Teampay Revenue, Valuation & Funding (2024)

hello everyone my guest today is andrew hoag he's currently the founder and ceo of team pay a venture back company transforming b2b purchasing software as an advisor consultant and serial entrepreneur he's worked with both small startups and large public companies on product strategy innovation operations and growth andrew you ready to take us to the top i am let's do this all right team pay now are you guys a pure place sas company or more like transaction based um we have a little bit of both so we're sas first so software is what we sell to our customers and then we also help customers move money and make payments okay so let me let me let me get to this answer really quick last 12 months revenue what percent was pure sas first transaction uh ninety-five percent okay good deal you're basically a sas company all right you are and so tell me what the product does for people not familiar yeah so basically it was a problem that i'd experienced as a founder which is i constantly had people coming up to me and asking to make purchases and once you start to scale if you have 200 500 people in your team you can't give everyone a blank check and you can't have everyone turning in expense reports for their monthly buffer subscription and so what we realized is that the fundamental way that companies do purchasing has changed uh more software is being bought bottoms up more is being purchased by everyone throughout the organization and other departments have great tools right you have tools like octa and one login which do single sign on you have tools like github which controls access to your source code and there's not a tool that actually controls access to the company's money and so that's really been where team pay is focused and the vision for us interesting okay and what's the company going to pay on average just the flat fee ignore transaction revenue just the flat sas fee per year on average what do they pay yeah so i mean our contracts range anywhere from 4k up to kind of mid to upper 5k figures depending on the volume and the features and those sets of things so sorry you said 4k did you mean four figures four figures yeah sorry four figure to five figure acv so kind of if you follow the rabbit's deer and elephants theory of zazz we're very much focused on rabbits and deer yeah perfect yeah this is that is the christophe chance thing that we put him on the kind of the cover of our last magazine specifically for that model first off i worked with when i was in berlin oh on which company um when he was at point nine i worked with a couple of their portfolio companies oh good yeah no he's still at point nine that's great so just to be clear an average for you would be called a hundred grand something like that yeah somewhere in that ten to hundred grand range okay ten to okay got it ten two hundred four to five four to five figures got it very good all right and so what's the difference if someone's gonna pay you a grand per month or grand per year versus 90 grand per year what pricing x's are you using to get higher price points yeah so we price on a couple different dimensions so we price based on capacity um so roughly how much customers use then we price based on features um so features can range anywhere from like if you're on quickbooks or zero you're at the lower end of the range and if you're on sap you're at the higher end of the range because it's a more complex integration okay and when you launch the company what year um we launched the company in january of 2017 to the public um we started building the product in september and you were there and you're one of the founders right you're there from the beginning i was there from the beginning i started working on it six months before the company existed that's good now were you so are you developer background i am yeah i started my career building super computers for nasa interesting very cool okay so talk to me about customer growth today if you're the if you're the engineering guy do are you also handling all the first you know five customer sales too or what i handled the first five but i've outsourced asked and brought on a professional team last year and they were able to grow us 26 month over month um you know we've had some really good logo growth and we've also seen expansion within our existing customers they're very happy with what we're doing that's great so how many customers are you working with um we just crossed over 100. oh congrats okay very good and then let's break down the team i want to understand kind of how you got that growth so team size today is how many people um so today we're 16 we just started ramping up in january um but you know in terms of the growth trajectory we were we were four people for the first year i was doing all the selling um then we added demand gen and an account exec on the sales side and that was 2018 and that's what kind of really put the inflection point in the curve and now we're starting to to you know basically replicate that out across the sales team and teams so the team says 16 everyone's based in new york yeah we're all in new york got it and bootstrapped have you raised um we raised uh about four million a venture okay so we raised a million before we launched three million um post revenue all equity or any debt or convertible notes that's all equity all equity very good and then how aggressive are you being today in terms of growth are you burning today or you break even um i mean we're still burning because i get to grow 25 month over month and if you follow kind of the j curve of sas um that growth begins to pay off a really nice annuity in the out years and we're already seeing that um so we've continued to invest on growth because it's really efficient our magic number is north of one um a dollar of cac for a dollar new arr uh it's divided by four right so the sas magic number is times four so yeah it's it's roughly a quarter i don't know i don't know what you're talking about yeah so it's one of kristoff's things in terms of the sas magic numbers so you take your sales and marketing investment in your current quarter and then you look at the the previous quarter's growth and you run a ratio on that um and so that's a measure of your sales and marketing efficiency so let's have the equation let me yeah yeah well the reason i asked everyone everyone we say sas magic number everyone has a different magic number kristoff just called it char you know identified this formula as his magic thing so that's why i asked so you're basically comparing new bookings new bookings i lost the internet there so that's okay you're comparing new bookings this quarter to basically marketing spend last quarter yep yeah got it and you're saying it's a one to four ratio so you're putting in 25 cents and essentially getting a dollar out yeah that's the well it 1.0 be it could be flipped though as well are you putting a dollar in and getting 25 cents out the next quarter no we're putting a dollar in and getting a dollar in a cv got it so you're putting it just to be clear you're putting a yeah that's that's a one-to-one ratio yeah yeah yeah so it's just that's the same thing as exactly why it's that's a cac payback of 12 months same thing yes okay we made we made that way more complicated than it needed to be all right 12 months 12 month payback period that's good and then um churn's critical in a sas company tell me about how you're measuring turn and how you keep it low um so i mean we haven't really experienced any churn so far out of two years so we're pretty happy with that are you happy with that shouldn't you have some churn or your price too cheap um well people don't churn in our in our business people don't churn because of price right so you know if you think about who we sell to right we sell to finance teams and the things they care about is does this screw up my organization and does this screw up my process well andrew but if you don't churn because if people don't drink is the price why wouldn't you forex your price point we have been every quarter it goes up by about 50 percent but you still haven't seen any churns so why not increase it by 10 10 why why are you here's my 10x the second you end this interview talk to me in a quarter no no but this is a serious question people get stuck on this all the time why aren't you why are you only going up by three or four i mean you should have my point is i think people should have churn otherwise you're leaving money on the table right but all of our customers are paying annual contracts so why would they churn if we increase the price if they if we increase the price they don't buy so they churn no but churn is when a customer buys and leaves yeah so if someone signs up this year and next year they come back and for the same thing you have four i haven't had any renewals yet yeah we haven't any renewals yet didn't you say you launched in 2017 yeah those were all monthlies and they've all stayed on monthly so we haven't gone back and re-upped the price on the monthly users today but certainly going forward i mean that's something that we think about but frankly customers hit bumpers and they upgrade themselves so i don't really have to go raise prices on them because they just bring us expansion revenue yeah my basic question is though is people always come on the show and brag about no churn and i see that and a lot of people say it has a massive weakness it shows that you're leaving tons of money potentially on the table and nobody knows no one has everyone has their own formula for increasing price so it's great they're naturally expanding i am 100 leaving money on the table i am certain of that yeah so my point is how do you push those limits quicker like there's a there's a thought process you're using yeah i mean part of it is it's more important for us to get logos on the platform than perfect revenue at this point right um and so because every logo gets us more logos right we see that as we get more reference ability within customers um and so like for me i'm not worried about pricing to perfection at this point right we're still a seed stage company so in terms of our go to market motion i close our average deal time is less than four weeks and that also is probably an indicator that we're not pricing enough right so i absolutely would mean you're not pricing enough like you're the highest price point yeah if it takes if it takes four weeks right um to close a deal then we probably could increase the prices a little bit because it's probably too easy for them to say yes well i don't know about that i i've run many companies in the past where a 30 sale a month costs the same as it takes the same amount of time as a 30 000 a month sale um i guess i guess what i'm trying to get is your pricing your pricing right now around it sounds like number of approvals uh the number of teammates people have no we don't price per user we basically price on how much they're using the system just like you would buy dropbox or anything yeah but dropbox is absolutely driven what is your version of storage um our version of storage is how much people use the system so how many request transactions volume that was the question size yeah so what's the number one what's the number one usage metric that is mostly directly correlated with upsells it depends on the customer but usually it's how much they use the platform so how much volume are they pushing through how many transactions are they doing how many approvals are they doing how many cards are they issuing right all of those are different dimensions that we can price across yeah again what i'm asking is of those dimensions which one is the is the strongest leading indicator for you in terms of expansion um probably transactions but it it's about half and half between accounts that's not consistent okay interesting um cause like we have some customers that are using us to buy we works right and if you're buying wework at 35 or 50k a month it's going to look very different than if you're buying you know if you're buying like office supplies right and so there's different usage patterns and frankly we don't dictate to our customers how they use the platform um it's just like if dropbox was charging per file or per gigabyte right they chose per gigabyte but they could also charge per file well no it wouldn't work because it wouldn't work that's exactly actually the question i the reason i asked this question is usually if someone gives me like seven answers to this it's like clear they're not actually quite sure yet what value they're bringing dropbox knows it is it is storage driven it doesn't matter if it's one file or a million files and so that's why i'm asking you this question i mean for me when i think about this problem at my last company we had 50 employees i i felt it i know exactly what you're talking about it's like i don't have time to freaking sign a piece of paper to approve a 40 a month you know g suite subscription that you want to go sign up for so my pain point on this would be its number it would be number of cards i have to issue i guess each co each each employee gets a card essentially uh no each vendor each vendor gets a card so if i am nathan locke's company and i'm signing up for a hundred different software platforms 100 different expenses i have a different card for each vendor i'm paying for yep so i have 100 cards i have to manage yep okay how do you make that work that sounds extremely complex to me because you never see the card so it's not a physical version you're already managing 100 vendors right and so the benefit is that each one of those so let's say you have one card for caviar and you have another card for github right those cards are coded differently on the accounting system so the advantage to the customer is that i have a card that's coded for food and i have a card that's coded for engineering r d right and we automate all of that on the back end so it's not a physical card uh we do physical we do virtual cards both right if you're doing a physical card for tme yes it works the way you talked about but most of our customers use us for opex because that's actually where the pain is every company we've run into has a spreadsheet of here's all our subscriptions here's all the stuff that the office manager is buying here's all the things that we need to book for this event um and that's really difficult to manage if you're trying to share that across cards and you have to do a bunch of coding at the end of the month and you have to make sure that it's in budget you have to make sure that it falls under someone's approval rules yep very good okay and then talk to me about the first 10 customers you got how did you hustle your way there where'd you find them um you know it was interesting like i think a lot of the customers came through our network right i mean i think that's just the way part of what we part of what we had to figure out in the beginning is what the right size of customer is and what the icp is right so we have a couple customers that are less than 50 people but most of our customers are a little bit larger and frankly in the last six months most of our customers are more than 200 people so a lot of what we spent the early time on was starting with very small customers realizing there wasn't good product market fit and then drifting up and up and up until we found that there was kind of that sweet spot there around 50 or 100 employees okay but you start off with your network this it's that super vague they'll be really specific so you found someone in your network with more than 50 people on their team and then how did you know this person who was it so i mean network to me includes investors advisors personal relationships friends of friends fellow entrepreneurs and people that we met through we met through events here in new york um is that las vegas no so specifically who was the first sale and how did you meet that person who's um good question or just an early one yeah and early when you remember was uh was through an investor who knew a cfo at another company got it okay so so you raised you raised pre-product pre-revenue yes okay so you had investors and basically said hey guys if you have any cfos you can introduce me to in your portfolio companies that would be a great customer for us we raised pre-product pre-revenue in preteen that's correct my point is you put out an ass to your investors that said hey we'd love for you to introduce us to cfos if you have any introduces and that's how i got your first customer yep got it okay that's really helpful very good among those other six things i mentioned yeah yeah yeah fine it was just that one was the one that converted yep well that's that's a good one to know about so okay good use your use your investor network there launch 2017 raised 4 million bucks to do it you're burning capital today investing in growth 12 month payback period that's good 100 customers you said and then you said kind of four to five figures so i mean when do you break a million bucks in ar or have you already done that um we're really close do you think it happened like this month or next month um it could happen this month yeah and what do you hope to get to so there's what 10 months left in this year what do you hope to get to do by the end of 2019 yeah i mean you know right there it's kind of like we think we can do better than the standard triple triple double double double yep um and i think that's kind of what we look at is the lower bar i mean most investors we talk to look at that as the floor so that's kind of table stakes um and we've got you know we've got a pretty aggressive growth plan this year considering all that growth we did on a single sales rep what'd you do historically so if you're doing 80 call 80 grand a month today what were you doing a year ago i mean we 10x 20x the revenue in the last year okay so you're doing like eight grand a month a year ago yeah even less okay good good i mean you were really just coming to market yeah exactly we were just proving the mvp out and then it was stalin to go to market yeah okay very good let's wrap up here with the famous five number one andrew what's your favorite business book um that's a great question the hard thing about hard things by mr horowitz number two is there a ceo you're following or studying um not a single one um i tend to follow a couple people i like what henry ward is doing at carta i think he's been thoughtful about how he's building the organization and there's a couple here in new york that i follow number three what is your favorite online tool for building the company uh what do you mean what does that mean the tool that your team uses the most to build the company the software you spend the most on internally oh probably slack okay no location scaling number four how many hours of sleep to get every night um six to seven and what's your situation married single kiddos um i'm married okay any kid no kids no kids nice sister pup he's got a chief dog officer that's good and how old are you he's on the website um i'm old for this i'm in my 40s that's not old andrew all right last question what do you wish your 20 year old self knew uh how much fun this was i took uh took a decade before i did the startup journey and i should have done it when i was younger guys get into a startup earlier andrew founded team pay to make again payments that you're already spending money on more efficient more easy to scale especially as you grow your team size to 500 200 people launched in 2017 now 100 customers paying caught an average of 800 bucks a month so 80 grand a month in terms of mrr up from call it four five six grand a month just a year ago so obviously nice growth there upselling really based off number of transactions uh as they scale again four million raised burning capital 16 folks based in new york and remote locations a 12 month payback period to get those customers andrew thanks for taking us to the top all right sounds good