How package.ai CEO Ziv Fass grew package.ai to $3.4M revenue and 24 customers in 2024.

hey folks my guest today is ziv fosse he's got 15 years of experience envisioning and building customer-centric communication software he's leading package.ai to become loved by customers as a wharton mba ex microsoft and skype guy in seattle specifically silicon valley again now focused on the business turning delivery into a marketing engine ziv you're ready to take us to the top absolutely let's go all right what does that mean turning delivery into a marketing engine so uh package ai is basically a combination of delivery management software and conversational ai platform that basically transforms the last mile or delivery experience into a very customer-centric experience and uh basically what happens is uh through our delivery management platform we give the consumers a real voice in the delivery process and then in turn uh basically produces engagement that turns into glowing reviews and repeat sales for our customers who are the retailers typically so name one or two of your customers when i think last mile delivery am i am i thinking like uber eats or am i thinking like mcdonald's in their internal app for last mile delivery no no so we actually focus on a very specific uh vertical which is uh home furnishings and appliance delivery uh so we work with a bunch of um uh you know small from the smaller to medium-sized and larger furniture and appliance retailers all across the us and canada and we help them with this challenging process right of delivering sofas and and dishwashers and putting them placing them in in people's homes so let's use let's use spencer's tv and appliance logo on your website so i am a consumer i order a tv from spencer's they're going to deliver it now are they using is are these spencer's delivery drivers or is spencer's using someone in between to do last mile delivery yeah so they're using contractors to do it but they manage throughout through our system they manage the entire process of routing you know the vehicles and drivers and then as a consumer you basically have a chatbot interface so uh into the operation where you can basically converse with um the the delivery operation and basically with spencer's tv right as a retailer uh and and um and exchange information in a two-way bi-directional manner about your delivery and that basically relieves like a lot of the micro stress that happens around cody negative deliveries making last minute changes you basically now have a voice that you can um you can sound like you you basically communicate with the operation and we handle most of these communications automatically i see so what does a company or retailer like spencers pay you on average per month or per year to use the technology yeah so the the sweet spot is about sixty thousand dollars a year so that's kind of what we think of as a medium size customer we have some smaller ones and we have a few larger ones and generally as many other sales companies we're kind of trending up in the account values but that's basically the so between let's say 50 and a hundred thousand dollars a year is uh like a standard okay but you'd say maybe 60 000 years sort of your average currently uh yeah it's the let's say it's the average in the in the last like year or so we have uh some again we kind of started from smaller and i've been you know going up the chain tell me tell me more about that so how people that were paying you like smaller plans what are you pricing off is it number of deliveries number of seats feature upsells what how are you pricing so we're pricing um there's basically two kind of two tiers of pricing one is based on how many uh drivers or delivery vehicles basically uh they operate and that's basically a proxy for a number of orders um and how many orders can one driver handle in a month uh so typically it's uh between let's say 10 and 25 a day depending on on the way they operate uh per vehicle um and we and that's basically a subscription you know per vehicle per month and then we also uh charge for uh reviews that we generate and that's by typically by location so the location that you manage we've used for like a kind of a physical store interesting avenues that's that's interesting so across i want to go back to how you got your first customers in because that's always a fun story but how many customers like spencer's are you working with today um so you we're breaking up a bit can you repeat the question i uh yeah i know i want to get the back story on your first customer before we do that how many customers are you working with today like spencer's so we have uh without going into specific details but we have dozens of customers okay america okay got it so fair to say sort of like more than 24 but less than 100 yes okay very cool and are you only focused on north america we are uh at the moment just you know we're we're still a small team um the engineering team is is in israel i'm i'm based in israel and kind of uh uh you know fly a lot what's the total what's the total team sizes yeah ten oh ten okay and so how many engineers are in israel uh so we have uh seven people in israel and uh three in the u.s today seven the seven in israel are all engineers uh it's uh mostly engineers and some you know engineering uh support but uh yeah for the most part it's very heavy very heavy on the r d all right take take me back to early days here you're a seattle skype microsoft guy how the heck do you end up in this kind of space when did you write the first line of code for the platform that's a good question so i yeah i lived in the so i'm israeli you know by origin i uh lived in the states between 2015 and uh sorry uh 2005 in 2015 i got an mba uh worked with microsoft in seattle and then in san francisco in a company called uh fuse which was a zoom competitor so i kind of you know come from the communication space and uh chatbots were kind of you know taking off starting to be interesting and there was a lot of hype uh and then we i was just you know we decided to move back to israel like as a family after a long time in the states and i was looking you know i kind of decided i'm going to do a startup and you know i had a bad experience with ups in silicon valley delivering a computer so that kind of you know it was kind of a personal experience uh and i got to thinking okay like chat bots this can you know communications is really the problem here and that was the genesis of uh you know how we got started what year was that so that was uh the company we formed in 2017 and you know got started a bit before i met you my partner who is the cto and the you know the master uh engineering mind behind us and um the two founders yeah we're two founders did you guys just say we're just gonna you we're just gonna split it 50 50 down the middle or how did you guys have the tough equity conversation yeah yeah 50 50 you know full partnership this is you know like a marriage uh yeah and it's been working well since then now now that the two of you guys still own 100 equity or have you raised capital oh no we've raised uh you know we've raised capital um we still own you know control but uh we've raised about three million dollars uh to date so no vcs you know more kind of friends and family and industry insiders um can you break that down for me ziv what was the first round of funding what year so in 2017 so in 2017 we raised the precede rounds it was around 700 000 and the rest um which i think was our seed round uh is was in kind of multiple you know safe uh safe kind of uh vehicles um and uh yeah and we're kind of gearing up to raise our uh kind of an a round in the next uh six months just starting the process okay i want to dive into that process in a second but first taking back to customer number one in 2017 who was it and how did you find them yes uh the trenches the trenches yeah yeah so our first so we there were two kind of first customers one was in australia which is you know our only customer in australia we we got them we got you know connected to them by by billy chance uh and they they you know they're a furniture retailer in sydney and melbourne actually all over australia and you know they really loved the it was very early days but they loved the vision and uh yeah they're still they're still you know on with us uh and then in the us uh there was a company called stella delivery based in new jersey um and they just took a chance on us how did you find them though was it a linkedin message you you knocked on their door what was it uh yes we it was a an email like uh campaign we did um but we're targeting you a lot of time targeting just you know like appliance delivery furniture and appliance delivery companies um and uh yeah the platform was again very immature that at that time and you know we made a personal connection and ralph who is leading our sales ralph shulberg he's he's the head of sales for us gm north america and he just you know kind of powered it through that's awesome we love that cold emails still work folks what you guys probably sent out thousands to get the one closed customer on the first one right that's how it works all right so so real quick going back to the to the funding story here as if so you raise 700 000 precede in 2017 obviously you're raising that based off your background it sounds like you were successful obviously at sort of the zoom company skype obviously seattle uh you're going out raising from friends and family what cap did you end up deciding to raise it in back in 2017. [Music] um so in 2017 we raised at uh it was a i don't remember like you know exactly but you know somewhere between 1 and 1.5 million okay pre-money yes got it so you sold basically like a third of the company back then um yeah yeah well actually um yes roughly a bit less but uh something like that yeah okay around like an incubator that was a bit like uh which incubator uh no it's like in israel there's like an incubation like incubators that are kind of government uh based so it will it was it's called the nielsen innovate um but it's kind of backed by israeli government so um like it's it's a program basically so nielsen innovate the incubator is on your cap table today yeah yeah i see and they're they're the largest uh shareholder outside of uh the founders basically and uh you know small investors i see well okay so they then also put in some of the extra 2.3 million you did in your seed they also participated yes oh i see i see okay now now you mentioned you're you're sort of raising now well how much are you doing well and then you know starting now what's the kickoff process like there's a lot of people listening that are thinking about raising but they don't really know what it's like and you've been through the trenches so what's that like um well well at this point you know we're um you know the business is proven we we're over a million dollars in ar uh so i think it's an easier process at this point than it is you know early on um yeah i'm we're kind of working on on on just kind of preparing the pitch and the plan and and you know we'll go out there how much are you are you looking for uh so it's so it's still kind of early in the plan but you know kind of a you know meaningful a round i don't know these days like the numbers uh just go up and now well they're all over that's why i asked i mean are you targeting like a 5 million series a yeah i think somewhere between five and ten okay between five and ten and then look valuations are also all over the place i would argue at your stage you have some metrics you can point to in terms of traction but it's still your ability to tell a good story about the future value of the company so what valuation do you think you try and raise at yeah uh it's a good question you know my philosophy or our philosophy is that like we you know we want a good valuation but and we want to give you know away as little of the company as possible but we also don't want to create you know get into a place where we have a down round after uh in the future so you know we want to keep it you know like sane i would say i think the you know average val average multiples at least like in the past have been between 30 and 40 right like uh at this growth uh rate that we're showing which is you know between two and three times three x like year over year uh so that's you know roughly the what we what we're thinking but it's again it's still very early on and if with 24 north of 24 customers paying caught an average of 60 000 bucks a year that would put you at about 100 1.4 million in ar right now run rate rise is that about right yeah and if you're going thirty percent forty percent year over year that means about a year ago you were doing what eighty thousand bucks a month in terms of run rate uh yeah sorry the you mean arr or sorry yes so right now if you take 24 north of 24 customers at 5 000 bucks a month you told me the average was about 60 000 acv 5 000 monthly rp times 24 is 120 000 a month in revenue you said you're growing three to fifty percent year over year so so a year ago what was mrr yeah a year ago mrr was about yeah around the 50 oh even lower okay guys so you've had more i mean you've you've had way higher than 50 of your beer growth yeah yeah 100 no 2x 2x yeah yeah yeah yeah good i'm glad i asked that okay good so so when you start then talking about you know 30 to 40x valuation multiples if you're at sort of 1.51 right today times of x multiple that means you're sort of i mean this is pretty standard actually right a 5 million on a 50 million pre something like that right interesting where do you think you think you'll raise from folks in in israel are you going to come over the states or who are you looking for in terms of lead it's a good question again i think we want to be we want to choose the right partner um and again right now the company is growing and you know we're very lean and still a small company but uh but growing you know fast and so it's looking very positive we'll find the right partner it can be in israel it can be in the u.s i don't know yet two minutes left here let's shift back to product for a second are you helping spencer's find new delivery drivers is there a marketplace where they can hire through you or just communication to the end users so no we we don't deal right now with uh with uh sourcing drivers uh this is more managing kind of they're basically kind of we call it first party so basically they manage their own um and we're focused on the software that just yeah communicates manages the entire pro process and also um helps upsell and creates repeat sales which i think is like a huge huge yeah how many drivers right now are on the platform um there are let's you know somewhere between like around a thousand and how many total reviews the whole life of the company across all your customers how many how many reviews have you generated it's a good question uh we have like the the i i actually i don't know uh how many we've generated but uh you know a lot like the response the engagement rate and the response rate is like through the roof relative to other returning like a thousand reviews or ten thousand reviews oh much more than a thousand yeah more like i would say ten thousand more like ten thousand exact numbers but a lot like the the value to our customers is is amazing and and uh we've had zero churn to date so you know no customer has left us uh that's great all right let's wrap up here with the famous five number one what's your favorite business book uh it's a good question uh you know the i would say the it's not really a business book i don't read a lot of business books but uh master algorithm is a book that i read recently about machine learning number number two is there a ceo you're following are studying uh jack dorsey is uh amazing number three what's your favorite online tool for building package favorite online tool um google spreadsheets number four how many hours of sleep to eat every night not many between five and six five and six okay and what's your situations of married single kiddos three kids yeah married married with three kids like a busy guy how old are you i am 46 46 last last question something you wish you knew when you were 20 um that i can do this package.ai launched in 2017 after zip had an issue with the delivery person messing up his laptop delivery in seattle he now built this chatbot which helps furniture and appliance delivery companies get live reviews from the end customers and also manage the delivery drivers they're serving over 24 customers right now doing over 120 000 a month in revenue that's up from 50 000 a month just a year ago so well over 200 100 200 year-over-year growth they raised cost 700 000 bucks to get started in 2017 at about a 1.5 million dollar cap looking at a series a now maybe five to 10 million at a 40 to 50 million valuation we'll see what ziv can get in the next six months here with zip in the meantime thanks for taking us to the top thank you very much 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 1pm central additionally remember these 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