FreeD Group Revenue (2023)

[00:00] Guys, joinharmonycvm.com. They help smart cities connect with local farmers to fill grocery stores with produce, for example. They make money on both sides of the equation. Last year, they did $35,000,000 in revenue of which 15,000,000 was recurring and 20,000,000 was their take rate off their GMV, which they did 20,000,000 in GMV in the last quarter. They hope to break a $100,000,000 in revenue this year on the back of a major acquisition they just completed. That 100,000,000 [00:23] will be split fifty fifty between true recurring ARR and then sort of recurring GMV take rate on top of the business. Hoping to IPO in 2024. We'll see what happens. Totally bootstrapped, which we love. Hey, folks. My guest today is Abel Zhao. He's a dynamic and driven business leader with over a year and years of experience in the technology, travel, and hospitality industry. Today, he's the CEO and cofounder of FreeD Group, a cutting edge travel and lifestyle [00:45] SaaS company. He's played a pivotal role in empowering global enterprises and government units to drive incremental revenue and achieve success for customer experience. Abel, you ready to take us to the top? [00:55] >> Yes. So go ahead. Thanks, Nathan. [00:57] Alright. So the company website is freedgrouptech.com, but the actual product is joinharmonycvm.com. That's the product. Tell us what you're selling and who's buying it. [01:08] >> Sure. So basically, are a typical SaaS company, but actually we're using a little bit different approach in comparison to a typical SaaS company actually available on the market. So first of all, one thing we created quite different from others is the multi merchant, multi channel, multi platform capability to help the sellers to create this kind of [01:31] >> it's combining actually with the CRM, with the Harmonycvm. [01:35] Abel, which sellers though? My audience doesn't know what sellers you're talking about. [01:39] >> Which sellers, you mean? [01:42] Just said to help sellers and people we don't know what sellers you're talking about. [01:44] >> Not too much. The sellers basically are actually quite wide range. It can be actually from product owners, distributors, content owners, then actually those actually the one that providing the actual product covers from travel to lifestyle to consumer goods. So basically anything that consumers can purchase, those are basically those related sellers. And then on the other hand, we also work with large corporations like telcos, governments, and airlines and airports, anything that actually the cons they can actually [02:15] >> reach to their large customer base. [02:19] So you're a marketplace with sellers who are the product owners, distributors, you know, and travel life cycle and kind of customer goods consumer goods. And then you have the buyers like telcos and governments that are buying things like travel or other things. [02:32] >> Exactly. Exactly. We're the one actually in the middle providing the solutions, providing the AI the AI solutions and data capabilities and so on to to link two groups together. [02:41] And how do you make money? Are you taking a cut of a GMV or is there a SaaS fee on one of the sides? [02:46] >> Oh, I have both, actually. So from the those big player side, we basically charge a SaaS fee. And then from distributor side, the product owner side, basically, we we earn the commission. [02:56] Okay. What's the commission typically? Like, 1%, 5%, 10%? [03:00] >> Well, that actually really depends on the market and also depends on the products. I mean, typically, for example, if we because actually we work with a wide range of suppliers from all the other merchants from different markets. For example, if it's in China, the take rate is actually quite sad. We're talking about below 2%. But if you're going somewhere like Middle East or Europe, then actually can range from between 10 to 15 10 to 20%. [03:24] Interesting. But when you look at total GMV for your platform over the past thirty days, then you look at the total revenue you got to keep, what is the effective weighted average rate you're keeping, the take rate? [03:33] >> I would say around 10 to 10%. [03:35] Okay. Around 10%. Got it. Very cool. And then going back real quick to the to the SaaS fee, which these buyers pay you, the telcos, the governments, help me understand how do you charge them? [03:47] >> So first of all, in this kind of situation, so we would again, we separate those into two groups. I mean, the smaller merchants, the people who actually try to to sell their product to different channels. Normally, charge them actually a very small fee. So to help them to grow, to help them to actually reach out to more audience and more customer [04:04] What's small though? $10 a month? $100 a month? [04:07] >> We're talking about it could be between $100 to $1,000 that kind of range. And then there's a big guys out there. So the governments or telcos or airports and stuff like that, that could actually go from $100,000 to all the way to $7,000,000 per project. That's basically the largest one we have, which is a smart city project now in Korea. [04:28] 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, you connect [04:51] your Stripe account, you see your valuation real time. You can see what it 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 gonna [05:16] 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 is [05:38] 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 you're [06:03] 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. All right, we're gonna go back to the YouTube video here in a second, but [06:25] 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 [06:51] the interview. Okay. So the the biggest customer you have today is paying you $7,000,000 per year. [06:57] >> That's correct. That is correct. [06:58] Okay. And it's it's a smart city project. So what kinds of things are they using your marketplace to access for the smart city from the distributors and merchants? [07:07] >> Sure. So give you an example. So before COVID, so let's say it's a small farmer outside Seoul, they can actually just drive their vegetables and drive their products to the city and sell it to different supermarkets or restaurants. Because of COVID, so that's actually been restricted. So the government actually tried to do all kinds of things to help the small merchants, SMEs to actually to survive, to create more different distribution channels for them, to reach out [07:33] >> to their clients directly. So therefore we are the one actually building the entire system from end to end to help those SMEs to distribute their products to different channels and help them to manage those as well. [07:43] And so on the SaaS fee, I heard you say that merchants, the farmer might pay a 100 to $1,000 a month, but then then the big guys, the airports or the people doing the smart city could pay up to 7,000,000. Is it very obvious the majority of your revenue is coming from the smart cities versus the small farmers or what's the revenue split on the SaaS fee side? [08:00] >> From the SaaS fee side, the one time solution to you right now, if you look at 2022 number, those actually so to large corporations, it takes about 65%. And then the the smaller merchants takes about 30%. [08:13] Okay. Got it. So if your 2022 total SaaS revenues, 65% were the big guys and 35% were the small guys. [08:20] >> That is correct. [08:21] Okay. Interesting. And you mentioned one time fee. Obviously, a one time fee is not a SaaS fee. So are these people paying recurring monthly revenues? [08:28] >> They do. Yes. Actually, because actually the bot the the guys who are paying the one time fee normally, so for our SaaS models, for example, 80% of those actually are SaaS components. That means ready to use, ready to launch to the market, but because actually they're bigger guys, they more or less have, they have around between 10 to 20% customization involved. So therefore allow us to charge them a little bit higher, like a one time implementation [08:49] >> fee or R and D fee. So therefore, we that's what the the the whole variance come from. [08:55] Yeah. But if someone pays you a one time R and D fee of a million bucks, that's a one time fee. It's not recurring revenue. So I mean, how do you what what is your true recurring revenue look like in terms of [09:04] >> Even they pay one even they pay $1,000,000 fee, they still pay us the recurring. So because actually we are the one bringing them the merchant, maintaining the the the the maintenance of the website, and doing all kinds of things behind on the regular basis. So therefore, we still we still charge them on a maintenance fee. [09:18] So the 7,000,000 of the smart city, was that a one time 7,000,000 r and [09:21] >> One time only. One time only. [09:22] Okay. So what I'm asking about is the SaaS fee. Right? So on a on a recurring basis, what are these folks paying you on average per year or per month? [09:30] >> Okay. So if it's on again, SMEs, they actually range from, like, a $100 to $1,000, and the big guys actually could be from 5,000 to $10,000. [09:39] Okay. Got it. Got it. Got it. And it's still 65-35 split? [09:42] >> That is right. That is correct. [09:43] Okay. So generally speaking, all of your customers on the SaaS fee side are paying somewhere between a $100 a month or $10,000 per month depending on where they are. [09:51] >> Correct. Correct. [09:52] >> What kind of project they involve? [09:53] Yeah. [09:54] Yep. Yep. Very good. Okay. That's very helpful. Let's now get your backstory here. When did you launch the company? What year? [09:59] >> We launched the company in 2016. [10:02] 2016. Okay. And do you remember how you got your first customer? [10:06] >> Oh, yeah. Okay. I I will never forget that one. So actually for the first three years, we're doing b two c. So it's travel related Hong Kong, Taiwan kind of only operating our own platforms, but actually pretty much tech driven. So AI driven, that's actually what we try to achieve. And then 2019, we realized that actually what we're trying to do on the B2C side, it's quite of, especially in this part of the market, Greater China [10:26] >> area, it's suicidal. So basically, we cannot compete with the big guys. So therefore, we switched the business focus from b to c to b to b, so or b to b to c. So that's 2019. Our very first customer was China Mobile and then Samsung. So we're very lucky that we got those guys on board, but actually it took a lot of efforts. I always always remember the story. [10:44] This is a very similar trend for most marketplaces that are b two b today. A lot of them start as b two c to build out the marketplace, and then they layer on a b two b model, which is what you did three years after your launch. [10:54] >> Exactly. [10:55] Okay. Now fast forward to today, how many customers do you have paying the SaaS fee? [11:00] >> Right now, globally, we have about 80 seventy, eighty. [11:06] Okay. 70 or 80. And then the other part of your business obviously is the GMV. Right? The dollars flowing to the marketplace. So the last thirty days, how much GMV went through your platform? [11:16] >> So last thirty days okay. I I do it for last quarter, it's around between it's around $20,000,000. [11:22] 20,000,000. Wow. So last year, what you put about 80, a 100,000,000 through the platform [11:27] >> Around in '20 that. Yes. [11:29] Okay. Interesting. And you kept on average 10%. So that's 8,000,000 of revenue for you last year just on that model. Wow. Okay. That's pretty impressive. I mean, I guess you're doing a lot of revenue there. Why worry about a SaaS fee at all? [11:41] >> Well, because actually when you're creating a SaaS fee that actually creates from the customer perspective, you don't charge them anything. Actually that lowered the stickiness and then also lowered the loyalty we find. And then so when you charge them anything, it becomes actually, treat the platform more, know, available or actually take it more seriously because they put more efforts into it. Because actually when we actually generate that revenue, the GMV, the take rates, the revenue, the [12:06] >> profit that we get from that, we actually do a profit sharing with our partners. So therefore they actually ended up actually probably making more money by using our platforms. But if you don't charge that, actually the engagement from the customer side, it could be could be lowered. [12:19] So of the 8,000,000 that take rate last year, which is your pro you know, what you keep, how much of that did you have to pay out in profit share? [12:25] >> That's already paid out. [12:26] That's not Got it. So 8,000,000 is your take net net? [12:29] >> Correct. Correct. [12:30] I see. Okay. Very cool. And then I guess we can look at the 70 to 80 customers paying a thousand to 10,000 a month. I mean, that is doing what? I mean, that's doing a 100, $150,000 a month right there. Right? [12:40] >> Correct. [12:41] Okay. And again, the GMV, if you're doing 8,000,000 take rate for you, that's I think, what, $600, $650,000 bucks a month there. So, I mean, you're you're you're getting very close to doing a million bucks a month in revenue. [12:52] >> Yes, sir. Exactly. That's exactly our how we're doing our YouTube SaaS. [12:55] That's exciting. And so if you're doing sort of $650,000 a month from your GMV business and a $150,000 a month today from your SaaS business, That's $800,000 a month today. What were you doing exactly a year ago so we can calculate growth rate? [13:08] >> Oh, wow. That's actually a very good question. So if you look at so exactly a year ago, actually, that's a general maybe I know I gave you the number from 2021 then. So first of all, actually or or actually a year before that, so 2021, we first started to switch the business model from B2C to B2B2C. So we only did around less than $2,000,000 in revenue in 2020 because actually that's when COVID first happened. We switched [13:31] >> from travel focused to non travel focused. So that's actually quite a bit of a struggle there. It took us about two to three months to start trying things again. And then so that's another 2,000,000. So 2021, we did about 14,000,000 revenue. And then this year so so we closed 2022 with 35,000,000. [13:46] Oh, wow. Congratulations. And what do you think you'll do this year? [13:49] >> We are targeting 100,000,000. [13:51] Okay. And I guess how did you do 35,000,000 last year? Is that take is that that's just your take rate. Right? Or is that GMV through the platform? [13:58] >> So that's actually the one time fee plus rate of the subscription recurring plus the yeah. Everything together. [14:04] I see. So of the 35,000,000 last year, how much of like, take subtract out the one time fees? [14:09] >> So subtract the one time fee, we are looking at so that's eight plus seven around 15. [14:17] 15. Okay. So so so 15,000,000 of ARR last year plus 20,000,000 of one time fees. [14:24] >> Correct. Correct. [14:25] I love this model because your one time fees basically help you arbitrage CAC. Right? You get your you get your money back immediately, basically. [14:32] >> Well, actually, to to to be honest, sometimes that we're thinking, well, why is the recurring fee so important? Because actually, if the customers for we will basically look at the contract value. If the contract value is about million dollars, if the customer waiting to pay us in advance, we have no problem collecting it. But in the market, of course, from the investor perspective, they want to look at the long term. So if we collect 1,000,000 in [14:51] >> the beginning or throughout three years for us, there's not much a difference because we have the recurring, the agenda going on. So we have the recurring revenue coming in anyway. So but because of the the the investors prefer that way, so that's why we sometimes actually change change the business model or commercial agree agreement a little bit. [15:08] Yeah. So you're you did 15,000,000 of recurring revenue last year. You think you'll double that to, like, 30,000,000 of this in this year and then 70,000,000 will be one time fees? [15:17] >> Oh, no. Actually, definitely have more. Actually, we start focusing more on recurring because actually there's several strategic movement that we company did end of last year and this year. So one of those actually, we acquired two companies, one that's based in Hong Kong, which is the largest TMC company for the greater in the market. So they already have the recurring revenue we're looking at. I think their 2019 number, this is a travel company. So Yep. GMC. [15:43] >> So back in 2019, their peak, they were looking at 2,000,000,000 Hong Kong dollar. That's around 300,000,000 revenue alone. [15:50] That's That's g m v GMV they process, ticket sales. [15:53] >> That is right. That's right. That's right. And then they take around 10 to 15% of that. So So that's actually their recurring revenue. They only care about those kinds of transaction, recurring revenue signs. So I think for us, that's actually contributes big part to that part already. Plus they work with like over a thousand big guys in the market. So we're trying to convert them into from a transaction based TMC company into a travel tech company. [16:12] >> So that's actually one of the strategic movement that we did. And then there's another company in Korea actually the same thing. So we're hoping that actually with all those strategic alignments put into place will help us to achieve the 100,000,000 revenue this year. And the amount that at least we're looking hoping that at least 50% of that ARR. [16:29] Yeah. That makes sense. How much did you pay for the $300,000,000 a year GMC travel business? [16:34] >> Can I keep that confidential for now? [16:36] If you would like if you would like, you can. Maybe if you can't give a hard number, could you maybe just talk about how you thought about the valuation, maybe from a multiple perspective? [16:43] >> Sure. If you I'll just say put it this way. So for that particular entity, we're aiming to IPO in 2024. So hopefully that actually gave us a minimal IPO. We're looking at $250,000,000 at least the evaluation. Yeah. [16:56] Did you guys have you bootstrapped this or have you raised capital? [17:00] >> No. We're bootstrapped. [17:01] Oh, you are bootstrapped. Congratulations. That's very exciting. Nice work. [17:04] >> Thank you. Well, it's painful experience, but still. [17:08] How many folks are full time on the team today? [17:10] >> Right now for that particular oh, for our for our company? [17:12] For your whole company? [17:14] >> Oh, 250. [17:15] Two fifty. How many are engineers? [17:18] >> 62%. [17:20] 60. Okay. Wow. Okay. Got it. So call that a 100, a 175, something like that. [17:23] >> 10 to 70. Yeah. [17:24] Yeah. Very cool. Great story. We're out of time though. Let's wrap up here with the famous five of you. Number one, what's your favorite business book? [17:31] >> I like the number of those actually from zero to one. That's actually one of those. And then actually, I like I read the CEO book. That's a book that they read there a lot. So I try to learn something from that every day. [17:43] Number two, is there a CEO you're following or studying? [17:46] >> Yeah. Actually, this one here. I I read that, the CEO Excellence. [17:50] Oh, yeah. Okay. [17:51] >> I like this one a lot. [17:53] Yeah. Very cool. Okay. That's a good one. Number three, what's your favorite online tool for building joinharmonycvm? [18:00] >> Oh, definitely the the the CVM. Harmony is one of those, RCS. It's one of those. Harmony. Okay. That's actually the one that we use quite on a regular basis. [18:10] Number four. How many hours of sleep do you get every night? [18:14] >> Around average around five. [18:16] Okay. That's not bad. And what's your situation? Married? Single? Kids? [18:21] >> I wish. Single as as free as a bird. [18:23] That's awesome. Not married. No kids. And how old are you? [18:27] >> I'm age 40. [18:28] 40. [18:29] Last question. Something you wish you knew when you were 20. [18:32] >> I wish I could start something early back then instead of just, know, goofing around. [18:37] Guys, joinharmonycvm.com. They help smart cities connect with local farmers to fill grocery stores with produce, for example. They make money on both sides of the equation. Last year, they did $35,000,000 in revenue of which 15,000,000 was recurring and 20,000,000 was their take rate off their GMV, which they did 20,000,000 in GMV in the last quarter. They hope to break a $100,000,000 in revenue this year on the back of a major acquisition they just completed. That 100,000,000 [19:00] will be split fifty fifty between true recurring ARR and then sort of recurring GMV take rate on top of the business. Hoping to IPO in 2024, we'll see what happens. Totally bootstrapped, which we love. Abel, thanks for taking us to the top. [19:12] >> Thank you, Nathan. [19:14] 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 live. It is fun to watch every Thursday one [19:38] 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 [20:00] 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 [20:21] 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 [20:41] have 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. Alright, I'll be in the comments. See you.