JustiFi Revenue & Funding (2024)

hey folks my guest today is joe keeley he's the ceo and co-founder of justified technologies which exists to accelerate the potential of vertical sas platforms with specialized payment infrastructure strategy and beyond uh uh and beyond payment fintech products the company was founded in 2021 uh after the team founded multiple venture-backed uh and had multiple venture-backed sas exits investors into justify include emergence crosslink and rally joe you're ready to take to the top very good thanks so much so you're talking payments infrastructure are we talking stripe paddle charge v sort of space or something different yeah that's right i think if you think about us as like a stripe custom connect with for vertical sas platforms where they don't have to uh build all this all this stuff on top of it to get the best economics so we came from a vertical sas background took us a decade and a half to really get to what we would say sort of world class and we said well you know and and thus the name uh we said well that's a that was a great ending but that was really complicated and that was really expensive and maybe that's not right so let's build what we wish we had it's interesting how you describe it sort of a virtual findex department sort of turn it on or off almost like rackspace and manage servers right turn on the team on or off is that sort of how you're thinking about this long term there's a service component there's a sas component there's maybe a percentage gmv component that's right so we have uh you know payment infrastructure for vertical sas that allows them to monetize payments and very quickly you're seeing that become frankly not that unique there are a number of folks that out there to do that the cat's out of the bag if you're a vertical sas platform or marketplace that you ought to monetize payments but there and you need to have the infrastructure to do that and we have that and we have some very interesting i think product features that make us different what i think is is really the next phase though is going beyond payments and we can talk a little bit more about that and bringing in lending and card issuing and insurance but back to the service side of it is there's a big difference between doing something and doing something extraordinarily well so when i think about you know monetizing payments for a vertical sas platform you can have all the infrastructure you want but if 23 of your barber shops on your barber shop sass platform or using your payments well one could say you're not really meeting your full potential so what you might need isn't actually you know a remarkable amount of new technology you might have the stack you need but what you need is sales enablement training so you know sometimes i think that you know and we have a platform that delivers that content and our virtual fintech team can can lean in but we we think that it takes more than just an api you have to have a really good api but i think putting a team around things to achieve the goals we shouldn't forget that it takes a lot of uh a lot of talent as well to win so we kind of model ourselves a little bit after the playbook we're a minneapolis-st paul based company there's another one called arctic wolf here that does um chief security officer you know and there's a lot of support that they offer that are you know powered by humans and i think we shouldn't forget the power of you know humans plus tech of course now i mean uh you're writing a bit of a wave which is over the past year and a half sas founders know if the closer they are to the transaction the more likely there is for them to unlock sort of fintech revenue right a percent of gmb and if they go out to the markets you know we're talking three months ago and the board deck sounds more like fintech plus percent of gmv valuations were higher it's a sexier it's there's more lock-in you're closer to customers etc oh what's going on there youtube good to see you guys now imagine this you love watching these interviews with sas founders but imagine if we took all of the valuation data out from over 2807 interviews i've done manually saves you a lot of time well we've done this we've built it into the beautiful interface inside of founder path check this out i'll show you how you can access this in a second but you log in you connect your stripe account you see your valuation real time you can see what it changed over the past 88 days and even set goals for valuation this year now the secret evaluation is there's many different ways to value a sas business so the reason you're going to see three or four different valuations inside of your frowner path dashboard this is all free by the way is because depending on who's doing the buying of your sas company you're going to get a different valuation a vc is going to pay a different valuation private equity firm is different if you're going to do a minority sale that's different and if you sell a whole business that's a different valuation you can see all those when i hover over here right so the teal is what a vc would pay yellow is what private equity and red is if you sold the whole thing outright now what's cool about this is this is not built off random data again you guys hear these interviews on youtube all these datas are built from real-time valuation data points founders share with us on the show so traction 1.2 million seed round 3.7 raised they sold 22 of their business go in here and filter by the event maybe you only want to see companies that have sold the whole business well here are a bunch that have been acquired the valuation and the multiple maybe you're going out right now and you're raising your seed round well go in here and look at all this recent seed deals that went down what they raised what valuation they raised at and what percent that they sold there's never been a larger data set of sas valuations than what you can get now inside of founder path and we're thrilled to bring it to you all right we're going to go back to the youtube video here in a second but if you want to check this tool out if you want to jump in and sign up you can check it out for free to get your valuation at this link this link founderpath.com forward slash products forward slash evaluations or if you go to founderprath.com and hover over products click on get your valuation here and go ahead and sign up to give it a whirl again all that valuation data live right inside the platform i hope to see you there all right let's jump back into the interview do you anticipate the desire for folks to move into payments right with their current customers who already have a sas platform will that continue as markets sort of compress your inventory dollars are a little more reserved well i think it's it's going to accelerate because let's say that there are venture dollars are reserved sure but that vertical sas company let's say dollars are reserved at this particular period of time for them acquiring new customers even so then you know getting greater value out of and uh you know while it's share of the customers they do have that's a big part of embedded payments in fintech so if you have you know 100 million or 10 million of funds flow how do you better monetize that with not just payments but other fintech products that you can offer them of course always thinking about how can you add as a vertical platform you know value to the customer lending is a great example you know a lot of times with these small medium-sized businesses you know very quick hit lending embedded lending products are um you're competing against them using their credit card which really you know as long as the ui and the ux is is good you shouldn't have that shouldn't be very difficult from a rate standpoint so we like to think about let's get payments right and and then use that underwriting and and all of that and take take someone beyond because it's going to uh at the end of the day even if pre-money gets compressed and other things it's going to be a vertical sas platform is going to be judged on you know the stickiness of their customer and how deep they can go with those customers so guys just to make sure you're following along here with joe knight because i'm about to ask way more technical questions if you're running a sas coming right now you're selling to construction workers or construction companies and they you know have to send invoices to buy lumber right and you add up all the potential lumber invoices and it's a million a month joe's going you should use justify and add a payments processor maybe you're advancing invoices there's a lending plan maybe you're doing something here and joe they can use your technology to do that that's right our technology and equally important our team to help unlock what are the other opportunities because you know we have a toolbox just you know using the construction analogy here we have a toolbox full of tools and not every tool is you know going to work for every every job so but but there's oftentimes you know a you know we think that one on their funds flow so that's all of the money that's flowing through the ecosystem we believe wholeheartedly after being vertical sas veterans ourselves that the platform is creating the value so they ought to share in the lion's share of that value that's created so that means you know 100 basis points in payment in payments and another 100 basis points in other products which you know you take do you take your cut out of that first hundred basis points no we we are operating on a very different model in so much as you know we think that you know there might be 225 or 250 and so our goal is to first try to make uh get the platform those 200 basis points plus and then if we can make you know 5 or 10 or 20 basis points in addition to that as being that true deep partner you know the great thing of course about vertical sas platforms and software sort of eating the world is that very quickly a small platform can see funds flow of 50 to 200 million dollars yeah yeah we see this all the time when we interview sas interview sas founders uh it makes tons of sense but just to be clear i'm trying to break down your model excluding some of the services that you sell which i do think are important for this your sort of like percentage gmb model the way you make money is you're going to help the founder get 200 points and then you're going to keep five to 20 points yourself on top of that that's right amazing okay so help me understand you know it's where you find folks that have gone through vc saying services are really important i think it's really important when you look at cohort analysis in terms of net dollar retention on folks that have done and paid you for services it's always higher almost always higher than folks that don't pay that setup fee or don't pay the service fee as well so how are you embedding services uh and is it on the front end or the back end of them installing justify in the first place you know there's nothing to install it it's it's more on a modular basis so we we have insights dashboard so think about insights is a scoreboard if you're in the vertical sas business your game is payments and embedded fintech so if you're going to play a game we think it's particularly important to keep score at the game so we've created one pane of glass for executives to say how are we doing in the payments game so that's that they can purchase that and then we have engage which is if you're in a game it's good to have coaches it's good to have folks that help you sharpen the sword so engage is our virtual fintech team where we have an lms platform and a team that that they can purchase and then we have our usage based you know tech platform with the sub-account architecture so um we have some very large platforms that are just purchasing insights and engage right now because on the roadmap it's not the time to do a migration and that's what you call your dashboard insights that's the name of the product that's right yep okay okay okay so just to be clear again five to 20 points on the first product insights is a dashboard to see how you're doing is that like a sas fee yep exactly and then engage is your lms tool that's your fintech that's your coaching that's right super smart okay now did origin story the company do you start off with one of these things or did you launch with all three at the same time so if we go way back i mean my background is i grew a uh you know it started as a service company and then we embedded our own vertical sas platform and uh you know real-time booking for 15 years in the babysitting and child care space actually uh so we had 10 000 employees in the us and uk and i sold that to bright horizons at public company out of boston and then my co-founder co-founder started sports engine sports engine is a vertical sas platform that provided these software tools for youth sports teams and it turns out that hockey and soccer is really expensive because they processed about four billion dollars and they built this sort of this fintech stack and this strategy where 85 of their revenue as a vertical sas platform came from what we're doing today so we got together and said um there must be a a better way than that sort of walk in the desert and that's why we started justify to say you know something's not right we started that in january of 21. okay so fairly recently when did you sign up your first vertical software provider on the platform uh about you started building right away you know the good news is we knew exactly what to build because yeah engineering right and they've done that and done this for 15 years so we brought our first platforms on you know in the late summer of 20 and we're in we're in production with a couple dozen platforms today and uh and things are going you know remarkably well that's great so call like 24 36 48 something like that platforms today actively using the platform are you seeing a pattern are you having just way more success with the lms or the insights or the basis point model only or they're all using all of them no there's a mix and it depends on stage i think when when a platform's uh early you know there there isn't as much to analyze and help on the cost side really it's and it's easier to embed the you know the processing platform right away and then what we're often doing is is really providing a you know a discounted part of that strategy because we want to invest in uh emerging platforms because the catch-22 in the industry of course is well come talk to us when you when you have 500 million dollars of volume it's like oh yeah okay how can i get there if no one ever sort of helps me accelerate this so we we really have a soft place in our heart for there but you know and then larger platforms tend to start you know we have you know 500 million a billion dollar platforms they like to start on the strategy side to just really because there's more there's more nooks and crannies to dig into they might have multiple processor integrations so but ultimately you know to go on this journey and we do think it's a journey we think of ourselves a little bit like you know payment fintech sherpas in a way we're here to to develop the map we're here to carry the load and uh so it it oftentimes leads to using all of them together because um the return is so material for a vertical sas platform mm-hmm and help me understand too there are people listening right now going am i too early or too late for justify what's the what would you say the minimum amount of potential gmv is for a platform for them to like really consider and making it worth their while to sign up for justify is it 10 million annualized gmv or 100 million or more honestly we have pre-revenue platforms and if they're the right pla if they're a vertical sas platform that is convinced that said yes i would like to monetize payments from dollar one oh wow okay and we would love to work with them and then we have a platform a couple platforms that are over a billion that we're working with so um and anywhere in between so it just really depends on uh you know we're having different discussions and there's different analysis for a much larger more mature but sometimes very large platforms aren't necessarily depending on when they were founded and what kind of payment stack they have they're not necessarily that much more uh sophisticated sometimes in in the payments game so it all depends on on the team so we we have really anywhere in between so so if we add up all of the gmb that you guys are sitting on because that's ultimately going to power how good you can build your ai engine right and your dashboards and things is that above sort of five billion at this point we're we're flirting with it okay this year this year it's still early days but um but uh yeah i mean and i think that the gmv is really interesting because yes you can oftentimes monetize the same funds flow in different ways because a platform can get best of breed of payments that that come in on the processing side but then there's opportunities on the payout side they made we're doing a project for one of our platforms that is paying some of their sub account customers out on the card issuing side so they're making money coming in and they make money coming out too so we we're looking at both sides of the coin and do take a little bit more of a bespoke approach um we don't feel like we need or necessarily want to work with you know thousands of platforms right out of the gate like just really leaning into and this notion of taking a team approach to um you know some select few platforms that really want to partner is really where we find um we deliver and get the most value you mentioned joe unlocking at least 200 bips for these platforms when they sign up with you you know if you're flirting with five billion let's be conservative and say there's three billion right now on the platform it's fair to say we can multiply times call it two percent you've unlocked something like 60 million bucks a potential gm you know new revenue for these platforms you're working with correct that's right so it's you know it's all about our we exist to accelerate potential and i think that done well and there's again a very big difference between doing something and doing something well we we really have a a lens on the world that says vertical sas platforms are literally worth three to five to ten times more if this strategy is implemented well with the right technology and that's why i don't think anyone listening disagrees i would totally agree with you deeper customers bigger wallet share our poo expansion net dollar retention higher stickiness all of it you got it all you got it so yeah um we exist to accelerate that potential so let's look at quarters not yours yup yup no this makes a lot of sense okay cool so um talk to me about how you guys have funded the business you bootstrapped or you decide to raise um so we the ceo founder of sports engine is at rally ventures so one of my co-founders so we we incubated this inside of rally ventures which says offices in minneapolis and uh silicon valley and then we went out for a seed raise and we brought in emergence capital in the in the late summer fall of last year and then a fast followed by crosslink so this has been um really predominantly venture-backed um you know really from the beginning uh we've raised 10.6 million seed round and uh and we're off and running what was the oh sorry uh the round you raised last year was 10.6 seed correct and the round you raised this year was your series a and how much was that no uh that was just an extension on the we it was a flight so we did 6.6 and we added four to it so got it that's the cd we had been talking uh with the same investors all along and it was just more of a timing a timing thing as part of the seed race i see ics we're looking to do a series a you know we we have uh we have plenty of runway which is always a good thing but the timing on it we'll see how many folks are on your team today full time we have about 27 folks on our team today what's the breakdown how many engineers a little over half yeah okay and then i imagine you probably step up pretty heavily in your lms side right a bunch of coaches trainers tech folks yeah exactly um we expect that to you know we're still my operational co-founders our chief payments officer casey kipfer he led the payments team and sports engine and then nbc comcast acquired them so uh you know he's really leading that team and um it's an awful lot of fun to lean in with with other entrepreneurs um because you know even very large you know gmv vertical sas companies are you know can be not so large businesses and for me personally and with casey it's just it's terrific to just really lean in and get to know their business and and and be more than just providing them with technology because i think technology enables us as entrepreneurs to do great things but but the human part is very real too joe is the onboarding zero or one very black white in other words if someone does a billion in gmv already do they have to onboard all of that revenue through justify on day one or they can can they run a test with a little bit of it to start yeah definitely a test and we can run alongside existing processors too so you know the first and foremost is you know the the migration and and you know the larger the more material uh certainly a migration might be but you know we're talking you know we have a 300 million dollar platform that you know started integrating and migrating six weeks ago and is in production yep but i want to make sure i understand your model where you're going here you know if you serve your customers well and you get to the point where you are sitting directly on top of five billion dollars of gmv right and you've created 200 bips of value for your customers that's 100 million bucks of ar basically unlocked your ability to revenue you know monetize that is effectively 20 bips on that so about a 10 million dollar run rate for you once you're sitting on 5 billion of au you know gmv is that about right yeah and the the our our best will vary and it will depend on the other products that are brought in as well so you know that that'll be a bit of a journey but um but yeah it's directionally correct very interesting all right anything else i missed before we wrap up no been uh been great to talk to you thanks for thanks for the invite and and uh look forward to accelerating potential together out there all right joe famous five here rapid fire stuff number one favorite book um traction number two is there a ceo you're following or studying tim cook number three is there a favorite online tool you have for building justify grow girl yeah that's a good one i just acquired recently i don't know if you know that i think that's public yeah but just required i hope that's probably yeah i think rob told me the other day i'm pretty sure it's public um number four how many hours of sleep are you getting every night 7.25 7.25 the aura ring or something and i saw a ring on so i think you're married any kids i do 16 and 12. ah two kiddos how old are you 41. all right take us home something you wishing you when you were 20. say again something you wish you knew back when you were 20. you you can get it done in eight hours a day guys you don't have to overwork yourself justify sitting on a very interesting opportunity which is all of you guys have great relationships with your customers already your sas platforms you sit close to payments you should launch a gmv model right deeper wallet share more revenue for you more value for them they enable you to do that much faster much quicker they're working with call it 24 to 48 platform sas companies right now their model is to you know take take bips on the value they create for you also train you with it with an lms tool and then also give you dashboards and insights with the sas fee if you want them take one of them take all three of them you pick but just getting going they've raised 10 million 10.6 million bucks to build this bad boy out team of 30 uh sorry team at 27 right now it's joe scales joe thanks for taking us to the top thanks so much 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 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