Bepretty Revenue & Valuation (2019)

hello everybody my guest today is alvaro lara naga he's an experienced founder and with a demonstrated history of working in the health wellness and fitness industry he's skilled in negotiation business planning sales entrepreneurship and public speaking with strong business development professional background and a bachelor's of ba focused an international business now building this company called be pretty all right alvaro are you ready to take us to the top yeah let's go all right so what's be pretty do is it a software company there's a well we are a marketplace for beauty services but with a huge focus on our software for our beauty salons okay do you charge fees on one side of the marketplace as a sas model or no exactly yeah we have the sas model where we charge a fixed fee to our to all of our beauty salons in order for them to use the sas okay so so beauty salons or who you're kind of monetizing and how many beauty salons are on the product today we have 3 500 beauty salons all over latin america and they're all paying they are all paid that's great tell me about the other side of the marketplace who are they connecting with so they're connected with uh 90 of our users are women between 20 and 45 years old looking for uh beauty services everything that has to do with beauty massage spa haircuts nails everything that has to do with it so alvaro i know this is hard to imagine but imagine i am a 29 year old female latin american looking great want to get my next spa service why would i not just go to google and say spa in my city that's that's a great point we did bpt came to life exactly because of that the information in in latin america it's really bad organized it's not easy to find there's it's not up-to-date so for a woman uh 29 years old looking great as you too it would be really hard it would be really hard to er to find the the i don't know useful information for them to book an appointment online or even call their beauty salon if they want to do it over the phone but that's the main reason we started this this company it was it's a huge market with really small uh businesses but really but uh organized do the do the consumers do i pay as the person looking for the services or just the beauty salons no that's the beauty salons okay and what are the beauty salons pay on average per month would you say we charge them it's uh around eight to nine percent of all the beauty services they they they do through our platform and that's approximately in u.s dollars that's eighty dollars a month ninety dollars a month per salon depending on the markets but that's an average okay so about 80 bucks per salon and that's eight percent to maybe 10 of what you drive them so we can multiply that by 10. you drive them about 800 900 bucks worth of business a month exactly that's that's that's more or less the the number we we are we are we have today very interesting interesting is the revenue predictable like i mean is it really about 80 or 90 bucks every single month or is it very seasonal it goes up and down it's seasonal it's seasonal on the marketplace side but it keeps growing month-to-month basically the summer months are the best months it's when women tend to do higher or more expensive services and on the winter months it's it's a bit harder that's why our margin sometimes changes but more or less we tend to be around the 8 margin more or less when you say eight percent margin you're talking about 80 bucks a month per salon on average exactly exactly so can i take 80 bucks a month times 3 500 salons that would mean you're doing about 280 000 a month right now in revenue exactly that's exactly correct okay great where were you exactly a year ago in terms of monthly revenue we grew three times a bit more it's 3.6 times uh exactly our year growth we opened two new markets this new year so that has helped increase our our our revenue okay so that means you were doing what about ninety five thousand dollars a month uh about a year ago and you've 3x to your every year exactly that's exactly correct getting 3 500 beauty salons signed up especially in a marketplace model you have a chicken and egg problem it's very difficult how did you get the first beauty salons and the first women consumers using you that's a great question we the first thing we did was uh build a really strong relationship with our first beauty salons so we uh we started in chile and we went to the to i don't know to visit the top 200 and we started this really close relationship with 30 of them and we managed to have them use our software and be like our uh you know first vip clients where we work together a lot and we did developments of our software just for them we we really got them engaged and having those 20 salons really engaged what's what was what really make the difference growing because we started having their users using our app and receiving feedback and their users sharing their their experience with their friends and that's the way we started growing and growing and the first man it was 20 second man we had 40 uh venues by er being really you know engaged with our software and then we kept growing and today it's cheated still our best market but we have 1 400 salons how do okay so you get your first 20 signed up because you visit 200 in person and you sign 20 as vip clients you build the software specifically for them you make them feel special how do you get your first female though using the consumer facing app to book one of these 20 salons so it was it was one of the users of the of the clients from the so it was one of the clients from our salons so basically we did we did through them all the other first marketing campaigns we did it to their to their clients so we launched emails for them we did a marketing campaigns and so but just for their clients so you convince those 20 vip clients to email their past customers and say use this app it's but why why would they need to use your app why is it better to use your app versus just keep working directly with the salon that that's also a great question because on our software we have a tools that help them have a better organized business so we have the we have a file a crm where they can see what services they're using they they have also some um loyalty programs where they can start like saying hey if you come 10 times to us alone you're going to have a free services and and they have also business intelligence they they can start downloading reports on what's happening on their salon on a daily basis what hours are the most i know booked and what days are the most booked and how price pricing wise they can start doing revenue revenue management to maximize their their times uh and and got it and that's our speech when did you launch the company what year we launched in 2015 2015. and then have you bootstrapped or raised capital no no we've raised capital we've raised over 4 million dollars okay so basically 4 million yeah 4 million raised and that was from chile investors or you went to the united states for it we we've raised it all with european investors okay most of the european very good and how many people are on the team today we are 57 in four countries okay mostly chile chile was our headquarters it's still our biggest office but we are starting to move people north to mexico chile and remote moving to mexico and then talk to me about profitability are you guys making money each month or are you still burning and investing in growth that's also a good question it depends on the market so for example chile it's a market we are already on a break even but if we go to mexico that we opened i don't know six months ago it's still a market that requires huge investment well look at your whole company though yeah overall no but then overall we're still on negativity okay and about how much are you burning every month you're talking like 100 grand a month 200 grand a month 100 guns a month okay so that's not the reason i ask is i want to get a sense of how aggressive so if you burn 100 grand a month but you raised 4 million assuming you did that recently you have some runway obviously to get to profitability well right now we are closing what we expect to be our last uh financial route oh okay we are that we are why are we doing that because we still have a couple of more markets we want to expand to and with that investment we're we're hoping to to um be our last round before uh break even so we are talking to to right now we are we we have a couple of terms on the table we are negotiating the terms with potential investors how much do you think you'll end up raising like we're talking like 10 million or 5 million or 100 million or what we we don't want more than 5 million and we are they want to invest seven we want five and i think five it's a it's a reasonable number yeah that's good and can you give me you're not giving me the exact number but how do you when you raise if you raise five million bucks what valuation do you hope to raise at what would be like a very good situation for you so uh basically when when when raising the money right now we're we're thinking or talking on a 25 million dollar evaluation okay so that would be if you're doing kind of 280 grand per month right now you're currently at what 3.3 million in terms of arr and if you want to raise out of 25 you can obviously do the math what's that like a 8x something like that yeah exactly that revenue um you told me what was my best scenario [Laughter] so raising 5 million on call like at 20 or 25 free yeah something like that very good well i hope i hope that goes well for you let's wrap this up with some of the other economics right so churn is critical in a sas company um what's your turn today on the salon side and how do you keep it low so our churn it's it's uh it's approximately 18 annual churn and and the amazing thing about this church it's mainly it's based because saloons close they they they they close the operation uh there are a lot of saloons that open and close we in spain we say that when we get bored we open a bar in latin america when people get bored they open a beauty salon and that's great for us but we have a lot of people in the market that open salons with not a huge business wise mine so that make that makes it really hard for them to to manage their financials and to manage the employees so there's a lot of opening saloons that after a couple of months close because they don't have a really clear business wise what are we doing to improve that we are working hand to hand with the saloons on many other aspects we are working with them on the financial side we are helping them with all the attacks and monthly accountability we are helping them with their community management strategy and working a lot with them on how they should be more efficient so we are starting to become much more than a sas but we are starting to become a partner to the salons where we are getting in all the pains that we know beauty salons have and try to help them totally i understand talk talk to me about what it costs you to get a new salon that makes you eighty dollars per month are you spending a thousand bucks to get the salon or a hundred bucks or what no it's 125 more or less per salon okay so you make that back in under two months exactly on the salon side yes or challenge now it's on the marketplace side but yeah the saloon side it's a really clean uh why do you have a challenge though on the marketplace side if you sign up a new salon and you convince them to market your con your app to their past customers that should be kind of natural viral growth yeah but we don't charge the fee on on all of the on all of our bookings so we only charge fees on the clients that we generate so um our challenge there is to have our clients or the clients that we have on our platform repeating and the cohort the cohort it's our main challenge we are seeing how it's improving but we'll still we'll still need to work a lot on very high numbers all right alvaro let's wrap up with the famous five number one what's your favorite business book that's a huge question i think i'm going for uh suzu the art of work number two is there a ceo you're following or studying right now plenty my favorite one it's richard branson number three is there uh what's your favorite online tool for building your company [Music] we we just discovered monday and it's working amazingly well but slack i i i have to go with slack number four how many hours of sleep to get every night i bought this garmin uh six months ago and it says i was sleeping six hours that's good and what's your situation married single kids i'm single no kids okay not married no kids in how old are you i'm 31 years old 31. last question what do you wish your 20 year old self knew well um [Music] i'll tell him to enjoy everything much more and like don't stretch so much about things and and enjoy the the ride guys enjoy the journey come on from alvaro launch his company in 2015 be pretty hopes over 3 500 salons manage their businesses started in chile by visiting 200 signed up 20 of them as vip clients again now as 3500 salon customers they pay about 80 bucks a month doing 280 000 per month in revenue that's up 3x year over year they're doing about 95 000 per month just a year ago they are burning capital burning about a hundred thousand dollars per month they've raised four million hoping to close another five million here in the next couple months team of 57 in chile and other remote locations moving aggressively into mexico in terms of economics on the customers 18 annual logo churn they spent about 125 bucks to get a new paying customer with a two-month payback period alvaro thank you for taking us to the top thank you so much