How Propster Doubled Revenue With 100 Property Developer Customers Paying €800 a Month (Interview with CEO Milan Zahradnik)

Introduction and Background

Nathan Latka

00:00Hey, 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?

Milan Zahradnik

00:18>> Yeah. I'm excited.

00:19>> Thank you for having me.

Nathan Latka

00:20Just to be clear, you're not an agency. You actually have software built. Right?

Agency Origins and Spinning Out Propster

Milan Zahradnik

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.

Nathan Latka

00:34Interesting. How In terms of revenue, how much revenue did the agency did before you spun out Propster?

Milan Zahradnik

00:40>> It was around 1,500,000.

Nathan Latka

00:42And what year was that?

Milan Zahradnik

00:44>> It was '20 yeah. It was actually 2017, 2016. Of '20 end of twenty seventeen, we we founded Propster.

Nathan Latka

00:55And 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.

Milan Zahradnik

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

Nathan Latka

01:30What does that mean, Milan? Popped up. Did you own 100% of the agency?

Milan Zahradnik

01:34>> Yeah. Owned 100% of the agency and Propster was actually built out of a pilot project with a with a client 2017.

The Paid Pilot and Decision to Build SaaS

Nathan Latka

01:46Did you give the client equity in the new business or do you own 100% of Propster?

Milan Zahradnik

01:49>> No. No. I founded Propster with three business angels from the industry, but the client was not involved.

Nathan Latka

01:55Oh, 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.

Milan Zahradnik

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.

Nathan Latka

02:34How much was the pilot for?

Milan Zahradnik

02:37>> I think it was like 20 ks or something like that.

Nathan Latka

02:40Okay. $20,000. So again, and then how much did you raise from angels to get going?

Milan Zahradnik

02:45>> We started quite small with 150 ks. Yeah. And this was like the, let's call it kind of seed, pre seed.

Nathan Latka

02:54Yep. Back in 2017, right?

Milan Zahradnik

02:56>> Yeah. End of twenty seventeen. Actually, the business started 2018, beginning of twenty eighteen.

What Customers Pay For: €800 a Month and the Configurator

Nathan Latka

03:01Okay. Now fast forward to today, what are customers paying you for? Describe the technology.

Milan Zahradnik

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

Nathan Latka

03:22Per 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?

Milan Zahradnik

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.

Nathan Latka

03:59Oh, 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.

Milan Zahradnik

04:19>> I'll show you how

Nathan Latka

04:19you 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

04:42because 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

05:05sold 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

05:30a 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

05:55gonna 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

06:20platform. 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

06:43this table?

Milan Zahradnik

06:46>> Like, you mean Can you explain a little bit more in detail what you mean with table?

Nathan Latka

06:51I'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.

B2B Model and the Manufacturer Marketplace

Milan Zahradnik

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.

Nathan Latka

07:37Yep, 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.

Milan Zahradnik

07:48>> Yeah, sure. Yeah. We have like manufacturers like Geberit or Villeroy & Boch, Duravit, like European manufacturers in the marketplace.

Nathan Latka

07:56How many manufacturers have you given at least one sort of paid customer to over the past twelve months?

Milan Zahradnik

08:04>> I would say around 25, something like that.

Nathan Latka

08:09Okay, 25. And how many builders, right, construction folks have used your SaaS tool to plan their buildings?

Customer Count and What Counts as a User

Milan Zahradnik

08:17>> Right now, have around 100 clients with over 15,000 nearly 20,000 users. Like

Nathan Latka

08:2520,000 what?

Milan Zahradnik

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.

Nathan Latka

08:44Well, 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?

Milan Zahradnik

08:51>> The unit is the apartment, and one apartment is a user for us.

Nathan Latka

08:55Yeah. 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

Milan Zahradnik

09:01>> your The person who is buying the apartment or using Yep.

Nathan Latka

09:04The 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

How the Licensing Model Works

Nathan Latka

09:14person 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?

Milan Zahradnik

09:26>> Yeah. So the property company is paying the license. It's around €800 per month.

Nathan Latka

09:32I see.

Milan Zahradnik

09:32>> They they give it to their to their customers for free, basically.

Nathan Latka

09:36Got it. So you And you have a 100 of those?

Milan Zahradnik

09:38>> Mhmm.

Revenue Today Versus a Year Ago

Nathan Latka

09:39Okay. 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?

Milan Zahradnik

09:46>> Exactly. Yeah. This is what we are with '21.

Nathan Latka

09:49Well, that's great. Congratulations on the growth. Where were you exactly a year ago?

Milan Zahradnik

09:54>> So the first year we tripled and then double double. So we doubled right now.

Nathan Latka

09:59Well, 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?

Milan Zahradnik

10:09>> Yeah, it was actually 44,000. 44.

Funding History: Pre-Seed to Seed Round

Nathan Latka

10:14Fair enough. Fair enough. Very close. What And did you raise more after 150,000 pre seed round or are you boot strapped?

Milan Zahradnik

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.

Nathan Latka

11:04I 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?

Milan Zahradnik

11:11>> Yeah. We There were like some some extensions, seed extensions and some some some smaller smaller convertible notes between seed plus.

Nathan Latka

11:20I 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.

Milan Zahradnik

11:27>> Yeah. Exactly. Yeah.

Valuation and Equity Breakdown

Nathan Latka

11:28I 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?

Milan Zahradnik

11:36>> Yeah, a little bit less. The valuation was The last one was 10,000,000.

Nathan Latka

11:4210,000,000. And did that feel like the right valuation to you when you did it?

Milan Zahradnik

11:47>> A hard question. I would say it's fair.

11:51>> It's Yeah, it was. It's good.

Nathan Latka

11:54Was that pre money or post?

Milan Zahradnik

11:57>> Post money.

Nathan Latka

11:58Okay. 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.

Milan Zahradnik

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.

Nathan Latka

12:20I 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?

Sole Founder, the 35% ESOP and the Equity Split

Milan Zahradnik

12:30>> Yeah. I'm I'm sole founder, but I have piece of incentivized co founders.

Nathan Latka

12:36I see. What does that mean? Like, how much equity have you reserved for the team?

Milan Zahradnik

12:39>> 35%.

Nathan Latka

12:41Oh, 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%?

Milan Zahradnik

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.

Cash in the Bank and the Next Raise

Nathan Latka

13:17Milan, how much of that 3,000,000 is still in the bank today?

Milan Zahradnik

13:20>> 1,000,000.

Nathan Latka

13:22Okay. So are you looking at another raise here soon?

Milan Zahradnik

13:24>> Yeah. We want to raise this year.

Nathan Latka

13:26How much are you hoping to raise?

Milan Zahradnik

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.

Nathan Latka

13:35What do you want to get revenue to before you go out and raise?

Milan Zahradnik

13:40>> Yeah. We would like to to be at around $100,000 to $120,000 MRR.

Nathan Latka

13:46Okay. Well, you're pretty close to that already. Right?

Milan Zahradnik

13:48>> Yeah. We are. We are. It's not so far away.

Nathan Latka

13:50So, 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?

Milan Zahradnik

13:59>> Yeah. I think I try to to get at least like 50,000,000 valuations, something like that, a little bit more.

Nathan Latka

14:05Mhmm. You said you said one one five o, right?

Milan Zahradnik

14:10>> Five o. Yeah.

Nathan Latka

14:11Yeah. 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?

Milan Zahradnik

14:23>> True. Yeah. I

Nathan Latka

14:24mean We'll see.

Milan Zahradnik

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.

Why Raise Capital: International Expansion

Nathan Latka

14:38Why 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?

Milan Zahradnik

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,

Team Size, Sales Reps, and Quotas

Nathan Latka

15:24into How many folks are on the team today?

Milan Zahradnik

15:27>> We have had kind of 41 right now.

Nathan Latka

15:2941. How many sales reps with the quota?

Milan Zahradnik

15:32>> This will surprise you. We have only two sales guys.

15:36>> Two.

Nathan Latka

15:37What's their quota? It

Milan Zahradnik

15:40>> it's, yeah, $5,000 MRR per month.

Nathan Latka

15:47So 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?

Milan Zahradnik

16:01>> Yeah. Yep. Yep. Yep.

Nathan Latka

16:03Interesting. Okay. And have they hit it over the past twelve months?

Milan Zahradnik

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.

Nathan Latka

17:11Understood. How many engineers are on the team?

Milan Zahradnik

17:13>> Right now we have 12.

Customer Acquisition Cost

Nathan Latka

17:1612. And what are you paying to get a new we know one of these 100 property owners? What's your CAC?

Milan Zahradnik

17:23>> Again, what do you mean?

Nathan Latka

17:24What's your customer acquisition cost?

Milan Zahradnik

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.

Nathan Latka

17:52Okay. 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.

Milan Zahradnik

17:59>> Yeah.

Famous Five: Books, CEOs, and Tools

Nathan Latka

18:00Okay. 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.

Milan Zahradnik

18:09>> Delivering Happiness by Tony Hsieh, who passed away sadly some some some months ago.

Nathan Latka

18:16Number two, is there a CEO you're following or studying?

Milan Zahradnik

18:20>> Yeah, of course, like Elon Musk.

Nathan Latka

18:22Number three, what's your favorite online tool for building Propster?

Milan Zahradnik

18:29>> Favorite what again?

Nathan Latka

18:30Online tool.

Milan Zahradnik

18:32>> LinkedIn.

18:33>> LinkedIn.

Nathan Latka

18:34Number four, how many hours of sleep do get every night?

Milan Zahradnik

18:37>> I would like to have at least eight, but in in average, it's like six.

Nathan Latka

18:42Okay. I mean, Milan, what's your situation? Are you married, single, kids?

Milan Zahradnik

18:46>> Yeah. I'm married, and I have two children.

Nathan Latka

18:49Two 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?

Milan Zahradnik

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.

Nathan Latka

19:22Guys, 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

19:46post 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.

Milan Zahradnik

20:03>> Thank you very much, Nathan.

Nathan Latka

20:06One 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

20:31Central. 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

20:54fundraise, 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

21:15for 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

21:35got 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.