How LighthousePE Is Building a Proximity Engagement Platform with About 10 Customers and a 5-Person Team (Interview with CEO Andrew Steele)

Introduction and What LighthousePE Does

Nathan Latka

00:00Hello, everyone. My guest today is Andrew Steele. He's the CEO of Lighthouse PE, a location based mobile behavioral engagement platform. He previously cofounded and led three startups in health care enterprise SaaS and earlier led marketing, sales, and business development for high growth businesses acquired by Comcast, Motorola, and Microsoft. Andrew, you ready to take us to the top? Already. Alright. So talk to us about Lighthouse. What does it mean when you say location based mobile behavioral marketing and what what

00:25does COVID mean for that when no one's moving around?

Proximity Engagement Platform Explained

Andrew Steele

00:28>> Yeah. So two great questions. So Lighthouse PE is is what we call a proximity engagement platform. And essentially what we do is we help businesses better engage their customers to increase their customer lifetime value and increase their customer retention. We do that, the proximity comes in in our use of things like location, real time location data. That could be from geofencing, it could be from beacons, combined with other things we may know about users from our

COVID's Impact on the Business

Andrew Steele

01:02>> customers' platforms like CRM, which we then analyze with our platform to engage based on the kinds of behavioral profiles that we can create from that data. So, you know, relative to COVID, you know, it's actually made what we do even more valuable to businesses, because one of the biggest things, maybe the biggest thing that they're struggling with now is how do I get my customers to come back, and how do I get my customers to come

01:32>> back more often? And so by communicating with them, by engaging with them using Lighthouse, you know, we're able to, you know, give them the ability to reach out on a very personalized level on almost one one to one level at scale, know, to to create that comfort level to remind their customers that they're still

Nathan Latka

01:57And Andrew, we we talking McDonald's here or like mom and pop coffee shop in Scottsdale, Arizona?

Target Customers: Local and Regional Brands

Andrew Steele

02:02>> It it could really either be both. You know, our focus right now is on local and regional businesses. A lot of what we do, you know, big global brands like McDonald's, like Burger King, Target, Best Buy, you know, they're doing this kind of engagement today, but they're doing it with a lot of technology spend and a lot of marketing spend. And so what we've built with Lighthouse PE is a platform that's very accessible and, you know,

02:30>> cost effective for businesses.

Nathan Latka

02:32How cost effective? What are these businesses paying on average per month to use you?

Pricing Model and Mobile App Requirement

Andrew Steele

02:35>> Yeah. So entry point's about $200 a month, and it scales up from there. We price based on a recurring tiered fee based on the size of their installed base of mobile apps. So everything we do from an engagement perspective is through their mobile apps. Consumers never see Lighthouse. We're projecting the brand of our customers.

Nathan Latka

02:59I don't understand what that means. So a mom and pop shop will have their own mobile app?

Andrew Steele

03:05>> A lot of them do. And if they don't, we offer app templates that they can, you know, basically brand and skin and use in conjunction with with Lighthouse.

Nathan Latka

03:16And so McDonald's will have I imagine McDonald's corporate has one mobile app, and they funnel all the location into that one thing. So you're only pricing based off that one mobile app?

Andrew Steele

03:26>> We're pricing based on the install base of that app. So for example, if if I'm a a local beauty bar with three locations in town, I've got my mobile app, maybe I have 10,000, you know, users across those three locations. Or if I'm a, you know, 10 state regional franchise, maybe I've got a couple 100,000 installed users. And so our pricing, you know, tiers based on that install base.

Nathan Latka

03:52And when did you launch the business?

Origins: Spinning Out of Off Madison Ave

Andrew Steele

03:54>> So the technology actually grew out of a marketing agency, also here in Phoenix called Off Madison Ave, really as an answer to their clients' questions or issues that they're trying to resolve relative to retention. And so the technology was built as a part of the agency, but late last year, we made the strategic decision to start the process of standing up Lighthouse PE as its own company. And that's a goal for us this year is to

04:29>> spin it out of the agency and really grow it like, you know, every other SaaS startup company.

Nathan Latka

04:37Yeah. This is a very typical model, agency to pure SaaS, but people get stuck sometimes in the middle. And the ways people get stuck is sometimes it's cap table questions. Who actually owns the spinout? Other times it's, you know, they don't wanna give up the agency revenue. Sometimes it's a $3,000,000, $4,000,000, $5,000,000 agencies and they don't wanna go in on the SaaS because then you lose agency. Where are you stuck right now and how do you plan

04:56to solve that stuckness?

Andrew Steele

04:58>> Well, know, the good news for me personally, I just joined the company back in last fall. And by that point, the agency had really created clarity around the objective with Lighthouse PE and the spinout. And so, you know, from where I sit, you know, we're not stuck relative to any of those things because we're spinning this out, and it's, you know, it's effectively been bootstrapped. The cap table is gonna be very, very clean. Who will be

Cap Table and Fundraising Plans

Nathan Latka

05:26>> on it?

05:26Will you be on it?

Andrew Steele

05:28>> Yes. Yeah.

Nathan Latka

05:29So And the agency will?

Andrew Steele

05:30>> The agency will. The team will. I will. And then as we raise outside funding, you know, those investors will will be on the cap table from there.

Nathan Latka

05:40Mhmm. How much are you looking to raise?

Andrew Steele

05:42>> So our initial raise, our bogey is 1,000,000. And, you know, the goal with that is to get from, you know, where we are today, which is about 10 ish K MRR to 80, to a million, you know, basically that to get to that hurdle for the series A. And so, you know, we're on our goal for the end of this quarter for 1Q is to get to $250,000, and and we can point to about a third

06:12>> of that. So we're

Nathan Latka

06:13Two fifty in ARR.

Andrew Steele

06:15>> In ARR. Sorry. Yes.

Nathan Latka

06:16Yep. Yep. That's great. And so when do you think you'll do the million dollar raise? Are doing it now?

Andrew Steele

06:21>> We're not I I haven't started it now. You know, current thinking is we'll start that in earnest towards the end of this quarter, early next I see.

Nathan Latka

06:30And what do you think let's say you get up to a $250,000 ARR when you do start the fundraise. What valuation story will you go try and sell?

Andrew Steele

06:36>> I think, you know, with that valuation story, you know, raising here in the Phoenix market, you know, somewhere in the 6 to 8 pre range, you know, if we're being really aggressive. You know, as you know, valuations are lower here than they are in in the Bay Area or in the Northeast. So that's sort of our realistic, I think, goal.

Nathan Latka

06:56And how many customers are you serving today?

Andrew Steele

06:59>> Today we've got about 10 brands on the platform. We're working on a couple of partnerships that will give us much broader reach into specific market segments that we also hope to launch by the end of this quarter. And that's really sort of our two swim lane go to market where we're going to be selling direct to brands, but also building partnerships, loyalty platforms, you know, vertical app platforms where we can get reach, you know, to a

07:30>> broader set of of customers and ultimately end users that way.

Nathan Latka

07:34Andrew, what's the total install base across all your 10 customers?

Andrew Steele

07:39>> That's a great question. I'm gonna guess it's somewhere in the 80 to 100,000 range.

Nathan Latka

07:49Yep. So they're each paying about a grand per month on average, which is where you get $10,000 per month currently.

Andrew Steele

07:53>> That's right.

Nathan Latka

07:54Interesting. Talk to me about funding, you know, to where you're at today, right? What's the team size?

Team Size and Burn Rate

Andrew Steele

07:59>> So we're five full time today. That's three developers. We've got an inside salesperson and myself. And you know, because of our heritage, we get a lot of marketing support from the agency, but five full time today.

Nathan Latka

08:19And so is $10,000 a month enough to pay those five full time salaries? Or are you bringing money in from the agency or something?

Andrew Steele

08:26>> So the agency is still covering the gap today. We're not cash flow positive at 10 k a month.

Nathan Latka

08:32Yeah. Yeah. How aggressive? I mean, obviously, you know all about burn from your time in the valley. What burn are you comfortable with right now per month?

Andrew Steele

08:40>> So we are as we sit here today, we're we're somewhere around the 20 ish k a month burn.

Nathan Latka

08:48Net or gross?

Andrew Steele

08:49>> Net. Yeah.

Nathan Latka

08:50Okay. That's not horrible. So you got about $30,000 in total monthly expenses, $10,000 in revenue, $20,000 bank account going down every month, and the agency's covering that gap.

Andrew Steele

08:59>> That's about right. Yeah.

Nathan Latka

09:00Yep. Very interesting. Okay. Cool. So team of five makes a lot of sense. You mentioned you already have a first your first sales hire, which is rare for a company this early. What quota target did you set for that first quota carrying sales rep?

Sales Strategy and Outbound Focus

Andrew Steele

09:12>> So basically what we've been able to do is is poach one of the the inside salespeople from the agency. And so we've got him focused full time. Everything we're doing from a lead gen perspective today is outbound. So you know, the focus from a sales perspective today is on getting demos. And then, you know, right now we're we're shooting to scale to getting to between two to four demos per week.

Nathan Latka

09:43Mhmm. And and what do you expect the salesperson to close each month in terms of new MRR or ARR?

Andrew Steele

09:50>> So the way we've got the process structured right now,

09:55>> the, you know, the goal to get from where we are today to, you know, just a hair over 20, which is our, you know, quarter one exit goal is, you know, roughly three to four per month in incremental net new MRR.

Nathan Latka

10:13Yeah. So so at a grand each, you're talking like $4,000 in new MRR per month from the sales, right? Yeah. Or about 50 k annually, right, in new MRR, which would be about 700 k in new ARR added over the next twelve months. Correct. Interesting. Very interesting. Okay. And so where do you think most of the growth is gonna come from? I mean, how do you go from 10 to 50? You mentioned outbound. Where are you

10:34hunting?

Target Verticals: Hospitality, Fitness, Restaurants

Andrew Steele

10:35>> So we're focused on three primary market verticals today. You know, the the technology really came out of the travel and hospitality business. So that's casino gaming, hotels, destination marketing organizations, that's one vertical. The second vertical that we've got some traction in is in the fitness and health and wellness world, kind of the, you know, the Mindbody, Booker, customer base world. And then the third is restaurants, primarily fast casual and QSR restaurant segments.

Nathan Latka

11:15Yep. That makes a lot

Andrew Steele

11:16>> that's where we're hunting.

Famous Five Rapid Fire Questions

Nathan Latka

11:17Andrew, what a fun story, man. We hope you grow like crazy. In the meantime, though, let's wrap up here with the the famous five. Number one, what's your favorite business book?

Andrew Steele

11:26>> Play Bigger. Play Bigger.

Nathan Latka

11:27Number two, is there a CEO you're following or studying?

Andrew Steele

11:31>> Is there a CEO I'm I'm following or studying? Well, I've I've followed Bezos for a long time, so I guess I'll I'll say him.

Nathan Latka

11:39Number three, what's your favorite online tool for building Lighthouse?

Andrew Steele

11:43>> Favorite online tool, HubSpot.

Nathan Latka

11:45And number four, how many hours of sleep do get every night?

Andrew Steele

11:49>> Target is seven to eight.

Nathan Latka

11:51And what's your situation, Andrew? Married, single kids?

Andrew Steele

11:54>> Married kids.

Nathan Latka

11:55How many?

Andrew Steele

11:56>> Two dogs, a cat.

Nathan Latka

11:58One dog.

11:59Daughter. Okay. And how old are you?

Andrew Steele

12:02>> I am the big five o.

Nathan Latka

12:04Oh, wow. Exciting. Great number. So what's something you wish you knew when you were 20?

Andrew Steele

12:11>> Patience.

Nathan Latka

12:13Guys, there you have it. Patience. Lighthouse PE spinning out of an agency. They now got about 10 customers paying a grand per month amongst, like, casino brands or, like, sort of the Mindbody customer brands or restaurants who are looking for new ways to stay close for their customers, especially during COVID to bring them back. They charge again on average a grand per month doing 10,000 a month right now in revenue, $120,000 in ARR, hoping to

12:33scale up to call it a million dollar run rate by the end of the year, ideally looking to go do a round and maybe q two, q three, call it a one on a six to eight pre money valuation. Currently have five people on the team, three engineers burning net about $20,000 per month, but the agency is covering that while they look to drive additional growth. Andrew, thanks for taking us to the top.

Andrew Steele

12:54>> Nathan, thanks so much.

Nathan Latka

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