How Package.ai Reached Over $1M ARR with Zero Churn Serving Furniture and Appliance Retailers (Interview with Co-Founder Ziv Fass)

Introduction and Company Overview

Nathan Latka

00:00Hey, folks. My guest today is Ziv Fass. He's got fifteen years of experience envisioning and building customer centric communication software. He's leading package dot ai to become loved by customers. Has 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 ready to take us to the top?

Ziv Fass

00:21>> Absolutely. Let's go.

What Turning Delivery into a Marketing Engine Means

Nathan Latka

00:22All right. What does that mean, turning delivery into a marketing engine?

Ziv Fass

00:26>> PackageAI 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 basically, what happens is through our delivery management platform, we give the consumers a real voice in the delivery process and then in turn basically produces engagement that turns into glowing reviews and repeat sales for our customers who are the retailers typically.

Target Vertical: Home Furnishings and Appliance Delivery

Nathan Latka

01:05So, name one or two of your customers. When I think last mile delivery, am I thinking like Uber Eats or am I thinking like McDonald's and their internal app for last mile delivery?

Ziv Fass

01:14>> No. So we actually focus on a very specific vertical, which is home furnishings and appliance delivery. So, we work with a bunch of,

01:25>> you know, the smaller to medium sized and larger furniture and appliance retailers all across The US and Canada.

01:35>> We help them with this challenging process of delivering sofas and dishwashers and placing them in people's homes.

How the Platform Works for Retailers Like Spencer's

Nathan Latka

01:45So, Ziv, let's use Spencer's TV and appliance. The logo is on your website. So, I am a consumer. I order a TV from Spencer's. They're going to deliver it. Now, are these Spencer's delivery drivers or is Spencer's using someone in between to do last mile delivery?

Ziv Fass

02:01>> Yeah. So, they're using contractors to do it, but they manage through our system. They manage the entire process of routing, you know, the vehicles and drivers. Then as a consumer, you basically have a chatbot interface into the operation where you can basically converse with the delivery operation and basically with Spencer's TV, right, as a retailer and exchange information in a two way bidirectional manner about your delivery. And that basically relieves a lot of the micro stress

02:36>> that happens around coordinated deliveries, making last minute changes. You basically now have a voice that you can sound like you basically communicate with the operation. We handle most of these communications automatically.

Nathan Latka

02:49I see. So, what does a company or retailer like Spencer's pay you on average per month or per year to use the technology?

Pricing Model and Average Contract Value

Ziv Fass

02:55>> Yeah. So, the sweet spot is about $60,000 a year. So, that's kind of what we think of as a medium sized customer. We have some smaller ones and we have a few larger ones. And generally, as many other SaaS companies, we're kind of trending up in the account values, but that's basically the So, between, let's say, 50 and $100,000 a year is like a standard.

Nathan Latka

03:22Okay. But you'd say maybe 60,000 a year is sort of your average currently?

Ziv Fass

03:27>> Yeah, let's say it's the average in the last year or so. Have some Again, we kind of started from smaller and then, you know, going up the chain.

Nathan Latka

03:36Tell me more about that. So how People that are paying you smaller plans, what are you pricing off? Is it number of deliveries, number of seats, feature upsells? How are you pricing?

Ziv Fass

03:46>> So we're pricing there's basically two

03:52>> tiers of pricing. One is based on how many drivers or delivery vehicles basically they operate, and that's basically a proxy for a number of orders.

Nathan Latka

04:04How many orders can one driver handle in a month?

Ziv Fass

04:08>> So, you know, typically it's between, let's say, ten and twenty five a day, depending on the way they operate per vehicle. And that's basically a subscription, you know, per vehicle per month. And then we also charge for reviews that we generate, and that's typically by location. So the location that we manage the reviews for, like kind of a physical store.

Nathan Latka

04:34Interesting. Okay. Two avenues.

04:37That's interesting. So, I want to go back to how you got your first customers because that's always a fun story. But how many customers like Spencer are you working with today?

Ziv Fass

04:48>> So, we're breaking up a bit. Can you repeat the question?

Nathan Latka

04:50Yeah, I want to get the backstory on your first customer. Before we do that, how many customers are you working with today like Spencer's?

Ziv Fass

04:58>> Without going into specific details, but we have dozens of customers in North America.

Nathan Latka

05:03Okay. Got it. So fair to say sort of like more than 24, but less than a 100?

Ziv Fass

05:07>> Yes.

Nathan Latka

05:08Okay. Very cool. And are you only focused on North America?

Ziv Fass

05:12>> We are. At the moment, just, you know, we're we're still a small team. The engineering team is in Israel. I'm based in Israel and kind of,

05:22>> you know, fly a lot.

Nathan Latka

05:25What's the total team size?

Ziv Fass

05:27>> 10.

Nathan Latka

05:28Oh, 10. Okay. And so how many engineers are in Israel?

Team Size and Structure

Ziv Fass

05:32>> So we have seven people in Israel and three in The US today.

Nathan Latka

05:36Seven. The seven in Israel, they are all engineers?

Ziv Fass

05:40>> It's mostly engineers and some, you know, engineering support. But, yeah, for the most part, it's very heavy on the R and D.

Founding Story and Background

Nathan Latka

05:49Alright. 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?

Ziv Fass

05:57>> It's a good question. So I yeah. I lived in the I'm Israeli by origin. I lived in The States between two

06:06>> thousand and five and twenty fifteen. I got an MBA. I worked at Microsoft in Seattle and then San Francisco in a company called Fuse, which was a Zoom competitor. So, I kind of come from the communications space and chatbots were kind of taking off or starting to be interesting. There was a lot of hype. And we decided to move back to Israel as a family after a long time in The States. And I was looking, you

06:34>> know, I decided I'm going do a startup. And, you know, I had a bad experience with UPS in Silicon Valley delivering a computer. So, that was kind of a personal experience. I got to thinking, Okay, chatbots, communications is really the problem here. And that was the genesis of how we got started.

Nathan Latka

06:56What year was that?

Ziv Fass

06:57>> So that was the company we formed in 2017 and, you know, got started a bit before I met Joab, my partner, who is the CTO and the, you know, the master engineering mind behind us.

Nathan Latka

07:11The two founders.

Ziv Fass

07:13>> Yeah. We're two founders.

Nathan Latka

07:14Did you guys just say we're just gonna you were just gonna split it fiftyfifty down the middle? How'd you guys have the tough equity conversation?

Ziv Fass

07:20>> Yeah. Yeah. Fiftyfifty, you know, full partnership. This is, you know, like a marriage. Yeah. And it's been working well

Nathan Latka

07:27Now, the two of you guys still own 100% equity or have you raised capital?

Funding History and Cap Table

Ziv Fass

07:32>> Oh, no. We've raised capital. We still own control, but we've raised about $3,000,000 to date. So, no VCs, you know, more kind of friends and family and industry insiders.

Nathan Latka

07:47Can you break that down for me, Ziv? What was the first round of funding? What year?

Ziv Fass

07:51>> So, in 2017, we raised the pre seed round. It was around $700,000 and the rest, which I think was our seed round, was in kind of multiple, you know, kind of vehicles.

08:11>> And we're kind of gearing up to raise our kind of an A round in the next six months. Just starting the process.

Nathan Latka

08:20Okay. 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?

Ziv Fass

08:28>> Yes, the trenches.

Nathan Latka

08:31The trenches.

Ziv Fass

08:36>> Were two kind of first customers. One was in Australia, which is our only customer in Australia. We got connected to them by really chance.

08:49>> They're a furniture retailer in Sydney and Melbourne, actually all over Australia. They really love the it was very early days, but they love the vision. And yeah, they're still on with us. And then in The US, there was a company called Stella Delivery based in New Jersey,

09:09>> and they just took a chance on us.

Nathan Latka

09:11How did you find them, though? Was it a LinkedIn message? You knocked on their door? What was it?

First Customer and Cold Outreach Strategy

Ziv Fass

09:17>> It was an email campaign we did,

Nathan Latka

09:24we just spent

Ziv Fass

09:25>> a lot of time targeting just, you know, like appliance delivery, furniture and appliance delivery companies.

09:32>> And yeah, the platform was again very immature at that time. And, you know, we made a personal connection. Ralph, who is leading our sales, Ralph Schulberg, he's the head of sales for us, GM North America, and he just, you know, kind of powered it through.

Nathan Latka

09:50That'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. Right? That works. All right. So so real quick, going back to the to the funding story here, Ziv. So you raised 700,000 pre seed 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. You're going out

10:13raising from friends and family. What cap did you end up deciding to raise it in back in 2017?

Ziv Fass

10:21>> So in 2017, we raised at it was a I don't remember exactly, but somewhere between 1 and 1,500,000.

Nathan Latka

10:32Okay. Free money?

Ziv Fass

10:35>> Yes.

Nathan Latka

10:35Got it. So you sold basically like a third of the company back then?

Ziv Fass

10:42>> Yeah. Yeah. Well, actually, yes,

10:47>> roughly a less, but something like that. Yeah.

Nathan Latka

10:49Okay. Around that.

Ziv Fass

10:50>> It was like an incubator. There was a bit like Which incubator? No.

10:56>> Like in Israel, there's like an incubation, like incubators that are kind of government based. So it was called the Nielsen Innovate, but it's kind of backed by Israeli government. Like, it's program, basically.

Nathan Latka

11:11So Nielsen Innovate, the incubator, is on your cap table today?

Ziv Fass

11:14>> Yeah. Yeah.

Nathan Latka

11:15I see.

Ziv Fass

11:15>> And they the largest shareholder outside of the founders, basically, and, you know, small investors.

Nathan Latka

11:22I see. Well, okay. So they then also put in some of the extra 2,300,000 you did in your seed?

Ziv Fass

11:26>> They also participated. Yes.

Nathan Latka

11:28Oh, I see. I see. Okay. Now now you mentioned you're you're sort of raising now. 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 you've been through the trenches. So what's that like?

Current ARR and Growth Rate

Ziv Fass

11:42>> Well, at this point, you know, we're, you know, the business is proven. We're over a million dollars in ARR. So I think it's an easier process at this point than it is, you know, early on. Yeah, we're kind of working on just kind of preparing the pitch and the plan and, you know, we'll go out there.

Nathan Latka

12:06How much are you looking for?

Ziv Fass

12:09>> 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 just go up and up.

Series A Fundraising Plans

Nathan Latka

12:18Well, they're all over. That's why I asked. I mean, are you targeting, like, a 5,000,000 series A?

Ziv Fass

12:23>> Yeah. I think somewhere between five and ten.

Nathan Latka

12:25Okay. Between five and ten. And then look, valuations are also all over the place. 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?

Ziv Fass

12:40>> Yeah, it's a good question. You know, my philosophy or our philosophy is that we want a good valuation, but we want give 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 in the future. So, you know, we want to keep it sane, I would say. I think the average multiples, at least like in the past, have been between

13:08>> thirty and forty, right? Like this growth rate that we're showing, which is, you know, between two and three times 3x like year over year. So that's roughly what we're thinking, but again, it's still very early on.

Nathan Latka

13:24And Ziv, north of 24 customers paying, call it, an average of $60,000 a year, that would put you at about $1,000,000 to $1,400,000 in ARR right now, run rate wise. Is that about right?

Ziv Fass

13:36>> Yeah.

Nathan Latka

13:37And if you're growing 30%, 40% year over year, that means about a year ago you were doing, what, $80,000 a month in terms of run rate?

Ziv Fass

13:46>> Yeah. Sorry. You mean ARR or sorry?

Nathan Latka

13:52Yes. So right now, if you take north of 24 customers at $5,000 a month, you told me the average was about 60,000 ACV, 5,000 monthly ARPU times 24 is $120,000 a month in revenue. You said you're growing 30% to 50% year over year. So, a year ago, what was MRR?

Ziv Fass

14:07>> Yeah, a year ago, MRR was about, yeah, around the 50.

Nathan Latka

14:11Oh, even lower. Okay, got it. So, you've had more. I mean, you've had way higher than 50% year over year growth.

Ziv Fass

14:16>> Yeah. Yeah. A 100 no, two x. So that's a 100 Yeah.

Nathan Latka

14:19Percent. Yeah. Good. I'm glad I asked that. Okay. Good. So so when you start then talking about, you know, 30 to 40 x valuation multiples, if you're at sort of 1.5 run rate today times a 35 x multiple, that means you're sort of I mean, this is pretty standard, actually. Right? A 5,000,000 on a 50,000,000 pre, something like that.

Ziv Fass

14:35>> Right.

Nathan Latka

14:36Interesting.

Ziv Fass

14:37>> Early thinking, but, yeah, that's

Nathan Latka

14:39Where do you think you think you'll raise from folks in in in Israel? Are you gonna come over The States, or who who are you looking for in terms of lead?

Ziv Fass

14:45>> It's a good question. Again, I think we want to be we want to choose the right partner. And and again, right now, the company is is growing and and, you know, we're very lean and and still a small company, but 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 US. I don't know yet.

Nathan Latka

15:07Two 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?

Ziv Fass

15:16>> So, no, we don't deal right now with sourcing drivers. This is more managing kind of basically kind of what we call first parties. So basically they manage their own And we're focused on the software that just communicates, manages the entire process,

15:36>> and also helps upsell and creates repeat sales, which I think is like a huge huge.

Drivers on Platform and Reviews Generated

Nathan Latka

15:43How many drivers right now are on the platform?

Ziv Fass

15:46>> There are let's somewhere between, like, around a thousand.

Nathan Latka

15:51And how many total reviews the whole life of the company across all your customers? How many how many reviews have you generated?

Ziv Fass

15:57>> It's a good question.

16:01>> Actually, don't know how many we've generated, but a lot. The engagement rate and response rate is through the roof relative to other

Nathan Latka

16:11You're trying like 1,000 reviews or 10,000 reviews?

Ziv Fass

16:15>> Much more than 1,000. Yeah, more like, I would say, 10,000.

Nathan Latka

16:18More like 10,000. Interesting.

Zero Churn and Customer Value

Ziv Fass

16:19>> Don't know exact numbers, but a lot. The value to our customers is amazing, and we've had zero churn to date. So, you know, no customers left us.

Famous Five Rapid Fire Questions

Nathan Latka

16:31That's great. Alright, let's wrap up here with the famous five. Number one, what's your favorite business book?

Ziv Fass

16:37>> It's a good question. I would say it's not really a business book. I don't read a lot of business books, but Master Algorithm is a book that I read recently about machine learning.

Nathan Latka

16:49Number two, is there a CEO you're following or studying?

Ziv Fass

16:53>> Jack Dorsey is amazing.

Nathan Latka

16:56Three, what's your favorite online tool for building package?

Ziv Fass

17:00>> Favorite online tool? Google Spreadsheets.

Nathan Latka

17:05Number four, how many hours of sleep do you get every night?

Ziv Fass

17:08>> Not many. Between five and six.

Nathan Latka

17:11Five and six. Okay. And what's your situation? Is it married, single, kiddos?

Ziv Fass

17:14>> Three kids. Yeah. Married and three kids.

Nathan Latka

17:16Married with three kids. Okay. Busy guy. How old are you?

Ziv Fass

17:20>> I am 46.

17:21>> 46.

Nathan Latka

17:22Last question. Something you wish you knew when you were 20.

Ziv Fass

17:29>> I can do this.

Nathan Latka

17:31Guys, package.ai launched in 2017 after Ziv had an issue with a 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% year over year growth. They've raised,

17:56call it, $700,000 to get started in 2017 at about a $1,500,000 cap. Looking at a series A now, maybe 5 to 10,000,000 at a 40 to 50,000,000 valuation. We'll see what Ziv can get in the next six months here at Ziv. In the meantime, thanks for taking us to the top.

Ziv Fass

18:08>> Thank you very much.

Nathan Latka

18:11One 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

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