A Louisville, Kentucky-based startup built on managing the financial health of other startups has improved its own with help from Mequon-based investor Capital Midwest Fund.
Forecastr, a business-to-business, software-as-a-service company, has raised $4.5 million in fresh capital.
The large portion of the round equates to $2.4 million. Mequon-based Capital Midwest Fund contributed $1.4 million, and the remaining funds came from FutureLabs Capital, a previous investor that has a managing partner and co-founder, Mack Shwab, based in Louisville.
Targeting the central U.S., Capital Midwest Fund's initial investments usually number between $500,000 and $2 million, said general partner Dan Einhorn. About 25% of its investments are based in Wisconsin, however.
According to its website, Capital Midwest Fund seeks out revenue-stage startups that are pioneers in problem-solving technologies.
"We invest in Steven," said Einhorn about Forcastr CEO Steven Plappert. "He's a uniquely talented CEO that really understands business, understands his model, understands his go-to-market strategy ... he takes accountability, responsibility. He's been terrific."
Plappert met with KY Inno recently to discuss what’s next for the company that was listed as one of KY Inno's 2023 Startups to Watch. It should be noted that he was wearing one of his company’s T-shirts with the following wording on the front: “RAISE MONEY. MAKE MILLIONS. DRINK MAI TAIS.”
Plappert said the raise started in mid-January, and included $1.2 million from simple agreements of future equity (SAFEs). Forecastr has doubled the amount of capital it's raised since the start of the year, for a total of about $9 million.
Plappert, who was also named as one of KY Inno's Most Admired CEOs in 2022, said out of the 22 investors in the latest round, three of them were new investors. He referred to this last raise as a “nose-to-the-grindstone round” as Forecastr looks to equally distribute the raise to three main areas: product/engineering, sales/marketing and finance/operations.
“We’re not doing a big round of hiring on the back end of it,” he said. “We’ve got largely the team that we think we need to scale the company.”
The company currently has an annual recurring revenue (ARR) of $1.9 million, but is aiming to increase that number to $2.5 million by the end of 2023. In September 2022, KY Inno reported how the company had reached the $1 million ARR milestone.
It predicts to be at $6 million in revenue by the end of 2024. At that point, Forecastr expects to have a headcount of 55 people, Plappert said. He added that reaching somewhere in the $5 million mark, should lead to profitability, which is another benchmark the company has for next year.
Given that Forecastr’s bread-and-butter vertical is financial modeling, Plappert said that getting the numbers as on point for his own company has been paramount since its founding.
“The bar for our forecasting is quite high,” he said. “We are the biggest super user of our product. We’ve dogfooded our product since Day One. We’ve got probably one of the most robust and heavily operationalized financial models of any tech startup you’ll see out there.”
Currently, the company has 31 employees, eight of whom are based out of Louisville and its 3,000-square-foot office space at 841 E. Washington St. in Butchertown.
The human touch
The hires that Plappert and company hope to make this year include a number of financial analysts as Forecastr has shifted its business model, effective as of July 1.
The company, which was founded in January 2020 by Plappert, chief operating officer Logan Burchett, Jonathan Frazier and Steven Ambs, initially offered financial analysts as an ancillary product, Plappert said.
“We saw that like those clients, they were the most profitable, they were the happiest … They were our best clients,” he said.
As such, access to a (live human) financial analyst is now part of the base packages of services for Forecastr, which also has changed its revenue model from annual to monthly subscriptions. Rates start at $500 a month, which includes access to a financial analyst, to $4,500 a month to get a fractional CFO.
“Our differentiator in this space has always been this human element, this human approach,” Plappert said. “There's a number of good financial modeling softwares out there, but a lot of them are software only. We’re software, plus human.”
Forecastr currently has approximately 700 clients, most of which are tech startups in the pre-seed to Series B rounds of raising capital. Although the span of annual revenue of those companies ranges from zero to $50 million, Plappert said that the majority of his clients have an ARR in the range of $100,000 to $3 million.
The company can be found both on the local and national scene offering several free programs at startup events — both as a way to drum up new clients but also serve in a mentor-like role.
“For the local ecosystem, and for the larger ecosystem as a whole, we want to be the go-to subject matter expert on financial modeling … We want to make sure that [startups] get that education," Plappert said.
