Saborpos Revenue & Funding (2018)

hello everyone my guest today is javier duton he's the founder and ceo of a company called sabor pos the premier restaurant software on the windows store our number one most downloaded restaurant pos for windows 10. the company provides all the features you need to fully automate your ordering and accept customer payments javier are you ready to take us to the top absolutely all right tell us about the cup tell us about the company what do you do and how do you make money uh we sell restaurant point of sale software to uh small businesses in tier two and tier three cities so a lot of mainstream america a lot of latino owned businesses a lot of immigrant businesses usually are our customers um our software is very i would say if you're a new business owner it's perfect for you and we usually provide them with services like credit card processing order order management uh websites social media and uh pretty much the point of sale is our way in and after that we upsell a lot of other services okay and walk me through uh the revenue model jg is a sas product you charge monthly fee for this uh yes it's all sas so um payment processing is a sas model our pos uh there's a free and the premium version um you know free most of our customers if you get the free version usually get the payment processing with us or another add-on service and bigger restaurants usually pay for the pos get an add-on as well as get the payment processing so if we just focus on paying customers that are paying you on our sas model what do they pay per month on average would you say i'd say the average restaurant is around 169 to 199 a month okay and that's per location uh correct okay great and give me more the back story when did you launch the company uh so my family owns restaurants uh we try to find a pos for the windows store so you know there was ios had square android had like uh clover and toast pos but when i looked at the windows 10 store there was no thing available so i might see them through microsoft and we decided to build one for the windows uh windows 8 and when you're what year was this this was uh 2015. 2015. okay good and name someone just hey might as well promote them right what are some of the restaurants your family owns uh they're called castillo restaurant it's a small chain in brooklyn new york ah very good too all right good so 25 now did you grow up in that business uh yeah i uh my family opened it up in 1999 and i've been in the restaurant industry since i guess i was seven years old and you're going i hate being in the kitchen walking on these rubber pad things so my feet don't kill me i'm going to go start a software company with higher margins right correct yep it's been working pretty well all right so 2015 you launch and what have you scaled to today how many customers uh we have over 9000 restaurants on their system running right now okay does that mean paying or free uh paying we're probably less than five percent of that of our user base okay so so how do you how so if i take five percent of of 9 000 i mean it's about 450 right yeah around there okay and then if i multiply that times that 170 price point per month it's fair to say you guys are doing what 70 or 80 grand a month right now uh yep we're currently valued at around 8 million and we're about to raise a new fine a new round of financing in about six months who valued today at eight million uh we did the 20x multiple and then we already have uh safe notes at that valuation uh what do you mean 20x multiple in other words 8 million is 20 times your current uh correct yeah okay so current if i take 8 million divided by 20 that means your current ar is about 400 000 bucks which is different than 70 or 80 grand a month so what are you doing per month right now on revenue oh wait um okay i must be mistaken but the the last the last financing we got was that eight million valuation um so i'll take it back to you on that well what when was that was that this year last year uh it was early this year early okay so early this year how much were you doing about per month uh our biggest month was probably like 45 50 000. okay 450 000 got it yeah okay so so all that means is all that means is you have early customers that are paying less than 169 per month something like that yes correct we had to give a lot of it away for free this industry is really really um it's a rural industry so our first customers are obviously you know paying the lease but our new ones are constantly getting uh add-on services at the regular price and there are like 170 180 the new ones correct yes but just to make that really clear so you have 450 paying 9 000 free of those 450 paying some of them were early paying less than the current price that new signups are coming in at which is 170. exactly you're doing about 45 grand per month and uh your last valuation was i think you said early this year you raised 8 million valuation how much have you raised a date uh probably 750k okay what do you mean what do you mean probably that's like a number of most people know right off the right off their head i would say 750k right now and then we have like one or two notes that we have to get clarified oh i see i see so was the last round you did was that also a note or was it an equity round it was a safe okay um we're about to go into our round a and that's our lawyers are just coming through everything that's become a little more complicated yeah what valuation do you want to try and raise out in your series a uh we're doing like maybe 20 to 25 million okay and and walk me through an investor says why are you worth 20 million what do you say uh as of right now we're actually a very good engine for other services to get restaurants for their services so um our attrition rate is extremely low like less than five percent that's logos per month uh yep okay and then industry average in the payment process industry is like 20 to 18 to 20 percent so we we lose less customers our acquisition cost is around 500 600 okay uh yeah i'd say yeah five to six months we have a few contracts with payment processors where they actually cover our entire acquisition cost and we have like almost no onboarding costs at this point but obviously we want to scale we want to get data so we're trying to give our software as um as a solution for other payment processors to sell and then they'll get the processing but we get like a small fee every month for them using our software yeah i'm just curious why are you what do you accomplish by raising at a 20 million valuation why is that important to you uh historically a lot of pos companies do raise at like a 5 million valuation then a 20 to 30 million valuation and then basically based on what though how old they are revenue based off what metric uh i'd say age and revenue so like shopkeep for example around their three four year mark they raised around 30 million valuation and what revenue were they doing um they didn't disclose that but they they raised around there so how why are you pinpointing yourself to that when they could be doing 10 times your revenue or one tenth of your revenue um i'd say it's just right now a lot of besides our revenue a lot of the values actually been adding on to the the ip we own and the trademark and has been really successful and then we're still trying to figure out as we go on where we're gonna go because pos is so brutal that we have to resell our software at a huge discount to distributors that we're actually looking at different areas to go into so it's um i mean i'm just doing the math 45 grand a month times 12. you're doing about 540 grand a year right now and if you're trying to raise a 20 million valuation that means you're asking for essential almost a 40 times multiple on forward-looking arr which is i mean through the roof so i'm just trying to understand how you're going to how you're going to try and defend that it sounds like you're saying it's ip it's trademark and it's lead gen for other businesses correct um as a we're hoping to hit those revenue numbers by the end of the year what revenue numbers uh to justify maybe a 25x or 30x to make it less of a 40x multiple what revenue do you want to try and hit by december 2018 maybe 70 to 80k a month okay so maybe double what you're at right now exactly yeah very cool what are you growing at each each month right now i'd say around 10 to 11 okay that's healthy and where are you getting these new customers from a lot of them actually just come directly to us so our marketing website is really popular we have good seo we do very good social media with latino business owners um i think facebook groups have been working extremely well for us so if you go on to facebook you find like a latino restaurant owners group i'd say probably a couple hundred restaurants that are just latino owned latino speaking we get a lot of leads from that and then downloading people from the store we're still number one so we get a ton of leads from that as well um what are you number one for like what does that mean so on the windows store if you look up pos uh we're rated number one out of all the competitors including paypal if you type in restaurant pos we're also rated number one as well as the first result okay i was going to say so what's more important a high rating or to be the top result uh top yourself is more important okay so so you're the top result like for example i imagine paypal probably has way more reviews than you because they have a bigger user base but what you're saying is their average rating might be a little lower than you so you have a higher rating correct they show up higher than you though um no we still show up before them on almost every search for pos or credit card process or anything like that okay and how many downloads today since 2015 all together probably close to 20 000. 20 wow that's the number one most downloaded yeah it's it's a small market it's really small but it's a lot of high quality leads and there's no choice at this point a lot of i guess a lot of tier two tier three cities are usually more windows friendly more android friendly versus ios which are probably all the startups that raise money in the pos game right now yeah oh just to be clear you're also saying this is just for that search term pos uh yes yeah yeah very good tell me more about the team how many of you guys are there uh right now we're about 13 people okay everyone in new york uh we have three offices we have a couple people in new york uh two of our co-founders are in florida they work by themselves and then we have a small team in um latin america and ecuador that's kind of just like cold calling and you know just constantly bugging restaurants what percentage of your 450 paying customers are actually in physically latin america or central america uh almost i think maybe we have one in latin america that sounds that feels like a huge opportunity to me it is but um there's a lot of government regulation and it's just incredibly expensive to go down there right now i see i see i was gonna say if you're already serving that market in the states it makes total sense to expand there but government makes it hard yep very good all right uh let's wrap up here with the famous five number one what's your favorite business book javier uh street smart number two is there a ceo you're following or studying right now uh probably following elon musk number three is our favorite online tool you have for building the business uh probably a sauna number four how many hours of sleep are you getting every night five to six okay pretty healthy and what's your situation married single kiddos uh single single no kids yet nope all right good and how are you uh 26. 26. all right last question take me back six years what do you wish your 20 year old self knew uh bought more bitcoin bought more bitcoin guys there you have it from javier serving the latin america restaurant market seems like he has some traction launched in 2015 they raised about 750 thousand dollars looking to raise an additional round of capital about a 20 million dollar pre-money evaluation but wants to double his revenue first he's currently at 45 grand a month in revenue uh wants to obviously increase that significantly revenue churn is about five sorry logo turns about five percent per month his customer acquisition cost is about 500 bucks and he's got 450 customers paying on average 100 bucks per month so payback is between five and six months again with a team of 13 between new york city florida and latin america javier thank you for taking us to the top thank you nate