Kudigo Revenue, Valuation & Funding (2019)

hello everyone my guest today is kingsley he's a gun uh he's a ghanaian tech entrepreneur with a passion for creating technology solutions that have direct impact on the average person on the street and enables them to leverage tech for social economic growth he's now building a company called codigo all right kingsley you ready to take it to the top yes i'm ready nathan good tell us tell us about the company what's the company do and what's your revenue model how do you make money great so the company is called codigo and the company sas startup based out of gather and our focus is to enable and empower retail informal consumer retail in africa to be able to grow their business and study our business so the primaries are simple nathan in our part of the world you have all these small retailers who move so much money do so much transactions but they're unable to grow their business because they don't catch any essential data i start today in 2019 they're still writing books trying to figure out what they do how their bonnets grow so we figured how can we enable their western tech that would help them grow their business scale it and be able to offer the business capital so what we figured was that they have smartphone they have android phones so we don't know what we call the kodi go storefront which is essentially a complete retail builder suite that enables them to capture essential data process transactions accept payments and have verifiable records where they can use to go their business now again to put no barrier to entry in front of them we have a free forever module and we have a premium model but the whole idea is to get as many people as possible to use the solution how many are using you now so right now we have 1 600 businesses in less than two years in ghana in nigeria using our submission currently and we offer the free version and a premium version for 39 monthly which offers them everything they will need how much is it it's 13.99 39 a month one three points by nine oh so fourteen dollars a month yes fourteen dollars a month and they get everything from a retail system to accounting through payments and giving them that essential verifiable data to grow your business and how many customers have you scaled to today so as of today we have a thousand six hundred customers in ghana and nigeria those are users or paying customers so paying customers is 20 of our total users okay so you have about 300 paying customers yes okay that's great so 300 customers paying 14 a month and that is from again about which is about 4 200 per month right now on revenue is that right yes so that's our first revenue model we also make money from payment transactions day process using card qr and mobile money payments and we make on average one percent on the transaction day process so in the past management some perspective in the past month we did over 20 thousand dollars in transactions non-customizations in ghana nigeria and we're making one percent of that exclamations coming to us last month how much total transaction volume went through your system transaction volume non-cash was around 20k usd oh that was a twenty thousand dollar number and you're making one percent of that so about that's another what two hundred dollars yes two hundred dollars but that'll that'll scale though yeah i mean we have very early state startup so like i said we're just two years in their business we just closed that seed round and we've really got a lot of traction in the past eight months yeah how much have you raised today we've raised 550 000 in seed round and we currently are about to bear series a in the next few months as well how much do you want to raise we're looking to raise half a million in our series a and why is that the right amount so it's the right amount because our current product is at a good phase where we can easily acquire 10 000 customers now for us to be able to do that that amount helps us close that particular user acquisition gap and focus on other products we want to go again we are a data company and the data we have will appeal to guys like nestle unilever and other fmcgs so we need to get our current product to get full product market fit and then look at innovation around different products around data engineering around building machine learning algorithm to figure out why particular products sell in certain markets why certain payments might was breaking various market so this race is for our current product and then we will do another range next year for other products so what valuation do you hope to raise the five hundred thousand dollars on is that's an 8.5 million dollar valuation okay so 8.5 million evaluation you're currently doing about 50 000 per year i mean so that is a massive that is i mean that is a huge value don't you ever get nervous about actually growing into that valuation well we don't because nathan again i'll put it very bluntly we have tremendous growth we have lots of partners a lot of well hold on what's tremendous growth what is growth over the past 12 months so let me just give you over the past three months just to show you how to manage the growth rate over the past three months we've grown our transactions by over 400 percent so for example in march we're doing over 600 transactions in may within over 2800 transactions in june with over 6 000 transactions and in july we are on course to do about 10 000 transactions now we just wrote out our premium processing model just two months ago and we've already been able to migrate a chunk of our users into our premiere processing model if we scale this at this projection by end of here we will be doing close to half a million in total non-cash transactions on our platform and that's from only payment processing commission the problem is that's nothing a a business that's built on taking one percent of transaction volume has to get into the hundreds of millions of transaction volume for it to be a meaningful business now by the way you could get there i'm not saying you won't get there but i'm just saying valuing the company 8.5 million dollars because you think you're gonna do five hundred thousand dollars in transaction by the end of this year is a in my opinion a tough sell well nathan so payment transactions is one part of our revenue model for our current products we have two revenue models we have the subscriptions we have the payment processor now if i onboard five thousand by chance instantly on my premium cost of conversion let's say if i ever get 2 000 all my premium subscription that is 164 dollars per user per year i'm getting from those users now if i'm able to scale them to do payment transactions over time that's my revenue life yeah kingsley by the way this is i get that but that's just a multiple i mean that's just a multiplication question right you're basically saying well currently i have 300 customers if i instantly get 2 000 and then you're multiplying by 14 and getting i mean anyone can just say if i instantly get this many customers this is what we're going to be doing but like valuations typically are based on looking at what you've done historically and then that helps investors get confidence that you can actually execute your pro formas into the future so i guess what i'm asking you is um tell me more about the business so that investors or that you feel like will make investors really believe that you can hit these numbers that you're saying what does churn look like today so our chain right currently is around eight percent monthly and it's you know over every quarter horsepower is around eight percent okay so eight per quarter which should be about 32 percent revenue turn annually yes okay and do you have expansion revenue where everyone pays 14 so again we have various product customizations based on who we're deploying to so if it's an average retailer they go with that fourteen dollars if it's a big retailer i would say multiple at let's say 10 or 15 there is a bespoke pricing around that and for us again the focus is on the data that we are collecting because today we are the single larger startups in south south africa led data on consumer retail and that is that nobody has got that is data or fmcgs want that and we already have work in partnership with a lot of the key fmc years in this part of the continent and that is really where our real money makers so this current product we have is to help us get the market entry they want to capture all that essentially so kingsley fast forward a year from today what what do you think will be a bigger business for you your sas product or your transaction business the biggest business files a year from today will be our enterprise data product ourselves product is just to help us get into the market transactions is an add-on value for our customers so they can do non-cash transactions but then our money maker sits on the data that we are able to acquire and how we can use that data to the benefit of partners like fmcgs mfis because look nathan in our part of the world now in south south africa people can't get micro loans because there's no federal federation system businesses are dying so if you are able to help these businesses acquire all the essential data they are able to scale so if today could you go roast us a micro loan product for over five thousand businesses we are certainly helping them grow at the same time making some money of them from those commissions so there's really a lot of value added if we are able to scale this up to other businesses without looking at the short-term revenue potential if you really believe that kingsley you would make everything else free you wouldn't you wouldn't have a 14 month plan because you have to get such a massive amount of data to make that data product the micro loan product valuable you wouldn't bother with a 14 a month plan i agree with you nathan which is why we've entered into strategic partnerships which is going to make this happen that we can give this product totally out for free so we have partners like visa we have founder like interswitch like standard bank group who are coming on board to ensure that this product goes to everyone who needs it again as a startup in my part of the world raising money is non-existent you have to bootstrap this to survive so again from the get go we have to make sure this product lifts to be able to even raise the city investment and even attract the nexus partners who cannot help what's your cash position look like today i mean what's your team size today how many people so currently we have a 14 member team with officers in ghana and nigeria one four one four yeah and how much cash are you burning per month so currently we're burning around 8k usd monthly okay but you raised 150 000 so how much how many how many months of runway do you have left we raised 50 000. oh 450. 450k okay so how much runway do you have left in the bank so currently we have a seven month runway in the bank okay so you have uh if i take seven months times the kind of your 8 000 burn you have about 56 000 in the bank okay so you've spent about 400 000 already of that hundred fifty thousand dollars so where do you think you'll raise the five hundred thousand dollars on eight point five pre-money if it's so hard to raise in ghana where will you go so again from the get go we looked at getting strategic partners and appealing to a lot of international investors and one of the things we did was set up our company at the delaware c-corp which enables us to attract other silicon valley-based investors so currently even for our seed round we've already got about four visas from silicon valley which is in the current one we want to raise and we just need one more engineering restaurant board which will help us close dialogue again we have a very robust board who have networks in silicon valley in south africa in other places and they help us i try to write investments right do you already have a term sheet for the 500 on the 8.5 i have one timesheet from one investor currently and it says this will be a 500 000 round on an 8.5 million valuation exactly and they're putting in more than 500 000 more than half of the 500 000 yeah they are putting in um about um one third of that okay so typically a lead who's setting the terms is going to be putting in more than 50 percent of the round so is this a real lead or a fake lead it's a real lead i mean we normally invest with a safe so we have a cup that we come with and then each investor comes in that didn't get the evaluation that we set it up so we do have invested and again by october when we have this call again we would have closed that so just to be clear you're raising on a safe right now so it's not on equity right now the 8.5 million is a cap not a real valuation yeah it's a cap on this thing okay that's very different uh in my opinion that's very very different okay so you're raising on a safe 8.5 million dollar cap on the safe that makes sense cool um very good what about um talk to me about getting new customers so do you know what it costs you to get a new customer yeah so we have two um customer existing channels one of them is through running um facebook app install us and once we run out it cost us around um 35 cents to fully acquire a lead through a facebook app install ads and that is a lead who comes through downloads application sets up a store and start selling on that system that cost us around 35 cents our next lead generation channel is story called our resellers so we have a wide network of resellers sorry finish the facebook funnel for me so 35 cents to get a new lead from facebook a download and they set up the shop how much how many leads do you need to get a new paying customer so if every um organic conversion that we get so if i get a hundred leads from facebook you're looking at about 15 percent of them wanting to convert to become premium customers okay so you need about six free uh downloads to get one new paying customer exactly that's actually right so i can take six times 35 cents right per dollar that's two dollars and 10 cents for a new 14 a month customer exactly that's right why wouldn't you put a billion dollars into that channel so again um nathan what we realized is that we needed to focus on building structures all the key structures we are focused on building is our customer support team so lead acquisition is cheap for us but then we have the right support to handle those things coming in the answer three months ago once it was no now we've built that so now we're turning on the price fully and we're going to acquire as many leads as we can because we now have the structures we want to support those leads to get them to convert and make us money eventually your second channel you said was your referral channel tell me more about that so it's a reseller program so we have about um 150 resellers in nigeria and these are smallholder accountants who already support these businesses in the market now we give them commissions and they go out there resell our solution and onboard these as foreign you give them so they get a minimum of 15 on the subscription value lifetime value of the customer or up and as high as 35 percent of the suspending value comes to them as commissions so between 15 and 35 paid out every month in perpetuity as long as the people they sign up stay keep paying exactly very cool all right very good um and then talk to me about growth so a year ago were you pre-revenue a year ago where totally pre-revenue we're really bootstrapping it trying to understand whether the product is for various markets outside ghana and figuring out how to roll it out so we're pre-revenue a year ago we just had a handful of around 450 users a year ago and now we are thousands of hundred users yeah that's good growth all right let's wrap up here kingsley with the famous five number one what's your favorite business book everybody's business book is the art of war number two is there a ceo you're following or studying pesos number three what is your favorite online tool for building your company drive uh number four how many hours i sleep to get every night uh two hours oh come on you'd be dead if it was two hours every night well i try to get sleep in between times i mean i really like i'm in the office to like 1 p.m i go home wake up probably around 4 30 you do have a call yeah yeah but like on an average 24 hour cycle or over an average week what would you say per day you get i always strive to get at least four hours of sleep every day minimum i always strive to get that yeah continuous at least yeah i mean like i respect that but i also think it's a massive weakness it's a sign that like you're not taking care of your body well i've been told that a lot and i've been advised to either i get put on by false leave or i start taking care of myself all right what's your situation married single kids um single no kids okay and how old are you i'll be 30 in november okay uh last question what do you wish your 20 year old self knew i wish my 20 year old self knew that the startup game is not just a game for fame it's a game for real impact and if i'd done that back then i'm sure by now i'll have really impressed where i am now guys codeigo.com helping so many small businesses in ghana nigeria sub-saharan africa scale faster and more effectively they're getting customers right now over 300 customers paying 14 a month so 4 200 per month in revenue up from nothing just a year ago again just launched they've gotten about they have a freemium model about 600 total users they're getting uh new signups by paying 35 cents per app installed download from facebook they need six of those app installs to get one new 14 a month customer they also have a revenue model where they take one percent of transaction volume that these businesses process their platform last month they processed about 20 000 so small business but growing and scaling they have 450 000 raised they've already spent 400 grand of that 50 grand left in the bank with 8 000 in net burn per month so running out of runway but they do have a safe in their hand uh terms 500 000 round on 8.5 million cap from a silicon valley entrepreneur hoping to close out the next couple of months with their team of 14 people as they look to scale kingsley thanks for taking us to the top thanks nathan i appreciate it look forward to talking to you soon