LemonEdge Revenue, Valuation & Funding (2024)

[00:00] Hey, folks. My guest today is Gareth Hewitt. He's a technology professional with over twenty 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? [00:25] >> Yep. [00:26] Alright. So did you were you like a CFO at a company or something? How did you really get familiar with this pain point? [00:33] >> No. It comes from a technical background, working in financial services in four different companies over the prior twenty years building out partnership accounting systems. Each time we started from scratch, built it again and iterated that design over the previous twenty years and got to grips with all of the problems in the industries and the complexities as times change. And so I have a modern solution to that. [01:05] 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? [01:12] >> So, really my background is within private capital, so private equity, fund administration, venture capital, etcetera. And what we did with LemonEdge is instead of building a private capital solution from the ground up, 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. And so this platform [01:48] >> enabled them to do that, but also it was because the story of there being twenty year old legacy systems that do the back office accounting in private equity isn't just restricted to private equity. It's the same in insurance, it's same in syndicated loans and credit derivatives, tax modelling, etcetera. So by starting with that local platform that did the GL for back office accounting for complex transactions and lots of different legal vehicles, [02:17] >> it meant that we could take the platform and move it across financial services. [02:22] And so today, what are customers paying on average per month or per year to use LemonEdge? [02:28] >> I mean, it really depends. It's subscription based product. It's not SaaS. Most of our clients are large currently because we're selling within private capital, are large billion dollar firms, so they're paying a yearly license. It's not like per month or anything like that. That's fine. [02:49] I'm just trying to get a sense. Are we talking like a 100,000 a year or like a million a year? [02:53] >> We're talking in the $100,000 plus range. [02:56] Okay, got it. So something like $100,000 per year. And why would someone what enables you to sell someone $100,000 a year versus $500,000 or a million a year? Is it assets under management or what's the utility based upsell? [03:07] >> That's the way it used to be. I think 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, etcetera, kind of have a matrix, but it's really about tying the software to the value that the company is getting back. [03:35] I guess that's why I'm asking it, 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? [03:49] >> I mean, that's, yeah, like I say, it's a matrix of those things. It's not AUM, 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 a hybrid fund across special credit or debt with lots of investors that's intensely more complicated. So it's really that gauges it more than the size of the fund does. [04:14] Understood. Okay. But customers again paying minimum 100,000 a year, maximum maybe $500, 600, 700,000 a year depending [04:19] >> on Minimum can be lower than that, but I would say, on average, it's probably 100 ks plus. [04:24] Okay, fair. Oh, what's going on there, YouTube? Good to see you guys. Now imagine this, you love watching these interviews with SaaS founders. But imagine if we took all of the valuation data out from over 2,807 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 Founderpath. Check this out. I'll show you how you can access this in a second. But you log in, [04:49] you connect your Stripe account, you see your valuation real time, you can see what changed over the past eighty eight days and even set goals for valuation this year. Now the secret evaluation is there's many different ways to value a SaaS business. So the reason you're gonna see three or four different valuations inside of your Founderpath dashboard, this is all free by the way, is because depending on who's doing the buying of your SaaS company, you're [05:13] gonna get a different valuation. A VC is gonna pay a different valuation. Private equity firm is different. If you're gonna 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 [05:35] 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 founder share with us on the show. So traction, 1,200,000 seed round, 3.7 raise. They sold 22% of their business. Go in here and filter by the event. Maybe you only wanna see companies that have sold the whole business. Well, here are a bunch that have been acquired the valuation and the multiple. Maybe [06:01] you're going out right now and you're raising your seed round. We'll 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 dataset of SaaS valuations than what you can get now inside of Founderpath. And we're thrilled to bring it to you. Alright. We're gonna go back to the YouTube video here in a second, but [06:23] if you wanna check this tool out, if you wanna jump in and sign up, you can check it out for free to get your valuation at this link. This link, founderpath.com/products/valuations. 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. Alright. Let's jump back into [06:49] the interview. Put this on a timeline for me. When did you write the first line of code for the platform? [06:55] >> We started in literally as soon as the world locked out in COVID. So I think that was March 2020. So I just came back from New York to London to start the company and literally like three days later that everything shut down. [07:11] Jeez. Okay. So 2020 and have you bootstrapped today or did you decide to raise capital? [07:16] >> We raised capital towards the end of twenty twenty when we launched the product, but up until that point, so for the first nine plus months or whatever, we were doing it ourselves and the whole world was locked down, so actually working out of our bedrooms wasn't a disadvantage at that point. [07:36] >> Everyone else was. But then, yeah, we raised capital when we started going to market at the end of twenty twenty. [07:41] And how much did you raise in 2020? [07:43] >> So, we raised just over $2,500,000 from a VC out in New York with two strategic investors alongside, one Ticon Burnson, who did parts.com and scribe.com, the other being Lauren Leipzovich, was the founder of Investran, like one of the competitors in private capital. And that was led by Sidekick, the VC out of New York. [08:14] So 2.5 in 2020, that's all you raised to date, right? So being capital efficient? [08:18] >> No, we [08:21] >> raised that beginning in 2021. And that was to bring on board the senior leadership team, you know, build [08:28] up Sorry, Gareth, just to be clear, you raised 2,500,000 in 2020 or 2021? [08:32] >> Beginning of twenty twenty one, sorry, end of twenty twenty. Beginning of twenty twenty one. [08:37] Okay, got it. And then it sounds like you did another round after that? [08:40] >> Yeah, so as we brought on the team, it takes about nine months to make an enterprise sale. So when we got towards Q4 of last year, we started talking to some firms who were interested in our product. Blackstone was one of them. We did a proof of concept with them. They were 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. What [09:04] >> we've been looking for is always strategic partnerships, not necessarily cash and 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 extended that for $4,000,000 just over $4,000,000 a total of about close to 7,000,000 for the end of that, for the entire year. [09:27] And how did you deal? I mean, obviously you grew between the end of twenty twenty one and when you just let people put in 4,000,000 more. Did you just do that as like a rolling safe and you just increased the valuation for the second tranche, or how did you structure that? [09:43] >> Yes. We increased the valuation, had to let Blackstone in as like I see. Extension that I see. Yeah. [09:51] I see. I see. But all on convertible notes, or have you actually priced the business yet? Price equity? [09:56] >> No. It's yeah. It's all on preferred shares. [09:59] Oh, okay. Got it. Got it. So I guess, would you consider that 4,000,000 in like your seed round effectively? [10:04] >> Yeah. Exactly. Yeah. That's [10:05] Okay. And then most most are selling sort of in their seed round, you know, anywhere between 10 to 20% of the business. Were you sort of in that same range? [10:13] >> About that, yeah. [10:14] Okay, fair. So that would mean you raised it like a 40,000,000 valuation, something around there? [10:21] >> Well, no, because we did it in two stages, right? We had the initial tranche and then the second tranche of Blackstone coming in. [10:27] Oh, so the full 6,500,000, you sold somewhere between 10 to 20%? [10:32] >> Total, yeah. [10:33] Oh, I see. I see. Got it. Got it. Got it. Okay. Very cool. And then I guess flush out more of the team, sort of the team for me today. How many folks are full time? [10:42] >> Well, everyone. We have [10:45] I know. I don't know how many everyone is. What's the team size? [10:47] >> We 15 at the beginning of this year. We doubled that in the last three months to about thirty, thirty two. I think we've got a couple more coming on. [10:56] And how many are full time engineers? [10:59] >> I think the development team is six. By now, it could be seven. [11:02] That's very small, actually. I was expecting you to say way more considering how heavy your pitch is. Why aren't there more engineers? [11:10] >> I think that's because it's been my experience and my background is developing these types of products, is that I think [11:24] >> we focus on hiring really good developers. We have a test that we think is really good and pretty much I would say eighty five percent, ninety percent of people fail. And it's been my experience in the previous companies I've worked with, the products we've achieved with four or five people and then move to competitors so they'd have 80 people and achieve less. I think most people in the industry, [11:53] >> senior developers and stuff that we hire, that we look at, aren't good developers, but there's so many out there people don't know Understood. [12:01] You lower amount, higher quality, more SWAT team approach versus army makes sense. How many customers are you now serving today? [12:08] >> Right now, there's five. [12:10] Five? Okay. [12:11] >> And another five that we're on in the process of of closing. [12:16] And then so is it fair to say five paying at that average ACV? You said earlier about a $100,000, you're about a 500,000 run rate today? [12:23] >> Roughly. [12:24] Okay. Can you can you break a million this year, you think? [12:28] >> We aim to do more than that. Mhmm. [12:30] And if you're at a 500,000 run rate today, where were you exactly a year ago? Do you remember? [12:35] >> Well, we only started getting the first set of clients in q four last year. [12:39] So you had no revenue a year ago? [12:41] >> Yeah. Essentially. Yeah. [12:42] 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 altogether? [12:51] >> Both. I think, you know, a lot of the clients that we onboard will want to do further work and expand what they do, particularly because we have a platform. But we obviously aim to bring on quite a number of new clients too. [13:07] 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? [13:15] >> No, have a I started the company back in 2020 with my co founder Jamie. His background is sales and marketing, so he heads off that, but a lot of our initial sales are from my background and Lauren's background, who's the co founder of Investran and our implementation. [13:41] So, Gareth, sorry, just to be clear, there's three co founders? [13:44] >> No, just myself and Jamie, sorry. [13:46] Who's Lauren? [13:47] >> Lauren is one of the investors we brought in at the beginning of '20 So '20 she's the co founder of Investran. [13:58] Got it. Okay. But you and Jamie, did you guys just split fiftyfifty at the beginning? [14:03] >> No, Jamie. Brought Oh, Jamie, sorry. So he's a I wanted someone who didn't have experience on [14:15] >> sale selling and private equity, but could target more financial services as a whole. [14:20] Got it. So you own a little more equity than Jamie because you started it. Yeah. I see. Okay. Very cool. Let's wrap up here with the famous five. Number one, Gareth, what's the last book that you read? [14:32] >> The last book that I read? It was a long time ago. It's probably some space epic, but I can't remember if I'm totally honest. [14:42] >> Space epic. We'll put that in. [14:43] Number two, is there a CEO you're following or studying? [14:47] >> I don't. [14:49] Okay. That's a none. Number three, what's your favorite online tool for building the business? [14:55] >> Favorite online tool? [15:00] >> I would probably say we use Teams a huge amount. [15:05] Microsoft Teams? Because [15:07] >> everything we've done has been virtual. We hired everyone virtually. [15:10] Gareth, we don't know what Teams means. Microsoft Teams or what? [15:14] >> Yes. Sorry. Yeah. [15:15] Okay. Got it. Number four. How many hours of sleep do get every night? [15:19] >> Between four to six. [15:23] Five hour. That's not healthy. [15:25] That's not healthy. [15:26] >> Most of the times I get six. [15:29] Alright. Fair enough. And what's your situation? Married, single, kids? [15:33] >> Married. One kid. [15:34] One kid. Okay. And how old are you? [15:37] >> 40. [15:37] >> 40. [15:38] Last question. Something you wish you knew back when you were 20. [15:42] >> Oh, start companies earlier. [15:45] Guys, like a good entrepreneur, lemonedge.com. Again, really selling into these big, you know, funds, hedge funds, pension funds, etcetera, helping folks understand and do fund management. It really prices against, you know, number of users, number of LPs, number of transactions. How complex is the fund effectively? Launched back in 2020 has raised 6,500,000. Today it's sold between 10 to 20% of the business. Looking to scale, now 32 people full time, six engineers. Again, five customers right now, about a [16:10] 500,000 run rate, looking to more than double that this year. We'll see what happens. Gareth, thanks for taking us to the top. [16:15] >> Alright. Thank you. [16:18] One more thing before you go. We have a brand new show every Thursday at 1PM Central. It's called Shark Tank for SaaS. 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 alive. It is fun to watch every Thursday one [16:43] p. M. Central. Additionally, remember these recorded founder interviews go live. We release them here on YouTube every day at two 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 SaaS world, whether it's [17:04] 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 SaaS 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 [17:26] people are saying. Sign up for that at nathanlatka.com/slack. In the meantime, I'm hanging out with you here on YouTube. I'll be in the comments for the next thirty minutes. Feel free to let me know what you thought about this episode and if you enjoyed it, click the thumbs up. We get a lot of haters that are mad at how aggressive I am on these shows, but I do it so that we can all learn. We have [17:45] to counter those people. We got to push them away. Click the thumbs up below to counter them and know that I appreciate your guys'support. All right. I'll be in the comments. See you.