Meetselect Revenue & Funding (2024)

hello everybody nathan latke here my guest today is carlos cisco he's a serial entrepreneur who's founded multiple successful companies and helped grow category defining brands he's currently the founder and ceo of select which has been heralded as amex for the next generation and the black card for millennials he's also a member of hawaii scene has been featured in 100 plus stories across many different media outlets including entrepreneur forbes and the huffington post carlo are you ready to take us to the top yeah i'm excited all right most people when they think about rewards cards they think oh like i'm gonna get some like weird token thing that i'm never gonna know how to actually use or exchange walk me through how meat select is attacking this market yeah exactly so so that's that's sort of exactly the way the system works today it's points it's fractional cash back it's things you need to earn a crew and you know they typically aren't necessarily that relevant so what we want to do is create a large network of benefits that were significant so our benefits are typically up to 70 off or you know priority access free drinks for your entire party that kind of stuff that people had instant and unlimited access to so meaning like once someone has a select card they can use all of our benefits anytime they want as often as they want there's no limitations whatsoever and then ultimately the goal is actually to combine that with the sorts of points and reward systems that you would see from typical cards today um you know in issuing a credit card to sort of create this mega credit card if you will and you know that's where the amex for the next generation line um came from is you know essentially there perhaps the company that's innovated the most to date but but we have more exclusive benefits than them by a magnitude of over 200 so over 200 times as many benefits so uh so we've built a pretty robust program this world you play in is about nothing more than leverage uh if if amex is processing 20 billion a month and they can say go to four seasons and say give our if they use an amazon four season give us a discount you know amex can argue they're gonna drive more gmv through four seasons four season does a deal you're not as big as amex so what leverage point are you using to get these deals great question and really for us it comes down to brand um the demographic we have and sort of our history in delivering for clients right so so i'll give you an example um and four seasons is a great one they're a partner as well but i'll give you an example from the dining space um you know of the top grossing restaurants in the country we have four of the top ten those venues do not need extra business they their tables are always full they don't need new people the reason they like to work with us is that we tend to bring that younger more affluent millennial and then in addition like our check sizes even with the benefit included tend to be higher than the average of the venue um so that's why venues like tao and and those kind of places love working with us is we're bringing sort of this younger fresher hipper customer demographic that's really focused on experience really focused on um you know being social and going out and doing these things and then also who tends to spend more than their average customer okay so let me role play real quick amex had a business development callstow bring bring hey like it's amex we want discount they say we're full we have a waitlist tonight for like four hours like we don't need extra business and we're not going to give your people a discount okay that call ends you call bring bring hey they go hey carlo you know select you go hey i know you're totally full but one way to increase revenue is to increase your average check size these millennials are spending so much money on freaking avocado toast and moscow mules they're going to spend so much money here it's going to be about 130 higher than your current wait list give us some sort of deal and you'll make more money is that kind of what it sounds like pretty much yeah am i hired uh yes absolutely um the other big leverage point is just like the network of brands becomes like a really good foundation and also sort of a huge barrier to entry so once you have brands like tao four seasons whoever it may be other brands want to be associated with those brands why do they believe that the other big thing we have to like why does tao believe why do they what why do they believe you when they say our checks is going to be bigger like why do they believe that so so with most partners especially one of that magnitude they're going to test initially right so so so initially with tau we had four locations um it was four locations here in new york within six weeks they expanded to all of their new york locations um what's the data look like from the test like what how much was the increase yeah it was uh it's a lot of reservations um you know check size i don't know specifically for tau i know across the board it tends to be around 20 to 30 percent so it's not a huge magnitude but it is higher and that is you know with the benefit factored in whether that's free drinks or a discount or whatever that the case may be like after providing that benefit they're still making more money yeah the reason i ask is i i mean i imagine i have a lot of millennials right now listening right who are like when they launch their own company and they're going why does he think that we're gonna spend more money i'm freaking broke putting all my money in my startup i'm not gonna spend extra on drinks like what it doesn't make sense and you hear them like millennials they like are bad at saving money like why do they actually spend more out of towel so so it depends on you know of course who who the person is how they like to experience things right there's going to be a degree of variance but typically what happens is when you're getting some sort of incentive that elevates your experience you end up like investing further in elevating that experience so like you know if you're saving 30 on a dinner let's say you tend to order an extra round of drinks or get an extra appetizer or maybe do things that you wouldn't normally would and what's cool about it is like it makes your experience at that place so much better it becomes like much more of a night out much more memorable and i would say that's actually even more amplified with hotels so so for example like i book well obviously i book all my hotels through us but uh but before our hotel program was as good as it was today i actually didn't do that um i used to use whoever had the best rates but but now um you know saving over a thousand dollars on a trade like it'd be hard if you're if you're staying somewhere for more than three nights not to save over a thousand dollars and it's typically in the range of like you know any well the average savings is 31 but you can be as high as 70. i tend to save like 40 to 50 percent but what's cool is it completely changes the caliber of the place you can stay you know like we're still a startup so like being able to stay at like five-star resorts at like basically half the price that's a pretty compelling thing for me and it completely changes the nature of your trip can you is i want to get like really specific here is there oh okay oh perfect okay i see on your site the standard high line i go here all the time all right member benefits up to 25 off best available rates complementary upgrade when available now is this 25 off best available rates like truly i look at booking.com i look at the standards website i look at hotel tonight ever they're the cheapest you will find will be 25 if with a select card yes and and and standard is a unique example too because they don't tend to like to be on those kinds of sites um so that's that's part of why um they're featured separate from the hotel portal um is that like they actually are a sort of rare brand where they really like sort of the importance of their brand the demographic that they bring in and they tend to stay off of those sites in general but but in total our hotel program encompasses um 500 000 locations um at a little over uh 200 000 of those and it varies based on inventory um we have the best rate anywhere so how do you make money how do we make money mostly our membership fee uh membership fee is the vast majority of our money i see okay so i'm clicking apply for membership you're asking for a bunch of information to sign up then you're gonna put a paywall up how much do i have to pay for this 300 a year okay 300 per year okay um and you are basically banking on the fact that people won't actually use enough savings to make up the 300 bucks is that accurate no we don't have to fund any of the benefits uh so so we hope that they use it as much as humanly possible on average members recoup over 3x that annual fee okay and that's in addition to having access to our concierge getting invites to member events other things that are more experiential that are harder to put a dollar value you have a dating app can i can i go find other rich people on select and only date rich people not not currently but um i i think that that is a popular element of our events for sure i'm kidding i'm kidding cougars stay away i'm i'm not interested i'm just kidding all right okay so 300 bucks per month um and when did you launch the company one year uh per year per year okay yes we rolled out in 2014. 2014. okay and what have we scaled today in terms of total members a little over 15 000. okay 15 those are all paying correct yes okay that's great i mean so obviously you know i'm gonna do the math can i just multiply uh the rate has gone up over time and there are also certain um group uh memberships okay sorry someone's stopping by but it's okay yeah um okay so so 15 000 paying customers they're not all paying 300 bucks kind of per year can give me a general sense of size to if they by the way if they were yeah i'll be doing about we'll be in the name you cut out carlos say it again i'm sorry we'll be in the neighborhood of two million this year okay that's great okay good so two million bucks that puts you out i believe about it caught 106 grand kind of per month now do they pay this fee all up front yes okay it's nice you have cash flow all right away and what's it cost you to acquire one of these customers um generally it's around 250 or a little lower it depends on the channel of course but but sort of across the board that's where it's been it's actually been coming down a bit because we've been diversifying our strategies a bit more we've been doing a lot more through partnerships a lot more with sort of our larger reach and email list and all of that so it's actually starting to decrease and if you're at it kind of that run right today two million bucks where were you a year ago uh around 1.2 okay so healthy growth where's most that growth come from like new members yes that's your only revenue stream yes that that and the renewal pool gets larger and larger so um so they're sort of like stronger and stronger and more and more volume revenue volume coming from renewals but no upsells i can go from 300 bucks a year to like a thousand bucks a year for extra premium not currently but that is a frequent request and and certainly something we look to do in the future yeah totally i want like celine dion performing on stage for me while i'm eating it's like you know a swordfish towel yeah uh okay very good and have you raised capital enough so how much uh a little over two and a quarter million dollars okay so okay it's 2.5 that's great and did you do those from local vcs convertible no dead equity what was it um mostly convertible note mix of um vcs um angel groups uh individual angels um we also did an accelerator program here in new york when we when we first started oh okay good and churn's critical on this so when people all the annual renewals come up how many churn yeah it's about a third right now okay so it's kind of high actually yeah it's it's good for like a consumer-facing product obviously for for a credit card it would be high but it's also not currently a credit card and that's obviously one one of the many many many reasons to make that transition yeah are you in talks right now to be bought by amex uh we've had multiple of the top five issuers want to buy the company and why why hold out uh we think that we can you know provide a credit card on our own in conjunction with one of those companies that allows us to become a much much much larger company um to the extent that you know our current revenue is is rather miscellaneous yeah interesting there's a lot of work though in terms of bank regulation all that kind of jazz it's not worth just piggybacking off one of those guys since they already did the work so you can do it in a different way actually um so you can have a bank sort of handle all the bank stuff handle all the risk handle underwriting all of that you can actually get revenue additional revenue in addition to the membership fee we have today um for people that sign up as well as their you know total spend uh so so when you have leverage and sort of a network like we do you can build a pretty attractive situation and then of course the other thing that's come up a lot with you know sort of the larger banks is obviously wanting to license portions of the program that kind of thing and we're open to ideas like that where there are certainly several discussions around that right now yeah because the value you've built in terms of someone want to replicate you is literally the phone calls and the emails and all these partnership deals in my opinion that's that's the real benefit yeah yeah that's not easy to get going um okay so walk me through your team today how many people so we have nine uh full-time and then like a few like part-time and contractors so it's actually a pretty small team all in new york uh about half it's about half here half elsewhere okay new york city remote um okay got it and what um going back real quick to the acquisition question so i mean you have investors as well so if if if an offer came to you where they actually got a great return i mean they could potentially obviously you know say hey carly really should do this um i mean is there a number today that you would sell for or really no you just you want to figure out the banking thing first and then it'd have to be pretty crazy um there's there's essentially too many opportunities on the table now of um you know varying options um to where there's really no reason to sell it it would have to be a pretty insane what's the highest multiple you've got offered uh so i can't discuss too much about like the specific um terms but certainly higher than you know current levels we've been raising at okay what was current level that you raised at uh so the last round we did was 12. okay uh pre um we'll be doing higher than that um significantly higher much very soon okay so you're raising now uh about to be that's great why raise now why is it the right time uh you know essentially to prepare for the launch really um the launch of what credit card oh the banking side yeah yeah so uh so we don't know precise dates we also you know there's a lot of discussions around that obviously so we haven't made um final decisions but but we are anticipating that sometime in 2019 um that will occur how much would you want to raise ideally we'll probably be looking in the neighborhood of 10 million dollars if not more yeah and what will you angle towards in terms of you know evaluation you'll fight for uh i think we'll be in the neighborhood of like 40 pre 50 post um it's possible it goes higher than that there's been some crazy things in the fintech space lately yeah so you sell maybe 20 of the company yeah that tends to be a standard that you sort of have to do in a in a round like that yeah would you ever i mean do you definitely want to take dilution would you ever consider alternative ways to do this like you know no personal guarantee no covenant no warrant kind of venture debt we've we've thought about that and we've actually done a little bit of a venture debt along the way too which firm uh so you're not going to know the the specific firm but it was actually one of our other institutional investors that invested you know equity convertible note or whatever um also opened sort of like a venture debt um fund separately but um i'm curious i'm curious about even the small players in that space who was it if you don't mind me asking and this one's called evpi investments so they're based out of um florida but it was um the partner there was from a hedge fund called landscape capital which was one of our first bigger investors and they're now doing venture debt uh yes so that specific firm is is doing venture debt um i mean look at the other options that are that are good that we've certainly um talked to um you know there's there there's kind of a number of those now um there's a ton but because of the size of this and also because of the size of what we're taking on um we definitely would want to do like an institutional vc round for this there's also about half of the top 10 issuers would like to participate as well yeah totally uh so it's possible that um there's strategic investors in there so long as there's no special terms obviously we can't yeah really when you do uh carl when you do kind of demographic profiling on your user base are most these like young ceo types it's it's a pretty good mix so so certainly high income pretty across the board um like do you know that data do you actually have the average income of your members yeah um yeah median's around 150 average is actually close to 320. um that gets dragged up by sort of professional athletes celebrities um ceo like sort of c-level exacts um typically some of the older members in in the program unless they uh are sort of young and have you know sort of extreme success either um in an area like sports or in like something like finance um trading hedge fund guys um that kind of stuff youngest members how old youngest member 21 oldest uh probably i think actually 80s those are some pretty cool people up there that's good yeah yeah all right good makes a lot of sense kind of love where you heard it and again no cost outside of 300 bucks here this doesn't affect anyone's credit score nothing like that no no not at all yep and it's just like is the card really do you actually have to have the physical card or not really that just makes it special no that just makes it like look cool pretty much um i i mean it's a black metal card people do like using it for sure but you can redeem everything through the app the site and the concierge by the way i'm gonna test this i'm gonna next time i go to the standard i'm gonna compare what i'm gonna call them and say what's your cheapest and then if i go on your thing and it's not 25 cheaper than what they told me on the phone i'm going to be like carla what's going on man you you can't i mean look at most of the properties we actually guarantee the rates that like 200 000 um plus number we actually guarantee the rates awesome all right let's wrap up with the famous five number one what's your favorite business book uh probably the intelligent investor so like even though i'm entrepreneurial um i do like investments quite a bit as well number two is there a ceo you're following or studying right now you know funny enough um not at the moment if you asked me a year ago it would have been mark zuckerberg but um you know i thought a lot of things they did were very smart but i think this year they're having some problems and handling stuff the wrong way actually number three how many sorry what billing tool do you use what a billing tool yeah a stripe you do stripe okay number four how many hours of sleep to get every night uh typically six to seven and what's your situation married single kiddos married no kids no kids and how old are you uh 31 31 last question what do you wish your 20 year old self knew whoa that's a good question um you know i'm pretty happy with how everything's turned out i i it obviously would have been good to hear about more entrepreneurial journeys um earlier i would say like i sort of dove in headfirst and learned a lot on my own i actually think it's really great to sort of listen to as many people as you can um you know with that sort of note that you know everyone's you know advice is going to be skewed by their personal experience but if you you know sort of seek out like a collective of knowledge and information i think there's a lot to learn from seasoned entrepreneurs and i would also say for people starting businesses if you're considering having advisors investors whatever it is in my opinion always more valuable to have people who have specifically startup experience and if you're doing a tech you're like a scalable high growth tech company specifically that experience that is much different than starting a consulting firm or whatever you know nothing against that it's just a different type of business guys study bios of successful entrepreneurs earlier on launched meet select in 2014 again site that gets you exclusive deals across many thousands of locations all around the world whether it's dining hotels experiences many other things even nine people based up in new york about 15 000 members that pay a membership fee they're doing about 2 million bucks in terms of run rate today that's up from 1.2 million run right just a year ago november 2017. they've done all this pretty capitally efficient about 2.5 million bucks in capital raised 30 revenue churn per year kind of high but not bad for consumer space 250 cac to acquire the 300 customer so pretty instant payback because it's all paid up front looking now at launching a banking product hopefully raising maybe 10 million on a 40 pre or something like that last round was called 12 million pre so healthy growth there carlo thanks for taking us to the top yeah yeah thank you