Impower Solutions Revenue, Valuation & Funding (2018)

hello everyone my guest today is adi bataan she is the co-founder and ceo of empower solutions which provides businesses with tools to text with their customers adi are you ready to take us to the top oh yeah all right tell us about the company and is this a pure play sas business or not um it started as a pure play sass we've uh kind of done some things that aren't pure sas to push us to a place where we can do pure sass so we can talk about that it's kind of interesting give us the tease us a little bit if you look at your total revenue over the past 12 months how much of it is pure sas percentage-wise of like 75 so fair a fair amount mostly yes yeah all right let's back up tell us about the company what's it do um so our thesis when we started seven years ago actually exactly today um was that by the way happy anniversary yeah thank you thank you it's quite a milestone surviving you know past three years so seven years is is is a um something we're pretty proud of so the thesis has always been people are not going to want to call businesses they're going to want to text businesses and um over time businesses have caught up to that idea but how do you give people and businesses tools to do that in an effective way scalable way so what we do is exactly that we take um either existing lines or give businesses new phone numbers and give them the tools they need so they can text with uh customers but not on their cell phones you know in a in a way that just doesn't scale we give them things like you know documentation and templates and automations and uh most importantly integrations of what what they currently use so just to clear a consumer a consumer could text a number and you have an automated solution on the back end to talk to the customer right so it's automated semi-automated or manual depending on the business and what they need and what they can afford okay and then um you've listened to a bunch of shows so you kind of know the drill which i like give me an average what's the average customer pay per month would you say so we've gone from having customers paying like 10 bucks a month to now our average yeah that's how we started seven years ago and now our average is close to a thousand okay thousand a month and uh launch 2011. now what have you scaled to today in terms of total customers we have 18 000 customers oh wow okay and yeah so but some of them are still in our freemium plan which we no longer offer and about 2 000 of them are paying got it okay so 18 000 free and paid 2000 pure play now you know the drill here if i take 2 000 times that thousand dollar average per month price point that gives you about 2 million bucks a month in revenue is that accurate it's not accurate because we started at 10 bucks a month and we didn't kick those people off so what's what's the updated average if it's not a thousand what's the average across two thousand would you say oh i don't know i'd have to i'd have to let's look at the last cohort can we back into it do you mind if we back into it can you tell me general size today what are you doing per month in revenue oh no we don't release those numbers okay well i can't tell you the most important thing is we keep pushing that average up right so i look at last quarter um cohort and keep pushing that number up that average revenue per per business yeah can you um i won't push you harder than this but it would be valuable to get like a range even a big as as big a range you want as big as you want to keep it i mean you're like a million dollar run rate or 10 million run rate generally where are you well one to two okay thank you for that i appreciate that that helps me kind of ask better questions okay so one to two million dollar run rate today and walk me through how you got these 2000 customers where are you acquiring them from so like i said we started kind of very small smb and um worked our way up as we realized the problem with s ps was mostly retention turned because they run they go out of business but all of our customers save for maybe five percent have come through word of mouth so what we worked really hard on was having extremely happy customers that then tell other businesses about us which is not easy to do in a b2b setting so you have to architect it in the right way but right now we do no marketing at all um just zero ads zero facebook nothing no direct paid spend no no direct page span spend and it's all coming from either existing happy customers or other um other uh providers that we work with so partnerships have been helpful to us not necessarily officially but you know folks that provide voice solutions their customers come up to them and then say hey you know i need a texting solution voice is no longer enough we made sure a lot of those folks know about us got it and then they say go to these guys yeah that's great um uh when you look at growth so you're doing one to two million run rate today where were you a year ago uh probably like a tenth of that oh so you've 10x year over year yeah so it took us a long time to again find our flow but once we did now what we're doing is turning the crank on what we already know how to do okay but i mean just be clear i mean that is significant growth you were doing call it 100 to 200 grand uh in in ar in arr and now you're doing one to two million i mean it's 10x year over year growth right yeah okay that's great um as most that come from adding new customers or expanding the historical cohort most of that is from adding new ones but we've expanded almost each and every one of our historical customers not the really small ones but everybody that's a mid-sized business and up we've come to them with new products and new offerings um that they can that they can bite into but we've also and that was part of the thesis with messaging was once you start using it your volume of usage grows because people like it and then you know our share of your wallet grows expands yeah so that that has definitely happened it just didn't happen as fast as we thought it would but now at messaging it was ubiquitous it's you know some businesses have gone from like you know to 10x usage then sure than what they used to sure that's great and you tie your pricing obviously axis around that usage exactly that's great um talk to me about churn turns critical what was your revenue turn over the past 12 months so um when we started out our turn was like 95 and now we're at two okay so you're two percent per month i'll be your two percent definitely improved on the turn sign then yeah okay and that's the logo turn or revenue churn sorry i couldn't hear you that's logo churn or the revenue turn logo churn okay what's revenue churn revenue churn is uh slightly higher than that like 3.2 okay around the same that's good so i mean look if you you know take 3.2 times 12 you'd call it 36 gross revenue churn per year right and and what is your expansion on that same cohort what are you expanding accounts by so smaller accounts work fine expanding by around 15 20 larger accounts we're actually going and offering them new products they're expanding more by like 40 to 45 percent okay so that is more significant when you add back all that expansion revenue does it cover the 36 percent that you lost yeah yeah we're about at 38 around that so so we're covering and adding a little bit but obviously we got to get better on that yeah so just be clear you know if you take 38 of expansion minus 36 have kind of lost that gives you two points of growth so your net revenue retention is 102 about is that right yeah that's good that's good congrats on that um you know a lot of the uh talk about your team you said most of the growth is is coming from word of mouth i don't understand what power is that so what's your team look like today how many people so we're 12 people and most of that is engineering obviously but um customer success is is a big part of of how we get folks to love us uh but we do something of the 12 our customer success um three do they are they quota carrying or no no okay but they are measured by by retention and by expansion yeah so they they it's not direct quota but it's um their bonus is tied to that and one of the things we do really well is they actually force the customer to use the product or we take them out and that's something that might be counter intuitive to some but our customers test people um that we have certain tools that we know if a customer doesn't use them they're not going to stick around they're not going to get value and so their their whole job is to push the businesses into using those tools and once they do then we can continue the conversation continue their relationship and come in and say here are the metrics from using these tools time to expand here's here's another product so that was key figuring that out customer success so of those 12 three of them are cs where is everybody based um we are a remote company our engineering is based in israel actually so um gives us actually really good flexibility in terms of uh engineering costs and we have folks on the east coast doing customer success and support and folks on the west coast we're on the west coast so we want to cover um as much as possible yeah that makes a lot of sense and so when you look at and include your cs folks when you look at your fully weighted cac to get a new you know you said you're signing them up at a thousand bucks a month right now what are you paying fully weighted to get that customer um long cycles so we're paying somewhere on the on the big guys the enterprises that we're signing up we're spending about six months okay so signing up an account yeah yeah sorry okay you're spending just be clear six months is your sales cycle or your payback period so six months is how much we're spending on the big accounts and the payback period on those guys is usually two months the medium accounts the more mainstream folks that you're just kind of signing up online with a video demo you don't have to handshake those folks have um an eight month payback okay so two days where are they back yeah yeah well the main cause of that is you've got to get them on a demo sometimes multiple times and then it's time right it's a time with your people that that are spending their you know answering questions doing the demo that have you bootstrapped the company or have you raised so we raised uh six years ago when we just started raised a total of three million and we haven't raised since that's great and are you casual positive today almost we're close to it so close so close close to it hopefully by the end of the year and then are you gonna are you gonna want to go raise then again or no uh good question talk to me in a few months yeah it's tricky let me ask you so the reason we didn't raise again is because we didn't want you know we didn't want that pressure to grow before we knew we actually know what we were doing and had something that that was fantastic now that we do the dilemma comes again like should we should we or shouldn't we no that makes that makes good sense you're almost cash flow positive should you shouldn't you venture debt is becoming very hot right now is that something you've ever looked at so you can avoid delusion i've considered it i know all the venture debt guys here locally yeah uh it's it's it's on my radar i have a few friends that have done it i think it makes a lot of sense if you look at the at the financials um you know it's it's not just a dilution that you're that's obviously a big deal it's also the you know you get vcs in they have their own agenda right where you get venture debt they just want they want to you to pay back that's it right so that's all you got to do to keep executing vc it starts to be you know this guy's raising a fund that woman's you know maybe leaving you start having these different dynamics um and and we don't know that we want that yeah adi you're dead on let's uh let's wrap up here with the famous five number one what's your favorite business book um so i just read this one and i'm really excited about it i think you were gonna ask um it's really great i actually bought a copy for a friend high growth handbook you familiar with it nope high growth handbook that's good yeah it's by el advil okay um he's an entrepreneur he used to be a twitter he sold the company i think to twitter and maybe one to google as well uh high growth handbook highly recommend um flipping through it brand new book last few months good number two is there a ceo you're following or studying right now uh max levchin yep number three what is your favorite online tool for building your business uh for building the business i'm a huge fan of slack because we're a remote team number four how many hours of sleep do you get every night that's a tricky question uh two to three you can have you only sleep for two to three hours yeah so i have a startup and i have a two-year-old and a four month old so okay so married yes okay married two kids um that but that can't be healthy i mean you're you have to catch up at some point you can't go on three hours of sleep every night right but when you have a four month old you just kind of have to juggle so this will go away hopefully soon when he sleeps through the night yeah um but yeah we'll sometimes um you know just take a break and take a nap yeah very good and you want me asking people about how old you are um for 41. okay 2018 41 40 40 years young all right uh last question what do you wish your 20 year old self knew uh start sooner iterate faster right um i didn't know entrepreneurship existed when i was 20 years old honestly uh only when i came to silicon valley 10 12 years ago um was i looking around saying hey wait lots of people do this and i can do it too and it's exciting and i love it i just something i didn't even occur to me right i was on the path to just be a lawyer i was on the path to you know get a job do well become a partner all that stuff that just wasn't as exciting as entrepreneurship is building something from scratches so that's what i wish i'd known just guys start sooner from a b again founded in power solutions 2011 today doing between a million and two million bucks in terms of run rate they've 10x year over year they raised three million bucks about six years ago hoping that casual profitability here in the next couple months they're serving about 2 000 paying customers uh 36 gross revenue return per year 38 expansion so added together about 102 net revenue retention each year they've got about 12 people all over remote locations again uh building paying about six thousand bucks to acquire customer payback periods anywhere between two and eight months avi thank you so much for taking us to the top oh thank you thanks for having me