Happyco Revenue & Funding (2024)

hello everyone my guest today is jindo lee he's a ceo and founder of happyco a software provider to the multifamily property management industry before happyco he worked in the video gaming industry on titles like mortal kombat and gauntlet he also founded and exited a few other tech companies as an ex-soccer player and studied graphic design at the university of south australia junior you ready jindo you're ready to take us to the top yeah yeah let's do it all right so you basically stole all my audience's childhood with mortal kombat and gauntlet huh oh yeah it was uh it was fun it was um you know games that i grew up with as well right and so uh working on getting to work on those titles was was well it was kind of a double agent it was really really fun to be able to do that but on the same token you got to see how the sausage was made and you're like man this isn't as great as i i thought it would be yeah yeah yeah we recently had howard on uh who's running start engine now but he was about activision back in the day and then obviously launched huge titles like call of duty and world of warcraft and such and once you realize how those things are made you start to go oh my gosh the psychology is incredible yeah it's um it's i remember like there was one um it was going to like recording studio trying to do the audio for i think it was maybe gauntlet or one of those titles and um this this is what killed my my whole childhood right in this one moment so i was like really excited to go check out how um the recording was done and this audio and i think they were trying to record like the death sounds you know like that kind of stuff and so i was like oh i'm going to go in and check it out i was trying to find the recording stream i couldn't find it and finally i saw this sign you know like recording in progress whatever i looked in and i saw this guy um you know the sort of the simpsons character that's like overweight eating pizza and a you know his box on his tummy and then he's just going right i'm like oh man i thought there would be at least like some actor from hollywood or something uh but it was just the pizza guy and i was like man that really sucks that's hysterical all right now you're building happy co so tell us what the company does and is it pure place ass um yeah for the most part it is a a it's a sas model that we we are adopting so um maybe i'll take a little bit from the top so happy co what we do is we actually believe in in building um stronger health healthier and happier communities and you know we actually believe that life is short and we want to help people live their best lives so um in a very roundabout way we actually offer very beautiful um like what i call our easy to use people-centric software and technology for the multi-family real estate industry so who's actually buying uh it's it's property management companies there's asset owners that manage and own residential real estate specifically in the apartment industry okay companies buy okay and the any geographical kind of just kind of center and cities rural um i mean the huge focus for us is is north america so um like multi-family as an asset class like the apartment industry only really exists in the us and really america it yeah it's it's crazy because i i came from australia um so this accent you're hearing isn't irish uh it actually throws people off and they're here and they look at me like i don't know what to do but um so in australia there is just single family like for rentals it's just single family or condos right so you can buy a prop buy an apartment but you can't really rent one um from like a uh like that's institutionally owned um so really this this only exists in the u.s um having said that it's actually starting to explode in other cities like you know i know in europe it's getting pretty huge now south america is getting pretty big um and so i think it's starting to catch wind and everyone is is trying to model the u.s sort of um the bus the model that we have in the u.s so yeah it's getting funny yeah okay so these guys are paying and now i know we we're short on time so i don't want to go down every customer core so i mean on average what would you say one of these folks are paying you per year to manage their properties um so what actually what we do is actually sell software to them right to to do um yeah yeah that's what i'm asking what do they pay for the software between like uh anywhere between on the enterprise side between like a 50 to 100k acv is what we typically see but again if i force you to average across your entire base what would you say that kind of average acv is um if i took out all the smb then i would say around the 70k okay but but again i i guess what i'm asking really is the reason i'm asking an average is that will tell us who your like main cohort is do you have a like a large majority of your writer when you made it from smb no um our our focus today is really on the enterprise side so anyone that manages you know 2 000 apartments and above um our largest customer manages a couple hundred thousand units okay uh historically though are you now moving up market or have you always had kind of average acvs of 70 grand no we our when we first started our average acv was maybe 500 a month a year yeah so um we started off in the smb space and and that then we over time and probably in 2017 we've made this jump from the smb to enterprise okay yes yes so see i want to understand that trend so so get i want to dive into that but first just that's now you know why i'm asking so today what would the average entire customer base it's obviously lower than 70. that's a very tough question i i um call it uh about five thousand dollars okay if you kind of got across all our customer base so that's really helpful now take me back when did you have the moment we're like ugh i love these customers but we've got to go out market yeah so i i can tell you exactly when it happened so um if you took went back so smb is you might manage um uh like 200 properties right like 100 doors so the moment that it blew my mind was we had a call in 2016 and some guy rang and said hey i want to use your software to to do inspections i'm like oh great um how many properties do you manage he goes well we own and manage a hundred and ten thousand units and i was just like yeah we can handle that and hung up the phone and we're like holy crap we did the math and then we're like that's that's amazing that would have been the equivalent of signing up um you know a thousand smb customers and so we actually launched um to them and the cool part was with an smb customer you you spent probably one support ticket a month on an smb customer paying you 50 bucks a month right and then with this enterprise customer um that was paying way more we only did one support ticket a month as well and it was a very uh it was an easy question to answer it wasn't like hey how do i turn on my ipad yeah um it's that big aha moment i'm like you know what i want to keep doing that this that's smart so okay so when did you launch the company we launched it in officially in 2012. okay and the payment enterprise was what year 2016. 2016 pivot enterprise okay and what's team size today uh we're just about 55 people in the company oh very good and have you decided to boost drop the company or did you take dilution and raise we've we we bootstrapped for the first uh maybe nine ten months and then the rest we've kind of had to raise some kind of jindo gosh this was gonna be a bromance i was following in love and now you tell me you raise how much how much did you have to raise yeah we've raised about 11 million dollars today okay i mean not horrible but still a big chunk why'd you have to raise i mean what what is the most cost intensive thing about what you're doing so like people right it's like hiring people and and then with sas models as you probably know in your view viewers know um there's this sort of value of death where you kind of have to build stuff you don't get enough revenue and so you have to kind of figure out creative ways to do that um i would have to if i went back and and redid everything um i would probably not raise a single dollar yeah yeah i mean by the way i think most founders generally would say that now was the 11 million equity or was there any debt it was all equity all equity okay yeah i think most founders would say that so all right let's go let's let's i know we're jumping around but let's go back to the start here for a second how did you get the first hundred customers okay so um the way i sort of started this was i actually owned a bunch of real estate and i really loved investing and then um through that process i had property managers that would be managing my properties and they had um they were giving me these reports of the inspection reports of pen and paper and i'm like what the hell is going on i pay you good money to do this and i found that there was no software so i made um uh some screenshots on an ipad one so no camera just ipad one and i rang 20 companies i called call and i said hey i've got this cool app can i come and show you and i'll go in and demo the the app it's like screenshots and an ipad one fit nicely they were trying to tap it i'm like no no these are photos it's not an app and we actually had 19 of the 20 people i met actually signed up to use the software before we had anything so that was did they pay that's how yeah so they paid they decided to pay 50 bucks a month okay so you had about you had about again a thousand bucks kind of in pre-sales yeah it wasn't a lot but it was like oh crap now i've got to actually build it i've got the actual contracts from from that from from back in the day that's so cool it was so dodgy it's just yeah i think by the way why do you say it's dodgy no that gives a bad that gives a negative wrap to what you did i think it's smart well it's smart in hindsight but uh the the the copy that i have have on there is just you know i i repair you money i'm like oh my god like there's no sophistication in there whatsoever but yeah that's the way to do it yeah but you know and i went back to the um went back home and i was like rang my co-founder and i said hey can you build this at night for me and he was working at a another video gaming company and he's like yeah i'll do it and that's how we got started that's great so now fast forward whatever six seven years how many customers are you serving today uh all up in the portfolio uh around the sort of 1500 accounts okay 1500 accounts and then you have some roll update on your website but give me the updated numbers so 1500 accounts how many locations managed are doors managed uh so we are at about 1.9 million units under management yeah okay 1.9 million kind of units and then um you also give quantitative metrics around inspections and photos so how many inspections are you doing to call it annually today oh geez i think we're we're we're around the four million mark right at the moment and or number of photos this is cumulative number of photos and it's very important but it's cumulative um we have about a 131 million photos what about just over the past year um i would say about maybe six or seven million would be over the past year so actually not that means growth rate it's kind of you've only been in business seven or eight years and you have 130 million total and only seven over the past 12 months that's actually declining in terms of usage oh sorry uh a month oh god yeah so that's about 84 million over the past 12 months yeah we've grown a lot in the last um i'd say last 24 months has been we've seen a lot most of our growth in the last 24 months yeah yeah now churns critical in a sas company what's been your annual revenue or your gross annual revenue churn um it's it's really been uh and just so we really focus on the enterprise we're going to look at smbs smb right so i'm trying to see let's quantify the revenue loss there we would churn about maybe five accounts for the smb a month okay um for enterprise we we've churned um two accounts in the last 12. but jindaway it doesn't matter let's not use the number of accounts because they're so different that's why we measure revenue churn because then you look at just a dollar not how many accounts make up the dollar so revenue churn over the past 12 months has been about what you think oh um it's it's been maybe uh 10 something even way less yeah does your expansion as you upsell across your your kind of three product tiers right then happy manage happy insights happy inspector does it more than make up for the 10 lost yeah so net dollar retention on on average is around 112 okay so you have 22 expansion then on the 10 churn and if you split up the cohort to just enterprise i think it's something along the top hundred customers um have a hundred and sixty percent the last 12 months have 160 retention yeah that's good i wanna i wanna talk more about kind of your upsell motion here in a second but uh but i mean can i do i mean i guess tell me how you're adding new customers today so if a new customer is coming on at a 70 000 acv what's your full weighted attack look like um so we look at it from a payback perspective that's fine it takes 12 to 12 months to pay back okay so you'll spend 70 grand to get a new 70 000 a month customer a year a year 70 grand a year customer fully loaded marketing marketing events uh customers implementations has a portion of that and um all the sales team yeah what's the last conference you went to that that worked really nicely for you uh we go to all the industry conferences uh last one was uh nmhc which is the national apartment like the housing count multi-family council and then we're going to naa next week which is the the big big one what's it called national apartment association national apartment naa yeah very that's that's the big one yeah yeah that's good and obviously there's sponsor fees involved there but still generally if you spend 10 grand you're going to look to get 10 grand a new ar wait way more than that yeah so what we do is we kind of run like a multi-touch attribution and which is really tough in enterprise as you know because you talk to someone and it really is another 10 more touches before you even get to something exciting so um but but the conferences they do really well for us yeah yeah that's good okay 2012 you scouted right at 1 500 customers you're moving into the enterprise but historically the averages you said caught maybe six grand acvs or 500 bucks a month i mean if i multiply that that lower than that like historically it was um you know 50 a month like that's when we first started right and then we started to on average if you took away all let's say um the 1400 customers and just took on the first the top 100 then that would be that magic number 70k okay got it and how many what percent of revenue do the top 100 customers represent would you say about 70 of the the revenue okay i mean yes that's fairly that's fair okay fairly significant so um yeah and when did you sign your first enterprise deal was it was that call you had back in the day yeah i think that was the one that we we kind of always said that that was the time when we went oh let's move to enterprise we did have a few um enterprise customers before that but they they were just big accounts we didn't call them we didn't classify them as such so really 2016 was that first the first time we made that switch consciously yeah and then look i mean can i back into the math so 100 of your enterprise accounts 70 000 acvs you're at about 7 million run rate today without including your s b cohort uh yeah about that that's that's good and then you said that that represented about 70 of your total so can i multiply that times 1.3 to get your kind of total run rate today or no um i i think you you could get yeah they would be very close to that number yes okay why why well i guess let me ask you about growth rate right so so if that's where you're at today what would you put growth rate over the past 12 months uh so last year we grew at a 60 top 1 year over year and then we we had a minus 10 percent ebitda margin so we we look very um we look at that pretty closely uh this year we're looking at a um we're on track to doing about seventy percent top line and then a ten percent positive even margin this year yeah so you're you know we can calculate e40 metric sixty percent growth negative ten percent ebitda would put about e50 which is pretty darn healthy yeah how do you manage decisions around kind of fluctuating those two things increase cash burn to drive growth decrease cash burn but lower growth um so i think so last year what we did is i i hate fundraising i'm really crap at fundraising and in 20 in 2017 was our sort of last round of so let me shift a little bit back and hopefully this will resonate some of your your listeners 2015 i think 2016 we raised bunch of a bit of capital and we had about maybe 25 people in the company at that stage we had about a hundred and ten thousand dollars left in the bank next payroll was in three days what year was that that was 2016 yeah that was 2016. 100k left in the bank yeah 25 people on payroll next payroll cycle would be in three four days like that was pretty stressful that's like the you know i remember going i don't know if i can swear but damn we need to get this sorted um and i like we were negotiating a term sheet and it just took forever and then finally i rang one of our investors i said hey look um this round that you agreed to be in we probably can't do it like we may not be able to do it because we're running out of cash and he's like um these are a bunch of belgium guys really great guys they said you know what i'll wire you half a million dollars and we'll get the paperwork sorted afterwards and there are investors on your cap table today our cap table today and um yeah my co-founder and i was sitting in my my bedroom of our living room a studio apartment in san francisco that's how glamorous we are we sat down went damn like i never want to do this again that we saw the the wire hit the bank account and we just went we dodged a bullet and so i decided i don't want to have to do that again so when we raised the last round of funding in 2017 um our goal was to get profitable and we got there in um december last year that's good and so what today kind of pro you know ebitda margin is what positive 10 percent close to the 10 percent contract you're doing positive yeah yeah and again if you're doing 7 million from enterprise and then multiply by 1.3 it's called 9 million run rate uh monthly that means you're taking what i mean 750 a month or talking about 75 grand in free cash flow monthly you just let it pile up as a safety net um so what we what we do is we've we've we spent a lot of time re recreating a bit more discipline and structure in our organization so what we do we have a planning framework which sounds really boring but what it is is you would say okay now we have um so let's say in q1 we take that for example we we actually came up uh half a million dollars ahead of budget right so we go okay well half million dollars hit a budget then we go how do we spend this money and then we we have a bunch of projects which we have on our back burner we go we should invest in these two or three areas one of it is actually to um uh increase the the well one of the projects was to make our existing employees happier so what does that mean reevaluating their benefits and and their salaries um but that's one project and there's another two more which which we kind of picked and we sort of said let's allocate that that capital into these two or three projects that's how we any plans to raise capital now uh we are actually going through a fundraise right now yeah what's the right i mean what do you think the right amount is to raise currently um so we're we're doing it because we have a bunch of customers that want to put capital in the company um and for us um yeah we don't need to raise and we really just want we're working on a few projects that would need our customers to back us i don't know how to really give more away but no i'm just curious like are you looking like a like a 5 million on 10 million 20 million uh we're probably going to do a 10 million dollar round but um only half of that will probably hit the balance sheet and then uh we'll probably do a bit of debt on top of that as well if we if we if we choose do you think you'll do 5 million in equity from customers and the 5 million debt if you want to i think something along those lines would is what we're we're aiming for yeah which jet firm do you think you'll work with um we're going to go with a very very more traditional and we don't want to do any venture debt why is that like i looked at it and i just think the venture that i think is structured in a way to make your business um like i don't know just it's not very friendly to to a business and right because you have these covenants and you have all these different like claws that make you work a certain way and if you change your business model you can't change it because they're like well you said you were going to do x and now we're going to call back and we're going to talk to any venture debt firms where they just there was no covenants no warrants and no personal guarantees it was just a simple interest rate uh there's very few that will do that interesting i do deal with it by the way surprise i do this on the side i would do a deal with you where it's no covenants no warrants no personal guarantees five million at a simple interest rate i'll i'll do that do any day okay let's chat i'm dead serious i do this my whole thing is like i saw some of these term sheets as well and i'm going because they all listened to the show and they asked for interest to ceos and i started looking at the term sheets i'm going this is crazy it's ridiculous uh so i started i started lending myself and you know by the way i'm not getting rich from it but i'm loaning it like you know 10 to 15 kind of very simple interest i get no equity no covenants no warrants and it works nicely for me and the founders yeah yeah and i think that that's a that's a really good product that you have there because um i looked at everything and it was just very sharky right and i'm like well this is no better than raising equity um but the ones that we're talking to at the moment are people that will base they'll lend on your revenue yeah or your or your accounts receivable and we're like that's easy for us because we have a good control over yeah yeah i i will go up exposure into any one company up to 1x arr so i'd max out at not around nine with you guys five is easy yeah um cool awesome i'll i'll send you a bullet you know email bullet version kind of thing after this and we'll see if we make something work that'd be fun all right let's wrap up with the famous five number one what's your favorite business book i love all of them um i i really like principles by ray dalio yep number two is there a ceo you're following or studying right now ceo um not at the moment no i i i think everyone has something to i can learn from number three what's your favorite online tool for building your company um [Music] we use asana a lot okay number four how many hours of sleep eating every night hours of sleep oh man i have a 18 month old baby so um maybe between three to four i don't know okay so married one kiddo or more uh one married one kid and a little tip have a kid when you're much younger than than one how old are you i'm 39 this year yeah you're still young all right last question what do you what do you wish your 20 year old self knew um just just do what you want to do and and then yeah don't don't live up to anyone else's expectations it's it's your life and just choose how you want to live your life guys there you go happy co started off making inspection seats going from pen and paper to digital ties now they're doing about 9 million bucks in terms of ar serving 1500 customers but their top 100 customers make up 70 of their revenue about 7 million bucks in arr they've raised 11 million bucks to do this profitable 75 grand a month going to the bottom line they've grown about 60 year over year 55 folks on the team 10 annual revenue churn gross basis 22 percent expansion for 112 net revenue retention annually spending call it a dollar to get a new dollar of arr judo thank you for taking us to the top thank you one more thing before you go we have a brand new show every thursday at 1 pm central it's called shark tank for sas 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 1 pm central additionally remember these recorded founder interviews go live we release them here on youtube every day at 2 p.m central to make sure you don't miss any of that make sure you click the subscribe button below here on youtube the big red button and then click the little bell notification to make sure you get notifications when we do go live i wouldn't want you to miss breaking news in the sas world whether it's an acquisition a big fundraise a big sale a big profitability statement or something else i don't want you to miss it additionally if you want to take this conversation deeper and further we have by far the largest private slack community for b2b sas 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 up for that at nathan latka dot com forward slash slack in the meantime i'm hanging out with you here on youtube i'll be in the comments for the next 30 minutes feel free to let me know what you thought about this episode 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 we got to push them away click the thumbs up below to counter them and know that i appreciate your guys support all right i'll be in the comments see ya