How Authenticating CEO Steven Ward grew Authenticating to $3.1M revenue and 8 customers in 2024.

hello everyone my guest today is stephen ward he's the most widely known expert he's the most widely known for being an expert on love dating and relationships as the master matchmaker host and executive producer of vh1's hit show tough love where he gained worldwide notoriety today he's building buildingauthenticating.com which helps identity verification and fraud prevention activities inside of a much larger company stephen you're ready to take it to the top yeah happy too how do you go from like love maker to like authentication well as a matchmaker we have to make sure our customers are who they say they are they're not lying about their age or their background and that we can represent them to other people in good faith so when we developed our own homegrown technology to do that online more efficiently and effectively we saw a bigger opportunity spinning that out to be more industry agnostic yep so you built did you build this for the show originally to verify profiles and then you spun it out well so because of the success of the show we started being contacted from people all over the country at first we were just a small mom and son team in philadelphia and so i needed to create a way for people anywhere in the country to quickly prove themselves and to pass our qualifications before we could start setting them up online okay and so when did you actually when was the first line of code written for this company uh i would say well this business authenticating.com uh i'd say last year november of last year okay november last year and when was the first a dollar of revenue when did that come in november of last year okay so all the same month yeah we already had the apis working for a mobile product that we created called love lab which was meant to be like the car fax for dating and once we had the apis working to support third-party integrations then we just needed to find a customer who wanted to use the tools and fortunately we found a company out of canada uh that was a publicly traded cannabis company they were interested in using us for identity verification age verification and so we started doing a pilot with them uh proving uh photo id for individuals in canada okay interesting how much did you put how much did you invest in cash wise in the mvp before your first dollar revenue uh probably about a hundred thousand dollars okay so where'd you get that money from did you guys just put it in yourself or what it was it was more or less uh seed capital that i had from love lab which was the original company that i founded with uh angel money friend and family money uh before we decided to to make authenticating a project uh that we wanted to spin out of that business so are they all still on the cap table or no you shut that company down and launch new no i brought everybody along for the ride because i wouldn't have been able to build this business without that ip that's the right answer you would have gotten neutered on twitter if you said anything else all right so how much have you raised today total uh 1.45 okay 1.45 and was that all equity or any debt uh it was originally the 4-5 was originally debt which converted to equity when i raised a million okay so no doubt on the balance sheets today and when was the million raised uh we closed on that in december of 17. okay december 7th so are you raising now i am okay how much are you looking to raise what's the right amount about it i have a team of guys that i've got that i've recruited from top management consulting firms other companies in the background check industry other uh proven sas uh sales executives and they want to come along and help me build a business behind these products and so i have to figure out how much cash burn i need even assuming i'm not making any sales just what would it take to build the service oriented architecture behind these products so that i could facilitate enterprise size contracts so i'm i believe that all i would need is about two million but i'm probably going to raise closer to three yep and what valuation do you hope to get obviously have to negotiate it but what valuation do you hope to get um effectively i'm looking to get at least six because i want to have enough of an option pool for these guys to incent them to stick around for you know eight to ten years if that's how long it's going to take but i also want to make sure that the new money investors have a sizable chunk as well so you're gonna sell like 25 35 percent of the business then 2 million on six pre uh it would be two million on eight pre but a 20 option pool when we're all done got it okay yeah so eight eight pre so ten post means you're selling call 20 of the company plus then adding an option pool on the back end yeah yeah interesting okay very good now you mentioned burn i mean are you burning a lot of capital today no i mean unfortunately you can see from my surroundings i'm in a uh nice co-working space i have my own set of offices in our own little corner and um you know i have made a strategic partnership with a customer who wants to leverage the apis that we have they they're very rich in development resources so they've taken some responsibility to do a lot of the client-side application work that needs to be done for our solutions which has fortunately saved me a lot of money so my burn right now is without the team that i want to bring on board and without giving them discretionary for just today what's burn less than 10k a month i mean that's great yeah that's not bad at all uh very good all right so launched you get going 2018. now help me understand how you price this thing is it pure sass yeah so it's a paper utilization model right my my idea is that the real value we added is that we kind of did all the deep dive product capability testing for you my my vendors that i've integrated are some of the world's best you know twilio sendgrid amazon google equifax transunion lexus nexus other companies that you you know can handle these types of calls at scale and so what we've done is we've managed to decompose their apis and then build our own apis where as a more or less custodian of the pii we're not reselling any of the data that we're buying from our vendors we're using that second party and third-party data to compare to the first party data provided by the consumer and we're essentially saying this we can verify this we can't yep interesting okay so when you say pay per utilization what is the actual utilization like if i used one of these credits what is that credit getting me if you wanted to verify the front and back of a government-issued id that was issued in north america it would cost you a dollar got it okay so then i guess break this down the average customer pays you about what per month so so our smb customers are gonna spend about 1500 a month our enterprise customers are spending around 100 000 a month okay and what do you think of fair averages well i'm looking i mean in my projections for next year it's going to be about 20 smbs i'm really focused on in about three or four enterprises what about today though so look at your total revenue divided by total customers today what's what's the average paying per month about a thousand a month okay about a thousand a month that's fair and how did you get your first obviously it sounds like you found one great first customer how'd you get your second and third um believe it or not my parents suggested people to me that they thought could use this technology and i just cold called them and i guess because they really you know they like the brand name authenticating.com and once i pitched us as a a way to add trust and safety to save money uh on the the fees that you're already using to manually review every applicant every new registration um we we save people a ton of money on overhead expense in the form of facility cost and head count and compensation and all that by really allowing them to quickly onboard people that they can so we reduce that manual process by by factors of two or three or sometimes up to an order of magnitude depending on how they're currently doing that so my my first customer was the cannabis company the owner of that company lived across the street from my mom the other second customer was a a contractor that my dad had done business before and he said you should call them as well and then i started going through my angel investors and asking them for referrals before i know it i started getting organic traffic through my website and people started finding me on their own and so so how much how many total how many total eight eight right now eight okay that's great okay so eight customers and what's the team size today well i'm i'm a solopreneur one of them yeah it's just me i'm the only one on the team officially as of now that's good so eight customers paying a grand a month about eight thousand dollars a month right now in revenue yeah and where were you a year ago do you remember uh i mean the the funny thing is i i do these proof of concepts so i have customers that'll pay 000 25 000 for credits and then they'll want to build and use the product and sometimes i actually have people that have paid me and then just disappeared they their companies didn't could go off get off the ground or their blockchain project or whatever they wanted to use me for and then you know i just don't hear from them again because they they can't deploy right so i mean in last year i had a total of fifty thousand dollars in revenue yep okay good so i mean if we didn't normalize that right you're talking like five or six grand a month something like that yeah yeah what is the so i mean that's not a good thing if people pay and then don't deploy because then they're not going to renew your churn's going to be high right so what's your turn over the past 12 months what's your churn been about 40 okay um that's on an annual basis right yeah yeah so like i mean how do you how do you fix that how do you make sure people get on board and use you aggressively so my idea is to develop more or less solutions right now we're a bunch of products so kind of like uh i was talking to a former partner at andreessen and he described it like legos right i give people legos but really what they want to buy is the castle or the racetrack and i have to give them the castle and the racetrack i can't just give them legos so what we're doing is we're identifying what are the key solutions that people want like for what one example is blue sky monitoring you know in the background check industry the the whole fcra and and all these ccpa and gdpr and all these rules and regulations are based upon what do you do when there is data or if there's some kind of dispute or or something derogatory but but the background check industry basically formed an association they all got together and they formed this industry standard practice of charging you the same price for a background check whether there's going to be data or not and then if they have to go to an official source there's pass-through fees and additional costs what i did is i i basically built the same sources and methods that they have and and decided like well if there's no data there and we can we can hedge that out as a signal right we can arbitrage out so much savings for our customers by saying hey there's no need to run a background check on this person no new data has been entered in any commercially available databases since you last checked them or we may say oh there is some data go run a background check on them right which would increase their hit rate with the background screening company to a hundred percent and essentially make it no longer cost effective for those background screening companies to charge the prices that they do on a per check basis because now you know that there's data available it's almost like counting cards at a blackjack table so how are you so obviously one person on the team today uh 40 churn i mean do you are you doing anything any paid marketing no okay so you don't have good metrics on like cat get or anything like that it's all been free because i i mean i literally get people on twitter i just got it it's not free it's your time you can call it free yeah time time is money so i i would agree i mean you should value yourself if you don't no one will well i have another business that's pulling in almost 200 000 a month and i have clients that will pay 25 000 for me to personally service them so i trust me i do value my time when i'm when i'm providing a personal service business master matchmakers okay what is that they paid 25 grand set up a tender date no a lot more than that i mean i have i have ultra high net worth individuals who are very discerning have me source people for them by whatever means necessary currently i'm trolling instagram uh and what i find somebody that i feel like is going to be a good fit for a potential client i offline them i do the diligence i vet them and then if the client's interested in meeting them i just arrange phone up phone numbers and they they meet on their own what's the first message when you find a good instagram profile for like someone you're helping i mean what what on earth do you say i'll give you a perfect example yeah read it tonight yeah it's great i mean i was doing this earlier so uh here's one that a woman just responded to i said hi i go i represent several amazing single men who are handsome kind generous and conveniently wildly successful by any chance are you single and open to an introduction to someone that beats your criteria and you'd be surprised like all i really want to do is find out what they're open to before i try to just force a square peg into a round hole and if they're not open to someone like my client then i tell them if they can refer somebody to me that would be i would give them a finders fee for anybody else that might be a fit interesting okay very good so you're doing that on the side to generate cash while you're building a software company on the side looking to raise some capital i think these metrics make a lot of sense would you ever consider raising debt or you only want to do equity no i would raise debt i would raise equity i mean to me i don't mind diluting myself i don't mind bringing strategic partners to the table really at the end of the day i feel like what i'm doing is is i'm creating a nascent threat to a globally mature industry identity verification as a service is projected to be worth over 20 billion dollars as a tam yeah by the way we've had many billion dollar companies in the space on jumeo i mean a lot of these folks have come on the show so i get it yeah so to me i feel like there's a a new emerging market that that is you know it kind of dwarfs this cottage industry which is the background check industry but meanwhile you got companies like uber if you look at their s1 they made mentions of background check 24 times in their s1 they spent 1.5 billion why would they use you though i mean they're using civic and jumio and these companies do a fine job for them they're using checker and what checkers doing is checker i actually have the guy who who built one of the back platforms for their vendor who's considering being a part of this team and what they do is they they actually go to the same sources that i do they check to see if there's data available and then if they got some kind of alert because they by law they can't rely on that data then they know to go to the source meanwhile they're not decoupling that for uber they're they're gonna charge uber the same price to monitor every single employee no matter what whether there's data there or not so to me i sat there and said well what if i decoupled checker what if i just tell you uber hey don't even bother sending these people to checker because you're not going to get anything there's no new data there yeah 99 of the time after they made that initial decision got it all right very good let's wrap up here stephen with the famous five number one favorite business book oh uh good to great but jim collins number two ceo you're following or studying jack dorsey number three favorite online tool um currently notion number four how many hours of sleep to get every night four how old are you 38 30 and then what's your situation married single kids happily married no kids not yet not till i exit all right and uh last question what do you wish your 20 year old self knew i wish i knew how to raise capital at 20. guys there you have it steve ward building on authenticating.com making identity verification easier this is on the back of a very successful vh1 show matchmaking business he's raised about 1.4 million bucks to build this business 10 000 per month and burn just him right now but looking to raise 2 million on an 8 million pre here shortly to bring on some additional talent i've got eight customers paying a grand a month so eight thousand dollars a month in revenue up from two or three grand a month just a year ago all right steve thanks for taking us to the top thank you very much appreciate it