How Pixlee Built a Usage-Based UGC Platform Serving Close to 500 Paying Customers (Interview with CEO Kyle Wong)

Introduction and Company Overview

Nathan Latka

00:00Hello, everyone. My guest today is Kyle Wong. He's the CEO and cofounder of Pixlee, a visual marketing platform that helps brands to market and sell using real customer photos and videos. Alright, Kyle. You ready to take us to the top?

Kyle Wong

00:11Let's do it, man.

Business Model: Usage-Based SaaS

Nathan Latka

00:12Okay. So first off, is this a pure play SaaS company?

Kyle Wong

00:15It's a pure play SaaS company with some data network effects. Our business model is SaaS, but, you know, like many other SaaS companies in this space, we're based off usage versus seats.

Nathan Latka

00:26Okay. So you don't have any upsell revenue based off number of seats. It's only based off usage.

Kyle Wong

00:31Correct. And so the upsell revenue comes from that. And not to kind of go so deep right now in the first ten seconds, but yes, we're a SaaS based company and that scales with volume and usage of photo served.

Nathan Latka

00:42Okay. So, yeah, give us an example of how maybe Kimpton use you. How do these folks use you on a daily basis?

Kyle Wong

00:47Yeah. So... Yeah. So we're a SaaS platform that basically helps brands harness the value of their customer stories. So our core belief is that your customers are some of your best marketers and that we build software to make them more scalable. So a lot of the brands today already have consumers that are posting about their brand on a day to day basis, talking about their experiences at Kimpton Hotels or Airbnb or the product they bought, etcetera.

01:14And what our technology does is we provide that infrastructure to use that content at scale, everything from the collection of the content, the permission rights of the content, the tagging, labeling of the content, and then the infrastructure to put the place... Put the content in the right place. You can almost think of it like an API for content, but that content being customer stories, otherwise known as your most valuable marketing asset.

Pricing Tiers: Free, Mid-Market, and Enterprise

Nathan Latka

01:38Mhmm. And what are people paying? Mean, give me a general range here. I'm sure you have a lot of different cohorts. But on average, what's a brand gonna pay per year or per month to use the tech?

Kyle Wong

01:46Yeah. We have a ton of cohorts. So we have a free tier. So anyone who's listening and wants to just do it right away, we have a free tier. We have kind of a commercial mid market tier that ranges anything between, you know, thousand... Couple thousand bucks a month. And then we definitely have an enterprise tier that's more in the tens of thousands a month, and that's for brands who are doing this at a global scale.

02:06So in other words, if you just wanna use this on a small part of your website, that's one thing. But a lot of our top customers today are using us at a global scale across their ecommerce, email, their... In their ads, you know, in their stores. They're using it anywhere you see a photo. So like a lot of API contents platforms, it's kind of like a... It scales with with usage.

Nathan Latka

02:27So, Kyle, just to simplify, because then I wanna get more of your background story here. I mean, are you... You know, let's just talk about your paid folks, not free. It's great. Have a free plan. But on the paid plans, it sounds like people are paying... You know, your sweet spot might be, like, you know, a couple grand per year or something like that?

Kyle Wong

02:42Per month.

Nathan Latka

02:43Per... Okay. Per month. Okay. Good. So you're very much an enterprise sales motion?

Kyle Wong

02:47Yeah. We've definitely moved more in that model. I think historically, we were not not that because I think the market wasn't ready for it. But over the past eighteen months or so, we've definitely seen a lot of growth in the enterprise segment, which is definitely more than 6 figures a year.

Founding Story: Stanford Dorm Room to Product Launch

Nathan Latka

03:01Yeah. Alright. Good. And then put this on a timeline for me. When did you launch?

Kyle Wong

03:05Originally, we launched the first version of our product in 2014. So, when we first started the company, Instagram just came out of the Android app. And, when we, started the company, like a lot of other Silicon Valley stories, it was right out out of the Stanford dorm room. So, it took some time for the market to really catch up to what we had what what we did what we did because at the time, the photo quality

03:28really wasn't good enough. You probably... If you're active on social media, you probably have plenty of photos on your Instagram with really ugly black borders and very blurry pics. So as that content got exponentially better, so did the asset that we're dealing with, and ultimately, it became a lot more usable for brands.

Nathan Latka

03:44Mhmm. Mhmm. So to... I mean, I guess one of the questions I'd like to ask is between first line of code and first dollar revenue, how much money do you sink into building the platform?

Kyle Wong

03:52That's a good question. I feel like there's a lot more sweat equity than anything else. Part of that is because we started the company with four technical cofounders. Didn't really pay ourselves that much money, in the beginning.

Nathan Latka

04:04Oh, yeah. Just quantify what you did pay yourself. Just to get the product built, MVP.

Kyle Wong

04:08Honestly, I think it was, like, a, like, like, a little stipend, like, a couple thousand dollar stipend for a couple months. But, you know, we actually got, paying users pretty quickly in our platform. You know?

Nathan Latka

04:20What was the distance between, again, first line of code and first paying customer? How many months?

Kyle Wong

04:25Probably like five to six months or so.

Nathan Latka

04:28Okay. So so what? You know, when you add up all those stipends across five developers, you're talking, like, maybe forty, fifty grand to get the MVP up, something like that?

Capital Raised and Funding History

Kyle Wong

04:35Something like that.

Nathan Latka

04:35Yeah. And did you bootstrap from the beginning, have you always kind of raised capital?

Kyle Wong

04:39We kind of... It was a little bit of half half depending on when you consider the bootstrap. But, obviously, like, you know, when we first wrote the first line of codes, we didn't we didn't raise capital.

Nathan Latka

04:51But how much total in the company today?

Kyle Wong

04:53We raised an eight... Low eight digits.

Nathan Latka

04:55Okay. So Crunchbase says 5,500,000. Is that accurate?

Kyle Wong

04:59It's not completely accurate.

Nathan Latka

05:00Okay. And why is it... No. Why is not accurate? Did use debt?

Kyle Wong

05:03No. Well, that was equity. I I mean, we just haven't got got around to updating it. It's not something that our our customers really actively look at, and it's something that we're just not really using to actively promote the company anyway.

Nathan Latka

05:18I'm surprised your customers don't look at that. If these are enterprise deals, a lot of times they see funding as more security means they can invest more in you because you're gonna be around longer.

Kyle Wong

05:26And part of that has to do with who you sell to in an organization. We sell to a lot of VP of marketing, of digitals, VP of ecommerce. And just candidly, a lot of them really don't care as much. They care a lot more about the other brands that you're working with. Right? And that that you can deal with enterprise scale of of of their platform. So

Nathan Latka

05:26Okay.

Kyle Wong

05:26We can be a lot more with the different

05:49brands that we worked with in the case studies over the funding, and I think that's actually more aligned with our customer value anyway.

Nathan Latka

05:55Okay. So we'll call it the eight figures. We'll call it somewhere around $10,000,000 raised to date. And where... Why have you had to raise the capital? I mean, this doesn't seem like it's that capital intensive. Why'd you have to take the dilution?

Kyle Wong

06:05Yeah. Well, part of it is just the r and d that we put into it. Right? So there's a lot of different areas of r and d that we spend a lot of lot of time on. First is just anything with enterprise functionality, you know, with all... With hundreds of people that are in any system. There's a lot of enterprise functionality that you need. Second is when it comes to things that are facing the customer, there's

06:27a lot of customization. So the same way that some of the customer facing applications allow you to customize everything, we we allow you to do the same thing with no dev resources. And the last

06:38thing is

Nathan Latka

06:38all your... Just because all your revenue is SaaS, or do you actually have professional service and customization upsells?

Kyle Wong

06:44Major... Like, 99% of our service revenue is is SaaS. So... But... So that's one of those things where this is something that one in every four Americans, like, sees. Right? And it's right on the front and center for a lot of the world's leading brands. It needs to look and feel how they want it. And we, as a SaaS company, don't really want to be doing all of that. Right? And for us, we spend a lot

07:07of time developing all that r and d to make sure it looks and feels the way it wants. And then last but not least, over the last eighteen months, we spent a lot of time on some of, like, deep learning improvements in our software. Because when you think about customer stories and this content, it's not just a quantity problem anymore. It's really a quality data and infrastructure problem around how do you tag and label the content

07:30more effectively so that you know what photos are... What products are in them. So, for example, when you go to Pinterest

Nathan Latka

07:35Google Image API and these kinds of things, these SDKs have gotten pretty sophisticated. You... Did you build a lot from scratch?

Kyle Wong

07:40No. No. There's no reason to build all that from scratch. You want specific products that are in the photos. Right? There's vertical specific applications of this technology that's super important. So the same way that you go to Pinterest, right, and you see the actual products that are in the photos, we have... We do... We we enable brands to do that but for their own platforms.

Nathan Latka

07:58And so, Kyle, what's the team look like today? How many folks?

Kyle Wong

08:02We're about 50 people.

Nathan Latka

08:03Five zero. And what portion are engineers or something else?

Kyle Wong

08:07It's about half half.

Nathan Latka

08:08Oh, okay. So...

Kyle Wong

08:09And we have offices in San Francisco, Toronto, New York, and kind of expanding internationally now.

Early Customer Acquisition via Cold Email

Nathan Latka

08:16Take me back to your first couple customers. How'd you land them? Do you remember?

Kyle Wong

08:20I think we, like, sent out a thousand emails.

Nathan Latka

08:23Okay. So it's cold... Basically, cold emails?

Kyle Wong

08:26Yeah. Exactly. And I wanted to also, like, set the tone for people, whereas, like, when we started the company, we were right out of college. Right? So there's definitely a lot of things that we didn't know, and one of the scenarios where we don't know what you don't know. And it took us a while to also figure out what type of customer segment this product was gonna be useful for. Initially, our first set of customers were

08:47the professional sports teams. So at a point in time, we worked with maybe one third of the NBA.

Nathan Latka

08:53So just to be clear, you basically got a thousand emails of people instead of NBA teams, and you cold emailed them. Those were your first customers.

Kyle Wong

09:00More or less. Yeah. And then once we got a couple of them, we were able to use that and and and

Nathan Latka

09:05What was the title? Like, of digital, head of VP marketing? What title did you optimize for?

Kyle Wong

09:10At that time, it was actually more of the social media manager over time.

Nathan Latka

09:10Like no budget.

Kyle Wong

09:10Exactly. Right? And, also, it's one of those scenarios where that role within a sports team doesn't really impact as much revenue because if the team is good, the team is good, right? The team isn't good. You know, it's only so much impact you're gonna have. So what we found out over time is that these small brands at the time, these

09:39small e commerce brands, would pay us a significant amount more money because we're adding a lot more value because we're impacting conversion and sales on their website. Because people, before they bought products, wanted to see how other people wore them, and we could tie the conversion, and they were willing to

Nathan Latka

09:39Got it.

Customer Count and Market Segments Today

Nathan Latka

09:56Yeah. Kyle, by the way, think my audience will totally... They totally get the product at this point. So I think that makes complete sense. I wanna try and get a big stamp now on kinda where you're where you're going from here. So help us understand where we're at first. So 2014, you're selling to basketball teams. You migrate from there. You go a little bit more enterprise. How many customers are you serving now today?

Kyle Wong

10:11So clarify, we definitely didn't go enterprise in 2014. It was like

Nathan Latka

10:11No.

10:15You are now. You just told me you're... Today you are.

Kyle Wong

10:18Yes. Today. Today. Yeah. Yeah. Yeah. So we service over a thousand brands.

Nathan Latka

10:21Okay. And those are all paying, correct?

Kyle Wong

10:24Not all paying.

Nathan Latka

10:24Okay. So how many customers are you working with today?

Kyle Wong

10:27We probably pay work with close to 500 paying customers.

Nathan Latka

10:30Okay. 500. That's great. And then like moving forward, where do you see the both the product going and will you service the same customer base, or do you also see that changing?

Kyle Wong

10:38I think we can continue to service more of the enterprise segment as we continue to grow the platform. Because when you think about the demand for content, that becomes even greater when it comes to international brands that have to find local content for places like South Korea. So for us, we we see us continuously move up... Moving upmarket while while also working with a lot of the emerging brands that are, you know, raising funding and very

11:02effective on digital.

CAC Payback Period and Upfront Deals

Nathan Latka

11:03How aggressive are you being with acquisition? Right? So you said earlier the average customer is paying, call it, a couple thousand a month. Will you... Let's say it's $3,000 a month or 36 k in the first year. Will you spend the full 36 k to get the customer, or how aggressive are you being there?

Kyle Wong

11:14Yeah. So we try to be a little more capital efficient around that. Actually, our model is a little bit different where we're trying to do it a little bit differently. So we're taking actually some of our traditional acquisition budget, and we're investing it back in things like community. And and our whole belief is that, hey. Like, if we make our customers successful, they are much more likely to help us acquire a new customer than us, you

11:38know, paying for this conference sponsorship or us, you know, doing a tremendous amount of outbound, etcetera. So for us, like, we've actually spent a lot more time on the customer success side of things, making sure... And and making sure that we're building these relationships with people because they all know people. And a warm introduction from one of our customers is worth just so much more. Yeah. So that's gonna be a little bit more our focus. So

11:57it's

Nathan Latka

11:57That also costs money.

11:59Right? That requires people, team energy, time, etcetera. So I'm... I guess I'm just curious, generally speaking. Right? Are are you happy with the six month payback period if you do spend money to get customers, or are you happy with 12 or more aggressive?

Kyle Wong

12:10I think anything between six to 12 is is... You'll take that all day, right, as a SaaS company. And, you know, especially because a lot of times you get cash upfront for a lot of these deals, so I think you'll absolutely take that all day.

Nathan Latka

12:20Are most of yours upfront?

Kyle Wong

12:21Yeah. A decent... Probably a good majority of our business.

Nathan Latka

12:24Like, more than 80%, you think?

Kyle Wong

12:26Probably around there.

Nathan Latka

12:27Okay.

Kyle Wong

12:27Yeah. I think part of it is also, over time, it's got gotten up there more. Like, when you're... When you first started the company, you don't really have any credibility. People are a little bit more risk adverse, wanna do a pilot, and all that kind of good stuff. When you have proven track record with lots of brands and people can can can easily reference your your your product with somebody else, it... It's a lot... You can

12:50do... You can definitely control more multiyear deals and cash up front as well.

Churn, Expansion, and Net Revenue Retention

Nathan Latka

12:54Churn, Kyle, as you know, is really critical in any SaaS company. Right? So how do you manage your churn to date, and have you gotten to the point where net revenue retention is north of a 100%?

Kyle Wong

13:02Oh, yeah. So actually, like, just in q two. I just did my board meeting slides. So, yeah, nice. Good word. So I know that pretty well. Yeah. So it's it's it's it's it's net negative churn. But I think, for us, we've had to also work towards that, everything from understanding, like, what you're putting in, so the right ideal customer profile. Right? And, also, what are the leading indicators for churn, which I think is super important for

13:24any SaaS entrepreneur to understand.

Nathan Latka

13:26Kyle, peel that onion real quick, and then let's talk more about tactics you're you're kind of testing there. So if you peel that back between what your churn was versus your expansion, what are those two numbers?

Kyle Wong

13:35Yeah. So

13:37churn and... So, yeah, I mean, I think it's it's net negative expansion. Right? So

Nathan Latka

13:37Well, you can't

13:42have net negative expansion. That doesn't make any sense. Basically, if you get net revenue retention or net negative churn, it means your expansion more than outpaces your churn revenue. So I'm just trying to understand what was your gross churn over the past twelve months, what was your expansion over the past twelve months, and then that gives us the net number.

Kyle Wong

13:57Yeah. So I I don't have all that right right right in front of me right now, un... Unfortunately. But, like, the overall is the upsells and cross sells over... Was greater than our our gross churn.

Nathan Latka

14:08Okay. Do do you have a general sense of one of those numbers? You said you just did them for the board deck. I mean, are we talking, like, 10% annual churn or more?

Kyle Wong

14:14For gross or net?

Nathan Latka

14:15Gross.

Kyle Wong

14:15Probably around that number. Yeah.

Nathan Latka

14:18Okay. Yeah. Yeah. So so again, if you got 10% gross and you have 10% expansion, net would be a 100, or it sounds like you're negative. So you have a little bit more than 10% expansion.

Upsell Vectors: Usage, International, Placement

Kyle Wong

14:25Yeah. Yeah.

Nathan Latka

14:25What are you upselling against? Is it... You mentioned usage based upselling earlier. What what do you define as usage? What's the metric?

Kyle Wong

14:31It could be a couple of different things. The the more than one is just volume of photos served. So like I said, like like many other kind of API based companies, it's volume and usage. But we also have brands who move internationally as well. And if they move internationally, they come with different types of requirements because things like, hey, the different data privacy in South Korea versus Russia versus in The EU right now, and they have

14:55different product SKUs and a much different team. So it's kind of like a... Sometimes it's it's like almost providing another platform for that team. So those are just some of the key vectors around our upsell and usage. And the last one is actually where you put the content.

Nathan Latka

15:08So Like, actually physically or, like, a screen?

Kyle Wong

15:13You... Well, one of the areas of where people put the content is in store. So it... We definitely upsell related to that.

Nathan Latka

15:21And just to be clear, you're upselling based off physical location, like number of stores you put our picture wall in or or places, meaning, like, the website and a billboard and a digital sign in New York City subway?

Kyle Wong

15:34The latter.

Nathan Latka

15:35Okay. Got it. So people... Are they not putting them? I imagine they also put them in their geographical located... Their actual stores.

Kyle Wong

15:42They do. Exactly.

Nathan Latka

15:43But you don't upsell against that?

Kyle Wong

15:45So we provide kind of an all inclusive package for that as you you do that. That that gets included in the volume that you use it in.

Nathan Latka

15:54I see. Okay. So the... In terms of upselling against kind of where you put it, when you've used the word where you mean specifically, like, a billboard, a subway sign, etcetera. And then you include the actual putting it in the target location or the Nike location right across the country that's included in the other fee.

Kyle Wong

16:11Right.

Revenue Discussion and Growth Rate

Nathan Latka

16:12I see. Interesting. Okay. Before we wrap up, my audience will take the 500 customer number you gave me earlier times the couple thousand dollar a month ARPU you told me as well and multiply to get about 1,500,000 a month in revenue today. Is that about where you're at?

Kyle Wong

16:26I'm really... Yeah. It's about... I think you probably could get to a pretty close... We get pretty close there.

Nathan Latka

16:31Okay. And then in terms of growth rate, so if you're there today, where were you about a year ago? You doubling year over year?

Kyle Wong

16:35About doubling year over year.

Nathan Latka

16:36That's pretty good. And you think you can keep... I mean, obviously, at some point, it gets harder to do that because you hit such big numbers, but do feel like you can do that for the next couple of years?

Kyle Wong

16:43You know, I think everything is always harder at scale. Right? But I think we have a lot of really good industry tailwinds that that are at our backs right now. So I think one thing we can't really control as founders is just the overall market. Right? And I think the market is kind of moving in our favor. So I think we're pretty optimistic about our outlook for the next couple of years.

Famous Five: Books, CEOs, and Tools

Nathan Latka

17:00Alright. Let's wrap up with the Famous Five. Number one, favorite business book.

Kyle Wong

17:04Oh, the reason one reason why I just recommended our coworkers is How Will You Measure Your Life by Clay Christensen. I think that's really important when it comes to building team culture.

Nathan Latka

17:12Number two, is there a CEO you're following or studying?

Kyle Wong

17:15There's a lot of CEOs that I'm following or studying.

Nathan Latka

17:17Pick one.

Kyle Wong

17:18Right now, it's actually the Zoom CEO, Eric. And the part of the reason why I think from as a leader, he's incredibly authentic. Right? And and, you know, in in the way that he approaches customer support and customer experience, I think, is actually world class.

Nathan Latka

17:31Mhmm.

17:32Number three. And by way, if guys wanna listen to Eric, he came on the show two weeks... Actually, before... It was about three months before the IPO, actually, and go listen to that episode. Number three, what is your what's your favorite online tool file for building your company?

Kyle Wong

17:44Oh, I actually really like Mixmax right now. It just helps me make sure my inbox is clean and making sure that, like, I actually get back to certain people and, you know, bump people when when appropriate. So I think that I think that's been really helpful for me just just in calendar and all that good stuff.

Nathan Latka

17:59Number four, how many hours of sleep do get every night?

Kyle Wong

18:01I try to average at least between around, like, seven hours of sleep. That tends to be my sweet spot.

Nathan Latka

18:05And how old are you?

Kyle Wong

18:07I just turned 29.

Nathan Latka

18:0829. Very good. And situation, married, single, kids?

Kyle Wong

18:12Not married, and I don't have kids. No kids.

Nathan Latka

18:15Alright. Single category.

Advice to Younger Self: Consistency

Nathan Latka

18:18Last question. What do you wish your 20 year old self knew?

Kyle Wong

18:21Oh, man. I think the importance of consistency. I think when you're younger, you can get super excited about certain things. Right? But it's not just about spending one day or two days on it really, really aggressively. It's about can you maintain that level of consistency over a long period of time? Because I think that's really where you get to the difference between good versus great is consistency over a long period of time.

Nathan Latka

18:42Thanks.

Kyle Wong

18:42It's similar to podcast, you know, by the way. Everyone wants to create one podcast and do two of them and then doing a thousands of different... A different level. So congrats on all the consistency you've had on this.

Nathan Latka

18:51This is episode 2,072, so thanks for that. Guys, there you have it. Pixlee, again, founded back in 2014. UGC marketing platform for brands that wanna use their customers and users and, you know, again, users have pictures everywhere. 500 customers to date caught a couple thousand bucks a month on average. They caught around 1,500,000 a month in revenue, doubling year over year. Obviously, nice growth rate there. Raised $10,000,000 to do it. 50 folks on the team is

19:13booked to scale net revenue retention north of a 100%. They are optimizing for, call it, a six to eight month, even twelve month payback period, but most of their growth coming from customer word-of-mouth marketing as they double down on that. Kyle, thanks for taking us to the top.

Kyle Wong

19:25Thank you for having me.