Shipedge Revenue & Funding (2024)

hello everyone my guest today is jose flores he's an electrical engineer and serial entrepreneur he's developed inventory systems for small size companies since he was 12 and then at erickson corporation as an employee after college he launched a multi-channel retailer company in 2003 and then developed an automation tool for to scale this e-commerce business in 2007 he started a fulfillment services company that sold in 2016 and was recently acquired by rakuten in 2016 in july 2016 he started ship edge his current company with an elite development team it's a full stack e-commerce operations software platform warehouse management supply and logistics management for fulfillment networks jose you ready to take us to the top uh yes great all right that's a mouthful so help us understand what the company is doing and what your pricing model is are you pure place ass uh yeah we're sas company um we have two types of customers so first what we are is uh what we call a wms or warehouse management system uh so we take care of everything of after the sale has uh happened so after you finish a sale online on any channel whether it's a marketplace or a shopping cart the order comes into shipped automatically we tether it to one of the warehouses that has your product so one of our mottos is inventory everywhere because we can route the order to the right to the party that has the inventory something else that we do is that we keep up with inventory uh in the channel so you don't over sell and we can uh update the inventories on social media are these are these physical warehouses sitting on your balance sheet the the no the warehouses are our clients and our clients uh suppliers okay so you don't have any big hardware or or real estate expenses related to the operation no no so it's purely software as a service we charge a fee that it's uh depending on the modules that they they want so they can choose an order management system for one of their customers uh two order management systems they can choose a shipping tool they can choose from devices so for example for the devices we charge 15 a month for each device and health device for moving inventory around and yeah the price starts around 600 so it's not a solution for the smaller guys it's more a solution for uh people that really want to accelerate growth they probably have investment in some real state like a big warehouse or something like that jose what would you say kind of the average i know you have a lot of cohorts what would you say the average customer pays you per year for the tech around 20 000 okay so call like a thousand or 2000 a month something like that yes and most of our customers are third-party logistics companies or fulfillment service providers name one or two uh so for example we have uh rally live guardian logistics uh fulfilled uh it's a company called fulfill ship ship zoom we have a number uh of uh companies what was that ship sue s spell it uh zoom ship zoom om yeah okay it just uh started with us you just mentioned the 15 a month for each device i mean that sounds like a piece of hardware are you providing the device no we just give access to the app so we have an app okay and yeah we do have a sourcing partner um so we have a device that we can rent if the customer wants to go that route how many of those have you rented in production today and deployment of hundreds but you know we don't um yeah i can't say exactly how much we are still bootstrapping it's a company privately owned that's great why did you decide to well first off put this on on its timeline for me so we can understand your history when did you launch the company what year yeah so this is a company that's been in in the works in my mind for for over 10 years right but we launched in july 2016 officially and uh with uh we saw exclusively as a software as a service company but the software came from a previous company i had where i had i owned the warehouses and you know we managed the warehouses and we were providing the service for other clients for for merchants selling online um but since then the software has improved tremendously and now we uh software service we rented i guess uh access to the servers uh to many customers and some of sellers said but how did you get walk me through the early days how'd you get your first 10 customers do you remember well yeah let's start way back in well i was selling online i was selling on ebay amazon in 2003 as one of the titanium power sellers i was selling camera accessories and then the 2007 problem came up the recession and then i couldn't afford to pay the fulfillment service partner i had so i brought that in-house and because i didn't have enough space for my inventory i partnered with some guy who did not have the means to do it he had the labor and the space but he did not have the software to automate and to to provide what i wanted so we created that software and since i was creating it for my company i decided to create it for everybody else and um so your first 10 customers after 2016 came from basically warehouses and third party logistics companies you'd already worked with in your life selling on e-band camera parts and things like that uh no we just they they came out because they needed the service yeah but how did you it's not that easy right how did they actually find you what was the job title after um i was in production so i started in 2007 with my own warehouse right not as a software service but as a service provider and then um that the first year we had 80 customers it was it was booming and then i grew to a number of warehouses and i sold the company but i sold the company without giving away the software i just sold them as licensed to the software and then we kept the software and then we started improving the software and prioritizing it so we can commercialize it with other people and that was launched in 2016 and uh and since then you know it's been uh slowly because we don't want to trip on ourselves when you launch a warehouse there is an implementation process there are certain needs some customers have so so it's not it takes us at least two three weeks to launch a warehouse so we are getting around five a month uh no more we could get a lot more but i'm trying to pace it so you're currently adding about five new warehouses uh uh per week per week you said per month okay adding five per month and how many total are you serving today uh we don't really say this it's on the hundreds it's uh okay around 300. yeah that's fine now do you consider each warehouse a customer or do those 300 warehouses belong to say three customers you actually interface with uh when i i was referring to warehouses as one customer but many of them have several warehouses you're right so some customers will have a warehouse in canada another warehouse in the u.s east coast west coast yes so do you actually have you actually have 300 customers but it's actually more like 500 or 600 actually physical warehouses they put you in yes and some of those customers have like 80 customers themselves yep um yeah those are the good ones the one the one to many plans they're higher more revenue for you right yeah i mean my philosophy in business is that it's what i can do for my customers rather than what my customers can do for me that's something i learned in business if i kind of share something with the audience here would be that uh think of what you can do for others and the rest will will follow so jose so i mean just to be clear though i mean you were building this for decades that that advice doesn't just happen because you can't just help customers if you have no revenue to build a team to help them right you you know you were building the right thing because you slugged away for you know decades but i have to say that i did it in a very selfish way at the beginning because i was creating it for myself and i was my own customer that's perfect my own customer as the warehouse as the customer of the warehouse then when i had warehouses i was building for myself because i had the warehouse and now that i'm building it for others it's a it's a much more gratifying experience because it's about of course customers help me understand a little bit more about kind of team today how many people are on it uh we have 12 full-time developers and we have uh staffing marketing and sales around five guys okay so about 17 total yeah okay and as you're obviously growing the company churn is critical in a sas business do you know what your churn is today um i lost two customers since i launched so basically no well what about what about customers that also you know churn isn't just measured by lost customers it's also measured if customers started with 10 warehouses then and year two downgraded to five customers they're still a customer but they pay you less yeah that hasn't happened okay so no downgrades and since 2016 over the past three years you've only lost essentially two customers so churn is essentially zero yeah i mean you're too cheap uh the other one was that he sold his business so josie i actually see that as a weakness uh because it makes me think that you're actually providing way more value than what they're paying you and if they paid you more you could hire more engineers and give them more value are you priced too cheap you're right i believe so yeah why would you increase prices uh i don't um i think that my customers are not doing extremely well themselves since my customers are fulfillment service providers uh it's a very competitive business the margins are slim so we charge what the market um you know provides well that's not what you're doing that's not what your data is saying though nobody's churned if you were priced too expensively more you would have at least some churn you have no churn yeah you're right and uh i'm sure that when investors can that you know they might make that or observation well who cares by the way who cares jose who cares about investors i'm not talking about investors i'm talking about you building a business you know how to deliver more value to your customers but you can't do that unless you make more money to hire more engineers and the way you make more money is getting pricing right i don't care about investors i'm talking about you as a business yeah yeah i think you're right correct yeah but when you think about it um pricing is a very complicated topic if i price things too expensive i go to another bracket of the market right so think of uh salesforce salesforce uh was competing against companies that charge two three hundred thousand dollars at least right and they were doing software as a service very cheaply so in my opinion that's the that's the beauty of software service you can really democratize uh the solution you're providing same with warehouse management systems we compete with companies like manhattan that will charge i don't know six hundred thousand dollars just to get you started and take six seven months to get you up there we can do it in two weeks or three weeks and uh you know charge uh not even a fraction of that of that cost yeah but why would you do that but if they're charging six if you have a minute jose jose if they're charging 600 grand for that you're charging 20 000 so if you want to beat them on priced and say the cheapest in the market okay price at 500 grand why all the way down at 20 grand because uh their customer base is different than ours right yeah but you just said you can do the same thing you just said you can deliver the exact same thing they're delivering uh yes and then we compete with them and we don't have the name still so we have to start somewhere and uh you know i think that my goal is to democratize the solution right so to expand the market to make the market bigger not so i'd rather sell my solution cheaper to more customers than only to a few customers more expensive if that makes sense it makes perfect sense i'm just saying you have no churn which to me is always a signal that a company is underpriced you should have churn a certain amount of churn is actually healthy it's it's it's a it's a signal that you are accurately priced right i think a company like you at your acvs you should have you know maybe something like you know 10 annual churn and maybe 30 expansion uh on those accounts um so look by the way there's no right or wrong answer to this it's all a gut i mean a lot of it's a gut feel and you're in it you know more than i do but um okay talk to me about how aggressive you're being so to get a new cause you know a new customer right that maybe has two three four warehouses how aggressive will you be in terms of fully weighted uh marketing customer acquisition cost to get them will you spend the first full year of acv to acquire them um not right now but that's the plan so right now we've been kind of under the ground perfecting the product it warehouse management systems is not a product that you can build quickly it it takes takes a lot of time a lot of effort so that's why it's taken us so many years right but what's it costing you though now to get a new customer fully weighted all in i would say 500. okay so your bits you're paying 500 bucks to get a 20 000 uh your customers so your payback is essentially instant yes and we want to change that uh creating commissions to the sales force yeah what about your bootstrap so unless you're pouring more cash into the company right to make up for losses you're operating at basically a breakeven or cash flow positive is that right yeah everything that we have we reinvest in software development so break even yeah that's great okay and then um look we can back into some numbers from numbers you gave me earlier on right so if you're serving 300 customers i call it a one to two thousand dollars a month i mean that puts you about 500 600 grand a month right now in revenue is that basically correct um not quite okay which of those two numbers that you talked about earlier were are not accurate or we need to change because uh some customers um so i have two kinds of customers the fulfillment service providers those are a thousand dollars a month okay or two thousand dollars a month right but then we also have e-tailers and they eat dealers with small warehouses they could be paying around 300 a month or two you know so they they're there's a smaller niche that's fine so so i mean it sounds like maybe you're closer like 200 grand a month something like that that's correct yeah yeah more electric where were you exactly a year ago if you're at 200k a month today so we double our our uh revenues jose congrats congratulations as a bootstrap ceo i mean that's that's something to be really proud of that you've been able to double without taking outside capital yep it's tough yeah it's tough but yeah it sounds like you're doing a nice job so good growth there uh let's go ahead and let me i mean let me ask you a question are you looking at raising capital right now or no uh not right now we're focused on organic growth okay and if someone if someone came to you and offered you you know let's say you're doing 2.4 million a year right now and someone offered you 10 million bucks to sell the company would you sell uh no and we receive offers every every week basically why say no so quickly our goal is to create some sort of fulfillment network ourselves and then we can sell the company to a marketplace so once we have uh right now we have around 45 fulfillment service providers in the states once we have 100 120 we will have the same the same [Music] the same infrastructure that amazon has so for example uh shopify is investing one one billion dollars right now on their infrastructure we're doing this purely with software and with a partnership with our customers so if we can attain that point you know at that point we will be able to create a fulfillment network ourselves and the value of that would be a lot higher than any revenues yeah but you don't you don't actually own the warehouse right you essentially control them because they're your partners but you don't actually own that warehouse and that network that's correct yeah that's correct we don't own them but because they're willing to provide their services it's uh the model in the industry is called a 4pl manager of 3pls and basically you don't need to have ownership of the of the warehouse it's like franchising but in this day you don't need to franchise very cool well look we're out of time so last five questions here one word answers if you can number one what's your favorite business book paypal wars number two is there a ceo you're following or studying uh elon musk number three what's your favorite online tool for building your company uh wordpress number four how many hours of sleep to get every night uh six okay and what's your situation married single kids married two kids happy that's great and how old are you that's good i'm 45. last question what do you wish your 20 year old self knew uh to be more generous and to do things like the question is not how can i be successful is how can i be good how can i be productive to others how how can i add value to other people and then that will make me successful guys ship edge.com warehouse management platform doing about 225 call 200 thousand dollars per month right now in revenue across 300 customers warehouses e-tailers uh third-party logistics companies using them that's up from 100 a month just a year ago so over 100 year-over-year growth they've got 17 folks on the team bootstrapped which i love no churn uh spending about 500 bucks to get a new 220 000 a year customer so obviously great economics there as jose looks to scale the company jose thanks for taking us to the top thank you thank you sir