Interview
How Shorthand Reached Nearly 250 Customers Paying an Average $6,000 a Year With Zero Marketing Spend (Interview with CEO Ricky Robinson)
- Interview Date
- August 21, 2018
- Interviewee
- Ricky RobinsonCEO
Company Metrics at Interview Time
Customers (2018)
Just shy of 250
Avg Contract Value (2018)
$6,000 per year
CAC (2018)
$3,000
Team Size (2018)
10 FTE
Cash Flow (2018)
Positive
Historical Snapshot
These numbers were reported by Ricky Robinson during the interview recorded in August 2018 and are a historical snapshot, not current figures. See Shorthand’s current numbers.
Key Takeaways
- 01Shorthand had just shy of 250 customers as of August 2018, all on annual subscriptions
- 02Average contract value was $6,000 per year, with no monthly plans offered
- 03Customer acquisition cost was $3,000, or 50 cents per new dollar of ARR
- 04The company was cash-flow positive as of the last Australian financial year ending June 2018
- 0530 to 40 percent of people reached Shorthand's website by clicking the Shorthand logo at the bottom of most published stories
- 06The remaining traffic came almost entirely from organic search, with SEO optimization just beginning
- 07The company had 10 full-time employees distributed across New York, London, Brisbane, Japan, and Seattle
- 08A potential restructuring discussion involved reaching $2 to $3 million ARR before bringing in a new investor
Company Metrics at Time of Interview
| Metric | Value | Source |
|---|---|---|
| Customers (2018) | Just shy of 250 | Interview, Aug 2018 |
| Avg Contract Value (2018) | $6,000 per year | Interview, Aug 2018 |
| MRR About a Year Earlier (2017) | About $60K | Interview, Aug 2018 |
| CAC (2018) | $3,000 | Interview, Aug 2018 |
| CAC per Dollar of New ARR (2018) | 50 cents | Interview, Aug 2018 |
| Cash Flow (2018) | Positive | Interview, Aug 2018 |
| Team Size (2018) | 10 FTE | Interview, Aug 2018 |
| Year Founded (incorporated) | 2013 | Interview, Aug 2018 |
| Total Funding Raised | A$3.5M (A$3M plus A$500K) | Interview, Aug 2018 |
| Top-End Export Plan Starting Price (2018) | $24,000 per year | Interview, Aug 2018 |
Growth Breakdown
Customers and Pricing
As of August 2018, Shorthand had just shy of 250 customers, all on annual subscriptions averaging $6,000 per year. About a year earlier, Robinson said, it was doing about $60K in MRR. He called growth over the last Australian financial year, which ends in June, "a little bit slower than the previous year" and put it down to story-limited plans, such as a $3,000 plan that gave customers a couple of stories. Those plans "sold by the bucket load," but many buyers left once they had created and exported their stories, and churn over the previous six months or so had been "terrible." By the time of the interview, Shorthand had stopped offering them.
Team and Locations
Shorthand operated with 10 full-time employees distributed across New York, London, Brisbane, Japan, and Seattle. The UK and Europe were the primary markets where the company first gained traction with large publishers, while the US was described as an emerging and potentially larger market.
Funding
Shorthand raised A$3 million from a single investor, a well-known Australian named Graham, and a further A$500,000 to open up shop in New York, for a total of A$3.5 million. Robinson said Graham, the only backer, owned the whole company, had always been very interested in independent journalism, and funds the Guardian newspaper in Australia.
Cash Flow
Shorthand had a cash-flow-positive year in the last Australian financial year, to June 2018. "We've kind of dug ourselves out of a hole and now we're cashflow positive," Robinson said. He also said that taking a large outside investment would change the way Shorthand operates.
Growth Strategy
Powered By Logo
Most stories made with Shorthand carry a Shorthand logo at the bottom. Readers who wonder how a story was made click it and come through to the website, and Robinson said 30 to 40 percent of people reach Shorthand that way, with no marketing spend behind it.
Organic Search
The rest of the people who reached Shorthand came almost entirely through organic search. Robinson acknowledged the company had done very little to optimize for search and described SEO as a major current project, including a contra deal with a specialist agency and work from an in-house data scientist.
Annual Subscription Model
Shorthand sold only annual subscriptions, with no monthly plans, and priced them on features rather than per story: Robinson said one lesson learned was not to price on a per-piece basis. The story-limited plans, which let customers create a couple of stories and move on, were a plan-design problem he said the company had sorted out by dropping them. Churn was still high at the time of the interview because story-limited annual plans sold a year earlier were churning as they came up for renewal.
Tiered Pricing Toward Higher ACV
Robinson described a push to move ACV upward with tailored export plans for customers who export stories onto their own infrastructure, which he said separates customers paying in the tens of thousands from those paying less. At the time, the top-end tailored plan started at $24,000, and Shorthand often sold those plans for a lot more, depending on the features and how many sites a customer put Shorthand on.
Zero Marketing Spend to Date
Robinson stated the company had spent nothing on marketing and grew entirely through the powered-by logo and organic search. He framed paid marketing as an untapped lever available if the company chose to accelerate growth with additional capital.
Best Quotes
“So these days, we do annual subscriptions. It's just annual subscriptions. We don't do monthlies.”
“So we've spent nothing on marketing, literally nothing. We've grown to where we are today just based on publishers coming in, creating great looking stories, putting them on their website, people reading those stories going, holy cow, how did they make this? Most of the stories have a shorthand logo at the bottom, and people click that and come through to our website. So I'd say 30, 40% of people reach us that way, and the rest is pretty much all just search.”
“We have 10 FTE. We're based all over the world. So we have a office here in New York, London. So London, The UK, Europe is kind of our main market. That's where we got started. That's where we got traction with a lot of the big publishers.”
“So the story limit... Story limited plans. Right? So offering these things where they create two stories, and that's all they need, and they move on. So I think our problem there was in plan design, and I think we've sorted that problem out now. Like we obviously don't offer those plans anymore.”
“Sorry. I was not a founder.”
“What is motivating us is that this is an awesome team to work for. We have a lot of fun. We have great customers.”
“I wish I knew what focus really was. I'd tell myself, you think you know what it is, but you really don't.”
What Happened Next
At the time of this interview in August 2018, Shorthand had just shy of 250 customers on annual subscriptions and was cash-flow positive after raising A$3.5 million from a single investor. Robinson described early-stage discussions about a potential future investment tied to reaching $2 to $3 million in ARR, but noted there was no formal offer in place. This page captures Shorthand as it stood in August 2018; visit the Shorthand company profile for current figures.
View Shorthand’s current profile and metricsFull Transcript
Chapters
- 0:00Introduction and What Shorthand Does
- 0:39Revenue Model: Annual Subscriptions Only
- 3:03Average Contract Value: $6,000 Per Year
- 3:55How Shorthand Handles Load Speed and Static Files
- 6:08Customer Count: Just Shy of 250
- 6:44Slower Growth and Churn From Story-Limited Plans
- 9:02CAC of $3,000 and Cash-Flow Positive Year
- 9:47Team of 10 Across New York, London, and Brisbane
- 10:37Growth Levers: Powered By Logo and Organic SEO
- 12:16Pricing Tiers and Moving ACV Upward
- 13:17Potential Investment and Cap Table Discussion
- 14:25Ricky Is Not the Founder: Background and Equity
- 19:21Famous Five Rapid-Fire Questions
Introduction and What Shorthand Does
Nathan Latka
00:00Hello, everyone. My guest today is Ricky Robinson. He's the CEO at Shorthand, maker of the visual storytelling platform trusted by the BBC, Business Insider, Refinery29, Honda UK, Save the Children, and hundreds of other publishers, brands, nonprofits, and universities. They make it simple for storytelling teams to create memorable stories that audiences want to share. Ricky, are you ready to take us to the top?
Ricky Robinson
00:23Absolutely. Let's do
Nathan Latka
00:25This is a... You know, scaling content creation is very difficult, especially when you start adding video elements, and it's not just, you know, blog posts anymore these days. I'm eager and excited to talk to you because I think it's a problem so many people have. So tell us what Shorthand does and how you make money. What's your revenue model?
Revenue Model: Annual Subscriptions Only
Ricky Robinson
00:39Yeah. So these days, we we do annual subscriptions. It's just annual subscriptions. We don't do monthlies. And we sort of sit in that space where, you know, prior to Shorthand coming along,
00:54news news organizations and big brands would would have an internal development team to create these sorts of stories on a on a custom basis, so case by case. So expensive, very long time frames to publishing, and shorthand kind of just comes in and makes makes that a lot easier. So, you know, we reduce time and cost by, you know, more than 10 x in a lot of cases.
Nathan Latka
01:17And how does... Walk me through how this works. So like the made up to look beautiful, sent out to die campaign by the BBC. Right? So this... As I scroll through it, I mean, a blog. It's essentially a full screen, full bleed blog post. There's other interactive kind of elements built into it. Walk me through the back end. How did you make this magic happen?
Ricky Robinson
01:33Yeah. So I mean, all the magic is really, I guess, two parts. So the editor. The editor is really magical to use. A lot of our customers say, you know, it's the best part of their day using shorthand to create stories. So we put a lot of effort into that. And then the rest of the magic is all in the browser on the front end. And I I think one thing that we do that, you know,
01:57a lot of a lot of other platforms don't, and I guess why why the likes of BBC and Business Insider are using shorthand is because we kinda make sure that all these interactions work across every device, every platform. So we do put a lot of effort into that.
Nathan Latka
02:13So how does... Give me an example of business insider. So like, what's the post they use you on?
Ricky Robinson
02:19Yeah. So business insider, they use it for commercial content. So they do sponsored content for, you know, likes of Volvo, Cartier,
02:28those sorts of brands. And that... That's a that's a fairly big use case. So news publishers wanting to offer their brand customers something special and a cut above what what they've been offered previously, but also something that they can do on a repeatable basis. Right? Yeah. So again, in the past, they've done these stories, but it's taken a lot of effort. And now they can kind of create a lot of these stories in a very quick
02:56time frame.
Nathan Latka
02:57Yep. Makes sense. Walk me through what the average price one is per year. I wanna avoid going down every customer cohort. I'm sure you have many, but on average.
Average Contract Value: $6,000 Per Year
Ricky Robinson
03:03Yeah. Absolutely. So it's 6,000 US.
Nathan Latka
03:06Got it. 6,000 per year. And and what what generally do people get for that? Is that like one piece of content per month, or how do you how do you define that?
Ricky Robinson
03:13No. So we'll we'll talk about that in a minute, but I think one of the lessons we learned was was not to offer it on a on a per piece basis, and we'll talk about why in a minute. But essentially, it's it's based on features, but the big differentiator between, you know, whether you're whether you're paying in the tens of thousands for shorthand or or less than that is whether you're exporting the story onto your own
03:38infrastructure. There's a big difference between customers who want and need that ability and customers who are happy to have their stories hosted on shorthand's infrastructure. And so there's a there's a big difference in value there.
How Shorthand Handles Load Speed and Static Files
Nathan Latka
03:55Walk me through how you're tackling something like load speed. Right? So I've tested a bunch of these sites before I did it, and the load speed was really, really bad because it's such interactive content. Right? Some of these things, I I imagine on the BBC, you're not actually hosting them. So how do you handle things like load speed?
Ricky Robinson
04:08Yeah. So I mean, load speed is an is an interesting one. I think you'll find that for the kinds of stories that these are, shorthand shorthand stories do load fast. And one of the things that
Nathan Latka
04:19If they're hosted on you and not exported.
Ricky Robinson
04:21Yeah. Well, it depends. Like, a lot of our customers do do a good job of putting that on, you know, decent infrastructure, CDN in front, all of that kind of stuff.
04:32One thing that Shorthand is that's different to some other platforms is that it's it's static files. Right? They're they're flat files. So you are loading the the the HTML, the assets, CSS, all off just a normal web server. Right? It's not being dynamically served out of a database. So that's one thing that that that is quite different to other solutions. And it's it's a big trend on the web at the moment is these static static files.
05:04Right?
Nathan Latka
05:05So when did you launch the company? What year?
Ricky Robinson
05:07So we got started... We incorporated in 2013, but there was no product until 2014.
Nathan Latka
05:13Okay. And so how did you support yourself over that time? Did you guys raise capital?
Ricky Robinson
05:16Yeah. We did. So we have an investor, well known guy in Australia called Graham Wood. So he's he's backed us. He's the only backer at the moment.
Nathan Latka
05:24How much how much they're in the beginning to give you?
Ricky Robinson
05:27Yeah. So 3,000,000 Australian.
Nathan Latka
05:29Okay. And and total raise total raise to date is how much?
Ricky Robinson
05:32That... That's it. Yeah.
Nathan Latka
05:33Oh, just the 3.
Ricky Robinson
05:34Okay. Sorry. We sorry. We we we did... We raised another 500K basically to open up shop in New York.
Nathan Latka
05:41Okay. So you raised 3,500,000 Australian dollars
Ricky Robinson
05:41Mhmm.
Nathan Latka
05:41Which is equivalent to about two point... Today, is equivalent about 2,500,000 US dollars. Yeah. Okay. Great. And just from one investor, that must be nice.
Ricky Robinson
05:53Yeah. I mean, Graham's really supportive. He's always been very interested in independent journalism, good journalism. He he funds the Guardian in Australia. So the Guardian newspaper, and he's had a bunch of other projects in this space before.
Customer Count: Just Shy of 250
Nathan Latka
06:08And over the past couple of years, what have you been able to scale to in terms of total customers using you guys?
Ricky Robinson
06:13Yeah. So we're just shy of two fifty customers at the moment.
Nathan Latka
06:16That's great. Now, if I take that two fifty times... Now you said the... That 6,000 obviously was annually, but that puts you at about a $1,500,000 run rate. Is that about accurate?
Ricky Robinson
06:25That's about accurate. Yeah.
Nathan Latka
06:26That's that's great. That's very good. And talk to me about the... Talk to about growth. So if you're at about 1.5 in ARR today, where were you about a year ago?
Ricky Robinson
06:33Interesting. Yeah. About a year ago, we were doing... Where are we? We're doing about sixty, sixty K MRR.
Nathan Latka
06:43So you've kinda doubled.
Slower Growth and Churn From Story-Limited Plans
Ricky Robinson
06:44So... Yeah. Over over this year, I think the the last Australian financial year, which kinda ends in June, it's been a little bit slower than the previous year. And I think the reason for that was these story limited plans that we offered. Right? So we we offered these plans for $3,000 and then $33,500, which gave you, like, a couple of stories. And that was great for growth. Like, they sold by the bucket load. The problem is
07:16that a lot of those customers, once they created those stories and exported them, that was it. That were done. Gone. And so churn over this last this last six months or so has not been great. It's been terrible. Like our churn is like 22%.
Nathan Latka
07:32It's like 22% logo churn per month?
Ricky Robinson
07:34Yeah. No. That's revenue churn.
Nathan Latka
07:362% revenue churn per month. That's net or gross revenue churn?
Ricky Robinson
07:40That is that is gross.
Nathan Latka
07:43Okay. So you're not adding back any upsells?
Ricky Robinson
07:47No. No. No.
Nathan Latka
07:48No. Okay. Great. And and so why do you why do you say that's horrible? That's actually... I mean, that's not horrendous.
Ricky Robinson
07:52Yeah. It's... For us, it is because we know where we were before.
Nathan Latka
07:56Where were you?
Ricky Robinson
07:56Churn was was awesome. So less than half of that.
Nathan Latka
07:59Okay. So what... Sorry. What changed?
Ricky Robinson
08:01So the story limit... Story limited plans. Right? So offering these things where they create two stories, and that's all they need, and they move on. So I think our our problem there was in plan design, And I think we we we we've sorted that problem out now. Like we obviously don't offer those plans anymore.
Nathan Latka
08:21But churns higher. Well,
Ricky Robinson
08:25churn churn is high at the moment because we've got annual plans. Right? So we sold a plan a year ago, one of these $3,000 plans, they're churning now.
Nathan Latka
08:33Oh, got it. They're they're not renewing at the new price point.
Ricky Robinson
08:36Yeah. Right.
Nathan Latka
08:36I see what you're saying.
08:37I see what you're saying.
Ricky Robinson
08:37So so that... That's been our issue. But if you remove all of those story limited plans, our curve looks a lot a lot nicer.
Nathan Latka
08:46Yeah. I mean, look, I would argue I would argue that 2% revenue churn per month on a gross basis generated by the fact that you're asking people to essentially... Who were paying $3K or now pay $6K for the same thing. That's actually not bad at all. Walk me through new customers you're onboarding. What's your CAC?
CAC of $3,000 and Cash-Flow Positive Year
Ricky Robinson
09:02Yeah. So our CAC... So it costs us 50¢ on new a r... ARR dollar.
Nathan Latka
09:10Yeah. So you spend 50¢ for that new for that new dollar of ARR.
Ricky Robinson
09:13Yep. So I guess 3... You know, it's $3,000 to bring on a new customer.
Nathan Latka
09:18Yep. Three k CAC. And so then you're getting paid back what in about six months?
Ricky Robinson
09:23Yeah. Roughly that. Yes.
Nathan Latka
09:25But it's all up... Is it all paid up front? So on a cash basis, it's instant?
Ricky Robinson
09:25Yeah. Yeah.
Nathan Latka
09:25Interesting. Yeah.
Ricky Robinson
09:30So so our cash... I mean, you know, the last Australian financial year, we we had a cash flow positive year. So it was... Yeah.
Nathan Latka
09:39And growing and growing, you said about a 100% year over year. That's healthy. Yep. Talk to me about team size. Where are how many team members and where are based?
Team of 10 Across New York, London, and Brisbane
Ricky Robinson
09:47We have 10 FTE. We're based all over the world. So we have a office here in New York, London. So London, The UK, Europe is kind of our main market. That's where we got started. That's where we got traction with a lot of the big publishers. The US is kind of just coming up and maybe gonna overtake that over the next twelve months. And then we have our development team in Australia, in Brisbane mainly, and we
10:13have a guy in Japan and another guy in Seattle. So we're kind of very distributed, very remote.
Nathan Latka
10:18That's great. And walk me through kind of in terms of what you're doing with the company today. So are you looking at raising more capital or drive growth?
Ricky Robinson
10:25We're not sure. Like we think, you know, obviously, we've we've done a bit of analysis. We know what levers we have to pull. You know, if we spend this much here, we're gonna grow by that much.
Nathan Latka
10:35Tell me about one of those levers.
Growth Levers: Powered By Logo and Organic SEO
Ricky Robinson
10:37Yeah. So we've spent nothing on marketing, literally nothing. We've grown to where we are today just based on publishers coming in, creating great looking stories, putting them on their website, people reading those stories going, holy cow, how did they make this? Most of the stories have a shorthand logo at the bottom, and people click that and come through to our website. So I'd say 30, 40% of people reach us that way, and the rest is pretty
11:03much all just search. And so we've, you know, we've done very little there to optimize that search as well. We're currently, that's a big project for us at the moment is SEO.
Nathan Latka
11:15And so how are you tackling that project? Does it does it have to do hiring SEO experts or what?
Ricky Robinson
11:19Yeah. So that... So just bringing in... We've we've done a contra deal with with an agency that kind of specializes in that. We have a data scientist on the team, very, very smart cookie.
11:35And, you know, there's just so much low hanging fruit for us in that space because we haven't done anything. So just looking at, you know, what keywords should we be putting on our homepage. Really simple. Most most startups of our size and and our our age would have done this stuff by now and we just haven't.
Nathan Latka
11:52Let let me ask you a question. So you're in a... From a price point perspective, when you start analyzing the effectiveness of a potential inside sales team or putting touch on a sale, Your price point's a very tricky one because it's high enough where someone doesn't feel comfortable putting their credit card on an online form without a phone call. But it's too low really to pay too much in terms of a commission, right, or a kickback
12:13to whoever the person is closing the sale. So how do you solve that?
Pricing Tiers and Moving ACV Upward
Ricky Robinson
12:16Yeah. So so you see... I don't know whether you've seen our pricing page, but we've just we've just put that pricing page up and we've got these export plans, which are tailored plans. The the top end tailored plan there really starts at 24 k. Right? But but we sell those for often a lot more. And that's based on, you know, the features that they get, how many sites they're putting this this shorthand on. And so we
12:46are slowly pushing that
12:50ACV up.
Nathan Latka
12:52So you got it. So you'll put touch on those accounts, but Yeah. Imagine you also have a lot of no touch sales coming in every month.
Ricky Robinson
12:58Yeah. We do. Yeah. We do.
Nathan Latka
12:58Interesting.
Ricky Robinson
12:58And and that's just just, you know, there's there's such a range of people who wanna use this tool. People who are, you know, upgrading from Squarespace
Nathan Latka
12:58Sure.
Ricky Robinson
12:58For example. They go on to a prelude plan, and and then at the top end, we've got, you know, the likes of the BBC, Honda, etcetera.
Potential Investment and Cap Table Discussion
Nathan Latka
13:17So if you did decide to raise capital, about how much would you target raising?
Ricky Robinson
13:23That's a really good question. We we... I'm... I I wouldn't wanna take too much, to be perfectly honest, but we've had offers, not offers. We're currently discussing. There's one really well known firm that is talking about a $20,000,000 investment. And that to me is like, that's gonna change our company. And we're not sure we wanna do that. Right?
Nathan Latka
13:23Hold on. Hold on. Hold on.
13:47Hold on. Investing 20... At a at a $20,000,000 valuation or putting 20,000,000 in?
Ricky Robinson
13:5320,000,000 in, which seems crazy to me. And the reason the reason that
Nathan Latka
13:53Well,
13:58they buying are they buying the whole company? What what
Ricky Robinson
14:00I they'd probably buy buy out Graham's stake.
Nathan Latka
14:04Which is what? About 30, 40%?
Ricky Robinson
14:06No. He owns... So so at the moment, he owns actually the whole company. And when when that deal... If that deal gets done, it restructures the company essentially.
Nathan Latka
14:06Wait. I'm so confused. Graham ends up with with you.
14:20Why as are a CEO taking all the risk, building this thing off, and you own no equity?
Ricky Is Not the Founder: Background and Equity
Ricky Robinson
14:25Sorry. I was not a founder.
Nathan Latka
14:27Who founded it?
Ricky Robinson
14:28I... Well, Graham did, actually. So Graham has backed a lot of these publishing projects in the past. The... You know, if, if we had our time again, you know, I, I wouldn't have structured the company like this.
Nathan Latka
14:28When did you come in then?
14:44What year?
Ricky Robinson
14:45I came in in 2015.
Nathan Latka
14:48Okay. And what happened to the start of the, like the founders?
Ricky Robinson
14:50Grandma wasn't happy with them.
Nathan Latka
14:52He fired them? What?
Ricky Robinson
14:53Essentially.
14:53Yeah. Yes. Okay.
Nathan Latka
14:54That that, by way, happens all the time. Okay. So they're they're not involved at all anymore. Now why don't they own any part of the company?
Ricky Robinson
15:01Who knows? They they they didn't take equity to begin with. I was not part of that. No idea.
Nathan Latka
15:07Okay. Interesting. So so... Okay. So Graham owns a 100% company. You're basically an employee. You have no equity, which that's a whole another conversation. I'm I'm confused why... What's what's motivating you. But maybe what's motivating you is potentially someone else buying out Graham for 20,000,000 and then giving you 10% equity or something and saying, Hey, run this, scale it and build it.
Ricky Robinson
15:24Sort of. What is motivating us is that this is an awesome team to work for. We have a lot of fun. We have great customers.
Nathan Latka
15:33Have come on. You're an entrepreneur. You're taking all the risk. I I believe what you're saying. Like that's the right answer. But you're taking all the risk. You own no equity.
Ricky Robinson
15:41Correct. Today. Today.
Nathan Latka
15:43Yeah. So what is your path to equity? It's finding a buyer who will then also say, hey, Ricky, now we bought Graham out. It gave him a great return. Now we wanna give you 10% equity and incentivize you to keep building the company.
Ricky Robinson
15:51It's gonna be something like that. Yes.
Nathan Latka
15:53Yeah. Interesting. Okay. So do you take a $20,000,000 deal or actually does Graham take a $20,000,000 deal?
Ricky Robinson
16:00I I think I think we'd we'd we'd need to consider that. It will change the way that that shorthand operates.
Nathan Latka
16:08Well, of course.
Ricky Robinson
16:08Shorthand. I mean, you know, the story so far is, you know, we've, we've kind of dug ourselves out of a hole and now we're cashflow positive and things are kind of going great. Right. And then we look at, we look at investment and we say like, do we want to change that?
Nathan Latka
16:27Well, just be clear.
16:28Let's not
16:28call it, let's not call it an investment because it's not Someone else will basically buy out. It's a sale and then a restructure of the cap table.
Ricky Robinson
16:38That that may be the way it goes down. It may not be. There there have been... Like, so there are multiple different paths to to how this could work.
Nathan Latka
16:48Okay. Well, if if if one of the paths is someone investing 20,000,000, right, and owning 10% of the company, that that gives you guys a valuation of something that I would just wanna understand how the hell you do that because 20,000,000 for buying 10%, that's like a $200,000,000 valuation on 1.5 in ARR. That's like 200 x.
Ricky Robinson
17:05Completely agree. It boggles my mind as well.
Nathan Latka
17:08But you... Just to be clear, you don't have offers for 20,000,000 to buy 10% of the company. That's not what we're talking about. We're talking about a buyout.
Ricky Robinson
17:15No. We're we're we have what we have discussed and I'll be clear. There is no offer.
Nathan Latka
17:15Yeah.
Ricky Robinson
17:15What has been discussed is that we reach something like 2 to 3,000,000 ARR.
Nathan Latka
17:15Yep.
Ricky Robinson
17:15At that point, it'll be basically a 30% cut to Graham. Right? So it will be as if Graham has owned 30% of the company in the past, and then the investor will come in by 30% of the company.
Nathan Latka
17:46Okay. So let me just play this through. You have 3,000,000... A year from now, you have... You're coming back on the show. Nathan, we hit $3,000,000 in ARR. Great. Someone came in. Graham currently owns a 100%. Someone pays 20,000,000 and buys 70%, which means Graham now owns 30%.
18:03Where are you fitting this picture?
Ricky Robinson
18:04No. No. No. No. No. No. No. So the investor will buy 30% of the company. So 30% will be Graham. 30 will be the new investor.
Nathan Latka
18:13Okay. Well, where's the other 40%?
Ricky Robinson
18:15The rest is the team.
Nathan Latka
18:18Yeah. But why... Someone has to buy that from Graham, though. Someone has to buy that from Graham though. He owns it right now.
Ricky Robinson
18:23Yeah. Absolutely.
Nathan Latka
18:25So the company's gonna pay him for that extra 40% to then make it basically an employee option pool?
Ricky Robinson
18:32I'm not sure what you mean.
Nathan Latka
18:33Graham currently has a 100%. For him to get down to 30%, someone has to buy 70% from him. You're saying an investor is gonna take 30. Well, there's still 40% unaccounted for. So how does
Ricky Robinson
18:33I'm
18:44just saying it'll it'll be a complete restructure of the cap table.
Nathan Latka
18:48Yes. But So it will be though generated by an investor coming in and essentially buying 60% from Graham.
18:54They'll keep 30% as the investor and then incentivize you with the other 30%.
Ricky Robinson
19:00That's the only way that can that's that's how that would free up.
Nathan Latka
19:03I just wanna make sure I'm understanding you correctly.
Ricky Robinson
19:06Yeah.
Nathan Latka
19:06Okay interesting.
19:07I'm just confused why you why not do demand that like say this now right like hey we're building a company. I'm driving growth. I'd like 10%. Give me... Put me on about
Ricky Robinson
19:16The next board meeting is gonna be interesting.
Nathan Latka
19:16When is it?
Ricky Robinson
19:16That's that's on the table. That's on September 12.
Famous Five Rapid-Fire Questions
Nathan Latka
19:21Okay. Good. We're gonna have you on on September 13. Alright, Ricky. Let's wrap up with the famous five. Number one. What's your favorite business book?
Ricky Robinson
19:29So favorite one, I... Probably Insanely Simple by Ken Segall.
Nathan Latka
19:34Okay. Number two, is there a CEO you're following or studying right now?
Ricky Robinson
19:37Not really. No.
Nathan Latka
19:38Number three, what's your favorite online tool for building your business?
Ricky Robinson
19:42I'd have to say either Front or Zoom.
Nathan Latka
19:44Front or Zoom. Yeah. Both great companies. Number four, how many hours of sleep do get every night?
Ricky Robinson
19:50I feel like this question is like a race to the bottom competition for for CEOs and founders. Not not enough. Nowhere near enough.
Nathan Latka
19:57How many hours?
Ricky Robinson
19:58Five.
Nathan Latka
19:59Five. Okay. By the way, I if someone tells me like they have a great company, but they only sleep four hours, I immediately ignore the interview and take none of their advice. If they say they have a great company, or okay company, and they're sleeping ten hours, I'm way more interested in that advice.
Ricky Robinson
20:11Yeah. Yeah. That Absolutely healthy. I think it's a problem in startups at the moment.
Nathan Latka
20:16Yeah. And what's your situation? Married, single kids?
Ricky Robinson
20:19Married, two kids, 11 and eight.
Nathan Latka
20:22And how old are you?
Ricky Robinson
20:24I am 39.
Nathan Latka
20:26Okay. Last question. What do wish your 20 year old self knew?
Ricky Robinson
20:31I've... I wish I knew what focus really was. I'd tell myself, you think you know what it is, but you really don't.
Nathan Latka
20:36Guys, there you have it. He would have... He had tried to have a better understanding of what focus meant and what it was. Joined Shorthand, but he is not the founder, but joined Shorthand back in 2016. That was three years after launch. The early investors who owned about a 100% of the company basically kicked out the first two founders. He's now running it, driving great growth, 100% year over year growth from about $60K in monthly recurring
20:56revenue in August 2017 up to about a $125K per month today. That's from 250 customers that pay on average $500 a month, but those are all annual plans. So about $6K per year. Again, those are usually paid all upfront. 2,500,000 raised all in. That's US dollars. 2% revenue churn per month. That's on a gross basis, spending about 50¢ for a new dollar of ARR or said differently, they're spending about $3,000 to acquire a new $6,000 customer
21:21with a six month payback period. Team of 10 people based in remote locations, but mainly New York City and London. Thank you so much, Ricky, for taking us to the top.
Ricky Robinson
21:31Thank you very much.