How Flowhub CEO Kyle Sherman grew Flowhub to $18M revenue and 500 customers in 2024.

hello everybody my guest today is Kyle Sherman he's the founder and CEO of flow hub and serves on the board of and director directors as chairman a legalization advocate nakamora kyle is finding ways to use technology to help drive cannabis legal legalization for responsibly in the United States Kyle are you ready to take us to the top I'm ready to do it let's go so I have to start with some that's gonna make you cringe you know everyone thinks we're doing like a cannabis interview or something everyone's probably high on the interview I just want to say I know smoking on my end we're good to go we're gonna talk a lot about the industry and what you're doing to legalize hey you know what I'm loaded on caffeine this morning do people always option they just assume you're always like smoking or high no you know it's funny early on CNN Money did a story that talked about us doing that consuming edibles during brainstorming sessions and you know as a team sometimes we do you know will responsibly consume as a group and we'll you know certain departments will sit down and talk and brainstorm of things at five o'clock it's kind of our version of the bar cards but you know during the day we're productive professionals right now I mean if I was stoned I think I'd probably be on a couch I was I think I have two kinds of friends the kinds of friends that like they get tired and they pass out other kind of friends they are most creative with the responsible kind of edible in their system or something like that so let's jump into flow up what do you guys do and how do you make money yeah sure so we created basically a point-of-sale Compliance platform for cannabis dispensaries and we're a SAS platform that means we charge monthly for our services and yeah it's gets pretty much how we make money today we know we're getting the payments to you which is really exciting so when you really look at us holistically we're a point-of-sale service that offers payment solutions for for the citizens what's the customer pay on average per month you know look our ACV years around $8,000 today some go as high as $45,000 it kind of depends on the size of the dispensary but you can break that down we typically do a minimum of a 12-month contract so we look at these contracts in kind of a 12 month view but eight grand a cv is a fair average yeah I would say for our single locations it's probably around 8 8 grand okay today and it grows every and are you you have a partner for the sounds like if there's a point - point of sale system are you building hardware yourself we have a partner for that know so we partnered with HP earlier this year to provide an all-in-one solution so these systems shipped from HP over to our customers with our platform installed on it however you can install flow hub on a Mac a PC you know a tablet any type of hardware Hardware agnostic truly but for those who just want an all-in-one out-of-the-box solution they're opening their dispensary you can get that from HP it works really well it's a very cool system you're socializing that for them you're paying for it for them or they're having to pay extra for that know they're buying that okay and what's that cost all-in-one HP solution always be solution I think it kind of depends on all the hardware options they buy and what state they're in because various states need various you know hardware packages you know some states you could print labels others you don't so I want to say it's anywhere between like two grand and 3500 bucks for an entire set up it's all your printers and everything something along those lines and how many custo will actually put us on a time line for me first so when did you launch company what year January 2015 we founded the company we raised some money and then really started cranking in April okay and so how much have you raised to date about eight million dollars eight million and was this through like traditional VCS or did you have to get creative considering the you know the industry now a great question you know interestingly there's actually some B C's that are specific to the space and so early on our seed round was led by a group called Poseidon out of San Francisco and they're kind of one of the premier early-stage hedge funds I guess I would consider more of a VC actually rather than a hedge fund but there were early-stage gotta first a market in the space and so they've been very supportive after that final partners green lion partners you know folks like that jam10 altitude these are kind of groups that are really focused on the space most both west coast East Coast and then of course filling it with angels mentors of mine folks like that frozen family did you pitch Brad and David Cohen no you didn't beautiful they're big obviously they're in Denver I was curious if they got in with you yeah what group were they Brad Brad Feld and David Cohen Kanako's by the textures funny oh no of course you know actually I talked to Ryan McCann top really or so rhymes Brad's partner but I found at that that foundry early on it found her I think they were really curious in the space but you know they were looking at going well we can't invest as a fund maybe we can do it individually but you know that's kind of the problem with our industry right like you like people are kind of on the fringe can we do it as a fun do we have to do it individually yeah I think they were kind of debating that internally early on got it okay so launch 2015 got crank and you got cranking in April this year April 2015 April 2015 okay yeah okay I'd say and then how many customers have you scaled to over the past three years gosh we're over probably at just under five hundred at this point and all across the it's only us-based are all around the world all us face so we're in ten states to that okay very good now if I take 500 times that a CV you gave me earlier it puts you at about 300 grand per month in revenue is that fairly accurate yeah we're right around 300 K and and what's growth look like so take me back a year what were you doing in August 2017 August 2017 we were at about 1.6 million dollar run rate I want to say so that's added that's about a hundred and twenty grand a month so healthy but more than 3xd over here that's pretty healthy oh it's great I mean the year before that we were doing a hundred eighty K so we're what we're growing quick where is the growth coming from is it literally just adding new dispensaries or is it expanding the revenue from dispensaries you already had both you know so what we did early on is we kind of started at the top down we said hey let's go serve these consolidators the folks who are growing really rapidly maybe they have 6 plus locations no now there are over 20 for example right a lot of these customers of ours and so those guys are kind of our expansion opportunities right but when you look at the industry holistically there's a lot of boutique stores popping up everywhere we can serve that part of the market as well so we've got to worked our way down right we started at the top sort of the big guys built our system so that it can support kind of that scalability and then you know worked our way down to the boutiques you are also probably looking the scale over time but maybe not as aggressively as the bigger folks what do you notice a boutiques and just be clear there they're actually sound what are they actually selling like the tools around the industry or the actual the I mean the actual edible is the actual things you consume these are cannabis infused products flour products you know bait pens these are C infused goods ok and when I say I really mean this is a concern like a microbrew brewery right at some small store maybe owner-operated maybe only a couple terminals right this is a small boutique stores maybe they're a little more pricey than your chain store but you're getting really high quality goods typically you get a lot more personalized service the bigger you go right you have a lot more standards so you know you kind of know what to expect right some of these stores like the Green Dragons the native roots is you're gonna find these guys all over the mountain range down here in the foothills you know expanding nationwide and that retail experience is similar across the board so you know it's akin to a Starbucks experience versus maybe your local coffee shop and talk to me about retention what's net revenue retention annually at today we rotated about 98 percent of our customers here in years so I you know really great retention we have very little churn really excited about that so anything well this is a sticky platform by Nature right because you're running their business so I mean once you're on the system it's why you're gonna switch it's been 98 percent that's 98 percent logo retention annually yes okay if you look at it on on a money basis though on a revenue basis so obviously you churn some revenue but if you expand revenue as well are you above 100 percent that's revenue retention we're right yes we're right around a hundred out of hundred okay that's great that's really great now if people - if people churn why do they churn you know typically it's a small mom-and-pop store that maybe you know dasn't figured out how to optimize their margins and so they close so that's kind of that's a big one another one is you know look a lot of these kind of business owners they don't fully know what they want do it's kind of like maybe they don't understand what software really means then so...