AX Semantics GmbH Revenue (2024)

hello everybody my guest today is stephen morrell he's a startup geek serial entrepreneur mentor digital native coder sales guru it's a hell of a combination aspiring skiing instructor he spent too much time in art tech and the science of sas sales currently chief revenue officer at ax semantics in germany stephen already takes the top yes thanks for having me nathan you bet so what is ax semantics for those that don't haven't heard of them well in a nutshell it's an ai that writes content for you so um you probably know the pain uh you wanted to write those five blog posts this week you didn't um if that's painful imagine writing i don't know 15 000 product description for your e-commerce store multiply this with five languages you need some help is this who you're selling to you're selling to e-commerce brands that need meta descriptions built at scale yes yes essentially you take data you take your knowledge about the products you combine this and the machine product produces uh on scale content um also works for weather report everything that is repetitive and based on data um the machine can write better than the human and what are these guys paying per month on average to use the tech um well we have an average sales price of 761. i know because i just calculated this two days ago because we're always looking on customer lifetime value that i was asking myself how much do we get in the first year so if you take the first year divided by 12 at 761 euros that's probably 850 u.s that's great okay and um walk me through your involvement here because you're not the founder were you there at the start when did you launch oh yeah well i know the founder for 25 years uh we both used to have advertisement and digital agencies what feels like a century ago and his evolved into a content writing agency at some point he started developing a software for his own needs to scale and then he pivoted from carter writing agency into pure sauce ai high tech company and about that time i was coming back from silicon valley uh we had a couple of beers next morning i started working for him and going uh i'll happy help you to what year was that when the company when did the company launch um i started in 2016. and um yeah yeah 2016. now did you get equity i mean were you basically a co-founder yes i i have equity um and uh i'm with him and uh two three others we are the sea level and we we hacked this to today's size i love that okay so you launched in 2016. talk me about tell me about the first 10 customers how'd you guys get them well you know um if if you start out the first 50 not 10 first 50 customers it's not sales it's coercion you go to everybody you know you know i know where you live you gotta buy this now i need you to buy this i don't care and um the founder did a great job in turning his agency customers into software customers um in the beginning it was it was crappy it was hard to use difficult to understand you know language is probably the most complex thing that you can try to solve um so it came with you know onboarding training service it was really really difficult by now today everybody can use it we are like the only natural language generation product out there that is reef for the rest of us everybody can just go there have a trial try it out so first 50 it's not sales it's coercion you get them on the platform how many customers are you working with today uh today we would have around 800 wow from 20 23 um different countries and so how are you getting customers obviously you're selling today it's not coercion how are you getting customers today um that's a great question uh because i i uh talking to other i hear a lot about empty uh pipelines and and lack of volume what we do we run um and we iterate it over years week for week we run facebook instagram google um ad campaigns um generating leads and then we have um a very traditional sdr calling um qualifying is this a business do they understand the product or was that just you know fat finger on facebook um and then we have a consultation call we see do they have the data um what is the exact need and then we onboard them and and close them so with all the spend you're doing on facebook instagram and google first off quantify that for us how much did you spend last month on those paid platforms um i wouldn't know on a monthly basis but i can tell you that it's it's a um probably 250k i'm talking euros yeah so at 10 15 yeah 250k a year yep on ads okay got it so with that kind of sample size you should sort of know what your tack is what do you pay to get a new you know 850 a month customer well and uh a fresh lead um is about 25 to 35 euros per lead from there we have um 25 to 30 conversion into an appointment from the appointment we have 70 conversion into an opportunity in the good stage and when i say good stage is a stage that keeps moving it's not like circle back or reconnect or whatever it's something like uh signature hand over um the two famous stages that we have ping and pong yeah we have to do something they have to do something lead appointment now they're qualified then what um and we have this um consultation call with them and from there we move them um in 70 of the cases into a good stage and half of those close okay got it so let me just repeat that back to you you spent 40 bucks for a lead 25 to 30 percent of the leads convert to an appointment 70 of the appointments convert to a qualified lead a good lead and then 50 of the qualified leads actually end up closing yes there you go guys there you have it cac in a nutshell we love that okay now can i take this math i mean you've got what you said 800 customers at 850 bucks a month on average you're doing about 680 000 a month in revenue we're doing about three and a half um million a year okay yeah so this is 4.2 or something yeah i got it got it so more like 350 400 thousand dollars 60 60 uh growth year over year i know what you're gonna ask yeah you you do you must listen do you listen to the show of course he listens he listens do i do yeah big fan okay so you like the process you still agree to come on in you enjoy it absolutely good absolutely i love good we love that so that's that's good growth now have you done this bootstrapped or did you raise a bunch no we we've been raising um multiple times i'm not at liberty to to go into details um but um they raised the first time when i wasn't around and then you know the thing is you cannot bootstrap an lg because you have to put in years of software development and uh that's very very difficult to do there's only like five companies out there who do natural language generation at all and coming up with a product that everyone can use and that supports 110 languages man imagine the grammar of 110 languages yeah this is this is not sending emails or you know uh doing on-page um analysis or something this is really high-tech yup no we love that um okay let's talk more about the team how many folks total roughly around 40 and how many engineers uh i'd say maybe you could you can divide it up in similar size teams um sales customer success uh how many shows how many engineers probably ten okay eight ten and then how many do you have any quota carrying reps and if so how many come again do you have any quota carrying sales reps this is not how we build um we how we build our sales team the sales team works as a team and not as um sales reps who compete against each other we also um they have their own kpis um and they actually they they they figure that out their kpis on on their own and present it go like this is what i'm doing this is what i think the team should know that i'm doing and this is what i want to be measured by and then the rest of the team goes like yeah someone's right i want to know that you're doing this so this is how we build the team we also don't sit on um hire and fire you you normally say uh you should uh even if you're good half of the sales people that you hire you probably have to let go because it's just not a good match for them i don't believe that i believe you have to develop people um and to train them and to build a team based on experience and knowledge of this product this company this customer type it's not i see a lot of others are just hiring and firing till they find this guy who does it well this is there are no naturals it's trading understood so 40 people total 10 engineering 10 sales reps and then about 20 other people in other roles yeah customer success support operations churns critical in a sas business as you know stephen so what's your guys return thanks for asking churn was our biggest problem we we we needed like three years to figure this out why because the software is yeah you have to learn it there is layers you have to put in two weeks to learn how to use it what are the numbers first and then explain the back story so what is your gross revenue turnout we had we we had in in the darkest days and those were really dark days we had like 90 percent yeah um annually now we are uh monthly trip oh wow okay yeah so we were we i mean that's not a were business i mean that's people that's loading in yeah we were loading in customers onboarding customers and we were losing them at the same time on the other end and it took us um almost three years to figure out how to how to stop that bleeding and um in the last year we cut the bleeding down to zero and now we have net dollar expansion well hold on so so what is let's do gross and then expansion and then net so what's gross revenue churn monthly um now it's um in in total numbers it's zero so we hardly lose any customers and we have in in growth numbers we have a one to two relation uh ratio um of growth so for every um hundred bucks that come in with new customers we grow existing customers by 200 bucks does that make sense yeah it does it's just a complex way to talk about this what is your expansion revenue either monthly or annually on accounts on historical accounts percentage-wise i would have to look that up but what you do know is that net dollar retention annually is now above 100 yes got it the expansion from historical cohorts is more than that same revenue you lost from that same cohort yes i see well congratulations that's a big step it was a long very very dark way and uh yeah but we made it through how do you plan how do you plan to get customers this year is it still going to be about 400 grand of facebook instagram and google ad spend well we are playing around um with new ways um we are looking into outbound for the first time um we are also developing the product further um next step is um i'm not sure it's totally official but it's gonna be official like next week we're going into personalization um let me give you a quick example uh take a power driller if you have a power drill it's a different tool for a carpenter than it is for a car mechanic that is for electrician yet it has the same description why they're doing different things with it so if you can tell from the path that you from the user journey this is a carpenter or this is a somebody who is into car parts then give him a different description of the tool um so it's close to one one personalization and um this is where we are heading with the product um this naturally has a bigger market um so we are looking into outbound as a new acquisition channel great we'll see we'll see how it goes you have to come back and give us an update in the meantime now let's wrap up here with the famous five number one favorite business book right now it's the mom test number two is there a ceo you're following or studying not really no number three what's your favorite i like the school guys what's your favorite online tool for building your business lately it's slap and documenting everything that we do and having a discussion slap s-l-a-b slab interesting number four how many hours of sleep to eat every night how many hours of sleep do you get every night plenty how many about the journey how many hours um i i get my six hours that's good and situation married single kids um girlfriend okay so not married no kids yet girlfriend 14 year old teenager two dogs two cats you're a busy guy how old are you 52. last question stephen what's something you wish you knew when you were 20. i was building companies that that that the term startup didn't exist but i was doing exactly that well what's something you wish you knew when you were 20. being being an entrepreneur always guys there you have it ax semantics they're helping you write content at scale faster they were doing about call it uh they're doing about 4.2 million in terms of run rate today up 60 percent year over year team of 40 currently uh spending and getting most their customers have 850 today getting those customers on paid ads they spent about 300 grand last year on paid ads paying out 40 bucks to get a lead stephen thanks for taking us to the top thanks for having me 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 2 p.m 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 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