QuestionProrevenue & valuation

just got done editing this interview you guys are gonna love it before i do that though i want you to know that i'm going to be in the comments for the next 30 minutes or so answering your questions if there's additional questions you want me to ask the ceo next time i interview them leave them below or if you're just loving the data points i get ceos to share click the thumbs up button below that's your way of telling me you're loving this stuff and i'll get you more of it additionally again i'll be in the comments answering any questions you have all right for 30 minutes enjoy the interview hello everyone my guest today is vik boscaron he is the founder of question pro a bootstrap 20 million run rate startup that has helps companies measure and transform experiences vivek you ready to take us to the top yes sir let's do this you're my man i love bootstrap this is great when'd you launch the company what year uh originally i started the company in 2005. uh then i took a break between 2010 and 2014 and i've been running the company since back from since 2015 onwards okay what drove the break i wanted to do a couple other startups so i started another company called idea scale uh and that's grown to about 7 million bucks so and then i decided to come back and run question pro again okay so 2005 was launch date um and how many customers are now serving today uh we kind of divide the business between our enterprise and uh non-enterprise customers the enterprise is about 800 customers and non-enterprise about 4 000 customers okay and when you look at kind of the average price points on both of those what are they on average would you say so the enterprise size about 12 to 15k and then on the non-enterprise side it's about 450 bucks i think sorry 450 per year yeah 400 per year okay okay got it and then so when you you said right now you just passed 20 million run rate last month yep you cut out sorry yes yeah for this calendar year will be around yeah so the era for this calendar year will be in the the 18 to 20 million dollar range so just to make sure i understand what you're saying you're saying in december of this year you will hit 1.6 million a month in revenue which is equivalent to a 20 million dollar run rate yep and where were you exactly a year ago uh year we were about doing about 15.5 we were about like you know less than about just about a million and one in it per month yep and is all that sas revenue so about 35 so we are going at about 30 30 35 percent effectively um not bad for a sas company by the way yeah i mean i think 90 percent of it is we do a little bit of services uh for our enterprise clients um and we kind of layer that in on top and and walk me through so you bootstrapped i mean how did you versus the temptation to raise i'm sure you got outreach all the time actually uh back when i started the company it was not cool to raise i guess i'd honestly to be brutally honest with you guys uh i just stumbled into more customers customers give me more money and i never look back frankly um back in the day i think when we started the company we started off the first year i think we made like 200k and the next year we made 800 the year after we made 1.5 million and so we just kind of kept going that way we didn't go out and raise money because and we were super profitable from day one uh you know you know we're pretty profitable even today we run at about you know 15 to 20 margins um and then back then we were you know back when i started the company we were running almost 50 60 margins at that time so uh so the need for raise wasn't there um we were making money and so we decided to kind of stick to our game plan and and service the customer and instead of servicing the investors we decided to service the customer so just to be clear on 1.5 million a month right now on revenue if you're taking 15 to 20 to the bottom line per month you basically have 200 thousand dollars in free cash flow monthly that you're trying to figure out what to do with yeah we are going to we do acquisitions using that money we've done we've done a couple of acquisitions tell me about the last one you did the one was a company called work exo um a guy by the name of charlie he developed this model for employee engagement and employee culture measurement um using surveys actually uh to figure out you know what you know how do you define culture and how do you measure culture with an organization so uh and he kindly runs our kind of employee engagement practice all together um so we we we acquired work exo about a year and change ago right now almost almost 18 months ago now and were you buying a revenue stream there or just a tech stack uh tech stack and uh and people on talent um charlie is an amazing guy and he's been there how many people were there uh about three three guys pretty small company three guys charlie and a couple other guys whatever and was the company pre-revenue are they doing revenue uh very tiny bit of revenue it's really talent acquisition as well as kind of access to access to access to their technology realistically and that cost you cash or was it utica skim stock and question pro basically yeah so cash plus stock nobody wants you to just do it all stock deal i mean by the way like less than 500 grand in cash yeah okay cool um and and so i mean look i want to understand more about how you're driving growth but help me understand once you land people i mean are they are they sticky what's what's your gross revenue trend look like over the past 12 months yeah so the enterprise the enterprise side is super sticky obviously and that's why we layer in the services so i think layering layering and services makes you know makes you know makes the customers stick um to a very large extent so on the enterprise side our kind of you know retention uh net revenue retention is 110 effectively so we usually make more money from a customer every year uh back though right so growth that's made up from gross revenue churn and then expansion to get to 110. so what are gross revenue return on expansion so the gross revenue charge so unit tron is about on the enterprise side is about 90 percent ninety-eight now but ignore unit churn because that doesn't matter for you your rpus are so different just look at a revenue churn right so on the revenue side we are we are you know for for every customer for from a revenue perspective we grow accounts by about 30 effectively um our goal is to grow every account by about 30 so if you paid me a dollar yesterday i'm gonna try to make a dollar thirty out of you this year and dollar sixty and two dollars out of you and you said net revenue retention is 110 yep okay so if that's the case right 110 percent minus 30 expansion right that would mean your your gross revenue turns about 20 that's how you get the 10 net revenue retention number correct yeah okay interesting and most that revenue churn um is it i mean it could be split evenly between both cohorts uh what do you mean the the enterprise enterprise no no this i'm talking about really the enterprise side the smb return you know the smb we lose a lot more customers so it doesn't be more likely it's like you know we the revenue sorry we're talking past each other okay number of customers does not matter when you're talking about revenue churn we divide the business between the revenue the enterprise business and then i understand that i get that what i'm saying is revenue churn though is specifically for these use cases where there you could have a thousand logos that make it one percent of the revenue so if they all churned right and that's like a hundred percent logo turner ninety percent logo churn but they only made up one percent revenue doesn't matter that's why we look at revenue churn so what i'm looking at is across the entire business gross revenue turn annually is it sounds like about 20 percent yeah well we don't look at the entire business in one shot we always split it up if you look if you ask me like okay we made we made 20 million bucks out of which i would say 50 million dollars from the rev for the enterprise business and 5 million from the non-enterprise business realistically uh the reason we do it that way is simply because the businesses are so distinct the operating models are extremely distinct one is a pure the five million dollars in the bottom line the bottom side is like pure sass kind of like you know people come in buy the product use their credit card whereas the 15 million bucks on the top is really around enterprise realistically it's a more hand-to-hand compact we have account managers customer success people so how many people are on the team today full time uh about 140 people how many are quota carrying reps uh so about 40 35 40 um sales folks and how many engineers again 40 40 45 ish fair enough that's good so when you take into account those those quota carrying reps plus any other kind of acquisition you're doing what does your fully weighted cost look like to get a new 15 dollar a year enterprise customer so yeah i mean i think our kind of cat approximately is and i think our analysis is somewhere in the in the six to eight thousand dollar range you know in terms of getting people into the into the door uh and one of the things you know we don't do a ton of kind of outbound you know we do a ton of outbound marketing we don't do kind of we've not gone into kind of like hardcore outbound sales um right now so we do a lot of kind of marketing work that brings in traffic um a lot of our work is through seo and you know that's kind of that has been our driver for our business for a long long time um give me dive into that for a second so name like an seo keyword that performs extremely well for you uh question types for example you know people are looking for different types of question types your number one for survey question types survey question types okay yep or survey question types itself or survey design where within the top 10 for survey design maybe these are high traffic words that drive a lot of traffic uh granted a lot of it is not buyer intent they're more informational intent around it um so so i would say you know the tougher keywords are obviously service software device of the customer survey these are and obviously extremely competitive and they're slightly more difficult to get to uh on the top um and and but there are kind of a whole long tail of kind of secondary keywords that we we rank on yeah i mean so so looking at like survey questions types right or examples the volume monthly on that keyword is called like 12 000 or so surveymonkey has that top spot there uh and then you've got type form you're competing with as well you're in the fourth or fifth spot i mean are there are there ways for you to milk more out of that can you get ahead of type form and survey monkey or it's just too difficult no we were you we used to be at some point i mean they've kind of obviously beaten up it's a cat and mouse game obviously so we used to be number one for survey design survey questions back in you know a couple of years ago and they've kind of obviously kind of you know gotten ahead of us in a couple of different areas um so i think another interesting stat is you know around especially on seo is that you know you know a lot of a lot of new keywords are coming online every day so effectively you know people are looking for advice on the customer survey or customer experience survey and all these kind of new keywords are coming online so we can fight those battles over there uh the other thing that i've invested in is kind of global expansion uh so we have a business in uh we have a we have an office in latin america rather mexico that serves the latin american business in a place called merida uh in near cancun in mexico uh that you know then we kind of dominate kind of you know that area and it's much easier to do seo in spanish than to do seo in english so there's a there's an entire team uh that is kind of you know operating in that so add all this add all these tactics together total organics to the to the site each month is about how much uh i don't know the time i had to honest with you sorry what about new trials uh so we do about four thousand five thousand new trials per month okay how about about ten percent convert to paid uh no not less than that so we we have a lot of information so we about we convert about two percent to two and a half percent so they're not converting at ten percent we're creating a two percent effectively okay so what is that about about 80 new customers per month yeah about 100 ish i think on the on the on the floor uh but our kind of ticket really is as you can see in the market in the space really like you know that's why we distinctly divide the enterprise and the what we call the self-service business so it's just you know there's an output jump of you know over ten ten thousand dollars if you think about it right so you know on this side i'm making about three to four hundred bucks up pop and that side we're making 12 grand to pop realistically right so so our goal is to we don't care about the bottom part as much as we can we want to convert most of these folks into the onto the enterprise are you in acquisition talks right now in terms of anyone buying question pro no uh we're in talks with a couple of private equity firms to help us kind of scale up um from 20 million to 100 million um what we think we need is kind of you know other other acquisitions revenue acquisition so most of that reasons we've done so far our kind of product like you like we talked about earlier our product and and people acquisitions but not necessarily you know growing revenue effectively so but that's kind of the next phase of our of our business what would the perfect deal what would the perfect deal with a private equity firm look like uh it's a primary secondary deal so obviously we've been running the company for quite quite a while that's why we're not going to talk into venture firms which are friends you know there's a lot of people who want to put money into this but they want you know 100 of the money to go into the company uh at this point given kind of where we are we want to take out you know half the have the cash out cash out half hour chips and then put a bunch of money into the company of what so what would the ideal round size be uh so somewhere between 30 to 50 million dollars is probably what will make sense for us because you know we have a couple of five million bucks in the bank frankly at this point to to do deals of our own but we want to we want somebody with like a little bigger bigger kind of checkbook that can that can help us you know frankly acquire revenue at a much larger scale yep uh so just to be clear if you go do a race from private equity forum and raise between 30 and 50 million you're saying you'd live to take about 50 or half of that 50 of that to yourself early shareholder or early employees yeah exactly and cash out all the early employees at least half of their stock is cashed out and then we kind of put a plan together to go out and buy a couple other companies and kind of grow you know blow up the business what um obviously you're still negotiating this right but what what like how little of the company do you think you can sell if you go get a 50 million dollar round done i think they'll want pr i think at that rate they're very likely most of most folks want to have some control premium so they'll they'll want us to control at least 50 60 of the company in fact okay so you think you'll have to sell you'll think you'll have to sell like 60 of the company for 50 million yeah okay i mean that's only giving you a valuation of i mean 100 million bucks basically you're doing 20 million right now that's only a 5x multiple on a company growing 35 year-over-year bootstrapped is that undervalued yeah maybe you could argue it's undervalued but that's kind of that's what i've talked to a few folks and a few folks are willing to do that kind of a deal right now um if you are growing a slightly higher i think we you know we would probably commend a better premium simply put i will tell you we we're not kind of probably under invested in marketing uh obviously you know if people look at look at the space and look at you know surveymonkey and qualtrics and and so on and they said look you are you're a much smaller player in this larger market uh we just it is probably true frankly uh and so we want to kind of you know figure out a way to kind of get our profile up uh if we were if we were a little bit more visible then i think we could have controlled a better premium but obviously they're not do you definitely want to raise this as equity would you ever raise debt uh know that would be a tough one for me to swallow because we we like our kind of current kind of mechanism where we we keep most of the money and we use the money for acquisitions really if we're going to start having debt the amount of time start making debt payments and all that stuff granted i have some cash sitting on the other side uh but i i would probably not go down that route given let me let me give you let me give you an example right if you if you put this five million to work right there's tons of deals i'm seeing right now where companies are doing exactly what you're doing but they're only like when you buy a house they're only fronting 10 of the equity so you're gonna get let's you could work with a debt from right now and get you know 10x leverage on your 5 million so basically 50 million in cash to go to acquisitions on just the five year holding in the bank and go do this you're buying revenue streams without using your own money would you ever do that uh good point actually to be honest with you i've not thought about it that way um because you know then you don't have to sell 60 of the company i'm not sure that's what i say i was going to say this seems obvious to me but i'm sure you see it yeah i mean the debt deals uh get slightly more complicated so far we've not i mean frankly even on the piece we've not really like like dug ourselves into it because we're you know we have money we are making money and we are kind of focused on kind of trying to grow it you know there's a lot of time that we spent on just trying to grow it at you know 30 itself that itself is a you know a reasonable amount of work that we are we are working on uh and that's uh that is that is that is a that's a fight and a battle that we're fighting already uh so going back to your point i mean you do have a point on the death side to be honest with you the finances inside we have not thought about it that that deeply or that creatively frankly uh and so i mean you you raise good points but um so that's something that you know probably i should consider which i don't haven't considered the institute listen i'll i'll put a i'll put a big great deal together for you i'm not a broker so you can't pay me any fees but if i get a deal done for you i want a big beautiful golden money truck in front of my house when it's all done okay it's paid i was freaking golden i'll be spray paint [Laughter] i'll tell you what i'll give you something internal money track do you know what an auto rickshaw is by anytime no tell me uh richard google it up rickshaws are those three wheeled uh motorcycles that that run in thailand and india have you seen have you heard of that it sounds like a death trap of like i would drive that thing and i would kill we have one in san francisco we have one so i imported one in san francisco i'll send you a link to it i have one of those i live in school and i drive that around in san francisco i have it so i'll send you it can handle the hills uh not all the hills you have to pick and choose what hills you go up no then you gotta figure out how you you know you gotta have a special map to figure out how you go around town um altos you know go back and forth so so so it's actually fine for for for for you know inside city driving that's absolutely we registered as a as a three-wheeled motorcycle so we imported it from india we wrapped it with our crusher brand and we write it around and it's it's a hoot actually that is hysterical all right good stuff man let's wrap up with the famous five number one favorite business book uh principles by ray dalio number two is there a ceo you're following or studying uh jeff bezos amazon he's crushing it number three what's your favorite online tool for building your company besides your own uh i think uh email marketing i wouldn't say like a tool but any all email marketing tools i'm like infatuated with email marketing tools because me to be email marketing works really really is that your next acquisition email marketing tool uh not really not really i mean there are tons of email uh you know marketing tools i don't think there's any synergies between what we do in email marketing in general you know we sell to a different buyer quite frankly so so we're selling to research and customer experience not necessarily marketing number four how many hours of sleep to eat every night i think i get eight okay okay what's your situation married single kids married to amazing kids 11 year old and a nine-year-old to two daughters so we got backpacking uh road tripping all the time so you know life is life life is good and how are you back your daughters i'm 43 43 last question what do you wish your 20 year old self knew uh hustle harder simple simple guys there you have it founded in 2005 question pro now doing 20 million dollars in arr up from 15 million just about a year ago all bootstrapped which i love taking 15 to 20 percent in free cash so every year to the bottom line or said differently about 200 000 in cash every month the bottom line reinvesting that in acquisitions 5 million in the bank right now a team of 140 people 110 net revenue retention looking at doing a deal with private equity firm between four between 30 and 50 million bucks to sell between 50 and 60 percent of company potentially to go out and fund more acquisitions and scale all right vivek thank you for taking us to the top all right thanks a lot take it easy these ceos rarely give these kinds of interviews i hit them hard i get the data and i want to do it more so if you want to get more of this stuff make sure you subscribe up here and then additionally go check out one of my other ceo interviews right now