Naehas Revenue & Funding (2023)

[00:00] As Rob launched his first company, raised $15,000,000 of equity and sold it to RR Donnelly, then went into about, call it, 2012 time frame launched Nehaas, which is serving financial institutions, helping them to launch customized offers to consumers faster in a more automated way. They broke a million dollars of revenue in 2013, 10,000,000 in 2019, last year did 35, and today at a run rate of about $40,000,000. He's done this basically bootstrapped, caught 2 to 3,000,000 [00:24] raised early on. Investors today on 17%, ESOP pool of 14%. He owns the rest and he's really serving 20 specific financial customers. Several of them pay more than $10,000,000 per year. So really deep, not wide. He has said though moving forward, he'd maybe look at the other hundreds of financial institutions with 10,000,000,000 or more in AUM. We'll see what he does next. Hey, folks. My guest today is Rab Goebel. He's the founder of multiple enterprise software [00:48] companies including Xenarate and Nehaas, which serves some of the biggest brands in financial services. He's got a MS from Rochester Institute of Technology and Computational Imaging where he was the president's scholar. He's also served on the board as a board member at AL for All. Rab, you're ready to take us to the top sorry. AI for All. Rab, you're to take us to the top? [01:06] >> Of course. Of course. [01:08] Very cool. So what is Nehaas? Give me a customer story. How's the customer use you? [01:13] >> So the best story we can use it is you pick any of the top 10 banks in the country. When they want to send a new product, create a new product, or send a new offer to you, we are the we are the platform they use to create the new product or or pricing or a specific offer for a consumer. It is approved in our platform. The content for that offer is created in our platform. It's [01:47] >> delivered into the channel using our platform. And then when a customer actually takes advantage of this product or offer, we are the platform that manages whether they should get the credit once they've achieved their goals. So a good example would be an in financial services, an offer might be, hey. I'm gonna give you $500 [02:14] >> if you open the Right. [02:15] Instead a conceptual example, I mean, is there a case study you've publicly published so we can actually talk about a real example to help people understand what you do? [02:23] >> Yeah. Of course. So let's use Bank of America as an example. [02:28] Okay. [02:30] >> Right? So when you're talking about Bank of America as example, they says, I wanna create a new product or a new offer. Right? And an offer would be they would go to the market saying is, hey. If you open up a new checking account or you open up a new credit card account, I'm going to give you [02:53] >> $500. As long as you open the checking account, you move $10,000 into the checking account, and you connect it to your direct deposit, as an example. So somehow they have some place they have to create the offer. They have to create the content associated with the offer. They make sure that the offer meets all the compliance requirements. Right? Then they have to deliver this product or offer into the marketplace. And once somebody takes advantage of this [03:24] >> offer, then they have to make sure that you meet all those requirements before they give you the $500. [03:30] Understood. You have [03:31] >> the analytics engine in the back, which actually takes all the transactional data that's coming in, evaluates it, and then tells you. [03:39] That makes a lot of sense. Okay, that's a great case study. So you're focused on financial firms, banks, you know, especially some of the top 10 banks in the world. Help me understand what these banks pay on average or any customer pays on average per month or per year to use your technology. [03:53] >> It is literally, I mean, we are the infrastructure behind the customer experience. So we have customers who pay us anything from a million dollars to 10,000,000 in ARR. [04:05] Okay. So you have a couple customers paying you more than $10,000,000 per year? [04:09] >> Yes. [04:10] Okay. So so like two or three pay more than 10,000,000 per year? Or is it just like one one one use case? [04:15] >> No. This is if they're if they're using a variety of use cases on our platform. Right? So our platform focused on financial services. We have a variety of use cases on a platform. So if a customer using a lot of varieties of use cases, it can be $10,000,000 a week. [04:30] Oh, what's going on there, YouTube? Good to see you guys. Now imagine this, you love watching these interviews with SaaS founders, but imagine if we took all of the valuation data out from over 2,807 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 [04:53] connect your Stripe account, you see your valuation real time. You can see what it changed over the past eighty eight days and even set goals for valuation this year. Now the secret evaluation is there's many different ways to value a SaaS business. So the reason you're gonna see three or four different valuations inside of your Founder Path dashboard, this is all free by the way, is because depending on who's doing the buying of your SaaS company, [05:18] you're gonna get a different valuation. A VC is gonna pay a different valuation. Private equity firm is different. If you're gonna 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 [05:39] 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, 1,200,000 seed round, 3.7 raise. They sold 22% of their business. Go in here and filter by the event. Maybe you only wanna see companies that have sold the whole business. Well, here are a bunch that have been acquired, the valuation and the multiple. [06:05] Maybe you're going out right now and you're raising your seed round. We'll 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 dataset of SaaS valuations than what you can get now inside of Founder Path. And we're thrilled to bring it to you. All We're right, gonna go back to the YouTube video here in [06:27] a second, but if you wanna check this tool out, if you wanna jump in and sign up, you can check it out for free to get your valuation at this link. This link, founderpath.com/products/valuations. 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. Alright. Let's [06:53] jump back into the interview. I mean, look, it's it's always impressive when a founder understands how to drive multiple accounts paying more than a million dollars of AOR. When we had Henry Schuck on, he talked about the ZoomInfo IPO. He specifically talked about his $100,000 accounts and his million dollar accounts. So if you look at if you look at Nehaas today and you look at how many customers are paying you, not could pay you, but are [07:12] paying you a million dollars per year, is that above 10? [07:15] >> Yes. It's all it's almost all our customers pay us million dollars a year. [07:19] Okay. So you you are a low volume, high high high ARPU go to market motion? [07:24] >> Yes. Yes. We we we are focused on the top 200 to two fifty institutions around the world. [07:33] Yep. Yep. Okay. Got it. So how many, I guess, many how many paying customers you're working on today? We're talking about a handful, ten, twenty? [07:40] >> We don't disclose the number of paying customers at this time, right, to be able to do that because we are doing this. But but you can assume, right, based on our revenue that it's a it it it's right now, it's in the tens, not the hundreds. [07:54] Got it. And what's your revenue today? [07:57] >> Our revenue is close to $40,000,000 in ARR. [07:59] And where were you exactly one year ago, so we can get a growth rate? [08:03] >> We are growing about 25% year over year. [08:07] So you were doing about 35,000,000 annualized in October last year. [08:11] >> Yeah. And we've been cash flow positive, EBITDA positive in the 20% range for a very long period of time. [08:22] Oh, that's a congratulations. That's huge. Nice work. [08:25] >> Yeah. [08:26] So so clear, that means you did about $6,000,000 of profits last year. Bottom line is okay. Wonderful. Are you bootstrapped as well? [08:33] >> We are. I'm the main investor in the business. In terms of doing this, we have not gotten any outside. We have any any outside institutional investment. We have some angel investment, but it's a very small amount. I think we'd only raise about 2 to $3,000,000. [08:47] And what year was that? [08:49] >> It was almost ten years ago. [08:52] When did you launch the business? What year? [08:54] >> The business was launched about twelve years ago. [08:57] Okay. So '20 what is that? 2010, 2011? [09:00] >> Yes. Somewhere in that range. I don't even remember specifically the date. [09:04] Okay. Got it. And then you raised 2 to 3,000,000 in a in a seed round back then. Most folks, you know, are selling, you know, call it 25% in their seed round. Is that what you did back then? [09:13] >> No. We raised we raised very little in our seed round. It was, like, $300,000 or something of that sort. [09:18] Ah, okay. [09:20] >> So so I think and then we raised a little bit along the way as we did this. So so, obviously, the investors own a very small portion of the business. [09:29] I mean, what? Like, 20%, though. Right? [09:31] >> I think they own like, I think less than around 15 or seven around 17%. [09:37] Okay. Got it. And and I guess, were you already independently wealthy before this? Did you have an exit or something? [09:43] >> I've I've had I've I've done reasonably well. Yes. I've done reasonably well. [09:47] Well, what's your story though? Mean, did you have were you a really highly paid consultant or did you have another software company you sold or how did you build your wealth? [09:53] >> I I've had software companies I've sold. I did some investments that kind of worked out reasonably well. Right? So so over the years, I've done well. So that has allowed me to now invest in a few ideas that I find super, super interesting. Yep. Right? [10:10] Okay. That makes a lot of sense. I wanna talk more about where you see this space going, specific specifically for the financial institutions that you're working with. I imagine you have a thesis on that. Before we do that, though, let's just spell out a little bit more of the backstory. How many years did it take you to break a million dollars of revenue? [10:23] >> I think we were in million dollars of revenue in year two. [10:26] Okay. So 2013, you did a million of revenue. [10:29] >> Oh, yeah. [10:30] Okay. Do you remember when you broke 10,000,000? [10:33] >> I think we grew initially it was an interesting cash flow business. Right? So we kinda grew, like, we kinda grew about, like, 30% year over year for a long period of time. Right? And the company just kinda ended up growing. In fact, the interesting story about this company is that until last year, we didn't even have a Salesforce. It was all word-of-mouth. Last year was the first year we actually added a Salesforce. Mhmm. Mhmm. [11:01] That's great. And how did you so teach us then. How did you get your first couple of customers? How did you hit your first million of revenue? [11:06] >> I think we had we had one of our kind of the top four banks kinda came to us. Right? We were we were working on some very interesting software related to landing page optimization. And one of the larger institutions came to us, and they thought that the software could be used to really cut kinda manage personalization at scale. And we worked with this institution to actually build out our first [11:33] >> the first piece of functionality that they were able to deploy at scale, and that allowed them to go from something like 800 offers to basically, like, 10,000 offers in the marketplace. [11:46] Mhmm. [11:47] >> Right? So the so the so the real story behind this company is is generally financial institutions are very behind from a personalization and customer experience perspective. [12:01] Perhaps, sorry, just a moment though, a big bank doesn't just come to a startup and say we wanna use you. Okay? So you're you're making this you're I wanna make sure you're not putting a gold ban on this and making it sound way easier than it was. You had sold a company previously to R. O. Donnelly back in 2010, and it looked like you were already in this space a little bit. Did you already know this [12:18] bank from NimbleFish? [12:20] >> Yes. Yes. I I I I have had relationships with these financial some of these financial institutions for a little while. Yes. Yes. [12:27] So were they a were they a paying customer at NimbleFish? [12:31] >> They were not a paying customer, but they've heard about me at that time. Heard about us, me at that time. So they were looking for a solution and and they were very interested in the technology I was developing. [12:40] So when I read the, my research team read the explanation of what NimbleFish does, it's very similar to what you're doing now, which is you're exclusively focused on financial, you know, the financial sector. So if you were gonna go right back into the space, why sell NimbleFish in the first place at all? Why not just keep building it? [12:55] >> Great question. So NimbleFish was very focused on the production piece. So this company is not like NimbleFish at all. Right? They were not [13:02] mean production piece? [13:03] >> Like actually doing the content production of getting a direct mail piece out or an email out. Right? Like what Salesforce or something goes for. Right? There's a huge amount of process ahead of the production piece, which is like, we are the system of record for products. Right? We are the system of record and these institutions for offers. We are the system of record for their compliance, for their disclosures. [13:27] Mhmm. [13:28] >> So we manage now their whole end to end process. Mhmm. Mhmm. Right? So it's a very different model. Right? Think about think about us being the ERP type of software for the customer experience. [13:40] Yep. Yep. [13:42] >> Right? Other otherwise, these financial institutions would not pay the money they pay us just for the production piece. [13:51] Mhmm. Mhmm. Okay. That makes sense. Now you found when did you found NimbleFish? What year? [13:57] >> I don't even remember. I think that was somewhere in the early two thousands. [14:03] Right? I have I have 2004, but you're you should know better than me. [14:08] >> You know, I'm horrible at dates, right? As an entrepreneur, they seem to just blend together, right? I get excited about the businesses and I don't even remember these dates. In fact, one of my businesses just got like some secondary liquidity, ZenRate, we did some secondary liquidity and I've already forgotten. I should have remembered when I have these big payouts, but don't seem to remember those exact dates. [14:36] How big was the payout? [14:38] >> The payouts have been in tens of millions of dollars, right? [14:42] And why was the right time, why was now the right time to do a secondary at Xenarate? [14:48] >> We wanted to get, like the company's been kind of growing a 100% year over year. It was important to kind of get the right [15:03] >> set of talent around the table that can help scale it to the next level. I think the best way I explain this is my skill set is kind of the 0 to 10,000,000, Right? I'm really good at the 0 to 10,000,000 range. And then I think the the people with better expertise that are kind of in the 10 to $100,000,000 range. So so for me, sometime it's good to kind of bring investors along that can help [15:34] >> you kinda scale to the next level. [15:37] And and to generate, are you referring to the round that was done back in June. [15:40] >> Right? The secondary then? [15:41] Yes. You said that secondary there was tens of millions? [15:44] >> Yeah. [15:45] I I guess what's not being reported? Because the seed round there is being reported as a 15,000,000 round by Volition Capital. So how was their tens of millions of secondary if the total round was 15,000,000? [15:54] >> That's the only thing we publicly have disclosed. [15:57] Okay. So Volition put more money on top of that that maybe wasn't published that it was secondary for early investors and employees? [16:04] >> Yeah. I think I as as I said, right, that that was the one we publicly disclosed. [16:09] Okay. Got it. And what is your I understand you're an investor there or I mean, how do you work with the founding team over there? I think Brian Brian's leading that company. Right? [16:18] >> Yeah. So I'm I'm, at this time, the executive director. So I'm very much involved, and I kinda help kinda drive the product strategy there. [16:27] Mhmm. I'm just trying to reverse engineer the math of how you as an executive director, as a non founding member would have enough equity to be able to take advantage of a secondary to the tune of generating tens of millions [16:36] >> Because I was yeah. I I was I was the major investor until at that time. Right? I was the majority shareholder. [16:43] Okay. Oh, so you own more you own more than 50% of the company? [16:47] >> I I I still own more than 50% of the company. [16:50] Oh, got it. So you you Brian wasn't really a hired gun then for you? [16:54] >> He was he was he came in, and and I cannot and he was one of the cofounders, and he had a portion of the company, but most of the majority of the company was to loan [17:02] >> by me. [17:03] How did you convince him to join you? I mean, if I'm Brian, I'm going, I'm gonna go do my own thing. I don't want Rab to own, you know, 90% and I only own 10. [17:10] >> Because I have all the infrastructure in place to kind of build the product and and the infrastructure, and he could come in and just be the CEO to drive drive the business. [17:24] Uh-huh. Uh-huh. He he was also COO at Neha's for a bit. So was this a Neha's spin out to some degree? [17:31] >> He he helped Nehos initially to kinda get do some work, and then he wanted to kinda go focus on my structure allows me to actually go out and allow me to go out and build new businesses as part of my overall structure. So he ended up kind of wanting to be the co founder and CEO of ZenRite. [17:49] Uh-huh. Uh-huh. I'm just I'm trying to figure out how someone like him I mean, graduate, you know, he was from Forbes sorry, from Bank of America for many, many years. And I mean, really well, I just I mean, I'm trying to figure out how you convinced him to work for you with such a small equity slug going into it. And your answer is you just had a lot of the stuff already in place. Yes. Yeah, interesting. [18:12] Okay, all right. Well, and I guess why was now, I mean, you're already wealthy. So why do a secondary when equity markets are generally compressed? People would say that's pretty bad timing. [18:22] >> Well, I think in terms of doing this, first of all, we got a very good multiple on the business, right? [18:30] I'm not asking for your data, but what would you consider generally today a [18:33] >> good multiple on a SaaS business, B2B? A good multiple on a SaaS business, b to b, I think, Nathan, it all depends on how how what the growth rate is Mhmm. Mhmm. Type of the business. Right? If if if you're if the business is growing 100% year over year, I think getting multiple in the double digits is not [18:57] >> and it it's it's reasonable. It's all dependent on the growth rate. [19:00] Mhmm. Mhmm. [19:01] >> And how efficient is the growth rate? [19:04] >> Yeah. So, I mean, was Xenaray growing more than a 100% year over year? Yep. [19:07] I see. Okay. Got it. [19:08] >> So, I mean, fair to say something between like a ten and thirty x multiple on that secondary? [19:13] Yes. I see. Interesting. [19:14] >> Just to be clear, that is completely separate in terms of our product use case than Nehaas. Right? [19:19] >> Yes. It is. [19:21] Yeah. That's a simulation training platform. Do you sell that platform also to financial firms? [19:26] >> We sell it for that goes across in multiple horizontal markets. [19:30] I see. I see. I see. Okay, so to Neha. So you break a million dollars of revenue back in 2013, is it what your first $10,000,000 year is what twenty eighteen, twenty nineteen? [19:44] >> The first $10,000,000 I think, [19:49] >> I'll have to look it up. I'm not specific. As I said, the company kinda ended up growing about 30 to 40 between 20 to 40% year over year depending on what the year was. [19:57] Yeah. That that will put you at about 10,000,000 run rate in around 2019. I'm not pinning you to that, but it's somewhere around that year. Right? [20:02] >> Yes. Yes, yes. [20:03] Okay, interesting. And then I guess, how have you [20:08] Where How are you growing the business today? I mean, is such an impressive story that you've done this bootstrap. People are gonna wanna learn. I mean, how did you get enterprise clients so quickly? How do you get individual customers paying more than $10,000,000 per year? [20:20] >> So I think, so first of all, right? I mean, you want to build such a strong relationship within these enterprises, right, that they come to you with their problems. Right? We didn't get to a $10,000,000 ARR business with one of our clients because we could just do one use case. Right? The trick behind this is if you solve the problem in a way and they feel that you are a true partner of theirs, right, they will [20:56] >> come to you with other problems they want to solve for you, right? I mean, IBM at one time kind of created that playbook, right, where [21:10] >> what what was the saying, right, before before they lost their way is like, you you you never got fired for buying IBM. Right? So once you build this level of trust within these large enterprises and take care of them, they will come to you to solve more and more of the problems. So then as an entrepreneur, you need to decide, are you going to build a vertical SaaS company? Where you're to invest more in multiple product [21:39] >> strategies? Or are you going to go build a horizontal SaaS company when you're taking one product out to multiple folks? Right? If you get your business model right and if you're gonna build a vertical SaaS company, well, then you need to be able to invest in multiple use cases and multiple products that go across the whole [22:04] Stack. Yep. [22:05] >> Stack. Like, across the whole stack. Right? That's the that's the only way to do that. So so partly, I think it's like you pick the right business model. Once you pick the right business model, then it comes down to is, are you gonna create the right infrastructure in place and stay true to your business model? [22:25] Right? So you're moving forward is gonna be to go deeper on your current 20 customers versus trying to go get 2,000 new customers. [22:32] >> Well, and get more customers like those. Mhmm. [22:36] Right? But there's only so many Fortune 100 companies, there's a 100 of them. [22:39] >> Well, they are actually, they're actually, you don't have to go out to Fortune 100 companies, right? You're, when you go into a financial services space, right? You can go to companies as low as 10,000,000,000 in assets. So we are not going after thousands of companies, but there are hundreds of those institutions. They're in the hundreds to a thousand institutions on a worldwide basis that [23:01] >> are Understood, our that's great. [23:02] I just realized I'm enjoying this so much we've run out of time. So just some rapid fire quick stuff here. Phil, if you can fill up the rest of the TAP table here. Have you set up an ESOP pool for your employees or no? Yes. 10%? [23:14] >> We are close to 14%. [23:15] Oh, that's great, you're generous. 14% there, investor 17% and you own the rest, right? [23:20] >> Yeah. [23:21] Amazing. Okay, and then you already told us about profitability, which is great. How many folks are full time on the team today? [23:26] >> I think we have close to two ten. [23:29] Wow, okay, Very cool. This is great. Let's wrap up here with the famous five, Rob. Number one, your favorite business book. [23:36] >> Ah, my favorite business book. [23:42] >> I'm trying to think is what was, what would be my favorite business book that I have? Or the one [23:47] I you're reading [23:50] >> wouldn't call it the one I'm reading right now is my favorite business book. I think my favorite business book has to be [24:00] >> the art of hiring. I think I'm trying to figure out who, how to hire well. I don't remember exactly the name of the book, but [24:09] That's okay. [24:10] >> The Art of Hiring, rapid fire ones. [24:12] Number two, is there a CEO you're following or studying? [24:16] >> CEO I'm following or studying, yes. [24:21] >> Peter Glassner at Veeva. Number He's done an amazing job, dollars 4,000,000 in capital and build I mean, what an amazing story he is. So he's probably the CEO I look to from a vertical SaaS perspective. [24:36] Number three, what's your favorite online tool for building Nehaas? [24:40] >> My favorite online tool for building Nehaas is probably Google. [24:47] Number [24:48] >> I'm not sure if I have a if I have a specific site or anything that I go to. [24:52] Number four. How many hours of sleep do you get every night? [24:55] >> Oh, I got I get a good seven to eight hours. [24:57] And situation? Married, single, kids. [25:01] >> I am I'm married with a with a daughter who just graduated proud dad graduated from MIT, and she's working for a quant hedge fund in New City. [25:11] Oh, very cool. Very cool. And how old are you? [25:14] >> I am 56. [25:15] Grab, take us home. Something you [25:17] wish you knew when you were 20 years old. [25:20] >> Something I wish I did when I was 20 years old or new. [25:24] Something you wish you knew. [25:28] >> You know, it's never as good as it seems and it's never as bad as it seems. Like my favorite saying to people is that reality will assert itself to acknowledge it early, but most cases of building any company is learning to auto manage your emotions. For the world, world doesn't change as much as you think it really changes. [25:52] Guys, Rob launched his first company, raised $15,000,000 of equity and sold it to RR Donnelly, then went into about caught 2012 time frame launched Nehaas, is serving financial institutions, helping them to launch customized offers to consumers faster in a more automated way. They broke a million dollars of revenue in 2013, 10,000,000 in 2019, last year did 35 and today at a run rate of about $40,000,000. He's done this basically bootstrapped caught 2 to 3,000,000 raised early [26:18] on investors today on 17%, ESOP pool of 14%, he owns the rest and he's really serving 20 specific financial customers. Several of them pay more than $10,000,000 per year. So really deep, not wide. He has said though, moving forward, he'd maybe look at the other hundreds of financial institutions with 10,000,000,000 or more in AUM. We'll see what he does next. Rab, thanks for taking us to the top. [26:38] >> Alright. Thanks, Nathan. Talk soon. [26:41] 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 1PM [27:06] Central. Additionally, remember these recorded founder interviews go live. We release them here on YouTube every day at 2PM 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 an acquisition, a big [27:28] fundraise, a big sale, a big profitability statement or something else. I don't want you to miss it. Additionally, if you want to 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 are saying. Sign [27:50] up for that at nathanlakka.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 to counter those people. [28:09] 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. See you.