ThreeKit Revenue, Valuation & Funding (2024)

hey folks my guest today is matt gorniak he's the ceo of three kits 3d and augmented reality visualization software for products he leads the company by building effective go to market strategies teams and partnerships prior to three kit he served as cro chief reference officer and was co-founder of g2 a leading marketplace for business software reviews it has raised over 100 million dollars he's also head of global sales leadership positions at steelbrick and big machines cloud configure price cpq platforms that were acquired by salesforce and oracle respectively matt you ready to take us to the top let's do it i'm amazed how much you can compact into this this is great nathan yeah i know we'll have fun so what what guy you go from software reviews to visual commerce explain that leap for me yeah i mean there's actually as you met my uh my business partner glitter evil and there's actually a couple of us who've done companies together led by him you know anyway but there's actually two threads you know g2 as you spoke to him was i won't go deep into that but that was more like scratching an itch of like hey how come this is happening this way and you know i know you're really keen on entrepreneurial stories and that's one of those like wow like why is this not fixed why is it not fixed but there's like another thread in parallel as well like to build companies which is a company big machines got sold to oracle and steel brick to sales for us those were you know basically product configuration companies so kind of like how do you sell complex products and that's kind of where three kit falls in so who's paying for the product today give me a customer example if you can uh tailor-made let's say telling me golf drivers and and maybe let me give you the inside what happened to us because i find the best ideas come from seeing things you know you know i also do uh entrepreneurs and and ideally it's something you have an understanding of right you have to be an expert but you see some patterns and the pattern we saw in the configuration space so think of our customers with big machines is like manufacturing company they need a quote for a very complex product right this is like 2005 and six with big machines right okay you put this together well what's it look like what we can show you it's too complicated okay that's early you're like this message you're like maybe one day people want to see the product you know but it was sort of like not a must-have and then when we got to steel break we got into salesforce um i was there for a couple years would go to integrating this you start seeing this demand this is really obvious nathan honestly but it's one of those things you have to need signals people start demand to see the product like let me give you a specific example when you go on e-commerce websites right well matt so can we get more specific can we talk about one of your current costs so creighton barrel uses you so let's be really specific you're trying to buy a couch on crate and barrel what are you what is three kit doing to help create and barrel yeah so visualize the product digitally so so think about you have every product that microphone that you're talking into has many many um options and when you go on the website or create a barrel you have couches just the complex products you have to be visually beautiful you want to see the actual couch and therefore you have to see all the images of all the options and therefore lies the problem most so that's we help them we have a tailor made with the golf clubs a golf club has a hundred thousand options it's just different colors it's just different grips just different shafts but really what that means is if you don't want to represent it you got to do it digitally otherwise you just have a picture of a club a picture of a couch of that microphone and that was sort of like acceptable he like but started we saw the trend right before covet and after that pandemic it's like wait a minute i'm online let's see that microphone i just chose a blue one i'm making it up with a sticker maybe you want to personalize it nathan's special microphone how come i don't see that how come i still see the stock one and that's kind of the thing we're solving 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 gonna get a different valuation a vc is gonna pay a different valuation private equity firm is different if you're gonna 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 valuation 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 understood so yeah just because you're buying a thousand dollar aries sofa on creighton barrel there's a bunch of metrics you can change how big are the cushions what's the fabric material what's the hardware finish what's the color you change all these things and 3k enables creatine braille to show you an accurate visual representation which ideally increases conversion rate what are these brands paying you matt to use the software today on average maybe per month or per year yeah it differs very much i mean like we have an smb segment we want to democratize this and so it's really primarily based on scope like our smb customers are much smaller they have one product let's say and they're typically starting points eighteen thousand a year okay big brands just in general where the scope is just massive you're talking 100 to half a million so your biggest your biggest customer paying around half a million a year how many like are they are they paying based off number of skus or like what's the utility metric right again it's like a total transformation like yeah oh it's skews mostly like basically the scope is just giant right whereas like an sap customer they have one product right you could have one you know not even microphone a lot of them make like let's see a dog crate we have a great customer making dog crates and how do you sell a high value usually these are high consideration items because you kind of want to understand you know if i'm changing things what does it look like it's a high consideration so in that case the impact dog crates right the wonderful uh um dark rates in that case to bring them to life you know they're a very small startup really you need digital but understood so democratizing it started at about a thousand or 2000 bucks a month all the way up to you paying 500 000 bucks a year who are total change management you know hundreds of skus thousands of options etc that's right millions actually millions of options yeah okay and put this on a timeline for me what year did you write the first line of code for the product so the platform so that is a cool story the to make this work you have to kind of bring two worlds together so basically ben houston is the founder of the company he started 2012 and he was a top supplier of visual effects to hollywood so like movies like you know ilm or movies like star force force awakens t-rod utilities he got a lot of credit for that and then in 2015 he met um a couple folks from a small company called shopify who joined the company and they said hey let's make this for e-commerce so the the the knowledge that the sort of the the the ip has been built over many years but the platform itself is three and a half years old so we kind of when myself and goddard got into the company we brought in with us you know the family and now we're 120 people we decided that hey this let's cuddle you know basically let's create a brand new platform headless let's reimagine all this so so the code is written three and a half years ago on the platform although the ip like the math how to do that it's been building up for a while so that's right and then and ben would say founding data is 2005 even so he's been thinking about this for a long time it sounds like that's right that's right okay interesting so is ben still active at the company yeah he's our cto our founder and that's kind of the marriage right you need the product complexity which we brought from us from all these years of experience all the companies i mentioned and this beauty like the ability to generate picture perfect representations at scale that's what the platform came together yeah so he's very much with us here he's a thought leader by the way he should have him on a show talk about where where this this whole world's going um it's really cool too i mean he's got an angle completely from visualization which is really fun um fun to listen to and then it gets getting getting you know fast forwarding to today right so how many total customers are you serving today across these four or five different segments to 220 and obviously growing and what we're seeing is really interesting the again that's i'm telling you no news here with pandemic this is starting to become like major fomo because um yeah i think people are realizing like my product just doesn't exist and the metaverse and nfts by the way just to give you some fun buzzwords that's obviously like way out there but it's really challenging the brains and the affections to think like wait a minute if i don't if i don't have a digital product version it's better to send a real product i mean if you can experience it online place it in the r and then get it shipped that's awesome but also in the pure digital world let's let's just not even i mean wherever you want to go with this but is it far far away or just some far away i'm not even ready for like web 2.0 what's happening with 3.0 so it's really fascinating to to see that pressure the fomo because the one that unlocks it you know in the space they're getting outsized returns essentially it's what we're seeing and that's kind of that's kind of um a fascinating place to be right now so before we dive i want to dive deeper into medicare stuff but i want to finish the regular non-metaverse story of right so so 220 customers paying on the low end between 18 grand a year on the high and half a million a year i mean if we assume a 3 000 average rp that puts you guys at something like 600 000 a month or about seven million dollar run rate today is that in the right range of where you're at we're going to exit much higher than that above 10 this year this year you'll break 10 you think yeah interesting and what would that if you hit 10 million in run rate this december where were you last december so we can calculate a growth rate yeah i mean we're but we're guys they're going to double or triple this year so well those are very different doubling and tripling very difficult it depends on big deal deals are getting bigger you know what i mean so that kind of depends we're still in the mode where we're going to be way north of 10 but like i said um we have a plan together where i mean we're happy with what we are but like i said you know as as this is accelerating you know we'll see the numbers aren't that big yet where a few big deals make a difference you know fair enough fair enough now br you know obviously it sounds like you know if you're at 5 million last year you finished this year at 10 that's doubling maybe you finish even bigger than 10 million it should be closer to tripling which is great but taking back to that magic moment do you remember the year you guys passed a million dollar run rate yeah that was a second year and that's always the hardest you know what is the second year though 2013 2014 um we got in there uh well technically the first platform i mean we're i'm sort of ignoring the we had some early customers before the platform it was the second year was 2020. okay so 20 20 20. yeah so that would have been sort of right after you raised that series a you broke a million dollar rate correct and that's kind of where we brought in and really made this a um i would say a sass business before this it was pre-platform it was essentially you know a bunch of cool utilities for visualizing e-commerce and we're like well that that won't scale and that was a plan to begin with i mean there's no surprise now before we jump into metaverse stuff with our last five minutes you have you obviously haven't bootstrapped i think godard was one of your first checks into the business actually how much have you raised to date and when was last round so we actually that that's kind of what you heard from us as well i mean the first seat kind of we did as a family like our own money into it it was 10 million in 2019 right that's right and then um we just raised 35 million last november so we're 65 million in in all in yeah and how do you set the valuation on that first 10 million friends family goat art i mean how do you set evaluation yeah you try to do it well i mean you you want to market in a sense you know i mean um also there's i mean i mean you're basically pre-revenue at that point right i mean that's a huge seed round so it's really going off just your experience which you guys have a ton of experience by the way right that's right i mean you want to be really fair to everybody you know i think i don't know like at some point you kind of see what market is i don't know i mean at some point it's everyone's happy with it obviously the founder is happy with it for existing shareholders i would say that one is kind of you know basically experienced i agree with you yeah yeah yeah the rest is market-based okay yeah i was gonna say so market for series b these days you're selling between 10 and 15 percent equity in the business were you guys sort of in that same range that's kind of i think we followed a traditional path yeah okay all right now what was cool about the last round we also got you know strategics involved like service now in salesforce and uh well salesforce was with us even prior on but servicenow was cool capgemini um so that was fun to see him in there i think that was kind of the appeal like beyond e-commerce like let's visualize products across i mean in some ways it's very obvious like i want to see the product whether i buy it or service it or um anyway just a little tidbit there that was kind of i know it's helpful and that was all primary capital right no secondary in the 35 million that's correct yeah yeah that's that's great by the way i mean if you're selling 10 to 15 raising 35 million that's like a 300 million evaluation with around 5 million in terms of run rate i mean you guys that's a healthy that's a 60x multiple that's a pretty healthy multiple you got to grow into yeah i know i would say the space is big you know i mean if you look at it yeah it's a big space i mean it's um yeah okay talk about ever we only have three minutes left i want to talk metaphors because i actually think this is like way more interesting than what you currently have built because the hard thing about metaverse is actually hiring animators to build experiences you basically can build experiences on demand because you built this algorithm to create all these variations with one core base set of inputs right what's the metaverse play here well i would say like i would you know so let me just take a step back we we help brands and manufacturers like we are a piece of the metaverse i actually the best nathan think about it were the on-ramp to the metaverse but truthfully if you take a step back also one more click back if you want to do e-commerce b to c b to b let's just say or or transform your business or your brand again we work with folks making forklifts and then very fancy handbags right so we covered all and you know we talked about creating braille and taylormade here um the ability to bring the product to life it's a very specific experience so the metaverse is a creator economy in some ways which is you can come up with whatever you want right you you draw things you you can create but if you want these parts to exist in the metaverse they have to be very specific with that you have to visually configure them that's sort of what we're finding so the metaverse is an amazing big vision at first stage is ecommerce are you ready for that and 99 of the companies we work with nathan are not ready for even e-commerce they have e-commerce presence but they don't understand how to bring the products to life right now i mean i just think for this though for like where i think this is very interesting is the product isn't actually the physical wood crate and barrel uses for the bottom other couches what's interesting is if i buy in snoop dogg's metaverse the land next to him and i now want to furnish my house i'm actually just buying the licensed crate and barrel design generated by three kit picking my cushion cover the distance and sticking it in my living room next to snoop dogg and his metaverse that actually becomes the product right so there's a super house right you you you do have a digital product maybe you want it shipped right i mean it could be or it's a pure digital for digital which has like teeth on the side of the couch it becomes a pure digital brand but still there's configurations options maybe you want to personalize it maybe you want to make an nft out of it and so millions of options create that's what we're seeing right digital to real because the the brand's prefectures have one advantage that can make you the product so if that's the strategy right which is you're at stu blocks house you can figure whatever you can figure and then by the way i want to buy it or buy an ft of it or it's totally like random right like um a table with fur on it right and something wacky and you'll never ever buy that but it's cool it's your digital brand it's your digital asset and that's the interesting thing i think about the again 99 of folks i haven't even done web 2.0 yet did not world but when you go into that world it's like who are going to be the brands to actually rule that i mean you could have sd already happening you and i can come up with the brand that's digital and that's like the considered a luxury watch for all i care you know but it's a digital watch and that's kind of the fascinating thing about that world like who's going to own who's going to have a brand well we'll see what happens in the meantime though one or two more questions here before we wrap up with the famous five um obviously net dollar retention is critical when you're selling to the enterprise are you guys above 110 120 today yeah and what we're seeing is that's right just right right okay that's right and what you're seeing is basically when you know the i'll give you an example that was a public case study with taylormade i mean that club that he powered with they made their sales number in two months for the whole year and the reason is that you take the mumbo jumbo out of it it's like i can finally see all the club options and get the club i want i get the club that i want i will not return it why would that's the one i want that's kind of how that works and that's great i mean that's a testament to the product but then the second thing is how do you actually capture the product value in in terms of expanded acv on that account right well because there's many many products right so obviously that's a conversion play on that product while there is other products that you have but that's typically how this happens yeah like on the taylormade account do you give them a net dollar retention target we do have a target but not a revenue target like they're not gold on on making more money their their gold and making the customer happy and yes of course um quantified by what though i know everyone says happiness but you have to quantify it somehow yeah it's so early i mean like the you know they buy more they're happy obviously we do nps scores there's a bunch of metrics in there um i'm just saying we're not comping him on saying hey get in there and start selling more it's about obviously getting the uh to to the roi get to the outcome for them obviously it's all about helping them grow and then good things happen but there's hard metrics around it just not revenue targets makes sense matt all right we're out of time here famous five quick answers number one favorite book um favorite book oh i should have known that um okay let's go next one number two is there a ceo you're following or studying you know what i um i learned a lot from godard i will say but um and uh but i would say like elon elon is just wacky to watch right now i don't know what's like it's just i don't know that i i know what's going on but it's just it's a fascinating time in history right now with what he's doing and i don't know like i would say i follow him but i kind of just his moves are just interesting to watch you know number three favorite online tool for building a business honestly i think linkedin is is immensely powerful number four number four how many hours of sleep to get every night probably six to seven i tried to make that a priority and situation married single kids married one uh daughter still very cool and how old are you matt i'm 47 47 last question young nathan that's young something you wish you knew when you were 20. um you know i think i think the one thing that i uh i would tell myself is and i heard us from other folks that have done this before growth happens over time but i think when you're 20 you're so impatient some actions that seem to not immediately create actually like like a result the investment feels like oh i want it faster and it creates a lot of anxiety in hindsight if you do do the right things kind of like a garden i guess i just didn't believe it that made no sense to me i mean obviously it may not work out it's where we're gonna celebrate our milestone because whatever percentage don't even get above 10 but it does work out at some point good people doing good things good decisions but it created a lot of anxiety for me i wanted that quick answer you know like let's go like what's the magical move and there really isn't one that i found if you finally call me i'd love to guys there we have it 3kit.com launched in 2012 where they got going in 2019 now 220 enterprise customers like creighton barrel who pay 3 kit to show their couches and all the dimensions the colors the hardware types on the on the bottom feet all that jazz accurately in a digital first world the company will break 10 million bucks in revenue this year up 2x over december where they had a 5 million run rate and raised their 35 million series b 120 on the team today's look to scale also thinking about potential metaverse play we'll see what happens matt thanks for taking us to the top thanks nathan 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 pm 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 further we have by far the 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