Lexicata Revenue (2018)

good morning everyone my guest today is Michael Jason he's a see he's the co-founder and CEO of the legal tech company lexicon of the world's number one client in taken CRM software for lawyers with thousands of law firms on the platform across 20 plus countries the company helps bridge the technology gap many law firms face as more and more professional services move on to the cloud before this company he founded law kick in 2012 a leading online marketplace for seamlessly connecting clients to the perfect lawyer for their needs after daddy became innately familiar with the fact that lawyers often struggle to manage their leads effectively that's when he launched Alexa cotta in 2014 Michael are you ready to take this to the top yeah I got alright man so this is like a tough space lawyers are cheap and it's hard to sell to them tell us what the company does and how you make money yes what are the SAS platform essentially what we are is a you know kind of like Salesforce for law firms is the easiest way to kind of describe what we are right they are very difficult breed to to work with they're very argumentative and they are very educated in their craft however they're not as educated like ways of running a business or technology so it is definitely a struggle implementation is a big thing that we really focus on from a service standpoint so that's a big thing that we emphasize here and what's the revenue money is to your place asks with that it's a pure place ask revenue model exactly it's a combination of multiple monthly and annual subscriptions and then because of the difficulty with lawyers we do have like an onboarding fee that kind of varies depending on the size of the firm but we started about 50 bucks a month for a single user and we go all the way up to like you know thousand bucks a month depending on the size of the firm and then you could do an annual plan plus you know at least a couple hundreds per setup up to a few thousand and what would you say the average customers paying you per month average okay got it good and then give me more the back story here when did you launch the company I think you said 2014 right yes so this was originally a kind of a pivot from logic I know you mentioned thousand twelve we launched like a law kick especially what law kick was was kind of like a oDesk or a TaskRabbit for law firms so basically on a DUI I'm forming my business I need to go find a lawyer and effectively what we figured out was it didn't matter how many leads we said to these firms they just had such a crappy process for following up and tracking people and then they also had a very paper driven process so they were you know require PDS and printing and all this nonsense we said before we can fix the problem of getting more lead for the clients or to the lawyers we didn't fix the fundamental issues so we started in about 2000 like we started coming up with the idea like late 2013 and then like Jude 14 was really when we like built the product and started to move and have you bootstrapped its own Center have you raised yeah when we first started the company that was law kick we raised a few hundred thousand dollars and we basically we're close to that of money and that's what kind of like forced the pivot and since then we've been completely bootstrapped off the opposite so so how much money did you raise in the beginning I've just about like a hundred eighty or two hundred thousand okay and did you keep those investors on or did you actually basically shut that other company down and clean up yeah that would be pretty dirty I think I like a divot so we kept so it basically the whole idea and the idea chain are at the path change which is basically me and my co-founder Aaron to people who stuck on we didn't have a big team up first anyways and yeah we just rolled those investors and we just kind of do a DBA or lexicon smart yep smart and how many customers have you scaled to we have long and then you know average three to four users prefer okay got it and so I mean so when you say a few thousand are we talking a thousand or nine thousand or fifty thousand ah I get the like the low thousand like three thousand all right okay got it very good and then you said I think you said I feasted on average like call it two seats purr purr purr purr logo about three three okay good well I think you said earlier each one pays what call it 100 bucks per month so it starts a what 300 grand a month something like that right now yeah something around there yeah we're in a few million range like right right and if you take that back in year ago help me understand growth what were you doing in July 2017 yeah I'd say we've more than doubled like year over a year pretty much for the last few years since we're bootstrapped it's a tough industry you don't get that kind of scalability you get like consumers and obviously we're not Enterprise it's hard to like move the needle with any one customer so it's just like a slow like a grind and burn type of thing and really we've been getting a lot of our a lot of our acquisition partner channels so it's a lot harder religious like market to law firm because they're not really a huge online business like you know like a SAS company would be or Enterprise company would be so it's really hard to like really scale really quickly at this pace yeah well still if you it sounds like if you grew hundred percent you over a year and you're 300 today and so I'll call it a 150 a year ago that's still pretty healthy growth for a bootstrap company in this space yeah definitely at the year before that I think we had a bottle like a hundred seventy percent growth or something that's great that's good well no thoroughness it's easy to go from $1 to $3 right all right to me I mean you just mentioned some of the difficulties with acquiring these guys what is your cat today fully weighted yes honestly we don't really have this super high attack it's bitchin you know it's very low like it's like you know $50 range mainly because we don't do a ton of marketing because it's just hard to like find these people so our attack is only gonna really involve a few things one is gonna involve conferences we spent some money in sponsoring conferences and those types of things she was obviously sales people a commission and then for the most part we're not really spending much money on marketing and I mean we're probably spending between something like you know one to three thousand dollars a month on like pure like marketing and Facebook Ads those things we're trying different channels but yeah it's pretty low crack but obviously it's artificially low just because you know if there is it like a whole whole lot of ways that you can market besides just branding efforts in our space what's the team size today so right now there's about 18 of us okay and where's everybody based LA everyone there we don't do any like got fully remote people all our devs are here we don't outsource anything that's great okay good so so call it a $50 attack on hundred dollar per month price point means you're getting paid back in about a month rice is super quick yeah yeah very quick especially with that onboarding T we have like a minimum like about a foreigner onboarding to be so we're pretty much you know making money on people immediately yeah and what it turns critical in this kind of business what's your turn really low it and it's dropping it's dropping really quickly so I'm pissed or it's been about two for two and a half percent per month and right now we're dropping sub two now so no we're like the mid one and that's and that's the logo churn or revenue Sherman that's gonna be that's gonna be customer churn like the by logo or by number of logos lost or by the actual revenue they represent logos not revenue it tends to be pretty even the bigger firms actually if anything it's lower because our we've had to retain a bigger firm on a longer basis the the ones highest are gonna be like these solo practitioners who are one-person shop to like we probably get like five purpose above who literally can shut down their business yeah and hey I'm just gonna go become a full-time mom I'm retiring or joining a bigger purse so when you look at net revenue retention annually pretty high yeah we're over a hundred how far with that I assume you're over 100 percent how far above a hundred percent I honestly I don't know that number table exactly I'll pop my head but that's lightly above okay and when you are driving expansion revenue what's what's the biggest factor driving that expansion is a number of seats new product add-ons what is it so right now we don't have different tiers just because like we're kind of one of the first ones to really do this in the space so where was the first one we do this in the space so essentially it's a lot of Education so we're not trying to like make the sales for complex so we don't want different tiers and things like that so when it comes to like upselling it's gonna be in terms of number of users and growth a lot of people I think one of the things that a lot of you know software in fact companies in general struggle to do is get people to really buy it completely in the first fell swoop right so a lot of our firms will say hey I have 30 employees that might be the number of users I have eventually but to start with like a little guinea pig microcosm of like four users and there's one department and see if it works and expand so that's where the up stuff helps upsell potential is in terms of users but we're gonna be seeing new features are eventually moving more towards the tiered model yeah and and walking through - you have enough cohort kind of I assume a large and a large enough sample cohort or no these numbers what do you seem lifetime value is in months and dollars so we're kind of figuring out we haven't been around for for long and again like double turn very fast and a lot of people stick for a long time so our LTV right now somewhere like north of 5k yeah somewhere five battalions that will change over time and then in terms of months like it's it's gonna be somewhere probably between I think it's something we need like 16 to 20 months something in that range yep yep fair enough good stuff are you you know you obviously built a company you know at the point now or soon over three million bucks and ARR yeah I don't know in terms of profitability where are you guys casual products positive today we always have been that's always about the business we kind of like run a little differently my co-founder don't really take a whole lot of money out of the company we're more just investing and growth so we pay ourselves you know a moderate salary and then we pretty much need every single dollar that we make back in the business are you raising capital today so no we allotted you know bytes and I don't want to inquiries from like PE firms and and then growth equity we might go that route eventually we're on sugar it kind of depends on what the market looks in the next year to whether people are adopting a faster or slower rate but right now we kind of don't have a strong need to raise capital we've kind of had rubra hyper growth days we went from like four to 18 employees in like eight months and we kind of focused a lot more on streamlining efficiencies and avoiding having to hire a lot of people so from here on forward I don't think Spence is gonna go up too much I'm just some media you know obviously some what's it called tomorrow you know some moving expenses right variable marketing expense exactly variable was the word I was looking for stuff I'm variable expenses will go up a little bit but not much so at that point we can start to really invest a ton of money invest and obviously our staffing or they making it a great place to work if you did go out on a raise today I'm curious what valuation do you think you'd be able to get somewhere I mean between eight to fifteen something like that yeah yeah it seems seems about four three two kind of five six x air or something like that especially when you're going you know growing a lot around a honey a year it's easy to get that kind of valuation but it really depends on like you know there are a lot of things like for us and legal when you plot other like PE firms or capital firms and legal they're gonna tell you anything around a two percent turn rate is like amazing right if you talk like enterprise customers it's like you know a you know a point two percent convert plate as bad sir no up so for us we're actually really great in that market because there's just a lot of different over in the small business market yeah very good let's wrap up here with the famous five number one what's your favorite business book dude late startup method I was the first one I did obviously everyone probably says that but I took great it's a great number two is their CEO you're following or studying right now so one of the ones that I always like he'd mentor to me but he kind of not really CEO Gary or he was the former CEO of that and now he's at Polaris I've always like really enjoyed the work he did he kind of came from a sales person worked and waited up I've always kind of like I envied him in the way he does things number three what's your favorite online tool for building businesses ooh favorite online we're going because I mean oh yeah we use so many of that honestly once that's worked really well for us we use autopilot for email marketing that's super helpful and it's really cool cuz we've kind of grown in let them so they've really grown over time that's probably one of my favorite tools number four how many hours is he very and every night I actually put a lot better these days last night I didn't do a lot of sleep because I got a big presentation today but I'd say they I don't need that much of estimating six hours a night is probably what I get on average and what's a situation married single kids okay not not married no kiddos that you know of okay alright that's leap six hours and so joy and Howard are you I'm gonna be 31 next month they're already one very good last question what are you is your 20 year old self knew how hard it'd be it's probably say and how long it take I you know I think a lot of these people a lot of people read no we really started method we saw TechCrunch and all these things were just like we see all these successes and a lot of times we don't know that there were three failures before they got to that in success on that fourth try so I think just like how persistent and how long it takes and the other thing I'd add is people I thought you know like oh my partner and I are smart we can kind of like drive the business we just need some people around to kinda still fill some holes I don't think we I think we underestimate how important it is really good people around you if you want to grow then great people around you remember it always is it's always harder and always takes longer than you expect he launched lexicon oh really pivoted to it in 2014 carrying his prior investors with him they gave a minus-- co-founder about 200 grand today they serviced over three thousand paying customers those customers are law firms think of the maket basically like the Salesforce for lawyers those 3,000 customers pay an average of hundred bucks a month so doing about 300 grand per month in a revenue that's up a hundred percent year over a year from last year doing about 150 grand a month in July 2017 2.5 percent per month logo churn has been the historic number that's now dropping below 2 percent and over 100 percent net revenue retention annually spending less than one month of ARPU on acquiring the customer so quick payback lifetime value they assume 16 months which is actually higher when you actually look at churn but conservatively 16 months and 5 grand and lifetime value over their team of 18 based in l.a michael thank you so much for taking us to the top thanks appreciate it