How Leasecake Grew to 250 Customers and Zero Gross Churn While Tracking to $1M ARR (Interview with CEO Taj Adhav)

Introduction and Taj Adhav's Background

Nathan Latka

00:00Hey, 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?

Taj Adhav

00:17>> Absolutely. Thank you very much, Nathan. Looking forward.

Nathan Latka

00:19So what was Channel Intelligence? What were you guys building back then?

Taj Adhav

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

Nathan Latka

00:48you early enough there to get some equity or no?

Taj Adhav

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.

Nathan Latka

01:03That's great. I mean, I ask, are we talking like 1% or like 10%?

Taj Adhav

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.

Nathan Latka

01:21Yeah, yeah. So we can say between sort of 1 to 10%, something like that. Right.

01:27Sorry. 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?

Taj Adhav

01:35>> Correct.

Nathan Latka

01:36Yeah. So did you go right into leasecake after that or no?

How Leasecake Was Founded

Taj Adhav

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

What Leasecake Does: Location Management OS

Taj Adhav

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.

Nathan Latka

02:29So 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?

The Problem Inside Commercial Leases

Taj Adhav

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.

Nathan Latka

03:49It's And so what are

03:51customers paying on average for this technology?

Pricing Model and Average Contract Value

Taj Adhav

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.

Nathan Latka

04:29So, Taj, just to be the average customer paying $10,000 a month or $120,000 a year upfront?

Taj Adhav

04:33>> Nope, $10,000 a year. That's the ACV.

Nathan Latka

04:36Got it.

04:37That's not the ARPU, that's the ACV is $10,000.

Taj Adhav

04:40>> Yep, that's correct. And I

Nathan Latka

04:41we found that this model

Taj Adhav

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.

Nathan Latka

04:59Yeah, 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?

Taj Adhav

05:11>> Anywhere between, let's say, 25 to 80 to 100.

Nathan Latka

05:16If you're charging like 200 to 500 per lease, something like that.

Taj Adhav

05:20>> Yep, that's right.

Nathan Latka

05:22Okay, cool. When did you launch the business? What year?

Taj Adhav

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.

Nathan Latka

05:49February 2021?

Taj Adhav

05:51>> Yeah, that's correct.

Nathan Latka

05:52How much was that for?

Taj Adhav

05:54>> 3,000,000. It was oversubscribed, 3.2, I think it was.

Nathan Latka

05:57Okay. And why did you need to raise capital? Why couldn't you keep bootstrapping?

Taj Adhav

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.

Nathan Latka

06:38You get going in 2018, raise some capital this year. How many customers are you serving now today?

Customer Count and Net Revenue Retention

Taj Adhav

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.

Nathan Latka

06:54Now, can I multiply two fifty customers times that $10,000 ACV? You're doing about $220,000 a month right now in MRR?

Taj Adhav

07:02>> No, that's not the case because what we've done is had a lower price point model.

Nathan Latka

07:09We

Taj Adhav

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.

Nathan Latka

07:34So are you guys north of $200,000 a month right now in revenue, or you think you'll break that this year?

Revenue: $1M ARR Run Rate and Growth Trajectory

Taj Adhav

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

Nathan Latka

08:09>> themselves.

08:09And if you're doing like $70,000, $80,000 a month today in revenue, where were you a year ago? Do you remember?

Taj Adhav

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.

Nathan Latka

08:26Yes. 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?

Taj Adhav

08:32>> It was a priced round. Yep.

Seed Round Valuation and Term Sheet

Nathan Latka

08:34Okay. And what sort of valuation did you go and raise at?

Taj Adhav

08:39>> Let's see, it was a 12 post, so it's 12.2 right now.

Nathan Latka

08:4312 post. And looking back, was that the right price or could you get higher or lower? What do you think?

Taj Adhav

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.

Nathan Latka

09:07It sounds like when you closed that earlier this year, what you're probably doing, like $40,000 or $50,000 a month in revenue?

Taj Adhav

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.

Funding History: Convertible Note and Seed Round

Nathan Latka

09:30Now is the $3,200,000 you raised in February the only money you've raised, or did you raise any before that in 2018?

Taj Adhav

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.

Nathan Latka

09:52So that note, was that a $2,000,000 note?

Taj Adhav

09:54>> Correct. Yeah.

Nathan Latka

09:55So 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?

Taj Adhav

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.

Nathan Latka

10:14Do you have co founders or were you the sole founder at the start?

Taj Adhav

10:18>> I have co founders. So to date, myself and two other founders that have been instrumental.

Nathan Latka

10:25When 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?

Co-Founder Equity Split and Ownership

Taj Adhav

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

Nathan Latka

10:55Is this a long way of saying you own them more than the other two?

Taj Adhav

10:58>> That's correct. Yeah.

Nathan Latka

11:00Alright. So you you start out with maybe, like, what, 70%? They split the rest, and you guys go from there?

Taj Adhav

11:06>> Pretty much. Yeah.

Nathan Latka

11:07Okay. 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?

Taj Adhav

11:16>> A little bit more than that, yep.

Nathan Latka

11:18Okay, okay. Any plans to raise additional capital moving into 2022?

Taj Adhav

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.

Nathan Latka

11:44You raised the $3,200,000 I'm curious. Where are you investing that money out today?

Taj Adhav

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.

Team Size and Engineering

Nathan Latka

12:27How many are on the team today?

Taj Adhav

12:30>> Let's see. We've got 32

12:34>> hires in the company, workers in the company, 23 full time employees.

Nathan Latka

12:40How many of those folks are engineers?

Taj Adhav

12:43>> About eight of them.

Nathan Latka

12:47Okay. And you've chosen to keep everything in house development wise or are you using any outsourced firms?

Taj Adhav

12:52>> No, they're all in house.

Nathan Latka

12:54Okay. And do you pair those engineers with any sort of quota carrying sales reps or no? It's a no touch model?

No-Touch Sales Model

Taj Adhav

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.

Gross Churn and Expansion Revenue

Nathan Latka

13:08And 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?

Taj Adhav

13:16>> Zero.

Nathan Latka

13:17Okay, got it. So your expansion revenue has been 27% for net 127.

Taj Adhav

13:22>> Correct, right. No customer churn, no revenue churn.

Nathan Latka

13:25What about revenue?

Taj Adhav

13:26>> Okay, yeah, was going say no revenue.

Nathan Latka

13:28So no one went from one location or 10 locations down to eight locations? No downgrade revenue, nothing like that?

Taj Adhav

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.

Famous Five: Books, Tools, and Habits

Nathan Latka

14:03All right, Taj, that's good stuff. Let's wrap up here with the famous five. Number one, what's your favorite business book?

Taj Adhav

14:09>> Zero to One.

Nathan Latka

14:11Number two, is there a CEO you're following or studying?

Taj Adhav

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.

Nathan Latka

14:23Number three, what's your favorite online tool for building a business?

Taj Adhav

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.

Nathan Latka

14:40Okay. And number four, how many hours of sleep do you get every night?

Taj Adhav

14:45>> Four and a half.

Nathan Latka

14:47Taj, that's not healthy.

Taj Adhav

14:49>> It's not. It's not sustainable, but I do take naps, my friend.

Nathan Latka

14:52Okay. Got it. Got it. So you're taking naps. And what's your situation? Married, single, kids?

Taj Adhav

14:57>> Married, got a great, great spouse, thirty five years. Kids are off and they're living there.

Nathan Latka

15:03How many kids?

Taj Adhav

15:05>> Two daughters.

Nathan Latka

15:06Two. Very cool. And how old are you?

Taj Adhav

15:09>> I am a lot older than you would think.

Advice to His 20-Year-Old Self

Nathan Latka

15:14Okay. 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?

Taj Adhav

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.

Nathan Latka

15:39I

Taj Adhav

15:40>> have no regrets, but that's my story.

Nathan Latka

15:42Leasecake.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

16:06to the top.

Taj Adhav

16:07>> Thanks very much, Nathan. Enjoyed it.

Nathan Latka

16:10One 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

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17:19for 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

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