Surferrevenue, valuation & funding

Introduction hello everyone my guest today today is michelle suskey he's a digital marketer with a love for seo he co-founded surfer that's surfersio.com and has been evangelizing the product and data driven approach to optimization ever since he's trained hundreds of seo folks copywriters and marketers on on-page seo writing and content marketing strategies you ready to take the top excuse me are you ready to take it to the top yeah of course okay let's get started so tell us surfer seo i mean what is it this is like an ahrefs tool or semrush or what oh no no no it's absolutely different approach like these tools are focused more on keyword research and on backlinks analysis while we are more like a data-driven tool that gathers a lot of information from pages that are ranking the top 10 to tell you whether you are missing something or overusing when it comes to content and these days we are drifting more into let's say content intelligence term that will be more about uh producing content that will satisfy both parties google algorithm and the end user so more of like a clear scope competitor oh yes you hit the nailing ahead okay got it cool that helps my head get in the right spot so now i know exactly what you guys do so so if someone just hired an intern that's writing content for their site the intern doesn't know seo they can use your tool to make sure they write the article in a way that's going to rank really well yeah absolutely that's all about it okay what are customers paying on average to use your technology um it's between 29 and 199 but the pricing we currently have is well we figured it out like a couple of years ago like when we started 2017-18 and it hasn't changed much so in general this this this pricing model we have is really not user friendly and doesn't help us monetize and doesn't help users to get the best plan for themselves so yeah uh in general there is a variate variety of plans however uh they're not you know too flexible and Monthly recurring revenue amiha what was monthly recurring revenue last month uh let me check precisely oh we just hit 250.4 congrats so 250 000 a month in revenue yeah and how many customers Currently serving 4000 customers it's about four thousand customers four thousand when did you launch the business uh we started the beta version in 2017 and it was released absolutely for free and it took us almost a year from the beta release to get the first client paying um Bootstrapped and since then we've been well we are bootstrap company so uh that was pretty a struggle at the beginning to uh figure the budget out and yeah until we've become profitable it took us a year and a half maybe Profits and so when you say profiling of 250 if you make 250 000 a month how much will go to the bottom minus profits um the yeah so we try to spend no more than 40 percent uh of uh the recurring revenue so we have this pillow uh that will help us uh through hard times when they come because obviously you have to be prepared when you scale up like right now we have 30 people and uh the biggest chunk of our spend is on salaries as we are trying to build only a player's team and so on so we pay them well and this is the biggest uh enough element of our payroll so yeah we are just building a massive pillow to you know be safe 40 profits on 250 000 per month is about a hundred thousand dollars a month in free cash flow going into your bank account every month to build that pillow is that about right yeah and you're bootstrapped just to be clear yeah that's right i love that congratulations yeah that was a tough decision for us we almost got uh into the vc carousel we were we were that close uh all the papers were lying on the on the desk but they just uh delayed uh the cash and there was like you have to start you have to move uh to another city where we have a headquarters so we did and we started in in september 2018 i mean the business for real because for a year it was a side project and before it was internal tool for the agency but yeah it was september and we we had a deal and they just didn't come with cash uh on the date that we agreed and in the meantime how much how much cash should they commit oh that was like it's confidential i think so well but it didn't be a number but it didn't happen right and you don't have to name the investor how much cash did they where they say they were going to give you uh it was six figures okay and and did you you actually signed a term sheet and or a safe whatever you were raising on yeah yeah we we had a term sheet but in the end uh it wasn't uh finalized just because we didn't receive the money and in the meantime we started selling early access subscriptions that gave us this initial boost of cash and that actually saved us from going on to the you know this vc world when you have to pump pump pump and then you know get higher revenue how much how much revenue did the agency do before you launched surfer seo so in 2016 what was agency revenue oh i don't know because i was the head of seo of the agency so i'm not the owner of the agency that it was born i would i was head of seo and the project was started by ceo of the agency me and my brother uh as a cto so there were two seos and one uh technical person um i'm not sure what was the revenue i i never known but we've been hiring um 12 people i think in total uh for the agency and uh working with 200 clients but well just be clear who who owns who owns server seo today do you own the equity yeah of course i'm i'm one of the founders so you're not the bureau of stakeholders but you your brother and then the ceo of the agency yeah slovak tchaikovsky i see when you and your brother put your equity together is at least 50 or no you guys are minority holders um quite a bit uh some people uh joined us to the to the equity as well do i have a majority with my brother no okay so under 50 between you two okay interesting but this is a great model because i imagine i mean did you get your first customers from the agency basically um yeah we had some contacts uh from the agency business uh because seo community in poland is not that big so almost everyone knows each other so our first clients uh were from poland uh however we had the first early access sign up from the us but the person immediately asked for a refund so that's kind of funny but other than that at the beginning we we had only clients from poland so how did you get your first hundred customers hmm there was 20 customers on early access plans so we secured a deal that they will have uh like better deal than anywhere in the future how'd you get them though um word of mouth no come on you can't have they don't just i don't just find a brand new startup and start paying you have to be intentional about how they get there we were in beta free beta for a year so they they have known us uh but how they how they find the beta um let's say we start in poland we released the beta on the seo conference there was a presentation which one data driven sem krk is from krakow uh krakow let's say yeah so that was pretty one of the biggest seo conferences in poland uh like 300-ish people uh scm krk conference yes uh that was a bit of a bit of lunch and since then uh people started using it obviously i was commenting uh on facebook groups and so on uh but actually i got a ban for self-promotion on one of the biggest seo groups seo signals lab seo signals lab that was fun and through that ban i got known uh stephen kang who is the uh the owner of that group and it turned out to be a great relationship between each other he helped me a lot with promoting the brand because after that that was actually crucial to the business at this early stage because after that ban i just reached out to him and how many people were in his group uh at the moment is nineteen thousand one nine thousand ninety thousand nine zero and nine zero yeah uh at the time it was like fifty thousand i think or maybe forty thousand how do you convince him to promote the product uh well he calls me a brown noser at some point uh when it when it comes to this uh release from the from the cage of being banned on the group but he he literally turned turned to me and say hey maybe do you want to do a pick his brain session which is something like ask me anything session and i received like over 100 questions and obviously promote a surfer there which caught a lot of eyes looking at us and another cool moment regarding that group was that our competitor cora page optimizer pro they were both founded in the us so they were well known in their communities and then we popped up as their co competitor that's who is correct can you spell it c-o-r-a okay like it's from correlation yep um and p-o-p page optimizer pro yep so so they build uh some sort of uh movement in seo that you not only have to acquire backlinks but you can also optimize your pages to help google understand better what you are about what are the missing elements uh and so on on the lower budget because on-page is the area audio control miho we've got to move forward because uh it's a quick show we only have five minutes left here so i want to get more of your story here right so i understand the first hundred customers how are you getting customers today you have four thousand still not so many ads uh i would say it's really minor but the biggest chunk is affiliate uh marketing we have established a decent affiliate program that drives uh 20 maybe 30 maybe 40 percent uh of the sales it's 30 recurring commission so they are really into uh selling our product so first it works and secondly they get big chunk of the the subscription uh we charge so uh it's like really a surf but perpetuating machine uh when it comes to sales and obviously this way we got a lot of brand ambassadors how much do you pay out to how much do you pay out to affiliates every month in their recurring fee oh i have to check but i will i will check it in a few moments so give me another question yeah no problem so so 30 rpoo 4 000 customers you're bootstrapped profitable 30 people on the team how many engineers uh 12 12 engineers and any sales how many on the sales team no no sales team oh yeah that's a good moment i'm looking for a super professional sales head of sales so yeah no sales and i would love to start it and revenue generated in okay monthly recurring revenue generated by the affiliates is roughly 25k so i had uh a little bit missed so it's like a ten percent so sorry do you that's that's what you're paying out to affiliates that's their commission or that's the revenue they've driven yeah yeah that's the commission got it so they have they make up about 80 000 monthly in revenue right now customers from affiliates as far as i'm reading these charts correctly yes yep yep wow that's okay so about 40 of your current revenue 250 000 per month sorry not 40. about 30 has been driven by affiliates over time those affiliates represent about 80 000 a month in your current revenue and you pay them out about 25 000 per month in commissions for that revenue if yeah if i if i read it correctly yes but well monthly recurring revenue 25k or maybe this is how much they generate so a third of that is how much we pay so right slightly less than that than 10k usd we pay every month yeah that's correct 10 yeah you can say eight 8 000 us dollars we pay out to the so they make up 25k only ten percent your revenue comes from affiliates yeah yeah yeah yeah yeah how many affiliates how many affiliates make at least a dollar from you each month um let's see in total we have oh gosh 400 affiliates that make at least a dollar in in total in our program but the amount of people that make at least a dollar uh is roughly a hundred okay interesting so affiliates are your main channel then right now anything else yeah uh engineering as marketing this is great uh so we released a free seo tool chrome extension uh that is used by over 200 250 000 people every day and it drives a lot of attention you can check it out keyword server it's a chrome extension uh that will tell you about search volume and we'll do some keyword research for you within the search results so it's like quickly how do you get people how do you get people from using your free chrome extension to actually hitting the paywall into a paid plan so there was super popular keywords everywhere extension that become paid and in a two weeks from that point we released our to fill the gap of a free extension that shows the search volume of a keyword so we just hit uh in the right moment with our engineering resources but how do you take 250 000 free users and convert them to like at least show them your paid plan do you get their email address and you email market to them no no no it's absolutely free and the only uh conversion we get from them is a tiny little button that it is powered by servers so if you want more data check it out so it's not like you know aggressive you're doing three million a year today or twenty two hundred thousand dollars a month how much were you doing a month a year ago um the spike is pretty pretty big a year ago it was uh here slightly less than 100 it was 82 000 in december 2019 wow that's an incredible growth right yeah it was like uh sometimes it was even 20 month to month and we have never experienced a month that was uh slowly slower growing than a month before so growth is growing what would you value the company at today um it's 100 times the monthly recurring revenue am i right i'm not a specialist uh whether it's your personal just you personally what would you buy oh you can't buy it well that was my question what would you what would you value it at today i have no clue i have no clue it would it should be like really irrational amount uh for us to sell it because it's more like uh not it's not only making money but it's rather a lifestyle do you pay dividends out when it makes money no no no no no we are in investing everything to hire more good quality so how do you how do you get rich if if you can only wait for an exit but you never want to sell like how do you get rich if there's no dividends from cash flow well the opportunity will come for sure but obviously we pay ourselves as a salary for a year we have been not paying a salary but now we do and it's quite all right so it's fine to keep on building it keep on growing and hiring more people last few questions churn monthly churn what's that quite high actually but there is a problem with calculating the turn in stripe and we have no great metrics to be honest because we have a paid trial which is one us dollar per week and the this is really easy to enter however it's counted into the churn so uh those values are well i don't know it's hard to measure let me ask you a different question how much do Customer acquisition cost you pay to acquire a new customer that pays you 30 bucks a month i have no clue do you spend money do you spend money on ads uh a little bit and the roi is more or less 10x 10x calculated against what like what's your payback period typically like ltv is like 800 dollars i think yeah it is 800 in ltv and if you calculate an roi of an ad it will be uh 10 bucks yeah so 880 dollars to acquire which means you get paid back in like a year you know three four months if it's 30 bucks a month i think so very good let's uh let's wrap up with the famous five number one favorite business book oh uh grade by choice number two is their ceo you're following or studying uh is slovak czechoslovakia yco no besides your own oh [Music] no any none number three what's your what's your favorite online tool for building a business facebook number for how many hours of sleep to get every night eight and what's your situation married single kids yeah i'm married and i have a son you're in the hall oh very cool how old are you uh i'm 30 30 years old last question what's something you wish you when you were 20. [Music] that i skipped university skip school guys there you have it surfer seo they were doing just 82 000 a month in revenue a year ago now doing 250 000 a month in revenue that's obviously a super healthy growth rate and they've done it all bootstrapped they spun it out an agency the agency's ceo and then mihaw and his two brothers own the equity in the business 30 people on the team right now serving over 4 000 customers growing using affiliates chrome extensions communities and more mihawk thanks for taking us to the top thanks for having me one more thing before you go we have a brand new show every thursday at 1 pm central it's called shark tank for sas 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 1 pm central additionally remember these recorded founder interviews go live we release them here on youtube every day at 2 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 sas world whether it's an acquisition a big fundraise a 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 sas 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 are saying sign up for that at nathan lacka dot com forward slash slack in the meantime i'm hanging out with you here on youtube i'll be in the comments for the next 30 minutes feel free to let me know what you thought about this episode if you enjoyed it click the thumbs up we get a lot of haters that are mad at how aggressive i am on these shows but i do it so that we can all learn we have to counter those people we got to push them away click the thumbs up below to counter them and know that i appreciate your guys's support all right i'll be in the comments see ya