Suzyrevenue, valuation & funding

Intro to episode with Nathan Latka hello everyone my guest today is Matt Brittany's the founder and CEO of Suzy and on-demand human intelligence platform used by over 175 leading brands including Microsoft PNG and t-mobile Matt you ready to take us to the top you know it all right man jump in here so for people that have not heard of the business before they missed your first episode what's the company do so Suzy is a software platform that allows companies to instantly become in touch with their customer to get instant feedback on anything from product design packaging or even to come up with new ideas with the customers that matter most yep and so how do they do this can you tell us how PNG is using you sure so we I can't speak to how any individual customer uses us because frankly I don't know I don't have access to their individual dashboard but the way Suzy works is we have a network of over a million US consumers that are on a gamified platform called Crowdtap those consumers earn points for answering questions anonymously on behalf of our customers so if you're a mom age 34 and somebody wants to hear from you you'll get a question either qualitative or quantitative forum you respond the aggregated of those answers go to our clients who are licensing software that answer the ask the questions and they can expect up to 500 open at the responses during the same meeting they actually ask the questions in yeah now make the link again between Crowdtap and Suzy are they on the same cap table same text editor okay so Crowdtap was that was the original company which I spun out of my agency mry and basically when I joined crowd's happen 2016 after selling the agency the publicist group it was an influence or activation platform so they were having the members of Crowdtap create and share content that business has kind of leveled off over time and I knew I had that sort of unlock growth and new opportunity so we've essentially changed the use of that network of Crowdtap by instead of having to create and share content answer questions I also knew I needed to create a new b2b brand to sit on top of the crowd tab network because Crowdtap is sort of had gotten a reputation of being in the influencer space so that's where Suzy was invented so it's basically two different brands under the same company now back on October 25th 2017 when you and I spoke last on the show you had articulated that our pool was around as monthly our boo was around ARPU kind of $11,000 so very much enterprise motion and you had about 70 customers at that point update those numbers have moved upstream and how many customers today we have nearly 200 customers are Customer count average now 11 thousand was a monthly number not a non annual number or I bar move and monthly yeah I didn't quote the exact number because I actually just listened to that podcast again this morning cuz I roll but revenue annually per customer is around seventy-five thousand dollars we started to work with a lot more middle market companies as well which is brought that number down slightly yeah by the way not nothing wrong with that right it's just a strategic decision yeah so when you tell me by the way we talked about this last time we talked in terms of a CDs and you had said somewhere on 130 hundred forty which would have been about 11 or 12 grand a month what you're saying is you you wanted to expand your top of funnel you've moved downstream a little bit now let me ask you many times when companies do this it throws your salesperson pro formas all out of whack quota targets like volume demo - you know conversion trial all that stuff out of whack how did you make sure how did you update how your sales people were selling with a lower ACB well we a talk we were just launching Suzy so a lot of the clients that existed were kind of ones that we kind of reconfigure from the legacy Crowdtap business so our sales team was kind of bet built net new from scratch going to market so there wasn't really legacy issues that had to kind of pivot away from okay okay fair enough okay good so so the company in Ronis again crowd that was launched in which year crack-tip is launched in 2011 it was spun out of my ad agency at mr. youth which just also knows mry and Suzy got Suzy founded in 2018 going in what year Suzy we officially launched it South by Southwest last March March 2018 March 2010 okay good and then so I was like asking this question how much did you total spend on building Suzy before your first dollar of revenue well when we first launched Suzy we essentially took the legacy Crowdtap platform made it purple stripped out all the functionality that were in insights and called it Suzy then last summer we had the reap lat form and that was some of the hardest months of my career because when we plant for him the site actually was intermittently down and had terrible performance issues last summer so keeping the customers that we did have sticking with us was not easy we did have some churn as a result all of it because we essentially had to rebuild what is now known as Suzy today from scratch but it's been up and running and kind of blazing-fast an incredible functionality ever since how much we put in the building a new Suzie if I think s I'd say anywhere between a quarter million to half a million dollars we have a really efficient program yeah development team not that ok quantify Gross churn that quantify that churn form am curious is the reap platform happened past 12 months revenue turn was about what are well we actually have a hundred percent and that net revenues are bodacious though gross basis I would say twenty twenty percent annual churn so maybe like a percent and a half a month yeah tops so just to be clear 20 percent gross revenue insurance you have 20 percent expansion to reach net revenue retention of a hundred percent and that's we're at right now how are you driving an expansion revenue what are you upselling it's it's both upselling cross-selling we're going from one brand that you know at Microsoft to multiple brands and we're unlocking new functionality in the product new ways to ask questions as well as unlocking more specific targeting segments on the app our clients which creates upsell opportunity are there any value based upsells like number of questions asked per month or number of targets reach okay what are those yes so basically the way our license tier works is for the most part the number of questions you get on an annual basis we don't really do monthly because some companies have seasonality so you buy a certain amount of questions not all questions are created equal quantitative questions cost more than quantitative so we kind of have an internal credit system and based upon how much the client spends we give them options you can get X amount of you know quality quantitative XM have qualitative questions to come up with an annual kind of license total that's the biggest driver of the cost but then as I mentioned earlier now we're unlocking new action types and also more specific targeting we're partnering with third-party data providers who were essentially overlaying our first-party panel data with their third party panel data so we could know with one of our our panel members our Costco shoppers or if they owned a Mazda what's the source of truth on that the customer email a credit card number and a geolocation we're matching the PII personally identifiable information which by the way we never share with our clients with a third-party company and basically they have a variety different inputs for how they get their data and the culmination of that is much deeper targeting segmentation interesting okay talk to me about how you funded this bad boy so so Capital raised to date bootstrap trav you raise capital so how much yeah it so it's kind of a convoluted story so I'll try to keep it as simple as possible basically mr. youth was a company that I started way back in 2002 made an agency yep my buildings up from one employee to about 500 it was acquired in 2011 by the public��s group before it was acquired I spun out a company called Crowdtap the impetus of Crowdtap was the manage and measure student representatives which then became kind of bloggers we spun that company out when we spun out the same cap table of the agency became the cap table of the new software company oh wow did you enjoy the owner in the agency I wasn't because we had done a private equity deal in 2008 where I took some money off the table and got one of the old partners out I was the largest individual shareholder was the peon firm they called Alta communications out of Boston so they're still on the top table they're still in the cap table they already got a 3x return from the agency and now it's all gravy but was that mistake um you know it I actually closed the private equity deal on the night of the Lehman Brothers collapse I like everyone else was kind of freaking out about my future I just had my second kid you know I didn't take a lot of money out of the agency so in retrospect I wish I wouldn't have done it but life doesn't work that way you know when you live and you learn so they don't teach you about that in college or high school right what to do about private equity eat deals and secondary offerings things like that so spun it out I'm spun-out Crowdtap the CEO of Crowdtap was my original product manager from the agency he went with the business and I helped him raise the series a in 2012 and found your group at about 6 million they raised an additional round I guess you can call it a be round a couple years later of another 6 to 7 million foundry led that again and then when I came into the company the company had also a where were you though I was can I ran the after I sold the agency I was at pupusas group Meyer I was gonna say that beautiful fort was it before you turn out there's a three year or now and then I I have some friends this company summit series which is a big entrepreneur conference that I ran for a year is almost like an externship just to kind of get away from the corporate world for a little and then I rejoined and then when I joined the company also some venture debt when I came up the idea of Suze I needed a little bit more of a leash to basically build the business so we got an extension of the B round for another five mil you raise the the six million debt round and 2015 or that was before you I was before I joined yeah got it so when I joined that six million of venture debt was already there we got an extra five million on top of the be just so I had a little bit more of you know leeway to basically build Suzy and we restructured that that ventured at the end of last year which freed up a little more capital and now at the end this year we're gonna be raising a growth round so so real quick when you came in you would not take that extra five from foundry in 2017 take that dilution unless you were like in a position where like crap like we I want more runway to feel comfortable here with a reap lat form for example right I mean basically we're walking away from ninety percent in the revenue to stop driving it the crew to focus on what was 10% of the revenue to build into a new business so yeah you're not gonna go two steps forward without taking one step so what when you joined after that debt round what was a range is fine but what was the run right at that point well it wasn't really a rum rate because Crowdtap was more of a tech enabled service business so it didn't really have recurring revenue so didn't really have a high renewal rate it was highly unpredictable and become it was almost like a media type business and it was shrinking right so and and the costs have blown out of control there was a second CEO would come in and between the guy who I put in and when I joined and it just wasn't being run the right way not necessarily his fault but just the market conditions what is the 2016 even on that model that's not really SAS we're talking like 10 million 5 million 100 million between 5 and 10 million between 5 to 10 it was burning a ton of cash and then in 2017 we actually had to cut about 70 percent of the staff be along with raising that capital I just needed to basically conserve capital refocus on this new business a lot of which was gonna spit out revenue right away so it was like the heart of the pivot so to speak and it was really hard coming out of 2017 we had the vision for Suzy right around when we last spoke launch it in 2018 and been off to the races ever since now we're we're cranking I mean is this great can I take MRR & ARR those 200 customers times that ACP you gave me earlier 75 grand now puts out like a million to a month something like that so Rommel will be in and this year probably little higher yeah and ends which you can see would you consider all that 1.2 million a month Pierce ass at this point or pure sass in fact feels good right yeah it feels great I mean we've simply stripped out things that Margaret believed was no I guess he crowd type revenue which we could have called SAS because we just don't want to screw around with that like SAS assess us we want to have you know we're gonna be benchmarked against other best-in-class SAS companies we want to have the gross margin profile the renewal rate profiles of other companies in our space ok good so you hope to break one point to by the end of this year we're gonna buy one point two at the end of this year we're yet today about one yep just around them and where Suzy 2018 Revenue were you exactly a year ago just pure SAS uh we were I think around 600,000 we're growing about eighty percent right that's I mean considering every I mean everything going on that's pretty damn good actually can she had a little misstep in q1 I mean it's funny because when you take a step back and you say we launched this product last year yeah and at a point right now where we're gonna be at a place where most US company takes 5-10 years to build its it's good to think of and we had a misstep in q1 because we had you know some churn in terms of our employees and we had the product going down last year but without that we'd be in over a hundred percent and and the renewal rate is actually accelerating it I mean the growth rates actually accelerating yeah so and by the way like you so the most successful like I've interviewed about 3,000 alsace SEOs so I like to look at patterns the most successful I'll just measure it purely based off just capitalistic ARR right the one is north of a hundred million almost all of them start off as an agency because you get unique insights into all the customers problems and then you've gotta find problem so like you you the actual store in my opinion coming to no sorry we're cutting in and out but I'm just saying you my opinion your story is actually like most companies will move from like an on-prem to assess your story is actually moving from mic a low margin cash like agency media business to pure place ass going to a million you know twelve million dollar run rate essentially in under 18 months yeah and I should say our agency was pulling 25 percent EBIT the margins at the end of the day you know it because we we had that that Crowdtap impetus but that IP was built into the services model but yeah I mean I think it's because you understand the customer pain points I mean I worked with CMOS for 15 years I understand what they need especially with our business I'm not coming at it from a market research standpoint I'm coming at it from a business build their standpoint and I think that curse of knowledge can sometimes hurt people who sort of are you know part of the industry that they're going into where I'm coming in from the outside looking in and now we're actually bring on market research experts actually help us cuz we're going up against companies like Qualtrics and Survey Monkey you know Qualtrics obviously we know about the big acquisition SurveyMonkey just went public those companies are in our space and that's who are competing with what's your team size today how many people we Employee count have 65 full-time employees how many are engineers 15 to 18 how many quota carrying reps quota can grabs eight eight what do you set when a when a salesperson is fully on board what's your salesperson profitability when you compare their quota relative to their full complement 5x okay so if someone's full earnings or 200,000 we want to see them bring in a million in license revenue that doesn't count project revenue because sometimes we'll do projects for clients for 20 25 grand actually show them the value before they sign a license I don't count that I kind of look at as pause the cost of acquiring a customer do you ever sort based off quarts or 200 customers based off who you put $25,000 professional services on and what their retention rates look like compared to people that you did not touch with professional services so it's not even professional services because we will they're paying us twenty five thousand dollars to do a project for us to actually prove the value it's not we're not spending it on them but we do compare customers by cohorts by how you know enterprise customers versus mid market customers customers who have them some type of managed service component versus pure-play self service customers we're always looking at that data our whole mantra at Suzy is kid tested mother approved the mother is the is sort of the expert survey research person the kid is the person that just needs the data and doesn't really care about market research we kind of need to appease the master market researcher while being easy and kind of intuit enough for the everyday person that just needs to get consumer feedback yeah you you took care it sounds like you wiped out the debt a year to ago it was yeah we restructured it okay so what is not maybe yeah so what so when you first who did you raise him was this an SV beacon alone uh yeah it was the the venture that original did venture that was through Trinity capital and we restructured it through a company called North Atlantic capital out of Portland Maine the biggest difference with the second round of debt and the first is this is an interest-only component where there's no principle pay back and then there's good of a balloon payment at the end so it basically takes away a lot of sort of the drain on cash flow tell us what is the rate are we talking like 6% or like 12% to the higher end I don't know what I'm able to disclose I know that's fine I asked because there are so many diesel own offerings now and it's so hard to compare them all equally because they throw in all these weird freaking terms and it's not normalized so actually the other place where you know yeah you'd be the place where you know you can pay it back listen if you can't pay back that balloon payment your company is gone but you know with the terms we had in the growth that we have in the business it's for us there was kind of a no-brainer and it really bridged us we were sort of in the tweener phase last December we're thinking about growth round phrase but growth round investors won a million mr are right they went a little bit more of an operating history and we were so they're too big to be early-stage and too small to be growth stage and now we're right in the heart of growth stage we have a ton of inbound interest and we want to get the right investor to come in and help us grow to do that next round we're doing we're gonna do in the fourth quarter okay and q4 and what do you think the right target is in terms of what you wanna raise I'm gonna raise around 20 million you know if where it concern you know we could get eight to ten X revenues so you know you're looking at anywhere between 100 to say 150 million valuation and based upon the ownership state that most growth round investors want will probably raise 20 to 25 million about site capital could part of that could be secondary yeah yeah yeah and you know so you'll sell call it you know 10 ish percent of the cut maybe it may be a little bit more personal the company 15 percent that's what growth investors need for it to move the needle for them yeah yeah interesting okay very good let me just make sure I've got nothing else here do you have more you didn't have a lot of insight of this last time cuz it Customer Acquisition Cost (CAC) was new but do you know what your fully weighted CAC is to get a new $70,000 ACV account up it's about fifty four thousand okay good I mean so healthy payback period there - yep yeah good stuff all right man let's wrap up with The Famous Five! the famous five number one favorite business book I hard thing about our things by Ben Horowitz number two is their CEO you're falling or studying I actually love following Jason Lumpkin who's more of a kind of sass expert but he obviously sold this company to Adobe but I get a lot of insights from him number three what's your favorite online tool for building your company I love a tool called insight squared that we use it sits on top of Salesforce that gives a sort of real-time information about how our sales team is performing number four how many hours of sleep you get every night six to seven that's good in situation married single kids age two kids I love that all right and how are you I'm forty four forty four wins the wedding by the way November oh that's excited let her do all me there I'm gonna be going I'm gonna be asking like you know revenue questions and then the scenes of all your SAS friends right last question alright last question what he was your 20 year old self knew a couple things I think first and foremost to think more long-term don't chase the small deals you know think big picture your time is a huge opportunity cost if you're not spending on saying that is really realizing your vision guys Suzy calm built on top of crowd top again helping big brands really get intelligent feedback from customers via surveys or even prospective customers now doing caught 12 million bucks an AR are up from six hundred thousand dollars months just a year ago healthy growth rate two hundred customers pain call it 60 $70,000 a CVS they raise twenty six million bucks to do this 65 on the team hundred percent net revenue more attention with a payback right now of about 10 months to land on you $75,000 a CV account alright Matt thanks for taking us to the top thank you