Sunroof Revenue, Valuation & Funding (2024)

[00:00] Hey, folks. My guest today is Travis Tillotson. He is building a tool called sunroof.us. He's a Louisiana native, Tulane grad, MITOCW, then New York City where he founded his last tech company in 2011 from truly a closet and grew to $10,000,000 in sales before exiting. We're gonna jump into all of it today. Travis, you ready to take us to the top? [00:18] >> I am indeed. [00:19] Alright. Tell us about that first company. When did you launch that business? What year? [00:23] >> Launched in 2011. [00:25] That was that day, that was actual launch or first line of code or LLC filing or what? [00:29] >> That's LLC filing. [00:31] Nice. Nice. And so you built that for how many years? [00:34] >> Actually, since up until 2019, we exited in November, [00:40] >> raised $10,000,000 of capital throughout that process. Our first, you know, big round of capital was in 2015, in 2018, and from there we achieved a few accolades like number two ninety fastest growing companies, number three best place to work Crain's magazine, that fastest growing companies was Inc. Magazine in 2018. [01:01] What revenue that year in 2018? [01:04] >> Six. [01:05] Six, up from what? [01:08] >> You know, that was sort of 2017, 2018 numbers. I would say [01:16] >> our growth rate was high. It was it was a you can look it up in the magazine, I guess, but [01:20] You don't come on. That's not something you remember. You don't remember. You were in the magazine. You don't remember. Oh, [01:25] >> no. I'm saying we were, like, at, like, two. Got it. Yeah. We were hedge funds and private equity firms. That was our, like, explosive growth vertical. They're willing to pay very quickly and, you know, really pay a lot for research disrupting the sell side using alternative data. [01:41] And how did you get that thing off the ground? Were you sole founder or did you bring in co founders? [01:46] >> So I was sole founder initially, and basically I started selling to the enterprise. And the long and short of it is, selling to the enterprise for several years, had issues with the standard consultant's dilemma of selling kind of all data at the time. So, reporting to, you know, various enterprise organizations on the advertising metrics across the country, and if you gave them bad news, wouldn't necessarily be rehired. It was almost a consulting esque model and turned [02:14] >> into a software model. And then, you know, basically brought in people who were experts in the financial sphere to be partners, and we ended up selling our research and data and getting paid for it no matter what the outcome was. So we weren't being paid just to paint rosy pictures. We're also being paid to paint. [02:35] So Travis, sorry. Just because I wanna I wanna focus on sunroof. So so I'm just trying to get the equity story of surgo. Right? So so when you guys sold, I guess, much equity do you still own? [02:44] >> I sold the equity that I'd owned. It was 33%. [02:48] Okay. Would you so would you do the same thing? Like, you raised some capital, you brought on some co founders. Is there anything you'd change about how you manage the cap table there? [02:55] >> I think that I've learned a lot of things in the past, and I will say that make sure you find the right partners. Like, want to make sure that I find the right financing partners. I want to make sure that ultimately, you know, you work with people that you like to work with and ensure good and clear communication. I mean, from my perspective, you know, it was really just a lot of lessons learned from a real [03:18] >> first time founder. The standard lessons you guys probably talk about every day and or every week of founders who've been through an exit, raise capital. You know, so yeah, I would treat it as don't go after those lofty valuations a little too early just because people are willing to give them to you because then you your expectations are much higher afterwards. [03:37] What so what was your valuation in 2018 when you raised the 7,000,000? [03:41] >> My valuation was 30. [03:43] And did that feel fair at the time? Did that bite you in the butt or was that fair and then good? [03:47] >> I would say it's- I would say that from an expect- it just is all about setting expectations, and, you know, recognizing that if you're taking these dollars, I fully, you know, expected that we could achieve and accomplish our goals, but I also, you know, there's a balance of, I guess you could say, hedging appropriately. So understanding like, okay, does this mean that we're be raising capital forever? Does this mean that we're going to be, you know, [04:14] >> our goal now is to get to 300,000,000. Let's just assume the 10x rule. So are we going need three more financing rounds to get there? Are we going be able to do it with this financing round? Ideally, I think you can build very strong, healthy software businesses without requiring capital once you get over that real hurdle, and you get to that magic mark from that 10,000,000 to 50,000,000 number, which we were not able to achieve, 10,000,000 [04:39] >> to 50,000,000 ARR, and that really is kind of the goal is ensuring that you know, getting a sticky market and make sure you have true product market fit and reducing churn. Standard topic point for all sorts Standard playbook. [04:54] All right, just to put a bow on that story before I go into sunroof. So you grew it, call it, past $6,000,000 in revenue. You raised about $9,000,000 to $10,000,000 in capital, and you sold it, you said, last year or 2019? [05:06] >> A couple of years ago. So it's been basically two years. [05:09] Two year. Okay. Okay. Got it. Yeah. [05:11] >> '19, the staff went to the acquirers office in November 2019. So then that's transitionary period, and, you know, from there, was in their hands, whereas kind of, like, take a step back and see how it goes. [05:26] And and what was the exit price? [05:28] >> That's something I can't really share because we still have components that are moving in place. So we did have a fixed number, but, you know, depending on how that how that fares out over this period of time, I'll let I'll let it speak to the upon completion. [05:45] Yeah. Yeah. So so if I'm reading you right, basically, there was a component of it that wasn't like cash up front. There's maybe an earn out, maybe some stock involved, and you're not quite sure what that's going to end up being value wise. [05:54] >> Precisely. And COVID COVID COVID was an interesting little hiccup that was not anticipated necessarily. [06:00] Yeah. The reason I asked is just to, again, to finish off that story is because you raised 70 on the 30. Right? So if you sold for less than the $30,000,000 valuation, many people would go as effectively a down round when you exited. Would you agree? [06:12] >> If it was a down round when you exited, I mean, basically, with all the factors in play, know, since we given the amount of capital that we raised, it was the best decision for the company at the time, best decision for all the shareholders, unanimous board consent to move forward what we had. [06:29] And that was [06:29] >> the best opportunity for us. It wasn't the headline exit that we had necessarily, you know, wanted and or anticipated, but it was what we, you know, what we did. So it's something that kind of, you know, I think it's a lessons learned story from the perspective of exciting, you know, rapid growth, but certainly want to make sure that how we account for things moving forward and how I do things moving forward is done in a way [06:56] >> that takes those lessons learned. So getting to an exit, working with the right investment bank, making sure that everything is, you know, done properly on the roadshow. I can't imagine telling investing in a first time founder having never gone through kind of a roadshow experience, and just trying to like, you know, wheel and deal. That's kind of, you know, something that was new to me, and I was able to do it, but I certainly think it [07:20] >> could always- it could always room for improvement, I guess, with everything, right? [07:24] So Yep. Okay. So you close out that chapter of your life. Now, you make like, you know, F you sort of money on that deal, or like, was it just enough money to have a little in savings or what? Like [07:33] >> No. Not F you money. [07:35] Okay. [07:35] >> And that's why basically, you know, there's a balance because we were really like an exciting, we had a whole floor and a bunch of great staff, honestly, product, great technology, great client lists, like we're talking like top investors in the world are our clients, and, you know, sky's the limit. That said, you know, one thing that was our end market, you know, did have some difficulties. So just quickly as they're willing to shell out money, they're [08:01] >> also willing to, you know, move on to what's hot, what's not. And I think that that's an interesting dilemma that's very specific to that market, because once you get, it's the opposite of software. Once you get, you know, 25 large holders buying your data and insights, basically, all don't have, they have diminishing returns. They can start to lose alpha. [08:25] Totally. They lose the edge. The more you sell to, the more edge they lose because then everyone else has the same data. So, hey, listen, we only have about five, six minutes left. Let's show folks on sunroof now. So you're selling now to banks, helping them service loans faster. What do they pay? What's your model? They pay you like a percent of loans completed at SaaS fee? What does it look like? [08:42] >> Basically customer orchestration from the customer experience components to the employee experience components, and then the ORM component, the online reputation management component. So we're looking at a market that really is crushing it right now, meaning the lending market and space, let's say mortgages lending, And, you know [09:02] They're not B2B loans, it's consumer loans, mortgages, things [09:04] >> like And there's a B2B component. So we've tested different verticals. [09:08] But what's your main one right now? Is it helping banks service home mortgages? [09:12] >> Yes. [09:12] Okay. [09:14] >> And basically, right now what we're doing is really trying to make sure that we take this next step to propel us to get to 50 customers, 100 customers, really make sure we make all these decisions so we are actually solving all the problems that we know we can solve, but solving the right problems, where there's not just a bunch of VC money being thrown in. [09:37] So, Travis, you're boot you're bootstrapped right now? [09:40] >> Yes. Bootstrapped. So I I've I've self funded it for the past [09:45] Well, come on. Much of your ass is on the line? How much of your own money have you put in? [09:49] >> A good amount. I I will say a good amount. More a [09:53] We quarter [09:56] >> could say yeah. I mean, you can you know? Yeah. I'm I'm looking at not a Okay. Not like a fun amount. [10:02] Like Okay. So it's more more than $250,000. I won't push harder, but more than $250,000. [10:06] >> Yeah. You could say that. [10:07] Okay. Fair. So you're putting your own money, but you hopefully own about a 100% of the business. Right? Yeah. So no co founders, no investors. [10:15] >> Right. And basically, we are, you know, right now looking at an instrument that didn't even exist, SAFE note, didn't even exist when I founded my last company. So SAFE note financing, you know, people who were aware and or invested with me before, who were interested and or involved, and then looking at accomplishing certain core metrics and goals, and basically over the next like three to six months. And then from there, you know, really already starting that series A [10:43] >> pipeline to make sure that we're properly capitalized, but with the right vision and the right, you know, team members in place. So I've got, you know, kick ass team across the country. [10:53] Many are on the team? [10:55] >> So we have an advisory board who's, like, inactive kind of role members. [10:58] Just how many full time employees, though? [11:00] >> Full time, we have five. [11:02] Five. Okay. Cool. And how many engineers? [11:04] >> Three. [11:05] Three. Okay. So I mean, heavy engineering. And are you an engineer? Are you doing all the business sales marketing? [11:10] >> I'm more doing the business sales marketing. I do understand and can do engineering. I just can't get stuck to that. I'm not an expert, and I don't want [11:17] to keep up with all of it. [11:18] >> So I understand how the components work, understand, you know, what we're doing, but not enough to say that I'm going be innovating something beyond on the front facing. More of the front end than the back end, you know? [11:30] So I'm a bank. I'm using you. I'm loving you. Let's say last month I landed a new million dollar loan to a resident here in Austin, Texas, and I'm using you to make sure that that customer is really, really happy. How much are you making on that million dollar loan? [11:45] >> So we're not structured to make a percentage of loans. So we're structured as a subscription model, and those that's one of the components that we're actually really trying to pin down because we are able to drive a high price given what we're actually doing because it is a very fragmented market. [12:02] How high? Like, what's the average customer paying you per month, would you say? [12:06] >> The range could be from, let's call it, $4,000 to $12,000 a month. [12:11] And why would someone pay $12,000 versus $4,000 Like, what are you upselling against? [12:14] >> Oh, there's customer experience, then there's employee experience, and then there's ORM. So essentially, we're looking at first party data for the customer experience and employee experience, so we're looking at survey data, analytics on performance, you know, metrics that actually are inside the organization, And then we're looking at the ORM component and how it impacts the actual journey at the end. So encouraging users to, you know, discuss and talk about reviews and such, and that's something that, [12:45] >> you know [12:46] So you're upselling based off these product. They can buy one product, two products, or three products. And if they buy three, they're paying $12,000 a month probably. [12:52] >> Yes. [12:53] In its current state, and that's assuming that we don't make any price modifications. But you will. [12:59] You will. [13:00] >> Exactly. So right now, I will say, like, I can definitively say that price modifications could always be considered when we're attacking the market in mass. [13:08] Mhmm. And how many how many customers do you have on the platform today? [13:11] >> Three customers. [13:13] Three customers. And you think you'll get to 50 in the next year, you said? [13:17] >> So it depends on if we're willing to sell independently one of the components or if we require two to be purchased to engage. And that's the decision we're making of kind of the, you know, leadership and such. Because do we really want to have all of the onboarding? We want to take on those costs and sort of those costs of integration for just like one step or one tier to be able That's to something that's currently [13:43] >> being actively discussed and engaged. [13:45] So Travis, three customers, minimum price points, $4,000 a month. That means at a minimum, you're doing about $12,000 a month right now in MRR. Is that accurate? [13:53] >> Yes. [13:54] Okay. And so why go out and raise it safe? You have some money. Why not keep, you know, self funding and keep a 100%? [14:00] >> Ultimately, want to so the market's just sitting there for the taking. And, you know, one thing that I will say is that if you're always raising capital, it is a big distraction, and doing a safe allows us to hire the right team to attack the market and get market share in a very like position of comfort. Right now, I would say our customers aren't getting enough, we're not collecting enough feedback from our customers to make the [14:25] >> true blue product decisions we need to be making, that we need to be hearing, we need to be listening to, because we don't even have real, you know, a ton of managers. We don't even have managers like full time managing these customers. So it's like [14:38] So so what's the right amount? How much are you trying to raise right now? [14:41] >> The right amount is small. So we are talking like very low, like million, million bucks, 1.5. [14:47] And how do you obviously, it's a negotiation, it's very much art, not science, but what cap would you love to raise at? [14:53] >> I'd say we basically are using two component Val cap and discounts. So eight and then the discount rate that we're providing and are offering in its current form. So, you know, it's reasonable because then we feel that no matter what, the investors are really aligned with our [15:11] Well, what's the valuation? I the mean, safe discount is pretty typical, 20%, and the interest rate is pretty typical at 8%. The cap is really what matters. I mean, so are you talking like a 5,000,000 cap or something different? [15:20] >> No. No. 8,000,000. [15:21] 8,000,000 cap. Okay. Got it. And then these are pretty standard terms. So do you think I mean, it's a really your [15:25] >> Relatively storytelling and the back standard. It also allows us the flexibility of not having common and preferred, which is something that I haven't done in the past. That is something that's highly relevant to me. It's nice to have everybody be fully aligned and not have some people have interests that may not necessarily align because my interest is always aligned with just making the company the most valuable as possible, of course. [15:47] Yep. And you're just remind us too, you really got this going last year, right? You launched in 2020? [15:52] >> Yeah. [15:53] Yep. Very cool. We're rooting for you. We hope to get the deal done. [15:55] >> Can get up to 50 customers here quickly. In the meantime, though, let's wrap up with the famous five. Number one, favorite business book. [16:01] Favorite business book? [16:02] >> No, the famous five. I don't know the famous five. I would say Principles, right, Dalio? [16:06] Number two, is there a CEO you're following or studying? [16:10] >> I'd say Elon Musk is always standard CEO, like to see what he's doing. Interesting. [16:15] Number three, what's your favorite online tool for building sunroof? [16:19] >> I would have to say Airtable. [16:24] >> Yep. [16:25] Number four. How many hours of sleep do you get every night? [16:28] >> Four. [16:28] And situation, married, single, kiddos? [16:31] >> Single. [16:32] No kids running around? [16:34] >> No kids. No no no but I I do have a partner, but nothing nothing nothing we're not, you know, engaged yet. [16:42] And how and and how old are you, Travis? [16:44] >> How old, Seth? [16:45] How old are you? Yeah. [16:46] >> Yeah. 37. [16:47] >> 37. Last question. [16:48] Something you wish you knew when you were 20. [16:51] >> Wish I knew when I was 20. [16:53] Yep. [16:55] >> I wish I knew, I guess, how I would I guess, I would be able to predict the future a little bit a little bit better and basically understand how [17:10] >> metrics worked. I think that if I really had a better feel for metrics and not just growth, I think it would have made some decisions a little differently. [17:17] Guys, he owned 33% of his last company when they sold that in 2019. He launched that in 2011, raised about $10,000,000, grew it to well over $6,000,000 in revenue before exiting. Used a little bit of that money to put it into this new company, sunroof.us. It's really helping banks manage loans more effectively, both the bank employees and the customer who took the loan. Helps with the entire customer experience. He helps to continue to scaling, currently doing [17:38] helping three customers at about $4,000 a month each, show $12,000 a month in MRR as he looks to scale up to 50 here in the next twelve months or so. Currently raising a million bucks on an eight cap on a safe. We will see what happens. Travis, thanks for taking us to the top. [17:50] >> Thanks, Nathan. [17:53] One more thing before you go. We have a brand new show every Thursday at 1PM central. It's called Shark Tank for SaaS. We call it deal or bust. One founder comes on, three hungry buyers. They try and do a deal live and the founder shares back end dashboards, their expenses, their revenue, ARPU CAC, LTV, you name it, they share it. And the buyers try and make a deal live. It is fun to watch every Thursday one [18:18] p. M. Central. Additionally, remember these recorded founder interviews go live. We release them here on YouTube every day at two p. M. Central to make sure you don't miss any of that. Make sure you click the subscribe button below here on YouTube, the big red button and then click the little bell notification to make sure you get notifications when we do go live. I wouldn't want you to miss breaking news in the SaaS world, whether it's [18:39] an acquisition, a big fundraise, big sale, a big profitability statement or something else. I don't want you to miss it. Additionally, if you want to take this conversation deeper and further, we have by far the largest private Slack community for B2B SaaS founders. You want to get in there. We've probably talked about your tool if you're running a company or your firm if you're investing. You can go in there and quickly search and see what people [19:01] are saying. Sign up for that at nathanlatka.com/slack. 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