How Brandfolder CEO Steven Baker grew Brandfolder to $24M revenue and 4K customers in 2020.

good morning everybody my guest this morning is Luke Beatty he serves as the chairman and CEO of brand folder a digital asset management platform located in Denver prior to that he served as the president of media brands at Verizon /ay AOL he co-founded or sorry I found that associate content in 2004 and served as it as its president and CEO and sold that company to Yahoo in 2010 before that he served on the executive management team at wand Inc his expertise is in contextual advertising models online media collection and distribution strategies in his free time Lucas Lee youth lacrosse coach and fly fishes around the world Luke are you ready to take us to the top yeah let's do it all right so tell us what brand fold or dozen what's your revenue model how do you make money yeah so it's a it's a very traditional SAS model and it's a it's a platform that allows brands to manage their digital assets and track the behavior and analyze the use of their digital assets across the web and are you what kind of space are you playing an enterprise small businessman market enterprise and we do some mid market but most of our customers we have about 4,000 customers and I would say more than half of them are brands that you know okay he's on a daily basis and can you give us a general sense of size and are these people paying a hundred bucks a month ten grand a month a million a month yeah yeah the average our our range for the downmarket product for the sort of medium sized enterprise you looking at brands that pay five five thousand dollars a year and then we have a lot of brands that pay up to $150,000 a year for a very tricked-out okay enterprise level product but you're you would say averages maybe in the 5 to 10k range annually a little bit north okay okay fair enough and give us more the back story here so you sold your was it your first company in 2014 to Yahoo or was that not your first yeah yeah that was that was my first company that I started yeah and and we started that in 2004 kind of did a traditional kind of Silicon Valley Sand Hill Road kind of angel round with Ron Conway kind of standard deal and then raised also standard anymore I bet terms were a little different back then huh yeah terms were different and so it's due diligence did notes exist back then uh there were no but they definitely weren't thrown around the way they are today although I think that's that's also starting to the Sun setting on a little bit of those sort of open note raises even raised couple rounds of financing from from South Bank and then we sold that company Yahoo in 2010 and and I stayed there for a while and we actually started brand folder while I was working at a Yahoo and and really spending a lot of time at the company that acquired my company and really along with a couple other folks came up with the need for brand folders so I sort of started brand folder from i from an idea perspective and came up with the product plan and when what year was that Luke found people to build it mm let's see we started brand folders been around for about five and a half years I think from like and incorporated level only twelve yeah and and so we started that company by just putting the money together and finding some engineers in town to start building it I know it wasn't necessarily hey let's have a startup and let's do that I needed the product Yahoo my friend Chris glowed a needed that product at his company as did a lot of other people so we do carve out the IP so that there weren't any conflicts with Yahoo when you did obviously go all-in yeah you know I you know when you when you join a big company like Yahoo you have to sort of very clearly detail what you're working on and and where what boards are on and when or where your investments are and you know I think brand brand management and SAS sort of platforms III I don't think you know I've really raised a flag at Yahoo at that time obviously there their model was really with content and ads so I mean what did that actually happen I mean so you're working you and your friend need it you scrape together some stuff you build it at what point you go wow this thing has escape velocity I should quit Yahoo and go all-in well it took a while I mean we sort of played around with it I I didn't quit you know I actually had another job between which is running the media brands for AOL and Verizon which is very similar to my job of Yahoo so and and I and and so I I didn't start as working as a CEO and joining Steve and the brand folder team until about seven months ago and until before that I had been really just the board chair and really sitting on the board and and and and and participating and from a from a from an investor in board perspective so I think that the the the indication of velocity was more around just you know I'd never seen a company that had built such a clean and and clean and clear and concise product that fit a very perfect niche with such an incredible customer base I think you know it was also a company that was you know after you know tooling around for three or four years and really trying to find its product market fit had gotten to cashflow positive and really was a great thing and I felt like hey you know I can I can come in raise a quick round of financing and we can we can grow this thing into a well many total has been raised our early stage kind of techstars angel stuff I think amounted to about 1.5 and then I just raised around a little bit north five million dollars okay so call six point five in all together and now yeah I think we're probably close to seven okay did you participate in that first five one point five million all around back in the day I put the first money into the company yeah me and other people not by myself yeah good and you kind of you used it as a customer which is a great place to start you kind of stayed a tune over the years as you're you know getting collecting more information probably different brands you're at now you say you go all-in full-time yeah and I spent my you know I spent my weekends and stuff working with these guys on it and yeah it's been a real a real pet project for me I think you know it's funny my my background has been almost exclusively in media and in ads and in content on the big side running you know brands like TechCrunch to Yahoo brands like Yahoo autos and you know big consumer facing media brands and so the the we know which is which is which is a very very difficult business so the prospect of working on a SAS business that I felt like had perfect abilities on predictor predictable revenue or just what I like to call revenue or revenue at all yeah that's that's been how that's that's work so you've been good what's your team size today we have 25 people mostly hosting Colorado except for like outside sales folks in in region okay and where what do you spent I mean 4,000 customers you know that's nothing to shake a stick out there how are you acquiring these guys what are you paying you know all and acquire customer you know it really depends on the product I think you know for a big big enterprise customer like a JetBlue or a you know one of the sort of bigger funder are more kind of some of our bigger huge accounts that we have you know we will pay you know like most SAS companies we can we can we try to have a 12-month payback someone you know we're willing to invest 12 months all right now across all your cohorts about a 12-month payback try to be yeah it kind of really depends on the product we also have a lighter product that this is necessarily for smaller businesses in fact a lot of our biggest businesses like you know like a slack or something they they don't have our biggest our biggest offering so it's really not about that it's more about use case as opposed to a company size so those guys you know a lot of those guys come organically and then their payback is is very very short I think some of our directly sold enterprise stuff where you know we get guys into market we do a lot of demos we show them we do some sales we do a lot of training and you know it's a heavy onboarding some of these brands you know are uploading digital asset libraries of you know tens of thousands of images especially e-commerce people who yeah you know most companies have logos gifts colors fonts and a really important set of brand assets that are kind of common whether you were a landscaping company or or Facebook and and then there's other companies that work in e-commerce and stuff where you imagine you know the company or the product photos product assets so raised before we get too far away from payback I mean you mentioned earlier your average contract by there is about grande so it's faired and you're getting paid back in twelve months so it's fair to say you're spending less than ten grand to acquire these guys at least your core cohort and probably not the coke or horde but our top cohort our most expensive enterprise cohort yeah I mean the averages get crazy over over a period of time where you have to really do it by by what what kind of brand polar brand folder people are buying what are you looking when you look at either turn or attention annually where are you guys at today we try to be north of 90 percent okay in terms of revenue end customer and logo churn yeah both in that and gross net and gross okay so so just to be clear gross logo churn annually is less than 10 percent or said otherwise retention is higher than 90 percent in terms of gross revenue retention you're also above 90 percent now are you at net negative revenue churn we are probably at net negative retention churn certainly on our big enterprise customers yeah yeah you're a donek don't do add-ons and and add new features and and that is that that's pretty common so I think we're unusually unusually good at at managing our attention and our churn I think is that predictable I think that that's it's been that way since day one I predict a dip at some point once we get to a certain certain number I mean I think if you look at you know you look at a lot of research it's very hard to get at a massive SAS scale and try to keep that north of of 83 to 85 worth of gross logo turn right so just number of yeah but most people once they're your scale they stop looking at logo churn and they care way more about revenue sure like net revenue because well yeah but you have but it doesn't matter because you have vastly different price points so you don't care about losing a grand a month customer you care about losing JetBlue right you can afford to lose a hundred small customers but yeah III think we're we care we manage both both RNR you know our goals on it that we track on a daily monthly basis that are on the wall directly across me right now so we look at both sharing numbers but in any case I you know III think it's very hard to keep them as high as they are right now I mean well obviously keep doing it and you know we have the best customer experience team our product compared to the rest of our product compared to most of our competitors is a very premium white glow yeah customer experience yeah I agree with you in terms of logo turn it's hard to keep high up get higher volume but rather than a turn to be the contribution you should be able to grow yeah I would say revenue 10g should be going much better over time yeah yeah interesting now is it a lot of consumer we're starting interrupt you we do a lot of consumer brands and you know consumer brands come and go with the wind right I mean they get Bob yeah so hey do you have pretty predictable expansion of like from year one to year two I do know that account on average is gonna grow 130 percent of hundred fifty percent based on upsells or is that not yet predictable once we get into cohorts we do okay interesting interesting all right good and then last question here before we wrap up with the famous five what do you assume lifetime value is on these guys how do you use lifetime value to help you kind of guide other parts of the business we try to think of about a 10-year customer your ten-year SAS magic customer I mean I think that's really where we are with our retention rates and our ability to hold on to folks that's where we we know we exist so I think that's not that's not out of the question I would say now at the at the board level we we think about that in a very thoughtful way I think we have work to do on on on add-ons and and and adding you know new features to folks I think lots of times we try we try not to you know interfere with with brands use cases I think you know we have you know you take a good segment of ours like like pro sports you the most the pro sports teams as you can imagine are loading in all of their logos all their player images all of the art that they're using in the stadium all that sort of stuff but they're random edge cases that teams have where they're not even doing that which is the most common thing you would do with a brand folder they're doing it in a different segment so we have to really start engaging on moving people in to out cages and into core use cases so that they can get the product better we we haven't spent a lot of time on that you know our our business operates a hundred percent on inbound sales right now so we we have we need to get better at going out and especially to existing customers and moving them to new into new features and building and then in terms of size wise before we close out here you know you mentioned 4,000 customers 10 grand a years basically what is that eight hundred thirty bucks a month so it's fair to say girls are doing what north of three one three two million per month and revenue no because all those are different sizes a lot of those have when we first started the company you know we have probably you know about 700 to 800 big time paying customers enterprise customers the balance of those in the four thousand number are are a lot of early-stage customers when brand folder first started you could buy a brand folder with a credit card online for four very cheap and onwards so you're doing you're being less than three point one a month sure yeah so you know it said otherwise your average kind of customer across your even historical cohort they're paying less than that ten grand annual a CV yeah although we haven't sold those brand folders for years we're actually getting ready to launch a product that's gonna be able to be bought with a credit card here soon but for the last two years you have been able to buy that product got it wouldn't we retain those customers that's good I mean it's good they're sticky what are you doing above have you broke a million a month uh I don't want to see your right now well you hit it you got there you got 30 days left in the year well you break it this year well we we will do it we will double in revenue every like we have every year since we started that's what I'll tell you that's good that's good alright fair enough let's uh let's wrap up here Luke with the famous five number one which is our favorite business book um my favorite business book my favorite business book right now which I just read about a month and a half ago is Zingerman's which is a deli in in in Ann Arbor Michigan which is a very famous deli and if you haven't been there you should check it out it's kind of got a cult following in a college town and they wrote a customer service book that is really amazing it's a very quick short read and it is it details how a brick-and-mortar business has a very unconventional a customer service model and I'll say that the sort of the punch line for the book for me is that if you go into customer service with an expectation that it's like fair you're you're screwed right that way you have to work it is this is an unfair thing I'm gonna be giving way more than I'm getting people are going to be unreasonable they're gonna have unreasonable expectations and you need to meet those so that the book is just called Zingerman's which is the name of the deli and it's a really good book about customer experience number two is their CEO you're following or studying right now I always follow Sheryl Sandberg I think she's really a I've spent some time with her and I obviously follow her like like anybody else that works in digital you know I think she's the most versatile person she's she's unbelievable you know talk about as somebody who is in a complicated cultural situation somebody said enormous personal challenges talk about somebody that has really done b2b and b2c stuff I think she's just a real glow-in-the-dark person who I watch at every turn besides your own with your favorite online tool I think my favorite online tool is Swift on the consumer Swift yes that's the bike right yeah it's it's a it's I'm a bike rider and and somebody likes to be in bike races and Swift is a a venture-backed startup that has built a a very very complex virtual riding experience for training racing and all that sort of stuff and if you haven't you don't have to be a cyclist to check it out the complexity of that product woman I always tell people when I go we can't build this or we can't build that and that'd be so hard I'm always like to go home and look at Swift and then come back and tell me that you can't build that problem guys can go look up they did over 30 million dollars in 2016 revenue growing really fast raised forty five million bucks they just passed 300,000 customers $10 are we had those with CEO Eric min on a couple episodes ago so check that out yeah it's awesome yeah last few here what's your what's your current state I'm sorry how many hours of sleep Luke are you getting every night I'd get eight hours of sleep okay I'm right thumb right down the middle on that and what's your situation married single you have kids I'm married with two little guys all right rolled in a year old Wow and how old are you I'm 47 last question take us back 27 years what he was your 20 year old self new I wish that my 20 year old self knew that that well hustle matters and and the expectation is that that you're working your ass off you need to set goals around what constitutes success and know you could be hustling you could not be hustling that actually matters more you know and that's not a 4-hour work week comment that's just more of a you know the expectation is especially if you're working at a startup that you're working obscene hours and hustling and going crazy but but the reality is if you don't know what constitutes success and you don't have very clear objectives that are you know recite a ball by everybody on your team and everybody around then then you're gonna then you're gonna really struggle and I think when I was you know 27 years ago I spent a lot of time just like thinking that if I just ran hard and hustled and took a lot of meetings and whatever that that would constitute success and that's not the case there you guys have from Luke hustle is important but don't kill yourself pace yourself be smart about what success means to you he's had many successes in the past his current company brand folder really launched in 2012 he just joined about seven eight months ago at the beginning here of 2017 bringing an additional round of capital they've raised about 6.5 million today they've passed 4,000 customers doing well north of 500 grand per month we'll say under a million a month healthy unit economics retaining over 90% of their customers on both a logo and revenue basis each year currently with their team of 12 people sorry their team of 25 people out there I'm Boulder Colorado again helping brands manage their digital assets Luke thank you for taking us to the top yeah yeah real quick people can email me at Luke dot Beatty at Bray folder calm and I'll set him up with a with a brand folder to try we'll stick that in the show notes for sure thanks again Luke appreciate it bye