Crystal Knowsrevenue & funding

so everyone my guests say is Drew D'Agostino he is the founder of Crystal for the past three and a half years he started multiple businesses before that including an event software company attend comm a pizza box eat advertising agency in a bed bug extermination company he's also a private pilot songwriter Runner and local diner regular Jew are you ready to take us to the top I am alright so the website is crystal knows dot-com tell us what the company does and how you make money sure crystal is a personality platform and we can tell you the best way to communicate with pretty much anyone so we offer access to a large set of personality data for a few hundred million people and if you're in sales management recruiting or really any other kind of position where you have to communicate regularly with people you don't know crystal can help give you lots of information of the best way to communicate to have stronger relationships mostly first so Germany is like a sexy version of StrengthsFinder is so strengths finder is one of the personality frameworks that you can use to understand people better Crystal's really rooted in disk which is a pretty similar framework and the the main difference between a lot of you know if you're just taking an assessment online is that crystal is actually predicting the personality type versus requiring an assessment from somebody you got and what inputs are using due to the prediction so we actually train on traditional assessments so people can take free assessments on our website but the majority of our profiles come from at using that and an accommodation of machine learning and natural language processing to analyze public data so social media emails resumes really anything that we can get that users provide that is um we can detect the writing style for okay so that's how we generate the profile just to be clear though I mean your business is very different if this is a passive thing where the user doesn't have to do a thing versus the user has to upload you know X Y & Z things this is something where if I wanted a personality test on you before we just met and I started interviewing you I could go to Crystal and it would tell me what you're like based off your your public persona right yep okay and like what's the risk there that it's not accurate and I come on expecting an egomaniac and you're actually like humble and shy we are so it's not perfect we have about 83 percent accuracy confidence across our platform how do you measure that though like like how do you measure how wrong you were that his egos not actually 100 points big it's only 60 points big so that's based on a sample size of a few thousand profiles per month okay and what we do is we compare our personality results to the primary disk type that that person got in a personality assessment so those are the people that take their personality assessments like just a standard straight-up questionnaire like people are used to taking an eighty three percent of the time we can properly guess what the primary personality type is when they take that assessment so crystal so Chris will get that about four out of five times accurately okay and how do you make money what's right what's the business model it's all free to use for inside your company so I feel that want to understand their co-workers or their boss or like new team members better that's how we grow I love you but now I hate you I mean I love because I love money I mean how do you make money so the people that use it for free some of those are in recruiting sales and management roles and those people can pay to access crystal profiles outside the company too to access outside the company okay got it okay this is a really interesting model so you basically have extra leverage when you land an account to quickly expand to their full team because the pitches it's free and when you're thinking is once you're there in your ecosystem it increases your data set which makes the whole system more accurate and then they pay to go outside yeah interesting ok now what do you price it off is it is it like a price per one person they want to go outside or do you sell in batches or is the SAS model what is it there's two main revenue streams one is a pretty standard SAS model and that's a $29 a month account to get unlimited access to our tools so somebody who wants to install our Chrome extension can get access to Crystal profiles whenever they're looking at LinkedIn using it in Gmail it also works with Salesforce and HubSpot that's what that's about 70% of our revenues huh and then the rest of it comes from API and just your data partnership so so companies that want to use personality data in their own software or if they want to segment customer lists on psychographics they can just get our data without the UI and now they're purchasing like a number of API calls per month or something like that yeah it's um like a monthly subscription service for the data interesting okay give me more the backstraight when did you launch launched the product in March of 2015 when did you start the company though well so I started working on the project in September 2014 okay at the time that was it was after my last company and does a whole big thing we're my co-founder and I got fired by our investors and during that period of time I was late you can't just you can't just blank over that what do you mean so so so you're talking out of tend yeah how much have you raised that we raise I think about three and a half million at that point okay and and was it the last round of investors that pushed you out or was like your first like angel who said you guys should leave we only raised we raised two rounds from one venture capital firm okay so yeah and how did that coming describe the phone call or the email or whatever it wasn't mean how did you see this coming or was it a shock and surprise it was a shock but you could have seen the red flags the whole thing at once it really caught up it was about a week process and I remember the last line of the phone call which is the last I've heard from them was the motion has passed and so did you not have like legal up front like you guys didn't have full control of the company in terms of your voting rights on the board or what we raised our first round when we were both 22 it was our first our first real experience with this so we didn't really understand how our Terms worked it was just a you know a million dollars to start company and honestly it wasn't like a bad relationship throughout it was just we understood our market at a pretty deep level and the investors saw they had a different vision for it and they wanted to they didn't want to be as patient with some specific niches we wanted to go after do they crash and burn the thing after they kicked you out that's obviously what we love to see right is they died and you go I told you so you know the company got bought by another company except I didn't get any check in the mail so I I really have no idea so was it you know you didn't have information rights to even know what the exit price was no and then they recapitalize the company so I'm pretty sure I didn't really want anything of it so I honestly have no idea that is crazy yeah before when you when you raised about money what did they kept even look like you you had 30% in front or at 30 and they had like 40% or what we so my co-founder i started he was a CEO so he had we split it up so he had slightly more than 50% and slightly less and then they came in I believe by the end after raising that money I had I remember owning something about 20% yep yeah so here co-founder Ivy had like 30 ish or something and the other side at 50 yeah something like that that's crazy that and what was revenue when they kicked you out I think we're about to hit a millionaire are ok so I mean that's not only I mean it's a big deal for 23 24 year old right I mean did you at least create some wealth for yourself or you guys paying yourself a healthy salary uh I mean we thought it was healthy at the time well how much how much were you paying yourself actually we had it so we ended up around I think we ended up we started at 60 ended up in 94 the couple months preceding the proceeding though that's good so hopefully you saved a little bit right oh yeah and it was enough to it was enough to have some runway while I started crystal and and it was just I mean and crystal was something that I couldn't not pursue you know as one of those things that was keeping me up at night yeah so I figured it out I did some consulting and while this during like the nine or so months where I wasn't making anything from crystal yeah so what you're a nice guy because if that ever happened I would sue the hell out of these people I would go at them so hard so that no one ever mess with me ever again but you see my nice guy with good energy and you don't want to do that it just wasn't worth the time we actually got we thought we were offered a severance package in exchange for a release but because if we signed that I wouldn't be able to have this conversation with you at that level of specificity so yeah I I prefer I prefer being able to speak and story not filter myself I mean was it like a baloney said I was like here here's 5 grand to never say anything I know was more than that ok about 10 times that but ok just you want to go to tell the story yeah yeah okay that makes good sense all right back to crystal so you launch and you start filling out of in 2014 you go full speed no have you raised I imagine you haven't raised right after that Horror Story no I actually didn't want to raise at all I wanted to just boostrap little thing so start it off rate launch the product had customers secured revenue from day one and I hired my first employee when we were bootstrapped he was actually the best engineer from the last company and that was a heard of technology so it was it was revenue from day one but then I realized that we I was just getting offers for investment like in my inbox for a lot of people because it had gotten some publicity so it was just an inherently interesting subject what did you put out publicly like did you put out a public revenue figure like grossly or something no it was just it got picked up by The Huffington Post um in one article and then spread and kind when it went viral in like a two week period not like super viral but it was it made the cover of Wired eventually yeah that that led to a lot yeah and I realized just as I was meeting these people who were just all like founders or operators themselves they wanted to put money out of business because they really believed in it it was just I recognized that this was a very good group of people that were reaching out to me no did you raise I did yeah oh wait how much did you raise I raised like a five hundred thousand dollar seed round later in that summer okay and what am i raised total today um we have raised a total of seven million okay so okay so you you were like okay we raise the first time around I didn't work out slow but I'm doing it differently this time did do it differently yes you you can't you just please summon your if you have co-founders I don't have co-founders now okay but you can't lose control of a company right no yeah so I had several several deal breaker terms especially going in angel round was pretty easy because it was too safe but going into the series day yeah I I knew what I wanted and wasn't gonna move on those and we were we are lucky to have honestly like I couldn't be happier with our investors sales for its sales forces our lead investor and obviously they're a huge scary company but they been like fantastic especially I mean you know there's there's lots of ways that those kinds of strategic relationships can go sideways but who do you work with either they've been great so I mean Johnson more shy leads the group so we have worked with him but specifically more often it's Rob Keith and Matt Garrett yeah yes okay good so back to your story so again launched in a launch in 2014 did a small round you raised seven million to date what have you scaled to in terms of customers we have about just coming up on two thousand customers now okay got it and and I imagine that's your bike you're paid number do you also obviously the freemium on how many total people using it altogether the amount of like total signups is just crossed half a million but as far as monthly active users that's in the tens of thousands okay and that two thousand number you gave me is that each seat or that's just total logos two thousand accounts most of those are individuals but if you were to add up the total number of seats it's probably it is a rough estimate that's probably the range of four to five thousand okay so me if I take just the logos two thousand times at $30 price point up puts you like around 60 grand a month is that generally what you're doing right now we're doing more than that because a lot of those are larger deal sizes okay I was gonna say so so it might not actually be 2,000 seats it might be like closer to 3,000 I mean have you broke a hundred grand in monthly revenue yet coming up on it okay good you think it break it this month or next month within within three months okay that's good now what have you in terms of growing me you know the obviously SAS company turn is critical tell me about your turn we used to struggle with turn a lot how high was it the highest churn got to was consistently seeing seven seven ish percent net mor churn per month okay now we've we pretty much focused for exclusively on that for a year yeah and released a new released a new pricing model right at the beginning of this end of last year and we're actually able to cut churn so far the numbers are showing that it's those cohorts are turning at less than half the rate and it's it's really taking over and taking hold on our revenue growth so we're still we're still seeing a lot of hangover turn from our old cohorts that are not as that are not as likely to say because they signed up for different reasons yeah but we kind of really boiled it down and it wasn't such a product problem it was really a packaging problem we were we were charging for the wrong things at the wrong amount to the wrong people when were you what were you charging for we were charging for like 20% of our personality profile but you get unlimited profiles and then you could unlock the whole thing but what we realized was that that 20% of the profile actually gave away most of the value and people would upgrade and then downgrade just simply because they didn't need the rest of it so what we did was ended up giving the whole profile but just for a limited number of people and that results in people that are actually using the product very frequently they upgrade happily because they want to use the product more and they stay so people are upgrading for the right reason and then we did we did consolidate the pricing made something simpler some minor other improvements but that was the core thing we needed people to upgrade for the right reason and what do you you know with with these economics getting more healthy what are you growing I would say you over here so what were you at you know you're I call it south of a hundred grand right now on mor what we had about 13 months ago we averaged 2007 we averaged just about five percent monthly mr our growth okay so what helped me on the math on that what we're doing like like 30 40 grand a month twelve months ago around there around their authority yeah so it's about a hundred I mean it's about 100 percent year-over-year growth II a little less than that I think we're 40 we're 40 in change at the beginning of 2017 yeah simchas yeah so this year our projection my target is to average 10 percent month-over-month revenue growth we're not there yet and the reason that we the reason that it's gonna take a little while is cause we've got a lot of that hangover churn but I'm pretty confident that by the end of this year we can hit that number well when you split out and only look at the new cohort are you seeing north of 10% you have a look at the new cohort it's more like 20 to 30% yeah that's great that's all right so yeah last few economics questions before we wrap up with the famous five what are you paying to acquire new customers with your cat we don't have any paid acquisition and we also don't really do bounce sales at this point calculus tack is very low and well how are you a finding you is it just the natural like people inviting their own teams mmm it's that internal it's the internal company based model yeah so one one one one person gets it we get you know we'll see a random company blow up with like 50 people signing up at once and then of those 50 people the salespeople and recruiters they either reach out or they just start using the tools and upgrade yeah and what is the what do you assume length times like assuming look you know your chernov's does of is she changing rapidly going down but what do you assume lifetime value is on these accounts LTV give you our average yeah that agreat is on self service accounts LTV is just under 600 okay and what what I assume your average is probably higher than that on the larger accounts right yeah that's that's a little hard to measure I can't do that right now okay alright what are you looking at are you use bear metrics or something I used to our mobile char mobo okay good alright and okay good last few questions here so what's your team size today we are 12 people right now and where's home Nashville Tennessee Nashville I love it alright good natural gonna see 12 people and then what do you a suit like how quickly do you like to get I mean I guess you don't really have tax so you don't have to look at payback periods right yeah that's it was so we it's not really that important to us however we're we're with this latest round of funding that we raised that the plan is to build out the growth side the company a little bit more we we're gonna start to get our act together and have a real sales team when did you when did you raise last round of funding and how much is it for just a month and a half ago we raise five million dollars five million bucks okay and then you probably understood keep as close to the best but it would be valuable learning if you share in valuation wise we believe like a four five six that's multiple on a our or or how do you negotiate that so air we got a very good valuation I can't disclose details on it but it was it was a pretty significantly high multiple mostly because it was competitive process yeah you you create a nice bidding war yeah like Tim can we say can we say north of 10 million valuation is that fair yes okay guys let's say if you're raising five I know you fifty percent of your company so it's got to be well north of ten which is well north of a 10x multiple you're currently doing so you had you definitely had some good social pressures happening inside of that bidding process yeah now here's a question for you do you ever worry about rolling into that valuation um do I worry about it up well yeah I mean we it's kind of like the trajectory here that we've signed up for yeah I'm very confident we will because we it crystals an interesting business in that we have this like very big kind of sexy vision that we can project where it's true it's like kind of why I do this I want everybody to have a handbook for how to work with everybody else I think that is ultimately gonna be good for like millions of people that's the big far-off vision kind of what we're working towards but in the process because of the pressure we put on with the bootstrapping in the beginning we've got this revenue model that works doesn't work great yet like we're not you know it's it's not growing you know two-three hundred percent year-over-year but we've got the the core a bit working and with some optimization we're going to grow into that into that valuation relatively quickly I mean if you're like like companies like you with your economics right now I mean they're selling there are corporate buyers that are selling and they're paying calling an average of maybe three to five X even on the high end of these deals I mean you are well north of a 10x valuation I mean you have to like me I mean a good the way I think that's not I always wonder about your your I think you probably mind regulate twenty nine thirty twenty seven yeah twenty-seven yeah so so like if you were offered today it sounds like you almost the company a five million dollar offer for the company you could take that as quick momentum right use that cash then double down on the same vision in a new company what you've done now that since you've raised so much I mean you can't sell the company really for less than ten fifteen million for anyone including yourself to see a good return so I just that's what I always wonder about is how people that are young especially determine opportunity cost in these kinds of things it was a really fun learning year last year like I remember like when I mentioned there's a competitive process it was definitely a I learned a lot about what the next three years of the company could look like and what acquisitions down the road could look like and all those kind of stuff yeah ultimately I came down for me was you know I didn't feel done with it and I think the the the overall mission of what we're trying to accomplish like it's very big and I don't really want to be working on anything else for the next three years so I mean we've had it we've had opportunities to sell the company and it just makes so much more sense to me to be working on this because I don't I don't see anything else that's more exciting to be working on at the moment it's a great rebound real reason day right let's wrap up here with the famous five number one let's last business book that you read not a business book but in the process of reading how to do things with words more philosophy book that's aligned with my business number two is their CEO you're falling or studying right now I read Jeff Bezos annual letters religiously number three what's your favorite online tool I live in short mogul so to say literally you're in right now yeah no they're number four how many obviously feed of a 90 hours of sleep yep eight and what's your situation married some UF kids single single and no kids they know of right no kids and these are your 27 last question when he was your 20 year old self knew but always my 21 my 20 year old self knew I wish she knew how much money he needed and not yeah yeah there's more specifics around what do you needed in his life financially health-wise relationally think there was a lot of there was a lot of misconceptions I had about what would make me feel fulfilled and and I chased a lot of time there you guys have from Drew understanding more clearly what it means to be fulfilled for him personally and what happiness looked like he got kind of booted out of his first company doing about a million bucks a year in revenue now from his investors then started flowing with Cristal in 2014 officially launched it has now raised seven million dollars serving in well north of 2000 though those three to four thousand seats paying 30 bucks a month or flirting with 100 million sorry hundred thousand dollars in monthly recurring revenue mark-up about you know call it eighty ninety percent year-over-year churn was really bad at seven percent net mor turn per month that's down to about three point five now is our new cohort is performing really really well after some product changes they've got a team in twelve in Nashville again building crystal really helping people try and understand each other's personality so that everyone can work better with everybody else drew thank you for taking us to the top all right thanks