Disco Revenue, Valuation & Funding (2024)

[00:00] Hey, folks. My guest today is Candice Faktor. She's the cofounder of disco.co, a platform for knowledge creators to build a live learning empire. She's also a serial tech entrepreneur who has a passion for learning and community. Before launching disco, she scaled Wattpad to 80,000,000 users, making the world's largest platform for creators to share their stories. Wattpad was sold in January 2021 for $660,000,000. Candice, you ready to take us to the top? [00:24] >> Absolutely. [00:26] Alright. So give us some more clues here. What was your role at Wattpad, and how did that role help you discover the need for disco? [00:33] >> Absolutely. So, I joined Wattpad. I was the first nontechnical employee, and I joined to help scale the business. So I was the head of business and the global general manager. And, you know, it was so great to be able to work with such talented founders to bring something that was really social and engaging to something that, you know, we always thought of as isolated, which was reading, right? Like most people think you read alone. Well, actually, [01:06] >> what we learned at Wattpad is it's really, really great to read with community and also to read on a serialized basis. And so when you think about disco, it actually so much of what I'm bringing to disco I learned from Wattpad, which is learning, especially virtually in an old world, all used to be about learning alone, right? Watching prerecorded courses and consuming content alone. And what I got really excited about during the pandemic when we all [01:39] >> had to sort of work from home, we learned that we can actually learn live together. And so just like we did at Wattpad, which was bringing a social element to reading, we're bringing a social element to learning because the science of learning is that you actually learn better with people because people hold you accountable. They give you support. You're able to reflect more with them. And so lots of learnings from Wattpad in disco. [02:08] Why did you feel like you couldn't build this inside of Wattpad before the sale, obviously? [02:13] >> Oh, so I left Wattpad a few years ago. I I helped scale Wattpad to, as I said, 80,000,000 people and then realized I wanted to do some other things at that point. And so this was, you know, after a few years [02:31] What year was that, by the way, that you left? [02:33] >> Yeah, so I left Wattpad in 2017. Okay. And we started disco in 2020. And what's interesting is when I left Wattpad, I became incredibly interested in learning because, you know, I was so aware that the skills that people are going to need in the future are so different than what they're being taught in institutional ed. And I actually built my very own live learning community after Wattpad. And what disco is really solving for is it's actually [03:06] >> really hard to do that. It's hard to bring a live element and a social element to learning with the existing tools that exist. [03:17] Oh, 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 [03:40] your 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 [04:05] get 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 [04:27] not 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 [04:52] going 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 [05:14] if 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 [05:40] the interview. I I I love this use case because, like, communities have time struggling all the time. Slack doesn't work. Circles even sometimes tricky. Gather around, right, whether it's one person meetups and it's random people. Videos also sort of tricky. I know actually, I have friends. I'm looking at your interface right now. I have friends that use you guys. I mean, did you guys sort of start in the Pat Flynn sort of Amy Porterfield sort of [05:58] world and expand from there? Did you start somewhere else? [06:01] >> Yeah, no, you hit the nail on the head. Like we started with knowledge creators who really wanted to build community based learning. And it's expanded, you know, from solopreneurs who are, you know, individual knowledge creators putting learning communities together to like really big now organizations are using us like Makerpad, which is the largest no code school. It's owned by Zapier. We are the OS for their entire learning community. Dribbble, [06:33] one of [06:33] >> the world's biggest product design communities, they're using disco to be the OS for their entire Dribbble university. And I think what [06:44] >> knowledge creators and organizations are realizing is you really want a seamless and branded experience for your learners to go to just one place, right? One place for chat, one place for live video, one place for content. And it's really helpful if you can have mission control to run your entire business from marketing and selling these live learning experiences to merchandising and monetizing different live [07:10] learning product, Candice, makes complete sense to me. I understand the pain point. Let's circle back to products here in a second because I wanna see if I can get some hints at you in terms of where you're taking the disco product. First, help us understand how you've gotten yourself funded to date. Customer fund or you decided to raise some capital? [07:23] >> Yeah, we've raised some capital. We have had, you know, a really [07:30] When was the last round and how much was it for? [07:32] >> Yeah, so our last round was our seed round. We raised that last time this year. And amazing investors from funds like Inovia, Quiet Capital. [07:47] >> We also [07:47] have How much did you decide to raise? [07:50] >> So in our last round, we raised 5,000,000 US, and we have incredible angels as well. Lots of interesting folks from Shopify, Lambda School, Solana, Endeavor, very interesting people who are participating. [08:08] So smart round, great capital. Was that your only round of data, have you raised other capital pre seed maybe? [08:12] >> Yeah, we raised a pre seed round. We raised SAFE as well because there was a lot of interest, and we'll we'll be sharing some some further funding in in that. [08:23] When was that pre seed round closed? Was that in 2020? [08:27] >> That was in 2020. [08:28] Okay. So first year in business, really. So so so 2020. And how much was that for? [08:34] >> That was just a friends and family 750 k round. [08:37] Did you get did you get Allen and Ivan, your your Wattpad? [08:41] >> I do. I have I have Ivan has been Esther. Huge fan of the Wattpad team, also like the head of product, Tarun Sakhtefo, as an investor. [08:51] Well, are good signals. I don't know [08:53] >> you though. [08:54] You're former founders you worked with, cut you a check-in your pre seed round, like you got my ears perked, I'm interested. So launch in 2020, you raised some money early on to get going. You raised another 5,000,000 in 2021. What gave you the leverage to raise the 5,000,000? Like, were you guys pre revenue still or did you have a lot of free user growth that let you get that valuation or? [09:13] >> Yeah. Mean, we were, you know, we were three times oversubscribed for that round. We had, you know, 15,000,000 of interest. I think two things. One, a really clear vision for where we wanna take disco and lots of interest from knowledge creators and organizations that wanted a tool like this. [09:35] But can you quantify that, Candice? Where were you? Like, what was an important metric to you last year when you raised their own? Is it number of active users, number of courses created, number of live sessions? What's the metric? [09:45] >> For a seed round, it it really was the product vision. [09:50] Okay. Got it. So you weren't there wasn't a deck where you were saying, I'm making this up 10,000 monthly active users with a thousand live events per week. It was really, I'm Candice. I'm from Wattpad. Here's what I believe about the world, and here's how we're making it happen. [10:02] >> Yeah. And I have an amazing co founder, Chris Zekornik, his sixth startup, serial entrepreneur. And so I think we're both mission driven, lots of complementary skills. [10:17] >> You know [10:17] You guys nice at the beginning? You split fiftyfifty, or was that a big debate? [10:21] >> No. A 100%. Fifty fifty all the way. [10:23] Fifty fifty. You didn't try and man, I would have fought like hell. You know, I'm Candice Wattpad 80,000,000 55% to me. [10:30] >> No way. He's amazing. We're very values aligned, very mission driven, and a massive market opportunity that we have a lot of conviction is, you know, just getting started. [10:43] Talk economics to me. Pricing is tough to go to market with. I'm sure you experimented a lot about this with that Wattpad. What do people pay you today to use the technology per month on average? [10:51] >> So so we actually have a really interesting pricing model. One is we have a free plan where we take 10%. So you can build your entire live learning experience and and just only pay us when you make money. So I think that's really appealing to some people. But what's really appealing to the knowledge creators and organizations that are making a business out of live learning is they don't want you to take a huge chunk of their [11:18] >> revenue, they want to pay you a SaaS fee. And so we have a pro account, which is $85 a month, or we have team accounts and an enterprise account for bigger customers. And so, we really scale with your business in the way that you want to scale. And then we have a very interesting new arm of our business called disco studios, where live learning is actually hard. It's a new phenomenon to build an immersive and engaging [11:47] >> live learning business is very, very attractive for a lot of people. They want to do that. It's a tremendous unlock of value for thought leaders, for even SaaS companies, for businesses, but they actually need an agency or a pro serve model to help them design the experience, operate it, scale it. And so we actually have a really nice business line as well that helps brands and organizations and thought leaders create and scale these experiences. [12:17] That's why So I wanna deeper into your new product, that live studio concept, but I wanna get more detail on the free plan and the SaaS component as well. I assume free plan maybe came first. What do you guys track? I mean, I mean, is it is the right question? How much how much live learning ticket sale volume did you process in January? Is that the number? [12:37] >> So we are creator focused. Right? So, yes, we we on the on the free plan, we're taking 10% of what our knowledge creators or organizations [12:46] And how many are on [12:47] the free right now? [12:48] >> Hundreds of customers are on the plan. [12:51] And do you Candice, I don't mean to keep interrupting, but how do you define a customer? Is it someone that's made at least a dollar of ticket sales? [12:57] >> Somebody who's actively building live learning experiences on our platform. So some [13:03] no sales yet? [13:04] >> Some have no sales, but the majority do. The majority. [13:07] Okay. And, I mean, are you close to getting to the point where you're doing, like, 5 or 10,000,000 in creator ticket sales per month? Or, like, what what's the metric you're trying to hit there? [13:16] >> Yeah. I would say so we have some creators that are on track to do 7 figures this year. [13:22] Oh, wow. Okay. Very cool. Very, very cool. Okay. Cool. So that model you're taking, you're taking 10%. I imagine you have power laws there. I imagine your top 10 creators are gonna make 80% of that total volume. And at some point, they're all moving to a flat SaaS because the economics make sense. So your funnel works naturally here. How many do you have not on the free plan, but are on the SaaS fee model already? [13:44] >> Yeah. So we don't break out our customers per plan, but we have hundreds of customers across our plans. So on this [13:52] but you know how many are on the SaaS fee. Right? I'm I'm curious how many have made the switch because I wanna ask questions about how you drove the conversions. [13:58] >> Yeah. I would say we're really early. Right? So we we're we're quite early in our evolution of even being live off our wait list. So, we anticipate lots of people will switch over, but we're just not sharing. I see, [14:13] I see, I see. Okay, that makes perfect sense. By way, everyone has to start from zero. So it's fair to say like maybe under a 100 on the $80 month plan. You're just now launching your storytelling around it and you're still learning. [14:22] >> Yeah. We're I mean, I we have a significant number of pro plans and enterprise plans, but absolutely growing a lot. And what's interesting is a lot of people prefer just paying you a set amount of money per month. [14:37] Totally. It makes complete sense. That's why I asked. It makes complete sense to me. Can you tell me the percentage? So you have hundreds of customers. Can you tell me the percentage split of the pie? Like, is it fifty fifty or ninety ten or? [14:48] >> Yeah. I would say it's about, like, in the range of between 30 to 50%. [14:54] 30 to 50% are on the SaaS fee? [14:56] >> Correct. [14:57] Oh, I see. Okay. Got it. So so 70 down to 50% are still on the free tier, but you anticipate more moving over to that SaaS model? [15:07] >> You got it. [15:08] That's very cool. Okay. Talk to me a little bit. And I guess I wanna understand timeline too. You guys mentioned you're early. When would you have your first dollar of revenue? Was that last year? Is that this year? [15:19] >> It was last year. We only [15:23] >> started the company in August 2020. So pretty, pretty new. And we are just, you know, moving off of our wait list. We had about a thousand customers on a wait list looking for access to the platform. [15:38] Can you break a million bucks in revenue this year? [15:42] >> We are absolutely on track. [15:45] I love that. How many folks, Candice, do you have on the team today? [15:49] >> Again, we don't share data on size of our team, but it's growing significantly. We've scaled the team 10x since last year. [16:00] Okay. But as you know, when you go from one employee to 10, it's fancy and nice, and you're well trained to say 10x growth, it doesn't mean it doesn't mean a lot. [16:08] >> No. We'll be over 20 people. [16:10] Okay. Fair. Fair. Fair. Got it. Over 20. And the reason I ask is I'm curious how engineering heavy this is. Right? How many engineers of the 20, or is it more about onboarding and helping people train them how to do a live course? [16:22] >> It's very engineering heavy. We're building a pretty fast platform, which we're really excited about. I mean, if you think about it, we're being the OS and a very essential part of people's business. So our platform's quite expansive in terms of what it does today and what our vision is for tomorrow. [16:43] And you've been through it at Wattpad. You understand what dilution is and what it means and how it means the whole cycle through exit. So as you now in control, right, you and your co founder of disco, how are you thinking about managing dilution at the same time managing bringing strategic partners in the form of investors? [17:03] >> You know, we we're big believers in bringing in strategic capital. And, you know, I think you wanna have the right amount of traction so that you have a valuation that allows you to do that with as little dilution as possible. And we're well on our way to do that. [17:20] Most folks in their seed rounds past twenty four to thirty six months are selling sort of 10 to 20% of the business. Were you sort of in that standard range or did you do something super unique? [17:30] >> Very similar. We [17:33] >> we're very lucky. Our our valuations have been very, very strong. [17:38] Do you ever go, gosh, I hope we can grow into this bad boy. We don't wanna have a down round. [17:44] >> I think we're we're thoughtful. Like, for us, it's not just about getting the highest valuation. We're we're very thoughtful around how much we raise and when for that exact reason. I don't know if you know this, but I'm a venture partner at a Silicon Valley based Series A firm. And so I'm all too familiar with understanding the dynamics between, you know, raising too much, raising too little, having enough traction, not having enough traction. So I feel [18:13] >> very lucky to [18:14] sort of This is why I asked the question because when I talk to most folks that fit your same pattern and the pattern that I'm picking up is early employee at a very successful company, Wattpad raised 50,000,000, about 50,000,000 on a 400,000,000 valuation two years before sale. The sale was $660,000,000. So slightly above the last drawn valuation. I know you left in 2017, but I assume you were fully vested at that point. So you had some [18:37] financial windfall from that. And if you really believe in this disco idea, ignoring the strategic aspect of your investors, you'd wanna own as much as possible and fund it with your own money. That's why I asked the question. [18:49] >> You're very smart and absolutely. We're we're big believers in what we're doing, and we also understand that in a competitive market, you want to have enough capital to scale the business appropriately. [19:01] Mhmm. How much was that a factor when you raised the 5,000,000? That everyone knowing that you were early at Wattpad and you could probably do the whole round yourself if you wanted to? [19:10] >> I think it was great. I mean, I think, you know, Wattpad was an incredible place to learn about scaling a very global business in the creator economy, so it definitely helps. And I would say a big part of it is the dynamic between my co founder and I. He's also sold companies and had great exits before, and we're very complementary and mission driven. I think that the the combination between, you know, our passion for what we're [19:44] >> doing and the growth in the market and our backgrounds made, you know, our funding three times oversubscribed. [19:52] Mhmm. How do you pick off people from, like, into the Hopins, the Bizzabos, the vFairs? I mean, all of those companies are moving in on one side on you. You're sort of building a wedge right in the middle. But like Hopin just pitched me yesterday on sort of a live studio event experience because it's clear there's an enterprise play there. You're doing the same thing. What's your wedge to a company like Hopin? [20:11] >> Yeah. I mean, I think, you know, as far as I understand, Hopin is still very event focused, right? We are really focused on learning communities and giving knowledge creators and organizations the merchandising tools to actually build a recurring revenue stream of business against knowledge and learning. And that's really, really unique and different in terms of the tools you need to do that versus having an event experience. So, you know, we're we're like there's an entirely new [20:50] >> breed of school that's being created today with like micro schools, boot camps, virtual academies, learning communities, and it requires a different set of tools to actually operate it as a entire empire and business journey from marketing, selling, creating these products, having great experience for your learners, scaling it. And so we do all of that tooling. It's actually quite complex for people to sort of piece together a Hopin with a Slack, with a, you know, curriculum [21:26] >> tool. And so we just make it super simple in one in one place. [21:30] Last question here. How'd you build a thousand person wait list? [21:34] >> You know, my background is in building community. So Wattpad, you know, it actually was when I left, like, even more than 80,000,000, was a 100,000,000 user community. And so there's some really important design principles when it comes to building community. I give a lot of credit to a friend of mine, Kai Sotto, who wrote the book Get Together. But one thing I learned is design with your community. Invite them to actually design your product with [22:02] >> you. And I think we did that in a really, really powerful way. And we also got some of the most interesting thought leaders and people who are the true pioneers of this new learning format, like Seth Godin, like Jerry Colonna, like some of the sort of leading investors, to really participate in thinking about what it means to learn live together. And I think we had an amazing round of angels and investors who care deeply about what [22:37] >> we're doing, and we invited them to participate in helping us build a community of this future knowledge creator and learning experience, and not just literally organically proliferated into a thousand person wait list. [22:53] Yep. Yep. Very cool. Alright. Let's wrap up here with the famous five. I'm gonna skip the first one because it's the, what's your favorite book? [22:59] >> I also love Get Together. Highly recommend it. [23:02] Let's go to number two. Kai Kai. Yeah. Kai's Is there a CEO, Candice, you're following or studying? [23:07] >> I really like Amy Errett. She's the CEO at Madison Reed. She's also a partner at I think it's, True Ventures. I'd say out of the CEOs, I've just really I just have a lot of respect for her. She's you know, she she came at it from she was an investor for a long investor in my life and sort of thought, am I only an investor? I'm an operator. And I just believe in seeing things from different [23:42] >> lenses makes you better at whatever lens you're wearing. And she's very mission driven and passionate about community and building iconic brands and businesses. She's incredibly inspiring. [23:55] Love that. [23:56] >> Number three, favorite online tool for building disco besides your own? [24:00] >> Well, Slack went down yesterday, and I was mind blown about as to how much of an essential tool that is for our remote first team. So we are a remote first company. My cofounder lives in Costa Rica. I live, you know, in Canada, and our team is all over North America. And quite frankly, we were quite dumbfounded on how essential Slack has been in our in our communication. [24:30] >> Alright. Slack. [24:31] Number four, how many hours of sleep do get every night? [24:33] >> A lot. I'm I I believe deeply in good sleep. So I I think I must sleep for at least eight hours a night. [24:41] Love that. And what's your situation, Candice? Married, single, kiddos? [24:44] >> All of it. So married, two kids, nine and 12, puppy. So, yeah, full on. [24:53] And can I and can I ask how old you are? [24:55] >> Yeah. I'm gonna be 44 next week. [24:58] So Cool. And and the reason I ask is for context. So now take us back to your 20 year old self. What's something you wish that she knew? [25:06] >> Do not be afraid to fail. Like, you know, I I I'd look back now, and I was like, I I can't believe how much of a perfectionist I used to be. It it does not get you where you need to go. [25:22] Guys, Candice, one of the first 10 employees at Wattpad really led building a community of over a 100,000,000 active, engaged, passionate community members, and she left in 2017 and said, you know what? There's a product here. She launched disco, went out and raised $750,000 in a pre seed round to get it going. Another 5,000,000 last year to keep scaling, grew a thousand person to wait list, now opening up revenue. They either take 10% from folks on [25:44] their freemium plan. These are creators doing live learning on the platform, or you can move up to an $85 a month plan if you don't wanna pay the 10% because it obviously gets very big if you're successful. So she's experimenting. They're scaling, hoping to grow to a million bucks in revenue this year. We'll see what happens. Twenty twenty one on the team today as they look to continue to scale. Candice, thank you for taking us to [26:01] the top. [26:02] >> Thank you. [26:05] One 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 [26:30] Central. 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 [26:53] fundraise, a big sale, a big profitability statement or something else. I don't want you to miss it. Additionally, if you want to take this conversation deeper and further, we have by far the largest private Slack community for B2B SaaS founders. You want to get in there. We've probably talked about your tool if you're running a company or your firm if you're investing. You can go in there and quickly search and see what people are saying. Sign [27:14] up for 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. [27:34] We got to push them away. 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