Keatext Revenue & Funding (2019)

hello everyone my guest today is narjes buffaden she is a pioneer and thought leader in the natural language processing field who's transitioned from the academic world to run her company she founded key text in 2010 for professional services in ai then pivoted into a product company in 2015. nardraz is also a contributor at forbes and a dedicated member a mentor at techstar a i nerd are you ready to take us to the top yes absolutely all right tell us about key tech so when did you launch the company and today how are you making money what's the revenue model yeah so basically we are helping businesses with a product that makes them aware of disengaged customers and employees and that is based on what they are sharing in their text feedback so basically we actually have that product it's a license and then people can well cx managers for instance can upload data uh feedback from their customers and then get a sense of uh what is happening what are the reasons of disengagement and then they can actually start thinking about solutions on how to solve that disengagement and how to reverse that situation with actionable insights okay which are the reasons why what data source so you're you know people are uploading tons of unstructured kind of customer feedback data to your platform you're helping them make sense of it what kind of data sources are they uploading into your platform though just like intercom data or zendesk data or what actually it could be whatever type of data it could be zendesk it could be intercom it could be surveys it could be live chat for instance or text coming from chat box chat bots so it's really whatever text interaction that is provided by a customer okay interesting and then what do people you mentioned this was professional services for the first four or five years and then you just transitioned to product in 2015. um why did you make that transition well for the folks who have done services they can understand that you know you can't necessarily scale and grow very quickly when you're doing professional services basically you are using people you know their knowledge to sell something to sell a service and unless you start to stack people you know one the other then you can necessarily grow very fast and having that product that actually would do part of what people used to do using ai was a very interesting way for me to scale and to grow the business solving practically the same problem but using technology and today as people pay you what do they give me a sense what are they paying on average per month for this yeah so it's it starts always it's around twenty five hundred dollars per month okay and then it depends really based on the volume of transactions the number of feedback the system is analyzing the number of users and the languages that uh in which those text feedback comes okay and when you measure kind of usage uh or like is it api calls what's the actual metric you're measuring there yeah it's it's basically so think of it as a as an excel sheet then you have lines right a lot of columns and and rows it's the number of rows i see okay so number of rows and the number of users at the company direction yeah yeah so number of data rows and then obviously number of number of users at the company that need access to your tool uh what was the other pricing axes languages so sometimes like you we deal with a couple of languages so depending on the languages that we need to to enable that's great and then 2010 2010 was launch date you pivoted in 2015. now 2018 obviously is where we're at today or 2019 how many customers have you scaled to yeah so now we are around 30 customers uh some of them well most of them are big businesses we've done a lot of work with uh with partners basically survey platforms and now we are going back you know to direct sales talking directly to brands and big businesses so can i take 2500 bucks a month times 30 you're doing about 75 grand a month right now do the math okay well it depends when it comes from partners it's a bit it's a bit different because it's uh it's a shared revenue so this is not exactly the same thing but when it comes to direct sales then yes you can do the math right that way so what are you at today in terms of monthly revenue a range is fine uh we are really not far away from 100k okay oh very good uh that's great so so north of a million run rate at this point hopefully very soon okay well 83 grand a month is a million dollar run rate and 100 grand a month is is 1.2 so those are very different so are you north of 83 at this point or no yeah we are almost there but still i mean this is pretty much sensitive data so typically i i don't give a an exact number but we are not far away okay okay from a million dollars in terms of run rate million dollars i see well very well that you have to come back on the show once you hit that that's a big milestone uh how are you driving the growth so the first 30 customers you've landed where are you getting them from uh so as i said part of them are really coming from uh partners and the others really through you know different marketing campaigns like where seo like traditional marketing strategies so yeah again the traditional is boring for my audience it offers them no value in terms of education so be specific here what kinds of partnerships are you launching that are working well oh so as i explained a bit earlier it's really about uh survey platform providers so we integrate our product in their platform name one oh we do have eye perception for example is one of our customers we do have a couple of them of others in the canada and canada and the us okay are we terminally like surveymonkey no we don't necessarily work with big brands typically they will mostly be having their own development in terms of text analytics so they they tend to have their own in-house you know technology okay and then when you say partnerships with these survey providers is one way and then you also have partnerships where people will as i guess self sell your product through them who are the some of these partners so another example of partners we do have lg2 which is a marketing agency so they have a lot of big businesses and they use our platform to you know increase the number of services and then build i would say other services on top of what the platform can provide and can you help me understand the kind of growth rate how effective these channels have been for you so if you're flirting with a million bucks in terms of run rate today where were you exactly a year ago oh you you mentioned in terms of growth well i can't i can't necessarily focus a lot on terms of revenues as i said this is information that we don't necessarily share publicly okay sorry you've already shared it right so you are like that sunk cost to this point help me understand what growth is look like over the past 12 months yeah so we've been really around 20 month over month growth so far this couple of months last couple of months okay again so when you when if we do it on an annual basis right so today is a snapshot on time like go back a year how much have you gone over the past 12 months would you say uh so we've might have multiplied by a factor of five x i would say derivative that's great okay well again if you're flirting with kind of 80 grand a month today and you 5x2 over a year i mean that's means you're doing about 16 000 a month about a year ago yeah and most that again is just coming from these partnerships with the survey providers and lg to selling through your product that's great what's your team size look like today around 20 people 20 people great and what's the breakdown how many engineers versus kind of marketing people sales people most of them are engineers a part of them are marketing and sales but mostly engineers like how many of the 20 uh probably around 14 in terms of of engineers and researchers that's great and where where's everyone based montreal are you two yeah that's great something's in the water in montreal i'm meeting with a lot of entrepreneurs and they're building amazing things in the city well you've heard a lot about ai in montreal and this is exactly like i'm doing ai so ai in montreal is definitely something that you will hear a lot why is it though why is that concentration exist i mean i know you came from academia is there is there an academic institution there that's really promoting ai yeah so you like university of montreal is definitely one of the very important institution institutions that helped a lot with you know growing that community of ai experts and and even entrepreneurs i would say coming from that community okay and and walk me through more about maybe funding situation in montreal have you bootstrapped the company have you raised i know it's bootstrapped and raised like as i said i was doing services so part of the development was you know um bootstrapped with the the income from the services and then we've hit you know um the road with some investors to help grow in the company start developing the product like helping the development and then with the sales and marketing okay so have you raised outside capital from investors or no yes yes of course okay and how much to date so so far we've raised uh around a bit more than four my film four million dollars canadian dollars okay and this is all equity i know sometimes the government will give out grants that is not dilutive or not dilutive uh most well no mostly dilutive uh i didn't count the grant within that that four million you did not include the grant okay very good and then and then with 20 people four million raised called a million bucks in terms of ar today are you break even are you still burning cash to drive growth no we still drive growth for sure i mean in a sas business as you might know it takes you know at least 24 to 36 months until you can actually hit the brick even it depends of course about on the technology the market and i would say in terms of you know technology that is really around ai it's a completely different set of parameters you know being break even when you have i would say a a standard business and versus a business that that uses the use well sell a product that is using basically ai is a completely different as the r d is far more substantial when it comes to ai so before having that product market fit with that performance that allows you to sell you know at wide um it takes some time yeah interesting walk me through churn it's critical in any sas company what's your turn today and how do you manage it oh so far we we actually renewed all our customers which is really great so far um we do have a lot of new customers all our agreements are on on a yearly basis so uh for those who came in couple of years ago like two years ago they're still with us which is you have no you have no churn revenue turn or logo churn not for now not for now that means you're too cheap sorry that means you're not charging enough if no one's leaving or no one's pushing back that means you're too cheap uh i'm not sure about that so if your customer is not well if we didn't have any user activation if we didn't have active users then i might say that but i don't think this is the reason why uh typically if people decide to renew it's because there is a value and if they are using your platform then this is because there is a value so no i get i get that what i'm saying is nobody i'm arguing the fact that no churn is a bad thing because you're leaving money on the table no so as yeah perhaps i don't know but i think basically there will be at some point churn for sure but still because we are still very young in the process i think it's too early to decide not that young though i mean you launched in 2010 you did services for a couple years 2015 you have three years of history being his product company under your belt uh so the product was started in 2015 it was launched at the end of 2006 at the beginning of 2016. so two years uh selling a product uh that means you have all of 16 all of 17 all of 2018 i mean that's 36 months of data that's that's a lot of data yeah but still as i said it's not a lot of data it is a lot of data i mean i can tell you it's a lot i know come many companies that are three years in running sas companies they know their churn like like the back of their hand yeah but as as i said for now we like i don't know for now we didn't have churn yet it might come what does that mean i'm trying to get in your head though what does that mean to you though right it could mean a lot of different things to me it sometimes means it's you're thinking your price too cheap or you just ignore it no absolutely not i can't necessarily put a correlation direct correlation between having churn and don't not having churn and achieve pricing i'm not sure 2500 bucks per month is a cheap pricing we are not talking about 99 or 5 a month so you can just pay it and forget it uh i think that maybe maybe we still have like most of our customers are really about a year you know of of experience with us of work with us for those who came in before uh they're still with us uh and from my from what i see they are really active on the platform it's not a lot of them when it comes to people coming from the the partners which is the big part of our of our customers then you you need to to understand that they are attached to the main product which is the product of our partners so lg2 exactly so yeah no not lg2 iperception for example so because they are attached to the main product which is the eye preception product that maybe we are actually you know uh not necessarily leaving that turn because we are already integrating that platform so basically the churn will come whenever the customers turn from their product yeah that will still eventually hit your books you will know when they churn from that because they'll stop paying you yeah yeah yeah absolutely what um it's fine what about i mean have you dialed in cat yet you know what it costs you to land a new 2500 a month customer uh it's really no not necessarily as i said we've for this last 18 months we were a lot focusing on partnership and with partners it's really hard to have that sense of the cost of acquisition as part of the most actually of the sales cycle is coming is done by the partner yeah but i'm sure what kickback do you pay them so whenever we we talk with partners uh i can talk about i can't necessarily evaluate for now the lifetime value of that partner so and this is why it's really hard to have that cost of acquisition because all our partnerships are the the oldest one is is 18 months which is not a lot and given that and since we still renew with with partners then it's really hard to put a lifetime value because we don't know necessarily how many of the customers they will be bringing they will be bringing but sorry this is this isn't making sense to me you can look at what they've already brought you over the past 18 months and you let's say they signed up three new 2500 a month accounts you're paying them some kickback on that account when they sign up what's the kickback 30 no as i said it's a shared revenue i said that already yeah but i'm asking you what person i know it's shared revenue i'm asking you what percent 50 percent okay well there you go then there's your cac it's 50 of 2500 bucks a month [Music] uh not necessarily the cost of acquisition is not necessary i don't know how you have you computed that i mean well it's very simple what do you pay to get a new customer you pay the partner 50 of of monthly revenue so the cost of acquisition of the customer base of that partner is really you need to take into account the cost that you had to pay to acquire that partner and then the costs that you put on top of that when you are helping the sales team convert the customer base okay so i don't know how you how you come up with that number but well you did did i mishear you didn't you did you just tell me you pay the partner a 50 kickback on any sales they drive yeah but this is not the cost of acquisition the cost of acquisition sure that is an affiliate cut is is part of cac i mean you're what you're arguing is there's also additional cac on top of that because you have to bring the agency on board train agency sales team so your cac is is going to be higher than that i'm saying at a minimum you're at a minimum it's 50 of the monthly spend um of the monthly spend i think i maybe misunderst did you say i asked you what kickback do you pay your partners and i thought you said 50 of revenue no so when they sign a deal it's 50 of that deal okay so if it's a monthly deal at 2500 bucks a month you're paying them back 50 percent of 2500 bucks a month yes exactly okay that's what i've been saying yeah okay sorry for that that's okay so just to be clear that's fifty percent of your annual revenues through driven through partners that's minimum cac you then have additional calc on top of that because there's people on your team of 20 that have to manage that partner train their sales team give them new materials things like that um so the business model itself is really about giving them a pricing for the product and then basically they will take around 50 on top of that so this is a rough share and the money the value that i i've i've i've shared is really what comes to the company and then it's another part of that revenue that they are taking yeah okay let's move on um let's uh let's wrap up here narjaz with the famous five number one what's your favorite business book so i have read predictable revenue which is really like i'm really a big fan of iron ross all all of his blogs and books is really i find it very inspiring it's a lot of interesting insights and operational information that you can definitely use right away so i love i love that another book that i find very interesting is hiking growth which i'm reading right now which is very interesting that brings you again to the very basics of understanding whenever you need to hit or punch you know punch it to grow and when you need to wait a bit which is very insightful number two is there an under the radar ceo you're following are studying right now uh no not necessarily okay number three what's your favorite online tool for building the company for what for building the company yeah but what was the the beginning of the question your favorite online tool for building the company oh online tools so we are working with uh with uh weekdon which is a an interesting tool whenever it comes to uh you know okrs defining the strategy and breaking down to objectives then you can that you can communicate with your team i like that that platform number four how many hours of sleep to get every night hours of sleep it really depends on the periods uh tough periods it's around four hours when i'm really cool six hours okay so we'll say five there on average and what's your situation married single kiddos oh kiddos how many kids i'll just stop with how many how are we talking like one kid 10 kids how many kids two uh sorry two kids yeah two teenagers okay very good and you might be asking about how old you are yes i might okay well i asked because the last question is take us back to your 20 year old self what do you wish she knew that you can do whatever you want you don't need the blessing of anyone i think that's the most important thing i've learned afterwards that you're capable enough you can just do whatever you want guys you can do what you want you don't need permission coming from keytech's founder narajas again back in 2010 launched now they've raised about four million dollars helping a lot of companies make sense of their customer feedback data now working with 30 customers paying 2500 bucks a month so about to break a million dollars in terms of arr that's up about four or five x year over year so healthy growth still burning cash obviously with 20 people full time in montreal churn is none today cat little wishy-washy as they look to build out those growth channels and really define what those growth channels look like in the future in the meantime though again approaching a million bucks in terms of run rate mirage thanks for taking us to ernard thanks for taking us to the top thank you very much