How Karmabot Reached $35K MRR with 350 Paying Teams While Staying Bootstrapped (Interview with Co-Founder Stas Kulesh)

Introduction and Background on Stas Kulesh

Nathan Latka

00:00Hey, folks. My guest today is Stas Kulesh. He is building a very cool tool called karmabot.chat. If you wanna follow along, it's people culture as a service. He grew up in Siberia, studied computer science and nuclear physics, played in a band, got excited got excited by the indie games making, and then left unity to become a digital designer. Since then, he's been working remotely traveling and blogging, now settled in New Zealand and growing karma. Stas, you

00:24ready to take us to the top?

Stas Kulesh

00:26>> Yes. Yes. Let's nice to see you again.

What Karmabot Does Today

Nathan Latka

00:29Alright. I'm glad you're here. Let's jump in. Last we spoke, you're really focused on Slack. It sounds like your positioning has changed a little bit, or maybe not. What are you working on today?

Stas Kulesh

00:39>> Right. Today, we're working on fixing bugs in the recently released departments, a big piece in Microsoft Teams. That means that now big organizations on Microsoft can create Karmabot sub installations.

00:56>> If I'm talking about, let's say, McDonald's, I don't have to purchase Karma Bot for the whole organization. One tiny shop can purchase Karma Bot now. That helps because before it wasn't possible technically. The whole department thing is huge and

01:14>> it's out there now. We tested it and we you know?

Nathan Latka

01:17So, Stas, sorry. Just to take a step back, for people that are not familiar with what you do, why are customers paying you?

Stas Kulesh

01:23>> Right. Remote work is here, like, you know that, and it's getting bigger and bigger and it will stay, most likely.

Why Customers Pay for Karmabot

Stas Kulesh

01:32>> It's really hard to maintain a healthy people culture in a remote company. Karma is one of those tools that helps companies to appreciate each other more, to record this praise, to convert that praise into rewards, and so on. We automate one on ones. We do all sorts of things to keep this remote people culture healthy.

Nathan Latka

01:57Got it. And how many customers are you serving today?

Customer Count: 350 Paying Teams

Stas Kulesh

02:01>> We've got a freemium solution. Altogether, I think it's more than 3,000, but 350 of them are paying. That's teams, 350 teams.

ARPU and Revenue: $35K per Month

Nathan Latka

02:12Got it. Three fifty teams. About how much do they pay you each month?

Stas Kulesh

02:18>> Approximately 100 a month.

Nathan Latka

02:20$100 per month.

02:23Have you generally increased? Are you moving up market or staying sort of where you're at flat?

Stas Kulesh

02:29>> The department was a huge block on the way and we're trying to solve it so we get into bigger organizations. So far, it's pretty much around 100 people paying around 100 a month. So, this is the regular size of the team and the regular bill.

Nathan Latka

02:47And can I take three fifty customers times 100 a month? You're doing about $35,000 a month in revenue?

Stas Kulesh

02:53>> Yeah, exactly. And one thing that helps in terms of revenue is actually we integrated automated gift cards purchasing. Some of the teams

03:04>> convert karma into rewards and we get a cut of that. The cash flow is being maintained by automated rewards, That really helps as well.

Nathan Latka

03:14Now you were doing about a year ago $17,000 a month, so you've more than doubled in size. I believe you've done this bootstrapped. Is that right? Yeah. Got it. Completely bootstrapped. You still are bootstrapped today. No outside capital?

Bootstrapped with No Outside Capital

Stas Kulesh

03:28>> No outside capital.

Nathan Latka

03:30Any plans to raise?

Stas Kulesh

03:32>> Could be. Maybe. Depends on how this remote thing is is gonna go. Because when when when the COVID started, we had a huge surge. I And think this was around the time when we spoke the first time with you. We were really hopeful that this is going to stay. But then a year ago we saw a huge plunge because people want to change things. It's in their heads. Maybe remote work wasn't working for many of them.

04:00>> But then maybe they panic buy it. They were doing panic buying initially and now they're kind of trying to sort this out properly. It's still unclear how fast this can grow.

Nathan Latka

04:13Tell me more about how you're growing so quickly. You had two forty customers a year ago. You now have three fifty. Your primary sources of customers earlier were a Product Hunt launch and then the Slack app Exchange, I believe. Where are most of your new customers coming from today?

Growth Sources: Word-of-Mouth and App Marketplaces

Stas Kulesh

04:28>> Fortunately, it's word-of-mouth because product market fit is 84% and NPS score stands in around 80 ish. We're kind of a happy product for happy people, so they talk about it. This portion increased since the last time we spoke.

04:47>> Otherwise, it's still Slack and Microsoft marketplaces.

Nathan Latka

04:52How many new users or trials signed up over the past thirty days from Slack?

Stas Kulesh

04:56>> Five 30 would be about 500.

Nathan Latka

05:00How many from Microsoft? Well, I guess they're they're sort of the same. Right?

Stas Kulesh

05:03>> Yes. Similar. Yeah. Yeah. Yeah. Microsoft is up and down because they're still figuring out their featuring mechanism. You know? It's it's like an app store. They always change things.

Trial Funnel and Onboarding Experience

Nathan Latka

05:13Mhmm. So 500 new trials. And then what do you do with those trials? Take me down your funnel. When they hit your website, they give you their email, then what?

Stas Kulesh

05:21>> Well, they actually install it from Slack. In Slack, you can have the application installed just through this plus button right there in the Slack. Then we have an in Slack onboarding experience. If that's not enough, they are taken outside in the web. There, we try to explain what we have, what we do. We've got a free thirty day trial and then over that period of time, we sort of reach out based on your activity. If you're

05:47>> a champion, if you're really digging it, we're going to be inspiring you to do more to help.

Nathan Latka

05:52How do you know that? What are you measuring to quantify really digging it?

Stas Kulesh

05:56>> Right. Well, you send in karma. I'm sending karma to Nathan every other day, and karma can see that. We don't really track people's activity on Slack. We don't really track their activity on Microsoft Teams. We're not that kind of company. We see what they do with us, how much they enjoy using Karma. And then, based on that, we encourage them to use it more. For the first thirty days, it's mainly an in chat experience. Well, as

06:24>> usual, we also have the marketing chain going on in the email. But that's helpful. I don't think many people conversion just because of that.

Team Size and Operating Structure

Nathan Latka

06:33Mhmm. And talk to me about team today. You were four people a year ago. How many today?

Stas Kulesh

06:39>> Well, it's five or six contractors coming and going. We try to stay lean and mean and keep this to the minimum because we're bootstrapping, obviously.

06:52>> As I said, it's still not clear where this would go because, I mean, that's why the investment probably is not happening and we're not really taking it.

Nathan Latka

07:00And and what was your what were your profits last month on $35,000 top line?

Stas Kulesh

07:06>> 25, approximately.

Nathan Latka

07:08So what do you do with that capital? Mean, is great. Bootstrap Founder, you're traveling the world, you're living a life you love. Do you leave that money in the company? Do you buy real estate in New Zealand? What do do with it?

Stas Kulesh

07:19>> All of the above. And also, to to simplify the answer, yeah.

07:25>> We're hoping to get big somewhere in the future someday. We're trying to play the long game. Capital will be needed in the future. We're trying different things in marketing, maybe reaching out here and there, spending money in this campaign or another. But still, none of that actually proved that it can work 100%. When you spend 10,000 and get 12 back, that that didn't happen yet. That's why we're still cautious, and maybe one day we'll spend it

08:02>> on marketing and, you know, convert some thousands of people and make it happen for them.

Nathan Latka

08:07Mhmm. So you didn't spend you're not spending anything right now on paid ads?

Stas Kulesh

08:12>> No. None. It's really deep. It's it's so difficult because the the main decision makers, they are at the top of the chain. We don't set we don't, like, trello. Engineers don't come to their superiors saying, Let's buy Trello Gold. It's so cool. We've been using it for a while. With karma, it's usually the culture. The culture is coming from the head, and then we need to convince those people. It's really difficult to target them and convert

08:37>> through ads.

Nathan Latka

08:38Yep. No, that makes sense. Now, you were thinking about selling the company if you got the right price a couple of years ago, maybe a year and a half ago. Where are you thinking about today? If somebody offered you 10x ARR, would you sell?

Acquisition Offer Turned Down

Stas Kulesh

08:50>> Well, 10x maybe 10x we've been offered and 15x we've been offered.

Nathan Latka

08:56Oh, sorry. 10x ARR, no.

Stas Kulesh

08:58>> Never been offered that, but we may consider it, yes.

Nathan Latka

09:03I understand. It's impossible.

Stas Kulesh

09:05>> What have you

Nathan Latka

09:07been what have you been offered?

Stas Kulesh

09:09>> Good question. That was

09:13>> two x ARR, so approximately 500,000. And that doesn't cut it. It's like we get in six

Nathan Latka

09:19When when was that?

Stas Kulesh

09:22>> Last month, literally.

Nathan Latka

09:24I mean, but you're doing you're doing $35,000 a month in revenue. You're doing almost $500,000 a year in revenues. They offered you effectively one x ARR, not two x. Right?

Stas Kulesh

09:34>> Two ish.

Nathan Latka

09:35Yeah. Yeah. Okay. Got it. So it's between 500 k and a million is what they offered.

Stas Kulesh

09:39>> Yeah. Yeah. Yeah. And a million was, well, kind of impossible. So we didn't get to What

Nathan Latka

09:45do you mean by that?

Stas Kulesh

09:47>> So they said that their range is 500 to 1,000,000, and that wasn't yeah. In our heads, that that doesn't do it, unfortunately, because that's so much we can get, like you said, we can get almost that bootstrapping being profitable in three years. If when if and if we put it on autopilot, meaning that we stop doing this, like, stop supporting people and stop maintaining it, it's just there on the store, full self-service. I think it will

10:20>> still grow. It's growing 7% a month at the moment. It will be growing 1%, 2%, and it'll still be making money.

Nathan Latka

10:28Yep. No. This makes good sense. You're doing it the right way. How much equity do you own?

Stas Kulesh

10:32>> 50%.

Nathan Latka

10:33Who owns the other 50?

Stas Kulesh

10:35>> Well, the other founder.

Nathan Latka

10:37Who's your other founder?

Stas Kulesh

10:40>> David Travis from Australia.

Dividends and Profit Distribution

Nathan Latka

10:42How do you guys decide to split the the the revenues? Is it do you just pay out dividends or what?

Stas Kulesh

10:47>> Yeah. Dividends, and it's fifty fifty. It's kind of super simple system.

Nathan Latka

10:51How does that tell me more about how that works.

Stas Kulesh

10:55>> Well, we've got money coming in, and then we split them when we need it. Otherwise, we don't touch that. If he says, like, I wanna I wanna take a, I don't know, I wanna do something at my house, and I need to take out 6,000, I'm I'm taking 6,000 as well. Kinda super simple.

Nathan Latka

11:10I see. So so do you do this every month or quarterly or annually?

Stas Kulesh

11:15>> At need. Like, when when we need that.

Nathan Latka

11:19So you could do it more or just it's all needed basis?

Stas Kulesh

11:23>> Yeah. Yeah. Yeah. It's a side business. It's it's a side business. We've got other things going on, and this is helping us in in, you know, moving along the line.

Side Project: Slidea Design Studio

Nathan Latka

11:33Oh, this is a side project for you?

Stas Kulesh

11:36>> Oh, yes.

Nathan Latka

11:37Else are you doing?

Stas Kulesh

11:40>> Still do some consultancy work. I've got this design and development studio, and this is a regular business for producing products for others.

Nathan Latka

11:52What's the URL for that?

Stas Kulesh

11:54>> It's called Slidea, slidea.com? Yep. That's been going on for eleven years. I think it's not the unusual story when the design and development studio builds their own product. Mailchimp did it. Right?

Nathan Latka

12:11Yeah. This is interesting. Obviously, you use Slidea to build Karma. Correct?

Stas Kulesh

12:15>> Yeah. That's why I'm saying that the team is flexible and fluent. They come and go because I take people from other commercial products, I put them on Karma, then they get back. One of those struggles to me.

Nathan Latka

12:29Yeah. No, I was just going say, Slidea looks interesting. I'm always looking for dev shops and design shops to recommend to help people get their MVP off the ground. Does somebody like Slobot

12:41pay to get the MVP built?

Stas Kulesh

12:43>> Well, it's such a vague question. It could vary from 10 k to 100,000 because of the complexity and the actual functionality that's required.

Nathan Latka

12:55You said 100,000?

Stas Kulesh

12:58>> 10 k to 100,000.

Nathan Latka

13:01Oh, 10,000 to $100,000 to build the MVP?

Stas Kulesh

13:04>> Yeah.

Nathan Latka

13:05I see. And and how much time does that usually take?

Stas Kulesh

13:10>> Well, one hundred hours to one thousand hours. It's kind of,

Nathan Latka

13:15you know Let's be specific.

Stas Kulesh

13:16>> Let's let's be specific. Your time tracking bot for Slack, right, that you have listed on slide a, how much time did that take you, and what was the full cost?

13:26>> The time tracking Slack bot, maybe three hundred hours that took. So roughly, that would be around 30 k.

Nathan Latka

13:36Okay. Got it. So and you're so you're always charging on an hourly basis, not per project?

Stas Kulesh

13:40>> Roughly. Roughly. Anyway, like, even if it's a fixed price, we still have I still have the amount of hours in my hand, it it it makes the

Nathan Latka

13:50And what was that hourly rate again?

Stas Kulesh

13:53>> 60 to 70.

Nathan Latka

13:5460 to $70. Interesting. Very cool. To and then it's two hundred to three hundred hours to build an MVP. That's how you get the 10 to a 100 k.

Stas Kulesh

14:03>> Yep. Probably.

Nathan Latka

14:04May really, really smart model here. Okay. Cool. So I understand dividends. Out of curiosity, how much did, you guys pull out in dividends over the past twelve months?

Stas Kulesh

14:12>> I don't remember.

Nathan Latka

14:13How much last month?

Stas Kulesh

14:15>> I it's taken it's taken when it's needed. It's not it's just there. It's, like, in a big pile of

Nathan Latka

14:21cash. So you don't you don't remember how much dividends were taken out of the company last month?

Stas Kulesh

14:25>> Yes. I don't remember that.

Churn and Expansion Revenue

Nathan Latka

14:27Interesting.

Stas Kulesh

14:29>> Maybe none because they have other sources. This is just one of them.

Nathan Latka

14:33Yep. Okay. Got it. Okay. Cool. This makes good sense. Let's move forward here with the with the sort of churn stuff. Obviously, churn is critical in this sort of business. What does it look like?

Stas Kulesh

14:45>> Let me open it up. It's getting up and down. Recently,

14:51>> we noticed that people, after using Karmabot for two years or three years, they just switch to another product because they want the novelty, not because the product is not doing it for them. It's just the team wants something new. The new manager is coming and they're just changing the tools completely because I'm a new manager. I have to change the culture. So, the churn was around 1%. Now it's four, three. Well, on average, it's slightly below

15:22>> 3%, 2.8%.

Nathan Latka

15:26Got it. Annualized 24% to 36%, something like that.

Stas Kulesh

15:30>> Yeah. It's not that.

Nathan Latka

15:32Do you have real expand you have real expansion revenue or no? Not you have nothing to upsell yet?

Stas Kulesh

15:38>> What do mean?

Nathan Latka

15:39Do you have the ability to take a customer that started paying you $70 a month last year and upsell them to a $140 a month this year?

Stas Kulesh

15:46>> Yeah. We're doing that and this this works even well, for the plants, sometimes we just say it's getting getting more expensive. Then we have the automated rewards. When they purchase stuff through us, we get the cut, and that's 10% cut. If they've got a 100 people on the team and they purchase 10 items a week, that would be roughly an extra $100 a week.

Nathan Latka

16:13Okay. So you upsell based off, like, percentage of gifts that they're buying for their team or karma they're buying for their team.

Stas Kulesh

16:18>> You upsell based off a number.

Nathan Latka

16:19Yeah. You up what else do you upsell on? Number of seats? What else?

Stas Kulesh

16:23>> Number of seats. Yes. And they have extra features and stuff.

Nathan Latka

16:27Very cool. What's the number one most popular feature that people are paying extra for?

Stas Kulesh

16:32>> Recently, that was donut.com, one of those tools to connect people and automate one on ones. We built Karma Connect, which will be a smarter version of Donut because we know we, Nathan and Stas, they exchanged Karma before, so they know each other. That happened years ago, so maybe we should reconnect the way we do now on the live call, and we can do it with karma as well. There is a video within karma that suggests us

17:02>> to connect.

Famous Five Rapid-Fire Questions

Nathan Latka

17:03Very cool, Stas. Let's wrap up here with the famous five. Number one, favorite book?

Stas Kulesh

17:08>> Nineteen eighty four.

17:10>> Nineteen eighty four.

Nathan Latka

17:11Number two, is there a CEO you're following or studying?

Stas Kulesh

17:14>> Studying. Who? A CEO that I'm following or studying.

17:22>> Been following Basecamp, but now I'm not sure.

Nathan Latka

17:27Alright. Number three, what's your favorite online tool for building karma?

Stas Kulesh

17:33>> Will be ProfitWell. I really love what they guys are doing. They really help you to understand the math behind the revenue.

Nathan Latka

17:41Number four, how many hours of sleep do get every night?

Stas Kulesh

17:44>> Seven today and I try to stay above seven.

Nathan Latka

17:47And what's your situation? Married, single, kids?

Stas Kulesh

17:51>> Married with kids.

Nathan Latka

17:52How many kids?

Stas Kulesh

17:54>> One.

Nathan Latka

17:55One kid. Okay. And how old are you?

Stas Kulesh

17:58>> I'm almost 40.

Nathan Latka

17:59Almost 40. Very good. Last question. Something you wish you knew when you were 20.

Stas Kulesh

18:07>> Don't know. Travel more.

Nathan Latka

18:09Guys, there we have it. Karma bot launched back in, call it, 2016. '16. They broke $17,000 a month in revenue last year. They're now doing $35,000 a month in revenue as three fifty teams and HR teams use their tool to give rewards out to their employees, drive engagement, and drive connectivity in this more and more remote digital world. On the thirty five thousand dollars a month, last month, made $25,000 to the bottom line as profits. The

18:34two founders own 50% each. They're totally bootstrapped, and their full team is five people strong. This is all really a side project for them. They turned on a million dollar offer already to exit the business. They want to keep building it in something big. Stas, thanks for taking us to the top.

Stas Kulesh

18:46>> Thanks so much, Nathan. Talk to you later.

Nathan Latka

18:50One more thing before you go. We have a brand new show every Thursday at 1PM Central. It's called Shark Tank for SaaS. 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 1PM

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