TestBox Revenue, Valuation & Funding (2024)

[00:00] Hey, folks. My guest today is Sam Senior. He's the co founder and CEO of testbox. Originally from Regional Australia, he studied software engineering and economics university where he met his co founder, Peter. He left Bain after six years as a senior manager in San Francisco to build the future of software buying. He now lives in Boulder, Colorado. Sam, you ready to take us to the top? [00:17] >> Yeah. Thanks so much for having me, Nathan. [00:19] You bet, man. So what does this mean, the future of software buying? [00:23] >> Well, I think previously everyone has talked about having an enterprise sales led approach. Now people are talking about a product led approach to growth and selling software. I think the future is actually customer led. So meeting the customer and how they want to buy software, the process they want to take and giving them a true hands on experience. We've basically built an app that allows people to test and compare enterprise software before they buy without needing [00:47] >> to talk to a salesperson with a hands on experience with real data in there and all the use case configures, they can do a side by side comparison within minutes instead of doing a month long sales process. [00:59] Sam, how does that work? It sounds too good to be true. Someone listening right now that wants to try Salesforce. Salesforce is not gonna let you try it unless you're on a sales call and all this stuff. Have you pirated their software or something and give everyone access? How do you do this? [01:09] >> So we've been very intentional in starting with just one software category to prove our value. So we started in the customer support help desk space, we've actually gone out and built partnerships with each of the major vendors. So we've got about six on the platform at the moment, three more in discussion, but we've got more than 50% of the market share of the top platforms already partnered and integrated with us. [01:31] And how do define market share? So otherwise, you wouldn't know how if you have [01:34] >> In terms of revenue or users, really, either is fine. I think if you take revenue, for example, Zendesk and help desk space has 20 plus percent of the market share. They're actually one of our partners that's integrated into testbox. [01:46] Okay. And what about Freshworks? [01:47] >> Yep. Integrated. [01:48] Okay. [01:49] >> And so HubSpot Service Hub and and a few others as well. [01:53] So what do you give Zendesk and Freshworks to let them do this? They want people going through their funnel, obviously. [01:57] >> Yes and no. I think they understand that people don't always want to go direct to go through an AE BDR process and said they want to go self serve and hands on. We're basically taking that self serve approach and supercharging it in a way that no one else has been able to do by getting it more real life like it's already been implemented for that end user. We're actually a new lead generation source for them. [02:20] Interesting. Yeah, well, it's actually funny. Dicksa's interview is next week. Nice. Girish came on before their IPO with Freshdesk and Brian Halligan came on pre IPO from HubSpot. I've got, you also have HelpScout, Trengo, and that crew as well. So this is cool. So you're gonna, I love how you're gonna sort of focus on a niche here and dominate the niche. Why customer support software though? Why start there? [02:40] >> My co founder and I actually about ten or eleven years ago worked as IT help desk agents. We just understood that space really well having used these types of software before and understand the use cases that really matter. But it all got coalesced around this experience actually, where someone close to me had previously bought help desk software and I watched how painful that experience was. And I basically interviewed her the entire time to understand what the [03:05] >> major pain points were and how we could make it better. So those two experiences together said, let's start there. Plus it's a hugely growing market that's like 10,500,000,000 today, growing at 10 plus percent and it's getting more and more important. So it's also a good niche for that reason. [03:18] Tell me more about growth. So you got going, you just raised some capital, we'll come back to that in a second, but you're onboarding. This is three step process. First, just introduce yourself. What are people mainly picking in the industry drop down? Are you seeing concentration around like B2C tech or B2B technology or something? Yeah. [03:32] >> So that that's primarily where we focus is B2B tech and then e commerce, then fintech. Sign ups. [03:39] Sign ups. What market are they in? Those three? Yes. Oh, okay. Okay. Okay. Got it. Cool. And then, and then, so I'm going through it now. I love asking these questions. I write, so you're basically saying what products do you wanna test? I'm gonna click HubSpot and Zendesk. Yep. Looking for another solution. So you're basically doing user generated content here. People start typing in something and it's like a new customer support tool that's taking off. You [04:00] should be aware of it because people will start typing it. Right? [04:02] >> Exactly right. And so we're basically trying to collate all that information so that we can say, great. We've had this many more people asking for this platform. Let me go build that partnership and get them integrated. [04:12] Alright. Talk money to me. When you give HubSpot a new customer, it's a hot probably the hottestly they can possibly get. You must have some economic upside here. [04:20] >> Yeah. Exactly. So with with HubSpot, it's about it's 20% of total contract value. So not just first year, but actually the entire contract value that we get paid. [04:31] What if you help the customer sign up on HubSpot for a $100 a month? HubSpot, the customer success managers work with them for twelve months and expand them to a thousand dollars a month. Do you get the expansion revenue too, 20% on that? Okay. So you have to trust on HubSpot and Zendesk and Freshworks reporting back to you accurate expansion revenue on accounts that you help them land? [04:48] >> Yeah, exactly. But that's part of the partnership terms in terms of terms and conditions, legal, that sort of goodness. [04:54] Super interesting. Okay. So you're effectively a sales rep for them, but running a different motion? [04:59] >> But, yes. But it's fully productized. [05:02] Yeah. Yeah. Yeah. Interesting. Okay. So when did you guys launch the business? When did you write the first line of code? [05:08] >> The first line of code was written just over a year ago, but we launched in sort of a public beta in middle of June. So only a few months ago now. [05:16] And what numbers do you care about right now? Like wait list size? Tell me what you care about. [05:21] >> I think there's two major things for us because we're essentially building a marketplace, we need to be building both sides of that. So the big one of just continuing to build partnerships really matters. So I'm trying to pick up a new partnership every month at the moment so we have that supply side of the market. Then on demand side, it really is just like how many signups can we be generating on a weekly, monthly basis? And [05:41] >> then once they're in, how quickly can we get them to a decision? Is it gonna take three months like it does today? Or is it gonna be like a recent converted customer, it took them two weeks? And that's a significantly better process than they go through at the moment. [05:54] So we're not in October yet, so I can't ask you for October numbers. But in September, how many total new sign ups? [06:00] >> So it it's it's less than 10. I think we're at, like, sort of eight. That sort of number. So it's still small, but it it's continuing to grow every single month. [06:09] Got it. And how many customers have you actually, there are now paying on one of your six, you know, or nine partners? [06:14] >> Yep. So we've closed we've only closed one deal so far, but [06:17] that's How does that feel? In other months. That must have been amazing. How'd that feel? [06:21] >> Yeah. It felt pretty incredible. There was a lot of jumping up and down. But I think importantly at the moment, it's not just a we've had a 100 person company use our platform, but we've also had a 100,000 person company use our platform. So at the moment, there's a company that's a 100,000 FTEs using testbox to make a decision on a new platform. So we're in this interesting phase where we've just been trying to build awareness [06:43] >> and we're just starting to see real elevation on size of company, how quick and number of people coming into testbox. [06:50] What prevents you from arbitraging or basically taking up HubSpot top keyword tools? You'd start basically paying for ad space or running SEO to get those leads before HubSpot does. I imagine there's something in the partial agreement that prevents that. [07:03] >> No. There isn't actually. [07:05] It's just incredibly expensive. [07:06] >> I think Okay. If you look at the cost for these sorts of ads, you're talking at least a 120, $150 for some of these ads on those keywords. Then that just conversion on that, when you think about the percentage that we're taking, it doesn't really work out economics wise. [07:22] What about like a product SEO play though, right? HubSpot versus Zendesk. HubSpot's number one, G2's number second, StackShares number three. Mean, you can run playbook there and our Yeah. [07:30] >> That's exactly what we're doing at the moment. [07:31] So does HubSpot like that? If you start outranking them, are they cool with that? [07:35] >> Yeah. That isn't a competitive term in our agreements with them. [07:39] Interesting. Do you give them like a row from the partnership agreement where if you ever want to sell or exit, they have like right of first refusal on exit price? [07:46] >> Not at the moment. Well, we'll see how that goes in the future. But I I think like right now, that's focus really is just like, let's keep being that amazingly generation platform for them. [07:56] Okay. Tell me more about economics. You're just getting going here. How much have you guys spent to date on getting MVP Live? [08:01] >> Yeah. So we've probably spent something like $700,000 to get the MVP live, and we raised 2.7. And and that MVP live is so much of it's like really deep infrastructure and orchestration of all these different services and getting them to spin up really quickly. That's, like, the more challenging piece. We haven't really spent any money on marketing yet, which is why the numbers are kind of on the lower side at the moment. [08:24] Mhmm. With the 2.7 was raised this year? [08:27] >> Yeah. At the start of the year, basically. [08:29] Pre seed. Okay. And it's two of you guys, right? Do you split equity fifty fifty? [08:32] >> No. [08:33] It's okay. That's a tough conversation. Tell me about that. How'd you guys how'd you guys sort of work that out? [08:38] >> Yeah. I think so my friend Peter and I have known each other for eleven years now. It was actually a relatively easy conversation for the two of us to go through. We realized that, look, a lot of the drive behind testbox was driven by me when it comes to the idea and the plan. We talked about, is this the ten, fifteen, twenty year company for me? Yeah, probably is. For him, he's obviously committed for the next [09:02] >> five years at least, but he's like, I don't know if I want to do this for twenty years. He's like, I don't think I'm going to be the one leading all of our really in-depth engineering stuff long term. I want to be more of the people management piece. As we thought about our roles in the company over time, we saw that they're going to change and develop and realized that actually there was initially anyway, [09:27] >> we thought that my sort of level of commitment and the the inputs that I was having into the business at the time were at that high value. [09:34] Alright. Come on. Gotta translate us in the numbers. You're talking like, so you own 60%, 80%? How big is the difference? [09:39] >> It it's sort of two thirds, one third. [09:42] Okay. Fair. Got it. So call it 66 to you, 33 to him, but now you're both dilute a little bit because you raised some pre-seed. I imagine you did it safe? Yes. Got it. How'd you go obviously, at your stage, it's not like a valuation multiple you're raising at. It's really what story can you tell and do people believe that you can execute on the story. So you tell a great story. It makes clear sense [10:00] to me here in just thirteen minutes in. What cap were you able to raise at? [10:04] >> It's a post of 12. [10:06] Okay. Does that feel fair to you? [10:07] >> It felt reasonable. We could have probably pushed to get to 13, but I think at the time we had a very limited prototype and really great story and a few partnerships basically built out. Honestly, we'd spent two months working on the product at that point or the company. So we're so early in our journey that we're like, okay. That's fine. This is what we need just to move forward to the next stage. [10:30] Mhmm. Is there a g p t three component of this? [10:33] >> Yes. [10:34] Tell me about that. [10:35] >> So all of the data that we actually create for our end users, we customize for them. So if you say you're a b two b company or you're an ecommerce or whatever, we'll put different data into the platform based on what you tell us about you. And so we use the GPT three engine to be able to customize that data. [10:51] Interesting. Okay. SignalFire and First Minute Capital were the main folks putting up the 2,700,000. How do you make sure they work their butt off for you? I'm sure you had a bunch of term sheets. You wanna make sure they're value add VCs. How do you make sure you activate them to really help you build the business? [11:05] >> Yeah, I've been incredibly impressed by SignalFire actually, and I would say 10 out of 10 recommend to anyone who's interested in raising capital. They turn up whenever we ask them to on absolutely anything. I could text Elaine, our board member, and she'll respond to me in minutes, jump on the phone whenever, and every time we've had a hurdle, they've gone and helped us figure it out. I lean on them pretty aggressively. I think a big thing [11:28] >> is that we're very transparent with them and that has allowed us to build a really strong relationship, which I think has been phenomenal. And when it comes to first minute, I reach out to them at least once a month and say, here are the three things I need from you. Go make that happen. And they've they've also been delivering, which has been pretty phenomenal. [11:44] Tell me last thing that SignalFire did for you, if you can be specific. [11:47] >> Yeah. So we were, having some interesting challenges with, the security protocols that Zendesk has on their platform. Basically, they're just creating some bot detection issues, And so they actually went straight to the chief of security at Zendesk to help us resolve that and work through their machine learning algorithms to basically improve everything we were doing. [12:06] Unbelievable. There you guys have SignalFire and Elaine doing a nice job here for saying that we love hearing. Okay, cool. So now let me ask you a question. Did you have a Is this sort of your first foray into startups? You came from Bain or have you already sort of gone through the mill already? [12:20] >> No, this is the first full on go. Peter and I dabbled a little bit about ten years ago or so together and made a little bit of money to pay rent, but nothing that was our serious full time thing that we're tackling. [12:31] I see. Okay. Cool. Well, you've got your first customer landed. And which company did they end up buying from out of your six partners? [12:38] >> It was Zendesk and it was a company called ProfitWell, who I think you've spoken to before in your podcast. [12:42] Yeah, Pip Pip, that's great. ProfitWell bought Zendesk and so what are they now paying Zendesk per month? Then break me down economics. [12:50] >> Yeah. So we got 15 to 20% of that deal and they bought something like 10 licenses. So if you look at the Zendesk pricing online, that ranges somewhere between 50 to $80 per seat per month. [13:03] Okay. So let's just assume it's on the low end. So it's $500 per month. You're making 10 to 20% of that. So you get about a $100 per month as long as ProfitWell stays active? [13:11] >> Yeah. Something in that range. [13:12] Do will Zendesk pay you upfront for the full year? So 1,200 or they pay you as ProfitWell pays? [13:16] >> So they will pay us on with Zendesk, it is on annual contract value plus expansion. So we get the upfront annual contract value, then anything that increases, we get paid later on. [13:28] Very cool. Okay. So you're making basically out of check from 12 around $1,200 from Zendesk and now you can keep scaling. Yep. Very interesting. Okay. Cool. Yeah. Big big big fans of of PC and probably well and everything they're building up there. So cool. Okay. Got it. So you've had your first $1,200 in ARR. You you're gonna keep scaling here. What's like the thing you're actually building towards? This is a Trojan horse to what in 2024? [13:51] >> 2024 is pretty close. I probably got 15 of product in my head at the moment, but if we take the next three to four years, basically to be able to say, Look, if you're trying to buy enterprise software, the first place you go to is testbox.com. You say, I'm looking for these three or four vendors. Let me get my hands on. And it shouldn't just be in customer support, but basically all of the sales ops tools, [14:12] >> all the marketing tools, or whatever basically comes to testbox and then you can make the best decision in a few weeks rather than many months. [14:19] Sam, you guys made your first hire yet or just still you and Peter? [14:22] >> No. No. We're we're at ten ten people already. [14:25] Oh, wow. How many engineers? [14:27] >> It is five engineers. [14:29] Okay. Got it. So if if I ask you like all in headcount expenses right now, how much are you spending just on headcount per month? [14:34] >> About a 100 k. [14:35] Does that make you nervous or you have plenty of runway? It's not not worried. [14:38] >> Plenty of runway. Not not a problem. [14:39] Yeah. Interesting. Anything else taking up a bunch of money that wouldn't be obvious in a SaaS business or no, a pretty standard? [14:45] >> Pretty standard at the moment. As I said, we haven't really focused too much on the marketing piece. We're really importantly, we need to buy it by build the supply side of the market with the integrations before we become valuable for people. And so we've just been really focusing there with our dollars. [15:00] Guys, crazy story. If you want to avoid all those marketing calls, sales reps, all that jazz, go test out testbox.com. Sam, before we wrap up here, let's jump into the famous five. Number one, what's your favorite business book? [15:12] >> Oh, I really like Radical Candor. [15:16] Number two, is there a CEO you're following or studying? [15:22] >> Think Bill HubSpot. [15:24] >> Yep. [15:25] Number three, what's your favorite online tool for building testbox besides GPT-three and besides any of the ones you're partnered with? [15:31] >> GPT-three is the one that I wrote code for specifically. [15:36] >> Think the team is loving AWS and writing with Charles apps on AWS. [15:43] Number four, how many hours of sleep do eat every night? [15:46] >> Eight. Eight. [15:47] Okay. Situation, married, single, kiddos? [15:50] >> Partnered, not married, no children yet. [15:53] And how old are you, Sam? [15:55] >> I'm 29. [15:56] >> 29. Last question. [15:57] What's something you wish you knew when you were 20? [16:00] >> The value of therapy. [16:02] Who are you using now? How did you find your therapist? [16:06] >> I connected with someone I was close to, had phenomenal therapist and she basically helped me find five or six people to go and interview. And then I went through that process and have phenomenal therapist called Andrea Dingda, she's in San Francisco, phenomenal. [16:20] A lot of founders, hear that this is like, it's really valuable, but they don't even know how to use a therapist. Without being revealing personal stuff, mean, does a conversation with your therapist sound like? What do talk about? [16:31] >> Yeah, so we started really checking in with where I am emotionally and ensuring I use emotional feeling words rather than thinking words, which I do most of the time, and then use that to say, Okay, what are the things that are really affecting me in some way and go deep on that? I think we try to get a balance between acute issues, so what's happening in the moment, and then also chronic issues. What's been the stuff [16:50] >> that's I've been challenged on for the last ten, fifteen years? How do we continue to work on those on ongoing basis? I think importantly, a really good therapist will help guide you and create some structure around this rather than allowing you to just flounder your way through. [17:05] Guys, Sam Senior. With testbox. If you wanna test customer support software without sitting on sales calls, test them out. They just landed their first customer, which means they help someone buy customer service software, Zendesk specifically. They make $1,200 a year on that. They're off to the races, raise 2,700,000 at a 12,000,000 cap as they get going here. Sam with owning, call it two thirds of the equity because he sees really a long term play here into [17:25] many other product lines. Team of 10 right now, five engineers as he looks to scale the business. Sam, thanks for taking us to the top. [17:31] >> Thanks, Nathan. [17:34] One 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 1PM [17:59] Central. Additionally, remember these recorded Founder interviews go live. We release them here on YouTube every day at 2PM Central. 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