How Birdzi Reached $4.8M ARR with 10 Grocery Store Customers and $40K Average Monthly Revenue Per Customer (Interview with CEO Shekar Raman)

Introduction and What Birdzi Does

Nathan Latka

00:00Hey, folks. My guest today is Shekar Raman. He's the CEO and founder of birdzi, a B2B SaaS company and industry pioneering customer intelligence platform that helps supermarket retail deliver a true supermarkets retail, sorry, deliver a true one to one automated marketing and personalization platform at scale using machine learning and other data driven technologies. Shekar, you ready to take us to the top?

Shekar Raman

00:20>> Yes, I am, Nathan. Good to be back on.

Focus on Grocery Stores and Expansion Plans

Nathan Latka

00:22I know. It was 2019 last time you were on. So this is great. Just to be But clear, those that are just learning about birdzi, are you only selling to grocery stores?

Shekar Raman

00:31>> Currently, yes. We have been asked by a number of other retailers about platform will work for them, but maybe towards the beginning of next year is when we'll try to transition into maybe C stores.

How Birdzi Works with Loyalty Programs

Nathan Latka

00:41Okay. So I go into a grocery store, if they're using birdzi, are they going to get my phone number or email? Or how do they get that? Is that at the checkout when the people go, Hey, do you want to give me your email address to get updated offers and stuff?

Shekar Raman

00:51>> No. Typically, work with retailers that already have loyalty programs, so they already have loyalty programs implemented, and our platform kind of goes on top of that. So we take first party customer identified data where you put in your loyalty number or your phone number so we know exactly what you bought in transaction. And we use that data to then track customer behavior trends and then figure out what offers to send you.

Nathan Latka

01:16I see. Okay. And what might one of those offers sound like? Know, 10% off toothpaste if I come back before Wednesday?

The Personalization Model Explained

Shekar Raman

01:22>> Yeah. So the unique thing with the birdzi platform is typically the way the promotion industry works is it's CPG driven. So the brands will say, hey, here's what I want to put out coupons on, or here's what I want to get deals on. And then the retailers essentially will try to identify the audience that works best for those offers. What we did is we flipped the equation. We said, let's start with the shopper. Let's look

01:46>> at Nathan. Let's look at his purchasing behavior and what will get him back into the store. Forget about what's on sale. Let's see what will get him back in the store. Is it 10% off sushi, 10% off pizza, whatever it is, let's create a promotion tailored around his personal experience and interests, and then figure out how to get that funded down the road.

Nathan Latka

02:06Very interesting. Okay. So what are grocery stores paying you on average per month to use this platform?

Pricing and Average Monthly Revenue per Customer

Shekar Raman

02:13>> Oh, it depends on the number of campaigns they run, but it can run anywhere from $40,000 to $60,000 a month.

02:19Okay.

02:19>> What they typically pay us.

Nathan Latka

02:22So all of your customers are paying more than $40,000 a month, some paying much more?

Shekar Raman

02:26>> Yeah, I'd say the average is around 40.

Nathan Latka

02:28Average is 40. Okay, fair enough. That, you know, this is a very much than an enterprise motion, right? $100,000 ACV. You have a big No, sales

Shekar Raman

02:38>> not right now. It's just a couple of people. Because, you know, the industry, while it's big from an addressable perspective, and the grocery industry is about $750,000,000,000 but there's only a couple of 100 supermarket chains that are really in our target market, right? And so they represent about $400,000,000,000 in sales in total. And what we're really going after is 1% of that is our truly addressable market, a $4,000,000,000 market. So we're going after a $4,000,000,000 TAM,

03:07>> which is really where the promotions industry is, right? Where coupons and sale and your weekly ad items, that's about the money that's spent on that part of the business. And that's where we're going after.

Team Size and Sales Motion

Nathan Latka

03:19So how many folks are on the team today full time?

Shekar Raman

03:22>> About 28.

Nathan Latka

03:23And how many of those are sales folks with a quota?

03:27Two. Two. Wow. Okay. So how many deals do you expect one sales rep to close then in a quarter or a half year?

Sales Velocity and Deal Cycles

Shekar Raman

03:35>> Yeah. So we, right now, we're looking at a velocity around two to three a year.

Nathan Latka

03:40That's a long sale. They must be very patient, right?

Shekar Raman

03:43>> It is, yeah, it is. You know, grocery industry is a tough business. So what we have been very successful at doing, however, is expanding revenue constantly with innovation, right? So we've had a fantastic track record of going in at a retailer at maybe $10, $20,000 a month and expanding that out to $50, $60,000 a month in a couple of years.

Nathan Latka

04:06Oh, what's going on there, YouTube? Good to see you guys. Now imagine this, you love watching these interviews with SaaS founders. But imagine if we took all of the valuation data out from over 2,807 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 Founderpath. Check this out. I'll show you how you can access this in a second, but you log in, you connect

04:29your Stripe account, you see your valuation real time, you can see what it changed over the past eighty eight days and even set goals for valuation this year. Now the secret evaluation is there's many different ways to value a SaaS business. So the reason you're gonna see three or four different valuations inside of your Founderpath dashboard, this is all free by the way, is because depending on who's doing the buying of your SaaS company, you're gonna

04:54get a different valuation. A VC is gonna pay a different valuation, private equity firm is different. If you're gonna 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

05:15not 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, 1,200,000 seed round, 3.7 raise. They sold 22% of their business. Go in here and filter by the event. Maybe you only wanna 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

05:41going out right now and you're raising your seed round. We'll 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 dataset of SaaS valuations than what you can get now inside of Founderpath. And we're thrilled to bring it to you. Alright. We're gonna go back to the YouTube video here in a second, but if

06:03you wanna check this tool out, if you wanna jump in and sign up, you can check it out for free to get your valuation at this link. This link, founderpath.com/products/valuations. Or if you go to founderpath.com and hover over products, click on get your valuation 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. Alright. Let's jump back into the

Customer Count and ACV Growth

Nathan Latka

06:29interview. I was gonna say how many customers are you working with today? About 10. Okay. About 10. Yeah. Mean, I can vouch for this, by the way. When you came on in 2019, you said the average ACV was about 300 ks. Now it's 500 ks. You've definitely expanded there. And is that because you're upselling new products or seeds

Shekar Raman

06:46>> Correct. Or Well, you know, a lot of our roadmap is informed by our customers. So we see their pain points and they come back to us and say, can you solve this? Can you solve that? And we wind up then building a platform base of it. So 50% is coming from pure internal innovation and R and D, and 50% is informed by the customer.

Nathan Latka

07:03I see. And can we take 10 customers times that 40,000 ARPU you guys are doing about $400,000 a month in revenue?

Monthly Revenue and ARR Discussion

Shekar Raman

07:10>> Yeah. That's about that's that would be about right.

Nathan Latka

07:12That's great. Look. Considering the space you're in, right, in that pre COVID, you were doing about a 3,000,000 run rate. The fact that you sort of grew in your space Right. Added almost $2,000,000 of ARR in the past twenty four months is pretty darn impressive.

Shekar Raman

07:28>> Yeah. Well, know, entrepreneurs are never satisfied. Everybody wants to be 10x in two years.

Nathan Latka

07:32That's right. That's right. Now, you Do you have to pursue growth at all costs? Have you raised a bunch of capital?

Cash Flow Positivity and Funding History

Shekar Raman

07:38>> Not really. Not since the pandemic. We had some just some internal note rounds, but that's about it. For today, of course, we're cash flow positive. Not really looking to raise money until maybe the end of the year. Have some

Nathan Latka

07:50That's a big deal too, because when you last come out in 2019, you told me you were burning $150,000 a month.

Shekar Raman

07:55>> Correct, correct. So right now we are cash flow positive, and I guess it's a good position to be in, but we see a lot of new opportunities come into the market, which we think will go out and raise some growth capital for.

Nathan Latka

08:06Mhmm. So and just to be clear, including the convertible notes, how much have you raised total to date?

Total Funding Raised and Round Details

Shekar Raman

08:11>> About 9,400,000.

Nathan Latka

08:14Oh, wow. That's a lot. Wait. So these were big convertible notes because when you came on last time, you had only raised a million dollar seed round in 2014, right?

Shekar Raman

08:20>> Correct. And then 2018, we did about three and a half. Oh, okay. Yeah. And then in 2020, we we converted some notes and did another 1.2.

Nathan Latka

08:30Okay. Okay. Got it. And that was in, sorry, 2020?

Shekar Raman

08:33>> 2021 is when we close those notes.

Nathan Latka

08:36Yeah. Okay. Right. Okay. Got it. So three point so pre seed of a million, seed of 3,500,000 in 2018, 1,200,000 notes over the past twenty four months.

Shekar Raman

08:44>> Correct.

Nathan Latka

08:45I see. I see. Okay. Now when you look at your pre COVID valuation, right, when you raised that 3,500,000, what what did you I mean, most people are selling in there. See, maybe like 20% of the business. Were you sort of in that same range?

Shekar Raman

08:56>> Yeah. About the same.

Nathan Latka

08:57Yeah. Okay. So so what does that mean? That means you were at like a 25,000,000 valuate 20,000,000 valuation, something like that?

Shekar Raman

09:03>> You got it. You got it, Nathan. Yeah. Got your numbers right. Yeah.

Valuation and Growth Equity Plans

Nathan Latka

09:06Do you care about valuation right now or no?

Shekar Raman

09:08>> Right now, no. I think we're just putting our nose to the ground and just focusing on growth, revenue growth. And we think that if we get the right velocity and the right market cap that we're going after, the valuation will take care of itself.

Nathan Latka

09:21So if you do want to go out and raise some growth equity, what do you think you have to get revenue to before you can do a competitive growth equity round?

Shekar Raman

09:27>> I think if we get a finish this year with a 5,000,000 realized revenue, I think we'll get about a 50,000,000 to $60,000,000 valuation.

Nathan Latka

09:37Value. Yeah, interesting. Maybe you'd be looking at like around like either late Q4 this year or early Q1 next year.

Shekar Raman

09:43>> Yeah, we're thinking more early Q1.

Nathan Latka

09:45Early Q1, interesting. And how are you thinking about that? I mean, would you structure that as 100% on balance sheet or there'll be a portion of secondary? Like, you know, you're getting to the stage where you can probably pull secondary. Right?

Shekar Raman

09:56>> Yeah. You know, I I think we're thinking about a couple of things. You know, obviously, there have been some investors who have been with us from day one, so we're trying to see if we can give them some early exit options, liquidity options, and to help some of the initial team take some money off the table. And maybe we'll raise a larger round as a do a recap plus some growth capital.

Nathan Latka

10:16Hey, one thing you should consider, by the way, so as you know, Founderpath, now we're a $120,000,000 fund. One of our big use cases is exactly what you just described. Right? So you raised a million pre seed in 2014. They've been around for six, seven, eight years. They're probably going, Shekar, man. Give me a return here. So let's say you you have to negotiate what to pay them out at. So they're gonna say, give me 10

10:37x, and you're gonna say, I'll pay two x. Right. Right? But, like, let's say you agree on two x. You need 2,000,000. Because your revenue is at almost 5,000,000, we could give you up to 50% of your ARR. So we could give you 2,200,000 and go use it, and you can use it to go buy out your early investors and buy back 20% equity.

Shekar Raman

10:53>> Right. Ah, it seems like a pretty good thing. Should look into it.

Nathan Latka

10:56Yeah. I'm not pitching you. I'm more just telling the story so everyone else can hear it and go, oh, could see how that would work. But we should actually talk about that offline. We'll see if it works.

Shekar Raman

11:04>> Absolutely. Absolutely.

New Product Innovation and Platform Capabilities

Nathan Latka

11:05All right. Talk to me about more product, right? So, you've doubled ARPU, right? So, what new products are building you for these grocery chains?

Shekar Raman

11:11>> Yeah. So I think one of the big, I think it's quite revolutionary, which is typically what happens in, like Nathan, like I said, in the promotions business is retailers go out and seek deals from brands like Kellogg's and Unilever. And they say, okay, I'm going to give you a dollar off a case of cereal. And then what the retailer will then go do is go put it on their weekly ad on their front page, hoping

11:37>> to move that at a dollar off, right? Yep. So they're restricted by the amount of deals that they have to offer back to the shoppers. And that I think is a huge constriction on personalization because you don't really care what's on sale or not. You want a product, you know, if you go to the store. And so what we decided to do is let's flip this equation. And I think the challenge that the retailers had was

Automating Personalized Offers at Scale

Shekar Raman

12:00>> really they didn't have systems that were big enough to figure out, if you had a million customers, how do you create unique deals for each of those million shoppers? Yep. That's really the problem we solved, is we have a system now that automatically generates for every individual shopper, six to eight offers a week that gets emailed out to them and executed. Wow. Think about now using the entire store catalog for creating your promotions. No longer restricted

12:27>> by what's on sale, what's on deal. I'm creating, so I'm able to now manage individual customer journeys. So I grow Nathan from being a new customer all the way to a loyal customer by driving promotions specifically for him, him or her, right? That's very good. And I believe this is scale. So this used to take, there are big companies that do this like Dunnhumby, which will do it, but they have 400 analysts sitting behind

Famous Five and Closing

Shekar Raman

12:51>> with, you know, systems, and they'll do it. We managed to do it in one hour for a retailer. They can execute these campaigns for hundreds of thousands of shoppers in one hour.

Nathan Latka

13:01Wow. Well, Shekar, I'm excited for you. I hope you double ARPU again before you come on again. That would be a big win for you. But in the meantime I'm excited. We're out of time.

Shekar Raman

13:08>> I'm excited for you too.

Nathan Latka

13:09We're out of time here. Let's wrap up with the famous five. Number one, favorite book?

Shekar Raman

13:13>> I've got to say recently, Build by Tony Fadell.

13:16>> Yep.

Nathan Latka

13:17Number two, is there a CEO you're following or studying?

Shekar Raman

13:21>> I think to me right now, the most interesting person in the world is Elon Musk. I don't know if I necessarily follow him, but I study

13:30>> Yeah.

Nathan Latka

13:31Number three, what's your favorite online tool for building birdzi?

Shekar Raman

13:35>> Got to say HubSpot. That's become my new favorite.

Nathan Latka

13:38Let me ask you another question.

13:39>> I'm just

13:39sort of throwing this in. It's a new one. What are you most curious about right now in terms of just like SaaS in general? Like, Like, you know, related to how you grow faster. What are most curious about?

Shekar Raman

13:48>> I think I'm curious about how to widen the reach of our technology. That's what I'm really curious about. I think a lot of times you get stuck in rut thinking and you don't understand where else your technology might apply. I'm constantly looking to, looking at places that I can apply.

Nathan Latka

14:04I love that. Number four, how many hours of sleep do you, by the if you liked that question and you think I should add that to the Famous Live all the time, just shoot me a text, (703) 431-2709. And you say, Nathan, ask that every time and I'll do it. Okay? I listen to you guys. Alright. Shekar, we'll see what they say. Number number four, how many hours of sleep do you get every night?

Shekar Raman

14:22>> As I say, it's gone up. It's about six and a half.

Nathan Latka

14:26Okay. That's pretty darn good. And situation, married, single, kids?

Shekar Raman

14:29>> Married, two kids. Well, one is working, the other is in college.

Nathan Latka

14:33That's the way to do it. And how old are you?

Shekar Raman

14:36>> I am 52 going 26.

Nathan Latka

14:3952 going 26. I love that. Alright. Something you wish you knew when you were 20.

Shekar Raman

14:45>> Yeah. Absolutely. Absolutely. I'm sorry about that. No.

Nathan Latka

14:49No. You can feel free to mute it. No worries. What's something you wish you knew back when you were 20?

Shekar Raman

14:53>> That I can do anything that I want. Guys,

Nathan Latka

14:57they sell to grocery stores. It should have been killed during a pandemic. They didn't. They added another $2,000,000 of revenue. Now doing almost $5,000,000 in terms of run rate, selling a personalization and marketing tool to grocery stores to get shoppers to come back in. They help groceries create custom offers for every single visitor to that grocery store over the past call it one, two, three, five, twelve months. Again, growing nicely. They did a 3,500,000 seed round

15:17back in 2018 at about a 20,000,000 post money valuation. Now 28 people on the team, two sales reps looking to scale past their current 10 groceries, grocers that use them. But big ACVs, $500,000 ACVs as Shekar continues to grow. Shekar, thanks for taking us to the top.

Shekar Raman

15:30>> Thank you, Nathan.

Nathan Latka

15:32One more thing before you go. We have a brand new show every Thursday at 1PM Central. It's called Shark Tank for SaaS. 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 1PM

15:58Central. 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 SaaS world, whether it's an acquisition, a big

16:20fundraise, 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 SaaS 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

16:42up for that at nathanlatka.com slack. In the meantime, I'm hanging out with you here on YouTube. I'll be in the comments for the next thirty 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

17:01people. We got to push them away. Click the thumbs up below to counter them and know that I appreciate your guys'support. Alright. I'll be in the comments. See you.