TABS Suite Revenue & Valuation (2024)

what is going on youtube you know we are just two weeks away from founder 500 in austin texas on september 1st and 2nd there's over 500 b2b sas founders all coming together you don't want to miss it ticket prices increase every three days i have it on automatic accelerator every three days and we're almost sold out you can see there's about nine left when you go to the event bright link about nine left and it's updating real time so check it out today it's founderpath.com and then in the upper left you can hover over our product drop down and click the event stream i'll also put in the description here of the youtube video i'd love to see you there hey folks my guest today's unattack he's a four times non-technical sas founder who's amassed an incredible amount of experience in building investing and growth hacking early stage sas ventures got his fingers into the model angel investing advising startups and mentoring founders through unique reverse angel method he's on the board of many companies and most recently he's built tabscore.com diligence as a service and he's got some big news to share we're not you ready to take to the top sure all right let's not bury the lead what's the news all right so uh pre-ipo corporation uh is a firm that is doing private and secondary market securities and uh you know as they were expanding and raising their round they found it pertinent to acquire a technology suite which was tab suite so adding our proprietary ai and ml you know intelligence as a service on these late stage companies but also as they focus down into mid cap and growth stage being able to perform the diligent suite functions uh you know and just enhance the tech suite of their offering overall yep yep i love that well look we are um we're obviously super excited for you tell us more about um tab score so pre pre-ipo right so what kinds of stuff were you working on or sorry not pre-ipo but like pre the acquisition to the company called free ipo right so who what would someone have paid you for you know four months ago yeah i mean we had everything from uh everyone from angel investors single angel investors all the way up to angel funds all the way up to micro vcs big vcs we even had sba lenders government organizations and their core crux was utilizing tab suite to essentially conduct an evaluation on an early stage or a growth stage company and what that means really is you know not like the traditional scraping style tools that just providing you know hey this company has 10 followers they're not a good company that's what we wanted to avoid so tab suite allowed uh these investors to perform quantitative analysis on the qualitative aspects of the business so being able to assign quantitative metrics to founder experience or you know where they are in the life cycle whether they're b2b or b2c and whether they've explored those paths being able to put quantitative metrics for that but then also able to spit out these dynamic reports uh in lieu of investment memos to not replace the diligence process but just augment the amount of information being provided to the team in a fraction of the time and cost and so was that if people wanted that diligence was it one offer do you guys have a sas model it's a sas model um similar to how it's uh it's how some of the companies like zapier are doing like a zaps or 20 000 zaps so the same way we did tabs tokens so different types of assessments quote-unquote assessments could be created in terms of the user going on the investor going on and creating like hey we want to learn about financial fundraising product market fit we want a data room but we don't care about xyz so it created a custom token cost for that assessment they could actually turn that into a button and then put that on their website or an email drip and then using zapier set triggers to send that off at any point during their process so as a sas model ranged anywhere from 500 bucks a month all the way up to sometimes 75k a year or more what would you say so 500 bucks a month to what would that be for uh six thousand dollars a month that's a big range what would you like the average customer is paying like a grand a month something like that yeah i would probably say we we had a lot of like 500 to a thousand dollar and then what they would do is go in and then if they utilized all their tokens they would just purchase a la carte or just automatically bumped up to another tier and when did you guys write the first line of code for tab score so sweet when did you launch uh we launched official so first i was doing the schema diagramming while i was on the last legs of the previous business as it all works with serial entrepreneurs but then the first kind of deployed launch was january 2020. when did you start the schema though uh october uh 2019. so it took a couple months it was a very crude you know we look back on it actually we have a funny like uh progression model of how the first one we had to buy uh it's actually sitting oh you can't see from there but it's sitting um over there it's a computer that we just had to run the excel macro that would put provide the report and it would take an hour and we couldn't breathe near it because it would crash oh what's going on there youtube good to see you guys now imagine this you love watching these interviews with sas founders but imagine if we took all of the valuation data out from over 2807 interviews i've done manually saves you a lot of time well we've done this we've built it into the beautiful interface inside of founder path check this out i'll show you how you can access this in a second but you log in you connect your stripe account you see your valuation real time you can see what it changed over the past 88 days and even set goals for valuation this year now the secret evaluation is there's many different ways to value a sas business so the reason you're going to see three or four different valuations inside of your frowner path dashboard this is all free by the way is because depending on who's doing the buying of your sas company you're going to get a different valuation a vc is going to pay a different valuation private equity firm is different if you're going to do a minority sale that's different and if you sell the whole business that's a different valuation you can see all those when i hover over here right so the teal is what a vc would pay yellow is what private equity and red is if you sold the whole thing outright now what's cool about this is this is not built off random data again you guys hear these interviews on youtube all these datas are built from real-time valuation data points founders share with us on the show so traction 1.2 million seed round 3.7 raised they sold 22 to their business go in here and filter by the event maybe you only want to see companies that have sold the whole business well here are a bunch that have been acquired the valuation and the multiple maybe you're going out right now and you're raising your seed round well go in here and look at all this recent seed deals that went down what they raised what valuation they raised at and what percent that they sold there's never been a larger data set of sas valuations than what you can get now inside of founderpath and we're thrilled to bring it to you all right we're going to go back to the youtube video here in a second but if you want to check this tool out if you want to jump in and sign up you can check it out for free to get your valuation at this link this link founderpath.com forward slash products forward slash evaluations or if you go to founderpath.com and hover over products click on get your evaluation here and go ahead and sign up to give it a whirl again all that valuation data live right inside the platform i hope to see you there all right let's jump back into the interview okay so so that you get going in 2019 and how long did it take you to get your first customer uh our first customer was march of 2020 so it took right after actually during covid one of the investors was like i'm not able to conduct diligence uh you know i know i turned down the tool earlier can i utilize it as a trial and you know we gave him one uh and it was super manual on the underside and we're like this is not sustainable that's where we started to build out the ml tool uh but he was yeah it was one of the first customers was a thousand dollars processed as a check handed over a restaurant table that's amazing all right and so how many customers did you scale to before the acquisition um so whenever even potential users or investors asked us that question the the way that we turned that around was we have some that you know ran incubator accelerator programs for thousands of assessments we had some that use it on a per deal basis so in terms of users or customers that wasn't the best metric to look at it by i would say that we had over 1 million lines of iterated code written by the ml and ai system that's how much the platform was used even today the sba company that uses it or the sba lender from the state of colorado we still have passively after they've turned off all their funnels are still dripping through three or four a day that's just that one person yeah sorry but i mean look i understand the metric you're giving me but my audience is going to hear that and roll their eyes so let me try and help you like save a little face here i get how you're trying to describe it but let me ask a different question it might be easier to answer how many folks spent at least a dollar on the platform over the past the prior 12 months before the acquisition i'd say about 70. okay there you go yeah that's a much better metric and you always have power this is a very high touch sas product where it requires you know multiple demos and to a point where it's enterprise uh to a certain degree even at the 500 level um you know so we introduced certain tiers of pricing that were always changing i mean i you know percentage of aum i mean we experimented with a lot of different stuff wait give me some other example percentage of a um you ended up on the cookies you ended up on the on the token basis right credits but what were the other things you test uh so you know it's different when you get on the phone and the guy's like all right well we have 500 million want to deploy and automatically it's like all right well 500 bucks a month doesn't really you know cut it for you so we we tried percentage of aum we tried um percentage of the amount you funded into the deals even though your fund hasn't closed yet uh we tried sas pricing where it was just uh one fee and then it was like blocks of you know uh assessments we tried a per assessment basis and then we tried actually opening it up to founders that didn't work well so we went back to b2b and then we went ultra high like b to b to e i would say or b to e to b enterprise to business uh-huh super interesting okay so you go from nothing to 70 customers over the past caught two and a half three years if they're paying on average you know called a grand a month right it's fair to say you guys were flirting with the million dollar run rate about 70 000 bucks a month in revenue right um yeah we had it wasn't recurring but that's where we were you know like heading towards rapidly because we also had the growth and consulting side which came up as an interesting piece because a lot of times when the when the assessments were created and the assessment is pointing out okay the company needs firms our help here and here we would be contacted by firms being like hey you know we have this package of like legal needs for example and then you've got these companies that are saying okay we need the following like let's match us together um so the consulting revenue became almost 30 to 50 000 per ticket um from there so interesting yeah so so i guess if we look at like the last full year then in like 2021 what was like what was the breakdown you think 40 was consulting 40 was like per assessment or sas or recurring base somehow yeah um some of our large sas customers like for example we had three or four sas agreements signed at uh thirty to fifty thousand dollar mark uh and those were per month or a year uh per year but those were deployed custom silos um and then each one of those uh for example like the the sba one while we're on the topic was saying okay now that we've deployed our silo we want to bring on 14 others or 10 others or whatever the number was underneath at that same 30 000 a year so the pipeline and run rate became astronomical like just from them becoming it was almost like a hub and spoke model yeah yeah but i mean did you do more than a million revenue and combine revenue last year we didn't okay so i guess the reason i'm asking this is yeah sorry the exit what our exit valuation accounted for us putting a pause essentially on going and closing that additional pipeline so we actually sold based on the metric of hey you know there's minimal revenue here let's take this give us the resources we'll you know build an enhanced tech suite but then we'll still go and attack those so now we're turning those funnels back on i see i see i see okay that makes sense and and you say we how many folks are on the team um we had about seven people i say about because you always have you know a couple contractors that are now closest family uh yeah that were like basically full-time um so who did all your engineering your business founder uh i am a business founder no uh technical exp i shouldn't say no technical experience um all our engineering was done by the same team that worked with me on the last business and the one before that um we grew that so those contractors are what i would call essentially part of the team but not legally you know like literally part of the team were they part of like an outsourced dev shop that you worked with over and over are there individual folks you found on fiber upwork top tell other places yeah it was it was a a team overseas that we basically kind of have taken ownership of in terms of hiring processes and and implemented almost like to make them our own but no but but you don't you don't let other founders or other people pay to put products through that team uh we actually have started doing that just because the size and strength of that team is so great that way it doesn't make sense to not you know i'm always approached by founders saying hey like can you help me with product or things like that and interestingly enough um something that came of the tabs whole like two year two and a half year journey was that i turned into our head of product um so i learned figma inside out i learned you know all the different tips and tricks and then we worked it on a model where i would design and iterate they would build overnight i'd wake up and work on the suggestions while they worked on my from the previous day and it became like a cool cycle yep yep no that makes a ton of sense um and so are they sticking with the company now post post acquisition they are part of the acquisition deal was that we usurp the tech talent or the top tier talent into the new firm interesting and how many outsourced developers are there uh seven six total okay very cool and what which country are you said india yep they're based in india between india and singapore very very cool all right um let's talk about the deal you know there's a lot of companies building great businesses here right you look at pitch book you look at cb insights obviously matter mark didn't work out for a variety of reasons they probably raised too much but like how do you know you didn't first off were you bootstrapped yes or no i think you were right yeah we were bootstrapped it was a little bit of a difficult like uh answer because it was gray area we were essentially funded i was the entrepreneur in residence for a fund and then i essentially built the product under them using 500k from them but it was still like bootstrapped to the point where i had to essentially you know that came out of the basis point so well how much what did you did you own more or less than 70 percent of equity in the business i did i own more than it yeah okay god and then they own whatever 10 15 20 correct okay okay okay i guess so why would they let this go why wouldn't they try them i mean if it's really working well it's proprietary why'd they let it why would they let it go so it's a good question it's one that we've been asked um you know asked a lot and again let me just clarify on the last point like i as part of that parent organization like they owned a hundred percent my shares or my structure ownership in tabs was through that um the reason that we well wait what does that mean so so we hear model all the time where this sort of happens where you don't actually own 78 of the business but on an exit you own 78 or 80 percent of the profits or the upside is that how structured yep so because i was an entrepreneur in residence my contract is with that fund um but i you know building it out my time became more and more focused on this and less on their portfolio companies i see um you know so and i'm glad that you were able to clarify that and that's a good cohesive method to explain it uh yeah i know that makes sense you answered a question about why did we let it go we actually didn't i don't consider it being let go uh in effect we realized 10 to 12 x on you know initial capitalization but that is only on direct cost not actually ip time and the actual time spent you know from the founders which that's a an age-old battle between vcs and and founders is you know how do you quantify that but in terms of the the equity received as part of the cash plus stock compensation the equity received is uh of us based on what we're building in our roadmap and everything like we talked about like pipelines that we had frozen that we're going to reactivate the valuation um and the percentage we own actually and the deal terms make it worthwhile to the number that we had kind of hoped and we're look we look at this as as let's put that like in once that was a lot of like sure that's hard to follow uh would you guys sell for 10 to 15 x multiple on trailing 12 months revenue no so we what i was saying is like because we spent like roughly 500 to you know north of 500k on physical like payments to either vendors subscriptions those actual capitalized costs uh the cash portion of the deal you know was roughly like the 10 to 12 range i mean sorry x range of that but the remainder of the deal uh terms were taken as equity in pre-ipo in the surviving and that percentage that we got of pre-ipo based on what we know about the roadmap and where we're headed with that um is it makes up for the difference in where we want it to be in terms of our vision for tabs well even if it's just cash though i mean and you did less than a million bucks in revenue trailing 12 months a million right times even 6x would be great right now right it's a 6 million deal but if you got a deal that's 10x the cash you put out 500k that's implying a 5 million cash component of a deal which i would consider a fantastic deal by itself yeah i mean you know you're a numbers guy especially when with the whole founder path thing and you look at those ratios i mean it was a great deal how did you convince that's crazy actually i mean considering you're not even pure size how did you convince someone to pay a you know more than 5 million total deal price but 5 million cash for business doing less than a million in revenue so one of the key parts of the diligence was actually it was a part of an aqua hire right they really wanted us and the team as part of it the other piece was they went and spoke to our sas enterprise customers you know it's one thing to say oh this is our pipeline but it's another thing to talk to them and those people to be like yeah we're just tell us when to go and we're going to bring on you know everyone else so in a way it was like okay we're going to use this the actual value of the ip as well based on their conversations with their large enterprise customers i mean the dollar amounts attached to what they were selling based on the usage of our tech was where they we kind of came to that of this price was public this price was in the press 20.8 million dollar deal price 2.8 million dollars well that was yeah the initial price the final price got uh you know that was the mou pricing but then we adjusted slightly to reach like terms more favorable to both parties um but was the total deal price lower than twenty point eight or higher than twenty percent after slightly lower than twenty point fair enough but five million of it was cash the rest stock equity whatever more upside earned outs things like that makes good sense interesting um okay well we'll see what happens now was pre-ipo bootstrap they raised a bunch of money so pre-epo is not bootstrapped it was for a little bit but they've uh they're about halfway through an 8.75 million seed round if i'm not mistaken um they're closing another 25 mil uh shortly after that and then there's a credit facility on the line for uh you know not closed yet but there's a several hundred million dollar credit facility to actually buy shares in in the pre-ipo companies from second yeah and they're playing serving the crypto world too so just to be clear when you say there was a five million dollar cash component of this this wasn't like some exchange for eth or some crazy inflated coin on coinbase that you can't actually hit liquidity this was 5 million usd fiat wired to you plus the fund that you're an ern plus any other one that owned equity in the business there's still a cash uh component like earn out that as you know during the purchase period or immediately following but i see it it's in us dollar it's not in some crypto coin i see okay so the total deal value was caught a little less than 20 million bucks of which five million was cash however all not all that cash was paid up front some portion is on whatever two-year earn out correct i see okay very cool um heck of a story here i guess um last thing i'll talk about were you guys profitable before you exited uh yeah we were break even okay break even pretty good pretty good very cool well hey let's wrap up here with the famous five number one favorite business book business book uh hard things about hard things ben number two yeah number two is there a ceo you're following or studying uh there is actually there are quite a few i can name one right off the top of my head number that's okay number three what's your favorite online tool for building a business it's gotta be figma and number four number four how many hours of sleep to get every night i actually get eight to nine i i can't question without it and what's your situation married single kids uh be married in march oh congrats no kids yet no kids yet other all right little on how ux designers are gonna pop out how old are you i'm 28. 28 last question something you wish you knew when you were 20. i wish i knew that there were founders willing to help out us building companies uh as first-time founders guys there you have it he learned by building his company as an eir and out of fun they gave him 500 grand cash and said spin this out and build it was called tab suite called machine learning and uh sorry uh due diligence using machine learning and ai grew it to you know something between 500k and a million bucks of revenue combined sas and consulting fees and then sold just recently for 20 million dollar deal value to pre-ipo which 5 million of that was a cash component now he's building this inside of pre-ipo and hopes to continue to scale it rapidly with his team of seven you know thanks for taking us to the top thanks 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 p.m 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 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