Merge Revenue, Valuation & Funding (2024)

[00:00] Hello everyone, my guest today is Gil Feig, he's the co founder of Merge. Now previously, he was the head of engineering at Canvas. He's led projects at Wealthfront and LinkedIn, he's a of the company university. He now lives and works in San Francisco. Gil, you ready to take us to the top? Yeah, let's do it. All right, real quick. So talk to me a little bit first, when you leave an engineering role at a company, it [00:21] either means your equity's vested and you're good going on a new thing, or you got bored and just wanted to leave, which one was it? [00:28] >> I think I've always wanted to start a company and the timing was right, the problem was there. You know, Canvas was a great place, but the timing was ready and I always wanted to do it. So I decided to make the leap. [00:38] So talk to me about the current product you're building and ideally tie into the discovery of the problem via your director of engineering role at Canvas. [00:46] >> Yeah, absolutely. So what we're building here are unified APIs. And so you integrate once with us and then you can offer your customers twenty, thirty, 40 different integrations in HR, applicant tracking, accounting, and then more categories on the way. And we came to this idea, me and my co founder, after experiencing this exact problem at both of our past companies. So my co founder, Shensi, had chief of staff to the CEO at Expanse, a cybersecurity company, [01:15] >> and they had to build out a ton of ticketing integrations. She saw it from the business side. And then as leading an engineering team, 15 people, I was spending my nights and weekends working on these integrations because it was just so much work. It was a lot of support, they were constantly breaking. And so when we realized that we both had this problem in two very different spaces, but a very similar problem, we did a lot [01:35] >> of research nights, weekends, and found this spanned so many B2B categories. And so we decided to launch Merge, which is a platform for unified APIs in the B2B space. [01:44] What year was that? [01:45] >> So we started Merge last year. So it's been about a year and a month since we started the company. [01:51] And have you been able to take down that first paying customer or still pre revenue? [01:56] >> No, yeah, we have several paying customers live in production. We're powering some pretty business critical functions now. So it's been really cool to see adoption. [02:04] So what do you look at in terms of you sign up a new customer and you need them to do X, Y, and Z in terms of activation metrics to get them addicted? Is it like number of API calls per day or what's the metric? [02:13] >> Yeah. So what we're really looking for is for someone just to embed us within their platform. So we kind of provide that, as you described that Plaid style linking flow at the beginning, where the customers go through and they link their account. It's really simple. It takes thirty minutes for someone to embed that, and then they just add our SDK to their back end and they can start exchanging all that data with us. So we consider [02:33] >> the point of activation to be the point when they've made that first backend exchange of data and link their first either customer or test account. [02:41] So like if we were gonna use you at Founderpath because we rely on a lot of integrations, could I do this knowing nothing about tech or would my CTO need to do this with a JavaScript embed or something similar? [02:51] >> Got it. Yeah. So we are aimed towards developers. We're built for developers. That's the whole experience is shaped around that. We make it really easy to just add those platforms with our SDKs, but yeah, it is always going to be an engineer who about us. [03:03] Got it. And what's your first guess here on what pricing is going to work? What are these couple of customers paying per month on average? [03:10] >> Yeah. So it really depends. [03:14] >> It really varies from customer to customer, but we offer our pay as you go plan. So it's 1¢ per API request. And then we offer a flat rate plan and that's really focused around the level of support that enterprises need. Or even mid market, when you need a custom onboarding, sometimes these integrations, you're gonna have situations where someone has a really custom instance set up and we're there to support along the way. And that's when we [03:37] >> do a fixed rate plan. [03:39] And what would that look like? If I didn't want Mubs, my CTO to do this, I would just pay you guys to get the setup done, what would I pay you? What's maybe a range? [03:46] >> Got it. Yeah. So we actually build it out for you. That's just a flat rate plan that doesn't vary based on usage. And again, it varies a lot based on what your predicted usage is for the year, but that's how we kind of get you that flat rate. And our goal always is to be significantly cheaper than the cost of an engineer and that will save a lot of time as well. [04:08] Gil, though, give me a sort of a range. Know you're experimenting. Mean, are we talking like a $100 a month here, these customers are we talking like a $100 a month? I mean, what's sort of the range of where your pricing comes in at? [04:16] >> Yeah, it'd be closer to the former. So it's, again, it really varies, but it's on the order of a couple grand a month for our enterprise plan, or it's not quite enterprise. It's more of like a plan where you require support and customer onboarding. So really, if you're a B2B company starting to onboard really legitimate customers, that's when you might consider moving to something like that. [04:36] And have you successfully upgraded any of these initial customers to that thousand dollar a month price point or no, that's sort of the next step? [04:42] >> Oh, yeah. Many. [04:43] Oh, great. Okay. Great. [04:45] Yeah. Take me back to customer one. This is always tough for founders. Who are they? How'd you find them? [04:50] >> Yeah. So it was kind of an, I would say our first five to six customers onboarded at all around the same time. And it really was word-of-mouth at the beginning. Ultimately, we started using a lot of marketing. Go for virality with a lot of things like that. We're really big on social and all of our If we build a new integration, it auto generates all of our marketing content and posts it across social. So we're really [05:14] >> going that way and that's resulted in a lot of our later customers coming in. But yeah, early ones were some friends, then that spread through word-of-mouth to non friends. Now I would say we're quite close with all of our customers, our early ones. And then we we did kind of view them as design partners, but we also know that integrations are business critical. So there wasn't a lot of room to really make mistakes. So it was [05:36] >> sort of like, you know, they give us feedback, but we made sure that things were perfect before ever launching things. [05:41] Yep. Now this is always an interesting question too. I mean, did you do some early consulting before you fully developed the actual productized version of this last year or no, you went straight for the SaaS revenue? [05:52] >> Oh yeah, no, we went straight for the SaaS revenue. We were fortunate enough to fundraise early and we spent six months just building up the platform. We didn't have a single integration. And then in January alone, we added 20 integrations because all of what we built is around being able to really quickly add integrations, but also keep them up to date, make sure that nothing breaks. We did have an API break on on a Sunday at [06:16] >> 3AM because they had, you know, a breaking change that they released automatically, and it broke hundreds of companies integrations with them. Unfortunately, our on call got paged and our postmortem says it was fixed by 03:06AM. So we're pretty proud that we can we can react really quickly as well and not expose any downtime or issues to our customers. [06:34] How many total integrations do you have today? [06:36] >> I believe currently we have around 45 to 50. We add like, I would say probably about two to three a week, and we're gonna continue increasing the rate that we're adding them. [06:46] And is that just a function of you hiring more engineers to build this out? [06:50] >> Yeah. So fortunately, and non engineers are able to build integrations here because of a lot of the tooling we've built. We've made it really easy again for us to move quite quickly when we add new integrations. But yeah, tooling that we built is internal and that's what we can, again, we can hire a team like in Miami to go out and build out those integrations or anywhere. [07:12] So couple customers, early customers last year. How many customers are now serving today? [07:17] >> Yeah. So we're not publicly sharing all those numbers just yet, but we will be coming out more. We do currently have two eighty customers on the platform, and that's been going up quite rapidly. So it's been Customers or users? So we have we have 280 organizations that have signed up for the platform, and then order of I don't have the latest number on me, but 40 to 50 fully embedded and more and more adding. [07:41] Yep. And when they're fully embedded, that means they're paying or no? You still have to convert them from fully embedded to actually paying you. [07:46] >> Yeah. So that means they're paying. Some are paid as you go and some are contract based. [07:50] Gil, that's congratulations. I mean, under twenty four months going from sort of nothing to two eighty signups and 40 to 50 paid, that's great. [07:57] >> Yeah. It's been really exciting and demand has exceeded what we've expected. It's actually been really interesting too, because since we launched so many companies, as you know, the the space the whole the whole world is crazy right now. But since we've launched, so many companies have come out in this space and just needed us right off the bat. So we're working with everywhere everything from public companies down to prefunded companies, vast majority in the, like, seed [08:20] >> to series C range, and then some in the public's range. [08:23] You raised early on, how much did you raise and why? [08:26] >> Yeah. So we raised 4,500,000 from NEA with Scott Sandell joining our board. [08:31] Last year? [08:32] >> Yeah. That was last year. And we we decided you know, we we needed that amount of money and it was largely based off what we were gonna have to do to accomplish our goals, which is building again a platform that's gonna allow us to iterate really quickly on integrations. We've never lost a customer to not having an integration and we promise free two to three week turnaround on new integration. So because of that, it did, again, [08:53] >> take a lot of upfront investment, a lot of time to build out that tooling and that platform. But now, we've kind of achieved our vision, would say, and there's lot more to go, but we've achieved our vision and we can just iterate so quickly. [09:04] Gil, most founders in seed stage like this, especially this size are selling 15 to 20% of the business. Did your term sort of come in that range as well? [09:13] >> Sorry, what'd you say? [09:14] 15? Yeah, most founders doing a seed stage, $4,500,000 on are selling 15 to 20% of the business. I mean, did you sort of come in that same range? [09:23] >> Yeah. Was in that ballpark. [09:24] Okay. And convertible or priced? [09:25] >> Priced. [09:26] Woah, that's interesting. How the hell do come with a price valuation when you're almost pre revenue? [09:32] >> Yeah. I mean, this is what we wanted. My co founder was really, really insistent on doing a priced round and I agreed. So we decided we wanted to go that route. [09:41] Why is that? Mean, is there a strategy there? Why do you want a price [09:43] >> Yeah. I think just the uncertainty of the note, we just we just didn't wanna end up in a situation where we were, you know, [09:49] >> kind of screwing ourselves over. [09:50] Interesting. Are would you recommend to your other founder friends launching companies to only do price seeds or do you would you still work on a convertible notes with the cap? [09:57] >> I mean, I think there's pros and cons to both. It's really easy to just get a convertible note done. If there's not too many terms, you can move really quickly. For us, our price round was a lot of legal, it was a lot of time, but ultimately we're really happy with it and we have no regrets. [10:11] What's your team size today? How many folks? [10:13] >> Yeah. [10:14] >> So we're currently 12 full time. And then we have year round interns as well that have become part of the team and they contribute quite a lot. Highly recommend that for early startups. [10:23] Do you pay them or are these free? [10:24] >> Oh, no, of course. [10:25] >> We pay them. We pay them all. We're not just Yeah. [10:28] You're an evil free intern founder. [10:30] >> We're not evil. No. [10:31] Alright. How many engineers? [10:33] >> We are currently so it's interesting. We're currently five full time engineers, but 10 of us can code. So 10 out of 12 are coders. My cofounder was computer science, but went into finance. She's now a full stack engineer and truly incredible. Six months full stack engineer. And then our designer, also an engineer, also was in finance, also an accounting guru, but also an incredible designer. He's designed everything you can see on our site. So, we we [10:58] >> really are are picking rock stars. We have an awesome team. [11:00] Have you spent any money on sort of paid marketing yet or it's all just organic word-of-mouth? [11:04] >> All organic, all word-of-mouth. I think we ran like a $200 trial on paid marketing, and we we decided we were gonna hold off until we have a full time marketer, which we hired. So we're excited about him as well. [11:15] I wanna move into product. There's lot of other companies in this space, whether it's Flatfile attacking it or Zapier, more for the marketer that's trying to do this and you're sort of for the engineer. But before we get into that, real quick, always like to ask this question. How long do you think it'll take you to break a million dollar run rate? [11:29] >> End of the year, by the end of the year. [11:30] You feel very good about that? [11:32] >> We feel very good about that. [11:33] Okay, very cool. I would ask you what your growth rate was from last year, this year, but it's gonna be massive because we're talking small numbers here, right? [11:39] >> I mean, all revenue started in the past two months. We came out of stealth two and a half [11:43] to three months ago. Oh, wow. Okay, good. So you think you'll go from nothing to $83,000 a month in this December? Yes. That's great. Very cool. So let's talk tactics real quick. Snowflake's IPO was massive and a lot of people said, Snowflake actually isn't a SaaS company. They actually priced purely off this usage metric. You're sort of doing this interesting test right now where you have 1¢ per API call, but also like a flat fee. Do [12:06] you see a world where you're moving only into one of those? In other words, more like Snowflake where you're only charging that usage fee and is SaaS gonna become irrelevant down the [12:14] >> Yeah. No. I I think we're always gonna have two models. It's just unrealistic to expect a really small even prefunded or, like, early seed startup to front so much money for integrations when they might only onboard one or two customers. They really wanna validate. And so while we don't view that as like, we do again, we view that that as presales, and it really is a way for someone to kind of evaluate and onboard. So ultimately, [12:35] >> yes, we do wanna convert everyone to a a fixed flat rate. We also wanna give them the certainty. Like, we found that customers like that. They like the certainty. Like, we don't have a limit. We can just onboard as many customers as we want, sync the data as often as we want. We don't have concerns around it. And we are also experimenting with it, with the 1¢ per API request pricing model, but there always will be [12:55] >> a usage based pricing as well. [12:57] Yeah. And how many API requests are you processing per month right now? [13:01] >> Oh, that's an interesting question. I can tell you since launch, it's been hundreds of millions. I would have to get you a more accurate number on that. [13:09] Is it I mean, that is your key growth metric. Right? I mean, imagine you look at that pretty frequently. [13:14] >> Yeah. It is a key growth metric. We do, if say someone's onboarding and they're on, like an enterprise plan, we'll comp it while they're figuring it out, a lot of things like that. But overall, yeah, that is a key growth metric. We are gonna start moving towards instead of API requests because it can be kind of unpredictable. Certain platforms might require you to make tons. We're gonna be moving to more towards a flat rate. So so [13:34] >> you don't have to worry about like the nuances of one platform requiring more API requests than a different platform. [13:39] Interesting. Okay. And then let's, the other thing I wanna chat about, right? Let's talk about sort of legacy players in this space, right? So Flatfile, interesting, they're raising a lot of money very quickly. We're basically saying, listen, if you rely on data from your customers and a CSV upload, like use this to quickly do it to map data. You're saying, Hey, if your customers don't have a CSV upload, just use our API integrator, let them [13:59] connect directly to the API. Do you think about yourself compared to Flatfile? [14:02] >> So we are actually very close with Flatfile. We are a customer and their CSV upload is embedded within our platform. When customers are going through that linking flow, they can actually come in and select from the different ATS platforms or HR platforms. And then the last one is CSV. So that if someone has an internal platform or they don't have API access, some platforms charge for it and they don't wanna pay for it. They can [14:22] >> ultimately just export a CSV, upload it with us. We still we use Flatfile to do all the sanitization and normalization or not normalization, sanitization. And then we pump that through our back end to normalize, and it appears just as another integration called CSV. [14:36] That's very cool. Well, guys, we're big fans of Flatfile. They love this show. I said, you gotta give me and my listeners a great discount to try a Flatfile. If you guys wanna take advantage of that, can go to nathanlatka.com/flatfile. Gil pivoting here. So how do you think about the more sort of marketer friendly tools in this space like sort of Zapier? [14:55] >> Yeah, so those platforms we don't [14:57] >> think of as like competitors. We don't view them as similar products and we don't really run against them in a sales process. So those platforms are really good for connecting. We say those are horizontal integration. They're they like to connect disparate systems. So something happened on Salesforce, notify the sales team on Slack, whereas we are so so sorry. So those two are vertical agnostic. We are vertical specific. So we make sense of the data and normalize [15:21] >> it into a single format. So if you wanted to accomplish something like adding 30 ATS integrations or 30 HRIS integrations to your customers, your customer would ultimately need to buy Zapier or Tray or Workato, and then go and build out each of those 30 integrations. And it's ultimately just moving from code to a UI. And so engineers actually prefer to just code. So so we we generally don't run up against those ones. They also just don't [15:44] >> go as deep with the data. You know, we're we're really covering everything that APIs cover. And even if we don't normalize something with Merge, we have we have tools that you can use to make it so that anything that's possible with a native API building directly, can do with Merge. [15:58] So if you succeed, you're making Tray and Workato irrelevant? [16:03] >> I I think that that's like I I think that, you know, it might be a little bit of overlap, but overall, it's just a different market and I don't think we're making them irrelevant. In fact, we also use one of those platforms for a different function internally that we, for piping Salesforce metrics essentially. [16:18] Interesting. And then interesting. And so how would I think about this, right? At Founderpath, we rely on Finch data for payroll account. Finch obviously allows us to just embed it and then our users can connect to like Gusto or any of those platforms. You were basically saying, Nathan, if you replace that Finch integration with Merge, Merge directly talks to Gusto and BambooHR and ADP and all those things. There's no need for Finch. Is that accurate? [16:44] >> Exactly, yeah. And we're all API based only. So we're built from enterprise from the ground up. We're built to scale up to enterprises. So all API based, no scraping. We're not doing things like that. And then again, a lot of the management tools as these issues come in actually, reference at Jumpstart, we would have sorry. Now Canvas, we would have issues come in and I would go into my spreadsheet and take a day off of engineering [17:06] >> days for each issue, because it was a context switch, they had to dive deep into the logs, figure things out. So all the tooling we built is to help manage that. Customer success can handle customer issues, not engineering. [17:17] Interesting. Very cool. Okay, last question. Obviously, when you're launching a company, one of the hardest conversation is Founder Equity. There's two of you guys, how'd you have the conversation? [17:26] >> Shensi and I have been best friends since college. It was an easy answer. We respect each other massively. We worked together forever. We did an equal split and we're really proud of that. [17:35] So now you each own like 40 or 37, 37 and Scott and the NEA have caught like 10 to 15%. He's the tiebreaker, [17:44] >> it's something like that. [17:46] What was your guys' last disagreement? Not with Scott, but you two and his co founders, maybe our product decision. [17:51] >> Oh, this is so interesting. Think, yeah. [17:55] I don't know if [17:56] >> I can think of our last disagreement. I would say we get along on a lot of things. I would say we occasionally disagree on certain factors, but ultimately we're very good at deciding who cares more about a specific issue after maybe a short argument. So I would say there's been nothing that's so memorable that I could bring it up. Do know what I mean? [18:13] >> That makes sense. [18:14] Yeah, let's wrap up with the famous five. Number one, favorite book. Oh, favorite book. [18:21] >> Oh my God, this is a tough question. I would say honestly, it's a lot of the Silicon Valley books more recently. Like I really loved Secrets of Sand Hill Road recently. [18:28] >> Yep. [18:29] Number two, is there a CEO or founder you're following or studying? [18:33] A founder that we're what? A founder you're personally following or studying. [18:37] >> Oh, yeah, many. Let me think here. We really respect the founders of Plaid. So yeah, I would say them, both of them. [18:46] Number three, what's your favorite online tool for building a business besides your own? [18:52] >> For building We love FullStory. [18:54] Is that a good one? That's a good one. Number four, how many hours of sleep do you get every night? [18:59] >> We think sleep is incredibly critical. I aim for at least five, but usually go for a six to seven. [19:04] At least five, Gil, come on, if you think sleep's critical, you gotta be getting seven, eight, nine, right? [19:09] >> Depends on the week. [19:10] Fair enough, fair enough. How old are you? [19:12] >> How old am I? I'm 28. [19:14] 28, last question. Well, actually what situation? Married, single, kids? I imagine single, right? I'm single. Yeah, okay, no kids. Last question, what's something you wish you knew when you were 20? [19:26] >> Take time to enjoy and learn your job early on. I think that like I was always in a rush to move on to the next better thing. And I think I should always be spending time living in the moment. [19:35] Guys, there you have it, Merge.dev. Again, integrate fast, integrate once it's sort of one API for HR, payroll, recruiting, accounting platforms. They just launched their paid plans two months ago, already call it sort of 40 to 50 customers paying sort of 500 to over $1,000 a month. They think they are on track to break a million dollars in ARR by the end of the year. We'll see what happens. Gil, thanks for taking us to the [19:56] top. [19:57] >> Thank you so much. [20:00] One more thing before you go. We have a brand new show every Thursday at 1PM Central. It's called Shark Tank for SaaS. 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 one [20:25] p. M. Central. Additionally, remember these recorded founder interviews go live. We release them here on YouTube every day at two p. M. Central. To make sure you don't miss any of that, make sure you click the subscribe button below here on YouTube, the big red button and then click the little bell notification to make sure you get notifications when we do go live. I wouldn't want you to miss breaking news in the SaaS world, whether it's [20:46] an acquisition, a big fundraise, a big sale, a big profitability statement or something else. I don't want you to miss it. Additionally, if you wanna take this conversation deeper and further, we have by far the largest private Slack community for B2B SaaS founders. You want to get in there. We've probably talked about your tool if you're running a company or your firm if you're investing. You can go in there and quickly search and see what people [21:08] are saying. Sign up for that at nathanlatka.com slack. In the meantime, I'm hanging out with you here on YouTube. I'll be in the comments for the next thirty minutes. Feel free to let me know what you thought about this episode and if you enjoyed it, click the thumbs up. We get a lot of haters that are mad at how aggressive I am on these shows, but I do it so that we can all learn. We have [21:27] to counter those people. We got to push them away. Click the thumbs up below to counter them and know that I appreciate your guys' support. Alright. I'll be in the comments. [21:35] See you.