How Kahuna CEO Sameer Patel grew to $3.6M revenue and 100 customers in 2018.

hello everyone my guest is Samir Patel he joined a company called kahuna in August of 2016 as its CEO before Kahuna's Samir was GM at s AP and success factors where I live a team responsible for making sa P a leading provider of collaboration solutions serving over 35 million subscribers Samir received a Bachelor at bachelor's and master's degrees from Babson College and Boston University Samir are you ready to take us to the top alright so so what is kahuna and what is the business models it's as if the fat company focused on customer engagement for consumer marketplaces so everybody from if you are classified you're right sharing like an uber or Airbnb or a door - or Yelp or an open table when you bring buyers and sellers together kahuna helps you find the right buyer spin them up get them on board and get them on the on the platform same for the sellers gives you the analytics to figure out who's your most profitable buyer way should be doubling down where should you fix your stuff and hopefully grow your market so give us an example for uber let's say they onboard a thousand new drivers in New York City next month that obviously then they're there that they're selling their services I'm the buyer as the consumer that wants that uber trip in New York how do you work with both sides so if you're on a you know so I'll use curve the curve is a customer of ours they do write tax sales in New York they used to Hoonah the idea here is you spent a ton of money on both sides which a typical business doesn't have if you're not a marketplace right in the marketplace you gotta sell money to borrow up sellers and fire our buyers you spent all this money bringing them to your site getting them engaged Kahuna picks up the ball right from that point when they land on one of your properties and guides them through step one step two and whatever that step is by your definition to say loyal buyer loyal seller right so we'll we'll get them will nudge them through the registration process we'll make sure that if your definition is if a drug if a passenger doesn't take three point four five rides they're not a royal drug customer Kuna will stay on them till we get you to that place right if someone's dormant they came they signed up the user once they haven't come back with we'll wake those people up yeah so you know if you're a marketplace right now you it is supremely expensive for you to go and get people to pay attention to what you're doing and to come to your site but once that happens you need somebody to really get your customer acquisition costs covered you need to drive them through a very very systematic process to get them to a point where every time they think of taking a ride they will take you they'll use curb every time you think of restaurant they'll use your service secure consumer service if you want delivery they'll use you not somebody else right so we wake up every day trying to solve that on both sides because if you don't have both sides working you can spin up buyers and sellers but if you got if you got if I got a lot of buyers in Austin a lot of drivers in California it doesn't make it doesn't help so we can help you with those kinds yep that makes good sense to me or walk me I don't know it on every customer core I'm sure you have a bunch segmented but generally speaking what does the customer pay you per month for this kind of service just ready at all it's all an activity in a volume-based right we've got customers repairs you know three thousand dollars a month my customers pay us thirty thousand okay well I don't know what do you think is more of a fare average you know four or five grand a month or twenty thirty grand a month I mean it's really hard right like it I don't think there is one I think it's just basically depending on the size and the volume of your businesses if you're in a small country somewhere in the world and you know you've got a curtail user base that can never grow over five million or ten million it's going to be on the smaller end if you're selling across world domination and you are 12 countries it's gonna you know you selling you spending twenty thirty thousand dollars for CRM at that point in time is a drop in the box yeah all right 2016 is when you joined a CEO why did you join do they pursue you or you pursued them no they found me and I got into it pretty quickly so I will not you know I won't they definitely came to me first but it didn't take long for me to fall in love with just a core of what this company is built why becomes you Donnie was they were they raising a VC round and they said you gotta bring in a CEO go find one no I think I think I think at the point where Kahuna was four years into its life it was you know they'd been assisted been tremendous technology build on the as far as the company was concerned the question now was how do we find someone who can help them figure out market that we go Oscar that we can actually own dominate only the stock leadership around on the technology space Iran know exactly we build stuff kind of what I love to do and so you know when I walked in and I started going through the interview process I quickly realized that you know I did have a bit of an unfair advantage the work that was done before I came up on the technology side was actually unique was different you know the pedigree of Kahuna the co-founder on the technology side was a co-founder of Sugar CRM your house real quick how many co-founders were there just one or two okay are they both still with the company active the technology one is they both are active yes the technology founder is head of data science in the building and Adam our chick who was the other co-founder he's he's on the board oh great okay very good and give me a general census you know size today how many folks are on the team total we got about a really shy of 40 okay the team is based in Redwood City we have just opened offices in Asia on the sales and customer success side and but we're pretty concentrated at the team you know all engineering right here in Redwood City is over 40 folks and over the years you know 2012 to 2016 they grew then you've driven more growth between 2016 and today what are you right now in terms of total customers using the platform well you know close to 100 customers using the platform our growth mainly so far has been international every country on the planet right now is racing to build out there with Zillow there Airbnb there uber there door - so but just the growth we're seeing outside the US right now is phenomenal we're starting to see growth in the US as well now the growth in the u.s. is much more verticalized market basis so you know we're not a jobs market place that we do jobs just for the gig econ for example or you know people who are saying hey we're going to try to do like a marketplace it's a doctor's for example so there's a lot of vertical eyes once in the US but there are massive land grabs happening in every other part of the world and Kahuna's got you know leading customers in Asia leading customers in Latin America and so we're just systematically building out a pretty wide berth so over the past months what did you guys grow at 30 percent a hundred percent forty percent where you at private company but way over hundred so we're growing you know we're growing really really fast I think our you know our as we are investing heavy on the sales and marketing side we're actually starting to see really good on the ground traction on the go-to-market side consistently across all the doors are you just using revenue to drive this quarter if you guys raise capital to fuel additional growth we raise capital Kahuna is backed by soft tech Sequoia Capital and and and Tenaya capital and we've raised close to fifty million five zero one five five zero five zero and did you say Timmy on the end the venture jet shop I'm sorry did you say Timmy ax on the end is one of the investors the venture dad shop no Taniya Taniya and I have yeah so that company was all it was all equity all equity okay very good good and then um let's kind understand understand more about kind of how you driven this growth so economics and its ads coming are obviously very very critical what is your churn today and how do you manage that I mean I think you know and it's no different from any size company on the turn side I mean I think I think in our case it's a function of you know having to do a lot more diligence on the viability of the customers record inaka remember we are going after a slew of marketplaces some of them are early stage some of them are mid stage late stage and just like you know there are many of them are venture backed companies as well at least at the lower end right so the same venture economics that apply to any other company applied to them as well so we you know we've been fortunate to align ourselves with companies that are right at that point where growth matters you know and we're not we we have to figure out exactly when we get into those companies well to manage that because the last thing we need is our entire customer base following the usual SAS economics of you know one in ten will survive right we don't we don't need that something we don't to be chasing you happy although I'm asking this question of specific doesn't want understand what expansion revenue looks like have you built the model that it allowed you to more than make up for lost revenue with expansion so your net revenue retention annually is above 100% yeah so our net churn is is easily becomes a runner Pacific you're never attention not net turn right so yeah so I mean whichever way you want to go that but yes so the idea being that our internal growth within each customer in this business is something that is you know because we we grow and we charge based on day usage right as they grow we grow and it's not of course feet kind of it's a per you know it's Advent and volume at which to use that use the product that drugs as far as their businesses go many of them enter new markets they take us along with right much like a lot of marketing automation platforms you know have done in the old school world of e-commerce so we follow some of those same dynamics well can you name some ones actually quantify those pricing axes so Brian how can we here on earth hub said you know hey we have number of seats we have a number of contacts we have product upsells as well actually trying Quan when you say volume what do you mean volume is look if you're a fast growing business you're trying to engage more buyers more sellers more often right Kahuna is that platform that lets you engage more buyers more sellers as much as you need as you're growing more you're going to need to engage with them more there's more buyers more sellers Kahuna charges you based on the usage of the platform so as your business is growing you know will come to you and say look you know this is kind of the estimate based on what you bought right it looks like you're used to just running in different direction you know there's obviously a facility for you to pay for overages but at some point is better for you to just consider what your new ARR should be so you're not being at an old bridge rate it's just sort of a flat budgetable for possible thing your customers like so you know well we will try not to go to them six months later and say here's a bill right we try out and how aggressive are you being in terms of acquiring customers are you happy with like a 12-month payback or twenty month or six month where are you trying to target payback period at definitely less than a year you know definitely less than a year I think we've gotten our Legion machines down to a place that we're feeling really really good about in terms of understanding what are the troughs of customers that fit within you know different average AR our values and what is the cost basis to go acquire some of those customers I think the other thing that is pretty germane and one of the reasons why you know this is also part of so that this is figuring out which markets to go after you know as you can imagine this land grab I mentioned earlier around marketplaces the good news is that these are all customers who have to make decisions fast so whether you're spending $20,000 ARR or $250,000 ARR it doesn't follow the usual type economics of well at $300,000 dealer should take nine months to close not true nobody has nine months in this market if you're trying to like keep her out of your country or Airbnb out of your country you don't have nine months make any decision so the good news is that the market you know that the decision cycles move really really fast compared to you know I've done this for HR I've done this for Europe ever saw all sorts of categories I feel like we're you know these markets move much faster because nobody has time to sit right and let's assume kind of a minimum scenario inside of your company so a minimum someone you know being on board is paying you three grand a month let's say you spend the full 12 months of caps you spend thirty six grand to get them where are you typically spending that is it heavy on your sales people or direct spend or travel or what no it's not I mean we've done a really good job of being able to sell remotely into accounts that you know don't require us to do a lot of travel and where we feel like the account size is a big we have feet on the street you know honestly I think it's a question of cleverly balancing our hosting and infrastructure costs because remember a lot of what kahuna does is real time like within four seconds of you you know leaving a breadcrumb somewhere in a mobile app of a customer come on update your profile within four seconds or less that kind of compute power can you know it's something that we've helped customers figure out where you need that level of real-time a near real-time right and we help them sort of craft out that cost so for us it's just a question of being very clever about having the architecture built in a way where we charge for things that matter and you know we don't pass on excessive costs we shouldn't be charging a customer for a Ferrari you know every time they need to go to the grocery store yeah right are those costs driving your margins down below kind of the average 85% for a SAS company well no I could but we've managed the architecture in a way where you know we those are we have a straight twenty able to manage that but yes we gave the Ferrari to everybody then you just you know you're passing on costs to a customer that they're like well okay give it to me for the use cases I yeah and then when looking at kind of future growth and where you see the space going talk me through last funding round how recently was that we did we did an inside round and q4 not really talked about the numbers will be there an inside round all the investors came back okay we do about pressing Q plus 27 yeah q so are you looking at raising again this year you're still investing from that rate that raise yeah we're fine we're fine you know we're totally fine this year we're we're just heads down right now I mean as you know that's a very time-consuming process and uh we start to get it out of the way last year so we can just focus on growth organ so assume you're burning cash obviously putting that investment to work you're not cashflow positive yet yeah yeah we're great big yeah yeah very good and then look we can kind of back into minimums here I have a hunch that you're way bigger than this but you said earlier you've got you know about a hundred customers and you also said earlier minimum monthly price out three grand up it's about three hundred grand per month or over three million a year you know the high side of that would be thirty six million if they're paying 30 grand a month on your high side is it fair to say you're somewhere between three million and thirty six million and air are okay what's the next big revenue target for you guys it's - I should giveaway right like I think we you know we are we're growing in 100 to 200 percent growth range and that's something that I just want to keep consistent through you know through the life of the ten you break I think we break through three million before 2020 um yeah we could you know I think we could I think it's a lot of there if you look at it more as a function of the available time out there I don't think there I don't think you know custom market size is going to be our limitation in any way right so it becomes inbound factors that we can control right I rather you know this is why we move to market that we feel like there's a lot of headroom above us right and it's just a question of how fast can we scale and but we've got to keep customers happy through this like there's no reason to just then have to start a pullback and do all those nasty things right yes all right those kinds of limitations very good Samir let's wrap up with the famous five number one what's your favorite business book what they don't teach you at Harvard Business School by mock Monica yeah number two is there a CEO you're falling or studying right now I've loaded respect for for millennia at number three how many sorry what what's your favorite online tool for building your business oh I think my new latest favorite is a tool that we use called drift yeah drift David canceled a good guy number four how many hours of sleep to get every night seven and which situations to me are married single kiddos kiddos married living power to living the life loving G are they how many kids are they mean are they young are they keeping you up at night yeah they're twelve and six oh we're big sports family you know competitive sports whereas I was one my son is that that is a lund and Howard are you a Sameer I am 44 44 last question what he was your 20 year old self knew good question my 20 year old self I think it was I think protections already tell your little ones is they think about you know competition and business and yeah I think I think that is the question I think I I had it all under my nose and I wasn't looking at it I think the lessons that you can take from athletics and winning in athletics and sports and how transferrable they are to the business world I think I'm spending more time with my son making analogies of the things he's learning right now how it's gonna help them and things outside of school guys there you have it if you're a parent right now we're at trying to raise entrepreneurs think about getting them in some kind of competitive sport teach ambition teaches them ambition lots of things you can tie back together but anyway Sameer again had a lot of s ap success factors 2012 a company called Kahuna launched they then pursued him in 2016 he joined full-time that company now is 42 full-time folks based in Redwood California helping marketplace companies keep buyers and sellers engaged on both sides very tricky problem he's solving it they raise 50 million bucks to do it currently have about a hundred customers that pay anywhere between 3 grand and 30 grand per month so they're run right today is somewhere between caught 3 million and 36 million they're gone between a hundred and two hundred percent year-over-year net retention in terms of revenue is over a hundred percent also so healthy expansion revenue based off volume and usage metrics amir thank you for taking us to the top line