Robert Johnston is a U.S. Marine veteran and entrepreneur, leading the tech startup Adlumin. Adlumin is a security and compliance automation platform that discovers threats, malfunctions, and IT operations failures in real-time. In this conversation you will get some really neat insight into the journey of a tech startup from zero to multimillion dollar raises and revenue.
TRANSCRIPT AUTO-TRANSCRIBED // PLEASE FORGIVE ANY ERRORS AND TYPOS
Aaron Spatz 00:00
Welcome to America’s entrepreneur. I’m so thrilled and excited that you’re here today. Thank you so much for tuning in. And we’re gonna dive right into today’s show. And I’m just so excited to welcome one. fellow US Marine. So you guys know I have I have a preference I love to interview fellow US Marines, Robert Johnston, Robert, actually, Robert and I commissioned pretty close to the same time back in 2008. So he’s a, he’s a fellow Marine went into the communication side of the house. And since punching out of the Marine Corps, he’s he’s dove headfirst into cybersecurity. And he’s also the founder and CEO of add lumen. And so we’re excited to dive all into a story. So Robert, I just want to thank you. Welcome to the show. Thanks so much for being here today.
Robert Johnston 00:47
Thank you for having me. I really appreciate it. Semper Fi,
Aaron Spatz 00:50
semper fi, brother. Absolutely. So give us give us a little bit of a tour of your background. What were you like as as a kid? What What inspired you What motivated you to, to join our nation’s military?
Robert Johnston 01:03
Yeah, I grew up in Florida, so and a small town called Satellite Beach, Florida, which is on the east coast, you know, there’s all these beach towns that kind of run north to south, like Cape Canaveral was the town just north, which is where they fire off a lot of the rockets. And they, you know, used to be the space shuttle and things like that. And so I grew up, I went to high school there. You know, my parents were Marines. Both of them, actually, my dad was a Marine for a really long time, he’s a marine for, you know, 35 years, my mom was a Marine as well for, you know, 1315 years. That’s where they met, they met, they met in the Marine Corps. And so it was always, you know, me going into the service, I feel like that, that did play a big role in, in the me choosing to, you know, to serve in the military, they never pressured me to serve in the military. But in fact, it never was even a conversation that we ever had, I think I just, you know, grew up, like watching my dad, put on his uniforms, watching my dad get uniforms ready, you know, go into do Marine Corps things and, and that, you know, obviously had a large amount of influence on my life. And so, when it came time to choose where to go to college, you know, at the end of junior year, senior year, I just kind of, you know, when our little military kick, right, I, I when I took a tour of VMI took a tour of the Citadel, I I went and took a tour of the, the Naval Academy, and certainly the Naval Academy has a way of, of capturing, you know, a young man or woman’s imagination, when you when you take a tour of the place, right? It’s it’s very opulent, it’s got a lot going on, you know, all the midshipmen running around the little white uniforms. And so it just, you know, I decided, like, that was a great place for me. Plus, they had a great wrestling team. I was a, you know, as a good wrestler in high school and, and I had had a desire to wrestle in, in college, at the collegiate level. And, and, you know, they had a coach, Bruce Burnett, who is one of the best coaches in the country. He was also, you know, the Olympic head coach several times for the for the US Olympic team. So, it was it was a great opportunity. It was an upcoming wrestling program. And, and, you know, I just thought it was a great place for me to land.
Aaron Spatz 03:27
Yeah, no, that’s, that’s a terrific story. And it’s, it’s really cool growing up in a family where, obviously, that the Marine Corps military service was your life. And it’s but it’s really neat how they did not, like force it on you just kind of like, Man, this is just a for me. So like a new it’s a natural progression. This is this is where I feel like I’m headed towards and so like, what, what was, what was their response to that?
Robert Johnston 03:54
They were supportive. You know, my parents. Like I said, they never it was never even a conversation that we had, like, have you ever thought about joining service never even left their, their mouth, I came to this, you know, ideation on my own. And I, you know, I think they were proud. It was very meaningful, of course, to my father, especially who spent, you know, a career and a lifetime, really, in the Marine Corps. And, and while I enjoyed my time in the Marines, you know, it was certainly, I don’t want to say less meaningful for me than it was for my father, but it was it meant it was it was a different part of my life. It was, you know, as my father was his whole life. For me, it was certainly a phase. You know, in my life, they gave my father everything like, you know, he joined in the in the early 70s, like, just after the Vietnam War, like you didn’t have to have a high school diploma. My father didn’t have a high school diploma. He dropped out. So they gave him a high school diploma. They gave him a college degree. They gave him a master’s degree, they have a career since belonging, you know, because he grew up from very humble beginnings, right? And so You know, for him, it was so much different than, you know, for me I was it was, you know, a point of pride for him was certainly a point of pride for me as well. And I enjoyed my time in the Marine Corps. But, you know, my father definitely set it up in such a way that, you know, as a young man, I certainly had my own options, right. Sure.
Aaron Spatz 05:18
Yes. Fantastic. So, so then, so So let’s cover a little bit about what your what what were you able to do there? I mean, we obviously have a have a non military listening audience as well. So but like, but what, what were some things that you’re able to do? And and then kind of, take us through the decisions to get out and kind of what your what your decision making process was? And, and that whole line? Yeah,
Robert Johnston 05:44
yeah, yeah. So you know, you go to the Naval Academy, it’s a four year university, just like anything else. And then you come to, you get to pick if you want to go in the Navy, or if you want to go in the Marine Corps. You know, the Navy has a pretty finite amount of jobs. Like, they’re, I think, you know, I don’t know, the exact count. But I think when I went in, there was only like, 810 jobs or something like that a totally, you could pick up anybody. You know, pilots surface warfare, you know, EOD, submarines, Navy Seal, like, there wasn’t a lot of a lot of job options. Marine Corps was one of those that you could sort of select. And then when you go into the Marine Corps, you actually have a laundry list of jobs that you can pick to do in the Marine Corps, you know, upwards of 30, or more different types of, they call in the Marine Corps, they call them mo SS, but there are jobs, right jobs that you do. And so, you know, cybersecurity was something I took two very, very young, I tutored at the Academy participating, I was, you know, an IT major. You know, I took all the cybersecurity classes that I could take back in, in 2008, cybersecurity wasn’t really as big as it is now. Like, it wasn’t really a thing back then. I’m not even sure how many people were calling it cybersecurity, but I took the security classes, I loved them. That was really the only thing I would say I loved about my major it, you know, what was the security thing and so, I took to there, and I knew, you know, this is going to be big, I could feel, you know, I could feel that this was going to be big was gonna be big and warfare as well. And so I knew that’s what I wanted to do. I tried a couple of different things to make sure I steered my career in that path. And eventually what I you know, joined the Marine Corps, I said, Okay, you know, cybersecurity is what I want to do. So I wanted to be a communications officer, which at the time was turning, much more data focused, right. And so now you have your own MLS, you have like a cyber warfare MLS, but, you know, I chose communications and decided that I was going to pick, you know, the jobs along that path to, you know, a while I was in the Marine Corps to put myself in those kinds of positions. So security type positions. I took a few detours in the Marine Corps. My first detour, you know, I graduated TBS, I went to calm school and I went to went out to Okinawa, Japan, I, you know, I, I loved Okinawa, Japan, I got to hop on what’s called an ATT, and embedded training team. Okay, so I went and did the Martian invasion two in 2010, with an Afghan infantry company, so I took a little detour there, that was a lot of fun. You know, got to get to play infantry for a little while. And then, you know, I came back from that a little bit motivated, and I went to, I was going to be a barstock operator, I went to bar sock Assessment and Selection actually passed, you know, at the, at the rotation time, I was supposed to go feed into the bar sock trading pipeline. And I decided to take a job that was offered to me at the National Security Agency. I just, you know, I came back and I kind of took a look at both career routes and, and I said, the NSA sounds like they’re up to some pretty interesting thing. So I decided to go to the to the National Security Agency, and that’s where I kind of finished out, you know, my career. You know, I got out of the Marine Corps in late 2015. Technically, I think, technically, my separation date was January 1 2016. You know, the decision for me to get out was was pretty, you know, pretty, pretty. Pragmatic one I think I, I just realized, you know, when I took that last position, I was leaving the Marine Corps Network Operations Security Center, actually, I was running what’s called the red team there. The red team is hacking our own computer networks in order to make them stronger. So I was doing things like breaking into wireless networks or breaking into computer systems. And and that was, you know, pretty, pretty interesting. But at that I had PCs, my tour there was up right. And so I had orders to go to mar sock or the the CEO there had You know, found found me a way to go to the National Security Agency. So I had kind of tours this way. And I chose to go to the to the National Security Agency. But at that point, you know, I wasn’t sure how much longer I was going to be in, I ended up being eight years total. So I went to the NSA. And, you know, I felt like I had just, I just run it, you know, my time there had run its course, like, I’d run out of things that I wanted to do. I gotcha, you know, and, and so it’s like I who’s coming to my NMI tour at NSA. And, you know, there, look, there are no bad, there are no bad options, if you want to stay in, there are certainly no bad options. And, you know, the the monitors, it was time for me to go back into a traditional kind of communications post, which, in reality, my career had kind of lacked traditional comm officer postings, right, I didn’t ATT that sucked up a whole year, I ran the red team, you know, doing computer hacking, that that wasn’t really like a traditional compost, right, I had been a platoon commander for a very short period of time. And then, you know, I had gone to the NSA. And so, you know, one thing if I did want to stay in and the monitor was right, but you know, if I wanted to stay in, like, I gotta go, I gotta go get some traditional Calm, calm time. Right? And so that that was next on the docket for me, and there’s nothing wrong with that. Sure. I’m not saying there’s anything wrong with that. It just, I, I took a look at it. And I decided, it wasn’t for me, there was something that I was feeling, too, I knew that I wanted to, you know, one day start my own company. I just, that’s something I actually, you know, I think I knew I it just looked like a real I always say real gunslinger way to live your life. And, and so it, you know, that that interests me, and it just had run its course it was a really good ride.
Aaron Spatz 11:53
Yeah, well, let’s, let’s dive onto that topic. That’s always that’s always a fun topic, which was when you mentioned, you know, wanting to run your own company. So like, where did that originate from? That been a fascination? Since since you were a kid? Or was it was that ideas that you were kind of marinating on while you’re in service? Like, where? Where do you feel like this all kind of came from?
Robert Johnston 12:17
Yeah, I, you know, I started just reading just consuming and, and, and, you know, this is something that took really from, from my time in cybersecurity, like, you know, I was just, I was just just reading a ton. I mean, my, my now wife would, would be like, it’s unreal, to me how you can read an engineering textbook, it’s like this thick, and I would read these things like cover to cover, but after, after a while, you know, I would understand, like the fundamentals of what was inside them, which was, you know, made them interesting to me, because I realized what they were talking about, but I started reading, you know, getting on like, I think, maybe even why you start this podcast, like, like an entrepreneur kick, right? I just, it sounds really interesting, really exciting. Like, okay, you tell me, you, you start this company, software business, or whatever, businesses that you want to start and, and you go out there and you you find customers, and you there’s a value exchange. Right. And, and you can build something really big. And, you know, it certainly helps. I think that there are here in the United States, so many success stories of, of people becoming, becoming so successful and building, you know, and building technologies or products or services that are extremely valued globally, or, you know, are very valued globally. So I thought, you know, why not?
Aaron Spatz 13:45
Yeah. That’s cool. So, so, take us through, then you’re so you, you, you separate you separate from, for the military. You, you worked in the private sector, so So walk us through the decision to launch the company, were like, just kind of give us that whole Genesis story.
Robert Johnston 14:08
Yeah, I, you know, I left in 2015, I actually got a job at CrowdStrike, about even six, eight months prior CrowdStrike was a very late stage startup at that time, they just, you know, raised their second round of, you know, $100 million, or something crazy like that. And, you know, I, I signed on the dotted line early, there was a few companies that I kind of wanted to work at, you know, I interviewed a bunch of different places, but I ended up kind of enjoying the direction that that company was going and, you know, they were getting a big name in the space and I’m like, Yep, alright, that’s fine. I’ll see it, you know, six, eight months, when I actually separate from the military and they and they were, they were fine with that, you know, they’re like, Okay, you know, no problem. So, you know, like many officers or anybody, you know, you leave the military and you end up going to work in the private sector for a little while. I really loved my time there, that’s a great company continues to be a great company, I think, you know, to this day, and then there was something just kind of still missing. You know, I, I still wanted to start my own my own company, you know, do something I wasn’t sure what it was. So they’re in the DC, Maryland, Virginia area around here, there was an incubator, and it still exists today called Mach 37. incubator, and, you know, an incubator accelerator, they, they, you know, bring your idea in, essentially, and they give you a little bit of money, not not a lot, but a little bit of money. And, you know, they allow you try, they try and teach you how to build a company, right? They teach you how to build a company. And so, I applied to this incubator, with an idea for a company that no longer really even exists today is our company as much different product, everything but, you know, I applied to this incubator, it was run by a former Naval Academy graduate actually, at the time. And, you know, he, he, we were accepted, we went in, and that was the really the catalyst for me to, you know, quit my job and go go give it a shot. At the same time, I also applied to my MBA, which is like a common, you know, common thing I feel like servicemembers do. So I went to Georgetown University, which was also, you know, ended up being really great experience, it got me, you know, my, my association there got me my first 100,000 in investment, right, I’m on the incubator. So yeah, you go into the incubator, and you get 50. You know, I think it was like 50,000, or something like that, maybe 60,000 bucks for three months. And, you know, it’s essentially enough to pay you for three months, keep the lights on, you know, spend some money on on trying to build your business, most people that go in to those incubators, and we were no different. We had no product, no sales, no marketing, no anything, right, just the, just a dream, I suppose. And so that that was that was the catalyst for me to leave there was, there’s nothing, you know, nothing other than that, then then I had created this little opportunity to get into this incubator, get a little bit of money, you know, from the incubator, and then I went to Georgetown, and I actually use the GI Bill, which also gave me a little bit of money and kind of gave me the the freedom, a little bit of freedom to leave my really high paying job behind to go take it take a chance at something.
Aaron Spatz 17:38
Wow. Yeah, I mean, that that’s the that that’s a story that plays out time and time again, across the country, right, if people if just hundreds, if not 1000s, of variations to that story of people taking different calculated risks and different decisions that they have to make, and just evaluating the cost and understanding what you know what the next step is, it’s, it’s great to hear your experience through that incubator program. And so, you know, what, what was that? Like, first of all, like, so you’re, you’re able to, I mean, it was it was like hands on mentorship, and just like, understanding kind of like, what, what are the some of the just the basic fundamentals of just getting a startup going? Like, like, what, what were the big lessons learned from that,
Robert Johnston 18:27
like, many, I would say, some of the entrepreneurship classes that I took in, in Georgetown were kind of the same thing, you know, and they’ve come up with these models over time, like the Lean Canvas model, you know, and, and different kind of startup frameworks, I would call them. And those are whole, all important. And you do go through a lot of those you bring in people to talk about sales and marketing. You know, you know, the one thing that incubator really didn’t help you with was product. And unfortunately, like, if you’re building a services business, you are that you are the product or your services is the product. So it’s different. When you’re building a product company, your product is the product, so you don’t have a company until you have a product. Yeah, right. And so, you know, we were in product development at the time. And so we were still kind of building working on that, but it was good to get a lot of those, you know, a lot of those building blocks, you know, some of them are as simple as like company formation, you know, a company has to look and feel a certain way in order to to attract investors. Like there are no LLC s or s corpse really to speak of, like you’ve got to have, you know, a C Corp, you want it structured in a certain way you want an employee stock option pool so that you can you can give in and attract talent to the company and dole out, you know, employee stock options for them. You have, you know, compliance things with the SEC you have to comply with, like no one knows, you know, no first time entrepreneur especially knows any of these things. but they are so important the beyond the product. You know, of course, having a product no one wants to buy is one way to kill the company. The other way is to not have your corporate administration together, right and not have, you know, your, your the administrative side of things kind of buttoned up. And so they they did a lot of that in the incubator. I remember it being a really rough time, actually. Because I was going to school for my MBA and going to this incubator at the same time. So it was really, really rough three months. But it was interesting because the incubator gave me that 50,000 bucks. And we we spent that essentially on the company and then going to school was giving me the GI Bill money, but going to school also gave me health insurance, which is, you know, important at the time. So you know, that was a it was it was a good Cabo it was a cabo that’ll go again, gave me the freedom to take to take huge risks. Yeah, which I did.
Aaron Spatz 21:02
Wow. So then. So out of that experience, which sounds like sounds like there’s a lot of things that you learned there. But then there’s also things that she’s just that you necessarily couldn’t learn there just because of the nature of the way it was set up. So like, how did you go about, then you’re taking it from that idea in in finishing the product? Right? So I mean, like you said, you’re in product development. And so when you’re taking something through product development, and then you’re going to mark it with it, like, how are those first few transactions? Like, how did you go about getting your first sales?
Robert Johnston 21:38
Yeah, we just went out there, we tried a couple of different things early on, we didn’t we didn’t early on, of course, we didn’t have a great product, right? I mean, it was, you know, not a lot of development was behind it. And it took a long time to really kind of get our get our stride. You know, a really, you don’t find out what the market wants, until you go out there, and you just start trying to sell, yeah, what it is that you’re offering. And we did that, and we just, we just tried to sell every chance we got. And, you know, to any customer, we could, or that we thought was a potential good fit. And, and along the way, we learned a lot, we learned a lot of what their pain points were, and you know, it shaped how we should build our products, you know, the features that were built on our product, the positioning of our product, you know, and in MBA world, they, you know, they call it the four P’s, you know, product pricing, positioning, all these different things, which go into, you know, why people buy your product, of course, how you bring it to market. And so, you know, we I got a chance to work on all of these things, and, and then, you know, things, things started to look better, and you know, you, you get some more customers, you raise some more money, and then you get some more customers, you raise some more money and things just get, you know, bigger and bigger and bigger and bigger and bigger. And then, you know, a few years later, you know, it’s millions and millions of revenue and, and, you know, 30 plus employees, right? So things grow over time.
Aaron Spatz 23:19
Is that I mean, that’s, that’s actually amazing. So let’s, before we go deeper, because I’m wanting to ask you more questions, but I don’t think we ever covered it, because we cover this off air. But give everybody just a quick, quick overview of what the company is, what it does, what its primary products are and all that.
Robert Johnston 23:37
Yes, a security and compliance automation platform for, you know, middle market and enterprise light companies, we’re a SaaS based serverless solution that, you know, does a good job of, kind of meshing together linking together, you know, the compliance component, which is what I would say, is traditionally missing from today’s security analytics, or sim technologies, and the traditional sim technologies that you’d have that, you know, that you that you have in, you know, in enterprises and larger and larger enterprises. And so we kind of mesh those two foundational concepts together, and, and brought a product to market that works really well, especially in highly regulated organizations. Gotcha, like finance, healthcare, insurance, even, you know, municipal counties, and things like that, that have to comply with cmmc and other compliance standards.
Aaron Spatz 24:34
Yeah, I mean, and, and that’s one thing that I have noticed, or at least I just, I mean, a very surface over you obviously have, you know, 1,000,000% more knowledge on this, but, but it does seem like just in my limited experience with dealing with companies like this, it is the compliance portion that is often left out. It’s more of an emphasis on the security aspect. But I mean, as you noted just a minute ago, I mean, compliance is becoming a bigger and bigger and bigger deal. I mean with with the European Union’s passage of GDPR, that really got everybody’s attention here in the States. And then California, passing their consumer protection act out, out there. And there’s all sorts of different legislation across the country that’s being considered at the state level, it’s only a matter of time before more robust federal things roll out. And then you you also mentioned the latest with si si MMC, which is like, that’s, that was the latest thing that rolled out, I think it was the beginning of this year, right is just another another set of compliance criteria and things that people need to consider. And so I mean, what I mean, how do people keep up with all this stuff, man? I mean, it is, it is a lot of stuff, right?
Robert Johnston 25:52
Yeah, it is. It’s, it’s, uh, you know, and there’s different people that can levy these requirements on an organization take finance, for example. You know, finance, like banks, and even mortgage companies and, you know, underwriting companies, things like that. You’ve got the government, you’ve got the federal government, which has a set of regulatory mandates, you’ve got, you know, state and local governments, which you can also levy those mandates, but then you have the insurance companies like the FFI DC, you know, the FFRDC insures, you know, really, almost almost every bank in the United States, they have their own set of requirements, right. So, you know, highly regulated organization, like like bank, or credit union or something like that is, is getting a lot of compliance and regulatory pressure from a lot of different areas. And then you even have, you know, the free market compliance and regulatory requirements, like PCI standards, which are PCI DSS, which is, you know, if you process credit cards, that is, you know, essentially a standard regulatory compliance standard that’s levied by, you know, the car brands, Visa, MasterCard, JCB, and so, you know, these financial institutions are, are becoming regulated from these three different areas. And so it’s tremendous what they what they, you know, have to do, especially if you’re talking about a smaller, maybe a small credit union, or a small bank, not necessarily Bank of America, they have, you know, tons and tons of people to do this job. But, you know, a bank with several billion dollars in assets, actually, you know, it’s tough for them, especially also because the talent pool, think if you’re, if you’re a bank in North Dakota, and you have 5 billion in assets, five, 5 billion acids is a lot of money, right? That’s a lot of money they’re holding, but, you know, the talent pool, and the number of employees you can bring in to do some of these high tech jobs is a lot harder in, say, North Dakota than it is in, in New York. Sure. So you know, there’s a, there’s a kind of a middle market struggle there that’s taking place that our company is really helping.
Aaron Spatz 28:01
That, I mean, that’s fantastic. So like, so let’s so now that we’ve covered a little bit, a little bit of the overview of the company, just from a broad level, I’d love to go back just for those that are listening. I mean, everyone’s curious about the, you know, the movement of a company from idea, then to just various stages of its growth. And so walk us through again, like walk us through, like, what, when did you realize that you had something when did you realize that okay, are, you know, our revenues are able to help sustain the company? I don’t, whatever you want to share in terms of profitability is fine, or, or not? Whatever you wanna do there, but like, but But what was that? What was that journey like for you? And like, when you realize like, holy cow, like we we actually, we actually have something here?
Robert Johnston 28:48
Yeah, I would say we, you know, we incorporated the company in 2016. And we went into the incubator at the end, the fourth quarter of 2016. We didn’t have a product, we didn’t have anything. At that point, we really launched the first generation of the product in 2017, we were trying to do well, that was called user and entity behavior analytics, which, you know, they thought it was going to be it’s a product category, but really, it ended up kind of folding into the same category. Right. So it was a feature non product category, but that was in the beginning stages. And so it wasn’t working, you know, we had garnered a few, a few customers. Now that we didn’t, but we did garner a few customers, it just wasn’t really working. But I, you know, in in 2018, we did well enough in 2017, that we were able to raise a little bit of money in 20 2018 to make a change to completely change product categories, which was, which was, you know, it was an engineering overhaul. It was tougher in that regard, but it was also vital. And so I would say we knew that it was a big hit, maybe just one or two quarters after You know, one or two quarters after, after we made that change, we found a really nice niche at that time in finance, we’ve since expanded far beyond that niche, but finance, middle market finance is a big niche, right? There’s a lot of business 1000s 10s of 1000s of businesses in that in that kind of category. Sure, though, we’re in that in that segment. And so, we found a niche, and probably just a couple quarters after 2018, I recognized that this thing was really selling really well. And it just continued to, to get like larger and larger and larger and continues to get even larger today. So,
Aaron Spatz 30:39
so let’s let’s talk really quick about about the necessity or not to specify to zero in on a niche. So like, what, what it, it’s obvious, obviously like your, your perspective on as like, Hey, you, you guys, did the research necessary to realize like, Hey, this is an underserved market, like, Let’s go after that, like, what, what is your stance on that, I mean, I’d love to give you a chance to kind of speak to that in terms of the importance of kind of going after a very specific segment.
Robert Johnston 31:12
It helps, it helps you build a product that’s very meaningful to one type of person, which in the early stages, you just need, you know, you just need to keep making money, right. And so, you know, focusing in on a niche really, really helped with that. Because we could focus on one type of customer, and we could build features and little widgets, that that one type of customer, really, really liked. And, and it made the product really sticky. And it made the product very valuable. Now, you know, in the early stages, my experience coming from that as if I were to start a new company, again, today, I do the exact same thing, I choose a product category, I want to build a product that does you know, this for people, and then and then and then I would say, Okay, we are going to start building this product specifically for credit unions are minimarket banks, right, and then just do nothing, but try and sell that product to them and build that product for them. And what you’ll find is even the features that you’re building for them, you can rebrand, and make those features global and make it meaningful globally, and then you can always break out of your niche, right, you can always from from that one niche, you can just expand and make it larger and larger and larger, right and more and more meaningful. So I think it’s a good way, you know, to to approach company building, because, you know, it allows you to target your resources as well. Like your, your resources in the early stages of, you know, building a company are not infinite, right. And so you’ve got to spend marketing dollars somewhere, you’ve got to spend sales dollars somewhere, you know, you’ve got to you’ve got to allocate these these resources wisely. And so when you focus in on a niche, it really allows you to allocate them very wisely.
Aaron Spatz 33:05
I love the way you said that, because that’s it, and when there’s several things that you said that I really want to pick out. So one is just because you just because you specify the niche now doesn’t mean you can’t go back and broaden it later, like and open it up later. And I think that’s important for people to understand and realize, like, you’re not married to this niche forever. Like, I guess theoretically, you could, I mean, there are companies out there that do that as well. But But as you’ve established and as you’ve maximized your resources, and really zeroed in on it on that one segment, then you’re able to, then you are able to kind of take those lessons learned and apply those to other areas in this in just slowly going open it up more and more and more. And so I think it’s a great, I mean, that’s really solid advice. And I think it’s great also hearing you say that, hey, if I had to go back and do it all over again, like what I do at the same, right? And your your answer still is yes. Like hey, I would, I would zero in on that niche, I would focus on something and then rather than just going, Hey, I’m gonna serve everybody, let’s you know, let’s figure this out, you know, and so I think that’s a really, really great insight. I really, really, really appreciate you sharing that and so talk with me then about those, those early sales so did you have a sales team was uh, you doing all the sales? Like what what are those first contracts look like for you?
Robert Johnston 34:30
So it wasn’t just me, I had a co founder, Tim that came along came along with me that, you know, really kind of how we split up the company roles was I was handling product, and he was handling sales. Now I helped with sales. Sure, and he did help with ideas for products and things like that. And so that’s kind of how we divvied up responsibilities. And it still is is kind of like that today. Although today we’ve got you know, a VP of sales, a sales Team marketing team, things like that. But, you know, that’s how those were kind of build up. And so he was out there trying to farm and get business, and then I was building product, and then I would come in and act as like the pre sales engineer to help himself to sell product, because I understood from kind of a technical technical point of view. And so we did that for a long time, you know, on time, and, and then, you know, eventually things get bigger and, and you you strategize about new ways to go to market. And so we heavily rely on a channel go to market now, today, you know, channel distribution strategy. And so we brought in a real pro, to build that program for us. And the program’s been highly successful. You know, and it’s amazing when you bring in a real pro, but I will say that from a company building standpoint, like you need the resources to bring in a real pro, like a real pro cost real pro money, right, and there’s nothing wrong with that. And so, and they want to come to a company, of course, that that can do that for them, because it means that you’ve, you’ve, you’ve made it a certain distance on your own. Right. And, and there’s less risk there. And so for them, but they come in, and they, you know, you definitely, the quality of people you hire is very important. And you need, you need to pay them well. And, you know, they’ll, they’ll do a good job for you, because they know what they’re doing. And in a lot of these areas, like as an entrepreneur, you’re, you’re trying to become a master of everything. But that’s just not possible. Really, you’re trying to become a master of everything, until you can bring in a true master at that one subject, whether it’s sales or marketing, or, or some other kind of division of, you know, engineering needed, you know, some kind of division of, of what it is that you’re doing, and then those guys bring you to the next level.
Aaron Spatz 36:59
Yeah, I love the way you said that, again, I feel like that’s another that’s a whole nother can of worms that you said that you just opened up there, which is the, the necessity in the early days of, of any company, you’re doing all of it, right? You’re doing invoicing, you’re doing, you know, elements of development, you’re doing sales you’re doing I mean, you’re literally doing all of it. And so take me through then that that entire, like that entire process of like, okay, how do I go from being a jack of all trades, master of none, essentially? But like, how do I go from having it in a place where, you know, we’re, we’re, we’re sustainable to some level, and then recognizing the areas that you need to outsource? Like, how are you able to let go of those certain things? How did you do that in a way that didn’t kill the company’s momentum? Like, what what what were you thinking about and considering during during those times?
Robert Johnston 38:03
Yeah, so you know, you start, it’s just the two of you, but then you start getting, you know, more employees. You know, for us, it was went to the incubator, we got like, 50k, at the end of the incubator, we raised about 300k, and that initially got us started, that brought us through kind of 2017 with just a few employees, like five, you know, total employees. And then, in 2018, we raised, like, almost 1,000,800k, you know, to make a change to the product. And then we raised, you know, a couple more million after that, and then 6 million after that. And so, you know, one of the things I will tell you, as your company grows, you know, pay the aspects of like payroll, you know, health insurance, you know, 401k, all of those things, we outsource to what’s called a PEO. Now, you know, this comes at a cost, right? It’s not, it’s not free. But if you try and do, I feel like if you try and do that overhead, those overhead tasks on your own, you know, you’re going to run into issues because it’s, there’s a lot there, just making sure that someone’s get gets paid, and the taxes are right, that come out on their paycheck. You know, there’s things that are these things are just like, they’re not even important to running the business. In fact, they’re not important to actually business operations at all, but they are incredibly important to Business Administration, corporate administration, right. And if you don’t pay your employees on time, or you don’t, you know, they like payrolls a challenge, like I think your employees will quit. And so, you know, we use we use outsource that and they take care of our health insurance, 401k payroll, everything they take, they take care of all that. The next thing is to have good books, you know, so we do outsource kind of that CFO component of it. bookkeeping, also doing, you know, outsource taxing a taxes. You know, these things are important to raising money, they’re important to just keeping that business administration part up and running. Like, no, an investor won’t give you money, if your books don’t look good, right? If they don’t have confidence that you know you’re doing in the revenue that you’re showing them, this is real. And you know that, that your bookkeeping is valid, because that that’s a critical component of it. Yeah. And so you need to start that early. You know, especially for if you’re going to plan on raising money, your books need to be you know, as pristine as possible, and help you paint that story. So those are good things to outsource. Right. And that just lets you focus on, you know, the the internal, the internal functions, right product development, and sales. So the things that are important to the business, you know, you keep internal. And then the things that are, you know, you outsource, and we have an internal marketing team. A lot of people outsource marketing marketing is one of the key ways that we get business. And I would say we use, you know, somewhat of a combination, we have a core team of really good marketing team, that’s kind of orchestrating everything, but we also, you know, sometimes supplement them to, with, with different companies, you know, maybe they want a marketing video, you know, we don’t have necessarily video expert, but that’s a great thing to like, contracts out, you know, so that we are bringing in, you know, different technologies and different companies to augment that, that marketing team, yeah, sales, you know, you can outsource sales as well. It depends where you are, and kind of your sales lifecycle. You know, it makes sense that, you know, that sales be, especially, I think, in the b2b in the b2b world, and in source, you know, something you do organically?
Aaron Spatz 41:43
Yeah, no, I mean, those those are, those are great perspectives, because you’re going through in your, your understanding, and you’re kind of making a case for which elements of the business need to really be an internally run item versus something that can be outsourced. And in that decision process, I’m sure it looks different for different companies, different industries and different situations. I mean, those are, those are great. Those are great examples. And, yeah, I mean, I, I can echo your comments, on the marketing side of things, we do a lot of work when it comes to company strategies, and then an executing marketing plans. And it doesn’t work for everybody, like some people, they really would benefit better. And I’ve told people this, you would benefit from just having your own one or two people that you can, that you can have sitting in a chair right next to you. Because sometimes it really can make a difference, depending again, depending on the company and where you are in your life cycle. And there’s other other companies where it is a tremendous blessing much in the way of like your HR Payroll, like, Hey, let me bring in a fractional or an outsource team, and let them cover down on all these different things. And so it’s I mean, that’s, that’s really great insight. And I, what I want to do, Robert, just this last couple minutes that we have with each others, the last question that I know people are going to have for you is, what’s the capital raising? Journey of this whole thing? Like, like, what are what are some of the things that you’ve learned? Some of the pitfalls that you would advise people that they need to avoid? But just at the end of the day, like, what’s what, what are your thoughts on this in terms of just the entire financing equation? When it comes to business?
Robert Johnston 43:20
Yeah, financing is, of course, absolutely necessary. And you meet some really interesting people on the way I’ll tell you our financing journey, like started at, you know, we were, we were contacting, you know, people that we were, you know, a seed stage company, with, with no product at the time, looking for seed capital. And we were showing up to meetings that like investment banks, and PE firms who are much later stage a and so we would, we would pitch these guys, and these guys would be like, Look, this is way too early stage for us. But, you know, I know a guy, right? And, and we kept doing this, and then we’d be like, great. Can you do an email intro? Yeah, yeah, sure. And people would help out. And we kept doing this, you know, I know a guy thing until we found a guy. And so that’s how it started for us. And, and a lot of people, you know, might be afraid to do that. I would say we certainly were afraid but we didn’t care at the time, we were just out there. And we were going to get this stuff. And and so we didn’t care how stupid we looked at like, you know, how stupid we look showing up to a PE firm, you know, with a seed stage company with a with an idea that wasn’t even a product yet. And they probably were like, well, you know, this is P firm, right? But but they you know, those people even if that’s what they thought they were, they were still willing to help. They were still willing to say, you know, look, where P firm we do much later stage, you know, but I do know a guy and we it just kept it just kept going like that until we found someone that was willing to give us just a little bit of money. Not a lot, not not a lot of money. And you know, it just built you to take what you Get and then. And then you go out and you try and make good on that. And then, and then you try and go a little bit more, and then you go make good on that. And then you just keep keep building and building and building and eventually, you know, people start writing multimillion dollar checks, you know, to continue to fund it expand the company’s growth.
Aaron Spatz 45:18
Oh, yeah. I mean, that’s, that’s a great. That’s a great overview of that, because it is so much about who you know, and I and I, and I really do think that’s like, part of the part of the takeaway here is, and I’ve heard people say, it’s not, it’s not who you know, it’s, who knows you, right? And so it’s like, being able to be able to build that network and to aggressively go after like the next link in that chain, like, Okay, you may not be able to help me directly. But you’ve got a network of people, and you just, you’re just continuing to get closer and closer, closer to the right people. And so, but I mean, are there? Are there any lessons learned that you want to share from that as we wrap up here, but like, as it relates to, like, dilution of your position in the company, for example, like, was there anything there that you want to share?
Robert Johnston 46:07
You know, I, I’ve struggled with this, and I’ve worried about it early on. Yeah, I worry about it a lot less now. You know, you can have, it’s kind of like that concept, you can have a, you know, a big sliver of a very small pie or a small sliver of a really, really big pie. And so that’s what you’ve got to ask, the real question that you need to answer I think, is okay, if I take this money, I’m going to take a dilution hit, but, you know, what are the multiples in the market? Like, what will my valuation be, once I once I exhaust this dry powder, so if I bring in $10 million, I’ve got now $10 million to go to market, right and to and to spend on increasing top line revenue, which is revenues, how they’re how you value a company, right? Either the revenue that you’re generating now the revenue that you will generate later on, like, it’s a very simple metric to bounce off of, and there’s, there’s a formula with how companies are being valued in the marketplace based on their revenue. So you have to ask yourself, you know, if I bring in 10 million and dry powder, and maybe I give up, you know, 50% of the company, but you got to think like, Okay, if I’ve got, you know, if I give up 50% of the company, and, and my company’s worth, you know, $10 million, or whatever, you know, $20 million, but I bring in that 10 million bucks, and I can grow my revenue, you know, 400%, on that $10 million, well, you just made a good decision, you may have given up 50% of your company, but now your company is going to be worth $250 million. And your position is now in a $250 million. So, you know, you it’s necessary, I think, depending on how fast you want to, depending on how fast you want to build your business, is how much dry powder you would need, because that’s really all it’s for. That’s what venture capital is for. It’s, you know, these investors come in, and they realize that your company has potential. And I think it’s a great play for software, right? Because software, it’s really easy to become a national company, to become an international company, right? Because what you’re selling is not not physical, it’s not based on region or location, it’s just based off off of a service that’s being provided through through the software. So it’s very, it’s a lot easier to to achieve scale. And so if an investor looks at it, it’s like, yep, you know, you’re doing X amount of revenue today. But if I, if I triple your sales team, you’re just going to get more at bats. And you know, your revenue is going to grow, you know, 300%, over the next 24 months, and then we’ll raise again, and your revenue will grow another, you know, 300%, and then maybe want to go international, so we’ll raise again, and then your goal will be to enter the Indian market or this other market, right, so you can see how things can kind of quickly begin to compound and so that is what I recommend.
Aaron Spatz 48:58
Love that. No, and I love I love the way that you that you like you gave everyone a great visual. And I think it’s something people need to contemplate depending on where you are obviously in the lifecycle of your company. But understanding exactly as you laid out is like, do I want a big slice of a small pie or a small slice of a large pie and then doing a little bit of the math there behind that the show? Like wow, yeah, that that really is I mean, that that’s a no brainer in terms of making that making that making that decision. So but I mean, Robert, I just want to thank you like thanks so much for spend time with me today. I’m going to throw your your website up here. So add Luma calm is or is there any other way that you’d like for people to reach out to you?
Robert Johnston 49:40
Oh, yeah. As lumen comm is a great way to reach out there’s a contact me on on the off stage. And, and, you know, I look forward to hearing from everybody.
Aaron Spatz 49:50
Awesome. All right. I appreciate man. Semper Fi brother. Thank you again for for taking the time with me this morning. Thanks. Yeah, thank you. Have a great day.