How Leon Hit $2.5M ARR with 264 Paying Customers and a SaaS-Marketplace Combo (Interview with CEO Bryan Smith)

Introduction and Founder500 Event Promo

Nathan Latka

00:00Hey guys, recording this here on what is it? Friday the nineteenth. Maybe you're seeing this on Monday at the latest, but wanna let you know we are almost sold out for Foundercomp Sorry, Founder500 in Austin, Texas here in about a week. It's gonna be an amazing event. 500 B2B SaaS founders. I'm looking at the attendee list. There's almost 60 founders with more than $67,000,000 in ARR. It's an incredible group of group. There's over one and fifty

00:27with more than 1,000,000, more than a million revenue. It's an incredible group. You don't wanna miss it. Grab your hotel, grab your flight, grab a ticket right now. I'll put the link in the bio in the description here on YouTube. And I think there's only about three tickets left. Okay, about three tickets left. I'd love to see you guys there. Don't be bashful. Grab your ticket now. Hey folks, my guest today is Bryan Smith. He's an

Bryan Smith Background and Leon Overview

Nathan Latka

00:48ex wellness professional and pro sports performance coach turned repeat founder and startup advisor, now building an employee performance and mental health platform, which you can find at myleon.co. Bryan, you ready to take us to top?

Bryan Smith

01:01>> Let's do it, man. Alright.

Nathan Latka

01:03How do you this feels like such a personal thing. How do you do this in software?

Bryan Smith

01:08>> You know what? It's it's funny. So my my background is as you said, so I was a director of sports science for USA track and field. Right. And then what we did is we used data science to predict performance or predict injury in professional athletes. Right. If athletes and people, salespeople, people work in tech, we're all the same. Right? We burn out, we get fatigued, all those other things. And really what we need to be able

01:30>> to do is we need to look for the signals within the data to understand what's going on. So what leonvc is we integrate into like Salesforce. We primarily work with sales teams, by the way. We integrate with Salesforce and HubSpot, and then we use sentiment analysis using diagnostic surveys and whatnot. Combine that into an algorithm that gives us a snapshot of the teams that are at risk of burning out, teams that are at risk of

How Leon Works: Integrations and Burnout Signals

Bryan Smith

01:54>> mental health issues. But on the opposite end of that, it actually tells us the teams that actually can be challenged or pushed harder. All right. So it tells us the teams that are very resilient. So it ends up being sort of a, almost like a mental model framework for a sales manager to say, these teams need support, these teams can be challenged to push harder. Now, how do I build my business model around that?

Nathan Latka

02:13So let's say one of our listeners here, B2B SaaS Founder, they've got five people on their sales team, they use HubSpot, they want to use Leon to reduce turnover. They sign up, they give you access to their HubSpot API. What are you reading for? Give us an example of a signal that you're getting from HubSpot's API to signify that one of the sales reps might be, you know, having a mental health issue or about to be

02:33burned out.

Bryan Smith

02:34>> It's a it's a combination. So what we'll do is we'll look at your HubSpot activity data. So, that could be calls, emails, revenue generated, meetings booked, opportunities generated, whatever else. Mix that with diagnostic surveys, all right? So, we're asking about sleep, we're asking about well-being, we're asking about psychological safety, work relationship, things along those lines.

Nathan Latka

02:56You're asking the employee.

Bryan Smith

02:57>> Asking the employee, correct.

Nathan Latka

02:59How do you incentivize the employee to do that?

Bryan Smith

03:01>> What's that?

Nathan Latka

03:02How do you incentivize the employee to take the time to actually fill those surveys out? I feel like people get those surveys, they ignore them.

Bryan Smith

03:07>> So, that's the interesting part about it, right? So, surveys suck, right? Everybody agrees that, right? And NPS specifically are very bad. Like you get no signal from it from an intense standpoint to understand what to actually do with it. So, one, it's the way that we ask questions. Two is the way that we score questions, right? So the way someone scores or answers a question has a half life associated with it. So that will help us

03:32>> understand exactly when to follow-up with that person again.

Incentivizing Employee Survey Completion

Nathan Latka

03:35But to your

Bryan Smith

03:36>> point, don't just take survey data and report some garbage metrics to a manager, right? What we also do is provide recommendations to both the manager and the employee to how to actually fix the things that are going wrong. So if we see that an employee is burning out, we'll push a playbook to a manager to say, these are the things you should be doing, reduce hours, whatever it is, right? Go to a four day work week,

03:59>> talk more about empathy. But we'll also, have a marketplace where we've integrated into Headspace and the Calm and Equinox and SoulCycle and InsideTrack and all these other things where we'll tell the company the exact service to buy for that employee based off the data that we're seeing. But on the opposite end of that, do we'll the same thing employees. We'll say, employees, this is what you're struggling with. Here's what you should do to be able to

04:20>> fix this. Here's some content that you can engage with. And here are some services that you can use through our marketplace to be able to sort of fix that issue that might be going on.

Nathan Latka

04:29Got it. That's compelling. Okay. So give me a sense of your business model, right? What's the average customer going to pay you per month or per year to use this technology?

Business Model: SaaS Pricing and Marketplace Revenue Share

Bryan Smith

04:35>> Yeah. So, now we have a couple of different tiers. So have a free plan all the way up to sort of like a managed care program. So primarily two revenue sources. We have a SaaS model, which is on average about $350 per manager per month. We're charging on a per manager basis. But the marketplace also has a revenue share, revenue model attached to it.

Nathan Latka

04:59Oh, what's going on there, YouTube? Good to see you guys. Now imagine this, you love watching these interviews with SaaS founders, but imagine if we took all of the valuation data out from over 2,807 interviews I've done manually. Saves you a lot of time. Well, we've done this. We've built it into the beautiful interface inside of Founderpath. Check this out. I'll show you how you can access this in a second. But you log in, you connect

05:23your Stripe account, you see your valuation real time, you can see what it changed over the past eighty eight days and even set goals for valuation this year. Now the secret evaluation is there's many different ways to value a SaaS business. So the reason you're gonna see three or four different valuations inside of your Founderpath dashboard, this is all free by the way, is because depending on who's doing the buying of your SaaS company, you're gonna

05:47get a different valuation. A VC is gonna pay a different valuation, Private equity firm is different. If you're gonna do a minority sale, that's different. And if you sell the whole business, that's a different valuation. You can see all those when I hover over here, right? So the teal is what a VC would pay. Yellow is what private equity And red is if you sold the whole thing outright. Now what's cool about this is this is

06:09not built off random data. Again, you guys hear these interviews on YouTube. All these datas are built from real time valuation data points founder share with us on the show. So traction 1,200,000 seed round 3.7 raise. They sold 22% of their business. Go in here and filter by the event. Maybe you only wanna see companies that have sold the whole business. Well, here are a bunch that have been acquired the valuation and the multiple. Maybe you're

06:35going out right now and you're raising your seed round. We'll go in here and look at all this recent seed deals that went down, what they raised, what valuation they raised at and what percent that they sold. There's never been a larger dataset of SaaS valuations than what you can get now inside of Founderpath. And we're thrilled to bring it to you. All right, we're gonna go back to the YouTube video here in a second, but

06:57if you wanna check this tool out, if you wanna jump in and sign up, you can check it out for free to get your valuation at this link. This link, founderpath.com/products/valuations. Or if you go to founderpath.com and hover over products, click on get your valuation here, and go ahead and sign up to give it a whirl. Again, all that valuation data live right inside the platform. I hope to see you there. Alright. Let's jump back into

07:23the interview. Sorry. Real quick. So how do I wanna focus mainly on SaaS here, the market how would the marketplace work? You recommended gym membership to Equinox and you have a relationship with Equinox, so get a cut from Equinox?

Bryan Smith

07:33>> Both sides of it. So it's almost like a vendor model to a certain extent, so a familiar vendor. So we'll actually buy, purchase, manage the whole entire benefit, which will make a percentage on that on the employer side. All right. But also on the other side, we'll make a percentage from Equinox or Headspace or whatever else. So we're making roughly about 20% of every dollar spent within the platform.

07:55>> 10% on both.

Nathan Latka

07:56It's split equally 10% on both sides?

Bryan Smith

07:57>> Yeah. Okay.

Nathan Latka

07:58So if you like I'm making this up. If you sign up a $100 a month user to Headspace, you'll get a $20 cut just as an example of that 10 from employer and 10 from Headspace.

Bryan Smith

08:08>> Most of the use cases are are company wide. Right? So an HR manager will buy Headspace for the whole entire organization, which will get 20% total on.

Sponsor Read: Founderpath Valuation Tool

Nathan Latka

08:17Oh, I see. Which of these is if you if you add up total revenue last year on a percent basis, what percent was marketplace revenue versus SaaS revenue?

Bryan Smith

08:27>> SaaS was about 70% of the business. And that was purely just because we didn't market it enough probably. Mhmm. But that's starting to switch over now, especially as our introduction into the free plan, because it gets really interesting, right? Because most of the time when we're talking about buying these benefit products, no one has any fucking clue what they're doing, right? What works, what doesn't work. What's interesting is we can quantify the impact of these services.

08:52>> So we can say of this percentage amount of people that engaged and signed up as Headspace or wherever it is, we saw this amount of improvement in mental health or burnout or performance or whatever else.

Nathan Latka

09:04That makes a ton of sense. Okay, very cool. You said three on the SaaS side, three fifty per manager per month, but I just, I don't know anything about your, the average, like your sweet spot customer that signs up for you, how many managers is on the team? How many managers are they gonna pay for?

Bryan Smith

09:19>> Most of the time it's a complete sales function. So we're talking about a VP of sales down to director of sales, down to sales managers and anything in between, right? So if it's, you know, SDR leaders or whatever else, that's normally what the structure usually looks like.

Nathan Latka

09:35So, but what does that mean? Like, don't if that means there's gonna be a thousand. So is there other like five leaders on average for the sales team size you're typically signing up?

Bryan Smith

09:42>> Yeah. Depending on the size of the company, we're looking anywhere between seven to about 12 depending Got on the structure of the

Nathan Latka

09:51it. And you're dealing so 350 bucks per manager times seven managers. What is that? Like, 2,500 a month. So you have an enterprise sales motion here. I mean, you're getting up there.

Bryan Smith

09:58>> Correct. Yeah.

Nathan Latka

09:59And did you were you always that way or did you move upmarket?

Bryan Smith

10:03>> No. We we it was always the the focus. I mean, it took some time to sort of us to to get our our legs underneath of us a little bit, but that was always the focus. It just took some time to get there.

Nathan Latka

10:14Yeah. Well, talk to me about time. When did you launch?

Bryan Smith

10:16>> Yeah. So we launched pre products, like pre actually anything roughly about two and a half years ago. We had existing product before that, which was a sort of a gym membership sort of model, sort of like gym pass, class pass type model.

Nathan Latka

10:322019, late twenty Exactly.

Bryan Smith

10:35>> COVID killed that business obviously, which accelerated So

10:39>> about two and a half years ago, we launched pre product on Product Hunt, signed up roughly about 6,000, early access users, through product Wow.

10:51>> It was actually pretty, I mean, we hustle man and we went through like every sort of community play and you know, we were very, what's the word, challenging, in the way that we opened up, you know, our tagline was like 85% of your employees hate their job. And a lot of people got mad about it and it was, you know, it was exciting for us. And then, you know, there was a wall because it got like

11:12>> anything from a product standpoint, everything got delayed. But we've been, like fully launched right now, roughly about a, about a year and a half.

Nathan Latka

11:21Year and a half. Interesting. Do you remember how many upvotes you got?

Bryan Smith

11:26>> I don't, to tell you the truth.

Nathan Latka

11:27Mean, you get, were you like first of the day? I'm just curious what position you have to be to get 6,000 signups from product hunt. Imagine it's like

Bryan Smith

11:34>> It the top actually wasn't all that great because what we did is we took that product launch and then went to like, you know, Dave Gerhardt's community and sort of like started talking to sort of the marketing people there and then went to some of the sales communities and just started like literally pushing buttons. But like your sales reps hate their jobs, your employees hate their jobs. And that's what drives a lot of sort of the

11:55>> engagement to figure out what the hell we were doing. But it definitely wasn't all product hunt for sure.

Customer Funnel: Signups, Active Users, and Paying Clients

Nathan Latka

12:01Yeah. You had another product launch in 2021. That's not the one you're talking about, right?

Bryan Smith

12:05>> That's not the one we're talking about. I don't know if the one we actually launched is actually on there anymore because we had to replace the one that we did in 2021, but I think that was number four of the day or something like that.

Nathan Latka

12:13Yeah. This one didn't do bad. I mean, didn't do amazing. It didn't do bad though either. Did, I would say fairly solid. Very cool. Okay. So Product helped you there. That makes a lot of sense. Okay. So that was your first sort of tranche coming in sort of late twenty nineteen, 2020 into 2021. How many customers are you now working with today? How many logos?

Revenue Breakdown: SaaS vs Marketplace

Bryan Smith

12:31>> So about 1,500 total total clients right now, sign ups right now. Roughly about seven fifty of them are what we consider active users, which primarily is, is data being answered and is there some sort of action being taken within the product? So if that is either content engaged or playbook started or a marketplace product invested in or something like that, With roughly, I think we're at two sixty four paying clients currently right now.

Nathan Latka

13:01That's great. That's a healthy little funnel. I love that you know those numbers off the top of your head. So can we take that two sixty four paying customers times sort of the seven manager ARPU we talked about earlier? Mean, that would put you guys at like $600,000 a month right now in revenue.

Bryan Smith

13:16>> No, it's definitely not that. It's a little all over the place because some of that is mixed in with some of our marketplace revenue. Some of it's mixed in with just red line deals and whatnot. Yeah.

Nathan Latka

13:27Well, is the, does the, again, when I asked earlier was like the average team when they sign up, how many managers and you said on the low side was seven. Is the low side actually more like two or three?

Bryan Smith

13:36>> Yeah, I apologize. So that's the teams that most of the time we're going after. So when we get into like a whole entire sales function, we're actually taking on it about seven, but we also have onesie twosie sort of sales managers.

Nathan Latka

13:46Oh, I see. I see. Well, okay. So again, if you look at your current, look at your current customer, not what you're going after in the future, but your current customers, you would say it's more like two person, like manager seat teams.

Bryan Smith

13:57>> Individual sales managers, things along, you know, like that. Correct.

Nathan Latka

14:01Okay. Okay. Got it. So like two seats times two, your two sixty four clients would be more like $180,000 a month in revenue, something like that. Yep. That's closer to accurate?

Bryan Smith

14:10>> Yes. Correct.

Nathan Latka

14:11Okay. And that's just on the SaaS side, right?

Bryan Smith

14:13>> Yeah. That's just something No, that's a combination. That's just on the SaaS side from there, and then there's the marketplace revenue as well.

Nathan Latka

14:18That's great. And well, and you said earlier that SaaS is about 70%. So we can mark the $180,000 a month up by about 30% to get to your total revenue of like $210,000 a month, something like that. Yep. That's fantastic. But you said what's surprising here, most people say SaaS is growing faster. You actually said your marketplace percentage revenue is growing faster than SaaS.

Bryan Smith

14:36>> Yeah. You know, and I think that's just because we sort of figured out the business model to a certain extent, right? You know, and we started pushing free a lot more also because we did see that there was dollars being spent within that sort of benefit space. There was really nothing sort of, you know, when really committing to that sort of market as a whole, the way that we looked at it, right? So the buying and

Year-over-Year Growth Rate

Bryan Smith

14:59>> the selling and the quantifying of sort of those metrics. So we pushed free and then from there changed a little bit of the sort of PLG function to make sure we're getting people to engage into those products and buy some of those products in the marketplace. That's on our end, that's a much stickier revenue source than some of the SaaS model that we have.

Nathan Latka

15:18Yeah, know, of course. What about overall growth rate? If you're doing $220,000 a month today in revenue, do you remember where you were exactly a year ago?

Bryan Smith

15:25>> Yeah. So roughly, I think we grew by 116%.

Nathan Latka

15:32Okay. So you've had about $100,000 a month last year. Now you've more than doubled.

Bryan Smith

15:36>> Sure. Yeah.

Team Size and Engineering Headcount

Nathan Latka

15:37That's great. Very cool. Talk to me a little bit more about the team. How heavy engineering is this? How many engineers?

Bryan Smith

15:43>> 13 engineers currently right now.

Nathan Latka

15:45Across the team size of a total of how many?

Bryan Smith

15:48>> Yeah. So from a sales and marketing standpoint, it's just me and my co founder who is still leading the sales and marketing aspects of it. And then the rest of it is customer success and engineering.

Nathan Latka

15:58So total team sizes what?

Bryan Smith

15:59>> Yeah. So we're at 26 people currently right now.

Nathan Latka

16:0326, 26. And do you feel like you've sort of hired ahead of growth or are you like, oh my gosh, everyone's wearing 20 hats. We need to hire more

Bryan Smith

16:08>> We're panicking completely right now. You know, and truth be told, it's, you know, I think it's a scary proposition to be able to hire a VP of sales or, you know, a director of sales or a VP of marketing, whatever that is. Know, and then truth be told too, it's like, there's a lot of things within product that, you know, are still being handled manually on the backend that we're still trying to sort of work through.

16:31>> So I think once we have some of those figured out, some of the PLG motion, then we'll start hiring some of those bigger folks.

Funding History and Seed Round Details

Nathan Latka

16:37Yeah. Have you bootstrapped all this to date or have you raised?

Bryan Smith

16:41>> No, we've raised. Right? So roughly about 4,500,000.

Nathan Latka

16:44Oh, I see. I see. When was the last raise?

Bryan Smith

16:47>> Eight months ago.

Nathan Latka

16:49Okay. So what was that? That was this year or last year?

Bryan Smith

16:54>> It's 2022, so this year.

Nathan Latka

16:57They closed in January, something like that. And was that your seed or series A or?

Bryan Smith

17:01>> Yeah, it was, I mean, it was sort of like a combination of like a friends and family sort of seed rounds. You know, essentially we have a relationship with a PE firm that spun off a VC sort of arm to be able to sort of fund us, but it was very much a friendly sort of investor, sort of friends and family type relationship. Just had a sort of organizational structure behind it.

Nathan Latka

17:23So, the full 4,000,000 you raised today was in that seed round?

Bryan Smith

17:26>> Correct. Yes.

Nathan Latka

17:27I see. Okay. Why raise the capital? I mean, why couldn't you I mean, was there a path to keeping equity, keeping control, not having to set up a board?

Bryan Smith

17:35>> Yeah. You know, I think it was on that end, it a friendly investor that we knew we could take in capital. Yes, we had to give up a board seat, but it was also too, we didn't really have to answer to our investors in any shape or form.

Nathan Latka

17:49I mean, the biggest thing though that you didn't mention though is equity. I mean, I understand it's a friend, but you don't want to give up 20% of your company just because they're Yeah, a

Bryan Smith

17:56>> sure. No. And I agree with that. But it was still friendly terms to a certain extent and truth be told, dude, and we got scared, right? Like we felt like we needed money to be able to sort of get us through where we're at and what our roadmap looked like. And we decided to do it, I guess.

Nathan Latka

18:11Fair enough, fair enough. Most folks doing seed rounds, you know, closing in January this year were selling call it between 10 and 20% of the business. Were you sort of in that same range?

How Capital Was Deployed and Lessons Learned

Bryan Smith

18:20>> Yes. Correct.

Nathan Latka

18:20Okay. So that would have been like a valuation of what something like $20,000,000 to $22,000,000

Famous Five: Books, Tools, and Personal Reflections

Bryan Smith

18:25>> little under there. I think it was about 17 or 18 actually.

Nathan Latka

18:27Post money? Yes. Okay. Very well, that's not that's not terrible at all. Now, is it panning out how you thought it would? You had a thesis on where you'd invest the money. You have six months now of history. Is it working?

Bryan Smith

18:37>> Oh, no. We burned through way too much money to tell you the truth. Made we made

Nathan Latka

18:40it How much is too much?

Bryan Smith

18:42>> No, I mean, we still have a considerable amount left, but we still, mean, like anything, neither one of us come from this world, right? So we made a ton of mistakes as far as keeping staff on too long, over investing in certain things. And I mean, you live and learn,

19:03>> but yeah, we've made a shitload of mistakes, man, to tell you the truth.

Nathan Latka

19:06Fair enough. I love the vulnerability. Very cool. Hey, a story here. Let's wrap up with the famous five. Number one, favorite business book.

Bryan Smith

19:14>> The

19:17>> Great CEO Within. I enjoyed that book actually.

Nathan Latka

19:20Number two, is there a CEO you're currently following or studying?

Bryan Smith

19:26>> No, I don't think so. No.

Nathan Latka

19:29Number three, what's your favorite online tool for building leon?

Bryan Smith

19:33>> You know, from a sales standpoint, I love ample market actually.

Nathan Latka

19:36Ample market.

19:37Number four, how many hours of sleep do get every night?

Bryan Smith

19:41>> I have a five month old, so like four.

Nathan Latka

19:43Oh, wow. Okay. Is that your only kid?

Bryan Smith

19:45>> No, we have two more. We have a 12 year old and a nine year old.

Nathan Latka

19:48Wow. Busy guy. So, okay. So married with three kids?

Bryan Smith

19:51>> Correct, yeah.

Nathan Latka

19:52Wow, and how old are you?

Bryan Smith

19:54>> I am 40.

Nathan Latka

19:5540, wow. Okay, and last question, something you wish knew when you were 20.

Bryan Smith

19:59>> Something I wish I knew when I was 20.

20:05>> I guess that everything would be okay.

Nathan Latka

20:07Mhmm.

Bryan Smith

20:08>> That's a good thing. Was a bad kid, man. So I was a bad kid, you know, did a lot of bad things as far as, you know, so, yeah, that everything was gonna be okay. Just to sort of stay faithful and stuff, you know.

Closing Summary and Outro

Nathan Latka

20:18Guys, myleon.co, you're gonna see more of this. They plug into your HubSpot API or Salesforce API. They'll look at certain signals along with employee surveys to understand where's burnout happening, who is, you know, maybe, you know, approaching a mental health issue or things of that nature. Then they also help you find a solution. Remember, it's a Headspace membership for 10 a month. His revenue model is you pay him, right? Per manager, $350 a month. And then

20:39also if he helps you sign up for Headspace to help solve some of these issues, he makes a 10% cut on each side, right? So a $100 sale, he'll make $10 from you, $10 from Headspace, currently doing about $220,000 a month in revenue up from a $100,000 a month just a year ago. 70% of that $220,000 a month is pure SaaS, rest of marketplace. They're scaling nicely here. 4,000,000 raised at around $17,000,000, $18,000,000 post money recently,

20:5926 on their team, 13 engineers. He says they're bursting at the seams trying to find talent. Bryan, thanks for taking us to the top,

Bryan Smith

21:05>> Appreciate it, man. Thank you.

Nathan Latka

21:08One 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 one

21:32p. M. Central. Additionally, remember these recorded founder interviews go live. We release them here on YouTube every day at two 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 SaaS world, whether it's

21:54an 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 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 You can go in there and quickly search and see

22:15what people are saying. Sign up 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. 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, I do it so that we can all learn. We have to

22:35counter those people. We 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. Hi.