How Duetto CEO Woojong Yi grew Duetto to $51M revenue and 3K customers in 2017.

they launched in 2012 three co-founders now 105 people helping hotels and specifically Hotel locations better optimize their pricing they raised $51 million serving over 3,000 individual Hotel locations paying on average 17 grand per year so they will very soon be doing about a $50 million run rate 75% gross margin which they've really like tripled uh over the recent future which is incredible how they how they work that fixed cost structure to drive more growth and and bring the margin up over time additionally again spending about 20,000 bucks on CAC so super healthy pay back period about healthy payback period at about 14 months again based out there in San Francisco and Vegas this is episode 737 coming up tomorrow morning I talked with Mariano the question is is he the future of design collaboration well folks 1,200 customers are paying him and $3 million every year my answer would be yes what's yours but first here's today's episode this is the top where I interview entrepreneurs who are number one or number two in their industry in terms of Revenue or customer base you'll learn how much revenue they're making what their marketing funnel looks like and how many customers they have I'm now at $20,000 per talk 5 and6 million he isent on global domination we just broke our 100,000 unit soul Mark and I'm your host Nathan lka hello everybody my guest is Patrick Bosworth he's the co-founder and CEO of a company called duetto research which and his Focus is driving vision and growth at the company he has nearly two decades of experience as a leader in the hospitality technology nonprofit and government sectors he also holds an MBA from Harvard Patrick are you ready to take us to the top yeah all right is your NBA is your NBA from Harvard worth anything in the startup world or no yeah I don't think the company would exist without it um tell me why well so the company was started through a section made of mine convincing me that there was an opportunity to build a tech business here and then he introduced me to one of my co-founders Craig Weissman who is the chief technology officer of salesforce.com at the time and was looking to found his own business and um and then in the fundraising process you know it's whe whether it's the just way the world should run or not um it definitely created a lot more credibility that you know I had an NBA from Harvard another co-founder had an NBA basically from Cornell and my third co-founder you know also went to Harvard and those networks are very strong and it helps you get meetings with uh Venture capitalists um and that's that's how we raised our first round for a young student listening right now that doesn't want to go through the work of actually completing a degree at Harvard but sees the value in the network like you do is there a way to hack that is there a way to get access to that Network without actually you know going through classes for four or five years um yeah there are um I I I think that you do get other benefits other than just the the network by by going through I did the 2-year program so it wasn't a four or five year commitment um but uh so in particularly in my case where I was going from a non-traditional background having worked in the Arts as an actor and singer to then working in politics um it was really helpful for me to have a a grounding in business terminology The Way businesses work meet a lot of you know people that had worked in banking and Consulting and other things that had a lot to teach me um aside from just the network there is a there are abbreviated programs so there are things like the Executive Education Program the advanced management program and other short short courses that you can take that give you access to the network so if that's the the primary interest now they tend to be expensive so it's like 60 or 70 I think it's like 60 or 70 grand I mean don't quote me I don't know the pricing but it's I think it's like $70,000 to go through an abbreviated program that then gives you full access to the alumni database you can put it on your LinkedIn and and start kind of networking in that Circle maybe that's what I'll do I'll raise a VC fund and all I will do is write a 100 Grand checks to smart people to go through the program so they can get access to the network with a guarantee that I get 5% of whatever company they create coming out the other side I don't know Patrick tell me tell me more about duetto what do you guys do and what's your business model how do you make money um we are a hotel software company um we Leverage What I would refer to as medium data not really true Big Data but large data sets to um help Hotel um managers at the property level make smarter decisions about their business so so our first product is pricing optimization so um we pull in a bunch of different signals of demand at the market level and for that particular hotel and help them pick the right price for each customer segment each Channel each room type um for every day for the next 13 months um and in general that increases the revenue by anywhere from 6 and a half to 8 and a half% which increases their profit by 75 to 100% M what is the I mean how do you make money on this is it a software as a service product or you're taking a cut of Revenue rise you generate or what most of it is a just a subscription uh payment that's paid annually um that's based on the product that they're buying and the number of rooms in the hotel we do have a performance kicker that allows us to get a share of The Upside um and helps align our our risk with the client surprisingly Hotel companies typically want that to be a small part of the deal of course wait why is that surprising to you that's what I would have guessed uh well I think I I thought particularly in the earlier stages of our company when we weren't as proven I would have expected them to want us to take on more of the risk and then make money more on the upside but because of the fragmented nature of the hotel industry where you have a separate party that owns the the property another one that manages it and then another brand that could be on the you know on the outside of the building um getting alignment among those three parties can be pretty complicated and what they want is to know what their expenses are going to be and have a a fixed price contract and so anytime we try to do a more variable contract a pricing negotiation that might take one to two weeks would drag on for one to two or three months and uh and so they wanted to limit the risk but having some of our fat risk does give them the confidence that we're willing to kind of um put our own uh livelihood and you know behind their success last month what what percentage of your Revenue came from just the flat SAS model versus the up you know hey we got a percentage of The Upside we created model I'm not certain but I'm guessing it's about 5% from the variable oh got it yeah okay yeah so this definitely is like 8020 even even more sharply at like 955 something like that yeah it may have been seven or eight% but no more than that yeah yeah Okay cool so take us take us back actually help us understand kind of averages here so I imagine you have all kinds of cohorts of different customers that you're selling to who are you actually selling to though is it the person that owns the building is it the Marriott that operates the building is like who are you who's the buyer it varies um so if it is a strong brand like Marriott who's not a customer of ours currently they control all of their brand systems and we would need to integrate into their ecosystem of inventory management distribution and so on and they would then have complete control so if a real estate owner wants to work with us at a Marriott property um Marriott would would prevent that because we're not integrated into their ecosystem today um so in the case of a very strong brand like that we have to go to the brand in the case of smaller brands that maybe don't exert as much control or have more of a membership model um or when it's more of just like an independent hotel in a market um then it can be more of the management company the people that are actually hiring the employees and operating at what a lot of people don't realize about the hotel industry today today though is that a lot of times the brand is no longer the operator they they've gone so asset light that they no longer not only do they not own the the underlying real estate they also don't actually hire the employees that service the guests got it um and so those management companies tend to be our first point of contact and our ultimate Champion to then get alignment from the brand and from the real estate owner to make a purchase of our software and give me a sense of the general size of that right so on average are they paying 30 grand for the year 300 grand for the year what's a range so on a per property basis I think today we're getting about 17 or $18,000 per Hotel per year got it um so depends on the number of rooms number of rooms and the product that they're buying got it okay take us back more to to the backstory here so what year did you guys launch this company in we founded it in February of 2012 okay 2012 and you say we there was two other co-founders that's correct okay and how did you guys have the equity conversation right there's always lesson in that between...