How Kooomo CEO Kevin Gough grew to $5M revenue and 350 customers in 2018.

hello everybody my guest today is kieran ballard he steers the ship at a company called uh kumo and hq has spent over 20 years growing and developing internationally focused online media and digital commerce businesses since taking the helm in 2016 he's made it into the gartner magic quadrant for digital commerce 2017 and is now positioned to service clients in the b2c market as well as cater to the explosive growth in the b2b e commerce space again helping businesses do e-commerce better kiran are you ready to take us to the top yeah hey nathan how are you i am well okay so tell us about uh tell us about the company what you guys do when are you a pure place sas company yeah hey so yeah kumo is a digital commerce platform that offers the full stack of technology in the cloud and we serve international customers who are looking to launch their ecommerce sites across all markets across all sales channels b2c b2b and marketplaces got it okay and so when the kumo you joined it in 20 of the company in 2016 correct correct yeah so the company actually the background just to give you some some some background on the company the company's actually been around for 17 years our sister company is xero gray which is a managed service agency in e-commerce and then we we had the software basically within that business and we spun the software business out of kumo a separate business in 2015 after which i joined the business okay clean cap table yes cleaning up table yes we are actually now taking private investors in we have been approached by the market but we we don't really want to take uh vc investment in at this point are you strapped up to this point no no we just we just because the company is essentially profitable what i'm doing at this point is just taking in private investment to get us to the next stage at which we will look at bc rounds when the company's at the right you know has the right structure right growth strategy right revenue trajectory and we've been out in the market talking you know there's about 30 vcs approached us actually and so how much money total have you raised to date and that's the information we're not sharing actually okay you i believe in europe and in the states you have to file this kind of stuff so i believe it's actually public i can look at government records correct no no we don't we bought our accounts which shows our balance sheet but doesn't show uh the investment taken into the company at this point okay so was it was it actual investment or is this the parent company just just pouring money into this actually now you can just answer a question we we hadn't actually raised any finance up until last year because we had our sister company which was profitable we've been investing the liquidity through that business in the kumo software business it's only this year we're starting to consider and take some some investment in predominantly through a convertible low note structure and because we know we're going to look at a vc round later in the year when you when you say convertible note you mean traditional kind of convertible node or are you talking about venture debt uh convertible low note and which is the same really it's similar to venture debt in that but in this instance it would be forced to convert in the next round okay you want to so you won't have the option to pay it back out it would be a forced conversion yes it's a forced conversion correct and walk me through the upside of that model for you well the benefit is twofold remember the people that we're taking on board now and we've chosen to to very specific people that we want involved in the business and who bring us value so these are predominantly high net worth people in this space who have a reasonably high profile and so they're getting involved to add value right so and one of them is actually just come on our board others you know the the new the md of google for europe has just joined our board as well and and vp of uh mia ronan harris and so we've been strengthening out the team as part of that we offered a convertible low note which gave a discount on the next round and and those people coming in you know give us two things they give us something extra finance to you know expand the growth of the business but they also bring us expertise so it's a small round of a couple of million um that we're taking in with a view to a much larger round yeah and the upside for us is that we're not putting evaluation on the business at this point in time and and we're kind of giving up giving us the money to kind of give us that growth trajectory based on our compensation you'll have a cap on the note though correct yeah yeah we will cap um i mean we're closing it off we're just closing the round so we won't offer it again after after another month or two yeah what what we jumped into the numbers a little quickly there let's back up let's back up a second right so so the company right when i hear e-commerce like there's a lot of people where it's not actually a sas company there's some other transaction model things like that what what does qmo do for the e-commerce companies you're providing and are you truly a sas model absolutely we're born natively in the cr in the cloud actually and so if you take a typical customer of ours let's say have i honest the big the flip-flop guys so we do two things for them they they want to sell their product internationally okay so they need an eshop to do that right they need an online store to do that on the front-end side for the consumer so we create that look and feel through our platform but on top of that we do all the back-office operations that are required to do e-commerce so order management for example if you're selling on ebay and amazon and you're selling through your web store you need an order management system to process those orders you have a warehouse we have a warehouse management system so you need a warehouse manager system to manage the people in the operatives in the warehouse you need um a an analytics tool to be able to report on all of that revenue we have an seo tool so the full stack of technology we're unlike some of the kind of entry level guys that don't have the full stack we've the full stack economy would be at the top of the software pyramid in this space and if you look at our competitors and who we would liken to to ourselves i guess it would be salesforce previously known as demandware in this space shopify at the entry level uh of the market we're more mid and mid market and large so if you're kind of mid-market and large i mean give me a general sense you know shopify you can get started for like 30 bucks a month what's your kind of average customer paying per month for access to this tech is it you know called a grand or 10 grand a month sure so how we work we are introducing actually a model like shopify's uh which is an entry-level product called kumo lite which will be launching in the market next year and but for now the way that we work is we i believe in kind of democratizing this space i believe that the ecommerce space in particular has been kind of dominated by the big big software vendors you needed a systems integrator and spending millions of dollars to put in place a solution i believe that that needs to change and so we we don't require a systems integrator we have actually a one-click ecosystem of partners that are built into the platform that you can future-proof your e-commerce solution with so you don't have to pay a systems integrator to do that so that's the first difference in the pricing model and the way that we launch and implement the e-commerce solution for customers there's a setup fee so the setup fee can be anywhere between 20 and 50k and that covers the onboarding process which is typically six weeks to three months can be longer for large-scale customers like morrisons is in you know the largest supermarket one of the largest supermarket chains in the uk there are recent customers just come on board and that can take six to nine months right they're a big nine billion dollar company um and so there's the setup fee and then we believe in a shared success model so we should charge a revenue share on the revenue the gmv the gross merchandise and value of the uh the customer yeah so so again see this is always tricky right so that's there are some people that would not consider that a sas model they would consider that a transaction model where it's a percentage of gmv uh and so i guess the reason i bring that up is because if you have started having conversation with vcs this will come up they will try and ding you and they will say this is a percent like gmv model not a sas model so we're going to give you kind of lower multiples because you're not pure play sas how would you answer that question yeah well i think there's two models that we operate we do operate a fixed fee model as well for b2b well okay which is what what's that on average per month so fixed fee is based on turnover so if there's an existing turnover on b2b uh below you know let's say two two hundred thousand online then we charge a couple of k per month for that okay okay so there's a basically a minimum fee and then you have you share on the upside a bit based off of a model where it's a percentage of gmv above 200 grand a year it depends on what you're selling to because the business to consumer we operate the revenue share model which is what the market wants and what our customers want which is why we have that model b2b is com is very different and b2b is exploding as i'm sure you're or you're there you'll be aware b2b in the e-commerce space exploding but that is existing business that the customer already has so we shouldn't be charging a revenue share on that business because they've earned that business themselves right so that's why we do a fixed model in the b2b space yeah i guess the flip side of that would be let's say someone signs up that's doing b2c with you today you're basically saying okay well so like how so i guess give me a general sense here i mean are we talking like one percent of gmv or ten percent of gmv yeah one to three percent okay okay got it one to three percent of gmv and so like if someone comes to you right now and they're already doing a hundred million bucks per year do they instantly start paying you one percent of that just because they turned you on so if it well typically a client is not going to negotiate that with you right they're going to the ghost state we have 100 million bucks in online turnovers so we're not going to pay it three percent right yeah so you know we we we will be flexible where there's existing turnover that's sizable we operate the combination of fixed on revenue share i see i see so each one is kind of a unique it's kind of a unique negotiation is that the standard the standard model which would be the majority of our customers would be on the revenue share model for b2c because they prefer that and as this market is growing most of our customers are growing 25 to 40 percent in terms of gmv annually and most of them are you know doing between 250 and 5 million bucks a year so they're not huge customers and the big tier is an individual discussion with that customer i like the example of morrison's the supermarket chain that's an individual negotiation yep yep okay i got it and then help me understand twos and we'll just focus on b b to seasons that's your primary focus how many b2c customers have you scaled to since 2015. so we have about 350 b2c customers and b2b okay 350. and walk me through your team size today how many people on the team sure we have two offices headquartered in dublin and then another office in italy and turin um and we have in total about 80 people okay 80 and of those 80 how many of them are dedicated to kind of marketing sales and onboarding sure so there's well there's it which is a big team and so that's one of our largest teams because we're you know obviously it's a software company and so they would be about 30 of that so there's about 20 people 20 more 25 maybe in i.t we have the marketing division which is a small team uh three to five people in marketing and we have a customer success team which is a bit big bigger because we've now got sizable customers um and that they're they're the majority of the staff are in those teams okay interesting and then when you're signing up uh when you're going after these accounts you have 350 today i assume they're fairly high touch i mean walk me through how you're closing these customers what's the process like yeah so we recently actually just hired they had a channel for shopify and who originally set up the whole shopify structure so channel i want to be 50 of our sales so that is where we work with agencies who are typically create the look and feel of the eshop and they have lots of customers coming to them wanting to create a niche up okay and those those agencies need to work with a platform and their creative skills and that's how we partner okay plus the ecosystem which is all the app partners development partners whether it's personalization ai or google shopping we've just recently integrated into into kumo as well so we get leads and generate some of our sales through opportunities that come through our channel and i'm really investing in that channel and but right now 70 of our sales is coming through direct sales and which is a long sale cycle for mid to large enterprise client sure it's not easy to move to a new platform and particularly people have this in their head that it takes you know six to two months to a year with the old traditional platforms and that's not the case in our case we have lots of customers who've switched and migrated from magento for example uh we should take it or six weeks to three months yep so it can it can be done efficiently so you should karen fully and we're running out of time here so i'm gonna try and jam a bunch in here um in terms of fully weighted cac to get one of these new accounts what do you what are you paying to get a new account um it depends i mean you know it can if you think of a sales guy right a sales guy is costing you between it depends for a year right let us a sales guy on the base will be costing you one to 150 okay that's what it's costing you or at the cost of acquisition if that guy doesn't perform the first six months and a new sales guy they won't do a deal okay because it's a long sales like in e-commerce so you have that four six month rampant period so for for a sales guy to be profitable in this business you need to be doing 10 to 15 deals a year they need to be doing a minimum of 10 to 15 deals a year so you can work out the math there yourself i don't have the numbers to hand donated well karen what if the question's more about like your capital efficiency right so like how do you i mean you're talking about raising capital so you have to be thinking about this these are questions you're getting how aggressive are you being in terms of payback period on a new customer account will you wait up to a year to get paid back or two years or less yeah it it between six months to 12 months nate and typically it takes uh on the payback okay got it and so you're assuming that customers worth is worth what over six to twelve months like yeah so i mean most of these customers are turning over between two to five million the average average customer okay so and so in terms of actual worth to you though we would just take that 200 million and just multiply times somewhere between one and three percent exactly okay exactly so they'd be somewhere between kind of 20 and worth 20 to 60 grand view something like that yeah exactly yeah interesting okay and so that 20 to 60 grand that that you would essentially make over the first year you're spending six to 12 months of that of that so call it 20 to 60 grand you're saying most that's going to go towards the sales guy you're not doing a lot of conferences or direct paid spend or anything else yeah so i mean the the marketing budget overall if you look at their tournament you know our turnover overall i'll give you the numbers overall the company is turning over about 20 million and between xerogray which is our managed service business and the kumo business how much just on kumo kumo is turning over at around five million per year yes okay and that's basically like that's made up because you're taking your total gmv and multiplying times your percentage and you're making five million yes okay exactly got it the five billion is the percentage that we get that's great and so what's total gmv over the past 12 months the total gmv has been about 35 to 40 million okay okay fair enough that's great that's good that's that's helpful to understand um really helpful and then last question here turn have you lost any customers no actually it's funny we it seems to be in this space as well but we don't seem to lose customers customers seem to stay a very very long time it's high cost of acquisition but they typically stay for five years minimum and we customers who are staying a lot longer than that that's great and growth rate if you're doing 5 million kind of in run rate today where were you a year ago yeah so we were start started off we were at a million and a half okay so healthy growth makes sense why you have so much vc attention now huh yes exactly it's nice to finally get attention in my past it was difficult to get that attention so it's interesting because this space is growing so aggressively i think that a lot there's a lot of money going after the space so that's right all right very good let's wrap up with the famous five number one what's your favorite business book um the art of war by su thing number two kiran uh what is there a ceo you're following or studying right now um the guy who runs alibaba yes i i watch a lot of his stuff and i think he's quite an interesting character he is number three what's your favorite online tool for building the business um right now what are we using we're actually using quite a lot uh south navigator with linkedin sales navigator number four how many hours of sleep to get every night [Music] depends on what's happening in that week but uh yeah i mean listen between four and eight hours okay god we'll say six there on average and what's your situation married single kids yeah was married now single okay so not married any kiddos yes one one kiddo and how old are you how old is he you how old am i sorry 46. 46. last question what do you wish your 20 year old self knew um god it's an interesting one sorry it just takes me a moment to think about that yeah for my 20 year olds if i was 20 now and looking back i don't know what i i actually i have an attitude where you live for the moment and i'm not one that would you know save money i have other people who earn similar money to me in my past and they they invested wisely in many properties and everything but you know i had an amazing time so i don't look back and go should i have done this or should i done that i really don't actually great so live in the moment there guys have it from kieran again joined kumo back in 2015 now helping over 350 e-commerce brands grow 20 to 40 year-over-year they process about 35 to 40 million bucks in total transaction volume across all of these customers they take anywhere between one and three percent currently doing about 410 413 grand per month for about a 5 million run rate that's up from about 125 uh grand a month just about a year ago about a 1.5 million dollar run rate uh their scaling 70 is direct spending between 6 and 12 months of customer lifetime value on acquisition with the team of 80 in dublin italy and other remote locations kieran thanks for taking us to the top thank you nathan