CustomerHub Revenue, Valuation & Funding (2024)

hey folks my guest today is kyle lovett he's a membership site pioneer and ceo and co-founder of customer hub a simple knowledge commerce platform that dramatically reduces the cost and complexity of launching and operating a knowledge business he's helped thousands of entrepreneurs increase their profits by selling their expertise online over the past 12 years kyle you ready to take us to the top absolutely thanks for having me all right you have to remind me i thought wasn't custer hub acquired by infusionsoft or keep or are you an independent company yeah we are independent now but it's been quite the journey we me and my my brother who's my business partner um we built customer hub after leaving infusionsoft back in the early days of infusionsoft we grew the business for a few years and infusionsoft now known as keep they acquired our business in 2011 and so we were both back at the company for um five or six years we ended up leaving starting another business and ultimately we acquired customer hub back from keep two and a half years ago so we're independent again and we're super excited about the future okay heck of a story here let's let's let's go to 2019. um how did you know there was an opportunity to buy customer hub back out of keep yeah so we made the acquisition in 2018. um we had had conversations with them um at the time we left the company about it and just the timing wasn't right for them and so we started another business software business called loyal stream and um we're growing that product along and they they knew we were interested and so when the timing was right for them they came back and engaged with us in early 2018 and the acquisition occurred in late 2018. and when was this thing a baby what was your one oh well we built the product and launched it back in 2009 so uh that software that we purchased back is you know is in its golden years at this point and we actually spent the last year and a half building a new platform to replace the older technology and we launched that early this year and so we're off and running with the new platform we've got a bunch of our classic customers migrating over and we're we're sort of expanding our market reach to step outside of the ecosystem which is where we've predominantly been for the past 10 years do you remember how much revenue you did in that first year 2009 oh it was it was minuscule we were we were you know we were predominantly doing consulting back then and we we knew we wanted to build software and so i mean heck we probably would have been lucky to to do uh ten thousand dollars that first year we launched it it was it was just mini mini how much total consulting revenue did you generate in the early years to plow back into the software building just enough to pay the bills that was our goal was let's let's pay the bills with some consulting and some services what was that though like what it cost you to build the software mvp you think back in the day oh uh it was six months and so and we actually didn't even know what we were building to be honest with you we built a little utility product for keep users to be able to have their customers log in and manage their billing information and make payments for outstanding invoices kind of like how you log into like a credit card account or a bank online and you can make payments and such we built that as a utility app for um keep customers for their users to be able to log into and and then our customers just started asking us for stuff and you know lo and behold a year or two later we realized we had built a membership product so totally understand hang on those first customers from your consulting business but let's fast forward all the way to today how many customers are you serving now today about 560 right now okay um so we're still pretty early we're pre a million in arr still but we're we're growing um we're accelerating pretty quickly now that we've got the new platform out and we're starting to get a little bit more aggressive with our marketing what was it keep ecosystem what was mrr last month uh we were 43k last month okay interesting got it so scaling nice and then what do you remember what mrr was when you sold it to keep back in 2011 yeah i think we were we were very early on so um we were i know we were sub we were sub 20k a month um and you know we we uh we we continued to run the business after the acquisition under the keep umbrella for a couple of years and we ended up growing it to around a million and a half in arr before really keeps priorities start to shift pretty dramatically and and the product sort of got shelved and didn't get much attention for about five years before we acquired it yup now that makes sense now had you bootstrapped up to 20 grand a month yeah where you sold yep yep still bootstrap today mostly we've we've done some stuff with some angels and some family and friends we had to raise some capital to buy the product back um that was more than we had sitting around in the bank so we did that and we're getting ready to to do a seed round probably later this year so we're going to get a little bit more aggressive about our growth i'm going to how much highers and so how much did you how much have you raised to date so far including the money you need to buy back uh we've raised about 750k to date um and so you know we had we had a in in buying the product back part of it was cash part of it was you know payback over time and um kyle go back there if you can i mean people do this all the time they try and like buy technology back from a company they sold it to but they never know how to structure it so like what was the total deal price and how did you split it down well um total deal price i'm not at liberty to share but what i can say is that um you know we had a we had a plan that was a chunk of cash up front and then we had about a uh i think it was about a two two or three year term um on monthly payments back to the to to to keep and that was share percentages like this what percent was chunk up front versus what percent was over the years i think it was about uh about 70 30 70 cash up front 30 over time yeah no no no the other way around 30 cash over front yeah yep and it sounds like if you raise 750 to date it sounds like like the guess the total price was somewhere under 750k right yeah yeah well the total cash up front yeah did did they make money in other words do they buy it from you for cheaper than what you ended up buying it for seven or eight years later they bought it for us for cheaper and then obviously it the product is the product was a cash cow um it still is a cash cow but it was especially a cash cow back in the day when we sold it to them and so you know the the majority of the money that they made wasn't in the increase uh between what they bought it for and what we bought it for put in all of the recurring revenues that they were generating through the products but it's not it wasn't it wasn't a ton though right i mean it's 20 grand a month in total mrr and they sold it to you and it was doing less than back to and it's doing less than 40 kmr so it's not like i was doing a million a month in revenue right well it wasn't doing what it it was it got up to a million and a half in annual recurring revenue while while keep had it so okay you know there was probably a five-year stretch of time where it was doing over a million in arr under the keep umbrella then they put the product on the shelf and a bunch of the users started jumping ship and so it fizzled out over time before we ended up buying it back so that was where they they made their biggest you know it was a good deal for them to have purchased the product just strictly from a revenue and cash flow standpoint yeah it's best year would have been like something like maybe 2016 2017 doing 80 85 grand a month in revenue right probably yeah probably 2015 would be my guess yeah yeah okay so you buy it back you have to rewrite the whole system how to take how much cash did you have to spend to rewrite the whole architecture get rid of all the technical debt well i mean a lot of that was just sweat equity equity because my my my brother's a software engineer i have a software design and product management background and so you know we we did a majority of the work ourselves in rewriting software but you know it took us over a year so when you consider the going rate of software engineering software design product managers and such uh you know we we probably spent between 500 000 million dollars to to rebuild the platform so 43 grand of today in revenue a month uh 550 customers which means the average pays about a thousand dollars per year um is the company how many people are on the team today we just have uh four full-time a couple of contractors and we have a we have a plan to hire about seven people over the next six months so how much do you want to raise in a seed that you're thinking about about a million bucks and what valuation you think uh we're shooting for a 10 million valuation so we think with with the right growth numbers and stuff we can get there what do you think you have to hit before you can get that valuation in terms mrr i think if we're around 50k and mrr with with nice growth numbers i think we'll be able to get that just based off of you know what we're seeing in the industry which is obviously white hot right now yep no i agree okay so four on the team right now it's kind of nice what about charn do these folks stick yeah our churn is um sub two and a half right now so monthly yep pretty i mean it's pretty good considering the size of our company um and how are you getting customers you mentioned raising to spend more on marketing what's it cost to get a five hundred dollar eighty dollar month customer yeah so right now um we're we're averaging about uh 50 bucks a month to acquire a customer so super cheap a lot of our customers are referrals what do you mean 50 bucks a month you mean you're spending a bunch on ads and each month is about 50 like the average is 50 bucks to get a customer yeah the average yeah would you spend last month total on ads uh really less than two grand okay so you think you can scale that yeah absolutely we've already started to demonstrate that over the last 30 days we've we've about tripled we've about tripled that ad spin in the last 30 days and we're seeing lift from that for sure so we know we're going to have to spend more we think if we can we can average around 300 bucks to acquire a customer that's super sustainable for us and it's just you and your it's just so sorry i just you and your brother on the cap table hours infusionsoft and keep still sit on the cap table they don't sit on the cap table we're actually free and clear of that deal um and so we're we we do have some angels and family and friends that have invested in the business that we've given you know that are that are on the cap table but how much do you still own pretty small percentages how much do you still own uh nate and i own a vast majority of the company still so um you know we've had we've had two different we've had one family and friends round and then we had a customer hub raise round to buy the business back and um together we still own uh about 70 of the company that's great um very cool and again nature brother right yep that's great very cool all right let's wrap up here kyle with the famous five number one favorite book uh right now it's um outwitting the devil i'm a big napoleon hill fan i just recently read that one uh on the recommendation like outwitting outwitting the devil number two you know it's leadership principles book basically mm-hmm number two success is their ceo or founder you're following are studying i mean i'm a big elon musk fan just because i think he does cool stuff and i like his sort of brashness and his innovation um he always he always says what he thinks and he doesn't really apologize about that i so i appreciate some of the things he's doing um smaller scale just just friends a bunch of friends at mc that are ceos that i'm buddies with i meant to ask you this earlier when you sold the company to infusionsoft in 2011 what was the deal price on that um it was it was over um it was over a million bucks in between a million and two million bucks was that was what we sold it for we had some consulting revenue so we had a service business as well and um we were able to uh you know we were able to get some valuation from that part of the business as well that's nice number four how many hours of sleep to get every night well i've got some little kids i got two little boys right now and two teenage girls the little boys are keeping us up so i'm averaging about six right now okay but to be hitting on all cylinders i need about seven to eight to really be on my game so mary looking to get out of the hole right now married four kids how old are you kyle yeah i'm 43 43 take us home last question something you wish you knew when you were 20. uh conflict resolution how to resolve conflicts effectively um i think if you can can learn how to communicate effectively really business life it's all about relationships and in the nature of marriage in the nature of business in the nature of life the only thing that is that you can count on is that conflict will occur and so having a skill set around how to lead through the conflict and how to resolve conflicts in an effective way was something that i was you know pretty oblivious to in my when i was 20 and that's that's a skill that i've acquired that served me well so guys customerhub.com founded in 2009 grew to 20 dollars a month in revenue sold to infusionsoft for between one and two million and twenty eleven and unionsoft grew it to over a million dollar run rate in 2015 before they put on the shelf decline then the original founders kyle and nate bought it back in 2018 after raising about 750 000 to get that deal done they bought it back rear of the software now it's doing about 43 000 a month in revenue about a half million dollar run rate uh they still own about 70 of the business serving 560 customers we'll go out and try and do a million raise on a 10 million valuation once they break that 600 000 arr mark again still own about 70 of the business we will see what happens kyle thanks for taking us to the top awesome thank you man one more thing before you go we have a brand new show every thursday at 1 pm central it's called shark tank for sas 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 1 p.m central additionally remember these recorded founder interviews go live we release them here on youtube every day at 2 p.m 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