Cake Equity Revenue, Valuation & Funding (2024)

[00:00] Hey, folks. My guest today is Kim Hansen. He wants a world where everyone is free to be creative and a healthy human being they were born to be. He's a serial entrepreneur, innovative company leader, mentor, startup adviser, social community manager, among many other things, including a mountain biker. He's now building a company called cakeequity.com. It's a cap table management platform for startup founders. Kim, you ready to take us to the top? [00:22] >> Absolutely. Excited. [00:24] Alright. Did you have like a horror story from one of your first startups in the cap table or what? What happened? [00:29] >> Yeah. Definitely, it was It has been a tough journey with with equity personally. First, it was hard to get access to to invest in the companies I wanted to get access to before I was a sophisticated investor. And secondly, in my other company, thought I was early, so I could kind of push a bit and get ownership in that. But I couldn't give ownership to all my other employees as we grew the company, and that was [00:51] >> a big pain. I tried for two years, but it was just too complicated and painful. [00:55] Mhmm. Why was that painful? So like here in The States, obviously, you would have an employee stock option plan, you would issue shares accordingly. We have Carta to manage that. Did you Nothing like that existed where you are? [01:06] >> It was some years back At the time, I was in Portugal building a team there, and it was, you know, the maturity wasn't there at all in regards to the cap table management and equity and all of that. So, especially from from CFOs at that time, it's it was just too complicated with tax and all of that. You know, as you're building a company, you have so many challenges. Understanding the value of using options to empower [01:29] >> and motivate your team wasn't quite there, so there wasn't enough understanding of the problem. And as maybe some of us are looking to Silicon Valley as inspiration at the time, you know, and saying, this is really awesome, this tool. As we're building value, this could be very valuable later on. And, you know, who's gonna who's gonna participate in in getting getting a return in that in that value creation. [01:54] So now focused on this cap table management for startups, what's the start what's an average start up paying you per month or per year to use your technology? [02:02] >> Yeah. It's we have around they pay a 100 Australian dollars for kind of average. Our package is is split in in the kind of early start ups, kind of the ones that are in that product market fit growth place and then for kind of later stage. So, but yeah, we're really targeting those that have already got some funding and they're in that really space where they're they have too many things to do and they're growing and [02:30] >> they need their cap table to really work well for them. And it's super challenging to learn fast. [02:35] So just to be clear, on average, though, these customers are paying something like a 100 Australian dollars a month or 70 USD per month? Yep. And what do you upsell against? Is it dollars of funding raised, number of employees managed, size of ESOP pool, something else? [02:49] >> Yeah. So we have a freemium up to five stakeholders as we call them, which is a combination of employees or investors and advisers that are using the equity. After that, from six and upwards, we have different cohorts that you pay as you go, as you grow the company. [03:03] I see. Okay. And what's the backstory here? When did you launch the business? [03:08] >> Yeah. We actually started as small kind of blockchain company as we wanted to really We're passionate about creating more liquidity in the private equity space, and we saw opportunities in the blockchain space. But we saw that there was an underserved demand in Australia for cap table management. There was nothing here, there was a lot of companies needing that. So, we kind of pivoted into, like, building the cap table solution also because in the blockchain space nobody was kind [03:36] >> solving the legal and compliance and all of those things, which you actually have to solve before you put the platform, the infrastructure for equity transactions in place. So, we started with the cap table platform and yeah, it's been great. [03:50] And Kim, what year? When did you launch? [03:52] >> I'm sorry. That's so cake was kinda like three three years ago. [03:56] Okay. So call it 2018, 2019, something like that. [04:00] >> Yeah. Yeah. Exactly. Okay. [04:02] Oh, 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 [04:25] your 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 [04:49] get 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 [05:11] not 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 [05:37] going 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. All We're right, gonna go back to the YouTube video here in a second, but [05:59] if you 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 [06:25] the interview. Very cool. And have you bootstrapped the company or did you decide to raise? [06:31] >> No. We had a family and friends and fools initial raise in the blockchain, then we pivoted into cake, and then we had a pre seed round and a seed round last year. Now we're going into a pre series a round. [06:42] Okay. Very cool. So, break those down for me. How much did you raise in the pre seed? [06:48] >> That was around $1,000,000 [06:53] dollars. So, got it. So, would have been something like 450,000 USD, something like that. 400 USD. [06:58] >> Yeah. 400 USD. Okay. [06:59] Yeah. And why did you need to I mean, you know dilution very well. Right? Why did you need to raise that capital to build platform, especially- It sounds like you've had some exits under your belt. Why not just self fund it, keep 100%? [07:11] >> Yeah, I think we were definitely also naive at the time, as I think many founders are in regards to equity and understanding how to use it well. So, and it was a bit of an opportunity also to get put a team together, which is really difficult in Australia to bootstrap. I came from I've been living in Portugal for more than fifteen years where it's quite cheap to bootstrap with people. But in Australia, the salaries are are [07:38] >> quite high. So to kind of get kick started a bit with the team, we we needed some funds. [07:43] I see. I see. Okay. So you raised 500,000 early twenty twenty one pre seed round, then you did a seed round for how much? [07:51] >> Yeah. Around 1,000,000. [07:53] Okay. So 1,500,000 sort of total raised last year. And most folks in their seed, they're selling, you know, 20% of the business. Is that about what you sold? [08:02] >> So we actually had an So we had initial round and then we actually had three rounds so far, 500 ks, 1,000,000 and last year we raised 3,000,000 with Jason Calacanis and Rampersand coming in on board. Rampersand is an awesome Australian VC here and you probably are familiar with Jason Calacanis and his book about angel investing and his fantastic LAUNCH syndicate of angel investors. [08:33] Okay. Got it. So before last year, you'd raised 1,000,000 in two tranches. Call those your two pre seed rounds, and you did a formal seed last year for 3,000,000. [08:40] >> Yep. That's it. [08:41] Okay. Sold between sort of 20% pretty standard? [08:44] >> Yep. Exactly. Okay. [08:45] Okay. Very cool. So that would be what is that? That's be like a 15 3,000,000 on like a 15, you know, million dollar pre money valuation, something like that. [08:53] >> 10,000,000 pre pre money valuation. Okay. [08:55] That's that's fair. And and and I guess what Strategically, why take what is that? You know, 15 again, 20% dilution. Right? Did that enable you to get in some, like, strategics in that round or or why do the deal? [09:07] >> Yeah. Absolutely. And and also just get these these partners on board like the VC and Jason Calacanis and his network. So, that's [09:17] So, you make them use your cap table management tool. Is that what you mean when you say a partner? [09:21] >> Well, more as, you know, there's a brand there and there's a huge network people and there's a lot of learnings we can get from them in that space. They're obviously really, you know, understandable of equity and all of that, bringing that in as well as we started in the Australian market. We were kind of a service offering in the beginning, sales led, and we had to shift to product led growth, which was a very painful journey [09:45] >> until, you know, it starts taking off and you get product market fit and all of that, which happened around like one and a half years ago or something, and then it really started growing. So, like, as you do that journey, it's not a straight line, you know. It's You do a lot of There's a lot of challenges to get to that product market fit where you're just trying to focus and you throw a lot up on [10:08] >> the wall and see what sticks until you get that. And then you start really making the engine run more and more smoothly as we've been doing the last year and really understanding all the data and how to benefit well from that. [10:20] And how many customers today? [10:23] >> So we have around 3,000 people using the platform. We have, yeah, 650 or something paying customers. [10:30] Okay. That's So that's pretty healthy conversion rate in terms of product led growth. Right? So what's the paywall? What's freemium? Then when do they see that first paywall? Is it up to the six stakeholders? Is that what it is? [10:40] >> Yeah, exactly. And that that depends, of course, to be what state you're at or if you want to go and unlock some of the the better features as well. Most of the features are are in the free version. But if you really need to tap into the power of cake, then it's good to upgrade. [10:55] And six fifty customers paying on average $70 month. That puts you at like $45,500 a month in MRR or something like that? [11:04] >> Yeah, we actually at, I guess, around 70 k MRR. [11:09] Oh, great. So you'll break the million dollar run rate here by the end of the year for sure, right? [11:13] >> And we have negative retention rate, so people tend to [11:17] Well, not negative not negative return, negative churn maybe. You don't want negative retention. [11:20] >> We have a very low churn and we have, you know, the customers keep paying more over time, which is an awesome thing. [11:29] Yeah. So, that for me real quick. What's net dollar retention? A 100%? [11:34] >> 105%. 105. We haven't realized that or looked at that at all. So, that's just kind of awesome to see that there's big potential there for us to grow the engine. [11:43] Well, I mean, something like cap table management, I mean, that is not something that's easy to rip out once they're in, right? I mean, that's a pain in the butt. [11:49] >> It's extremely sticky. Yeah. So, it's amazing. And, yeah, as I was getting into before, one of the big challenges and why we have been asking, needing more funding, I guess, was to go global, which is what we're doing now. So, we are we're in the three big hubs of, you know, The UK and US and Singapore as well as Australia, we've opened in nine other countries, and we're expanding extremely fast in the the world. [12:15] If you're doing about $70,000 a month today in revenue, where were you exactly a year ago? [12:20] >> I think around 10 k or something. [12:23] Around around 10. Well, so you I mean, you did that funding round at a 13,000,000 post money valuation with 10,000 in MRR? [12:31] >> Yep. Yep. [12:32] That's a big I mean, that's a massive multiplier even for US standards, right? What enabled you to get such a high multiple when you were so early? [12:41] >> Yeah, I think, you know, it's obviously a hot market and all of that. And as we had really strong growth and big support [12:50] What do you mean really strong growth? I mean, that was You were at mean, you're big now, but you were only at $10,000 a month in revenue. What do you mean strong growth? [12:56] >> We had a lot of users and we had like 200 partners in Australia and there was no there was no competitors really here. We kind of, you know, we're showing that we're winning the Australian market and we've pretty much done that. We have 20% market share in Australia that is growing every day. So, I think that's that potential was definitely there. [13:18] Mhmm. Yeah. And I mean, just for context sake for the audience, I mean, that's effectively 120,000 in ARR at a 13,000,000 post money valuation is something like eighty, eighty four x multiple. I mean, that's I mean, you're growing into it, but that's [13:31] >> We're just a little bit long, but maybe we're a little bit more. [13:33] I think Okay. You were more than 10,000 in MRR? [13:37] >> April, we were at 240 k ARR, [13:41] I think. Okay. A little higher. A little higher. Yeah. Yeah. Still Okay. But you're growing Point is, you have three hubs. You're also in Australia. You're growing into it nicely. What what do you What's the what's the playbook here to, like, sell more things to the same customer base? Right? What's the next product look like? [13:56] >> Yeah. We we're definitely betting on remote teams as we've seen the likes of remote hiring companies like Deel and Oyster and all of those are growing exponentially. The whole world has changed to become a globally connected world. So, we think less and less about borders and regions and all of that. [14:17] Well, but what's playbook there? I mean, Deel, Remote, Oyster, these are all growing very fast. What's do you- Have you identified a mousetrap you think you can build in that space and get some market share? [14:26] >> Yeah. So, we can definitely see, you know, we have our bread and butter and our awesome product that works really well is giving options to your employees and start ups should be able to hire globally and to tap into a global talent pool. So, that's what we can perfectly help them with in regards to the equity. So, working alongside these remote hiring companies that we're doing partnerships with is, yeah, where we can really tap into that [14:54] >> growth that is happening there and get our product out. We are strongly convinced that, you know, equity should be borderless. Just that we see, like, there's a lot of ideas around the blockchain space to make this happen just without a lot of the legal stuff. We put the legal and compliance. [15:13] Yeah. Mean, if you can figure all this out, you save people a lot of time because the last thing I wanna do is go figure out how to issue options to my employee in Bulgaria. I have no idea what the tax laws are over there and I will never go figure it out. [15:23] >> Exactly. As well as getting investors overseas so we can just break down the barriers that are currently [15:30] What's the team size today? How many folks full time? [15:33] >> We are around 25 people. [15:36] And how many engineers? [15:39] >> I think we're seven, eight engineers. Okay. [15:42] Pretty pretty heavy there. And and I guess talk to me more I mean, go to market. I usually would ask about CAC, but it sounds like a lot of your growth is going from these partners. Do you pay them a kickback? Are they an affiliate? [15:52] >> Yeah. We have different types of partners. So we have partners that are just kind of referring us and so there's a discount there. [16:00] How big? Like a 30% discount or something? [16:03] >> There's a 20% discount. And then we have operational partners that we work closely together with that we bring leads to them and they give us a referral fee as well. So, and then we have more close strategic partnerships, which depends on on the deal. [16:21] I see. I see. So do you have a CAC today? Have you have you calculated that or no, it's not big enough or it's not important? [16:28] >> It's less than a thousand dollars and we can optimize a lot on that as we get our SEO engine working well. This is going to be reduced a lot. [16:36] I see. Interesting. Okay. Very cool. This is a great story. Let's wrap up here with the famous five. Number one, favorite book. [16:45] >> Being brilliant. [16:47] Number two, is there a CEO you're following or studying? [16:55] >> I mean, it's impossible not to constantly look at Elon Musk and what's going on, whether you try to or not. [17:03] >> Polarizing figure. [17:04] Number three, what's your favorite online tool for building cake besides your own? [17:09] >> I would say ProfitWell is is a fantastic tool. [17:12] >> Yep. [17:13] Number four, how many hours of sleep do you get every night? [17:16] >> I sleep around seven on average. [17:19] Okay. And what's your situation? Married, single, kids? [17:23] >> I'm married and have one child. [17:25] One kiddo. Very cool. And how old are you? [17:29] >> I'm 47. [17:30] 47. Last question. [17:31] >> Something you wish you knew back when you were 20. [17:35] >> Just start the start the entrepreneur journey right there, right then, which I think I did, does not, very consciously. [17:44] Guys, he's launched a bunch of companies, realized how how difficult it was to issue equity to both local employees, but more importantly, employees into today's remote world. He wants equity to be borderless. He's executed on that vision at cakeequity.com. Their last raise was a 3,000,000 seed on a 10,000,000 pre money valuation. They grew from about $10,000 a month in revenue last year to about $70,000 a month today. So really healthy growth as they look to [18:08] continue to scale for their six fifty customers who use them for cap table management, team of 25, eight engineers. Alright, Kim. Thanks for taking us to top. [18:15] >> Thank you so much, Nathan. Have a good day. [18:19] One more thing before you go. We have a brand new show every Thursday at one p. M. 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 [18:43] Thursday one p. M. Central. Additionally, remember these recorded Founder interviews go live. We release them here on YouTube every day at two p. M. 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, [19:04] whether it's an acquisition, a big fundraise, a big sale, a big profitability statement or something else. I don't want you to miss it. Additionally, if you wanna 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 [19:26] what people are saying. Sign up 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. [19:46] We have to counter those people. 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.