Hiremojo Revenue & Valuation (2017)

this is the top entrepreneurs podcast where founders share how they started their companies and got filthy rich or crash and burned each episode features revenue numbers customer counts and other insider information that creates business news headlines we went from a couple hundred thousand dollars to 2.7 million i had no money when i started the company it was 160 million dollars which is the size of any ipos we're bootstrapped we have like 22 000 customers with over 5 million downloads in a very short amount of time major outlets like inc are calling us the fastest growing business show on itunes i'm your host nathan latka and here's today's episode hello everybody my guest today is john younger and he is the founder of over five startups he has made more mistakes than most of us could imagine he's currently the ceo of hire mojo a sas hiring automation platform with a recruiter bot he also founded akulo an award-winning pro uh sorry our rpo and was vp of hr at bank of america he has a bs in math from notre dame and was on the us national rowing team all right john are you ready to take us to the top sure all right quite a variety of things you've jumped into which is great so what years were you vp of hr bank of america because i remember i i'm guessing that's kind of when this idea started festering it was it was a from about 87 to 93 94. and it was actually when i was managing all the recruiting for two divisions about 16 000 employees that i asked the question is this really the best we can do and that's really what set me on the course that i'm actually still on today and so did you launch the company back in 95 i didn't i actually launched a company called ynet and i launched it actually in november 96 and sold it in sorry february 96 sold it in november 96 to a a company called trinet that outsources hr and payroll and how much was that sale price um that's so price well it depends on how you it was mostly in stock so it's hard to put a dollar value on it at the time how much stock was it um it was probably pushing four million dollars something like that okay and keep keep the story going there what happened after so so i stayed with trinette and we were on inc magazine's 500 fastest growing companies every year i was there for the next four years and in fact we had really hit some milestones that allowed us to ultimately get a major investment from general atlantic who ultimately took it public i left in early 2000 and ultimately started a colo so what i realized is that all of this knowledge of how to recruit is completely tribal it's still tribal today for most companies um and so one of the first recruitment process outsourcing companies akolo is like a turnkey internal recruiting department and what so what happened to that company so uh ended up growing a colo and um it struggled at first imagine having a recruiting related company right as the bubble burst in uh 99 2000 2001. so no one wanted to touch anything related to recruiting at that time um ended up getting uh through sure force of will through that period liquidated my entire retirement which is how much um i don't know a couple hundred thousand dollars at the time and how old were you uh let's see that would be that was so long ago so like in my mid-30s so you're late 40s early 50s now yep exactly so um ended up building it version one i ended up finding a group of nine unemployed developers in fremont california who worked with me to ultimately create it and we got version one out 2002 as one of the leading recruitment process outsourcing companies you can appreciate that we were given the hardest most wacky jobs possible to support because anything that was easy everyone filled so we got things like the um uh let's see there was there was a parasitic engineer for texas instruments and they wanted someone from india who was trained in college here and then wanted to move back to india that was so what did you so i want to spend most this time on your current company so fast forward on this company did you raise capital on a colo and did you ended up we ended up being the 42nd fastest growing company in america in 2006 raised money in 2007 how much uh about 4 million and we ended up getting to a place where we're hitting about 2 million a quarter and and growing quickly right when the bubble burst in 2008 uh brutal period most of the companies that did what we're doing went out of business in fact one of them hirian i called the ceo right as they were filing chapter seven and took over all their customers because it was going to hurt the industry if we hadn't done that and then it was really a little later on we got colo back on track and started higher mojo around 2015 we realized we had built a platform that had uh really grown to learn with every job and ultimately put this recruiter recruiter bot concept to work well so john what happened to akolo do you mean did you sell it you shut up yeah it's still out there oh is it part of higher mojo no no no separate company okay yeah so you that's a big gap i mean why aren't you still involved there how did you leave what what happened um i am still involved i have someone else running it but we recognized that there were two totally different businesses a cola is a recruitment process outsourcing company that like i said the turnkey internal recruiting department the technology underneath it we realize could support thousands hundreds of thousands of businesses that didn't want rpo but wanted to make it possible to fill jobs way more easily okay so we separated the companies in january 2015. and what was the size of the combined company right before you you you split it up i mean we're doing 8 million 10 million 20 million a year um it was yeah eight nine million something like that we had caught our way back okay and what did they how did you you know a lot of people think about doing this spin outs how did you structure the cap table at higher mojo oh this is you're going to laugh at this nathan because this is very unusual so imagine having a company whose cap table has an abc rounds of financing has preferred warrants with put rights a very complex cap table and so it occurred to me that to separate out the companies we wanted to end up with the final state would be two companies with a completely flat cap table so everything's common shares so to do that we issued notes to the preferred shareholders and the warrant holders so that created a note uh and transferred their stock to all common and then the new company was created by assuming some portion of those preferred nodes so the acquiring company was able to basically buy the assets in this case of the recruitment process outsourcing business with no cash out but simply by assuming notes so the the end result was higher mojo has the original um corporate structure but all common shares ocolo business services exists and is all um flat from a from an ownership standpoint and all this was done in a way that was tax neutral why would the investors agree to this because they're getting paid back whereas before there was no guarantee of getting paid back and even though they lose all their rights well they don't they lose their preferred rights but they start getting cash back that's right and they were willing to do that [Music] many of you know i am buying companies that i really really like and there's no quicker way for me to get to the bottom of what is happening on that website than using this tool called nathamoca.com forward slash hot jar h-o-t-j-a-r it basically will give me a recording okay when anybody lands on the website i'll give me a recording of where the viewer is scrolling and obviously does the basic stuff like heat maps too but i learned so much about where the users are scrolling and clicking on my site using that tool it helps me increase conversion rates make more money and grow those businesses faster and we'll have to see what happens with those businesses but i'm buying them i'm buying them very quick and i'm using nathanwacka.com forward slash hotjar for all of my website analytics you can too i work with them it's totally free you can go to nathan latka.com forward slash hot jar no credit card required again use it as much as you want nathan lika dot com forward slash hotjar i'll see you there okay higher mojo so uh you know it sounds like a more automated platform than you know the high touch model you were in before what are companies paying you per month on average or is it a performance-based model well let me let me tell you what it is first and i'll tell you the model so it's really a platform that makes it possible for almost anyone without any recruiting talent or skill to fill jobs so that that in itself is remarkable so we incorporate this robot and all of the premium four fee sites that you would typically pay a lot of money to uh i i don't want to say their names because i want to be careful about branding issues but if you want to link to something you can do that through us and you know if you feel like you've got to deal with the monsters under your bed you can probably do that with us too and that was very that was very creatively worded and if you want to build your career you can probably do that with us and so just know that we buy in bulk and just include it because at the end of the day we're solving a social problem and i'll come back to the structure here in a minute and that is that right now today there's about six million open jobs united states and a full third of those have been open three months or longer and we think that's criminal that's the the impact sociologically economically to individuals and businesses is tremendously bad yep but john take me so i don't want to run out of time here um we have about five minutes left tell me about the business model what is it a sas model business model we've been through several and here's where we are now and this one seems to be working so um companies come to us and we determine together how many jobs they need supported over the next year how many recruiters they want to use because this actually eliminates executive retain and contingency search completely as well it eliminates the need for an applicant tracking system it eliminates the need for all those premium site costs all of those go away so we scope it out and we determine a number of mojo points a company gets throughout the year and then they simply use their mojo points to do things so if you have a job for a software engineer it's seven mojo points and you get everything the whole platform the outreach all the screening all the interviewing it finds and screens them and then uh if you don't use them it just rolls the next month like cell phone minutes okay got it so so they're buying it's perform you've basically said these seven actions equal one mojo point if you do all seven it's seven mojo points here's a package for a thousand mojo points exactly yeah okay what is what is uh huh the average subscription size is somewhere between ten and fifty thousand dollars a month a year a year okay got it 10 and 50 000 if i just to avoid going down every cohort if i had to force you to pick an average would you say it's like 20 grand a year yeah 20 to 25 okay something like that and um and do they renew each year after year or is it very chunky no no they renew our level of renewals is north of 90 in terms of logos or revenue um both okay they're both pretty high then okay great usually usually there's more revenue people usually scope a subscription that's smaller than they think they're going to need because they're not sure and then they start using it and fall in love with it and so we see a lot of upgrades and how many people have bought mojo points today how many customers are you working with um about 200 oh that's healthy okay good so i mean can i take 200 times about you know 20 grand a year or 800 bucks a month you guys are north north of 160 a month right now okay good but uh uh but okay so can we say between 160 a month and 170 a month yeah it's probably closer to two oh it's closer to two okay so i'm missing revenue somewhere yeah yeah um we have a yeah so so if this average size is probably a little bigger then yeah yeah that makes sense and and now have you raised capital on this one as well or bootstrap we have not oh good bootstrap that's great and um if you take me back so the the break up story between colo and hire mojo what year was that again that was 2015 january 2015. okay and what's the team size now just on higher mojo so we're still small lean and mean we're about 10. i love that that revenue per employee is high that's good 10 people and where are you based we're based in san francisco and what when you look at oh i love a bootstrap company in san francisco that makes my day um what are you willing to pay to acquire one of these customers what's your cache on average um right now it's about 1700 bucks okay and now you say that with confidence because you're assuming a lifetime value of what well the cost well the lifetime value is if you figure an average subscription that we talked about it it's too early to tell but at 90 retention and renewal it's probably three to four years yeah it's gotta it's over you know 150 grand definitely yeah interesting so you're getting you know that's actually not a lot so if your your average first year contract size is 20 grand and your cac is 1700 you're paid back in the first like two months but well month basically why are you not more aggressive on your cac um well we are i think we're it's all in motion like i said we refined the model this year we had to work out how to combine a subscription sas platform with a consumption cogs and we were able to do that with this this gamification yeah so it's just a matter of timing and give me a sense of the growth so we know you're at about 180 in mr today take me back a year december 2016 what were you at um well we've been growing eight to 12 a month to give you a sense pretty consistently so we dialed it back so we were about a third i guess okay yes just call it somewhere around 60 65 70 grand something like that yeah right that's great that's great growth uh really good growth and where's where are most of the customer gains coming how are people finding you mostly referrals as you can appreciate in the absence of a big bucket of money doing you know carpet bonning carpet bombing marketing campaigns is not something that we've uh aggressively pursued and at this point the referral activity is so robust that that's keeping us going obviously we want to accelerate that but that's what's working right now interesting okay very good let's wrap up here uh with the famous five john number one what's your favorite business book oh god um it's probably a great game of business jack stack i found that to be really a great game of business yup number two is there a ceo you're following or studying um there are several i think elon musk is fascinating as a as a way of running a a series of companies number three what's your favorite online tool oh boy um it depends on for what uh building the business growing the business um well higher mojo is my favorite online besides your own yeah um i think that um yeah favorite online too i said that we use tools aggressively and so i think i'm really appreciative of amazon web services for being able to scale infrastructure without the corresponding pain that used to to be there how many hours of sleep to eat every night hey that's pretty good and what's your situation married single you have kids married two kids awesome spouse and how old are you john i'm 54. 54. last question take us back 34 years what do you wish your 20 year old self knew um well the best way i can summarize this is the older i get the more i know and the less i care and i think that probably would have served me well then so you would have told your 20 year old stuff kind of maybe care less yeah just well just you know be a little less intense you know just take things a little easier there you guys have it from john quite a story had a company launched is doing very very well but they realized they had really two assets in that company one was higher touch more professional services almost and then there was underlying technology he decided to kill two birds with one stone in 2015 both clean up his cap table and spin out this new company which he did it's called hire mojo their team is now 10 people and they do exactly what they say or they sound like they do they help you find qualified candidates for positions you have opened and you don't have to have any recruiting background they're helping over 200 customers right now they've passed about 180 grand in monthly recurring revenue up 3x from just 12 months ago in december 2016. they're retaining both on our revenue and logo basis over 90 of their customers every year spending 700 bucks on cac which they get paid back instantly super healthy economics with our team of 10 out there in san francisco john thank you for taking us to the top you bet