33 Year Old Quickly Closes 100 Customers For His Construction SaaS, Gets $10m+ Valuation

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Hey folks, my guest today is Eric Helter. He's a third generation builder and double gator from the University of Florida. He's transformed construction with his expertise. After impactful roles with Baker Concrete and Gricon, he founded Subbase to revolutionize material procurement. Under his leadership, the company streamlines procurement, managing thousands of orders and millions in invoices. Eric, are you ready to take us to the top?

Yeah, Nathan, appreciate it.

I always love someone that is eating their own dog food. So you were in the industry and said, this is the problem and I gotta go fix it. What year was that?

Yeah, so I actually started in the industry in 2008, interning, went to college and then graduated to work in the subcontractor world in 2011. But really started to see in 2014, the shift of the digitization at the GC level of how workflows are being transformed. The problem that we solve for today really came about in 2020, really post the COVID era where material management was in flux, pricing fluctuations were happening. And that's where we really saw the opportunity to build software for subcontractors, which is how Subbase turned into what it is today.

So to be clear, the first line of code was written in 2020?

The first line of code was written in 2021, actually. 2020 was more of surfacing the idea, but the actual MVP was built in 2021.

And how'd you get that done? Are you an engineer by by heart? Or how'd you get it? What's co-founding team look like?

Yeah, so I'm not an engineer by heart. I was actually partnered and paired with a technical advisor who reached out to me through a mutual contact who was very involved in the manufacturing and the technology space out in Silicon Valley, wanted to break into the construction tech world because he witnessed that there was a lot of fragmentation and a lot of manual processes there. So as he was searching for someone to help guide him on the journey, we kind of met up together through a mutual friend and honestly, the rest is history.

Okay, so just the two of you at the start?

It was just the two of us at the start and it was both actually part-time. So I was working at a company running operations for a commercial contractor in South Florida and he was actually working at a company out in Silicon Valley. So we were kind of both paired together and he took on more of a technical advisory role and then I actually took it over in late 2021 because I saw the opportunity, which is what SubBasis now, because we were actually using it and building it with our subcontractors in the field.

So before we get into your first customers and what the tool does for them, etc., how'd you guys, this is the hardest part of starting a company, it's also the most dilutive event in a company's history, how'd you decide the equity split?

So the equity split was very non-traditional. We had an original investor who was the company I was working for. We had my technical advisor and then we had myself. And the split was really getting out, putting on a piece of paper and all agreeing that this is it. There was no, there was no real structure to it, which was the interesting part upfront. And we weren't really thinking about that as much as we were thinking about the problem that we were going to solve for and how we've been executing the short term. But it was a, it was a very non-traditional equity split, let's put it that way.

Okay, so you, it wasn't 33, 33, 33?

No.

Wasn't equal?

No, it was not equal.

Is it fair to say, you mean, usually the person with the money at the start has the most equity, is it fair to say the company that sort of put the original capital up owns the majority and then you two split the rest?

I would say it was kind of similar to that, although the company that did put up the money, I actually was a part of that as well. So it was a little bit different than your traditional split with two co-founders because there was really only one person who was full-time at that point and that was me. The other two were, were more capital investors. Can you hear me?

You're good now. You're good now. You're back.

Yeah. So it was really myself that was going full time. Capital partner who had the expertise that was putting money and then a technical advisor who was not full time. So that's how we tried to divvy up the shares to make it even and equal for those putting in capital versus those putting in just time.

Yep. And that was effect. I mean, you could consider that kind of your pre, pre, pre seed round, right? Are we talking like a hundred K investment or like a million dollar investment?

That was under a million and that was a, I would call it a pre, pre seed. Yes. And then we did.

Why did you need money to start? Why couldn't you hustle? Why couldn't you pre-sell a little bit and avoid that dilution?

So we did hustle as much as we could, but coming from a non-technical background, I needed to put more technical people in place that were able to build and take the vision we had of the product and put code to it. And so that's where all of our money went upfront was just on the product and engineering front. I was doing the product management. I was doing all the sales, everything else I was doing, but that's what we needed the money for. It was all for building product and engineering. Yep.

I see. Okay. I want to foreshadow a bit and then come back to how you got your first customer and what their use case was. But let's, again, let's sort of tease the audience here for a second. What is your average customer paying you today to use Subbase monthly?

Yeah. So the average customer, depending on size, because our platform is, our pricing is based on size, meaning like transaction volume could range anywhere from 10,000 a year, all the way upwards of 30 to 40, 50,000 a year, depending on size. It really depends on that. We grow as the company grows. We are not a one size fits all. We go based on the company and most of the time our pricing is customized.

I see. Was it fair to say that the average customer goes towards the lower end of that range, but you have some outliers are paying way more?

No, I would say, I would say the average customer size that we do very well with is paying anywhere between 20 and 30,000 a year. That's where, that's where we see the most benefit and that's where the big pain points of the material procurement process are actually taking place at that size.

And if I'm paying you $20,000 per year, how much transaction volume am I likely putting through you?

You're seeing thousands of invoices. You're seeing hundreds of purchase orders. You're looking at millions of dollars that are moving through the system that would normally be done very manual. So you're talking about a large, large volume of purchasing.

Okay, so that's the tease. Now let's go back to day one. How'd you get your first customer? How'd you price that contract?

Well, lesson learned. The first customer was free. Probably should have charged something. But the first customer came about at a scoping meeting when we were on the GC side and we were we were awarding a new job to that customer. And at the time of the award, after that job, after that award, I'd said, hey, and I don't want to name the name of who it was, but I said, hey, come into my office and let me show you how we're going to streamline your material procurement. And he was so blown away with the software upfront, and this was like a really early on MVP, that the next week, we were in his office, we onboarded their team, and we didn't charge anything for it. It was a free account. They started using it. We started to see traction.

Why not? Are you just not confident?

I honestly, there was two things. One, I felt that the platform wasn't fully built out yet, and I really didn't want there to be any friction. There's a lot of pricing friction for some that come in that have never bought software before, and we wanted to prove to them that there was value there, but we also wanted to, we wanted to also bring on a true design partner who was going to use it enough, and we did not want any friction for there to be any, anyone to say no. We just wanted to get the software in their hands as fast as possible.

Okay, tell me about the first paying customer.

Yep. First paying customer was a plumber, who was a little bit smaller than we would even go after today, but they were a plumber who really liked the idea of the software, and we didn't know what we were going to charge. We threw a number out there that we thought was fair, and immediately he said, yes, that's fine. Took his credit card information, and I remember when we charged his credit card, I sent it to our investors at the time and said, hey, someone's paying for Subbase. Where that led us was the conviction that, okay, like, we got someone who is a lot smaller, but still seeing some pain, willing to pay for us to solve problems, and we were not even fully built out yet with integrations, with our invoice module and all these other modules we built. And so from there, we actually were able to start testing pricing.

We did a tiered pricing model, which is now a little bit changed from where we are today. But one of the biggest regrets I have was that we, A, didn't charge enough upfront, and also, some customers, we charged about a couple hundred.

Eric, I think your headset is like, batteries are low, you go in and out on audio every now and then, but say that one more time. Would you, would you charge on day one for that first customer?

On day one, we charged about a couple hundred dollars a month and it was a monthly contract. Yep. And so that was a couple hundred a month, but my point was this was the wrong way to do it. We did not charge early enough. It spent, we spent a year giving the software away for free, testing and really iterating until we started actually charge. And now, you know, obviously we see where the pain is, we shifted our product focus and our pricing model now reflects the value that we are adding to these customers.

Okay, so then fast forward today, how many total customers are paying you today?

Yeah, so we have over almost 100 companies that are on the platform and paying in some way as far as monetization. We, we have a lot of interest on both sides of the market and right now the customers that are paying today are the ones that obviously are seeing the most value as far as the return on investment. But today it's still everything mostly founder-led, but we now are starting to build out our go-to-market solution with a true head of sales and really start dialing into a lot of the, a lot of the nuances that we do well in specific trades, specific size companies, and that's where our focus is.

How many folks are full-time at the business today?

We have over 20 full-time and we have a lot more on the, you know, advisory positions in our company that are helping support as well. So 20, over 20 full-time.

And can I multiply to back into revenue? You said earlier about 20 to 30,000 ACV and then you just said 100 customers. I would put you somewhere around a 2 million, 3 million run rate today. Is that accurate?

Not yet, but I will, I would like to keep that confidential, but we are, we're not there yet. Our, our revenue, our forecasting of where we're going to be heading should be there pretty soon, but right now we're not there yet. A lot of the earlier customers that we brought on are still on early adopter pricing, which is where we want to keep them right now because of the value they're providing. So as we begin to grow and we begin to see the pricing change a little bit more towards the higher, you know, larger subcontractors, we should be able to attain there a lot faster.

We, we're recording this in September, we've got a couple more months left this year. Do you think you can break a 2 million run rate this year or is 1 million more the target?

Right now, 1 million is the target.

Okay, okay, great. So when you said 20 to 30,000 average ACV earlier, that's not a true average. You might have some customers paying that, but you still have 100 of those customers say that are paying lower tiers. You're trying to figure out how to get them up or go target more enterprise accounts moving forward.

Yep, exactly. And our move into the enterprise is actually a big push for us because that's where the biggest pain is for a lot of these companies that you would be surprised have never seen, you know, solutions that can offer digitization, still very manual and still a process that most don't understand at that level as well.

Talk to me a little bit more about how you've built out the 20-person team today. So, for example, do you have quota-carrying sales reps or no?

Yes. Yep, we have quota-carrying sales reps. The team was built out, everything, you know, up until recently was founder-led on the sales front, still is very founder-oriented. But a lot of our team was built around product and engineering with a very, very also heavy focus on customer success. One of the biggest challenges I saw in the industry early on was that support from day one. Implementing new software into construction is not an easy thing to do. So we have a heavy focus on implementation and customer success because that is really a true pain point for people. Even if the software is easy to use, you still touch a lot of different personalities and a lot of different hands in construction. And it's been a big, big success for us.

Now, I think you've raised some additional capital. I think you did a seed round in March this year. Is it accurate?

Yes.

Can you tell us more about that? How much did you end up raising and why was it important for the business?

Yeah, so between the seed and the safe converted, we've raised a total, this is now outside before the pre-seed of 4 million. That capital was important because it allowed us to grow on multiple fronts. It allowed us to bring on our head of sales, invest a lot more and go to market, and bring on, you know, a lot more senior-level product experience and engineering experience that is taking the platform to the next level. We've found a phenomenal partner who is in the space already, who has seen this type of...

To have seen this type of company grow in certain areas in the construction tech space and they were phenomenal as far as the vision and really focused on what is going to make us successful. Our success is from the people we surround ourselves with and those that we were talking to on the investment front were very excited about Subbase, but we chose the partner that we believe is going to be able to take us to the next level by understanding not just the industry, but how to grow this business in an industry that is most likely lackluster when it comes to trying to sell software into.

Now Eric, to no fault of your own, but this equity market right now is just terrible for any software builder, right? Maybe that turns if interest rates come down here on September 17th or the election goes smoothly or things like that. You chose to do this sort of round anyway. Most of the seed rounds I see closing in the last month, two months, they're selling on the order of somewhere between 15% and 20% of their business. Were you in that same sort of range?

Yeah, I mean, look, it's a range that is very common. I would say that yes, that's a range that, without disclosing fully, is the norm. What I will say is that the actual business of raising money and raising capital through the venture space is not easy. There's a lot of great companies out there, but the bar is set very high and at the end of the day, you have to find for yourself who is going to be the right partner because the way that I look at this is this is a team effort. This is not a solo person that's going to be able to build a billion dollar business. You have to bring in the right people, but you have to also be incentivized. And so incentivized on both sides. Investors need to be incentivized and also the founder needs to be incentivized.

So I would say that the equity percentage that you mentioned is accurate, but it also depends on the scenario. Each company, each founder has a little bit of different asks there when it comes to their investors where they're raising capital.

What use of funds? Where's most of it going to go?

Go to market. So mostly go to market. That was where honing in on the ICP that we know is hitting well and really helping support the founder-led motion. And again, accelerating on the product. So the product right now is hitting very well, but we have a lot that we want to do, focus on both sides of the marketplace, but more so focused on where our current customers are finding the most value. And so I would say more heavily leaning towards go to market, but the product still is moving just as fast.

Eric, good stuff. Let's wrap up here with the famous five. Number one, what's a business book you read recently?

The Mom Test, which I think is a business book because I was reading it to really understand how to ask the right questions from a lot of our users that I spend a lot of time with. I was told to read this book by a couple of people and so very fast read, but honestly, one of the most informative books I've read about how to really talk to users and ask questions that actually will get you results a lot faster.

Eric, name the last CEO or founder you got coffee with that really impressed you.

That's a great question. The last founder I got coffee with was, or CEO, let's put it that way, the founder of a company in Miami called Novo. They're a financial fintech company based out of Miami. It was really, really exciting to talk to him about his journey. They just recently raised a couple of really large rounds. I was introduced to him through a user of ours and it was a really insightful conversation, but I would say that's the most pressing one that I remember. Founder, his name-

Michael Rangel.

Yeah, so of Novo-

Yeah, Michael's great.

Yep. We met in Miami and he was really, really insightful.

Something special's happening in Miami in terms of SMBs. Finally, also just raised a massive round. Felix and his team is based down there in Miami too, so something special's going on. To be clear though, even though you sit very close to the transactions right now, you do not currently have like an embedded lending or, you know, advance on inventory purchases, you know, lending product, nothing like that yet, right?

So currently, it is on our roadmap and it's something that we're very much looking into as far as how to wedge that into what we've already built, but our focus right now is workflow optimization and then getting into the financial piece.

Yeah, it's a huge space. We had Build on recently, B-I-L-L-D, and they're big in that space too, but I don't think they have quite the software that you have. So different angles to approach different problems. Number three here, Eric, what's your favorite online tool for building Subbase?

Ooh, my favorite online tool for building Subbase, right now, we really like, I really like Retool. We're using Retool in a lot of areas of the platform to help on our end, and also a big fan of Redash. So Redash allows us to see like where we can optimize more usage in the platform, where customers are getting a lot more value, and we're very data focused. So a lot of the data that we're looking at is really helping optimize the usage there. Those would be the two that I would say we, I look at as a founder, very much so, and I would say that those are the two, two of my favorite right now.

Number four, how many hours of sleep do you get every night?

About four to five.

That's not a lot. Wait, so what's the situation? Married, single, kids?

I have three kids, married. I typically like to spend around, and this is Eastern time, from 5:30 to 7:30, eight with my kids, and then a lot of our team's on the West Coast. So by the time I get, you know, relaxed, I'm usually on my computer about, until about 10:30, 11:00, I sleep, and then I'm typically up by five, 5:00, 5:30, because sometime, one of my three kids will be up. It's not because of work, it's because one of my three kids will be up, and then I usually start my day around 6:30, 7:00.

That's great. And Eric, how old are you?

I am 38.

Last question. Something you wish you knew back when you were 20?

I'm sorry, I'm 36. I don't know why I said 38, because I was born in 1988. Sorry, what was that last question?

Something you wish you knew back when you were 20?

I wish I knew more about getting into the software space earlier. When I was 20, I was more focused on building my career in construction, but wasn't yet thinking about how software can overtake the construction world. And if I was doing it a little bit earlier, I think I would have had more insights as to, even more insights as to how I could make a bigger impact. That was the biggest thing. I wasn't really into software until my later stages of my career.

Folks, Eric is building Subbase. It is a procurement system for plumbers and other enterprise construction-like companies. He's eating his own dog food coming from the construction industry. Wrote the first line of code for Subbase with his founding team back in 2021. Gave it away for free, then got his first paying customer for 300 bucks a month in 2022, 2023. Fast forward, today he's got 100 paying customers. They're aiming for over a million bucks of ARR finishing out this year, but again, post-revenue, which is great. Just recently, closed a $4 million seed round, selling, you know, called on average between 15% and 20% of the business as they look to scale with their 20 folks on the team and double down on product, engineering, marketing, and go-to-market in general. Eric, thanks for taking us to the top.

Yeah, thanks, Anthony. Appreciate it.