Idronect Revenue & Valuation (2018)

hello everybody my guest today is tom verbragen he is the founder and ceo of idrenect he's 44 years old and he's obviously an entrepreneur and active airline pilot and has a master's in aviation science with his company i dinect he wants to unlock the huge potential the drone industry has by making it easy to fly safe legal and in a fun way tom are you ready to take us to the top yeah thank you for having me nathan you bet okay so drone management software what does this look like and is the revenue model a pure play sas company well it looks like a digital tool to help people enable the enormous potential that drones have so a lot of people see uh see a lot of opportunities in in drones but they are faced with a lot of challenges legal uh how how how to fly safe how to be how to be legal where to fly etc and we give them a digital tool that makes it intuitive to follow those rules and regulations um so in in a way it's really a sas platform software as a service platform where the basis is given for free and then there are premium features that need to be paid i see and and i want to obviously put this on a timeline in a second before we do that though i mean describe the kind of average customer what's the perfect customer for you uh the perfect customer for us is a recreational to serious recreational drone users so anybody that buys a drone that is about with a decent camera where they either do it for fun or start making money uh it can go up all the way up to a business to business so where we provide services for airports drone schools etc but the the typical customer for us is somebody who is serious recreational to beginning professional who wants to get rid of the entire administration so we focus on that so he can focus on flying and tom for that kind of user you're kind of your average user what are they paying per month on average would you say or per year well it depends a little bit country to country but our we are markedly in belgium and there our customers pay 20 20 euros so let's say 24 a month okay got it so 24 bucks a month and then how do you charge people more do you what are the pricing axes that you maybe upsell against is it like number of drones managed or number of seats what are some of the utility metrics it is it is per pilot account so an administration account does not pay but a pilot account pays a monthly fee and then the the axes that go up are when premium features are being unlocked and premium features are for instance we also provide a complete ensuite invoicing tool and quoting tools so drone pilots can get in touch with their customers quote a drone flight and get already access to that through that customer in the platform and in order to unlock that they pay an additional fee an additional premium fee for that and put this on a timeline for us when did you launch the company so we started in 2015 uh when belgium belgium had his first drone rules being drafted and i saw because i come from this aviation background that there's a lot of rules and regulations and even for professionals it's not easy so we decided to launch in 2015 a helpful tool that made that made it easy and since then uh yeah we've come a long way we've just launched our fourth version of the platform last last week actually congratulations thank you we're going fully international now and we are able to cast to cater for any drone regulation anywhere in the world right now this is great tom and how many customers have you scaled to today well at the moment we are at 1500 users they are all in in belgium uh and we we want to reach as soon as possible to 10 000 users and of those 1500 uh because i know you have a free plan how many of those have converted to paid uh we are about 20 percent uh upgrade to paid okay that's pretty good i wanna i wanna learn more about that you're kind of a unique industry doing this but a lot of people try freemium models and they only get four or five percent free to paid trials you have 1500 free users you've converted you know 20 so call it 300 is that right to paid yes how have you done that and specifically when do you introduce a paywall how do you decide what to give for free versus what to keep as paid well we started completely for free in the first year because we thought it to go full uh free and then monetize it after after a while we figured out that the users really get value when they communicate to the authorities so the drone authorities in the in the us it would be the faa in france it would be the the direction the aviation etc etc so whenever they start communicating through our platform to the authority then we provide really the value so whenever they do that then we introduce the payment all the rest like charts like aeronautical charts weather information a log book all of that is for free that is the content that we provide for free and actually we try to also build a community and that's why it's important to give a lot away for free actually so 24 bucks a month on average 1500 users 300 customers i can multiply 300 times 24. it sounds like you're somewhere around seven grand per month right now in revenue is that right yeah something like that yeah and where were you exactly a year ago so you can get growth rate well a year ago let's say that we were about at a hundred paying customers okay uh 2500 a month yeah okay that so look healthy growth so let me ask you a big question here you have some early success you still have your full-time job it sounds like though when do you cut the safety net and go all in on the company well i would say that the this is all i'm already all in in the company so i'm still flying uh i'm lucky enough that i don't fly uh a lot let's say okay uh so i can i can spend quite some time on on the on the project i drank um to go all in would require though a serious internationalization growth where where we need to manage a bigger team for the moment we are still quite quite limited we we do everything ourselves we are about four people now and uh all in belgium all in belgium yeah that's great and we have a partner we have partners in the other in other countries so we have country managers so we are looking actually four country managers that want to be the specialists for that country for identity so because we are not a specialist of course in france in canada in the u.s when it comes to drone regulations so we are looking for ambassadors in each country we can help us so we have a specialized let's say it's very trademarked at the moment we have this specific rule editor that makes it very easy to transform any complex regulation into an intuitive flow into either net done by the hydronic country manager yeah so 2015 founded four people today based in belgium you know scaling nicely uh have you gotten this bootstrapper have you raised capital no we are well mainly we are bootstrapped we got some uh initial funding uh through a an incubator program in belgium where we were one of the innovative projects they gave us a beginning capital it's 50k 50 000 and which program was this this is the uh the imec istart incubator program in belgium interesting would you recommend it definitely definitely not only for the only for the funding it's also a lot of coaching there's a lot a lot of things that go uh besides that social media growth etc so yeah definitely definitely and so then you raised some money in the past i mean today as you look at the business are you operating kind of cash flow positive for now or are you still putting money in the company to help it stay afloat um we we have been putting some of our own money in so of course our our fixed cost at the moment can be brought can we can be covered by our revenue um we have put in those some extra investments when for instance we are we are one of the only companies that really use what we call aero aeronautical data uh quality compliant charts which means that drone pilots that use either neck use exactly the same information than airline pilots use it's really highly professional in order to get that database we invested some money and tom how much of your guys's own capital the founders capital have you guys put in uh we've put in for at this moment we've put in about 75k okay so not a huge amount but something that's still meaningful yeah it is meaningful uh of course uh but we we tend to keep it uh low profile um so you want to be clear though you're burning like today because you're putting in some of your own capital you're burning a little bit of cash like maybe two three four grand per month above the 7 200 in revenue you're bringing in yes yes exactly yeah which is fine as you drive growth so what i mean how do you how does this thing go from seven grand a month tom to 90 grand a month well it will it will go through the international growth in belgium we have reached a little bit our uh our limit there are so only so many uh drone pilots uh that there that are there in belgium so it will be international growth and in order to do that we've unlocked the potential to transform any regulation into uh into idrenect into an intuitive flow that is that it was exactly the thing we needed to unlock it so we're launching now last week we launched either net.com which is our our website if you go on there you can go straight to the platform 4.0 and see in which country uh what we still need um and the international growth will drive our sales and our our revenue more than that last economics question here around churn which is critical in any sas company what is your churn today we are at five percent at the moment that's five percent logo turn per month yes monthly monthly chart okay so that's about you turn it through about 60 of your logos per year uh i'm sorry it's five percent on yearly basis i'm sorry oh five percent okay that's much obviously much better yeah all right so five percent yearly and then it sounds like you don't have a ton of expansion revenue yet meaning you're upselling old customers because really these are hobbyists paying 20 24 bucks a month is that right uh we that's one that's one of our distribution channels so the the pure sauce and then on the other side we have the the b2b development or the the white label development where we develop our platform with white label for let's say drone schools that use our platform and expand it to a tool that can be used for their for their schooling where drone pilots can follow courses not only follow courses but they they log immediately their flights into idronect we developed for instance a a let's say a virtual air traffic control for a drone test center uh these are things that are of course different distribution channels where we were paid by development and that there is a different fee okay of course but do you have meaningful expansion revenue at the moment i would say i would like to say yes but uh i must admit naughty not yet so we we really look forward to that international growth yeah that's great and then last question here fully weighted cac i mean do you know what you're paying to acquire one of these new customers all in we are at the moment at 38 euros oh okay i mean so about 40 us bucks to get a 24 a month customer that's not bad yeah it's a two month payback yeah and that's that's the thing of course where um um where we have with limited capital you cannot go and spend on google ads and facebook ads uh um too much money either so we are looking a little bit of getting our our users on board getting that getting that feedback uh that we need to develop the program further and further so we do we do about 45 updates a year wow and that's all that's all about uh customer feedback that's great uh yeah that's good stuff let's wrap up here with the famous five number one what's your favorite business book uh my favorite business book since two weeks ago crushing it from gary vaynerchuk number two is there a ceo you're following or studying right now um richard branson number three what's your fa what tool do you use for billing if it's not your own uh well we have our own so we having integrated billing into uh into itunes it's one of the core features i know it's a feature but what do you personally use for billing like authorize.net or or stripe or ah stripe yes stripe okay number four how many hours of sleep to get every night too little uh six okay and what's your situation married single kiddos a single a single with two kids okay so not married two kiddos and tom how old are you 44 44. last question what do you wish your 20 year old self knew um to that doing is better than perfect so it's uh don't wait until everything is perfect just start doing guys doing is better than perfect founded idrenect which is management software for drone operators to make sure they're compliant founded it back in 2015 they're they have 1500 free users 300 customers paying 24 bucks a month so 7 200 bucks per month right now in revenue that's up from 2 400 a month just a year ago so healthy growth they're burning about 3k per month right now as they look to scale only raised about 50 grand they've got a team of four people based in belgium five percent logo turn annually for about 95 net revenue retention because there's no expansion spending 40 bucks to get a new 24 a month customer so two month payback period as they look to expand internationally tom thanks for taking us to the top thank you nathan thanks