How Sunroof Reached At Least $12K MRR From 3 Customers in 2021 (Interview with CEO Travis Tillotson)

Introduction and Travis's Background

Nathan Latka

00:00Hey, 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?

Travis Tillotson

00:18>> I am indeed.

Building and Exiting His First Company

Nathan Latka

00:19Alright. Tell us about that first company. When did you launch that business? What year?

Travis Tillotson

00:23>> Launched in 2011.

Nathan Latka

00:25That was that day, that was actual launch or first line of code or LLC filing or what?

Travis Tillotson

00:29>> That's LLC filing.

Nathan Latka

00:31Nice. Nice. And so you built that for how many years?

Travis Tillotson

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.

Nathan Latka

01:01What revenue that year in 2018?

Travis Tillotson

01:04>> Six.

Nathan Latka

01:05Six, up from what?

Travis Tillotson

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

Nathan Latka

01:20You don't come on. That's not something you remember. You don't remember. You were in the magazine. You don't remember. Oh,

Travis Tillotson

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.

Nathan Latka

01:41And how did you get that thing off the ground? Were you sole founder or did you bring in co founders?

Travis Tillotson

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.

Nathan Latka

02:35So 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?

Cap Table and Exit Lessons

Travis Tillotson

02:44>> I sold the equity that I'd owned. It was 33%.

Nathan Latka

02:48Okay. 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?

Travis Tillotson

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.

Nathan Latka

03:37What so what was your valuation in 2018 when you raised the 7,000,000?

Travis Tillotson

03:41>> My valuation was 30.

Nathan Latka

03:43And did that feel fair at the time? Did that bite you in the butt or was that fair and then good?

Travis Tillotson

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.

Nathan Latka

04:54All 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?

Travis Tillotson

05:06>> A couple of years ago. So it's been basically two years.

Nathan Latka

05:09Two year. Okay. Okay. Got it. Yeah.

Travis Tillotson

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.

Nathan Latka

05:26And and what was the exit price?

Travis Tillotson

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.

Nathan Latka

05:45Yeah. 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.

Travis Tillotson

05:54>> Precisely. And COVID COVID COVID was an interesting little hiccup that was not anticipated necessarily.

Nathan Latka

06:00Yeah. 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?

Travis Tillotson

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.

Nathan Latka

06:29And that was

Travis Tillotson

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?

Nathan Latka

07:24So 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

Travis Tillotson

07:33>> No. Not F you money.

Nathan Latka

07:35Okay.

Travis Tillotson

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.

Introducing Sunroof and the Lending Market

Nathan Latka

08:25Totally. 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?

Travis Tillotson

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

Nathan Latka

09:02They're not B2B loans, it's consumer loans, mortgages, things

Travis Tillotson

09:04>> like And there's a B2B component. So we've tested different verticals.

Nathan Latka

09:08But what's your main one right now? Is it helping banks service home mortgages?

Travis Tillotson

09:12>> Yes.

Nathan Latka

09:12Okay.

Travis Tillotson

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.

Nathan Latka

09:37So, Travis, you're boot you're bootstrapped right now?

Bootstrapped and Self-Funded

Travis Tillotson

09:40>> Yes. Bootstrapped. So I I've I've self funded it for the past

Nathan Latka

09:45Well, come on. Much of your ass is on the line? How much of your own money have you put in?

Travis Tillotson

09:49>> A good amount. I I will say a good amount. More a

Nathan Latka

09:53We quarter

Travis Tillotson

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.

Nathan Latka

10:02Like Okay. So it's more more than $250,000. I won't push harder, but more than $250,000.

Travis Tillotson

10:06>> Yeah. You could say that.

Nathan Latka

10:07Okay. 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.

Travis Tillotson

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.

Team Size and Engineering Focus

Nathan Latka

10:53Many are on the team?

Travis Tillotson

10:55>> So we have an advisory board who's, like, inactive kind of role members.

Nathan Latka

10:58Just how many full time employees, though?

Travis Tillotson

11:00>> Full time, we have five.

Nathan Latka

11:02Five. Okay. Cool. And how many engineers?

Travis Tillotson

11:04>> Three.

Nathan Latka

11:05Three. Okay. So I mean, heavy engineering. And are you an engineer? Are you doing all the business sales marketing?

Travis Tillotson

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

Nathan Latka

11:17to keep up with all of it.

Travis Tillotson

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?

Nathan Latka

11:30So 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?

Pricing Model and Product Tiers

Travis Tillotson

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.

Nathan Latka

12:02How high? Like, what's the average customer paying you per month, would you say?

Travis Tillotson

12:06>> The range could be from, let's call it, $4,000 to $12,000 a month.

Nathan Latka

12:11And why would someone pay $12,000 versus $4,000 Like, what are you upselling against?

Travis Tillotson

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

Nathan Latka

12:46So 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.

Travis Tillotson

12:52>> Yes.

Nathan Latka

12:53In its current state, and that's assuming that we don't make any price modifications. But you will.

12:59You will.

Travis Tillotson

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.

Nathan Latka

13:08Mhmm. And how many how many customers do you have on the platform today?

Current Customers and MRR

Travis Tillotson

13:11>> Three customers.

Nathan Latka

13:13Three customers. And you think you'll get to 50 in the next year, you said?

Travis Tillotson

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.

Nathan Latka

13:45So 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?

Travis Tillotson

13:53>> Yes.

Nathan Latka

13:54Okay. And so why go out and raise it safe? You have some money. Why not keep, you know, self funding and keep a 100%?

Why Raise a SAFE Now

Travis Tillotson

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

Nathan Latka

14:38So so what's the right amount? How much are you trying to raise right now?

Raise Amount and SAFE Terms

Travis Tillotson

14:41>> The right amount is small. So we are talking like very low, like million, million bucks, 1.5.

Nathan Latka

14:47And how do you obviously, it's a negotiation, it's very much art, not science, but what cap would you love to raise at?

Travis Tillotson

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

Nathan Latka

15:11Well, 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?

Travis Tillotson

15:20>> No. No. 8,000,000.

Nathan Latka

15:218,000,000 cap. Okay. Got it. And then these are pretty standard terms. So do you think I mean, it's a really your

Travis Tillotson

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.

Nathan Latka

15:47Yep. And you're just remind us too, you really got this going last year, right? You launched in 2020?

Travis Tillotson

15:52>> Yeah.

Nathan Latka

15:53Yep. Very cool. We're rooting for you. We hope to get the deal done.

Famous Five Rapid Fire

Travis Tillotson

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.

Nathan Latka

16:01Favorite business book?

Travis Tillotson

16:02>> No, the famous five. I don't know the famous five. I would say Principles, right, Dalio?

Nathan Latka

16:06Number two, is there a CEO you're following or studying?

Travis Tillotson

16:10>> I'd say Elon Musk is always standard CEO, like to see what he's doing. Interesting.

Nathan Latka

16:15Number three, what's your favorite online tool for building sunroof?

Travis Tillotson

16:19>> I would have to say Airtable.

16:24>> Yep.

Nathan Latka

16:25Number four. How many hours of sleep do you get every night?

Travis Tillotson

16:28>> Four.

Nathan Latka

16:28And situation, married, single, kiddos?

Travis Tillotson

16:31>> Single.

Nathan Latka

16:32No kids running around?

Travis Tillotson

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.

Nathan Latka

16:42And how and and how old are you, Travis?

Travis Tillotson

16:44>> How old, Seth?

Nathan Latka

16:45How old are you? Yeah.

Travis Tillotson

16:46>> Yeah. 37.

16:47>> 37. Last question.

Nathan Latka

16:48Something you wish you knew when you were 20.

Travis Tillotson

16:51>> Wish I knew when I was 20.

Nathan Latka

16:53Yep.

Lessons Learned and Wrap-Up

Travis Tillotson

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.

Nathan Latka

17:17Guys, 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

17:38helping 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.

Travis Tillotson

17:50>> Thanks, Nathan.

Nathan Latka

17:53One 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

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