How Hiconversion CEO Zee Aganovic grew to $6M revenue and 100 customers in 2018.

hello everyone my guest today is ze aganovic he's the ceo of high conversion an enterprise software company offering the first adaptive real-time testing and personalization solution for e-commerce a serial technology entrepreneur z thrives on solving big real-life problems through innovative technology to help global brands transform their digital business z are you ready to take us to the top all right tell us about high conversion what do you guys do and what's your revenue model how do you make money yeah so the the problem that we are solving is the buying experience on e-commerce sites so we help our clients merchants we call them merchants to stage memorable buying experiences what that means is that when visitors engage with their brand every element of that engagement can make positive or negative impact our mission is to create a better presentation of content messaging uh functionality of the site that would then ultimately yield directly measurable results uh our revenue model is based on uh sas subscription that our clients are paying and the rates are proportional to number of visits that that site has got it so without going down every customer cohort what would you say the average customer yeah what would you say the average customer pays you per month yeah so the the start of the company was to serve larger enterprises so their you know size is four to six thousand dollars a month uh we are right now expanding our reach into uh mid-tier of marketplace and our entry price point right now is two thousand dollars a month okay but when you look at an average of your current paying customers would you say it's closer to two thousand or four thousand yeah right now we we closer to five thousand our average client is generating five thousand dollars our goal is actually to go down to a sub thousand dollar level but we will do that in stages before scale and expand the business and ideally get higher volume right exactly so we want to make it available to every merchant out there and the only way that can work is if it is you know simplified and easy to use for masses of other merchants z when did you launch the company what year um you know the idea started long time ago you know that the same team that built this company has built uh several other startup companies and uh you know those companies were acquired by majors like microsoft rico corporation so we always have a pipeline of ideas so this idea incubated itself in you know over 10 years ago but the real businesses last three or four years it took us a while to you know formulate a targeted market uh create product market fit and now ultimately uh build the distribution that reaches customers so you've launched you launched officially in 2014 and have you chosen to bootstrap or raise uh we self-funded it for most of the time and then we raise some money from institutional investors okay so how much capital have you raised to date uh up to now i i think it's roughly 10 million dollars 10 million and why why'd you i mean it sounds like you bootstrapped for many years why decide to finally raise from institutional why not keep it all you know for yourself uh we learn over time that you need to have a balance if you raise too much money too soon that's equally dangerous as not having enough money to execute so our approach was to incubate the idea through self-funded and proof in the marketplace and now we are the stage growth stage of the business and it makes sense to now add additional capital to you know take your full potential in the marketplace very good make sense when was that round the 10 million round uh we we actually raised it in in a smaller uh increments so the most recent one was uh 3.5 million dollars last year and then before that we had the smaller increments in like a million and a half two millions etc we have extremely good relationship with our investors and it's not the issue do we have access to capital it's like what's the right thing to do at right point in time tactically z though what did you do there did you did you basically have one investor early on set a term sheet for a convertible note and you just let it roll so you just use that same term sheet to add additional capital or did you renegotiate a term sheet every time uh we renegotiated the the term sheet every time it's a lot of work your lawyers love you it's it is but it is not if you're dealing with the same investors so it was simplified procedure that's good that's very good okay and what you know four years in what have you scaled to in terms of total customers using the platform we have several hundred customers that are using our platform but those numbers are now changing uh dramatically because uh we are getting good traction in the marketplace and one of the reasons that we are getting good traction in the marketplace is we took approach of building the community of users uh instead of selling our solution uh through traditional ways explaining value proposition and what we can do to or for our customers we created a partnership with several major e-commerce platforms including magento and payment companies and together we are creating developing best practices for you know checkout optimization or general customer experience it's by invitation program where we select uh merchants who will participate in a program and at the beginning these merchants don't have to pay anything we as a sponsors of this initiative would cover the initial cost of those merchants using our technology and then as they are using the technology they are learning about what that technology can do for them which then changes the way how product is being sold and adapted in the marketplace but z just to be clear when you say you have several hundred customers today i mean so it's like you have actually 200 ish or a couple hundred that are actually paying you full price not free subsidized users yeah so there's a like the full customer base is over 600 companies that are at different stages at this moment at different stages of sales cycle where full price is let's say something closer to 100 customers okay that makes sense yeah so if i take again i'm just back in the nap getting this but if i take 100 customers at that you know 5 000 average you told me earlier i mean it's fair to say you guys are somewhere around or north of half a million bucks a month right now on revenue yeah so we are private companies so we tend not to disclose uh revenue numbers but you can triangulate and make your own yeah i i'll never guess but if you give me two data points and all i have to do is multiply z i can't resist i'm going to multiply i know i know multiplying is good business uh since we have that data point give us a sense of growth if you're at 500 grand a month today where were you about a year ago we were probably one tenth of that oh wow okay i mean so that's that's so called 50 000 bucks a month yes so i mean that's incredible growth what drove most of that growth the partnership model the testing personalization is a very crowded space and our technology is quite disruptive to how other testing and personalization companies are solving that problem and you can spend a lot of money marketing and promoting and creating differentiation or take a path that we took to put our product our solution into hands of targeted qualified customers and earn their trust and and business so you follow kind of an account based model you're picking who you're who you want as your customer and you're reaching out absolutely we we we select uh the the merchants that we think are the best merchants to work with us and then we focus on those merchants and and we get them engaged with us that's great yeah the idea is to remove any barrier to entry to remove any risk from the merchant side and basically deliver value to merchants at every point of contact [Music] what's your i want to understand kind of what that looks like from a personnel perspective what's your team size today and how many are focused on sales so we we have a let's say uh 26 employees and the sales team is four people okay okay that's pretty effective sales team then and where is everybody based uh we are pocarotone florida based company we have a few uh external resources but let's say 95 percent of people 90 percent of people are here and z including your sales people any other marketing or onboarding any any other kind of direct paid spend you're doing what would you consider your fully weighted customer acquisition cost to be um it is changing now it's changing dramatically like a year ago it was in in many thousands of dollars as as you can imagine direct sales model is very expensive model it costs you a lot of money to just get the lead and then a lot of time and effort to sell so we are trying to reverse that model and and create the pull so that we exchange the cost of marketing and sales with the cost of services and value that we deliver to to clients and that cost is going down as as we are automating and improving uh our ability to engage and and deliver value to merchants so it sounds like you know for your kind of average five thousand dollar a month plan today you're willing to spend a couple thousand bucks to get that account that still puts your payback period i mean if you spend five grand to get a five thousand dollar a month account that's a very quick payback period it is very good quit payback period assuming if you know 100 conversion what do you mean by that meaning if you spend a few thousand dollars to engage with the customers and you convert every one of those customers well they're not a customer unless they convert otherwise it'd be otherwise be called trial acquisition cost exactly yeah all right yes so let me ask a different question then you're to get actually a customer how long are you willing to wait to get paid back are you health are you happy with a 12 month payback a 24 month payback six months again it's it's very fluid we are building this new go-to-market model our goal is to have basically an immediate payback from from customers uh i cannot state that we reach that goal yet but the setup that we are creating has that potential many would argue z with an instant payback period that you're actually not being aggressive enough uh that your price too cheap why do you want to get an instant payback uh it's not no no it's not the question about price we we are not winning our customers based on price we are winning them on total value but what we are trying to develop here is market pool so that all we have to do is to demonstrate within a limited period of time that what we are promising or telling to those engaging with us is actually reality so that proof what i'm saying is like very quick within 30 to 45 days our customers are starting to see directly measurable benefit of our solution and the only cost in ideal case we incur is the cost of services that we provided up front to win relationship with that client okay great let's move on last question here before we wrap up a churn's critical in a sas business uh you have a variety of plans and price points so let's ignore logo churn and just talk about revenue churn in a given year so the past 12 months obviously your growth has been incredible but when you look at the cohort that was with you a year ago how much of that revenue churned and how much do you expand it yeah so we we closely track that churn and we are within margins of other sas companies like ten percent uh churn per year per year is acceptable to us but we believe that we will have uh much better retention than that yep okay so ten percent low ten percent revenue churn per year now it sounds like you're also driving up sales uh w will your upsells on that cohort more than make up for the ten percent of lost revenue yes uh our accounts are growing because uh our pricing is based uh or proportional to number of visits that that site has yeah so organically you know sites are growing more than 10 a year that's great very good z let's wrap up here with the famous five number one what's your favorite business book uh the most recent one like it's usually the most recent one is the small data book everybody is so crazy about big data and people are ignoring the details associated with the human psychology and how people react and that small data usually is the pathway to some huge market opportunities number two is there a ceo you're following or studying uh i follow a lot of uh different people like in in the old days i definitely was inspired by gates by steve jobs but lately i i'm following more uh people who are investing in venture companies i'm curious why would they put their money at risk and how many decisions to pick at people like me or somebody else number three what's your favorite online tool for building your business see we as a technology company we use a lot of different different tools you know in the marketing area hubspot in email we we use a lot of different email tools like uh there's a small brand called outreach that we like to use to supplement uh sales prospecting etc no number four how many hours i sleep to get every night uh i i get minimum eight hours of sleep that's good and what's your situation married single do you have kids married two kids uh and uh having lots of friends that's good z and how old are you i'm early 60s early 60s very good we'll say 60. and uh last question what do you wish your 20 year old self knew uh what was what do you wish your 20 year old self knew oh i wish i knew everything i i knew today so that i can play this game way better like uh more you learn more you know name one thing though so just something you wish you knew when you were 20. uh oh my gosh that's a loaded question i uh you you made that's a tough one anything related to business ignore personal yeah so on on a personal level is uh uh you know your own limits i i wish you uh that i can do way more than like today i have way more confidence about things i can do than i had in my 20s my goals were not as big when i was 20 as uh as they are today guys there you have it maybe make bigger goals from z launched high conversion with his buddies back in 2014 they've done a lot of companies together had very successful exits to likes of microsoft this new company today over 500 000 bucks per month in revenue that's up almost 10x year over year from 50 grand a month just uh about a year ago a lot of that growth has come from partnerships they've established um they raised about 10 million bucks to grow the business currently serving about a hundred enterprise customers at five grand per month the pop but they are looking to flip that from account based marketing to more of a pull strategy moving downstream making the software easier to use 10 gross revenue churn per year that's more than covered up by expansion revenue and that same cohort so net revenue retention well north of a hundred percent he's totally willing to spend a couple grand to acquire these customers but obviously wants an instant payback with his team of 26 people based in florida again helping adaptive optimization of e-commerce buying experiences z thank you for taking us to the top thank you my pleasure