Issuurevenue, acquisition & funding

Introduction hey folks my guest today is joe herkin he's building issue.com that's i-s-s-u-u crate wants share everywhere he's got more than 20 years of tech sector experience and it's a proven ability to successfully lead companies from the startup phase to ipo and beyond he joined the company in the fall of 2012 and brings significant silicon valley experience through all having led executive business development and product leadership roles at other companies backed by major firms all right joe you ready to take to the top tell us about issue what's going to be doing great to be with you again uh nathan we were talking about the last time we were talking with uh five years ago isn't that crazy world has changed it's yeah i think uh last time you called me and did an audio skype or something yes so issue is uh you know we're this massive digital publishing platform we enable marketers businesses content creators to make their content materials available digitally in all the different formats that they need that content to be available in to reach their audience wherever they are so uh if you have a catalog or brochure content marketing materials collateral you're able to create that once upload that into issue and then we help you transform that into everything from a full-on video and link enhanced paginated version that can be embedded on your own website or shared across any social media platform turn it into a gif uh that content into a gif so that can now be embedded in a mailchimp email which now makes your mailchimp email much more uh vibrant and engageable and uh better click-throughs you can turn it into an article or a visual story so now it's uh optimized for mobile screens and and can be shared as a story on apple news or a visual story on um snapchat or uh or instagram or come on joe i'm waiting for you to say turn it into an nfc but you didn't say it um yeah the nft market is i don't know if you want to go there but the nft market is a super interesting one and um we're we're trying to figure out what the what the right move is there i think it's uh it's one of those markets that's getting a tremendous amount of attention right now we are about making sure that we're providing value for our customers in the ways that they want to be reaching their audience and if nfts are one of those we will we'll certainly explore that our focus right now is uh businesses being able to tell their story to their audience wherever that audience happens to be yeah okay this makes total sense give me a general sense here what is the average business sort of paying you to use the issue suite of tools yeah so we cater primarily to smbs um in addition it's it's groups at large companies so everybody from folks at shell to patagonia um the miami dolphins use us um in in all those instances it's groups within the marketing group or the hr group that's using us are our largest set of customers we've got over a million customers um we're a freemium product over a million folks are using us it's everybody from those large companies i mentioned to real estate agents and restaurants and solopreneurs and um and and commerce companies that are selling products uh the the base product that most people are paying us for is 500 a year and with that they get a whole set of tools and services that enable them to take the content that they have and turn it into all the right assets they need the the super interesting thing about what we're doing now that's that's uh where we've evolved quite a bit in the business is that the ecosystem has evolved a lot right so even five years ago digital meant you had a piece of content you put it onto a website and you got access to the web by buying it through wordpress or squarespace or godaddy or one of those now the web is just one of dozens of channels where you as a marketer as a business need to make your content available and the bulk of those channels pinterest instagram linkedin etc are requiring you to create natively for that platform and every time you have to create natively you're creating from scratch and it takes a massive amount of time huge amount of effort and often people don't have the expertise so what we are doing is enabling you to again create that content once leverage us to get it onto all those different platforms so indeed you can take advantage of uh of of the digital world in ways that that's transformed if you're if you are selling knitted hats in and you make those in perth australia your market used to be farmers markets in perth australia um now you can take those assets create a catalog turn that into uh a range of different other pieces of content share that across every single channel and you know make sense so how many etsy's national geographics Currently serving 200000 customers hyatts use you not free they pay at least for one seat how many brands so we've got as i said we've got a million folks who are using us well that's users though paying brands paying brands a million wow you have a million paying logos we have a million brands they're not all paying it's a freemium product okay i'm asking how many paying so we don't reveal how many paying but it's it's in the high double digit thousands right tens of tens and tens of thousands of customers when can you break a hundred thousand paying customers uh we expect that will happen relatively soon like next year uh you know probably interesting is that an important metric for you guys or is that not not something no the important metric for us is there's sort of two key metrics for us right um one is customer engagement are they using our product are they getting real value at the end of the day the revenue we generate from customers is a proxy for the value we're delivering to them we want to see those folks building their business um so it's really customer engagement how are they using us are they using the tools we're making available we monitor that carefully and second of course is um is paying customers absolutely it's a key metric trick it's the thing that enables us to understand that we're running a good business it's also uh at the end of the day the thing that keeps us in business um i'm a huge proponent of what i like to call the pro profitable and growing so you know we we've looked at running issue as a business that's uh that's growing nicely and also Profits uh for for most of our tenure for most of the last six years we've been a profitable business and what is nicely growing last 12 months you're talking 30 year over year or something else yeah we're in that range okay 30 percent of your growth that's great and where is most of the growth coming from expansion on current logos or brand new logos brand new i mean uh we we get them um from all over the world the u.s is a fast grower for us um but what's the go-to-market motion joe i mean is this a paid advertising you know it's premium obviously but got it yeah so it's uh it's a range of things one is we've been a we've been an established brand and known as a company that's super valuable in this space for many years and so there's a lot of word and mouth and organic growth that happens uh we do we spend a little bit on sem um a few you know less than a few hundred thousand dollars a month on sem we have strong seo we have um you know customers part of our business is that when you leverage us often you're making your content public and so other people in and around your space see that you're getting so much value from issues so they come to us right um increasingly what we're finding is you know we're marketing in particular categories so you know we've seen huge growth in in restaurants using us right all of a sudden now in the last two years everybody needs to read a restaurant menu online in a digital format we provide really good tools for that um we're seeing increasingly businesses that used to require in-person handing out of pieces of information are now using us for for digital experiences conferences huge growth for us and joe when these folks are shining up again like the heights of the world you said there's many tens of thousands of these logos using you on average i mean the per the weaver in perth australia i imagine is one seat usually but i can imagine national geographic is like 60 seats on average what's the team size using you yeah it's probably in the five to ten uh that's what i was expecting but the other the other piece that we have of our business is uh issue.com which is the consumer discovery site so we have a hundred million uniques a month who are consuming issue content half of that happens on issue half of that happens wherever that content is being distributed so that by the way is another uh part of our flywheel it's another part of how our customers come to find us so we may find a real estate agent is looking at a catalog for furniture on issue and she realizes wow i can actually start to create my real estate brochures um on issue as well so it's a it's a lot of people engaging the experience and then using us themselves and just to be clear when you mention these brands are paying you with an average of five person teams they're paying 40 bucks a month for the whole five teams or they're paying five times 40 bucks a month uh it depends on the on the plan so we we actually have uh have essentially uh four tiers there's basic which is they're not paying us it ends up being ad supported there's starter there's premium and then there's optimum you get you get seats with each one of those tiers um so you get up to a certain number of seats per tier and then if you want more seats you you upgrade i see what's the deepest on a per seat basis what's the cheapest i can drive if i sign up for a big number of seats uh again we uh the biggest uh plan we have is optimum uh you get 25 seats and if you need more than that we can you know we'll sort of do things custom for you as well what would i have to pay to get 25 seats it's it's three thousand dollars a year three oh okay so that's a bit of a okay got it so that's a discount off the 40 bucks a month but what it is is you also get a range of other tools right so we we package it we don't focus on the seats as much as we focus on the tools that are available within those tiers so you get access to um you know unlisted unlimited unlisted uh content you get access to additional data and statistics uh you get access to a different level of customer service and those sorts of things no my point though is joe is people can use you without having to keep paying that 40 bucks a month per seat as a scale 3k per year for 25 seats what is that effectively 10 a month per seat right so there's economic advantage for being bigger indeed indeed okay okay makes more sense tell me more about the team how many on the team today so we've got about 120 people okay uh 30 of those are in the u.s the rest are in split between copenhagen uh berlin and braga portugal where we just opened there um and we've grown you know throughout kova throughout the last year and a half we've probably hired 50 people um we just raised 30 million Raised dollars and we're going to plow that into uh you know growing growing that why'd you raise that that's obviously a big decision yeah so um we see we raised it because we see the market the market is massive and the opportunity ahead of us is massive we've seen um you know there are tens and tens and tens of millions of businesses all of them are creating marketing collateral brochures catalogs need to be able to tell their story and we're finding um you know we wanted to raise that money to be able to reach them more effectively than we have been we also raised that money to be able to innovate pretty dramatically uh against the product so we'll be bringing on additional engineers and uh and developers as well as marketing folks so that they'll be uh you know whole additional set of tools and services what do you consider this is a series b c it's a it's uh it's a c round um it's it was a debt financing um so which was which was great for a company like us um you know we're essentially a pro all of it all of it was debt thirty minutes yep and um the way it works is you know there's essentially no dilution so it's really good for the team and really good for the company no warrants uh very little dilution okay yeah sub five percent warrants oh wait's up waste of five percent okay wait wait wait wait wait yeah i mean like not even sub one yeah yeah yeah yeah that's what you mean by solution but how does it work four-year payback interest only for four years yep yep pretty standard uh a really good partner working with capital ip and and um uh we're excited to have it it really helps us why does it really help people how do they make money on this they don't get any equity so they get a little bit of equity um you know that it's it's an interest-only loan they make they make money on interest they make um uh you know they see it as an investment they've got they have lps themselves they see it as investment and um they're they make their money on the interest they make a little bit of money on the warrants they make um you know there's there's certainly some additional relatively small fees that are associated with it as well how do like what interest rate are they typically targeting across all their portfolio companies you know i don't know what they're targeting but i think uh loans in this nature are sort of in the 9 to 11 range probably some are paying higher um yeah got it that's a lot of debt i mean usually you don't see that amount of debt coming to the company unless you just raise a big bc round there's only cash in the bank how i mean that is i imagine that's flirting with like 1x ar basically right i mean something like that uh you know it's we we took that debt because again we see this massive market we're seeing you know i get that joe i get that but how do you get them comfortable with it that seems like it's almost 1x your total revenue it's a big slice of debt they're comfortable with it because of the growth the the growth that we've had the growth that we see ahead of us and the market that's that's happening um that's sort of unfolding in front of us they're comfortable with it you look at other comps in our space you look at canva just you know canvas now valued at 40 billion dollars you look at what would you value your what would your value issue at today oh i don't know i mean the market will determine that right but i know i know but what's based off what you know like what what would you put a range would you put on it i don't know you know we're certainly in the high hundreds of millions of dollars probably more depending on um on on who's doing the valuation and yeah where things are going i i don't focus that much on valuation i think valuation is a um is sort of a red herring in a lot of cases because right because valuation is simply whoever is doing the valuation has their own context for doing it what i'm focused on is again are we in a are we in a massive market is there a huge scale can we deliver great value to these customers and if we're able to do those three things we are we have a choice ahead of us we can go build and grow this business we can go acquire companies you know we can uh we could be acquired but uh our focus isn't on any of those things right now though we are looking at potentially acquiring companies uh our focus is uh is real growth and and um and building out the market and the opportunity ahead of us if i take those those uh 40 000 customers times five percent on average Monthly recurring revenue that's 200 000 sort of paid seats right obviously at scale people can get issue for as cheap as 10 bucks a seat if i multiply obviously 200 000 paid seats by 10 that's like 2 million roughly an mrr or 24 million bucks in arar do you guys see a path to breaking sort of 30 million in the next six months uh so that's not our revenue um we have there's a we have a range of other revenue revenue generation aspects of the site as well we sell advertising uh against um the those customers who are using the basic package we sell advertising against that but um yeah certainly we will be um well over those numbers um you know in in in we already are over those numbers but just be clear though pure sas business though those are about right you know we're you're in the neighborhood but um we don't we don't reveal the specifics but you're in the neighborhood how do you think about uh like last 12 months revenue split between sas versus ads and how you divvy up the hundred people 20 people on your team like working on each one yeah the bulk of everything is sas our business is and even on the advertising front we we see the advertising as a fourth sas tier the customers themselves aren't paying but it's advertisers are paying for their use of the product okay so more than is it fair to say more than eighty percent of those pure sas traditional sas the others call it ads that's the majority it is but we we do have some customers who are um you know all the numbers that i gave you are averages we we have customers who are um who are certainly paying more have have larger uh you know we have larger partnerships in place with some of them um we also have integration partnerships that drive revenue so there's a range of um of ways that we're building growing out the road and if you think you're sort of going to grow 30 this year so between 30 and 40 million bucks in revenue that means basically a year ago you were caught between sort of like 25 and 30ish something like that for 30 years growth you know in in that neighborhood yeah okay fair um any new product lines coming out which you know about uh yeah so one of the big things that we're focused around is uh is integration so we we've rolled out um early stages of it but integrations with hootsuite mailchimp um dropbox google drive so we're focusing a lot on providing our customers easy integrations with the other products that they're using in what i like to refer to as the story cloud so the story cloud are those sets of tools that businesses are using to tell their story uh in in the digital world so a huge focus around um uh around those integrations um we just rolled out uh early stages again um a set of tools around creation so templates you can now come to issue if you haven't created somewhere else you can now come to issue and start creating directly with us we have templates for uh restaurant menus and catalogs and uh real estate agencies and uh a whole range of uh those sorts of capabilities um and that's uh we're starting to see some some really nice traction uh on that side of things so all right joe that's right wrap up with the famous five number one favorite business book uh favorite business book is um what is my favorite business book uh ben horowitz's book which i'm i'm all of a sudden forgetting uh the hard thing about hard things hard thing about hard things that's my favorite i like the actual anecdotes and the stories that are in there it's it's real stuff number two is there a ceo you're following or studying uh you know i'm probably following the one that everyone's following mark zuckerberg for good and for good and bad number three what's your favorite online tool for building issue um favorite online tool you know we we use um we use figma a lot why do you like them uh just super easy easy for our creatives to share uh to create and then share what they're uh creating with everybody do you think you'd be able to sort of grow to where you're at today without something like figma um yeah i mean we've used other tools as well it's just it's one that's super efficient for us what would you use before them well you switched to them i guess uh we were using uh you know mirror we're using adobe tools we're using you know a range of different things but all in onto figma now huh uh primarily yeah nice all right number four how many hours of sleep date every night uh not enough five to six okay and situation married single kids uh married two two boys two kiddos how old are you how old am i yep 51. 51. last question i'm an old dude no you're not what are you wishing when you were 20. what was what something you wishing you knew when you were 20. perspective guys there you have it issue helping you create content once and use it a thousand different places to just squeeze a little extra return on like as you can they've got over 200 000 paid users on the platform across over 400 different logos sorry 4 000 different customer logos um scaling nicely just raised 31 million bucks in debt to look at potentially doing some acquisitions things of that nature been pretty capital efficient today uh going after joe's sort of pro model you're growing nicely 30 year-over-year but also profitable 120 people on the team right now as i continue to scale joe thanks for taking us to the top absolutely thank you 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 nathanwacka.com forward 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 and 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