Almost all the talented entrepreneurs we meet at Beta-i put their customers first and above all things. Felipe Ávila da Costa, the founder of Infraspeak, a startup from Porto that has been through Lisbon Challenge and at the Lisbon Investment Summit, is one of them.
However, what Infraspeak has achieved over the past few years is truly remarkable. They have apparently ‘cheated’ an inevitable fate and made the impossible, possible.
Infraspeak is the first startup I know that has never lost a customer, like ever. And, if that wasn’t enough they kept on growing unbelievably fast – 243% growth in 2016.
I bet your jaw just dropped. However, there’s a trick to it.
A few weeks ago, I spoke to Felipe who calls himself the “business guy” of Infraspeak to talk about all the tricks they’ve been holding up their sleeves. We talked about how they kept their customers extraordinarily happy, how they grew 243% in 2016, and how they bootstrapped during the first 2 years and later joined 500 Startups in San Francisco after meeting Marvin Liao at the Lisbon Investment Summit.
Meet 500 Startups and many other top investors at the Lisbon Investment Summit this June.
In the end, it was an honest conversation about customer development, building a great product, defining a strong company culture, going from direct sales to inside sales, and getting investment at the right time.
Keep on reading and learn from Infraspeak’s story.
Infraspeak is a facility management software so, you have a product that can be used by many different segments but, you clearly have a focused portfolio of companies. Why is that? How did you define your target?
It was really by the book because I spent 5 years attending and giving workshops about the best practices to start a startup at UPTEC, the biggest incubation center in Portugal. So, in the beginning, we spoke to as many segments as possible, we reached out to our network of contacts, and that’s when we realised that a lot of different segments needed a solution such as Infraspeak. We had a good problem on our hands because we had a lot of different segments interested. This whole thing was a challenge, because we talked to a lot of people and they were all very receptive so, at that stage, we weren’t really focusing. What happened was that we were getting lots of feedback and we were trying to iterate the product according to completely different opinions. By the time we got to Lisbon Challenge, one year later, we realised that we had to focus in order to be more efficient in our sales process. So, at the time, we decided to focus on hotel management and in companies that provided technical assistance for air conditioners. And the good thing about our product is the cross-selling opportunity because it’s easy for these segments to spread the word about our product and then it gets used by more companies. Infraspeak is a management solution that can be used by both the maintenance sellers and the maintenance buyers, so we set up this natural cross-selling mechanism for the business to grow. For example, we send operational reports from Infraspeak to both sellers and buyers, so they all get to know the product.
And how is your sales process? How did you define that?
In the beginning, we started with a direct sales approach. So, we were knocking on doors, sending emails, asking for introductions, and just reaching out to companies for them to get to know us. At the time, we were having an average of 3 meetings in person before closing a customer. After closing, we had an average of 3 other meetings for the onboarding process. Our product is very complete so it’s not like to implement a CRM where you have 2 concepts to understand, deals and contacts, we have 7 or 8 concepts to interpret, so this requires a (simple yet necessary) training process. But, just for you to have a comparison, our competitors take an average of 6 months to implement their products, while we take around 3 weeks.
But that’s not a scalable model, right?
Yeah, right. But, with this direct sales approach, we grew our portfolio of customers and we were already rising as a reference in the market because we were more innovative and efficient than any other solution. So, this allowed us to evolve into an inside sales approach, which is scalable, and right now, we have a bunch of customers that we have closed 100% online. With this sales model, we’re doing demos online and then negotiating by skype and phone calls. As for the onboarding process, so far, we’ve had 4 customers that did everything online except for the last meeting which involves training their technical staff, that one is still done in person.
We have a churn rate of 0%. We have more than 50 customers, and our oldest customers have been working with us for 2 years, except for the 2 initial partners that have been with us for 4 years now.
And what about the customers that you already have? Have you been able to keep them?
One of the metrics that we’re most proud of is our churn rate. We have a churn rate of 0%. We have more than 50 customers, and our oldest customers have been working with us for 2 years, except for the 2 initial partners that have been with us for 4 years now. On the other hand, and still related to this metric, our negative churn, which means the percentage of customers that we somehow managed to upsell (more users and/or more services) is around 25%.
That’s impressive. How is that even possible? Are there any tricks up your sleeve, or is it just the product that is very good?
Well, when we started to hire people to join our dream we had kind of a philosophical epiphany. We started thinking about why would anyone work for us and why does that make sense. So, at that time, we began drafting the vision of Infraspeak, not in an economics point of view but, in a cultural point of view. In the end, we decided that Infraspeak exists to be a source of good life, a source of good life for our customers, as we relieve the technicians and managers from stress, and a source of good life for our team, for our partners, for our investors, and for anyone that is in touch with us.
So, we bring this motto to everything we do at Infraspeak. We created the role of a customer success lead in a very early stage. In the beginning, it was my partner Luís, but now as we have more people in the team we have had more support in this area. So, the mission for this person is to support our customers constantly and to be kind of an advocate for our customers within the team, when for example we need to define the priorities in product development. I think that this focus in customer support was an added value to the product itself, and in keeping our customers happy.
I’ve never thought that receiving investment was a success indicator. It is an indicator that you have a good pitch, and the ability to convince investors to believe in your business. To me, the true metric comes from customers.
You have only received investment quite recently, and until then you bootstrapped. Why and how were able to do that?
I’ve always been against the kind of entrepreneurship purely focused on investment. I’ve never thought that receiving investment was a success indicator. It is an indicator that you have a good pitch, and the ability to convince investors to believe in your business. To me, the true metric comes from customers, and from bringing value to these customers. So, since the very beginning, we’ve had this mindset. When I joined Infraspeak we started setting milestones, and we would look at a certain milestone in a specific time frame and we would analyse if we had enough resources to go that far. For example, at that time, our milestone was to validate the product and the market, so the challenge was to close our first 5 customers, and it’s not like you need investment for that, it was just the personal effort from the founders. When we closed the first customers, our goal was then to get to product market fit, and we were able to do that ourselves with our own resources. We were just 2, we worked from home, and we had no salary. We were really betting on Infraspeak with our savings (and the cost of opportunity) and luckily (at that stage) it was enough.
And how did that bootstrapping, the ‘no salary’ kind of thing, turn out for you?
It went well, I guess. Our focus was to close paying customers from day one, and we became profitable in 9 months. We actually became “ramen profitable”, the concept elaborated by Paul Graham from Y Combinator, which refers to the point where the founders are able to pay their bills and eat ramen soup every day of the month. So, the company lives and its founders don’t starve. But, right after reaching this point, we had to take a strategic decision. We would either get a salary ourselves or we would start hiring. So, we decided to invest on product and build a team, so we hired our first employee, João. It took us another 4 months to return to this type of profitable, and we had to take the same decision. We ended up doing the same thing as before and we hired another engineer, Pedro. When we joined Lisbon Challenge we were a team of 4.
So, the first year and a half we bootstrapped in the best possible way, which was through paying customers and with the personal effort from the founders.
But, if you were profitable and if the company was growing, why fundraise? When have you felt the need to get investment?
When we were going through Lisbon Challenge and we were profitable again, including the minimum salary of the founders, and when we actually got to product market fit. At that point, we realised we had a good product, we had an unsatisfied market, and we felt the need to maximise that opportunity. And obviously, at that time, it wasn’t just a matter of getting to the milestones but getting there fast. That’s when we started drafting a pre-seed round with investors, which was also one of the reasons why we joined Lisbon Challenge. Throughout the accelerator, we wanted to define our growth strategy and leverage the program’s network to set up our investment round. In Lisbon Challenge, we got the help we needed from mentors and investors, and this was what we were expecting when we applied.
We met Marvin Liao from 500 Startups at LIS and 2 weeks later they sent us a proposal for us to join their program, and another 2 weeks later we moved to San Francisco. It was incredibly fast.
How did Lisbon Challenge work out for you?
It opened a lot of doors for us. We had access to a relevant network of corporates, partners, and investors through Beta-i and Lisbon Challenge. I have known Beta-i for a long time now, and I know the founders have a lot of contacts so, to us that was the key factor when going through the program. However, the big highlight of this journey was the Lisbon Investment Summit that happened right after Lisbon Challenge, and it was really a launch pad for Infraspeak. Through the Lisbon Investment Summit, we met several investors, mostly international, including 500 Startups. We met Marvin Liao from 500 Startups at LIS and 2 weeks later they sent us a proposal for us to join their program, and another 2 weeks later we moved to San Francisco. It was incredibly fast.
Since Marvin Liao from 500 Startups is coming back this year, do you have any advice for the entrepreneurs that will be attending the Lisbon Investment Summit and that want to follow your footsteps and join 500 Startups?
That’s a hard question. My advice is pretty general for anyone that wants to join one of the best startup programs in the world such as 500 Startups, Y Combinator, or Techstars. Go and build a good product that the market is interested in, look for a market that is big enough and with enough growth potential, and set up the right team to take your business forward. To me, it’s not really a matter of what you say and how you talk to investors, but what you’re building. If you’re building a good product then it’s much easier to sell it to investors. I’m personally not a fan of those networking hacks because I think the focus of the founders should be on the business itself.
it’s not really a matter of what you say and how you talk to investors, but what you’re building.
How was your experience on 500 Startups in San Francisco?
To me all the accelerators kind of offer the same thing on paper, just like an MBA. They offer mentors, a network of investors, support, a space to work, and perks. But, what changes is the league you are playing, and 500 Startups is like the Champions League. Regarding mentors, it was amazing, regarding the network of contacts we got all the contacts that we wished for, regarding exposure and support it was incredible, and so on. 500 Startups delivered everything at the highest level. It was a great experience and actually it’s still running because when you join the program it’s not like the relationship ends there, it was just a first step. So, we’re still in touch with them because they are our investors, and it still opens many doors. At the moment we’re very focused on expanding to different countries, we already have operations in Portugal, Brazil, and Angola, and now we’re focusing on expanding in Europe, and they have lots of contacts for us here too. And of course, when we enter the American market, which is part of our plan for 2018, they will be a huge help.
Did getting investment change your mindset? Do you notice any difference in terms of your own company culture?
Well, yes. It’s completely different for you to set up a company while bootstrapping, where you have your own timings and flexibility than setting up a VC backed company where you have specific metrics and milestones that are aligned with the investors. The founders need to be ready and they need to align their medium and long term goals with the investors, or they will end up bumping into each other.
Was that the most significant change you’ve experienced so far at Infraspeak?
Not necessarily. I think that the most significant change didn’t have anything to do with investors but with the growth of the team. When we first got the investment from 500 Startups and Caixa Capital and when we were going through Lisbon Challenge we were only 4 and now we’re 12. This was really a transition phase.
Getting to product market fit is really an accomplishment of the founders, but scaling and becoming a successful company is an accomplishment of the team.
And how different was it working with a bigger team?
Well, in the beginning, it was the founders doing everything, from product to sales, from legal stuff to finance, or even cleaning the office. But, when you have a bigger team, the whole thing changes and the founders need to be more focused on growth, setting up the structure and being one step ahead of the company. So, the challenge here is to build a team that is proactive and efficient in order to maintain the growth of the company. I usually say that getting to product market fit is really an accomplishment of the founders, but scaling and becoming a successful company is an accomplishment of the team. So, at that point, the role of the founders is recruiting a talented team and above all provide the support so that these people can do their job well. We’ve been really learning a lot, this transition is not easy, but so far we were good enough, or lucky enough, to hire very talented people. This allows us, the founders, to focus a lot more on the next steps.
And what is your biggest challenge?
I think it’s setting up a growth strategy. Right now in April, we’ll be entering the Spanish market, and this is very important because we’re actually validating our expansion strategy. We have operations in Brazil through a partner, and for Spain and other European markets we’ll set up our own teams. We’ll be facing the challenge of having a multilingual startup with different teams in different locations, and this is what we need to validate. Spanish market will be like a test lab for us where we’ll see if this model makes sense, and if it all goes well growing into 10 other European markets will be like replicating this expansion strategy.
Why have you decided to set up local teams instead of managing it all through Portugal?
Our market/customers are somehow language oriented. If we want to enter Spain we need to speak Spanish, if we want to enter Italy we need to speak Italian. So, our goal is to do exactly what we did in the beginning. First, we’ll start with direct sales, with the meetings in person, and have a dedicated team in the country. And as soon as we get a portfolio that gives us credibility in the market we’ll dive into the inside sales approach. This inside sales approach won’t require a local team but we can get local partners instead to deliver the support to our customers mostly during the implementation process. This is obviously a complex process because we are disrupting an industry that has been buying software in a consulting model, where it takes 6 months to define the project and another 6 months to implement. So, this industry is used to closing deals in person but we’re actually turning something that is very complex into something simple and we’re simplifying the buying and selling process, and that’s why we’re growing so much. However, this definitely implies credibility, these companies don’t just change their processes with a product that doesn’t have a credible portfolio, unless they are early adopters, but that’s really a minority. In the end, it’s about understanding the curve of technology adoption and the diffusion of innovation. We have to reach out to the early adopters and innovators through direct contact, and as we conquer those first customers migrate into a more efficient model to reach the majority of the market.
And how do you see the evolution of your product? What will the future be like with Infraspeak?
The segment of property tech, which is our technological segment and that includes infrastructure technology, is currently very hot. This segment got left behind in terms of technology and innovation for so long that there are many opportunities in the market now. So, in our opinion in the future, we’ll see a growing number of technological and intelligent buildings. In parallel with this artificial intelligence, we’ll see a growing number of data collection on the buildings’ operations and it will be more complex to manage all these big infrastructures, and this is where Infraspeak will be. We will be an interface between the building and its managers. So, we’ll be chewing on these volumes of information on operations and deliver it in a simple way. Obviously, this is a big challenge but this is the way to go and we are really excited to go there first.
In terms of technology, today Infraspeak is already a solution with multiple interfaces that allows the several players to centralise all the information and communicate efficiently. However, the next step will be to integrate IoT in this process. We already have proofs of concept working and we’re now evolving on a few projects with some of our customers by adding sensors in the buildings and by automating failure processes and so on. And from here on, we’ll be entering the world of big data. Right now we have more than 1 million tasks performed through Infraspeak, 75.000 pieces of equipment being managed but, when we start implementing sensors we’ll multiply these numbers by the thousands and we’ll put artificial intelligence to work for our customers. So, instead of reacting to these maintenance issues, we’ll be able to implement models to predict failures according to the available data. Instead of reacting to a problem we will be proactive and act on these failures before they happen. All of this is part of our product roadmap for the next 2 years. So, we still have a long way to go before we call this a success. When we hire people for our team we usually say that happiness is in the day to day life, and not at the end of the process. We’re very happy with our journey so far but it’s still a long way to go.
Want to follow the footsteps of Infraspeak and meet top VCs in Lisbon? Register here for the Lisbon Investment Summit and meet investors from Accel Partners, Index Ventures, Atomico, or 500 Startups.