How Onfleet CEO Khaled Naim grew to $35M revenue and 900 customers in 2024.

hello everyone my guest today is khalid naim he's the ceo and co-founder of a company called on fleet the world's fastest growing provider of last mile delivery management software all right kyle you ready to take the top let's do it all right man so this is a space people would think and assume has has benefited from cobit people need more help delivering everyone's you know ordering online things are delivered are you seeing a spike definitely yeah i mean you know as you can imagine uh retail is going through a massive sort of transition to online delivery focused um models so yes we we absolutely are so can you help people describe like what is the use case been especially over the past three months how are people using on fleek can you name a company um yeah so drizzly we announced recently they're an alcohol delivery service they've always been focused on delivery but you know many retailers are basically people use onfleet to deliver goods locally so our customers are companies that have some sort of the last mile delivery operation and they use our software to help them manage their fleets of drivers so routing dispatching real time tracking analytics proof of delivery customer facing communication so you know any retailer that's um you know looking for new ways to distribute to get their goods out to their customers can benefit from you know creating a pool of drivers and using on fleet to deliver to their customers so are the pool of drivers on your payroll full time are they contractors are on your cut or are they on your customers payroll full time customers payroll or they are contracted as a as a third-party courier so we also allow for businesses to work with third parties and use on-fleet as kind of a collaboration tool or orchestration layer to interact with that third party so they can pass the work over the third party courier company executes the work and then you know the the retailer gets all of the data the visibility as if it were their own fleet you launched this company back in 2015 were you delivering were you hustling and hustling and delivering yourself and had the idea or what gave you the idea no that's not how we got started we got started we were actually originally down at stanford working on location-based services technology so we were targeting emerging markets at the time this is back in like 2011 helping people that lack functional street addressing systems in their countries to communicate locations with delivery services that's how we got started so we we created a simple web app that allowed anyone in the world to create a url that represents a physical location so that was kind of uh we called it adi and addie was the kind of the the the sort of inception of on fleet happened um as we were building it we sort of identified that these companies that we were talking to for for addie just didn't have any technology um on the back end they weren't they were managing their fleets with pen and paper chat apps phone calls text messages and meanwhile here you know we were in silicon valley and saw all of these companies emerging around us that were basically just using smartphones to better manage fleets of drivers and we saw an opportunity to build the infrastructure for that kind of emerging world and and walk us through customer growth so i remember i mean you've been on a couple of times back in 2017 you shared you'd broken 300 customers in late 2019 or september you said about 500ish customers i was about to almost a year ago now what are you at today today we're close to 900. we're around we're around around 900 right now actually and they're all like do they all fit the persona of drizzles of drizzly drizzly sorry no uh no it's close come on give me credit yeah um definitely not drizzly's you know kind of a modern um you know new consumer-facing like direct-to-consumer delivery service for alcohol but we have customers that are more traditional that have brick and mortar locations total wine and more is an example in that industry their total line what total wine and more they're an alcohol the largest independent uh retailer of fine wines and spirits in the country um a gap you know more traditional sort of retail uh sweet greens so we work with restaurants as well wait how does gap use you so gap in some of their international markets they actually have fleets of drivers that are doing same-day delivery so they offer same-day delivery in some of their international markets and they use that fleet and that fleet that they use to do those deliveries is powered by oncleed interesting okay so using the sweet greens example i mean i'm just thinking well wait why the heck would sweet queens use on fleet when they've got ubereats and doordash and all that and the only answer is the margin profile using you is much better for them yeah great point so they do also work with ubereats um and maybe others as well but i know ubereats and they so a lot of retailers a lot of restaurants are adopting a hybrid model where you know they still there is sort of omnichannel right they need to take orders and from however they can um especially now and they but but because of the you know the margin profile of having their own drivers especially if it's a large order like a catering order um then you know it makes sense to have their own fleets of drivers and to use on fleet to manage those workers the the cost is just is a lot lower when when you're talking about a large order so can we just role play for a second i'm sweet green i have a new 100 order i'm gonna use on fleet can you sort of build a little mini p l for us well so the biggest cost is going to be the driver right so you have a driver on payroll um depending on how you know your location and how you the driver is going to be the biggest uh cost usually they're bringing their own vehicle um in this you know in this day and age with kind of the gig economy drivers you know show up with their own vehicle so you're not leasing or paying for that vehicle or dealing with maintenance um if you look at the p l for like uh you know the trucking industry those are big line items there's fuel costs there's vehicle leasing maintenance et cetera and the gig economy sort of local last mile delivery um typically the largest cost is paying for the driver so say you know 15 20 bucks an hour i got that but what is on fleet take out of 100 order so we don't take a margin so that's the nice thing about on fleet is we charge you based on the feature set that you need within the software it's a sas model so we talked about this last time but it's you know depending on the feature set and the task volume so we do you know charge you based on the delivery volume but we don't care if you're delivering something for ten dollars or a hundred dollars yep yep this is i wanted to give you a chance to kind of explain that because i think that's a massive arbitrage plate for anyone that needs less mild delivery is you you do not maybe your vcs would argue you should but you take no percent of sale it's based off number of tasks processed through the system in a feature set correct yeah you know we're not driving the sales so you know we can't really command a margin um and we don't even know the value of the items that are that are going through all we care about is the volume of deliveries the number of transactions and you know when a driver starts a delivery completes it we say okay that's one task and that adds to their um to their task usage and if they exceed a certain threshold then they they start paying on a per usage uh model but initial they have up to a certain volume that's included in their in their base rate last september you told me each customer was paying somewhere around 800 bucks on average per month is that still about the sweet spot that's the average yeah that's about right i think we're closer to 900 now but in that range and paint that picture for us real quick if i'm paying you 900 bucks a month how many tasks are you you probably processing for me so our average across all of our customers uh paying about 20 cents a task okay interesting our highest volume customers are all the way down to you know 10 cents a task and lowest volume is you know a little higher than 20 cents a task if you're below that like initial tiers threshold you're going to be paying a lot for per task got it so 900 bucks a month at 20 you know 20 cents a task or something like that i mean that's what 4 500 tasks or about 150 deliveries a day through on fleet something like that yeah yeah that sounds about right obviously you know it's it's a the distribution is you know pretty pretty much across the board i mean we have customers doing hundreds of thousands of deliveries a month and customers doing hundreds a month so um it varies pretty pretty dramatically across customers but yeah that sounds about right how many across all your customers how many tasks last month across the entire base we are north of 3 million now wow so you know 100 000 plus a day so i mean at that scale you have to have people that want an asset in this space calling you up asking to buy the company you've obviously chosen not to sell why is that we think we're just getting started i mean you know this this space is just is really growing quickly um you know we've we've achieved a lot over the years we hit break even a couple years ago um break even still break even yeah i mean with the growth this year you know our revenue has growth has outpaced our the ability for us to hire um we are hiring but um but yeah we're you know we have we have been approached by a number of folks uh for you know for m a but have decided to continue pushing forward yeah i mean 900 customers paying 900 a month you guys are somewhere around 800 grand a month in revenue yeah that's right yeah which is double where you were 12 months ago about correct yeah yeah this year we're definitely uh on track to double probably more than double revenue this year that's great okay so what about funding situation have you just i mean i think last time came on you said you'd raise a total of five million bucks is that as accurate in equity yeah and we raised close to a million in debt so mentioned that we you know we work with lighter capital um so yeah that's still the case and when did you raise the million from lighter uh over the course of the last several years um in different in multiple tranches we started with a revenue based uh financing vehicle and then um and then now we have a fixed term loan and that was i think late 2018 maybe yep yep very cool and and so talk to me about capital needs moving forward i mean do you see places you can invest to drive growth would you raise additional capital if you have that as an option yeah so we're you know kind of certainly looking at uh raising now um you know we we wanted to get the business to a point where it could stand on its own two legs and we don't need outside funding but we are at the point now where it looks like you know there's a there's a huge exciting market opportunity to go after and you know we would raise some some capital um we'll be announcing something in the you know in the near future to that effect oh that face tells me something's cooking we'll look forward to that announcement what what what's the right amount i mean do you have an amount you're targeting like if you're gonna raise you might as well have a target have a plan for it is it 5 million 10 million 40 million probably in the 10 to 15 million range um you know we don't need a ton of capital we're super lean operation and i think you know we've we've gotten really used to this approach and you know we don't plan to go back into like heavy burn mode and um spend tons of cash to grow the business we think we can do it quite efficiently um so we don't need you know boatloads of capital but you know a little bit goes a really long way with us yeah very good what's the team look like today how many folks uh we're 40 people right now 40 and how many engineers uh of the 40 about 15 15 to 17. okay and do you have any quota carrying sales reps and if so how many we do yeah we have um a few str's we're like three sdrs um five aes something in that range so yeah eight eight to ten yeah and and do you have i mean are you testing anything in terms of your sdr to ae relationship that isn't already common in practice we're always testing i mean you know right now that is that is the kind of big question as we grow the team you know by the end of next year we'll be probably about 65 or 70 people on the team and so and a large you know large portion of that will be on sales and so you know we are looking for folks in like revenue ops which is a new position we've never hired for before but they would help you know all the plumbing to kind of make our reps more efficient but then yeah we you know we've only historically had one outbound sdr one inbound sdr and then a couple of aes so now we're thinking about okay what is the right ratio as we grow the sales team um and you know we still you know there's still a lot to learn we haven't quite figured it out yet but right now it's pretty close to two to one uh aeu's sdrs last question here obviously unit economics ready to churn are critical in a sas company now i think my notes cod might be wrong here did you tell me last time about a year ago your your gross churn annual revenue basis was 72 but your expansion was 90 so net revenue retention was 110 so the net revenue retention number sounds right right now we're more than that our net revenue retention it annually is about 115 116 that's a great spot rose yeah i mean a lot of that is obviously you know may june uh just crazy uh expansion across our existing customers as you might imagine people you know staying home ordering their groceries you know we do a lot of food and beverage delivery so a lot of expansion in our existing customer base we did see higher than usual churn so this year has been just a you know across the board you know anomalous the last few months have been you know more trend than usual more new customers than usual more expansion um but yeah typically you know we are our gross our gross annual revenue retention is around 85 percent uh well that's not bad at all so that 15 gross turn then yeah yeah so i must have been i must have yeah or or i or i recorded that wrong um okay so 15 gross return annually you know 30 expansion puts you 115 net revenue retention a lot of interesting dynamics at play or anything that you want to touch on that we haven't already touched on um no thanks for having me back on the show um yeah no it's uh some some exciting updates to come soon so i always wonder why founders like you decide to i mean you know the show is a lot about data i do it because i want the audience to learn from real data numbers and it's you know i'm thankful that ceos and founders like you choose to come back on i have to what's in it for you though why do you come on the show yeah just you know i i've learned from a lot of people over the years um and it's always nice to kind of give back i mean you know we we don't really have anything to hide our investors aren't like asking us to be super quiet about our numbers um you know you can you can kind of put the put the pieces together and see we've you know we we've been on like the inc 5000 and things like that so we've had to disclose our numbers so yeah no it's uh it's my pleasure and uh hopefully you know your your audience learns a little bit all right let's wrap up here rapid fire famous five number one favorite business book um i just started reading meditations by marcus aurelius it's not really a business book but i think a lot of learnings people would argue there's a lot of people who would say that's a business but you have to let me know what you think about it okay number two is there a ceo you're following or studying uh these days bill gates i don't know i guess he's still a ceo but um yeah always been a fan of his and really interested in sort of how he used the world number three what's your favorite online tool um yeah i remember this from nasa last time i actually said gusto i think and we are moving away from gusto we've just kind of been reached the point where we're outgrowing them i think favorite tool generally i mean these days it's you know have a good lawyer uh that's that's been a really useful tool for us in the last few months number four how many hours are sleep breaking every night uh trying to keep it around seven or eight and situation married single kids i'm married any kiddos no kids no kids how old are you i'm 35 35 last question what do you wish you knew when you were 20 um when i was 20 see those yeah invest in amazon guys there you have it uh on fleet.com helping folks that have some sort of delivery component as part of their business they help them make that happen providing them software they processed over three million tasks last month they now over 900 customers that pound average 900 bucks a month so call it 8 million or sorry 800 000 an mrr up from 400 000 just a year ago so healthy growth about almost a 9 10 million run rate right now 5 million dollars raised looking at potentially raising another 10 to 15 million here shortly we'll see what happens with our team of 40. thanks for taking us to the top thanks nathan my pleasure one more thing before you go we have a brand new show every thursday at 1 pm central it's called shark tank for sas we call it deal or bust one founder comes on three hungry buyers they try and do a deal live and the founder shares back end dashboards their expenses their revenue arpu cac ltv you name it they share it and the buyers try and make a deal live it is fun to watch every thursday 1 pm central additionally remember these recorded founder interviews go live we release 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