How Compliable Reached $14K MRR and 7 Customers Helping Gaming Operators Stay Licensed (Interview with CEO Chris Oltyan)

Introduction and What Compliable Does

Nathan Latka

00:00Hey, 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?

Chris Oltyan

00:16>> Sure.

TurboTax for Gaming Licenses Explained

Nathan Latka

00:17What does that mean, make gaming licensing easy? Who's paying you for this?

Chris Oltyan

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.

Who Pays for Compliable and Why

Nathan Latka

00:55Interesting. Okay. Can you name one or two people that like pay you for this and why they need gaming licenses?

Chris Oltyan

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.

Nathan Latka

01:19Sports

Chris Oltyan

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.

Nathan Latka

01:57I 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?

Chris Oltyan

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

Pricing Model and Annual Subscription Structure

Chris Oltyan

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.

Nathan Latka

03:10Okay. 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?

Chris Oltyan

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.

Company Founding and the Pivot to Gaming Licensing

Nathan Latka

03:24Okay. 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?

Chris Oltyan

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.

Nathan Latka

03:43Okay. Got it. So '20 And how have you funded a bootstrapped or raised capital?

Chris Oltyan

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.

Funding History: Pre-Seed, Seed, and Closing Round

Nathan Latka

04:23And we're like, cool. So how much did you raise in what year?

Chris Oltyan

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.

Nathan Latka

04:37Okay. Was the 1,700,000 before this three, the only capital you'd raised?

Chris Oltyan

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.

Nathan Latka

05:05So 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.

Chris Oltyan

05:13>> Correct.

Nathan Latka

05:14I 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.

Chris Oltyan

05:24>> Or, yeah, late seed, the words kind of

Nathan Latka

05:27Whatever 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?

Chris Oltyan

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.

Nathan Latka

05:52Did you guys split equity at the beginning, a third each?

Chris Oltyan

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.

First Revenue and Customer Acquisition Timeline

Nathan Latka

06:37Yep. 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?

Chris Oltyan

06:47>> I think we're up to seven.

Nathan Latka

06:49Seven. 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.

Chris Oltyan

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.

Nathan Latka

07:30And for

Chris Oltyan

07:30>> that, you have tens of thousands of people who are trying to head into those hills and mine that gold.

Nathan Latka

07:36Now 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?

Chris Oltyan

07:46>> Yeah, ish.

Nathan Latka

07:47Okay. And where was that exactly one year ago?

07:52Okay, 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.

Chris Oltyan

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.

Valuation History and Pricing the Seed Round

Nathan Latka

08:13Got 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?

Chris Oltyan

08:26>> We were a pre revenue there of about 4.5.

Nathan Latka

08:32Pre money?

Chris Oltyan

08:33>> Our pre money. I'm sorry. Yes.

Nathan Latka

08:34Yeah. Yeah. So that was a price drowned. It wasn't a convertible note?

Chris Oltyan

08:38>> Correct.

Nathan Latka

08:39Okay. Got it. That's rare. Why did you decide to price it pre revenue?

Chris Oltyan

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

Nathan Latka

09:12Got 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

Chris Oltyan

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.

Why Take Dilution: Market Timing and Engineering Capacity

Nathan Latka

10:02Higher valuation?

Chris Oltyan

10:04>> Higher valuation. How much higher? Almost double.

Nathan Latka

10:08Almost 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?

Chris Oltyan

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.

Team Size, Engineers, and Sales Structure

Nathan Latka

10:58What is the team size today? How many people?

Chris Oltyan

11:00>> So right now we're at 13 and we'll probably be 20 by the end of the year.

Nathan Latka

11:03And how many engineers today?

Chris Oltyan

11:05>> Right now we have five of that team as engineers.

Nathan Latka

11:08Any quota carrying sales reps or no?

Chris Oltyan

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.

Nathan Latka

11:51And that's kind of the

Chris Oltyan

11:51>> pain that we're building.

Equity Ownership and Option Pool Breakdown

Nathan Latka

11:52If you close this three on 12, so assume that's already closed, how much equity will you still own in the business?

Chris Oltyan

11:57>> I think we'll be at roughly 30%.

Nathan Latka

12:02What do you mean you think? You've definitely calculated this.

Chris Oltyan

12:06>> So, you know, yes, I've calculated it. We have an option pool. All those options aren't specifically allocated.

Nathan Latka

12:14How big how big is the ESOP?

12:18Big is that equity pool for employees?

Chris Oltyan

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.

Nathan Latka

12:29Are they requiring you this new 3,000,000? Are they requiring you to make that 6% bigger?

Chris Oltyan

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.

Nathan Latka

12:51So 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?

Chris Oltyan

12:59>> The co founders and the investors.

Nathan Latka

13:01Got How much do the co founders still own?

Chris Oltyan

13:04>> Altogether, we'll be very close to 45.

Nathan Latka

13:09Including the employee options or no?

Chris Oltyan

13:12>> Yes, including the employee options.

Nathan Latka

13:14So your co founders only own 330%, 15%.

Chris Oltyan

13:19>> Own 30%.

Nathan Latka

13:21Eight stop is 12%.

Chris Oltyan

13:24>> So we haven't allocated the full employee options. And the co founders together have about 15 between them right now.

Nathan Latka

13:33Okay. Fair, fair, fair. So 30 plus 12 plus 15%, the rest the investor zone.

13:40Is that right?

Chris Oltyan

13:41>> Alright.

Venture Capital Strategy and Growth Philosophy

Nathan Latka

13:42Okay. 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

14:02the 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?

Chris Oltyan

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.

Famous Five: Books, Tools, Sleep, and Personal Life

Nathan Latka

15:12Yeah. 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?

Chris Oltyan

15:22>> Built to Last.

Nathan Latka

15:23Number two, is there a CEO you're following or studying?

Chris Oltyan

15:27>> Tom Higley.

Nathan Latka

15:28Tom Higley, what's the company is he running?

Chris Oltyan

15:31>> Ten ten ten.

Nathan Latka

15:33Okay. Interesting.

Chris Oltyan

15:33>> It's fascinating. It does founder problem fit.

Nathan Latka

15:37Interesting. Okay. Number three, what's your favorite online tool for building the business?

Chris Oltyan

15:45>> Pivotal tracker. I'm a product guy. It's hard for me to get away.

Nathan Latka

15:49Number four, how many hours of sleep do you get every night?

Chris Oltyan

15:53>> Yeah. I get an hour of sleep every night.

Nathan Latka

15:55No. No. How many hours?

Chris Oltyan

15:56>> Yeah. Oh, you don't get

15:58>> a come on, an hour is not healthy.

Nathan Latka

16:00How many hours do you get?

Chris Oltyan

16:02>> Usually four to six.

Nathan Latka

16:04That's still really not that healthy. How long can you go on that before you start having health issues?

Chris Oltyan

16:09>> About a month, month and a half.

Nathan Latka

16:11Okay. And then what's your process for catching back up?

Chris Oltyan

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.

Nathan Latka

16:28I totally understand, Chris. Talk to me about situation. Married, single, kids?

Chris Oltyan

16:32>> Married with kids.

Nathan Latka

16:34How many kids?

Chris Oltyan

16:35>> Two. Two kids.

Nathan Latka

16:36How old are you?

Chris Oltyan

16:38>> I am 41.

Nathan Latka

16:4141,

16:42he says with a question mark.

Chris Oltyan

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.

Nathan Latka

17:00All 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

17:26is emerging fast. Chris, thanks for taking us to the top.

Chris Oltyan

17:30>> Thank you.

Nathan Latka

17:31One 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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