KPI Sense Revenue & Valuation (2023)

hello everyone my guest today is will cordes he has over a decade of experience helping sas and software business solve their strategic financial challenges during that time frame he's led operate advised or invested in over 100 sas and software companies in march 2019 he founded kpi sense to reinvent the concept of outsourced cfo and fpna work for sas and software companies will you ready to take to the top yeah let's do it so that was a mouthful i mean are you a fractional cfo basically uh kind of it's kind of an evolution right so uh i started doing this work back in 2015 and it's it's funny if you search sas outsource cfo or sas financial model my name or my old website typically is on the first page of google and and not to say that i'm the best or i know the most it's more uh just that there wasn't a lot of specialized services and for sas companies with deferred revenue with the different metrics uh and with a lot of kind of the unique uh financial statement and kind of other kind of data challenges that are posed it was a good opportunity so started kpi sense uh about 18 months ago to really help companies and blend automation and kind of product related focus with expertise in the space so just be clear you launched in 2019 not 2017 correct okay yeah launched in 2019. yep so we've been in business for about 18 months uh i've got a team of 13 now and uh we work with close to 50 companies so you know 50 customers correct that's right and almost all of those are our sas businesses anywhere from uh 500k of error up to 50 million of error what do they pay you per month for your services on average yeah so average acv uh it's about 30k annually um you know price point on average is about 2500 a month and uh again we have we have great great net retention people stick around what's great uh 100 plus yeah uh right on average i mean again we don't have a ton of data we've only been in business for a year and a half so you know knock on wood uh hopefully that uh that sticks around there but yeah i mean i think for us the reason being the traditional outsource finance space is broken uh you're you're talking about consultants who are old school a lot of them with mixed uh you know financial experience within sas and there's perverse incentives there's no benefit for them to go and build automation and structure that's worked they're taking off their plated future periods uh so our model is more long-term focused we do minimum six to 12-month deals and we try to work at a much more reasonable price point an average outsourced cfo or consultant will charge five to 15k a month for this type of work we're half the cost and even if you go and hire a full-time cfo or vp of finance we scale with your business so we that's happened in five of our engagements we've stayed on every time because we become more of a fractional fp a financial analysis resource and we're a third or fourth of the cost of a full-time finance head to begin to support your business is there software behind this or is it consulting yes it's a great question so it started off as more consulting more of a managed service you know retainer format we started building our platform back in april uh and now we've got an engineering team of four and are actually in kind of a fundraising process ourselves uh kind of reviewing term sheets and bootstrap today uh we raised 225 cad so for for all intents and purposes yes we're bootstrapped and i've got all that all that money more in the bank we've got about 350k in cash so we've been uh really cash efficient as a business thankfully how much are you hoping to raise right now probably a million a million and a half uh that's kind of the target again we're we're still we've been going through this a while right and you probably know this uh better than most people i think coming in as a service business business and transitioning to sas it's a challenging story for kind of investors to grasp especially pure play sas investors so but we're using all the data that we've gathered to really as a proof of concept to say people are willing to pay this lunch per month they're looking for kind of that consistent financial support and not just somebody that whip up a model that they can shoot off to an investor to raise some capital they want that consistent trusted resource with a little bit of that tech enabled automation to drive further efficiency so with the platform we're really looking to kind of enable and bring together the finance stack for a typical sas company so transactional data financial statement data and ops data bring it into one universe and cleanse it and then build interesting use cases on top of that so whether they're analytics measuring your metrics or dashboard looking at sales efficiency helping to raise venture debt for example those are all use cases that we can help automate and streamline moving forward and we're already starting to do that today what valuation are you targeting on the 1.5 million you're raising uh we're flexible right i i think i'm not looking to to box myself in there necessarily but uh you know again you know we're seeing stuff in the mid to high you know single digit millions you know we did talk to some growth equity parties uh you know for something a little bit higher than that but um a lot of capital to potentially raise and um you know a little bit more control than i think i'm willing to go up at this point so still in flux but i'm a little less focused on dilution and more focused on finding the right partner and making sure that we're well situated to kind of drive things forward from here 50 customers 30 000 hc on average so i mean so you guys have gone from nothing to a 1.5 million dollar run rate in the past 18 months yeah so some of those are professional services hourly customers we're a little bit below that uh we're more in kind of the 1.2 range okay uh but yeah not too far off so about about you know closer to 40 customers they're on the recurring side uh and then again five to you know five to ten and some change on more hourly professional services clients that we're working with but our view is with the managed services that the 40 that we're going to be able to get them into pure sas in the next six to 12 months or very close to it yep how is this different from sas optics or i mean there's dozens of these sorts of forms out there yeah it's a really good question um sas optics is is a great business i know those guys well and honestly they were inspiration for this business model dave ryan uh one of the co-founders of sas optics who i have a ton of respect for called him one day walking back back from from the office and my full-time gig back i think three years ago at this point and said hey what about a point of service offering for sas optics for us to come and work with your customers use sas optics data and provide more of an analytics as a service to your customers you know i think cess object is a great platform amazing revenue recognition and good kind of reporting fundamentals but there's an element of that that's last mile where they you need a finance expert or a kpi metrics guru to go and extract value out of the data that they have uh love the idea we talked for the team i think they decided at the time it wasn't incremental enough for them to really pursue aggressively and i was just idea stage at that point on a napkin um but it kind of got my head churning and kind of led to the the foundation of the business but we're not a rev-rec tool we're not a pure reporting tool i would think about us as an amoeba we're taking no sas optics is going to help you with rev rec and subscription revenue data where you're still going to have this delineation with your quickbooks instance your financial statement data and then all of your analytics data we're bringing all that together to help you be kind of a source of truth for historical financial information and forward-looking predictive information so getting your financial model your scenario analysis preparing for example for 2021 planning and budgeting and really nailing down your metrics and understanding that but you don't have to be the guru what will be that expertise for you and give you the the materials and the feedback and kind of the the decision-making uh criteria that are going to help you execute and be a better business at the end of the day i mean do they probably hate that you're launching this and have grown so fast so quickly like why didn't they just hire you and have you lead a yeah no well that's a good question uh you know honestly i think uh you know i talked to dave about that a little bit i think i think there was definitely interest of you know potentially working together um but i wanted to kind of go out and do my own thing i don't think it's really competitive though to what they're doing it's much more of a services layer i mean think about early early days of like salesforce right they they created this robust services market on their platform whether through applications through professional services from implementation from architecture it's the same concept with the subscription economy there's a way to take that financial and operational data and build really interesting use cases that are monetizable that drive value to customers but it all is reliant on good financial data and you know this with founder path right getting good data from from companies can be really challenging there's all sorts of different shapes and sizes so for us we're able to unlock additional value from these different kind of tenants and kind of stool stool post but really sas optics and these other subscription management providers like a chargebee or someone else they're not really monetizing this type of work they don't have a robust set of cfo services or other things because that's not really what their focus is that's not their target market maybe down the road that's something they expand into but for us we see ourselves as being complementary and we ultimately see ourselves unlocking additional value within these types of platforms interesting um how much capital have you helped your founders raise uh so our materials um since including my consulting days we we've helped founders raise over 300 million of institutional investment capital uh and that doesn't even include the private equity backed control back businesses we work with but our financial models dashboards like we consider kind of a strategic finance package has been used anywhere from seed rounds up to series d to raise capital so we've got a really robust network of growth equity venture capital and private equity firms that we've worked with in some capacity over the years uh that have really helped shape and craft and mold what people are looking for but really it's kind of that mix of good data quality uh with kind of efficient reporting uh you know we assume that every investor's got a five-minute detention spin right so our goal is to get them the saline data points in an efficient way and do that in a way that's going to make their lives easier and help kind of open our clients up to you know getting their materials looked at and trusted versus just assuming up into the right with with no real data to back it up that makes a lot of sense we hope the raise goes well and those notes will let's wrap up here with the famous five number one favorite business book favorite business book uh shoe dog shoe dog number two is there a ceo you're following or studying yeah uh a ceo that i'm following or studying i think um you know obviously elon musk is an easy one visionary i don't think i have as much uh visionary juice in my bones but uh hopefully at some day i can i can unlock some of that number three what's your favorite online tool for building kpi sense besides your own favorite online tool for building the business building the business of building the business uh in terms of like foundational i mean again we love we love quickbooks i think it's it's highly understated i think it's super critical people that don't have good bookkeeping fundamentals um it makes it really challenging for us to do our work so i'll go with a compound answer there number four how many hours of sleep to get every night see it again how many hours of sleep do you get each night oh uh i'd say about six to seven i've got a nine month old so it's shockingly good for for that situation and what's your situation married single and you have just one kid or more uh married with one kid so yeah i'm a new father uh entrepreneur i'm rolling all the dice and it's coveted so i love it you're doing it on how old are you i am 33 33 yeah last question what was the journey in two years ago what's something you wishing you when you were 20 i wish i knew when i was 20. uh to go out and and and own it and try and have my own kind of hustle side hustle i mean i think you're you're a good testament to this yourself um i think fear can be paralyzing um so i always tell people if they ask me own your niche go out and start your own side hustle um if you ever get laid off or fired you have something to fall back on and um again i think you've done that i did that about 10 years ago not 10 years ago about six or seven years ago and uh i've never regretted it since so you own your outcome versus relying on somebody else will cordis kpi since working with 40 sas customers on a recurring basis just broke 1.2 million bucks in ar after launching about 18 months ago again think of it like a highly strategic outsourced cfo but a lot of other stuff as well kpis forecasting capital raising etc 13 folks on the team so far looking to ra they've already raised 225 000 bucks they're gonna raise another 1.5 million today it's somewhere between sort of a five and 10 million ish valuation we'll see what happens for engineers on the team as they continue to scale sign up new accounts usually starting with managed services and then backing into sas products on the back and recurring products will thanks for taking us to the top yep absolutely one more thing before you go we have a brand new show every thursday at 1 pm central it's called shark tank for sas 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 1 p.m central additionally remember these recorded founder interviews go live we release them here on youtube every day at 2 p.m central to make sure you don't miss any of that make sure you click the subscribe button below here on youtube the big red button and then click the little bell notification to make sure you get notifications when we do go live i wouldn't want you to miss breaking news in the sas world whether it's an acquisition a big fundraise a big sale a big profitability statement or something else i don't want you to miss it additionally if you want to take this conversation deeper and further we have by far the largest private slack community for b2b sas founders you want to get in there we've probably talked about your tool if you're running a company or your firm if you're investing you can go in there and quickly search and see what people are saying sign up for that at nathan laca dot com forward slash slack in the meantime i'm hanging out with you here on youtube i'll be in the comments for the next 30 minutes feel free to let me know what you thought about this episode if you enjoyed it click the thumbs up we get a lot of haters that are mad at how aggressive i am on these shows but i do it so that we can all learn we have to counter those people we got to push them away click the thumbs up below to counter them and know that i appreciate your guys's support all right i'll be in 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