Botco Revenue, Valuation & Funding (2024)

[00:00] Hey, folks. My guest today is Rebecca Clyde. She's the CEO of botco.ai, a startup offering intelligent chat nurturing solutions for health and wellness enterprises. With more than twenty years of experience in the technology industry, she's passionate about advancing women in tech. Prior to botco, she co founded a digital marketing agency and managed marketing programs at Intel. Rebecca, are you ready to take us to the top? [00:21] >> Definitely. Hi, Nathan. [00:23] It's nice to meet you. Okay. Tell us about botco. Who are you so you're selling directly to health and wellness enterprises. Why that niche? [00:29] >> Well, because they had been severely underserved. I've been in the marketing automation space for quite some while, and I thought that a lot of the marketing technology that was built was really suited more for technology companies, software businesses. But when it came to the health and wellness space, they had some needs that were just weren't really satisfied. Things like compliance around personal health information, the ability to integrate with maybe benefits and verification of benefits systems. So [01:00] >> a lot of these providers use insurance as the form of payment. So they had some kind of unique elements to the way that their business is done that had not been addressed by the traditional marketing automation platforms. And so I found that there was an opportunity there to go in with a service, a product that could really satisfy that gap. [01:19] Love that. Okay. And so what are these customers paying on average per month to use the technology? [01:24] >> You know, anywhere from about $1,900 a month to upwards of $7,000 a month. [01:29] Oh, wow. So what would a fair average be? Like 2,500, 3,000, something like that? [01:34] >> Roughly around there. Mhmm. [01:35] Okay. So you're very this is very much an enterprise motion then. Were you enterprise from day one? [01:39] >> Yes. Always. Very first customer was a billion dollar company. Yes. [01:43] Can you name who that was? [01:45] >> Massage Envy. So they are a large Massage Envy. [01:49] Oh yeah, of course. [01:51] >> Yeah, so Massage Envy is one of the largest wellness providers in The US. They provide clinics all over the country. They have over a thousand clinics that have massage therapy, but also a lot of other services as part of their program. They were one of our. [02:05] How do you land? I mean, people listening are like, wait, how did Rebecca land Massage Envy on day one? How does Massage Envy look at a startup company and say, we're willing to bet our HIPAA compliant chat on Rebecca? [02:17] >> Well, to be fair, I've been working in enterprise for a long time. So I mentioned the agency that I started previously. So I already had a lot of relationships in the enterprise space. Was very familiar with that. [02:27] Oh, the agency worked with health and wellness folks. [02:29] >> Yeah, my previous agency, yes, had a lot of clients in this space. I do a lot of public speaking and actually the way that I met them was through a, I was doing an event. I was speaking as a keynote at a conference and talking about the power of AI and being able to automate conversations to scale engagement with consumers. And they came up and talked to me afterward. It was one of their marketing executives, and [02:55] >> pretty soon I was in the C Suite with their entire executive team talking about how we could make this happen for their company. [03:01] So did you this was your agency. Right? [03:04] >> Previously. Yeah. [03:05] Mhmm. Did you shut down the agency in favor of botco, the SaaS company? [03:10] >> No. I hired a management team and replaced myself with other people and turned over the reins to my business partners and then started this company. [03:17] Did you were you able to did you sell something there? Did you get a was there a cash event for you that you didn't plow that money into botco? [03:23] >> No. No. [03:24] Okay. So you still have exposure equity upside in the agency or rev share or something like that over there? [03:29] >> Yeah. Exactly. Mhmm. [03:30] I see. Okay. But now you're building botco. Okay. Now I understand this is Massage Envy is your first customer. Now how many customers are you working with today? [03:37] >> We have about 30 now. [03:39] 30. Wow. Okay. Got it. And and walk me through how you're getting those customers. Is it still all from relationships from the agency side or are you running some other growth tactics? [03:46] >> No. No. No. That's just how you usually get your first couple of customers. Now we have a sales team and a marketing function. So, you know, we hold webinars. Actually, we just had one earlier this week. We have a lot of webinars. We will put on events. People will either sign up because they're interested in the topic. We provide them with really useful content and usually [04:07] Rebecca, go deep with me on the webinar for a second. Very few people [04:09] >> will be learning as well. [04:11] So let's go deep here. Know I'm gonna ask some weird questions, but stick with me. Sure. No How many people showed up live on the webinar? [04:17] >> About 25 or roughly. We'll usually have maybe about a 100 that will register for the live for the events. Usually, a quarter will show up to the live event and then another quarter will watch it on demand. But what's really interesting is the people that show up are super engaged, right? They really want to learn about this topic. They are spending, you know, a good hour of their day doing this. So nobody spends that type of [04:41] >> time unless they're really, really make trying to make a big decision. And so when we follow-up with them and try to, you know, set up a meeting, they're usually very keen [04:49] at So you don't try and close them live. You don't say go to this checkout page and pay today. What like, what's the call to action, the last three sides of the webinar? [04:57] >> Yeah. Usually, it's we'll we'll usually have some kind of program where they can meet with us to put together a demo that's uniquely suited for their company. And so that's that's the call to action is like, hey. [05:06] I see. [05:07] >> Why don't you set up a meeting with us? We'd love to put a demo together for you to actually show you how this would work for your business. And then from there, we we close that after that. [05:16] Okay. 100 registered, 25 show up, another 25 watch on demand. So 50% end up engaging with webinar somehow, then some portion of those folks book book a demo. Go back top of funnel. How do get the 100 registered? [05:26] >> Oh, yeah. A lot of different ways. So tons of social media efforts. So we share it out with our individual networks. We've heard it all organic. We don't really pay much for social media promotion. We do, like, a tiny bit, maybe a couple $100, but we don't spend thousands on promoting it. We just the attendees come from either our shares or our shares of shares. Right? So we'll have people who we know, like, share it out [05:48] >> for us. We also have a really good solid subscriber list, you know, people who have engaged with our content before. [05:56] How many, Rebecca? [05:57] >> Our webinars I would say we have upward of, like, maybe fifty, sixty thousand people in our database already. [06:03] And you've been building that since '27? [06:04] >> Yes. Yeah. Please tell us more about your products and services so they're all opted in because that's a must be safe. And so we, of course, let them all know and oftentimes that we'll see that they forward it to their teams or to colleagues. We also get on a lot of podcasts like this and talk about the fact that we might be holding a webinar or have something coming up, and so we get new participation that [06:31] >> way. I'm very involved in the community, so I do a lot of stuff in the healthcare and technology industry. So I tend to kind of be at a lot of events and I just tell people what's going on and that's how they also hear about it. So there's a little bit of organic social media and then of course, just reaching out to our database and letting them know that these events are happening. [06:53] And now, Rebecca, can I do the math here? 30 customers at an average of 30,000 a year would mean you're about a $75,000 a month right now in revenue. Is that about right? [07:03] >> Yeah. That would be about right. Yes. [07:04] Okay. When [07:05] >> you heard customers that are grandfathered into our earlier pricing, so they're not paying as much, but the rest, yeah. [07:11] So maybe closer to like $65,000 to $70,000 a month in revenue. Wait. Can you do so you have what what do we have? We have we have sixty more days left in the year. It'd be very cool if you were to break a million dollar run rate by the end of December. Do you think you guys can do it? [07:24] >> Oh, I I I don't think so. No. We're gonna we're projecting that for next for next quarter. [07:29] I see. [07:30] >> Okay. Notoriously, it's the sales month. And so we really only have this month left this call in in the short month because of Thanksgiving. [07:37] Yep. And help me understand growth. So if you're doing about $60,000 a month today in revenue, where were you exactly a year ago? Do you remember? [07:44] >> Yeah. We were in ARR terms, we were at about 150 roughly. So it was we've more than tripled our business, almost quadrupled our business. [07:54] Yeah. Yeah. I mean, so you've gone from like $12,000 a month or $150,000 ARR up to $60,000 a month today. That's incredible growth. Now, you done all this bootstrapped or did you raise? [08:04] >> No, we raised money. So we started the company bootstrapped, then our first customer actually helped pay for for the product in advance, which was very nice. [08:13] How much did a Massage Envy pay upfront? [08:16] >> I don't think they would want me to share that, but nice try though. So they were our first customer and they were willing to pay upfront before we even had anything to deliver to them, which was really great. So I kind of see them as a little bit of an they took a chance on us. And then we [08:37] >> raised money from angels, which is probably raised about 1,000,000 from angels, and I got some grant money from the state of Arizona. So Arizona has a really great startup ecosystem and they actually give out grants to outstanding startups. We [08:53] got How much from that? [08:53] >> A $150,000. [08:55] Wow. [08:56] >> From the state of Arizona, which was great. And then we got another $25,000 grant on top of that from another startup oriented group here. So that was actually very helpful at the beginning when you don't have a lot of capital to work with. [09:07] What year did you raise that million from Angels? [09:10] >> It was '20 late twenty nineteen was when we started. We raised just a couple 100 k in 2019, and then 2020 was when we raised the goal. [09:18] I see. I see. So all in, you raised a million? [09:22] >> No. After the angel funding, we raised for institutional VC, then we had we we raised another 2,500,000 from institutional VC. [09:30] I see. And I believe based off my notes that that 2.5 wasn't it closed in February of this year. Is that right? [09:36] >> Right. So we had a a chunk of it closed in February, and then we had a couple of investments that came in after. But, yes, it was at the beginning of this year. [09:44] Tell me more about why you felt you needed to do that. Obviously, ownership is really important. You took dilution when you did that. Why did you need to raise capital to build this? [09:53] >> I mean, technology is is tough to build, especially what we're trying to do. It's not an application you can build with, you know, a no code platform. Right? So we have significant engineering team, about 10 engineers that work on our product. And, you know, what they're doing is coming up with technologies that handle, for example, fast knowledge acquisitions so we can train AI virtual agents faster. We have to be able to understand concepts like, you know, [10:22] >> what do people mean when they're looking for benefits coverage? If we connect to other systems of record, which we have to have an API development effort that's going on where we're connecting to marketing platforms, CRM platforms, and EHR platforms. So there's a lot of integration that has to be done in order for our product to be really useful to our customers. We need engineers that are building those APIs constantly. So, yeah, it's a it's a it's [10:47] >> it's a big effort from an engineering standpoint. And then, you know, you have to hire people to sell and you have to hire people to market and you have to do all those things. So not something that I could have done by myself by any means. [11:00] Well, if you're going to have to raise money to invest in technology, the second best thing you can do is you as a speaker, I bet we're able to tell a really good story with your deck to try and get a valuation that minimized the dilution you took when you raised $2,500,000. What valuation did you end up raising the 2,500,000 at? [11:15] >> So that money, the 2,200,000, we raised it like, I wanna say close to by the time it was all said and done, you know, we were raising our valuation kind of uptick to about $15,000,000? [11:30] Already [11:31] >> taken yeah. But we had already taken a little bit more. So that was like in the $3,000,000 range where we got to the 15,000,000. So we did the step up strategy. It was actually a really great approach. Recommend everybody read. There's one of my investors is Ash Rust. He has a company called a firm called Sterling Road, and he has this really great strategy for how to step up your valuation little by little. So rather than taking [11:55] >> all the money at one price, he's basically create the system where you create, I guess, scarcity around different price points. So you say, okay. I'm gonna raise 250 k at this price, and then you quickly close that round. And then you raise another 500 at a, you know, maybe slightly stepped up valuation, and then you close that. And what this allows you to do is to more quickly move these people along into making a decision, investors, [12:21] >> because especially in early stage, they're a little bit like, I want to wait, you know, they're always trying to kick the can down the road. They want to participate, but they don't want to get paid too much. And so they're trying to kind of like, delay it obfuscate a little bit. And so this strategy really gets investors to move quickly because [12:39] What paper did you use on this? Was it basically a safe and you just kept increasing the valuation cap? [12:43] >> So I did I've done a combination. So I did at the beginning, convertible notes. Then we actually converted all those notes into securities that we issued stock. And then we had some investors come in after that wanted to invest after the the securities had been issued. And for them, we issued a safe note also using the the step up strategy. So we would raise a small amount at a valuation, close it out, and then if the [13:06] >> next set of investors wanted to come in, they had to [13:08] >> step up the I see. [13:09] Yeah. This is called typically sort of like a rolling close, and it is a very effective strategy. So just to repeat that back to you, Rebecca, you took the first money in sort of this thing at a 3,000,000 valuation. Over time, as you stepped it up, you ended up raising a total of, call it, 2,200,000. And the last tranche that came in was at a 15,000,000 valuation post money. [13:28] >> A little yeah. So you have the numbers a little bit off, but at the end, we ended up with 3,600,000 all in raised to date. [13:35] I see. [13:36] >> 3,600,000 at that $15,000,000 [13:38] Oh, I see. So when you say you did like a seed of the 1.45 in 2020, and then the 2.2 in 2021 is all together. It's just a rolling thing. [13:48] >> So we went from 6 to 15 in that kind of six month period where we were using this stuffing up to be. [13:53] I see. Okay. That's helpful. That's what I was trying to get to. [13:55] >> Yeah. Very cool. It wasn't like 6.8, seven, eight, seven, fifteen in that six months range. So it's hard to tell that's why it's hard to say, like, what did you raise it? Because it was like, well, who are No. No. [14:07] It rolls. Yeah. It rolls. It always it's always increasing. [14:09] >> We're we're constantly moving it up. [14:11] You mentioned 10 engineers on your team. What's the total team size today? [14:15] >> We're 25. [14:16] 25. Wow. Okay. And talk to me about churn. It's critical in a company like this. Do you have dollar expansion yet, you know, considering how big your any of your clients are? [14:25] >> Yeah. So our customers that have renewed this year have all either renewed at 100% or higher. So we have some customers that renewed at 200%, so they actually doubled their subscriptions with us. Some of our biggest customers, that's what they did. And so I would say right now, our expansion, our renewal rate, if you average it all out, is like 130%. [14:48] 130 net dollar retention, that's a good place to be. And then talk to me real quick, sales reps. How many quota carrying sales reps do you have? [14:55] >> Two. [14:56] And and do you set them you know, the standard here is usually set them on a million dollar quota. Base is a 100 k. If they hit quota, they get another 100 k. So it's 200 k on target earnings if they hit the quota for a five to one ratio there. Is that sort of the playbook you're running there? [15:07] >> Roughly. Yeah. Yeah. Yeah. Although we use an we use an uncapped plan, so they don't necessarily have to we set an accelerator in place if they once they meet their quota. [15:19] Oh, interesting. So if they break a million dollar quota or whatever the quota is, then they can start making more in terms of bigger percentages of commission. [15:25] >> Very cool. [15:27] And you have to come back on a year and tell us how that's going. That's an interesting setup. All right, Rebecca, it's time to wrap up. What a story here. Number one, what's your favorite business book? [15:38] >> There's so many, but right now, pitch anything, I would say, because I'm always pitching. [15:43] >> That is a good book. [15:45] Number two, is there a CEO you're following or studying? [15:51] >> You know, that's interesting. I I I look and study a lot of different CEOs, but I would say probably one that I admire is one that's actually on my cap table that I have really worked with closely. His name is Greg Scoresby, and he's the CEO of CampusLogic. [16:05] Of campus what? [16:06] >> CampusLogic. CampusLogic. [16:07] Very cool. Number three, what's your favorite online tool for building botco? [16:13] >> My favorite online tool for building botco? [16:17] Yep. [16:18] There's a tool you use a lot. [16:20] >> Oh, in our company that we Yes. Wouldn't die by. I mean, it has to be Slack probably. [16:27] Number four. How many hours of sleep do get every night? [16:31] >> Five to six. [16:32] >> Six. Okay. [16:33] And situation, married, single, kiddos? [16:37] >> Kiddos. Yes. Three of them. Formerly married. No longer. [16:40] Three kids. Wow. Okay. Amazing. And, Rebecca, do mind me asking how old you are? You don't have to answer. [16:47] >> Of course. [16:48] You don't have to answer. I only ask because it helps give listeners context. Right? So let's take us the the question [16:54] >> It's off by okay. It's okay. I'm happy to tell. I'm in my forties. [16:57] Fair enough. Fair enough. She's 40 years old. You guys heard it here first. All right, Rebecca, take us back to your 20 year old self. What's something you wish that she knew? [17:06] >> I wish that I had, [17:10] >> I would say believed in myself more earlier on. I was very much a learner during that time of my life. And so I put a lot of weight on what other people would say instead of really trying to rely on my own experience and my own intuition. [17:24] Guys, botco.ai, it's HIPAA compliant chat for companies like Massage Envy, right? This sort of space health and wellness. They broke 12,000 a month in revenue exactly a year ago. They've four x'd you every year, now doing over $60,000 a month as they look to break 1,000,000 hopefully next year. She's done this in a very efficient way with rolling closes, 3,600,000 raised with the last most recent valuation at around 15,000,000, using this to fund her team's growth [17:46] and product development. 25 on the team, 10 engineers, two sales reps as Rebecca continues to grow. Rebecca, thanks for taking us to the top. [17:53] One 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 [18:19] Central. Additionally, remember these recorded Founder interviews go live. We release them here on YouTube every day at 2PM Central. 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