Jellyvision Revenue, Valuation & Funding (2018)

hello everyone my guest today is amanda leonard she is the ceo of jellyvision one of chicago's fastest growing tech companies that serves 1400 customers with alex the most helpful employee decision support platform on the planet jelly jelly vision's been recognized as the best software company and best culture by the moxies the lighthouse winner by the ita and the top place to work in chicago by the chicago tribune and cranes amanda are you ready to take us to the top ready i'll try my best awesome all right so it sounds like alex is like your main product but help us understand what does jellyvision do and what's your revenue model how to make money we make money by licensing alex to mostly large employers to help them help their employees choose their benefits so it's an annual recurring license fee based on the number of eligible employees that we mostly licensed to the jumbo employer market meaning companies with lots and lots of people okay and how would this be different than like a gusto yeah gusto is a full benefit administration platform they help you enroll employees and and manage employees all we do is help people understand their benefit choices and help them understand the mathematical and annual out-of-pocket costs so they can make those good decisions and you say well how is that possibly a big enough business compared to gusto that's an end-to-end sort of crm for people and the reality is ford spends more money per car on health insurance than it does steel and one in four of their employees would rather clean a toilet than think about their benefits and so we just drive really really good decision making around health insurance to help reduce the cost of confusion on overall care we save employees and employers a ton of money on one of the most expensive decisions they make in a given year that's fascinating so right now how many employees are under a brand that pays you uh total we have 1400 customers that represent 18 million employees wow that's a lot okay that's very good mostly u.s based all u.s based largely because we're the only country that really has messed it up so that employers are in the game other countries have nationalized health care and no health insurance to pay for it so it really is a very uniquely american phenomenon in large part that's fascinating i want to put all this on a timeline here in a second but first you mentioned kind of enterprise many times like kind of how enterprise are you so on average what are these people going to pay you per year for this kind of thing um it depends on the number of employees but it can be a five six or seven figure deal depending on number of employees and we work with the country's largest employers okay can you tell me ignore per logo like per seat typically i mean or per employee are we talking like a dollar or 10 cents or a hundred bucks yeah sliding scale which depends on the number of employees you have and on the teeny tiny companies you can get it for you know 18 bucks for a large enterprise you can get it for a quarter an employee a month you can get much much smaller so okay so so the most if someone's listening right now they're really small the most expensive would be about 18 bucks per month per employee oh did i lose you i'm so sorry you just cut out i literally just i just missed that question if you can edit that out yeah i don't know it's fine it's 18 per month per employee that's the most expensive for someone listening is really smart a year that's that's an annualized 18 per year and it drops down to uh per uh you know a quarter or less for very very large employers okay got it so almost basically almost a little over a dollar a month that's right that's great very good all right put this on a timeline for me so when'd you launch the company so jelly vision actually started in one form as a gaming company in the 90s that was making very famous for making games on cd-roms these things used to slide into computers that had data on them so we created virtual game show hosts like you don't know jack and who wants to be a millionaire this company then began saying we're not going to create virtual game show hosts in a b2c gaming space but we'll create virtual advisors in a b2b interpret space so in 2002 we relaunched raised a small series a which was technically a seed but we call it a series a and our thesis was we're going to go to where there's for a brow where people are trying to do something complicated and boring but important and we'll talk you through it alex isn't the first time we tried to productize and scale what we do it's just the first time it worked we spent the better part of a decade from 2002 to 2010 thereabouts really just trying to find innovative ways to sell and we did projects for large companies operating more or less as a digital agency before alex happened started to get some positive market momentum into 2011 2012 started to sell directly and in 2016 it became the company and it's our sole focus but it certainly was a longer-tailed start than many many of the companies uh featured on this podcast and and how did you know so so in 2002 how did you know that you wanted to move away from b2c kind of game show host and like b2b basically tutors yeah it was because the the mob is so fickle and in b2c gaming you don't need to just have a great game you need to be really lucky uh it is very very hits driven and it is very impossible to guarantee a hit no matter what kind of the cultural phenomenon you're riding on it's just a very lucky business and we had figured we had used up all of our luck so far and as games moved from cd-roms to online nobody was making money online yet and we're a company that's been largely bootstrapped largely run by the other type of vc not venture capitalists but vested customers and so we wanted to figure out how is the way to more predictably create you know scalable revenue that didn't rely on a hits driven business that takes a lot of luck to win yeah okay so again you mentioned mainly bootstrapped how much have you guys raised today though uh in total we've raised 27 million but only 6.6 of it hit the balance sheet we did a 20 million dollar secondary round that closed last year and okay so walk me through the psychology how that affected the team who did you offer liquidity options to was it all employees or just early ones etc there was a line in the sand uh based on appetite our original you know our series b investors sigma partners chose not to participate they kept their chips uh on the table so we drew a line in the sand and it was based on tenure it had nothing to do with seniority it was how long had you been in service to the company and drew a line and then also offered it to our earliest investors okay interesting sorry the line in the sand for your early employee base that was based on a hiring date if they were before that's exactly right we just picked a hiring date it went far enough back that we could reward a lot of people but not so far that we'd be wildly oversubscribed that's interesting um that's really interesting and you're just doing a backwards math there in terms of exercise price and things like that correct that's interesting what percent of uh well okay hold on did it surprise you or was it in line in terms of how many of those early employees did take advantage of liquidating you know it's a very personalized thing i think i was probably surprised by what everybody did because they all made very personal decisions versus anyone's statement about the growth and success of the business it's how long have you been there how diversified are you as an individual what are your liquidity needs how bullish are you about the future there's no one dynamic therefore it was a very very personal thing that everybody did i thought it was really interesting but i also was very pleased by how many people didn't take chips off the table or left a large porsche portion still to ride like people see still upside potential jelly vision and that was pretty cool too yeah that's that is very cool uh what do you get today in terms of total employees uh just under 400. going to next year will be about 470. all in chicago most in chicago we're chicago headquartered about 10 of our population is permanently remote but it's more like they start in chicago and then move and take their jobs with them versus us having a strategy of hiring outside of our town yeah talk to me about churn turns critical in any sas company what is your churn today and how do you think about it it's a low digit net positive dollar churn we've been very successful in having a sticky solution it does its job it creates an roi and so we stay in with our core product and then we expand through additional line items things that help employers navigate leave of absences or financial wellness or additional add-ons is how we grow but we have a we have a really uh lucky relationship with a lot of our large employers with our core product so when you say a low single digit churn i mean so less than 10 revenue churn per year it's net positive we actually grow each year ignore expansion for a second i'm talking just gross just gross revenue churn before you add back expansion it's it's you said it's 10 or less yes okay and then let's then go to the fun story which is when you add back expansion you make up that 10 gap and you're above 100 net revenue retention yes how far above 100 it changes every year it depends on what new items we're taking to market but it's a our growth has really shifted from net new we're seeing a lot of growth in our existing book of business too that's great that's really good it's it's a it's a fun place to be once you start hitting that scale and realizing introducing kind of higher acv products across current base can drive a lot of the growth did you do any acquisitions to drive those upsells or it's all been built internally we've done an acquisition but it was purely strategic we wanted to bolt on some technology that would allow us to optimize our pricing to be able to better uh offer a smarter algorithm uh everything else all of our growth has been organic nothing inorganic what's been your most successful cross-sell product to alex a product that gets into a totally new space something that helps employees navigate their leave of absence as an employee sometimes you need to take more than just vacation days and you probably ask yourself two questions a am i going to get fired and b am i going to get paid and there are employer roles and then there are state by state rules that actually legislate how employers have to treat certain types of leads and we've created a product that is not only compliant it is humanistic and very helpful and walking employees through these leave considerations and that is our most successful uh line extension by far it really is sort of a mini business unit in and of itself that's interesting amanda can you describe to me new new logos you're adding today what do they typically look like is it a team of a hundred or a thousand or ten thousand the typical starting point yeah for sure um our business thrives on complexity we need large benefit departments that are trying to solve lots and lots of constituency so we don't really play you mention gusto we start where gusto stops we need hundreds of employees to actually be able to provide the real roi that you're looking for in terms of plan shifting and tax savings vehicles are our bread and butter are companies with 10 000 employees or more we do particularly well with jumbo employers we have 50 000 employees plus mid-market to us is 2 000 to 10 000 employees and then we do okay 800 to 2000 but if you have a forty person company you may not even be offering benefits let alone meeting alex to explain them yeah so then is it fair to say if you're closing a ten thousand kind of seat account at that eighteen dollar seat price point i mean that year one acv is gonna be 180 easy 180 k it is we have a six-figure average price point for our electrical errors yeah that's great so let's just use it as an example to understand kind of how aggressive you're being on acquisition so let's assume that it's a 10 000 kind of seat account 18 bucks a seat 180 grand first year acv what are you willing to pay to get that account fully weighted our cacta ltv is about 11 to one our gross margin payback period is 8.8 we are able to very cost effectively land and keep jumbo employers got it so just to be clear if you've got a 8.8 kind of month payback that means you're willing to spend call 130 140 to get 180 grand a new arr yeah we spend less than that yeah that's great okay very good and then um gross margin ltv a lot of people sorry gross margin payback a lot of people do the less aggressive version just say what the payback is they don't multiply by gross margin on the end help help explain the importance of that well it's it's all about you know profitable sustainable long-term growth isn't it you know we we are a business that has sas margins uh sas revenue and we need high gross margins to be sustainable and what we're looking at isn't just you know is it cash in but is it profitable you know are we going to have a profitable business in three years yep are you casual positive today have been since 2009 we are also profitable this year with line of sight to uh having substantially improved margins by 2020. so we are a business that has grown through customer revenue not you know venture capital yeah so the 20 was secondary there was another 6.5 that you said was going into the company that's still all sitting in the bank uh well it was 1.6 in 2002 5 million in 2007. we haven't put cash on the balance sheet in over a decade that's great that's really cool well you say you're improving gross margins where do you anticipate getting most of those points back from what are your biggest expenses right now above the line i think um where we're going to get gross margin back is improved efficiency and implementation it's not an off-the-shelf product it is configured versus customized by a customer the better we sort of deliver our product where it feels personalized but it's pretty turnkey from an implementation standpoint will improve gross margin and then a huge part of it is selling more things we we are building a more and more robust line our customers are saying what's next and being able to walk in and sell a multi-product solution will help us from a gross margin perspective as well yeah that's great last question here as we wrap up i mean can you give me a general sense of kind of arr size or range that you're at today yeah we're north of 50 million in uh in revenue our arr is north of 60 million okay um walk me through whether they're different is that just gap versus cash it is yeah we book we have a very seasonal business like accountants but our tax day happens in november so we book all of our revenue in the year in which we win it but we recognize that parata over the start of a license which typically starts in november or december so revenue trails bookings yeah that's interesting interesting so very good so at a at a 60 million run rate today i think what that puts you at about 5 million bucks per month in revenue across 1400 customers that means average customers painting caught 3 500 3 600 bucks a month something like that does that sound about right yeah but we really look at it on an annual basis just because of the cyclicality we don't have a lot of ebb and flow month over month it really is an annual business just to kind of give you it's a unique dynamic maybe four years about 43 grand a year then average acv yeah that's it we don't win a lot we lose a lot of business in q1 do you have the ability though to upsell or can you only upsell every 12 months if we're selling into the benefits solution selling to our core uh customers in the core sort of pain that that alex is best at solving at it is an annually cyclical business we've tried to bend the will of the market but it is it is uh well but the good news is we have something a lot of sas companies don't we have a trigger for purchase and we have a trigger for implementation and we have a trigger for use so to see markets you got to get your customers to buy you got to then get them paid to pay attention and actually implement and go live with your software and then you need users to come and actually use your software so you can prove value to your purchaser in our instance because they're the dynamic period called lawyers get their employees to pick their benefits for the following year it's where billions and billions and billions of insurance decisions are made we get everybody our employers know that there's this date that they have to have everything ready for and it forces all kinds of purchasing and all kinds of implementation behavior and then employees have this like 18 000 carat if you don't go through open enrollment you will not get insurance from your employers so we have sort of this like carrot and stick that gets employee behavior to change so user and purchaser behavior are driven by this annually cyclical business and also we don't have to have the normal like quarterly you know race to close we have an annual race to close and we put all of our eggs in a seasonal basket a year it's a different it's a different selling dynamic at jelly vision for sure before we wrap up here because we're out of time growth so you're at 60 today what we had a year ago in terms of run rate we are we have a five-year compound annual growth rate north of 50 okay so make that easy for me about a year ago i do know that's what i'll give you you can you can revisioneer that will give you 51 5-year compound annual growth rate fair enough fair enough good north of 30 any plans to raise any additional capital not not on the horizon we're opportunistic there's a lot of zipping up happening in the marketplace if we find something that could be a creative we're always open to it but so far we're able to run just through reinvesting cash flow yeah and i love that any acquisitions on the table you're looking at right now i just we just uh looked at one today uh nothing worth announcing at this point but we're always shopping to bring solutions to market sounds good let's wrap up with the famous five number one favorite business book amanda the culture code number daniel coyle number two is there a ceo you're following or studying justin from sprout social number three what's your favorite online tool for building your business lyft i'm serious i build my business by talking to really smart people hiring them partnering with them and probably lyft getting around is probably my most productive thing i'm spending a lot of time out of the house instead of in jelly vision right now and that's probably what i use most from a productivity perspective that's great number four how many hours of sleep to get every night it depends how many hours in my bed how many hours do i sleep let's call it six six and what's your situation married single kiddos super married 20 years uh super married i love that i have a pile of kids at home many and only daughters how many three but it feels like a lot it feels like a lot that's a lot and do you mind me asking amanda how you are how old am i i am uh old enough to that question's annoying but young enough to still answer it i'm uh 46 years old i only asked i want you to take us back 26 years what's your 20 year old self what do you wish she knew man i if i say go back and say like one piece of advice that i would tell little mandy it would be this have more audacious dreams i don't think by saying you're going to change the world you will but it you sure can't do it if you're not intentional so i wish i had been more aggressive more hungry for impact and for scale and for growth instead of just running a nice business i'd wish i'd wanted to change the world coming out of the gate so i would tell young people be bold 2002 jelly vision really got going alex started taking shape helping employers more efficiently work with all their employees to pick the right plan for them save a lot of money drive a lot of efficiency they're working with over 1400 companies right now over 18 million employees they're doing this basically bootstrap 27 million bucks raised a lot of that was secondary they're growing healthy year over year doing about 60 million bucks right now in terms of run rate over 100 net revenue retention and over 90 gross revenue retention annually again 8.8 month payback period so healthy growth 400 people based in chicago has looked to add additional products related to you know paid time leave and do i get fired and how's that all work expanding rapidly amanda thanks for taking us to the top nailed it boom am i hired nailed it