How Simpli CEO Frost Prioleau grew to $100M revenue and 400 customers in 2020.

hello everyone my guest today is frost or pre low he's the co-founder and CEO of a company called simplified he's an experienced online advertising executive specializing in targeting optimization and technology primo focuses on corporate strategy driving simplifies growth and ensuring customer satisfaction frost are you ready to take us to the top sure I am ready let's go all right tell us about simplify what do you guys do and how do you make money so simplified is brings programmatic advertising to local advertisers so if you know about programmatic advertising it's taking over just about every form of digital advertising mostly investment in today has been focused on large national brands that are good buy through some of the big six agencies we said we're gonna go the other way we're gonna be the guys who bring programmatic to local and so and that means we have to be very good at powering high volumes of smaller localized campaigns so for the last year the last months right we did a hundred thousand campaigns about half of which spent less than $100 a day there sorry hundred dollars a month and the other half spending all the ways up to like $1,000 a minute interesting and is your business model a pure place SAS model or is it a percent of ad spend model we're a percent of ad spend model but we measure ourselves as a SAS business and we have because some SAS investors we've had and to actually have metrics that are favorable to many SAS businesses what does that mean that means like our net recurring revenue so if we didn't sell a new customer all year we'd still grow 30% in a year because our existing customers come back he's not another way of saying retreat and the revenue retention annually is 130 percent that's correct that's great where's most the expansion revenue coming from typically from new products that were rolling out so programmatic started in display desktop display advertising and moves to mobile we have a very strong mobile solution and now a lot of the growth continues in mobile but also in over-the-top and connected TV video advertising interesting okay you mentioned investors how much have you raised well over we sold about a year ago to GPCR which is a private equity firm up in Chicago prior to that we had raised about ten million dollars okay good so not a ton and we're you one of the initial guys who are the initial founder that's correct myself and our CTO Paul Harrison were both founders and both still active in business well so you frost you know what they say right about acquisitions how do you know once you make a guy rich how do you motivate him why are you so why are you still there well they were very clever Jiki CR wanted both B and told to remain on and so actually although they they really acquired the company both of us like the business want to keep working here and we actually reinvested almost half of our proceeds back in the business same year they made you buy it made you buy back equity huh well I wouldn't say made we were honored to do so actually actually it was that was a favorable part of the terms that actually we could buy back equity on there on the same terms they bought because hey otherwise what would I do I cash it out I'd pay a lot of taxes and I'd put it in D built somewhere so I'm happier having it simplify stock yep interesting okay and how many customers are on the platform today so we have about 400 customers that are billing customers we have about 30,000 advertisers but many of our customers are media companies who have thousands of advertisers working through them yep and and I want to put this on a timeline before I get too deep into so when did you launch the company what year 2010 2010 okay good and do you remember how long it took you to hit a million bucks in revenue that would have been in 2011 okay and how much until you had 10 million ah gosh that would have been I don't remember those I would have guessed three years or so three okay so maybe like 2013 something don't worry that would be my guess okay and then are you comfortable sharing before you sold the GTC our what was your trailing 12 months revenue so we don't share that but I'll say we're about 250 people now we're growing at 40-plus percent still and we've been profitable for last three years okay forty percent in terms of your head count or your revenue year-over-year revenue forty percent year-over-year revenue growth and so headcount a little less than that thankfully yeah I was gonna say when I hear headcount I just hear expenses tell me about revenue growth right 40 percent that's pretty good and he said your cash flow positive yes we have been for the last three years one of the reasons GKC are actually looked in this space for many years for a company to buy and one of the things they liked about us was both our profitability our growth and then our network our SAS like metrics yep yep I was about to say you know private equity firms you know they have a tough time looking at top-line revenue for if they want to see a bit de margins so if you were cashflow positive it makes sense why that works they absolutely re bedell buyers yep now when the acquisition happened I believe my research team said they just bought a stake not the whole thing is that accurate yeah actually what are the headlines came out saying they had a majority investment but accurately they actually did buy the whole thing and not Paul Paul Harrison and myself bought back in yeah correct yeah that's it's nice a clean way too easy way to manage that cap table interesting okay so so I'm curious a lot of the add to companies that have on they are moving from a port rent you know a percentage of transaction model to trying to you know sell the add text software solution right a self-serve SAS platform and some are doing really well some are not doing really well do you have any true kind of SAS revenue or is it truly just a percentage of revenue and that revenue spend scales over time so it looks like SAS revenue so today we are truly percent we do not have any pure SAS revenue we have been completely transparent from day one so all our customers know when they spend a dollar exactly how much goes to our platform fee if they ask for services how much because that and how much goes to media and data so we're totally transparent on that side but we and we are we're working on if you can bait out some analytics products that could be SAS trap pure SAS revenue but today most of you know really that's because the way the buyers want to buy they don't want to see you don't want to pay us platform fee plus media they want to buy you know one one all in price and that's the way as you know much of the industry is evolved that's right for us break down the economic storm real quick let's pull that dollar example for and I pay you a dollar what do you keep and what gets spent typic on average no it probably ranges wildly but on average yeah so typically so platform fees depending on depending on depending on the size of the customer typically go from high single digits to to the mid-teens as far as the platform fee we offer well we have lots of customers using our platform on a self-service basis we also offer a managed service and so for those who want to use our managed service we charge another 10% of spend which is actually considered these customers have thousands of campaign spending one hundred dollars a month is actually I think fairly inexpensive and then the balance and you call that sorry to fund some management fee managed services fee and you're really helping with creative they're mostly we're helping them traffic campaign so they're having they want us to set up you know a hundred campaigns for different locations I see franchises set up geofences pull retargeting things like all that correct and so those are the two buckets and then the balance goes to media and data that's great after they're rated so let me just let me break the down I want to make sure I got it captured correctly on a dollar spend I put through you on average call it nine cents maybe up to mid-teens 16 or 17 cents would go towards your platform fee if I want your help and say frost help me with my four hundred you know car dealerships all spread out give me give me ads for all of them you might say okay there's another ten cents on the dollar going towards the managed services so worst case is you got about 26 cents on that dollar going towards the platform and managed services the rest is going towards the actual ad spend correct both data and media so on that side got it interesting okay great healthy growth launched 2010 while teams I say is 250 people as everyone based in Texas or they spread out we got about 200 in Texas and there we got about 50 people as spread around the country mostly sales and all the normal places that you'd guess but as some of some developers and other service people as well and generally speaking over the past 12 months how much just pure ad volume was put in processed through your platform so that's our spin we don't so we don't disclose that either but we continue to see that that grow especially as I mentioned on the mobile and the OTT and CTV side can you give me a really big range that allows you to be you know you know vague enough where it's not hurting you competitively uh yeah I mean you know well north of in the hundreds of millions hundreds of let me ask you a different question when do you break a billion it will be this year next year what do you think we would grow a lot if it was next year it'll be a few years down ok but but within striking distance right I can see in your eyes it thought or it's on our map that a roadmap will have a big celebration that's good ok so a couple hundred million for your platform and so you mentioned you've got about 400 of those customers so I mean is it sounds like most these folks are putting called maybe what a million through your platform something like that a year it's it's very so our customers break down into two two types of customers one is media companies who are out selling to local SMBs and local local advertisers and so we power the programmatic offering of cable companies TV companies newspapers and because they have a sales person now calling say on the local auto dealer and they're selling up a bundle of programmatic search social and they're owned and operated inventory alright that's about half our business and the other half our business is multi location brands so these are the two types of large local advertisers so if you think of quick service restaurants real estate companies insurance agencies where they have hundreds or thousands of offices we go in and customize campaigns around each one of those offices yep well what I'll just be transparent you what I'm actually trying to do is to back into your what what your revenue is after media spend right so so so I'll do a back the napkin here right if you're doing a couple hundred million right now and ad spend call it 300 million and we just talked about you know called a ten cent platform fee right so there's there's 30 million right there and then if they I think you said managed services I don't know what percent of them use managed services but there's potentially another 30 million there so I mean is it fair to say I won't get too specific here but is it fair to say you guys are doing north of 25 million at this point per year well look I would give you more credit but I don't want to be too specific you can give me a better number if you want that you're doing great okay fair enough we'll leave it at that where's your future growth going to come from Drive more ads keep 130 percent net revenue retention in early going or is it adding new product lines so a lot of that net revenues retention comes from product lines right so we grow along or along two ways one by we're a platform we started with desktop we had a very strong mobile solution the next big leg of growth is coming from again CTV and OTT spanned as TV advertising comes over so that's how we're selling more to our existing customers by extending our product line and then we're a continue to add more media companies who have local TV cable newspapers who have local sales forces we've powered their programmatic offering then on the flip side we're growing very very quickly with multi location brand so brands with hundreds or thousands of locations who are looking to localize campaigns both the targeting and the messaging around their each of their stores there's a lot a lot of pressure right now just because of how much ads been is done annually across the globe you trillions of dollars to remove folks like you the middlemen people see opportunity there and so a lot of people said well hey block you know maybe blockchain can solve this people like you would say well no we add a real value we make the dollar go further with our platform fees how do you avoid just getting undercut by someone else saying okay we're going to charge five cents instead of ten cents for our platform yeah so we've got to add value so that's one thing about being completely transparent as our customers every day can say hey is is simplify earning their fee that they're charging me every day and can so what else do this better and so as you see from our net recurring revenue or net revenue retention they're voting with their with their business that we are doing well because they're adding more and more spend through our platform but yeah we've got to be competitive we've got to add value we've got to be the most efficient way for them to buy media and especially when you look at the types of campaigns that we're running which are high volumes of small campaigns there's a lot of automation that has to go into there think about writing a hundred thousand campaigns like we did last month 50,000 of those were spending less than $4 a day so there's a lot of automation that has to go into getting those campaigns up live optimizing reporting on them and and delivering the kind of performance they expect last question here frost before we wrap up with the famous sabe no I saved the best for last to prepare yourself hold on hold on your armchair here you know a lot of companies when they sell their private equity firm especially if the founders stay and are still involved and especially if they are still in the cap table it's not uncommon to see them actually do a take private or sorry not take probably but actually buy back their companies from the private equity firm any plans from you and your co-founder to do that with GTC are no none at all GTR they're they're great partners and and we're sitting there alongside them we're happy and we just want to grow the investment and keep growing the company alright GT CR if you're listening you got to give this guy raise I mean he's saying all the right things come on double double the salary and frost I want 10% if they double it okay that's my platform fee all right frost let's wrap up with the famous five number one what's your favorite business book right now it's bad blood that's a good one number two is there a CEO you're following or studying right now well I was following Elon Musk but I may need a new mentor that's right number three what's your favorite online tool for building your business black totally totally been fantastic for our business number four how many hours of sleep are you getting every night between seven and eight go for I try for eight and I get around seven that's good in what's your situation married single kiddos married for 30-something years I got three kids Wow congratulations in how old are you Wow the ripe old age of 57 57 last question frost what he was your twenty year old self knew you know I wish I knew from a business side the importance of business models yeah and so just how important the business if you're going to start a business really look at it's a business model and how much how important it is to both have recurring revenue and then secondly just then build a company with a great culture which has been really fun thing about simplify guys focus on the business models simplify was taken private by GT CR back in August September of 2017 again playing you know aggressively in the ad tech space they're processing hundreds of millions of dollars of add something to their platform over the past 12 months and the economics look good it must be working net revenue or attention annually over a hundred and thirty percent their team of 250 folks deserve a lot of credit in Texas and other remote locations founded in 2010 passed a million bucks in 2011 ten million bucks around the 2013 time frame today you know call it doing well north of 2530 million bucks in revenue each year through their platform fees management fees across about four hundred paying customers frost thank you so much for taking us to the top you bet thank you