How Estated Reached $1.68M ARR and 151 Customers with a 12-Person Team (Interview with CEO Josh Fraser)

Introduction and Customer Segments

Nathan Latka

00:00Folks, exciting interview today. My guest is Josh Fraser. He's building a company called estated.com. It's a property intelligence tool. Josh, you're ready to take us to the top?

Josh Fraser

00:08>> Let's go.

Nathan Latka

00:09Alright. There's a lot of money out there right now and everyone's willing to buy houses, investors included. Who is using you guys? Is it investors or home buyers, consumers directly?

Josh Fraser

00:18>> Actually, our bigger segments are in FinTech and Insurtech. So we're working with like Blend and SoFi and State Farm and Swiss Re and USAA and companies along those lines on more like the PNC insurance side and getting lending and mortgages and just trying to speed up all those tools because, like, talking to a friend in Florida yesterday, it took them sixteen hours to get a mortgage. It's like we should be able to do this in sixty

00:41>> seconds. And so we're helping with a lot of the data on the background to build, profiles around those houses for mostly insurance and, yeah, lending.

Customer Count and Pricing Model

Nathan Latka

00:51And so how many customers like that do you have?

Josh Fraser

00:54>> We have a 151 customers as of today.

Nathan Latka

00:59Amazing. Okay. Got it. So this makes sense. And the main model is license it's basically a licensing model. Is it SaaS fee or it's, like, per API call or something?

Josh Fraser

01:06>> So we have two models. We have a data licensing, which is annual contracts, and we update it monthly. So we still consider it a subscription in ProfitWell. And then as well, we have, yeah, per like, a volume based subscription for the API.

Nathan Latka

01:20Interesting. And so how many a p I guess, maybe this is the right question. How many API calls hit the system last month?

01:28Josh was just telling me before the call guys that he has all this data open, and then I asked him a question.

Josh Fraser

01:32>> And this is, the one question that that that isn't in. Probably, like, six to 7,000,000 Okay. That were successful. So probably, like, 20,000,000, but there may have been inaccurate addresses sent through the system. And so that happens a lot if people don't clean their addresses, and especially with user inputted ones. So, like, correct ones are probably in the six to seven million range.

Nathan Latka

01:55Okay. Okay. And so these 151 customers, what are they paying on average per month?

ARPU and MRR Breakdown

Josh Fraser

02:00>> So the lifetime value in our ProfitWell account, because I pulled this up for you, is $54,268 a year. Average revenue per user is $929.

Nathan Latka

02:11Per month.

Josh Fraser

02:12>> And that's on a monthly basis. Yeah. Yeah. Because that kinda scales out across the 151.

Nathan Latka

02:16Yep. Yep. So so you're doing about a $140,000, $150,000 a month in revenue right now?

Josh Fraser

02:21>> Exactly. We are a 140 MRR with a 1.68 ARR.

Nathan Latka

02:28Yep. Yep. And how has that grown over time? Where were you last year? Do you remember?

Year-over-Year Growth and ARR History

Josh Fraser

02:32>> We ended the year at 900 k in ARR. And so the last thing I see in ProfitWell is March. Yeah. We started January at 77. So to be at $140, we'll definitely cross over, like, a 200% growth this year.

Nathan Latka

02:48Yeah. I know. That's that's incredible. Where is most of that growth coming from? Is it upgrading the same customers to more API calls or adding new logos altogether? Adding new logos. Where are you finding them?

Customer Acquisition: Google Ads and Content

Josh Fraser

03:00>> I come from digital marketing, so I have pretty good Google AdWords presence. I think we have a little bit of thought leadership in the space as well just with content. But, you know, Google AdWords and and driving leads from there has been really successful for us. How much did

Nathan Latka

03:14you spend last month on Google Ads, would you guess?

Josh Fraser

03:17>> $20, $22 grand. Okay. So not not at well,

Nathan Latka

03:21maybe a little bit. Was a 15% of your total revenue, so $22. And what will that get you? How many leads?

Ad Spend, Leads, and Conversion Rates

Josh Fraser

03:26>> Yeah. I have my scorecard. Thanks to SaaS Academy here. In June, we generated 415 leads. Okay. So my ad spend was actually 29,000. Okay. Little bit more. That so I was that was Google AdWords. It was probably 22. Across Facebook, LinkedIn, we're kind of experimenting a little bit with Bing as well. So 29 total, 415 leads, average cost per lead, $72. Conversion rate on turning that into customers, 2%. 2%? Yeah. We got eight customers.

Nathan Latka

03:59Okay. Got it. Eight customers. And that's at that $900 a month price point. Right? Correct. Okay. Got it. So, I mean, that I mean, that's a super health I mean, can you spend more money there? That feels like healthy ad spend to me.

Sales Team Challenges and Hiring Strategy

Josh Fraser

04:11>> Yes. But I only have one salesperson. We're recruiting. We'll be hiring another one here right away, and then we'll we'll keep ramping that up. But we had two salespeople turnover last month, so a little bit of a change.

Nathan Latka

04:23You know, this is always a tricky this is one of the hard know, luckily, it's engineering. I see more SaaS founders that getting the, like, the sales motion with actual people involved, like the reps hired, onboarded, and sticky is really difficult. So 100%. Sounds like you're comfortable being vulnerable. Why did those two people quit that that recently left? And how are you thinking about the next one? What what learnings are you taking to the next one?

Josh Fraser

04:44>> Yeah. This was a really good learning experience. So one quit because he was an entrepreneur on the side and his business got too busy, and I kind of motivated him to continue working on that. So almost my fault, but I'm proud of them. And then the second one was once, so I had this very experienced sales rep. Liam was in the middle, and then we had a junior sales rep. And so when the middle rep quit,

05:04>> the disparity between my senior sales rep and the junior sales rep was so vast that I fired this junior sales rep the next day. I was like, oh, I'm like, you're not gonna be able to cut it. And so now I'm only gonna hire someone from a competitor that has five to ten years experience. And the words I've been using in interviews have been, I need you to come in and hit the ground running. I think

05:26>> as a SaaS founder with we have 12 employees, I don't have a lot of time for training. And so I want people to come in and know the language, know how to sell already. And so I call it, I need them to hit the ground running. And so I'm really only looking at people directly from my competitors, and we're using a recruiter to help us with that. Interesting.

Nathan Latka

05:45What do you pay a recruiter to do this sort of thing?

Josh Fraser

05:48>> About 20% of the salary. And on an SDR, they don't even include the commission or OTE, it's on base, which was really surprising to me. And we found a company called LMRE Tech, but they're specifically a prop tech recruiting firm. And so it's been fantastic. The resumes that they're sending us are just amazing. I'm very, very happy.

Nathan Latka

06:08Interesting. How do you spell that? LMRE?

Josh Fraser

06:12>> It's just L, like the letters, like an acronym, L M R E. I think it's.tech. And they help me recruit for prop tech firms. And it's a global company too, so that's been interesting. Us being in Canada, they find us candidates in Canada, The US, even over in The UK.

Nathan Latka

06:28So it's been a it's it's unique. I've never seen something like this niche. That's incredible. Is, like, a perfect fit for you guys. Interesting.

Josh Fraser

06:37>> It's blown blown me away so far, the people that they've sent to it. A little bit more expensive than I would hope. I think I'm just Canadian in British Columbia getting used to what someone gets paid in New York. It's always a little surprising to me. Yeah. So what do

Nathan Latka

06:49you think, like, this new hire, what do you think their base will be and what will their their quota target be and what will their total on target earnings be?

Josh Fraser

06:56>> Yeah. So we are I have no cap. Their quotas are 1,200,000 a year and we pay 10%. So there, if they achieve that 1,200,000 on a 50 to $60,000 base, they could make it up to

Nathan Latka

07:09$1.80. Got it. $1.80

Josh Fraser

07:11>> to one and eighty depending because we pay out on the schedule of how they sign up. So if it's like month to month subscriptions versus annual subscriptions, there's a bunch of variability in that. But like one fifty is like OTE.

Nathan Latka

07:23Yeah. Hopefully. That makes a lot of sense. How do you manage like a developer who might hear this interview and hear that your new sales rep's gonna make more than them and they're going, but I'm the one building the technology. Why don't I get paid more?

Josh Fraser

07:37>> That's a great question. We have our develop I've never been asked that, first of all. And we do have a lot of transparency within our company. People do know how much everyone else is making.

07:49>> I'm not even sure the developers all understand what the OTE number is. They probably just see the base. You know? Like, I'm not sure that that acronym makes a lot of sense to them. And so but I I do think that they understand that the the salespeople are the ones. They hustle they hustle at a different pace and have a different, like, type of work environment. Whereas the engineers are all, it's pretty cushy. You know? They

08:11>> get tasks. They they get them done. I know they work hard, but it's a little bit just of a different environment to work in. Their environment's a lot more comfortable. Our salespeople are grinding.

Engineering Team and Remote Work Setup

Nathan Latka

08:20How many engineers do you have?

Josh Fraser

08:22>> Seven right now.

Nathan Latka

08:23Are they all in house, or did you leverage sort of outsourced dev team?

Josh Fraser

08:27>> They are full time employees, but we went work from home COVID, and then we have decided to go fully remote. So now we have one in Russia, one in Germany, one in Brazil, and then four in British Columbia. How'd you find them? Another recruiting firm out of Vancouver, and both of them had experience working with Estated's data, which was crazy to me. But that's a company called VanHack, and they're like an an engineering recruitment firm that

08:57>> help people globally immigrate to Canada. And so it's a really cool company. Met Ilya a few years ago.

Nathan Latka

09:05And model so there too?

Josh Fraser

09:07>> Yeah. And they actually one of the cool things is that we just pay VanHack for those employees, and then they immigrate them within the first twelve months usually, and then we'll hire them full time once they move to Canada. But so for the first year, we're actually just paying Vanhack. They're not full time employees, so we don't have to pay benefits or anything like that. So it's actually been so far, it's been working out.

Nathan Latka

09:28Yeah. That's great. How do you spell Vanhack?

Josh Fraser

09:31>> V a n h a c k. I guess if it's like dot I o or something or I'm not sure which one

Nathan Latka

09:37it in the notes on GetLatka when we publish this bad boy. So what does this put your total team at today? 12 people, you said?

Josh Fraser

09:43>> Exactly.

Nathan Latka

09:4412. Okay. Seven. So engine very engineering heavy. Got it. So this Yeah. Is

Josh Fraser

09:47>> Two finance people, sales.

Nathan Latka

09:49Yeah. Two finance people. Got it. And and put this on a timeline for us. When did you launch the company?

Company Timeline and Techstars Seed Round

Josh Fraser

09:55>> Estated started right after we entered Techstars in April 2017.

Nathan Latka

10:00Okay. Twenties.

Josh Fraser

10:01>> And so we had no it was bootstrapped, and then Foundry came in. Because you kinda know we have an existing consumer business that's really, you know, cash flow positive and does well.

Nathan Latka

10:11What is that called? Sorry.

Josh Fraser

10:12>> US Realty Records. That sits in the background.

Nathan Latka

10:15It's a b to c subscription.

Josh Fraser

10:17>> And so we launched Estated, and we ran it for about eight months. And then Foundry Group and Techstars came in, gave us 3,000,000 USD. We were then started burning cash 2018, 2019, 2020. About three months ago, Estated turned to profit again. And now we have both business units profitable. And I don't think we'll probably go into the negative again anytime soon with no intention, at least within the next, I'd say, three to four quarters of raising

Path to Profitability

Josh Fraser

10:48>> more capital. No intention of it. Such a different way to run your business.

Nathan Latka

10:52Yeah. So that 3,000,000 was raised back in 2017?

Josh Fraser

10:56>> We closed, like, 12/15/2017. Got the check, I think,

11:00>> January, early January.

Nathan Latka

11:01'18. Interesting. And what cap was that at or what valuation?

Josh Fraser

11:06>> 15,000,000 USD.

Nathan Latka

11:07How did you get to that?

11:08Like, what did that feel fair at the time? Or

Josh Fraser

11:11>> No. It was an idea, honestly. But we did have this existing business in the background that was doing about 3,500,000 a year, and I guess 3,000,000 US at the time. So I think we just got like a five x on that, but they were buying into both businesses. But I was pitching that Estated was gonna be the big one. And we have a very clear path to get to 10,000,000 ARR. I think we could get to

11:31>> 2.5, 3 this year if we keep this up. So that'll be a, like, 300% growth, which we'll be in a healthy position. There's a lot

Nathan Latka

11:41of founders that go into this where they they have, like, multiple projects running and, like, one starts to take off and you end up raising for it. And many times these VCs, like in the term sheets, it'll say you have to commit all, you know, the founder, especially you have to commit all your other IP and they'll want all these other things sort of included on the same cap table. Now it sounds like that's exactly what

11:57you did with this business that was doing 3,500,000 a year. Do you regret that today? Would you have tried to keep them separate if you did it again?

Josh Fraser

12:05>> Yes. For sure. Honestly, like, you know, when if we were to go raise a series a, there's a pretty good chance that I would take it off the table. Instead of taking, like, cashing out a little bit of my Founder stock or something at that raise, I would probably just be like, I'll just take that business out because, one, it's a little bit of a headache for us to do the reporting on to them. And, ultimately,

Cap Table and Founder Equity

Josh Fraser

12:23>> they know it's not the end goal for us. And so we've pitched Estated so hard, so I absolutely would recommend. If you can still raise at the same value, though, because your VCs are smart, and they're like, oh, you have this cash flow business in the back? Like, of course, we want a piece of that. And so, yeah, you're you're gonna work with VCs because of their network and their intelligence most of time. So it would

12:45>> have been a harder pitch, but I absolutely would have tried it.

Nathan Latka

12:48Yeah. Yeah. Yeah. No. Interesting. Okay. And so what does the cap table look like today? How much do you still own?

Josh Fraser

12:52>> What's 68%? And then Okay. I'd say about, yeah, 10% is to my employees and 20 per we did this a standard 20% round.

13:01>> To the investors?

Nathan Latka

13:02Yeah. Yeah. Very interesting. Okay. Cool. So so about to be back to breakeven, which is obviously a great place to be. You're driving nice growth, about a 150, almost 200%, maybe 200% year over year growth by the end of this year.

Josh Fraser

13:13>> Do you remember, though, we got twenty twenty on a number.

2019 Product Launch Failure and Data Pivot

Nathan Latka

13:17Do remember, like, what you're doing back in 2019, MRRIs?

Josh Fraser

13:20>> Oh, like, nothing. Like, '40 like, we barely even had a product launch. We we completely failed our product launch in 2019. It was it was less than $300,000 in revenue the whole year. What hap what happened? Why'd it fail?

13:33>> Getting a nationwide dataset of property data and collecting it on your own is just a massive challenge that we underestimated. The project scope I still think the project scope was okay for our first attempt at it, but, you know, we're competing with two pub like, Black Knight and CoreLogic, First American, multibillion dollar companies that invest 50 plus million a year into this. And so we thought we could do it with three, and we blew through that

13:58>> money real quick. And we had, like, 60% coverage, which just doesn't work in the data world. We it wasn't enough information. And so we ended up biting the bullet, buying, and then reselling, which was, like, a really challenging decision for us. Wait. Say that again. You you did what? We ended up pivoting at that point. And instead of doing this whole collection model, we purchased it from our competitors to some extent and then merged them all

14:25>> together and then started just doing better data quality. And then that's why I think Estated is starting to take off because we have this mixed model of we know how to collect the data. We just didn't have enough money to collect it all, and it's an expensive project. And so if I were to do it again, I just know that I probably would have, like, you know, tripled the cost and tripled the time it takes.

Nathan Latka

14:45Yep. I

Josh Fraser

14:45>> used to, like sometimes people say double, but, like, I'm like, with data, triple it. Like, data's messy. It's just disparate data siloed all over a certain geography can be really, really messy. So I triple pretty much everything in my head.

Net Dollar Retention and Customer Happiness

Nathan Latka

15:00And are customers happy now? Are they sticking? What's net dollar retention look like?

Josh Fraser

15:04>> Yeah. So it's a little over a 100%, like one zero one, which I was really my friends at Banana Tech got acquired for like 40,000,000 not that long ago, and that was like one of the most important metrics that he brought up to me that I think I didn't fully understand until he mentioned that. So MRR retention rate is 99.2, and customer retention rate is 98.6%.

Nathan Latka

15:30Yeah. That's monthly or annually?

Josh Fraser

15:33>> So that's, like, just my July metrics.

Nathan Latka

15:35Okay. Got it. Yeah. I mean, it sounds like it it sounds like you probably have something like, you know, 5% annual churn, but 6% expansion. So it's a one zero one net, something like that.

Josh Fraser

15:46>> Yeah. That sounds about right. We have pretty low churn rates. Like, we're kinda hovering in that, like, one to 2%. If we're less than one, we're pretty happy. And we break it out for, like, customer and revenue, but it's usually, like, we're trying to keep it at 1% or less. Our customers are really happy. You know, we just started, like, gathering g two reviews. We have, I think, 20 some now, and they're almost all five stars.

16:07>> Yep. Even the one that we got that was three stars also has nice things. And so no one's really Someone's

16:14>> like it's like two stars. It's like, great product, beautiful, but like this one picks what it's like that teacher that would never give out a 100 because they she didn't believe or he didn't believe in giving out hundreds. Drives me crazy.

Nathan Latka

16:23What it is.

Josh Fraser

16:24>> Yeah. It like, they say the nicest things, they give us, like, a three or two star review. Like, weird.

Nathan Latka

16:28But the the the algorithm.

Josh Fraser

16:31>> Yeah. Exactly. All I care about is the algorithm. So yeah. But I you know what? Honestly, one of my favorite parts about this business is that our customers are happy, and there's lots of cool companies. Like, we're doing some pilot stuff with, like, Walmart and Lowe's and, like, really interesting projects. And I think that's what's exciting about it. It's, like, I know we're just scratching the surface on making some of these services better. And, you know,

16:53>> when you're talking, like, Walmarts and Amazon to Google's, 1% improvement anywhere is huge. It's worth millions and millions of dollars to them every year. And so it's really fun working on these projects.

Famous Five Rapid Fire

Nathan Latka

17:04Alright, Josh. Let's wrap up with the famous five. Number one, favorite book?

Josh Fraser

17:08>> Measure What Matters, John Doerr.

Nathan Latka

17:10Number two, is

17:11there a CEO you're following or studying?

Josh Fraser

17:14>> Assaf Wand from Hippo.

17:16>> Yep.

Nathan Latka

17:17Number three, what's your favorite online tool for building Estated?

Josh Fraser

17:23>> Can I say Google Drive?

Nathan Latka

17:25Sure. Of course. Yeah. Number four, how many hours of sleep are you getting?

Josh Fraser

17:30>> Seven.

Nathan Latka

17:31Okay. And situation, married, single, kids?

Josh Fraser

17:33>> Single.

Nathan Latka

17:34Okay. No kids running around?

Josh Fraser

17:36>> No kids running around.

Nathan Latka

17:37Alright, Josh. How old are you?

Josh Fraser

17:39>> 30.

17:40>> 30 years old.

Nathan Latka

17:41Very cool. Last question.

Josh Fraser

17:42>> Something you wish knew when you were 20.

17:46>> Oh, god. Something I wished I knew when I was 20.

Advice: Overnight Success Takes Ten Years

Josh Fraser

17:52>> Don't rush it. It's gonna take time. That overnight success is ten years. You'll read about that overnight success. And when they say it took ten years, they're telling you the truth.

Nathan Latka

18:01Guys, there you have it. Estated easy access to a 150,000,000 properties worldwide. Insurance companies pay for this like SoFi. They've got a 151 customers. They're doing about a $140,000 a month in revenue. That's doubled from a year ago, up from 70,000 per month, again, back in 2020. They're doing this all with just they've raised about $3,000,000 on a $15,000,000 round back in 2017. But Josh and team cap table wise, Josh on 68%, employees 10% and investors

18:2520%, but they're scaling nicely. Next step, 10,000,000 in ARR. We'll see what happens. Josh, thanks for taking us to the top.

Josh Fraser

18:31>> Thanks a lot, Nathan.

Nathan Latka

18:34One 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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