How Refersion CEO Shibo Xu grew to $5.3M revenue and 5K customers in 2020.

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 shibo zu he's the co-founder of refursion and grew the company from the two co-founders to a leading sas platform serving over seven thousand merchants across two offices before reversion he was a technology consultant partnering with fortune 500 enterprises to concept and build great digital products shiva you ready to take us to the top yeah all right so for people that haven't heard about version tell us what the company does and what's the business model is it pure play sas yeah so it's pure place sas what we do is help merchants figure out and attribute orders so uh let's say you're selling t-shirts online you have thousands of t-shirts orders and you're not sure which ones came from influencers or youtube people because you're commissioned on those we'll help you figure out which of those orders came from which influencer and calculate the commissions and help you pay that out and what tracking do you use is it cookie based does each influencer have to have a specific link or what's your tracking mechanism yeah we have a lot of different mechanisms so we use skus we use emails we use coupon codes we also have referral link tracking as well um we don't use cookies we actually use something called local storage which is similar uh but yeah we and sometimes the merch based on like the program or what they're trying to do we might mix and match a lot of different things so you might have like a referral link from one influencer and then track to a coupon code at another campaign and we help you analyze all that and figure out like what actually the roi was okay and how why are people using you over you know things like maybe embed get ambassador like other referral marketing programs yeah so i think our secret to success is that we really start an smb space and what that means is we really need to figure out how to take things from like zero to one uh and help merchants go from zero to one so in order to do that we built a lot of apps um that helped us do all the integration work so we would install the cookies into automatically we would kind of get the web hooks and order data automatically from all the e-commerce platforms so magento stripe and we figured out all these integration paths so all the merchant needs to do is click a few buttons get everything integrated and they're good to go okay now how are you monetizing those is the affiliate paying you or is the merchant paying you we take money from the advertisers or the merchants themselves um they pay a monthly fee like an 89 a month for the professional plan that's kind of just into the gate trying to start things out and then from there uh if you go into enterprise we actually switch over to percentage models i think the latest percentage is like 249 2.5 percent of affiliate sales so it's a 249 minimum uh that's our enterprise plan and then 249 a month yeah okay and then if let's say that because affiliate revenue is very spiky like this month maybe you signed up a really awesome influencer he drove thousands and thousands of orders um we'll take one point uh 2.5 of the total order value yeah from that influencer yep okay got it well generally speaking the people on your 249 a month plan do you have a cut off like they're all doing more than a hundred thousand dollars a year in sales through you that's the cut off yeah so typically like at some point it just starts making sense to to go on the 249. um i think it's somewhere between ten thousand to twenty thousand affiliate revenue it starts making sense tonight a year yeah okay no a month okay um and and i mean why do they move over in other words you have something that is restricted on your 89 a month plan that incentivizes the move what is restricted on 89 a month uh how many orders you can pay out to affiliates every month i and what is that number it's 130. i see so you only can do 130 payouts or pay out to 130 affiliates you can do 130 payouts got it so if you have one affiliate that you pay 100 you wouldn't do this but if you have one affiliate you pay 130 times you hit your max yeah pretty much so like what we actually track is the number of conversions so how many orders this affiliate drives so up to 130 orders and then on the 131st order you can't pay that out okay so regardless if it's one affiliate who drives 130 sales or 130 affiliates to drive one sale each it doesn't matter what combination at that point you're probably gonna move enterprise yeah yeah and it's really consistency so like excuse me so let's say that you had like 130 and then 135 this month next month you have like 20. um it's okay the next month will roll over and those 130 get unlocked so oh no yeah so it's really if you like consistently prove out this channel and it works really well shiba you're a nice sass founder you roll the credits over that's very sweet of you we try hi we work with smbs so why don't you be successful so so this is a great story put this on a timeline for me when you launch the company so we launched a company in i think officially as like 2014 the company was probably incorporated in 2015. okay and today how many merchants are you working with so we work with um somewhere between like total uh all merchants about 7 000 i think about 5 000 of so are our paid accounts yep uh yeah we started as premium how have you so the seven thousand total uh and the delta between how many are paying which is five thousand those two thousand are those just early early people that sign up on a free plan that you now don't have but you grandfather the men exactly why choose to grandfather them you know intercom they just automatically make you pay more doesn't matter if you've been paying them for a decade they make you pay more why not make those people pay yeah because we work with um smbs and like e-commerce and if you ever watch shark tank it's like their margins are thin compared to like sas you know i love how shark tanks your barometer for that yeah it's true though it's true they're successful merchants too they're successful retailers yeah um so it's it's tough on the retail side a lot of our customers are kind of retailers and their margins are tough so you know we try to make it successful for them and our whole thesis is like we really want to turn affiliate marketing to like a viable kind of channel for everybody just like facebook and google so the more we can kind of get into that fold the better and it doesn't matter to us if you are successful today or like five days from now yep this is great so you when did you turn on when did you so you launched in 2014 when did you turn off the freemium and turn on your first paid plan uh probably in 2015 um because in order for us to do our tracking how it works is that we need to look through every single order to figure out if this order belongs to an affiliate right we have data pieces and there's a data piece here we make a match we say hey this one is an affiliate order um so that hit us really hard on the server cost and we just could not kind of afford premium so we switched that off and turned into like paid only got it okay okay so and what was your first stab at the price point do you remember back in 2015 yeah yeah we started at 29 79 and then 179. 29 okay so if i was visiting your site in 2015 i saw 29 79 and 179 something like that yeah interesting okay and what what was your first like what did you price against did you price against 130 orders then two or did you change over time we changed over time we've had a lot of different pricing strategies over the years so like one of the things we did was you know um pricing against total number of affiliate sales so total number of like revenue driven by affiliates um and then a lot of merchants kind of complain that like our average order value is high i'm not getting many orders through this system and then we switch over to a percentage so it would we would like it was kind of like a grading scale so on the nineteen dollar plan we take two point two percent or like it was like six percent actually and then it goes down from there i think it goes to like two percent or two point five percent 89 and then it went to like 1.5 percent on the enterprise side but yeah i mean it looks like my research seems as good as back in march of 2015 you essentially had four plans zero all the way up to 139 dollars per month and the things that you listed below each pricing plan was like literally dollar volume affiliate sales number of visits and then all your plans had unlimited affiliates except your free plan which limited to 15. and then you also restricted on some feature-based upselling like skew level commission can and conversion triggers and phone support yep yeah so a lot of complexity now fast forward to today we can kind of see what worked and what didn't right four or five years later so now you don't price against volume of sales you just priced against number of orders do you limit any of your pricing based off visits today no no we don't okay um we found a lot of bad traffic happening so it was not fair to like penalize merchants for like bad pixel fighters yep yep and then you don't restrict you know you don't have unlimited affiliates on anything ex until they get to the 249 i guess and then you're pricing against gmv correct oh well actually we do have unlimited affiliates on both plans on both plans right yeah i guess what i'm saying is you're 130 purchase kind of um uh uh think like limiter that by nature you can't have like 10 000 affiliates you're gonna have more than 130 payments right so they'll naturally upgrade it's nice you found a utility metric that captures all these things yeah yeah and what we found is like it's an affiliate network promotion programs like this it's like a 90 10 rule so like 10 of your network is gonna do not over 90 of your promotions it can be even as high as like maybe one or two two really big influencers driving a majority of your sales yeah um so we don't limit people on how many affiliates they can sign up it's always questionable what the conversion rate is so let's go through this here for a second so so 2014 do you remember how many customers you signed up and and the total money processed through your platform ooh 2014 i'm actually not sure uh yeah so i have figures in front of me for like 2016. okay so total revenue around that time was about uh eight nine sorry 894k that's how much revenue you did as a company in 2016. yup okay do you know how many merch how many like merchants were on your platform then i want to guess about like i want to say about like 3 000 at most okay 4 000. and do you know that year how much total transaction volume they processed like that that you tracked through your system oh i actually don't have numbers for that the only year i have numbers where is like 2018 for that what was 2018 2018 we did about 250 million in transaction volume i was trying to process and and how many merchants at that point 4 000 or something yeah it's like somewhere between 4 to 5 000 ish and then what was your revenue in 2018 from the 250 million going through about 2.6 2.6 million okay so pretty good so you go from between uh 2016 you do 894 000 you scaled in 2018 more than triple that to 2.6 million and then what did you finish 2019 at run rate wise about uh 5.1 and so what drove i mean that's that's nice growth you're bootstrapped too as well right yup this is pretty cool right i love this you double year over year bootstrapped creative ceo what enabled you to drive you know the doubling of ar between 2018 and 2019. uh so and i think a lot of it is like just overall industry trends um so a fair amount of growth can be contributed to that i mean what we did this year was that we looked at our plans and we realized that the ones that churned the most was actually the lowest paid plans um so what we did was just kind of cut off those lower pay plans uh so that we would get less sign ups and focus more resources on a fewer amount of customers try to kind of increase the ltv um and really focus on like our enterprise clients move us up market and in 2019 what was total gmb through your platform how much dollars did you track do you know i'm not sure we haven't done that analysis yet i do know that on black friday uh the about 100 million passed through our platform just on black friday just on this yeah this year's backpack i got to the office and it was like 9 00 a.m we were like 20 million in wow and i mean so i think what i'm trying to back into is when do you think you'll pass what year do you think you pass a billion track for your platform oh actually i think maybe like this year or next year if we haven't passed in 2019 um i'm actually not sure i'm not sure so a rough estimate um from what we can see we track and this is only for the shopify segment of our business we track about 10 of all gmd for shopify okay you track 10 of all gmv for shopify no sorry not gmd orders 10 of all orders that go through shopify okay so how many total orders does shopify process each year uh so i'm not exactly sure this is so based on the black friday numbers uh when shopify posted like total number of orders they tracked that day and we looked at our servers and it's about ten percent oh i see so how much did they track that day so i would guess about two billion at least okay and so you and then so you had a hundred million yeah something like that okay got it so i caught five percent there of total total volume now was so obviously shopify's number is pure shopify is you're 100 million was that all pure shopify data too no that that actually includes a lot more a lot more other platforms as well okay so your total volume on black friday when compared to shopify you're about 10 essentially some portion of 100 million you tracked on december you know in black friday 2019 was your shopify cohort but it included your entire co-order customers yeah yeah that's the right way to look at it okay okay very cool um okay great and then just to make sure i've got these numbers right now today right so 5 000 customers minimum 89 bucks a month um that would put you north of 450 000 a month right now on revenue is it accurate that's about right yeah okay is it right at about 400 like last month 450 uh last month i think yeah about 4 50. okay my thought would be you might be higher because i'm assuming everyone's on the 89 a month plan when you have people on 249 as well yeah yeah we do so i mean a fair amount of our revenue so the big change from last year to this year also was that about a third of our revenue started going into the meter plans so a percentage um we started pushing those meter plans more and more so if you imagine those percentages are a lot more spiky um and it's not really clear but it's harder to track yeah and you're not exactly sure but we're tracking the growth of those so we actually did we ended 2019 uh in december around five five hundred and we're probably sitting around 520 at this point uh okay so december of 2019 you did about 500 000 and you think now like last month you basically did or this month january i'll do about 520. cool but that will again that will spike during like this holiday season and things like that because you have a percentage of gmv on part of your deal exactly i see okay very good so i mean so what do you think you'll close out this year at do you think you're double again to 10 million uh we're hoping we're shooting for eight okay uh we're pretty conservative about our numbers generally and we don't really have a finance person on our end so we really focus on like the product side of things that's good that's good now let's talk about product you know any kind of product led marketing you're doing in other words how are you signing up new customers yeah so largely through the app stores um now because we put on events we sponsor other events within the shopify community um folks are starting to understand us and hear about us and so they're coming to us they're looking for our brand they're trying to find us and then we kind of connect them uh but generally most of our customers are probably coming through like a shopify app page my general apps page uh stripe connectors page so like when you what ends up happening is that let's say that you want to you know run an affiliate a business on shopify that uses affiliates and recurring orders you probably end up with reversion plus recharge for shopify yep um something like that and then and the shopify app store forward version reflects that you've got 758 reviews 4.7 average of which 658 of those are five star or 650 of them are five star reviews so clearly a top app in the shopify app store yeah yeah we we work really hard and kind of work with our merchants for for those uh to get those reviews and it's it's uh it's important it's important to like kind of work with the conversions themselves so that they understand what's going on shopify loves buying its most popular apps in their app exchange are you in any chats to sell to shopify uh not really no i've actually spoken to the corp dev i mean i think that they put feelers out all the time but surprisingly i think their acquisition strategy for apps is seemingly more strategic like they would want to make big bets and technologies that they don't have or technologies they think makes sense yep that all makes sense so how many give me a sense of kind of speed today so so this month how many new customers will you sign up [Music] good questions let's see so new customers this month we're probably looking at that's why i love the show by the way we we have founders that like sheba that come on they're cool being transparent then they're refreshing dashboards because they want to make sure they get me some sort of accurate numbers this is great yeah so we're signing up about probably around 200 customers this month okay now that's kind of the bottom of the funnel where they convert let's now work up the funnel so where do those those 200 come from the app exchanges like what do you track is it number of clicks each month from the app exchanges the number of free trials the number of converts to paid uh number of sign ups into into reversion into like kind of like first into um yeah first sign up what is that first touch though is it an email sign up a free 14-day trial what is the first the top of the funnel it's a yeah it's the first free 14-day free trial okay for okay so to get so how many free 14-day trials you sign up this month uh so that was the number i just gave you about 200. oh okay okay and what percent of those do you think will convert to paid so typically our conversion rate here is about 60 so like two-thirds of customers usually convert to paid okay um yeah okay got it so you'll get like 120 130 ish convert to paid of the 200. that's great and what do you know that they have to do in that 14-day period to drastically increase the likelihood that they do convert to paid like what's the activation metric you're trying to drive yeah so there's a few one is uh convert integration so getting their software working with ours we have our first test orders we know everything's working correctly and then first affiliate first sale first conversion so what we found really works well is like merchants who already have some idea of what they're going to do so they have an affiliate or influencer that are exist they're working with right now and this influencer needs to be tracked and that ends up being kind of the driving force for getting a reversion integrating everything and then seeing how well this person tracks and then paying out the commission's owed very cool now you mentioned your bootstrap correct no money raised yep that's correct and are you reinvesting everything so are you operating at breakeven or are you do you have margin are you are you profitable just printing money we are profitable we actually have money stored in the bank um and we uh we just get celebrated enough we have to celebrate this this is a beautiful way to build a sas company imagine that there's money coming into the bank account holy hell yeah yeah so we're we should be pretty good for like you know at least like at least a year um from now if like everything goes to hell yep yep yep i mean can you give me a general sense are you talking like you know you do 520 000 bucks in january you'll add 50 000 bucks to the bank account in terms of margin or 100 grand or more um so i think we landed ended like 2019 with about like uh 1.7 or 1.5 and ebitda something like that okay on five top line i mean that's obviously really i mean that's great so so here's my next question to you is that a good thing or a bad thing and what i mean by that is someone look at that and go hmm do they do they know how to spend money to get new customers right because if you did you wouldn't you wouldn't let us in the bank you'd want to invest or do you feel like you're growing at the perfect rate right now you don't need to reinvest faster and it's just it's all it's all good i think that we can always be doing better honestly like i think every entrepreneur every founder thinks look at their numbers and just looks and just sees opportunity right i think that's just how we're wired fundamentally um i do think that we could be more aggressive and we like to be more aggressive but with a bootstrap company um we just try to i think we're just like generally conservative founders or entrepreneurs in general we try to like figure out experiments um we know we can throw money in a lot of different places but we don't like to throw money at it until we experiment and we know we're good at it and then we are able to like scale it up so this year we're just starting to kind of we just hired our first um director of marketing uh and we're really starting to scale campaigns and acquisitions what's your current cac to get a new 89 a month customer do you know well i think it's about 20 25 it's not very high at all our marketing spend is only in like it's only like 200k not even a year a year and most that goes on what facebook google ads no there's no advertising it's just seo and content creation we invest in content to kind of teach users how to use the software are these full-time employees or like you hire some freelancers to write great content you spend 200 grand a year doing that so it's they're they're all freelancers agencies freelancers and then we have a marketing manager helping us do some of that i see okay what's your team size today how many people total so we're about somewhere between 20 and 25 um fluctuates between the two um about six are engineers uh we have an outsourced qa team as well okay any quota carrying sales reps or no no not any no quarter carrying sales reps but we have about like um so the miami office is also business development we have one person for partnerships and three people kind of doing biz dev just helping merchants get introduced attending conferences so foreign business six engineers what are the other ten uh customer success product management uh screws engineering and stuff i see okay before we wrap up turns critical on a sas company when you look at the past 12 months what's been kind of your gross revenue churn would you say uh it's high so our gross revenue turns somewhere between eight to nine percent monthly or annually uh let's see i think that's annually okay and why do you say that's high well because um it just seems really high like if we you know keep charting at this rate right we would it seems to be like it seems to be something that's like if we were able to get this down to like six percent seven percent we should see a really large acceleration in growth um it really changes like the nature and the curve of our graph yeah so and that's the feedback we've been getting a lot i mean we've been we've talked to kind of people outside and talked to people in the finance world the vcs the part that they all got hang up on is the churn um and i think a large part of that is due to shopify as well shopify it has natively high churn uh and that's like something high well i'll tell you unless i'm misunderstanding you 10 gross annual churn at this price point is not bad uh if it's monthly it's bad if it's annual this is it you're actually i would say i mean i can run the math i mean your top your top 20 percent in terms of best like lowest churn at this price point across all the you know 2000 companies i'm tracking so i'm wondering if i'm wondering if that's my i wonder if that's monthly churn if people are telling you it's bad who knows we can we can we can follow up but basically what you're telling me is if you have 500 if you have customers last year that are paying you a hundred thousand dollars in a month you're saying this year only ninety thousand dollars a month will come from those exact same customers so you churn ten percent of the revenue no i think it's spelled it's fell and it's end it's monthly sorry it's okay okay got it got it got it yeah so you're you're got it so you're turning eight to nine percent per month which is equivalent to like 80 to you know 100 annually yeah yeah i'm looking about like somewhere so january 2019 we're seeing maybe like retention of about 50 in revenue got it so everyone that stays with a year you're retaining about 50. [Music] yeah okay good well again you know it's all fixable stuff it's good that you're obviously tracking it so you can jump into it so let's wrap up here with the famous five number one favorite business book oh uh right now i'm reading um fast and slow thinking that's been really helpful number two is there a ceo you're following or studying uh yeah so i really like um this is very dorky but i really like gabe newman i like i like the way that he kind of built a very private company um bootstrap self-funded which company like he did valve valve okay all right number gaming software yeah um number uh number three what's your favorite online tool for building your company oh yeah right now uh we really love stripe uh stripe has all the data it has everything you ever need it makes sense it's easy to onboard other people too right number four how many hours of sleep are you getting every night i typically sleep about six hours a night um i think i can sleep more uh but i just naturally can't sleep more than six to eight hours all right and how old are you i'm 32 32. all right and uh take us home here um what's your current situation married single kiddos i am married uh yeah i live in australia with a great life any kids no kids no kids all right soon good good last question what do you wish your 20 year old self knew oh uh start entrepreneurship earlier i just wish he i got started earlier i probably got started about when i was 27 28-ish i wish i jumped into it earlier refersion guys helping you track your affiliates they did 5 million last year in top line revenue and get this shocker 1.5 million in ebitda a profitable bootstrapped company based in new york city sas model plus percent of gmv price points started 89 a month goes up to 249 a month plus 2.5 of gmv that's tracking of sales that you're doing through their platform launched in 2014. 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