How Cohley Reached 220 Brands in 2020 While Raising Only About $2.3M (Interview with Co-Founder and CEO Tom Logan)

Introduction and Company Overview

Nathan Latka

00:00Hey guys, my guest today is Tom Logan. He's the co founder and CEO of New York City based Cohley, the tech companies that changing the way brand generate photos, videos, and product reviews. Tom, ready to take us to top?

Tom Logan

00:12Let's do it, Nathan. Yep. Great here... Great to be here with you. And, yeah, I'm ready for

Nathan Latka

00:12You my

Competitive Positioning and Sales Mousetrap

Nathan Latka

00:18are competing in a fragmented space, man. What's your mousetrap? How are you getting in?

Tom Logan

00:24Yeah. So, early on, it was the influencer angle. Back in 2017, it was very buzzy. People were very willing to get on a call to talk influencer. And then from there, we were able to ask about content generation, about ad testing strategies, email marketing strategies, and and how they were thinking about content generation as a whole. So we'd go in with this influencer marketing mousetrap, then expand the conversation well beyond engagement rates, likes, or, you know,

00:56some hollow promises of traffic to the website.

What Cohley Does and Why Brands Pay

Nathan Latka

00:59Interesting. And so just taking a step back, what is the company doing today? Why are people paying you?

Tom Logan

01:05They're paying us because they need content. And that really falls into three categories like you mentioned, photos, videos, and product reviews. And really, they just need more content than they've ever needed at any other time in history. And they need to be able to test at high frequencies if they wanna compete in these crowded spaces.

01:23They need a lot of content. And, you know, that that also means they need creator driven assets for TikTok. They need content that's gonna speak to a one to... In a one to one fashion to Gen Z versus just repurposing content that they use for, you know, a classic millennial audience a year or two ago. So it's all about tightening up that feedback loop and giving them the assets that they need.

Customer Mix and COVID Impact on Content

Nathan Latka

01:47Are these mainly e commerce companies paying you?

Tom Logan

01:50They're mostly e commerce brands. Yeah.

Nathan Latka

01:50Interesting.

Tom Logan

01:50There's been a little bit of a shift over the last year because brands haven't been able to run traditional photo shoots just because of COVID restrictions. But... And they're learning that their fears around third party created content weren't as drastic as they thought. And sure, they might not may not be able to control every little bit of, you know, what the model might be doing with, you know, her or

02:15his hand. But guess what? It's significantly less expensive. It tests the roof and allows them to scale.

Founding Story and Early Beta Customers

Nathan Latka

02:22Yeah. That all makes sense. Okay. What's the backstory? When did you launch the company? What year?

Tom Logan

02:26We launched in 2016. Yeah. So coming up on our fifth birthday, my co founder and I started out the user generated content space, and we basically saw influencers as the answer to all of our prayers. They're creating high quality content on time frames that are predictable. The legalities aren't a huge issue, and, the quality is really significantly better than, you know, content that you or I might just create on our Instagrams, taking pictures of our Nikes

02:54or something like that.

Nathan Latka

02:55How much of your own capital do you and your co founders stick in?

Tom Logan

02:59We put in about $35,000 upfront.

Nathan Latka

03:01Yeah. Did you

03:03blow it immediately, like, before you had a paying customer?

Tom Logan

03:06Not immediately. No. What we actually did in early twenty sixteen was we started with a $100 a month product that was basically like a shoppable Instagram tool. So it's like a workaround that would allow people to shop from Instagram feeds. That allowed us to to get our first, like, 25 beta clients for Cohley. And then, you know, of course, not all of them used it, and an even fewer percentage of them actually ended up being paying

03:33customers. Only four of those 25 ended up paying us. But there's today, and they allowed us to build out the marketplace. Right? And that was a huge thing early on, just like any marketplace, the chicken or the egg. Gotta build up the creator base, gotta build up the brands.

Creator Marketplace GMV and Monetization Model

Nathan Latka

03:48Okay. So let's talk about the marketplace for a second. Let's just let's just talk GMV. I assume that's what you measure last year. How much went through the marketplace?

Tom Logan

03:56Yeah. So just south of $1,000,000, but that's not how we... That's not actually how we monetize. We don't take a cut of that at all. Yep. So annual SaaS licenses directly with the brands and we don't take a cut of anything that they do on top of that. We'll give them...

Nathan Latka

04:12And creators are free?

Tom Logan

04:15Creators take a 100% of what they earn on Cohley.

Nathan Latka

04:18Oh, wow. Interesting.

04:19So you paid out a little under 1,000,000 to creators last year.

Tom Logan

04:19Yeah.

Nathan Latka

04:19How many creators?

Tom Logan

04:24I don't even know the total. There are a lot that do, product exchange only, especially the product we use. Right? That's an FTC regulation. We do it in exchange for free product. But, you know, we also have high end photographers that make a few thousand dollars for producing 20 photos. So we're starting to service both sides of the market.

Nathan Latka

04:44And you're talking, like, hundreds of creators or thousands of creators or dozens?

Tom Logan

04:47Thousands.

Nathan Latka

04:48Oh, wow. Thousands. Okay. And how many brands put at least a dollar through?

Tom Logan

04:52220 brands last year put at least a dollar through. Yep. So it's a thriving marketplace, and, you know, naturally, it's become a lot easier to create these pockets of of niche creators, for example, in, like, New Zealand or people who, women who are going through menopause. That was the conversation we had earlier today. It becomes much easier to build out that creator population once you have good brand names on the actual platform.

Pricing and Average Contract Value

Nathan Latka

05:22When the brands are paying you the SaaS fees, what are they paying per month or per year on average?

Tom Logan

05:28On average, paying 1,500 a month. So 18 ks a year is the kind of the median price point.

Nathan Latka

05:36And could you see yourself ever, if the GMV grows 10, 20, 100,000,000, you start taking a small percent or no?

Tom Logan

05:42Yeah. Definitely. It would just have to... It would have to fit within our larger mission to generate lots of content at low costs. Right? We want these mid market brands, these D2C brands that are keeping the the massive conglomerates honest. We we want them to continue to be able to be viable challengers, and we like that David versus Goliath type of type of positioning. So potentially down the road, I I wouldn't say never to that, but

06:10there are other ways that we can monetize.

Nathan Latka

06:12Two twenty brands at a, call it, dollars 18,000 price point. You're flirting with a $4,000,000 run rate, something like that?

Tom Logan

06:19Exactly right. Yep.

Nathan Latka

06:20You think you can break it this year?

Tom Logan

06:22Absolutely. Yeah. Yeah. We wanna double this year. We feel like the the,

06:28the the factors that are out of our control in terms of the market and and, the overall enthusiasm for what our offering is continues to grow. And we're also really benefiting from partnerships with Klaviyo, with Attentive. We're one of five creative partners for TikTok as well. So we're starting to be associated with these bigger brands and, like, sit in the middle of this ecosystem where we can where we can add testing where it didn't previously

06:56exist.

Nathan Latka

06:57Are you in any acquisition talks with Klaviyo?

Tom Logan

07:00No. No, we haven't. And I've been told to be careful because I know they're builders. But, yeah, they've been they've been awesome to work with and certainly certainly going to the moon.

Revenue History and LTV to CAC

Nathan Latka

07:10You're trying to double this year, maybe get up to an $8,000,000 run rate. But where were you exactly a year ago in maybe December 2019?

Tom Logan

07:16A year ago, we were at two five, and we were essentially flat through about May 2020, and then really accelerated like crazy as as e commerce spend, went berserk. So we started doubling down. We went heavy into marketing, maintaining a really, really healthy 3.3 to one LTV to CAC. So we've been able to lean into this. And and, you know, the products continue to mature. We've done a good job of of of using our most successful

07:48clients to help evangelize our offering and our methodology.

Nathan Latka

07:52Yeah. What do you what do you put your... What do... Like, I assume you do some sort of math here, obviously, but what do you put your LTV at right now?

Tom Logan

07:59Yeah. Our LTV to CAC is, well, our LTV is like 12 ks. So...

Nathan Latka

08:04Interesting. Yep.

08:06How do you get that? How do you get that?

Tom Logan

08:08Yeah. It's like marketing. We're pretty conservative about it. So we like include rent expenses, direct and...

Nathan Latka

08:14Oh, hold on. That's your CAC is 12 ks?

Tom Logan

08:16Right.

Nathan Latka

08:17Sorry about What's your LTV?

Tom Logan

08:19Oh, LTV. Yeah. Yeah. So, I mean, it's like two and a half years.

Nathan Latka

08:22Yeah.

Tom Logan

08:22So... Yeah. Yep. Yep. And...

Nathan Latka

08:24You're talking like 40 ks, 40,000 ace, something like that.

ICP Focus and Churn in SMB Cohort

Tom Logan

08:27Yep. Yep. Yep. And the biggest thing for us is... Has been understanding what our actual ideal customer profile is and leaning into that like crazy. Right? No. And these numbers suck, but, like, our non ICP, our sub like SMB cohort, I mean, they're churning out at 60%. And that's not, that's not a SaaS business, right? Yeah. So now we've really been able to focus our marketing efforts, our sales pipeline, all the way through on, on ICP.

08:56And luckily, those brands are also a hell of a lot easier to work with. Right? They come in with relative expectations. They come in with ample budget, resources, and they know how expensive content is, relatively speaking. Right? For working with a brand new upstart brand, looking to cut as many corners as possible. Doesn't tend to work out very well.

Sales Team and Quota Structure

Nathan Latka

09:15You can afford to put AEs on the $18,000 ACV sort of deal. How many sales or quota carrying reps do you have currently?

Tom Logan

09:22We have eight. Yep.

Nathan Latka

09:23Okay. And what do you set quota at?

Tom Logan

09:26Quota is 120.

Nathan Latka

09:28Monthly?

Tom Logan

09:29Nope. That's per quarter.

Nathan Latka

09:31Oh, quarterly.

Tom Logan

09:32Yep. That's quarterly.

Nathan Latka

09:33Exactly. Okay.

09:35You want them closing each year about $500K of new ARR?

Tom Logan

09:38Yeah. Interesting. Yep. We'd like to see it a little bit higher. I mean, like our, our CSMs are only managing right around $550K ARR right now. We'd like to see that closer to 1,000,000 in the near future.

Nathan Latka

09:52So what you have, six of them right now?

09:54So it's seven?

Tom Logan

09:54Yeah.

09:55You're quick with your math.

Team Size and Argentina Engineering Team

Nathan Latka

09:57Yeah. I try to, we want to get right to the like, yeah, I try to get right to the numbers. It breaks through a lot of fluffy stuff. You know how that works. So, what's your total team size today?

Tom Logan

10:06Total team size, including, developers in Argentina is at 42.

Nathan Latka

10:1042. Okay. Argentina developer.

10:13How many there?

Tom Logan

10:1512.

Nathan Latka

10:15Why Argentina?

Tom Logan

10:17Well, two ways to look at that. One is cost, about 20¢ on the dollar. The second is just an incredible education system. They are able to take a concept, take an end goal, and build around that, build up to that, understand all of the dynamics and potential solves without needing line by line instructions. And I've just been, I've been blown away by these steps they've been doing. Yeah.

Funding History and Debt Round Plans

Nathan Latka

10:43That's great. Well, good team, nice growth, hot space. I'd be really impressed if you've all this bootstrapped. Have you raised?

Tom Logan

10:50Yeah. But not very much.

Nathan Latka

10:52So, I mean, only 2.3 to date.

Tom Logan

10:56We did a seed that was $2,000,000 about a year back. We're about to do another debt round here in, in the next couple months. We've really benefited, and and I would actually recommend really any SaaS company do this early on. You're obviously gonna be told by every investor and and SaaS adviser under the sun that, like, stick to SaaS. Don't resist the urge to become any sort of agency. But early on, and this has carried over

11:21a little bit, like, we we were doing things that didn't scale. We were doing project based activations where we were essentially dogfooding our own tool. And, you know, we did a did a campaign with Chobani where we spent $22,000, not to mention, hours and hours of labor for my co founder and I, and we, we only charged them 12, right? But until they put the cease and desist order on, on us using their logo, it was,

11:47it was, gave us a story. It gave the story. It wasn't, it wasn't SaaS revenue by any means, but, we do still have a 20%, pocket of revenue that comes from project activations, primarily with like

12:02CVS and things like that.

Nathan Latka

12:02So 2,000,000 raised last year.

12:05When was the other 1.3 raised?

Tom Logan

12:07The... No. It was only another point three. So we did a $50,000, friends and family, then a $200,000, $250,000 pre seed, and a $2,000,000 seed.

Why Debt Over Equity and Exit Optionality

Nathan Latka

12:19Oh, got it. So, yeah, I mean, I would say that is pretty capital efficient. I mean, you've raised less than your ARR, which is always a good place to be. Now, is the perfect debt deal look like for you to drive future growth and why are you choosing debt over equity?

Tom Logan

12:32Yeah, that's a great question. And, certainly we're unique in our thinking on this, but this will be a $2,000,000 loan with a initial twelve month interest only period. Fairly high interest rate, but we're staying away from from warrants.

Nathan Latka

12:48What's high in your book?

Tom Logan

12:5118% -ish.

Nathan Latka

12:52Yep.

Tom Logan

12:53Yeah. That's, that's one I've seen. We saw one for, for 16 that has some warrants baked in. The warrants have penny strikes, right? And if that's equivalent to 1.5% ownership of the company, that's like gifting 300 ks plus to them on day one. Yep. It's kind of brutal, right? But, we are very much of the mindset that while we absolutely wanna grow this thing as, as efficiently and as quickly as we can, we also know that

13:2290% of all tech acquisitions are sub 100,000,000. And we're cognizant of getting in bed with a VC that would make us grow or force mandates on us from a hiring standpoint that would move a little faster than we're ready for. Right? We want that exit optionality. We want the ability to make decisions on our own terms. And it's very possible that at year end, we do... We see our retention shore up and get to that 90%

13:51level across the board. We see our win rate continue to skyrocket, ACV continuing to go up. We could make the decision like, alright. Let's let's go all in on this. And I know that you're doing a, you're doing a webinar tomorrow to talk about, like, secondary, you know, liquidity and and all of that type of stuff, which I think is awesome that you're educating on that. I just... I believe that there is a different way to

14:15grow a company, in a way that that isn't that isn't coming from a place of fear. It's coming from a place of prudence and being able to make decisions on your own terms. And

Nathan Latka

14:25My kind of founder, man. My kind... Preaching preaching here. I love it. That's great.

Tom Logan

14:30Pressure on, on founders, I think, especially early on, to to aim for the moon and to... Everybody reads Blitzscaling, and people dream of of, you know, being being a billionaire and whatnot. And that's that's all well and good. I think for the most part, are coming from a good place there. But, like, think about it in a regimented fashion. Think about scaling in a way that you feel confident in. Then think about the funding process,

14:55kind of working backwards from that. Right? And tell yourself like, all right, I'm gonna study these metrics religiously. I'm gonna make decisions based on these. And I'm not just gonna just swoon for the first VC that that offered this $5,000,000 term sheet.

Famous Five Rapid Fire Questions

Nathan Latka

15:11I hear you. I know you're good. You're you're preserving optionality, which is important. Tom, we're out of time. Let's wrap up with the famous five. Number one, favorite business book.

Tom Logan

15:19Zero to one.

Nathan Latka

15:20Number two, is there a CEO you're following or studying?

Tom Logan

15:25That's a great question.

15:29Jeremy Levy at Indicative. Longtime mentor. I was gonna say Elon Musk, but that's that's a comment.

Nathan Latka

15:36Number number three, what's your favorite online tool for building a business?

Tom Logan

15:43That's a great question.

15:45My favorite online tool for building the business. Oh, let's go BuiltWith. I think it's... I think that's my favorite tool. Being able to see the integrations that have that have lots of carryover and and crossover with our client base allows us to build out the partnership ecosystem and set our sights high.

Nathan Latka

16:05Number four, how many hours of sleep do get every night?

Tom Logan

16:09Five and a half. It's a it's a problem area and my fiance would be the first person to to take it, but I gotta work on it.

Nathan Latka

16:15So fiance. So so not married, but not single. Any kids?

Tom Logan

16:18No kids.

Nathan Latka

16:19No kids. And how old are you?

Tom Logan

16:2133.

Nathan Latka

16:2233.

16:23Last question. What's something you wish you knew when you were 20?

Tom Logan

16:27You know, I I wish that I knew that I didn't have to go into a field that was directly correlated to my major. I think what I was really learning through college was the ability to communicate ideas, to write well, and to think creatively, and just to learn. Right? If I could go back to college, I wish I could just soak it all in and go to every office hours with every, you know, with every teacher

16:51and and just soak it up.

Nathan Latka

16:51Mhmm.

16:54Guys, Cohley launched in 2016, very capital efficient, up flirting with $4,000,000 right now, just $2,300,000 raised. They're about to close a $2,000,000 debt round to preserve optionality, whether they wanna exit, grow, whatever they want. They have all options on the table. Nice growth rate now serving up two twenty brands that are connecting with creators. A million dollars went through the platform last year as brands paid creators to come up with unique new content, mostly e commerce

17:16brands as is where they're focused. We'll see what happens as they try and double this year. Tom, thanks for taking us to the top.

Tom Logan

17:23Thanks, Nathan.

Nathan Latka

17:25One 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

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