How Cuvama Won Its First 4 Customers at $50K to $200K ACVs on a $10M Valuation (Interview with Co-Founder and CCO Alex Smith)

Introduction and Guest Background

Nathan Latka

00:00Hey, folks. My guest today is Alex Smith. He's the co founder and CCO at Cuvama. Customer value management has been a passion for Alex through his twenty year career in B2B SaaS across sales, pre sales, delivery, and customer success. He's based in Manchester, UK, started out as a physicist at Oxford University, is an avid cyclist as well. Now building cuvama.com to help connect companies and customers on value. Alex, you ready to take us to the top?

Alex Smith

00:23>> Yeah, jump in.

Customer Story and Product Overview

Nathan Latka

00:26All right. So me, maybe start off with a customer story and explain why they're paying you and what they use you for.

Alex Smith

00:33>> Yeah, so that's a great question.

00:38>> The world of B2B SaaS has been transformed by the move to subscription. It's, you know, everyone knows that, but the move to SaaS and subscription means that the kind of the customer has so much more choice, the customer has so much more power in the kind of the business to business environment that we're operating in. They can pick from lots of different vendors, they can choose to churn, the end customer, I should say, the customer of

01:04>> our customer. So we're helping our customers to really kind of engage with their end customers with an understanding of not just what features and functionalities you need, but what are the success outcomes that that end customer wants to achieve? And then make sure that that relationship, that connection passes through to a delivery team, a customer success team so that you end up with a bit more of a focus rather than in the traditional world of SaaS,

01:34>> customer lifetime value has been the lifetime value of a customer to the company. Our vision is to try to flip that on its head and actually move it to be more of the value, the lifetime value for the end customer.

Nathan Latka

01:50Land, expand, retain, NDR above 130, that's the goal.

Alex Smith

01:54>> Exactly, exactly. So there's loads of great reasons why a SaaS company needs to do that. And there's just been, it's just been an area that is, it's been a gap for a number of years. We recognize it again in my career, I started out in software when it was all on premise perpetual licenses. I've kind of been through that move to SaaS and subscription and I've seen a lot of companies struggle to catch up with the

02:19>> new reality of the new way it works. Maybe they put a customer success team in place. Maybe the sales team are in theory selling value, but it's never been a joined up approach and it's never been kind of customer centric.

Nathan Latka

02:32So think we understand the product, that's fantastic. Give me a general sense of what are customers paying on average front for this or are you guys pre revenue, you're just getting started?

Pricing and Contract Values

Alex Smith

02:40>> No, we are, we're definitely post revenue. So it's, you know, in terms of kind of what are they paying? It depends a little bit on the size. At the moment it ranges from maybe 50 ks dollars per year up to around $200,000 per year in that kind of range.

Nathan Latka

03:00Okay. So your largest company paying maybe $200,000 per year. Help me understand why, how they're getting more value? Is it number of seats? Is it number of features turned on? What enables you to upsell to $200,000 a year?

Monetization Model and Upsell Strategy

Alex Smith

03:12>> So it's, so honestly, we're still at the stage where we're figuring out the right way or the right monetization model for this. So actually my background is I've done a lot of consulting work for SaaS companies on packaging and pricing. So it's, I have some experience in it, but it's not always, there's not always one easy, obvious answer. So the model that we're using at the moment is a platform fee plus a user license. So we

03:40>> are targeting our app to be used by the business development functions, be that BDRs, SDRs, salespeople, the pre sales team, you might have business value engineers and then customer success managers post sale as well. So there's quite a lot of different kind of user types and user roles, but at the same time,

04:01>> you know, our views to have a platform fee based on the kind of the scale and the complexity of the solutions put in place. So our upsell model as we grow will be a combination of the customer growing their kind of the usage of the tool in terms of users and teams, but also then selling in additional modules to better support the end to end journey of that interaction.

Nathan Latka

04:26Oh, what's going on there, YouTube? Good to see you guys. Now imagine this. You love watching these interviews with SaaS founders, but imagine if we took all of the valuation data out from over 2,807 interviews I've done manually. Saves you a lot of time. Well, we've done this. We've built it into the beautiful interface inside of Founderpath. Check this out. I'll show you how you can access this in a second. But you log in, you connect

04:49your Stripe account, you see your valuation real time, you can see what it changed over the past eighty eight days and even set goals for valuation this year. Now the secret evaluation is there's many different ways to value a SaaS business. So the reason you're gonna see three or four different valuations inside of your Founderpath dashboard, this is all free by the way, is because depending on who's doing the buying of your SaaS company, you're gonna

05:13get a different valuation. A VC is gonna pay a different valuation, Private equity firm is different. If you're gonna do a minority sale, that's different. And if you sell the whole business, that's a different valuation. You can see all those when I hover over here, right? So the teal is what a VC would pay. Yellow is what private equity And red is if you sold the whole thing outright. Now what's cool about this is this is

05:35not built off random data. Again, you guys hear these interviews on YouTube. All these datas are built from real time valuation data points founder share with us on the show. So traction 1,200,000 seed round 3.7 raise. They sold 22% of their business. Go in here and filter by the event. Maybe you only wanna see companies that have sold the whole business. Well, here are a bunch that have been acquired the valuation and the multiple. Maybe you're

06:01going out right now and you're raising your seed round. We'll go in here and look at all this recent seed deals that went down, what they raised, what valuation they raised at and what percent that they sold. There's never been a larger dataset of SaaS valuations than what you can get now inside of Founderpath. And we're thrilled to bring it to you. All right, we're gonna go back to the YouTube video here in a second, but

06:23if you wanna check this tool out, if you wanna jump in and sign up, you can check it out for free to get your valuation at this link. This link, founderpath.com/products/valuations. Or if you go to founderpath.com and hover over products, click on get your valuation here, and go ahead and sign up to give it a whirl. Again, all that valuation data live right inside the platform. I hope to see you there. Alright. Let's jump back into

06:49the interview. Understood. So so cheapest, though, 4 or $5,000 a month, 50 ks ACV all the way up to 200 ks ACV depending on how many BDRs Okay, and SDRs they and put this on a timeline for me, when did you launch the business?

Company Origins and Consulting Roots

Alex Smith

07:02>> So, we started out as a consulting company. So again, I know that you engage with a lot of companies that are bootstrapped to really get things going. I think that's very much kind of part of our journey. We started out in 2017,

07:18>> still focused on B2B SaaS companies, that is our main target market, but initially doing consulting and helping them monetize their offerings through consulting throughout that life cycle. We

07:32>> had a kind of a passion for this topic of the value management part within the overall monetization problem. And we explored it through lots of interviews and through building out a prototype initial just to design in 2020, in the kind of the summer of twenty twenty, we won a grant from the UK government, an innovation grant in Q3, so in October 2020, started build out code.

UK Government Grant and First SaaS Customer

Nathan Latka

08:02How much was the grant for?

Alex Smith

08:03>> £100,000. Okay. And it was kind of linked to COVID recovery and linked to a few other pieces. So, that point, you know, we brought on some contractors, did our first bit of code development, sold that to our first customer in contract signed in Q2, fully in Q2 of twenty twenty one and have grown from there. So we're now at four, we again, if you look at our customer base, it's around 15 to 20 customers in total

Current Customer Count and Paying Customers

Alex Smith

08:32>> that we've worked with over the years. We now have four customers that are up and running on the kind of the new technology platform.

Nathan Latka

08:42How many are paying you something per month right now?

Alex Smith

08:46>> Four of them that are paying us per month.

Nathan Latka

08:49So why didn't the other 11 stick around?

Alex Smith

08:53>> Well, the other 11 was a mixture of consulting work. So it's not that they are, no, I don't mean to say that they started on solving this problem and then haven't stuck around. It's more that, I guess I would describe it as at points in the past, we've solved the same type of problem with consulting projects and with Microsoft Excel based tools and things like that. We are still our—

Nathan Latka

09:19This makes a lot of sense, right? But going back to the agency story, what year in terms of revenue was your best year at the agency before you started really pivoting to pure play SaaS?

Alex Smith

09:28>> Oh, it's a good question to which I'm not sure I have the answer. Yeah, I'm not sure which would be the best year in terms of the kind of the agency consultancy work, but-

Nathan Latka

09:40I mean, Alex, are we talking about like a two person agency with 500 ks a year in revenue or like a 50 person agency with like 5,000,000 in revenue annually?

Alex Smith

09:48>> No, it's, so while we were doing the consulting, there were three of us that were full time with contractors pulled in, five to 10 contractors over the course of a year on different kind of targeted projects. So still small in that kind of scheme of things.

Nathan Latka

10:06When did you launch your first, like the first agency contract was in what year?

Alex Smith

10:10>> The first consulting contract was in 2017.

Nathan Latka

10:15Okay, got it. So I guess you launched this company as an agency knowing you were eventually going to pivot to SaaS, you just wanted to use the consulting to learn?

Agency to SaaS Pivot Decision

Alex Smith

10:23>> No, I wouldn't say that actually. Would say we launched this company as focused on solving a problem and then based on a passion for the problem, based on learning, learning partly that consulting can't solve it, we've recognized, we discovered and we spotted an opportunity to build out a SaaS product. I don't think when we started, we had a clear plan that this will definitely become SaaS.

Nathan Latka

10:49So like what was agency revenue then in 2017? Do you remember, first year?

Alex Smith

10:56>> I don't have the numbers to hand. I can tell you in 2021, we were close to a million dollars in total revenue for the company.

Nathan Latka

11:06Yep, majority consulting.

Alex Smith

11:08>> Yes, the majority consulting. And for 2022, it will still be, again, takes, it will take a while to transition that across. Part of it is the nature of the solution that we're selling. It's not a plug and play, just turn it on SaaS app. It's very much a business solution that needs set up, needs work around the consultants. I understand. We're growing the deployment to get it done.

Nathan Latka

11:38So how many today are full time at the combined entity?

Team Size and Hiring Plans

Alex Smith

11:41>> Yeah. So right now, today, we have four full time employees. We have around five or six people that work with us on a contract for different hours per week. As part of the, so we've just taken on pre seed investments and we'll be growing to around nine full time employees as the right people are brought on and hired.

Pre-Seed Raise and Valuation

Nathan Latka

12:04How much did you raise in the pre seed?

Alex Smith

12:08>> £1,100,000. So that equates to around 1.4 plus million dollars.

Nathan Latka

12:14And most folks in pre seed round are selling between call it like 10 to 20% of the business. Were you sort of in that same range?

Alex Smith

12:20>> Yeah, in that range.

Nathan Latka

12:21Okay, got it. So you're talking like a 10,000,000 cap, something like that?

Alex Smith

12:25>> Yeah, something like that. Okay.

Nathan Latka

12:26Priced round or was it equity or was it a debt? Convertible debt? Priced. It was priced. Okay, great. Interesting. Very cool. And why do you need, I mean, that's dilution is a real thing, right? Your co founders in that seed round is the most dilutive event in the company history. Why did you need 1,300,000, especially when you've already proven you can generate revenue from customers via consulting contracts?

Why Raise External Capital

Alex Smith

12:45>> So it's a really, really great question. It's about being able to accelerate the growth. So we are, you know, the way that we'll use the money is partly investment in the platform, partly investment in the kind of delivery and customer success function. And it's all just about being able to do what we want to do faster. The market that we're in has the potential to really take off. I think we've seen recently Gartner as a, you

13:18>> know, your classic technology analyst that tracks many, many markets. They're starting to really report on this market, and I think they're starting to recognize that it will grow and take off.

Nathan Latka

13:30Mean, would argue though, Alex, it's already pretty mature. I mean, Gainsight's a billion dollar company and they really started really in customer success, which you could define as land, expand, retain, right? So like what's the mousetrap you're moving into the market with where you think you can steal market share from these players?

Alex Smith

13:42>> Yeah, so Gainsight is not a competitor to really what we're trying to do in that the Gainsight is just focused on the customer success phase of the customer journey. Are trying to think of what we're trying to do is actually have a platform that integrates with the upfront marketing activity and marketing message, connects and supported by the salesperson so that they integrate with CRM and Salesforce as part of the sales phase and then integrate with Gainsight

14:15>> once a customer becomes a customer to support the expand and renew kind of phase. So Gainsight has, the best way to think about it is within Gainsight, they have a success plan module that tracks what does a customer want to achieve and how they're doing. And our vision is that, you know, really that the definition of what success looks like for the customer, well, it has to start where the relationship starts, which is back in the

14:44>> sales cycle and that's what our platform is supporting. So our platform goes across that customer journey and then integrates with the CRM, the customer success tool at the different Understood.

Nathan Latka

14:54Okay, great.

Famous Five Rapid Fire Questions

Alex Smith

14:55>> Well,

Nathan Latka

14:55we'll see what happens. We're out of time though for today. Let's wrap up here with the famous five. One word answers if you can. First one, last book you read.

Alex Smith

15:02>> Oh,

15:04>> last business book or sorry, this isn't one This last book. I'm into my sci fi, so I've forgotten the name of the book, but

Nathan Latka

15:13Okay. That's okay. Number two number two, is there a CEO you're following or studying?

Alex Smith

15:17>> Yes. We have a relationship with somebody called David Politis, who is CEO of BetterCloud. He's been helping with a bit of advice, a lot of kind of experience in building a category and what that meant.

Nathan Latka

15:31Number three, what's your favorite online tool for building Cuvama?

Alex Smith

15:36>> So I have to say Jibber. Jibber. It's just fantastic in terms of the amount of value that we get out of that platform.

Nathan Latka

15:44Number four, how many hours of sleep do get every night?

Alex Smith

15:47>> I'm somebody who needs my sleep. I don't know if that's your classic entrepreneur, but I try to be in bed for eight a night. Do I get all of that asleep? Not necessarily.

Nathan Latka

15:56And what's your situation Alex? Married, single kids?

Alex Smith

16:00>> Married, two kids, two boys, lots of friends.

Nathan Latka

16:03Great. And how old are you?

Alex Smith

16:04>> I'm 42.

Nathan Latka

16:0642. Last question, something you wish you knew when you were 20.

Alex Smith

16:09>> Do you know, I had to think about this one. Watched your I listened to your podcast in advance and I had to think about this one. The, and you know what, mine is kind of play to your strengths. I think there's many points in my career I've thought, oh, I need to get better at this, I need to get better at this, I need to learn how to do this. I think I've learned now that no,

16:26>> actually you should optimize what you are good at and focus on what you're good at rather than trying to be good at everything else.

Nathan Latka

16:33Guys, there you have it, cuvama.com launched in 2017 as an agency, did about $1,000,000 in revenue last year. We'll do more than that this year as they pivot to a SaaS platform to really service this customer need. They have four paying customers today that pay between 50,000 a year and 200,000 a year. Four full time on the team, but they're about to ramp up. 1,300,000 raised on their pre seed round at between, call it, 10 and 20,000,000

16:53valuation as Alex looks to scale. We'll see what happens next. Alex, thanks

Alex Smith

16:56>> for taking us to the top. Thank you, Nathan.

Nathan Latka

17:00One 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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