How Cake Equity Reached $840K ARR and 650 Paying Customers with a PLG Model (Interview with CEO Kim Hansen)

Introduction and Kim's Background

Nathan Latka

00:00Hey, 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?

Kim Hansen

00:22>> Absolutely. Excited.

Cap Table Horror Story and the Problem

Nathan Latka

00:24Alright. Did you have like a horror story from one of your first startups in the cap table or what? What happened?

Kim Hansen

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.

Why Equity Management Was Painful Early On

Nathan Latka

00:55Mhmm. 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?

Kim Hansen

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.

Pricing and Average Customer Value

Nathan Latka

01:54So 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?

Kim Hansen

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.

Nathan Latka

02:35So 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?

Kim Hansen

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.

Nathan Latka

03:03I see. Okay. And what's the backstory here? When did you launch the business?

Kim Hansen

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

Company Origin and Pivot from Blockchain

Kim Hansen

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.

Nathan Latka

03:50And Kim, what year? When did you launch?

Kim Hansen

03:52>> I'm sorry. That's so cake was kinda like three three years ago.

Nathan Latka

03:56Okay. So call it 2018, 2019, something like that.

Kim Hansen

04:00>> Yeah. Yeah. Exactly. Okay.

Nathan Latka

04:02Oh, 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

04:25your 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

04:49get 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

05:11not 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

05:37going 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

05:59if 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

06:25the interview. Very cool. And have you bootstrapped the company or did you decide to raise?

Fundraising History Overview

Kim Hansen

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.

Nathan Latka

06:42Okay. Very cool. So, break those down for me. How much did you raise in the pre seed?

Kim Hansen

06:48>> That was around $1,000,000

Nathan Latka

06:53dollars. So, got it. So, would have been something like 450,000 USD, something like that. 400 USD.

Kim Hansen

06:58>> Yeah. 400 USD. Okay.

Nathan Latka

06:59Yeah. 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%?

Kim Hansen

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.

Nathan Latka

07:43I 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?

Kim Hansen

07:51>> Yeah. Around 1,000,000.

Nathan Latka

07:53Okay. 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?

Seed Round Details and Investors

Kim Hansen

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.

Nathan Latka

08:33Okay. 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.

Kim Hansen

08:40>> Yep. That's it.

Nathan Latka

08:41Okay. Sold between sort of 20% pretty standard?

Kim Hansen

08:44>> Yep. Exactly. Okay.

Nathan Latka

08:45Okay. 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.

Kim Hansen

08:53>> 10,000,000 pre pre money valuation. Okay.

Nathan Latka

08:55That'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?

Kim Hansen

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

Nathan Latka

09:17So, you make them use your cap table management tool. Is that what you mean when you say a partner?

Product-Led Growth Transition

Kim Hansen

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.

Nathan Latka

10:20And how many customers today?

Customer Count and Freemium Conversion

Kim Hansen

10:23>> So we have around 3,000 people using the platform. We have, yeah, 650 or something paying customers.

Nathan Latka

10:30Okay. 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?

Kim Hansen

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.

Nathan Latka

10:55And six fifty customers paying on average $70 month. That puts you at like $45,500 a month in MRR or something like that?

Kim Hansen

11:04>> Yeah, we actually at, I guess, around 70 k MRR.

Nathan Latka

11:09Oh, great. So you'll break the million dollar run rate here by the end of the year for sure, right?

Kim Hansen

11:13>> And we have negative retention rate, so people tend to

Nathan Latka

11:17Well, not negative not negative return, negative churn maybe. You don't want negative retention.

Kim Hansen

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.

Nathan Latka

11:29Yeah. So, that for me real quick. What's net dollar retention? A 100%?

Net Dollar Retention and Stickiness

Kim Hansen

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.

Nathan Latka

11:43Well, 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.

Kim Hansen

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.

Nathan Latka

12:15If you're doing about $70,000 a month today in revenue, where were you exactly a year ago?

Kim Hansen

12:20>> I think around 10 k or something.

Nathan Latka

12:23Around 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?

Kim Hansen

12:31>> Yep. Yep.

Revenue Growth and Market Share in Australia

Nathan Latka

12:32That'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?

Kim Hansen

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

Nathan Latka

12:50What 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?

Kim Hansen

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.

Nathan Latka

13:18Mhmm. 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

Kim Hansen

13:31>> We're just a little bit long, but maybe we're a little bit more.

Nathan Latka

13:33I think Okay. You were more than 10,000 in MRR?

Kim Hansen

13:37>> April, we were at 240 k ARR,

Nathan Latka

13:41I 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?

Next Product and Global Expansion Strategy

Kim Hansen

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.

Nathan Latka

14:17Well, 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?

Kim Hansen

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.

Nathan Latka

15:13Yeah. 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.

Kim Hansen

15:23>> Exactly. As well as getting investors overseas so we can just break down the barriers that are currently

Nathan Latka

15:30What's the team size today? How many folks full time?

Team Size and Go-to-Market

Kim Hansen

15:33>> We are around 25 people.

Nathan Latka

15:36And how many engineers?

Kim Hansen

15:39>> I think we're seven, eight engineers. Okay.

Nathan Latka

15:42Pretty 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?

Kim Hansen

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.

Partner Network and Affiliate Model

Nathan Latka

16:00How big? Like a 30% discount or something?

Kim Hansen

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.

Nathan Latka

16:21I 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?

CAC and SEO Growth Engine

Kim Hansen

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.

Nathan Latka

16:36I see. Interesting. Okay. Very cool. This is a great story. Let's wrap up here with the famous five. Number one, favorite book.

Kim Hansen

16:45>> Being brilliant.

Nathan Latka

16:47Number two, is there a CEO you're following or studying?

Kim Hansen

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.

Nathan Latka

17:04Number three, what's your favorite online tool for building cake besides your own?

Kim Hansen

17:09>> I would say ProfitWell is is a fantastic tool.

17:12>> Yep.

Nathan Latka

17:13Number four, how many hours of sleep do you get every night?

Kim Hansen

17:16>> I sleep around seven on average.

Nathan Latka

17:19Okay. And what's your situation? Married, single, kids?

Kim Hansen

17:23>> I'm married and have one child.

Nathan Latka

17:25One kiddo. Very cool. And how old are you?

Kim Hansen

17:29>> I'm 47.

Nathan Latka

17:3047. Last question.

Kim Hansen

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.

Nathan Latka

17:44Guys, 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

18:08continue 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.

Kim Hansen

18:15>> Thank you so much, Nathan. Have a good day.

Nathan Latka

18:19One 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

18:43Thursday 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,

19:04whether 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

19:26what 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.

19:46We 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.