How Convert Group Reached 78 Customers and 100% Year-Over-Year Growth (Interview with Panayotis Gezerlis)

Introduction and Background

Nathan Latka

00:00Hello, everyone. My guest today is Pan Gezerlis. He's been managing projects and firms across various industries with a focus on e business and technology. Amongst his roles was head of business planning for the leading mobile commerce firm Upstream with business development responsibilities in 40 countries. He founded Convert Group in 2014 as an e commerce consultancy and as we see in SaaS a lot, now pivoted successfully into an enterprise SaaS play with his partner, Elena. Pan, you

00:24ready to take us to the top?

Panayotis Gezerlis

00:26>> Yeah, let's do it.

Consultancy Origins and Early Revenue

Nathan Latka

00:27All right. Take me back to the consultancy. When was your first dollar revenue there?

Panayotis Gezerlis

00:32>> Well, we were going pretty good since we were founded on 2014. So we managed to have businesses and projects in 13 countries around Europe and also Asia. We reached about €2,000,000 in annual revenues. So it was going fantastic. Up until we had the idea to that was about last year that we had these revenues, annual revenues.

Nathan Latka

00:54Okay. So Founded 2014 took you six years to grow at about $2.3 million, $2.4 million in revenue and then what?

L'Oreal Partnership and SaaS Pivot Idea

Panayotis Gezerlis

01:02>> Well, it was three years ago that L'Oreal came to us and they asked us if they could find a way to measure their market shares in e commerce. So we told them that this doesn't exist anywhere in the world, neither in Asia or The United States. And they asked us to make a project. So that's why how we came with the idea to create a SaaS platform to actually give data to brands like L'Oreal on how

01:25>> they perform on e commerce.

Nathan Latka

01:27But now you have a big question. Do you shut down the agency revenue and go all in our SaaS or do you try and do both?

Selling the Consultancy to Ernst and Young

Panayotis Gezerlis

01:33>> I was trying to do both for like two years. I saw that this was not possible. So we sold our consultancy to Ernst and Young this January.

Nathan Latka

01:42Oh, congrats.

Panayotis Gezerlis

01:43>> Yeah, that was fantastic. Both Deloitte and EY bid to buy our consultancy. And we did this just to focus on our dream, which is, you know, to go big with our SaaS product. And we put all the money in the business.

Nathan Latka

01:57So you sold the consultancy to Ernst and Young in January this year?

Panayotis Gezerlis

02:01>> That's right.

Nathan Latka

02:02How do you value an agency doing 2,400,000 top line?

Panayotis Gezerlis

02:06>> Well, it's about one times the revenues, you know, since we are in services or something like that. We, you know, it was a good transaction. They didn't get the founders, they didn't get me. They took my people, they took our clients and we were able to invest the money to our business as a product. Actually it's not the money, it's the focus we wanted to have on what we do.

Funding History and Capital Raised

Nathan Latka

02:29Now, correct me if I'm wrong, but I think you raised 50,000 in 2017, dollars 3,500,000 in 2019 and another $6,900,000 in 2020.

02:39Is that the business you just sold?

Panayotis Gezerlis

02:42>> No, we didn't raise any money for our consulting business. We've raised for our product business and it's less money than what you said. We've raised about 1,200,000 about two years ago.

Nathan Latka

02:58Okay. And the website is convertgroup.com, correct?

Panayotis Gezerlis

03:02>> That's right, yep.

Nathan Latka

03:04I wonder why my research team got these raised. Did you raise debt?

Panayotis Gezerlis

03:09>> No, but yeah, that's interesting. But we are raising now, I don't know, maybe your research team is too good because we are raising now €3,000,000. So, maybe they're ahead of their game there.

Nathan Latka

03:22Well, no, I believe you over my research team, you're straight from the source. So, just to be clear, you raised 1,200,000 for Convert Group, your product company in what year?

Panayotis Gezerlis

03:30>> Yeah, that was two years ago. But listen, as we were pouring all the money from our consulting business, it was very, very profitable. To tell you the truth, the numbers that your research team came with sounds like right. If I calculate how much money I didn't take back as a shareholder but put back in the product business. It took a lot of money to build what we have today. So it was like other companies have heard

03:57>> in your show that their services business was funding their product business until it was big enough to go to investors.

Nathan Latka

04:04Yep, yep. Okay, got it. So you raised $1,200,000 two years ago. What valuation did you raise at?

Panayotis Gezerlis

04:09>> That was

04:11>> 6,000,000 pre money.

Nathan Latka

04:12It was two years. How

04:14much revenue were you doing then?

Panayotis Gezerlis

04:17>> Well, was about €400,000 more or less.

Nathan Latka

04:22Okay. And again, this is just the product business, not the agency.

Panayotis Gezerlis

04:24>> It's the product business. So it was about 12 times our revenues.

ARR Growth: Doubling Every Year

Nathan Latka

04:28Yep. And then what did you grow that $400,000 to in 2020 last year?

Panayotis Gezerlis

04:32>> Well, last year we were about double of that 800. And this year, again, are double of that. So every year we go, you know, double times our ARR.

Nathan Latka

04:44That's great. Okay. So 1,600,000 now today, and you said you're planning to raise capital now. How much do you want to raise?

Panayotis Gezerlis

04:50>> That's €3,000,000 now and about €6,000,000 a series A next year.

Nathan Latka

04:57That's for the three million you're looking to raise now, what valuation are you hoping to raise at?

Panayotis Gezerlis

05:02>> Well, we're about 17 to 18,000,000. Again, it's 15 times our revenues and you know, there are many ways to do valuations for companies. I think it's more like an art, not a science. And we've done all of the valuation methods, but what I think it's more comparable to us, it's a Similarweb that they IPO'd in New York Stock Exchange a couple of weeks ago at 17 times the revenue. So we're something like that, only

05:28>> we focus on e commerce and data for brands and retailers that are selling fast moving consumer goods and medicine online.

Nathan Latka

05:37Like L'Oreal, right?

Customer Base and Contract Values

Panayotis Gezerlis

05:38>> So what is a brand and what do you on average per month?

05:42>> Well, our customers are like L'Oreal, Unilever, P and G, Badger, GlaxoSmithKline. We have 15 of the 20 biggest multinationals in fast mover consumer goods and consumer healthcare. And they give us contracts of about, it's enterprise contracts, €20,000 per year on average. A company like L'Oreal would give us double of that, but we have smaller clients with about €10,000 per year.

Nathan Latka

06:08How many total customers today?

Panayotis Gezerlis

06:10>> We have about 78 customers, 79 customers.

Nathan Latka

06:16Where

06:17was that a year ago?

Panayotis Gezerlis

06:20>> That was about a little bit higher than a half. But we are able to increase the revenue from every customer like 10% year after year because we upsell the contract we have. We get more money from them.

Churn and Net Dollar Retention

Nathan Latka

06:38Yep. Are you able to quantify what that upsell revenue looks like? And you know, what's your net dollar retention over the past twelve months?

Panayotis Gezerlis

06:45>> Well, absolutely. Actually, our churn is very, very low. We have 2.5 churn.

Nathan Latka

06:51Monthly or annually?

Panayotis Gezerlis

06:53>> This is annually and talking about logo churn because if I tell you about our

07:01>> net churn and money, we are minus 5%. I mean existing customers give us more money than the customers will lose. Don't know if it's our product, it's a low price because it's abnormal for a startup to lose only 2.5% of the customers. I think it's normal to be around 10%.

Nathan Latka

07:20Yeah, mean, I think these economics are good, right? So, if we just round up, you're churning 3%, you're expanding that same cohort from a year ago, 8%. So, your net dollar retention is 105%, which is the same as negative 5% net churn. So it's all healthy economics. Now, how are you getting new customers? What are you spending to get a new $15,000 a year contract?

Customer Acquisition: Word-of-Mouth Only

Panayotis Gezerlis

07:38>> Right. Funny enough, Nathan, we didn't have any marketing department and we didn't have any salespeople. It was happening organic up to this day. So now we're investing in the sales organization and you know doing some marketing and spending some money on AdWords and LinkedIn etcetera. Up to today it was word-of-mouth. So you know L'Oreal Greece would recommend us to L'Oreal Spain and L'Oreal Spain to L'Oreal Italy and Johnson and Johnson, etcetera. And you know,

08:07>> I try not to feel guilty about it that we didn't spend money to grow faster. But on the other side, I can see now the upside of this that now we are ready, we have the people,

08:19>> we know we can spend money in order to grow faster. And all the metrics I told you happen without salespeople.

Team Size, Engineers and Sales Team

Nathan Latka

08:27What's the team size today?

Panayotis Gezerlis

08:30>> Sorry, what's the?

Nathan Latka

08:31How many on the team today?

Panayotis Gezerlis

08:33>> We are about 50 plus people, something like that.

Nathan Latka

08:36How many engineers?

Panayotis Gezerlis

08:38>> 20.

Nathan Latka

08:39How many engineers?

Panayotis Gezerlis

08:40>> Engineers and data scientists, yeah, we're 20.

Nathan Latka

08:42Wow. Okay. And how many salespeople, like even if they don't have a quota?

Panayotis Gezerlis

08:46>> Okay. No, today we just built the sales team. We are, it's like three people. We just got the third one on one director. So it's been from January after we sold to that we started building a really great world class caliber sales team.

Nathan Latka

09:02Four on the sales team with that director, three of them, those three are they carrying a quota?

Panayotis Gezerlis

09:07>> Yeah, absolutely.

Nathan Latka

09:08What's the annual quota?

Panayotis Gezerlis

09:10>> Well, know, they should bring something like 500,000 each on ARR.

Nathan Latka

09:17Okay, got it. So they have to bring in 500,000 in ARR and if they do that, what can they earn full compensation?

Retailer Acquisition as the Hard Problem

Panayotis Gezerlis

09:23>> Well, know, do it mostly for our salespeople getting extra salaries. It's not like a percentage of sales but for the director we have a different arrangement. Having said that, what we're doing at Convert Group actually, we have a data marketplace so it's not selling to L'Oreal that will give us the money or Johnson and Johnson. These brands, Nathan, are ready to give us the money. They want data. They want to visit built on e commerce like

09:51>> crazy. It's the easy part. The difficult part for our salespeople is to convince the retailers. So go around to Carrefour, Ahold Delhaize or PillPack if they were interested to give us data and convince them to give us access to their systems. Because what we do, the data we have is with the consent of the online retailer.

Nathan Latka

10:13So this

Panayotis Gezerlis

10:14>> is the difficult part of our equation. Now, we will give bonus to our salespeople when they bring on retailers. And this can be like €3,000 per retailer to bring on or things like that.

Nathan Latka

10:26Yep, no, this is interesting. You know, you remind me a lot of CircleUp and what he did, you know, Ryan Caldbeck did with CPG brands, started off as a data play, then raised a debt fund, then raised a credit fund and now also sells, think it's called Sphero or something like that, where basically it's a data play that he sells out to CPG brands. I wonder, do you have plans to ever launch your own credit

10:46funder debt fund to give debt to smaller versions of L'Oreal?

Panayotis Gezerlis

10:51>> Well, no, I'm not sure about that. Our plan is to raise at the moment from private investors and institutional investors and grow like that.

Nathan Latka

11:02So sorry, I guess my point is, would you ever offer debt to CPG brands as a value add, like inside of your tool to your customers?

Panayotis Gezerlis

11:12>> Can you explain that? Because I'm not sure I get it, sorry.

Nathan Latka

11:15In other words, you sit on a very unique dataset. If a new CPG brand signs up for you and you see a unique dataset, can you give them capital to help them grow based off the unique data you see or no?

Panayotis Gezerlis

11:26>> Give them capital like percentage to our company, a percentage share, what do you mean?

Nathan Latka

11:31Sorry. Let's say

11:32you were running your own fund that invests in CPG brands. You have a unique dataset. Would you ever do that? Use your dataset to make investments yourself via Convert Group into other CPG brands.

Panayotis Gezerlis

11:44>> Oh, right. Now I get it. No, I wouldn't do that. You know, we are really focused on the business we do. We want to give data back to brands and FMCGs, that's our business. And we should be totally neutral, you know, like Switzerland, not get involved with any brand. We want to measure the global sales of FMCGs, become something like what Nielsen did about seventy years ago, and they became the global brand of measuring the offline

12:11>> sales. We want to do the same for e commerce.

Nathan Latka

12:14Yeah, but you're in Athens, Greece, not Switzerland. So we'll see if you pick sides or not.

Athens Engineering Talent and Cost Advantage

Panayotis Gezerlis

12:19>> You know how good engineers Athens, Greece has?

Nathan Latka

12:22I bet they're great.

Panayotis Gezerlis

12:23>> And you know, you know, mathematics mind, and we can get them half the price that someone can get them in the rest of the Europe or a quarter of the price.

Nathan Latka

12:30What you pay a senior engineer in Greece?

Panayotis Gezerlis

12:33>> Well, that should be, you know, about €60,000 maximum per year. So, you know, I think it's a fraction of what Google would pay or other companies.

Equity Structure and Investors

Nathan Latka

12:44Yeah. That's incredible. Last question, you're talking about equity. How much equity do you still own?

Panayotis Gezerlis

12:50>> Well, me and my partner Elena, it's two of us, we have 60%. So 30% me and 30% Elena.

Nathan Latka

12:56And where's the rest?

Panayotis Gezerlis

12:58>> The rest is with stock options to our team. We have some early investors, mostly family members, and we have one fund called UniFund that invested in us at $1,200,000 they have 17%.

Nathan Latka

13:11How big is the stock option pool?

Panayotis Gezerlis

13:14>> Well, it's about 10 to 12%.

Famous Five Rapid Fire

Nathan Latka

13:17Okay, that's great. I love that. Very cool setup here, Pan. Let's wrap up with the famous five. Number one, favorite book.

Panayotis Gezerlis

13:23>> Well, I have to say Trailblazer from Marc Benioff from Salesforce. You know, I really love this guy and the book.

Nathan Latka

13:29Number two, is there a founder you're following or studying?

Panayotis Gezerlis

13:33>> I like to take things from many founders and CEOs, not one particular, but if I was to name one, I would say my dad because you know, he taught me most of the things I knew for entrepreneurship.

Nathan Latka

13:45Love that. Number three, what's your favorite online tool for building a business?

Panayotis Gezerlis

13:50>> Slack, full stop. No comments.

Nathan Latka

13:53Number four, how many hours of sleep do you get every night?

Panayotis Gezerlis

13:57>> Well, Nathan, funny you should ask that because I don't know how the other entrepreneurs you interview get like six or seven or eight hours of sleep. Admire that. I can't get more than four hours. Mean, wake up and my brain is working to do what I have to do next to my work. So this is something I have not find the balance yet, but that's the way I am.

Nathan Latka

14:16Well, and it's late there now.

Panayotis Gezerlis

14:17>> Hold up your beer.

Nathan Latka

14:18You're drinking a good Corona or something, right? That's power now. You're late there. You go. All right. And what's your situation? Well, Panayotis, know you're married with that. It sounds like married. Do you have any kids?

Panayotis Gezerlis

14:28>> Yeah, I have two kids.

Nathan Latka

14:30Three?

Panayotis Gezerlis

14:31>> Two, two kids.

Nathan Latka

14:32Two, okay. And how old are you?

Panayotis Gezerlis

14:34>> I'm 48 years old.

Nathan Latka

14:3648, last question. What's something you wish you knew when you were 20?

Panayotis Gezerlis

14:41>> Well, I wish I knew many things, like I named 100 things, but listen, I'll prefer, I didn't know anything more because of what I am today, it's the journey I had to learn all these things I didn't know. So I'm okay with how I was at 20.

Nathan Latka

14:57Guys, Convert Group gives brands like L'Oreal great insights on CPG information and data sets. They've grown from an $800,000 run rate a year ago to 1.6 today doubling year over year. They raised 1,200,000 on a 6,000,000 valuation in 2019 and looking to raise 3,000,000 right now on an $18,000,000 valuation. We'll see if they can get it done. 78 customers paying on average $20,000 per year. Their team is 55 people, 20 engineers. We will see what happens

15:22next. Pan, thanks for taking us to the top.

Panayotis Gezerlis

15:24>> Thank you, Nathan.

Nathan Latka

15:27One 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

15:52Central. Additionally, remember these recorded founder interviews go live. We release them here on YouTube every day at 2PM 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 notifications when we do go live. I wouldn't want you to miss breaking news in the SaaS world, whether it's an acquisition, a big

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16:36for that at nathanlatka.com/slack. In the meantime, I'm hanging out with you here on YouTube. I'll be in the comments for the next thirty minutes. Feel free to let me know what you thought about this episode. And if you enjoyed it, click the thumbs up. We get a lot of haters that are mad at how aggressive I am on these shows, but I do it so that we can all learn. We have to counter those people. We

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