How Sirqul CEO Robert Frederick grew to $3.6M revenue and 15 customers in 2018.

hello everyone my guest today is robert frederick he's the founder and ceo of a company called circle and has been focused on connected communities of devices people and businesses back since 1993. he was inspired by the balanced future potential of smart connected devices and leveraged this passion to attend mit to work on projects in the mit media lab and to join one of the first startups focused on standards that would be later called bluetooth in the late 90s the startups licensed product devicetalk.com was a central server running intelligent agents that used event-based logic to complete actions on behalf of its users via simple commands and conditional triggers all right robert are you ready to take us to the top oh yeah sure good all right tell us tell us about obviously impressive background tell us about your current venture what is circle and how do you make money oh well uh circle is a middleware solution it's a platform a sas platform if you know what that means and we license our technology we license uh templates that leverage that technology uh across multiple verticals uh automotive smart buildings uh retail uh healthcare and uh of course developer services like sdks and apis so that others can actually benefit and uh generate their own uh solutions on top and your pureplace sas or is there a pay as you go a professional conserva service component actually we we're one of the few that has uh our license pay-as-you-go as well as we have hardware components that people purchase and license uh and or lease from us uh over the course of multiple years so uh we we tend to be in multiple sort of areas not just a single you know uh particularly robert if you were to break down the revenue streams is caught north of 80 percent coming from sas or is it more diverse than that it's more split up more so uh when it comes to revenue it's a combination of uh sas as well as so what's the hardware i'm curious what the split is oh it's it's probably around 70 30. okay um when it comes to software uh to 30 percent harder um if that makes sense it does make sense there's a lot of companies you know era which is kind of you know a wi-fi inside the house there's a lot of companies you know purple wi-fi which there's a hardware component they have to sell them that locks in the subscription fee are using the same economics in other words the hardware is really an important piece for retention well it's it's kind of different um can i uh sort of explain a little bit about what the hardware does yeah of course back so we actually have patented hardware with multiple radios inside of it and those radios when you place the devices in in the right configuration around a room or a space hallways whatever a stadium a hotel a casino a hospital you name it a retail store it can actually determine down to i call it show or we call it shoulder to shoulder accuracy of where everyone in that particular building is located or where the devices are in that building and then we historically can show and in real time where someone's going where someone's dwelling let's say like the they're staying at the in a line at the grocery store so go open up another point of sale there i call it the uh i guess you could call it a big box retailer problem where you know someone's roving roaming around the store looking for staff well our system notifies staff in real time where to go got it i'm looking at your website as we're chatting here you've you've taken this technology and it sounds like you have many different use cases one of them is you know called a casino in vegas right and and or maybe watching flows inside a grocery store or even cars and smart mapping right how do you how do you how do you pick a focus or can you do all these things at once with the technology and is that the right business strategy so one of the things that you kind of missed or uh on the background which is kind of fun uh is i actually was at mit i did have a startup that startup was acquired by amazon um devicetalk.com uh became uh amazon anywhere amazon anywhere had a mission and that missions focus or the focus of that mission was make it possible for anything anyone anywhere at any time on any device to be able to access information uh from amazon services that turned into uh multiple different groups but the one that i'm responsible for and the one where you can you know look me up and what i'm known for is amazon web services so uh talk about a sas solution and coming up with the strategy for uh one of the most successful sas uh offerings uh out there um i was on the original team i'm taking that same concepts those same uh capabilities and um we're getting developers to adopt uh customers startups fortune 500s fortune 100s to adopt our technology across many different verticals just like we had adoption within the first few years of aws does that make sense of course it makes sense but i would argue also i mean did aws have a hardware component that made up 30 of the revenue no they did not yes i mean you certainly learned a lot doing that it's a very successful sas company but i mean what you're doing now you're leveraging totally new tech that you you know maybe from mit right i mean so yeah so look i mean there are the kindles and there are the uh echoes and there are the fire tvs and uh and you are talking to someone who anticipated that actually happening uh so in our in as an argument uh and in defense yeah basically robert sorry i'm not i'm not trying to disqualify everything you've done what i'm trying to do is focus on the last 10 minutes kind of where i drill deep on right and i want to focus on circle so so for someone listening right now i look i think i get it because i've read their website in my research and put it together but for someone listening right now when they think about what circle does how should they think about how it impacts them when they're in the sands in vegas sure no problem so what we would be able to do is to give uh using a little bit of ai a little bit of machine learning uh the devices are uh basically our toe in the door they're the ones that are sending the data into the uh the back end of the of the system of the services is that locked in from the consumer or you do that automatically we we do that without even having uh a need to opt in it's sort of like uh radio surveillance yeah you know what i mean like um that's why our system is unique um because you're on the tech but it's like it's radio waves or something like that right yes exactly it's radio waves are leaking from your device in your pocket and we're able to detect that we don't know that it's you yep but we know that there's someone standing there does that make sense or the phone's like resting on a table at the blackjack table it could be the uh the earbuds that are in your ear it doesn't have to be the phone right so the idea or a badge or um your uh your key card whatever it is that's leaky and then we fingerprint that device and then we use that information in real time uh to create triggers and notifications to staff to build reports to uh generate uh data that would allow our customers to enhance and create these really engaging experiences does that make sense it does robert let me pull that forward one degree and then i want to move back to more of your story here so if you capture my leaky iphone when i'm sitting at the blackjack table at the sands and you know that you've been capturing that leaky signal for over two and a half hours you know i'm potentially pretty addicted to that blackjack table and that you should have the waitress come give me another rum and coke because i'm gonna be there they'll keep me there another two and a half hours that kind of perfect okay good am i higher i'm hired you are you're you're more technical than you think on a on a business point of view um now apply that to a stadium now apply that to a hospital you know like someone hasn't moved for a period of time um and you actually need to trigger someone to go check on them yep uh apply that to you know all of these different use cases and uh to go back to the circle side you know by being able to have the back end capability to do this analysis to do these predictions to create these customizations and these really engaging experiences then the different devices that are being built both by our company and other companies can be installed into a vehicle they could be installed into a home they could be installed into a condo or into a stadium an arena or a a big box retailer does that make sense it does let me show i think we now have a great idea example of kind of what the tech does let's shift real quick to get in the business history so starting first i believe you're very much in the enterprise space but i want to confirm that what's the average customer paying you per month i'm guessing it's thousands if not hundreds of thousands yeah uh it depends on uh the average customer can be anywhere from tens of thousands a month to we've had uh hundreds of thousands as well okay and why would someone pay 20 grand versus 100 grand it's like number of captured leaky devices per month or what's the metric it's the usage of the servers the number of service servers that are needed in order to license and i do want to basically say uh there is a difference we are unique one more time because we do both cloud as well as on-premise um service capabilities so you don't have to go out to the cloud um if you have your own hardware on-prem hipaa security reasons all kinds of stuff exactly and that's your hardware on-prem solution and that's our differentiator great okay fair to say though you just give us a big range fair to say minimum though it's 20 grand a month and then everything else is north of thousands yeah okay and then when did you launch this company uh 2013 after um doing a lot of research and uh bootstrapping my uh the previous company for four years which one was that device talk uh that was uh it was called gripwire before this and then we pour we basically raised money in 2013 okay and for the new the new idea yeah exactly did you shut down the old company or it's the same yeah it's it's pretty much every all the employees everyone moved over into the new entity clean cap table clean cap table okay good so so shut it kind of very important very important uh that's why that's why i asked did you have investors in that first one or no no okay good so you roll it in clean cap table uh have you you raised in 2013 how much have you raised to date uh nine million uh at a uh 20 pre so about 30 million dollars uh is the valuation of the company when was the nine round uh nine uh closed in 2016. yep got inside that was a 21 pre yeah yeah basically um interesting i thought you said you also raised in 2013. no i uh yes so basically it was a convertible notes and the convertible notes turned into the series a round yep if that makes sense it does it does they converted yeah cool so so 921 and and that was in 2016 you did that so right now you're either selling to amazon again or you're raising capital which one is it we're uh we are both a well i have to be careful on that so uh we are a very attractive company to put it that way it says you're a good looking guy right that's how it works well all i have to do is smile just like you do right [Laughter] the fun part is we have uh existing customers they're really large and we're trying to uh be profitable uh without having to raise a lot of uh capital and give one month what month do you think you'll be profitable this year uh ask me again uh another call we are aiming for this year okay you're aiming for this year got it okay then you just talked about more about customers how many customers are you serving now today oh um uh we're uh i think just coming to large customers um total customers anyone paying uh 15 15. major major customers and like i said uh tens of thousands a month yep uh upwards to hundreds of thousands so uh that's about as much as we can basically cover yeah with our current size well i mean i can say i can say two i mean you give me that twenty thousand a month minimum earlier times fifteen it started so you're north of 300 grand a month right now not i can't say that no i'm not allowed to well but hold on you already said both 15 customers and 20 grand minimum so one well run those numbers wrong there you go so you basically got it yeah yeah okay good yeah yeah but but and that's the minimum by the way you could be doing weight those are paying customers but we also have a whole entire development site uh a portal and people are jumping onto that portal they're using our technologies they're proving out our capabilities and then that's how we basically convert them into paying customers that's the aws play right get that adoption you got it yeah what's the team size today uh we're just about 20 people and where's everybody based in seattle everyone yeah uh well not everyone we have uh when it comes to sales in some contractors we have um we have boston and atlanta uh and uh new york okay good and growth rate what do you if you're doing call 300 today what we're doing a year ago um let's just say that uh the growth rate moving forward uh just on one deal could be uh multiples just on one deal out of so our 16th deal if you want to put it that way would be much larger than what we've actually earned uh over the last uh year yeah robert anyone going an enterprise base will say that though because that's what growth looks like when you're in the enterprise space i mean are you generally right now growing 20 year-over-year 100 year-over-year 200 yeah we're we're basically around 25 to 30 percent year over year over here okay healthy and you think obviously that can be accelerated with some of these larger deals now yeah just one deal alone um yeah yeah so good i mean look if you're 25 year-over-year you're 300 now you could argue it's called 220 250 something like that about a year ago so good i look healthy growth as you're figuring out the market um churn has anyone left uh we have we've had both uh people uh join as well as uh uh leave uh we do have churn um um and part of it is uh just tied to um startup versus enterprise a lot of a lot of people have come from enterprise space startups are tough you know um what is what is churn today annually uh let's say if we were around 20 so i would say we typically have two or three people a year over year basically joining in and leaving uh so it's basically even um net zero but gross you might turn 2 out of 15 so call it maybe churning 25 but again net zero yeah pretty much yep logo churn annually good and then what about things like cac i mean you know what are you paying to acquire these customers oh um so that's that's a that's also a very tough question to answer but um i'd have to put you in touch with our our uh vp on that uh for biz dev but ultimately speaking it's it's typically a um two to three month sort of uh uh turnaround from uh first contact to um either knowing that they're a paying customer because they're doing a pilot sure um to um basically putting them in uh the the uh what do you call it the uh into the pile of people who uh will approach a little bit later does that make sense qualifying or so i mean do you have a good idea though fully what fully weighted cack is are you willing to spend 10 grand to get a thousand dollar a month customer oh yeah like we we would basically spend that just on a conference if that makes sense and typically we get a lot of interest from uh uh from conferences and uh from exposing our capabilities yeah let me ask this let me ask this differently what do you what do you like to keep payback period under if someone starts paying you today you like to make up your cac in how many months uh within uh three to four months okay got it so three to four months minimum is 20 grand a month that's what you sell so you could argue cat could be as high as 60 grand or you know 60 80 grand something like that yeah it all depends on what it is yeah that we're selling right it makes good if it's just hardware that's one thing if it's um um if it's uh services like for a large retail chain take for instance it could be a little bit longer yep very good let's wrap up here with the famous five one word answers here number one what's your favorite business book wow who moved my cheese okay number two is there a ceo you're following or studying right now uh i i always study jeff bezos um so yeah number three what's your favorite online tool for building the business it or not uber conference that's a good one number four how many hours of sleep do you get every night uh four to six and what's your situation married single kiddos married with kids how many two two okay and how old are you uh 46 46 last question robert what do you wish your 20 year old self knew how to raise money at 20 um as opposed to and what stock options actually meant guys there you have it he was on the team that built aws now taking that same concept and really building uh how do i best describe this he's giving find the utility value to the internet of things in terms of what a waitress at a casino could do when they realize what a cell phone signal has been in the same spot for four hours and how they drive business results from that or same same thing in a hospital where they might have an on-prem solution installed for hipaa and other privacy regulations and making sure patients get checked up on hot hot space interesting technology nine million rays doing right now about uh again three hundred thousand bucks in monthly revenue that's that firm called 250 about a year ago 15 paying customers looking to potentially raise here later this year but only after they get to a point where they're profitable so that robert has all the leverage robert thank you for taking us to the top you are welcome only one change and that is instead of internet of things we like to say the intelligence of things which is the next the next next guys there you have it he's branding it here on the show intelligence of things the book comes out late 2019. robert thank you for taking us to the top all right thank you