Zinrelo Grows 50% a Year on $2M Raised. Then It Went Downmarket on Purpose
Zinrelo is profitable on $2 million raised and growing 50% a year. Latka spends several minutes arguing that its new self-service tier is a mistake.
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Zinrelo has raised two million dollars in its life, is profitable, growing 50% a year, and has just done something most bootstrapped enterprise companies would call a mistake: launched a self-service tier for small businesses.
Nathan Latka spends several minutes trying to talk Jai Rawat out of it.
The thesis. Rawat did not go downmarket to chase volume. He went downmarket because the enterprise business had been running long enough that the processes were good enough to serve small customers with almost no marginal support cost — and because Zinrelo’s pricing means a small customer that grows pays more without anyone selling them anything.
What it does and what it costs
Zinrelo is a loyalty rewards and referral platform for retailers — helping them acquire, engage and retain customers through what Rawat calls 360-degree engagement. Retailers pay a monthly fee for platform access.
There are two plans and they are an order of magnitude apart.
About $150 a month. Discovered through Shopify or Magento, signed up without a conversation, supported by videos and documentation. Launched about six months before this interview.
About $2,000 a month, more features, more support, sold by a team.
Across 500-plus customers, the blend still sits much closer to the enterprise number because the self-service plan is so new. Latka builds the ceiling from that: 500 customers at $2,000 a month is a million dollars a month. Rawat declines to confirm any revenue figure — “I won’t comment on that, but you can take a guess” — and Latka lands on somewhere below it.
The GetLatka profile carries $12M for the date of this conversation, which is that ceiling arithmetic and is flagged an estimate for exactly that reason: it assumes every customer pays the enterprise price, which Rawat had just said they do not, and Latka himself closes the show calling Zinrelo “south of a million bucks in revenue per month.”
The pivot that kept its investors
The company started in 2009 as ShopSocially, and the original idea was consumer-facing: a platform for asking friends and family what camera to buy or which school to send your kids to.
As we grew that business we realised that there was good traction, but not good enough to make a business out of it. Businesses are binary — either you make it or you don’t, there’s nothing in between.
The observation that produced the pivot is a decent piece of retail thinking on its own.
Twenty years ago the relationship between a customer and a retailer was that of a buyer and a seller, that’s it. However, today’s customers are much more than that. Social media has really democratised marketing — a customer is not just a customer anymore, they are also talking about you in social channels, posting pictures on Instagram, writing reviews. The whole interaction paradigm has changed.
The first round was a priced round raised for the consumer idea. When the business became something else entirely, those investors stayed on the cap table.
We didn’t want to shut down and start a new business.
Why growth compounds without a sales motion
Zinrelo prices on the number of users enrolled in a customer’s loyalty programme. As the retailer signs up more of their own customers, Zinrelo bills more — which makes expansion a function of the customer’s success rather than of an upsell conversation.
Rawat puts net revenue churn between negative 5% and negative 10% a year, with an average customer lifetime around three years.
That lifetime value is 36 months of a $2,000 subscription. Against a fully weighted acquisition cost around $12,000 — blending lead generation, commissions and conferences, with SDRs feeding a separate closing team — the payback is about six months.
Asked what he tells the companies he advises when they quote him a partial CAC, the answer is short.
You have to see where you are spending the money and what is the total cost of acquiring a customer, because unless you look at those numbers you really don’t have a good handle on your business.
The downmarket argument
Latka’s objection is the standard one: if the enterprise business is healthy and you are bootstrapped, why take on the support burden of small customers when other ecosystems could grow them for you and send them up later?
Rawat’s answer is about sequencing, and it inverts the usual advice.
We started out as an enterprise platform and we were only focusing on the enterprise customers, and over time we realised that our processes have become so good and so smooth that we can launch a self-service platform without creating a lot of support.
The second half of the argument is the pricing model doing the work again: a small retailer signing up at $150 a month is not a $150 customer forever, because the bill rises with enrolment. “We want to engage the customers even when they’re small, because as they become bigger the opportunity becomes that as well.”
Thirty people, two-thirds of them in Pune
The team is 30 — about 20 in Pune, India doing development, and 10 in Sunnyvale on sales and marketing. Rawat is unusually specific about why an offshore development team works here when it often does not.
The reason why it’s working for us very well is because my co-founder is actually based in India, and he’s a guy that I’ve known for over 30 years. This is the third startup we are doing together, so we can complete each other’s sentences at this point. And he was in the US for a number of years before he moved back, so he really understands the market here.
The failure mode he names is not code quality: “the biggest challenge with an offshore development team is communication, and really making sure that they understand the market, they understand who we are trying to serve. That’s an understanding which is very hard to come by.”
Not raising, on purpose
Asked whether more capital is coming, Rawat gives the answer that only a profitable company can.
I don’t think we need to raise at this point. The best time to raise money is when you don’t need it, so we want to create a point where we don’t need the money, and then we’ll see.
He thinks the 50% growth rate holds as the numbers get bigger, because loyalty is not confined to retail — there are adjacent verticals to expand into.
Asked what he wishes he had known at twenty, the founder who spent nine years turning a consumer idea into a profitable enterprise business picks the opposite of caution.
Be bolder. You don’t have any responsibilities at that time, so you can really be much bolder. You are also naive and you’re not really tethered by the notions of what’s possible and what’s not possible. So really don’t be afraid of failures, and just be bold.
Sources Jai Rawat’s interview with Nathan Latka, recorded 8 March 2018; revenue, headcount and funding rows from the GetLatka Zinrelo profile.
