Customer Subscription Financing - with Alex Sandkuhl, Founder and CEO Keystone Growth

**Ray Rike** (0:00)
Hello, I'm Ray Wright, Founder and CEO of Benchmarkit, and your host of the Metrics It Measure Up podcast. We talked to a wide variety of the top B2B SaaS and Cloud thought leaders, CEOs, executives, investors, and people just like you to discuss the metrics and benchmarks they use to make metrics informed and benchmark validated decisions. Now, on to today's show.
Welcome to today's episode of the Metrics That Measure Up Podcast. Today, we are joined by Alex Sandkuhl, the founder of Keystone Growth Advisory. Today, we'll be covering three main topic areas with Alex. Number one, how customer financing for subscriptions works.
Two, how is customer subscription financing different than revenue-based financing? And third, some real life examples of customer subscription financing in the SaaS industry. Alex, would you please take a moment to give a brief overview of your journey to becoming a guest on the Metrics That Measure Up podcast?

**Alex Sandkuhl** (1:13)
Sure. Thanks, Ray. Excited to be on the show. A little bit about me. I'm an active operator and investor in multiple companies. Most recently, I grew InSync Healthcare Solutions, which was a B2B SaaS health tech company from six to 39 million, fully bootstrapped, with 25% EBITDA using a unique subscription financing model, which we're going to dive into today.
In late 2021, we sold that business to Warbur Pinkus via strategic acquisition. And then Ray, I stayed on for a year to transition that company. And then I exited and founded Keystone Growth Advisor, which has brought us to this conversation today. Keystone is a full service go-to-market firm. And really, I founded that to combine my subscription financing experience as an operator and my network of financing partners to help other B2B SaaS companies launch their own customer financing programs. Outside of that, I know we had talked about a little bit before, involved in a lot of other businesses outside the B2B SaaS industry. I've owned a Jewish deli, which I'm proud to say had the best matzo ball soup three years in a row.
I've owned a Tampa based media company called Why Tampa Bay, all about building and growing businesses in Tampa.
And I also am a partner in a French wine importing business. And we import wine from 14 different small vignerons, all biodynamic and organic. And we distribute those in about 15 states. And Ray, before we jump in, I know you and I share a passion for wine. So I did put something together for you and Dave, for the Metrics Brother, cause you know I am a huge super fan. So I thought I would share this with you. I use some of my expertise to make you guys your own wine label. And of course this is from a very prestigious vineyard, the Wright Kellogg with Metrics Brothers and a wonderful vintage, 2023, the same year you guys launched your podcast.
But Ray, I think you'll like the blend on this. 88% customer lifetime value, 12% customer acquisition costs, which based on my recent review, this would put this in the fourth quartile of the benchmarker report. So this is a certified healthy wine, Ray. Excited to present this.

**Ray Rike** (3:16)
Well, this is really nice, Alex.
Sorry that this is an audio only episode for our listening audience, but I'll make sure somehow on the SAS talk with the Metrics brothers, our audience can see it on the video. But let's move away from wine, and maybe you can also send me one of those pastrami sandwiches someday. Sure. But let's talk about why you decided to actually create and launch a company focused on customer subscription financing. What was the motivation to do this?

**Alex Sandkuhl** (3:49)
I think the motivation was for me, I was an operator and I had a problem and I had to find a solution for it and really the back story there with NSYNC, I came into that business in 2017 We had 19% growth and negative 3 EBITDA. My challenge was I needed to find a way to generate enough cash flow to grow the business the way I needed to. We were selling perpetual software licenses and I used a financing partner or many of them to finance them over five years, which that works great for my cash flow in EBITDA, but it was not great for my subscription revenue valuation. My next challenge, Ray, was I needed to figure out, how do I move this business to a true SaaS model without disrupting my cash flow? So I went back to those financing partners who were working with the perpetual licenses and I said, look, if I started selling a three-year subscription, could you fund me upfront for all three years? You collect the monthly payments directly from the customer. You take your spread on the transaction and you also absorb the collections risk. And it took us a while, but we figured it out. And we were able to finance over $30 million of contracts.