Leasecake Revenue, Valuation & Funding (2024)

[00:00] Hey, folks. My guest today is Taj Adhav. He spent more than twenty five years in technology and business. After starting as a big four CPA, he managed more than 2,000,000,000 in assets for Disney development company. As an early hire at Channel Intelligence, he helped drive the company to a successful exit to Google in 2013. Taj, you're ready to take us to the top? [00:17] >> Absolutely. Thank you very much, Nathan. Looking forward. [00:19] So what was Channel Intelligence? What were you guys building back then? [00:23] >> It was an e commerce data platform that effectively put buy now buttons on manufacturers'product pages as the internet and e commerce was really taking off. So we literally managed billions of micro transactions and billions of dollars of [00:42] >> making it easy for consumers to click and find the places they can buy products. Were [00:48] you early enough there to get some equity or no? [00:50] >> Yeah, absolutely. I was employee number eight. When I was a CPA at Disney, I'm like, man, I need to repot myself and was their CFO. Then I transitioned into business development. I saw the power of software, so it was good to get in early. [01:03] That's great. I mean, I ask, are we talking like 1% or like 10%? [01:07] >> Probably like, I think by the time the exit happened, dilution takes place. So sub 10%. But enough to give me a taste and not enough that it left me hungry. [01:21] Yeah, yeah. So we can say between sort of 1 to 10%, something like that. Right. [01:27] Sorry. You cut out. Yeah. Yeah. Yeah. Yeah. So that that happened in 2013. And I think that exit price was what? That was a $125,000,000 deal, right? [01:35] >> Correct. [01:36] Yeah. So did you go right into leasecake after that or no? [01:39] >> No, I frankly kind of lost. Did some consulting gigs, started my own businesses, lived in other parts of the planet, came back and leasecake was started really kind of over a cup of coffee at a diner because I just was kind of looking for what's my next gig. And it turns out there was this massive unserved market that we've invented. We've created a whole new category that we're going after. And frankly, it's kind of based on [02:09] >> this simple idea that everybody in business owns or leases commercial real estate. Where's the app for that? And so while leasecake is this operating system for lease management, we're also really an OS for location management, primarily for tenants and of all different types and sizes. [02:29] So what does this mean? If McDonald's has 100,000 locations on the East Coast, they're going to use your app to manage all that real estate? Or how does that work? [02:37] >> Yeah, so basically whether you're in the franchise business, you're a corporate tenant, whether it's retail or office or in private equity, the use case is there's tools like property management, facility management. Those are traditionally geared for landlords. Location management is a new domain. So in your example, whether you're a franchisee or a franchisor with, say, thousands of locations, the things that matter to you most are typically the things that can potentially blow up and you're not [03:11] >> looking at the details. Within a commercial real estate lease, there are 100 different things that could potentially trip you up. One of the most obvious is missing a renewal option. The others are dates that are specific when a personal guarantee should expire or do you need to get permission from a landlord to sell your locations. All of those kinds of things are really buried in a piece of paper that sits in a drawer that no one [03:37] >> looks at until it matters. So we've created a cloud based system that puts all of that information in a very easy to use application and provides proactive notifications as well and team collaboration. [03:49] It's And so what are [03:51] customers paying on average for this technology? [03:54] >> Yeah, so we're based on a per lease model. Our average customer is probably around 10,000 to $15,000 a month on average as our deal size has gotten larger. We've seen explosive growth through COVID, which frankly surprises the investor community, but it doesn't surprise us. So that's our average deal size, and it's an annual licensing fee. And it really kind of scales up or down whether you have three locations, 30 or 300 or 3,000. [04:29] So, Taj, just to be the average customer paying $10,000 a month or $120,000 a year upfront? [04:33] >> Nope, $10,000 a year. That's the ACV. [04:36] Got it. [04:37] That's not the ARPU, that's the ACV is $10,000. [04:40] >> Yep, that's correct. And I [04:41] we found that this model [04:42] >> is a very simple model to understand. And because we're a network effects play, we're an operating system play, it's important as we look at these clients and we say, there's a better way to do this than spreadsheets or Judy in the back that's keeping track. [04:59] Yeah, Taj, I totally get the product. It makes complete sense. I think the audience totally gets that. People are rushing to sign up right now. So when you're charging up a per lease model, someone paying you $10,000 per year, how many leases are they probably managing at that price? [05:11] >> Anywhere between, let's say, 25 to 80 to 100. [05:16] If you're charging like 200 to 500 per lease, something like that. [05:20] >> Yep, that's right. [05:22] Okay, cool. When did you launch the business? What year? [05:25] >> Let's see. Probably beginning of twenty eighteen, late twenty seventeen is when we won this global technology award across 58 countries. And we said, I think we've got a business. So that's when we started. And we basically shoe strung or bootstrapped our way into having a team and grew it. That led to our VC round, our CVC round in February. [05:49] February 2021? [05:51] >> Yeah, that's correct. [05:52] How much was that for? [05:54] >> 3,000,000. It was oversubscribed, 3.2, I think it was. [05:57] Okay. And why did you need to raise capital? Why couldn't you keep bootstrapping? [06:01] >> Well, we found that the opportunity was too great for us to kind of nurture this along. When you're the first mover and you're there to educate a marketplace, we had such a substantial lead as our earliest investors were really family office insiders with customers over the product. So we felt that if you're going to build an operating system, time is your enemy. You need to have an application that demands to be on everyone's mobile devices as [06:32] >> soon as possible. So That's really what we're about and that's the reason we raise the capital. [06:38] You get going in 2018, raise some capital this year. How many customers are you serving now today? [06:44] >> About two fifty customers represents maybe about 1,000 different users in our system and 10,000 plus locations across The U. S. And other geos. [06:54] Now, can I multiply two fifty customers times that $10,000 ACV? You're doing about $220,000 a month right now in MRR? [07:02] >> No, that's not the case because what we've done is had a lower price point model. [07:09] We [07:09] >> have seen a pretty strong adoption, strong enough to have 127% net revenue retention. Some of our earlier customers were at a lower price point. We're now moving them up rather quickly to effectively 2x to 3x what they were originally paying. We've got some legacy customers, long story short, and we're excited about where it can take us. [07:34] So are you guys north of $200,000 a month right now in revenue, or you think you'll break that this year? [07:38] >> We're basically at $1,000,000 in ARR. We're tracking to be $1,000,000 in ARR. And I think it was very important to make sure it was an affordable price point. It's a totally new domain, so we can't just say, hey, it's a $50,000 enterprise sales cycle. We typically have a fast sales cycle of anywhere between two days to two months, I'd say, on average. And these are pretty large operators that are kind of multimillion corporations in and of [08:09] >> themselves. [08:09] And if you're doing like $70,000, $80,000 a month today in revenue, where were you a year ago? Do you remember? [08:15] >> Yeah. We were at probably, let's say, [08:20] >> $20.15 grand, I'd say. No, actually, even less, $10. $10 to $15 grand. [08:26] Yes. A lot of growth here. You raised the seeds right in the middle of all this growth, 3,200,000 raised. Now, did you do that on a priced round or a safe? [08:32] >> It was a priced round. Yep. [08:34] Okay. And what sort of valuation did you go and raise at? [08:39] >> Let's see, it was a 12 post, so it's 12.2 right now. [08:43] 12 post. And looking back, was that the right price or could you get higher or lower? What do you think? [08:49] >> I think we got a really fair deal. We pushed and we negotiated a term sheet that was very palatable to us as founders. [08:59] >> Think our initial term sheet was a little bit lower, but I think we found the right number to make sure that it was kind of a win win on both sides. [09:07] It sounds like when you closed that earlier this year, what you're probably doing, like $40,000 or $50,000 a month in revenue? [09:14] >> Probably a little less than that. Saw this hockey stick happen, Nathan, probably in June. Hockey stick happened again back in 2020 despite COVID, but certainly with more rocket fuel in the engine. This summer was phenomenal. [09:30] Now is the $3,200,000 you raised in February the only money you've raised, or did you raise any before that in 2018? [09:36] >> We did have a convertible note that was provided to our earliest investors, so that kind of helped us continue to bootstrap. But you know, this round, this is the only price round that we've had. [09:52] So that note, was that a $2,000,000 note? [09:54] >> Correct. Yeah. [09:55] So that 2,000,000 converted in with the 3.2, so 5,000,000 to 12. I mean, that's a pretty darn diluted. I mean, that's a pretty dilutive seed round, right? [10:03] >> It's one of those things where you kind of have to make your bets and find the right kind of partners that believe in ultimately this operating system plan. [10:14] Do you have co founders or were you the sole founder at the start? [10:18] >> I have co founders. So to date, myself and two other founders that have been instrumental. [10:25] When you guys were out there on day one coding this together in 2017 and you had the tough early on conversations, did you guys just split it evenly, a third, a third, a third, or no? [10:34] >> No. We did, I think, a very thoughtful approach in terms of value, contributions, [10:42] >> the longevity of each individual's role. So it was myself and Jim Bankston and Dave Schrader. So that's really [10:53] >> the core team. We brought it [10:55] Is this a long way of saying you own them more than the other two? [10:58] >> That's correct. Yeah. [11:00] Alright. So you you start out with maybe, like, what, 70%? They split the rest, and you guys go from there? [11:06] >> Pretty much. Yeah. [11:07] Okay. Fair. So so got it. So today, what? I mean, if you guys have raised at that valuation, you've sold like 30% of the business to investors, something like that today? [11:16] >> A little bit more than that, yep. [11:18] Okay, okay. Any plans to raise additional capital moving into 2022? [11:22] >> Absolutely. I think as we built an operating system, this is not just a U. S. Play. This is a global play. Many of our customers are already asking and many of our customers are already in those markets, so Series A is definitely in the plans for mid-twenty twenty two, and we're excited about that. [11:44] You raised the $3,200,000 I'm curious. Where are you investing that money out today? [11:52] >> Primarily sales. On the software side, yes, we've invested, but I think this is about a lather, rinse, repeat model. What are the key metrics? How many different sales pods? What verticals are we going after? We have five distinct customer segments. We've got franchisees, franchisors, corporates, private equity, and tenant rep brokers, within those different industry verticals. It's about making sure that we get our metrics right and we have those completely dialed in. It's sales primarily and then [12:25] >> engineering, new features, new product offerings. [12:27] How many are on the team today? [12:30] >> Let's see. We've got 32 [12:34] >> hires in the company, workers in the company, 23 full time employees. [12:40] How many of those folks are engineers? [12:43] >> About eight of them. [12:47] Okay. And you've chosen to keep everything in house development wise or are you using any outsourced firms? [12:52] >> No, they're all in house. [12:54] Okay. And do you pair those engineers with any sort of quota carrying sales reps or no? It's a no touch model? [13:00] >> It's a no touch model. Our sales reps are, you know, of set it and forget it. The demos are relatively self explanatory. [13:08] And you mentioned healthy net dollar retention, is 127% is great, but peel back that onion for me. What's gross churn look like over the past twelve months? [13:16] >> Zero. [13:17] Okay, got it. So your expansion revenue has been 27% for net 127. [13:22] >> Correct, right. No customer churn, no revenue churn. [13:25] What about revenue? [13:26] >> Okay, yeah, was going say no revenue. [13:28] So no one went from one location or 10 locations down to eight locations? No downgrade revenue, nothing like that? [13:35] >> The location count may have gone down, but our revenue count has compensated [13:44] >> for any reductions. So that net revenue retention of 127% is irrespective of any location degradation, if you will. We haven't seen much of location degradation because I think, frankly, the ones that are leading into technology, the ones that are winning, [14:01] >> and they need a better system. [14:03] All right, Taj, that's good stuff. Let's wrap up here with the famous five. Number one, what's your favorite business book? [14:09] >> Zero to One. [14:11] Number two, is there a CEO you're following or studying? [14:15] >> Bob Iger is an absolute role model. I mean, I've got Disney experience and the stuff that he's learned are many of the stories that I've also learned. [14:23] Number three, what's your favorite online tool for building a business? [14:27] >> Favorite online tool building a business? [14:35] >> Would say HubSpot was a great beginner for us even though we're graduating in Salesforce. [14:40] Okay. And number four, how many hours of sleep do you get every night? [14:45] >> Four and a half. [14:47] Taj, that's not healthy. [14:49] >> It's not. It's not sustainable, but I do take naps, my friend. [14:52] Okay. Got it. Got it. So you're taking naps. And what's your situation? Married, single, kids? [14:57] >> Married, got a great, great spouse, thirty five years. Kids are off and they're living there. [15:03] How many kids? [15:05] >> Two daughters. [15:06] Two. Very cool. And how old are you? [15:09] >> I am a lot older than you would think. [15:14] Okay. You don't want to share your age. No problem. We ask because then the next question as we wrap up here is take us back to your 20 year old self. What's something you wish you knew? [15:23] >> What I wish I knew was, man, find something that makes you happy. Success will be absolutely yours to have, right? Never ever become a CPA because your parents told you to. [15:39] I [15:40] >> have no regrets, but that's my story. [15:42] Leasecake.com founded in 2018. They raised 2,000,000 on a note, then raised a price around 3,200,000 on a 12 post money earlier this year as they continue to scale up to about $1,000,000 in terms of run rate. That's up from just $10,000 a month a year ago. So really healthy growth, serving two fifty customers. Over 10,000 locations are managed by these B2B corporate clients, again, who need this location management system called leasecake. Taj, thanks for taking us [16:06] to the top. [16:07] >> Thanks very much, Nathan. Enjoyed it. [16:10] One more thing before you go. We have a brand new show every Thursday at 1PM Central. It's called Shark Tank for SaaS. 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 1PM [16:35] Central. Additionally, remember these recorded founder interviews go live. We release them here on YouTube every day at 2PM 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 SaaS world, whether it's an acquisition, a big [16:58] fundraise, a big sale, a big profitability statement or 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 SaaS 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 [17:19] for that at nathanlatka.com/slack. In the meantime, I'm hanging out with you here on YouTube. I'll be in the comments for the next thirty minutes. Feel free to let me know what you thought about this episode. And 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 [17:39] got to push them away. Click the thumbs up below to counter them and know that I appreciate your guys'support. Alright, I'll be in the comments. See you.