Living Securityrevenue & funding

just got done editing this interview you guys are gonna love it before i do that though i want you to know that i'm going to be in the comments for the next 30 minutes or so answering your questions if there's additional questions you want me to ask the ceo next time i interview them leave them below or if you're just loving the data points i get ceos to share click the thumbs up button below that's your way of telling me you're loving this stuff and i'll get you more of it additionally again i'll be in the comments answering any questions you have all right for 30 minutes enjoy the interview hello everyone my guest today is ashley rose as the ceo of living security ashley is passionate about helping companies build positive security cultures an adaptable problem solver she is thoughtful and transparent in our approach to running the company and working with clients for a singular goal to reduce risk by making security awareness engaging and quantifiable ashley you're ready to take it to the top yes absolutely so how should we think about this i mean are you like a training company are you true sas like know before these other kind of security firms yeah so we are a cyber security awareness training company and we are a sas company as well so we train people through sas products um essentially experiences that are backed by a technology-enabled platform interesting okay so so i mean if you look at last 12 months just to really understand what you truly are if you look at kind of training revenue versus true sas revenue what's the split what percent was sas yeah in um 2019 we were three-quarters sas revenue and then we had another portion of our revenue that was services based okay okay got it so your majority sas the service to support the sas that's correct okay take us through a customer example so we can understand what the services you deliver and what the sases they pay for yeah so um we work mostly in the fortune 1000 enterprise um and they are buying training from us that's uh again it's delivered through an experience the experience can either be online or in person but they're subscribing to a sas application to help them run and enable them to deliver both types of training so they are either hosting a cyber security escape room oh is that your dog um might have to pause no no bring bring the puppy in this is great this is this is this is how founding life works we work from home we work in basements we work in garages we work with puppies and babies and husbands and wives that's how it works all right here's zoey zoey oh my god puppy that's i'm gonna say that's not a puppy she she's is it he or she she's a girl she's she's six months old she is a puppy but she's humongous amazing okay so now with zoe in your lap tell us about uh can you tell us the story about a fortune 1000 that used you recently yeah um so i mean a lot of them look very similar i'm not gonna put any names on there you can look at our website um can we talk about like mass mutual or enterprise working with us with our cyber security escape room uh essentially it's an in-person training experience that we actually enable our clients to run continuously throughout the year with a subscription to the platform that manages it okay um and then that client they usually bring you know a good portion of their users online um they're getting them trained up throughout the year and they love the experience they love how immersive it is and the feedback and then we're um able to cross-sell them onto our online platform um to help them scale that out to more users and remote locations and you know with a global audience okay so give me a general sense then once these companies sign up ignoring the upfront payment for like the secure the escape room experience on average really paying you per year to use the technology so our average um currently is 24 000 per year and that's for a good person of their their organization that's pretty sizable okay yeah so give me flesh that out if someone's gonna pay you 24 000 in sas revenue per year how many people are in the organization typically what are they getting for that yeah so we um price per user it's between five and twenty dollars per user per year um most of our clients are training between a thousand to three thousand of their users and we do have some larger clients as we work to grow and expand within the accounts that are training their entire enterprise and then with those clients we'd be looking at training uh 10 000 plus employees as part of their organization interesting okay so um so this is interesting take me through the kind of the back line here when did you guys launch the company so we launched the company at mid year of 2017 um really we're in market in october so just over two years old at this point okay and who is we by the way you have a couple of co-founders or what's the team look like uh yeah so myself and my husband drew co-founded the company who owns more equity where aaron even 50 50 split wow that's a lot of trust ashley that's a lot of trust um and then from there we've grown a team we're actually um at 18 people right now amazing okay so 18 people and have you bootstrapped the company or have you raised we've raised money um to date we're at around 1.75 raised total okay so uh 1 million 750 000 was that equity or debt uh equity okay it was all equity okay great so 18 people and how many customers have you scaled to we are at 58 so almost 60 licensed customers um those people are licensed on our escape room platform and our online training platform okay are they all on both or some of them only on one um yeah so we have the portion that would be on one or the other and then there's a handful um that are on both and we're seeing more clients who are leveraging both products now okay how many are just on the sas platform well they could be on both but how many are on the sas at least so it's a 50 50 split between uh staff and escape room and then also the escape room platform okay so what does that mean um percent of those are only on our escape room platform the other 50 are either on just sas or sas and escape room oh i see okay so 30 are on sas and escape room together and then another like call it 28 ish our just escape room correct the ones that just the escape room why don't they upgrade to the to the software so at this point the software is a little bit newer of a product um and it's the escape room is a little bit more unique and so a lot of clients that we're coming in the door and having conversations with um they have something that they're already leveraging for the compliance or checkbox training and so they're really looking for something more immersive and outside the box so they love getting started with that in person it's just unique something they've never seen before once we're able to get in the door and form those relationships with those clients and able to show them that there is an impact and we can bring this into a digital experience that's where we're seeing the upgrade and the upsell come from okay i see okay so can i do the math 30 customers 2 000 a month or twenty four thousand dollar acv that's like what you're past six thousand dollars a month in terms of pure sas revenue yes uh well so our uh escape room platform is also managed by a sas application so the license to that is um is also sas revenue we have another portion of revenue on top of that that's service based where living security is hosting the training if that makes sense okay so if i if i asked you um i understand there's a dual model here but if i just asked you what you when you guys track internally what your true monthly recurring revenue is right now what would you say how would you respond uh we're over 115 at this point total okay so so so that's north of obviously the 60. so you're including the escape room license platform in there as well correct yeah yeah okay interesting okay so so um take us forward a little bit i mean you've raised capital um we met through a mutual connection pat matthews that runs active capital i'm an lp in the fund so i know a little bit about the company but i mean i imagine vcs must hit you all the time and say ashley twit this escape room nonsense it's low margin it's difficult to scale just focus on sas if that's true how do you respond yeah so i mean there's a couple things that um actually you know the escape room has done a lot of really amazing things for us and so the escape room service as i mentioned where living security comes in the door and hose um it has high margins it also helps us to get our foot in the door and build a relationship with the client but we're also seeing those clients not only be retained but also buying more services and products from us and so there's a positive conversion over them purchasing something that's an annual subscription license after a service um you know same thing with our escape room platform it's actually recurring revenue they're buying a year license revenue for each you know each user seat and we're seeing recurring um retention and upsells on that as well again having high margins with both of these and so it's something that's unique the market is honestly like pulled us in that direction when we first started we thought at some point maybe we would drop it but um people just can't get enough of this you know really immersive in-person experience that we're offering so talk to you you just talked about upsell on churn a little bit when you look at past 12 months what is gross churn been on a revenue basis before upsells yeah so um we've only had one percent uh net revenue churn and then uh we have over 300 net revenue retention so people that are buying something from us they're loving it and they're buying much more of it okay so hold on so break that down for me so to get to 300 net revenue retention that's made up of two numbers gross revenue churn and then you add back all the upsells right so one percent revenue churn gross revenue turn and then over another i think it was a 312 percent uh in growth expansion growth expansion yeah and that expansion is not including new customer signups that's just upgrades from historical accounts that's great okay amazing and that one percent gross churn number is that monthly revenue churn or annual uh total annual well okay amazing so you basically have no revenue churn 300 year-over-year expansion on the accounts for like you know i mean that puts you like 400 net revenue retention at this point yeah i think somewhere in the mid 300s 300 to 400 okay so that i mean that's pretty remarkable i mean uh most sas companies at this kind of stage don't see those kinds of economics what's the number one thing you're upselling against year over year where you got that 300 growth from historical accounts is it number of seats or something else so it's number of seats and it's also the cross sell from the escape room platform over to the online in the digital trading platform okay what's the you talked to us about what the average cost on the sas was about 24 000 a year what's these typical escape room license cost so um our price per user seat is actually really comparable five to twenty um we're starting with a smaller amount of users uh with the escape room so generally like we're going in and doing you know a thousand to two thousand users on that one um but then we're charging more so we're averaging out at the 24k uh the larger expanded accounts on our online platform are over six figures okay and this has allowed you again to get about 115 000 month recurring revenue today where were you exactly a year ago do you remember yeah a year ago um we were just over 10k in mrr so we've seen over 10x uh growth from january 2018 to 2020. that's pretty i mean that's a pretty impressive story are you raising capital now or are you good to go for a while so we are raising capital um we're pretty far progress in our series a round of funding we have some theses that are really excited to partner with this with us on this so we're excited to um you know be able to take the growth that we've uh accomplished the next year and then expand it out even further how much are you hoping to raise in the series a uh we're looking between five and eight and why are those the right numbers how did you guys come up with that yeah so um you know we looked at the customer acquisition costs and our unit economics that we had in 2019 and then what our projection and goals were to get to the next phase of growth for us going into 2020 and 2021 um we think between 5 and 8 million we can take that in the door and we can actually get to cash flow positive okay how much are you burning right now like a lot or a little no not very much like less than 10k a month it's right around there give or take okay that's not horrible and that's net not gross right obviously yeah um okay so five to eight million are doing call 1.5 million in run rate right now i mean you have a great story here 10x year over year growth you seem pretty convincing what valuation are going to try and get pre-money on this well i'm not sure that i'm ready to talk about that can you talk about can you talk about a range on that right so like 5 to 10x multiple are you in that range um we're looking at higher than a 10x multiple okay higher than 10x multiple okay so let me ask you another question here right um you have a great story right 10 grand a month to 115 000 a month you can probably go out and get a really great valuation above 10x right now so it'd be above a 10 million valuation raising you know five to eight the tricky thing is let's say you are so convincing you raise at a really high valuation there's been real pressure to grow that valuation otherwise you risk a down round ratchet causes liquidation preferences does that make you nervous at all so um i mean wait when you talk about it like that but i mean we feel really confident in our growth from what we've seen last year our pipeline building through 2019 2020 is looking to be an awesome year even you know not even halfway into january we've um you know we're already going to be exceeding our goals for this quarter so we're really excited we believe the market's growing at an insanely fast rate there's a huge opportunity for us and there's a lot of people not only in north america but worldwide that need the the products and the solutions that we're offering so yeah less less so nervous but more excited yeah fair enough now to get a new twenty four thousand dollar your account uh what do you what's your all in cack on that is it the same price so yeah year-long payback or is it something different yeah so we're about a 50 uh your paybacks around a six-month payback period so just around that 10-ish thousand and where are you so to get a new customer paying 24 000 a year you'll spend kind of 10 to 12 000 where are you spending that money where are your marketing costs going yeah so we have a mixed approach between events marketing and then inbound marketing through like digital seo and content marketing um we also run a direct sales model right now and so there's costs that go into that um events for us are have been a really fantastic uh lead generation can you name one we're able to essentially trade services so we come in and bring our escape room on site so we found that to be a terrible way to get our to generate awareness about what we're doing um but we're actually seeing about 50 percent of our new customers come through our website okay interesting tell me real quick um an event that that worked really well for you in 2019 yeah um so we do a lot of regional cyber security uh themed uh conferences um so rmisc which is rocket rocky mountain information security conference has been great wait say that a little slower rmis rmisc so the rocky mountain information security conference okay got it that does work yeah a lot of regional events where people are coming to learn um you know it's the right kind of buyer persona the right market for us which is director level and above um and we're you know interfacing with these potential buyers for 30 minutes at a time as they're coming through and experiencing essentially a demo of what we can provide for their company tell me real quick about the direct sales model how many quota carrying sales rep do you guys have right now of the team of 18 you said so we have one outside of the founding team so you know we've been selling up till this point but we have another one that's clearing a quota and he's taking butt uh we actually just brought on a vp of sales this month and we're gonna be looking at him to help grow our team and help scale out our our direction well he also carry i mean people struggle with this when they hire their first vp of sales is he responsible for a quota or is he only managing the one sales rep he's responsible for full team quota so anything any difference between the sales rep and then what we're looking to hit for um for the team he would be responsible for making up and then he'll also be responsible for growing the team interesting um a lot of people are not quite sure how to set up their pro formas for their first salesperson hire what i mean by that is what to set the quota target at relative to like their their full earnings how did you guys think about how to compensate your first sales rep yeah i mean it was definitely a lot of back and forth with pat he was involved with that as well as some of the vcs that we're working with and then i really worked hand-in-hand with our vp of sales higher um he comes from you know sas uh companies in the past where he's worked and so um he had a lot of insight and we just looked at historicals and what our company goals were for the next year and then kind of fit all the numbers together can you give me a general range so is that quota set at north or north or south of like 500 grand a new arr for that one rep oh for the the one rep just the one just north yeah okay just know okay so fair enough so somewhere between 500 a million bucks is what that that rep is expected to land in 2020 that's correct interesting okay um and you said he's doing well so i assume you feel really good about him being on track to do that yes okay that's interesting uh will you increase quota um not at this point i think we're we're feeling really confident about where we are so your vp of sales feels like you can go hire more sales rep at those same kind of economics that's correct yeah which should make sense if you want to go then raise money to do some of that yes very cool okay uh so that makes sense um we talked a lot about growth we talked about um evaluation we talked about how you're thinking about raising we talked about cac um are you i mean so are you able to go in and using this on person escape room concept win over people that are using other cyber security solutions right now like malwarebytes no before i mean there's a bunch of them out there yeah absolutely so um yeah one of the things we've done really well is just developing really the relationship with the enterprise building trust with them and being able to show value and the initial product that we've delivered and so we are seeing now um opportunities to rip and replace some of these competitors and it's exciting for us and we're seeing positive results from people on the online training and getting user feedback that they you'll love this so much more than any other training they've done in the past yeah last question i have for before we wrap up you said 50 of your new signups are coming directly from your website that it works together with your two other channels direct sales with your quota carrying rep and your event management stuff or your event kind of sponsor stuff all the stuff coming through their website you have a pop-up that basically says hey get a free cyber security card game does that work it does that's actually our biggest uh forum submission on our website people love getting things through directly give me conversion rate give me a conversion rate if 100 people hit that pop-up how many of them will put an email in if they hit the pop-up um i don't have the exact number i probably say it's like 20-25 getting an email that's amazing okay because you're also then okay so then you're also getting an address after that correct uh yes until then after that they get an automated email and then they have to submit their address and we send out the card game what does the card game cost you to produce uh i think it's about five to seven dollars at this point when we bought like larger packs and then yeah and obviously just shipping on top of that that's a pretty cheap cac for someone that could be worth 24 grand a year yeah we love the card game and we're kind of thinking right now like what's the next card game but it's still working so we haven't changed it up i love that all right ashley let's wrap up with the famous five number one favorite business book uh something i'm finishing up right now the hard thing about hard things by ben horowitz number two is there a ceo you're following or studying uh jason lumpkin number yeah number three what's your favorite online tool for building your company i love hubspot um but envato i also love getting their their digital files number four how many hours of sleep breaking every night oh i'm an eight hour girl i have to get eight hours of sleep that's great now you mentioned your husband so i assume you're married any kiddos we have three kids three oh my gosh three you guys are busy yes very busy they're uh five seven and twelve though so they're all in school and wow makes things a little bit easier okay and then do you want me asking how old you are i'm 32 32. last question what do you wish your 20 year old self knew yeah i had to think about this one i don't think i would have listened to anything that i said to myself at 20 but probably the one thing would just be what i thought mattered then doesn't really matter at all so um but yeah nothing nothing too extreme guys living security playing in a cyber security space doing 10 grand a month a year ago now up to 115 000 a month so 10x year over year growth they're currently raising their series a pretty far down that path targeting five to eight million dollar raise at north of a 10x revenue multiple their economics makes so much sense even though one-fourth of the revenue is professional services in the form of escape rooms they bring on site to companies to do security training and then upsell the sas product they have a team of 18 people right now two quota carrying reps including their first vp of sales and obviously the founder included in there as well what's remarkable here is the upsell revenue from the escape room to the software is really high and that has led to between 300 400 net revenue retention annually and a payback period of under six months ashley thank you for taking us to the top thanks nathan these ceos rarely give these kinds of interviews i hit them hard i get the data and i want to do it more so if you want to get more of this stuff make sure you subscribe up here and then additionally go check out one of my other ceo interviews right now