Lotame Revenue & Funding (2024)

hello everyone my guest today is andy manfred he founded a company called lotimi in 2006 and has been focused on building the world's leading unstacked data solutions company that helps publishers marketers and agencies find new customers increase engagement and grow revenue he led the company's successful ad network for many years targeting thousands of campaigns valued at millions of dollars all delivered and executed through the platform then in 2011 he shut up the ad network to focus the company on it on its original vision a full-featured sas based dmp under his leadership the company has grown to 200 plus people with offices in the us eu and apac prior to founding the company he was an executive at with advertising.com from 99 to 2005. andy you ready to take us to the top i sure am nice nice to be aboard all right hello to me sas based dmp what does that mean and how you guys making money uh well what it means is we help 300 plus plus brands manage all of their customer data and activate it so this big issue about big data uh we actually come in with a strategy and execute on it and um the name low to me stands for locate target message that was one of the original premises of the business was to locate the proper consumer with the proper targeting and the proper messaging um and that was a premise and it started off as a media business and we pivoted fully into a sas based technology so so this by the way i've had a lot of people on you know mediocre and bill i mean tons of people that used to be in kind of the pure ad tech space a lot of them actually based up there in new york and it takes guts to truly shut down the ad business and go all in on the sas play but they're right now they're all kind of dancing they kind of don't want to give up the old revenue but they want the new sas revenue and it's some combination what gives you the confidence to totally shut down the ad agency's side of your business and go all in on sas so we were doing about 30 million dollars in uh media based revenue we were profitable it was growing uh yeah by the way that's gross okay got it so we were doing yeah we were doing a big dollars though for a 40-person business using our technology we were eating our own dog food we were using our platform to deliver campaigns for agencies and brands and what ended up happening was in about 2009 in 2010 we started getting signals that the agencies were running those campaigns through their own trading desks at the time they were called agency trading desks and we were left out of a lot of quote unquote rfps and ios and because of that i saw that signal and rather than ride that puppy down into the ground i literally woke up one day called a board meeting and in august of 2011 we let go about i don't know 30 people and went back down to about 10 or 15 people in the company um and rebuilt it from zero revenue from literally zero back to where we are and we more than doubly replace that revenue over the next six years all based around sas so andy just to be clear the 30 million that was 30 million in ad spend going through your platform of which you were taking what five times 30 million was net to us that was our revenue okay how much total ad volume uh it was in the in the millions i mean the total the total amount of revenue we were delivering was based on campaigns so we would get let's just say we'd get a 500 000 campaign for pepsi we would have to pay the publishers who helped fulfill that inventory probably in the neighborhood of 50 or 60 percent of that revenue but the net to us was 30 million we were a 30 million dollar revenue business yeah what i'm trying to get out was the average kind of ad tax you were taking if so if someone put a million bucks through you what percent of that were you taking on average uh 50 50. okay so we can double the 30 million that you took net so you were putting about 60 million annually through your platform at the time keeping 30 for yourself that was the ad tax correct right so make sense by the way why people would want to run these internally right they want to they want to take that money and spend more of it right but the great question ends up being when agencies do that agencies are supposed to be agents for the client my question always is when agencies run their own trading desk and it's much more opaque it's much more transparent now is who are they optimizing for when you're running a trading desk or you're running a quote-unquote ad network one of the great things about an ad network that i helped run was ad networks are very clear they optimize for themselves they're optimizing for their own yield and their own margin to maximize that value for themselves do agencies do the same thing when they run their own trading desks do they act on the best interest of the client when they're taking that 15 or are they doing what's best for the trading desk and that was the thing that i grappled with the most when i shut the media business down and i was pretty public about it how much how much capital did you guys raise at the time in 2011 uh we raised at the time probably about 20 million 25. okay and after we shut it down we raised another 35 million so why did you andy why not spin out i mean you wouldn't get a huge multiple on it but why not spin out that 30 million business and sell it to somebody else it was something we toyed with and we had offers actually to sell it the reason you can't do that when you have limited uh focus and you want to be focused is because you end up servicing it if it's on your platform you have to continue to develop ways to deliver those those media dollars yeah and i knew if we sold that business it would have to stay on our platform to get delivered now remember what we built was the first platform in 2006 that i was able to walk into an agency and say tell me nathan you want to reach males to 25-34 that love soccer and have written about soccer at the time nobody was doing that because what they were focused on was contextual targeting of of publishers all of our data came from the social channels myspace friendster kazaa uh all these platforms where the consumers in 2004 2005 2006 were writing about themselves and there was no technology to harness that and what we called it was collecting verbs write read upload blog share these are the verbs and our whole platform is predicated on that was predicated on that collecting verbs or actions um and then packaging that up neatly for an agency to use and transparently showing them how we're now reaching them company to do that now as you went through that pivot in 2011 i mean you didn't clear the cap table right so battery and emergence all those hooks are still on the cap table all those folks are still in the cap table we have never lost one investor um in fact if anything they've all doubled and tripled down on the business uh and they've participated in the rounds all the way through so let's let's let's break down i don't mean to keep cutting off but i want to get a lot in here and we're running short on time walk me through what the customers look like today so on average what are these customers paying per month for this data platform uh somewhere in the neighborhood uh i'll just give you round numbers between 15 and 20 000 a month okay and our customers range from comcast to ibm to companies like hearst companies like the weather company companies like let's see webmd the daily mail we have about 300 customers on the platform tribune corporation cbc canada broadcasting um in australia we have the largest broadcasters uh we have telcos like vodafone so basically these car these companies with huge data sets what i call first party data which is all their customer and subscriber data they need a way to link that with the outside world with the world of experian and dun and bradstreet and all these other and sync that data so that they have better knowledge of who their customers are so when they get on the phone with a call center or they're looking to have a conversation or personalize things they're using our platform as the central warehouse yeah for all of that by the way i i totally get the product i mean this is a very hot space uh execution is different it sounds like you're executing very nicely with those kinds of customers now let me do some math here fifteen thousand dollar a month price point on average nice round number times 300 customers that puts about 4.5 million bucks a month right now is that accurate i think it's a little higher than that yeah we generate a lot of uh excess revenue in terms of uh what i call overages so you'll see a lot of data fees in there uh pure sass though 4.5 a month yeah it's it's a it's it's ballpark in that ballpark okay and then help us understand growth rate so exactly a year ago so march 2018 what were you doing per month then uh it was probably about 20 less okay got it so you're doing maybe 3.6 million a month at that point yeah our growth is pretty consistent with the industry our profitability has grown has grown faster because we've kept our expenses uh the same or even declining year over year so we have i say this tongue-in-cheek but we've effectively we've doubled revenue in the past three and a half years while keeping our head count the same and um so we've moved folks in and out but we've kept our expenses uh very much in line so we've been able to grow top line and grow ebitda and net income pretty significantly over the past what is so i mean are you talking ten percent profitable today like last month what percent are we taking to the bottom line i think it's a little higher than that but we're privately held so we don't really disclose that but it's a little higher than that but yes we are we are a healthy we're running a healthy business um we're actually looking at potentially acquiring a few smaller pieces to add to our company currently yeah i mean andy not not to push back hard by the way but if you with the amount you've raised 20 percent growth year over year is actually very slow uh considering how much you've raised i mean i imagine you must be getting pressure from the board to do m a related things or drive growth faster to drive you know closer to 40 50 year over year growth of course well the rule of 40 absolutely uh it applies so i totally get that wait explain that because not everyone in my audience knows what rule of 40 means so the rule of 40 is a combination of growth with even a margin so if you had you could have a 30 growth and 10 even a margins and that nets out to 40 or alternatively you can have five percent even a margins and 35 percent growth and it nets you out at 40. that's the judge of success with many software companies and currently speaking we're in the 30s we're in the low 30s with the two the combination of those two things but keep in mind this and this is what we explain to customers and everybody else look at who my competitors are i'm the last independent company that does what i do my competitors are adobe oracle and salesforce i am fighting against multi-billion dollar public companies with marketing budgets that could swallow this company and step on us in a heartbeat and yet i managed to grow we just won a huge piece of business probably our biggest account and took it away from adobe this week so we are literally fighting every day against the largest you consider us a robot we're fighting against global warships global battleships so while some people may say your growth rates are lower than the rule of 40 and you're even a margin that's okay we'll take a business that's growing in a stable way uh over trying to be a high flyer burning money to try to to win bigger deals and remember we're a 13 year old business it's not as though i'm operating a high flying startup with 13 year old business with with stable customers and marquee blue chip companies like ibm on the platform you i mean most companies though at your level right if they're driving if they're driving see the thing is you're either venture funded or you're not and once you're on that path you're on it i mean there's an expectation there's timelines etc and when you look at your funding history in terms of the last raise i think it was a series d back back in i think 2015 so post pivot but still three years ago people could look into that two ways they could say one growth is too slow he hasn't been able to raise another round and not have it be a down round or they can look at it another way and say no andy has figured out a way to buy time with his board where he doesn't need to go register for capital and he's profitable which one is it well i'll tell you exactly what that round stem from we had an offer to sell the business and i went to my board and said we could sell the business for x or you could put more money in it why so i can go look at some opportunities to grow and they chose why which was for them to put more money on the table so i could go build our tv product and so i can get access to a fire hose of tv viewership data before anyone else in 2015 was talking about it so there are opportunities to grow we've chosen the path of growing at a reasonably um a reasonable rate of both profit and growth and our board is happy with that that's great what's team size today uh we're about 150 odd people uh with contractors it's a little bit north of that okay uh closer to 200 with contractors but uh we're at about 150 and the lion's share those are engineers down in our maryland office i i'm in new york um so it's a big engineering and product shop uh and yeah it's it's it's pretty stable in terms of both growth head count and profitability real quick here because we're out of time churn is critical in a sas company look at trailing 12 months what was gross revenue churn how much expansion and what was net revenue retention so it's we're in the probably in the mid 90s in terms of revenue retention i would say we're probably in the 95 to 96 percent of total revenue retention of our current customers i would say churn to be honest with you is probably uh in the four to five percent range in the last year annually not monthly correct that's anyway and that's still higher than anything that i want it to be um and when you're an owner founder that's the stuff that keeps you up at night well andy you know and in all fairness i have to give you credit for credits too if that number is accurate we're talking the same page here five percent gross revenue churn annually is not bad at all uh i mean that's actually very good for this space i mean i have the data i've interviewed a lot of people in the dmp space that's actually very good for this space the question is have you have you expanded cohorts those cohorts year over year to get about 100 net revenue retention absolutely that's part of the growth of the acv all right the thing i'm most proud of is the way we grow the revenue so when we lose we typically lose a publisher we'll lose i'll give you an example we'll lose a buzzfeed uh who'll go in a different direction with their data business uh but will gain a comcast yeah so the quality of the customers that we're landing once we lose somebody is what makes me most proud but still i think the thing that i grapple with the most is churn uh i know that five percent in for from an outsider it still is the thing that bothers me as a founder own what's your expansion though so you lose five percent what do you expand that same cohort by uh probably we double that if not more in terms of what we do every quarter in terms of net loss versus acv uh we're adding we're adding well over i think somewhere in the ballpark of a million dollars a quarter in net new acv somewhere between one to 1.8 million from new customers though or from historical cohorts oh it's like it's it from the new customers make up probably 70 to 80 percent of that but like an upsell we generated an upsell this this last week uh of on a renewal so ibm did a two-year renewal and paid a lot more money i'm including that in that number but do you know do you know what net revenue retention is it sounds like it's above 100 percent do you know by how much i don't know the exact number but you're confident you're more than making up for your five percent lost revenue each year that same cohort you're upselling them by more than five percent 100 yes that's true that's great okay last question here on economics um fully weighted right how aggressive are you being to get a new 15 000 a month customer fully weighted cac um you mean how many months does it take to pay back yeah that's another way to say it i think we're in the ballpark with everything fully loaded probably in the seven month range eight month range and that's why most of our deals are in the two year you know two year and most of our deals require uh you know one year prepay yeah no that's great so that means you're you know to get a new fifteen thousand dollar a month customer you're spending call it kind of 110 120 grand to get that customer for seven to eight month payback period correct that's good health that's i mean look healthy stuff man now are you hiring in new york right now you looking for more people we are we just hired ahead of marketing here in new york ahead of product we're hiring sales people and again now this is a really cool little factor to keep in mind the whole company and everything we do we only have about eight sales people in the entire company so when you start looking at the numbers what what you need to do to run a profitable business we don't have a sales shop so when someone says to me well you're only growing at 20 and you're only doing this well let me just tell you because we're running a profitable business i can't be a high flyer i'm not a dot com i'm not a marketing machine we're literally fighting for our lives so i have eight very successful sales people who are very efficient uh do we need more yes i would like to add two or three more heads on the sales team andy i think you get the most leverage once you get your kind of um arr to funding ratio greater than one meaning your arr is more in a year than what you've total raised i mean will you pass 60 million bucks in terms of ar run rate this year you think or no you need another year to do that probably it'll be right on the cost yeah right around there that's good stuff very good and are you raising capital right now or no we are not raising capital we've been offered uh i have a meeting tonight actually we take a lot of meetings we've been offered a lot of uh opportunity around that uh i just don't need any further dilution right now the only reason we would do it is opportunistically around some of these potential acquisitions and tokens that we would do um but i am not adverse if we can get our revenue up to 100 million through organic and inorganic growth and looking at an exit in the public markets over the next two or three years yeah look the the public stuff's going good today now um what kind of deal size are you looking right now in terms of m a like could you gobble up an all-cash deal i'll call it 10 million bucks of one of your smaller competitors or what's the size yeah that's about the range of what we're looking at right now okay good so if a private equity person is listening or growth equity they could be thinking i'll give him 10 million bucks if he goes and does a roll up that's kind of what you're looking for correct yeah very good andy let's wrap up with the famous five number one what's your favorite business book well that's a good question jack welch i just uh jack welch is on my uh in my library and i love all his books uh number two is there a is there a ceo you're following or studying right now uh see well jack dorsey i just finished reading all about his diet this morning and all about the way he lives his life so yes i i like listening to jack number uh three what is your favorite online tool for building your company it's a good question uh probably gainsight we uh use client health game site as a client health tool i love game site number four how many hours a sleeper get every night uh six okay that's pretty good and what's your situation married single kids married two kids 18 year old twins and how oh nice and how old are you i am 50. last question take us home why do you wish your 20 year old self knew um candidly i wish i had i just stopped drinking alcohol i wish i had stopped drinking alcohol 25 years ago hey thanks for being honest on that i appreciate it guys there you have it andrew uh low to me again or andy sorry growing quickly they raised 61 million bucks really shut down the ad agency business even though they were doing 60 million in total ad spend 30 million revenue to them so 50 ad tax there shut that down totally in 2011 and then pivot it into this new business kind of sas dmp space now profitable take and call it you know 10-ish percent to the bottom line they're doing about 400 4.5 million bucks a month right now in revenue 300 customers paying 15 grand a month hurst comcast those kinds of people uh growing about 22 year-over-year 3.7 million bucks a month just a year ago so nice growth have stayed relatively the same size in terms of team 150 people looking now at hiring uh net revenue retention north of 100 healthy economics there also in terms of payback period less than eight months andy thank you for taking us to the top thank you nathan