How Simpli.fi Reached 400 Customers and 40% Annual Revenue Growth Bringing Programmatic Advertising to Local Markets (Interview with Co-Founder and CEO Frost Prioleau)

Introduction and Guest Background

Nathan Latka

00:01Hello everyone. My guest today is Frost Prioleau. He's the co founder and CEO of a company called Simpli.fi. He's an experienced online advertising executive specializing in targeting optimization and technology. Prioleau focuses on corporate strategy, driving Simpli.fi's growth, and ensure customer satisfaction. Frost, are you ready to take us to the top?

Frost Prioleau

00:19Sure am ready. Let's go.

What Simpli.fi Does and How It Makes Money

Nathan Latka

00:21All right. Tell us about Simpli.fi. What do you guys do and how do you make money?

Frost Prioleau

00:26So Simpli.fi is brings programmatic advertising to local advertisers. Advertisers. So if you know about programmatic advertising, it's taking over just about every form of digital advertising. Most of the investment in it today has been focused on large national brands that are that buy through some of the big six agencies. We said, we're going to go the other way. We're going be the guys who bring programmatic to local. And so, and that means we have to be

00:51very good at powering high volumes of smaller localized campaigns. So for the last year, the last month, sorry, we did a 100,000 campaigns, about half of which spent less than a $100 a day or sorry, a $100 a month. And the other half spending all the way up to like a thousand dollars a minute.

Business Model: Percent of Ad Spend vs. SaaS

Nathan Latka

01:07Interesting. And is your business model a pure play SaaS model or is it a percent of ad spend model?

Frost Prioleau

01:14We're a percent of ad spend model, but we measure ourselves as a SaaS business and we have, because some SaaS investors we've had. And so actually we have metrics that are favorable to many SaaS businesses.

Nathan Latka

01:27What does that mean?

Frost Prioleau

01:29That 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.

Nathan Latka

01:29Is that another way of saying net

01:38revenue retention annually is 130%?

Frost Prioleau

01:41That's correct.

Nathan Latka

01:42That's great. Where's most of the expansion revenue coming from?

Frost Prioleau

01:46Typically from new products that we're rolling out. So programmatic started in display, desktop display advertising and moved 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.

Nathan Latka

02:02Interesting. Okay. You mentioned investors, how much have you raised?

Frost Prioleau

02:06Well, over we sold about a year ago to GTCR, which is a private equity firm up in Chicago. Prior to that, we'd raised about $10,000,000

Nathan Latka

02:16Okay, good. So, so not a ton in. Were you one of the initial guys who were the initial founder?

Frost Prioleau

02:20That's correct. Myself and our CTO, Paul Harrison, we're both founders and both still active in the business.

Nathan Latka

02:26Well, you know what they say, right, about acquisitions?

02:30I don't know. Once you make a guy rich, how do you motivate him? Are you still why are you still there?

Frost Prioleau

02:37Well, they were very clever. GTCR wanted both, me and, Paul to remain on. And so actually, although they, they really acquired the company, both of us, liked the business, wanted to keep working here. And we actually reinvested almost half of our proceeds back in the business.

Nathan Latka

02:37They they

02:55made you buy, they made you buy back equity,

Frost Prioleau

02:55Well,

02:59I wouldn't say made, we were honored to do so. Right, Nathan. But, no, actually, actually it was, that was a favorable part of the terms that actually we could buy back equity on theirs, on the same terms they bought because, Hey, otherwise what would I do? I'd cash it out. I'd pay a lot of taxes and I'd put it in T-bills somewhere. So I'm happier having it Simpli.fi stock.

Customer Count and Advertiser Base

Nathan Latka

03:19Yep. Interesting. Okay. And how many customers are on the platform today?

Frost Prioleau

03:23So 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.

Nathan Latka

03:35Yep. And and I wanna put this on a timeline before I get too deep into this. So when did you launch the company? What year?

Frost Prioleau

03:412010.

Nathan Latka

03:422010. Okay. Good. And do you remember how long it took you to hit a million bucks in revenue?

Frost Prioleau

03:46That would have been in 2011.

Nathan Latka

03:48Okay. And how much until you had 10,000,000?

Frost Prioleau

03:52Gosh. That would have been... Don't remember those. I would have guessed three years or so.

Nathan Latka

03:57Three. Okay. So maybe like 2013 something?

Frost Prioleau

04:00Somewhere in there would be my guess.

Nathan Latka

04:02Okay. And then are you comfortable sharing before you sold to GTCR? What was your trailing twelve months revenue?

Revenue Growth, Headcount, and Profitability

Frost Prioleau

04:08So we don't share that, but I'll say we're about two fifty people now. We're growing at 40 plus percent still, and we've been profitable for the last three years.

Nathan Latka

04:16Okay. 40% in terms of your headcount or your revenue year over year?

Frost Prioleau

04:20Revenue.

Nathan Latka

04:2040% year over year revenue growth.

Frost Prioleau

04:22Headcount a little less than that, thankfully.

Nathan Latka

04:25Yeah. Was about to say, when I hear headcount, I just hear expenses. Tell me about revenue growth, right? 40%. That's pretty good. And you said you're cashflow positive?

Frost Prioleau

04:33Yes, we have been for the last three years. One of the reasons GTCR 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, growth, and then our network, our SaaS-like metrics.

Nathan Latka

04:46Yep. Yep. I was about to say, you know, private equity firms, you know, they have a tough time looking at top line revenue growth. They want to see EBITDA margins. So if you're cash flow positive, it makes sense why that works.

Frost Prioleau

04:57They absolutely are EBITDA buyers.

Nathan Latka

04:59Yep. Now when the acquisition happened, I believe based on my research team said they just bought a stake, not the whole thing. Is that accurate?

Frost Prioleau

05:08Actually, one of the headlines came out saying they had a majority investment, but accurately, they actually did buy the whole thing.

Nathan Latka

05:14And then you bought back some.

Frost Prioleau

05:15Paul Harrison and myself bought back in. Yeah.

Nathan Latka

05:18Correct. Yeah. That's that's a nice, a clean way, easy way to manage that cap table. Interesting. Okay. So I'm curious, a lot of the ad tech companies I have on, they are moving from a per trend, a percent of transaction model to trying to, you know, sell the ad tech software solution, right? A self serve SaaS platform. And some are doing really well. Some are not doing really well. Do you have any true kind of SaaS

05:43revenue or is it truly just a percentage of revenue and that revenue spend scales over time? So it looks like SaaS revenue.

Revenue Model Transparency and Pure SaaS Plans

Frost Prioleau

05:50So today we are truly percent. We do not have any pure SaaS 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 goes that and how much goes to media and data. So we're totally transparent on that side, but we, and we are, we are working on it actually in beta on some analytics

06:13products that could be SaaS rev, pure SaaS revenue. But today, most of, you know, really that's because the way the buyers want to buy, they don't want to, agencies don't want to pay us a 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.

Nathan Latka

06:30That's right for us. Break down the economics for me real quick. Let's pull that dollar example forward. I pay you a dollar. What do you keep in? What gets spent on average? I know it probably ranges wildly, but on average.

Platform Fee and Managed Services Economics

Frost Prioleau

06:40Yeah. So typically, so platform fees, on, depending on, depending on the size of the customer, typically go from high single digits to, to the, to the mid teens, as far as the platform fee, we offer, while 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

07:06thousands of campaigns spending a $100 a month. It's actually, I think fairly inexpensive. And then the balance.

Nathan Latka

07:12And you call that, sorry, they call that the management fee?

Frost Prioleau

07:15Managed services fee.

Nathan Latka

07:17And you're like helping with creative there?

Frost Prioleau

07:20Mostly we're helping them traffic campaigns. So they're having, they want us to set up, you know, a 100 campaigns for different locations of, franchises, set up geo fences, pull reports,

Nathan Latka

07:32all that.

Frost Prioleau

07:33Correct. And so those are the two buckets and then the balance goes to media and data.

Nathan Latka

07:38That's great.

Frost Prioleau

07:39After those two.

Nathan Latka

07:40So let me just, let me break that down. I wanna make sure I got it captured correctly on a dollar spend I put through you, on average, call it 9¢, maybe up to mid teens, 16 or 17¢ would go towards your platform fee. If I want your help and say, Frost, help me with my 400, you know, car dealerships all spread out. Give me give me ads for all of them. You might say, okay. There's another

07:5810¢ on the dollar going towards the managed services. So worst case is you got about 26¢ on that dollar going towards the platform and managed services. The rest is going towards the actual ad spend.

Frost Prioleau

08:10Correct. Both data and media. So on that side.

Nathan Latka

08:13Got it. Interesting. Okay. Great. Healthy growth launch twenty ten teams, I say is two fifty people. Is everyone based in Texas or are they spread out?

Frost Prioleau

08:22Oh, we've got about 200 in Texas and then we've about 50 people spread around the country, mostly sales and all the normal places that you'd guess. But, some developers and other service people as well.

Ad Spend Volume and Path to $1 Billion

Nathan Latka

08:34And generally speaking, over the past twelve months, how much just pure ad volume was put then processed through your platform?

Frost Prioleau

08:41So that's our spend. We don't disclose that either, but we continue to see that grow, especially as I mentioned on the mobile and the OTT and CTV side.

Nathan Latka

08:50Can you give me a really big range that allows you to be vague enough where it's not hurting you competitively?

Frost Prioleau

08:59I mean, well north of... In the hundreds of millions, let me put it that way.

Nathan Latka

09:04Hundreds 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?

Frost Prioleau

09:10We would grow a lot if it was next year. It'll be a few years down the road.

Nathan Latka

09:13Okay, but within striking distance, right? I can see it in your eyes.

Frost Prioleau

09:16It's on our map. On our roadmap, we'll have a big celebration.

Nathan Latka

09:20That's good, okay. So a couple 100,000,000 through your platform. And so you mentioned you've got 400 of those customers. So, I mean, is it, it sounds like most of these folks are putting call it maybe what a million through your platform, something like that a year?

Customer Segments: Media Companies and Multi-Location Brands

Frost Prioleau

09:33It's it's, it varies. So our customers break down into two types of customers. One is media companies who are out selling to local SMBs and local advertisers. And so we power the programmatic offering of cable companies, TV companies, newspapers, and cause 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 their owned and operated inventory, right? That's about half our business. And the

10:00other half of 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.

Nathan Latka

10:17Yep. Well, what I'll just be transparent with 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 of the napkin here. If you're doing a couple 100,000,000 right now in ad spend, call it 300,000,000. And we just talked about, you know, call it a 10¢ platform fee. Right? So there's, there's 30,000,000 right there. And then if they, I think

10:37you said managed services, I don't know what percent of them use managed services, but there's potentially another 30,000,000 there. So I mean, fair to say, won't get too specific here, but is it fair to say you guys are doing north of 25,000,000 at this point per year?

Frost Prioleau

10:48Well, well north of that.

Nathan Latka

10:49Yeah. 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.

Frost Prioleau

10:55You're doing great math. You're a mathematician.

Nathan Latka

10:58Doing great. Enough. We'll leave it at that. Where's your future growth going to come from? Drive more ad spend, keep that 130% net revenue retention nearly going, or is it adding new product lines?

Future Growth Strategy: New Products and Customer Expansion

Frost Prioleau

11:09So a lot of that net revenue retention comes from product lines, right? So we grow along two ways. One by, we're, we're a platform. We started with a desktop. We had a very strong mobile solution. The next big leg, of growth is coming from again, CTV and OTT spend 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 continuing to add more media companies

11:35who have local TV, cable, newspapers who have local sales forces. We power their programmatic offering. Then on the flip side, we're growing very, very quickly with multi location brands. 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.

Nathan Latka

11:55There's a lot, a lot of pressure right now. Just because of how much ad spend is on annually across the globe, know, trillions of dollars to remove folks like the middlemen. People see opportunity there. And so a lot of people have said, well, 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

12:14getting undercut by someone else saying, okay, we're gonna charge 5¢ instead of 10¢ for our platform.

Competing on Value and Transparency

Frost Prioleau

12:20Yeah. So we've got to add value. So that's the one thing about being completely transparent is our customers every day can say, Hey, is Simpli.fi earning their fee that they're charging me every day. And could someone 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,

12:42we've, 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. When you think about running a 100,000 campaigns like we did last month, 50,000 of those were spending less than $4 a day. So there's a

13:04lot of automation that has to go into getting those campaigns up live, optimizing, reporting on them and delivering the kind of performance that they expect.

Staying with GTCR: No Plans to Buy the Company Back

Nathan Latka

13:13Last question here, Frost, before we wrap up with the famous five. You know I saved the best for last, so prepare yourself. Hold on hold on to 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 on the cap table, it's not uncommon to see them actually do a take private, or sorry, not take private, but

13:32actually buy back their companies from the private equity firm. Any plans from you and your co founder to do that with GTCR?

Frost Prioleau

13:39No, none at all. GTCR they're great partners and, and we're, we're sitting there alongside them. We're happy and we just want to grow the investment and keep growing the company.

Nathan Latka

13:48All right. GTCR, if you're listening, you got to give this guy a raise. Mean, he's saying all the right things. Come on, double, double a salary and Frost. I want 10% if they double it. Okay.

Frost Prioleau

13:56I'll let you know.

Famous Five

Nathan Latka

13:58That's my platform fee. All right, Frost. Let's wrap up with the famous five. Number one, what's your favorite business book?

Frost Prioleau

14:05Right now, it's Bad Blood.

Nathan Latka

14:07That's a good one.

14:08Number two, is there a CEO you're following or studying right now?

Frost Prioleau

14:11Well, I was following Elon Musk, but I may need a new mentor here. Tweeting patterns recently.

Nathan Latka

14:17That's right.

14:18Number three, what's your favorite online tool for building your business?

Frost Prioleau

14:21Slack. Totally been fantastic for our business.

Nathan Latka

14:25Number four, how many hours of sleep are you getting every night?

Frost Prioleau

14:28Between seven and eight. Go for... I try for eight and I get around seven.

Nathan Latka

14:31That's good. And what's your situation? Married, single, kiddos?

Frost Prioleau

14:35Married for thirty something years. I got three kids.

Nathan Latka

14:38Wow. Congratulations. And how old are you?

Frost Prioleau

14:40Wow. I'm, the ripe old age of 57.

Nathan Latka

14:4357.

14:44Last question, Frost. What do wish your 20 year old self knew?

Advice to Younger Self: Business Models and Culture

Frost Prioleau

14:48You know, I wish I knew from a business side, the importance of business models. 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 to build a company with a great culture, which has been really fun thing about Simpli.fi.

Nathan Latka

15:08Guys, focus on the business model. Simpli.fi was taken private by GTCR back in August, September 2017. Again, playing, you know, aggressively in the ad tech space. They're processing hundreds of millions of dollars of ad spend through their platform over the past twelve months, and the economics look good. It must be working. Net revenue retention annually over a 130%. Their team of 250 folks deserve a lot of credit based in Texas and other remote locations. Founded in

15:342010, passed a million bucks in 2011, $10,000,000 around the 2013 time frame. Today, you know, call it doing well north of $25,000,000 to $30,000,000 bucks in revenue each year through their platform fees, management fees across about 400 paying customers. Frost, thank you so much for taking us to the top.

Frost Prioleau

15:51You bet. Thanks, Nathan.