How Brandverity CEO David Naffziger grew Brandverity to $6M revenue and 400 customers in 2018.

hello everybody my guest today is David nav Seager he's the CEO and co-founder of brand a Verity a provider of enterprise technology solutions that combat online trademark abuse and help advertisers ensure compliant marketing programs the service enables clients identify abuse and efficiently take action to resort resolve the issues discovered David received his BS from MIT David are you ready to take it to the top fantastic awesome okay so this sounds like a very kind of niche specific product how did you stumble across this space and tell us what the company does and how you make money sure so a couple two companies ago I was I think it kind of a junior co-founder of a company Louisville that developed a technology that maps IP addresses so the the IDS that people use when they connect to the Internet to some extent to physical locations and one of our principal so when you do a search on Google you'll see targeted ads on the right hand rail or on the top that are related to where you're physically located and kula at the time I don't know if they still do but they were a provider that that technology to Google our core customer though were online fraud department so if you made a purchase online and let's say you were shipping it to Miami you're physically sitting in Austin but maybe you were accessing the internet from Kazakhstan that might be a sign of something about to happen and you might want to give that person a call or talk them a little bit more I'm so along the way I kind of really met a lot of people in the fraud teams of these took ecommerce companies and got a real appreciation for kind of the thrill of the chase out of some extent and the bad guys that they catch so fast-forward to a company after that where an engineering team for a comic called Duty's book that was a once upon a time Yelp competitor and we became an affiliate I was one of the ways that we made money and we were active in the the gap affiliate program and we began to get purchases from customers who had visited a review of a Gap store or then go and make it purchase online and using an affiliate link or something like that so our marketing team began to think about how do we get more money from these pages so is there an arbitrage opportunity there introduced yes so they began buying paid search ads to send users to those pages that we made money from and you know within the day or two the gap affiliate manager contacted us and said hey you're not supposed to do that that's against our Terms and we had no idea but you know we pulled down the ads but from where we cents yeah no we saw lots of other affiliates doing the same thing and so we asked a field manager how what would we need to do to get the same permission that everybody else has and the foot manager's response was there is no one else I'm just you and over some back and forth we realized that our team sitting in Seattle saw a really different set of ads then I as she saw sitting in San Francisco and it turns out the affiliates were doing the cold reverse geo targeting right so they're running they're excluding San Fran totally exactly and so this was the sort of first sign that there's sort of a problem here that's not well solved so we we wound down Ginny's book and has this thing about with it and actually flew down to Affiliate Summit that which is says they're the largest affiliate conference yeah and kind of walked around and talked to folks like hey is this a problem you have and there were a lot of yeses and is this how do you solve it today and not a lot of good answers and would you pay money for a solution that did that and sort of got enough of an interest to feel like it was worthwhile to build you know sort of a V Y liner an alpha alpha product brand Verity yeah by the way what year was this in 2008 okay well that's great okay good so that that's really helpful to get the jest as a company and then walk me through today I mean what's the revenue model is it a SAS bass player so it's a SAS base play it's a subscription service we sell two products from one that one others paid search for various forms of affiliate abuse for partner compliance and trademark protection and you know it will have some data that shows where to prioritize your efforts and the second product monitors web content we call it web compliance for really like regulatory concerns are I think that the problem that we solve exceptionally well revolves around are your partners promoting you in the way that you've required them to and so that might be critical companies who have very specific terms for how their cars are promoted won't be more general brand compliance concerns and so do you have to put us alongside blank or in a way that sort of aligns with our brand image and so on so forth and so we have a politic in David what are for these products on don't go down every customer color but on average with our customers paying per month for this so paid search kind of runs from I think we have a starting price somewhere around 250 dollars a month our average selling prices are sort of just shy of a thousand a month know about compliance you know sort of an order of magnitude higher yep what are they 50/50 in terms of the revenue split or is one way outpaced the other all right so our paid search product is by far our oldest and so I'd say that eighty percent of revenue today but the younger protocol compliance sort of has a faster growth rate yep yep that makes sense that makes good sense and then walk me through so again launched in 2008 it's your oldest product how many folks have be scaled to in terms of customers are serving on that platform that we're sort of probably little or 400 direct relationships yeah a lot more customers will the agencies or affiliate networks and they'll monitor and I sort of tens to hundreds of thousands of brands underneath that yeah and for them folks paying you know color an average of a brand new month it's fair to say guys are doing about what 400 grand a month in revenue so are we just crossed explain great so we celebrated that milestone and I'm a few months back that's good so it's about 500 grand per month that's healthy and have you bootstrap the company already raised Italia bootstrapped oh I love that that's great how be resist the urge to raise so it's interesting you know my first two first two companies were sort of your classic metro plays so clova and Jewish book both companies raised ton of money I want to say kula over its lifespan sort of close to 50 and JJ spoke I think you know close to 10 and ish give or take and and you know I think I got to see a lot of the pros at that model offers and and you know some of the challenges as well and I think it also got sort of out of I think my system and I think if someone something that's relatively common sort of both should of the view that raising around is success in and of itself and you know I sort of having seen both those models play out it was sort of interested to try something different yeah that makes good sense and it's better for your stress levels right as I think I I won't say that you know or should have been the never raised you know it's not sort of a core flux let's talk about difference but I think we also as we've been growing are we've never I think identified sort of the moment of and then we become huge Jon so it's also never really felt like a play that would you know we'd really be able to accelerate growth are you growing at right now so five hundred grand today per month in revenue what were you at a year ago July 2017 grows sort of between 20 and 30 percent year okay so call it maybe 400 ish 420 something like that a month a year ago yeah yeah that's good that's great bootstrap that's what's wonderful and round up some the unit economics churn is critical with your turn today mmm turns great question so churn is something that we spend a fair amount of time looking at and one of the things that you know we've I think begun finishing as a business has been to really focus on moving from small or lots of smaller accounts to sort of fewer larger accounts and so we sort of see relative turn numbers that are different by customer size but our roast churn is sort of a little under 20 percent okay that's gross turn annually yeah okay and have you because of expansion or ever things like that is your net revenue retention annually above 100 no net revenue tension is below 100 okay has been above 100 overtime I serve as company aged it we sort of when you got sort of you know 20% gross churn that sort of you know gives you an average lifetime value of kind of five years ish so below five years we had absolutely positive net retention but were net maybe 90 plus percent yeah yeah that makes sense you assume a five-month lifetime value what do you some that that is in dollar figure oh sorry five-year lifetime value yeah yes so so you get sixty months yeah sorry what do you assume like time by and mother we're just talking about your 80 percent product that your oldest product so I'd have to I'm gonna back up envelope that live it so our lifetime value you know we're looking at roughly 10 grand a year sort of 50 grand ish yep that's that's about look if you have our provable grand a month and it's 60 months it's 60 grand right there you go are you what about...