How Postalytics CEO Dennis Kelly grew to $19.4M revenue and 2K customers in 2024.

hello everyone my guest today is Dennis Kelly he's the CEO of postal it Excel eating direct mail marketing automation tool he's a six-time entrepreneur primarily focused on software and technology he's been involved in founding investing in senior management roles in startups such as Genesis business system on ebay.com Palm Inc adjoined solutions Computer Associates and others Dennis are you ready to take us to the top I am ready all right post oolitic so what do you guys do and how do you make money postal it exede rekt mail automation tool and what we do is we help marketers deploy direct mail marketing programs as a part of their CRM and marketing automation platforms one of my favorite tools is bond which allows me to do handwritten letters out to folks tied into our CRM it sounds like you're that but maybe all kinds of direct mail physical objects gifts toys etc you got it we're focused right now at our launch at on postcards and letters and we're able to send two very large lists as well as small lists or triggered CRM based campaigns as well that's great now you said you're just getting ready to launch or you're pre-revenue today no we are early revenue okay and so we launched in 2018 okay and and we're ramping very quickly we've signed up over 450 customers right in that on a time and folks are using the platform and a self-serve basis and are these 400d these are at either actual paying customers not free users correct that's correct we do have a freemium up and some folks are able to sign up and use the products for free and then upgrade as they go pay as they go and Dennis I know you've got kind of a zero per month plan $1.99 up to 399 give me an average what's the average customer pay you per month the average customers paying us about $300 per month on a subscription basis and we're pulling in about $1,000 a month for paying customers on purpose fees per PC okay interesting now if I take 450 customers and average $300 kind of per month the price point that puts you right now at about 135 grand per month is that accurate yes that's roughly accurate okay that's great so you just launched in 2018 going from nothing 135 grand per month it is very quick and just be clear that hundred thirty-five grand that's just the pure place ass revenue you didn't have sending fees and all that on top of it about a thousand bucks a month exactly okay very good where did you mean that's incredible growth done it's congrats where did you get back with those customers from how'd you sign them up the vast majority of them are HubSpot customers and they have found us through both of our content marketing as well as our investment in the hub spike connect partner program okay and what is that investment look like walk us through how that works sure so hub spot is early on but investing very heavily in building out their partner ecosystem and so we have been aggressively working with hub spots management to be sort of a premier partner we're geographically located near hub spot we know a lot of the senior management team and so we've been investing very heavily in marketing and sales enablement and and doing Co marketing Co selling we have an agency product hub spots got a huge agency partner program and so we've really embraced a go to market strategy that involves a heavy investment with a very fast-growing Sierra and the marketing automation tool yep and how many pieces of mail have you sent today we've sent about 2 million pieces of mail in the last 8 months that's great yeah I'm looking at your pricing page you know I'm just gonna give a sample real quick so for a 4 by 6 first class but you know between 0 and 2500 copies that's you know 55 cents right so these are the kinds of things people can can pay and that's the cheaper rate on that plan because the per month software fee is higher it's 389 per month versus if it was a cheaper per month fee than it be higher per per kind of piece of mail sent correct exactly exactly and so the the typical onboarding process our customers are going through is they'll find us they'll sign up for the free tool they'll send out a few mailings in the free tool and then as they ramp up they move up into a subscription now if I'm paying you for our bucks per month is that pure margin to you or do you take that spent and apply it to my first a thousand you know four by six you know things that you send no that's pure margin okay got it so good I just want to say so so you don't have like you know hard call you know that the the physical paper the stamps the envelope and all that out of that 400 ollar per month fee no that's really covered in the per piece fees got it very cool boots drop to raise capital so yeah we are just starting to put together a name from where we're planning to reach out to folks that are interested in investing in the space we're really trying to sort of redesign the way the direct mail works and so folks that have an idea of how effective direct mail marketing can be and and but want to sort of disrupt the space traditional printer model is the workflow and the sales process the onboarding process really hasn't changed since the 1990s and so we're really trying to apply a sass business model and a SAP software model to this industry that still is about forty five billion dollars a year in the US but has really stagnated in terms of evolution so Dennis how much are you looking to raise we're gonna raise between 500 and 600 thousand dollars okay here to start and how can I put together business model that allows us essentially to take that capital expand the footprint of the product and the sales marketing organization and take us through to cashflow positive that's great so you're raising five in our grand and I'm gonna do that on on a convertible note or a safe we're actually gonna sell equity we're actually selling money okay great so you're gonna do a price draw and write it right away you got it that's great and what are you aiming you have to tell me the exact number but what are you aiming for in terms evaluation in the high seven figures hi son figures okay so call it somewhere between maybe you know seven and ten million something like that exactly yeah very good and and have you have you had any pitches yet I mean have they gone yeah we've had a couple pitches we've got a several folks that are interested and and we're really trying to find the right partners we want to find folks that can help us not only financially but also through their relationships and their experiences and so you know we're really on the process but we feel pretty confident we'll be able to raise that money yeah and I just want to be clear to usually I feel about growth rate in terms of your out of hundred five grand today in a revenue taking back a year in August 2017 what were you at you were pre-revenue at that point right that's correct yeah so nothing there very good what's the team size today there are four of us four people everyone based in Boston or in that area yes yes we have we have a extended team of contractors and part-time folks you know Leigh you mentioned where the reason you wanna raise capital is to get profitable what I imagine with four people at her 35-grand and monthly revenue yard yeah I think your cash flow positive correct right oh yeah but but we are planning to significantly increase our spend I see I see no that that makes sense but I mean look even though if you raise 500 brand and you then increase spending by a hundred grand per month you still have a hundred and thirty-five grand of income there I mean it would be you'd have to really spend you'd have to spend that five hundred and you raise in five months or less I would imagine to put you guys into serious cashflow negative territory yes yeah you you have a lot of experience kind of with other companies and such walk me through how you're you know why not go raise five million or why raise at all why not keep bootstrapping well we're really trying to grow this company little bit differently than we have in the past we are interested in taking small sips of capital and and and small sips of outside leverage to grow the business rather than kind of take the traditional venture capital approach and and we want to build a business that is aligned around disrupting this business and building long-term value as opposed to I guess often meeting the needs of limited partners and and things that can sort of distort the early progress of startup yeah but you're about to be in that if you raise 500 grand even with a ain't friendly Angels you're about to be in that phase yeah yes some extent but it's a little bit different than raising five to ten million dollars yeah yeah definitely okay tell me more about some of the economics here so churn with your turn today about four percent per month okay that's a logo turn per month I'm sorry that's a logo turner revenue churn that's revenue teacher revenue churn per month okay that's not bad at all and how are you people that are turning why are they turning they'll typically not have success with the campaign they'll try a few things out decide to focus on other channels and so that really is a great opportunity for us one of the things that we're finding is that over 50% of our clients are new to direct mail and so that you know the actual creative piece of it is something that we think we can really bring some expertise to the table too as we ramp up mm-hmm now one of the things that I've got a question about a seasonality on this kind of thing I imagine during the holidays people are gonna send out more you know Black Friday deals via snail mail than they would at other times how do you deal with seasonality the business model make sure doesn't totally kill you in terms of churn yeah that's something we're really trying to work through our first year right we have to kind of see what that really looks like and and understand what the the model will require in order to smooth obviously having the subscription revenue helps and then the other thing that we've done recently we've given folks see an ability to pre-purchase mail credits so that they can buy in bulk and get volume discounts and and so that should help smooth particularly for high volume centers mm-hmm yeah it'll be interesting to see how you develop a model you know four percent revenue trim per month I think what that's 48 percent per year so you're turning half year revenue each year you've got a I'm sure you're working on this but you've got to figure out some way to bring that down like two ish or one-and-a-half percent something like that and a lot of its got to do with pricing experiments right yeah pricing as well as I think giving folks tools to be more effective in their marketing mm-hmm is there value to the platform if I'm paying you and in that month I send you no mail yes so what you are getting in the platform actually is campaign management and tracking and so often there's actually a much longer life cycle of the direct mail send and so leads and inquiries will come in weeks after a a piece of mail is sent and so we've got some proprietary tools that enable marketers to understand the actual attribution of a piece of mail to a person how so we we actually have a patent-pending method of delivering a unique URL for each piece of mail that is sent in a campaign and so what you're able to essentially do is apply our tracking code into your landing pages and we can understand hey this is Dennis responding to this piece of mail that was sent three weeks ago mm-hmm so Dennis have a question for you about this because in theory it sounds great but a lot of friends have tried this model Alice strikes me as an example they do virtual gift-giving and they allow customers to basic or CMOS to send out gifts to a thousand customers and there's a tracking code you know X seven one six three five go to a WW customer name com put in this code to like get your prize it's they found it so difficult to tie the attribution loop because and I look I've never done it either I've never got a physical piece of mail from say Restoration Hardware and actually use the code I just go to Restoration Hardware comm and buy whatever I want from the direct piece of mail how how are you gonna try and make sure that consumer when they get the mail who doesn't give a damn about tracking actually use that complicated more complicated than just typing in the company name use that URL or that tracking code sure sure so there's two things first when when the call to action and the offer is tied directly to the code you find a very high percentage of folks they're responding will use that code a second there's new technology rolling out in every phone being built by Apple and by Google that will automatically scan QR codes as well as URLs there's a new feature being rolled out in Android called google lens that is applying artificial intelligence to the camera and so in the very near future you'll just point your camera at a URL and it'll take you right to that page but you see I'm saying this though when I pick my mail up and I bring in my kitchen counter the last thing I'm gonna do like I've never pulled my phone out and scanned a mail before you're having to teach the consumer to do a whole behavior which is a steep learning curve specifically so your customers can track attribution how do you make that process valuable for the end customer well what what again the first thing is is really getting the creative tied to the use of that URL and and so we have clients that do that and they do it with great success somehow so if they send out a thousand unique codes how many of those codes end up getting activated in the first month that the mail sent well if there's a very strong offer we see 5060 percent sometimes mhm and so and then the other key of course is tying in multiple ways to respond right snow so we'll have an ability to add 800 numbers to unique 800 numbers to a mailing and provide a wide variety of different response mechanisms interesting all right last few questions here on economics before we wrap up a payback period or sorry CAC how much are you spending to acquire these customers right now we're not spending that much money if is acquire customers Minoo were we're very early-stage we're not really spending much on marketing we're gonna be rolling out marketing programs that will you know cost some money here after we raise some capital but let's say you're in a meeting right now with a friendly angel they're gonna ask you well if I give you five hundred ran what are gonna spend it on and your answer is gonna be what we haven't tested that yet we don't know if the payback period is but we need to figure that out well you know if we're talking to an angel we'll be provide a little bit more detail I see I mean but what what what cohort data will you use if you haven't done like paid testing yet on CAC well I think we're in a very early stage and folks would be buying into the fact that this is an idea that makes sense and I'm investing very earlier yet you know early-stage unit economics are very unreliable no no I agree with that by the way I'm not saying there are there are companies doing a million a month in revenue that don't know some of these numbers but I'm just saying I think the the thought process on the decision tree related to CAC and payback is more interesting what then what the actual number is sure sure and in you know we've got unit economics I just don't think that they're worth very much at this point yeah cuz cuz the sample size is so small exactly yeah very good okay so again for people remote locations too early to dive too much in the economics looking at raising some capital here well you go outside of Boston or you think you'll stay mainly in Boston and maybe look at you know people like HubSpot investing directly as strategics yeah we will be definitely speaking to some strategics we have some folks that are beginning to tap into our API that are interested in potentially investing and we are speaking to investors outside of the Boston area that's great and does how much a new AR you're gonna close there it inbound good question so we're hoping to bring in between four to five hundred leads and and go from there that's great all right let's wrap up with the famous five number one what's your favorite business book my favorite business book is the one-page marketing plan number two is there a CEO you're following or studying right now the CEO that I'm most interested in is Brian Halligan an up spot yeah by the way if he comes in and just says okay you're trying to raise that 7 million pre what do I just offer 7 million to buy the company do you sell no you don't sell for 7 million that's like what is that that's 4x your arr I don't interesting ok number 3 what's your favorite by the way then why raise it that rate it's it's just a number that I think will work ok number 3 what's your favorite online tool for building your business besides your own favorite online tool for building our business drift number 4 what is your how many I was asleep are you getting every night I get 7 to 7 half hours it's pretty good in what your situation Dennis married single kiddos married kids out of the house how many - two kiddos very good and how old are you I am 52 years old all right take us home Dennis what he was your 20 year old self knew I'm sorry what he was your 20 year old self knew I wish I knew the the value of balance in my life with exercise family relations and and the things that you you started pick up over the years in terms of life balance guys balance is important Dennis CEO of Post oolitic slicking to raise 500 grand on maybe seven to ten million pre-money they've scaled fast just launched went from nothing to hundred thirty-five thousand bucks per month and pure sass revenue across 450 customers bootstrapped today they've got four percent revenue turn per month he's exploring ways to drive that down too early for most the unit economics but the growth so far is impressive seriously cashflow positive with just four people in all remote locations around the states again found it here in 2018 Dennis best of luck and thanks for taking us at the top thank you everybody have a great day