Sococo Revenue & Funding (2018)

hello everybody my guest today is mark kirschbaum he's a business leader strategic advisor and board member to companies in healthcare software and information technology he's retained by investors founders and ceos to build grow and turn businesses around that will deliver sustainable and measurable results for investors employees and customers he's been serving as the ceo of his current company sucoco since august 2017. mark are you ready to take us to the top i'm ready nathan good to see you all right so good to see you as well let's jump right in here so tell us first what the product does and how do you make money is it pure play sass yeah sure it is and it iscoco is the online workplace where distributed teams come to work together each day side by side so consider it a virtual office for distributed teams and it is a sas model on a subscription basis for users that are in the space during a given month for our customers and it's paid for on a per user basis so mark people when they hear the place to work for distributed teams they're going to think slack they're going to think these kinds of tools where are you different absolutely so succoco is actually not just a communication platform with integrated audio video and messaging which by the way integrates with slack and other audio video tools we are not a pure audio video communication play what we are is the place we are the virtual office so i wish i could share my screen with you and maybe that's an option but you could see the sococo team actually at work so i was in a meeting this morning with a colleague in the marketing team who's in london one who's in boston one who's in boston me sitting here in our provo utah office and we were all able to come together in one space and be visible to the entire organization so when you're in sococo and you're seeing the map it's actually addictive to our users when they see these blinking avatars in a space that is actually the communication of someone speaking to another i can see that someone's sharing their screen i know whether it's okay and depending on our company protocol to walk into a space where someone might be or a group of people might be and you think of all that time that's wasted nathan to start a meeting hey do you know where nathan is is he coming oh i don't know maybe he's in another meeting still but when you're looking at the succoco map and you can see that the leader of the meeting has popped into a room with the sound of the pop all of a sudden the 20 other people from wherever they are in the world know that that meeting's ready to start and there's absolutely zero wasted time this feels like a vr play 10 years from now we'll jump into that more in a second 100 100 but first take me back to pricing real quick so people are paying on a per seat model per month what's the average when a new when a new logo signs up how many seats are they buying on average and what's that our pool look like sure you know from a land and expand approach if it's a team that is getting on board then you're looking at 50 to 100 users initially in a pilot and that has grown for our customers into the hundreds and we actually have customers in the thousands of users who actually are distributed teams around the world who come to work in sakoco what's the seat price there mark it's 15 on a per user basis and then obviously there's an annual discount and a volume discount got it so if the average start is 50 people paying 15 again 50 c's paying 15 bucks to see it's about 750 bucks a month for a new team joining you correct but with an annual subscription it's less that's good okay that's good so what do you do like it two months free on an annual subscription something like that so we're doing a one month um free trial a free to paid model and so we will get them started in this space for 30 days and we'll have our customer success team working with them to make sure that they're using sococo appropriately because you can imagine if they're not understanding how to effectively use the platform then they might not see and derive enough of the benefit from it so we have a team dedicated to that first your acv though it sounds like it's still though healthy north of eight nine grand that's correct yeah okay so why do you like this higher gun roll right you're put in by investors like why not go back out and do your own thing again well so in a way you know that's kind of what's happened with succoco right is i i was on the board and i was you know evaluating the opportunity for sococo going forward how did you get on the board were you an investor so i represent the lead investor um as one of my clients i'm who's the lead investor in soco and has continued to support the company financially is it an eir thing or vcs and people pay people like you to take board seats so it's more i'm working mostly with family offices and private equity firms where they have direct investments in operating companies and they've asked me to come in and help combination of evaluate guide mentor coach across the board and the leadership to help derive value because what i'm absolutely focused on are what i think are the three pillars of success for any business which must all be firing strategy leadership and execution oh i think i thought that all three pillars must be firing like firing people right no like we must be firing on all three cylinders yeah um thanks for that uh that reputation you're gonna give me well you seem like a nice guy here you know your beautiful mountainous background serendipitous and you say fire people fire on fire no i'm just kidding but philosophically just on that note nathan let me say the first thing i do in organizations coming in is saying were people given the tools and training that they needed to succeed and were they given the right management and guidance yeah and in this situation with cisco specifically i believe that when you look at our intellectual property our unique product positioning with the sococo map which is much more than an asynchronous communication tool and the amazing logos and customers that have stuck with us as we have evolved the product into a more stable platform it got me to step in and say you know what this is really really worth the investment of my time and we have now built out a really strong management team how many people on the team full time so full-time we have close to 30 people okay between which offices well we we you know we we practice what we preach so we've got a distributed team um we've got a core team of people here in provo utah in eugene oregon um some people in the boston area a couple people in europe and the rest are distributed okay and funding wise how much has the company raised to date so the company has been around actually for 10 years um and the patents go back to that original filing in 2008 since 2008 and the company has evolved um so you know i more look at you know where we're going and where the growth is now because it really is frankly irrelevant as to how much money historically has gone into that i'm curious though historical so you mentioned you represented some of these firms though like was this they put in 10 million in a series a that's when you took a board seat like before you came in and started switching everything up and optimizing how much had the company raised yeah so since 2015 2015 or so there's been approximately you know five to seven million dollars that has gone into the company and the three years prior to that there was probably about the same amount of money so call it 10 to 14 million and all in something like that yeah in the current iteration of second yep and and so what happened i mean you're on the board and then there was some change where you said i got to come in and run this thing obviously there's a current ceo how did that person go in or out what was the feeling there yeah so there was a transition in june the prior ceo did a great job of bringing our platform um you know up to date from an audio video perspective but traditionally you know it was a proprietary platform because when you think about it if you go back to 2008 sukoko predates the prevalence you know audio video and chat so it was a completely proprietary platform and now the shift has been um since coming on board so that it is focused on connecting to the other tools that people use and make them available inside sococo for example but what happened though like was it slow like it wasn't growing fast enough for the board just liking i mean what specifically what happened i think it was a combination of looking at the projections for the growth going forward and whether those would get us to where they needed to be and then a combination of the of the market positioning so succoco is an excellent tool for development teams especially agile teams because the whole concept of agile methodology are scrums they're quick decision making and when a team is distributed it's really hard for them to get together and they actually spend a lot of money to physically get together every quarter so the company was positioned as primarily a tool for development teams and more specifically agile development teams um to be more effective and so that's an important component of it but as you can imagine as we've talked about sococo has much broader applications beyond that and the focus really needs to be on the scope mark how did you get the previous ceo to agree to leave i mean that's not an easy thing to do i imagine there were some tough conversations there yeah so obviously that's confidential and i can't really get into that except you know except to say that there was a very very smooth transition um and and the team got it and we think everyone would say that if i ask the board and i ask current employees that i'll say oh yeah it was really smooth or would they say it was rough but we worked it out probably the latter yeah that's not always easy no one ever no one ever talks about this by the way but but it happens eight out of ten times it's so important and again i've been part of a lot of different turnarounds whether they were you know smaller companies or part of large global organizations and so much of it is focused on communication and and consistency in the messaging right because if it's in my head i got it and i'm committed but how do i make sure i translate that to the employees and repeat it consistently and then give examples of how we're successfully doing it because you really really have to as a leader in my opinion repeat that um to the point where you know okay now two or three people got it on this friday's all hands meeting and hopefully two or three more people get it on next friday's all hands and it's all about you know repetition and reinforcement um and the level of energy you bring to the table we're running out of time here last few economics questions here so what have you scaled customers to today right so we have we have scaled uh you know into the into the good strong five digits of users and several hundred hundred customers okay and these include these include fortune 100 companies um and mostly again the focus has been so far on development teams and distributed teams um and the expansion is much broader i mean distributed could be me and a colleague two doors down because i can't physically see where they are and what they're doing and if they're busy but if i look on the sakoco map i can tell and so we really help hiring and building organizations when it when a head of hr says gee i want to hire the best people for my organization but how do i keep them connected and build build loyalty and a sense of belonging and that's really what succoco helps them do in addition to obviously productivity so there's a reason that yeah there's a reason apple spent five billion dollars to build you know this the spaceship of course right yep so with three everybody with a couple thousand users and then a couple hundred customers let's call it 300. i mean you talked it to me earlier about kind of a minimum when people join it's 50 seats or something like that at bucks a pop 750 a month if i take 750 times at 300 is it fair to say you guys are north of 200 300 grand a month right now in revenue that's a fair statement okay good and what are you growing at year over year so we're growing 66 percent year over year excuse me 61 yep um and we've had 92 percent customer retention that's a long lower revenue um that is both logo and revenue we've set both of those goals uh for the business you hit them both 92 we absolutely did and we're seeing and again we have yet to invest in marketing since i've been here and we're seeing 20 to 40 walk-up leads a day coming into succoco and we're converting those at about a 20 to 30 clip that's great and then with those new accounts we're growing our new accounts over a 69 period by about 20 so those are some of the metrics you know that you'd expect to start seeing in a strong sas business that we want to scale yep and then is it fair to say if you know if you're north of 220-ish 230 right now in terms of mrr if and you're growing 61 year-over-year so about 12 months ago 13 months ago you call it you were somewhere in the 150 range is that fair sub 150 okay when do you think you'll break like the 3 million ar mark you think that happens this year that's the goal absolutely that's right michael my goal for end of 2019 is to break the the 1 million mrr yep that's good 12 million ar that's that's good and so we need healthy growth this year for the last eight nine months and then obviously healthy growth next year as well tell me real quick payback period so you mentioned you don't do a ton of paid stuff but if you look at your fully weighted cac how quickly do you like to recover that on these new accounts we're recovering that in about 12 to 13 months that's pretty healthy and where are you spending money when you do spend it so the answer is we really haven't um we just haven't yet so how do you calculate a 12 to 13 month payback period basically looking mostly at what we spend on marketing labor resources but not third party yeah you're talking about so if you look at fully diluted cac you're also including salaries of your marketing team your onboarding team etc that's where you get that period that's correct okay good so a 13 month payback period again with people paying 750 bucks a month people can kind of back into a cac number of somewhere around 9 700 bucks something like that that's right okay anyway any plans to raise additional capital now that you've got the company kind of on a different track or no yeah yeah absolutely we've got the strong commitment of our existing investors but we are looking to do another round um this year um to provide us that growth capital that we need because you know prove that it works like we have and now you know put it on steroids yeah and invest more aggressively so put the pitch out how much are you looking to raise so we're looking to raise uh in the seven million dollar range okay in the next in the next few months um and that money as i said will go toward growth capital um to invest in marketing and expansion of our sales and marketing resources as well as obviously product development hoping to sell what somewhere between kind of 10 and 20 of the company something like that yeah something i think the 20 20 is a fair peg on that yep very good all right let's wrap up here mark with the famous five number one what's your favorite business book my favorite business book is oh gosh or the last one you read my uh my favorite business book actually for a good quick read um is actually lincoln on leadership lincoln on leadership good number two is i have yeah number two is there a ceo you're following or studying right now um i would probably say uh on schultz up at starbucks yep howard schultz number three what's your favorite online tool for building your business besides your cocoa cocoa besides your own sococo beside that it's slack yep number four how many hours you sleep to eat every night uh uh four and a half oh yeah it's pretty good what's your situation married single you have kids married with uh two daughters oh wow and how old are you i am 49. all right mark last question last question here take us back to your 20 year old self what do you wish he knew patience and perspective patience and perspective there you guys have it from mark he's been a hired gun for some of these family offices private equity firms got involved with sucoco many years ago via a family office or private equity investment that come you know company raised caught 10 million total all-in was launched in 2008 helping distributed teams communicate in a way that really not many other people are doing very visual obvious obviously audio features as well um today they're 30 people based between provo oregon boston europe and then the rest is a distributed team they're serving 300 enterprise customers paying on average 750 bucks a month so doing about 220 grand call it around there per month in revenue hoping to break a million bucks a month by the end of 2019 and hopefully 3 million in ar by the end here of 2018. they're currently growing at about 60 percent year over year so healthy growth 92 logo and revenue retention again cac payback period about 13 months mark thank you for taking us to the top absolutely visit saccoco.com