Fisiononline Revenue & Valuation (2018)

hello everyone my guest today is mike brown he's the founder and chief enthusiasm officer out and inventor of the patented fission digital asset management platform it's also a sales enablement platform he attributes his experience to serving as a u.s navy submariner and u.s navy diver as the foundation to his success as a corporate executive and entrepreneur mike are you ready to take us to the top i am all right you bet thanks for joining me i appreciate you coming on thanks for your service and so tell us about fission why do you attribute success in the marines to your success here uh at fission well um slap your mouth calling me a marine i'm a navy guy right now oh i made the cardinal sin yeah former uh in a past life i've had about uh 30 some years of business since i was in the service but just the whole dedication to a purpose to a central purpose uh the dedication to something bigger than yourself the leadership attributes i gained all of that when i was in the in the u.s navy very proud of it and i'm i'm very thankful for those that continue to serve let's dive into the company uh what's the company do and how do you make money what's the revenue model well um my my background in business was in the health club business for many many years of product that many people across the country now and actually in canada as well know lifetime fitness and that was a monthly dues annuity business model uh that was very very successful the business that we're in is very simple right we're a cloud-based patented cloud-based technology but what we do for large enterprise companies is we simplify how they distribute their brand materials and we simplify how they enable their front line employees and their sales teams to use that material and in that they pay us a one-time setup and a monthly license fee and it's a you know 82 percent gross margin business so it's a good business there's no there's no uh workout equipment you have to buy to get launched there right no it's interesting you know we in uh in the fitness game you'd have to continue to go out and develop additional uh locations at 25 30 35 million a pop with fission you know we've got about eight million total invested uh to date which is far below our competitors in the industry we've gotten a great deal of traction but we can have unlimited memberships in the cloud from these various different uh global companies that we serve that's right and ignoring the setup fee originally on average with the customer paying you i mean are we talking a grand a month at 10 grand a month 100 grand a month well i have i have two stratums of customers we look at it as kind of the smb market my smb market is probably 3 500 a month okay on average right my enterprise level uh ranges in the 15 to 20 000 uh a month we've got some that are as high as 30 35 000 a month right so it's a fairly big range but all blended we've we have tripled our monthly annuity uh as a on an average client basis in the last year we've doubled the total annuity value just in the last 12 months while still while still driving revenue growth yes yeah because you know if you have one if you have if you have one million dollar month customer it's easy to just fire the rest of them and lose revenue but increase your rpu yeah that would be that would be pretty risky i don't think we have any customer right now that represents uh more than five percent of our total revenue okay and what give me the revenue breakdown in those two cohorts are they 50 50 or is the enterprise make up way more uh enterprise right now is probably managing to be two-thirds of the total revenue we actually discovered you know all small businesses start out and you hope somebody wants to sit down and have a cup of coffee and hear your story right so you typically get focused on small business because they're easier to get into well we have found that the the attraction selling into the small business channel is harder to accomplish than selling into the large corporate global enterprise channel because they don't have a tech muscle to understand digital asset management or they've got a bigger pain point right so it's a it's a multiple uh it's a multiple of problem uh at the global enterprise so if i'm a small business with 50 or 100 employees versus an enterprise that has 20 000 frontline sales reps uh the the dynamic of problem created amongst 20 000 sales reps if their off-brand message is a huge pain point so we have learned through trial and tribulation right that calling on global enterprise is our sweet spot and what have you scaled to today in terms of total customers using the platform um i'd like to keep that you know we're uh dozens we're not hundreds yet but we're dozens uh and we have eclipsed now uh on the annuity run rate of over a million that's great here on the annuity basis so it's kind of a critical point and we should see uh we should see 3x at this year that's really great now where were you can you give me a sense since you shared kind of you just passed a million can give me a sense of growth where were you at about a year ago uh half that are you okay so you had about 100 over your growth yeah we've got 100 january to january in our annuity uh which is awesome and we should see 3x that by the time we end this year so it's really starting to take off for us and we haven't had this cycle on enterprise uh it's it's really something that you have to be mindful of uh enterprise is probably easily in the tech space 15 months on average from the time that you uh you engage until you have a uh a profitable generating client right that's right that's right now and we haven't talked about your extra revenue kicker here which is you you kind of smooth out cash flows a bit with an upfront it sounds like setup fee of some kind right correct it's minimal and and strategically it's designed to stay underneath an organization's capital expenditure um uh guideline right because once it goes above the capex guidelines for a company then it typically needs a higher level sign off we try and stay at the operational level uh with the companies that we serve yep you mentioned you've invested about eight million so far was that all money that you've raised you fundraised or is that from cash flows half of it is mine not a hip national bank both branches right and uh and the other half is from uh friends family small business folks that that know my track record and so forth and we're just now going to be going out and doing a larger race sometime this year oh that's great if just to the next level right how do you think about well let's get more let's put some time stamps on this so we understand more the story when was year one uh we've been at this now six years six years okay so 2011 was launched and and we kind of puddled around with it a little bit i i was retired at the time i had i had cashed out my chips from the lifetime fitness casino yeah that public and i left that company about four years after we went public so it took us a couple years to develop the first product the market wasn't quite ready for it yet we've only seen in the last 24 months where digital asset management and localized digital asset management has really become the norm prior to that everybody was focused on getting their crm in place salesforce or getting their marketo or eloqua lead generation machine uh in line and now they're all scrambling to say hey how do we control our digital material and that's that's when we really started to see the lift yep and obviously the sas company churn is critical you have an upfront fee which probably helps create a little bit more stickiness you know because you know they're serious customers signing up what is your churn today and how do you look at that number um the industry will say will suggest 15 annual attrition logo or revenue churn uh a total contract site so they'll they'll not renew or they'll cancel we haven't seen that yet we're probably less than we're probably about a third of that so we've been really really blessed uh and i and i attribute that to the exceptional service that we provide post uh integration and setup of our tech right tech is one thing and it solves a problem but people still do business with people i don't care what industry i don't care what business you're in you're talking to another person and you're helping them solve a business problem a pain point and so you have to be focused and keep it real you also fit i mean people watching the youtube version of this if i had digital assets i wanted managed you fit the profile i mean just talking to you like with the background and the navy how articulate and you talk very precisely i'm like if i want to trust someone with all my digital assets you fit the model perfectly so it makes perfect sense and i'm irish and you're irish i mean how can you go wrong that's funny all right very good and um talk to me more about the economics here what are you willing to spend to acquire these customers and how quickly do you like to get your money back you know it's uh we're really not at that level of specificity yet i mean we've got a ballpark on it you know it probably costs us several thousand dollars to acquire to acquire the the client sure our setup we typically make uh on the setup barely enough to break even on the actual setup itself very labor intensive in the front end but long term this is an 82 gross margin business model so think about that for a second that's amazing so at the ebitda level which is earnings before you know interest taxes depreciation you know what not right it's 45 to 50 percent that's one of the healthiest business models out there that's why the sas space is growing so fast in our particular area it's expected to be 22 billion uh within the next 12 to 24 months growing in about 16 per year so it's it's exploding right now so just to be clear you're it sounds like you're making back your money with the setup fee and the first month of the annuity payment i mean you're making your money back in less than less than a month yep yeah we should we should get it back within about 90 days typically okay got it okay right and then talking so interesting question here you mentioned that you're potentially going to raise this year but you also just mentioned i mean you're taking 45 to the bottom line um why not fund growth just with cash flow because uh your costs we're not profitable yet and if you look in the industry many of your tech companies your sas companies they're not profitable from multiple years into their endeavor got it you're not at 45 ebitda yeah manage your you have to manage your balance sheet with additional capital raise right so we've got 8 million into this half of it is as we said was mine um but you know we still have a we still have a burn rate that's negative until we get above critical mass so um and that's very typical if you look at no mike that's why i asked that's why i asked the question i missed i must have misheard you though i thought you said you took 45 to the bottom line the model the model itself is about a 45 to 50 percent eva to model once you've established good god got it you're still burning trying to get to critical mass yeah and that's very and if you look at the if you look at the market it's very technical it is probably less than 30 percent of your sas companies out there are actually showing a profit it's very typical on purpose right yeah what's your team site today uh we've got 15 plus an augmented team so we're probably close to 20 head count right now and where's home home is well my home home where i'm talking to you today is apple valley minnesota if you can believe it is that where the team is no we're in downtown minneapolis so if you're familiar with the twins baseball stadium or the timberwolves basketball stadium we literally are shoehorned right between the two states we're at ground zero in the famous warehouse district in minneapolis that's pretty funny all right mike let's wrap up here with the famous five one word answers here number one what's your favorite business book um i'd have to say uh by gino wickman it's a book called traction and it encompasses many of the theory that i've deployed over my 30 plus years of business experience number two is there a ceo you're following or studying right now um a gentleman just down the street there's a there's a company in town called calabrio and the ceo of that company is a guy named tom goodmanson and he is a rock star in the tech space yeah tom goodman tom goodmanson all right number three besides your own what's your favorite online tool for scaling the business um our own product valero which is a team collaboration tool it's really cool valero volero v o l e got it we just acquired that company this year it's added to our tech stack oh interesting why why'd you make that acquisition um they actually uh work on the front end with the client company and their agencies to collaborate on creating the content that ultimately gets loaded into fission and gets distributed to the local level by fission so they were a natural upstream uh play for us to extend our services generally a small acquisition sub a million dollars uh very small and we did it purely on stock you know yeah we're publicly traded on the qb so we used our stock as as uh as uh currency on that what's the qb uh otc markets on the qb board so we're publicly trading right now we just we just started publicly trading this year wait what is it mike i i don't know what that is what is the key what's this stock exchange the the over-the-counter markets for that it's more of the small it's the penny stock small board why did you do that just because the admin cost of being public is so high at your level um you know it offers validity it orders trans offers transparency in our reporting we're a cleaner company it allowed us to as as this example to buy a company with our currency being stock and it'll give us the opportunity for a platform to grow off of our intention is to lift to nasdaq within the next year interesting all right number four how many hours of sleep to get every night i'm lucky to get six and there's more less than that so and what's your situation married single we have kids i'm married i've got two gorgeous daughters in their mid-20s no ideas fellas they're you got to get through mike first all right and how old are you mike well i'm going to be 60 in uh in next month that's great i would have never guessed that's great my second my second half of my life i'm gonna go out and build something new i love it all right last question take us home what do you wish your 20 year old self knew you know um i think the thing that i didn't do as well uh was take the time to appreciate the path and the journey as much whether you want to climb kilimanjaro or if you want to swim out of submarines like i've done in the past jump out of airplanes enjoy the path enjoy every day and the people that you come across because it ends up being the memories that you have when you get to my stage of life right there you guys have it from mike enjoy the process and the adventure with fijian digital asset management had a big success with lifetime before that served obviously the country before that as well credits a lot of the success he's having in business to that service but the company is doing very well they put about eight million in the company four million of his own launched in twenty thir 2011 team of 15 uh 20 maybe based up there in manila minneapolis serving currently the low dozens in terms of customers they're doing about 88 grand per month right now or a million dollar run rate that's up 100 year-over-year so about 44 grand a month in december 2016 or about half a million in ar then super healthy churn less than five percent annually cac about three grand payback you know 90 days so who super healthy economics looking to raise capital maybe this year mike thank you for taking us to the top hey and remember this weekend go vikes go there you have it thanks mike all right have a good day