The Mentor Method Revenue, Valuation & Funding (2021)

hey folks my guest today is joseph kopser he serves as an executive in residence at the mccombs school of business prior to his company ride scout uh prior to that is coming right scout was acquired by mercedes he served in the army for 20 years after graduating from west point in harvard and was recognized as the white house champion of changing clean energy and won the u.s dot a data innovation award he's co-author of catalyst he's an advisor to clean texas and is now building the mentormethod.com joseph are you ready to take us to the top yeah nathan thanks for having me on heck of a background man thanks first off thanks for your service and tell me more what came first did you start at mccombs first and then develop the mentor method or did you develop a mentor method and then they want to bring you a minute mccombs well no so janice omadeki really gets all the credit for the mentor method as the founder and ceo of it so where i come into this is helping companies grow so mccombs really was a stopover uh after i actually had ran for congress here in texas i'm a builder a problem solver so when i see big ideas with cool people that i think i can help and add value that's where i jump on board so i've created an endowment at mccombs about six seven years ago when i sold my company in mercedes and so uh bennett mccombs here and there actually now the bio can be updated i'm at the president's office helping him with all things military veterans and their families at the university of texas you can't help with football can you uh no not right now we have a new coach for that let's see what we can do there let's let's hope and pray i'm in austin so let's let's open breaks all right um tell me more about the the the first company what was ride scout and when did you sell that to mercedes yeah so ride scout was a at its simplest form a two-sided marketplace an aggregation play it was created because i was tired of being stuck in traffic in my background i'm an aerospace engineer and so i know there's lots of different ways to solve problems and what i wanted to do is try to create the perfect set of combinations and permutations of the different modes of transportation to get me to and from work every day and out of it i started nights and weekends while i was still in the army studying mobility and transportation simultaneously learning how to build a business then found the smart people around me raised the money that i needed and before we knew it uber and lyft got huge all the car companies freaked out for good reason in this new mobility space we're in and they went on a buying spree and so mercedes bought my company bmw bought some others ford got into that play and it's just the classic build or buy scenario that young entrepreneurs face themselves with all the time how'd you use that to your advantage to maximize the exit price well you know the the idea behind reiscout was really timeless everybody wants to spend less time in traffic and more time with family and friends and then if you can introduce a really elegant way to show them all their options what i was able to do better faster than some of my peers perhaps was get those strategic relationships with the big cities big companies big uh other players and partners in this space trying to do all modes of transportation while simultaneously running a really positive message i mean we were all about reducing carbon footprints we're all about making life and quality life better for people and that combination of technology team and then of course the messaging that went along with it uh just appealed to mercedes a lot more than a lot of their choices and they had a lot of choices yeah but they did now were you the founder of ride scout and if so whenever you launch it yeah no so we launched it in well founders can appreciate it started its genesis was in 2010 it wasn't really incorporated as an llc until 2011-12 time frame and we didn't really go full speed till i left the army in 2013 and then we sold it about a year and a half later in september september 2nd 2014 but not you know not that i remember those dates is this specific but you might imagine why yeah of course now you mentioned you guys raised a bit there how much did you raise so by the time we got into the acquisition talks we raised about 2.1 million dollars i jokingly refer to that in today's dollars about five or six million dollars because cost of talent was a lot less ten years ago than it is now uh and you know i feel for founders that are having to raise what they are today that's why i love actually working with founders and multiple startups like the mentor method well and we'll pivot to mentor method in a second but i imagine those investors that put in that capital i mean how did you get them over the hump of them saying joseph build let's go beat uber and lyft let's not sell too early go go build a billion dollar company every founder will be faced hopefully with that dilemma which is we've got traction we've got a whole lot of users we can see growth you know at one point i think we had several hundred thousand downloads and we knew we had a nice trajectory but we also knew uber was out there and lyft was out there and ironically at the time they were just single mode ride for hire if you go into their apps now you can see they do so many different modes of transportation which is where our vision was but i didn't have the the the the financial capital to go underwater uh like they have had to do for many years without really turning a profit so for us at the time in 2014 first startup out the gate an opportunity to create wealth for a lot of the original team members and investors we made that decision uh you know as a group and as a family and then you know we've got uh seven years to look back on it and i don't think anybody regrets selling when we did now were you is craig cummings associated with the company oh absolutely craig cummings was my co-founder okay yeah so this is why i was doing research i was very confused because he's listed as the founder and i'm going where the hell is joseph's name did you come in a little bit later or something no no no we yeah depending on how it was written or who wrote it you know founder co-founder of ride scout so he heard the idea that i was talking about i was still living in washington dc at the time and uh he described and said look but that idea you're describing could be something that a lot of people would want to use not just your own commute and i said yeah but i don't really know how to build a business he said you stick to the idea of fixing this problem and learning how to solve it and he'll and he craig will help me build the business around me and that's exactly what it did which is again what i'm trying to do now to a whole next generation of entrepreneurs and then a subsidy the company that acquired you guys called reach now which mercedes was very much involved in is that accurate yeah you know at a few years later then let's see so cargo north america technically was the buying agent then that's a subset of movable move will then merge with bmw create create reach now it's a hot mess to figure out all right let's talk about mentor method so is his mentor method again what's your relationship there you're not the founder what are you no no no so i'm employee number two however you want to look at it um janice omadeki gets all the credit for the idea and creating the initial momentum behind it and then i came along as an advisor but i was already fascinated by mentorship and leader development it's my dna in terms of helping to build the teams and then as she went through sales meetings and investor calls she'd asked me to be on a few more a little here a little there and after she had raised some money she turned around and said okay no more being an advisor come join the team and i just couldn't say no interesting okay so who's paying for the app today well so right now customers uh that we have you know so here's what we've done we've made a transition from being a one-person show that janice was before now we've signed on names that people recognize like lincoln financial and amazon uh before that her original customers with their original format were companies like deloitte twitter had a run with the program and the format at the time it's evolved quite a bit since then as any learning and growing ceo wants to do we currently have a really cool contract with the department of education as a sub to a larger prime trying to figure out how to inspire that next generation of students in the business and then of course the future uh is looking bright too because we're caught with three things going on simultaneously you have the george floyd uh incident and the reaction to people in america saying this just doesn't sit right you have companies making pledges about dei and trying to do more but they don't have a tool to do it and we provide that tool to provide that mentorship and then thirdly we're in the middle of the great resignation so we have people just hemorrhaging uh talent inside of their large organizations fortune 5000 companies and they're looking for a way to invest in their people so i'm just as excited about being in the mentor method now with this opportunity during the great resignation as i was to be in ride scout 10 years ago at this time and place when suddenly we have all kinds of mobility new startups popping up on the scene uh and so i think that the mentor method shows even greater promise than the right than ride scout did with me and craig back in the day and all my sas founders are sending into this they always like to understand pricing and how someone is scaling especially in a tool like this so i imagine you're selling to what like universities on a per seat basis and if so what's the average customer paying you per month per year to use the technology yeah so so why we do it right now is we're looking at doing this as a sas play more for large or larger companies so think 200 employees or more and then the pricing as any sas play will want to do smartly is try to be able to gauge it based on size of the customer but you always have a fixed cost always have a fixed cost and then of course you have the debt and the legacy that you have of all the money that you bought into it so you have to be very careful so if you're looking at something to the nature of like 20 per seat per company per year is that what you're charging right now well it it's evolving as it's going over time but that's a easy way to start just kind of figuring your brain as you think about who our clients are without going into the proprietary nature of what deals we've served with them but that's a generally easy way to think of it and then of course you have on top of that all the other but sorry i don't keep cutting you off but you know i don't want you to name customers or what an individual customer pays i'm just trying to get a sense is the university paying you 10 000 bucks a year to service a thousand campus residents right or something like that what does that sort of sound like oh yeah but but even much larger than that yeah the deals so you have people paying you way more than 10 grand a month for the software yeah okay 10 grand a month or 10 grand a year well it depends on the deal but you're correct and distinguishing some are yearly subscription others are monthly subscription and then the easiest way to think of it is on average somewhere around 10 or 15 000 a year excuse me a month for some of the current and then some of the older clients are on a different pricing model because we had a different platform then yeah but to your point it's a great sas play because once you figure out the basic offering then you can add on top of that other services other customized features other white labeling that allows you to go even beyond the current sas play yep so if you have a bunch of customers that are paying like 10 grand a month right i mean this is like 120 000 contracts a year i mean why go out and raise a million dollar seed round just you know three four months ago why not fund it with customers so absolutely it's a great discussion point which is you have to and every sas founder has to figure out can i hire enough talent off of the income that i'm generating now to give me a runway long enough to inspire confidence that we know we can do this or do i bring the money in now do i give up some of the equity and ownership in order to be able to really build it and point this rocket towards the moon and janus i believe made the right decision to be able to bring in the capital now to build out the team because you know the earliest versions of this she basically built with a small offshore team and what we want to do now is to be able to put the rocket fuel in and send it to the moon no i get that but there's two the biggest you know this from your first company the most diluted events for any sas founder is your co-founder and your pre-seed round and you're usually both the co-founders usually forty fifty percent and then that proceed run is usually twenty twenty five percent and then it goes down from there so like it's a big deal to take a million dollars in june and i guess i'm you see where i'm getting confused if you have customers paying you 100 a year already why you can fund it from customer growth or do you not are you are those like pocs you haven't closed those contracts yet oh yeah no no those were closed deals and prior customers what we're talking about doing is putting even more capital into it because in this goes to another point that you know you debate in sas plays which is if i do take on capital now early on can i build a team that can make enough of an offering and make this elegant enough that then i can go way beyond the current base because the kicker right now the competition that we have in the marketplace is it still requires a bit of sales more than any company would want because we have to overcome the legacy of inertia inertia being oh well my program's good enough now i don't need to do anything else and so breaking through that in the hr world and human resources is a tough play which is just that but it's very rare you see apps like this get up to the point where they can command premium valuation so the founders can preserve equity because churn is usually an issue on these attribution and you know mentorship apps like this is very very difficult it's hard to code that into the ui so listen we're out of time here but quick rapid fire stuff here how many folks on the team today full time about 11. okay 11 how many engineers well right now most of it is still offshore but we're bringing that in with this current round oh i see i see okay cool that makes sense and then um is this your you mentioned you're doing a bunch of stuff right now but is this what you're spending the majority of your time on oh yeah oh yeah okay cool and then how many customers are you serving today you know they're on board they're using you they're happy yeah so three or four right now they're in the pipeline as we're rolling them out and then like with any good play we've got the pipeline that allows it to you know hopefully double by you know first half of 2022 and then nice little quadruple after that because again as your listeners know and you know from experience it's about establishing that professional reputation in the marketplace and more than just a one-off of the ceo being the best salesperson which she is but we've got to go beyond that point where it's the ceo as a salesperson yeah i know you mentioned three or four in the pipeline listen we love celebrating pre-revenue companies everyone starts there it sounds like you guys are pre-revenue today but you have a good plan for 24. no no no it's a considerable ar right now with the contracts and the names that i mentioned earlier we just hope to be able to take that and double it and keep doubling it it's a 100 million dollar company if we play this right i'm uh banking on janus and the team doing great things are you guys north of a million dollar run rate today almost okay you're flirting with it close you got you've got 15 you've got 15 days left in the year joseph yeah uh no we will be on track for a million uh before too long which is all a part of this pre-seed raise that word or series seed raise that we're on the roadshow now so if you have folks that are listening into this oh how much are you raising well right now we're just socializing the idea it's probably going to be about a four to seven million dollar raise janice herself is only the 93rd black woman in america ever raised more than a million dollars of venture capital uh so it's it's pretty exciting time that's very cool all right very cool um so targeting four million there i'll make sure i can go to that one see that's great all right let's wrap up here with the famous five number one favorite business book favorite business book you can't nail me down to one but if i gotta pick one how to win friends and influence people by dale carnegie it's the absolute classic it's a little bit dated but if you read a modern version it's a must do number two is there a ceo you're following or studying oh man who am i not following or studying right now my uh you know obviously janice is is who i'm spending most time with but in terms of who i'm trying to learn from the most who well i just got to get an easy answer throughout there right now which is elon musk because the guy is causing so much turmoil both good and bad which is what disrupting entrepreneurs do so he's probably who i'm following the most right now number three what's your favorite online tool for building the mentor method favorite online tool oh i mean i happen to love trello just because of the ability to be able to coordinate across so many different groups the team is really starting to expand their use of notion so i'd put trello in notion kind of one two right there okay and number four how many hours of sleep you get every night oh i you gotta sleep i get seven to eight hours a night if you don't have the energy to tackle these problems and you want to go around and pound your chest that you only need four hours night go ahead and do that but i don't know and i've seen very few people in history that they can sustain that over time and what's your situation joseph married single kiddos oh i'm happily married 27 years i got three daughters 27 24 21 and uh spent a lot of time with him how old are you i'm 50. 50. last question something you wish you knew when you were 20. do not think that the people that are out there accomplishing all these things that you read about in history or current events are somehow superheroes they are literally as as equipped and capable as you are it's a matter of how much you're willing to study and apply yourself and work at it luck certainly plays a factor but luck always favors the prepared but i have met now what i call a lot of famous people and they turn out to be just as normal as i had with all of my insecurities and all of my problems growing up guys there have been the mentor method launched in 2015 employee number two joseph joined after a story to history selling and growing his own company they raised a million dollar pre-seed round earlier this year targeting a four million dollar seed round now today we will see what happens joseph thank you for taking us to the top thanks for having me on your show 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 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