How Issuu CEO Joe Hyrkin grew to $30M revenue and 65K customers in 2023.

I am um very excited about this next guest because every time I have on had him on the podcast I couldnot get you guys know how I push that I just could not get the data I wanted and then all of a sudden I say let me put you on stage at SAS open and he says well we actually just had a big transaction I'll come to SAS open we'll talk about it that's all I'm going to say please tell me welcome to the stage Joe from issue Joe come on up good to see you my friend thank you for the water so I'm going to keep chatting while I ask you questions and I'm going to grab my coffee while you make yourself comfortable um first off go ahead say um you should change the name of this conference to the resilience open because all we're hearing about is like one experience of resilience after the next it's sort of the core of these businesses anyway I I also want to tell you guys uh and Joe I hope you don't I hope you don't mind me doing this but we'll get to this later because conference is not always just about business but he actually feels great he just sounds terrible we'll talk about that in a little bit uh we'll let that be an open loop I have vocal cord non ner this is called an open loop and foreshadowing it let it sit they'll pay attention we'll get to it in about four minutes the point you know this happened about a month ago what did you do with bending spoons yeah so first of all I should just say I'm no longer the CEO of issue I was a CEO of issue for 11 years 11 and a half years and we got acquired by bending spoons at the end of July mhm um um so any anyone familiar with bending spoons so um there a company everyone in this room should know more about they're uh italian-based and they are acquiring primarily product like growth s companies but also doing more as well they bought uh Evernote Meetup uh they just bought we transfer they bought us as well hop um hop in yeah um and what they're doing is they're buying companies that have uh some pretty good scale kind of Revenue in the 25 to $200 million range profitable or close to it and then they go run them they buy to own it's not a PE firm and we found them uh through some of their earlier Acquisitions and they were sort of always on my list of folks that we should be reaching out to at the time when we were ready to look getting acquired we're going to get your backstory here but I want everyone to understand what the end looks like so this is sort of what the end looks like and can we put a dollar value on the deal or maybe a range on the on the AR multiple uh sure we can I can't give you specifics because you're never allowed to give specifics like this but I've never given you anything so I'm going to give you a good range here which will be pretty good um so you know we we did um uh as a company we're doing just north of 30 million in Revenue profitable um not not very profitable but sort of barely profitable and uh we sold the company for nine figures y so fair to say like a 4 to 6X Revenue multiple something in that range yeah not six I mean uh unless you're AI right now you're not getting north of five okay I mean there's that that there's all these companies uh you know given the stage of where issue was when we sold it in July if we had sold it 2 years prior in 22 we would have gotten 2 to 3x what we got why didn't you because we weren't at the size we're at now I mean one of the things is when you're selling a company it's important to understand our Lane right so and where the market is so uh we could have held on and contined to grow and build issue for another two years and hope that the market comes back but I think it's also important to understand where we are in the business is where we are in the uh opportunity cycle and um we felt like uh you know profitable growing north of 30 million in Revenue good business um huge number of really happy customers wait a million free customers a year marketers content creators uh 65,000 of them paying a shuee and um we had gotten some inbound interest and once we got that inbound interest we started talking to folks out the market so here's what we're going to focus on over the next 14 minutes and 30 seconds you know going from zero to a nine figure exit right we're going to talk about how Joe used debt how he scaled AR across three key sort of story points and then exiting right you paid your Bankers how much to do the deal $2 million over2 million little too over2 million over $2 million uh was it all cash or Cash Plus earnout a mix whole deal was all cash no earn outs um we just let let it hang so we'll talk about that and then that's good right and then we'll talk a little bit more about the layer the lawyers and the process you did on the exit so all that in the next 14 minutes but let's talk about the product for a second this is your homepage this is what you do yeah so issue is this massive digital publishing platform primarily catering to marketers to take their marketing content collateral sales materials brochures um publication all a whole range of different documents mostly created in using figma Adobe or canva get uploaded to issue issue hosts it um transforms it into a range of assets so you create one piece of content and it can get transformed into a video and Link enhan paginated version uh an article using AI social post whole range of different assets that can then be shared anywhere embedded anywhere and then provide a whole range of data and analytics around that content we landed on this homepage about two years ago um we had our version of the purple homepage yeah also um going all the way back I just put the revenue graph up first revenue is back launch was 2006 is that about right launched 2007 uh very slow Revenue growth for the first five or six years Focus initially was massive scale so I joined the company in 2013 took over for a from a previous CEO um and up until that point the focus has been go find anybody that's got a longer form high quality PDF brochures cataloges Market materials magazines Publications all that stuff get it into issue because from there make it look great issue launched like as the iPad was launching right so it was a different time um make it look great get lots of data and then start to f figure out what aspects this are valuable to businesses and start to charge and we really honed in on being a B2B company in that 2013 2014 time frame so you guys can see again the story here just doubling down on this idea it's not always like you know zero to a billion dollars of Revenue in two days you know this is like well it is for most companies yeah it is for everybody else except you right but we we all it's I mean look at this I mean that is that's 10 years of hustle before your first 5 million of Revenue right and now we see it we're seeing the Big Exit on LinkedIn it's a great story but it takes a decade two decades almost of hustle right to get to this point so you're scaling at this point you come in a CEO in 2013 should we dive deeper there was there a contention with Founders and investors and they brought you in or what happened company was founded in Denmark in where Denmark Denmark and the lead investor is airmed one of the larger Scandinavian VCS would they have the 2007 round for 10.3 million yeah okay the bottom one yes um yeah I don't think it was whatever yes um this is wrong it's crunch basis fall not much but crunch base doesn't have everything but it's close I think it was a little less actually okay I think some of that 2007 was actually the point being the lead of that series a is yeah hardcore Capital they also put the the bulk of the rest in um in 2014 when I raised and kddi the big Japanese Telco came in as part of that uh they had there was a founding group of five people they were doing a nice job of scaling use um but the but there's sort of two M main growth opportunities one was Partnerships with content Tech Platforms in Silicon Valley primarily Facebook Pinterest uh Adobe ultimately later canva Etc um and then the other was really an emphasis on Revenue growth and so they decided to go find a Silicon Valley season person to come in and and run the business so I joined they had actually gotten rid of the CEO six months before I joined which was really great most times when there's a CEO switch the board will bring in the new CEO and then say hey lucky you you've got this previous CEO and you can have them do whatever you want and even in the best circumstances and often it's you know it's challenging um it's confusing because the people who are still in the company aren't sure whether loyalties are supposed to lie or who's really in charge or whatnot so what are the brass taxs here though so they they got rid of the CEO because he wasn't performing or she wasn't selling or what what was wasn't we didn't have any connections outside of Denmark and wasn't really growing the business couldn't grow internationally they find you were you already involved in the company or they brought youch no they brought me in from scratch from scratch you are a talented guy you can do anything you want how do they recruit you what was your compact like did you get Equity yeah so we flipped the company first of all we flipped the company from being a Danish company to us company um that was uh somewhat complicated process um I got uh I got a nice comp package I'm not going to give you the specifics but I got a high a much higher percent of the company than normally when you bring in a CEO um what a normal CEO be like four or five% yeah so you're higher than that high significantly higher than that okay um Nathan always ask these questions really fast hoping that you'll answer them um but we've done this a lot so you know I'll give but I'm giving you more today then you're great I'm not complaining this is wonderful um but so you come in you're well incentivized you you get the thing inter finish on the point why I came in so I've spent my career in this intersection around creativity content and Technology growth uh I was at a company called verage back in the late '90s early 2000s that did video search uh I ran the business side of things at flicker so I sorted my wheelhouse as content uh and I I loved the background and basis and Foundation of what hu was doing so I was excited about the product I thought wow I think there's a lot we can do here um good comp package and uh exciting y so so you're in you're in now full-time you're growing the business you did the series B I want you to T just quickly on what was the thinking in 2021 when you did this debt deal and can you share the terms yeah so we were an unusual uh cap table it's quite quite good we had no preferences when we flipped the company from being Danish to American as part of that as part of a deal between me the founders and the uh investors we agreed that everybody would have be treated equally so there were no preferences just to be clear there were only common shares of the company there were basically they were preferred shares but they were treated the same as common all the same okay um so what it meant is when we got to a point where we wanted additional Capital raising money so in 21 given where we were at a revenue and growth trajectory 21 you know everybody was pushed to raise way more money than they wanted had higher valuations than were reasonable and we're seeing a lot of Fallout from that now right so I wanted to make sure that we maintained our flexibility so instead of raising we would have had to raise 30 million on a $250 million valuation which meant that for everyone to feel successful we would have had to have a billion dollar exit which may have happened but I want to make sure I maintain flexibility around things plus we would have now have this big preference stack so we got introduced to A lender uh very highly recommended we uh took on $20 million of debt actually and had access to another 10 so it was announced is 31 but it was really 20 um and uh I won't give you their name but uh we had we've had three lenders in our history one was svb where we took a very tiny amount of debt actually during that 2014 raise and then the third one was a firm called Eastward capital in Boston who are absolutely fantastic to deal with um we ended up refinancing this 2021 lender with Eastward I want people to take the lessons you learned from that I know you don't want to talk negatively but this is important stuff what went wrong about the first debt deal I don't want to talk negatively but I will talk honestly um we worked with a firm who were uh really essentially predatory lenders um lending has a bad rap however I think they're are great lenders Joe I gotta hold on on there's one piece of information they have to have what was the interest rate on the first piece it was like 12ish per the reason I'm bringing that out is he most of you wouldn't put the idea of predatory lender and 12% together most of you if I told you hey what is a predatory lender charge you're going to say something like 40% okay right so now take the rest of the story yeah there's two forms of predatory there's interest rates and then there's process uh so we raised $20 million of debt again so that there wouldn't be additional preferences Etc um and we had um we use that money to power Innovation to power launching a an Enterprise product um and to start powering deep Integrations with uh folks like can V Adobe we Ed the money well uh however about a year into it we missed our Revenue Covenant by a footfall so on a $7 million quarter we missed by about 150k so just to be clear Revenue Covenant is going to see something like when you're sending a termo it's going to say as part of the compliant certificant covenants you must grow Revenue by 10% year-over-year to remain compliant otherwise we can call all the debt back to us that would be a similar kind of Covenant so we knew we would have to pay a penalty and increased interest all that was fine that wasn't the predatory part predatory part came in when we agreed verbally to change the Covenant terms moving forward and this firm um continue to negotiate with us after we had verbally agreed and kept squeezing and adding in more and more and more and more terms to the point where they started to demand um they wanted uh at one point an additional point in the company for each month that we didn't refinance the business and wanted to charge us a penalty of a million dollar if we didn't give them those 1% warrants within 3 days prior to all of that coming into Play We refinanced with Eastward Capital who are fantastic um and we didn't end up having to pay much of those penalties but anyway um through all of this we continue to grow the business brought on uh better and deeper Integrations um I had a health scare um but um we never through it let me pull the story through now right so so and remember 1 million 1% of the company they sold for nine figures just recently so every 1% penalties paying on the company if he even sold warrants on the debt deal 2% well if you sold for north of 100 million bucks that just the 2% warrant is $2 million right there and then every extra 1% that's another million dollars off the sale I mean right out I mean that you got to calculate that on your cost of capital I'm beating this down a little bit because it's self- serving founder path is always more expensive on an interest rate level but we never take warrants and we never do these process tricks that put Founders like we don't charge a revenue growth cover for example for this exact kind of reason the point of it is like we got through it and it didn't actually hurt the business but it's a distraction you know and one of the things that I uh focus on as a CEO is CEO's main job is to limit distractions that's it we talk about CEOs are supposed to make sure there's money and all that stuff of course but if you don't have money it's a distraction so the key is limit as many distractions as it possibly can y so uh came through it uh landed bending spoons and um let me fast forward through this because I was going to play a clip here but I want to also be respectful and you name the firm in the clip on the podcast and I don't want to create an awkward situation right now but if people want to privately do their own research y they can go but I would just say in the moment when I interviewed in 2021 right after you did the debt deal you loved it loved it he had no idea I mean oh the rate is so cheap Nathan this is incredible it great they were a really highly recommended firm um and I'm happy to talk one-on-one afterwards or um they're still running around trying to do debt financing don't work with them work with the Eastward capital or Nathan or there's a set of really good lenders and debt financing can be a really positive thing for the business um but if you get in with the wrong folks it's important to understand how to navigate out of it o over the last minute Joe I want to wrap up because there might be people in this room thinking I actually do want to go sell to a private Equity shop like a bending spoon or a rocket internet or one of these kinds of companies so you get this deal done just recently for those of you that join late over $100 million exit on 32 million bucks of Revenue this is a company that is known for doing these kinds of deals they've bought these other kinds of companies which Joe mentioned what should people be prepared for if they're entering an m&a process with abending spoons lawyers banking fees process yeah so you know you have if you typically have a banker that's a couple million dollars um you're a lawyer I think most people think oh I'll just get an m& lawyer at the time I'm doing an m&a maybe your Law Firm does it the lawyer you use makes a big difference we worked with Goodwin Proctor um Larry Chu you know when I talk about folks we work with I try to be as honest as possible like if they're not good I'll tell you if they're great I'll tell you um Larry Chu is a fantastic lawyer Goodwin and he helped make phone calls and talk to people in the midst of this process that enabled us to navigate through both the term in the contract way more efficiently than otherwise did the terms drastically change between signing and final no one of the great things about working with bending spoons they they didn't retrade with us I don't think they've rrad with others meaning change the price terms were the terms we agreed there was lots of stuff that lawyers haggled over and things like that but uh price was the price and um they're very high quality folks to work with and I think one of the things as you're thinking about selling that's really important is most of us me included think oh pees will start to get interested in us and there'll be you know 5 to 20 strategics of some form or other some quality or other that we think can and should buy us and I think all of us in the room once you're north of 10 15 20 million become attractive to pees and strategics and so you know there's 50 PS that could be interested 20 strategics but the truth is in the moment that this starts to happen the people that are interested start to Wi away fast because uh you know if it's a strategic canva was one of the folks that could have and should have bought us potentially but they had just bought Affinity they give you a term sheet we were we had really deep conversations with Canan Adobe okay um part of bending spoons was good very good terms really fast we uh and all cash if I'd signed with Adobe we'd still be negotiating and I'd worked there for four more years was the deal price still higher with Adobe they would have all in been higher you know we were kind of around the same okay some of the some of the Strategic may have been a little higher um but my point is many of the strategics that you think are going to buy you have something else going on either they're trying to get sold themselves if they're private they might be buying something else they may have just let someone go that's important all kinds of things happen most companies when they get acquired there's one to three that really come to the table so don't be disappointed if the 20 folks that you thought were going to buy you that you thought were going to keep raising the price and quadrupling it if that doesn't happen it happens with AI companies it happened with you know a few here or there but it's pretty rare at the end of the day there's one to three companies that are right for that time um when you're ready to pull the trigger he can stop and say I'll wait two years or whatever but if you hang out in circles like this all the time you would think the $100 million exit is the norm it should happen every day it's you know of course that's what we want to do but it is actually the Rarity right growing coming in in 2013 at 4 million bucks of Revenue as CEO scaling it to $32 million of Revenue in a very competitive space I mean I won't name all the other companies very competitive space and then running a successful process to get a all Cash Nine fig deal done doing it all with vulnerability and transparency working through debt deals personal health scares as well got to give it up for this guy for being so vulnerable give it up for Joe from miss you thank you I appreciate you man that was that was awesome that was great uh we'll keep the slide

hi everybody I'm Joe herkin I'm the CEO of issue we're this massive digital publishing platform that enables marketers content creators businesses to take all of their marketing materials brochures catalogs all the kinds of content that they're using to tell their story to Their audience turn it into the right set of digital assets that they need and then share and distribute it wherever they need that content to be seen by Their audience and I'm going to talk today about how we got issue we're Venture back how we got issue to be profitable in 2016 and lessons that we can all be learning from that hopefully right now in the midst of looking at profitability as well um so I'm going to talk a little bit about what was happening in the tech economy and the and the ecosystem at the time how we were working on lining up investors to raise some additional money and then how we started to look at moving into a profitability uh uh world and um and then how we started communicating to our customers and to our uh to our employees as well throughout that process so I'll start off with um sort of how we began to unlock this idea of what I like to call a pro grow profitable and growing and you know back in uh in 2015 2016 the notion of profitability for a tech company was not all that popular certainly in the last few years it's been uh it hasn't been popular at all there's been this focus on growth at all costs and yet I think if we look at businesses particularly in the tech world that we most admire we pretend to think about we we pretend to sort of dismiss and ignore the fact that they're all profitable if you look at the big companies that we most respect and that have had the greatest impact on on Society on the world around uh products and how uh people are using them and engaging with them these are all profitable companies or in the case of Amazon could be profitable if they uh manage things a little bit differently so the truth is the sort of Secret of of successful tech companies actually is profitability but often it's ignored and uh it's it's not always as fun as uh just sort of Reckless growth at all costs mentality and especially right now as we move into kind of a new environment the notion of profitability becomes uh increasingly important and really a necessity so um in in 2015 uh issue was we were in the mid second half 2015 we were looking at raising some additional Capital to uh to sort of power additional growth and innovation in uh in our business and we had some really great conversations with VCS significant serious interests particularly in in Q4 of 2015 and we were getting to the point where we had uh multiple VCS lined up to invest significant money into issue in um in in a growth round we were in those discussions in December the holidays uh came hit and we agreed we'll revisit this in um in q1 and for those of you who remember at the time q1 of 2016 we began to get scared around the economy there were indications that the economy might uh might start to have have challenges it was nine months prior to the election and um we were we were in one of those times when uh when when particularly investors started to caution uh their companies around getting more profitable and investors themselves started to get uh cold feet around actually making deeper invest Investments and we started to see articles come out and proclamations come out from the Venture community that were similar to the Sequoia memo of 2008 and the Sequoia memo of 2020 and the Sequoia memo of 2022 but in 2016 we started to see the beginnings of uh some of that communication so for us what happened is again in December we had really strong interest from multiple VCS we had you know really good discussions around valuation a nice plan to use that uh money to to power growth and not much of an emphasis on the the need to get to profitability we had promised term sheets that we expect to come in as these articles came out and as people started looking at the economic environment and the concerns um we and and the calendar turned to early 2016. I went to revisit some of these conversations with the VCS that were ready to start giving us term sheets and uh in in early January all of them actually started to change their tune and they were saying things like well we really like your business but actually uh we're concerned about the economy right now and we're we're putting a halt on any Investments for the next six weeks while we start to reevaluate things um and as we started talking to them more they the companies the the investors that were looking to invest in companies that were doing in the you know uh pre-10 million to 20 million dollar in Revenue um we're now looking for 20 to 30 million dollars companies that were looking for a particular growth trajectory we're now looking for more gross trajectory uh the VCS were starting to look for uh more sort of more uh a deeper understanding of the growth opportunity that existed and they were also starting to emphasize profitability and so um we we began to look at how do we actually turn issue into a profitable company how do we uh start to move the business rather than go rely on this sort of growth at all cost trajectory for the business and having to constantly rely on um on on VCS we wanted to control our own destiny so we spent three months really digging into the business what were the core things that we needed to be uh to be looking at what were the ways in which we needed to innovate uh around the product what were the areas that we needed to uh streamline around um around our initiatives and around Innovation and we put all those pieces together and in June of 2016 we decided to communicate very clearly to the whole company we are moving issue into a business that is what we like to refer to as a program profitable and growing not just profitable you know it's not profitability at all costs or growth at all costs it's this combination that actually creates long-term sustainability uh for the business so we uh made sure that we were really transparent with uh with the team with what we were doing got really clear on Revenue that we're making every single month so that everyone in the company understood where we were and what we needed to be doing moving forward we got really clear on uh what this means in terms of what we're going to be focusing on products that we're going to focus on what the teams are going to be looking like um and the other thing that we started to do um the other thing that we we made uh really clear for everybody was uh make sure that everyone understood here's what it means for you um here are the uh areas that you're going to be um focused on we had a very small number of people this was not a a late 22 um sort of uh Tech oriented uh layoff situation we had we had a very few people that left the company most for performance reasons we had a couple of others that were part of that as well made it really clear we were thanking them for the work that they had done we got really clear for everybody on what the new cost structure means in terms of what we could be doing what we were looking for from a revenue perspective and that profitability gives us the much more flexibility and much more opportunity to both control our own destiny and make sure that we're delivering the best products for our customers we I think every company always has moments where you know we want to be innovating we want to be coming up with new ideas but there's often this conflict between Innovation and efficiency and sometimes we're putting too much energy into new ideas that actually aren't going to pan out and so we spent time looking at how do we make sure that we can continue to innovate in a way that's efficient so that we're not wasting time and wasting energy we reoriented the teams into uh more flexible teams that that could execute against uh really specific goals that were oriented around again the pro grow idea profitable and growing not just profitability but growing and growing of course uh was referent to uh uh engaging our customers more fully rolling out um more effective products um and highlighted for everybody exactly how we are sitting in a really big opportunity in an ecosystem that's continuing to grow we just needed to make sure that we're aligned from a business perspective with how that growth can be happening and we started to show at this meeting in June and then moving forward exactly how we were doing how much we were spending how much revenue is coming in what the projections were looking like sort of gave that level of accountability to the whole company and got buy-in from everybody this wasn't Joe's chart it was everybody in the company's chart so that we all started to understand we got to uh we we planned on getting to profitability in September we burned 22 000 in August we were you know just about there and the difference and in September we we made sixteen thousand dollars um the difference between being you know burning that last twenty two thousand dollars and actually starting to make money itself began to show us that we could actually do this and that the changes we had made many of which were challenging when we first made them people thinking we're not going to be able to be as Innovative we're not going to be able to do the kinds of things that we're able to do um by organizing ourselves effectively we were both able to get ourselves into profitability and establish it in a way that was sustainable so that us to become what again what I like to call a pro grow and what I'm um what we what we did on an ongoing basis and continue to do is really reinforce this notion of uh of profitability and growth and the way that we did that is we made sure we were focused sort of on two key areas the first were the set of priorities that we had around making sure that we were serving our customers effectively uh making sure that we're reinforcing the core aspects of the product and the way in which we were interacting with our customers um and the second was really refining The Innovation that we wanted to do rather than have a whole set of new ideas that we were uh experimenting with we got really specific we're going to do this one or two projects around Innovation and then we will uh incorporate that into the product and move on so it made us be much more efficient with how we were operating the next piece that we looked at really was was around pricing and um we started I think one of the key things that we did and that is important as you're moving into this notion of of pro grow again profitability and growth is to start to really align particularly for freemium companies like us premium companies often give away too much and always trying to test what are the uh right things to include in the free product as opposed to the paid product and so um we started to really align the value that we're delivering with what we were charging for and began to identify a couple of aspects in the product that we had been giving away for free and we began to experiment with how to incorporate those into the paid plan so that our uh our pricing now started to align with the value we delivered increasingly which enabled us to grow in ways that we hadn't been doing before um and then you know continuing to to streamline this notion of um of of innovation and new initiatives how do we make sure that we're picking the right pieces to do over the course of the time that we're uh rolling things out and one of the key pieces of course to that is testing really quick iterative testing around um new pricing plans new elements to incorporate into the paid tiers looking at new tiers we rolled out a couple of new tiers of pricing along the way looking at the the Journey of how do we move our customers from one tier uh to the next um so along the way as we were moving into this uh the structure of profitability and growth we were constantly reinforcing this notion with the company and with the employees at the end of the day as I as we talked about earlier in the session here the the tech companies we most admire either are profitable or have are getting there right um and reinforcing that as a way to take responsibility for our our future it's a way to make sure that our customers know that we're going to be around we're not just a company that is um going to be making you know huge growth Investments and then we won't be here in in a couple years that they know that they can rely on us and build their business around the tools and services that we're providing and it's a way to take care of our employees our employees know that they're working for a company that emphasizes profitability and growth and we're not going to be in a position where we're unstable um so the other families understand that they have a good home with us at uh an issue and then constantly reinforcing of the goals how we're doing how we're performing um and really build that uh that into the culture and communication with uh with the team and how the teams are uh working with us so again you know I think one of the key uh pieces and you know this became so important to us I I put together an e-book around it sort of looking at the key things that um that you most want to be looking at but um you know how what are they what a bunch of key questions to be asking in particular how are you adjusting your pricing strategies how are you adjusting what you're including for free if you're a freemium business and what tiers you're making available how do you start to create new tiers in the business and move your customers along that path how do you start to Leverage the scale that you do have to expand into new markets or expand deeper into customers uh that you already have and most importantly at the end of the day profitability and revenue in general is really a proxy for the value that you're delivering if you're able to think about this from a from a perspective of um of delivering value then of course you ought to be profitable because the businesses that you're providing tools and services to are finding so much use and so much value from what you're doing that they're willing to pay and they want to be in a position where you're you're you have an ongoing profitable concern so um those are the key lessons that I've learned along the way and I think right now as we're in this crazy economic environment uh all of us should be looking at how do we establish a profitable and growing company um you know there has been this uh there hasn't been a lot of emphasis around profitability over the last three to five years and now all of a sudden investors are demanding it and uh getting there quickly is is can be really challenging if you pull together the key three or four components that go into that and and incorporate it into your culture into how you're communicating and getting the team on board then you have an opportunity again to to really manage your own future in ways that provide sustainability for your business and sustainability for the employees and the team that you're working with thank you very much foreign

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