How Getvenga CEO Sam Pollaro grew to $3.6M revenue and 2K customers in 2018.

hello everyone my guest today is sam polaro uh he's the ceo of a company called venga a washington dc based technology company that uses big data to help restaurants and fitness companies better understand and engage with their guests before venga sam was the founder of petals of for the people a business that revolutionized the sale and distribution of fresh cut flour sam are you ready to take us to the top let's do it you're a flower guy you must be very sweet huh actually once you uh once you see like the business side of flowers it kind of ruins the the experience for you it's like watching the sausage get made totally understand tell me more about your current company venga what's company do and how do you make money yeah sure so we are a customer relationship management system for uh businesses we work right now in the restaurant and fitness verticals meaning we help those companies to use their data to better understand and engage with their customers in a much more personalized manner that's very cool and and help me understand kind of general price points what's the average customer pay per month between two and three hundred dollars per month per location so if you're a restaurant group and you've got 10 locations you're paying you know 2500 bucks a month is the location paying or or corporate restaurant the corporate is paying most of the times of the corporate we do work with some franchise locations where they have uh you know the franchisee will pay for the the software but most of the time we we prefer to sell to the corporate and get all the locations and when you sell to one your your typical deal you settle one corporate i mean how many locations are they signing up typically uh we work primarily with groups that have three up to 100 locations is our kind of sweet spot okay interesting and how many locations are you across today we're about 2000 locations oh wow okay so that's a lot across how many brands um probably between 150 and 200 brands okay that's great now i mean can i take 2000 locations times that 200 price point you guys are doing about 400 grand a month right now in revenue yeah a little bit less than that because uh some have like smaller packages like if they're paying for uh you know some partial plan kind of thing but we're doing about 300 000 in uh monthly recurring revenue okay that's great thanks for sharing that and um most of that you're talking like legacy accounts maybe that's signed up at lower price points um or they're using uh you know a fraction of our tool set so the the kind of 200 to 300 per month is if they're using all our features but some are using you know a 99 price point that only covers one aspect of our tool i see so 2 000 locations about 150 bucks a month you multiply those you get about 300 grand a month in revenue yep and what's growth look like where were we at a year ago we're going about 35 percent a year that's great so call it what is that 2 50 240 k in october last year um yeah we did about for the calendar year we did just under 2 million in revenue but ended a little bit under 3 million in ar that's great and this year yo what you'll close out at like 3.8 3.9 um something around there yeah 3 5 and 4. that's great now this will be really impressive i hope you tell me your boots drop but i have a feeling you might not be are you bootstrapped or be raised we've raised uh 2.7 million today okay not actually you know you still get a little street cred not a ton you haven't raised a ton though which is nice yeah all right and why make the decision to raise why not stay you know stay bootstrapped uh well i think you know if i were to do it all over again i might take a different uh path i would certainly wait uh much longer to raise money but at the time you know i i i'm a technical guy but i'm not really a a programmer so you know we need to hire engineers and uh a team to help us build the initial product so that was the reason now not saying it's the right reason but um that's why we did it originally yep no and you invest in design i know that i've seen the animations on your homepage on dribble before so you go and get the right kinds of designers and you do things the right way it makes sense there um put this on a timeline for us when did you launch uh so we actually launched in 2011 with a product that's slightly different from what we do now as like most companies you know we pivoted uh a couple times along the way we realized within probably six months that our first product wasn't going to work and we pivoted to something else that worked a little bit and then finally probably in 2014 uh we really found that kind of product market fit and then have been kind of growing consistently since then interesting um uh when was the last pivot you said it you said a year ago when was the last pivot was 2014. oh 2014. okay got it so 2011 2014 kind of figuring things out 2014 you kind of double down on the current space now you've scaled to 2000 locations yep yep and just added our new vertical basically within the last year so we started restaurants we're exclusively in restaurants for the first you know six years of our life then realized we could take that product and bring it over to the fitness market and have done that in the last year interesting how did you make that transition how did you know it'd be a good fit for fitness as well versus going into some other you know you know you know mechanic shops that's a great question yeah we actually had a lot of the same market dynamics so we have partnerships on the restaurant side with opentable which is the dominant booking platform if you want to go out to dinner and there's a similar company called mind body which if you ever booked a yoga class or a spin class you probably use mind body whether or not you know it and they both have about the same number of businesses they both have about the same market share which is like over you know 80 of the market and so by going to market with a really strong partner and the same sort of market dynamics where there was a platform that was really good at the booking but they didn't do so much crm we knew there was an opportunity for us sam mindbody great company they just bought friends in your area at booker why didn't they buy you instead well i think actually booker came with a company that does a little bit of what we do called frederick but really they were looking to expand their capabilities on the appointment side so mind body does a lot in class-based fitness but they didn't have a very strong offering on the appointment side like spa salon and so that's why they bought booker booker had acquired frederick about a year before that so they sort of got a two for one there were you in talks with with uh with booker before they went with frederick we weren't again this is all the the fitness space is very new to us it's only we've only been in it for about a year interesting um so walk me through some other economics so churn is critical in a sas company what's your turn today yeah we actually have on a revenue basis we have negative net churn in other words our clients are paying us more today than they were uh you know six months or a year ago and that's because they're either adding locations or uh moving up to a higher price point um than than they had at the beginning of the year yeah so let's talk about that cohort let's peel back that onion so before you add back expansion revenue what was gross revenue churn uh gross revenue turn was probably about five percent okay and then expansion was how much ten percent twenty percent no probably closer to you know uh seven to ten percent okay so seven percent expansion and then five percent loss puts you at about 102 net revenue retention annually it sounds about right that sounds great that's great congrats on that um what pricing axes besides number of seats the number of locations are you using to drive expansion uh it's the basically the feature set uh and then kind of services revenue so we have a pro product that works really well for small to mid-size businesses when you get up into some of the enterprise customers they want um some uh what we sell like a business intelligence package that includes some higher level reporting some more customized reporting as well as some services on top of that okay now just be clear 300 grand in mrr you told me earlier that's all pure sas right that's all services yeah we have a very or sorry it's all pure sas we have a very small actual professional services we don't even have a professional services team what is your team today how many people 21. and and what's kind of the breakdown between marketing sales engineering we have six engineers uh we have uh four people on the client services team uh we've got a product manager uh four people on the sales and marketing team um we've got a business intelligence person who also does our is also kind of our director of finance and then myself and my co-founder got it hopefully that's up to 21. yeah yeah or somewhere around there right and where are you where are you guys all based everyone in dc uh we're predominantly based in dc we have three remote employees but the rest of us are here okay dc and remote and then talk to me about you know as you look to onboard a new 150 a month location what are you willing to spend to get that location yeah that's a great question and something we're kind of going through right now but you know typically i know most sas companies will spend a dollar for every dollar in arr that they get we've been historically um under that and maybe because we're conservative or maybe we're foolish we should be spending more but right now we spend typically probably about 60 to 75 cents for every dollar in ar that we we acquire okay so if you're you know if you're your acv 150 bucks a month at a location that puts you at about 1800 bucks per month in first year acv and if you spend call it 60 cents on that so that'd be about a thousand bucks to get a new customer paying 125 a month oh yeah 150 hundred twenty hundred fifty yeah yeah that's great and whereas so let's just call it a thousand bucks in cac to make it easy where's most that spend going is it your team or is it direct paid stuff right now it's it's team um because of our relationships with uh mind body and opentable we actually get quite a few referrals um from those companies and so we haven't done uh a lot of actual sort of digital marketing but that's a focus area of ours going forward and we plan to kind of ramp up our our spend on the marketing side quite a bit do you pay those partners a kickback we don't we would actually like to but you know the way our agreement works you know uh mindbody opentable they don't want us paying their reps uh you know to sell our product they want them focus on selling their product they actually make those referrals because it's in their best interest to because once one of their clients is using our product they're actually stickier and less likely to churn than if they weren't yeah no that all makes perfect sense there um talk to me about funding i mean it sounds like you're about to experiment with some more paid stuff are you in the process of raising additional capital no we've been uh cash flow positive and profitable for the last year so uh we're continuing to reinvest you know as we grow our top line we put that back in the business so we continue to try to operate right around break even uh so that we don't need to raise any more money i mean some people would argue that fast-growing sas companies they have confidence in that channel that scales and because of the nature of a payback period you want to go get capital as fast you can if you're confident in that growth channel so this is an equation of you know what you just want to be patient kind of do it the right way don't don't drive like hyper aggressive growth or is it you haven't actually figured out a scalable growth channel to invest in i think it's it's more the the latter that you know when you've operated a company for you know seven years and you've been on the brink of of going under for uh you know a big part of that you know and you come kind of through the woods and you're out the other side and you see the light you know do you really want us to remortgage your house um to to place another bet wait how did you mortgage your house you're talking about your own capital you put in the company at the beginning no no i was using that metaphorically in other words if we were to raise more money now we would put the company at risk and such that if we weren't able to grow as we expected you know we would would be in trouble whereas you know being a little bit more measured um you know takes away some of that risk yeah look this is the chicken and egg problem right because it's easy to measure what you would lose but it's very difficult to measure what you could gain by having another two million to spend so most people just hang on to what they have because they don't want to lose it yeah exactly and i think you're right i mean i think if we knew um with 100 confidence this sort of unit economics of you know for every you know 50 000 we invest we're going to get this out then yeah i'm going to be a no-brainer to do that and i think you know because of we we haven't done that much in digital marketing you know we we need to hit some of those proof points before we really you know pour a lot of fuel on that fire yeah um the the money you've already raised was that diluted was it equity or is it convertible debt or venture debt uh so our first round was a convertible note we then did a million dollar series a and then we did around million and a half after that uh that now since converted to equity so now everything's in equity would you ever consider venture debt to preserve your equity in the company yeah and we thought about like a revenue back revenue-based uh loans we've considered that and so that would probably be the first place we go for funding at this point interesting what did you like about that model i mean obviously that's non-dilutive um you know also that we're in more control so you know having to if i were to go out and raise money now you know i would be sort of resetting the goal posts for what it would mean to be a successful exit right you know um you can do some quick math and figure out roughly where our valuation is now and if we were to raise you know another five or ten million you know those guys are gonna be looking for you know a five to ten x return that means you know they're looking for an exit at you know a hundred plus million dollars and so that really resets the goal post for what's a successful exit and then feel good about the result yeah yeah 300 grand a month right now caught 3.6 million a month i mean you could make a very solid argument for selling for four or 5x arr or you know call it 18 million bucks which investors right now with just 2.7 million in it you know potentially would be on board with that but to your point if you go raise another five million so you've got you know eight in the company well they're not they want you to sell for 50 or 60 to get a good return there exactly yeah i know it makes good sense uh you're being thoughtful about it that's great um let's uh let's wrap up here with the famous five number one what's your favorite business book uh i think the hard thing about hard things yep that's a good one number two is there a ceo you're following or studying um no i mean i i always like to to follow elon musk that's probably the the easy answer but more probably for the entertainment value than anything else number three what's your favorite online tool for building your business uh i love asana it's a great tool for me to keep track of everything i need to do as well as everything my team is working on number four how many hours of sleep to eat every night uh on a good night seven not a bad night five uh not bad and what's your situation married single kiddos i am divorced i've got an eight-year-old son okay uh and uh eight year old how old are you i'm 40. 40. last question what do you wish your 20 year old self knew um i wish i had started a business when i was 20 and said when i was you know 33 i think uh obviously you know uh not having the the responsibility and the uh the worries of of someone who's you know already started a family makes it a lot easier to be flexible about you know where you start how much money you need to start a business the lifestyle you have uh you know having to make sure your family is provided for even where you start the business and be able to move so i wish i would have started a company i was 23 you know something i always wanted to do but it really it took me a while to take the leap into entrepreneurship guys there you have it venga helping restaurants and fitness studios manage customer experience launched back in 2011 they now serve 2000 locations doing about 300 grand per month in revenue that's up from about 240 grand per month just a year ago healthy growth considering they've raised just 2.7 million bucks uh each location paying caught 150 bucks per month five percent gross annual revenue churn seven percent expansion gives them 102 net revenue retention annually spending called a grand uh to get a new a new 150 a month account so that's about a seven month payback period pretty healthy team of 21 people in dc and other remote locations sam thanks for taking us to the top thank you very much