How Sortable CEO Chris Reid grew Sortable to $3M revenue and 300 customers in 2018.

hello everyone my guest today is Chris Reid he's the founder and CEO of sortable a Waterloo Region startup on a mission to empower publishers with engineering background from the University of Waterloo he's a serial entrepreneur on his fifth venture and his and has led tech ventures and industries ranging from educational technology to the consumer web and b2b SAS he's a driving force behind sortable which was formally snapped sort media which uses machine learning to help online publishers automate add operations previously web publishing company it was acquired in 2011 and bought back in 2014 to relaunch sortable current day business we'll jump into it today Chris are you ready to take us to the top all right so this is gonna be fun so it sounds like I'm gonna get this right you built an agency you sold it you didn't like what happened to it so you bought it back and now it's more pure place as that accurate no give me the mini accurate version yeah so we built out of publishing business that was a consumer focused sold it and yeah it wasn't wasn't happy with the sort of the trajectory we were going on post acquisition and so bought it back and largely pivoted to B to be focused yeah SAS company trying to help publisher so first company was publishing base we learned a lot of lessons as a publisher and then bought the company back and repeated towards helping publishers okay so there are for the minute let me break this down for a second number one why'd you say what's company after the acquisition was there an earn out you had to yeah I mean there's I think with all acquisitions there's some there's some type tie-in you know I think that there's like monetary ty and Stockton and then also just me wanting to you know finish you know finish the job like there's like commitment so a lot of reasons and why did it take three years for you realize your new home wasn't gonna be a good fit and you should spin it back out why not do it immediately or after a year that's just that I would never do that right I would never sell something and then not not we make it work for the for the choir you know sorry Chris I'm not accusing you of doing something unjust what I'm saying is why did you need a three-year cohort sample size right to understand it was never gonna work right why not wait that way if we go off your current logic why not stay and why didn't you try for 10 years oh because it was it was clear it wasn't clear initially that it wasn't gonna work it took some time and then it took some time to execute a buyout like I see working with private equity firm to have to you know we're working with the the money side is not necessarily easy you know so it's like you can kind of break the time up into we need to grow the company was blowing well then a period where it looked like you know it wasn't going to be what we thought it would be and then a period of executing about that you know those three things took time and that's that's how you get to three years so how much capital do you need to raise and a round up from these private equity folks to take it back private I mean a million or 100 million or so I'm speaking primarily about negotiating with the PE firm who largely controlled us taking it back not us raising money from private Li using our rebellion directly I'm talking about the P firm that backed rebellion I see okay rebellion was the company that bought you guys in the first place you had to kind of get on good terms with them first negotiate the deal and then you were able to spin it back out yeah you have to negotiate books with the choir and with the P firm who you know has a lot of say over what what they do guys oh yes okay let's focus on the business so what's the company do and and today again how do you charge how to make money so we charge publishers in sort of two models right one model is sort of a SAS style tonnage fee which is on a CPM basis and then the other the other way we charge is on a road share okay Aska that's how we make great and is there one to one of those make up more like the majority of their revenue so does 80 % sass and 20% is rep share something like that yeah I mean ultimately ultimately it models that like sass because the way we make money is a function of the amount of advertising someone who's doing so that's that's pretty stable you know it's a pretty stable sort of input so we you know the input is how many impressions how many ads or we are we managing for you and then the output is we're either charging a fixed amount per ad or we're charging a rep sure about bread and the primarily primarily rev-share focused that but the to model really similarly because at some point you know a CPM and a rupture are actually the same thing they're they're a they're transacted on a per impression basis and they can actually back up the exact same way so it's really two sides of the same coin in turn you know when you say model similar to a SAS company you know people like SAS because they like predictability right and so they look at things like churn to see is the bucket leaky or is it truly recurring revenue so so if I just ask you just to try to understand this in one metric net revenue retention annually are you guys above a hundred percent I mean in aggregate we we try and look at it across a few cohorts right so that it's like it makes sense and I would say yes because there's you know normally in SAS you have a lot of upsell opportunity right and so that's that's fairly typical with us there is some variability because some publishers grow really quickly and as they grow that kind of looks like like over 100 percent retention but if a publisher shrinks they don't and so modeling retention in our industry is like a little more complex because you do have that variability you also have variability across quarters so q4 is a huge advertising season so revenue goes up so you don't really have retention going up so we can look at revenue pretension we can look at like just like a number of publisher retention we can look at what is that what's number of publisher retention oh it's it's like 90 yeah so this doesn't factor it up cell but it's like 95 percent something like that again I would I would have to bring on my my VP of customer success to give you we won't go too deep there I just want to understand you know a lot of times I'll have ad tech companies on and they'll call themselves SAS that it's tied to ad spend and Chris I've never seen more lumpy P nails in my life it's not SAS it's like super super up and down what I'm hearing you say is you have the basic ups and downs of spend related to like the holiday season in q4 but generally over a the spec course of a year these could be you know your net revenue or attention is over 100 percent meaning revenue that you lose from publishers who are shrinking on a yearly basis is more than made up by folks that are spending more on you and having more success on you so that's I get north of a hundred percent yeah and to be to be fair most ad texts like some ad tech companies are really SAS based where they're charging you know a monthly fee for for something you know like when Domo works as a publisher is that is that SAS based ed tech company I mean demos not an ad tech company but they work with a lot of publishers so selling a platform though it's not a percentage of it like typically it's not a percentage of ads under a Rev share right right but so and we're a little different in that we're charging you know we help publishers with their entire business right whereas most most I detect companies or I would say most exchanges most people who transact on revenue are transacting on a piece of publishers revenue so that that creates a lot more variability not only is there variability in terms of the publishers volumes but there's vulnerability in terms of how much of that volume you're able to capture and so we don't have a lot of that variability we don't we lose the variability piece in terms of what volume of publishers transaction that we participate in we are primarily helping them with all of their business right so they're there coming to us and say we want you to help us optimize our entire business and so it's a lot less fickle then I would say typical points I'm sure but yeah yeah let me let me try and summarize that just so we don't go down every potential little you know you know alleyway here the average fuster per year is paying you what we don't disclose that I'm sorry give me a range I mean are we talking you know a million dollars 100 million dollars you know five hundred grand you know there there's an there's a pretty there's a pretty broad range we work with very small publishers and we work with very large publishers and there's a huge range they just give me whatever range you're comfortable I'm trying to get a general sense of its kind of SMB or enterprise or mid market just give me a general range whatever you're comfortable with yeah I don't want to get into ranges because I think I don't think that that's gonna be Chris it is sorry it is meaningful we've been about three thousand three thousand these interviews it's one of the number one pieces of feedback we get from audience and folks that listen in is we don't know if this was a small medium or large right so...