How SEON Passed $900K in Monthly Revenue and Near-200% NDR with Usage-Based Fraud Prevention (Interview with CEO Tamas Kadar)

Introduction and Founding Story

Nathan Latka

00:00Hey, folks. My guest today is Tamas Kadar. He's the Founder and CEO of SEON. He started the company with his co founder when they were still students in university and built it from scratch. His personal experience has sparked an interest in fraud prevention, and his vision is to build an innovative go to solution for online businesses affected by fraud. Tamas, are you ready to take us to the top?

Tamas Kadar

00:18>> Hey, everyone. Thanks for having me, Nathan. Yes, of course, I'm ready.

Nathan Latka

00:21What's your personal experience? Did somebody rip you off or what?

Tamas Kadar

00:25>> Yeah, it's very similar. So with my co founder, Ben, we have launched a crypto exchange during our university years, it was a couple of years back, and we actually faced fraud issues ourselves. We tried to solve the problem ourselves but we couldn't find an efficient solution. We have decided to develop a tool in house and then pivot it into SEON and now here we are getting ready for our series B.

Total Funding Raised and Round History

Nathan Latka

00:50Very cool. Okay, so you mentioned Series B. So you raised some capital. How much have you raised to date?

Tamas Kadar

00:55>> We have raised so far 13,000,000 USD.

Nathan Latka

00:5913 or 3?

Tamas Kadar

01:01>> 13.

Nathan Latka

01:0213. Okay. And I guess break that down for me. When did you raise the first round?

Tamas Kadar

01:07>> The first round was when we have started the company. So about four years ago when we have formed the firm and then we have raised 500,000 as a seed investment. And then we've done bridge round of 1,000,000. And then we have What year was the 1,000,000? The 1,000,000 was 2019.

Nathan Latka

01:29Okay.

Tamas Kadar

01:30>> Yes. So then we raised €10,000,000, and it was about a year ago.

Nathan Latka

01:36In 2021?

Tamas Kadar

01:38>> Yes, that's right.

Nathan Latka

01:39Okay. And so I guess help me understand the need for the €10,000,000. Why do you need to raise capital to grow the business?

Tamas Kadar

01:47>> In one hand, we have opened our first international office here in London where I'm based at. And as well as we have expanded to US, so we have opened an office in Austin and to Indonesia, Jakarta, where we have in both this location our business development office.

Product Overview and Key Customers

Nathan Latka

02:05Interesting. Okay, tell us more about the product. So who's paying for this and what are they using it for?

Tamas Kadar

02:11>> We work with some of the largest now banks such as Revolut, Nubank. We work with subscription services such as Patreon, we work with online gambling companies, online lending companies, BNPL companies, so like Afterpay. And what to use a tag for is basically based on someone's email address or phone number, we can associate your digital profiles to one single data point. And then we provide an API access so our clients can send through these data points, get

02:44>> the rich data, take it back and make better decisions based on those.

API Volume and Scale

Nathan Latka

02:49And in December alone, how many times does your API hit? How many process like API processes?

Tamas Kadar

02:55>> It was more than 90,000,000.

Nathan Latka

02:58Nine or nine zero?

Tamas Kadar

03:00>> Nine zero.

Nathan Latka

03:01Nine zero million just in December of last year twenty twenty one?

Tamas Kadar

03:04>> Mhmm. That's right.

Nathan Latka

03:05That's incredible. And how that's across how many companies who are hitting API?

Direct Customers vs. Gateway Partners

Tamas Kadar

03:10>> Well, we have just close to 200 direct customers. But since we have some payment gateway customers, we are protecting more than 5,000 online businesses out there.

Nathan Latka

03:20I see. How many how many partners do you have that are one to many?

Tamas Kadar

03:26>> Sorry, can you repeat that?

Nathan Latka

03:28Yeah. So you have 200 direct customers and you reach another 4,500 or 4,800 through partners. How many of those partners do you have? The gateways.

Tamas Kadar

03:37>> We have about four or five gateways, so not too many.

Nathan Latka

03:40I see. Okay. So those four or five gateways bring you another four or 5,000 sort of indirect customers.

Tamas Kadar

03:46>> Mhmm. That's right. Yes.

Nathan Latka

03:48I see. And how does the majority of the 90,000,000 monthly API calls come from the payment gateways or your 200 direct customers?

Tamas Kadar

03:56>> It's more the the rest. So the big bigger ones.

Nathan Latka

04:00These are

Tamas Kadar

04:01>> all small long tail long tail merchants. The majority of the revenue and the API calls comes from bigger businesses.

Nathan Latka

04:07Oh, what's going on there, YouTube? Good to see you guys. Now imagine this. You love watching these interviews with SaaS founders, but imagine if we took all of the valuation data out from over 2,807 interviews I've done manually. Saves you a lot of time. Well, we've done this. We've built it into the beautiful interface inside of Founderpath. Check this out.

Tamas Kadar

04:27>> I'll show you how

Nathan Latka

04:27you can access this in a second, but you log in, you connect your Stripe account, you see your valuation real time. You can see what it changed over the past eighty eight days and even set goals for valuation this year. Now the secret evaluation is there's many different ways to value a SaaS business. So the reason you're gonna see three or four different valuations inside of your Founderpath dashboard, this is all free by the way, is

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05:13sold the whole thing outright. Now what's cool about this is this is not built off random data. Again, you guys hear these interviews on YouTube. All these datas are built from real time valuation data points founders share with us on the show. So traction, 1,200,000 seed round, 3.7 raise. They sold 22% of their business. Go in here and filter by the event. Maybe you only wanna see companies that have sold the whole business. Well, here are

05:38a bunch that have been acquired, the valuation and the multiple. Maybe you're going out right now and you're raising your seed round. We'll go in here and look at all this recent seed deals that went down, what they raised, what valuation they raised at, and what percent that they sold. There's never been a larger dataset of SaaS valuations than what you can get now inside of Founderpath. And we're thrilled to bring it to you. All We're

06:02right, gonna go back to the YouTube video here in a second, but if you wanna check this tool out, if you wanna jump in and sign up, you can check it out for free to get your valuation at this link. This link, founderpath.com/products/valuations. Or if you go to founderpath.com and hover over products, click on get your valuation here, and go ahead and sign up to give it a whirl. Again, all that valuation data live right inside

06:28the platform. I hope to see you there.

Tamas Kadar

06:29>> Alright. Let's jump back into the interview. But are the bigger businesses the ones that use you directly or the gateways?

06:35>> Things that's directly.

Nathan Latka

06:37Directly. Okay. So the 200 direct customers, that's your biggest asset, your biggest customer base, your most revenue. Yeah. Okay.

Tamas Kadar

06:42>> That's right.

Usage-Based Pricing Model

Nathan Latka

06:43And how do you price for this? I mean, obviously, per API hit pricing is very popular these days. Know, look at Snowflake and others, but how do you do it?

Tamas Kadar

06:51>> Very similar. It's usage based. So we pay, I mean, we charge our clients micro fee for each of the API calls and then it's postpaid such as AWS does. It's very straightforward. We try to do the opposite than what everyone else does in our industry.

Nathan Latka

07:08So it's a micro fee per API call and then what else?

Tamas Kadar

07:12>> That's it.

Nathan Latka

07:13That's it. Okay. So how micro? Are we talking like a tenth of a cent or something like that?

Tamas Kadar

07:17>> It's between 4 to 8¢.

Nathan Latka

07:21Oh, okay. So got it. So 4 to 8¢. And has it always been that way or have you're moving sort of up or down market?

Tamas Kadar

07:27>> No. It's always been like that and we never raised prices since the beginning.

Nathan Latka

07:32Okay. Got it. So so force 4 to 8¢ per API call. And do you make people buy like a number of credits ahead of time or do they pay as they go?

Tamas Kadar

07:43>> Pay as pay as you go. So this is why it's so friction free. So we always post post bill our clients, so they don't have to top up anything. They can just, you know, use the system and and and then next month, beginning of it, we charge

Nathan Latka

07:59Interesting. And so when you look at on average, the 200 direct clients, you know, they all obviously, you know, hit the API different amounts of times, but what's your sweet spot? What would you say the average customer is paying you per month?

Average Contract Value and ARPU

Tamas Kadar

08:12>> The average, the ACV is around right now like $55,000 a year. So about 4,500 US dollars a month, I would say.

Nathan Latka

08:29Yep. Okay. That that makes sense. And and are those are they they're not committing those contracts, though. Right? They're basically paying as you as they go?

Tamas Kadar

08:37>> Yep. Yep.

Nathan Latka

08:38Very cool. Give me more of the backstory here. So you launched in 2018. You you've scaled. Now do you have a co founder?

Tamas Kadar

08:45>> Yep. Yep. My co founder, Ben, he was he's a university friend. He is a COO of the company. He's based in Budapest.

Nathan Latka

08:53Interesting. And did you guys just put equity fiftyfifty at the start?

Tamas Kadar

08:56>> No, was different. We

09:01>> invested different upfront, so we have come to an agreement between us, but we are both happy with this agreement.

Nathan Latka

09:08Okay. So you own more or he owns more?

Tamas Kadar

09:11>> Yeah. I think yeah. Since I'm the CEO and I I I have, you know, started with the investment as a bootstrap investment, I own a lot.

Nathan Latka

09:21Yeah, I think it's important, right? So just to be clear, it sounds like you put in some of your own money at the beginning to help get the business going. Because you put in money and your other co founder maybe didn't put in as much or put in none at all, you got more equity at the start.

Revenue Run Rate and Year-Over-Year Growth

Tamas Kadar

09:33>> Yep, That's correct.

Nathan Latka

09:33I see. Okay. Now now you're scaling nicely, right? So 200 customers out of $4,500 per month ARPU. I mean, that I mean, that would put you at about $900,000 per month in revenue. Is that right?

Tamas Kadar

09:44>> Yep. We are over that, actually.

Nathan Latka

09:46Okay. Over that. Are you past 1,000,000 a month yet?

Tamas Kadar

09:49>> Not yet, but very close.

Nathan Latka

09:50Very cool. That would be a fun thing to celebrate. If you're doing about $900,000 per month right now in revenue, where were you exactly a year ago? Do you remember?

Tamas Kadar

09:58>> We were one third of it.

Nathan Latka

10:01One third. Okay. So where does most of that growth come from? Is the same 200 customers pinging the API more expansion revenue or is it brand new customers altogether?

NDR, Churn, and Expansion Revenue

Tamas Kadar

10:09>> We've got lots of brand new customers. So we have almost doubled our client base, but as well as we see healthy growth from the existing clients. Our NDR metrics are very good.

Nathan Latka

10:21What is the NDR? How far above 100%?

Tamas Kadar

10:24>> It's very close to 200 actually.

Nathan Latka

10:27Okay, about 200%. Yeah, that's great. Obviously, doesn't surprise me you're able to raise this much capital with that kind of NDR. Do you have any gross revenue churn?

Tamas Kadar

10:38>> Not really, it's like 5% a year. We don't see businesses switching from us to other tools. What they see is they cease to exist usually due to some business continuity issues such as COVID and so on.

CSM Bonus Scheme for Expansion

Nathan Latka

10:51So Tamas, 5% gross revenue churn means 105% expansion for a total NDR of about 200%. Interesting. Do you have a game plan for driving that expansion revenue? In other words, customer success reps that are incentivized with expansion or how do you do that?

Tamas Kadar

11:06>> Yes, yes, we have a bonus scheme in place for customer success. But since, you know, it's a usage based pricing, we usually grow together with our clients.

Nathan Latka

11:17For other people listening using a transaction based pricing model or a per API call per seat, they're thinking about bonus plans for their CSMs as well. Can you tell us a little bit more about how you structured your CSM bonus plan?

Tamas Kadar

11:27>> Yeah, it's a, you know, we set up some base numbers for the expansion based on historical data. And then anything top of that, they get, you know, chunk of revenue, which is expanded on top of the average expansion. So it's not too much, but it's very motivational, I would say. And it's something that I was not thinking before, but our Chief Commercial Officer actually has came up with the idea and we have implanted just recently and

11:56>> actually works very well. So I can recommend to all the startup founders out there.

Nathan Latka

12:01So for 2022, you just did this, So what does a CSM have to get above in terms of NDR before they can start earning a bonus?

Tamas Kadar

12:09>> Oh, that's a good question. Would have to look up, I can't say on top of my mind.

Nathan Latka

12:14What do you think it is? Do you maybe have a no range or an estimate?

Tamas Kadar

12:18>> I I can look up right now.

Nathan Latka

12:21Okay.

Tamas Kadar

12:21>> It's in a sheet just now.

Nathan Latka

12:24I love founders with models in front of them. They're my favorite founders. Always.

Tamas Kadar

12:33>> Yeah. To the debt, net expansion.

12:41>> Yeah. Should be at least a 2% uplift from previous month, that's base. And then they earn also the same amount of commission based on that. Yeah, it's a new scheme. So as well as, you know, have.

Nathan Latka

13:02So Tamas, if someone so if if I'm one of your CSMs and I get a $100,000 of revenue from last month, those customers to upgrade to about a 102,000 this month, that's the minimum target. But if I get them to upgrade a 110,000, so there's 8,000 above target, how much is a CSM would I get in commission on that extra 8 ks?

Tamas Kadar

13:22>> I think, yeah, it's a good question. Think it would be like around 5%. It's a bit like it's deal based. So 2% net expansion, get 2% commission. So if the net expansion, let's say like $50,000, they get 2% of it, which is 1,000. And if it would be 5%, let's say 100,000 and get 5%, which is 5,000.

Nathan Latka

13:47One time or is it recurring commission?

Tamas Kadar

13:49>> It's recurring.

Nathan Latka

13:50For how long?

Tamas Kadar

13:54>> Paid monthly. And that's a good question. I think at least for,

14:03>> I think at least for one year.

Nathan Latka

14:04One year. Yeah, that makes sense. Very cool. I'm seeing more and more founders do this. And so thanks for the transparency. I think this is another good data point for folks to learn from. So, okay, your per API billing is proving to be very effective. Your product is very strong. People are banging the API more, which is driving your expansion revenue through the roof. You've chosen to raise some capital. Managing dilution as you raise is obviously

14:22very important, right? So a year ago, you said you're at about $300,000 a month in revenue or $3,600,000 run rate. That's when you did your 10,000,000 series A, right?

Tamas Kadar

14:31>> Mhmm. Mhmm.

Nathan Latka

14:32And most founders in a series A are selling like 10 to 20% of the business. Were you sort of in that same range?

Tamas Kadar

14:37>> Yeah. Just can be okay. Yeah.

Nathan Latka

14:39Okay. Cool. So what what would that put you out of value? You break a $100,000,000 valuation post money?

Tamas Kadar

14:45>> No. Not yet. Close to it? Somewhat close in in US dollars. Yeah. Yeah. Yeah. But this time for the B, we will be of course.

Why Now Is the Right Time to Raise the Series B

Nathan Latka

14:54So you're raising right now, it sounds like the B. Why is now the right time to raise?

Tamas Kadar

15:01>> Yeah. It's we had two very strong months in terms of revenue and expansion. So I think that's, you know, a good momentum to go on the market. I think it's also the climate still is very good. And as, you know, I have explained some of our metrics then it's actually like, you know, very healthy. So I this is right time. We still have like more than a year runway. So we are not, you know, in a

15:28>> position where we will need, you know, cash quickly. But we are also feeling that, you know, since we got two very strong months, it's the right time.

Nathan Latka

15:35Yeah. That makes it timing is is very important. So how much are you targeting to raise in the Series B?

Tamas Kadar

15:40>> Yeah. It's hard to say we'd like to rely also on the guidance from the investor. We have some plans, but, you know, I wouldn't share them upfront as long as term sheet is not signed and the money is not lodged in. But yeah, it be announced very soon actually.

Nathan Latka

15:57Around what?

Tamas Kadar

15:58>> It will be announced very soon.

Nathan Latka

16:00I mean, the raise process that takes a while. I mean, so so like, mean, I guess what I'm asking is, are you trying to do like a 20 to $30,000,000 Series B or more like a 60 to $80,000,000 Series B?

Tamas Kadar

16:11>> Yeah. It's the latter. Yeah.

Nathan Latka

16:13It's more like 60 to $80,000,000 series b?

Tamas Kadar

16:15>> Mhmm. Mhmm.

Nathan Latka

16:16And what valuation I mean, do you think you can command like a $405,100,000,000 post money valuation raising that much or no?

Tamas Kadar

16:23>> I think it's definitely doable.

Nathan Latka

16:25You think what?

Tamas Kadar

16:26>> It's definitely doable.

Nathan Latka

16:29So if you raise it like a 70,000,000 series A, you can get up to like 150, 180,000,000 series B, something like that?

Tamas Kadar

16:36>> Yeah. Well, you know, we raised 10 for our A and then this time it's going to be, you know, hopefully at least six to eight times multiplied. So our B will be around 60 to 80, that's what we're aiming at. But, you know, it's still ongoing. I wouldn't

Nathan Latka

16:55Well, what what I'm trying to get though, Tamas, is how you're managing dilution. So raising 60,000,000 on 120,000,000 valuation, you're selling a third of the business. That's pre money.

Tamas Kadar

17:03>> No. I mean, valuation would be like, of course, you know, we would dilute the same amounts before. So standard dilution, you know, 15 to 20%.

Nathan Latka

17:13Got it. So you think you can go out and command like a 400, $420,000,000 pre money valuation, something like that?

Tamas Kadar

17:19>> Yeah. Yeah.

Nathan Latka

17:2140 x multiple. Mhmm. Mhmm.

Tamas Kadar

17:23>> Well, that's, you know, what to see on the market today is quite insane, you know, like valuations are multiplied, multiplies of the

17:34>> 40 to 80. We see 80 and you know, we'll see where we end up, but I'm quite optimistic. So I hope for the best.

Nathan Latka

17:43Yeah, know that there's a comp from last month or last week that closed Cognism, $25,000,000 in revenue, about doubling year over year, raised at a $436,000,000 valuation. So now we're seeing 20 to ADX multiples all over the place. Yeah. Yeah. Well, good luck. You have to let us know if that sort of goes through. Now, that capital, what would you use it on? I mean, dilution is dilution, right? You're gonna sell 20% of business. Why do

18:06you need it?

Team Size, Engineers, and Sales Headcount

Tamas Kadar

18:07>> Yeah, we would like to open some more offices in one hand. Of course, you are mainly increasing the number of teammates in our headquarter, which is in Budapest, Hungary. That's where we keep the whole R and D and product development. So we would like to add there almost 100 new engineers. The team right now is there's 140 people there.

Nathan Latka

18:32How many engineers?

Tamas Kadar

18:33>> About 70 currently.

Nathan Latka

18:3570. Okay. Very cool. Or and and just to close-up the sales questions for you. So how many folks on your sales team carry a quota right now?

Tamas Kadar

18:43>> All of them.

Nathan Latka

18:45How many?

Tamas Kadar

18:46>> Yeah. We have about 10 BDMs and we have the similar similar amount of SDRs. So we got, yeah, 20. And we got, of course, BDRs too, but they don't have a quota really.

Nathan Latka

18:59So 10 carry a quota?

Tamas Kadar

19:03>> No, I mean, like the BDMs have a, you know, like a quota for the bonus scheme. And of course, the SDRs have just a monthly minimum quota.

Nathan Latka

19:11I see. Got it. And then the CS how many CSMs do you have?

Tamas Kadar

19:15>> I think it's a lot done now. Yeah. We have cost center recruiting.

Nathan Latka

19:18Got it. So between SDRs, BDRs, AEs, CSMs, you've got about 40 people on the sales team.

Tamas Kadar

19:23>> Mhmm. Yep. Yep.

Famous Five Rapid Fire

Nathan Latka

19:24Very cool. Alright. Let's wrap up here with the famous five. Number one favorite book?

Tamas Kadar

19:29>> No Rules Rules.

Nathan Latka

19:31No what?

Tamas Kadar

19:32>> No Rules Rules.

Nathan Latka

19:34Number two, is there a CEO you're following or studying?

Tamas Kadar

19:37>> Sorry. Can you repeat that?

Nathan Latka

19:39Is there a CEO you're following or studying?

Tamas Kadar

19:42>> Yeah. Of course. Like Jeff Bezos.

Nathan Latka

19:46Number three. What's your favorite online tool for building SEON?

Tamas Kadar

19:50>> Favorite online tool? Let's say, Figma.

Nathan Latka

19:54Number four. How many hours of sleep do you get every night?

Tamas Kadar

19:57>> Eight hours.

Nathan Latka

19:58And what's your situation, Tamas? Married? Single? Kids?

Tamas Kadar

20:02>> I have a partner, but not married.

Nathan Latka

20:04Okay. And how old are you?

Tamas Kadar

20:06>> I'm 27 years old.

Nathan Latka

20:08Last question. Something you wish you knew when you were 20.

Tamas Kadar

20:12>> I'm still 20.

Nathan Latka

20:13I When you were 20?

20:15Two zero. Two zero years old.

Tamas Kadar

20:18>> Oh, oh, yeah. Well, yeah, I'm a bit older. That's something I wish I would know or I would done.

Nathan Latka

20:24Just something you wish you knew.

Tamas Kadar

20:26>> I wish I knew.

20:29>> Yeah. Well, like investing in in that acquisition is more important than, you know, I I would have thought back then. But, yeah, you know, it's a journey. We're all learning, right?

Nathan Latka

20:42Guys, seon.io launched in 2018. They helped large neo banks and Patreon and lenders quickly verify accounts. They had over 90,000,000 API calls just last month hitting their system, right, to verify a bunch of these identities. They grew from $300,000 a month in revenue a year to $900,000 a month today, about a $10,800,000 run rate. 200 direct customers on their 4 to 5,000 through payment gateways they partner with. They raised a $10,000,000 series a last year, sold

21:07between 10 to 20%. Now raising like a 60 to 80,000,000 series b at a much higher valuation. We'll see what happens there. A team of a 140, 70 of which are engineers. Tamas, thanks for taking us to the top.

Tamas Kadar

21:17>> Thank you too. Take care.

Nathan Latka

21:20One more thing before you go. We have a brand new show every Thursday at 1PM Central. It's called Shark Tank for SaaS. We call it deal or bust. One founder comes on, three hungry buyers, they try and do a deal live and the founder shares back end dashboards, their expenses, their revenue, ARPU CAC, LTV, you name it, they share it and the buyers try and make a deal live. It is fun to watch every Thursday, 1PM

21:45Central. Additionally, remember these recorded Founder interviews go live. We release them here on YouTube every day at 2PM Central. To make sure you don't miss any of that, make sure you click the subscribe button below here on YouTube, the big red button, and then click the little bell notification to make sure you get notifications when we do go live. I wouldn't want you to miss breaking news in the SaaS world, whether it's an acquisition, a big

22:07fundraise, a big sale, a big profitability statement or something else. I don't want you to miss it. Additionally, if you wanna take this conversation deeper and further, we have by far the largest private Slack community for B2B SaaS founders. You want to get in there. We've probably talked about your tool if you're running a company or your firm if you're investing. You can go in there and quickly search and see what people are saying. Sign up

22:29for that at nathanlatka.com/slack. In the meantime, I'm hanging out with you here on YouTube. I'll be in the comments for the next thirty minutes. Feel free to let me know what you thought about this episode and if you enjoyed it, click the thumbs up. We get a lot of haters that are mad at how aggressive I am on these shows, but I do it so that we can all learn. We have to counter those people. We

22:48got to push them away. Click the thumbs up below to counter them and know that I appreciate your guys'support. All right. I'll be in the comments.

Tamas Kadar

22:55>> See you.