Ignition Revenue, Valuation & Funding (2024)

hey folks my guest today is guy pierce and he's got more than a decade of experience in professional services he's a chartered accountant chairman of interactive accounting a progressive accounting company founded in 2009 and an angel investor in multiple portfolio companies today he's the ceo and founder of practice ignition the world's first client engagement and commerce platform for professional services businesses guy already takes the top they made it let's go thanks for staying up late i think you're based down there in sydney right i'm up early it's uh 7 am here oh my god you've got the coffee in you've got your coffee and i'm at the other end right here yeah absolutely fair well okay so practice ignition.com is a site now just to be clear you are not a consulting company you build software for consulting companies correct i see 100 right i explained to my mom like shopify for services right so you think about it like that where the engineer used to run the revenue on payments and connect through the third-party workflows so they can have their tasks billing and collections all tied together to a digital handshake not based on what we do and so so to help me understand can you name a customer that's paying you and what they what they pay you for specifically uh bakertilly in the u.s would be one of the larger ones uh let me think about what else um you said sorry bakertown baker tilly's their large cpa film in the us and uh in canada and they pays for software to help run their contracts um and accountants usually re-engage or reissue contracts every year so there's sort of a phone plan if we can dumb it down to that um and it's like we're selling mandarin mainly to accounting firms 100 at the moment 95 percent of our customer base or cpas and bookkeepers around the world interesting okay so there is a sector focus here it's not just any consulting firm in the world no that's true we do have some weird and wonderful customers in many different industries like small isps education providers lawyers digital agencies marketers etc but the large primary bulk now focus has been on bookkeeping and accounting as every professional services business has a cpa or has a bookkeeper so it's very much sort of let's solve their problem and then they can recommend it to their clients in the long run i see okay that makes tons of sense so what is the average you know baker tilly not actually bigger chili but what's the average customer paying you per month or per year to use the technology the painting is about us 400 a month for a mix of software and payments um so sort of a blended piece the average software uh clip is about 150 us and the payment's about 250. interesting so so what is the 250 is that a percentage of the volume they process through your platform correct so we process both och and credit card in about five countries around the world um us canada uk australia uh new zealand um and we've got a couple of billion dollars of revenue under management and we process north of a billion um annually at the moment obviously that rates that are drawing up got it so you process over a billion per year and these are individual accounting firms like baker tilly sending invoices or quotes to their customers we add all those up it's over a billion you take a small cut of that correct so that's exactly how it works come on guy what's the cut what's what's the smallest uh smallest uh we take about well i mean it's on the websites it's very easy to see but the blended take rate for ourselves is about 50 bibs at the moment um we're looking to push that up um through getting the volume up there and negotiating on our cost side but also just thinking about how we charge smartly for people so people are feeling like they're paying the right amount for the right service ultimately what we're trying to do is just make sure there's no administration make sure they don't have to use another system make sure the clients can see their payments and understand where they're coming from and that everyone's kind of happy on the two-sided degree yeah i mean but guy i mean look just quickly i mean a billion bucks in gmv at a five percent take rate is your lowest that means at a minimum oh fifty fifty bits point five guys sorry sorry sorry point five percent take rate i mean your your minimum revenue there's five million bucks there right if that's your lowest take right probably higher yeah yeah that's great yeah yeah thankfully that's good um what is the how do people get down to 50 bips like what are they what do most people start at is it like 250 bips 2.5 percent no uh yes so the the gross rate uh before we have to pay any of our providers is sort of uh it's about 270 bips in the us on credit card and this is a headline rate um but we have a flat fee charge for ach presently and so if you're processing b2b payments sometimes to say likable.com but you're running it through us between the two parties they're paying a fixed fee of maximum one dollar and so obviously you get a blended rate that take rate comes right down um and so yeah it's a fairly you know nice mix we're just interested in being in the flow of commerce between two b2b parties and you know getting rid of checks right that's kind of our our main secret source and it's a great platform for removing that i'm in layer so everyone gets stuck in and has a good experience yep now i want to i want to get to the round and just do with jmi equity recently like literally a couple days ago but let's go back to like day one for a second when did you guys launch what year uh 2013 we had an mvp out in 2012 um but yeah about eight years ago okay well eight years ago and do you remember the year you broke a million in revenue uh yeah that was 2017. 27. okay so zero to a million five five years that's the is real back then huh oh hey this is whatever trying to sell to account as a bookkeepers they're lovely people um but also trying to have the right level of product in terms of not too structured and flexible and trying to find that balance is is a real pain point and it's a it's a slog um i think we'd only raised about two million dollars in that whole five-year journey so you know we had a very lean main team trying to figure out how to make things work and scale it up and then on it sort of you know more expansion capital and why we went do you remember yeah you did i think you did like three seed rounds a million and 2015 and 1.5 ish in two tracks in 2014 and then 110 angel round i think before that right something like that yeah so we had like uh family friends and fools so my brother my best mate and then my old business partners my old cpa firm then we had a bunch of angels which was um anchored by a guy called craig winkbot who's uh effectively like our intuit founder but just in australia um and on the back of that we then raised from real ventures which is up in canada now i'm based in sydney australia to sort of put how far we had to go um and so john stokes up there i read our first c check and kind of split around into and we had uh enterprise uh software was the company founder here lead the second part of the state round a year later so it sort of split and then it was on to series a uh with uh australian funding particularly now it's great and it keeps getting better but we had four vc funds and two billionaires wrote us five million australian dollar check to give you an idea so it's three and a half us so um at that point we were like you know what maybe maybe this raising thing isn't for us uh we actually got through to break even in 2019 and sat down with friends and advisors and whatnot and was sort of like well where to from here we had this much of the share of the market we had product market fit and we ended up going to look for the biggest and the baddest and had tiger global come along to lead our series b um in 2019 which is phenomenal uh and yeah like you said jmi recently so yeah if you look at the crunch base for us it's like little bits of capital and kind of like big chunk and then bigger chunk and next it'll be five billion dollar evaluation oh my my mother would be so proud but uh look i wouldn't take out that uh take me back i mean managing delusion is obviously critical you want to build a big business and also try and preserve as much ownership for you and your co-founders and your brother your best mate as you can over time right so when you guys went on to that 3.6 u.s uh usd around back in the series a back in 2017 do you remember what valuation you raised that at yeah was it was it was it very dilutive it was it was uh really so australians uh how would you put this they'd like to see efficiency and capital deployment um as a mindset we're used to profitable companies and so when you've got something that's not profitable for growing quickly people sort of struggle um we really needed the capital uh we found great partners once you know the price was on the low end um but we also were sick of raising so like this is gonna be our last round so that obviously played into played into the price uh as well um but we've brought on some great partners so those people who joined us actually helped us get to the b round and onwards so there's a mix of what if um you know what come on come on what's the number though are we talking like you said like 20 percent of business or like 30 of the business uh 30. 30. okay that's not horrendous right i mean no no no no i think it's because we we don't never really got 12 months capital as you can see from our raised history right so it was sort of like the ongoing dilution and the small step ups in between each round up until the b and then the c um so yeah yeah just uh it was painful at the time yeah yeah i've painful but not now worth you guys are scaling nicely how many customers are you working with now today like like baker tilly's uh five thousand oh my gosh five thousand how could chili would be on they could tell you'd be on the high end and we probably should stop using their name because they're sort of one of the largest in the world but okay i'll stop using that so she's uh good good friends of mine zen accounting in canada um would be would be a good example of like a great customer that fits right in our icp it's about 5 000 of those around the world that we're working with today okay okay and can i sort of get a range here if i take those 5 000 customers times the 400 average rpu i mean that puts you at like 2 million a month in revenue is that about right yep yeah it's pretty close and if that's where you are today what is growth over the past 12 months uh it's funny kobe's being an accelerator and a headwind for us uh because you've got accountants looking after their clients doing forecasts and all these things they never would have done probably for years and then you've got the wanting to get paid and having moved online uh so we've grown in about 70 plus percent last two years running which is not terrible but we would have liked to grow more and you know hopefully that's what's coming as uh as the campus particularly look forward to getting paid and you know i've taken care of their clients and now needs to take care of their own business so what we're seeing is an acceleration and we've made some really great partnerships recently to help us sort of conquer the us augusto thompson reuters uh intuit pcg group um so we're kind of off off into the races and we're looking forward to you know coming coming to uh bring all the goodness that we've got down here into the u.s market and ramp up that market there tell me tell me more about the team today how many folks are full-time uh 105 it's changing a lot every week we're north of 150 um i think we'll finish the year at 170 give you an idea of the rate we're hiring at the moment um and we started about 100. uh that's a good question about 20 20 but we've got about 20 positions coming down the pipe in the next couple of days so um we're trying to ratchet it up um we went to market and scaled by making sure we took care of it manual ways to look taking care of the customers on the post sale side and learning what they needed and then on the inbound side and we just had basically content for marketers driving people in for sales and we're switching that gear into product like growth to take them through the journey and still keep the team that we've built and then adding on i think a marketing team's gone from four to twenty people in the last four months oh wow okay so we're ratcheting on yeah do you guys employees or map on strategy do you have internal quota carrying sales reps with like million dollar quotas or no we do um and that's probably roughly about right but the the asp on an average deal is probably 175 us and so they have to actually sell quite a lot of software uh to make that happen so we have those folks and they tend to stick to our large two larger plans which are still quite small and then the the base plan tends to be a straight flow through from marketing into a soft sign up what comes first uh accounting from putting a dollar of revenue through you and you making out the percentage gmv or them buying the software first and then adding on invoicing later uh the first ones they buy the software they'll run through usually like accounts as you can imagine um have a system currently for billing and collecting payment and so typically what they do is they send a contract out to one of their teams or their friend who's a client they start there they build up trust in the platform as we start to manage the revenue then they turn payments on um and the faster we build that trust the faster they roll it out across the client base um the freemium model is something we tried way back in the day and that did not work as soon as we turned pricing off and payments or sorry charging everyone for the software we had a whole bunch of emails going oh great now i'll start using it so big lesson learned back in like 2014 or 15 i was just like yeah well the reason ask is you're really well i mean some of the highest multiples revenue multiples i'm seeing right now in terms of fundraisers especially like a 50 million series bc whatever is net dollar retention being through the roof and anytime you have a combined business model where it's sas plus a utility based metric like percent to gmv usually the ndrs are through the roof i mean do you guys have pretty high net dollar retention we do yeah we're sort of you know i think payments expands at about 130 percent a year every year and then software is sort of industry standard yep so like adding it all together with like 140 150 net dollar retention across the base and both product lines yeah yeah that's i mean can you hold that at scale you think can you can you keep keep that up to a hundred million bucks an error well that's definitely the plan um but you know there's challenges along the way right uh we we're just starting we've got a very loyal customer base that loves us uh which is great um but obviously the challenge is on us to keep building great software and help keep that retention level high and and so bring more incentive for them to expand and bring the rest of the team into the mix as well so we sort of make sure that sticky products yeah i mean it sounds like you had great growth um obviously you did the series a it was a little dilutive you probably learned from that you probably never sold 30 percent of your business again you waited for it and you're both serious being serious c waited for something more competitive but why raise i mean 50 million still dilutive right why raise it we had one shareholder that was wrapping up their fund and so we used part of the process to sort of clear them out but also we wanted a bit secondary yeah we had about 10 mil secondary oh in the mix um only the rest investor or did you give them early employees the option no we actually yeah we did so we made um all the employees existing team members who've been with us for a while and had options that were invested they were allowed to cash out some um myself and my co-founder took a few chips off the table wait guys hold on how do you decide that like if you sell a million bucks of your personal shares it's like a bad signal but like then you want to take enough where though where you're like financially safe enough to worry about right so like how do you balance that oh i mean i guess i'm a cpa by background and so having the conversation with folks is like look if i don't have to worry about making a mortgage or payment at home and banks hate entrepreneurs particularly in this country and so it's like well i can you know grab the house or buy the apartment finally and then i don't have to worry about that side maybe have a small mortgage and i'm focused on the company but i don't have the sort of pressures at home like i did in the early days where you've got personal credit card debt because you're paying yourself 20 grand flying around the world sleeping on couches trying to figure out how to make ends meet um so the the focus is just sort of laser in and most people actually people jmi folks were great about it tiger was great about it um people were really supportive they're like you've been on a 10-year journey we don't want you to burn out i'm hearing great things so i've talked to maybe seven founders that raised significant rounds from tiger over the past like 90 days and everything i'm hearing is tiger has been extremely supportive about allowing big chunks even 50 rounds to be secondary um so it's great to hear that from you as well and that they've been great to work with um now in terms of evaluation most folks are you know serious c they're selling maybe 10-ish percent of the business were you sort of standard there or were you way lower or way higher for some odd reason uh we were a little bit higher um not i'm sure i think not dramatically i think the dilution was such closer to the 15 percent 13 yeah yeah i said a little bit higher not not massively that i mean and did that i mean when you look at your revenue and then you look at sort of multiple that did that sort of feel fair to you i guess maybe a better way asked that did you ha did you turn down higher valued term sheets because you like tiger and the secondary they allowed well jay and i led this round we turned down and then we did the tiger round we turned down no tiger had the highest um when we did this round we turned down higher uh term sheets to work which imi um they backed clio service now point click care so a couple of things vertical software tiger was your yeah yeah lit out say oh they're 2019. 10 million of a 20 million was secondary oh sorry i'm um back then it was two million of the oh okay and i let you take 10 out of the 50 and tiger let you take two out of the the the 16 or 17 usd yeah oh i see i see so we've done it in both rounds uh mostly just easing these invertings to people like you know uh buying a house putting kids through school we had a whole bunch of angel investors who practiced like my best mate my umbrella yeah it's like they're not really in this in this game they were there to support me so letting them sort of de-risk a little bit along the way which is great yep um yeah my my lettuce was about four million went to the team six million to buy out a suicide investor so any advice you'd give to founders that are going through this right now this you know doesn't get talked about a lot so appreciate being transparent would you manage the secondary any differently no i think it's really important so for us like being from australia having having stalking options and and valuing them at more than paper is is not really a thing so i think the biggest education for us what we were trying to do and wearing my accounting hat was very much let's put a price on these let's let some of the team sell some so that they place a value on options um and sort of been a new journey here and i was as to how to think about that as an employee as a team member and so we really wanted to make sure that people thought it was valued but it wasn't just a piece of paper that might be worth something someday um and really once again just relinquishing pressure on the home front um for the most part so paying down debts clearing out formal option holders letting them sell all together if they wanted to if they weren't at the company anymore and just clearing out a bit of the option table yeah so the advice would be you know make sure you take care of your people yeah i i i might be a smart individual on on certain days but realistically i can't run i'll do the jobs that have 150 people do so i think particularly you know with what is it the great resignation or what not coming up like make sure you take care of your folks they believe in the journey and they think you're looking after them they'll stay and they'll back you up i can see why you have 150 people following you these days people obviously love that approach so that's great to hear um round out the valuation story for me real quick so we've got series a we've got series c what did you guys raise the series b at um just north of us50 uh post money free okay got it so 50 priests call like fifty six to eight like 70 posts something like that okay very cool great story there um did you feel like you're at a disadvantage being based in sydney or do you feel like you got a multiple like same multiple you get if you were based in new york it's a good question i think most of my american teammates who've been with us for a while uh i think i'm disadvantaged they didn't go to stanford to be frank but uh but um no not so much um i'm sure you know uh there's definitely like people like you being on the continent right so like it'd probably be easier to raise certain rounds or have more investors interested if you know they feel like they can fly and pay as a visit much easier um but i'm quite happy building an australian company i mean i'm not sure you've got canva uh campaign monitor at last year and zeros from this end of the world and all this kind of goes on uh we're just trying to throw a hat in the ring and create another another great company from this end of the world and bring that culture that allows 150 people to stay with us you know to the world and you know do it do it our way um not super patriotic in terms of like beating my chest but i would really like to you know sort of help us australia has a history of digging things out of the ground farming things and building things up on top of it we really like us to sell our smarts so that's the reason to stay down here um also great r d incentives so any developers that want a job coming out how big is it shred in canada is like a 60 kickback what's your kickback got the same wow so if you pay a developer i'm making the 200 grand you're gonna get 120 000 bucks at the end of that year back from the government yep yeah wow that doesn't get that's a very i don't know so like i think shredding in our program are very much the same and that it's something on things that you build that are at risk so not for maintenance and not for devops but for like new feature development yeah very cool on that note guy let's wrap up with the famous five number one favorite book uh the hard thing about hot things by ben harwood number two is there a ceo you're following her studying uh let's try to see what does china uh intercom yup number three hum favorite online tool oh i don't know that's the hard one i've just said g suite i can't imagine my life without it no that's a good one number four how many hours of sleep you get every night except you know days when you're doing a 7 a.m podcast about six to seven i'm uh i get up super early and what's your situation married single kids recently married oh wow that's exciting i got married the day after the round closed so how's that for tonight out there but we don't really available between 15th december and 15th to jan it's kind of like fourth of july thanksgiving christmas and august all tied into one so i enjoy that just married about to do honeymoon and no kids or have any kids my kids no kids how old are you guy 37 37 last question something you wishing you when you were 20. more patience guys he says he needs more patience i think he has incredible patience launched in 2013 they've had patience enough for five years to go up to a million bucks in revenue did four different sort of angel and seed rounds but now they're scaling nicely they're serving over five thousand uh think that like accounting practices helping those firms scale what they're consulting they'd have dual business model sas plus percent to gmv they're processing billions now over a billion per year doing about a 24 million dollar run rate across all their brand's last raise just a couple days ago 50 million seriously at a 330 million dollar evaluation sold about caught 13 percent with 10 million secondaries taking care of his early team members early employees guy thanks for taking us to the top all right thanks so much appreciate it 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 1pm central additionally remember these recorded founder interviews go live we release them here on youtube every day at 2pm central to make sure you don't miss any of 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 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