Streamline Software Revenue, Valuation & Funding (2024)

[00:00] Guys, she's building getstreamlined.com, which is selling software to something called special districts. There's 55,000 of them in The United States today. They already have fourteen fifty using their platform, paying an average $275 per month for about $400,000 a month in revenue up from 140,000 ish a year ago. She joined as chief strategy officer just a couple months ago and is saying, how can we get our hands on additional revenue lines here? If I can increase ARPU [00:21] across the base of 1,450, we can double triple revenue quickly without even adding any new logos. We'll see what happens. They've got 37 folks on the team sold about, call it, ten, twenty, 14% of the company in their pre seed round last year, targeting selling something like around 20% in a 7 6 to $8,000,000 series a round that they're out there looking at right now. Will see what happens. Hey, folks. My guest today is Rachel Stern. [00:44] She's an investor operator and political strategist, currently the chief strategy officer at Streamline, provides digital services to special district governments. Before Streamline, she served or founded, sorry, in state partners venture capital lobbying firm investing in GovTech. She's an active investor and advisor for early stage GovTech companies. Rachel, you ready to take us to the top? [01:03] >> Yeah, I'd love it. Thanks [01:05] for So having it sounds like you have exposure to a lot of cool companies via your investing, You decide to jump all in two feet first to streamline why. [01:12] >> Well, it felt like I had the experience of being on the investing side of the table, less on the operating side. I'd sat on a number of boards. I, you know, advise a lot of CEOs and C suite people. And the reality is that it's much harder to execute than it is to advise and be an investor. And so to be the best leader I could be in this space, both as a thought leader perspective or [01:36] >> building companies or investing in companies, I figured I needed the experience of actually being in the trenches, building these things, fundraising, coaching teams, helping us figure out product market fit and pricing. And boy, I have learned so much in the last five months. [01:51] Well, I wanna get into Streamline here in a second, but first, fill out your backstory just a little bit. When did you close the first fund for in state partners and about how many investments did you make? [02:01] >> Yeah, so InState was actually an evergreen fund as part of a private equity firm called Advantage Capital. And Advantage was a very unique type of private equity investor in that it used a network of state and local lobbyists across the country to create programs where government incentivized capital and to come into very vulnerable areas. And that's a tale as old as time. [02:22] Like what? Might be in a vulnerable area? [02:24] >> Yeah. So they were called new market tax credit areas, and they tended to be lower median incomes than their surrounding areas on average. But you're thinking urban areas, you're thinking rural areas, you're thinking entrepreneurs of color and women and minorities, and it's just really trying to encourage the private markets to bring capital into areas that typically are overlooked because they're seen as too risky. And so government often steps in in these ways, usually the federal government, [02:51] >> but more and more on the state level, to say, Okay, guys, we are willing to put our money where our mouth is and say we want to invest invest in small businesses in our communities, particularly our vulnerable ones, we're gonna help create these programs whereby we're creating pools of money to invest in those areas. And private capital comes in and matches that money and then invests it and then pays back the state. [03:12] Fast forward to Streamline. Right? You said this is my audience might not know what special districts means, but you cater to them. What is a special district example? [03:20] >> I had never heard of them before approaching Streamline actually as a as an investor and partner before just, as you said, jumping in two feet first. So special districts are everywhere. And if you own your house, I'm confident you're paying into some. You'll see it on your property tax bill. It's water districts. It's utility districts. It's libraries. It's cemeteries. Sanitation districts. It's this really funny corner of the government market that is wildly underserved, partially because it's [03:47] >> so disparate. No one really knows how many there are. They supersede city and county boundaries. They're managing their own budgets. They're providing a singular service to a specific geographic area. And so they're very hard Most states don't even know how many districts there are. [04:02] Interesting. [04:03] >> Within their borders. And so part of our work is creating that unity of market and understanding the TAM [04:11] >> and really serving them in a way We provide digital services. It's a website. It's social media presence. It's an ability to post agendas in meetings. They are being regulated on a state level, basically being told what they have to do. And very few of them have the tools or the technological background to build it themselves. So we're coming in providing that sort of gap in the market, which is getting them online, getting them digital tools, having [04:35] >> them better serve constituents. [04:37] And Rachel, when you bucket all that up, what's the average special district paying you per month or per year to use your technology? [04:43] >> Yeah, so our average, it's actually very, very small. Our average monthly customer is paying us about $275 a month. [04:52] Okay, interesting. And on the website at the bottom, I see it's $60 Is that per seat or per district? Or what's the $60 I see on your website? [05:00] >> So there's three tiers and it's based on their budgets. It's based on their operating budgets, which is how much money is coming in, how much money is going out, what are their revenues, what are their profits, what are their losses. And different kinds of districts operate different ways. So we've tiered it in such a way to accommodate each district's needs, whether it's size, whether it's, for example, water and utility districts collecting money. They've got large operating [05:23] >> budgets because you're paying your fees every month. Versus a fire district or a parks and rec district, maybe they're collecting little bits of money over time for charity or for bake sales, but it's not part of their intrinsic value. And so the pricing tiers and also the packaging of services is to accommodate each of those customers'needs. So there are three tiers based on budgets. [05:44] 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 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 [06:07] connect 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 Founder Path dashboard, this is all free by the way, is because depending on who's doing the buying of your SaaS company, [06:31] you're 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, [06:45] >> Right? So [06:46] 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, 1,200,000 seed round, 3.7 raise. They sold 22% of their business. Go in here and filter [07:09] 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 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 [07:35] what you can get now inside of Founder Path. And we're thrilled to bring it to you. Alright. We're gonna go back to the YouTube video here in a second, but 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 [07:59] 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 the interview. I also see though you you powered by Stripe offer payments. Folks can make payments through your sites. Obviously, one of the big, big spaces we're seeing is this idea of SaaS plus a core SaaS model, and you add plus on top. You've got payments. Some [08:21] big companies take one, two, 4% of payments and they're processing billions and that's a huge revenue stream for them. How does Streamline think about revenue generated from payments going through your platform? [08:30] >> Yeah, it's a great question and one that we're talking a lot about right now, which is Stripe is a wonderful partner because they are easy to integrate. Right? That's why everyone's doing just API to API. We are in. We're processing payments tomorrow, and we're keeping about 1% of that. [08:45] Yeah. On a net basis. [08:46] >> On a net basis. But the reality is that, as I was saying, very few of our districts need sort of constant collection of payments. And those who don't really trust Stripe. It's not Stripe's fault. It's just not a sophisticated enough tool for reoccurring payments or someone to pause their payments or someone to process ongoing water or utility bills. And so as we think about our payments, we're starting to think about partners in our market and expanding [09:14] >> that offering that's mutually beneficial because, again, we have a huge corner of the market. We just passed fourteen hundred and fiftieth customer. [09:22] Fourteen fifty special districts using you. [09:25] >> And growing every day, which is what allows us to keep our ACV so low. [09:30] No. That's yeah. I mean, what if we take fourteen fifty times the two seventy five that two seventy five that was monthly ARPU, right? [09:37] >> Yeah. [09:38] Yeah. Yeah. I mean, we can multiply that. And what does that come like? 398,000, $400,000 a month, something like that? Yeah. That's great. So, I mean, is it fair to say though that it's not, I mean, your chief strategy officer, would you say that it's not a high priority for you to think about capturing 1.5 or 2% of GMV because you don't you're not sitting on billions of GMV yet? [09:56] >> Well, I think that having a more sophisticated payments partner would actually open up those more sophisticated districts to us. [10:04] Ah, okay. [10:05] >> So as I think about it, Stripe is a great stop gap for what our districts need right now, but we are losing out on deals like water and utility districts, which are much bigger fish because we can't process Yeah. [10:16] Those have consistent GMV. Right? Those are you know, you get into the billions very quickly. [10:21] >> Yeah. So we are exploring the market the partner market now and and [10:25] this Who do they use today? Who do water markets use today? [10:28] >> You know, it totally depends. It is often a third party vendor, or there are specific companies like Streamline, not as sophisticated, that just do water or just do utility payments. Like, they are specialized. And this is where my background as an investor in the GovTech world comes into play because I've met a lot of the players here. It's not a huge market. [10:51] It's How many special districts are there in The US total? [10:54] >> Well, thank you for the big reveal. We think there are about 55,000. [10:59] But okay. You think. Is this you can't there's no database where you can actually get a hard number here? Does it change daily? It [11:04] >> sure isn't. The census did exploration in 2017, and they came up with the number 40,000. Now we have a cold calling apparatus. It's we have a big sales team with BDRs and AEs cold calling these districts. And what we found was that number was absolutely not correct. About 20 or 30% of the census list was unreachable, whether they'd been dissolved or didn't have a real phone number or weren't a real district. And so what my team [11:30] >> has been doing over the last four or five months is calling each getting that data that they're collecting, because there's a requirement in most states that districts file annual budgets with the state. Collecting that data, calling all of the counties, collecting the data that they have about each district in their jurisdiction, overlaying that with the census, overlaying that with the thousands of districts our sales team has already called to really try to come up with the [11:55] >> first comprehensive list. So we are very much in the mix on that. We've got about 37 states'worth of data, And those remaining 13 states are really tough because the state isn't tracking them, counties aren't tracking them. So we have to go either hand to hand combat or sort of trust the census list and trust but verify. [12:14] >> Figuring out that TAM is really the biggest barrier to entry in this market. [12:18] So what is your team size today to be able to collect all this data, do all this work? [12:22] >> Yeah. So we've got 37 people in the company right now, 12 of which are sales. [12:27] Then there's Do they all carry a quota? Yeah. Wow. Okay. Can I ask just out of curiosity, I mean, this is this is a low ARPU, high volume kind of business model? It's very rare you see quota carrying reps at this very low price point. How do you make that math work? [12:42] >> Well, we often team them up. So you're spreading the wealth a little bit. We've got BDRs fitting into associate AEs, which is sort of the middle tier, which are graduate BDRs. And those AAEs are partnered with one of three AEs. And so everyone is getting credit for each deal that is going through the pipeline. We're tracking what each deal is in stages. The BDRs are being judged and also rewarded for what we call S3s, which are [13:11] >> demos that they're able to get with the cold calls, and then that translates into it. So it's really just a fully flushed out sales system where they're all fitting together and all rowing the same direction. [13:23] Break that down for me a little bit. There's 12 there there's 12 folks on the sales team. How many are BDRs? [13:28] >> There's six BDRs. There's three AEs and three AEs. [13:32] Sorry. What was the middle one? [13:33] >> Associate account executive. So they're sort of in this middle ground between cold calling and doing demos. They're training on how to do demos. They're tending to deal with sort of slightly smaller deals. They're working with the AEs on the bigger deals, on the bigger fish, so everyone's getting credit. And the BDRs are being judged on how many demos they're able to pass on to the AEs and AEs. [13:57] I see. Okay, so just again, at this price point, how many demos do you want a BDR setting up per month? I mean, it's gotta be double digits. Right? Ten, twenty, 30? [14:06] >> Oh, yeah. More than that. I mean, we we have them making between fifty and sixty five calls a week. [14:13] Okay. [14:14] >> And I would say of that, we have about a 37% translation rate into s threes. [14:22] Okay. Which is a which is a demo call? Yeah. Okay. [14:25] >> And then we have about a 60% close rate on demos. [14:29] Interesting. I love this. It's very rarely I hear a sales motion work with touch at this price point, which is why I'm gonna drill there for a second. [14:37] >> Yeah. No. You're and and you're it's so interesting you say that because we're out raising series a now, and some of the feedback we've been getting from investors is like, wow. You guys are touching these customers a lot. [14:47] Yeah. [14:48] >> A $100 ACV. Yeah. Think that that was a necessary motion before we had really good data and before we had a real sense of the market. Right? You almost just needed a certain volume of calls out to verify the dataset because, you know, of those 50 or 65 calls, maybe 20 of them weren't real numbers. [15:06] Yep. Yep. No. That all makes sense. Let me get I I wanna ask yeah. I wanna ask more questions about where you're taking the company strategy wise, but I also wanna get a sense of historical growth rate. So if you're at about $400 a month right now in revenue, where were you exactly one year ago, you know, range? [15:18] >> We incorporated eighteen months ago and we grew 122% this year. [15:23] Okay. Got it. So, so a 122%. So you guys were doing something like, you know, call it like a 140,000 exactly a year ago? [15:29] >> Yeah. Between between a 120, a 140. [15:32] Okay. That's that's great growth. Yeah. And just to be clear, you joined when did you join? Twelve months ago? [15:37] >> I joined last July. Nope. [15:38] You're you're basically founding team and first five, right? [15:43] >> Well, we are we are in I I mean, in certain leadership team. Yes. Yeah. But I was employee number 35. [15:50] Ah, okay. Okay. [15:51] >> Yeah. [15:52] Okay. So you were okay. So the okay. Got it. So you were employee number 35 and you but you joined about sixteen months ago. The team you said is 37 today. So three hires the past eighteen months? [16:03] >> Sorry. No. I should have said that. It's July of this year. [16:05] I'm Oh, this year? Ah, got it. Got it. Okay. That makes sense. [16:08] >> I'm brand spanking new. [16:10] I got it. Got I [16:11] >> am bringing a lot of energy and effort to a team that has been doing this so consistently and so well for the last eighteen months. And what they needed was someone with legislative experience, someone with partnerships experience, someone with fundraising experience, someone with, you know, strategy and data experience. And so I came in and sort of took over those functions. [16:29] And is the company bootstrapped today? Did you guys do a seed or pre seed? [16:32] >> We did a seed where we only offered common stock, but did about $2,000,000 in what we're calling a party round. [16:41] That was last year? [16:42] >> That was last year. And right now we're raising an A. [16:44] Okay, interesting. [16:46] >> And we have a couple of term sheets in play right now. I'm sure some of your listeners have had to make these choices between venture and growth equity and the different things that they offer and the different things that they look for. Growth equity was saying to us, You're burning too much. You have too many touches. We love this potential, but we would expect you to grow 40% to 50% next year and really get efficient. And [17:09] >> venture's like, Don't change a thing. Go out there, grow 150% next year. Think bigger, think bigger marketplaces, think bigger partnerships. Efficiency, who needs it? Just wanna see this thing grow, go capture as much of the market as possible. And so we, as a leadership team, have had to really weigh those options of what kind of company do we want this to be and what kind of partners do we want to help grow it? [17:32] No, that's very insightful. When the growth equity folks are saying too much burn, I mean, do you guys at say, negative 10, negative 20% EBITDA margins per month? Or where are you guys comfortable operating? Higher? [17:41] >> Yeah, yeah. I would say we are on the cusp of inefficiency and it's [17:47] worth Of inefficiency? Yeah. [17:49] >> I that, to your point about the touches, I think we have a really big sales team. I think that probably [17:57] Oh, yes. 30% of your team. That's big for your [17:59] >> I think in the long term, that model will shift. I think we will move away or at least maintain some semblance core of the cold calling mechanism BDRs AEs. But I think the key to our growth now, we've proven we can bring logos on. [18:15] That's not [18:16] >> the hard part. The key now is to increase that ACV, increase the value of each of those customers, increase the offerings that we have, even by $100 $200 $300 a month. [18:24] That [18:25] >> recurring revenue is huge. So that's really my next frontier and and the team's next frontier of just like, how do you increase the value of each customer? [18:34] Yep. Couple of rapid fire things as we are out of time, but this is very interesting to me. Most folks are selling about 10 to 20% of the company in a pre seed round. Is that about what you guys did? [18:42] >> 14%. [18:43] Okay. 14%. So that would have been like something like a, like a 5,000,000 pre seven posts, something like that. [18:49] >> It was a 12 pre 14 posts. [18:52] Okay. But common. Okay. Okay. Well, sold less than right? If, Yeah. Yeah. That's great. That's not a lot of dilution at all. What are you guys targeting in your a in terms of how much you wanna raise? [19:01] >> Yeah. I think we're looking to raise between six and eight. Okay. I think that will allow us to get to profitability in the next eighteen months. [19:09] And and what are you targeting? You sell temp I mean, are you hearing in the market today? Selling 10%, 20%? [19:14] >> Yeah. It's probably between twenty and thirty. [19:16] Oh, wow. Interesting. Just compressed equity market. [19:18] >> Like, you should you're seeing very few offering 10 x. It's not twenty twenty, twenty twenty one. I think it's usually seven to eight. Yeah. And I'm hearing that from my other founder friends as well. It's just like it's not that the market's cool. There's a lot of money out there, but valuations are cool. [19:33] Totally. Yeah. I mean, so if you guys can get something done, we're raising seven I mean, you're at 5,000,000 revenue ARR right now. If you can get a 7,000,000 down on a on a 40,000,000 post. Right? Something like a it's like an eight x multiple. I mean, that you consider that a win. [19:45] >> Yeah. I mean and and then you go and try to build this thing another you know, you double it and then you have some choices. [19:51] Yeah. A couple of questions quick here for you. In terms of expansion as strategy, when you when your folks are calling into these 36 states building a master database, what's the total GMV, all the 55,000 special districts do per year, right? Total revenue collected. [20:04] >> Yeah, the average is 5,000,000, but there's a real spectrum, right? Would say The [20:08] average is 5,000,000 per district? Yeah. Oh, wow. Okay. Well then that, I mean, tells me that, I mean, that's $275,000,000,000 of GMV annually. If you can get your hands on 1% of that, obviously you gotta go get all that scale. That's a massive revenue stream for you. Why not build your own payment rails and start selling it to take more of that net margin? [20:27] >> I think that we could. I have a partner in the market who I've worked with for a long time. Actually, they were my first investment, and I just think they're great. [20:35] Okay. [20:36] >> Model their model is that they're free to the government, and they charge the user a fee. And so it's really easy to plug and play a pretty sophisticated model into existing program without having to build it. We could. We could build our own. But it's this constant weight of how much tech debt do we want to take on versus sort of acquiring or partnering for it so that we can continue to build our roadmap of just [21:02] >> existing tools within the site that our customers are asking for. [21:07] Yep. No, that all makes sense. Okay. It's still a huge price, right? $275,000,000,000 of GMV. If you can keep 2% net of that, what is that? Five point that's 5,500,000,000 of revenue if you can make it work. [21:18] >> I'm hoping to have a private jet. [21:20] Alright, Rachel. Let's wrap up with the famous five rapid fire. Number one, favorite book? [21:24] >> Favorite book is East of Eden. [21:29] Number two, is there a CEO you're following or studying? [21:32] >> My current one. I'm loving learning his moves. [21:35] Number three, what's your favorite online tool for building streamline? [21:40] >> ChatGPT right now. [21:41] Number four, how many hours of sleep do you get every night? [21:44] >> Nine. [21:45] Okay. And Rachel, can I ask situation, married, single kiddos? [21:48] >> Ah, very quick. [21:49] When's the wedding? You have a wedding date [21:52] >> planned Next April. [21:53] Yeah. Very, very exciting. Okay. So no kids? [21:58] >> No kids. Two dogs. Two loving dogs. [22:00] That's awesome. And can I ask how old you are? [22:03] >> I am 33. [22:04] >> 33. [22:05] Last question. Something you wish you knew when you were 20. [22:07] >> Oh my God. Buy property. [22:10] Guys, she's putting getstreamlined.com, which is selling software to something called special districts. There's 55,000 of them in The United States today. They already have fourteen fifty using their platform, paying an average $275 per month for about $400,000 a month in revenue up from 140,000 ish a year ago. She joined as chief strategy officer just a couple months ago and is saying, how can we get our hands on additional revenue lines here? If I can increase ARPU [22:32] across the base of 1,450, we can double triple revenue quickly without even adding any new logos. We'll see what happens. They've got 37 folks on the team sold about, call it, ten, twenty, 14% of the company in their pre seed round last year targeting selling something like around 20% in a $7.06 to $8,000,000 series a round that they're out there looking at right now. We will see what happens. Rachel, thanks for taking us to the top. [22:53] >> Thanks, Nathan. Have a great day. [22:56] 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 1PM [23:21] Central. Additionally, remember these recorded founder interviews go live. We release them here on YouTube every day at 2PM 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 an acquisition, a big [23:43] 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 people are saying. Sign [24:05] 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 to counter those people. [24:24] 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.