How Smartcsm CEO Craig Caryl grew Smartcsm to $499.2K revenue and 52 customers in 2019.

hello everyone my guest today is craig carroll he's a serial entrepreneur ranging from tv productions hasbro robotics medical devices to now sas smart csm is b2b sas providing commercial property owners and facility managers in depth visual of mechanical infrastructure like hvac plumbing and such deployed by toyota united airlines salvation army and more to save time money and lives craig you ready to take us to the top let's go all right man tell us about the company uh what does it do what did i miss and uh are you a pure place sas company we are a pure place fast company with a uh like a secondary services business to get the information and the data into the sas but primarily we're a big data player ultimately we want to get the data on all the clients and understand what they're doing with their infrastructure and the short answer to what it is is it's the google maps of commercial infrastructure where does my hvac go where's the vav how does it connect to the air handling unit where's the transformer for the electrical there's some of these facilities are millions of square feet uh tens or hundreds of locations and you can have a handful of facility team members that are overseeing it all and it becomes an impossibility to know every square inch of it so we created a super easy point-and-click tool that anybody can learn in an hour and it basically helps you define your entire electrical plumbing hvac infrastructure very interesting and who is paying for this like the homeowner or the contractor or who so it's primarily a commercial uh tool commercial application so it's usually the facility manager or the building engineer uh secondarily it's the owner that's about eighty percent of the business and then 20 of the business is through contractors who use it as a value-add when they're when they're completing a job and and delivering part of the turnover process and it's a way it's an interesting model because the contractors actually want to own the data because they want to own the client and ultimately freeze out their competition so they'll actually absorb the cost of the software and maintaining it um as a way of sort of choking out their competition no that's that's interesting um so on average what are one of these companies or contractors paying you per month for access to the technology i'd say the average contract value is about a thousand dollars a month okay okay so pretty and you know that's kind of like i would put that kind of min market do you have a kind of a sales team built out to go land those or can you land them kind of no touch via your website i wish you were that easy uh we're really educating the market right now it's it's a pretty new concept for the market so um it's uh it's for you know smart sales guys on the phone a couple of bdrs so it's a team of six out there making calls dialing for dollars advertising in general doesn't work it's it's really touching them understanding their specific problems then backing them in down the sauce will sas will solve those problems yeah so what's the total team size today it's about 14. okay everyone based uh there in california uh 12 are based in california we have two subs that uh that work abroad on our engineering team but we're actually bringing that engineering team into in-house as we go to uh series a probably end of this year early next year oh very good now are you bootstrapped to this point i know we've done a couple of venture capital rounds we did a seed uh note round and then a c plus um uh priced round okay so how much total in the company so far we raised 3.5 million okay and why why did you feel like you needed to do that in other words what made the company kind of expensive to get started why couldn't you bootstrap well you know sas is expensive it's dollar for dollar you know you're if you want to raise if you want to do 10 million annually you're going to spend about 10 million to get there that's been my understanding in studying the market before i got into it um you know changing a market is never easy this is a green field market that has been doing business on paper since edison invented the light bulb you know he basically invented the light bulb wrote on a piece of paper where that circuit came from and for all practice of practical purposes it hasn't changed so we're trying to change the market uh bring a laggard market into a digital uh solution and really what we are is a bridge from from a sort of analog paper to digital the iot or building internet of things um you know and so changing the way markets work for over a hundred years is not easy it takes money it takes persistence uh constantly making the software better changing and adapting to our clients needs it's not expensive how long have you been at it when you launch we launched it uh mid 2017 in beta and then january 2018 and in sort of live uh so about two and a half three years okay and so over that time frame how many customers are you now working with we have 52 customers okay uh but primarily large customers like toyota united airlines uh salvation army the ones you mentioned we just closed carrier corp and goodyear very cool so coming can i do the math on you told me earlier the average is about a grand a month you're doing about 52 000 a month right now yeah about that roughly about the high 40s i think our arr is about 400 460 470. 400 right now yeah that puts you about 40 grand a month where where were you yeah right yeah where were you about a year ago just so we can understand growth we've doubled we were about 22 a year ago so we're about eight to ten percent month over month that's great and where's most that growth coming from upselling current customers or landing new logos all together uh primarily landing new logos about 20 of it is upselling uh existing customers to expand like we have several cities that like city manhattan beach started out with one building they're up to 10 and 11 buildings uh cal state dominguez hills uh started out with one building they're up to ten buildings is that what allows is that your number one pricing level is number of buildings managed or is it based off square feet or number of seats or something else it's not number of seats or the amount of assets it's square footage primarily and then secondarily buildings but there's a lot of negotiating in that you know it's all about getting them on once we get them on the platform they don't leave yeah well because again you're a data play yeah interesting okay so i just heard you say now can you count on an average of 20 cohort expansion on these accounts of the ones that signed up a year ago is that a fair statement yeah i would say that's a fair statement and on that same cohort what does churn typically look like it's about five percent annually six percent so far i don't know that we have enough empirical data to give you a you know a hard number but that's a good ballpark well look net net if you're turning six and expanding 20 right your net you know net revenue retention as i'll call it 114 even if that's not exactly accurate and it's back in the napkin that's still healthy yeah yeah now now how aggressive are you being in terms of you know driving the growth are you burning a bunch of capital today oh you know i don't know what's burning a bunch of capitals you're in california you're in california so i'm used to hearing big numbers here no i don't think on the on that level now we're not burning that much capital um i would say the toughest part is is finding sales team members that uh you know can really understand the facility manager's plight and and get into their their pocketbook and and close the deal that's the toughest thing we've had a high churn in the sales team yeah um facility managers are being sort of barraged by janitorial service security services and so they're getting about 100 sales calls a day and we're selling into that that that frenzy of of feeding so to speak and these are people who traditionally their budgets are getting cut every year they're asked to do more with less so that's that's the environment we're selling into and that's probably the biggest challenges is getting that one minute of their attention to really hook them once they understand what we're doing they're pretty intrigued they'll usually agree to a demo demo turns into a software demo uh and at that point you know we have about a 30 close ratio yep and are you talking when you say not burning a lot you're talking like 10 grand a month or 100 grand a month or where are you about oh we're burning about 80 grand a month okay that's not that's not too bad so i mean that leaves you with plenty of time to get to your series a you think yeah i think we have uh enough runway to get to our series a we may do a bridge around uh we're exploring that you know just to have a little extra capital on the bank we're you know we're expanding the software quite a bit so a lot of that money is really you know working on the software yeah what would a bridge run look like would you do a control node or venture debt or what we'd probably do venture debt it would be somewhere in the half a million to a million range at the most uh more like a half a million um a series a and q one of 20 20. okay probably four to five million raised yeah and what do you hope i mean obviously this is a negotiation but if you raise five million in q1 2020 what valuation do you hope to raise that at well our last valuation was a 5 million...