How Purechat CEO Hamid Shojaee grew to $1.3M revenue and 4K customers in 2017.

hello everybody my guest today as I made show judge he he is the founder of three software companies one that crashing burned and two that are flourishing he's helped create several multi-million dollar sales products including access off transfer big files calm get crackin and pure chat I meet are you ready to take us to the top yeah let's do it good okay so what do you I mean so are you an advisor to these companies are you an investor are you a CEO of 100 more to spend your time no I I started the companies and and those products in particular a couple of them or three of them are underneath the same same company access off and then one of them is a separate entity it used to be part of access off but we've broken up into its own company called pure chat account but yeah each one is a multi-million dollar SAS SAS company essentially which one lost the most money for you the one that crashed and burned that was a previous company prior to starting access soft I I was involved in a company called VY tricks which was creating software for biometric devices like fingerprint readers and it struggled quite a bit had for millions of dollars in that company and of your own money or investor money part my money and most investor money unfortunately and yeah it did it didn't go anywhere it certainly wasn't moving as fast as we wanted so I finally call it quits and left and went to work for Microsoft for a few years so that was the end of that okay let's for this interview let's focus on one of these products so which one are you most proud of our is doing the best which one you want to focus on we can focus on pure chat if you like that's the this the company that I'm CEO of now and and really focused on and we're no tell us what it does and how you make money so we provide the live chat software that you see on websites that provide the little pop-ups that say you know chat with us if you have a question we actually have a free live chat tool for websites and and what we do is we besides the live chat capabilities which are now 100% free we also have real analytics so once you put our widget on a website you can get a lot of insight into that into that website visitors and who's on there how many people are on there at any given time what pages they visited where they've come from that sort of thing God and we charge for full time analytics portion of it and what's the average customer pay your per month for would you say so we have tons and tons of free customers and and you know like in the hundreds of thousands of signups and the paid version is $99 per month so the ones that are doing on the paid model are paying $99 per month okay and that's your only price point yeah we've experimented with a bunch of different price points which is something I recommend to all entrepreneurs but our current price point is $99 I was telling one and what year did you launch this company in in 2012 is when the product was launched and then we separated out into its own company in 2014 ok and bootstrapped or have you raise capital for it no we we did an angel round for about one and a half million locally in Arizona okay and it was at a price drowner convertible note price round and and what's this so you said you did it out there in Arizona what's your team size out there today we're nine people right now though yeah so and actually we've been plus or minus that but by like a couple people from from when we separated it out into its own entity so when we when we when we broke it off into its own company the revenues were 0 in 2014 and we basically for all practical purposes were at break-even point right now and which is what we're definitely we're about 1.3 million in revenues right now an AR are in AR so you're doing about a hundred grand a month yeah a little bit more than that fair enough and how many customer sorry how many do can I just take 99 or a hundred divided into the 100,000 to get your current customers no so what we did is experimented with a lot lower price points initially and what we decided and we charged for the live chat or what we decided to do is and we gave away sort of like analytics but it was a per operator pricing initially so we moved away from that so a lot of our customers are paying less than the $99 but the new customers are all paying $99 so we actually have over four thousand paying customers right oh wow ok so so if I take your your your call it a hundred and one hundred and five grand and mor and divide the four thousand into that your average customer is paying about 26 bucks a month on the historical cohort but new ones are paying a hundred per month correct got it interesting okay and why compete in this space I mean you know the play drift HubSpot intercom facebook Messenger embedding on the site I mean this is a very competitive space why get into it yeah so this is a great question and I think that what's interesting is that this space is extremely large right I have every website could potentially use a live chat tool and obviously every website needs some sort of analytics like most of them are putting Google Analytics capabilities on there but there's a lot to be desired there's a lot of potential improvements that can be done in terms of ease of use and for the vast majority of companies that want something very simple very easy to use they don't necessarily have what they need in those tools and that's what makes the opportunity open I mean like and almost everything is sort of that way right there's always room for a better mousetrap if you will what rate are you growing at so December of 2016 what were you doing in mr our that's a good question I don't have that off the top of my head but one large one of our biggest focus lately has been around user growth as opposed to revenue growth so we went to this sort of mostly free live chat model about three months ago and we've doubled the rate of growth as a result of that you know I mean someone could look at and just say oh great I just doubled their support cost they have a bunch of new free users they have to support their infrastructures more burdened now so let's talk more about your freezer race in a second because there is value to obviously growing that as a conversion tool but can you making even a general sense have you doubled your over a year are you flat year over a year yeah no no we are up about 70 percent you're a reader okay so that's pretty healthy you were doing call it seven sixty five seventy grand ish about a year ago something like that that sounds about right actually so tell us okay tell us more about the free strategy what why turn it on three months ago at all why make it free so so you know that there is there is a lot of competition out there and we think we have a a better tool but what we decided to do is if you know if we make it free we have a shot at becoming the standard sort of live chat tool for the web and if we can become the standard live chat tool for the web our support cost and infrastructure costs are sort of like minimalist sort of like the non like we don't worry about that because it's just such a small expense in comparison to it's just personnel in general right but if we can become the standard that we can figure out other ways of monetizing it such as the real-time analytics that provides additional opportunities through to our customers to like convert their wizard errs into into sales so every website if you think of it like this every website has a list of things that they want to know every website owner has a list of things that do want to know about their website whether it's that hey it's functioning properly hey I have you know how many visitors do I have on my website or you know is there a burst of traffic all of a sudden that happened as a result of some some mention that somebody did but nobody has that visibility easily into the website even Google Analytics doesn't provide you with that kind of things and if we can solve that problem for everyone then we have an opportunity to really shine and and carve out a niche for for ourselves is the product sticky what's churn look like currently so it's with the free model it's actually been the stickiest it's ever been because so about three months ago when we decided on the live chat stuff should be free we've doubled the rate of signups and people who are actually sticking and coming sorry just just soon or short on time can we just focus on the paid cohort so once they're paying you how sticky are they oh we have about 3.8 just around 4% attrition rate on Monday okay yeah and that's on logo that's obviously oh I guess they're there with logo and your revenue turn is the same since you only have one price no now it is but in the past price points okay and with a 3.8 percent monthly churn and if I do the math you can assume essentially them to stick with you for about twenty six months at that hundred dollar price point so you're assuming LTV is about twenty six hundred bucks on a conservative more aggressive side it's just a finger in the air what do you want what's with but that's about two thousand dollars a little over two thousand dollars it's what we're we're at like right now but but it goes up and down a little bit from there with that in mind what are you willing to pay to acquire a customer yeah so the the general sort of math on that is that we're willing to spend as much as a third of the lifetime value so about you know six seven hundred dollars on average to acquire a paying customer at the $99 per month rate but it does it does take some time for four different venues like we do Google Adwords or Facebook ads or whatever to prove themselves out before we decide to stick with with one of those things and increase the spend but but yeah we we haven't sort of down to like how much we're willing to spend for a free sign up and how much we're willing to pay pay for a paid sign up and so on but those numbers are largely dependent on the attrition rates and overall lifetime value which fluctuates from time to time yep and so you're obviously payback period there is what about six months typically to get payback for the investment cost yeah macaque yeah okay interesting and and you're so you're spending your full time on this what's your goal with that I mean is this something you quickly flip and sell once you get mass scale to like a hub spot so they can bolt it on or is this something where no you just want to go mass market and like freeconferencecall.com went free they do the most conference calls of anybody and now they have a ton of leverage right I think that's the key is right making making sure that we have a viable business this long-term is self-sustaining and those are the most attractive businesses for others to potentially buy so we're not we're not like out there actively knocking on doors trying to sell the company but but if that happens a Pentax a what we're trying to do is build the company that's rapidly growing and providing a service instead of tools that people need if somebody offered like a lot of investors listen to this show if somebody offered you 3 million bucks for it you know 2 or 3 XA our would you sell no no absolutely not we raised at a higher valuation than on a camel on a cap right convertible note no no we did a price round o was priced I misheard you earlier what was the valuation if you don't me asking we did a five and a half three okay got it that's great very cool so you're working to grown to that valuation I mean let's wrap up here with the famous five quick answers number one what's your favorite business book good to great number two is there a CEO you're following or studying I'd say there's a lot of CEOs that are intriguing to me like Jeff Bezos or Elan musk you know Steve Jobs when he was alive but there aren't any that I would say I'm study number three besides you're on with your favorite online tool uh slack probably for how many hours of sleep to get every night I tried to get the full eight recommendation I tend to get a little slow when I get less than seven six and they you know it like if I can go probably three four days with six hours of sleep but by the fifth day I'm like you know it has to be made up or that's for sure yeah and how many what's your situation married single you have kiddos I'm married with two kids Bill Murray eighteen year congratulations that's exciting and now how are you forty four forty chapter you passed the last question take us back twenty four years what he was your 20 year old self new I don't know there isn't any specific advice that I would you know like I think that one of the things that I didn't do in my first company was have a more of a focus on a single product or product line and then and I think we should have have happened at the time so one of the big mistakes we made is we did five different things simultaneously I mean that we would improve our probability of success trying to create five different software products for biometric devices and it took us a year to realize we should have really only focused on one and that was a costly year for us to have made that mistake essentially there you guys have from Mohammed focus on the one thing go all-in and avoid some those mistakes that he made earlier on but he's had a lot of success even with that one or two failure she's had a lot of success with a lot of big wins currently running pure chat playing in a live chat space certainly a hot market he's raised 1.5 million dollars to go ahead and go after that market they're currently serving over 4,000 customers paying on average 26 bucks a month so doing a little over a hundred grand in monthly recurring revenue churn monthlies about 3.8 so pretty healthy churn CAC is 600 bucks they get that paid back at about 6 months with a super-healthy lifetime value over $2,000 with his team of system of nine out there in Arizona I mean thank you for taking us to the top base David appreciate it