problem by insisting profitability is an intentional strategic choice they could trigger immediately.

 Hardest push from Nathan ▶ 12:33 Nathan catches discrepancy in customer numbers and ARR

Nathan directly halts Brendan to point out that 1,100 partners at $1,000 a month only equates to $15M ARR, forcing Brendan to explain the remaining revenue breakdown.

 Biggest teaching moment ▶ 14:45 Brendan breaks down partner vs SMB churn dynamics

Brendan educates Nathan on why channel reseller churn is under 5% net while underlying SMB churn can reach 60%, explaining the 'valley of death' for onboarding partners.

 Nathan holds their own ▶ 22:10 Nathan diagnoses cost structure despite high LTV:CAC

Nathan applies financial mechanics to point out that an 18:1 LTV-to-CAC ratio without profitability must mean heavy non-CAC fixed payroll costs in engineering.
the scores for every segment, with the reasoning behind each
ChapterTopicNathan as informed peerGuest teachingGuest disagreementNathan pushing backWhy
Vendasta's Business Model and Revenue Streams 6413 Nathan drills into Vendasta's dual revenue model, verifying whether second-order channel revenue can legitimately be classified as predictable SaaS ARR. Brendan clarifies that subscription revenue is only one-third of the business while software resale drives the rest.
Growth Metrics, ARR Run Rate, and Team Scale 6313 Nathan clarifies GAAP revenue versus ARR run rate and questions whether Brendan is disappointed with 48% growth. Brendan explains hitting within 1% of budget and recounts founding the company during the 2008 financial crisis.
Unit Economics, Churn, and Customer Acquisition 8527 Nathan performs real-time math multiplying 1,100 partners by $1,000 ARPU and catches a multi-million-dollar gap against the reported $28M ARR. Brendan clarifies that second-order SMB usage fees constitute the missing volume, and details their strong unit economics and churn dynamics.
Mid-Roll Sponsor Break: SignEasy 7326 After the mid-roll ad break, Nathan questions why Vendasta is not highly profitable given an exceptional 18:1 LTV-to-CAC ratio. He pushes Brendan until Brendan admits their massive R&D team overhead is excluded from CAC calculations.

Statements from this episode (14)

Assertion Not checkable as stated
Vendasta makes one-third of its revenue from software subscriptions
“Our subscription revenue is is now about a third of our revenue, so it's very meaningful, but our second order revenue is really what's really important.”
Brendan King Feb 4, 2018 ▶ 3:04
Prediction Not publicly verifiable
Vendasta expects to end 2017 at a $28M ARR run rate
“This year we'll end the year at a run rate of twenty eight million dollars.”
Brendan King Feb 4, 2018 ▶ 3:25
Assertion Not checkable as stated
Vendasta expects 2017 GAAP revenue to hit $22.8M
“No, our gap revenue will probably be about 20, 22.8.”
Brendan King Feb 4, 2018 ▶ 4:20
Assertion Not checkable as stated
Vendasta reached an $18.7M ARR run rate in December 2016
“Yeah, it was about 18, seven, just a little under, yeah.”
Brendan King Feb 4, 2018 ▶ 5:11
Assertion Not checkable as stated
Vendasta booked its first real product revenue in March 2011
“Our first real product revenue was 2011 in March to Hearst and Zip Local, which was a yellow page in the newspaper.”
Brendan King Feb 4, 2018 ▶ 6:25
Assertion Not checkable as stated
Vendasta bootstrapped with a $1.3M consulting prepayment from Ritchie Bros
“It was about, I think it was about one point, you know, 1.3 million, and what we did was, is we got money from, ah, from a heavy equipment industrial auctioneer called Richie Brothers, and we used what they prepaid us to start that company.”
Brendan King Feb 4, 2018 ▶ 7:44
Assertion Not checkable as stated
Vendasta fully repaid its initial $3M government seed round
“In August of 2008, we ended up, it was a government backed BC and we paid all that money back. So it's not in our cap table, but you know, that three million dollars in those days was really everything that started our company forward.”
Brendan King Feb 4, 2018 ▶ 7:58
Assertion Not checkable as stated
Vendasta bills 100k SMBs monthly through its 1,100 reseller partners
“So we have about 1100 resellers. Marketing to just over 700,000 small businesses, and we bill about a 100,000 small businesses through those partners on a monthly basis.”
Brendan King Feb 4, 2018 ▶ 11:56
Assertion Not checkable as stated
Vendasta operates at a remarkable 18-to-1 LTV to CAC ratio
“So overall, our LTV to CAC is, is really, really good. Like we're running, you know 18 to one right now.”
Brendan King Feb 4, 2018 ▶ 16:21
Assertion Not checkable as stated
Customers paying over $20k ACV generate 83% of Vendasta's revenue
“So we have, you know, a core, a cohort that pays us more than 20,000 dollars in annual contract value is about 83% of our revenue.”
Brendan King Feb 4, 2018 ▶ 16:40
Assertion Not checkable as stated
Vendasta maintains an eight-month CAC payback period
“So, you know actually the payback period right now is about eight months, and there's a couple of ways that we do that.”
Brendan King Feb 4, 2018 ▶ 18:10
Assertion Not checkable as stated
Vendasta employs 235 of its 250 staff in Saskatoon, Canada
“Out of the, you know, the 250 folks, about, I'd say, you know, 235 are in Saskatoon.”
Brendan King Feb 4, 2018 ▶ 19:40
Assertion Supported
Vendasta's marketplace features 45 third-party products, including competitor Yext
“This year we've introduced our marketplace, which we released in February, which brings in third party vendors. So we've got, you know, other people that even compete with us. Like we've got Yext as a listing solution inside of our marketplace. And so we're ad…”
Brendan King Feb 4, 2018 ▶ 21:29
Assertion Not checkable as stated
Vendasta operates near profitability with minimal cash burn
“We're very close right now to being profitable. So we're not earning a ton of cash. We're right where we need to be.”
Brendan King Feb 4, 2018 ▶ 22:47
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