How Netcore Cloud Reached $85M ARR Bootstrapped with 5,000 Customers and 123% NRR (Interview with Founder Rajesh Jain)

Introduction and What Netcore Cloud Builds

Nathan Latka

00:00Hey, folks. My guest today is Rajesh Jain. He's the Founder of Netcore Cloud, a global marketing technology company that offers AI powered marketing automations and analytics solutions. Rajesh, are you ready to take us to the top?

Rajesh Jain

00:12>> Yes.

00:12All right. So this is an interesting platform. We could say you're maybe one of the OGs in the marketing automation space. That means original gangster. So tell us what you're building. What are customers paying you for?

00:24>> Yeah. So we've got a full stack martech platform. I'll put it in comparison to what US companies do so it'll be easier for people to understand because we do a lot of things. We come from India. Emerging markets have been our playground so far and we are now working to expand in The US and Europe. At the lowest end, we have a communications layer, which is like Twilio SendGrid, API plus campaign management. Then we have customer

00:54>> engagement for B2C companies like what Braze offers. Then there is the experience layer, product experience, so nudges and AB testing inside there like Pendo, which does for B2B companies, we do for B2C companies.

01:12Yep. So it's like Braze plus Twilio plus Pendo.

01:16>> Yeah, Pendo for B2C. And then there is also search, so search personalization recommendation, a bit like Dynamic Yield and Nosto. We recently acquired a company for $100,000,000 basically invested and is one of the largest deals out of India in the SaaS space. It's a company which primarily operates in The US, a company called Unbxd.

01:43>> They essentially do search recommendations, so on-site search, exactly what Amazon does on its site when you do the search for other sites. B2C companies, B2C companies, retailers, they do recommendations and they do PIM, the product information management.

Nathan Latka

01:59Now, Rajesh, are you mainly selling to e commerce brands?

Rajesh Jain

02:02>> Oh, yes. All our customers are basically B2C companies globally, very big in emerging markets, so India, Southeast Asia, Middle East, and Africa. We've got now about 40 customers that Netcore has directly in The US and about 100 odd customers that Unbxd has in The US, so pretty significant presence now in The US also.

02:25How many total customers is Netcore working with, including Unbxd customers?

02:29>> Netcore totally has about 5,000 customers, but we have a few other products which basically add up to this. In the communications and martech space, we would have about 1,000 plus customers.

Unbxd Acquisition: $100M for 90% Equity

Nathan Latka

02:43I see. Very cool. Talk to me about the Unbxd deal here for a second. They had raised 14,500,000 from some VCs as well. When you guys put in 100,000,000, were you buying 100% equity or just the majority, 60%?

Rajesh Jain

02:55>> We bought 90% in the company. Founders own 10%, the remaining 10%. They continue to run the company. Pawan and Prashant, great team there. Investors are out. We are in and we'll work together. There's a great cross sell opportunity actually with Unbxd because Unbxd customers can now get the rest of our stack, so email engagement, etcetera. We can take Unbxd to our customers across India and emerging markets.

03:21Oh, 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 Founderpath. Check this out. I'll show you how you can access this in a second, but you log in, you connect

03:44your 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 Founderpath dashboard, this is all free by the way, is because depending on who's doing the buying of your SaaS company, you're gonna

04:08get 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 this is

04:30not built off random data. Again, you guys hear these interviews on YouTube. All these datas are built from real time valuation data points founder 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. Maybe you're

04:56going 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 Founderpath. 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

Nathan Latka

05:18if 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 jump back into

05:44the interview. Now just to, Rajesh, paint a picture here, this is a great setup obviously for those two founders, because now they're building with you and maybe they obviously have some equity in the combined company, but they had raised 14,500,000 total. Their last run was a series C in 2017 for 12,500,000. Now, if they were raising 12,500,000, that was probably at a valuation at around a 100,000,000. So now three, four years later, they're effectively selling for

06:06a 100,000,000. So this was not a big win for the VCs that had money on, right?

06:12>> I think VCs got a reasonable return on their investment.

06:18>> Actually, the way we got to look at it is that they had multiple rounds of VCs. Early VCs, of course, got a bigger multiple.

06:26>> Think for Unbxd, basically the advantage that Netcore really brings in is that we bring in additional capital, we bring in our capabilities, our customers across the region. And for their customers, I think the ability to actually have a fuller solution with what Netcore also does, email engagement. I

06:50>> think we are seeing this happen in the SaaS space, is that marketers basically over time will want to work with fewer vendors. So there's a consolidation which is happening.

07:00>> I think the other big thesis that we've been working on is really the big shift which will happen from ad tech to martech, and I can explain that.

07:08I would love to. I don't want people to get lost here though on the headline, which is you guys have some significant scale. You reported to the Economic Times, I believe last year that you broke a $75,000,000 run rate. Is that accurate?

Revenue Scale: $85M Standalone, Near $100M Combined

Rajesh Jain

07:19>> Yes. So we are ourselves at about 85 now and we had unboxed 10,000,000. So we are very close to a 100,000,000 ARR now and completely bootstrapped.

Nathan Latka

07:31That's my favorite part of this whole story. Completely bootstrapped. You should be on the cover of every magazine, on every billboard, people should be celebrating. When did you found the company? What year?

Company History: Founded 1998, First Exit India World

Rajesh Jain

07:40>> Okay. So I founded it twenty five years ago after I sold my first company for $100,000,000

Nathan Latka

07:47Wow.

07:48>> It was India's first internet portals basically targeted at Indians globally, especially in The US.

Rajesh Jain

07:55What was that first company?

07:57>> India World. India World.

07:59>> Yes. It a media business? We a family of internet portals.

Nathan Latka

08:06>> I set up India's first internet portals in March 1995. I started just around the time Yahoo and eBay did. So it was very early. I did it pretty much all from India And we got a very good exit when Satyam Infoway, which was listed on NASDAQ as Sify, bought my company for $115,000,000 primarily pretty much all cash in November 'ninety nine. Sold, I think at the right time just before the NASDAQ.

08:32Yeah, That's amazing. And were you the sole founder there?

The Proficorn Concept: Profitable, Private, Bootstrapped

Rajesh Jain

08:36>> Yes, we were. So India World and Netcore have one thing in common and you love this one. We are both what I call proficorns. So profitable, private, promoter bootstrapped, and highly valuable. Highly valuable excess of $100,000,000

Nathan Latka

08:49What was the word you just used?

Rajesh Jain

08:52>> Proficorn. So like unicorn, proficorn. So P R O F I C O R N.

Nathan Latka

08:58I love that. I'm stealing that, proficorn. I love that.

09:02>> Yes, proficorn. Absolutely, Nathan.

Revenue Milestones: $1M, $10M, $50M, $75M

Rajesh Jain

09:04Okay. So give us more history here. Dollars 95,000,000 run rate today, dollars 75,000,000 in 2021. What year did you break a million in revenue? You launched in 1998.

09:13>> Yeah. We've had a few pivots along the way. The first ten years, Netcore did not grow much. We hit about $1,000,000 I would say in 2007 or 02/08, thereabouts.

Nathan Latka

09:28>> We've basically got two streams. We have what we call the high margin business, the platform business. That's email, martech, and all the other things that I spoke about. That we sell globally. We also have an SMS business, which we only do in India. SMS, of course, is a little lower margin. The revenues are split between these two businesses for Netcore. SMS also is doing very well. Basically, we combine CPaaS and martech together. So like Twilio has,

09:57>> we don't do much of voice, but other than that all of the full stack basically. So the way I think of it is that the trend is really towards digital experience platforms really. Other than the content part, DXPs and big and emerging markets and now looking to grow of course more aggressively in US and Europe.

10:19Fill Okay. Out the revenue story though for me. So a million in 2018, what did you have in 2015 revenue wise? Do you remember?

Rajesh Jain

10:25>> Oh,

10:27>> '15, I don't remember.

Nathan Latka

10:30When did you break 10,000,000?

10:32>> Yeah, I think we would have been over 10,000,000. Yeah.

10:34Okay. And what about 2018?

Rajesh Jain

10:38>> 2018 would have been, I'd say about 50 odd million.

10:44Okay, so you had a lot of growth from 2015 to 2018. In three years, you grew from 10,000,000 to 50,000,000.

Nathan Latka

10:50>> Yeah.

Growth Drivers: SMS in India and Global Platform Expansion

Nathan Latka

10:51Drove most of that growth?

Rajesh Jain

10:53>> Two things. Basically, the big drivers have been that SMS grew in India and we also expanded the platform business outside of India. The challenge for us is that the Indian market is actually quite small. Even though the customer base is very large, companies don't pay a lot of money yet. The email market plus the martech business put together would probably be just about 150, maybe 200,000,000 across India and Southeast Asia. You have to grow, you've got

11:24>> to expand outside. Over the last three years, the real growth has come from our platform business and we haven't focused as much on the SMS business because SMS is low margin, a lot of operator involvement and we only do that in India but it's a profit margin business. But where we see the future growth coming really is, and of course the valuation of the business comes from the martech side of the business, email and the martech

11:48>> side.

Nathan Latka

11:49Now you said that you're eyeing $150,000,000 in ARR by 2024. I think you're going to beat that.

Rajesh Jain

11:57>> Oh, yes. Now with Netcore plus Unbxd together, I think we should be doing much more than that. We're also planning to do an IPO in India in about twelve months'time. Yes. We have 25% owned by employees. So I've got to make sure they also get some wealth creation.

Nathan Latka

12:14I love that. Okay. So the equity today, you own 75% employees own 25.

12:18>> Absolutely.

Fifteen Years of Profitability and the Unbxd Cash Deal

Rajesh Jain

12:19I love this. Okay. 75 is Rajesh. Okay, great. Then I guess take me back, profits are a beautiful thing. I rarely get to talk about them on the show though because so few people have them, so we should talk about them. So when you did 75,000,000 last year, how much profit?

12:36>> So our profit margins have basically been about 17% to 18%.

12:42You said 17%? You profited about 13,000,000 last year, something like that. 1,000,000 a month.

12:51>> Yeah, million a month is what we've been doing. That's how the internal accruals have been, Nathan.

12:57The internal accruals

13:00>> to help us do the acquisition. So the profits basically we've used to invest into Unbxd.

13:06Yep. Now, you go raise debt to do that Unbxd deal or it was 100,000,000 of your own money?

13:11>> We are debt free, zero debt.

Nathan Latka

13:14So where did you get 100,000,000 from if you're only profiting like 10,000,000 a year? Does your bank had 100,000,000 in it and you use it on Unbxd?

Rajesh Jain

13:20>> We've been profitable for fifteen years.

Nathan Latka

13:23Wow. Wow. So before Unbxd, how much cash did you have in the bank? Like 120, 130,000,000?

Rajesh Jain

13:29>> Yeah, just over 100. So plenty.

Nathan Latka

13:32Okay. That must be a little nerve racking, right? You're spending almost all of your cash balance on one deal?

Rajesh Jain

13:38>> Yeah. Basically, we look at is Unbxd is a great asset.

13:45>> I think now that we've got the critical scale, it also allows us to tap the public markets. We could have gone public in India probably even a year earlier, but what I wanted was a story which is a global company, not just India and emerging markets, but also with a significant presence in The US. That's what Unbxd gives us. It gives a fuller stack also.

14:15>> There's going to be more consolidation, so we want to look at funds raised from the IPO. We get a currency plus we get cash both for further consolidation as we go forward.

14:26Rajesh, I imagine a lot of people have tried to buy you. Don't tell me who, but what's the size, the dollar amount of the most recent acquisition offer you turned down?

14:37>> We haven't got too many acquisition offers, Nathan.

14:41Why not?

14:43>> Yeah, but see, companies like us should basically, I'd say, profitable companies, not too many in this space.

Nathan Latka

14:51>> Emerging markets are going to grow very well going forward. We've got some great innovations coming up, email 2.0, what we call the martech 2.0 stack also, which basically brings in a lot of AI for predictive segmentation, etcetera. Email 2.0 brings in some very interesting ideas to transform email, which has been around for a long time. I'd say that companies like ours should basically be a mix of CPaaS and the platform business. I'd say we'd probably be

Rajesh Jain

15:21>> valued anywhere between 6 and 10 times revenues and maybe with some bonus for being profitable.

15:28I know you deserve a bonus. Maybe 800 million, 900 million dollars valuations. If you IPO in twelve months, you could IPO at like a 1.5, 2 billion dollar valuation, something like that.

15:37>> Hopefully, I don't want to preempt the markets, you know how they've been.

15:44>> I think for us the intermediate valuations are not that critical because I really want to build it as Jim Collins puts it, an enduring great company. We've been around for twenty five years and we want to be around for another one hundred years.

Net Dollar Retention, Churn, and Expansion

Nathan Latka

15:57I love that. Talk to me a little bit about churn. What's your net dollar retention today?

Rajesh Jain

16:02>> About 123%.

Nathan Latka

16:05How much of that is coming from expansion?

Rajesh Jain

16:11>> I'd say about 13% to 15% in expansion.

Nathan Latka

16:15Well, I guess, sorry, to get net dollar retention, subtract your churn, you add back your expansion. Shouldn't your expansion be more than 23%?

Rajesh Jain

16:23>> No. Let me correct that.

16:28>> I

16:31>> thought what you meant was the growth from existing accounts.

16:35Yeah, you're talking NRR, right?

16:37>> Not the GRR number.

Nathan Latka

16:39NRR. NRR would be roughly about 30%.

Rajesh Jain

16:42>> We have churn of roughly about 5%, so 5% to 7%.

16:45Monthly? No, annually. Annually. Okay. Got it.

16:49So you're churning 5% and you're expanding like 30%. So net retention is like 125%, something like that.

16:55>> And our platform business is growing totally about 45%, so you add another twenty five percent and twenty plus percent in new customers.

Nathan Latka

17:03I see. And Rajesh, how many folks are full time on the team today?

Team Size, Engineers, and Sales Reps

Rajesh Jain

17:06>> We are seven fifty people in Netcore, another 150 people in Unbxd.

Nathan Latka

17:11Okay. How many engineers total?

Rajesh Jain

17:14>> Engineers is about 175.

Nathan Latka

17:17Wow. Okay. How many sales reps that carry a quota?

Rajesh Jain

17:20>> That's 175 in Netcore and add maybe another 60 in Unbxd. I'm going to add now both the companies. We still run them independently.

17:27Okay. How many sales reps with a quota?

Nathan Latka

17:30>> Sales reps would be about 100 plus.

17:33Do they all have a quota?

17:36>> I would say 65 to 70 would be a quota. What you also got to remember in Netcore is we've got two smaller businesses also which have been our legacy businesses. They also have about 100 plus 125 people working on those. We have essentially Linux based and we resell Office and Google Gmail in India. That's been a legacy business. We have also our own Linux based server. We also do some amount of acquisition, so ad tech type

18:08>> business. It helps us get into companies. The mail server business has been around for a long time, so we basically resell security and infra solutions for companies in India largely.

Rajesh Jain

18:19You have huge penetration in India, right? I think you said 75% of India's email traffic and 50% of Asia's email traffic goes through Netcore Cloud, right?

18 Billion Emails per Month and Market Position

Rajesh Jain

18:27>> Absolutely. We do 18,000,000,000 emails a month,

18:33>> which would be among one of the largest ones. We are probably one of the few independent email companies left in the world given that most of the other companies have been acquired.

Nathan Latka

18:43Emails per month, you said, right?

Rajesh Jain

18:45>> Emails per month. Yeah, 18.

Famous Five: Books, Sleep, and Lessons Learned

Nathan Latka

18:47Yeah, it's incredible. All right, Rajesh, heck of a story here. Let's wrap up with the famous five. Number one, what's your favorite book?

Rajesh Jain

18:54>> Favorite book is Jim Collins, the book which came out about a year and a half ago, Beyond Entrepreneurship 2.0.

Nathan Latka

19:01Number two, is there a CEO you're following or studying?

Rajesh Jain

19:07>> Essentially, I think couple of our competitors, basically, I think Twilio has done a fantastic job. There's a lot to learn from Twilio and, of course, Salesforce. Both the CEOs, I think, have a lot to teach us on how to build very big SaaS companies.

Nathan Latka

19:25Rajesh, number three, besides your own, what's your favorite online tool for building Netcore?

Rajesh Jain

19:30>> Online tool for?

19:31Nathan, I

19:32missed Online tool that you use to build the company.

19:35>> Oh,

19:38>> we use Salesforce a lot internally and Freshworks.

19:43>> Yep, for Girish.

19:44Girish, a nice comp for you in the public market. Number four, how many hours of sleep do get every night?

Nathan Latka

19:51>> I get about six point five to seven hours of sleep every night.

Rajesh Jain

19:55What's your situation?

19:55>> I wake

19:55>> up at 04:30, so I sleep early. So this is late for me by my standards.

19:59Oh, amazing.

20:00>> What's your situation?

20:01Married, single, kids?

20:02>> Okay, married for twenty nine years and have a kid who's 17 years.

20:08Okay, so one kid?

20:09>> One kid.

20:10Yes. Okay. And how old are you, Rajesh?

20:12>> I'm 54. I'll be 55 in August.

Nathan Latka

20:1554 years young.

20:16>> Last question. Something you wish you knew when you were 20.

Rajesh Jain

20:21>> Okay. I wish someone had told me how important things other than engineering would have been, especially economics, psychology. A lot of these disciplines, the liberal arts basically, are something I think I realized the value of liberal arts pretty late in life, so I wish I had known that when I was 20.

Nathan Latka

20:41Guys, we found a gem today. It's so rare. A profitable company doing almost $100,000,000 in revenue launched in 1998. They broke $1,000,000 revenue in 2008, 50,000,000 in 2018, dollars 75,000,000 last year. They did their first acquisition, paid over a $100,000,000 of cash, which was about 90% of their total cash in a bank at a point. A big bet added on $10,000,000 of revenue, but it helps Rajesh build out a full stack and move into The US

21:04market with an acquisition company called Unbxd. They're looking at an IPO in the next twelve to twenty four months. We will see what happens. Rajesh, thanks for taking us to the top.

21:11>> Thank you very much, Nathan. Great conversation.

21:15One 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 alive. It is fun to watch every Thursday one

21:40p. 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

22:01an 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 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

22:23people 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

22:42to 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. All right. I'll be in the comments. See you.