Finimize Revenue & Valuation (2020)

hello everyone my guest today is max rafaga he's the founder of afinimize the world's largest and most engaged finance community he previously co-founded one of the largest e-commerce players in switzerland and sold it with 200 employees to the largest swiss media house he was a forbes 30 under 30 a participant in 2016 and also a tech stars mentor mac you ready to take us to the top absolutely thanks for having me that's great so when did you start building phenomize was it during the you building the e-commerce business or was it after um it kind of started a little bit as a as a side project um and then i really started to devote my time to it uh fully at the end of 2016. so i started the company in august of 2016. and and what is the company is it is it community play like how do you make money so we define ourselves as a community business uh and we make money through multiple revenue streams so we have three revenue streams uh we have advertising we have subscription and we have um perhaps most relevant for your audience the b2b licensing play as well um where we license content to other platforms oh that's really interesting so i think i get the ads model that's probably sponsorships in your email sends on your site peel back that onion real quick before we do the other two revenue streams what's the sponsorship to like your email list look like exactly so we we have a around about a million users members as we refer to them uh all over the world uh it's a very relevant target group for many uh specifically financial institutions and so they can buy access to to that audience primarily through the newsletter but also on the website some of our meetups etc and you can buy a daily or or weekly or like multi-month slot and get that brand awareness brand exposure um and education of the market about your product can we go deeper for there for a second so how many people are on the email list around about a million okay and when you send out a sponsored sort of dedicated email send how many typically open uh so we have uh pretty high open rates between like uh in the high 30s low 40 percent okay so caught 300 or 400 000 open and how many will click obviously this is very dependent on how cool the sponsor is right if it's a bad sponsor low clicks good sponsor who you love more clicks what's a good sponsor get uh that really depends uh as you say i mean we see like 10x variances oh wow it really it really depends like some stuff really resonates uh and some stuff uh i think there's not not as much as a sort of a partner audience fit uh and that's why sometimes we do we do test campaigns and people can try stuff out test our audience and if they like it they do more and if not they they had a pretty minimal exposure what what would you know something that resonates well what would you consider resonates well on 300 000 opens they're going to get how many clicks i mean that can range from anywhere from like a thousand all the way to like thousands of clicks in one day and really there's very very wide um uh uh variants there so how do you manage i mean a lot of spawn folks who have a sponsorship newsletter the morning brew style the stacked marketer style druid trend style the sort of sub stack you know subscription plus sponsor style they have the same issue you're never quite sure how well sponsors are going to resonate and if you sell them a number of clicks and then don't deliver like what do you do so we don't sell we don't sell clicks we sell opens as i think is the case for many of the newsletter products out there um and so we say hey this is how many opens we estimate that you're going to get and then we charge you on an open basis um and that way we're incentivized to actually deliver your ads to the audience and they they open it um but that you know we can control ultimately whether someone's going to click onto your onto your product or onto your ad what we do is we do a b testing we work very very closely with partners we have our in-house copywriters produce the produce the ad copy so that it feels as native as possible um and then we just try and do our best uh also to apply our experiences there yeah so what would you charge like when you send your media kit out to a potential sponsor 300 000 opens a million and let's just say they want to test one cent what what do average rates look like uh that's something that you'd have to talk to our sales folks with that's not something that we just would publicly communicate because there's so many different parameters um involved here um what's the what's the duration etc so uh probably one for for our sales team can you help us get like some sort of concreteness or less vague just so people can learn live so pitchbook came on the other day they've got a list that's about your same size about same open rate they said you know look it obviously varies on a lot of stuff but we charge on average about seven thousand dollars per cent to be included in the send uh the number of clicks we're not responsible for but it's about seven thousand they get about 250 000 opens i mean is it fair to say you guys you know somewhere between maybe like five and ten grand per per placement something like that yeah it's probably in a similar ballpark to some of the other players in the market for sure okay so so that's one business model tell me about the other ones so then we have uh our consumer subscription um which is a uh premium uh premium content play and the um end users essentially pay us uh 59.99 pounds or uh i think in the us it's uh 79.99 us dollars depending on it depending on the day exactly depending on the day very much uh and what that does is and that's per year per month correct per year okay um and so what that does is it unlocks our full content library which is currently primarily in the app but we're also building out a web app for this we have over a hundred different audio guides long form audio guides that explain anything from how to how to think about investing in microsoft or how to think about google's mood shot when you think about their investment thesis there and but the primary driver that we see why people buy this is we have two products one is we have a daily brief so we we basically explain to you every single day in under seven minutes as an audio product uh what's happened in the world of finance very similar to our newsletter um and then we have our analyst insights which is i think personally the most exciting product and what so we have a whole team of analysts who previously worked with goldman sachs and bloomberg um really really uh sophisticated financial experts and they share their views and opinions on investing opportunities investing trends and so you can learn from their insights and that again is available in text and audio are they full-time employees of finimize or they volunteer their time and analysis no it's uh it's our we have a full team of analysts one of the core assets that we that we have is is that team except how big is that team uh i think we are now six people oh wow six analysts wow and how big is like your whole the whole operation everything all together how many total team members um including a couple of like part-timers uh i would say around about 30 um between 25 and 30. yeah depending on how you count it yeah so we're pretty lean but uh but it works yeah well hey there's nothing wrong with being lean nothing wrong at all all right so newsletter membership consumer subscriptions and the last one and so the last one is our api business which is a sort of our newest business which very much came out came up from uh inbound that we received oh wow um so what happened so what happened essentially was um we started getting a lot of investment platforms a lot of brokerages come to us and say hey we have a huge user base we're struggling a little bit to activate uh all of them and we want to use content to activate them um there's a couple of examples you know robin has done a decent job with this um you're starting to see an e-trade uh those kind of guys in their latest earnings reports talk about how content is a major activation driver for them and so these platforms come to us and they say hey you know we've tried content ourselves we couldn't really crack it we love the way that you guys do content can we have it and so when we when we started to receive a couple of these inbound requests we uh we thought about what can we do and we essentially uh created an api and now you can go and plug into our api and pull um sort of a product palette that we've created from daily weekly news text and audio and plug it directly into your own app um and so then all of a sudden you have a really really nice content library and then we sell that to you in an annual as an annual license very interesting and are you able to have expansion revenue on that i know it's new but can you drive expansion revenue on that product based on like number of api calls annually or project a number of api calls yeah so i think right now we're we are early days and so we're just doing a flat fee okay for a year on the on the product that you're doing but 100 what you said so obviously one of the things that will be interesting is to start charging based on usage and the other thing is obviously today we have a very small product palette that we offer you by the api again we're looking to expand that um so a lot of things that we can do and max when you look at like the last 12 months so 2020 is almost done we'll just use this year as an example what would you say the revenue split is between these three streams percentage-wise good question so uh certainly our our fastest growing segment has been our subscriptions um and i would say it's roughly it's it's uh maybe 70 percent uh subscriptions and advertising and then 30 licensing oh so even that new business it must i mean it must be growing pretty quickly to already be making up 30 of your total revenue yeah it's been it's been growing pretty nicely that's super i mean this to me is what's fascinating right is if you if you agree today that social capital is the precursor to financial capital you've done when did you launch venomize what year uh and end of 2016. yeah you've spent the last four years building your moat your media mode the attention and now you can effectively launch any financial product pretty darn quickly on a what you could call a better business model a sas based or whatever an api based business model are you seeing that pattern internally do you feel like you have a leg up versus your last e-commerce company built in switzerland where you didn't have a big audience before you launched um so we i i would caveat that a little bit one of the learnings or one of the appreciations that i got for for for having scale is my previous business so we were um we were reaching 25 percent of all households within switzerland um we had a higher brand awareness than british airways what was that business by the way it was called a dine deal which means your deal um and it was one of those things like everybody knew it um and if you weren't shopping with us then you probably didn't like what we're doing and what what i was the reason why i mentioned this is we did a ton of experimentation into different product verticals and we would test so many different categories and if it worked we left it if it didn't work we killed it and the power here was that we had such a large audience that we could do that and so that's i think was one of the i think kernels that then led me in the way i started building finalizes that scale is so crucial because exactly what you said it allows you to start testing some things as we're doing now did you gain financial independence from the dying deal exit so you could take a big risk with finimize or was it sort of a nice exit you could take a couple months off but you had to sort of get back to work building something new yeah so i think you know i was i think 28 at the time and i wouldn't say that i that i would would have never had to had to work again um but uh it was it was a it was a nice it was a nice exit and and i think it gave me freedom to to experiment with with a new product which i'm super grateful for yeah you and there were a lot of there were several of you guys there at the top right i mean there are a lot of founders five yes yeah it's a lot of people to get to agree on one single direction right exactly how many are you the sole founder now a feminist or you have multiple co-founders uh i'm the only founder okay so uh gone the totally other direction yeah that's what i mean that's one of the reasons i asked right you got one way now you go the other no have you bootstrapped or have you raised we raised a little bit of money um from some angels and from some uh vcs but uh really not that much what year was that raised a precede in uh 2016 at the end of 2016 when we started and then raised a little bit more money after that um primarily just to get a bunch of interesting people on board who could help us but uh like i said we've been pretty lean um which is which which has advantages and disadvantages yeah i want to talk more about leanness in their last five minutes here but can you quantify that force and we needed two rounds it sounds like how much did you raise in 2016 uh we did round about like a half a million pounds uh then and then we did um we did something in the single digit uh um million all together um i actually don't have the exact number of the top match so nothing by any means nothing major got it kind of got it yeah so all together some some maybe around a million bucks usd something like that probably a little bit more okay uh yeah in that ballpark okay fair enough so so you use that capital bring on uh you know great great new talent run some new tests um talking about running lean right i mean how have you resisted the urge to go raise more capital to accelerate growth how do you be able to stay patient yeah so i think um it's it's a good question uh uh so i think fundamentally one of the things that i think is really important is uh that that you're able to build the business and it feels like you're your business and i think what's sometimes a bit challenging is uh if you end up with you know like seven percent of the the business that you started um then and everybody else has the full control and you ultimately have become an employee uh you're no longer the actual founder and so i think that was uh i think something that i valued is just having that independence and being able to steer the company and i think you know the thing that we're building is is not something that a has been done before and b um is super easy to understand for everybody uh you know especially community players are so complicated to really appreciate um that i that i wanted to make sure we have the right breathing room to actually build this properly that all makes interesting sense to me um and and so with these three business models moving forward um you said 70 is coming from ads plus the consumer subscriptions 30 from a new api business right like i said roughly off the top of my head though yeah yeah yeah on the consumer side there's a lot of newsletter companies right now with very effective sort of ways to introduce a paywall right we see sub stack doing very well we see people you know setting up their own click funnels things how do you introduce the paywall and can give us a general sense of maybe how many new subscribers you're adding per month right now yes i think for us uh um we i think we see two things we're a little bit different to what you what you described with the example of substance so um we actually we've never done paid marketing up until this year and the only reason why we started doing paid marketing is because we have our consumer subscription product and that allows us from a cash flow point of view coming back to this leanness that allows us to acquire customers and basically we get the money back through the subscription that they pay us and so we're using also the subscription to really build a new user base uh in addition to the transfer that's happening from the newsletter into the subscription so i think it's not like our user flows not sign up for a newsletter and then we try to upsell you although we do say there's there's more stuff here that you're missing um i think there's a there's sort of an overlap and some people um prefer to be on the newsletter and we monetize those through the advertising and some people prefer to be on subscription and we monetize them through subscription and no advertising and then there's an overlap um but we we our aim is not to say everybody from the newsletter needs to be on the subscription we want to grow it both ways yep no it makes a lot of sense when did you officially launch that subscription product in july of last year okay so call it to call it 2019 and do you remember by the end of 2018 how many folks you'd signed up to that um i do not remember the exact number but i can tell you that in the u.s we are usually in the top 15 top 20 highest grossing finance apps and in the uk typically in the top three i know nothing about app annie data and app store data what does it mean what is the top gross saying i don't even know what the top grossing finance app is in the us like how much do you have to make to to make the top 10 would you say they don't say that information unfortunately they don't tell you that they just give you sort of your relative ranks typically the way these rankings work is you either measure it by download so we're typically in the top 100 or top 50 depending on the country downloaded finance apps and then they look at okay so how much revenue do these apps make through the app store um and so a lot of these apps um are very established players like uh intuit has has some apps that with quickbooks that make a a very very high grossing products um in the ranks um but unfortunately app annie and sensor tower and those guys don't actually tell you the revenue numbers yeah yeah interesting before we wrap up so can i mean can you uh you don't know the exact number but are we talking like a thousand people on the consumer subscription or like tens of thousands on the consumer subscription product uh so we don't we're not super keen on always uh sharing these numbers but it's definitely in the latter camp oh wow okay so i'm going to give you a big range here for you to confirm is it fair to say somewhere between 10 thousand and a hundred thousand subscribers there yes okay there i won't push you harder see i'm being nice we won't push any harder than that but that's good i mean that's i pushed you there because i want people to appreciate what you've done right i mean that's not easy yeah it is not easy i mean how many engines yeah you have to build the whole app right i mean how many engineers do you have on the team we have four four full-time engineers with us yeah i mean it's a custom-built app right tiny yeah it's custom built i mean pretty much everything we do is custom even the audio the themes are our head of audio custom made we compose the musical themes everything we do is pretty much custom wow that's incredible okay anything else i i you wish i asked about that you feel like it's just like a secret that you've learned that i haven't asked about yeah i think the power of community um and and i'll give you a couple of nuggets um perhaps that are interesting um i think number one uh we have this underlying product he says that people come for the content this day for the community and one of the things that we've noticed is when it comes specifically to our subscription product we see that the churn of our community engaged people is literally half of those who aren't engaged with the community so community for us is a huge retention driver wait what do you mean by that how do you define someone who has paid for the consumer app but is not active how do you define that they haven't downloaded it or so when you when you buy it by a subscription you get access to the premium community and that means meetups that are only available for for premium members but it also means we have these chat groups and you only get access to the chat groups if you're part of the premium membership and as soon as you engage with the chat group for example we see in the data that your retention rate doubles or you're children whereas if you're just a normal person consuming the content you're still paid you're still consuming you're twice as likely to churn um that's a really interesting insight a community contributor versus a community lurker possibly that's like what else you were giving me a list power of community number one come for content stay for community engaged is lower turn then not engaged what else um then obviously um there's this whole you know i think there's two two ways that you can play community one is you can really push word of mouth um the other one is that you can really push customer satisfaction through nps uh we've been more focused on the nps side of things and then the final piece which i think is interesting and one of the things that we've now been really focusing on is the whole concept of ugc right so user-generated content and and so we're finding new ways how we can empower our audience our community to create content and then we can use that content and the insights that we get from the community to share it with the rest of our audience and we're doing that through text but also through our audio product which is super cool interesting so ugc is another thing that's you know you're typically used to on like reddit those kind of platforms but the thing that we're exploring for the first time really is can you create an interesting useful audio ugc product and that's what we're working on really interesting all right mac let's wrap up here with the famous five number one favorite business book i'll give you the most recent one i i read because i love it is the autobiography of michael roberts the founder of c a a big red cover right oh the auto wait power or his autobiography autobiography also has a red cover oh god but you're not talking about the book called power no okay got it this is autobiography i think it's just called like michael obviously i don't know yeah yeah okay number two is there a ceo you're following or studying um i'll give you i'll give you two two sides of the coin i think obviously on the on the uh in the tech world you know huge uh admiration for people on the very top like uh jeff bezos etc um but i also really love to learn about people who are not in the tech world like the person who founded whole foods or the person who founded patagonia and really just to get slightly different and perspectives on how to run a company number three what's your favorite online tool for growing finimize as in x for user acquisition or growing us as an organization for internal purposes user acquisition tick tock number i want to ask so many questions about that we're out of time number four how many hours of sleep to get every night i try to get eight and what and what's your situation married single kids uh i've been in a long-term relationship any kiddos no not yet okay and how old are you i am 33 all right max take us home here what are you wishing when you were 20. go with flow it'll all make sense as you go along guys there you have it finimize three different revenue streams we've got a million folks on their newsletter they focus on being highly and having them be highly engaged via their mps score they've also scaled a consumer subscription product at 80 a year they're also just launched their fastest growing revenue stream their api product which makes up 30 of their total revenue as they look to continue to scale they've done this on a pretty capital efficient way one point you know caught between one and three million dollars raised team size of 34 engineers their own app built really focused now on driving user retention by helping community members contribute content both audio format and text format we'll see where that leads in the meantime max thanks for taking us to the top perfect summary thanks so much one more thing before you go we have a brand new show every thursday at 1 pm central it's called shark tank for sas 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 1 pm central additionally remember these recorded founder interviews go live we release them here on youtube every day at 2 p.m 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 sas world whether it's an acquisition a big 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 sas 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 up for that at lanka dot com forward slash slack in the meantime i'm hanging out with you here on youtube i'll be in the comments for the next 30 minutes feel free to let me know what you thought about this episode if you enjoyed it click the thumbs up we get a lot of 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