Streamline Software Revenue, Valuation & Funding (2024)

guys she's building GST streamline.com which is selling software to something called Special Districts there's 55,000 of them in the United States today they already have 1,450 using their platform paying on average of $275 per month for about 400,000 bucks a month in Revenue up from1 140,000 is a year ago she joined his chief strategy officer just a couple months ago and saying how can we get our hands on additional Revenue lines here if I can increase our po across a 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 uh uh 10 20 14% of the company in their preed round last year targeting selling something like around 20% in a 76 to 8 million series a round that they're out there looking at right now we will see what happens hey folks my guest today is Rachel Stern she's an investor operator and political strategist currently the chief strategy officer at streamline which provides Digital Services to special district governments before streamline she served or founded sorry instate Partners venture capital and lobbying firm investing in govtech she's an active investor in ADV visor for early stage gov tech companies Rachel you ready to take us to the top yeah I'd love it thanks for having so it's something to you of exposure to a lot of cool companies via your investing you decid to jump Allin two feet first to streamline why 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 seite people and the reality is is that it's much harder to execute than it is to advise and and be an investor and so to be sort of the best leader I could be in this space both as a thought leader perspective or building companies or investing in companies I figured I needed the experience of actually being in the trenches building these things fundraising um coaching teams helping us figure out product Market fit and pricing and um boy I have learned so much in the last five months well I want to get into streamline here in a second but first give fill out your backstory just a little bit uh when did you close the first fund for instate partners and about how many invest M did you make yeah so inate 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 into to come to come into very vulnerable areas and that's you that's a Tale As Old As Time tax like like what might be a vulnerable area yeah so um they were called New Market tax credit areas and they tended to be lower median incomes than their surrounding areas on average um 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 um because they're seen as too risky and so government often steps in in these ways usually the federal government but more and more on the state level to say okay guys you know we are willing to put our money where our mouth is and say we want to invest in small businesses in our communities particular particularly our vulnerable ones we're going to help create these programs whereby we're creating pools of money to invest in those areas and private private Capital comes in and matches that money and then invests it and then pays back to state so fast forward to streamline right you said this is uh my audience might not know what Special Districts means but you cater to them what is a special district example I had never heard of them before uh approaching streamline actually as a as an investor and partner before just you know 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 it's sanitation districts it's this really funny sort of corner of the government Market uh that is wildly underserved partially because it's so disperate no one really knows how many there are um they supersede city and county boundaries they're managing their own budgets they're providing a singular service to a specific geographic area um and so they're very hard Most states don't even know how many districts there are interesting within their borders and so part of our work is sort of creating that Unity of market and understanding The Tam um and really serving them in a way you know we provide we provide Digital Services it's a website it's social media presence it's um an ability to post agendas and 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 them better served constituents and R when you bucket all that up what's the average special district paying you per month or per year to use your technology yeah so our average it's actually very very small um our average monthly uh customer is paying us about $275 a month 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 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 be to accommodate each District's needs whether it's size whether it's um for example water and utility districts are collecting money they've got large operating budgets because you're paying your fees every month versus a fire district or a parks and wreck 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 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 287 interviews I've done manually saves you a lot of time well we've done this we've bu 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 valuation is there's many different ways to value a SAS business so the reason you're going to see three or four different valuations inside of your founder paath 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 real time valuation data points 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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 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 SAS plus a core SAS model then you had Plus on top you've got payments some big companies take 1 two 3 four% 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 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 um and we're keeping about 1% of that on a net basis 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 do don't really trust strip yeah it's not strip's fault it's just not a sophisticated enough tool for reoccurring payments or someone to pause their payments or someone to process you know 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 that offering um that's mutually beneficial because again we have a huge corner of the market we just passed our 1450th customer 1,450 Special Districts using you and grow and growing every day which is what allows us to keep our ACV so low no that's incred yeah I mean what if we take 1450 times the 275 that 275 that was arpo monthly arpo right yeah yeah I mean we could multiply that and what does that come like 398,000 400,000 bucks a month something like that yeah that's great I mean but is it fair to say though that it's not I mean you're 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 well I think that having a more sophistic ated payments partner would actually open up those more sophisticated districts to US ah okay 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 um because we can't process sophisticated yeah those have consistent gmv right those are you know you get the billions very quickly yeah um so we are uh exploring the mark the partner market now and and this who do they use today who do water markets use today you know it's totally depends it is often a third party vendor or there are specific companies like streamline but not as sophisticated that just do water or just do Utility payments like they are specialized okay and and you know 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 um so it's how many Special Districts are there in the US total well thank you for the big reveal um we think there are about 55,000 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 sure isn't the census did a exploration in 2017 and they came up with the number 40,000 now we have a cold falling apparatus it's we have a big sales bdrs and AES cold calling these districts and what we found was that number was absolutely not correct about 20 or 30% of that census list unreachable whether they'd been dissolved or didn't have a real phone number or weren't a real district and so what um my team 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 okay collecting that data calling all of the counties collecting the data that they have about each each district in their jurisdiction um 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 first comprehensive list so we are very much in the mix on that um 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 toand combat or sort of trust the censes list and and trust but verify yeah but it's but figuring out that Tam is really the biggest barrier to entry in this market so what what is your team size today to be able to collect all this data do all this work yeah so we've got 37 people in the company right now 12 of which are sales and then did they all carry a quota yeah wow okay can I ask just a curios I mean this is this is a low arpo 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 well we um often team them up so it's you're spreading the wealth a little bit we've got bdrs fitting into uh associate AES which is sort of the middle tier which are graduate vdrs um 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 um judged and also rewarded for what we call S3s which are sort of demos that they're able to get with the cold calls and then that translates into it so it's really just it's it's a fully flushed out uh sales system where they're all fitting together and all rowing the same direction break that down for me a little bit there's 12 there there's 12 folks on the sales team how many are bdrs there's six bdr there's three AES and three AE sorry what was the middle one 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 like sort sort of slightly smaller deals um they're working with the AES on the bigger deals on the bigger fish so everyone's getting credit and the bdrs are being um judged on on how many demos they're able to pass on to the AE and AES 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 got to be double digits right 10 20 30 oh yeah more than that I mean we we have them making between 50 and 65 calls a week okay um and I would say of that we have about a 37% translation rate into S3s okay which is a which is a demo call yeah okay and then we have about a 60% close rate on demos interesting I love this it's very rarely I hear a sales motion work with touch at this price point which is why I want to drill there for a second yeah no you're and and you're it's so interesting you say that because we're out raising our series a now and some of the feedback we've been getting from investors it's like wow you guys are touching these customers a lot yeah $0000 ACV yeah um I 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 data set because you know of those 50 or 65 calls maybe 20 of them weren't real numbers y yeah no that all makes sense let me get I want to ask yeah I want to ask more questions about where you're taking the company strategy wise but I also want to get a sense of historical growth rate so if you're at about 400 Grand a month right now on Revenue where were you exactly one year ago you know range um we incorporated 18 months ago and we grew 122% this year okay got it so so 122% so you guys were doing something like you know call it like 140,00 exactly a year ago yeah between between and 20 140 okay that's that's great growth um and just to be clear you joined when did you join 12 months ago Jo last July nope I'm you're basically founding team and first five right well we are we are in I I mean a certain leadership team yes um but I was employee number 35 okay okay yeah okay so you were okay so the T okay got it so you were employee number 35 and but you joined about uh 16 18 months ago the team you said is 37 today so three hires the past 18 months sorry no I should have said that it's July of this year I'm oh this year ah got it got it okay that makes sense I'm brand spanking now got it bringing a lot of energy and effort to a team that has been doing this so consistently and so well for the last 18 months and what they needed was someone with legislative experience someone with partnership 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 and is the company bootstrap today or did you guys do a seed or preed we did a we did a seed where we only offered common stock but did about $2 million in what we're calling a party round so that was last year that was last year and right now we're raising an A okay interesting and we have a couple of trim sheets in play right now I'm sure some of your listeners have have had to make these choices between sort of venture and growth equity and those things that the different things that they offer and the different things that they look for growth Equity was saying to us like you're burning too much you have too many touches we like love this potential but we would expect you to grow 40 to 50% next year and really get efficient and Ventures like don't change a thing go out there grow 150% next year you know think bigger think bigger marketplaces think bigger Partnerships like efficiency who needs it like we just want to see this grow go capture as much of the market as possible um and so we as a leadership team have had to really weigh those options of like what kind of of company do we want this to be and what kind of Partners do we want to help grow it no that's very insightful when the growth Equity folks are saying too much burn I mean what do you guys at say negative 10ga 20% EIT margins per month or where are you guys comfortable operating higher um yeah yeah we are we I would say we are on the cusp of inefficiency and it's of of inefficiency yeah yeah I think I think that to to your point about the touches um I think we have a really big sales team I think that probably yes 30% of your team that's that's big for 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 that's not the hard part um the key now is to increase that ACV increase the value of each of those customers increase the offerings that we have even by a1200 $300 a month huging revenue is huge yeah so that's our really my next Frontier um and and the team's next Frontier of just like how do you increase the value of each customer Yeah couple 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 preed round is that about what you guys did uh 14% okay for 14% so that would have been like something like a like a five million pre seven post something like that it was a 12 pre4 post okay but common okay okay well you sold less then right if uh yeah okay that's great that's not a lot of delution at all what are you guys targeting your a in terms of how much you want to raise yeah I think we're looking to raise between six and eight okay um I think that will allow us to get to profitability in the next 18 months and what are you targeting you to sell 10 I mean what are you hearing in the market today selling 10% 20% yeah it's probably between 20 and 30 oh wow interesting just compressed Equity Market you're seeing very few offering 10x it's not 2020 2021 I think it's usually seven to eight and I'm hearing that from my other founder friends as as well it's just like it's not that the Market's cool there's a lot of money out there but valuations have cool totally yeah I mean so if you guys can get something done when you're raising seven I mean you're at 5 million Revenue AR right now if you can get a 7 million done on a on a 40 million post right something like it's like 8X multiple I mean that you'd consider that a win 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 Yeah couple other 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 yeah the average is five million but there's a real Spectrum right I would say the average is five million per District yeah oh wow okay well then that I mean that that tells me then I mean that's 275 billion of gmv annually if you can get your hands on 1% of that obviously you got to 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 that net margin I think that we could um 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 OKAY 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 our exting program without having to build it we could we could build our own um but it's this constant weight of how much Tech debt do we want to take on versus sort of of acquiring or partnering for it so that we can continue to build our road map of just existing tools within the site that our that our customers are asking for yep know that all makes sense okay uh it's still a huge pricee right 275 billion of gmv if you can keep 2% net of that what is that five that's 5.5 billion of Revenue if you can make it work I'm hoping to have a private J all right Rachel let's wrap up with the famous 5 rapid fire number one favorite book favorite book is uh East of Eden stand number number two is there a CEO you're following or studying um my current one I'm loving learning his moves number three what's your favorite online tool for building streamline um chat GPT right now number four how many hours of sleep do you get every night nine okay and Rachel can I ask situation married single kiddos uh on fiance ah very when's the wedding you have a wedding day next April yeah very very very exciting okay so no kids no kids two dogs loveed dogs that's awesome and can I ask how old you are I am 33 33 last question something you wish knew when you were 20 oh my god um buy property guys she's building GST streamline.com which is selling software to something called Special Districts there's 55,000 of them in the United States today they already have 1,450 using their platform paying on average $275 per month for about 400,000 bucks a month in Revenue up from 140,000 is a year ago she joined as Chief strategy officer just a couple months ago and saying how can we get our hands on additional Revenue lines here if I can increase our po across a 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 uh 10 20 14% of the company and their preed around last year targeting selling something like around 20% in a 76 to $8 million 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 thanks Nathan have a great day one more thing before you go we have a brand new show every Thursday at 1:00 p.m. central it's called Shark Tank for SAS we call it deal or bust one founder 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