How Fomo grew to $1.1M revenue and 5K customers in 2020.

you're gonna love this interview just got done editing it i'm glad i got it live for you i'll be in the comments for the next 30 minutes hanging out answering any questions you have in fact leave a comment below about data points or what you think is going to happen to the company and i will respond to every comment additionally if you're just loving the content click the thumbs up and i will go and check out your profile as well and give your videos some love as well in the meantime enjoy the interview hello everyone my guest today is ryan kulp he's a marketer and self-taught developer best known as founder of fomo.com he and his wife buy and grow small companies together at their micro private equity fund called fork equity ryan's been traveling full-time for two years and writes a data-driven travel blog at rickshawlabs.com all right ryan you ready to take us to the top let's do it all right so so you or the wife who who owns more uh equity in the private equity fund who gets more carry so we actually did 50 50 like the thing you're not supposed to ever do with an llc but we also did a will so we have some like like if she dies i get it all right got it otherwise it's sure that's fair okay so take this back to the beginning of this so so i i consider you kind of just a hustler and you happen to be in b2b sas and those are obviously good things what kind of got you into this in general maybe start with did you launch your own sas company back in the day back in the day i was a musician and then i got into marketing at a techstars company and that kind of just got me in the in the circle so i started freelancing i started doing agencies i worked in venture capital but always doing marketing always on b2b products and uh getting into ownership was just sort of like you know innately i wanted to be an owner one day i tried and failed multiple times with ventures and starting from scratch and then finally a mix of two things happened first was learning to program which i'm still obviously doing we're learning every day and the second half of that was being in the right place at the right time aka being lucky and having the opportunity to acquire a product that was already working and putting those two together in the last few years i've been able to like achieve more or find my groove more than all the years before it when i was like on the employee side of the table starting things from scratch and not being able to program so let's go back to the text marketing at the tech stars company what year was that and which company this was 2013 january 1st i joined a company called shuttlecloud uh they're still around they moved kind of to the enterprise so i didn't think my marketing was well marketing doesn't make a dent in an enterprise software so i i left that company and then jumped to a yc company called keychain uh logistics that was what year from cisco uh that was 2014. um moved back to 2014-15 to new york started a marketing agency called sprinkle labs yeah we did a mix of you know product marketing kind of whatever when you're an agency you just do whatever people do to be honest people always say like we're super focused on copywriting like no you don't you probably set up like google analytics for people if they ask right and then i moved back to san francisco in 2015 to work in venture capital while in venture capital discovery which firm notify uh growthx growthx.com and uh and then move back to new york city in 2016 2017. okay so 2017 moved to new york city sorry what was the company you discovered at growthx uh notify and it was notify app.io and it was a shopify app that showed recent orders we then took that rebuilt it and turned it into what's fomo today okay so so explain to me the cap table of fomo did you it was a growthx company that was struggling that you bought it and kind of rescued or how did that all work so i was doing the typical vc thing just reaching out to cool companies around town that i thought might want to take investment and the founder uh said no you know actually i'm not looking to raise i'm looking to sell uh i mentioned that to my buddy justin mayers just kind of in passing sometime that week like oh yeah like traction justin mayer's yeah attraction just demares yeah and he said well we should buy it um so together we we bought it i i mentioned this to the fund and they were interested in buying it as well and then kind of having me run it and be an employee at the fund but couldn't figure out the numbers to make it really interesting so just bought it as like a side project kept working full time at the fund and eventually went time phone so i mean what did you pay for notify app back in the day [Music] can i say you can give me a you can give me a range so you don't break any ndas or anything what's a range yeah six figures under a million fair enough okay got it uh and we did it with seller side financing which is a magic trick for all those who haven't tried it yet tell us how that works sure so seller side financing it's it's financing which means you don't have all the cash up front you pay it off over time except the financing quote-unquote isn't cash injection that you receive from like a bank with an interest rate it's uh like a loan of equity that you receive directly from the seller so if you're gonna buy a company for a hundred thousand dollars and you get seller side financing uh maybe you pay them ten thousand dollars a month for ten months but if it makes ten thousand dollars a month and you don't have an interest rate well in ten months the business is yours for essentially just your sweat as long as you kept it humming and didn't blow it up so we did a structure like that without interest without outside financiers the monthly payments were similar to the the revenue we were able to grow it just above board of our monthly service payments and then we introduced a clawback provision such that if two months went by and we didn't make payments the seller would get 100 of the company back and we did this for two reasons a we were young and fresh and like didn't have a how old how old were you oh well i suppose i was i was 26 but by young i mean uh i mean uh no track record right and so it's like saying hey you'll get the whole company back if we screw up at all was awesome because they would keep all the money have someone like running it for free and then get it back but the second reason we did the clawback was because we wanted 100 equity on day one so i didn't want it to be like a mortgage or like every month i owned three percent more in my house or something i wanted a 100 of it right now so we can make all the decisions not have the original seller have like voting rights or be on a board or anything like that so we get 100 now and you get 100 later if we screw up and obviously we we didn't screw up so yep well if there was a time when when for whatever reason revenue dipped or something you could pull into your personal finances and cover if you still believe in the product yes and actually that happened once not because the product wasn't growing we were just developing putting a lot into product i think that i think we each put in justin and i put in like fifteen hundred dollars one time maybe month four month seven because we barely overspent on dev so kind of say kind of a joke and then when we wanted to re-brand it and rebuild it from scratch as fomo well that's a lot more than like uh maintenance work for dev we needed let's say 50 grand to build that new mvp so what did we do we just got a chase credit card 12 month zero percent apr interest and i think we put like 70 or 80 g's on that card and then like month 10 of the uh of the accrual we paid that off in full so again paid no interest and essentially did like a 80 000 raise with no interest in addition to the seller side financing what did you provide chase that enabled them to basically approve you for you know no interest 80 grand on a credit card that's a good question i mean we both had jobs and salaries like i think my my venture salary was well into six figures at the time so that combined with like history although i didn't have a chase account already i wasn't banking with him personally but yeah it was like i think we got approved for 90k uh on day one for the chase like ink card so was it like it was probably no interest for first 12 months but then it was like ridiculous interest if you after month 12. either 16 18 20 22 something like that and it's actually not that bad yeah i mean it would have yeah i mean look if you paid off month 14 and then you pay eight thousand dollars the difference between not making not getting any dollars and paying 8k above is nothing yep yeah okay so you did this uh you did this back then i notified how did you know that notify app was the right one to go after i mean you talked to hundreds of companies uh i can't say i really knew right i had conviction but that's not the same as knowledge as a marketer i looked at notify and uh this is a cool tool right that's like what marketers love to find cool tools and i looked at it and when i saw it in action on a website uh serendipitously i thought to myself what is that i have to know and that conviction like that moment of being a marketer and being magnetized towards it i just had a conviction that thousands of other markers could feel similarly and then you get to know the seller and you find out well they have like this many customers not the thousands i think they could have and then you calculate like the value of that gap and our propensity to to get it there so how many customers the company have when you guys bought it uh maybe between 800 and a thousand but they were paying like four bucks a month seven bucks a month eight bucks a month yep yep but four dollars a month was the minimum something like that and there's people on like legacy lifetime freebies that i don't know about i just don't run enough sql yeah i mean just just i'm trying to quantify this this thing was doing less than 10 grand a month in revenue when you bought it no it was actually around 15k oh wow yeah yeah it was i mean as far as i'm concerned as a real business it was run by one person and he had a full-time job and he didn't want to go full-time on it and so those were all decisions he had made before we we spoke which made it really serendipitous timing he had thought about should i quit my job he had thought about should i hire people and he said no no no but he was also killing himself till two in the morning every night to keep it humming so it made a lot of sense and again the timing was right yep yes i mean some like good lessons i want to pull out here for a second there's a lot of either buyers or founders or sellers any side of this equation that mix up you know deal price and terms they're two very different things uh ryan just gave a great example of how these are very different i mean i'm gonna make an assumption here and we'll watch ryan's face to judge it he basically took over a company doing call it call it 180 000 bucks in arr for essentially 3k that they had to put in and one down month because they were investing extra the rest they basically paid the deal price off from profits that was somewhere between 100 000 bucks and a million bucks for the first 12 months ryan basically correct right yep that's right yeah so again difference between hey listen we'll buy your company for i'm gonna i don't know what this one is but we'll buy your company's a for 300 grand but again the payments are going to be structured in a way where it's actually very low risk to buyers ryan and justin it's a great way to obviously structure these deals i'm surprised that i guess the founder agreed to this because he had a full-time gig so this wasn't his full-time thing and it was killing him he was losing sleep and killing him exactly and that's why actually we named our fund fork equity and our tagline is uh painless exits for founders at a fork in the road because i think when you hit 10 to 20 kmrr as a solo founder like hey you're you're crushing it quote quota and by definition you're in the top one percent earners but b you're at this inflection point where like to double again to 30 camera you kind of need employees or you need to be like a total whiz with systems low touch automation everything most people need to go the employee route but once for 15 kmrr and you hire even a couple part-time developer support now you're down to like five kmrr take-home and so it's this hedonic treadmill of like you need to get to 25 or 30 kmrr with employees to make the same amount of money as 10 kmrr alone and most founders just like screw that like they see that um and then and then god help you if you end up raising capital and there's a liquidation preference you have to get out from under right yeah or you know you hire full-time people and then you don't grow and now it's like you're stuck at 18 kmr with two employees and previously three months ago you were murdering it just doing it alone so i think that's a big risk and i understand why founders don't want to take it but with us because we can get some economies of scale having a shared team a centralized team of developers marketers and so on it's like not a big deal to tag on a business at 10km or r we can inject 3k worth of development and support and design and everything because everything kind of a la carte from our core team yeah okay so fast forward today what is it you did this in 2015 so we're five years later i assume you basically changed everything right uh what's kind of average price point today i assume it's not four dollars still no so we've experimented we've raised prices a few times i think two of those three price raises we did it on black friday uh kind of to troll uh but also because we blow up on black friday so shopify has named us the number one black friday app our installs go through the roof so raising prices makes a lot of sense uh but over the years we've attracted like down market and up market so huge companies will use fomo but then really small mom and pops want to use it for their like mechanic business too so our pricing now ranges we have maybe 25 30 plans from 19 a month which is our new starter plan we launched that recently up to around 2 000 a month and that would be a little more enterprisey which is still very low for enterprise okay but yeah it's all it's all based on notification volume and notification volume is sort of a proxy for site traffic yeah so you upsell based off notification volume uh there's a big range there 19 bucks a month up to 2 000 bucks a month give me a sense someone paying 2000 bucks a month how many notifications is that tens of millions okay and you know most page views are going to see one to five so 30 million notifications a month doesn't maybe that means you get 5 million page fees a month you know if you're an e-commerce store with 5 million page views a month like you're you're doing something right um and it's worth it yeah the marginal increase in conversion percentage when they see the fomo pop-up is worth way more than the 2k per month oh yeah and you know we actually recently published we kind of queried like top accounts by their sales volume because we allow them to connect ga we show the click-through conversions based on utm params blah blah and there are sites that are we anonymize all the screenshots but you can check them out on our blog there are sites that are paying like 79 and their click through conversions are like 15 grand a month right so like the roi for the right customer is tremendous and well 15 grand higher than without fomo so 15 grand click through on fomo notifications oh got it yeah so and most of these kinds of customers they run their own fomo no fomo a b test during setup and we have yet to do that once you're live it's hard to know like you can't maybe is to let you know you can't even test it okay so night up from four bucks a month now 19 to 2 grand a month over 30 plans 800 customers back in 2015 when you bought it how many customers today 5 5500 yeah there's a few hundred that are on a lifetime deal so i don't know if you want to count those um did you do that with appsumo uh long story almost we did it with a similar competitor to appsumo well you want to give up 70 of the you know the revenue no it wasn't that i i tweeted about it the other day but yeah we just couldn't uh i think it's a terrible model by the way i think selling lifetime plans in a sas business is potentially the dumbest thing you can do unless you're just totally broke and you're trying to fund some development so i'll tell you why we did it two reasons one we had just launched an ad network which is a totally new product and we were giving all new users like ten dollars credit to spend in the ad network but of course to activate the credit you have to add your credit card and we start roll over billing just like google ads so the opportunity to give hundreds of people credits was really appealing and the fact that we could get paid by people to give them a new product was appealing and then secondly uh yeah we wanted to raise money not for development though we wanted to go on like a crazy team retreat so that's what we did we rented a yacht we raced in the barcelona 50 um in the adriatic sea and we just kind of lived it up in italy slovenia croatia what'd that cost how much i don't know 28 grand something like that which was not that bad we're not a big team but totally worth it how many people are on the team today now there are oh man maybe only uh five full time three part time that's our fomo on the 14 there's probably like 10 people total okay okay fork team 10 got it um we'll get to fork here in a second just wrapping up the story here on notify up to fomo five full time three part time how many engineers everyone's an engineer okay all five yeah even the designer uh he actually we've worked with him a couple years and a few months ago he was like by the way i'm not a designer i'm a front end engineer but when you guys hire me you said you want a designer so that's why i do this it's like my brain exploded but he's a great designer and engineer i love that okay and then give me a general sense here today on size right minimum 5 000 folks at 20 bucks puts it 100 grand a month but you could be obviously way bigger than that if you have a bunch of enterprise accounts can you give us a range in terms of where you're at run rate wise it's just below 100 uh our best month we did 154 that was with the lifetime deal our best recurring only revenue month was like 111 okay and now we're between 90 and 100. the reason for that simple math is we did have a lot of 15 customers uh that we never upgraded uh when we took it over and for the first several months and we also do 30 percent off for annual plans okay quite okay so 90 000 like last month basically 90 000 just in recurring revenue ignore the ad network everything else just sas revenue and what was that exactly a year ago let's see i got it right here unhide cells a year ago that was uh [Music] a year ago that was 97. okay got it so so the that part of business is basically flat to declining the sas side yes so the revenue at fomo is has been flat for a while but our team was 12 people full yeah this time last year you're more profitable profits yeah which i've decided that's just so much more important yeah yeah it is it is there's nothing wrong with that at all you're bootstrapped right the company hasn't raised money it's your own money right correct and the other thing is we're spending less time in it so we've got half the team and even the team we have is spending like half their time on it because they're working on forks other portfolio projects yeah and so i think some of the dip is because we're we are spreading ourselves a little thin but the master plan the method to the madness is that we're ultimately growing a much more special portfolio if you add the entire fork portfolio together today maybe look at last month what percent of revenue does fomo account for is it like less than 10 or percent or more like 50 or something else it's 67 percent or so it's around two-thirds okay got it got it got it so you're doing total your whole portfolio right now somewhere called 160 top line 160 000 a month in top line revenue that's right we're around one point yeah around 1.5 1.6 a year yep yep yep that's good and but again what i love about this is you're optimizing for profit so you can do things like fun team vacations in chile or in the adriatic sea yeah exactly and trying to buy more companies you know so we we launched this course uh because people kept asking us but now this course has become its own portfolio project that makes 78k a month and we don't do anything you know like someone says can you give me the spreadsheet template that's our support there's no bugs there's no sales there's no and so uh now courses are like becoming a part of our portfolio we're going to do one on learning to code we've done one on like how to do an lbo model because people are trying to understand wrap around financing so yeah our our thesis is kind of grown from like shopify b2b sas apps which i love and i understand uh completely but now it's kind of like well info sas sure all of it's really really interesting if you do it right with the right team and so we're kind of going horizontal now and and then rising rising tide raises all ships kind of when my team looked at your ahrefs account to see what kind of paid ads you are running uh you're running a lot against proof which makes a lot of sense you're both in the same market how do you think about those guys so regarding our ads kind of to troll because uh in the early days proof did a lot of ip infringement against us so we've invested a lot in copyrights trademarks we have a pending patent and proof like copy pasted our entire terms of service word for word word for word and you know i've actually never said as publicly which i don't mind talking about it but yeah so it's kind of obnoxious that they don't have they don't have integrity and character and uh but otherwise you know i think it's just like the age of the cockroach that's one of our designs on our blog it's this guy reading a newspaper and there's a unicorn and it's got a strike through it's like f unicorns it's the age of the cockroach it's all about living and surviving and i think because we don't have a board and we don't have people who can tell us what to do or regulate our salaries or whatever unlike proof who does have all of that we're just going to keep going and because we have these other projects we're going to keep fueling it i think proof's definitely cut into what could have been some of our market share but they've also injected a lot of capital into educating the market about this type of technology and that's been positive so it's like we've got a lot of proof customers ex proof customers when we tried to find it the other way around like disenfranchised film where people went to them we didn't find it and this was like by crawling thousands of websites who canceled and looking for script tags we did it javascript yeah just looking at the javascript and so i think it's a net good that proof exists that any of our competitors exist uh can't say it's not a little annoying we were the first to market and the only in the market and now there's like 35 of us so super proud of our team product positioning etc uh but but definitely i think we're reaching a point where it's like the competitor landscape is growing a little faster than the address of a market is growing which is again another good reason to hedge a bit and have this portfolio i'm trying to think if i was in proof shoes early on and i was like didn't have a lot of money if i would have done the same thing and copied your terms of service and your eula to save for my own legal fees and ryan i couldn't tell you with a straight face that i wouldn't do exactly the same thing was there other was there other things they did that was more disingenuous oh yeah so actually i've mentioned this once to someone i sent like an open public letter outlining several of the things they did that were infringing upon one or another of our bits of ip some of the other things they've done are like made advertised promotional videos with our customers in it and then put tens of thousands on facebook ads to promoting these videos and if you watch the video it's talking about proof but in the video is our customers with our product that's i think about it but regarding your point like i appreciate you being honest that maybe you haven't done the same thing but also you're super smart and you know that you could just google like free terms of service generator and you don't have to pay anything to get a good terms of service so it's actually like lazier and weirder and kind of more malicious to copy and paste hours than to just go to like the free wordpress.org open source i'm going i'm like when my audience listens to this they're all going to cringe because i guarantee the majority of them copied their eulo from somebody else now they do it for directly from a competitor that's a different story but they probably definitely use a template because no one wants to pay lawyers yeah no one's pay lawyers i mean we paid lawyers but i understand no one wants to pay lawyers and there's generators out there you know would you pay for fomo.com the url that's a hell of a domain name uh give me the story i guess i could i could say this i could this could be like our reveal you're right you can come out do it now okay here's how much we paid for it we paid a hundred and five thousand dollars okay you paid more for the you paid more for the domain name than you paid cash out of your pocket for the company uh yeah if you put it like that yes which is a sign of spiritual growth you know we put our stake in the ground yeah so we bought the domain it was a long process as these kinds of deals often are when we started fomo in 2016 we bought usefomo.com you know we're looking at try use get whatever went with use 10 bucks and kind of just sat on the idea of owning fomo because it had a very viable business on it it was like a spray foam for construction workers company since the 90s they had owned the domain a lot of authority for their keywords but nonetheless every month or two i would look them up on linkedin and i would go to their website and their press relations and see what's new and contact like different emails it whatever never got a reply ever but again i did this every month or two so finally in the spring of 2018 i'm going to their site business as usual click click click and i see that they've just been acquired by a pe fund like that's interesting another few weeks later i go back and check in on i think linkedin news and the pe fund made like the dumbest decision ever they rebranded the company from fomo which is obviously a badass name the most badass name they rebranded it to like something something interactive adhesives something like that icp adhesives it was like okay so are they going to get a new site so i start guessing around like icp adhesives.com and i start going to these urls and what does it do at forwards to fomo.com so i'm like okay so they're probably in the process of forwarding these domains so then i reach out to them again i get connected to someone who handled their it like an outsourced firm and they were very friendly and they definitely had their client in mind they advocated for the client not for me but they were able to broker going back and forth and we got the deal done very quickly we paid cash and then um you know sent that sent that guy a watch and some wine just to say a small things but that's very cool what year was that when you buy it i think we closed the deal in june or july 2018. okay 2018. i love that all right i just realized uh you and i could talk forever because we're of the same sort of blood uh but real quick here going over to fork for a second are you plowing your own money back into this or did you actually go out and put a little fun together raised from lps your friends you're deploying capital from them paying them back things like that or no we've done a few deals with sort of friends and family capital where it's like okay here's the deal we have do you want 10 20 30 and people have put in capital that's sort of just for the fun of it you know i kind of like having a little bit of pressure and accountability and people that i need to send reports to and grow a company on behalf of but otherwise everything we've done has been with our own capital through financing through you know the leverage we have from existing revenues do you use debt ever we actually use debt to buy the fomo.com domain so we had the cash in the bank at the time but uh i wanted to hire some new employees i hired a marketer i hired a sales dev person and i didn't want to to blow it all on this dot com that was definitely just for vanity purposes so we did a debt for like 10 percent 105k paid it off in 10 months 12 months who gave you the debt i uh just some buddies yes so like fork has sort of like a high net worth individual bcc list and every month or two when we have a deal or an opportunity it could be for an acquisition it could be for something like this buying a domain we just ping this list and say hey here's the opportunity here's like what we want to propose as terms and people reply back hey i'm interested i'm in we've already vetted them before they get on this list and that's how we were able to get that done in like probably 24 hours last question are you always a buy and hold or would you sell portfolio companies if the right offer came along happy to sell uh we're very interested in for example there's big exit opportunities with companies like tiny capital and their new subsidiary commerce specifically for shopify apps but we're structuring them such that you know hopefully the revenues at least stay flatter go up and the costs go down so i'm happy to hold forever can't really say we have a either or strategy right now it's just make them as profitable as possible that's going to secure the best valuation for an exit it also makes it the most interesting type of lifestyle business to hold yeah so for for a notify app you essentially paid something like...