Paragon Revenue, Valuation & Funding (2024)

guys use paragon.com launch back in 2019 they help you connect to your customers applications faster that means you can onboard them quicker you can deliver more value faster they've got 100 customers today paying on average $30,000 per year call at somewhere around a $250,000 a month uh rate up from 80 grand a month just a year ago so Healthy Growth 3x year-over-year growth as he looks to be conservative with a series a cash he raised last year 13 million bucks he says quote still a large percentage of that still in the bank today with a team of 30 looking to scale uh this year we'll see what happens next hey folks my guest today is Brandon Fu he's the co-founder and CEO of paragon previously the founder and CE the co-founder and CEO of polymail the embedded integration platform for SAS that has raised 60 million bucks in Venture funding he's a two-time y commentator alumni with for 30 under 30 recipient as well and graduated in math and economics from UCLA where he co-founded Brewing entrepreneurs UCLA's largest entrepreneurship organization Brandon you ready to take to the top absolutely thanks for having me naan you bet so it's great having you on again this we were just talking about this was back in 2017 I think when you came on to talk about poly mail what happened to that business yeah so long story short is we built a great product at Poly mail we grew it into a profitable company um but one that wasn't necessarily growing at a venture scale rate so what we did is you know we decided to run it as a profitable business it's uh still around today uh and eventually had small exits and I stepped down and eventually transitioned to started Paragon a little over three years ago that's awesome walk me I mean so so how did you run the exit or the sale process I mean was it a was it a friend who just took it off your hands at cost or how did you run it yeah so I actually stepped down from the company a little bit before that but ultimately we sold it to one of our investors so again it was a very small exit um but you didn't make a bunch of money off of it right I mean this was basically like it has a new home you can move on to your next thing right interesting and was this one of the investors I think you guys raised like 7 or 800k right in preed or seed money was it one of those investors yeah that's right can you share who uh it was Ryan ml interesting and did he bolt or I'm not sure if that's a female or male did he did they bolt that on to another company or just they're still running it Standalone uh they're still running it very cool I believe it's yeah still a profitable company today okay so there just to be clear the reason you stepped away is because it was clear to you this was never going to be Venture scalable and you really want to go build a venture scalable company yeah again you know I think we built a product that people loved we had tens of thousands of active users um but the email space is tough and I think you know it wasn't necessarily something that had uh the potential to grow into a venture scale business um so you know eventually I stepped down for that reason and uh started a paragon and you have to remind me what was your best month at po mail in terms of Mr do you remember uh I don't remember off the top of my head now all right let's jump into paragon what's it do describe a customer and how they're using you today yeah so Paragon is a embedded integration platform for SAS apps so what we do is help software companies integrate their product with thirdparty SAS applications like Salesforce like HubSpot and allow them to get to Market faster with new Integrations to provide to their customers so an example of a customer is uh saleshood uh some of our audience may be familiar it's the sales enablement platform and by nature of their products uh they need to integrate with the data in their customers crms like Salesforce and HubSpot for example so with Paragon they're able to easily embed these CRM Integrations into their products and provide them as customer facing Integrations that allow them to connect to their customers CRM data in Salesforce or HubSpot for example so is this very similar to like what kodat does for like embedded Finance they allow finance companies connect to you know QuickBooks of their customers to to your degree you've got folks that um if if if a company uses you and they need their customers CRM Salesforce access you will help them build that basically unlock that API without having to build a custom connection to Salesforce API yeah so the use case that we serve is similar in that we enable our customers to easily connect to their customers data in thirdparty apps like Salesforce crms accounting systems um our approach our product approach is slightly different from kodat and other vendors and that we provide a fully visual workflow editor along with an SDK that allows our customers to both easily embed the product facing Integrations and we provide embedded ux components example as well customers can display for their end users to connect their Integrations we also provide a workflow Builder that allows our customers to easily map the data basically the integration logic that they can then provide for their end users oh what's going on there YouTube good to see you guys now imagine this you love watching these interviews with SAS Founders but imagine if we took all of the value ation data out from over 287 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 connect your stripe account you see your valuation real time you can see what it changed over the past 88 days and even set goals for valuation this year now the secret valuation is there's many different ways to value a SAS business so the reason you're going to see three or four different valuations inside of your founder paath dashboard this is all free by the way is because depending on who's doing the buying of your SAS company you're going to get a different valuation a VC is going to pay a different valuation private Equity Firm is different if you're going to 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 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 1.2 million seed round 3.7 raise they sold 22% of their business go in here and filter by the event maybe you only want to 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 going out right now and you're raising your seed round we go in here and look at all the 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 data set of SAS valuation than what you can get now inside of founder path and we're thrilled to bring it to you all right we're going to go back to the YouTube video here in a second but if you want to check this tool out if you want to jump in and sign up you can check it out for free to get your valuation at this link this link founder path.com products SLV valuations or if you go to founder path.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 all right let's jump back into the interview got it very interesting and I guess help me understand pricing on this is it per API call per integration what's the average customer pay per month yeah so we pric based on usage so number of Integrations uh as well as requests volume or task volume uh and so our pricing varies depending on a customer's usage of paragon um but on average today our customers are coming in around 30 to 40K ACV uh that has grown over time and now we're starting to work more towards mid-market and even Enterprise we're starting to work towards six figure plus ACV range so someone paying you $30,000 per year how many Integrations do they likely have and what's their task volume probably look like yeah so typically our 30,000 a year package would include around five Integrations up to let's say a million tasks or requests per month and then there's certain features too that we might include on certain tiers that could help uh determine pricing as well so let's say a c let's say I'm paying you 30k per year and my I need access to my customer Salesforce um and I need it updated every day so I'm GNA have to hit I'm gonna have to use one task basically for that one customer let's call it uh 365 times in a year do do does that count as 365 times and so if I wanted to have real time frequency it's basically like that's not possible because i' it'd be too expensive uh so our starting package usually includes up to a million tasks per month and customers can well exceed that volume as well and we just price based on volume beyond that initial um task quota essentially um but the usage Can Depend based on the users or the customer use case so you could be sying you know one request per day you could be sinking hundreds or even thousands of requests per day too so it does highly depend on yeah the shape of the customer's usage the type of use cases that they're trying to enable for their customers I see okay put all this on a timeline for me when did you launch the business yeah so we started Paragon in the end of 2019 we're about three and a half years old now I think uh we raised uh we went through Y combinator in Winter 2020 I raised a small seed round about $23 million back then and uh just raised our series a 13 doll series a in uh the spring of last year so today we're about 30 employees in growing and uh very excited about where we're at today that's awesome so I guess take me back to the seed in 2020 you said you raised 2.5 there yeah a little over two million and and most folks in their you know seed preed rounds you know back in those days were selling 15 to 20% of the company were you sort of in that same range um around that range uh we did go through y combinator so that factors into that a little bit um but but most people though when they go through YC they'll give YC the premium right they whatever it is 150k for 7% but they won't let other investors come in at that same quote lower valuation did you have did you take the full 2.5 at the Y valuation yeah I can't disclose exactly but it was around the typical range that you would see for a seed round uh it was around the typical range that you would see for a seed round um well I guess let me put it this way um 150,000 for 7% of your company is extremely dilutive uh in fact I think that actually the the total valuation would be under two million if you let everyone come in at that on those terms so how did you manage that yeah so our seed investors excluding YC were at a different valuation of course okay that's what I was asking we consider our seed round all funding raised including YC averaging that ownership percentage roughly around the range of what you would see for a typical seed round I see I see okay got it you sell 15 to 20% of the company which means you know it's a round valuation of 10 15 million something like that around that range fast forward why series a in Spring of last year what makes this company expensive to grow yeah so first of all I think we hit an inflection point last year where we had uh grown at a nice rate we validated that you know this is really a problem that customers have in the market and that we have a product that customers love using and uh because of that you know we felt it was a good time for us to pursue a series a um you know in terms of growth for us there's really two areas of Investments um engineering and go to market so as far as engineering um you know we are building Integrations on behalf of our customers and that requires really a dedicated Integrations team which we um essentially utilize to build and maintain the Integrations that our customers are then using through their products through Paragon as well um so we're able to use you know the funding from our series a in order to um you know invest into the products growing our integration catalog growing the products and our features in General on the go to market side um you know we are always well I would say before our series a we were in a position where it was really just me and I think one account executive who was leading sales yeah um so that we were able to validate you know we're able to get customers you know customers are buying the product we're able to validate that you know we have a go to market motion at least the early workings of 1 works and then uh you know today after raising our series a I think we're really in a phase where uh we're looking to scale from one to 100 and really build the team and the organization The Playbook that can scale our go to market strategy from today into the next few years really transition from that founder LE model and then again in series a most companies are selling 10 to 15% of your company were you sort of in that same range around that range okay take me back to the first customer how'd you get them yeah so the great thing about the YC network is that you have a lot of folks who are uh eager to try your product and um I think the YC network is over a thousand companies today uh we started off by really selling to other companies in our batch other YC Founders that we knew and because the problem that we're solving is one that inherently every SAS company has uh we got a lot of our early customers from our y network friends the companies in the batch and we're really able to uh grow start growing from there one of the one of the negatives that you'll hear from buyers when they're looking at acquiring a company that was run through YC is when they go in and do the DD after the term sheet signing and they see the customer list and it's a bunch of other YC companies they go man are these companies really getting value here or are they just buying it because it's VC dollars being traded back and forth and sometimes I've seen it hurt valuation would you agree or disagree with that uh I could see why people would think that um but I would say that while we started with our initial customer base in the YC community we have in the last couple years grown pretty far beyond that and I think we've definitely extended the reach of our goto market and our customer base well beyond just the YC Community that's great so how many customers are you serving today yeah so we work with just over 100 customers today around the world and I've been growing nicely over the last couple years yeah know that's great 100 customers at that ACV you said earlier it means you're doing what is it like 250 Grand a month in Revenue something like that I can't disclose a revenue exactly but uh around that range that's awesome and if you're around 250 Grand a month today in Revenue where were you a year ago so we can look at growth rate so we grew by a little bit uh close to 3x in the last year so we started yeah last year around I'd say the 1 million EUR range yep yep that yep that's great and then okay so it took you basically from 2019 to 2022 to break that million run rate range um any learnings from there is there a way you could have done that faster looking back or was it going to always take three years no matter what we definitely went through several product iterations since we first started Paragon so the products as we know it today Paragon um really we launched in the Market at the beginning of 2021 so we've been in the market now for about two years just over two years but definitely a lot of learnings from that uh you know first year of really building iterating talking to customers seeing what works that's I think ultimately led us to you know what uh we've built today and what we've learned about our Market our customers and what they're trying to achieve with Paragon and Brandon when you did your seed round did you guys set up an ESOP pool uh did we set up what sorry an employ stock option pool uh not at our seed rounds but at our series a okay so question for you right if you were doing a Million last year call a run rate and you raised you know you sold about 10% when you raised 13 million that would put you at valuation of call somewhere north of a 100 million bucks or about 120x multiple no one is getting that now today the market has really changed and you're seeing a lot of these folks that raised these premium valuations 12 months ago now having to deal with morale issues because every single option every employee owns is way underwater how do you think about that well I can't disclose our exact valuation series a but I will say that it's uh not exactly the range that you uh stated oh okay sorry I mean even if it was more conservative right I guess even fast growing task companies today the best ones are getting only like 8 n 10x you are way above let's just put it this way you are way above that right maybe you at like a 40 or 50x instead of 100x but this question is still the same yeah so look I think that you know the folks that we have on our team and you know we have an amazing team of incredibly talented folks I think are here really because they believe in the long-term vision of Paragon and what we're doing and really the opportunity that lies ahead of us in the market I think that if we are successful in executing our vision uh Paragon will become the default solution for customers building Integrations um and so I think you know our we and our team by extension are really focused on that long-term Vision more so than the day-to-day or year-to-year fluctuations of the market and I would say that ultimately um you know our team has not uh really expressed concern and I think that we are not concerned about you know seeing some of what uh the market may be showing us you know in these few years we know the market changes you know year to year but ultimately we're focused on I think really the potential and the opportunity what we can achieve at Paragon in the long term and um that's what we're most excited about how conservative are you being with cash do you still have most of 13 million in the bank yeah so uh we do have a large percentage of our seriesa funding um I would say that especially in the last few quarters we've been increasingly focused on efficiency and we have managed to improve along all of our efficiency metrics including cost of acquisition burn multiple gross margins and I think we still have a way to improve we still have room to improve certainly but that has become a core Focus for us as a business not only growth at all costs but growth with increasing efficiency Brandon some would argue we're going into a recession you know with that in mind I mean are you comfortable you net burn 200 300 Grand a month or what are you optimizing net burn for right now yeah so I can't share those numbers exactly but like I said we are focused on continuing to improve our efficiency across the board in go to market in operations product and engineering and so that is uh certainly a top priority for us we are fortunate having just raised our series a last year that we are well capitalized and I think very well positioned to enter the next few years of the economy where you know no one knows what's going to happen right um but I think that we're also you know uniquely positioned to help a lot of companies in this type of um you know Market where a lot of companies are looking to do more with less where they may need to still get to Market with new Integrations but they may not be able to bring on new engineers in order to do so and I think that's a position where Paragon is really able to help these companies accelerate their products their integration strategy and do so in a way that's far more efficient which everyone is you know I think uh looking to do today Brandon on that note let's wrap up here with the famous five number one what's your favorite Business book uh Steve Jobs biography by Walter isacson number two is there a CEO you're following or studying uh I've always been inspired by Stuart Butterfield at slack although he did just recently stepped down number three what's your favorite online tool for building Paragon uh I'll give you two both y companies vical for calendar and Sama for task management use them both every day number four how many hours of sleep do you get every night I try to get eight um usually six or seven but I think sleep is incredibly important and I try to G if I can and Brandon what's your situation married single kids I am married uh for the last two and a half years um and no kids yet um no kids and how old are you entally on the road map uh I'm 31 as of this month congrats happy birthday last question something you wish you knew when you were 20 uh if I could go back when I was 20 I would probably drop out of school and join a startup so I could better learn how to start my own in the future guys use paragon.com launched back in 2019 they help you connect to your customers applications faster that means you can onboard quicker you can deliver more value faster they've got 100 customers today paying on average $30,000 per year call at somewhere around a $250,000 a month uh rate up from 80 grand a month just a year ago so Healthy Growth 3x year-over-year growth as he looks to be conservative with a series a cashy rais last year 13 million bucks he says quote still a large percentage of that still in the bank today with a team of 30 looking to scale uh this year we'll see what happens next Brandon thanks for taking us to the top thanks for having me Nathan one more thing before you go we have a brand new show every Thursday at 1 p.m. 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 backend 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 p.m. central additionally remember these recorded founder interviews go live we release them here on YouTube every day at 2 p.m. central to make sure you don't miss any 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 SAS World whether it's an acquisition a big fund raise 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 SAS Founders you want to get in there we've probably talked about your tool if you're a company or your firm if you're investing you can go in there and quickly search and see what people are saying sign up for that at Nathan la.com slack in the meantime I'm hanging out with you here on YouTube I'll be in the comments for the next 30 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 we got to push them away click the thumbs up 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