How Famoco CEO Lionel Baraban grew to $7.4M revenue and 250K customers in 2024.

hello everyone my guest today is Lionel Barban he is a serial entrepreneur and started the adventure and France where he launched several successful startups he didn't went on a managed technology incubator in Israel from 95 to 98 in 1998 he founded intopia a company specialized in semantic analysis and raised 40 million dollars he added the company from the silicum so from Silicon Valley until 2006 after France and Israel in the USA he moved to China where he develops Xanadu a key player of online travel services with Nicholas his founder in 2010 they co-founded simogo of which he is now the CEO Lionel are you ready to take it to the top thank you alright you have to close up the story first so you mentioned the company intopia you raised 40 million bucks for that in 1998 what the hell happened we sold the technology okay that's that's not a full answer 90 it was obviously a rough time and 99 was even a rougher did you guys lose all the investors money no we don't know no we did not know no we saw the technology we didn't close all the invested money okay did you worry was it a did you end up going public in 99 or did you stay private no no we stayed probably all the time okay you stayed private and and why'd you decide to sell vs. keep building it uh-oh it's a long story it's because at that time we had a lot of competition and at that time we had an offer and I was not in a position to refuse the offer we got mmm-hmm was that pre the crash or post the crash holes the Grouch post the crash okay very good all right and then you jump into your current company walk us through what for moco does and how you make money what's your revenue model okay family Co is what we do basically we validate digital transactions so when I say we validated you that transaction what we all have in mind when I talk about transaction or financial transaction payments now in reality a transaction is not only about payments but transportation is a transaction crossing a border is a transaction with two government one letting you out one letting you in access control is a transaction so the world transaction is much broader that only payment we validate all those transaction and we do that by providing to that world Android devices so we are doing hardware and software so we provide Android sort of POS if you will point of cells on which you can do the transaction you can validate your transaction we accept the transaction through a QR code NFC card contactless card or biometric so we create those smart POS smart touch point a smart touch point and on the top of that there is a mobile device management platform enabling you to put a business app in order to transact to do your transaction so let's give you a few example of that for example we work with a united nation and we digitalize humanitarian voters for the united nations so it's like we have invented for the UN money a digital money we use it restriction so we provide a god an ID count to all the refugees in the world this is a biometric card and when the refugee approached the card on one of our POS he will receive the voucher that he's entitled to so we're giving money but with that money he can buy only food no guns no munition know how cold no tobacco and he can buy him his IDs have you shipped we have today around 15 million users you know how many of the physical IDs have you shipped the hardware 250 thousand devices ok I want to I want to split the company and understand hardware and then we can talk about software so I want to make sure I understand the hardware side you've shipped 250,000 devices are these actual and they look like Android phones or it's more like a chip no no it's it's uh let me show you one okay no this is one of this one has that just happened to have this one in my table this one is one with uh a like a credit card built in so yeah so it's like a it's like a phone that we would not phone yeah okay so you've shipped hundred fifty thousand of those yeah do you subsidize those have you raised a ton of capital or gee pass it on the United Nations paying for them no it's two thousand two hundred and fifty thousand in total not two hundred and fifty thousand for the unity sorry I know I know I'm using it as an example I mean your business model do you subsidize these to your customers or do you make them pay for it depends some we subsidize and some we make them pay for it okay I see let me ask a different question I'm trying to understand if you're more Hardware or more software business over the past twelve months if you look at your total revenue what percent was hardware versus software no sixty forty sixty Hardware for the UH yeah sixty it's it that the the hardware in the Trojan horse on which you put your OS your secure the mobile device per oh the hardware has no value in it it just has the value because that it did not exist at the time we created a company yeah I totally get where we take another hardware so the howler has no real value beside the fact that when we build it we control it we know what's running on it we know exactly what is inside and when you are in the security business and you know there's it's more and more important yeah so just to be clear over the past twelve months 60 percent of your revenue has come from basically people paying for these hardware the phones forty percent has come from the software people by to go on top of the phones yes I imagine margins though it's very different your margins on the software are way way higher than this the the way you're making on the hardware yeah our what's over the next twelve months I've interviewed probably I want to say maybe 20 or 30 CEOs that are doing anywhere between caught a million and seventy million per year with some kind of hardware subsidized hardware plus software business and many of them their goal is to continue zhing the software to drive down the cost of hardware to increase basically penetration over your next 12 months are you following that same pattern and if so what's gonna enable you to drive the cost of the hardware down quantities of course but also the economy what we do basically we when we started the company it was only our hardware so today we have developed the technology in in a way that I can't I can take another hardware rather than all Hardware flash iOS on that hardware and put our mobile device management and and send the keys directly to our secure network so today more and more we will just send the OS and the mobile device management sometime on our hardware and sometime on other people's hard work when you say other people's harder you mean an iPhone and Android phone not necessarily a phone but a hardware that you can find in China you have thousands millions of a hardware manufacturer they have good hardware but the software running on them is our crappy so we're just going to do a better ok let's let's switch now and talk about software for the next seven minutes so the software business when an organization signs up to use you and it sounds like you're on the enterprise space if you're citing the United Nations is a customer example how do you price them what what do you price against so we we we provide our job is when you're in an android business and when you look at mobile device management platform they all come from the BYOD concept so bring your own device concept we don't do that what we do is you take a piece of hardware and you dedicate that piece of hardware to a very specific use case so it can be a kyc can be payment can be access control can be transportation whatever so our business model is very simple I sell you the piece of hardware that can run the business I'm selling you to and and I will take $1 or $2 per month per device for the mobile device management platform on the top of that you will have a business app sometimes we do that business app and some although people do that business app give you another example we are a POS for WeChat pay and Alipay so we equip thousands of shop with our devices enabling Chinese tourists to pay whether we chat pay or a leap a wallet and so when I provide that or I run the device with all the applications inside or I sell the device and those people will pay me couple dollars per month you know though to be able to use the service okay so either it's an it's an integer consumer paying you couple dollars per month you service or it's a United Nations buying a bulk package of ten thousand or something exactly I see like and what's the hot if I just buy one of the hot pieces of hardware for me what's that cost me ah depends on which one but it goes from $100 to $300 $400 depends wouldn't go okay and put this on a timeline for me when you launch the company what year so we we launched the company I have a co-founder called Nicholas and we together created the company in 2010 we had really three years of rnd so from 2010 until 2013 it was more four five people in a garage trying to do some R&D stuff and then we raised the first million in 2013 and we started really to sell January 2014 okay how capitalizes the business today how much capital raise total 21 million ok 21 mostly from investors in in Europe or the u.s. or mostly from investment in Europe yeah and you're up very good and then if it's a 2010 you are Indy you start selling just a couple years ago how many customers have you scaled to today not consumers the actual organizations yeah 404 okay okay so fairly healthy so I mean are these all enterprise level like what's tell me about the smallest customer you have that's not a prosumer smallest I would say I don't know we have people using 20 devices 30 device okay so those are very small customers so we go from a company that are willing to have organized a fleet of devices of 30 50 devices to a company that have been 20 40 thousands of devices yeah and you said so far you've shipped about 250,000 devices correct can it can I divide the the 400 in the into the 250,000 to basically get an average number of seats per kind of account of about 600 or 700 it doesn't work really like that because you have I would say we have 20 there and the rest are SMBs totally under so power labs are the beauty but the beauty of the business model is all those sm bees are growing because it's a new service it's new equipment so they are growing so we never say you too small so you cannot buy from chemical you never - that's great so totally understand that you have very different kind of customer cohorts but if you have ship 250,000 devices and people pay $1 to $2 kind of for the software per device I mean I can kind of take two bucks right times 250,000 and say you guys are doing north of 500 grand a month at this point on just the software is that accurate yeah okay and and help me understand growth rate so a year ago just looking at software what were you doing per month so I don't like to think about you know our actual numbers but let's say we there was a burn on the news we if I take from 2014 up to now on average we do a growth of over 300% well yeah that's kind of a that number doesn't really mean anything cuz going from $1 to $2 it's a hundred percent year-over-year growth and you know that and that's why you cited that number doesn't it doesn't help my audience at all talk talk to me specifically I mean again you said two bucks per EE their numbers you gave me two bucks per device turn for a few thousand devices shipped one two bucks per device yes okay one in two per device okay so okay so just to be clear you might be you might be low on the software so you might be 250 grand per month that's still a healthy business if you just started selling it two or three years ago it is a very healthy business he'll help me under 10 you help me understand growth rate of just the software side are you not wanting to talk about that what a girl percentage-wise year-over-year Wow we we grow about between 50 to 60 percent booyah okay I mean so healthy that means again just on the software side there's only 40 percent of your business you're maybe doing caught 150 or 170 grand a month just about a year ago give you 50 60 % your your growth that's great how are you finding these customers talk to me about how you're landing them it's an interesting question we we are doing a lot of so we receive a lot of incoming leads from the website very simple we are doing a lot of trade shows and we start now to have a little name in our local ecosystem so people are more more coming to us so it's a it's a mix of we have also locations so we have an office in New Delhi we have an office in Singapore we have an office in Abidjan we just opened something in Nairobi and we have an office in Brussels so all those local people are dealing their own local markets plus we are doing trade shows all over the world and money 2020 the the similar the Mobile World Congress and so on so it's a mix of incoming leads coming from the website word-of-mouth and trade shows got it and help me understand team size today what do guys that we are 120 something like that 120 and where's everyone based so we have about 60 people in Paris 30 20 in Brussels we have a team in Rennes in uh in France and rnd team and the rest are sales people all over the world that's great now one of the upsides I've seen with folks like yourself that are combining hardware plus software is that retention is extremely high because they own a piece of hardware so your software revenues are gonna be really sticky and ideally when you go raise your next 21 million your valuation will be higher because of that true or false are you seeing really really high retention rates for people that are paying a buck to two bucks per month per piece of hardware no no it's absolutely true we have almost no terms so the only churn we have our company that are going bankrupt or stopping their businesses or whatever but but unless that's less than I imagine 5% per year right yes okay that's great and okay so yeah that's healthy what about expansion revenue there there are some hardware companies where you know the start them at a buck per month or two bucks from month and I have very strong pricing axes that can drive that user to ten bucks a month you know one year after they start do you have those levers yet yeah of course because we started the company by just creating the hardware the OS on the hardware and the mobile device management platform and taking the business apps from partners and now slowly we trying to get up the value chain and propose some gateways or some added value services such as bi artificial intelligence predictive failure on the fleet or we have a QR code gateway for payment today so we have various services that help us to drive better revenue from our customer do you know what expansion is you're over here just in the hardware side like can you say it's usually about 150% or as a cohort to small right now to predict that no no we know it's it's a new business yes yeah so basically on average when a customer buys you a hundred the year one it will buy another hundred the next year and and another forty the third year and beginning of the fourth year it will start to replace the fleet from the year one you have to replace the hardware yeah those are low cost hardware so they they are not here to stand ten years yeah after three years four years you start to replace your fleet not the entire fleet you will replace 20% of your fleet the first year then 20% the next and so on you know Lionel this is a very Tim Cook move you know keep the nice camera out of the iPhone X and then you know three months later launched the iPhone XR with the better camera and make everyone replenish their fleet right that's how that's basically recurring revenue yes all right very good let's yeah let's alo very much much much lower margin in software but it is still recurring revenue revenue that's how you make the hardware you can have decent margin what's decent like 30% these are the decent net I'm talking net margin right yeah all right very good let's wrap up with the famous five number one what's your favorite business book crossing the chasm number two is there a CEO you're following or studying CEO I I don't know I don't be engaged number three what's your favorite online tool for building the company online tool to build a company yep [Music] our CRM which is low Zoho number four how many hours of sleep to get every night for Lionel that's not healthy for hours I know how are you how are you living you only get four hours of sleep each night yeah I feel like you're gonna die early because of that no no no say that don't say that you know what well I I have a mission here what we do is we are protecting we are democratizing access to security I know Lionel I get that but I think too many entrepreneurs tie the idea of less sleep to like more passionate about their mission and I just feel like that's a horrible correlation to make I agree but you know what I have four kids I have a lot to do okay for kids and married or single married okay for kids married in how old are you 50/50 last question what he was your 20 year old self new question what's something you wish he knew when you were twenty uh [Laughter] nothing what I love is learning guys what he loves is learning make sure you're always doing it launched his company a FOMO Kobach in 2010 did rd for a couple years raised 21 million bucks to build out essentially a piece of hard where that folks like the United Nations use to basically get accessed better access to more quality goods to folks like refugees and they can track all this which is great over 250,000 devices shipped in terms of the software side they charge $1 to $2 per device so doing north of 250,000 dollars per month just on the software side that's up about 50 to 60 percent year-over-year they've got a team of 120 people in Paris Brussels France and remote locations less than 5 percent revenue churn per year gross again very sticky once the hardware is installed Lionel thank you so much for taking us to the top thank you you're awesome