Hatchbuck

Don Breckenridge Jr. had already run a SaaS company before Hatchbuck. His recruiting software business sold to third-party recruiters, and it relied on Salesforce and Pardot to grow its customer base. The tools worked, but the company paid between six and seven thousand dollars a month for them and needed three technical people on its marketing team to run them. After that business was exited, Don looked at what small businesses had available. He found that most were using MailChimp, Constant Contact, or an email newsletter system, along with a lightweight CRM, a spreadsheet, or Outlook. He also saw engagement with newsletters falling as inboxes filled up, and he saw that the market was moving toward personalized outreach. Small businesses that wanted to do more had nowhere to go. That gap became Hatchbuck.

Hatchbuck launched in mid-2012 as sales and marketing software for small businesses, combining a contact management CRM, email marketing, and marketing automation in one easy-to-use, affordable product. Pricing started at about $59 a month and rose with the number of users and contacts, which gave customers a path to upgrade once they saw results. Don said the team focused on one customer profile: small B2B business owners with one to ten employees and under a couple million dollars in revenue. Narrowing the target was, in his view, the first step toward reducing churn.

The company was funded first by about several hundred thousand dollars of Don's own money, then by outside equity rounds totaling over $5 million. Don said the rounds were all priced, with no Series A tranche, and that original investors kept supporting the business as it needed more capital.

Hatchbuck did not rely on outbound sales. Don described a fully inbound model: content such as white papers and marketing courses, web content, and paid search through Google AdWords and Bing drew visitors to the website. Those visitors requested demos, and an inside sales team ran the demo and closed the deal. Don said the company tried to keep customer acquisition cost at about a 3:1 ratio to lifetime value. Using a roughly 3% monthly churn rate and a $200 average revenue per customer, the host estimated a lifetime value above $6,000 and an acquisition budget near $2,000.

The biggest lever Don described was net revenue retention. Customers started on lower tiers and then added contacts and users as they saw results, which pushed average revenue per customer toward about $200 a month. Monthly gross churn ran around 3%, which Don called good for the SMB segment, where 3% to 7% is typical. Revenue churn was lower still, and net monthly revenue churn was below 1%. Don also said churn is hard to measure at low rates because it fluctuates, so he averages it over several months. He pointed to a lesson from his earlier company, Sendouts: the team had already learned how to run inbound marketing, and he wished he had found a mentor earlier instead of learning everything the hard way.

By the 2016 interview, Hatchbuck had about 1,200 customers, more than 4,000 users, over $2.5 million in ARR, and a team of around 30 people based in St. Louis, Missouri, with some remote staff. Revenue had reached just under $2 million in 2015. Don said the company was moving from its early build phase into a scaling phase focused on customer acquisition, and that it had turned down an offer from the host's hypothetical buyer.