Cogsworth Revenue & Valuation (2019)

hello everyone my guest today is boris gefter he's the founder of cogsworth a growth hacker passionate about time scheduling having built several sas and nonsense companies in australia with industries ranging from insurance to e-commerce he's also got a deeper respect and passion for data and the power of well-built software boris you're ready to take us to the top i am indeed all right so are you competing with like calendly sunrise security scheduling you can book me these kinds of companies yeah yeah i noticed you're using one of our competitors as well yeah yeah yeah i am and i mean by the way you know square just actually bought acuity you know for a pretty good chunk of change i mean how do you see the space playing out over the next got a year to three years it's funny when i first set out to build cogsworth um i did i had a bunch of google survey credits um because i was one of the first to use it and so i surveyed a 500 australian businesses to see if they used any scheduling tool and the vast majority of them almost 90 of them said that they didn't use any scheduling tools at all even though the space looks fairly congested and fairly well penetrated to and to someone that's technical like you're a uri um but the the reality is that 90 of the space just isn't penetrated and isn't well marketed um and part of that has to do with the fact a lot of these tools are quite hard to use and so uh we think that we will not only be able to take a good percentage of the existing uh customer share but we'll be able to grow the pie uh significantly as well if we can do what we need to do so what is i mean are you focused on any specific niche or is it scheduling tools for anybody no it's we're not focused on any specific niche um much to um much to the contrary uh advice given by a lot of kind of would-be advisors and investors and part of that is because um i personally view scheduling as our niche because scheduling is a is a problem across many different industries and to limit one's industry focus would be to pretty much become a marketing tool for an industry which i really don't want to do i just think there are there's so much variability across scheduling across sectors if you don't pick a specific niche you risk getting beat out by point solutions and every single niche you try and serve you know all of them um so i mean let me ask this a different way if you look at all your current paying customers or users and you sort them by who they are do you see a cohort that is kind of more aggressive or more actively using yeah actually we do um and i'll go into why that also means that we can't be a niche player right now um so our the vast majority of our users tend to be marketers developers consultants and so in other words they tend to be um customers with customers of their own and the biggest thing they want out of cogsworth which is what we're about to release very shortly is the ability to resell cogsworth in other words to install it for their customers and make money off of it well then you're selling agencies well they were selling to agencies that's right but the fact is that agencies don't have a niche right agencies need to be able to say okay this customer who it happens to be a restaurant needs a scheduling tool this customer who happens to be a beautician this customer who happens to be whatever they need a scheduling tool um but but you know your point about um about you know us being risk us risking being beat out by uh niche competitors is a valid one and that's why we kind of approach it in a very interesting way so cogsworth has a core set of scheduling features but we also have add-ons and so when we release a feature into the into our add-ons we don't bloat our existing product we release it as a discrete feature that can be bolted on and that add-on helps us tackle particular niches as well yeah express plug-in model uh kind of yeah exactly so so uh for example we could when we release group group scheduling and class scheduling we'll also open ourselves up to for example the fitness and gym industry you know to to use cogsworth rather than just going for the gym industry first so help me understand pricing is obviously also critical in this space right so on average what are what are customers paying you per month or per year for this so we're really really new so our um our revenue is almost non-existent i mean by the way that's fine everyone has to start at zero but do you have any paying are you pre-revenue yeah no no we have some stuff um so we have um so just to set the context the way that we launched is we know sorry i want to go back just trust me on the process so current customers are the current customers that are paying how much are they paying per month uh they're paying about nine bucks a month okay nine bucks a month so so now let's backtrack so now that we have that what year did you launch uh we launched in late like literally december 2017. so call 2018. okay so um okay and you've scaled up today so how did you get your first whatever you know 100 beta users or 10 paid customers yeah um so we did we did product hunt um and what was interesting is that like there's a little story behind that i can go into that if you want um but we did product hunt and then we looked at lifetime deals so hold on tell me the product on story first so when did you launch on product time uh we launched i i think it was a march of 2018 on product and how many votes that day uh we we were like one of the most upvoted companies i think we had like 400 300 or 400 i don't exactly remember now okay um but it's on product hunt if you want to check it out how am i well no okay i want to go down the product funnel right i do this with people that launch on product hunt and then i can compare different products on launches so 400 uploads that day how many clicks back to your website that day uh we had a few few hundred um clicks it wasn't like a huge surge in traffic like i'd read other people had maybe yeah so why is that by the way because mostly usually usually usually it's a 10x multiple 400 votes would be 4 000 clicks yeah i don't know um i don't know why that would that was the case um i yeah i i'm no expert in product okay but look we got we got um i think we got uh like a lot of this is memory but i i reckon we got between about 100 users off the back of it i don't think we got any paying customers what's a user sorry what define a user uh somebody who signs up an account creates a business things like that is it including an email sign up sorry yeah yeah with emails okay cool but no paying customers did you have a paid plan at that point or no no i don't think we even had a page i think we had like a paid plan but it was really just a just something to have there because everything pretty much was unlocked at the time yeah and so so we did that and we got a bunch of feedback off the back of that and a lot of people came up to us and kind of asked you know partnership um opportunities and i don't think any of them really again this is kind of kind of new for us so i don't think i i necessarily so yeah let's move on past product hunt so the second thing you did was lifetime deals tell me how those went yeah so we we launched with siftree um and then up until recently we've been with stack social and i think right now we're just finishing off some stack social stuff as well um yeah it was an interesting experience we required the majority of our customers that way uh part of it part of the necessity for lifetime deals with us has been the fact that we're completely bootstrapped and um we've been focusing all of our energy on the product and not on marketing so in this way we've been able to get maybe 1500 users of the back of um lifetime deals and probably over over 1200 paying customers who have paid a lifetime uh price to be on conference with of about how much and that's and that's allowed us to have beta testers and people who built that right now boris about how much is the lifetime price uh it's varied because we've had some different what's the cheapest the cheapest is probably 49 okay and the most expensive uh we did one really really early on for 199. okay so it's somewhere between kind of 60 and 240 k right from all these lifetime deals that you've made uh not quite not quite because um all of the thing that people don't understand about lifetime deals is that the actual lifetime deal company takes a huge chunk of it uh no no no no i know that but i wasn't i want to get top line first so top line was somewhere between 50k and 280k depending on if it was a 50 price point or 200 price point for the top line for the lifetime deal companies correct yeah that's i'm going down the funnel okay so then typically they will keep i've seen sometimes up to 70 percent right so what percent did they keep of yours yeah it's roughly 70 okay so how much cash just from lifetime deals over the past 12 months did you end up with in your bank account uh probably 40 50k okay fair enough so that times we'll call it um times kind of one point yeah so i mean that would that mean you did something like 140 across the top right because if i take 140 000 right times 0.3 that puts about 42 in your bank yeah yeah what did you then obviously okay so you did that on sifter and social which one of those drove you more kind of cash like net net yes um so you know we also did these ones there are these niche sites um like facebook groups for lifetime deals and so we did um we did like a um there's a facebook group called martech for example and we sold i think close to 50 uh licenses at around 199 and so that was like in about 48 hours that was insane um but it came with a price of having to onboard these customers so so that was the biggest chunk of money we got in one point but um you're talking about you're talking about the facebook group martech wise right that's yeah oh you know what yeah yeah yeah so guys it's facebook.com forward slash groups forward slash mar tech wise yeah that's right and um but but stack social has been um a steady source of customers for us and um yeah and has been the best the highest source of referrals yeah this is interesting just going through all these things yeah so okay cool why didn't you use a company like appsumo oh uh we tried they just wouldn't have us um and um and they were quite rude about it so yeah that's because that's because they're already in bed with other scheduling tools um by the way i think all these things are fine to get cash up front but i just think it's such a toxic way to launch the business outside of the cash because these are all discount shoppers they're like jcpenney shoppers they're going to be nagging and annoying and they're never going to go up and pay you enough where it makes it worth it to do support and affords you to be able to pay designers and developers to build your product so like how do you manage like now like picking the potential high value customers at all these lifetime deals sorry nathan you just cut out this yeah so i was saying is how do you pick off the high value people out of the out of lifetime deals yeah look it's it's a really tricky it's a really really tricky uh question so what happens is it's actually a really interesting social phenomenon because what happens is i would say like 25 percent of people that buy lifetime deals don't use them um and so they just give you cash for nothing in a way um and then some of them just buy them with something specific in mind like they what they think that they can sell it but they don't end up doing it um and then there is a really valuable segment of maybe more than 50 of people at least in our experience that bought it and they use it and they are really good at using it and what we wanted in the early days it was usage and that's what we got and then the idea was that you know as people would use it and as their customers would use it it would kind of uh virally spread look that viral phenomenon certainly exists it hasn't been as great as one would have thought okay so today today how many customers you have paying recurring monthly uh we have about okay so 109 a month so you're doing about a thousand dollars a month right now in a true recurring revenue yeah but you've managed to say bootstrap because you use the cash from these lifetime deals correct yeah yeah but uh cash i yeah like the cash is running out because we sell developer costs and things like that what's your team size today it's two people that are developing and myself i don't get paid but yeah the two developers together so what's like your monthly burn right now like 10 20 grand a month yeah that's right like 10. yeah between 10 and 20. there is a kind of a bit of variability so how i mean how are you paying your bills did you like get rich off something else earlier in life and you're you're like milking up yeah i wish uh no so raised some money um oh how much have you raised uh 200 grand australian so by the way numbers are australian um and um yeah so so that's that's coming to an end we're now looking to raise our next round and so kind of engage in some due diligence um with some investors um because the the story that we have like first of all like we can talk about how hard it is to raise money in australia soon uh that's a hobby horse of mine but um yeah it's really hard to raise money in australia so so i had to kind of go to an angel put put in some money of my own um and i've kind of just had to come to the to to the comfortable spot where i believe in the product and i believe in what we're doing and a lot of our leading metrics are quite encouraging and even if we run out of money i'll just kind of continue to fund it because i you know i still consult tonight how many free users are there that are not paying but they actively use it um so every day we have about three four hundred users that log in and do something with cogsworth um and i i'm not sure what like of the top of my head what percentage of them are paying not paying but uh roughly speaking 50 of our users are free and 50 of them are paying yeah um okay and then what about churn right so of the just your paid customers which turn monthly uh uh honestly i could count them on one hand um you know you have 150 customers so like is that five people four three two yeah it's probably five or less okay so that would be about three percent churn per month something like that yeah something like that yeah yeah i mean the reason the reason it's important right is because it allows you to start to get a sense of what your customers are worth right so at three percent monthly churn you can back into what that is annually right and get a lifetime value and then you can back in a cac from that oh so sorry i when i it's not per month yeah you know peop like i i i don't think we've had more than 10 people churn off the entire platform like uh in the last in the last six months well when did you launch the monthly recurring nine dollar plan uh we've had it for about a year now so uh yeah it hasn't it the the has the reason i don't know our trend starts is because it hasn't been a big stat to know of right so that's why that's why um yeah i just the problem is i just don't believe you right because i've interviewed almost every other calendar company in the space especially at this price point and they they're they everybody has turn at this price point it's smbs they go out they go by the way by the way a lot of it's not in your control sometimes you go out of business yeah so we have we have like 100 paying recurring customers and it's um yeah it hasn't been substantial so i'm not asking if it's been substantial i'm asking what is it i i don't know i don't know but the point is it has been uh like i could count them on one hand maximum them okay good so we'll say maximum ten percent annual churn right uh you know by the way it's not helpful to see kind of on a hand you have 100 customers so hopefully you can count them on one hand you have 100 customers yeah i don't know but but the other thing is um the when you say chan the other thing is um like those that pay uh us on a monthly fee like the i i don't even i don't think we've we've had more than two or three of those customers that have stopped like we've had churn from people like from a lifetime deal perspective how do you turn from a lifetime deal they pay for that's not even a sas that's not sas revenue there is no charge there's no expansion there's no nothing it's one time and done it's like bad sex and we've had people asking to us to delete their accounts um who have like signed up for the trial but that but again uh that's not churn board that's like boris it's totally something different i'm not even talking about that yeah that's what i'm saying yeah yeah i'm just talking monthly recurring so i mean if you raise more capital today do you have an engine where you know what it costs you fully weighted to get a new nine dollar a month customer um so we need to we tried uh so facebook advertising and google advertising and linkedin advertising and the cost of acquisition has been uh like prohibitively expensive so we're going down we're going to be experimenting with resellers and integrating with marketplaces in order to um yeah in in order to get scale and achieve a reasonable cost of acquisition okay what is reasonable customer acquisition um it has to be it has to be around 20 bucks or less okay so you're optimizing there for like a three month payback right so any other scheduling tool in the space that can survive on a four month payback essentially beats you because they can pay more to get the customer yeah well the idea is that they don't just uh pay the nine bucks a month the idea is that they can they upgrade our add-ons and um they add staff and things like that i know same point though right if you're optimizing right for a three-month payback there are other companies in the space that would be totally happy with the 12 month payback because they have a little bit more scale so like that's that's my whole point about why you have to you have to invent like a better mousetrap to win like when you look at software companies that take off they always monopolize one thing they have with some interesting distribution or mousetrap and then once they dominate that like very specific one thing they start to slowly expand before you know what they're slacking ipo inc that's what i'm trying to get from music i don't i don't see what you're trying to monopolize except finding cheap bad customers that are paying one-time lifetime fees that clog your support channels yeah um well you know so far so far it's been a um what we've acquired are those lifetime customers that have helped us build the product and test the product and things like that um and that's what the first kind of round was about this round is all about building that engine that you're referring to and how much fun it is uh we want to raise about half a million dollars okay and do you think you do that in australia or you have to go somewhere else we'll try we'll try we'll see yeah i mean i i i'm i'm not an expert at raising money unfortunately and yeah it doesn't look promising i mean how do you plan like i mean are you gonna do a debt around are you gonna do priced equity uh we're just gonna yeah with equity we're gonna try to try and actually give away the company it was part of the company so what by the way weird thing for a founder to say but um what valuation do you try and are you trying to raise that uh two million dollars okay so so you're gonna sell 25 of the company um i mean how do you right now you're doing 10 000 a year right so so you can back into obviously the metrics there right i mean how the hell do you convince someone to give you a two million dollar evaluation now if you had some growth engine by the way you could argue growth is there but like you have 400 users total yeah so what we're trying to what we've done is we've proven that we can get uh we've built a platform that does a substantial amount of appointments it has good usage what's substantial number of appointments yeah so we we do about 20 to 30 000 appointments every single year through the platform um it's not that much by the way yeah well it depends on uh how often like you get appointments how many however many times a day but a lot of businesses don't get appointments that often i know by the way 20 or 30 000 appointments though when you're saying you want to be the appointment scheduler across all niches everywhere is nothing it's like a fraction fraction of a point yeah like we were like at the very beginning of it yeah i agree i mean what we've done right now is we've just built a good product and we've had to live with acquiring customers through a lifetime channel so so like yeah it hasn't been like it hasn't been a a a space where we've been able to go and say okay let's acquire ten thousand bucks on a on a cpa of 50 bucks and that's my point by the way that was a point at the beginning of the interview it's a very fragmented space with a lot of marketing spend that's why it's very difficult for someone to come into the space and win at any kind of economies that actually work yeah i mean so that's why we're going down the reseller out um plenty of those though i mean talk to me about plenty who's playing countlessly doesn't work no no i don't have to defend it you tell me how many resellers have you got to install your platform and how many customers have they signed up no we're about to create uh like a release our reseller thing but uh all uh pretty much all of our competitors except for one that i can think of and have a reseller functionality mm-hmm yeah well again i think once you execute and you have real data it'll be it'll be more obvious to know if that will work right yeah totally so like the the realities that we're um looking to find our market fit in terms of who who our customer that will scale us will be um but right now we just said you don't want to focus on a niche you said you mentioned earlier you said at the beginning i'm quoting you now developers marketers marketing agencies i mean you actually don't know who the customers you're not even trying to find a single customer profile that's going to help you scale but isn't that a customer profile no marker selling to a marketer saying to a developer are two very very very different sales motions so so these are developers that have um like customers of their own so people that build wordpress sites things like that so these they are they are our customers customers that have their own customers it's not like we're selling to uh like a marketer out of um like out of a corporate these are these are marketers that kind of have their own agencies seo ppc that sort of stuff okay yeah that's a marketer yeah a developer is totally different right in the past 30 minutes 30 seconds you just described two very different personas no i i understand but the but the actual use case would be very similar for cogsworth okay because they have their own customers and they need and their customers we need schedule well yeah but i mean that's that's like duh anyone listening to the podcasters now is going uh duh that's literally what they're feeling right now okay i mean i i'm like rooting for you because i want to see you win but like i don't see how you win without me totally why why would i not i love entrepreneurs that's why i do this show that's why i do 30 days back to back every day is to feature entrepreneurs but like you're selling out like a huge chunk of your company and you don't have a sales motion or a customer profile figured out and you've spent probably your own money doing this and you've already burned through 200 grand dude i just want to see you keep more of your company yeah well but the thing is i'm not sure um i'm not sure how what we're doing isn't like a kind of rational because we've we've uh done these lifetime deals with quite some of our customers we've got some paying customers we've proven this on a relatively small amount of money um we've we know what doesn't work in terms of cost of acquisition like facebook google that's too expensive um and so now we're going after like the reseller channel and the people that tend to resell most tend to be people at service um small businesses such as smaller web developers and and uh smaller yeah boris i mean look brian halligan from hubspot was just on a couple days ago okay and they have a free scheduling tool and guess what 60 of their new revenue every month comes from their 5600 resellers right their resell hubspot software like you just either you just don't know about these other tools i mean i've interviewed probably 40 scheduling tools on the show over the past two years so like i know the space like backwards and forwards and that's why that's why i'm what i'm listening for intently is to hear you say we are focusing on this one specific profile that nobody else has done and by the way i come from this specific profile my past life i was this customer and then i believe that you have some unique inside knowledge that nobody else has where you could actually scale right in that space and dominate i just haven't heard that well i mean maybe i should tell you about how like i came up with cogsworth because that might give you a bit of an insight into what you're looking for well i would love to but we're out of time okay well come but but what i would love to do is as you do this you know come back on a year give us an update tell us how the reseller stuff pans out right um and we'll see what happens by the way you know i think people will like how transparent you are on the call i think you'll get customers from this and that'll be good and i won't and i won't take 70 percent sounds good all right let's wrap up here with the famous five number one what's your favorite business book um uh the hard thing about hot things number two is there a ceo you're following or studying yeah uh like everyone i love elon musk number three what's your favorite online tool for building your company um probably trello number four how many hours of sleep to get every night averages about seven okay and what's your situation married single kids uh i have a long-term girlfriend okay no kiddos running around and not just a dog all right and uh and how old are you i'm 31. last question what do you wish your 20 year old self knew um how how much patience life requires patience is key guys cogsworth.com playing in the appointment scheduling space they've done a bunch of lifetime deals which is nice because it's given boris the cash to get this thing built they're running around 10 grand a month right now but running out of cash looking to raise an additional 500 grand on a 2 million dollar pre-money valuation here shortly 10 annual churn team of three right now again about uh about 100 customers paying nine bucks a month so a thousand dollars a month in revenue launch back in 2017. boris thanks for taking us to the top cheers nathan one more thing before you go we have a brand new show every thursday at 1 pm central it's called shark tank for sas 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 1 p.m central additionally remember these recorded founder interviews go live we release them here on youtube every day at 2 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 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