How Handshake (acquired by Shopify) CEO Glen Coates grew to $20M revenue and 1K customers in 2020.

this is the top where I interview entrepreneurs who are number one or number two in their industry in terms of Revenue or customer base you'll learn how much revenue they're making what their marketing funnel looks like and how many customers they have I'm now at $20,000 per top 5 and6 million he is help on global domination we just broke our 100,000 unit sold Mark and I'm your host Nathan lka okay top drive this week's winner of 100 bucks is Rick segman Rick segman he is stuck brick and mortar business that is his Focus so congratulations Rick if you guys want to win 100 bucks every Monday on the show in order to enter simply subscribe to the show on iTunes now and then text the word Nathan to 33444 again text the word Nathan to 33444 folks many of you reach out to me and you say Nathan so many guests on your show talk about the importance of batching but whenever I try and batch you tell me this you go Nathan they don't book back toback times so you or they don't show up after they book it's frustrating the answer is guys you have to use Smart Tools I use a tool called AE scheduling at Nathan lat.com I'll tell you specifically how I use it later on in the episode Nathan La here this is episode 547 coming up tomorrow morning I dive into the fin Tech space with Manuel Silva who's a partner at Santander innoventures it's a $200 million fintech fund they're very bullish on one of their Investments cabbage will break down why and where he sees fintech going all right guys Nathan lka here our guest today is Glenn coats he is the co-founder and CEO of a company called handshake they focus on putting the right product on every shelf in every story goes between Sydney San Diego and New York City Glenn are you ready to take us to the top totally all right man thanks for having me on the show than for jumping on so it's not going to be easy you know that right it's going to be tough oh I'm I'm well aware I've been out this for long enough to know that um I get to choose what's that quip from the Evernote guy I get to pick any 23 hours a day that I'd like to work there you go all right so so tell us what handshake does and what's your business model how do you make money great so uh as you kind of just pointed out um handshake is about getting the right product to every shelf uh in the world um and so that's you know think about every store you've ever gone into whether it was a shoe store or a grocery store or the hardware store all the products on those shelves that we buy as consumers how did they get there well the way they get there is that the Upstream suppliers have to sell them into those stores and the thing that most people don't know is that even though for you and I Nathan the world of buying things ordering things has become the world of Amazon you know if I want to order a car I pick up my phone and I order an Uber if I want to order food I pick up my phone and I order seamless the world that you and I are in where we get to order things really easily that world one step back in the supply chain is totally broken and it's all pen and paper and phone facts email imagine if we went back to the 80s and instead of ordering something from Amazon I had to pick up a mail order catalog and send in a form to order a pair of shoes from you know the place that I wanted to buy it so that's the world that those businesses are still in and so what handshake does is we basically bring that Amazon like uh modern technology powerered um buying and selling experience to businesses so that when the shoe store wants to order um 100 pairs of shoes from their supplier they get the same experience that you and I would get if we were ordering one pair of shoes from you know zapo or amazon.com and so um we really have two lines of business that we that we uh that we go to market with um one is handshake rep which is primarily mobile apps used by um sales reps who are working on behalf of the BRS the manufacturers the Distributors to sell that product into the stores and so we're replacing their paper cataloges their order forms all that kind of old school stuff with a modern mobile app uh for selling and then the flip side of the coin is um we make handshake direct which is a mobile and web-based um e-commerce uh product for B2B and so um you know when the sales reps not around and that um convenience store has sold out of hershy bars and they want to reorder the Hershey bars from the distributor um instead of picking up the phone and calling their rep or faxing the order form into the into the warehouse they can pick up their mobile phone scan the product from the shelf and just reorder it from the distributor the same way that you and I would order an Uber and what's your what's your business model so how do you make money who who's paying for what right so we're we're a SAS business um uh we sell to the manufacturers and Distributors and so we really have two sets of users we have the the manufacturers and Distributors and then we have their customers who are logging into our products but we uh we work with the manufactur and distri Distributors to um to sell to them so we we have in many ways a similar business model to a Salesforce where we're selling you know per year um per user or per website in the case of our e-commerce product um licensing you know the same as most SAS so what is kind of for so how what year did you launch the business then uh we got going uh you know I started working on handshake in about 2010 we got our first customers in 2011 okay and what was first year Revenue how embarrassing remember yeah it was it wasn't much I'll put it that way uh he was in the he was in probably in the thousands or tens of thousands you know 10,000 I I honestly can't even remember by the end of 2011 I I couldn't even tell you we were probably doing 10,000 20,000 a month something like that back in the day got it yeah and then if you fast forward us to where you're at today how many customers are you serving it's December 2016 yeah so we work with over a thousand companies today um out there in the market in in different Industries we have customers in you know food and beverage in you know apparel and Footwear in you know the outdoor sporting goods industry Glen is that thousand number though is that users or is that paying customers no that's companies okay that's actual companies they're paying you with their credit cards they're actively using you Etc right okay and it sounds like ways that you're kind of driving Mr expansion RP expansion is depending on number of seats are there any kind of value based other value based metrics you're using to charge more per company um so we the the pricing model for um our sales rep product is pretty straight forward it's it's very Salesforce like you know per seat per per year um on the e-commerce side look there's a lot of variables in um in the complexity of the of the of the experience that someone needs like all these industries work in very different ways um so the pricing on that is is kind of made to order I I guess you could say um but we don't have what you would think of as like um we're not inside the transaction if that if that's what you mean we don't charge a per transaction fee um we don't take a cut uh like that so on on average what what is one of these business paying you guys per month uh it varies we have um today we really have two kinds of customers we have like we have a small business kind of channel that is probably more the kind of QuickBooks based business or maybe they're running zero or something like that and those companies pay us you know there's a range but probably somewhere from sort of5 to $20,000 a year for the smaller businesses um and then the larger businesses that we work with pay us you know kind of go from there up right so kind of mid five figures up into kind of lower six figures um is is where our customer base goes for the kind of bigger companies so take take me through you said 2011 maybe you got up to 10K in Mr what will December 2016 Mr be uh I'm going to decline to answer that question or give give me give me a Range so we kind of know generally where you're at and be as vague as you want yeah so we're uh we're we are in the series B stage SAS company range so we are probably approaching what a um typical growth investor would consider the beginning of like a growth stage status company and what is that number I've talked to many folks that have raised a series B that have are pre-revenue right so most a lot of growth stage investors talk about like kind of 10 million in as being you know you know where they kind of find their sweet spot and um you know we're we're we're in that kind of scale right so I mean it's fair to say again be specific or general as you want fair to say 800 Grand in Mr plus or minus 100 Grand something like that uh without being specific you know we're in we're in the order of magnitud I thought you were gonna say without being specific yes I was going to say I was going to say I like this guy all right so good that's helpful to understand um so kind of big range is everything you're selling annual contracts or is there any folks actually paying monthly um we used to have monthly contracts um we we sort of sunset those about about a year ago now um and we we let some of the companies that were on those monthly contracts from kind of back in the day um stay on them as a kind of good guy um you know kind of a good guy yeah we kind of grandfathered some of the older customers in but um today all of our contracts are annual and what have you you mentioned you're thinking about series B right now you've already raised series B how much money have you raised to date uh it's about 24 million 24 25 million something like that and is that inclusive or exclusive of a series B that was including our series B so the three rounds that we raised were a $1.5 million seed round an $8 million series a and then a $4 million series B and what when did you close the series B uh in February of this year so you know 10 months ago now okay so you're either right now uh you're you're either raising another round of funding or you're in the middle of acquisition talks which one is it uh no neither you know we're we're only 10 minut we're only look at me look at me with a straight face and say neither no I can't look at you straight face and say neither we're we're not we're not talking about either we were fortunate enough to raise a healthy amount of money at the um at the last round and um we're in hardcore execution mode like we are you know I I kind of glossed a little bit over what our product is before you know I kind of said well we do this sales thing and we do this e-commerce thing but you know if you think about what we do you know it's we we make uh a really complex B2B e-commerce solution that works on the web and it works on Native mobile that's really hard and then it's integrated on top of a platform that also supports sales reps using an integrated sales automation tool that is running off the same data and then that platform that sits underneath all of it um has really Advanced customization features in it kind of similar to like a force.com that allows people to build in their own custom data types and their own business logic and even customize the UI of the application which works on web and mobile so this thing we're building is um it's no mean feed it's not a uh it's not a weekend Twitter clone project and um so so uh we are building out the platform you're throwing some shade on all those weekend hackers hey man if you want to learn like Swift or go or whatever like new language came up that you know build a Twitter clone but it's great for doing that but um yeah this thing we're building is really big and we are in hardcore execution mode yeah so you guys those of you watching and by the way you may or may not know this we're now publishing episodes of the top not just on iTunes but also on YouTube so you can go check this out but you can see once you raise 24 million you look over Glenn's shoulder they have these whiteboards with lighting tracks across the top of them what the hell is this these are not that's how that's how you know I've made these are not Ikea these are not Ikea whiteboards Glenn what's your team size where are you guys at uh I think we're at about 70 people right now 70 or 17 70 and where are they based uh they're almost all in New York we have uh we have one team member up in Toronto we have one team member out in Fort Worth but are for the most part A New York City based company and give us kind of a general breakdown how much Dev how much sales how many support um yeah so uh you know the product and Engineering Group is uh I think it's probably 20 people give or take at this point between design engineering product management those kind of people um you know sales teams probably 20 people something like that you know the service and Professional Services team like customer success and all that stuff is probably 15 people marketing GNA on top of that so it's it's a pretty balanced like company for a you know ass SAS product and go to market strategy y okay good that's upful understand go let's go back to economics for two seconds here uh you've raised Capital which means you have a pretty good idea of how to use money to get more customers right where to spend money to get you know customer acquisition um I know you have kind of it sounds like you have two very distinct cohorts you know one's under 50 Grand ACV ones above 50 Grand ACV but generally speaking what do you project in kind of your board decks and your assumption cells and Excel she it's the lifetime value of one of your businesses or customers well I mean the lifetime I don't think that much about lifetime value because that that that depends a lot on how much you're paying right and different cohorts are behave differently what what I think about and what a lot of the the SAS um the SAS investors and you know the kind of people who are thinking really well about economics to thinking about payback period right because that's the kind of that's the uh the the kind of speed liit on how fast you can grow and like what the cash efficiency of the business is and so a lot of what we're spending time on right now is thinking about how can we get our payback period into a place that we feel um is right for the business is the right blend between um growing fast because the faster you try to grow like the more sales reps you hire well every time you hire a sales rep the got a you know six Monon ramp in front of them where you know they're collecting a base salary but they're probably not delivering that much new revenue and So the faster you go on that side the worse your payback period gets because you're supporting a larger goto Market team you've got all annual contracts though right you're pulling on most of that cash forward unless your payback period is more than 12 months right but yes but a rep doesn't immediately start closing business when they show off on day one right like you got to train them you know so like how far you dial that needle up and down is like if you're more conservative with your reps then more of your reps are like if you don't hire as many more of them are ramped at any point in time so they're the amount of cash they're generating versus the amount they're costing is more favorable to the business but the less reps you hire like that's going to slow down Top Line right so that's the line you walk is like how fast do you um make investments in go to market whether it be sales reps sales leadership you know the services team that has to support that it's a very tough line to walk to to find the right balance between the Topline growth trajectory that that you want and the payback period that comes with that what are you aiming right now in terms of uh kind of Target growth rate month over month in terms of uh Revenue growth you know for a SAS company at our stage like you know doubling every year is the kind of gold standard so that's the standard we hold ourselves to um so you want to be doing you want to be doing 100% growth per year I think think you know with what's gone on in the in the kind of public markets you know what's happened to like SAS valuation multiples in in the past year and the kind of the Swing probably a little bit away from like growth at all costs towards you know a little bit more profitability like fiscal uh responsibility um you know for me at this point I care more about delivering 100% growth with a better payback period than I care about delivering 200% growth with like a terrible payback will you do that in 2016 100% year-over-year growth from 2015 yeah yeah yeah that's how we're we're measuring the business like quarter to quarter like those are the numbers we look at is like we want to be always looking at that quarterly growth rate and making sure that it's pointing to us doubling and then what do you you talked about payback period how many months are you kind of where would you get concerned if payback period was more than x months where would it show up a red flag for you well if you look at like what the market considers a red flag I think if you if you talk to the The Venture community and the guys who really know this stuff you know they're going to flag a payback period that's like greater than two years as you know probably a bit of a problem um and uh that doesn't mean you can't sustain that business because if you've got a customer lifetime that's more than two more than that then you will eventually get paid back but it just it's just cash intensive because it just you've got a longer cash outlay before it comes back in through the door so it makes the business more expensive to scale if you look at companies like Salesforce at the scale they're at like they're going for a payback period that's around about a year I think Salesforce might be like 11 months or something like that so they managed to just kind of n nudge underneath that um but when you're trying to like Drive pretty aggressive growth like keeping your payback period you know between a year and two years is kind of in that sort of healthy range um if you can get it down towards a year that's like really nice um so that's kind of you know my world is we want to be at 100% growth and then given that let's get the payback period as low as we can like right now you know trying to get it between a year and a year and a half is where I feel comfortable with the business okay last few questions here before we get wrap up with the famous 5 um are you burning more or less than half a million bucks in cash per month right now can't disclose how much runway do you like to have in the bank before you start thinking about another raise I think you've always got to give yourself at least six months to raise money like you know from the start of like seriously starting conversations but frankly like you know it's as the CEO it's your job to always sort of be raising money like even if it's passively but I think once you begin an actual process you want to give yourself six months at a minimum my question though is uh let's I'm making this up I don't know your numbers let's say you have uh uh 17 million left in the bank right now your burnings uh I'm making this up a million in cash per month that's a 17mon kind of Runway what what amount of Runway do you feel comfortable where you can dedicate 100% of your time on execution versus going out and raise and raising all right how much runway do I have to like not how much runway do I need to have to not even be thinking about raising correct like when you go out and raise a new round you don't want have to go raise six months later when you raise a new round how many months of burn are you raising for right yeah usually we've raised for a couple of years like that's been like we want to have each time we've raised money it's like bought us basically two years of Runway got it um so yeah I think you you really need to start thinking about run raising when you've got a year of Runway but like the real like you're out there pounding the pavement stuff is probably when you're into the last six months ignore expansion revenue and upsells gross customer turn annually where's that at yeah so that's a really interesting story for us like as we've moved up market right so like if you look at handshake three years ago almost all of our customer base would have been or much more of our customer base would have been in the S&B category um and as we've moved up Market um churn has come down a lot right because you know small businesses just go out of business more often um from what to what what was it when you were almost exclusively small business and where did it come down to yeah I mean it would fluctuate a lot the other thing about small businesses and back in the day when we had monthly contracts you know you could see seasonal fluctuations where they're like well you know I want to use you for my selling season in January but I don't really need you in April ail and I'll come back in July and so we would see you know months that if you annualized the the churn rate could be you know there'd be months where it would be in excess of 50% right like that's a lot I mean not in the one month but annualized it would be you're talking you know five you know that 5% monthly yeah four or five something hard to build business on that right really hard to build business so the two things that we did to kind of combat that um were one is moving to annual contracts right which helps smooth that out and yeah maybe some of the guys who would have only paid you for 3 months of the year don't buy anymore but that's you know that's the price you pay for a more healthy kind of unit economics base um and then but just moving up markets so like today we're selling to um you know companies I would say our sweet spot today is companies that are selling you know that have between you know say a 100 and and 2,000 employees okay um we don't do a huge amount of business today that's like small well big big Enterprise um and and we're doing Less business that's smaller than that um you know and churn now has come down to you know I think we cut it down from you know an annualized rate in the range of you know 40 to 50% in some quarters you know it's down in the teens now heading towards you know the kind of gold standard you want to be at is around 9 10% annually annualized yeah that's great so we're kind of we're in the teens now which which feels a lot better than like 40 to 50 and it's kind of going down and that that feels pretty good that's gross customer turn if you add in upsells are you guys add that net negative Revenue turn yet yeah we we've always had net negative Revenue churn because like the things for us is like you know they might buy a couple of sales rep licenses and then they can always add more sales rep licenses and that tends to happen and then they might say great the sales rep our sales reps are loving this let's get your e-commerce thing to give to our customers so we have a lot of both like seat expansion and product expansion kind of opportunity so our churn has always been great it's always been negative um it's just like that gross Churn number you know even with a really good net negative churn story you don't want to have a big uh sorry a net and you know even with a negative net turn story you still don't want to have a big gross turn story you want your underlying grow high gross turn has maybe a leading indicator to Future not negative net revenue turn totally yeah aome it's a leading indicator yeah okay if if Amazon came to you today offered you 120 million bucks for the business you sell uh no you're so full of you can't I wouldn't I just did the math in my head all right what math were you doing I I think the business is worth a lot more than that even today and uh and uh the long-term potential is many times that guys I get asked all the time Nathan you host all these interviews hundreds of them per month how do you do them efficiently and guys the answer is simple people always agree to my calendar backtack meetings I batch my interviews to stay very efficient and the way that I do it is I use a tool called Acuity scheduling at Nathan lat.com schedu and the reason I use them is very simple they keep my noshow rate very low because they send out reminders about when the interview or the meeting is coming up and also they make it very easy to schedule time right I don't have to go back and forth via email 10,000 times with people I'm trying to meet with at Nathan l.com schedu helps me so much and by the way look I like have so many meetings I'm the best at meetings okay I do them back toback very very efficient you guys know me many people say I'm the most efficient they've ever seen okay so I use the tool it's so efficient and by the way I got Gavin I said Gavin he's the CEO I said I want a great deal for my people he said Nathan well most people get a 14-day trial isn't that great I said no he's giving us a 45-day free trial at Nathan la.com schedu that's it's not going to stay up forever so go get it now Nathan lat.com schedu yeah yeah awesome all right let me throw you some softballs I'm giv you some tough stuff Famous Five here these are one word answers Glenn you ready first one what's your favorite Business book ah favorite Business book um I'd say five dysfunctions of a team number two is there a CEO you're following or or studying right now um honestly I would say say uh Dave yold who's a bit of a mentor to mine he was he is the CEO of service Max they just exited to GE a couple of weeks ago congrats Dave if you're listening um but Dave's been a really great mentor to me and I and I really look up to him number three is their favorite online tool you have like tap to um my favorite online tool I don't know if this counts is is probably Boomerang for Gmail M yep let's go to number four yes or no do you get eight hours of sleep every night yeah religiously I'm uh I'm I don't deal well with not getting sleep I turn into I'm I'm already a cranky pretty angry son of a most of the time anyway uh if I go below eight hours it gets really rough to be around me what's your situation married single you have kids uh I am uh I'm not married but I'm I have a long-term partner got it no kids then no kids how how old are you I'm 35 all right don't think about it last last question take us back 15 years what do you wish your 20-year-old self knew oh what do I wish my 20-year-old self knew I wish my 20-year-old self knew uh how intense uh running this company was going to be and spent a lot more time making music and going surfing top drive there you have it from Glen coat CEO of handshake he would have surfed more if he knew how intense it is to really build a longlasting and look they having a lot of success uh in their business over 24 million bucks raised to date serving over a thousand uh customers they like to stay under a year in terms of payback period but not sacrificing 100% year-over-year growth somewhere around can confirm but somewhere around 800 Grand a month they recuring revenue is what a series b or series cish company's looking at they've got 80 folks uh or 70 folks between uh in based in New York City again making it easier for stores to get what they need and really deal with their supply chains and their product Supply chains Glen codes thank you for taking us to the top thanks Nathan if you enjoyed Glenn today go back and listen to Josh yesterday his podcast to pitch made 80 grand in its firste sponsorship revenue and pass 700,000 downloads okay top tribe I'll see you bright and early tomorrow morning and don't forget before you listen to any other episodes subscribe on iTunes right now for your chance to win a 100 bucks every Monday [Music]