How Honestly CEO Mateo Freudenthal grew Honestly to $3.2M revenue and 100 customers in 2024.

hey folks my guest today is mateo fruttental he's the ceo of honestly a cologne-based hr technology company who helps organizations to understand employees needs and motivations using honestly increases retention and decreases sickness rates 100 companies with 60 000 licenses used honestly by the day mateo you ready to take it to the top yeah of course so these 100 companies that are using you can you name one or two of them yeah of course one of them is for example sunrise technologies um which is like a mobile technology company or big insurances um users helvetia would be like one example and so there's a hundred of these companies using you to manage it sounds like about 60 000 employees so tell me how they're using you what are they using you for to help with their employee relationships yeah so basically we help them to understand what needs to be done in hr so we have like an employee survey module so we have prepared surveys and they send out these surveys and they have like their internal communication through honesty so we give basically the leadership of these companies a closer um yeah a closer way to reach their employees and have um a closer relationship with them so they understand what makes people leave the company what makes people stay at the company and they also use it to drive internal projects so if they have like change project they make sure it is successful and they measure the progress and what do you charge these customers on average per month a license would be like two dollars one to two dollars per user per user per month yeah okay and if you have 70 000 sort of seats today across 100 customers the team size average is about 700 per team yes that's correct all right and at two bucks a seat for 700 seats that means the average customer pays something like 1500 a month or about you know 20 000 a year i think it's i think it's 12 uh 13 yeah 1300 a month yeah okay that's great so with that sort of con and that would be about you know 15 to 20 000 a year as the average sort of acv right and with that go ahead no sorry sorry yeah it's it's more or less right yeah with that context give us more of the backstory here what year did you launch the business oh we launched it way back but we had to do two pivots until we finally landed on our business model and this model we're executing for the fourth year now so we have three yeah like three years completed and now it's the fourth year of this of this business model but we don't want to just skip to the success we want to understand the early failures too so when did you actually launch the original company so the original company 2012 will be 10 years old next month 2012 congratulations so what was the first idea so first we wanted to like just make uh surveys online and we would say for everyone hey we have the easiest way to do customer feedback and we gained many many customers with that but none of the customers were actually working so um they did like people wouldn't give feedback back then over a mobile phone and a restaurant or at like a travel agency but we had one product which actually worked very well and it was a tablet with we placed supermarkets and we scaled that up it was actually like a hardware software thing and we had thousands of supermarkets across the germany all the kit before uh tablet solution odyssey terminals yeah so we were like the number one provider for supermarkets um grocery stores and uh that business model simply um yeah it turned up to not be profitable so it didn't we weren't able to make it profitable um but we're making a lot of revenue but we had to spend all the revenue on um what was a lot of revenue how much like like uh let's say uh two million dollars per year what's going on there youtube good to see you guys now imagine this you love watching these interviews with sas founders but imagine if we took all of the valuation data out from over 2807 interviews i've done manually saves you a lot of time well we've done this we've built it into the beautiful interface inside of founder path check this out i'll show you how you can access this in a second but you log in you connect your stripe account you see your valuation real time you can see what it changed over the past 88 days and even set goals for valuation this year now the secret evaluation is there's many different ways to value a sas business so the reason you're going to see three or four different valuations inside of your frowner path dashboard this is all free by the way is because depending on who's doing the buying of your sas company you're going to get a different valuation a vc is going to pay a different valuation private equity firm is different if you're going to do a minority sale that's different and if you sell the whole business that's a different valuation you can see all those when i hover over here right so the teal is what a vc would pay yellow is what private equity and red is if you sold the whole thing outright now what's cool about this is this is not built off random data again you guys hear these interviews on youtube all these datas are built from real-time valuation data points founders share with us on the show so traction 1.2 million seed round 3.7 raised they sold 22 percent of their business go in here and filter by the event maybe you only want to see companies that have sold the whole business well here are a bunch that have been acquired the valuation and the multiple maybe you're going out right now and you're raising your seed round well go in here and look at all this recent seed deals that went down what they raised what valuation they raised at and what percent that they sold there's never been a larger data set of sas valuations than what you can get now inside of founderpath and we're thrilled to bring it to you all right we're gonna go back to the youtube video here in a second but if you want to check this tool out if you want to jump in and sign up you can check it out for free to get your valuation at this link this link founderpath.com forward slash products forward slash evaluations or if you go to founderpath.com and hover over products click on get your valuation here and go ahead and sign up to give it a whirl again all that valuation data live right inside the platform i hope to see you there all right let's jump back into the interview okay so what year did you kill that business uh the same year we launched a new one so when we pivoted we said okay we will no longer focus any businesses we will get the cash but we cannot we were not able to grow it that's why we built the revenues so you killed that business in 2018. yes okay and then how did you get the idea for honestly oh actually customers came to us or potential customers came to us and said hey we really like what you do for customer feedback but we need this for employees and they explained us the problem and um since they were like different customers with the same problem we were like okay let's ask them if a solution like that would work so we build up like a mock-up and we send it to them would you buy this if if we would have this and they all said yes so we started building it and we actually signed contracts with all three of them so we had like three companies with i don't know 15 000 licenses or something three bigger companies like using the product right from the start and uh yeah that helped like actually like customers had the idea and we just said oh it's so much better than our business model that we have now that we had back then that we decided to pivot and mateo fast forward now today a hundred customers paying you know thirteen hundred dollars per month you're doing about what a hundred and thirty thousand dollars a month in revenue uh rounded yes around that and if that's today's revenue where were you exactly a year ago so we can calculate growth it was like 50 less 55 percent less okay so something like 65 000 a month in revenue and where did most the growth over the past year come from adding seats to current customers or adding new customers all together 20 to 30 uh came um from up sales and the rest came from new customers okay so like so with 20 to 30 percent of the growth yeah so so when you look at your net dollar retention right the amount you grew customers subtracted by the amount those same customers shrunk what is your net dollar retention today uh it's i think it's six percent plus something like that so churn is six percent annually no no minus six percent okay so yeah so so that's so yeah net what you just gave me is net negative churn of six percent but what i was asking was so net dollar retention is it 106 yes like based on the on the dollars not on the number of customers it's like six percent yeah yeah you're giving me a churn number and i'm asking for a retention number they're usually just inverse so i just want to be clear your net dollar retention not churn net dollar retention is a hundred and six percent correct you're expanding yes yes okay and then do you have meaningful churn but like what is gross churn before expansion oh i i don't know that number i don't have it like in front of me it's um yeah it's mostly let's say like the smaller companies at the moment it's not like there are bigger accounts maybe we focus too much on bigger accounts but um i don't have that number in head and have you built all this bootstrap or did you decide to raise mainly bootstrap so it's it's uh it's pretty mainly bootstrapped you've either raised a dollar or you haven't raised a dollar we raised for the other model we raised for the other model so we do have like shareholders but we didn't raise for this model what year did you raise in and how much um three million seed capital five years ago so what was that 20 to 2017 yeah yeah when the other business was like going good yeah well i mean you shut that business down in 2018 so if you raised a 5 million seed one year before you shut it down something changed very fast three million seed and um we raised basically on the other model let's say we raised three billion that's that's basically the easiest part let's say we raised seed capital of three million but we had to invest a lot in like we invested to grow a business that we were not able to grow so we decided to pivot yeah but what i mean you you basically shut the business down less than a year after you raised three million bucks so what changed so quickly um it was like more like one and a half two year situation and investing a lot in like investing what we raised in growing what we wanted to grow and that didn't turn out so we had to pivot because we were not growing so we raised on growth but we didn't okay so we basically like it was not our business model and then we did the pivot that was like more or less understood when you raised the 3 million seed what valuation did you raise it do you remember 11 11 post pre pre okay so you so you sold what you sold about fifteen percent of the twenty percent of the business something like that yeah yeah i think a little but yeah like a little more yeah okay okay more than twenty um and then in no capital raise since then right are you looking at raising right now no no no no are you guys profitable today yes yes ah that's great okay how profitable like 10 percent orders that's pretty good and how many folks are on the team i think we're 12 12. you're what do you mean you think you're 12. you forgotten no no no like i would let's say that 12 is the correct number of 13. like we we just hired three forks and i just know when they start if they start to lie of course but let's say 12. okay so you're 12 people today um that's pretty impressive i mean that i mean you're doing again you're doing about 1.56 million in revenue with a team of 12. that's high revenue per employee what's enabled you to scale without having to hire you know a bunch of dozens and dozens of people we originally like with the other business model we had like this 25 people and we're not doing more money than now especially not paying employee and we like realize that we have to say no to a lot of projects and just do the projects that really will have the impact and by not doing like i don't know for example we not do partnerships well at the moment everyone will say oh but you don't do it yeah because it would like just block resources for really important stuff so i think that saying no to projects that don't have any impact on your company i think that's that's the main part of if you want to have like a high revenue battery and how many engineers are on the team at 12 today five five five okay are you an engineer no do you have a co-founder i have two uh did you guys split 30 each at the beginning evenly yeah two of them are engineers was that a mistake to split equity evenly at the beginning i don't think so i think it's the only way to go like you should look for people who are like better than you at least and then everyone should think that and then splitting it evenly makes a good deal for everyone but if you think they're better than you when you want to give them more equity no no because they think that too because i'm like better at what i do and they're better than what they do so i i don't think so i think it's actually good to like to to not have like a co-founder with who thinks that he or she is like much better than you and research much more equity so i don't i don't think so i i actually believe in this equal share model like i think like at least for co-founders because you need to make decisions together and then one has more equity so she should take more decisions than you so how happy will you be and for how much time okay when things are good i believe you will be happy but if things are bad and then you start blaming this person sure the flip side is the flip side is there's no clear accountable leader uh it's a three-pronged leader yeah you move slow everything's slower that's correct that's that's that's very much correct yes what was the last thing you guys what was the last thing you guys disagreed on i i think um do you know the lean startup where you have like this approach that you test a lot of things and i mean it's good for many projects but there's like some projects where you just have to have like a lightning strike through the organization where you don't cannot test it you just do it and we disagree mostly um in in in projects where we're not sure which of the two approaches we need to replicate and uh because i'm i'm yeah i'm more like the lightning strike kind of guy like that's let's just do it and yeah i have conviction on this project let's freaking do it we don't need to run a million tests let's go some things you can't test so you're not uh it will take you too much time then the opportunity is over again yeah how much of the company or how do employees own if any do you have an esop pool a 10 well we have 10 eso 10 e-stop so right now the cap table is 10 esop pool 20 investors and then each of you guys own like 23 percent the founders and smaller correct yes yeah yeah yeah interesting okay very cool um team of five uh what's coming up what's going down the product pipeline what are you guys building oh like a lot of integration so we have like some product workspace when it's interested in the human capital solution like workday or sap success factor so integration into that the second is predictive analytics so that you can predict how likely churn or sickness rates will develop based on our employee surveys and the third one is we have a partnership with like a academic institute of the free university of berlin where we will implement all um scientifically validated surveys with benchmarks into our solutions to make it even easier for our customers to implement those very cool matteo on that note let's wrap up here with the famous five number one what's your favorite business book um uh how to be a capitalist without any capital of course have you you've read it i read it i've read it actually i i would um what's your honor what's your honest what's your honest feedback after reading it it helped me a lot because it unlocked my brain to think outside of my um organization because before that you have like this thing where you like describe how you had like an exit opportunity you missed it and that took you much longer to be like free um um like in in capital terms so it unlocked my brain in many ways so it makes me feel like i'm like a teenager again when you're a teenager and you do business you feel like very free in everything when you're like a founder and you're an organization you want to dedicate 150 of your time and your thoughts and into this organization and it freed up my brain and that helped me to make very wise investments and very wise decisions so i actually made over 100k like let's say since then of this personal investments that's a that's amazing congrats number two is there a ceo you're following or studying right now um mark benioff is of course the the one that i always follow and i admire i think my penny office yeah oh great i study him and number three is there a ceo that you're sorry not a ceo i just asked you is there what's your favorite online tool for building the business notion i think uh yeah notion because of the um knowledge management you know like all processes number four how many hours of sleep do you get every day seven seven okay and what's your situation married single kids i i have a fiance so fiance okay very good uh and any uh and how old are you i'm 34 30 for any kid no kids right no no kids all right last question something you wish you knew when you were 20 mateo uh time is more valuable than money guys there you have it honestly launched in 2012 they built a business through 2018 they did 3 million in revenue but ultimately just never took off and was unprofitable they pivoted into honesty.com which now helps over 100 enterprises managers or 70 000 employees with surveys employee feedback each customer pays on average thirteen hundred dollars per month they're doing a hundred thirty thousand dollars a month in revenue 100 year over year growth up from sixty five thousand dollars a month just a year ago and now at again about a one point five million dollar run rate three co-founders split evenly at the beginning employees own ten percent investors on twenty percent they raised three million bucks but now they're profitable which we love which means mateo can do anything he wants he has full flexibility and freedom we'll see what he does next mateo thanks for taking us to the top thank you nathan 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 nathanlacka.com 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's support all right i'll be in the comments see ya