How Passkit CEO Paul Tomes grew Passkit to $1.2M revenue and 550 customers in 2019.

hello everyone my guest today is paul tomes he's the co-founder and ceo of pass kit which helps powers connected customer experiences paul you ready to take us to the top let's do it all right so what does that mean connect customer experiences well i mean let's put it this way what twilio is for sms or mailchimp is for email passkit is for apple wallet and google pay passes and both apple wallet and google pay provide this incredible opportunity for brands to connect their customers digitally in their phone using mobile wallet to connect an online experience to an offline experience when you're in store so we provide a service for all of the brands across the world to ultimately create manage um and distribute passes into apple wallet and google pay okay sas platform it's a sas platform yes okay so walk me through on average what's the company going to pay you per year to use your technology i'm sure you have a lot of cohorts but what's your sweet spot on average uh sweet well average monthly recurring revenue is about 180 us dollars but but we've got a very bimodal distribution so you've got sort of mom and pop shops that are using us for sort of average around 25 all the way up to uh you know multinationals like best western jet star heathrow airport and they're sort of more around the 10 000 plus a month mark and so why do they need this why can't they just build this inside of the wallets themselves so you can certainly use um apple's api and google's api but you need an infrastructure you need a push server you need uh to continually be updating uh your your software and using those different apis so initially to be honest when we started pascat we thought the service would be mostly suited to small medium-sized businesses that don't have their own developers or certainly to have a don't maintain an infrastructure and a server proposition what we found is the larger enterprises found that it was easier and better more efficient to outsource wallet content management to passkip so they could focus on their core competences let's take an airline for example you know a core competence of an airline it's not a digital boarding pass an apple wallet or google pay a core competence of an airline is to make sure that you take off safely and you land safely digital boarding passes uh and the ability to access all of the capabilities of apple and google google pay is not something that's core but it's something that's really important for a consumer so they use our servers the same way you'd use mailchimp if email delivery is not core but your customers want to know that they've got the right email and yeah this is a b though right like we shouldn't think about you like a last pass competitor not not like a dashlane or whatever absolutely not no our users are all businesses now the ultimate benefactor is the consumer so the consumer has an engaging experience what's more frictionless yeah more no paper stuff in their wallet no plastic membership cards that are static and boring not thousands of emails not a new app to download okay i think i get it i think i get the product this makes sense here so put this on a timeline for me when you launch the company 2012 long time ago okay and and do you remember so like the first line of code when did you write that uh well actually my co-founder of the first line of code that was back in june 2012 pretty much the day that apple launched passbook which is the precursor to wallet uh during wwdc and when was the first dollar of revenue do you remember first dollar of revenue was october 2012. okay pretty good so how much did you guys think into the mvp before that first dollar revenue uh probably under a million us dollars okay no not not too crazy now did you i mean are you guys rich did you raise capital the beginning or what we did not raise absolutely to start with both nick and i we were in investment banking so we did oh that's probably an overcall actually that that number um but we yeah we basically have been building infrastructure on aws since about 2006 so when aws first launched we were building uh you know scalable content management products when we saw apple passbook announced we said hang on a second this is going to become the way that consumers use their phone to transact for credit card payments as you've seen with apple pay and google pay but there's all this other rich functionality in apple wallet and google google pay that allows for digitalization and membership cards boarding passes and gift cards what we saw is developers were actually struggling with apples and google's api but more importantly struggling with the infrastructure so we turned the infrastructure that we'd already invested in purely focused to service mobile wallet okay so you launched you get that going back in 2012 so how much money did youtube put in by yourself um it's probably a i mean if you take it it's it's a tough one to know actually if you if you take into account sort of lost opportunity costs no no no just the cat just cash cash i mean we we were pretty lean in terms of the way that we actually had to put into the costs around aws the cost that we put into uh hiring people we did raise a bit of have you raised capital 2.1 million okay so and it was any of that your guys capital or no you put in your own money before that we didn't owe money before that and then we raised from friends and family at crown okay very good so first customers 2012 timeframe how many today 550 paying customers we've had around 10 000 users in total we have a freemium model so for under a hundred cards or passes in an apple wallet google pay we provide it completely free so if you've got a small business that wants to get into apple wallet and google pay or a small to developer was looking at how you leverage those channels they can use our service for free up to 100 passes if 100 people hit that 100 pass limit in a month how many of them will actually convert to your 180 a month on average plan um so the 180 is just average our first plan starts at 40 usd my point is how many people convert that hit that limit small number small number at this time okay yeah i mean i mean we could just take the whole thing five fifteen to ten thousand right and get a percentage there but i'm just curious if you knew what that was on a monthly basis i don't know exactly that great question i don't know absolutely um that's okay so you're about five about which you're about 5.5 conversion rate today across the entire base around around that on the you know across the gamut when you get enterprise businesses coming in the conversion rate is significantly high for we've got a product called loopy loyalty which allows small merchants to digitize stamp cards effectively so getting rid of those paper punch cards um and the conversion rate is around about 10 to 12 on those ones okay very good now 550 customers on an average of 180 bucks a month puts you at about 100 grand a month right now on revenue is that right correct and where were you right where were you a year ago uh 100 less than that 50k so we've got a we've got 100 growth this year i mean well just be clear 50 less than that would be 100 year over year growth the 100 year on year exactly yeah all right now are you still you raise capital are you still burning cash today you're positive we're positive just okay that's good does that mean you're prepping for a new raise with i'm i'm debating it for mid-2020 okay if you did raise in mid-2020 how much would you raise and why i'd raise about 10 million us dollars and predominantly around minimizing the amount of system integration work that we have to charge for we cut so our model is 75 of our revenue of sas 25 is development into integration so some of the businesses ask us to do the integration work is the hundreds of pure second is the hundred grand a month is that the pure sass component or do i need a month okay 100k a month is psas um so what what i'd ideally like to do is that we offer businesses um our services to integrate basket into their business model because you know there's there's a long-term benefit for for their business it's a long-term benefit for their customers there's a lot obviously a long-term benefit for passkip um to do that would be worth raising we would also i'd also be spending more on marketing the majority of our um uh ongoing expenses is around engineering we have a small we spend a small amount on marketing what's your total what's your total team size today seven people yeah and how many engineers okay and any quota carrying sales reps or no uh no really apart from me just see you yeah all right so when you look at your fully weighted act like let's say to get you know are you happy with the 12 month payback period are you more like 18 24 months uh we're less than 12 months i would say okay i mean obviously it varies the enterprise business is quite a slow burn um and it does take a lot of meeting time and a lot of integration services and kind of mapping out their processes to integrate to someone like a best western or or a jet star airport or heathrow airport there's a there's a client on ours that to to actually get them revenue generating is is 12 to 18 months but the smaller businesses um they typically are using our um api and using our platform they're up and running within a couple of months and paying revenue within a couple of months after that now it's nice to convert them but you know making sure they stick around is even more fun right so...