LemonEdge Revenue, Valuation & Funding (2024)

hey folks my guest today is gareth hewitt he's a technology professional with over 20 years of financial services software experience his experience with the current legacy system approaches to data integration customizability modeling complex accounting and others show his and demonstrate his belief that there's a deep rooted need for a powerful modern development platform with integrated accounting in financial services that's why he's building lemonedge.com gareth you ready to take us to the top yep all right so did you were you like a cfo at a company or something how did you really get familiar with this pain point um no i uh it comes from a technical background working in financial services in four different companies of the prior 20 years building out partnership accounting systems so each time you know we started from scratch built it again and kind of iterated that design over the previous 20 years and got to grips with all of the problems in the industries and the complexities as times change and so have a modern solution to that and and so today can you maybe share some of the customers that are paying for your platform is there a specific niche or is it really for anyone so really are my backgrounds within private capital so private equity fund administration venture capital etc um and uh what we did with lemon edge is instead of building a private capital solution from the ground up we started with a low code development platform for financial services and then we used that to build our private capital solution and really that was mainly for any implementation of these types of products clients build lots of proprietary systems around them um and so this platform enabled them to do that but also it was because the story of their being 20 year old legacy systems that do the back office accounting and in private equity isn't just restricted to private equity it's the same in insurance the same as syndicated loans and credit derivatives tax modeling etc so by starting with that local platform that did the gl for back office accounting for complex transactions and you know lots of different legal vehicles um it meant that we could take the platform and move it across financial services and so today what are customers paying on average per month or per year to use lemonade i mean it really depends it's a it's a subscription-based uh product it's not sas but like most of our clients are large currently because we're selling within private capital our large billion dollar um firms so they're um paying a yearly license um it's not um like per month or anything like that but that's fine but i'm just trying to get a sense are we talking like a hundred thousand dollars a year or like a million a year uh we're talking in a hundred thousand dollar plus range okay got it so something like a hundred thousand dollars per year and why would someone what enables you to sell someone a hundred thousand books a year versus five hundred thousand books a million 500 a year is it aum under management or what's the utility-based upsell that's the way it used to be um i think that a lot still kind of stick to that it's not obviously favored by our clients we tend to do a user-based approach but that also ties to complexity so depending on the simplicity of the fund or the complexity number of investors number of entities complex transactions etc kind of kind of have a matrix but it's it's really about tying the software to the value that the company's getting back i guess that's why i'm asking right is the value tied to aum managed number of users number of lps in the fund number of transactions if you had to pick one that was the most meaningful in terms of capturing value which one would you say it was i mean that's that's uh yeah like i say it's a matrix of those things it's not a um but it will be because you could have a big fund that's pretty simple in terms of how it runs you could have a small fund that's got you know a hybrid fund across special credit or debt with lots of investors that's intensely more complicated so it's really that that gauges it more than the size of the fund does understood okay but customers again paying minimum hundred thousand a year maximum maybe five six seven hundred thousand a year depending on the minimum can be lower than that but i would say you know on average it's probably 110 plus okay fair oh what's going on there youtube good to see you guys now imagine this you love watching these interviews with sas founders but imagine if we took all of the valuation data out from over 2807 interviews i've done manually saves you a lot of time well we've done this we've built it into the beautiful interface inside of founder path check this out i'll show you how you can access this in a second but you log in you connect your stripe account you see your valuation real time you can see what it changed over the past 88 days and even set goals for valuation this year now the secret evaluation is there's many different ways to value a sas business so the reason you're gonna see three or four different valuations inside of your frowner path dashboard this is all free by the way is because depending on who's doing the buying of your sas company you're going to get a different valuation a vc is going to pay a different valuation private equity firm is different if you're going to do a minority sale that's different and if you sell the whole business that's a different valuation you can see all those when i hover over here right so the teal is what a vc would pay yellow is what private equity and red is if you sold the whole thing outright now what's cool about this is this is not built off random data again you guys hear these interviews on youtube all these datas are built from real-time valuation data points founders share with us on the show so traction 1.2 million seed round 3.7 raised they sold 22 percent of their business go in here and filter by the event maybe you only want to see companies that have sold the whole business well here are a bunch that have been acquired the valuation and the multiple maybe you're going out right now and you're raising your seed round well go in here and look at all this recent seed deals that went down what they raised what valuation they raised at and what percent that they sold there's never been a larger data set of sas valuations than what you can get now inside of founder path and we're thrilled to bring it to you all right we're gonna go back to the youtube video here in a second but if you want to check this tool out if you want to jump in and sign up you can check it out for free to get your valuation at this link this link founderpath.com forward slash products forward slash evaluations or if you go to founderpath.com and hover over products click on get your valuation here and go ahead and sign up to give it a whirl again all that valuation data live right inside the platform i hope to see you there all right let's jump back into the interview put this on a timeline for me when did you write the first line of code for the platform uh we started in literally as soon as the world locked out and covered so i think that was march 2020 so like i just came back from new york um to london to start the company and literally like three days later everything shut down geez okay so 2020 and have you bootstrapped today or do you decide to raise capital uh we raised capital towards the end of 2020 when we got uh launched the capital of the product um but up until that point so for the first like nine plus months or whatever we were doing ourselves and you know the whole world was locked down so actually working out with our bedrooms wasn't a disadvantage at that point um everyone else was but then yeah we raised capital when we started going to market at the end of 2020. and how much did you raise in 2020 so we raised two just over two and a half million dollars um from a vco in new york with a um two strategic investors alongside one ticon bernstein we did um uh parse.comscribe.com um and the other being um lauren licence who was the founder of beshran like one of the competitors in private capital um and that was live by sidekick the pc fellow at new york so 2.5 in 2020 that's all you raised to date right so being capital efficient uh no we um it's not we we raised that beginning in 2021. um and that was to bring on board the senior leadership team you know sorry gareth just to be clear you raised 2.5 million in 2020 or 2021 beginning in 2021 sorry end of 2020 beginning 21. okay got it and then it sounds like you did another round after that yeah so as we brought on the team um it takes about nine months to make an enterprise sale so when we got towards uh q4 of last year um we started talking to some some firms who were interested in our product blackstone was one of them we did a proof of concept with them they were um incredibly impressed with what we could do and so we saw the ability to extend that seed round to bring them on as a partner you know what we've been looking for is always strategic partnerships not necessarily cash in blackstone is obviously an enormously valuable name and they have a huge amount of experience across asset classes which can help us in the product so we extended that for four million dollars just over four million dollars a total of about close to seven million for the the end of that for the entire year mm-hmm and how did you deal i mean obviously you grew between the end of 20 or 20 21 and when you just let people put in four million more did you just do that as like a rolling safe and you just increase the valuation for the second tranche or how did you structure that uh yes we increased the the valuation but to let blackstone in as like extensions that i see yeah i see i see but all on convertible notes or have you actually priced the business yet priced equity no it's yeah it's all unprepared okay got it got it so i guess would you consider that 4 million in like your seed round effectively yeah exactly yeah yeah okay and then most most are selling sort of in their seed round you know anywhere between sort of 10 and 20 percent of the business were you sort of in that same range about that yeah okay fair so that would have been like you raise it like a 40 million valuation something around there uh well no because we did we did it in like two stages right we had the initial tranche and then the second try flagstone coming in but oh so the full 6.5 million you sold somewhere between 10 and 20 percent total yeah oh i see i see got it got it got it okay very cool and then i guess flesh out more of the team sort of the team for me today how many folks are full-time um well everyone um we have uh i know i don't know how many everyone is what's the team's we had uh we had 15 at the beginning of this year we've doubled that in the last three months to about 30. um 32 i think we've got a couple more coming on so and how many are full-time engineers i think the development team is six right now it could be seven that's very small actually i was expecting you to say way more considering how engineering your pitch is heavier pitches why aren't there more engineers um i think that's because it's been my experience that my background is um developing these types of products um is that i think we focus on hiring like really good developers um we have a test that you know we think is you know really good and pretty much i would say 85 90 people fail um and it's been my experience in the previous companies i've worked with you know the products we've achieved with four or five people and then moved to competitors they'd have 80 people and achieve less like i think most people in the industry you know senior developers and stuff that we hire that we that we look at aren't good developers but there's so many out there people don't understand lower amount higher quality more swat team approach versus army makes sense um how many customers are you now serving today right now there's five uh and um another five that we're on uh in the process of closing and then so is it fair to say five paying that average acv you said earlier about 100 grand you're about a half million run rate today roughly okay can you can you break a million this year you think uh we aim to do more than that mm-hmm and if you're at a half a million right today where were you exactly a year ago do you remember well we only started getting the first set of clients in q4 last year because you had no revenue a year ago yeah essentially yeah yeah yeah okay very cool this is great and do you think most of your growth this year will come from expanding on these first five customers or adding brand new customers all together both um i think you know a lot of the clients that we on board will want to do further work uh and expand what they do particularly because we have a platform but we obviously aim to bring on a uh quite a number of uh new clients too and how are you finding these clients i mean do you have a head of sales that does this or is this really you and your relationships from the hedge fund world um no we have uh my uh i started the company back in 2020 with um my co-founder um jamie he's his background is sales and marketing um so he kind of heads up that but you know a lot of our initial sales are from my background and lauren's background who's um you know the co-founder of investor and and our implementation so garrett sorry just because there's three co-founders no just myself and jamie sorry who's laura lauren is the um one of the investors we brought in at the beginning of 2021 so she's the co-founder of um investor got it okay but you and jason did you just split 50 50 at the beginning uh no um jamie i brought you sorry um so he's uh um i wanted someone who didn't have experience on sale selling and private equity but could target more financial services as a whole got it so you own a little more equity than jamie because you started it yeah i see okay uh very cool um let's wrap up here with the famous five number one uh gareth what's the last book that you read the last book that i read um it was a long time ago it's probably some space epic but i can't remember if i'm totally honest with you as epic we'll put that in number two is there a ceo you're following or studying i don't okay that's none number three what's your favorite online tool for building the business favorite online tool um i would probably say we use teams of huge amount um microsoft teams everything we've done has been virtual we hired everyone virtually gareth what what we don't know what teams means microsoft teams or what yes all right yeah okay got it uh number four how many hours do you sleep to eat every night between four to six five hours that's not healthy it's not healthy most of the times i get sex all right fair enough and what's your situation married single kids uh married uh one kid one kid okay and how old are you forty forty last question something you wish you knew back when you were 20. oh start companies earlier guys like a good entrepreneur lemonade.com again really selling into these big you know funds hedge funds pensions etc helping folks uh understand and do fund management really prices against you know number of users number of lp's number of transactions how how complex is the fund effectively launch back in 2020's raised 6.5 million today sold between 10 and 20 of business looking to scale now 32 people full time six engineers again uh five customers right now about a half million run right looking to more than double that this year we'll see what happens gareth thanks for taking us to the top all right thank you 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 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