DesignPickle Revenue, Valuation & Funding (2024)

hello everyone my guest today is russ perry he is building a company called design pickle which is a platform that allows you to grab flat rate creative services he's the uh he's the with the world's most successful flat rate creative service he leads a global team as they rethink and deliver a remarkable new way to find the perfect creative all right russ you're ready to take it to the top let's do it all right so this is a obviously a competitive space you know i've used tools obviously like fiverr and upwork and things like this before you know dribbles maybe on the other end where do you put yourself on the spectrum of these content services creative services we're what you do when you graduate from those marketplaces we find that our services is like the perfect blend between the benefits of a employee but without the risk or the cost of of that and you can dial it up dial it back add it to subtract it really dynamic with the needs that you have when did you come up with the idea what year 2015 after i unsuccessfully tried to run a creative agency for eight years and was an unemployed consultant trying to get like help and i couldn't find it on the marketplaces and i was like damn it there has to be a better way to find reliable help and then you know how the rest of that story goes why was the agency unsuccessful we never specialized we were a generalist agency trying to do too many things to everyone we couldn't develop a process we couldn't develop a system and that was my aha moment afterwards it was like look i could just do really i you know i'll even say it kind of boring design production design straight level stuff and if i could get it really dial in and optimized i think i could have a different kind of business than trying to do you know everything under the sun so that agency just had a curiosity i mean what did you it's best year how much revenue to do we did around three million in our best year but we were doing high ticket items i'm talking half a million dollar branding projects quarter million dollar trade show events so one and done huge monster projects i never had more than eight clients at a time and it was unscalable and there was no sales system i i made about every mistake in the book possible with that agency which i actually think is like 85 percent of why design vehicle has done well is because i got all my mistakes out of the way okay so best year three million there are never more than eight clients and what was the team size they're about we had a team size of about six people here in scottsdale and then this is when i um you know kind of fortuitously tested the outsourced model i had a partner in buenos aires in argentina and we had 12 designers and creatives down there and the whole model was to try to use international teams to have a lower cost of goods it worked on that part but what i mis estimated was just not having a system for the projects and so we spent so much time redoing work managing clients we lost all our profits in the client management side of it interesting well by the way six employees and a three million dollars in your best year i mean half a million per employee is not that bad plus plus the 13 in argentina i i he was a 50 50 partner so all half my money had to go there i see okay all right so 2015 you jump into design pickle so so walk me through your my is this typical marketplace model where do you make money so it's not actually we're the only service out there all of our team is full-time dedicated to us and this was a decision that i had from the very beginning is i just knew how hard it is to always having to like find someone build that relationship explain what you need explain your brand and from day one our creatives have just worked for us so that was started with one creative one project manager and myself three people launching in january 2015. i never wanted to actually be in between the client and the creative so our clients just work directly with the creatives and it was a super bootleg hacked together system uh the running joke is actually if you knew what emailed address we used you didn't even need a paid account because you could just circumvent the whole penis thing uh and we just launched from there and just really looked at what is the average utilization that i could think of of a client and what they would need on a week-to-week basis and and i was listening to a ton of startup podcasts at the time i was like i just want recurring revenue what's the price i could pick and i just picked that and went it went to market so how many designers now are full-time around uh 470. okay 470 full-time i mean back in the napkin i'm thinking oh my gosh this guy's head count expenses per month or through the roof it is but when you think about that most of our of that is our labor in other markets this is where our cost of goods really comes into play because our gross margin is on a good month uh you know 68 percent on a on a on a when we start to grow and we're adding middle management it gets down to low 60s but we're our teams are in markets i call them emerging markets where they are you know on average making three to four dollars an hour if they want to get a job where we'll start at six to seven dollars an hour so we're 3xing their take home still fractional what you could hire here and tons of automation and systemization that we've built on the software side to streamline everything of the 470 full-time designers how many are not in the united states 470. oh god so they're all they all in argentina no they're in philippines mexico indonesia uh argentina colombia uh moving into peru india a couple of countries that are escaping me so our our goal is to be the best employer in every one of those markets you can't make a living working on a marketplace like you can't make a living cobbling together jobs off fiverr or 99 designs and that's where a lot of those companies get their teams from their labor we give them full-time rates weekly contracts benefits all of that so we can recruit from the best of the best and we're also having a nice labor arbitrage as well providing really good talent from countries that have a much lower cost of living is that the is that the growth play go on fiverr and upwork sort by designers with most reviews to lease then go pick the top ones off and say hey instead of hunting every month we'll give you guaranteed six bucks an hour so that was our play the first 18 months and then we ran out of people yeah this is not not a bad way to get started yeah upwork we were just hunting on upwork all the time yeah and you know we just ran out of talent now it's all uh we have an entire dedicated recruiting team so of the 470 not all our designers they all at one point were but we have hr training recruiting um all of the functional side of that is included in those numbers as well interesting okay so let's fast forward uh to today how many customers are you serving actively we have 3 300 subscriptions so that could a customer could have multiple subscriptions depending on how much of our service they want how many unique customers i would say on that a little shy of 3 000. and can you explain to me why one customer like one person might have two plans it's unique economics and how much volume you get in a in a day so each subscription you have guarantees you a certain amount of creative output and if you just want more done per day you can pay more and sort of buy up more of their time also we do more than graphic design we do right now graphic design and illustrations later this year we're doing motion graphics next year copywriting video editing so we're so eventually you could build your own virtualized team with multiple subscriptions across each service yeah i mean i wonder what a platform like what you're building is your is the moat that you're building as buffett would say your ability to recruit globally right and get people in a system that can deliver that talent also globally and then there's a spread between what an american company would pay for a great design from someone in argentina or is your competency a design competency i think it might be a recruiting competency it's not the design competition yeah we're not winning any off you know madison avenue awards here yeah what we are is we've built a system that optimizes creativity really and you know anyone i joke anyone can go out and make a couple hundred thousand dollars a year copying what we do but there's like legitimate and really complicated scalable like challenges that you have to have like we'll do you know 12 000 requests this week individual unique requests we're serving you know hundreds of thousands or millions of emails and messages and all of that and managing it we have ai all this tech that's the moat it's managing that not just finding some cheaper designers compared to us and reselling their time yeah yeah okay so of the 12 000 requests you get per week first off explain what that is so i'm on the home page right now as a request when somebody clicks one of these green buttons on one of your plans 399 995 or 4.99 a month nope that's just your subscription to the all-you-can-eat buffet of design pickles so we're flat rate whatever you pay per month is what you pay no matter how much you request so i see our entry plan is uh 400 bucks a month we have a pro real time plan which plugs a designer into your slack so you can actually have a nine to five designer in your slack into your own channel for a thousand dollars a month and um and that's the flat rate so it's all about the utilization there so a request is just anytime you log into the app and you need something so what i mean obviously people can pick one of these plans what would you say the average price point is that a customer's paying per month i mean our rrpu is is like five hundred and twelve dollars okay got it good split yep and if you just count by popularity it's just an average is your 995 the most popular or the 3.99 per month most popular so by volume it's all it's the entry plan because it's been around longer but i i i laughed the day we launched the thousand dollar plan it's easier to sell the clients stick around longer our cost of our cost is negligible it's it was like the running joke like why didn't we do this sooner interesting yeah and so the upsells there are real-time collaborations same-day delivery api integration and a couple others which one of these upsells that are not available in the 400 month plan were the most powerful in terms of converting people from 400 to 1 000 bucks a month so i wouldn't actually say it's an upsell or a conversion they're two different audiences but the what people value the most the value metric that's the most powerful is i can talk to my designer real time got it the collaboration here's a dropping in a file in slack what do you think about this check out take a look at this and their little green dot turns on at 9am and it turns off at 5 p.m and they're there they're available it's pretty it's pretty cool on that front interesting okay talk to me about revenue growth so first year do you remember how much you did we did 300 000 our first year uh you only just go through all the years yeah why not 300 000 uh 1.2 3.4 4.2 10. okay interesting so you did 10 last year yeah what do you think you'll do this year with the with the prices and everything uh we rounded down conservatively we'll be doing 14 million interesting and all of that like when you look at your hiring plans you have to have some sense of what of that is fixed true sas sticky revenue versus what is kind of one-time kind of work so break down the 10 million from 2019 how much would you put into that in a predictable recurring sas revenue that you can make hiring decisions around um it depends on the time horizon so of of the first year uh year zero through or month zero through 12 it's going to be around 50 and i'm going to explain something on the back end because these numbers might seem a little scary to an average sas business okay um lifetime signups it's 25 percent like have we've we will retain 25 of our sign ups for life but we really focus our sales strategy on uh multi-month and annual plans so we will um you know our numbers we we might have a client that you know would normally only stick around for three four five months but we really aggressively look to sell them on a full a discounted 12 month plan their first 90 days to capture that full revenue and that's just learning about the utilization of design it's not a sticky service like an accounting tool or some other thing so we have to have a much different approach on how we capture that revenue from a client because we know at some point they might just change their mind and not want to use us anymore and there's really no we have like a whole categorization of happy churn i love you you guys are amazing my project's done yeah yeah and there's nothing to that you see this in the event business as well you know these sassies call them the show they go nathan i hate how high returners i'm going well if you do your job and do a great event they're gonna stop it and they're going to come back next year when they do the event like you can call it whatever you want to do we have to understand how people are using the tools so this makes sense i want to dig into the annual sales so first off break your team down for me so what's the total team size today total team size is like 505 folks okay including the 470 outsourced kind of designers managers we categorize it as hq because we do have a few people outside the us on that side sales marketing engineering customer support and then production so hq plus production is about 505. so 35 is hq yep how many are engineers we have five engineers now and how many are quota carrying sales reps zero so how do you motivate your sales reps to get the customer to go to annual in the first 90 days we incentivize um so quota carrying is you know they they have a a bonus pass their salary uh they get incentivized on the percentage of the first deal a customer has with us so if that cost if that inbound lead only signs up for a monthly they're only going to get a percentage of that monthly uh contract but if they're able to sell them into a three six or twelve month plan out of the gates then they'll have a much larger uh i guess numerator for the for the uh bonus on the sales side okay and then talk to me about how you've capitalized the business bootstrap review raised we are bootstrapped and then about two years ago we did a debt lending uh and just use use some borrowed some money and that has been the best for us because we cash flow really well our ltv is you know well over four thousand dollars and our our cac is anywhere from six to seven hundred for dollars so we can return on a client in two to three months as long as we have the cash available yeah how much did you raise on the debt side 1.2 million and which from sas capital lighter capital lighter lighter the guys are lighter interesting i love it i mean i always joke it's like the sketchy college credit card you get you know high interest and it's super easy to get but they were easy i mean they understand it it was it was a great decision for my business because of my numbers but if i was selling a 25 30 product without a big return immediately i don't know if that would have been the route what year was that that you did that with lighter um in 2018 yeah so people that founders have come in that looked at lighter and ultimately passed you'll commonly hear nathan it was too hard to figure out what the interest rate was it was four to eight percent of our gross monthly receipts plus a 1.2 to 1.8x repayment cap over like a targeted three to four years but if we grow fast and we pay it back faster and then the cost capital goes through the roof yeah so we actually i don't know how many people have gotten this we just got a term loan with them got it got it i think it's a new a newer product and they saw our numbers and they it was so just three three and 36 payments we know what it is we can budget for it easy peasy can you are you comfortable sharing a range what that rate is usually these you see between like 14 and 25 percent um you can probably do the math quicker i just know where payments like around 60k a month so okay i don't know i don't know what the yeah yeah yeah that's good okay so six game month three year term we can come back to that later but interesting so this is by the way a trend i think you're gonna see a lot more companies using debt um yeah especially healthy ones like this because you can essentially then own you and your partner keep 100 control the company right exactly interesting okay cool so you're expanding in traditional spaces um would you ever look at mna right now are there any companies you go by so this is a i tease it not not anyone that's like us but i actually have this sort of weird um fantasy i don't know that's like a right word of like finding burnt out agency owners and gobbling up their account managers and putting them just all on our customer success team so and then you know buying books of business that could we could resell our services directly into to recoup on the m a transaction um but you know haven't been too aggressive about that was talking to one company uh out of south dakota of all places and before kovit hit and just put it put the ice on that interesting yeah i mean this is you know there's a lot of these like chrome extensions that are like color palette chrome extensions or like you know small small market places that just fizzled out because they couldn't get the chicken egg problem done but like i mean like this is a the way i currently do this is i will come up with one design like a podcast logo and i will just pay i'll give it to six people on fiverr and then they'll and they're all cheap and they'll i'll get six options back and i'll pick one i you know i used to use 99 designs but like the quality was just like all over the place it was very hard to get anything predictable yeah well you know we when you're ready to not have to even mess with that anymore we'll be here for you i think with fiverr they actually tried to buy us twice last year and they they're we're on premium but what comes down to is like when you when you need one every week or one every day and you just want to send the info to someone and not have them give them a brief not having to go through the commerce checkout process or sync it to your asana you just put the details in there and it zaps right over to design pickle interesting okay here before we wrap up so you said you got 1.2 from lighter on a three-year term right so yeah something's wrong i mean unless it really is as high so if you're paying like 60 grand a month that basically means uh that you're paying like a 40 interest rate if you're 60 grand a month for three years it can't be that high it's not that high i know that so i might i must have gotten something off in that and i'm the creative guy remember yeah yeah yeah i mean i have a thesis that a lot of these lenders right now are lending based off the spread they have to cover their expenses not based off the true risk of the sas company defaulting so i look at what you've built on the surface and it seems like a stable predictable thing i just think over time the cost capital for folks like you are going to come come way down into the 11 12 13 14 range yeah i know i know it's not the cheapest out there it was just the easiest for us at the time because we are not a pure sas business we're you know we're a tech enabled service so it was harder for us to try to find other lending um that would have been you know out when we were smaller yeah what did uh what fiverr offer you the first round was two or three million the second round was 20 million and then i said no to both the the second round was what year last year last year yeah interesting and why did you say no to off the record there were there weren't any term sheets these were casual conversations yeah yeah yeah yeah technically they didn't offer us anything for the record yeah yeah of course of course uh but general chat and and why why not a 20 million you own 100 with your partner you know i loved actually the fiverr team you know don't get me wrong i think they're badass i think they have a lot going through them they were early adopter it was a lot in what the deal was going to be public stock earn out performance um so it was just complicated yep and i don't think it was the right fit i don't think we're gonna say no i'm still friends with them i think i knew there was a number for me to make it work and we just weren't there but um i think just the timing was off yeah all right let's wrap up with the famous five number one favorite book edna's game by orson scott card number two is there a ceo you're following or studying oh i love cal newport i don't know if you can call him a ceo he's an author but he does do a little coaching and speaking so yeah i'd count them number three all right what's your favorite online tool for building the company right now it would have to be profit well like i couldn't live without it yep number four how many hours of sleep are you getting every night seven to eight situation married single kiddos married with three daughters fourteen eight and four wow okay and how old are you i'm 37. last question what do you wish your 20 year old self knew uh stop drinking immediately it's not helpful guys there you have it design pickle he built his own agency up to about three million dollars now has over three thousand customers closer to a sas model 68 gross margins they pay for designers time they built a team of 470 offshore designers that are very talented making six seven bucks an hour those customers pay between 500 and 600 bucks per month on average they're doing they will do about 14 million this year did 10 million uh last year in 2019 processing over 12 000 design requests per day look to scale 100 of the company they bootstrapped raised 1.2 million in debt a couple years ago building the company the right way russ thanks for taking us to the top hey thank you so much