How Kooomo CEO Kevin Gough grew Kooomo 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...