Compliable Revenue, Valuation & Funding (2024)

[00:00] Hey, folks. My guest today is Chris Oltyan. He's building a very cool tool called compliable.com, which makes gaming licensing easier. He's a nine time serial entrepreneur with three exits. He shipped over 30 software products and has raised about 2.8 for Compliable to date. Chris, you're ready to take us to the top? [00:16] >> Sure. [00:17] What does that mean, make gaming licensing easy? Who's paying you for this? [00:20] >> So it is mostly the operators and the people who want access to revenue in either the sports betting or gaming space. [00:29] >> And if you want to think about the product, what it does, it's TurboTax for gaming licenses. Getting licensed in any of the states and jurisdictions in which it's legal is a giant mess complicated, but it's the same data over and over and over again, much like Intuit and TurboTax really defined how you can simplify that process. We're doing the same thing except in the gaming space for licensing. [00:55] Interesting. Okay. Can you name one or two people that like pay you for this and why they need gaming licenses? [01:00] >> So, one of the operators, Sport Trade, is the startup in the space, and we're working with another major operator that we can't name publicly yet, but those are your sports books. So I will say in general, is the, you've seen the ads on TV, bet with this [01:18] >> FanDuel. [01:19] Sports [01:21] >> Those are the types of people that are paying for this because they have hundreds of people that they have to get licensed in order to be able to legally operate in those states. So that becomes somewhat of a nightmare if you're doing it all using Microsoft Excel and lawyers. We can get in there, organize the process, give them a bit more of a framework and really walk people through all those questions that are poorly worded or [01:45] >> thrown up in legislation real quick so that they can get access to sports betting revenue and then translate that into English so that you can answer it meaningfully and still be able to fill out all the forms in a way that's compliant. [01:57] I see. Sport Trade, FanDuel, DraftKings, you didn't say them, but I did. Think we get it. So me the backstory here. What are some of these companies paying you per month on average to use this technology? [02:08] >> So the way that this industry works, them and their vendors, because in order to sell to those companies or give them [02:18] >> I'm going to use FanDuel as an example randomly for no particular reason. If you are a person who is sending traffic to FanDuel and FanDuel will pay you for that traffic, you have that affiliate relationship. In order to do that, you must get licensed very specifically. Those licenses tend to be one or two year deals depending on the state. And every state also has a different kind of way that you get licensed. So we sell those [02:46] >> kind of on an annualized basis, dollars 7,000 a year is currently our beta pricing for it. And companies that want to work with these sports books pay us that and that's the annual fee. The sports books themselves, we have a slightly different model on that. There is an annualized fee for the platform. And then we actually have a per license fee. So you have one person who needs to get licensed in three jurisdictions. We charge you [03:08] >> a flat fee for each of those. [03:10] Okay. So that's a lot to digest. Make it simple for me. What's the average company paying you per month to use the tech? [03:16] >> So a major operator would probably be around 5 to 10 ks a month. For the smaller groups, that's about 1,000 a month. [03:24] Okay. So you maybe your average is something like $2k a month, something like that. Okay. But two very different cohorts there. What's the backstory in terms of of launch? When do you launch the company? [03:34] >> So we kind of pegged this at September 18, which is when we presented the first prototype to the last year. Last year. Yeah. [03:43] Okay. Got it. So '20 And how have you funded a bootstrapped or raised capital? [03:48] >> Raised capital. And we actually raised capital for a different idea and a different company name. We rebranded once we kind of encountered this opportunity and discovered that it was sweeping and that we were the first to really address it directly head on. And I have to say, having done this nine times, being in a market leader position is awesome. Like it is very kind of encouraging when you do a press release and then people like follow [04:17] >> on their press releases being like, no, no, no, we're here too. And we do something sort of related. You should pay attention to us as well. [04:23] And we're like, cool. So how much did you raise in what year? [04:27] >> So last year on this pivot, after September, we raised 1.7, and we're actually very close to closing another three right now. [04:37] Okay. Was the 1,700,000 before this three, the only capital you'd raised? [04:41] >> No, we had done bits and chunks before that, 600 in a seed round before that as well. But that was as we came out of Techstars the year before with a very different company and a very different idea. The pandemic, however, had different ideas on whether or not that company would be successful different than ours. Like you do, we found the thing that was going to work. [05:05] So just to be clear, the company that you currently own equity and was actually launched earlier than last year is maybe in 2019. You just pivoted to your current product last year. [05:13] >> Correct. [05:14] I see. Okay. So 2019, you raised $600,000 pre seed out of the accelerator program. Then you raised $1,700,000 in 2020 last year, call that your seed and you're about to close a $3,000,000 series A. [05:24] >> Or, yeah, late seed, the words kind of [05:27] Whatever we want to call it. Yeah, whatever we want to call it. Alright, very interesting. So, the pivot takes a lot of courage. Is it just you or you have multiple founders here? [05:37] >> Multiple founders. So we have, I have two other co founders that went on that pivot with me. And, you know, yes, it takes courage, but when it's like, well, we're going to die or we need to try something new, it's less courage than you think and more just survival instinct. [05:52] Did you guys split equity at the beginning, a third each? [05:54] >> No. When we started this way back when it was on an idea that I had, I had brought in the initial capital and pretty much took no salary in order to make things work While we had a consulting gig that kept the doors open and the lights on and was able to divert a lot of that to my technical co founder at the time. So in exchange for that, I took the lion's share of equity as [06:20] >> the labor of his various different projects really fueled the company forward. We were able to balance that out a little bit more, but some of the later co founders who came in after we had a more established idea of what was going on did not get as substantial equity. [06:37] Yep. Understood. Understood. And then customer story. So did you land your first customer last year for Compliable? Was the pivot Complete. And how many customers now today? [06:47] >> I think we're up to seven. [06:49] Seven. Okay. Got it. So, I mean, this is probably gonna be, I mean, you probably can name all your potential 100 current customers. It's just about going and knocking them all down now at this point. [06:56] >> Yeah. And especially on the operator side, when you talk about the major sports books, the way legislatively The US is set up, it's a very finite number. There's gonna be like fifty, sixty players total, twenty, thirty of substantial size. For their vendors, however, everybody who wants to sell to those sports books, everybody who wants to divert traffic. If you decide that To The Top Podcast decides to start suggesting people try various different sports books and you [07:24] >> want to get paid $500 for those affiliate references, then you would also get a license. [07:30] And for [07:30] >> that, you have tens of thousands of people who are trying to head into those hills and mine that gold. [07:36] Now Chris, I multiple Yeah, picks and troubles are good. Now, can I take your seven customers times that ACV average you told me earlier, you guys are doing about $14,000 a month right now in revenue? [07:46] >> Yeah, ish. [07:47] Okay. And where was that exactly one year ago? [07:52] Okay, got it. So July August of last year, were still at about $0 You didn't have any customers at that point. All your customers were in We didn't have a product. [07:59] >> September, we didn't have a product. We just had an idea. We got people sign on to a pilot. By November, we had people running through the product and we actually booked our first revenue July last month. [08:13] Got it. Okay, got it. So you've gone from nothing to seven customers sort of in the last, call it three months. Now, all that being said, you essentially raised that 1.7 seed round pre revenue. What valuation cap were able to negotiate? [08:26] >> We were a pre revenue there of about 4.5. [08:32] Pre money? [08:33] >> Our pre money. I'm sorry. Yes. [08:34] Yeah. Yeah. So that was a price drowned. It wasn't a convertible note? [08:38] >> Correct. [08:39] Okay. Got it. That's rare. Why did you decide to price it pre revenue? [08:44] >> We had established kind of where we were and where we wanted to be. We did have existing investors and we had a prior price round. So that was kind of an easy place to base off of. And actually, that was the first round right after Techstars was the $4,000,000 money price round. Then we did for the $1,700,000 that was $6,500,000 [09:12] Got it. So you went from a $4,500,000 valuation in 2019 after Techstars raised $600 there. You then raised 1,700,000 at 6.5 posts. So that's selling what about 10% of the business, something like that, maybe a little bit more $15.06 percent of the [09:25] >> point five pre eight posts. And then this time around we're targeting a higher number as well. And it was an opportunistic round and it was a much different negotiation and it was very quick. We actually weren't looking to do this raise. We were kind of good for cash flow, had enough powder in the keg to get us to what we believed enough to get us to kind of break even. But there was such demand once we [09:53] >> were out in the market and announced the name change and we had a string of customers and investors come in. We were able to kind of move more quickly on that. [10:02] Higher valuation? [10:04] >> Higher valuation. How much higher? Almost double. [10:08] Almost double. Okay. So it's called 12 pre three, but why take that? I mean, it's still dilution. Dilution is dilution. Why take the dilution? [10:15] >> Acceleration in speed. So right now we are at a seminal moment for the sports betting industry and so much is happening and so many states are about to hop onto that bandwagon. If we can get out there ahead of that change, if we can be the provider for the states themselves to be able to grant licenses, that puts us in a pretty unassailable position. And that opportunity will exist for the next six to eight months. And [10:44] >> we simply don't have the engineering capacity to capture the entire thing right now. So sure, we could kind of make it happen over the course of twelve months, but doubling our engineering team, we can make literally the same thing happen in six. [10:58] What is the team size today? How many people? [11:00] >> So right now we're at 13 and we'll probably be 20 by the end of the year. [11:03] And how many engineers today? [11:05] >> Right now we have five of that team as engineers. [11:08] Any quota carrying sales reps or no? [11:10] >> Nope. None. [11:13] >> One of the founders is our Chief Revenue Officer and they are pretty much all the outreach towards the operators is being handled by them. So that really helps focus exactly what that outside sales organization is going to be doing. However, we're getting so much inbound and the channel partnerships because what happens is we get an operator and then all the vendors who want to work with that operator, we provide them that licensing service so that the [11:44] >> operator knows what's going on and can make sure that the people that they're working with are properly licensed. [11:51] And that's kind of the [11:51] >> pain that we're building. [11:52] If you close this three on 12, so assume that's already closed, how much equity will you still own in the business? [11:57] >> I think we'll be at roughly 30%. [12:02] What do you mean you think? You've definitely calculated this. [12:06] >> So, you know, yes, I've calculated it. We have an option pool. All those options aren't specifically allocated. [12:14] How big how big is the ESOP? [12:18] Big is that equity pool for employees? [12:19] >> Oh, we started at 12% with last round and we've been giving it away steadily since, but we have about half of it left. [12:29] Are they requiring you this new 3,000,000? Are they requiring you to make that 6% bigger? [12:33] >> No, and really that's why I'm calling this kind of another seed round or late seed round. It's really just opportunistically saying, Hey, for basically the same terms, we're just going to continue moving forward and accelerate our ability to capture the market, but not really giving them the sorts of preferences you might see in a Series A. [12:51] So on a fully diluted basis after this round and assuming you use the whole option pool, team members will own 12%, you'll own 30%, where's the rest? [12:59] >> The co founders and the investors. [13:01] Got How much do the co founders still own? [13:04] >> Altogether, we'll be very close to 45. [13:09] Including the employee options or no? [13:12] >> Yes, including the employee options. [13:14] So your co founders only own 330%, 15%. [13:19] >> Own 30%. [13:21] Eight stop is 12%. [13:24] >> So we haven't allocated the full employee options. And the co founders together have about 15 between them right now. [13:33] Okay. Fair, fair, fair. So 30 plus 12 plus 15%, the rest the investor zone. [13:40] Is that right? [13:41] >> Alright. [13:42] Okay. Okay. Interesting. How do you I mean, this is one of those things to me, it's sort of fascinating, right? It's a very different choice than someone that like bootstraps to $500,000 in revenue and is really profitable and pays themselves dividends. I mean, does it ever worry you? I mean, how do you make money on this thing? You've got go validate. You're at $160,000 in ARR, you're raising $12,000,000 valuation. You can do your own math on [14:02] the revenue multiple, but you've got to grow so big to even grow into that multiple before you see any sort of dollar from an exit. How do you get there? [14:10] >> So that is kind of the nature of the beast, right? When we started this business, it was very much a venture backed business. And there are certain realities that I accept as a founder when I say I'm going be a venture backed business. The hockey stick growth that you got to hit is just a reality of taking that sort of money. Now, I think the market opportunity is there and it would be impossible for me to [14:33] >> do that with the resources that I have. And the nature of this market, it just generating itself from nothing so quickly puts this timer on it. When time and opportunity are crunched that much, taking in outside equity, it's expensive equity. Venture capital is the most expensive money you'll ever get. I could get a bank loan for less than 50% annual return and still be able to do a lot of what I'm doing. Being able to get [15:04] >> that money quickly now so that I can grow this organization and be there for when this industry explodes is where I'm positioning it. [15:12] Yeah. Under the bet makes perfect sense. I get it. Go big or go home. That's great. Let's wrap up here with the famous five. Number one, favorite book? [15:22] >> Built to Last. [15:23] Number two, is there a CEO you're following or studying? [15:27] >> Tom Higley. [15:28] Tom Higley, what's the company is he running? [15:31] >> Ten ten ten. [15:33] Okay. Interesting. [15:33] >> It's fascinating. It does founder problem fit. [15:37] Interesting. Okay. Number three, what's your favorite online tool for building the business? [15:45] >> Pivotal tracker. I'm a product guy. It's hard for me to get away. [15:49] Number four, how many hours of sleep do you get every night? [15:53] >> Yeah. I get an hour of sleep every night. [15:55] No. No. How many hours? [15:56] >> Yeah. Oh, you don't get [15:58] >> a come on, an hour is not healthy. [16:00] How many hours do you get? [16:02] >> Usually four to six. [16:04] That's still really not that healthy. How long can you go on that before you start having health issues? [16:09] >> About a month, month and a half. [16:11] Okay. And then what's your process for catching back up? [16:14] >> Hopefully, I'll be able to take a vacation after this close. But we were doing a close, doing a round, of grants and growing the company and a couple other things were going on. Just a confluence of fun and suffering. [16:28] I totally understand, Chris. Talk to me about situation. Married, single, kids? [16:32] >> Married with kids. [16:34] How many kids? [16:35] >> Two. Two kids. [16:36] How old are you? [16:38] >> I am 41. [16:41] 41, [16:42] he says with a question mark. [16:43] >> Take us What do wish you knew when you were 20, Chris? [16:47] >> Geez. I mean, I started the first of my several companies then. It was during the dot boom and it would have been nice to know just how bust it would have been shortly after. [17:00] All right, guys. There you have it. Compliable is helping folks get gaming licenses when they need them. Think FanDuel, SportTrade, etcetera, DraftKings. They've got a team of 13 today. They raised $2,300,000 to date, 600 pre seed, 1.7 seed at a 6,500,000 post. Trying to close a 3,000,000 on a 12 pre money right now as they serve their seven customers and generate about $168,000 in annual recurring revenue to date, looking to scale quickly as this market [17:26] is emerging fast. Chris, thanks for taking us to the top. [17:30] >> Thank you. [17:31] 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 [17:56] Central. Additionally, remember these recorded founder interviews go live. 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