How Loop54 grew to $3.1M revenue and 130 customers in 2018.

hello everybody my guest today is Robin Mel strand he's the CEO and co-founder of an award-winning and quickly expanding startup called loop 54 he holds a master's degree in industrial engineering and management has been into sales his whole career prior to loop 45 loop 50 which one is it as a loop 54 45 54 54 good he currently lives in Stockholm Sweden together with his girlfriend and judgemental dog Robin are you ready to take it to the top yeah I'm ready all right so tell us about the company what does loop 54 do and how do you make revenue so we do them search navigation for retailers around the world and we yeah basically increase the conversions and revenue online and they pay us via subscription mode okay so it's a pure place ass model yeah definitely but delivery that's an API what do they pay on like give me a general sense on average with a pay per year per month so on average 30k per year US dollars okay so about 2500 bucks a month and they're basically buying what a number of API calls yeah more less than than you can buy depending on which features issues if you just do search and if you have to or if you have the whole category structure being delivered by ah sleep a bit differently but yeah more or less it mostly volume okay so just so we can get a real stranglehold on what the company does can you give me an example how our customers currently using it actually name the customer in the use case yeah sure we work with we work with Office Depot here in in the Nordics as well as like a lot of grocery chains and if you go to co-op which is big grocery chain in the Nordics are the positive wall as well and you go search for an orange like a human has very easy typing out orange meat right but for computer that is exceptionally hard orange it could be food it tastes a color or a telecom operator in France right so there's big ambiguity to that word what do you actually mean a human figure is instantly that if you're in a food store you're asking for orange in that context you obviously mean the fruit but for a computer that's much harder to do that automatically so a lot of search implementations today it's actually done with a lot of manual work adding in custom sorting adding synonyms adding in redirects to the right content pages so basically today is the truth that if you you want to put the most time and money on the search is one is going to have best solution but we might build a solution that learns automatically in automate automatically without you having to do so Robin o tell me specifically our office depot used it like like do I go to Office Depot comm where to where am I gonna see your software in action so this is we are basing the Nordics and we are growing in the UK we don't we don't have any clients in the u.s. right now so this is on obviously per Swedish site yes now okay I'm there so where do I see your stuff oh well just in the search box you don't really see it so we we're just algorithms that deliver the search results okay so I'm gonna search pen black gel ink what do you then probably not going to yield a bunch of results since all this catalog is in Swedish right okay let's say I put type it in in Swedish yeah then it's gonna figure out what is your underlying intent what do other people start to say that things mean and give you the best possible results but each and every query okay so you commerce search engine yeah well let's go interesting and and then that would count as one query in terms of Office Depot's paying you for a million queries a year at $30,000 a CV yeah well that's interesting okay before I get more the backstory so what have you scaled to today how many total customers are you working with we have a hundred and thirty clients and we are three million dollars or three point well maybe okay so three point one today and are you growing what were you at about you know caught 16 months ago 16 months ago or sorry sorry sorry twelve months ago that's easier or 1.6 I think okay so we December 6 2016 you're about 1.6 million in air so you've doubled almost more than double yeah yeah exactly that's that's great and you said you're 3.1 today right yeah okay wonderful let's get more the back story here when did you launch the company long story so this wasn't actually a search company from the beginning we actually launched as web console doesn't mean the two other founders was mathematician and the programmer it didn't go really well since we didn't really know how to sell the mathematician services so we basically had a lot of time onyx on his hands and this was back in 2011 so he basically ended up he has done one sale in the company three and he talked like company called bubbler which is basically the local copy of Netflix if you would say back then they don't exist anymore and he pitched him saying that yeah I completely the exact same recommendation and in their Netflix has because back then it was all everything was in white papers was a big big bus around that six or seven years ago okay so we just used 2012 2011 I think so and he said yeah completely same recommendation in the earth they had and it did and obviously worked really well on Netflix data public data problem is that all these kind of algorithms are built around you having massive amounts of user data so they had their global company and they have lots of behavior data basically so work perfectly for them but when we implemented it at bobbler everything trailer part because they are a regional company with not as much data as everyone else and then all the theory buddies are going well together basically so we gave them the product saying oh this is how you do it use it when you get bigger and then afterwards since we didn't have a new product for our mathematician in sat down and thought all right is there any way else I can understand how products get together without knowing anything about the users so applied new type of mathematical research and this particular problem and found a way to do that long story short it turned out to be quite a horrible recommendation onion still but the beginning to really interesting search engine yeah so so how many I mean your system gets smarter the more it gets used because you can do pattern recognition how many queries did you guys process over the past 12 months across all your base yeah we right now we all have about two billion a month okay so really say a fairly significant fairly significant so you're you're now not just going in blind you also maybe have historical cart data on you know people put the post-it notes with the black pens so if they searched black pens show them post notes to increase cart checkout by a hundred thirty percent yep sure interesting interesting okay so you launched company now when did you officially move from an agency to a the sass platform all in a so when we really did a bit of trial and error a couple years and we launched did middle of 2013 and I can change on the company we sold off the customer stock for peanuts because yeah what well the customers talk firm for the consultancy has handed off to someone else to continue that work what was that company what was it can talk Lucy doing at its height like a million a year 2 million oh not even that okay not almost nothing I think we sold it for $2000 in the case of beer so it's easy for you to give it up yes no particular motions attached that's funny okay and now fast you're scaling 2013 you fully shift over or have you raised today or your bootstrapped yeah we were boost up for the first two years but now we've raised how much in total around three million dollars and why you decide to raise because we think that we have a solution to we have found a solution to search basically in this particular context a lot of people trying to do what we're doing but we have a solution for this but that's not always gonna be the case this is an area that is heavily investing right now and it's gonna be a consultation of technologies in the upcoming years even we are week them to that constellation wave or we drive it so and if we go organically we will be probably the best search provider in Stockholm but that won't matter too much in a couple years yep so you expand into the states today and things like that or what right now folks on the UK and later Germany and for the next financing realm we're gonna focus on the u.s. interesting when did you raise that three million so we raised it over two years two times just from the current owners first end of 2015 and then a smaller amount again this year okay and you what do you mean last year you said you said he raised from Curt the current founders I thought you were the founder no current owners no people who are already invested yeah exactly got it okay makes good sense now tell you about churn so we had a pretty 6% shown in total last year at logo basis a revenue basis revenue basis okay and what was that was gross turn I imagined but you probably drove expansion revenue do you have over a hundred percent net revenue original job yeah I think about a hundred point I present just barely you know 100.5 net revenue retention annually that's pretty good and what if the team size look like we all 27 people right now and I'm asking as I'm curious how many of those folks are dedicated towards upselling to drive that again net revenue retention number up an interesting question because like we didn't even have opportunity to upsell until like four months ago so that mor is purely based on the organic growth of Industry so because our rabbit pricing model was purely based on volume before you basically every feature we had and to a fixed price depending on moley so but then we changed up four months ago and we are right now trying to implement upsell if handled by the customer success team and a sales team what are you looking at other economics related to one of these sales what are you paying to acquire these customers fully weighted so that obviously depends a lot month of month depending on how many salespeople we have currently and how many of them are wrapped but on average we are looking at a cat peepee of ten point nine months so we are an average last year we paid $20,000 to acquire a customer yep and you're getting paid back in ten so thirty doesn't know our ACV costs you call it twenty grand to acquire the customer which is where you get your ten point nine month payback period more or less yeah yep interesting what do you soon lifetime value is on these guys so depending on you can you count the lifetime value if you look look at our growth shown our lifetime value is some like four hundred four hundred thousand dollars for their client right so we don't know what actual lifetime value is if you just look at a 77% really sure that gives you a really fun number but if that's corresponds to the truth we're not sure yet yeah it's hard because when you if you just divide by your turn number to get how many months they stay with you then multiply it times your monthly our pool it can lie to you and be very big very quickly so I believe like so we are just now getting to scale where we actually have can use quantitative data but until get quantitate on the actual lifetime value of the customer I think that's still some some years off yeah I do I mean I always wonder how valuable lifetime value is to actually use because ultimately the biggest changer of lifetime values and companies is some market shift you didn't see coming yeah right and it drives your churn way up in a given month and you couldn't predict it and a Proform is never gonna tell you so I don't know how valuable really lifetime value is and outside of investors like hearing and that you know to analyze it exactly so would lifetime value release its your or boo and your shirt in another way yeah what I'm saying though is even that right even if you take a you know a thousand bucks a month and you're only turning two percent per year so they're gonna stay with you for what is that 50 right 50 months or a hundred months times a thousand mean it can lie to you because two years from now something might change that screws up your old business exactly exactly this it's re which is hard to predict so interesting okay are there any other metrics you're looking at on a weekly or monthly basis I haven't asked about so we're looking at an or or of course the net net mor growth and of course the cat pee he is one of the most important for us to understand how efficient we are and there's a bunch of those really popular metrics right now like them SAS magic number for instance what's your magic number the 0.9 okay and explain to people what that is so basically you look at how much you invested in sales and marketing the previous quarter and how much your revenue increase was this quarter it's basically the mission about that yep so just be clear if you invest a bunch in January and February and March you're gonna say okay I invested a hundred grand that's the sales salary that's any direct paid spend etc or anything on sales and then you say okay that money has to kind of be into the company and it's gonna take some time to drive the customer growth so the next three months after that write my April May June see how much Mr R increases and then divide it - exactly yep okay and that's Mr ar-ar-ar-ar-ar in what yeah so let's say let's say you spend a hundred grand and in the next three months mr r goes up by ten grand a month d was ten grand a month or or 120 grand multiplied out for the ARR number did you look at them at the monthly level at Emma or level yeah okay so what's the division I have ten grand new mr r and a hundred grand invested yeah so there's at times for on them on the investment and you also look at your gross revenue growth revenue increase after you remove you rows cost of them delivering the product yep so what am i multiplying by gross margin the ten grand yeah exactly okay so let's say ten grand times eighty five percent that's a typical SAS gross margin right so we're down to eight billion five grand yeah then what know you yeah yeah yeah you basically I'm putting on a spot here so that the audience can learn I'm trying to I'm trying to remember if you feels a bit like a test but I think it is you put your total and you put your total increase in revenue times gross revenue times four and divide that by your marketing and sales spend and then you get then that quota is the magic number and if you are about 1 you're doing fantastically great if you are below 0.8 you may not have a product market fit yet yeah you may you may have to think about more but you should think about if you really should invest in sales marketing at that point because your may not be as efficient as it should be yep so just to be clear if I take 8,500 which is how much mor grew over the three months multiplied by four that's gonna be thirty four grand that's basically an A or our number essentially and then I take one hundred grand which was the investment times four that's four hundred grand you're saying take 34 grand the growth divided by the cost four hundred grand that gives me point oh eight five is that good or bad yeah it's kind of good you're still about the line the zero point eight which is sort of language you really rethink how you do things yeah this is actually really bad point zero eight five not point eight so it's really bad that's extremely bad yeah yeah yeah yeah we want to be we wanted to be 34 grand divided by forty grand would give me point eight five which would be decent exactly yeah and basically they say that magic number is basically just trying to help you figure out you get your money back in a year yeah exactly I'm for us it's particularly important since we need to consistently understand are we doing things efficiently enough are we good enough at what we do should we invest in this and also looking at how does this actually differ from different markets since we're heading in the UK which is significantly harder market to the business and then the Nordic so how efficient are we do we acquire customers as efficient as we should be doing and so on and so forth it depends on how we look at our spending and where's that where's the team based today so we have 24 in Stockholm and three people in London okay so Stockholm and London got it alright Robin let's wrap up here with the famous five number one what's the last business book you read I think it was the hard things the hard thing about hard things a bit cliche maybe met him that's a good one number two is there a CEO you're falling are studying right now yeah it's almost always the AGM lampkins founder of echo sign among others number of number three what's your favorite online tool for building a business for building this I don't know but right now I love yep keeps you keep your spelling good right number four how many hours of sleep to get every night yeah I think I'm around seven probably that's good and what your situation married single you have kids single I'm not married but I'm not saying I've girlfriend don't Hank it's the dog okay dog no kids a judgmental dog you said and how old are you yeah I'm 31 31 last question what are you is your 20 year old self new Robyn I thought a bit about that and probably let go those management consultancy career thoughts right now they won't lead anywhere it's not for you let go of your career or faster from Robyn who launched loop 54 it's essentially search for e-commerce right and retail launched in 2011 the agency went all full in on SAS and 2013 has scaled today to about 130 customers paying $30,000 a CD so doing about 260 grand per month in revenue which is 3.1 million bucks in a RR that's up from 1.6 million in air are just 13 months ago so over a hundred percent well about a hundred percent year-over-year growth six percent revenue churn annually and just over a hundred percent in terms of net revenue retention which is great his team of twenty seven people out there and Lenin in Stockholm building quickly Robin thank you for taking us to the top Thank You Needham great talking to you