Lymb Revenue, Valuation & Funding (2024)

hey folks my guest today is marcos kearney is a munich-based sports tech company on a mission to make the world more physical physically active using the power of gamification if you want to follow along the website is lim dot io marcos you ready to take us to the top absolutely always ready to be active all right i feel like the most recent version of this was this like ar pokemon go everyone who's usually sitting on their couch is now running around towns capturing pokemon is this sort of what you're building here but at scale um yeah sort of i mean i love the the effect of what happened there because it got people out it's the same approach we obviously like to focus on a much more holistic workout so we really want to make you sweat not just walk around and obviously we want to create a hype that's a little bit more consistent and a little bit more sustainable than just doing for a couple of weeks who's buying this is it consumers or assigned to sports teams or what well right now we're very strong in the business to business uh market so it's sports teams clubs facilities even kindergartens a lot of offices but now we're also launching our b2c console so it's also going to jump into your living room but who's paying for this right now though is it mainly b2b yes mainly b2b because we just launched the new console it's going to come out probably in february because obviously we have a little bit of delay with the whole smd crisis so so far right now we're in 45 countries and it's only b2b about 500 pre-orders for the console okay so wait are you selling a sass tool here or is it a physical piece of hardware it's a hardware connected with a sas ooh okay so i love this model because once they sell the hardware they never turn on the sas so so let's let's talk just to be clear do you have any sas revenue yet or your pre-revenue on that side no no we we have around i think the annual should be around 45 right now okay in euros uh sas revenue but we just started early 2021 to even switch on the sas before that it was just lifetime licenses and yeah just like you said it's it's a hard sell because it's hardware but so far we have a retention rate of 100 so we're happy well okay so let me break all this down real quick so you're doing right now at about four thousand dollars a month in sas revenue which is about 50 000 united states dollar run rate annually correct and you have 500 pre-orders of the hardware no we just started 21 so we have around six and a half k per per month right now actually oh i see of sas revenue exactly because probably around 80 of the systems that we have out there already they went with a lifetime license so we just started switching over to sas how many systems are installed currently around 600 i guess oh wow how much does it cost you to make each of those units uh the production cost is depends the range is pretty good so the retail price is between i think the cheapest one is four and a half grand the biggest one is around 60 grand which is full led uh the production cost is always about 70 of that so we have a 30 margin interesting um that's a massive difference 4 500 to 60 000. what drives that cost up again well the smallest one is just what you would put in in a classroom for example then we have like complete sets that go into squash courts and we also have like massive led walls that you just put outdoors and you let people interact with it you can swipe a card you can play or you can pay with the app and just book it whenever you want i see so what was it like take 600 times all of their retail prices how much total sales of the hardware today a little bit obviously in the beginning we've been selling at quite other prices as you know it was like more like okay get it please um i think right now we're like approaching around the four minute four and a half no it must be close to four and a half million in lifetime revenue which probably we made two and a half last year and that's just on hardware right not lifetime sas stuff it's a very small portion of light of sas but probably oh what's going on there youtube good to see you guys now imagine this you love watching these interviews with sas founders but imagine if we took all of the valuation data out from over 2807 interviews i've done manually saves you a lot of time well we've done this we've built it into the beautiful interface inside of founder path check this out i'll show you how you can access this in a second but you log in you connect your stripe account you see your valuation real time you can see what it changed over the past 88 days and even set goals for valuation this year now the secret evaluation is there's many different ways to value a sas business so the reason you're going to see three or four different valuations inside of your frowner path dashboard this is all free by the way is because depending on who's doing the buying of your sas company you're going to get a different valuation a vc is going to pay a different valuation private equity firm is different if you're going to do a minority sale that's different and if you sell the whole business that's a different valuation you can see all those when i hover over here right so the teal is what a vc would pay yellow is what private equity and red is if you sold the whole thing outright now what's cool about this is this is not built off random data again you guys hear these interviews on youtube all these datas are built from real-time valuation data points founders share with us on the show so traction 1.2 million seed round 3.7 raised they sold 22 to their business go in here and filter by the event maybe you only want to see companies that have sold the whole business well here are a bunch that have been acquired the valuation and the multiple maybe you're going out right now and you're raising your seed round well go in here and look at all this recent seed deals that went down what they raised what valuation they raised at and what percent that they sold there's never been a larger data set of sas valuations than what you can get now inside of founder path and we're thrilled to bring it to you all right we're gonna go back to the youtube video here in a second but if you want to check this tool out if you want to jump in and sign up you can check it out for free to get your valuation at this link this link founderpath.com forward slash products forward slash evaluations or if you go to founderpath.com and hover over products click on get your valuation here and go ahead and sign up to give it a whirl again all that valuation data live right inside the platform i hope to see you there all right let's jump back into the interview but we can take that 4.5 million of hardware sales multiplied by 70 cost of goods sold to get your margin of the 30 percent yes which would be about 1.3 million on 4.5 of total sales yeah we always have to factor in that in the beginning obviously creating this hardware it's it's it's not as profitable in the beginning we're also now bringing down or bringing up the margin quite much but at the very beginning it was obviously much uh you you sell the first units as added deficit obviously and you did all that this is just you launched in 2020 so your first hardware sale was last year or two years ago no we're actually we're more almost five years old now oh okay it took a very long time to develop the tech before we even started going on the market then it was a very slow start hardware is like to get the first clients took a very long time and now the last year we've grown 2.9 percent at 2.9 times the size that we had before so now it's really starting to show off so when what year was your first hardware sale 2017 i think two you sold two units in 2017. something like that yeah okay got it so between 2017 and today you've done 4.5 million total of hardware sales which is about 600 units does that 4.5 million include the 500 and pre-orders for the 500 new units no it doesn't okay so you've done much more than 4.5 million in revenue if you add the 500 in pre-orders yeah we have a kickstarter campaign so that's where we obviously sold the pre-orders at a quite discounted price and now there's like every week four five six nine ten sometimes coming in i see interesting okay and and what do you sell it for on the kickstarter campaign well the kickstarter campaign we started with around 800 to 900 bucks which is also the retail price that we're aiming for right now we had to go up quite a lot because production is insane so we're now selling it at around 1 400 for the first units at least but if you pre-sold a bunch at 600 a pop let's say just to make the map easy so to all 500 at 600 a pop that's 300 000 bucks in sales with cobit supply chains changing so rapidly couldn't you potentially lose money on every one of those pre-sales to be honest on the kickstarter ones definitely yes absolutely we factored that in already in the beginning and this is also what we're compensating with the new price for but obviously the very first batches when you produce something you always have to estimate that you're like not making any its economy a scale like you're always losing money if we would sell the first 20 units we would have to charge like three grand per system we're now sending them out actually um which obviously wouldn't it would be very hard to sell those so it's it's always quite an investment okay understood so so tell let's let's now i understand this let's now talk about how you're turning on the sas revenue so how many customers are paying are making up the 6 500 a month right now you're doing in sas revenue uh i'd have to exactly look around that i think about 60 70 80 something like that okay and just be clear always have hardware in order to pay for sas right they can't only pay for sas no makes no sense okay so why would someone buy them why would someone buy the hardware and then not pay the sas they didn't it was just our choice in the very beginning because people hate in that business like the fitness industry in schools they hate monthly payments they hate yearly payments so we always just said hey instead of charging them let's say 99 bucks per month let's just charge them a thousand and say that you never have to pay again so it was like the kind of like cost that we did for for just getting 10 months or 100 months of revenue forward effectively exactly so and also for our cash flow it was amazing because every sale was like okay we have a much higher margin so now we're slowly shifting yeah no this this story is making complete sense to me so launch in 2017 you get your first hardware sales and sorry first hardware sales in 2017 you launched also that year as well you wrote first line of code that year uh late 2016 2016. okay cool so first hardware sales 12 months later 2017 you did two now today up through the this uh last year you've done call at 600 orders that are now out in the wild 4.5 million total volume you just add another 300 000 in sales from 500 on kickstarter at 600 bucks a pop you're still adjusting what your hardware costs will be because supply chain issues with cobit but what's growing really nicely is you just recently turned on your sas revenue with 90 70-ish customers paying 95 bucks a month for 6 500 a month and monthly recurring revenue is that all accurate sort of we have a range obviously for the fast but you're probably pretty close to the common average interesting okay so what's the sales approach now how are you convincing you change now people are paying monthly how did you change your sales approach um to be honest so far the sales approach is very different because we're so we've never spent any money on advertising we're very happy that so far the inbound is much more than we can actually do we're now 32 people i think we have we just upgraded to six people in sales until a couple of months ago it's only been three so so far we have 32 people total yes oh wow okay you've raised capital you've raised you've raised capital yes we did surprisingly little so far but yes what's little like we only raised 2.8 over the whole five years break break down the rounds for me uh oh that would be very because we very obviously we're not a classic startup everybody hates hardware we started with little tickets here they're 100 200 300 and now last year we just raised about a million from the first institutional investors okay so when what would you consider that like your seed yeah yeah you could say seed it was a little late because yeah but i would say seed we're now preparing for a big round towards end of the year so that would have been a seat so now it's a series a and most folks in their seat are selling 10 to 20 percent of the business is that about what you sold for the million bucks over the time over the whole time we sold about 35 over the whole process until today okay so so right now your cap table investors own 35 do you have an esop pool set up for your teammates yes we do how do you structure that the founders always wonder how we set that thing up but i wonder myself to be honest um obviously it's just we have a couple of people that have been with the company so far i'm still the only founder so i still hold the rest of the the percentages and we uh blocked about 10 which we now slowly give out to the employees i see so 45 between investors and your esop and then you own the others call it 55 great model love that okay um talk to me about talk to me about the hardware side of things if you could figure out a way to subsidize the hardware and give away for free all of a sudden you like really jack up your ability to drive mrr have you considered like raising a debt fund or something to facilitate this um yeah very smart smart idea and this is what we're also working on right now the pain points to our growth are a little bit different so it's not exactly it's first of all we're only working with inbound so we're structuring a couple of things to optimize that and fully get up to capacity but we're already preparing to raise some money for our own financing model so we work with leasing partners and financing partners but you know how it is especially like globally it it's very complicated deals sometimes so it's very hard to find somebody who does this licensing financing deal in dubai and then obviously the one making the most money out of it a lot of times is the bank so we're already experimenting with giving out systems only for a subscription so you don't pay let's say the seven grand that you need for multiple which is a small system for school and instead of saying paying seven uh seven grand and 59 bucks per month for the software we just tell you listen you're going to be paying 299 and you just pay for that forever so we're experimenting with it at this point i think we're not going to take it to the crazy scale because just with the fact that the hardware is so expensive it would be insane like we will need to raise like 25 mil to really scale with that um and in the end we're not trying to be a bank so we try to find partners to rather give us this working capital for a certain fee that we can then work with can you can you lend out i mean i'm looking at this beautiful thing i don't it almost looks like futuristic 3d goggles but it's it's it's not you don't wear it on your face you put it on the wall and it projects out can you lease these out or or you want to keep selling them did your customers actually own them uh it's a question of the time in the beginning obviously the first movers and the people that want to be sexy and you know own this their threshold to actually getting this and having it in their room is really really high obviously this is what we now want to first take care of but then obviously we're going to reach to a point where we then have to get into real skill and then these things it's like you only rent it will be highly attractive for people that are not as sold as they are right now so i think it's probably going to be one two years until we go into models like these but it's definitely on the list and just to make sure like i'm getting this pricing right i mean i'm on your limb.i o forward product right now this graphic i see just this projector it looks like it's about sort of like this big ish this thing is is how much per month for that's how much does it cost to purchase retail uh right now it's 148 to purchase it right now we're still working with a freemium model so because also there's only 45 apps on the on the system you can already start purchasing stuff uh like a monthly subscription but we're still waiting i think we're now at 1990 we're still waiting till we fill up the app store more so it actually gets much more interesting so it's not going to be a model like with the usual peloton where you say like hey listen if you buy the hardware and you're not paying this subscription you can't do anything with it because our clients also our families their elderly care facilities they're like so we try a little bit more more of a fairer freemium approach you can still play if you don't pay it's just not going to be the premium content but you still use it if you want to have the premium content then you obviously got to do your subscription i see but but your cost of goods sold on this model i'm looking at right here 1480 retail your cost of goods sold is still about 70 or a thousand bucks so your margin per sale is about 400 bucks not at this time to be honest we're planning to go there again with the current crisis right now it's it's actually much worse than that it's like you buy some components and they would normally be like one and a half dollars and they're like 15 bucks um so it's it's a crazy time to be doing this insane like and people just broke her stuff and you buy something and you pay the purchase order and they call you back like listen somebody else wants to have it are you also going to be willing to pay double price hey guys we ordered 2 000 units from you it's sold we sent you the money yeah i can send the money back or you pay double it's it's the wild west right now when it comes to hardware that is crazy okay interesting so so sas growing quickly now has any any of these 70 80 customers that are paying the sas of any of them signed up with the hardware and then cancelled yeah yeah so one thing that we're also super happy with all the hardware comes with a five-year warranty so we're very german like all the metal parts are like massive stainless steel everything's like industry great and like you know we literally been asked by school operators what happens if kids pee into the sensors that the sensors can take and we're like yeah i guess so um every single system that we ever have some kinky over there in berlin that's all i have to say that's weird maybe maybe so every single system that we stole sold none have returned have been returned and all of them are still active yep interesting okay very cool again you you've sold about 35 to investors so far and you raised you said 2 million 2.2 million total i'd have to check i think it was 2.4 2.6 something like that 2.4 okay cool so so valuation-wise i mean you could argue it's sort of like a six to 11 million valuation but i predict you know as you add on the sas component evaluation will go up you're planning to raise later this year you said yes but for uh we're actually also because the last time that we raised this quite a while back so we're aiming at a quite higher valuation what valuation would you try are you gonna try and raise that are you targeting well we're right now exactly in that phase so we're gonna keep that a secret but it's what would make you happy maybe it's not what you end up going with but what make you happy um let's say it this way low double digits um it's a good point to be okay call it something between like 10 and 30 million bucks something like that somewhere in that range maybe what do you think you need to get sas revenue to to raise at a 30 million valuation well i mean right now also our evaluation is a little bit different because we're taking a classic sas approach so our valuation would be a little bit would not be fully suitable because with the hardware you have such a long term but a very very solid and very predictable um for example we have a hardware sales uh quota of around 30 quarter to quarter increase um so there's been some side of that would be much harder to go to market if everyone has to buy a piece of hardware to use your sas tool right but double edged storage exactly exactly but um so generally there's also patents there's also proper technology with we built our own sensors and you have patents yes how many actually even sticks so far even wanted like three three different kinds of patents two of them already been granted also in the us so how many engineers are on the team we have all together around 12 engineers right now okay pretty happy and do you have your own in-house creative and media people designing these 45 apps and games or is that do you incentivize the market the world to build a little bit both so we we have our own game development part so we have four or five game developers um and we also work with so we also have some revenue share models where other people create apps on our system so it's like it is an open platform but it's more like an app store like there's profit shares there's but people can actually join very easy and just create cool stuff um so yeah i think in the in the long term it's going to switch quite much right now we're probably building around 70 to 80 percent of the content that's on the platform comes from us but in the future we're looking more like at 20 to 80 interesting hey i love this model i want to get an update from you in a year but in the meantime let's wrap up today with the famous five number one favorite business book marcos favorite business book um the funny thing is i think my favorite business book is is probably not i love business books and there's a lot of them that i could recommend but what i would recommend at this point is probably sapience by yuval noah harari which is not a classic business book but it very well defines the origin of people why we started forming communities and how people interact with each other and what effect that has which is the main basis of business like working together onto something number two is there a ceo you're following or studying there's a few not really following us there's a few people that i highly highly respect for the way that they they're doing their decisions but not really like uh okay no worries number three what's your favorite online tool for building limb for what for building the company uh probably end up with slack because it's just a nice communication tool it's not even like a there are so many issues i don't know number four how many hours of sleep to get every night um pretty pretty straight with like five and a half six okay in situation married single kids uh not married but i have a right woman for it i just didn't uh it just didn't occur right now but i uh i'm very very proud father one and a half year old very cool and how old are you and four raccoons and four racks yes uh i'm now at 39. 39 last question something you wish you knew when you were 20. wish uh don't take myself too serious and realize that some things just take time guys there you have it limb dot io they're helping people get active finally in your homes at your businesses etc they sell a little unit for 1400 you install that piece of hardware then pay 90 to 95 per month to access all these games you can play with your family it's taking them many years to get this level but they have 600 of these devices installed in the wild today about 4.5 million in total sales there where they made an average cost of 30 margin that margin plus a million bucks or 2.2 2.4 million they raised from outside partners has enabled them to grow that hardware decrease their costs launch games on the platform now 45 apps available as they look to continue to scale maybe raising a series a or maybe you know late seed later this year at a 10 to 30 million valuation we'll see what happens marcos thanks for taking us to the top thanks for perfectly summing that up man you're a machine i'm just going to steal that and that's going to be my pitch thanks man one more thing before you go we have a brand new show every thursday at 1 pm central it's called shark tank for sas we call it deal or bust one founder comes on three hungry buyers they try and do a deal live and the founder shares back end dashboards their expenses their revenue arpu cac ltv you name it they share it and the buyers try and make a deal live it is fun to watch every thursday 1 pm central additionally remember these recorded founder 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