Issuu Revenue & Funding (2024)

[00:00] I am, very excited about this next guest because every time I have it on the have it on the podcast, I cannot get you guys know I push. That I just could not get the data I wanted. And then all of a sudden, say, let me put you on stage at SaaS Open. And he says, well, we actually just had a big transaction. I'll come to SaaS Open. We'll talk about it. That's all I'm gonna say. [00:18] Please tell me welcome to the stage, Joe from Issuu. Joe, come on up. [00:26] Good to see you, my friend. Good to see Thank you for the water. So I'm gonna keep chatting while I ask you questions and I'm gonna grab my coffee while you make yourself comfortable. [00:34] >> First of all, go ahead. 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 sort of the core of these businesses. Anyway. [00:50] I also want to tell you guys, 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. We'll let that be an open loop. [01:03] >> I have vocal cord non nerd. [01:04] Go. This is called an open loop and forbatta [01:06] >> I'm wings. It sit. [01:09] They'll pay attention. We'll get to in about I'd like to just four minutes. Know. The point, you know. This happened about a month ago. What did you do with Bending Spoons? [01:17] >> Yeah. So first of all, I should just say I'm no longer the CEO of Issuu. I was the CEO of Issuu for eleven years eleven and a half years. And we got acquired by Bending Spoons at the end of July. So any anyone familiar with Bending Spoons. [01:35] >> So there are a company everyone in this room should know more about. They're Italian based and they are acquiring primarily product led growth SaaS companies, but also doing more as well. They bought Evernote Meetup. They just bought WeTransfer. They bought us as well. [01:57] Hopin. [01:57] >> Hopin. Yeah. And what they're doing is they're buying companies that have some pretty good scale kind of revenue in the twenty five to two hundred million dollar 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 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 [02:27] >> time when we were ready to look at getting acquired. [02:30] We're gonna 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. [02:42] >> I 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 give you a good range of that to be pretty great. So you know we we did. I think as a company we're doing just north of 30,000,000 in revenue profitable not not very profitable but sort of barely profitable. And we sold the company for 9 figures. [03:10] So fair to say like a 4 to 6 x revenue multiple something in that range. [03:14] >> Yeah. Not six. I mean unless you're AI right now, you're not getting north of five. Okay. And there's that that there's all these companies, you know, given the stage of our Issuu was when we sold it in July, if we had sold it two years prior in '22, we would have gotten two to three x what we got. [03:37] Why didn't you? [03:38] >> Because we weren't at the size we're at now. I mean, of the things that when you're selling a company, it's important to understand our lane. Right. And where the market is. So we could have held on and continue to grow and build Issuu 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, where we are in the opportunity cycle. And we felt [04:06] >> like profitable growing north of 30,000,000 in revenue. Good business. Huge number of really happy customers with a million free customers a year, marketers, content creators, 65,000 of them paying Issuu. And we had gotten some inbound interest. And once we got that inbound interest we started talking to folks on the market. [04:35] So here's we're going to focus on over the next fourteen minutes and thirty seconds you know going from zero to a 9 figure exit. Right. We're going to talk about how Joe used debt, how he scaled ARR across three key sort of story points, and then exiting. Right? You paid your bankers how much to do the deal? [04:50] >> $2,000,000. [04:51] Over 2,000,000. [04:51] >> Little two over 2,000,000. [04:52] Over $2,000,000. Was it all cash or cashless earn out in a mix? [04:56] >> Well, it was all cash, no earn outs. [05:00] We actually Barry, let let it hang. So we'll talk about that. And then yeah. 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 next fourteen minutes, but let's talk about the product for a second. This is your homepage. This is what you do. [05:14] >> Yeah. So Issuu is this massive digital publishing platform primarily catering to marketers to take their marketing content, collateral, sales materials, brochures, [05:29] >> publications, all the whole range of different documents, mostly created in using Figma, Adobe or Canva. It's uploaded to Issuu, Issuu hosted, [05:43] >> transforms it into a range of assets. So you create one piece of content and it can get transformed into a video and link enhanced paginated version, 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 home page about two years ago. We had our version of the purple homepage. Yeah. Also [06:12] going all the back I just put the revenue graph up. The first revenues back in our launches 2006. Is that our [06:16] >> company launched two thousand and seven seven 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. [06:32] >> And up until that point, the focus has been go find anybody that's got a longer form, high quality PDF, brochures, catalogs, market materials, magazines, publications, all that stuff, get it into Issuu. Because from there, make it look great, Issuu launched like as the iPad was launching, right, so it was a different time. Make it look great, get lots of data, and then start to figure out what aspects that are valuable to businesses and start to charge. [07:03] >> And we really honed in on being a B2B company in that twenty thirteen twenty fourteen timeframe. [07:12] So you guys can see again the story here. Just doubling down on this idea. It's not always like you know 0 to $1,000,000,000 of revenue in two days. You know, this is like Well, it is for most companies. [07:21] >> Yeah. [07:22] 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 ten years of hustle before your first 5,000,000 of revenue. Right? And now we see it. [07:30] 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 out at this point. You come in as CEO in 2013. Should we dive deeper there? Was there a contention with founders and investors and they brought you in, or what happened? [07:46] >> Company is founded in Denmark. [07:48] In where? [07:49] >> Denmark. [07:49] Denmark. [07:50] >> And the lead investor is referred to one of the largest Scandinavian VCs. [07:54] Would they have the other 2007 round for $10,300,000? Yeah. K. The bottom one? Yes. [08:03] >> Yeah. I don't think it was whatever. [08:05] Yes. This is wrong. It's crunch basis fault, not mine. But [08:08] >> 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 [08:15] The point being the lead of that series a is. [08:16] >> Yeah. Hardcore capital. They also put them the bulk of the rest in in 2014 when I raised and KDDI, the big Japanese telco came in as part of that. They had a there was a founding group of five people. They were doing a nice job of scaling use, but but there are sort of two main growth opportunities. One was partnerships with content tech platforms in Silicon Valley primarily Facebook Pinterest Adobe ultimately later Canva, et cetera. And then [08:55] >> the other was really an emphasis on revenue growth. And so they decided to go find a Silicon Valley seasoned person to come in and run the business. So I joined. It actually got 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 [09:24] >> you want. And even in the best circumstances, and often it's, you know, it's challenging. 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 [09:39] are the brass tacks here though. So they they got rid of CEO because he wasn't performing or she wasn't selling or what was the [09:43] >> Wasn't what didn't have any connections outside of Denmark. [09:46] Okay. So And [09:46] >> wasn't really growing the business. [09:47] Couldn't grow internationally. They find you were you already involved in the company or they brought No. [09:51] >> They brought me in from scratch. [09:52] From scratch. You are a talented guy. You could do anything you want. How do they recruit you? What was your compact like? Did you get equity? [09:58] >> Yeah. So we flipped the company. First of we flipped the company from being a Danish company to US company. That was a somewhat complicated process. I got [10:12] >> 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. [10:22] Would a normal CEO be like four or 5%. [10:24] >> Yeah. [10:25] So you're higher than that. [10:26] >> Significantly higher than that. Okay. [10:29] >> Nathan always asks these questions really fast, hoping that you'll answer them. [10:34] >> But we've done this a lot. So, you know, I'll give but I'm giving you more today than [10:38] You're great. I'm not complaining. This is wonderful. But you say you come in, you're well incentivized. You you get Let the thing [10:44] >> me just finish on the point why I came in. So I've spent my career in this intersection around creativity, content, and technology growth. I was at a company called Virage back in the late 90s, early 2000s that did video search. I ran the business side of things at Flickr. So I've sort of my wheelhouse is content. And I I love the background of the basis and foundation of what Issuu is doing. So I was excited about [11:11] >> the product. I thought wow I think there's a lot we can do here. Good comp package and exciting. [11:19] So you're in you're in now full time. You're growing the business. You did this series B. I want you to just quickly on what was the thinking in 2021 when you did this debt deal. And can you share the term? [11:28] >> Yeah. So we were an unusual 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 investors we agreed that everybody would have be treated equally. There were no preferences. [11:50] Just to be clear there were only common shares of the company. [11:53] >> There were basically there were preferred shares but they were treated the same as common. [11:57] >> All the same. [11:58] Okay. [11:59] >> 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 at 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 [12:29] >> to raise 30,000,000 on a $250,000,000 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're not at this big preference stack. So we got introduced to a lender, very highly recommended. We took on $20,000,000 of debt actually and had access to another 10. So it announced as 31, but it was really [13:00] >> 20. [13:03] >> And I won't give you their name, but we 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. We ended up refinancing this 2021 lender with Eastward. [13:29] I want people to take the lessons you learned from that. I know I don't talk negatively but this is important stuff. What went wrong about the first debt deal. [13:35] >> I don't want to talk negatively but I will talk honestly. We worked with a firm who were [13:43] >> really essentially predatory lenders. [13:47] >> Lending has a bad rap. However, I think there are great lenders. [13:51] Joe, I gotta hold on. [13:52] >> There's one of his information they have to have. What was the interest rate on the first piece? Was [13:57] >> Like 12 ish percent. [13:58] So the reason I bring 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 gonna say something like 40%. [14:10] >> Okay. [14:10] >> Right. [14:11] So now the rest of the story. [14:12] >> Yeah. There's two forms of predatory. There's interest rates and then there's process. So we raised $20,000,000 of debt against that. There won't be additional preferences etcetera. [14:26] >> And we had. [14:29] >> We used that money to power innovation, to power launching an enterprise product and to start powering deep integrations with folks like Canva and Adobe. We use the money well. However, about a year into it, we missed our revenue covenant by a footfall. So on a $7,000,000 quarter, we missed by about 150 k. [14:56] So just to be clear, covenant is gonna see something like when you're sending a term loan, it's gonna say as part of the compliance certificate covenants, you must grow revenue by 10% year over year to remain compliant. Otherwise, we can call the debt back to us. That would be a similar kind of covenant. [15:09] >> 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 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. They wanted one point an additional point in [15:44] >> the company for each month that we didn't refinance the business and want to charge us a penalty of a million dollars if we didn't give them those 1% warrants within three days. Prior to all of that coming into play, we refinanced with Eastward Capital who are fantastic, and we didn't end up having to pay much of those penalties. But anyway [16:11] >> through all of this we continue to grow the business brought on better and deeper integrations. [16:21] >> I had a health scare but we never Let [16:26] me pull the story through now. Right? So so and remember, 1,000,000 1% of the company, they sold for 9 figures just recently. So every 1% penalty is paying on the company if he even sold warrants on a debt deal of 2%. Well, if you sold for north of a $100,000,000, that's just the 2% warrants, it's $2,000,000 right there. And then every extra 1%, that's another million dollars off the sale. I mean, right now, I mean, you [16:46] gotta calculate that into your cost of capital. I'm beating this down a little bit because it's self serving. Founderpath 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 covenant for example for this exact kind of reason. [17:01] >> 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 focus on as a CEO is CEO's main job is to limit distractions. That's it. We talk about CEOs and 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 [17:24] >> it possibly can. Yep. So came through it, landed Bending Spoons, and [17:32] Let me fast forward to this because I was gonna play a clip here, but I wanna also be respectful and you name the firm in the clip on the podcast and I don't wanna create an awkward situation right now, but people wanna privately do their own research. Yep. They can go. But I would just say in the moment when I interviewed in 2021, right after you did the dead deal, you loved it. [17:49] >> Loved it. [17:49] He had no idea. I mean, you know, the rate is so cheap, Nathan. This is incredible. [17:54] >> It was great. They were a really highly recommended firm. [17:59] >> And I'm happy to talk one on one afterwards or 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. [18:19] >> But if you get in with the wrong folks, it's important to understand how to navigate out of it. [18:23] Over the last minute, Joe, I wanna 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 Spoons or a Rocket Internet or one of these kinds of companies. So you get this deal done just recently. For those of you that joined late over a $100,000,000 exit on $32,000,000 of revenue, this is a company that is known for doing these kinds of [18:40] deals. They bought these other kinds of companies which Joe mentioned. What should people be prepared for if they're entering an M A process with a Bending Spoons? Lawyers, banking fees, process. [18:49] >> Yeah. So, you know, you have if you typically have a banker, that's a couple million dollars. Your lawyer I think most people think, oh, I'll just get an M and A lawyer at the time I'm doing an M and A. Maybe your law firm does it. The lawyer you use makes a big difference. We worked with Goodwin Procter, Larry Chu. You know, when I talk about folks we work with, I try to be as honest as [19:13] >> possible. Like, they're not good, I'll tell you. If they're great, I'll tell you. 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 sheet and the contract way more efficiently than other otherwise. [19:31] Did the term is drastically changed. [19:33] >> No. She's signing and final. [19:35] >> One of the great things about working with Bending Spoons they they didn't retrade with us. I don't think they've retreated with others. Meaning change the price terms with the terms. We agreed. There was lots of stuff that lawyers haggled over and things like that. But price was the price and 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 [20:02] >> included, think, oh, these will start to get interested in us and there'll be five 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, $20,000,000 become attractive to PEs and strategics. And so you know there's 50 PEs that could be interested 20 strategics. But the truth is in the moment that this starts to [20:32] >> happen the people that are interested start to winnow away fast because 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. And when you term sheet we were we had really deep conversations with Canva and Adobe. Part of Bending Spoons was good very good terms really fast. We an all cash. If I'd signed with Adobe we'd still be negotiating and [21:02] >> I worked there for four more years. [21:03] Was the deal price though higher with Adobe. [21:05] >> They would have all in been higher. [21:07] >> You know we were kind of around the same. [21:09] Okay. [21:10] >> Some of the some of the strategic may have been a little higher. But [21:14] >> my point is many of the strategic that you think are going to buy you have something else going on. I say 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 [21:41] >> 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 when you're ready to pull the trigger. You can stop and say, I'll wait two years or whatever. [22:05] But if you hang out on surface like this all the time, you would think the $100,000,000 exit is the norm. It should happen every day. It's, you know, of course, that's what we wanna do, but it is actually the rarity. Growing, coming in in 2013 at $4,000,000 of revenue as CEO, scaling it to $32,000,000 of revenue in a very competitive space. I I won't name all the other companies, a very competitive space. Then running a successful [22:24] process to get a all cash, 9 figure deal done, doing it all with vulnerability and transparency, working through debt deals, personal health scares as well. Gotta give it up for this guy for being so vulnerable. Give it up for Joe from Issuu. [22:36] >> Thank you. [22:38] I appreciate you, man. [22:39] >> That was awesome. [22:40] Thanks. That was great. Alright. We'll keep the slide

[00:00] Hi everybody. I'm Joe Hyrkin. I'm the CEO of Issuu. 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 [00:27] today about how we got Issuu, we're venture backed, how we got Issuu 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. [00:43] So I'm going to talk a little bit about what was happening in the tech economy and 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 world and then how we started communicating to our customers and to our employees as well throughout that process. [01:11] So I'll start off with sort of how we began to unlock this idea of what I like to call a pro grow, profitable and growing. And back 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 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 [01:41] world that we most admire, we tend to think about, we tend 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 society, on the world, around products and how people are using them and engaging with them, these are all profitable companies or in the case of Amazon could be profitable if they manage things a little bit [02:07] differently. So the truth is the sort of secret of of successful tech companies actually is profitability, but often it's ignored and it's it's not always as fun as 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 increasingly important and really a necessity. So in 2015, Issuu — we were in the midst of the second half of 2015, we were looking at raising [02:41] some additional capital to sort of power additional growth and innovation [02:48] in our business. And we had some really great conversations with VCs, significant serious interest particularly in Q4 of 2015, and we were getting to the point where we had multiple VCs lined up to invest significant money into Issuu in a growth round. We were in those discussions in December, the holidays hit and we agreed we'll revisit this in Q1. And for those of you who remember at the time, Q1 of 2016, we began to [03:22] get scared around the economy. There were indications that the economy might start to have challenges. It was nine months prior to the election and we were in one of those times when, particularly, investors started to caution their companies around getting more profitable and investors themselves started to get cold feet around actually making deeper investments. And we started to see articles come out and proclamations come out from the venture community that were [03:58] 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 some of that communication. So for us what happened is again in December, we had really strong interest from multiple VCs. We had really good discussions around valuation, a nice plan to use that money to power growth, and not much of an emphasis on the need to get to profitability. [04:30] 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, [04:39] 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 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 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 [05:06] start to reevaluate things. And as we started talking to them more, they the companies, the investors that were looking to invest in companies that were doing in the [05:19] $10,000,000 to $20,000,000 in revenue were now looking for $20,000,000 to $30,000,000. Companies that were looking for a particular growth trajectory were now looking for more growth trajectory. The VCs were starting to look for more sort of more a deeper understanding of the growth opportunity that existed and they were also starting to emphasize profitability. And so we began to look at how do we actually turn Issuu into a profitable company. How do we start to move [05:54] the business rather than rely on this sort of growth-at-all-costs trajectory for the business and having to constantly rely [06:05] on VCs, [06:07] 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 [06:17] to be looking at? What were the ways in which we needed to innovate around the product? What were the areas that we needed to streamline around our initiatives and around innovation? And we put all those pieces together and in June 2016, we decided to communicate very clearly to the whole company, we are moving Issuu into a business that is what we like to refer to as a pro grow, profitable and growing. Not just profitable, it's not [06:48] profitability at all costs or growth at all costs, it's this combination that actually creates long term sustainability for the business. So we made sure that we were really transparent 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 what this means in terms of what [07:17] we're going to be focusing on, products that we're going to focus on, what the teams are going to be looking like. And the other thing that we started to do, [07:27] the other thing that we made really clear for everybody was make sure that everyone understood here's what it means for you. Here are the areas that you're gonna be focused on. We had a very small number of people. This was not a late-2022 sort of tech-oriented layoff situation. 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 [07:54] 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 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. [08:20] I think every company always has moments where 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. [08:46] We reoriented the teams into more flexible teams that that could execute against really specific goals that were oriented around again the pro grow idea, profitable and growing, not just profitability, but growing. And growing of course was referring to [09:06] engaging our customers more fully, rolling out more effective products. And highlighted for everybody exactly how we are sitting in a really big opportunity and 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 [09:36] 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 planned on getting to profitability in September. We burned $22,000 in August. We were, you know, just about there, and in September we made $16,000. The difference between burning [10:06] that last $22,000 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. By organizing ourselves effectively, we were both able to get ourselves into profitability and establish [10:30] it in a way that was sustainable. So that essentially got us set up to become what I like to call a pro grow. And [10:42] what we did on an ongoing basis and continue to do is really reinforce this notion 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, making sure that we were reinforcing the core aspects of the product and the way in which we were interacting [11:09] with our customers. 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 experimenting with, we got really specific. We're gonna do this one or two projects around innovation and then we will 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 around pricing [11:37] and we started, I think one of the key things that we did and that it is important as you're moving into this notion of pro grow again, profitability and growth is to start to really align particularly for freemium companies like us. Freemium companies often give away too much and always trying to test what are the right things to include in the free product as opposed to the paid product. And so we started to really align the [12:03] 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 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. [12:28] And then continuing to streamline this notion 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 rolling things out, and one of the key pieces of course to that is testing. Really quick iterative testing around 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 [12:59] way, looking at the journey of how do we move our customers from one tier to the next. [13:08] So along the way as we were moving into this 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 talked about earlier in the session here, the tech companies we most admire either are profitable or are getting there, right? [13:33] Reinforcing that as a way to take responsibility for our future. It's a way to make sure that our customers know that we're gonna be around. We're not just a company that is gonna be making huge growth investments and then we won't be here in a couple years. 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 [13:58] 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, so they and their families understand that they have a good home with us at Issuu. And then constantly reinforcing of the goals, how we're doing, how we're performing, and really build that into the culture and communication with the team and how the teams are working with us. So again, I think one of [14:29] the key pieces and this became so important to us, I've put together an e book around it sort of looking at the key things that you most wanna be looking at. But, you know, what are the 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 and what tiers you're making available? How do [14:52] 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 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 perspective of [15:23] 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 wanna be in a position where you have an ongoing profitable concern. So 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, all of [15:50] us should be looking at how do we establish a profitable and growing company. [15:56] 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 getting there quickly can be really challenging, but 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 you're getting the team on board, then you have an opportunity again to to [16:24] 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.

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