Propster Revenue, Valuation & Funding (2024)

[00:00] Hey, folks. My guest today is Milan Zahradnik. He's the co founder and CEO of a company called Propster with over fifteen years of experience in the real estate industry. He's the industry's leading voice on how the DACH region is currently embracing prop tech and what possibilities this may present worldwide. Follow along at propster.tech. Milan, you ready to take the top? [00:18] >> Yeah. I'm excited. [00:19] >> Thank you for having me. [00:20] Just to be clear, you're not an agency. You actually have software built. Right? [00:25] >> Yeah. It's actually a quite interesting story. Propster was bootstrapped out of one of one of my former agencies. So it was an agency before. [00:34] Interesting. How In terms of revenue, how much revenue did the agency did before you spun out Propster? [00:40] >> It was around 1,500,000. [00:42] And what year was that? [00:44] >> It was '20 yeah. It was actually 2017, 2016. Of '20 end of twenty seventeen, we we founded Propster. [00:55] And you said 1,700,000 agency revenue? Yeah. Interesting. So so what gave you conviction to move away from the agency and into software? That's not a small amount of revenue to walk away from. [01:06] >> That's true, and my wife was also not very happy about that. But there was a quite simple simple reason. Like, I was working in the industry with the agency for more than fifteen years and I was really ready to do something new, you know, to do something big. I already reached somehow the ceiling and yeah, this opportunity popped up and I just embraced it and [01:30] What does that mean, Milan? Popped up. Did you own 100% of the agency? [01:34] >> Yeah. Owned 100% of the agency and Propster was actually built out of a pilot project with a with a client 2017. [01:46] Did you give the client equity in the new business or do you own 100% of Propster? [01:49] >> No. No. I founded Propster with three business angels from the industry, but the client was not involved. [01:55] Oh, I see. Okay. So so you took the validation from the client to some of your friends with money, angels, raised some capital early, then built this and you already had your first customer. [02:06] >> Exactly. Yeah. The pilot project was actually paid. It was a it was a it was basically a paid project. And when we started, we realized that what we are doing here is actually a SaaS business. We can build a SaaS business out of it. And I was sharing this also with one of my mentors and he also- And he just recently sold a company and said, hey, Milan, you have to go for this. This is like [02:32] >> huge opportunity. [02:34] How much was the pilot for? [02:37] >> I think it was like 20 ks or something like that. [02:40] Okay. $20,000. So again, and then how much did you raise from angels to get going? [02:45] >> We started quite small with 150 ks. Yeah. And this was like the, let's call it kind of seed, pre seed. [02:54] Yep. Back in 2017, right? [02:56] >> Yeah. End of twenty seventeen. Actually, the business started 2018, beginning of twenty eighteen. [03:01] Okay. Now fast forward to today, what are customers paying you for? Describe the technology. [03:07] >> Yeah. So basically, it's a SaaS enabled marketplace, but this is also something what developed through the last last three years. Right now, on average, the clients pay around €800 We earn euros [03:22] Per in month or year? Yeah. Monthly. Per month, yeah. It's about $950 And what again, what are they paying for when you say SaaS enabled marketplace? What are the two sides of the marketplace? [03:32] >> Yeah. So the SaaS business is just simply explained, a configurator. You can configure your apartment, house or office, like configuring a car online and everything what you configure online, all the products and the services are coming from a marketplace. So the SaaS is enabling the marketplace and the marketplace, the the idea behind the marketplace is to get commissions out of the products which have been chosen through the configurator. [03:59] Oh, what's going on there, YouTube? Good to see you guys. Now imagine this. You love watching these interviews with SaaS founders. But imagine if we took all of the valuation data out from over 2,807 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 Founderpath. Check this out. [04:19] >> I'll show you how [04:19] 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 eighty eight days and even set goals for valuation this year. Now the secret evaluation is there's many different ways to value a SaaS business. So the reason you're gonna see three or four different valuations inside of your Founderpath dashboard, this is all free by the way, is [04:42] because depending on who's doing the buying of your SaaS company, you're gonna get a different valuation. A VC is gonna pay a different valuation. Private equity firm is different. If you're gonna 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 [05:05] 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 founder share with us on the show. So traction, 1,200,000 seed round, 3.7 raise. They sold 22% of their business. Go in here and filter by the event. Maybe you only wanna see companies that have sold the whole business. Well, here are [05:30] 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. We'll 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 dataset of SaaS valuations than what you can get now inside of Founderpath. And we're thrilled to bring it to you. Alright. We're [05:55] gonna go back to the YouTube video here in a second, but if you wanna check this tool out, if you wanna jump in and sign up, you can check it out for free to get your valuation at this link. This link, founderpath.com/products/valuations. 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 [06:20] platform. I hope to see you there. Alright. Let's jump back into the interview. I see. I see. I see. So can you I'm gonna go in here and try and find an example. I'm in your configuration tool, and I just pulled in this very cool sort of like circular table. Name one of your table vendors and how do you pass me, someone using your SaaS tool, as a lead to the person and the manufacturer that makes [06:43] this table? [06:46] >> Like, you mean Can you explain a little bit more in detail what you mean with table? [06:51] I'm using your software right now designing my apartment. I drag in one of these tables to see what it looks like in the virtual design. Okay. How do you Yeah. [07:01] >> Yeah. This is It's working a little bit differently. So we are a B2B SaaS business. So our clients are mainly property developers, general contractors. And the biggest issue what they have is exactly what you just you just tried to describe, like, I have an individual request. I want to have something individual in my apartment. And this is a huge issue. And what we try to do is with the SaaS solution is really to build something more [07:29] >> modular, to guide the customer through a predefined product selection, through predefined packages. So you can, like a car. [07:37] Yep, Milan, I totally understand that. What I'm trying to get is the other side of the market. So name a sink manufacturer that you're going give leads to or table manufacturer that you're going to give leads to from your SaaS. [07:48] >> Yeah, sure. Yeah. We have like manufacturers like Geberit or Villeroy & Boch, Duravit, like European manufacturers in the marketplace. [07:56] How many manufacturers have you given at least one sort of paid customer to over the past twelve months? [08:04] >> I would say around 25, something like that. [08:09] Okay, 25. And how many builders, right, construction folks have used your SaaS tool to plan their buildings? [08:17] >> Right now, have around 100 clients with over 15,000 nearly 20,000 users. Like [08:25] 20,000 what? [08:26] >> Twenty twenty thousand users. So we Basically, the property developer is providing the solution to their customers. Like, you have a you have an apartment building with hundreds 100 units and these are the users for us. [08:44] Well, a unit is not a user. It's not an It's not a live thing. What do you mean the units are the users? [08:51] >> The unit is the apartment, and one apartment is a user for us. [08:55] Yeah. But what does that mean? Who who an apartment can't use software. It's not a living thing. Who who who is the thing using [09:01] >> your The person who is buying the apartment or using Yep. [09:04] The I see. Okay. Got it. Got it. Okay. This makes a lot of sense to me now. And so when you say that the average [09:14] person is paying $950 per month, is that the building owner and they have to get enough seats for all the people buying each of the 100 apartments to cover, like, the use? [09:26] >> Yeah. So the property company is paying the license. It's around €800 per month. [09:32] I see. [09:32] >> They they give it to their to their customers for free, basically. [09:36] Got it. So you And you have a 100 of those? [09:38] >> Mhmm. [09:39] Okay. So a 100 at 950 US dollars per month means you're doing about what? 90,000, a $100,000 a month right now in revenue? [09:46] >> Exactly. Yeah. This is what we are with '21. [09:49] Well, that's great. Congratulations on the growth. Where were you exactly a year ago? [09:54] >> So the first year we tripled and then double double. So we doubled right now. [09:59] Well, okay. Got it. So you're at $95,000 a month today, which means in January 2021, you're at about $45,000 a month in revenue? [10:09] >> Yeah, it was actually 44,000. 44. [10:14] Fair enough. Fair enough. Very close. What And did you raise more after 150,000 pre seed round or are you boot strapped? [10:21] >> Yeah. Yeah, yeah, yeah. So as you can imagine, it was quite a challenge, you know, to coming from an agency business into SaaS. So in the beginning, it was a combination of license and one time payments. And we learned like our way, how SaaS business should work, trying to focus more on the license, on the licenses and getting going away from one time payments. And with focusing more on MRR, was also more and more interesting for [10:50] >> investors. And last year, in May 2021, we raised our seed plus round of with 3,000,000. And today, until today, we raised 3,500,000. [11:04] I see. Got it. So 3,000,000 in your seed, 150,000 in your pre seed. I'm missing about $400,000. Where'd that come in? [11:11] >> Yeah. We There were like some some extensions, seed extensions and some some some smaller smaller convertible notes between seed plus. [11:20] I see. Okay. Got it. So more like last year you raised like 3,300,000 on top of the 150,000 you'd already raised. [11:27] >> Yeah. Exactly. Yeah. [11:28] I see. Okay. Very cool. Now most people when they're raising their seed round, they're selling 10 to 20% of the business. Were you selling sort of like 20% as well? [11:36] >> Yeah, a little bit less. The valuation was The last one was 10,000,000. [11:42] 10,000,000. And did that feel like the right valuation to you when you did it? [11:47] >> A hard question. I would say it's fair. [11:51] >> It's Yeah, it was. It's good. [11:54] Was that pre money or post? [11:57] >> Post money. [11:58] Okay. So pre was 6,470,000, post was 10,000,000. Yep. So you sold I mean, so you sold about 30% of the business. [12:08] >> Yeah. We had some convertible notes there too, and actually it was in in, I think, 25% was in the end, the equity we we give away. [12:20] I see. Okay. Because of how the caps worked on those notes. Yep. I see. Okay. What about the the your co founder story? Are you the sole founder or you have co founders? [12:30] >> Yeah. I'm I'm sole founder, but I have piece of incentivized co founders. [12:36] I see. What does that mean? Like, how much equity have you reserved for the team? [12:39] >> 35%. [12:41] Oh, okay. Great. Very easy number there. So so employee the ESOP pool is 35%. Investors own, it sounds like total about 25% and then you own the rest? Mhmm. Okay. And that would be about 40% is what you would own today? Yep. Okay. Do you still get excited about waking up every morning only owning 40%? [13:01] >> I mean, look, the journey has just started. Right? So I think sure. I'm excited, like, excited, but on the other on the other side, of course, it's still lots of work and the journey is is ahead of us, so yeah. [13:17] Milan, how much of that 3,000,000 is still in the bank today? [13:20] >> 1,000,000. [13:22] Okay. So are you looking at another raise here soon? [13:24] >> Yeah. We want to raise this year. [13:26] How much are you hoping to raise? [13:29] >> It's a good question. Something between 5,000,000, 10,000,000, 15,000,000, something like that. It really depends on the growth now, the next months. [13:35] What do you want to get revenue to before you go out and raise? [13:40] >> Yeah. We would like to to be at around $100,000 to $120,000 MRR. [13:46] Okay. Well, you're pretty close to that already. Right? [13:48] >> Yeah. We are. We are. It's not so far away. [13:50] So, I mean, if you're at 100,000 a month in revenue, 1,200,000 a year in terms of run rate and you go out and raise $10,000,000, right, what valuation do you hope to get? [13:59] >> Yeah. I think I try to to get at least like 50,000,000 valuations, something like that, a little bit more. [14:05] Mhmm. You said you said one one five o, right? [14:10] >> Five o. Yeah. [14:11] Yeah. Yeah. Yeah. That'll be great. I mean, I I've I've certainly seen crazier things. I mean, what is that in terms of a multiplier? That is like a 1.2. That's like a 40 x multiplier, but really fast growth. Right? [14:23] >> True. Yeah. I [14:24] mean We'll see. [14:26] >> Yeah. Yeah. Yeah. Let's see. Let's see. Yes. Like, still we have some homework to do, and looking forward to to to start fundraising. [14:38] Why do you need to raise all that money? I mean, what requires capital about this business? Why can't you bootstrap and get profitable and just pay yourself and get rich off dividends? [14:46] >> Yeah, it's basically about the pace of growth. We want to invest into sales and grow faster, grow more international. So when we started, it was very much focused on the DACH regions of German speaking countries. And like the first important step was outside like having business outside of the DACH region. This is something what we established last year, and now we know that we can basically build a global business out of it, and that's why we [15:18] >> want to use the investment to to, yeah, to to invest into into growth, [15:24] into How many folks are on the team today? [15:27] >> We have had kind of 41 right now. [15:29] 41. How many sales reps with the quota? [15:32] >> This will surprise you. We have only two sales guys. [15:36] >> Two. [15:37] What's their quota? It [15:40] >> it's, yeah, $5,000 MRR per month. [15:47] So you want them to add 60,000 in new well, hold on. 5,000 per month, which would be 6 so you want them to add about 1,200,000 in new ARR. Or sorry, 720,000 in new ARR per year? [16:01] >> Yeah. Yep. Yep. Yep. [16:03] Interesting. Okay. And have they hit it over the past twelve months? [16:09] >> No. Why not? [16:10] >> Yeah, there are different reasons. I think [16:15] >> we still underestimated a little bit like the sales cycles. The industry is like the real estate industry is old fashioned slow. We When we started, it was kind of, you know, like we had a quite boosted the whole business quite As I said, like we tripled in the first year and we were like super excited. And then the years after we realized, okay, we have to be aware of that the business can grow also a little [16:49] >> bit slower. And yeah, it is, you know, there's always the story that you have these early adopters and people jumping to new technology quite quickly. And then you have to have to make you have to prove that actually the whole or the bigger market is also jumping onto your technology, and this is something the on the stage we are right now. [17:11] Understood. How many engineers are on the team? [17:13] >> Right now we have 12. [17:16] 12. And what are you paying to get a new we know one of these 100 property owners? What's your CAC? [17:23] >> Again, what do you mean? [17:24] What's your customer acquisition cost? [17:26] >> The customer acquisition cost is wait. I just received the latest [17:36] >> was just give me one second because I saw that. Where is it? [17:47] >> I think it was around [17:50] >> 5 k or something like that. [17:52] Okay. So $5,000 to get a new customer that pays about a thousand bucks a month. So you have about a call it a five month payback, something like that. [17:59] >> Yeah. [18:00] Okay. Not not not terrible. It'd be interesting to see what you do here as you grow and contemplate raising capital. But for now, Milan, let's wrap up with the famous five. Number one, favorite business book. [18:09] >> Delivering Happiness by Tony Hsieh, who passed away sadly some some some months ago. [18:16] Number two, is there a CEO you're following or studying? [18:20] >> Yeah, of course, like Elon Musk. [18:22] Number three, what's your favorite online tool for building Propster? [18:29] >> Favorite what again? [18:30] Online tool. [18:32] >> LinkedIn. [18:33] >> LinkedIn. [18:34] Number four, how many hours of sleep do get every night? [18:37] >> I would like to have at least eight, but in in average, it's like six. [18:42] Okay. I mean, Milan, what's your situation? Are you married, single, kids? [18:46] >> Yeah. I'm married, and I have two children. [18:49] Two kids. That's great. How old are you? Yeah. I'm 40. 40 years old. Congratulations. What's something you what's something you wish you knew when you were 20? [19:04] >> When I was 20, listen to to to the more experienced people and, yeah, just be thankful for advice. And, yeah, this this is this is something what I would tell my 20 year old myself. [19:22] Guys, I predict this will be a $100,000,000 business quickly because he follows a similar pattern. Built an agency to $1,700,000 in 2017 before shutting it down and spitting out his SaaS company with a $20,000 project built directly with a client, brought on $150,000 from Angels to get it launched in 2018. Today, a 100 customers paying $950 a month on average for about a $100,000 a month in revenue. They raised 3,300,000 seed last year on a 10,000,000 [19:46] post money valuation. Milan still owns, call it 45, 50% of the business looking to scale, potentially raising 10 on a 50 here later this year. We're rooting for them again. It's technology that helps you plan your apartment and also find the materials, build it. It's a SaaS enabled marketplace. Milan, thanks for taking us off. [20:03] >> Thank you very much, Nathan. [20:06] One more thing before you go. We have a brand new show every Thursday at 1PM Central. It's called Shark Tank for SaaS. 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 [20:31] 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 want you to miss breaking news in the SaaS world, whether it's an acquisition, a big [20:54] fundraise, a big sale, a big profitability statement or something else. I don't want you to miss it. Additionally, if you wanna take this conversation deeper and further, we have by far the largest private Slack community for B2B SaaS founders. You want to get in there. We've probably talked about your tool if you're running a company or your firm if you're investing. You can go in there and quickly search and see what people are saying. Sign up [21:15] for that at nathanlatka.com/slack. In the meantime, I'm hanging out with you here on YouTube. I'll be in the comments for the next thirty minutes. Feel free to let me know what you thought about this episode and if you enjoyed it, click the thumbs up. We get a lot of haters that are mad at how aggressive I am on these shows, but I do it so that we can all learn. We have to counter those people. We [21:35] got to push them away. Click the thumbs up below to counter them and know that I appreciate your guys'support. All right. I'll be in the comments. See you.