How we got high-ticket beta customers for our HR SaaS platform

Upendra Varma: 00:00:00

So Richard, talk about these beta, beta customers that you have. How did you manage to convince them? How does that story look like? So

Richard Lear: 00:00:06

we have a number of beta customers who have looked at the platform. Um, three are in, uh, participation. One is, um, uh, a series C company in Austin. They, um, they have only a hundred, uh, employees, but they, um, But they are actually 200 million in funding.

Upendra Varma: 00:00:25

Hello everyone. Welcome to the B2B SaaS podcast. I'm your host of Paint. Today we have Richard Le with us. Richard here is the c e o of the company called Apollo Factor. Hey, Richard, welcome

Richard Lear: 00:00:34

to the show. Uh, great being here. Thanks, SAPRA for

Upendra Varma: 00:00:38

inviting us. All right, Richard, so let's get started and let's try to understand what your company does and what your how, why do customers pay your.

Richard Lear: 00:00:47

So poly factor, um, our key product is Comp Edge. It's competitive edge for talent intelligence and it's a platform in itself. Uh, the platform really targets the key pieces of talent management or talent intelligence. Uh, retention is a big piece of the platform. Pay equity is the other big piece, and we're breaking new ground in both areas. So, And the retention side, we're creating a retention score and we're, we're actually, uh, uh, using 30 factors of retention in order to calculate for each employee how likely they are to leave. Interestingly, the retention score is also a performance passion score. So when an employee is, um, not passionate about what they're doing, then they're likely to leave at some point. They're likely to listen to offers and, uh, those kinds of things, but it's also sometimes impacts their performance. So we're creating a unique score that's, uh, patent pending, and the score basically shows a manager in a snapshot who is at. And the idea is if you know who's at risk, then you can do something about it. And you know, it was not too long ago that, um, that, uh, research came up. Uh, Gallup research saw that retention is a 1 trillion cost to US businesses, and they found out that more than 50% of the people left said that the company could have done something about. Another 50% said no one talked to them in the three months that before they left. Mm-hmm. So our tool looks at that and says, okay, we're going to show a manager who's at risk and then we're going to nudge them, nudge them to con talk. And even a conversation in itself can improve the, the prospects. So the retention tool does that. Uh, the retention platform is built on other factors like engagement. People use the word engagement. We actually use the word employee experience. So we have a personalized engagement or personalized experience with every individual in the company. It's a confidential tool. It captures the key drivers of their satisfaction, of their alignment with their role, their boss, the company, their team, and how it all works in with career. So we're using a lot of the, uh, the tools that are built by executive recruiters to understand why people are leaving a company. And those come together with a compensation platform, which we built in technology. Mm-hmm. and the compensation platform basically. what would you make in the market at any given, uh, company, uh, tomorrow if you were hired? Mm-hmm. So it's a new tool that looks at market metrics. Today's job market versus salary surveys, and together the market predictions, the employee experience and the factors of. uh, you know, the, the factors of how long you've been at a company, the tenure and your performance all come together into a score. So the platform looks like a retention platform, but it also captures other things. Yeah. Like

Upendra Varma: 00:03:58

pay equity. Yeah. So, I, I, I wanna understand this from a perspective of a customer, right? So, so, uh, who exactly are you selling this particular platform to? So maybe can you walk us through one of the example and how they're using. You don't have to name the customer if you're not comfortable with, but just explain how exactly they're using you.

Richard Lear: 00:04:15

Yeah. And head of hr, uh, head of HR, C H R O, VP, people director of, uh, hr. That, that, that's the typical first client that's a buyer, but the platform actually serves employees, managers, executives, and hr. Okay. So. HR is typically responsible for a lot of, or, or feels like they're responsible for talent intelligence, talent management, and they're the buyer. Mm-hmm. and, uh, you know, they're also a user. So the platform allows them visibility into this, but the person who's the most, the most active actor is the manager. Mm-hmm. So the tools actually a platform from continuous management improvement because all the employees give their feedback and it comes back to the manager, and the manager sees how they're

Upendra Varma: 00:04:58

succeed. And how many paying customers do you have on your platform? As of today, we are

Richard Lear: 00:05:02

just, we're just entering the market now. Paying customers will be a q1. We have betas, we have three betas going, and we have another 15 betas that are, uh, in process of signing. Got

Upendra Varma: 00:05:14

it. So, so, so what's been, what's the journey like? So, so when did you start the company, uh, and when exactly did you sort of, you know, start, you know, when exactly would you call yourself, you know, an official release?

Richard Lear: 00:05:25

So really, uh, beginning of 2019 is when we began to, uh, to do the heavy r and d. We built a compensation platform first. In fact, we thought we were gonna build a marketplace for compensation and tech. We did, uh, as we built it and we went to customers, customers, uh, said to us, we like what you're doing. You're using a lot of ai. But we would love to see, what we're most interested in is retention. Mm-hmm. So we stepped back and we said, well, we can use our compensation platform as an element of retention. We can use it totally for retention. Some compensation companies do. But we said, let's find out a deeper, uh, you know, like a deeper model. And we began that this year.

Upendra Varma: 00:06:06

So Richard, talk about these beta, beta customers that you have. Right? So, so who are they and where did you manage to, you know, sort of get them talk about, since they are just very few, right? I think you've got it on three at this point. More in the pipeline. Yeah. So just help me understand where you got these customers from. How did you manage to convince them? How does that story look like? So

Richard Lear: 00:06:24

we have a number of beta customers who have looked at the platform. Um, three are in, uh, participation. One is, um, uh, a series C company in Austin. They, um, they have only a hundred, uh, employees, but they, um, But they are actually 200 million in funding. Um, and so they're very excited about it. They've had the deepest look at the entire platform and they were the first, we have another 4,000 person company, uh, that's a private equity company. And, um, that company is in process of deploying the platform. And so we're, we're early on, uh, that cus that came through one of our key advisors. And then we have one more company that's, um, I think about 300 million in revenue. and they are, uh, in process of deploying as well. That company has, I think 750 employees and, uh, it's in the, um, monitoring space. Um, but all three are. Into the beta, and then we have just a number of betas that, um, companies

Upendra Varma: 00:07:27

that are willing join. What was, so, so you mentioned that that 400, 4000% P firm came from one of your advisors, you know, maybe pointing them towards you. Right. But what about the rescue companies? Who, what exactly like that does that first touchpoint look like? How did they discover you?

Richard Lear: 00:07:43

Well, often the ci I came from the executive search business. I worked there for 20 years. Um, I have 4,000 or plus contacts at the C level as c e o, and I've got, uh, probably a thousand in hr. So a lot of them came through my own network. Um, so we didn't go out and actively market. Mm-hmm. And we will start marketing next year, but right now it's basically through LinkedIn, through email, through. Catching up with people. Um, we've also been to a bunch of conferences this year in HR and I've met a lot of people there. So, uh, and then there's partners too who, who know about us. So, um, it's just a variety of sources, but we haven't gone into a full scale marketing

Upendra Varma: 00:08:22

campaign yet. Sure, sure. I mean, you've got a variety, but I guess you still have around 20 odd, you know, beta betas lined up in your pipeline. Right. So if I were, if I were to ask you one channel that's really been working for you as of. is it your network? Is it your partners that bringing, that's bringing in you, bringing them to you? What's, what's really working for you at this point of time?

Richard Lear: 00:08:39

Yeah, it's really the, um, my, uh, the network of the company. Uh, but we also are now moving into a new phase where we're including consulting. So h we have a couple HR consultants, top HR consultants that are working with us. So we can go in with a company and we can say, we can do an engagement, uh, uh, consulting engagement or, and we can back it with software or we can do software. And then we'll have a, an expert in, uh, in compensa in compensation or retention. Or an engagement that can support it. So that is also bringing us out. We're starting to do webinars. Our first webinar will be what about these

Upendra Varma: 00:09:17

consultants? Are they independent consultants or are they on your payroll?

Richard Lear: 00:09:21

They're independent cons, uh, consultants that are working in partnership

Upendra Varma: 00:09:24

with us. Yes. And they do bring you clients. You end up sort of packaging your software along with their consultancy experience, and that's how you end up. That's

Richard Lear: 00:09:31

the idea right now we're just, we're, we have our very, uh, first couple consultants that have signed up. They're going up onto our website now. One's up already up there. And, um, we're actually doing a webinar on December 7th with, uh, with, uh, Charles Ashworth.

Upendra Varma: 00:09:46

Got it. So, so what's, what's the future gonna look like? What's gonna happen from now, right? So how exactly are you gonna sort of convert these data customers into, you know, paying customers and how exactly are you planning to build your pipeline? Because it's gonna, because you're just gonna start all of those marketing initiatives, right? So what's, what's that vision look like at, at this point

Richard Lear: 00:10:03

of time? Yeah. It really is all about critical mass. Uh, people in the HR space who are looking at new products are overwhelmed with products. They have too many HR products and, uh, something like our product, if, if you don't look at it carefully, the company will conclude, well, we already have a retention tool. We already have a engagement tool. Our compensation. So breaking through, that's the hard part. Um, I've got 15 blocks written. I'll start, uh, delivering them in the next week or two. And, um, we'll talk about transformation. So we're, we're, we're actually taking, um, the talent intelligence to a new level. We're using the idea of transparency. to actually create transformation. And what's happened is, uh, individuals, uh, 87% of uh, individuals, employees say they want more transparency. Companies are willing to give more transparency, and as employees give more transparency, then we're able to pull that information and anonymize some of it. And then bring more metrics to, to four. So we're transforming metrics and retention. We're transforming, uh, metrics and pay equity. Our pay equity tool is world class, and it's using market data. So pay equity is a big, you know, the, the number two, one and two, uh, initiatives next year for HR are pay equity and retention. These are our best two, uh, platforms and both of 'em are revolutionary, so we need to get that word. And it's really gonna be a critical mass. You need to get five or six or eight customers singing your praises before the rest of the market follows. So Richard,

Upendra Varma: 00:11:33

would you consider yourself, you know, building something very novel and interesting that's, that's nobody, that nobody has done so far? Or do you, do you, do you think that there are competitors out there who are sort of doing something similar to what you're doing?

Richard Lear: 00:11:46

It we're, we're doing something that is quite different. We're creating a, a retention monitor metric, and we're creating a pay equity platform that leverages market compensation, not internal compensation. Mm-hmm. And that's a big difference because if you don't use market compensation, you're introducing bias into your pay equity model, which is the last thing you wanna do. Yeah. Using your current customers or your current employees and comparing them to each other. Is not accurate because if you're looking at the VP of marketing and VP of engineering, they're gonna make different numbers anyway. But I'm looking at a VP of marketing at your company, VP of engineering. I'm comparing them to the market. So each of them have a level playing field. So that is, that's, uh, it's patented. you know,

Upendra Varma: 00:12:29

so, yes. Mm-hmm. So, yeah. The, my, my follow up question here is that, so now, now that you know, I mean, what I would assume is a, a typical HR team would be using a bunch of softwares, right? To solve a whole bunch of things around, you know, the company and people, right? How exactly are you gonna fit there? So, I mean, this also needs a, a bit of market education as well, right? Because nobody understands that something like this could be done, and this would lead to something like employee retention. I mean, these are brand new concepts, right? So how exactly are you managing to convince these people that, hey, this is gonna work for. And this is how we are gonna add roi. I mean, that part is going to be very critical, right? I mean, it's not like, Hey, this is a software, just buy it. I mean, like, it's gonna be useful, right? You, you wanna do something more than that because you are a novel product, right? So, so how does that journey look like? So are you gonna invest a lot of your time and energy into educating people that something like some, a product like this is needed and then, you know, convincing them that, hey, we are one of the best in this space. How does a journey.

Richard Lear: 00:13:24

Right. And it's, and it's a combination of things. It's, um, you know, first of all, you, you've got this credit market space debate chart tech, and we're just saying, don't, we're not replacing anything. We're actually creating two new metrics that you can't find at any other vendor. Mm-hmm. right? Yeah. And so if you want them, it's easier to deploy. You can deploy in 24 hours. It, it's easy to use and you're gonna have metrics that can save you money immediately. Mm-hmm. So think of it as a very easy to use platform that you can put alongside your other vendors. And it will actually augment those other vendors. And so it's a different kind of thing that's going to be, uh, painless and it's

Upendra Varma: 00:14:03

going to be Sure, sure. So how, how about demonstrating the ROI or value, because that's going to be a bit tricky, right? So because it's, it's, it really takes a lot of time and I mean, I. I can't even imagine how you would end up saying, Hey, I've ended up, you know, stopping this, use this, you know, employee of yours from leaving your company and, cause it's pretty hard to demonstrate that value. So how do you deal with conversations like those when you are sort of pitching your product?

Richard Lear: 00:14:26

Yeah, and, and we are creating a, uh, r ROI calculator that will be up on the website in the next month or two. The, um, basically when any employee leads, especially high value knowledge worker, right when they. it's gonna cost you between one and 300,000 to replace them. That's in tech? Yeah. Okay. So the, the easy way to do it is to, I mean, you could deploy our platform in a trial for, for 90 days, and let's see, you could save one or two employees. Mm-hmm. you've now saved two to 600,000. You

Upendra Varma: 00:14:56

know, the other thing is, can, can you really do that? Can you really quantify that? Hey, I actually ended up stopping this employee to leave by doing some things on your platform. Can you actually

Richard Lear: 00:15:06

do that? Yes. Because the, uh, we create a score. Mm-hmm. and, um, you know, let's say the employee's score is today 65, high risk. We show this high risk. It's, you know, re they're ready to leave. The, the, you know, and then we nudge the manager to talk with that person. And that person has four things on their mind. One teams aren't collaborating. I'm feeling frustrated. One, teams aren't executing. I'm feeling frustrated. Two, I don't feel empowered. I'm not having autonomy in my role. Three, I'm worried about the d. We're gonna let raise a D round. Now the manager talks to that person. The conversation in itself, we found will probably improve that score from 65 to 75. Mm-hmm. just the conversation. Even if nothing happens, let's say the manager says, look, I'm gonna grant you more autonomy, give you a little more broader responsibility. Now the score's at 83. right now. You talk to them and, and you, the D round. You say, I want you to talk to the CEO O. They'll have the CEO e talk to the company about the D Round. Mm-hmm. We're talking to Sequoia. We're talking to Norwes. We're gonna get our D round. We're feeling good. Now. The entire employee base moves up eight points. Now you're up into the high eight, mid to high eighties. That person is no longer at risk. Now they could leave still because the next Google comes along and recruits them. Yeah. But they may not, and you can see that, but in their attitude. And so you can actually see the score change, you can see the longevity happen. And then when you see people leave at with a 65 score, you don't even have to, you know, use the plat. You don't even have to talk to your people. Mm-hmm. just watch the score. Because you're, you know, we will show your top 10 people that are ready to leave, and you can say, I would say, you know, in the next six months, you're gonna lose a, a chunk of those. Mm-hmm. And so what we're hoping to do is quantify people's emotions, their sentiment, their satisfaction, communicate that quantification, take action. see the quantification change, and then you can see actual results. Mm-hmm. it's, you know, it's actionable analytics and then that at the end of the year, I mean obviously it takes time. You can see your, your, uh, retention went from, you know, 25% attrition to 20%, and now you can do the calculation, right. So the platform will pay for itself and show very, uh, concretely the.

Upendra Varma: 00:17:27

Got it. So did you raise any external funding so far to sort of build the company?

Richard Lear: 00:17:32

Yeah, we, we've raised funding through friends and family and angels so far, and we'll be doing an institution around probably q3, Q4 in 2023. Mm-hmm.

Upendra Varma: 00:17:43

Got it. Alright, so, so yeah. So I mean, typically what, so since you are, you know, you claim yourself to be category leader and you're sort of in this new, brand new space that you're sort of trying to create for yourself. You would require a lot of investments into educating and creating a market for yourself, right? Because, so if you are, if you are a competitor of an existing product, you really don't have to do that. Somebody else might have already done it for you. It's just about convincing anybody, right? Who understands the value of a product like yours to just, you know, switch. But now you really have to sort of educate the market as well. So, so what's, what's your thought process on that? Are you gonna take a lot of funding and you sort of, you know, educate the market and build a market for yourself? Or are, how does the vision look like?

Richard Lear: 00:18:21

I don't think it's gonna be about edu. I, I don't think the education piece it, it's important. If you can pull that off, it's great. If I can have an audience to go up the HR tech can talk, you know, in front of, you know, hundreds of people, then I can make a big difference and that's great. Um, it's a combination of things, but my sense is, Five to 10, uh, happy customers with testimonials will create enough buzz. Then we can go to, um, you know, venture capital funds and we can say to a company like Norwest mm-hmm. and say, Hey, we've got this tool. You've got 250 companies in your portfolio. It's ideally suited for startup companies. It's a full platform. Yeah. Why not introduce this to your portfolio companies and leverage the fact. That, you know, Norwest wants to have a better outcome for their companies and they wanna reduce retention and they wanna increase engagement and they wanna see compensation properly administered. Yeah. So we can create a platform. Startups, the larger companies are a little different. They're gonna take a little bit longer to adopt. But once all that is going, we will be, we'll be moving. The other thing is partners, we have no problem with partnering with some of the big players. Mm-hmm. uh, we have tools. We've already talked to four or five, um, major players with lots of, uh, capital and they've looked at our platform and go, wow. this would fit our platform. We're not doing this right now. Maybe they'll go and try to do it, but we have patents on, you know, four of the key features. So for them to just, you know, jump in and try to do it, it's taken two and a half years to build a compensation platform. Some of the, the math, so it's not an easy thing. But yeah, with one or two big, um, partners, we feel like we can, uh, penetrate the market too. We have

Upendra Varma: 00:19:59

no problem with that. Got it. So Richard, how does your pricing look like? So are you priced on a per employee basis? It's per employee? Yes. Yeah. And how, how, what's the average value, like average cost that you sort of charge an employee in a company? Yeah. The

Richard Lear: 00:20:11

platform, uh, would, would typically be $5 per month or $50 per year if they do a, your contract. Okay, got it.

Upendra Varma: 00:20:19

I just was trying to estimate your annual contract value for a typical, you know, a hundred percent company. That makes a lot of sense. Yes. So, so, so did you manage to close any of these beta use beta customers? You, you manage, you three of them have already onboarded, right? So did they actually sign a contract as a paying customer or that's still in pipeline? We have,

Richard Lear: 00:20:37

we don't have paying customer, uh, Uh, BETOS, but we have a POV that we're, uh, going to be administering in about a month, and the POV will basically say, use the platform for up to 90 days. It converts to a paying contract. And so that will be, uh, that's our next step. We've just finished, uh, the. the basic platform is just being finished. Mm-hmm. for all the way through retention right now, so Sure. The companies are just getting up to speed on it. It's going to be an aversion 1.0 and q1 right now it's, you know, it's sort of MVP to beta all the way through, but it's usable and it's also, it's already predicting, so it's

Upendra Varma: 00:21:13

good. Uh, and, uh, just talk about the team, right. How many folks do you have on your team as a today? So it's 11 people.

Richard Lear: 00:21:19

Mm-hmm. and how many engineers? software engineering. We have four in software engineering and we've got some, uh, data science folks. Uh, and then we have data management and um, you know, we've got some part-time people doing different parts of marketing. Our BIS dev. Mm-hmm.

Upendra Varma: 00:21:33

Got it. It's primarily engineering folks because you've been focusing a lot on building the product. Right. Exactly. Got it. Alright. Uh, alright Richard, thanks for taking the time to talk to me. Hope you scale, you know, the company to much, much greater heights in the coming days. We

Richard Lear: 00:21:47

look forward to it. Avera, thanks so much for having us.