Case Revenue & Valuation (2019)

hello everyone my guest today is bahar on sorry she's a practicing attorney and the co-founder of case one she graduated magna laude from uh jd with uh from whitaker law school where she specialized in business law and was an active editor of the law review now today she's building out a case in legal project management system in case one but are you ready to take us to the top sure all right so it sounds like practicing attorney here where did you get your software muscle to build a software company so i i found my co-founder who's the tech guy i knew nothing about technology but i've learned a lot since he's not your husband is he no okay just make it just making sure you know that happens all the time and i gotta ask all right so for people not comes for free exactly all right so for people that are not familiar with the company help me understand what you do and what's your revenue model are you pure place ass yes we are um we we actually have a few different softwares or modules we call them we started out with the case management system for legal and then we kept on building and now we have bots we have doc assembly we have knowledge management we have a lot of different softwares that integrate with each other that you can build up will be self-service robotic law firm or legal department auto okay and so on average what are companies paying you per month or per year to access the technology uh the case one subscription model it it has a huge range it ranges anywhere from let's say 100k to a million um per year per month what's that per year per month a year okay per year so minimum though every customer is paying at least a hundred thousand dollars per year and then some of them go way up north of that yes okay very cool and put this on a timeline for me when you launch the company uh we launched the company three years ago in the us we've since expanded a lot but my co-founder actually had his company in eastern europe and it existed before i came on board and he had a huge development team in place so the company itself as a whole is quite old but i consider ours only three years okay so 2016. i mean so how did you guys have the equity conversation early on does he own the majority of it because he was doing it before did you get majority or how did you have that conversation yeah he owns majority of it he owns a little bit more than i do um of course he put in the technology and the initial investment and uh i came on board as the ceo and the lawyer to contribute building the software and what have you scaled to today in terms of total customers on the platform so we have over three thousand clients now globally uh the u.s side again it's a little bit slower with with uh the traditional culture of lawyers here but overall globally it's over three thousand okay and how many of them are actually paying all of them all of them paying clients in the us two non-paying clients that were our first users other than that everybody paying okay so all three thousand clients are paying again something per month how did you get your first 100 customers signed up do you remember uh the first hundred clients uh where on the u.s side it was it was crying and tears and blood it was hard work to get the first hundred signed up and onboard it of course but what'd you do though tell me how you did it uh i still do a lot of the sales i did it personally with with my team it's some in person meetings that we squeezed our way away and we took some we attended some conferences and a lot of it just cold calling just pick up the phone and call and try to get through it well but help me understand how you actually did that so you sit down in the morning back in 2016. you're on a cold call today what do you search on to find websites of companies and then the phone numbers that you think might be great fits for your software so we actually made a big mistake our first year and we started targeting law firms small law firms which which wasn't the general international user of our of our uh platform so with that it's exactly that we looked up local law firms starting with local law firms and started calling started trying to ask for either in-person meeting or a shared screen um i had some lists uh on my own that i had gotten from having attended a couple of conferences a few months before so that was helpful not too helpful because the contact information is never really that great but really just google i mean stalking abilities have really improved since then i found better ways but i also utilized social media that was different at a time i i was able to target some younger attorneys and the cell cycles were easier but other than that just exactly how you described and bahar have you guys chosen to stay bootstrapped or do you choose to take dilution and raise capital uh we're still bootstrapped we haven't raised any we're talking to some funds but um the company overall is is profitable right now so we're not in a rush yeah how i mean when you say profitable being like 10 a month to the bottom line or just barely break even um it's a little bit over that it's it's around 10 or more but the us i if we want to separate out different countries because we launched in latin america and we launched in the middle east and now we're launching in asia and we're using a lot of the profits to keep reinvesting to grow the company so if we want to break down the the companies us is still a little bit of you know below but if you look at the whole company though 10 to the bottom line very cool what's the team look like today how many folks uh 300 okay and where's everybody based you guys all spread out or a central location it's spread out everywhere it's we're literally everywhere uh the development team is a little bit more central they're based out of europe there's 150 of them who work on product the rest of the team is spread out okay and then look churn especially with law firms i mean this is a really critical problem with sas companies right so over the past 12 months what does your churn look like and what are you doing to try and keep that low um it's it's less than 10 percent overall um that's annually revenue churn yeah we we focus a lot on engagement and we have an interesting subscription model it's we it's actually not user based so we want to encourage companies to not only bring in like their their legal team but also to bring in their outside counsel to work on the same platform and bring in more employees and the more engagement you have the less churn so we focus a lot on engagement with wine and what do you upsell based on if you don't have sell based on seats and modules modules okay so feature based do you have any utility based like usage based upsell for example number of contracts processed per month we do we do so so the way we price it is the size of the team and uh kind of usage and a couple of our modules for example we have a knowledge management and that's based on gigabytes based on data some are based on number of templates our bot has number of conversations attached to it so we kind of limit it up okay so just you do actually you just said you do price based off team size so you do have a seat based model um we do it based on company size so if it's a if it's a really large company with a really small legal department they could still fall into uh this small uh size but we max out the number of seats for example a small is considered one to 49. got it but you don't charge per license it's for that so back to the churn question if you have about 10 you know the cohort you signed up exactly a year ago let's say that 10 that revenue churns do you have enough expansion revenue to more than make up for the 10 of lost revenue again ignoring new customers you do are you how far above 100 net revenue retention like 120 130 do you know i i don't know for sure but around you know alex are my co-ceo the company and i want to tell you that i'm not the best one with numbers but is there a target is there a target for that do you have an internal target for net revenue retention or no uh sure i'm sure we do he's actually here let's get him on oh is he in the room yeah oh alex yeah bring him in what's he doing sitting over there eating like potato chips while i grill the hell out of you why isn't he here you go you go handle it and i'll stay on one second okay i think he he just went outside on the phone but i'm gonna grab one because he do all of the tough stuff yeah bring him back in after he comes back inside and we'll keep chatting in the meantime um okay so so you're growing you have module-based upsells um you said you'd passed i think you said three thousand customers those are actually paying customers correct yes and you said kind of average one is paying about again a hundred grand per year right yeah and we have an interesting um kind of client base we not only sell to enterprises for legal departments we also sell to law firms so that changes the range but we also have government clients for example right now we are working with the country of bahrain to automate their co-support system as an e-justice platform so that plays a huge part in the range because those are much much larger deals versus like an average size let's say fortune 1000 average size dealer what is like the minimum like if someone's listening right now and they're going to be one of your smallest customers they want to sign up what's the what's the least amount that can pay to start using you testing you out they can actually for example like start with one module and start with the bot the bot is very popular even outside of the legal system um it's any service provider that we're selling into and they can start with with less than 100 with 20 25 um 25 000 a year yeah yeah okay let's start it with a plot would you say 25 000 a year is is uh more accurate in terms of the average across your base or no you think it's more like a hundred thousand dollars it's more of a hundred thousand dollars we have we have more larger clients that we do small ones and it throws the numbers a little bit because the bot and some of our smaller modules are new we've had them let's say for the past year and a half so the range is still very wide yeah yeah well i guess the reason i'm asking is because and maybe you're going to shock me here and i'll i'll be i'll be cheering on from the front lines but 3 000 customers if they all pay obviously 100 grand a year right that's eight thousand bucks a month or about 24 million dollars a year in rev sorry a month in revenue you're doing or 300 million dollars a year i'm assuming you're not assuming you're doing well but you're not that large which of those numbers is not accurate uh we're actually a little less than that we have most of our growth has been in the past eight months and we have a lot that's coming in in terms of closer numbers this year and these ranges are actually from this year our our last year's ar was about 17. uh so this year we're projecting 25 or more but based on these deal sizes so our numbers are a little bit we can get into it later that's okay but seventeen balls added we have new products added yeah so 17 million last year kind of run right you you're hoping if you do well you guys are hoping to scale that up to 25 million by the end of this year yes okay got it so i mean if i take that 17 million right divided by the 3 000 customers that's more like each customer's paying six grand a year not a hundred you got completely caught up no no that's okay i'm just saying if i take 17 million dollars per year last year in revenue across 3 000 customers that means each customer is paying on average 5 grand a year not 100 grand a year so our biggest client like i said is three major court systems so most of that revenue is even from that the current pipeline with with uh the current this year's model with the new product so i'll take you back a little bit to next year because a lot of changes have happened so in january we actually implemented and integrated all of our products and builds like a fully robotic self-service system with that because all of the modules are combined it's changed it's changed the average deal sizes of what we have in our current pipeline so since then we also took a dip and had about probably no revenue on our u.s side for a few months while all of this is going through so to these averages that we've calculated out is based on the current pipeline size not necessarily everything that's happening we've also so um so hold on just to be clear though so historically i understand the numbers you give me are for your customers you're signing up now today they're larger deal sizes but when you look at arpu it's i'm asking across your historical customer race and what they're actually paying you you have it sounds like a couple cut three court four court systems paying a lot of money and then a bunch of long tail but on average these three thousand customers are paying something more like four or five grand a year not a hundred grand a year um if we mix sure well because that's the reason is that's how i get to seven you said you did 17 million last year so divide that by 3 000 customers that'd be five thousand per customer well but i don't want you to disagree with i don't want you to disagree with me i just wanna understand the real you're saying i wanna make sure i understand your reasoning the reason that the numbers are different is because now today you're targeting more enterprise hundred thousand dollar deals is that accurate yes perfect that's that's i try to make sure i got that out at the gate conversation because i feel like now i'm botching all of the numbers and this is why i stay out of them no no you're not botching them um i'm it's my job to help them like be crystallized i think you did a good job of doing that you're adding new modules you're expanding new geographies and that's what's helping you expand revenue and contract values yeah very cool um in order to get new customers where are you getting them today how are you signing them up um we're still actually doing the same approach it's a lot of cold calling we don't have a huge brand in the us and it's it's still um not very inbound driven so it's all a lot of still cold calls and a lot of conferences we go to a lot of conferences much smaller conferences to be able to have actual um effective sit-down short conversations with general counsels but that's still our main way and are you i mean how aggressive are you being in terms of like what you spend on a conference relative to how quickly you sign up customer to get that money back are you comfortable with the 12-month payback period on a new customer um we are we we need to uh work on that right now it's not very profitable for us it's costing us a lot more to go to these conferences than to see the return because the sales cycles on these deals are 9 to 12 months exactly like you said so from the first moment which was last june where we switched all of our focus on our target market to this we're starting to see results not to actually be able to have to measure what we've done got it so you've got more like you've got north of a 12 month payback period right now and you're trying to get that sooner faster yeah very cool all right let's wrap up here with the famous five number one what's your favorite business book um i just got a new book that i started uh that i started reading it's letters to founders which is really interesting good number two is there a ceo you're following or studying um i was for a while uh right now no one's specific number three what's your favorite online tool for building your company oh gosh um my favorite i use ours i use r2 no besides you're on what tool to use the most i use linkedin the most to be honest number four how many hours of sleep to get every night maybe two to four oh come on you can't survive on two to four hours every night and i'm super sick right now but the past couple of weeks that way but honestly i try to get at least six okay and what's your situation married single kiddos single okay good so no it's you know what you're your baby is the business no no kids running around keeping you up all right and do you mind me asking uh how old you are i'm 33. last question take us back 13 years what do you wish your 20 year old self knew um that it's not a race it's a sprint wait hold on what does that mean enjoy life as it's happening and keep working but know that tomorrow's nothing is the end of the world nothing is the end of the day there's always a new day and just keep going guys there you have it case one case management system for legal firms courts all over the place they got over 3 000 customers did over 17 million in terms of run rate last year hoping to break 25 million this year as they continue to scale with our team of 300 people all bootstrapped which i love love love love bootstrapped they have a north of a 12 month payback period at this point and they also are profitable churning about 10 percent of their revenue annually but expansion more than makes up for that hole for north of net revenue retention north of a hundred percent bahar thank you so much for taking us to the top