How Servicechannel CEO Tom Buiocchi grew Servicechannel to $60M revenue and 500 customers in 2019.

hello everyone my guest today is tom b okay he joined service channel as executive director and ceo in 2014 he has more than 30 years of experience leading growth companies in both technology and energy services including jetta networks drobo a vc firm as an eir brocade communications and hewlett-packard he has a bachelor's of science degree in electrical engineering from union college and mba from northwestern's kellogg school of management he's also on the board of directors for conics and gmac all right tommy you're ready to take us to the top thanks a lot that's a lot of stuff right there must be and i'm very old that is a lot that means you're doing something right right i don't know we'll see so why is a guy like you coming in and run a company i mean you know enough why not take all the risk and launch it from scratch and own 100 well it turns out about four years ago three of my colleagues and myself ran into a couple of founders who had an awesome business and we decided at that point in time to become investors and take a majority share in that business over time we got so involved and loved the business so much that a couple of us of us got involved in the operating part of it and so that and that was service channel that's exactly right exactly right so what round did you come into the company when was it personal money or through via vc firm well we we raised our own money it was quasi personal quasi friends and family we formed a small fund to make that investment like a little svp exactly right okay and what year was that in late 2014 okay so that was that was about four years after kind of the debt financing exactly exactly so okay so i want to go back to that in a second so then you so you put money in 2014 you also took over in 2014 so were those things tied together no i took over in 2015 it turns out i got involved as a board member in 14 and about a year into it uh we took over as the management team as well the founders moved on to the board and still remain on the board and so we just took over as a management team so tom what happened you know a lot of people gloss over changes to the founding team in terms of who's leading but i know there's a lot of nuance right so like was it friendly was it not friendly why the change very very friendly um stephen and serge the founders had incredible insight into this industry insight that no one else has had in the past and they they founded the stalwart company in this space but they hadn't had experience in scaling a technology company so we're taking their expertise and their insight into this space and hopefully coupling it with a couple of software executives who have done this before in in hopefully the one two combo interesting okay so from a capitalization perspective how much total has the company raised to this point we raised 54 million dollars uh in us in a in a series with um excel in 2017 we put in about 40 before that so in the in the 90s okay in the 90s and was all was that entire excel round for operations or was any of that part of a recap uh mostly for operations it was okay all right so 90 in the company now let me take a step back here for people that have not heard of the company before what do you guys do so we're online platform like online platforms we collect buyers and sellers so they can transact with one another our buyer is a facilities manager or real estate professional of a chain uh think of your favorite chain that you eat or shop at subway yeah exactly they need to maintain all of their facilities in a in a consistent clean and safe manner we connect those people with a network of commercial contractors who perform all the trades that make that location safe clean inviting and allow that user experience at that brick and mortar location to be great so think of you know chipotle panda cvs amc theaters louis vuitton nike stores adidas stores the gap so things like that so if i'm at nike and a little toddler basically runs into something and just destroys a wall or a shoe rack or something the the local nike rep can open your app quickly call a local person to come fix the thing in the store exactly and if you're a thousand miles away and the water heater needs replacement or something you can hit a button on our app and it will contact the local contractor a thousand miles away who's closest to that location to come in and do the job for you so what is your ip are you maintaining and managing this network do you pay these contractors directly or is your ip really the tech it's the tech it's the connectivity between the buyer and the seller the ability to transact and find someone a thousand miles away who's the right person for the job who you can manage to your slas to your price into your quality standards much like you get an uber driver across town we get a commercial contractor across the country pure sass pure sas okay so you're not taking any percent of like projects completed through your system or anything we take a pure sas uh at the customer side and because we're a platform we take a tiny transaction for each invoice job that the contractor performs it's very very small like under one percent yes it is okay um from the contractors great now you must give them enough business where they stay hyper responsive to alerts that you send them otherwise people wouldn't use you because it would be too slow absolutely uh so when the customer mandates basically that the contractors will receive all of their work on the service channel app they need to just look at their phone when they get a work order they need to respond to it just like an uber or lyft driver would and then that process is digitally recorded just like an uber or lyft drive is except it's i need tom to fix the toilet in toledo as opposed to johnny to come pick me up in my ride right okay and then so let's just talk pure assassins that's the majority of your business on average i i know you have a lot of cohorts but we don't have time to go on all of them on average what are companies paying you per year to use the tech or per month so think of it as a a double digit or slow triple digit amount per location per month okay and i guess that's part of why i'm asking the question is i'm curious on average how many locations does one customer sign up with all of them so for for cvs it's 15 000. for panda it's 2400 but if you take your total customers divided by or divided into all the locations you serve what was the average oh about 600 locations is our average customer oh wow i mean okay this is a large deployment every time a new customer comes with a big deployment oh yeah so so think of a cvs on one side with well over ten thousand and think of um what's what's a good one shake shack hundred locations or um uh all birds or bonobos or warby parker with maybe a dozen or twenty or twenty five it's that range but on average it's about 600 okay and and these brands again pay about anywhere between 50 up to the six figures 50 grand per year per location well we charge them on a per location per month basis so think of 50 to 150 per location per month oh i see and then you multiply it by those number of locations that they have so we charge on a per store basis i see i see okay very good and then uh remind me again the timeline on this when did the company launch the company this is a great story the company launched in 1999. when i was born tom that's exactly right the two founders working in new york city were kind of the savants between the contractor and the retailers at that time a lot of work on a phone an old phone they put technology to it their first customer was the gap in 2001 word of mouth spread the internet happened mobile happened then all of a sudden in 2014 you got a pretty pervasive tool and a lot of customers on the platform how many today we have about 500 brands that you know on the platform we manage about 350 000 of their locations in 63 countries so uh when uh apple opened or when the gap opens a banana republic in tokyo that banana republic comes on our platform interesting so 350 000 locations across that base and you said earlier 50 bucks per location per month minimum and that puts you at 17 million a month in revenue minimum is it accurate well that's not accurate but was going to say you're taking you're taking you're taking me out to dinner next time i'm in town yeah taking very wide ranges there so we won't do the math here but it's a very wide range of uh legacy pricing and current pricing and growth and so forth okay i guess what i'm trying to uh well okay we'll move on past that so help me understand today how you're getting new customers sure um so first of all word of mouth is a great thing when a facilities manager or real estate professional moves from one chain to another which they often do they often take service channel with them in conjunction with that we have a network of 50 000 commercial contractors on the platform they're always referencing us because they get more work when they reference us and it's easier for them to receive and do their work when they get it on their mobile phone so we get references that way plus we have a sales force of about 15 individuals quota carrying reps who are in the field talking to uh other...