Reveleerrevenue & funding

you're gonna love this interview just got done editing it i'm glad i got it live for you i'll be in the comments for the next 30 minutes hanging out answering any questions you have in fact leave a comment below about data points or what you think is going to happen to the company and i will respond to every comment additionally if you're just loving the content click the thumbs up and i will go and check out your profile as well and give your videos some love as well in the meantime enjoy the interview hello everyone my guest today is jay ackerman he's the ceo and president of a company called a revolution in his role he's responsible for fostering product innovation accelerating business growth and scaling operations to propel the company's impact for health plans they're a sas platform focused on value-based care all right jay you ready to take it to the top yeah for sure nathan let's do it so what does that mean what's value-based care yeah so um as you've probably been hearing a lot in the news there's been a shift from from feep uh uh you know uh fee for service you know with a health plan you go in and see a doctor they'll charge you a fee whether or not they actually take care of your ailment and so the government's been pushing for value-based care trying to ensure that providers doctors hospitals and the health plans are working to ensure that members get healthy and stay healthy and so we play a part in uh in supporting that okay so and so what does the platform look like and who's buying it's the hospital the patient too yeah perfect so uh we have a cloud application that's uh used by government sponsored health plans so that would be health plans that are participating in medicare medicaid aca or kind of affectionately known as obamacare and they use our platform to engage with providers doctor offices health systems and hospitals to capture critical information on members to make sure that they can demonstrate to the government that they are doing their part to ensure that their members receive proper care stay healthy and they insure a balanced set of members so jay who who is they though is it is it literally the hospital down the street here or is it somebody else oh well so our our customers specifically it's a health pla health plan so national health plans like uh anthem uh united are are people that we target our customers down to uh regional health plans and local local plans that might be in your city or your local market got it that's helpful okay good so they're paying you and how do you set up like what are you price based off number of patients you know quality care seats yeah so perfect we um we have a couple of different pricing arrangements some are what i would consider kind of typical enterprise agreements where they can use it um as much as they want as broadly as they want but our typical pricing model is based on what we call a chase which is affectionately effectively the um the particular member that they're trying to capture information on so we will know up front how many members they're trying to capture information for over a given year over a given year and then we set pricing around that so we have kind of a per unit uh pricing model what does that mean though so anthem comes to you you close and they say hey listen jay we want to capture information on 10 000 members members of what and how do they get the information yeah so they'll say hey we um in the area of risk adjustment we want to go out and capture records on 50 000 members that sit across five states not what are members though like that's not interesting sorry member like you consider that member would be uh a patient right it would be somebody who is insured by that health plan okay someone insured by anthem yes why don't they already have all the data on that person they're already a customer of anthem well so um i mean you hear a lot about this like the interoperability within healthcare and systems that don't speak so doctor offices uh hospitals they have lots of information sitting on each of the individuals that walk into their building to receive care and that information is not shared very well back to the health plan okay got it so they are anthem is using your technology to get more information on their own patients uh yes on the members that they insure yeah which would yeah they don't they don't think of them as their patients right they think of them as insured members yeah okay very good that's helpful understand and then so help me understand on average what what is no obviously don't talk about anthem's actual contract but on average what are these companies going to pay you per year to use the tech yeah so today we have about 30 customers um and on average we earn about 375 thousand dollars per plan that we cover and services revenue and about 275 000 in sas revenue so we have both the services model and the sas model okay so so uh one of these 30 customers like anthem would pay you on the sas side about 225 000 per year on average to use the tech yeah and that number for us has uh i've been going up uh pretty pretty significantly year on year yep and that's okay so that comes out about 23 000 per month across those 30 those 30 customers now if i multiply those 30 customers times 22 grand a month i mean that puts you at what is it like 680 grand a month in revenue just on sas uh yeah yeah just on sas that's probably that's a good number okay i mean is that accurate yeah okay so that would mean you guys are running essentially an 8 million dollar arr right run right sas company and then you've got another 30 juice on top of another 2 million or 3 million on setup fees professional services yeah perfect you your numbers tie out great sweet that's great okay so that's the company now you mentioned this has been expanding over time so take me back to day one when did you launch the company what year yeah so uh well there's probably two day one so i i i joined the company in 2016. i'm not the founder i got uh hired by our investors to take a business that they had a lot of faith in where they thought they needed somebody who had more scaling experience so i jumped in in mid-16 and so there's kind of the chapter that's been written from 16 onward but the company was actually launched back in 2009 more as a professional services business that started to morph into a software company uh so the company's been around a while but but i like to think about kind of what's been happening over the last three years between 2009 and 2016 how much company did the capital raised before you came uh close to eight million dollars eight million raised and how much total today raised uh just under 18. okay why did you have to raise an extra 10 why couldn't you come in and fix stuff and get cash flow pumping and not have to take extra dilution yeah so um you know we're solving a big problem uh we're solving a complicated problem working with health plans require technology that is highly secure and i would say the other part is we to support the health plans and to solve a problem across the area called quality and risk adjustment are effectively while they're like products they're different products and so from a product development standpoint requires a lot more capital got it okay so i assume obviously you raise additional capital now you're burning capital to drive growth is that accurate are you cash flow positive uh we will end the year uh cash flow positive okay that's great today though like last month are we talking burning like a million a month or 100 grand a month or how close to your oh no yeah i think we've been really great stewards of capital so we're burning about a hundred grand a month oh that's not okay that's not bad at all and what's your team size team size we've got uh today about 80 people full time okay how many engineers uh 15 engineers 50 you know these numbers you've listened to the podcast before haven't you yeah well look like anybody who's worked with me know i'm a numbers guy so i like it i'm right up my alley i like you when i interview another numbers guy that's good or gal alright so 15 engineers and at this price point i imagine you have serious kind of field sales operations how many quota carrying sales reps yeah so we actually have a small team but we're expanding it we have two quota carrying reps uh but our sales leader also effectively carries quota as as uh as does effectively anybody at the senior team right we're all kind of play a part well so jay 80 people full time 15 are engineers two are quoted carrying reps who are the other 60 people yeah so all right yeah so those um we've got on the product side we got a team of six um and then our operations team we've got about 50 people now so you know we talked about the 10 million revenue um you know we have business under contract to have that number be about 70 higher next year and so the 50 and ops are effectively supporting that new growth that's already been solved what is it i don't understand what that means in your space what does an opa mean uh so our operations team so when i talk about you know we have to capture information on behalf of a health plan and and look like you know from a standpoint of like our business we're trying to disrupt a tech enabled services model that's really heavy with people and so our competition will reach out with um they'll have people calling provider offices a doctor to request a medical record to be sent in on a member that information has to come in and be reviewed to make sure that it matches the member that they're seeking they'll then attach it into the system then it gets reviewed by a certified coder or abstractor and we're trying to continually take out that layer of work and try to automate it and so right now our team of our operations team is about 50 and those are the 50 people who call on providers to get the record and review the record and attach it into the system so i imagine if your operators do a good job onboarding new customers you see great expansion revenue so if you look over the past 12 months let's peel back that onion what was gross revenue churn over the past 12 months uh so gross revenue term we were about 90 gross 90 retention on a gross basis okay so 10 gross revenue churn and then how much expansion on that same cohort uh 150 okay so just to be clear the customers you had ignoring new customers over the past 12 months just the customers yet from exactly a year ago 10 to their revenue churn but that same cohort of customers you up sold 150 percent of the revenue is that accurate uh that's accurate that's great okay i mean so that's obviously i mean that's like 240 net revenue retention uh i would put that definitely in world class the question is can you do that at scale yeah so we think we can and you know we look at the 90 um retention and and i would say that that's not something we're we're satisfied with and and so we think from an improvement standpoint we can drive that up towards 95 through some improvements in product additional capacity in our customer success team and then just maturing kind of how we sign up customers and making sure that we have the right fit on the front end and we've appropriately identified the solution 30 customers at 225 000 a year or 23 thousand dollars a month puts you again right now about 700 000 per month in just sas revenue what was just the sas revenue about a year ago do you remember yeah so a year ago it was uh maybe two million okay got it so about 160 000 up to 100 basically hundred sixty thousand up to seven hundred thousand yeah yeah that's impressive okay good so basically what you're telling me then is if you had a 100 sorry 150 expansion on 160 000 you had exactly a year ago right so that takes you up to about 350 000 the rest of the new the rest of the new revenue growth the other 350 000 basically came from new customer editions correct yeah interesting so how many customers did you have over the past 12 months uh we've added uh half a dozen customers half a dozen six okay interesting that's i mean again really really really nice story there so six new customers and how are you getting these customers at the field sales knocking on doors yeah so we have a field team out there i mean the the beauty of our market is it's easy to identify all the customers that we can sell to there are effectively 2 000 health plans across the country that participate in medicare medicaid and the commercial exchange so we take an account based uh marketing approach for the the top players and then we work through um sale various sales campaigns with integrated email campaigns blogs we have our own podcast and we try to weed those together and time into some important trade shows that take place throughout the year to bring customers to us and make sure that they know who we are and what we're about so when you add all these things together to get these six new customers what do you put your fully weighted customer acquisition cost at for a new 300 000 year plan yeah so um our actually customer acquisition cost is is pretty low um and it's probably low because we we have we would like to invest more but i would say our cus fully loaded customer acquisition costs with all of sales all of marketing uh commissions in there trade shows about trade shows about 20 25 oh a first year acv or your total revenue a first-year uh acb got it so 25 of 300 000 bucks a week you're spending about 75 000 to get a new 300 000 customer yeah and and i would say as we look into next year we're looking to expand our customer acquisition cost yeah what um i mean it sounds like a pretty capital efficient business are you looking at raising capital right now uh yeah we're in the final stages of a capital raised process that's great i mentioned i know you said you're announcing this friday this will be out obviously by then so how much how much are you raising uh so it's it's still a little bit in flux but um but we're expecting to raise uh close to 10 million dollars and why do you need to raise 10 million bucks with such healthy unit economics 240 expansion three-month payback period you don't have a cash gap yeah i mean we we think there's an opportunity to build a really significant business and um and we're we have um when i came in 16 and 17 we were playing uh kind of defensive uh a defensive game shoring up the foundation of the company and now we've got a lot of momentum behind us and we want to be much more aggressive and we think there's an opportunity to to to move faster and um and one of the you know with the new investors we're bringing on we have a lot of support to to build something large uh and impactful in the healthcare space jay what percent of the company do you think you'll have to sell to get 10 million you know new dollars into the company are we talking like 10 20 of the company uh you know so typical kind of like i look at typical cap raise kind of you know 20 20 30 percent okay got it so you're looking again like a 50 million dollar pre-money valuation 60 million post money something like that yeah i think that's um you know that's close and do you feel like that's fair with 8 million in terms of true ar annual you're looking at about a five six x a or multiple uh it depends on you know depends on the day but uh you know we wouldn't be taking that money in if we didn't think we had the right um you know the right valuation and the right relationship how'd the firm incentivize you in 2016 to join the company you're a guy you look healthy you can do anything you want right it's not your baby i assume they have to give you a significant portion of equity to get you to come in correct yeah yeah i probably asked my wife that question but um you know i i i was an executive in a publicly traded company and um i really want i was uh most recently guidance software which is in the endpoint security space i was chief revenue officer um i want to take the opportunity i wanted the opportunity to lead a company i thought there was a good fit here with what the reveler was up to and was happy to take a really significant cut and and w2 compensation for equity and so um you know with our key investors upfront ventures uh uh you know key player in southern california and we work to ensure my you know my stake was aligned with theirs so you know heavily equity laden you know relationships more you got more or less than 20 of the company oh less than that less more than 10. um you know that's close okay we'll call the reason i'm asking is this if you sell 20 a company let's say you let's just make the math easy let's see at 10 of the company right now i mean you're taking a two percent cut right on on that dilution i mean there are so many ways you're doing about 10 million a year right now in a revenue total when you add your sas post professional services why not go use non-dilutive debts you save personally for yourself being self-interested you save your two percent yeah so we're um uh it's a good question um you know i think the uh the two percent um the 20 you know haircut for me or for members of my team i think we're willing to do that with the investor set we're bringing on who uh we're bringing on a key investor that knows our space extremely well and i think can play a significant role in how we scale uh and then on the you know the topic of venture debt um we are um we do have venture debt um we have uh a term loan and we're also um we will have an ar line going forward uh to support the cash flow needs of the business who did you get the term loan from was it an svb deal uh we we're current svv bankers yeah but did you get a term loan i mean you can bank with sbb and not have a terminal yeah so we have a term sorry we have a term loan with them and and with our cap raised process we're also evaluating some other options beyond svb but uh currently we have a term loan with svb and those are that's kind of your typical rates somewhere between three and six percent 20 to 50 bips of warrant coverage that kind of thing yep yeah right in that line yeah and why would you look at moving away from svb have you found cheaper capital uh we are finding yes we're finding cheaper capital um and i think our story is appealing to some of the banks we're talking to and they're being pretty aggressive and how they're looking at us yeah uh when you analyze the cost of capital is it strictly just looking at can we get cheaper than a three to six percent interest rate uh yeah i mean i think there's you know it's that's part of it but also making sure that we're building a relationship as we think about some inorganic opportunities out there that that we have a potential lender that um you know can support us with that i'm not quite sure i know what that means so um i mean i guess the reason i'm being the reason i'm being curious here is because if you found cut capital that's cheaper than three to six percent i want to know about it because everyone will go to no no no no so i mean on the term loan um you know they're all kind of in and around the same spot okay but we're uh you know we are looking at some acquisition opportunities and and would like to finance that in part with debt and we want to make sure we have a banking partner that's you know kind of you know at our at our side on those opportunities okay so let's do that if you were going to raise capital to help to help essentially put up some debt in an acquisition where you maybe only have to put let's say you're going to buy a company for 5 million bucks you only have to put up a million you use debt to put up 4 million what facility would you do that under would it you said an a you you do it under kind of an ar advance versus something else uh no i think i think we would um i mean so we have the equity coming in and we'd probably bounce out with additional uh term loan okay have you found so very rarely will svb or basically these debts if you're getting a three to six percent interest rate because these banks are making so little they always are going to be want to be senior position it's very hard to stack term loans without doing a refi so is that what you're looking to do is actually a refi does something give you a bigger term loan than svp yes oh i see so you're not looking to get someone to sub svb you're looking to refi and get a bigger line absolutely sorry i see got it okay very good very good well we'll look for that news that'll be exciting um on that noah jay let's wrap up here with the famous five number one what is your favorite business book um you know my favorite business book would probably be um uh never eat alone by keith ferrazzi although i'm reading uh right now i'm reading um the founder um which is also a great book very good number two is there a ceo uh of your following or studying yeah so uh timely one with uh john donahoe who just stepped into the nike ceo position yesterday leaving servicenow yep number three what's your favorite online tool for building your company uh you know uh since i'm kind of a market-facing leader i would probably have to say hubspot so i i look into the app every day to see our sales team is doing and building pipeline and and uh driving activity with prospects jay number four how many hours i spend every night uh target seven but uh not often hitting it so i'm about six and a half okay you mentioned a wife earlier so it sounds like married how many kids yeah married uh two boys two boys and how old are you i'm 52. 52. last question what do you wish your 20 year old self knew yeah so it's a that's a good one because my oldest boy is 16 so he's approaching that age pretty fast i think uh probably three things probably one find a great mentor two don't be afraid to join a large company early on they can provide great opportunities to learn and develop and the last one i'd say manage your cost structure if you want to take the leap start a company be an entrepreneur it is really hard to peel back costs after they've kind of you know crept into your life guys revellier is helping folks like anthem get more information on the clients and patients that they ensure they're doing that again via jay's tool he stepped in in 2016 after the company had already raised about 8 million bucks today raised about 18 million looking to raise another 10 uh right about now to fund some acquisitions and do some other things they're burning about a hundred thousand dollars per month right now 80 people on the team 15 engineers two quota carrying sales reps really impressive economics here 10 gross revenue turn annually 150 you heard the right 150 expansion uh revenue so call it 240 net revenue retention payback period only three months so healthy economics again 30 customers paying about 300 000 per year we're about 8 million in arr is pure arr and another 2 million professional services on top of that jay thanks for taking us to the top yeah hey nathan this was great thanks for your time do you guys know i fight like heck to get these data points for you from these ceos that rarely do these kinds of shows if you want more shows like this make sure you subscribe right now we're trying to get 10 000 youtube subscribers by the end of september here 2019 and it would mean the world to me if you clicked now to subscribe additionally i've got two more great interviews for you if you want more data points from the world's leading sas ceos click and watch one of them right now