Abstrakt Revenue, Valuation & Funding (2024)

hey folks my guest today is greg rafner is one of the very first power users of conversional intelligence as an account executive he fell in love with how technology enabled his success as abstract's leader his vision and why is to help every sales weapon leader avoid the pain of missing their number you can follow along at his website it's abstract spelled a b s t r a k t dot ai greg you're ready to take us to the top yes sir absolutely thanks for having me nathan all right who who were you working for were you where you were selling these you know using these conversational intelligence tools yeah so i was working for a company called act on software back when marketing automation first kind of took off back when hubspot was becoming that thing and um act-on was a very a company that was known for being early adopter of technology and so we we started using gong actually back when they had like a football player on their website on their homepage i think we were one of the first handful users of gong like seven years ago wow yeah no no act on well that makes tons of sense there so you were using gong um so i guess help me understand now what you're building today as it relates to what you learned from using gong at act on yeah so with um with gong it's an amazing tool uh they've obviously done very well for themselves as one of my first customers described it gong is like finding the black box after the plane's already gone down tells you what went wrong tells you what happened but it does nothing to actually kind of stop losing the opportunity and i wanted to do something about that and so with abstract um we're a real-time conversational intelligence software where based upon what you're telling me nathan as my customer or prospect abstract is in real time telling me what i should be saying what questions i should be asking how to handle those objections so that i don't lose the opportunity and we do all that through natural language processing a little bit of machine learning and some some fancy algorithms anytime someone comes on and mentions machine learning algorithms my follow-up question is always the same uh both of those tools are useless unless you spend a lot of time training them and you have a very large data set to feed into them which usually requires someone to do a lot of freaking work have you figured out a way to have someone be able to get value from this and avoid having to do all that upfront work and if so what is it yeah so um no secret we just found a creative way to tap into google's library and data already and so um typically the way most companies tap into google's library and natural language processing capabilities um results in the capabilities not being able to be used in real time and so we uh as one of my engineers would say stumbled into a creative way to tap into that um and access that data in real time yeah you're talking about like the natural language ai from group from google right yeah correct but but the question still is the same right for every company let me just be very specific for a second if you're trying to sell uh mode.com which competes with looker maybe mode knows that because they're selling to developers don't say the word pricing until at least minute 25 but if you're selling to a cmo maybe you're a company like hubspot selling to someone you need to say pricing the first three minutes who's training the system to know 25 minutes first three minutes got it great okay thank you for clarifying nathan so candidly we're too early in our data set to have that information um we suspect in about two years we'll be able to start making those recommendations to our customers based upon the data that we have but right now the system is configurable per customer so if you're a looker you're configuring the system to say what you want a rep to say when it hears xyz objection or question right so as our customers are configuring the system it's helping us build that data set to then be able to here in the future kind of start to make those recommendations oh what's going on there youtube good to see you guys now imagine this you love watching these interviews with sas founders but imagine if we took all of the valuation data out from over 2807 interviews i've done manually saves you a lot of time well we've done this we've built it into the beautiful interface inside of founder path check this out i'll show you how you can access this in a second but you log in you connect your stripe account you see your valuation real time you can see what it changed over the past 88 days and even set goals for valuation this year now the secret evaluation is there's many different ways to value a sas business so the reason you're going to see three or four different valuations inside of your frowner path dashboard this is all free by the way is because depending on who's doing the buying of your sas company you're going to get a different valuation a vc is going to pay a different valuation private equity firm is different if you're going to do a minority sale that's different and if you sell the whole business that's a different valuation you can see all those when i hover over here right so the teal is what a vc would pay yellow is what private equity and red is if you sold the whole thing outright now what's cool about this is this is not built off random data again you guys hear these interviews on youtube all these datas are built from real-time valuation data points founders share with us on the show so traction 1.2 million seed round 3.7 raised they sold 22 of their business go in here and filter by the event maybe you only want to see companies that have sold the whole business well here are a bunch that have been acquired the valuation and the multiple maybe you're going out right now and you're raising your seed round well go in here and look at all this recent seed deals that went down what they raised what valuation they raised at and what percent that they sold there's never been a larger data set of sas valuations than what you can get now inside of founder path and we're thrilled to bring it to you all right we're going to go back to the youtube video here in a second but if you want to check this tool out if you want to jump in and sign up you can check it out for free to get your valuation at this link this link founderpath.com forward slash products forward slash evaluations or if you go to founderpath.com and hover over products click on get your evaluation here and go ahead and sign up to give it a whirl again all that valuation data live right inside the platform i hope to see you there all right let's jump back into the interview okay that makes complete sense to me so what are companies paying you on average for months to use your technology 100 per user per month and our average customer has about 15 16 number 16 seats in the in the product okay guys that's about 1500 a month on average yes sir interesting when did you start building this what year uh so we started almost two years ago to the week um so early march of 2020 okay 2020 got it um and how did you fund the mvp uh great question um so convince my wife to let me take a decent chunk of our savings account out and uh kind of get a proof of concept built and with that proof of concept i went and raised a small kind of friends and family angel round from local investors here in arizona and uh that got me to my mvp that we launched on april 1st of 2021 okay get get real with me here because everyone goes through this right it's the conversation with the spouse going baby how much are we going to put into this startup and and they're going honey i'm working a full-time gig to support this crazy idea you're working on like if it doesn't work out i'm gonna be pissed uh how what how much was it we're talking like 10k or like a thousand sixty thousand dollars sixty okay interesting yeah and was that meaningful for you guys like was it gonna be stressful if you lost 60 grand or is that like play money for you um so we have so what's funny is at the time my wife was pregnant with our first son and um and we knew we wanted to have a second child and so she's now pregnant with our second child and congratulations thank you and so she's a full-time mom and so yeah that's not it wasn't uh insignificant for us to make that investment because if i lost it that lost our cushion that lost you know that that risked potentially having my wife go back to work and not be able to take care of our children um so it's super stressful i mean it's uh but the way i kind of explained it to her i was like hey you spend 60 grand on your college education that you don't use anymore so i get to use 60 grand for abstract that's so funny okay and how many how many weeks or months did it take you to get the mvp to a point where you could sell it so what's crazy is we got the one of our product out on april 1st and we weren't expecting revenue until like october november of 20 sorry just to be clear that's like five weeks from start from first lineup code to launch no so we spent about a year so march of 2012 next april to next april 2021 so it took us about a year to get the product to the place where we were like let's go get give it to customers um and on april 1st we got you know production ready product and our plan was to go out and just give it to like beta users like give it to people hey go use this see what you think about it uh we weren't expecting revenue for at least a handful of months we ended up closing our first customer and doing our first dollar revenue three weeks after launching the product and um it was kind of crazy we weren't expecting it and we actually kind of grew it at a nice organic pace that allowed us to bring on customers last year while still hardening the product developing our roadmap before we went out and closed our real seed round of funding uh last year and then one startup showdown a couple weeks ago interesting okay so okay so hold on 60k personal money you raised a pre-seat in 2020 how much is the precede for uh 130 000 okay and was that sort of typical three or four million dollar cap uh so we had a four million value cap on that from friends and family around yep yeah that makes tons of sense and then you did the seed round in 2021 how much did you raise there so we raised with the winnings that we just won uh three weeks ago in atlanta so we raised 620 dollars total okay went before the prize money when was the other money closed uh december of last year okay okay got it and and um the prize money was 120 that means you raised about 500k now was that at like a higher was that what six seven million valuation or uh so we actually did a little bit less i wanted we were still kind of risky in my mind um and i felt like it wasn't really fair to go out and try to raise that valuation on the value cap so we did a we kept it at four million dollars i essentially just decreased the interest rate a little bit and uh kept the value cap the same that makes a lot of sense okay then you just won this competition which is great you give up no equity i assume right uh so they take a small percentage of equity how much uh so i can't discuss the the details of it what's the name what was the name of the competition uh startup showdown hosted by panoramic ventures oh interesting so there's base like if you do do they only take equity if you win or even if you enter and don't when they still take equity just if you win uh okay panoramic ventures okay interesting and why'd you decide to enter and spend your time on that obviously your time is very valuable as a startup founder um honestly i am i entered that competition in may of last year and i got told that um two things one they didn't think we could actually build a stable product that people would buy and two we didn't they didn't think we'd go out and get customers and so um i had this kind of i guess chip on my shoulder and so i was like you know what i saw a linkedin thing post that i was like i'm gonna go apply to this let's see if i can kind of prove these guys wrong and um so the only reason i entered it was honestly to i guess prove them wrong so what so what sport did you play in college uh so soccer baseball and snowboarding there we go this guy's competitive as hell and that explains that dynamic yes don't don't tell me i can't do something yeah that's exactly right okay interesting all right now you got your first customers then how many customers are you serving now today uh 113. that's 113 seats or logos 113 logos wow okay i mean so then i mean can i take 113 times 1500 bucks a month you're doing 170 000 bucks a month in revenue simple math well done nathan i mean that that's pretty incredible growth yeah i mean it's been fun right like it's uh what's crazy is most people don't know this technology exists and so when they see it um it's we have seven day sales cycle so um it's generally like okay let's let's get started because they no one else is solving this problem but just be clear i mean that's really rapid growth right what did you do what was your run rate like like what did you finish 2021 with 60 000 an arr yeah so like your monthly recurring revenue in december so this has been four or five months ago was what fifty five hundred dollars five thousand dollars uh four months ago so you've basically added all your revenue in the past four or five months yes sir well okay this is crazy so how did you i guess how did you land those first one on 13 customers at a pretty high price point i would say for a startup yeah so ultimately um myself my founding team we our background is in sales and marketing so we did what we knew how to do we generated an inbound marketing machine um we spent a year and a half building content so we could rank organically when people are searching for our competition uh name two or three of those what are the search terms in google so real-time call coaching software uh call coaching software conversational intelligence software um sales coaching software i think we just got to page one on that um i think yeah like conversational intelligence software we just passed gone in our rankings uh for that keyword and so you know it was just building out kind of a steady generated inbound marketing machine and we knew i knew two years ago that i needed to start that process then in order to have it impact us today yeah greg sorry you have some sort of genius here that i have to dig to find out because you're above hubspot gong and a lot of people for conversational intelligence software so how are you so good at seo what's the secret sauce here um i can't take any credit for nathan i found people that are better than me and got out of their way and i think if i could give anybody starting a company a piece of advice it would be like as a founder you've got to put your ego aside and you have to understand where your gaps are and i couldn't tell you the secret sauce in terms of how we got there i was just told hey go write the content we'll tweak it we'll edit it we'll put in the meta tags we'll do the keyword saturation and um i was like cool so i built a team that knew what they were doing that got out of their way where did you find those people was it one person or how many or an agency or what yeah so there's a couple different people um kind of a mix between knowing people so claire dobson our director of marketing she worked at an agency she's the wife of one of my best friends and so i just kind of spent time talking with her about what she knew and what she had done and when she explained what she was capable of brought her on board and then i met a couple people actually through some connections out in india that kind of self-proclaimed nerds and geeks around google and seo and brought them on board on a contracting basis and like i said got out of finding me up do you find them on upwork or fiverr or what uh through linkedin actually just kind of reaching out to people and was like hey do you know anybody that does this this and this and what were those what were their this is like who's who who do you know that lives and breathes paying attention to google search algorithm changes you know google makes hundreds of those changes a year about 13 major changes a year who do you know that could tell you tell me every single time google makes an impactful change to their algorithm i want to talk to that person and i want to bring them on board and i want to hire them yep so you hired these two folks in india full-time yep correct oh wow how big is a team today so we have just two people here in the united states two people in india and then i have uh my offshore i guess yeah offshore development team in indonesia is nine people i love how you're building this this is so cool okay tell me about the the offshore dev team how did you find them so i'm not a technical person nathan um i've become a uh maybe an elementary level technical person over the past two years but when i started abstract um i was trying to find a technical co-founder and everybody i talked to told me one of two things like no this can't be built the technology exit doesn't exist or two i can't build it with the amount of money you want to build it for and so i went to this website called co-founders lab where i ended up finding a gentleman by the name of john bunting out of omaha nebraska of all places and he uh started a startup studio called be so studio and i posted beso studio okay and um so started talking with him and he was like screw it let's try it and so um kind of pulled together the team uh i'm making john 50 no no just uh i mean single digit equity percentage so come on and build a product um oh so he's full time now yep yes he's the second one in the us no so that's claire so he's john's kind of moved out of the picture and now we're just working with the development team and indonesia but he's still but john still has equity he says his company biso still has equity for getting us to this point oh so they sort of help with mvp as a startup studio and then help to basically transfer your work onto this from an indonesia correct yes sir ah super smart i love this part okay and what what's the can we look at the website of the firm in indonesia uh so it's called biso studio so oh his firm he his people are in indonesia yeah correct oh i see so he's okay got it so you're still paying be so studio for work for their talent that they're onboarding or or not based off needs in indonesia correct yeah so ultimately we're i guess contracting them in a little bit of ways but i see i mean what i'm able to get out of them for the dollars that i put into it is so much more than if i you know went here in the united states or hired just a single technical co-founder here in the united states makes a lot of sense um can i ask what do you pay them per month like a range is fine uh anywhere between like 12 and 25 000 a month yeah yeah but again cheap because of all the equity preserved if you grow this big right i mean it makes a ton you have to take a risk up front but right if it works it works so this is super cold and then and then sorry real quick on the two seos in india what what's their website or do they not have a website they don't have a website yeah because they're just with you yeah and i i mean i come by and pay them a thousand dollars a month that's crazy okay interesting um i'd love to interview one of them if you're open to it to ask them exactly what strings they pulled to help you rank for these things to be i mean i want i see a headline of small phoenix startup outranks 10 billion dollar gong for the word conversational intelligence and i want i want the playbook yeah it's been it's been a fun ride i think ultimately like i was fortunate nathan where i saw i was part of act on software and i went to a company called all bound and i saw what all bound did where they invested in inbound content and creating the optics of looking bigger than you actually are and that's a playbook that i wanted to follow where if you look at our company if you look at our product you would never know that like it's mainly been just a handful of us over the past couple years and you know it's just uh you're targeted though to like see if someone was just looking at like alexa rank and unique views per month you would never come on their radar because you don't rank high but you rank really high for the keywords that matter you picked three or four and you really rank high for those because like when i click on the thing that what you rank for for conversational intelligence software and go to the page it's not a long blog post it's a landing page with great images smart h1 tags um a video built in the middle and then some stuff at the bottom so your team it's not like you're spending hundreds of hours writing blog content they just needed to write headlines and little descriptions for the design and they did all the optimization correct i mean we've written i think close to 60 blog posts we have 40 plus podcasts built or recorded so we are generating a significant amount of content nathan to help kind of bolster all of that i i love this story so you have two there's two full-time employees right now effectively correct million dollars in revenue per employee folks love this greg i say one day i think very soon there's gonna be someone that takes a company public with less than 10 ft's a sas company you could be one of those john at smart suite is another one i'm watching very closely but i'd love it for i'd love for it to be you that would be uh that wouldn't be a bad day all right cool let's wrap up here with the famous five number one favorite business book favorites oh simon cynic start with why number two is there a ceo you're following are studying i uh i like steve jobs i can't go wrong steve jobs yeah he's a good one number three what's your favorite online tool for building abstract besides your own for online tool for building abstract i gotta give uh i gotta give hubspot a shout free tools i mean we've been free crm free marketing tools for a while now hey real quick if a meat from gong comes and offers to buy over 25 million all cash up front do you sell today oh yeah oh yeah everyone always says no i have to talk to the board or no i have to talk to my wife you're like no if that happens 10x multiple i'm out i'll take it i'll i mean just come bring me on board for three years and let me run the product i i would not shock me greg seriously because of the quality people we have listening to the show if you get some input from this we'll see what happens so here um number four how many hours i sleep to eat every night uh i'm very fortunate to have a wife that takes very good care of me and so i usually get like seven eight hours of sleep a night okay yeah so seven married um one kid already and another one what do in three months uh in july yeah so three months yeah is it weird that i knew that i just i feel like a july baby all right last last how old are you greg uh i'll be 35 in june last question something you wish you knew when you were 20. [Applause] i wish i would have known to listen to my dad every time he told me that something would happen or i would feel a certain way and i fought him every step of the way i wish i would have known to listen to my dad guys abstract.ai launched in 2020. he was one of the first users of gong at a company called akron when he was doing sale he said you know i need to make this stuff real time he's done it with a laser focused seo strategy they've gone from basically nothing 170 000 a month in revenue over the past five months to two million dollar run right and get this to full-time employees these very smartly used contractors to preserve equity and preserve his cash and have a really healthy balance sheet and also has done this pretty cash effectively he's only raised about 630 000 uh to drive 2 million revenue very healthy capital efficiency we'll see what happens next greg thanks for taking us to the top thanks nathan enjoy the rest of your day thanks for having us one more thing before you go we have a brand new show every thursday at 1 pm central it's called shark tank for sas we call it deal or bust one founder comes on three hungry buyers they try and do a deal live and the founder shares back end dashboards their expenses their revenue arpu cac ltv you name it they share it and the buyers try and make a deal live it is fun to watch every thursday 1 pm central additionally remember these recorded founder interviews go live we release them here on youtube every day at 2pm central to make sure you don't miss any of that make sure you click the subscribe button below here on youtube the big red button and then click the little bell notification to make sure you get notifications when we do go live i wouldn't want you to miss breaking news in the sas world whether it's an acquisition a big fundraise a big sale a big profitability statement or something else i don't want you to miss it additionally if you want to take this conversation deeper and further we have by far the largest private slack community for b2b sas founders you want to get in there we've probably talked about your tool if you're running a company or your firm if you're investing you can go in there and quickly search and see what people are saying sign up for that at nathan lacka dot com forward slash slack in the meantime i'm hanging out with you here on youtube i'll be in the comments for the next 30 minutes feel free to let me know what you thought about this episode and if you enjoyed it click the thumbs up we get a lot of haters that are mad at how aggressive i am on these shows but i do it so that we can all learn we have to counter those people we got to push them away click the thumbs up below to counter them and know that i appreciate your guys's support all right i'll be in the comments see ya