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Our journey from 0 to 5 million € annual recurring revenues

9 min read  •  September 08, 2020

In keeping with the old tradition, I would like to revive our startup stories to talk about one of our goals at the time and reflect on how we achieved a seven digits annual recurring revenues (ARR).

A few years ago I published an article in which I spoke in detail about our beginnings as a start-up company. Those of you who have read it know that not everything instantly work out as expected.

Contrary to my own expectations 8 years ago, the great success hasn't immediately come about. In my mind we had created a digital money printing machine with Stackfield: once set up, we would only have to wait for the registrations. Well, as you can imagine, my idea didn't quite match reality.

Comparing Stackfields history to a roller coaster ride would probably be a better fit – we had many ups and downs. Since our concept has been focused on privacy and information security from the very beginning, privacy scandals have of course played into our hands a lot over the last few years.

After the NSA scandal we were declared the "insider tip of CeBIT" and the "start-up of the week" in the Wall Street Journal. We were therefore particularly frustrated when the successes we achieved did not match our expectations right from the start.

You can read about what had happened exactly here. But this much is for sure: We haven't performed a rocket launch.

More than 1 million ARR - to reach this goal was something we have always associated with a certain market maturity. Once you reach this size, you have established a raison d'être in SaaS circles. The own product solves such a big problem of the customers that they are also willing to spend money for it. It is also referred to as product/market fit.

Success rarely comes overnight, building a B2B business usually takes many years

The stories that you read about in the newspapers, that you hear about in the podcasts and that you can watch on TV are different from ours. Those stories are the ones everyone knows – the stories of startups that have built a business worth millions in no time.

Obviously, you cannot fail to be impressed by this. However, the glorious success stories are not the norm.

Over the years I have had the opportunity to meet many successful founders who have been in business for many years. They all agreed on one thing: building a SaaS business takes many years.

As for me, it took quite some time until I had finally understood that.

There is also a way without venture capital

It's not like we didn't try to raise venture capital within the first two years. Unfortunately, our timing for this was rather bad. We had come too far with our technology to sell a pure vision with Stackfield, but at the same time we had no revenues to present. "First of all, we want to see if you can make money with what you have built," was the feedback we have received so many times.

So we had to improvise in order to get along with the means we had at our disposal. Of course, it was impossible for our sales to skyrocket overnight. I suppose, in retrospect, this was probably the healthier way, because that's exactly how we learned to handle our financial resources very effectively.

Of course, it wasn't always easy that it took a bit longer, but we were convinced that we would make it work. I think that if there had been any doubt about our concept, if we hadn’t been one hundred percent convinced of our product and if we hadn’t been certain of being able to offer the market something that no U.S. company can offer – security – the company would certainly have been liquidated long ago.

Now, if you look at the numbers of the last few years, you can see that our sales have more than doubled every year until we finally reached the magic boundary of one million ARR. Our sales didn’t skyrocket, no, but they increased slowly, steadily and above all in a safe way.

Only hire once you really need someone, but hire the best people you can get

The past has repeatedly shown that especially highly rated companies came under pressure to grow quickly and were ultimately unable to survive under these circumstances. I see various reasons for this.

Growth must always go hand in hand with an adjustment of organizational structures. The faster a company grows, i. e. the faster its sales increase and the more employees join in, the more difficult it becomes to adjust internal structures and the less transparent the correlation between investments and results becomes.

Our team was quite small for a long time, and in my opinion that was a good thing. We simply did not have to deal with communication problems, lack of transparency and inadequate process management.

Problems like this often occur, however, especially when the product itself is not yet very mature. A small team, especially at the beginning, facilitates communication and allows flexibility. If the product is still in the early stages of development, it becomes more difficult to maintain this flexibility with each new employee.

Anyways, as far as staff growth is concerned, I think it is extremely important, to...

  1. Not simply hire employees haphazardly, but only when it is really necessary
  2. not have long pockets and short arms at the wrong time, but to get the best people for your team especially in the very early stages (provided you can afford it)

When we are looking for employees today, we pay very close attention to finding someone who a) has the best qualifications and b) fits perfectly into our team. Those two aspects are absolute dealbreakers for us.

Always keep an eye on the market, be fast and flexible

But let's return to the subject of flexibility: In our business area, long-term plans are difficult to implement because market conditions are constantly changing. So by keeping our team as small as possible, we were able to remain as agile and flexible as possible.

We still try to maintain this as far as possible, because a number of advantages became apparent for us: Information can be passed on quickly. Plans can be adapted. We have always been able to react quickly and even today we sometimes cast away some of our ideas if we discover at short notice that other things make more sense or plans do not work out as expected.

Why it makes sense not always to follow plans meticulously was something we noticed at the beginning of the Corona crisis. Numerous companies shifted their work to the home office, which justified a timely expansion of our telephony functions. So without further ado we moved the conference calls up the priority list and put other things on the back burner. Being a secure provider from Germany, we had a big rush on our tool and found ourselves in a rather fortunate situation during the pandemic - at least economically speaking.

Often timing is crucial too

Edward Snowden and the NSA spying scandal, the enactment of the GDPR, the ECJ ruling that invalidated the privacy shield, the Corona pandemic - events like these have obviously played into our hands from a strictly commercial point of view.

What's important then is to take the moment and react quickly.

The society is facing new data protection problems and has to distance itself from US providers who are not entirely legally secure. We offer the alternative. A large number of companies is forced to switch to the home office because of COVID-19 and suddenly everyone needs a secure collaboration platform. We can provide it. Timing is everything - in terms of marketing but also in terms of integrating new features.

As Stackfield is requested as a secure alternative to US vendors, it is natural that there will be requests for features and integrations from competing products.

Now, better be quick and shift the requests to the developer team's to-do?

This one we had to learn: The more extensive the tool becomes, the more complex it becomes, the more complicated it becomes.

There are only compromise decisions

New functions, no matter how great the ideas may be, always need to be reasonable and provide added value for the majority of customers. For this reason, we involve customers when developing new updates. However, we always actively check suggestions for their relevance and feasibility.

This means that we record and collect every wish. If functions are requested very frequently, we think about whether users actually need the function or whether they just feel they do. Often it's not that easy to decide. However, if we discover that the ideas would greatly enrich the use of Stackfield, we also start to implement them.

The willingness to compromise is worth it. But it is only worth it if new functions are not implemented at the expense of user-friendliness. Nobody wants to work with a tool in which you cannot find your way around.

We have noticed that a clear and friendly interface is more important than ever for users today - perhaps even more important than the individual functions. People are overwhelmed by masses of information on a daily basis, and that alone is quite a challenge for the human brain. Stackfield is designed to make the job easier, not more complicated.

Now, what does this mean for our work:

Polish, polish, polish

We do not implement any function until we have found a user-friendly way to embed it. Existing functions are constantly being fine-tuned and optimized to keep click paths as short as possible and usage as simple and intuitive as possible.

There is no tool that can do everything. You have to be aware of that. So instead of frantically adding functions, we concentrate on our strengths.

Long-term existing customers are more important than new customers

One area in which we are two steps ahead of our competitors is customer support.

Any customer who tries to personally contact an US provider will probably not be very successful. Here, support is mainly based on forums and articles.

In contrast, we use a considerable part of our resources to support our customers and offer individual and personal support (in English and German). This is especially important for customers during the trial and introduction period. We have noticed, for example, that people simply don't notice some functions once the tool reaches a certain size or scope. However, the more clearly we communicate the potential of our platform to our users, the more likely it is to win them as customers in the long term.

I want to emphasize the importance of the word "long term". Outstanding support also increases the user experience and leads to new customers becoming loyal customers.

I consider our long-standing customers to be particularly important.

New customers are important - no question. But the biggest mistake that can be made, in my opinion, is to neglect existing customers in favor of acquiring new customers.

Granted, we have put rather little money into the sales area and might have been able to generate a little more here and there. Yet our customer base has grown steadily - slowly but steadily. Why?

Because recommendation brings a higher trust value and in many cases, this can have more effect than intrusive sales calls - at least that's been our experience.

Learn from your customers

When I recall how we used to work in the past and how we work today, I see one thing above all that has always remained the same: from the very beginning, we have been close to our customers, we have maintained direct contact and from my point of view, this is something that must not change.

Without direct contact to our customers, we would have missed out on much of what our business is based on today - starting with our on-premise product. The public cloud has become increasingly popular in companies. It was predicted that the self-hosted software solutions would soon come to an end, but thanks to our customers, we have realized that this is not the case: On-Prem isn't going the way of the dodo bird at all.

To a significant extent, this is due to the fact that the topic of data protection is now more important than ever. Many companies simply have no choice but to opt for an on-premise solution. Since many other software providers no longer offer this option, it has become an extremely profitable business for us.

What are our next goals?

Now that we have achieved a certain level of market penetration, our ambition is to significantly increase awareness of the brand Stackfield and scale the business model. Quite often we're told: "Your product is great, but why have we never heard of you before?".

Since we passed the seven digits mark, we have seen a clear upward trend in growth, not only due to corona. We have not yet completely passed the 5 million barrier, but we are growing every month to such an extent that we are confident of reaching this and our next goal in the not too distant future - 10 million ARR.

A big thank you to our team for their passion and conviction and of course to our customers for the trust they have placed in us.

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Cristian Mudure
About the Author:
Cristian Mudure is the Founder and CEO of Stackfield. He loves digital business models and spends his spare time on the tennis court.
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