Casebook PBC Revenue, Valuation & Funding (2024)

[00:00] Hey, folks. My guest today is Tristan Louis. He's a serial entrepreneur who's built and taken five technology companies from idea to exit. He also served as the global chief innovation officer for HSBC and global head of mobile and Internet for Deutsche Bank. His writing has appeared in The New York Times, Forbes, and many other publications. He currently serves as president and CEO of casebook PBC, a government technology software company. Tristan, you ready to take us to [00:22] the top? [00:23] >> Sure. Absolutely. I mean, pleasure meeting you. [00:26] Pleasure meeting you. I have to ask you real quick about that year time at HSBC. What years were you there? When did you leave? [00:31] >> So I was at HSBC from 2001 to 2008. Mhmm. [00:37] >> Interesting time in the sense that when I joined the company, did not even own the name hsbc.com on the internet. I actually had to go and purchase that from the Holland Schoolboy Choir and built up basically all of their Internet infrastructure over over that seven year period. [00:58] Did you do any SaaS debt at that time or was it too early? [01:02] >> It was way too early. At that point, really, just getting people organized around the concept of APIs and hosting things outside of big data centers was a little early. Now, at Deutsche Bank, I managed to do some of that. [01:20] Very cool. Okay, tell us about casebook. What's the company doing? How are you guys making money? [01:24] >> Okay, interesting problem space that we started identifying is the human services space. So, services, what people generally think of as social services, so child welfare, juvenile justice, [01:40] >> domestic violence, which is like sexual abuse or domestic abuse, anti recidivism, which is generally people getting out of jail, those types of programs. And what we've identified is that it's a huge, huge space. $24,000,000,000 is spent on software in that space by the US government in state and county's level, and yet there isn't a platform for this particular space. As we've grown, we've also identified that there was an adjacent portion of what we're doing, so [02:15] >> we shifted a little bit from just being a purely government focused organization to also servicing the nonprofit sector because there's about 40,000 human services organization that employs 3,200,000 people in the country and deliver services to one in five Americans. [02:30] So Tristan, who are you selling to? Governments [02:32] >> or We're selling to both nonprofits and government agencies in that space because what we've identified is that the size of the problems that they have is very similar. The type of problems are very similar and the type of data that they need to handle is very similar. And the enemy that they've got or the competition that we're dealing with is very similar. It's pen and paper. [02:53] So what are they paying on average per month to use the technology? [02:57] >> So on average per month, it depends on the size of the team. What we've done is that we've created a product that has, just like every other SaaS company, three different product tiers, $29 $49 and $69 depending on the features that they're using. The $29 is organized really as a way to [03:15] Hold on Tristan, sorry. Before we go deep on all the what's the average first? [03:18] >> The average is about 49, maybe 50, call it 50. [03:22] Okay. [03:23] >> 50 per seat or per company, per nonprofit, Per seat. [03:25] >> Per And generally, we're looking at Our average customer has about 15 to 20 seats. So yeah, still relatively small numbers. It's the law of aggregating a lot of small numbers, which is why we need to find a market that had a lot of actors in it. [03:45] So 50 per month on average, 20 seats on average, each nonprofit or government's paying about $1,000 a month. [03:51] >> About $1,000 a month, but most block contracts tend to be twenty four month contracts. So they're actually, you know, it's nice from a retention standpoint and from a churn standpoint because we don't have to worry quite as much about controlling churn on a month by month basis. [04:04] Is your net revenue retention above 100%? [04:07] >> Way, way. I mean, I think net revenue retention is yeah. I mean, year on year, our gross is probably 50x, 60x, but remember again, we love small numbers, we've been in the market only a couple of years, this is our second year in the market, and our revenue retention is yeah, well over 100%. We actually I don't like to talk about churn that much because our churn numbers are ridiculously low in that we've had one customer [04:40] >> churn out and that was because the organization we were dealing with actually ran of money and so it couldn't pay us anymore. [04:45] If a churn doesn't make sense for you, you were founded in 2019, so two years ago, but your contract minimums are two years. So there hasn't there hasn't been a chance for people to [04:52] >> churn Yeah. [04:54] Is the opposite true? There hasn't been a chance for people to upgrade yet? How do [04:57] >> you get people to upgrade you're [05:00] on a two year contract? [05:01] >> That's actually kind of the interesting thing is that the opposite has not turned out to be true. Initially, our initial assumption was that your average customer was going to be there and then we would, when contractor negotiation came up, we would start increasing the number of seats. But what we've seen is that actually a number of our customers are now asking us how do we go about increasing seats on top of the contract that we already [05:24] >> have. [05:25] And how many customers are you working with today? [05:29] >> Know, low hundreds is really what we're seeing in terms of our logos. [05:34] Got it. So call it like 200, something like that? [05:36] >> Yeah. [05:37] Okay. And did you guys bootstrap this or you decided to raise? [05:40] >> So it's one of those crazy things where we neither decided to raise nor bootstrapped it. It has to go to the foundational story of the company. We found the Annie E. Casey Foundation, which is one of the biggest child welfare foundations, and they needed to get a sense of how many children were in the child welfare system. Along the way, they ended up developing some technology that kept them managing systems for one state, and so they were like, [06:10] >> well, can you take this contract from us? We turned that contract into a profitable contract and we've been basically bootstrapping off that profitable contract to help us build out a [06:21] So, you have not raised external capital to date? [06:23] >> We have not really raised any external capital to speak of. We're actually about to go into market right now to raise just a small round. [06:31] What's a small round? [06:32] >> How much? 6 to $8,000,000. [06:35] Okay. And what valuation do you think you'll be able to raise on? [06:38] >> I'm trying to keep it tight right now. So I figured, you know, based on where the market's sitting and on numbers that we're doing and figuring something in the 16 to $20,000,000 range. Pre [06:53] money? Or post? [06:55] >> That's gonna be in the post post money. [06:58] Got it. So you raise it like a 14 pre raise 6,000,000 for 20 post? [07:01] >> Yeah. Exactly. [07:02] Interesting. [07:03] >> Part of reason is that, you know, my view is that we have a fairly long trend. I don't want to signal a very high valuation at this early stage in the game because I'm looking at eventually raising other rounds further down the road. [07:18] 200 customers at a thousand dollar ARPU we just talked about, $50 a month, 20 seats on average, that puts you at like $200,000 a month in revenue. Is that about right? [07:25] >> That's about right, yeah. [07:26] And where were you one year ago? [07:29] >> One year ago, [07:33] >> we were at 50,000 in ARR last year. [07:36] So just to give you [07:38] >> a sense of how big the ramp has been this year, it's been a pretty incredible year. [07:42] Oh, so I don't know what 50,000 in ARR means because I don't know what month you're multiplying what, but like in December of last year, what was your MRR? [07:48] >> So our MRR in December of last year was sitting around $11,000 [07:55] Okay, got it. So yeah, you've weighed more than 10x, which is great. Where's the growth coming from? Why so fast? [08:00] >> So a number of things. One is we've identified the right product market fit this year. We've identified the right markets to target. We've also noticed that there really wasn't that much competition for what we were doing. The interesting thing is that the market is mostly dominated by system integrators. There hasn't been a software package that's really doing what we're doing. We've also priced it right and maybe even priced it low, but that was by design. I [08:30] >> wanted to make sure that from an operational standpoint, we could operate at the lowest possible price point in the market so that it would be very difficult for any competitor to come in and come in and under price us. There's always room to grow ARPUs from a low point, but there's very few opportunities to lower ARPUs when you're in a particular market. So it was really key to what we were building to make sure that we [08:58] >> could operate at a profit on a very low ARPU level. [09:02] Are you profitable today? We [09:04] >> are not profitable because we're still investing in R and D, but our burn rate is in the very, very low six figures. I mean, I'd say, when I'm saying very low six figures is that on high spent month, I'll probably be breaking 100,000 to $120,000 But usually we tend to sit below that. [09:24] That's net burn or gross? [09:27] >> That's net burn. [09:28] Got it. So after that means if you add back 200,000 of revenue to $120,000 in net burn, your total expenses monthly are $320,000 [09:36] >> No, because remember that I mentioned that we're working off the back of a large system integration contract that we've been using to fund this. So really, total burn, if you were to take out the contract, is sitting closer to $600,000 to $700,000. [09:55] Monthly? [09:56] >> Monthly. [09:59] How [10:00] big was that contract and what year was that closed in? [10:02] >> That contract was a $7,000,000 contract and that was closed in 2010, 2011. We still had another year plus on it, and so we're basically using it as our outside investor from our standpoint, right, is that we've been working on building a SaaS business and growing a SaaS business on the back of [10:28] >> a very, very lucrative contract. [10:30] So the story is getting a little loose here, I need to ask questions to tighten it up. Right? Yep. So that was launched in 2010. You guys were launched in 2019. So you basically picked up that contract four or five years in. Okay. And how much of the 7,000,000 contract is now being up are you applying to the $200,000 a month revenue dollar figure you just told me about? [10:48] >> Oh, so so so that's zero. I mean [10:50] Got it. So you're doing $200,000 a month in revenue. That has nothing to do with the $7,000,000 contract. [10:55] >> Exactly. [10:56] Yeah. Okay. Got it. And you're spending $650,000 a month on all these expenses right now when you add [11:01] >> that to 200 using that contract to fund the difference. [11:05] Got it. That's lot of money to be spending for a company that's at a $2,400,000 run rate. Where is that money being spent? [11:12] >> That money is being spent on a substantial amount of R and D because what we've identified is that we've identified a 12,000,000,000 to $24,000,000,000 opportunity that's largely greenfield. [11:23] So How many engineers, though? [11:25] I mean, can you quantify the R and D spend? [11:28] >> So we've got 36 people in the organization. I've got six in sales. Everything else is in product management and engineering. So I'd say, call it 20 plus I mean, I could give you the exact number, but 20 plus engineers and product managers, and then the rest is customer success and sales. We're actually at relatively young stage in terms of building our sales infrastructure. Our sales team is relatively new and we keep hiring on that. [11:58] It's just it's still high burn with 36 people and $650,000 a month and burn, you're burning like almost $20,000 in burn per employee. I mean, that's a lot for a startup. [12:07] >> That is a fair amount for a startup. [12:09] What happens when the contract stops? I mean, you really have to go raise this equity round. Otherwise, you're gonna have to cut your burn a lot. [12:15] >> Absolutely. [12:16] >> Yeah. Yeah. And that's exactly why we're looking at at raising some money right now because it's gonna take us another couple of years to get to the point where we're filling that gap. [12:26] Yeah. Are you a 100% owner of the business today? [12:29] >> Yeah. Got it. You own a okay. Good. [12:31] So so how did you I mean, imagine a lot of people were fighting to take over the $7,000,000 contract. How did you get it? [12:39] >> It's a weird, weird type of story. 2016, the election has happened. I'm on the losing side of it. I'm trying to figure out shit. How do I get involved with technology that actually can have a positive impact on the world instead of the previous startups that I've built. And I get connected to this foundation and they're like, we don't know what to do with this. They've got a largely unprofitable contract at the time because it's not [13:06] >> being managed like a software management contract. And so I started looking at that, I started looking at the space and was surprised that there were a number of dynamics in the space that were interesting. One was that there really weren't any standardized software packages to address some of the problems that were there. Two was that there was a tremendous amount of money that was flowing into that space to system integrators. And so I figured, Okay, let's [13:35] >> take those contracts, let's right size them in terms of how you're servicing them, and then let's leverage the revenue that is generated by the profit that is thrown off from there to actually build a proper SaaS package. [13:52] That makes a lot of sense. Let's wrap up here, Tristan, with the famous five. We're out of time. Number one, favorite book. [13:58] >> Favorite book on leadership. It's a history book about five different presidents that, are stuck at a particular moment of crisis and how they went through that particular crisis. [14:10] Number two, is there a CEO you're following or studying? [14:13] >> Is there a CEO I'm following? I mean, Satya Nadella is probably one of the most interesting CEOs right now in terms of, what he's doing with Microsoft and how he's transformed. [14:23] >> No. [14:24] Number three, what's your favorite online tool for building a business? [14:27] >> Favorite online tool for building a business? HubSpot. I pretty much live and die by the numbers still sitting in there. [14:33] Number four. How many hours of sleep do get every night? [14:36] >> Eight. I try to make sure that, you know, it's really important to me. [14:39] And situation, married, single kids? [14:42] >> Married, one kid. [14:44] That's great. And how old are you? [14:47] >> Just turned 50 this year. [14:49] Happy birthday. [14:50] >> And well, not today, but, yeah, earlier this year. And so that's why the eight hours of sleep. I mean Great. Ten years ago, and it was four. [14:59] Yep. And take us home here. Something you wish you knew when you were 20. [15:03] >> Something I wish I knew when I was 20 that you spend too much time in your head. You should really focus on the problems that you've got in front of you and on what you can actually impact. [15:16] Guys, casebook.net founded two years ago on the back of a big professional services contract. Now they're pure SaaS, 200 customers paying on average $1,000 a month, $2,400,000 in terms of run rate, up from just $132,000 in terms of run rate in December of last year. Incredible growth, raising 6,000,000 on a $14,000,000 pre right now. We'll see if Tristan can get it done as he looks to scale with his team of 36 to support these governments and [15:37] nonprofit organizations. Tristan, thanks for taking us this off. [15:40] >> My pleasure. [15:43] One more thing before you go. We have a brand new show every Thursday at 1PM 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 Thursday 1PM [16:08] Central. Additionally, remember these recorded founder interviews go live. 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