Latelyrevenue, valuation & funding

Introduction hello everyone my guest today is kate chernus she is the founder and ceo of lately which uses ai to automatically transform long-form content like blogs podcasts and videos into dozens of smart social media posts it learns will yield the highest engagement from your audience she's a former marketing agency owner and created the idea for lately out of spreadsheets for old clients like walmart that got him a great roi she's now bringing that power to all of you kate you ready to taste the top i'm so ready this is great okay so so how much of this is like ai versus like a human-powered back-end how many engineers are on your team yeah so we're a really lean team actually so there's three on the team um that are full-time and then we use some other people auxiliary about 82 percent of the brain is built in-house and then we've since integrated with c3 uh watson in the beginning that kind of thing so we recently also brought on um a professor at shanghai university who's got some crazy crazy ai accolades so he's been helping us do some cool stuff that i'll share with you maybe in a little bit i love that okay so three on the team total right now yeah yeah yeah okay no no not on the on the engineering teams the whole team it's about 14 strokes oh perfect great okay fourteen and three let's take a step back for a second what you launch the company uh 2014 i can't even believe that's true i love it when someone says to me like an investor be like what's taking so long and i'm like okay couple things amazon isn't profitable yet number one number two facebook took at least four years so you know female founders do you know this nathan we have to work 98 harder than our male counterparts i know i and i actually need to do a better job you know i don't do anything in my outreach to founders to target specific founders it's just sort of been natural but if i don't actively recruit female founders on the show it just doesn't happen so i'm really glad that you're on and you know what i really the other thing that i sort of struggle with is i never want to feature a founder because they're female i want to feature them because they're a great founder yeah i mean that's by the way right like i used to be a rock and roll dj my last gift was broadcasting to 20 million listeners a day for xm so like right no small shakes and i remember like not at xm but other radio stations having the directive to play two to four female artists an hour and that was annoying to me honestly yeah right because it was like it didn't go with the vibe i was playing not not that they were female but like i i wanted to play rock guitar rock and roll and there's not a lot of broads who do that super well you know joan jett baby okay so so 2014 and take us back to those early days i mean do you remember the revenue you did in that first year um so we actually just were in market only three years ago um i can tell you i i don't remember but i remember last year pretty well so last year we were at 25 000 mrr and we Monthly recurring revenue are now at 74 74 thousand dollars mrr so that's 196 increase in time that's incredible so so what did you you prepared you knew exactly what i was gonna ask um what uh what drove the growth yeah a number of things so number one we only use lately to market lately nothing else so our own ai which is all organic right we don't do any paid ads no cold calls and no cold emails what we've learned is that the ai is so good at finding the messaging that you want to read right or here that our leads are already warm so we look for customers that are liking commenting and sharing and then we can we engage with them and then move them into dms our demo is our kpi the demo has always had a 50 or higher conversion it's been at 98 for the last 10 months how many demos do you do a month um i can i know my week so i know weeks better it can be between 30 and 50 for a week generally yeah so we get a lot of we have more leads than we can handle we're you know one of those actual growths and constrained companies um but it's been interesting so so only using it lately is a big one also so nathan i'm hell bent on upending the sas sales model uh a funnel model i think it's completely broken and old and dinosauric even right it doesn't apply anymore nobody wants to receive those cold calls nobody wants a bank of sdrs smiling and dialing who also by the way are painting your ass they they're only they stick around for like four or five months if that and then leave so you're constantly rehiring so why not instead make everybody uh an uber champion like instead of me just being on the cover of the magazine that we're selling let me put my whole team on it right so lauren chris on kit ben right and make them social animals which they are and merge marketing sales and customer service which is what we've done right so my job back to radio is to make you not a listener but a fan not a customer but an evangelist because an evangelist is going to go out and get me 30 more customers yup right yeah so have you built a community here that where can i start and what platform do you use to do it yeah we have and we've built it first on social so all the places linkedin twitter facebook insta um and then we moved it internally to a customer slack channel which we recently launched what's amazing to us is that honestly since march of this last year every single day at least one person has spontaneously posted something wonderful about us on social oh i love that i love that yeah so so you're saying a lot of the growth from 25 to 74 000 bucks a month over the past 12 months has been organic and sort of word of mouth all organic and word of mouth so no pain no paid whatsoever yeah we stopped that a long time ago i paid is dead i mean there's tons of data about this out now freakonomics just did two episodes on this the last couple of weeks in case you guys listen to that podcast but it has been for some time i mean you know facebook and twitter are making it very hard for you to do paid and do it well right and there's a reason they want you to go there and be active or and organic cambridge analytics you know that up for everybody frankly right um but it's taking marketing people aren't catching on you know why because they're so lazy right nobody wants to do any work when it comes to sales and legion which is shocking to me right so this is working Currently serving 378 customers for you how many customers are you now serving today 378 customers and how many a year ago uh i need to go look but i think it was roughly 120. okay got it um and are all those 120 still with you today um ish we've watched cohorts churn and so what we've learned is price point is a big one right yeah so a year ago we were selling a lot of people at 99 that was our price point now it's 300 that's our average price point per customer and we've up sold to much larger customers what's been interesting to us is about 20 of the people that fit our key demographic now who churned in the past have come back oh nice so the price point did something which was it it made the value more clear that was number one but also we did something so back to your earlier question so so a couple years ago and i'm going to back up a couple years ago i was in new york Raised and i'd raised around two million dollars and i couldn't find a lead what year was that 2019 uh 2018 20. okay so you raised 2 million like pre-product basically i raised i had raised 2.7 million dollars um and some of it was pre-product yes and then some of it was product but no sales yeah right and then and that's all you raised today 2.7 2.67 yeah and then when i had that two million circled i couldn't find a lead right and that's when that data came out about female founders not getting the funding right only two percent and so joanne wilson is one of my investors and on my board she's uh the gotham gal one of new york's most prolific angels she's balls and she was like hey this is what's happening to you and i was like what and so i had no choice nathan but to drop my burn from 100k to 10k which is pretty amazing and that are gross i assume that that's not yeah yeah yeah right monthly and like and also monthly and so but that also means most of my staff didn't get paid for the last two years okay i doubled our sales in that time and i landed some big clients sap and ap and bev and then i got us into jason calikanis's launch accelerator out in silicon valley right so he's he's you know this week in startups for people who don't know so i flew out to san francisco every week for four months to do a demo day right i graduated in the top three of the class won the final demo day had a term sheet in hand i'm over subscribed four million bucks and the world explodes yeah coven covet yeah but i had a couple of things i didn't love that term sheet so i was dragging my feet to be honest i was it was difficult for me i was there i couldn't i couldn't please all the people i needed to please where were you at though i mean a kid at the end of 2019 i mean do you remember like how much cash you had in the bank and what your burn was then oh yeah my burn was 10 was still 10k then okay and how much cash in the bank anywhere between you know thirteen thousand to twenty four thousand okay so you're operating like right on the margin here super lean yeah super duper lean right yeah and that's by the way i mean that's just i wasn't paying a bunch of people so like i owed my staff money yeah so it's much leaner than that really um and then what i did though is before i went and stuck my head in the sand because hey i failed nathan twice not once but twice right and so this felt pretty bad of course and i said all right i need to just take a break the world is collapsing my entire family wants to zoom call with me which is the last thing i want to do with anybody i don't want to connect i want to disconnect right so my head of growth lauren she was my head of customer service at that time she was out selling every sales gun we ever brought in by three to one by the way and i said just run the company i need to go die for a second but before i do can you please release this feature that everyone's been asking us for and that was the video clips feature right so gary vee saw that somebody somebody who he works with made him a twitter channel out of that showed it to them on his phone and he was like oh my god i need that that now which was great the change for us was we stopped having to explain what lately does we could just show them yeah yeah so what did you close out the funding story for me when did you did you what did you close capital and if so how much in what year no and i so i didn't actually i did so you didn't raise 2.7 million you're still bootstrapped no no no i raised 2.7 in the in the beginning of 2018. uh no 2014 to 2017. oh okay so that's what funded it from and then you were gonna do another round and you ended up not doing that you didn't do that another round of another round of 2.5 couldn't do that right so i fail fail fail what was the value what was the valuation you raised out in 2014 do you remember the the last round i raised it was a seven mil post and that was the one in 2014. it it was so my starting to be confusing but my first round in 2014 was 250 thousand dollars right so the 2.67 in total that i raised of all price rounds between 2014 and 2017. right so you did the that round that seven million valuation was 20 in 2017. yep that was in 2017 yep so then we go to that 2018 round can't close it and then this last year can't close it but before the other thing i did before i passed on the couch and died was i said it was before i knew i wasn't going to close this round it just occurred to me like i feel like the world is going to be crazy right now i know that i need more runway to close this round i took out a loan of 50 000 bucks from one of our current investors who i trust and love and it gave me just that breathing room uh i think it was not much like i want to say we've already paid more than half of it back now so i want to say it was like i want to say it was four percent um it's not great it's very friendly yeah not crazy yeah um sorry there's a lot we have a lot of that's good i mean that means that means you have people that's backing i mean you can't build this without that so hey just because we have about three minutes up they want to get as much of your story in here so so 378 customers say if you look at your churn over the past 12 months on a revenue basis what's that been yeah the churn is two percent per month okay or less okay and what's expansion when you add back um of you mean upsells upsells oh yeah um so the upsells we move them from monthly into annual now what's as you know that's not the best move for the company overall right but it is the best move when you need cash in the bank yeah which is what we've needed got it right so your net revenue retention annually then is about 76 to 80 percent with with 20 return and and minimal expansion that's right yeah interesting okay so so this is great you've got a flywheel that's working what do you think you can hit next year in revenue so we're certainly looking at a million in arr by january yeah of course and yeah and so then next year it's it's going to be interesting so we're do we have a partnership with garyvee what does that mean um it's i can't give you all the details but it's all about gary driving ar to the company does he have equity in the business he is becoming an investor in lately yes got it is he the exclusive investor in whatever round you're raising right now or is it a bigger round um we're actually deciding that right now because i'm i'd be at series a obviously yeah if i want to but i'm not sure i need to sell 20 of my company and we're convinced that i don't yeah work means that we can make this a multi-million dollar company on our own in this lean way and really just take in a couple hundred thousand dollars to you know ease some annoying pain but not actual pain just annoyance right um with the team that i have now so i'm most excited about that um because i'm tired of working with nathan you know like i'm really good at the dog and pony show i can dance no problem right but like do i want to dance anymore f now i love that on that note kate let's wrap him with a famous five number one favorite business book favorite music book it's called pitch anything it's totally cheesy but it's all about the psychological manipulation of sales number two is there a ceo you're following or studying right now um other than myself no i'm completely self-obsessed number three what's your favorite online tool for building lately for billing building building building um like the product yeah um you know you're asking me questions where i only know like enough to be dangerous so i mean i'm going to have to answer for my cto and would i mean would that be github i assume sure number four how many hours of sleep to get every night i don't know i wake up between three and four or five then i take some cbd oil and hope hope i fall asleep and then i have a cbd hangover for the first four hours of the morning so this is like you relate this is hysterical okay so who knows we're gonna be a little bit question mark there and what's so what's your situation you mentioned your husband's downstairs cooking chili so assume you're married you have any kids no kids lately is my kid okay no kids yet and can i ask how old you are i'm 46 40 wow i would i would have guessed much younger last question thank you what's up eye cream there you go what's something you wish you knew when you were 20 um to listen to my gut because that sucker knows guys there you have it kate churnis uh 14 folks on the team building try lately up for to a 900 000 run rate today up from a 300 000 run rate just a year ago 196 year-over-year growth uh they are they have raised 2.7 million dollars 2.5 million in 2017 in a 7 million valuation but now they're in a great spot 14 people on the team healthy growth mainly word of mouth spending nothing on acquisition 24 annual turn a little high but that's to be expected in this space 76 net retention as she looks to continue to scale kate thanks for taking us to the top love you nathan thanks 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 pm 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 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