How Compstak CEO Michael Mandel grew Compstak to $5M revenue and 100 customers in 2017.

hello everyone my guest today is michael mandel he's the co-founder and ceo of a company called comp stack the company creates transparency in commercial real estate by gathering information that is hard to find difficult to compile or otherwise unavailable the world's largest brokerage firms and most pre-eminent real estate investors use comstock's commercial real estate data to compare properties and make investment decisions michael are you ready to take us to the top absolutely sure all right tell us about comstack give us more detail on what it does and how do you make money what's your revenue model absolutely so we're a real estate data company and our secret sauce really is that we crowd source commercial real estate data in particular records of commercial lease and sales transaction data that has taken deals that have taken place effectively so we've got commercial real estate brokers appraisers and research people within real estate brokerage firms who actually trade data on comstack they um we have a gamified system it's a credit system so they earn credits for sharing data on our platform they can use those credits to get other data back out and then we end up with a comprehensive database effectively of all the deals that have taken place in a given real estate market we're live in over 70 markets across the u.s and uk over uh 900 submarkets and over 8 000 cities so they're trading data in all these markets and then from that database of deals that has taken have taken place we are then able to sell uh subscription access to that data to commercial real estate investors and lenders so our customers are some of the world's largest um banks private equity funds hedge funds institutional owners so people like wells fargo and jp morgan and morgan stanley we've got you know institutional owners like blackstone brookfield mornado tishman's fire what have you so they pay for access to our data and they use it to underwrite real estate investments and to lend on commercial real estate and so michael it sounds like you're very much playing in the enterprise space before i move forward tomorrow your story what's like the average customer would you say paying you per year uh around fifty thousand dollars okay around fifty thousand and do you is that on like for one seat and people buy multi-seat deals or that's the average total size that's the average total size um our contracts range from you know in the very low end for a really small market you know for one user like 12 000 a year up to um high six figures um you know close to seven figures for for some of our bigger deals and the um they're paying based off the number of seats you know number of users they want on the platform uh the number of markets they want to have access to and specifically which markets they want to have access to each market is a different price when did you launch the company uh we launched in january 2012 in new york city 2000 and where were you at that point like in life if you don't mind me asking like did you did you have any responsibilities married single debt no debt where were you sure i was married um i didn't have any kids yet i was still working as a as a commercial real estate broker so actually i started the company while working as a commercial real estate broker in new york city and did it uh basically from my desk you know after hours which firm um until i was with grubbin ellis how did you how did you provide i was gonna say how did you prevent them from trying to claw back that ip and saying no he did it on our watch it's our it's our stuff well i specifically asked my bosses at the time you know the heavy office um you know and told him what i wanted to do and and that i was wanting to work on this and was that cool and then i you know they they he said it was fine and then that boss left and i didn't talk to the new boss because the company was going back the company was ultimately going bankrupt at the time that i was starting it up starting up comstack so that uh as people were walking out the door i guess i i had more and more time to work on it and do you remember what first year revenue was in 2012 how small was it it was pretty small we closed although you know we i think we probably closed out 2012 at sixty thousand dollars in annual revenue um we but we actually that was from basically two customers right um we at the very end of 2012 we closed you know bernado and tishman spire who are two of the largest landlords in the country or in the world we managed to close them as our first two customers so it was interesting i mean we weren't actively trying to generate revenue at that point but we've gotten introductions and we ended up building our enterprise product to sell um because we had interest and and we're able to get those deals done and uh it was an interesting experience because it was probably too early to start selling because your data company were you writing the code by the way or had you hired a developer no so i've got a co-founder um who's our cto okay um his name is vadim and he had been building trading systems and banking systems for banks where did you find him um it's a good question actually so when i was starting the company i needed i knew i needed a co-founder and i because i had actually worked on starting something else in the past where i hired some outsourced guy and it was a mess and so i realized i was not going to start a tech company without a technical co-founder so i um i actually was going to tech startup events in new york basically every night of the week um trying to meet somebody and pitching people everybody i could meet on the idea every night and try to generate interest until eventually actually i had several people who were developers who had some interest in it and then i was talking to people and just got to know people and effectively had like a dating period with my co-founder where we got to know each other and make sure we felt comfortable working together did you just split it right down the middle 50-50 or if not how did you have that tough conversation we did split it down the middle wow michael you're a fair guy okay interesting you know i i think i didn't intend for that to be the case um but what but ultimately you know actually my co-founder worked on comstack for um nearly a year full time while i was still working as a broker was he making any money like did you get let him have that 60 grand that you guys had for revenue or no well no that was the sixth grade we had in revenue that was after we actually had some funding so we launched january 2012 but we we started working on this in the spring of 2011. okay and you know um and at that time no he had been doing consulting work and he basically stopped his consulting projects and just only worked on com staff i wasn't making any money nobody was you mentioned you raised how much have you raised to date uh around 20 million okay and all that has been traditional kind of equity funding or have you done any debt stuff or gotten creative there there's some yeah we did about 3 million in venture debt and why make the decision to do some inventory we've now paid off about half of that um we'll bet your debt if you get it from a bank is pretty cheap money you know the um it's a pretty good deal the interest rates is low and the um you know they they take a little bit of in warrants but not very much so it's a pretty good deal you're not getting dilution and you're getting um you know money that's not actually guaranteed um by anything and ultimately um did you personally guarantee that no there's no guarantees at all i mean the only the only thing it's backed by effectively is like uh the property of the company of which we all we own our computers really yeah you know so um it's a it's a good deal if you can get it and it's it was interest only for a while too which is good so you know you've got time to what's the interest rate like are we talking like ten percent or seven percent or fifteen percent or higher i we're tired prime i think we're probably at about four and a half percent right that's amazing okay that is cheap money interesting and then where are you at today now in terms of total customers five years after launch um we're a little shy of 100 customers now um you know and we're growing a pretty good clip um they're mostly very very large institutional type customers so it's not a massive number of customers but you know if you look at the world's the bulge bracket banks we've got the bulk of the bold bracket banks we've got you know a good percentage of the world's largest institutional owners and lenders yeah no i mean if you have 100 customers and you told me earlier your average customer is paying 50 grand a year i mean you're sitting on basically a almost a 5 million business or about 416 grand a month in revenue is that are those generally accurate well we don't we don't disclose you know just to be clear michael those are just your i'm just multiplying your numbers right so are your numbers yeah yeah yeah no no the numbers aren't wrong okay um there's some nuance because we have some data partnership fields as well that we do which are kind of bigger deals uh where we do integrations with um with different you know other technology companies and data companies um where we and we also have revenue share deals with some companies as well so there's some other some other things that...