Play Revenue, Valuation & Funding (2024)

hey folks my guest today is dan atlas of the he's the entrepreneur ceo who's built grown and led successful teams and businesses in the digital space for over 15 years his latest venture play is transforming how teams design mobile products by letting them design build and experience their product in real time all on the medium they're designing for their phone dan you're ready to take us to the top yes thanks for having me you bet so should what's the comp here what's the analog is it sort of like web flow for mobile is it more like sort of you know like a figma for mobile yeah it's actually i would say in between the two in terms of our current state right so we're we're the first native ios design tool for teams to design prototype and share directly on their device previous to play we ran a design agency building a lot of mobile products for our clients and one of the things that we experienced with as many great design tools there are figma adobe xd sketch they're sort of a mile wide and there is not really a platform built for people designing specifically for mobile products so what we're trying to do is fill that gap and be very kind of focused in terms of product teams designing for mobile and how do we give them an input directly into what they can achieve with kind of the sandbox that apple has created and give them access to all that stuff when was uh the agency before you like spun out the sas it sounds like a software company what year was the agency at its prime i would say probably right before and during we sold uh 10 years ago so we sold to densu yeah the name of the agency was called firstborn uh and then we sold to densu it's about 10 years now so myself one of our michael who founded firstborn he left after four years after sale and then june and myself left uh after uh eight years post uh post acquisition uh we started play okay and and give me a general sense of like size so before you sold how many folks full time and like can you share sort of what revenue was back in 2010 fr at our older agency at the agency yeah yeah we were doing around 27 28 million dollars uh annual revenue about 100 people um so it was you know services based business uh so you know there you know we had some repeat clients aor clients but a lot of a lot of project-based business so every year you're kind of you're you're starting over to to refill you know the pipeline uh but going from agency world which is you know services business profitability from day one to managing sort of now you know we're pre-revenue right now so going from managing a p l to just an l has been uh you know a mental shift from from sort of a ceo perspective but um it's been a good transition and so so sort of help me understand so companies and agencies like when i've seen multiples recently but this was again 10 years ago so it's almost irrelevant but you're trading for somewhere like two to four x ebitda i don't know where your ebitda was at the agency but but what what sale price is like 50 60 80 million something like that yeah it was no i mean we never publicly disclosed it but it was a it was a it was a it was a good deal i think for for for everybody you know involved not just financially but i think we found the right uh the right parent company um to sell at least at the time when we sold the business what i'm trying to do by asking that question is get in your head as a founder right so have you now created a cache cushion for yourself back in 2012 that allows you to sort of do anything are you still sort of like eh you know have some flexibility now but i still sort of need to stay here and earn my iron out for the next three years oh yeah yeah no i i got to work so i mean we you know was able to to to have a have a bit of a safety net but no i'm i'm i'm here to work uh and and build the next next big thing that's what we're here to do yeah so you sold in 2012 when did you leave 360i or detsu uh left ensue uh it was three years ago now okay got it so left now did you guys already start writing code for this inside of densu no no we we we june left uh i left about four months after he did uh they you know june and our other there's four partners so myself michael june and eric um jun and eric kind of started together uh i finished out a few more months at firstborn then i left and then joined them 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 valuation data out from over 2807 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 evaluation is there's many different ways to value a sas business so the reason you're gonna see three or four different valuations inside of your frowner path 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 raised they sold 22 percent 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 well go in here and look at all this 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 valuations than what you can get now inside of founderpath 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 founderpath.com forward slash products forward slash evaluations or if you go to founderpath.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 so sorry when you say partners you don't mean at the agency now you're talking about play there's four or four founders that's correct yeah sorry so say that again june eric who else michael who founded firstborn uh and then myself so we all we're the four founders uh for play very cool and did you guys just decide okay we're gonna be even and split 25 each or what how'd you have equity conversation that's always tough yeah it was it was relatively equal um we started with our own capital um so we started with a million dollars of capital uh michael put in the lion's share of capital um so that kind of got us started we're i think a good position from from that standpoint like we can hire people from day one um we weren't really like hardcore bootstrapping you know per se and then we ended up raising kind of a pre-seed round on safes and then quickly followed that up with what ended up being our seed round uh that first round lead which we weren't really looking to do but after meeting a partner there todd uh we we thought it was the right thing to do so how much was that precede round four in what year so we did both of those were um last year uh the pre-seed round we raised three million uh uh on a 15 million dollar you know post money valuation cap on the safes and we followed that up with another 6.1 uh that first round lead and did you close that like december last year or that or like closed oh yeah we closed that in april of last year oh god so that 3 million precede was like basically end of 20 right or end of 2020 or early 2021 that's right i see i see okay so the six one so help me understand that i mean obviously you still probably had a bunch of 3.1 million sitting in the bank when you did the 6.1 million um sorry sorry you said that was 6.1 on what did you get the valuation on that no we didn't we have we haven't disclosed the valuation on the on the on the sixth one but it was in the it was in the you know tens of millions i think it was it was a it was a good jump up from where we did our our pre-seed uh kind of yeah i mean most in their seed today they're selling something around 10 to 20 percent of the business right we're in that range yeah we're in that range okay fair so that's like call it 30 40 posts something like that yeah we were okay yeah so why do it again you still have a bunch of cash in the bank yeah so we had good runway we had cash in the bank it was two things it was i met todd jackson uh we got to know each other you know over the course of a few weeks he was the you know former founder he first round actually invested in his business he was a product guy he you know tried the product he had some of his kind of designer uh you know co co-workers use the product uh he like he did a lot of diligence in a very short period of time and understood the vision of what we were trying to build and he he wanted to use like look i want to be involved and i just had a good relationship with him you know we just we just kind of kicked it off we didn't run a process we didn't optimize for evaluation per sales like i think this is the right partner i think this is the right firm and what it allowed us to do from a capital perspective was just accelerate our roadmap right so we're now going to be releasing the ipad product for play this month we're building out some other products uh some other platforms you know as well so it allowed us to double the team and not be overly concerned with you know our burn so we doubled the team for 20 people now and i think if we would have done that race towards the end of last year we wouldn't have been as far along on the roadmap as we are now so i mean what are you comfortable with burn i mean 20 people i'm doing back in the napkin right i mean what you guys are burning something like you know 200 300 grand kind of expenses per month yep yeah interesting is are there any other big expenses i wouldn't know about no that's it we just signed another we signed a lease for some office space in the city again uh kind of get some people out of there out of their apartments and back into the office at least a few days a week but other than that it's all people yeah yeah so you're talking like burn is like caught 350 a month something like that or approximately three you know three million years so you've got like you know what 16 to 18 to 20 months of runway something like that yeah we're about 24 months right now so i think you know the plan is maybe raise our our a towards the end of this year early next year but we've we've had we've had a fair amount of interest early this year and maybe we'll end up doing earlier i think we'll you know we'll see in the next few months what happens where is the interest coming from i mean what are people seeing about the business that are flagging are usually a lexus score going up is your user list growing what i have no i have no idea i have no idea we will get inbound calls and i'll ask you how did you well i know a product designer or i know a senior person at this company and a few of their designers are using it and you know now it's on my radar and i wanted to you know reach out to you but it seems to be more word of mouth of people who have used the product tried the product and then it makes its way through i guess you know the kind of the vc channels yep yep yep i mean and you're getting traffic right alexa score 282 so it's not like you're getting no traffic and people are hitting this site and it look frankly the design king you know congrats this makes sense you're coming from agency bones but the site looks like you guys are a much larger company in terms of revenue than what you when what you are so when does the paywall go up how are you thinking about pricing yeah i think the the we will introduce i think monetization this year uh for sure right now we're focused on retention and growth obviously uh from from our users i don't know if we want to reinvent the wheel when it comes to actually like packaging in terms of pricing we'll probably look to do something as other design tools in the space have done maybe three tiers will most likely be a freemium product so it'll be a free tier for starters a paid individual tier and then a paid tier for organizations and for for teams um so that's been the focus now we're you know getting our stock to you know certification going because we you know we're running into those conversations with companies where we've got a few designers inside of a company using it and then you go down you start talking to it and legal and you know are you sock too compliant and so kind of beginning you know those processes so we can at least begin to you know sell it into the enterprise we're ready who are you using to get that sock too done are you using a software or you can hire a consultant or what we're using vanta interesting good i get this question all the time and i never had a good answer so i always ask now i mean have you liked vanta to date yeah we've just started we're about 30 days in but to date they're the system is i the person who's doing it on our end has done this before and is like dude this is amazing compared to like the nightmare that you you have to do this when it's on your own so the dashboard that they provide has been really useful just in terms of tracking everything you need to do and how you you know giving you suggestions so it's been it's been pretty seamless so far is it super expensive it's not terribly expensive i mean i think we benchmarked a couple other companies they were all in relatively in the same range but quite honestly i think if you're gonna i mean look you need to save every dollar but also if you're gonna save two thousand dollars but it's gonna cost you another ten thousand dollars of manpower right of per people power to actually do the work i'd rather pay the two grand and have those hours back for my engineer so they can get on building with the product so like if someone is going to sign up for venta right now they know they need to talk to compliance they should budget what 10 20 30 grand to get it done something like that yeah i think yeah i think for the first year you budget budget around 20 grand you know yeah of the of the auditor fees too they kind of bundle everything together yeah that makes a ton of sense um okay cool let's keep going here so you just mentioned you're focused really on retention today many people would hear that go he's pre-revenue what does he mean retention what activation metrics are you measuring right now to define a retained customer or a retained user yeah so so depth of usage and retention i would say are our two primary kind of focuses right so we've got we just put the app in the app store at the end of last year right in q3 of last year and as you know there's a there's a gate where you can go in but you can't get full access it's in an invite only so we've got about 30 000 people on the on the list of people who've registered for full access and we've been batching those people in over the course of the last year we've got 11 000 app installs already of the product on ios so comparing usage quarter over quarter and then comparing and then looking at retention rates so we have cohorts emerging in terms of retained users at five six seven weeks that are 80 85 retained right so meaning they're doing more than just checking out the product and seeing oh this is this interesting or not they're actually using it to to design things and to build things so what i'm doing is i'm looking right you looking at at those cohorts and mix panel and then going in and talking to those people right over the last six to twelve months and say what's how are you using the product what size company are you working in uh what is the size of your product team what are the biggest hurdles what do you want the biggest piece of feedback we got over the last year by doing this was people were like i would love a tablet application can you build this on ipad and so we're like okay we're going to build it on ipad and now we're shipping that this month so looking at those retained cohorts of people who are using the product how are they using the product and where is that fitting in one of the earlier things that we learned was we've got to meet designers where they already are which is in their primary design tool which is why we spent an enormous amount of time working on our figma import capability right so we're an and tool right and so i think like play is a great complement to figma so if your design system is in figma you can import that design system in play and continue to use that inside of our product so that you don't have to reinvent and redesign everything inside of our product so dan just to repeat all this back to you you had 30k on the waitlist 11 000 app installs today correct correct and the way that you measure retention is you look at mixpanel and you say you watch when they're designing but that's not a good you can't quantify by that mixpanel so tell me what it actually is what's the action they click the purple publish button on the app design or what's the action that defines retained yeah so they're they're generating and uh basically it'll be an app session and then they're engaging with adding something to their page right so are they are they creating something on their page if they do that multiple times then we're gonna we're gonna look to that as a as a retained user and adds an element on their mobile app design page so maybe they add a new button or they upload a new image or something a new style class something exactly so those we're tracking those as like events right and so if we look at the past month there were actually 650 000 events right 650 000 individual actions inside of the product across how many users are 11 000 no those are just app installs so actually we have it's it's far lower we're in the multiple thousands but the app installs are still people who haven't gotten full access yet right and so i see how many have full access on the 11 grand uh we have it's about 4 500. oh okay that's still pretty significant yes yeah got it got it got it so we can take the 6 500 actions across the 4 500 activated users each one's using it about 144 actions per month something like that 650 000. yeah 650 000 divided by 4 500 is about 150 actions per user per month yep exactly right and so do you have a sense of like how many actions per user per month they have to hit before they're comfortable paying 100 bucks per month per seat not yet so we started to reach out and have conversations with some of our more active users like how much would you pay you know what's what's to what's too expensive to pay what's too little that you would want to pay but we're just starting those pricing conversations with users right now interesting really interesting okay got it um so just be clear pre-revenue today thinking about pricing 4500 sort of active you know folks that have installed and are using burning 350 grand to 400k per month with called 18 to 24 months of runway team of 20 right now how many engineers uh it is 12 engineers oh wow jordan yeah majority engineers yeah yeah that's great and um this is interesting um this is like one of those products where i look at it and like i just know if i ever asked my designers to design on a mobile app they'd go give me a freaking desktop please but you must have identified like what is the scenario designer is in where they wouldn't use their desktop and they really want to design on their mobile device they're stuck on a subway all day or what yeah well i think it's what it affords you to do that a desktop may not afford you to do so for example when you're designing on your phone you're designing in the native environment so you now get to plug into all these native elements that ios has to offer so if you're designing a video player right all the primary design tools don't support native video they don't support native modals or live maps or haptics or input text fields so what happens is designers spend all these times on their desktop designing around hacks for all these native things that you and i and everyone else feels on our mobile product or just prototypes right we're using web technologies to simulate what a native gesture feels like a pan gesture or a pinch and zoom so in play you're using all the real native ios gestures and controls now that's not to say there won't be some sort of desktop companion to play in the future we currently have a web dashboard so it allows people to drag their images their svgs their custom fonts over into the dashboard you you would you would think that they're the um the play web dashboard will grow in its fidelity as a tool as we're also launching ipad so it is not going to be a solely a phone uh product you know forever i think what we want to do is we want to use each medium in each device for its strengths instead of trying to design one thing on one device and try to make it a mile wide yeah yeah we're out of time but wrapping up you know if someone like figma or mural or one of these companies envision maybe canva even probably cam is probably too junior like it's a different subset for you guys but if one of these guys comes to you and offers you 50 million cash all up front right so about a 1.2 x 5x premium on your last valuation do you guys sell the business i don't know i mean i think we're i think we may need more than that to get off the get off the highway i mean where you never say never you know right but i think we're we're happy building we're having fun uh and i think we're there there's a lot of opportunity in the market for a product designing for mobile devices no one else is really focused on that right now all right guys let's wrap up here with the famous five number one favorite book dan uh sorry uh principles by ray dalio number two is there a ceo you're following or studying uh studying no file elon musk just for his comic relief on uh number three what's your favorite online tool for building play uh the huddle feature in slack number four how many hours of sleep to get every night uh shoot for seven okay and situation married single kids yeah married my wife and i have uh two boys oh wow okay and how old are you i'm 42. 42 last question something you wish you knew when you were 20. uh it's not about you just most things are not about you so don't make it about you guys back in 2011 their agency did about 20 million bucks in revenue across 100 people they sold that to a firm uh caught er in that same year 2012 stuck with that firm for a couple years left in 2019 to launch play it's createwithplay.com it's a mobile first builder for websites a lot of the designers are loving using this because they can use native elements on mobile you can't get on the same sort of app builders on desktop they've got eleven thousand and thirty thousand on the waitlist eleven thousand installs forty five hundred active users that have done about sixty six hundred fifty thousand events the last thirty days nice growth six point one million seed raised it called 30 to 40 million valuation middle last year maybe raising series a later this year early 2023 we'll see what happens dan thanks for taking us to the top thank you 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 1 pm 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 of that make sure you click the subscribe button below 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