0 Comments |  Technology |  PRINT | 

The Nitro story: How to grow a software company from five guys to over $25 million in annual revenue

Friday, 4 October 2013 | By Rose Powell

Taking on the “gorilla in the room” competitor doesn’t always end well, but it seemed like a great idea to the founding team of now international software company Nitro when they squared up to Adobe in 2005.

 

Since then they’ve grown into an international software company of over 120. Cofounder and chief executive Sam Chandler told StartupSmart they’ll bring in more than $25 million in revenue this year.

 

PDF software may not seem sexy, but it was a major pain point for the five co-founders of Nitro when they first started kicking around start-up ideas.

 

“We had come to understand that Adobe was generating over $600 million at the time in Acrobat revenue on the desktop alone and was growing rapidly. We could see it was going to be a billion-dollar software category,” says Chandler.

 

“We thought it was an industry space that was really ripe for innovation and disruption, and thought that going after the gorilla in the room was a pretty attractive strategy as we thought there wasn’t a lot of love for Adobe out there.”

 

They launched their first PDF software product in 2005 and made their first sale 45 minutes after launching the website. They’ve gone on to release a series of productivity-boosting document management tools since then.

 

They had built their user base up to just under 100,000, generating $1.6 million in annual revenue in 2007.

 

The growth was mostly due to PR campaigns that focused on being the first real Adobe alternative, but growth was beginning to plateau when Chandler decided he was ready to catalyse the business.

 

He pitched a then-emerging strategy that would become ubiquitous for software companies in the coming years.

 

“I proposed a strategy at that time which I struggled to get board support for initially. Essentially it was the concept of ‘freemium’ (free capped service with premium, paid options), but this was before it was a word, or even a concept,” Chandler says.

 

The plan was Nitro would launch a new series of fully functional products with capped use.

 

“So our user acquisition would skyrocket, and we assumed that a certain percentage of those users would need to do more, and when they did they would pay for the premium version.”

 

They did. In 2008 the company made over $4 million.

 

“Freemium has driven most of our growth, although at the time there was a sense that maybe this was just a massive roll of the dice,” Chandler says. “It was basically an SEO strategy. We called it the ‘all roads lead to Nitro’ strategy. Anyone who was searching for anything PDF or document related would find us.”

 

While the idea of giving away software for free was new at the time, Chandler says when he weighed up the potential to reach millions of users against the cost of the media and marketing spend he would need to reach that many via more traditional routes, he says it was a no-brainer.

 

“People really struggled back then to get their heads around giving away software for free,” Chandler says. “The platform has now got over 8 million users per month. Only a tiny, single digit percentage of those pay, but our user acquisition cost is very low. This means our job is to convert the users into customers when they’re ready to do more.”

 

Nitro’s strategy for converting users to customers uses automated, targeted email software, which is the second major factor Chandler attributes their growth to.

 

“The best way to look at the marketing function in a modern software business is to view it like a big funnel with prospects at the top. You then invest in a range of strategies to bring users through the funnel to ultimately become customers,” Chandler says. “We were then, and still are today, quite ground breaking in our uptake of marketing automation. We do a lot of very targeted and relevant email around particular user flows, and that can be customised quite dramatically.”

 

On top of the targeted email marketing, Nitro uses strategies such as interactive product experiences and feature discovery campaigns via free tutorials for non-premium users.

 

Despite the consistent growth, Nitro has experienced some “catastrophically bad” product releases and cashflow issues that put their business at risk. In the video below, Chandler talks about the time they came closest to losing it all, and how they navigated their way back to growth.

 

 

In 2008, Chandler went across to the United States to launch their office there in January 2009.

 

“I went across on recon, and felt like I was starting again because I was again one guy in a room,” Chandler says, adding he’s from Tasmania and always wanted to play in a big pond. “We looked across to Silicon Valley, saw the talent pool, and realised if we were going to hire dozens of great people, that was where we had to be.”

 

The San Francisco team has now grown to 95 people, and Nitro will be launching an office in Dublin this month to drive growth in Europe.

 

Their hiring and growth plans were brought forward after they received their first venture capital ($3.5 million) funding in May last year from Starfish Ventures, and another $3 million in the May this year.

 

Chandler says the next 12 months will be focused on the launch of a new product and international expansion. They’re hoping to get to 100 million users within three to five years.

 

“We’re trying to build what we call an IPO-able company. My vision of a great company is one that makes 100 million or more in revenue and has 30 to 50% operating margins,” Chandler says, adding while they’re not planning on floating the business on the NASDAQ anytime soon, it’s the most likely exit strategy in the next five years.

 

Chandler adds even though it’d be hard to “give up the baby”, he’s undecided about his own journey with Nitro if it became a public company.

 

“I would have to ask myself, do I want to be a public company CEO? I’ve always been focused on building, and managing is just part of the business getting bigger,” Chandler says. “But when you come very close to losing it all, and we’ve had a few cashflow crises in our earlier years, you’re suddenly more appreciative of what you’ve got.”