ThreeKit Revenue, Valuation & Funding (2024)

[00:00] Hey, folks. My guest today is Matt Gorniak. He's the CEO of ThreeKit, three d and augmented reality visualization software for products. He leads the company by building effective go to market strategies, teams, and partnerships. Prior to ThreeKit, he served as CRO, chief operating officer, and was cofounder of G2, a leading marketplace for business software reviews that has raised over a $100,000,000. He's also held global sales leadership positions at SteelBrick and BigMachines, cloud configure [00:24] price quote, CPQ, platforms that were acquired by Salesforce and Oracle respectively. Matt, you ready to take us to the top? [00:31] >> Let's do it. I'm I'm amazed how much you can compact into this. This is great, Nathan. [00:34] Yeah. No. We'll we'll have fun. So what what got you go from software reviews to visual commerce. Explain that leap for me. [00:41] >> Yeah. I mean, there's actually as you met my my business partner, 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, g two, 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, know, I know you're really keen on entrepreneurial stories and that's [01:03] >> one of those like, wow, like why is this not fixed? Why is this not fixed? But there's like another thread in parallel as we like to build companies, which is company BigMachines got sold to Oracle and SteelBrick to Salesforce. Those were, you know, basically product configuration companies. So kind of like, how do you sell complex products? And that's kind of where ThreeKit falls in. [01:23] So who's paying for the product today? Give me a customer example if you can. [01:27] >> TaylorMade, let's say, TaylorMade golf drivers. And and maybe let me let me give you the insight what happened to us because I I find the best ideas come from seeing things, you know, I also talk to entrepreneurs and ideally it's something you have an understanding of, right? You don't 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 BigMachines [01:52] >> as like manufacturing company, they need a quote for a very complex product, right? This is like 2005 and 6 with BigMachines, right? Okay, you put this together. Well, what's it look like? Well, we can show you. It's too complicated. Okay, that's early. You're like this message. You're like, maybe one day people wanna see the product, you know, but it was sort of like not a must have. And then when we got into SteelBrick, we [02:15] >> got into Salesforce. I was there for a couple of years with Godard integrating this. You start seeing this demand. And this is really obvious, Nathan, honestly, but it's one of the things that 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? [02:32] Well, Matt, so can we get more specific? Can we talk about one of your current costs? So Crate and Barrel uses you. So let's be really specific. Sure. You're trying to buy a couch on Crate and Barrel. What are you what is ThreeKit doing to help Crate and Barrel? [02:42] >> Yeah. So visualize the product digitally. So think about you have every product, that microphone that you're talking into has many, many options. And when you go on the website of Crate and Barrel, you have couches, just their complex products. They 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 [03:08] >> TaylorMade with the golf clubs. A golf club has a 100,000 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, like, but started we saw a trend right before COVID. And then after [03:31] >> 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 wanna 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. [03:48] Oh, what's going on there, YouTube? Good to see you guys. Now imagine this. You love watching these interviews with SaaS founders, but imagine if we took all of the valuation data out from over 2,807 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 Founderpath. Check this out. I'll show you how you can access this in a second, but you log in, you connect [04:11] your Stripe account, you see your valuation real time, you can see what it changed over the past eighty eight days and even set goals for valuation this year. Now the secret evaluation is there's many different ways to value a SaaS business. So the reason you're gonna see three or four different valuations inside of your Founderpath dashboard, this is all free by the way, is because depending on who's doing the buying of your SaaS company, you're gonna [04:35] 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 [04:57] 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, 1,200,000 seed round, 3.7 raise. They sold 22% of their business. Go in here and filter by the event. Maybe you only wanna 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 [05:23] going out right now and you're raising your seed round. We'll 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 dataset of SaaS valuations than what you can get now inside of Founderpath. And we're thrilled to bring it to you. Alright. We're gonna go back to the YouTube video here in a second, but if [05:45] you wanna check this tool out, if you wanna jump in and sign up, you can check it out for free to get your valuation at this link. This link, founderpath.com/products/valuations. 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. Alright. Let's jump back into the [06:11] interview. Understood. So, yeah, just to be clear, you're buying a thousand dollar Aerie sofa on Crate and 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 ThreeKit enables Crate and Barrel 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, [06:34] maybe per month or per year? [06:35] >> Yeah. It differs very much. I mean, like we have an SMB segment. We wanna 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, 18,000 a year. Okay. Big brands just in general, where the scope is just massive, you're talking a 100 to 500,000. [06:54] So your biggest customer paying around 500,000 a year, how many, like are they paying based off number of SKUs or like what's the utility metric you're It's selling [07:03] >> like a total transformation. Like, yeah, it skews mostly like business scope is just giant, right? Whereas like an SMB customer, they have one product, right? You could have one, 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 it at high value? Usually these are high consideration items because you kind of want to understand, if I'm changing things, what does [07:27] >> it look like? It's a high consideration. So in that case, they make dog crates, right? They're wonderful dog crates in that case to bring them to life. You know, they're a very small startup really, you need digital. [07:39] Understood. To democratize, you can get started at about a thousand or $2,000 a month, all the way up to you'll paying $500,000 a year who are total change management, you know, hundreds of SKUs, thousands of options, etcetera. [07:51] >> That's right. Millions actually. [07:52] Millions of options. Okay. And put this on a timeline for me. What year did you write the first line of code for the product? [07:59] >> So the platform so that's just a cool story that 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 or movies like Star Wars, The Force Awakens, he got a lot of credit for that. And then in 2015, he met a [08:24] >> couple of folks from a small company called Shopify who joined the company and they said, hey, let's make this for e commerce. So the knowledge, sort of 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 Godard got into the company and we brought in with us, you know, the family and now we're 120 people, We decided that, hey, let's let's scuttle, [08:49] >> 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 a platform, although the IP, like the math, how to do that, it's been building up for a while. So it's really cool. [09:02] And Ben would say the founding date is 2005 even. So he's been thinking about this for a long time. Sounds like [09:07] >> That's right. That's right. [09:09] Okay, interesting. So is Ben still active at the company? [09:12] >> Yeah, he's our CTO, our founder, and that's kind of the marriage — 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 where 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 the show talk about where where this this [09:34] >> whole world's going. It's really cool too. I mean, he's got an angle completely from visualization, which is really fun. Fun to listen to. [09:42] 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? [09:50] >> Two twenty. Okay. And obviously growing. And what we're seeing is really interesting. Again, I'm telling you no news here with pandemic, this has started to become like major FOMO because 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 brands and the manufacturers to think like, wait a minute, if [10:16] >> 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 AR and then get it shipped, that's awesome. But also in the pure digital world, let's just not even, I mean, wherever you wanna 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 web 3.0. So it's really [10:39] >> fascinating to see that pressure, the FOMO, because the one that unlocks it, you know, in the space, they're getting outsized returns, essentially is what we're seeing. And that's kind of a fascinating place to be right now. [10:54] So before we dive deep, I wanna dive deeper into metaverse stuff, I wanna finish the regular non metaverse story of ThreeKit, right? So 220 customers paying between $18,000 a year on the low end and 500,000 a year on the high end. I mean, if we assume a $3,000 average ARPU, that puts you guys at something like 600,000 a month or about $7,000,000 run rate today. Is that in the right range of where you're at? [11:14] >> We're gonna exit much higher than that above 10 this year. [11:17] This year, you'll break 10, you think? [11:19] >> Yeah. Yeah. [11:20] Interesting. And what would that if you hit 10,000,000 in run rate this December, where were you last December so we can calculate a growth rate? [11:27] >> Yeah. I mean, we're we're guys that are gonna double or triple this year. So [11:31] Well, those are very different. Doubling and tripling are very different. [11:34] >> Oh, it depends on big deals. The deals are getting bigger. You know what I mean? So that kinda depends. We're still in the mode where we're gonna be way north of 10. But like I said, we have a plan together. We're 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. But the numbers aren't that big yet where a a few big deals make [11:53] >> a difference, you know? [11:54] Fair enough. Fair enough. Now, Matt, you know, obviously it sounds like, you know, if you're at 5,000,000 last year, you finished this year with 10, that's doubling. Maybe you finish even bigger than 10,000,000, which 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? [12:07] >> Yeah. That was second year, and that's always the hardest. You know? [12:11] But what is the second year, though? 2013, 2014? [12:15] >> We got in there well, technically, the first plat I mean, I'm sort of ignoring the we had some early customers before the platform. It was the second year was 2020. [12:27] Okay. So 2020. Yeah. So that would have been sort of right after you raised that series a, you broke a million dollar run rate. [12:35] >> Correct. And that's kind of where we brought in and really made this, I would say a SaaS business. Before this, it was pre platform and it was essentially, you know, bunch of cool utilities for visualizing e commerce. And we're like, well, won't scale. And that was the plan to begin with. I mean, that's no surprise. [12:54] Now before we jump into metaverse stuff with our last five minutes, 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 the last round? [13:03] >> So we actually that that's kind of what you heard from as well. I mean, the first seat kind of we did as a family, like our own money into it. [13:11] Then That was 10,000,000 in 2019. Right? [13:13] >> That's right. Then we just raised 35,000,000 last November. So we're we're 65,000,000 in in all in. Yep. Yep. [13:22] And how do you set the valuation on that first 10,000,000? Friends, family, Godard? I mean, how do you set a valuation? [13:28] >> Yeah. You try to do it well. I mean, you you wanna market in a sense. You know? I mean, [13:34] >> also there's, I mean, you kind [13:35] of 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? [13:42] >> 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's happy with it for existing shareholders. I would say that one is kind of, you know, basically experience. I agree with you. Yeah. Yeah. The rest is market based. [14:00] Okay. Got you. I was gonna say, so market for Series B these days, you're selling between 10 to 15% equity in the business. Were you guys sort of in that same range? [14:07] >> That's kind of, I think we follow the traditional path. [14:09] Okay. All right. Let's What [14:11] >> was cool about the last round, we also got, you know, strategics involved like ServiceNow and Salesforce and well, Salesforce was with us even prior on, but ServiceNow was cool, and Capgemini. So that was fun to see him in there. 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 [14:35] >> anyway, just a little tidbit there. [14:36] That was kind No, no, it's helpful. And that was all primary capital, No secondary in the 35,000,000? [14:41] >> That's correct. [14:42] Yeah. Yeah, that's great. By the way, I mean, if you're selling 10 to 15% raising 35,000,000, that's like a 300,000,000 valuation with around 5,000,000 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. [14:54] >> Yeah. No, 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 [15:00] yeah. Okay. Talk metaverse. We only have three minutes left. I want to talk metaverse. 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? [15:18] >> Well, I would say like, would Now, so let me just take a step back. We help brands and manufacturers. Like we are a piece of the metaverse. I actually, the best way, Nathan, think about us, we're 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, B2C, B2B, let's just say, or transform your business or your brand. Again, we work with [15:41] >> folks making forklifts and then very fancy handbags, right? So we cover it all. And we talked about Crate and Barrel and TaylorMade here. The ability to bring that 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 draw things, you can create, but if you want these products to exist in the metaverse, they have to be [16:04] >> very specific. With that, you have to visually configure them. That's sort of what we're finding. So the metaverse has an amazingly big vision. At first stage is e commerce. 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. [16:23] I mean, I just think for this though, for like where I think is very interesting is the product isn't actually the physical wood Crate and Barrel uses for the bottom of their couches. What's interesting is if I buy in Snoop Dogg's metaverse, the land next to him, and I now wanna furnish my house, I'm actually just buying the licensed Crate and Barrel design generated by ThreeKit, picking my cushion cover the distance and sticking it in my [16:43] living room next to Snoop Dogg and his metaverse. Actually becomes the product, right? [16:48] >> So there's two paths, 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, and maybe you wanna personalize it. Maybe you wanna make an NFT out of it. And so millions of options create. That's what we're seeing, right, digital to [17:10] >> real because the brands and manufacturers have one advantage that can make you the product. So that's a strategy, right, which is you're in Snoop Dogg's house, you're configuring whatever you're configuring. And then by the way, wanna buy it or buy an NFT of it, or it's totally like random, right? Like 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 [17:31] >> asset. And that's the interesting thing I think about the again, 99% of folks haven't even done web 2.0 yet in our world. But when you go into that world, it's like, who are gonna 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? Yeah. But it's a pure [17:52] >> digital watch, and that's kind of the fascinating thing about that world. Like, who's gonna own? Who's gonna have a brand? [17:58] Well, we'll see what happens. In the meantime, though, one one or two more questions here before we wrap up with the famous five. Obviously, net dollar retention is critical when you're selling to the enterprise. Are you guys above 110, 120% today? [18:07] >> Yeah, and what we're seeing is, that's right. Above 120%, [18:11] just to be right. [18:12] >> What you're seeing is basically when, you know, the, I'll give you an example. Those are public case study with TaylorMade. I mean, that club that they powered with, they made their sales number in two months for the whole year. And the reason is like, 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 I want. I will not [18:33] >> return it. Why would I? It's the one I want. That's kinda how that works. And Well, that's great. [18:38] I mean, that's a that's a testament to the product. But then the second thing is how do you actually capture the product value in in in terms of expanded ACV on that account. Right? [18:45] >> 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, and that's simply how this happens. [18:54] Yeah. Do you give your CSMs, like on the TaylorMade account, do they give them a net dollar retention target? [19:00] >> We do have a target, but not a revenue target. Like, they're not goaled on on making more money. They're they're goaled on making the customer happy. And yes, of course. [19:08] Quantified by what? I know everyone says happiness, but you have to quantify it somehow. [19:12] >> Yeah, it's still early. I mean, like, you know, they buy more, they're happy, obviously. And we do NPS scores. Okay. So it's a bunch of metrics in there. I'm just saying we're not comping them on saying, hey, get in there and start selling more. It's about obviously getting 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 [19:35] >> targets. [19:36] Makes sense, Matt. All right, we're out of time here. Famous Five, quick answers. Number one, favorite book. [19:42] >> Favorite book. Oh, I should have known that. [19:49] Let's go next one. [19:49] >> I don't know. [19:50] Number two number two, is there a CEO you're following or studying? [19:54] >> You know what? I I learned a lot from Godard, I will say. And but I would say, like, Elon Elon is just wacky to watch right now. I don't know what's I guess, 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 that I I would say I follow him, but I kinda just his moves are just interesting [20:19] >> to watch, you know. [20:20] Number three, favorite online tool for building a business. [20:24] >> Honestly, I think LinkedIn is is immensely powerful. Number number number [20:29] four, how many hours of sleep do get every night? [20:32] >> Probably six to seven. I try to make that a priority. [20:36] And situation, married, single, kids? [20:38] >> Married, one daughter. [20:40] So Very cool. And how old are you, Matt? [20:42] >> I'm 47. [20:44] >> 47. [20:44] Last question. [20:45] >> Is that old or young, Nathan? [20:46] That's young. That's young. Something you wish you knew when you were 20. [20:53] >> You know, I think the one thing that I would tell myself is, and I've heard this 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 action, 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, [21:19] >> I guess, I just didn't believe it. That made no sense to me. I mean, obviously it may not work out. That's why 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 create 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 [21:38] >> that I found. If you find me, call me. I'd love [21:41] to Guys, there we have it. Threekit.com launched in 2012 but really got going in 2019. Now two twenty enterprise customers Crate and Barrel who pay ThreeKit 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 $10,000,000 in revenue this year, up two x over December where they had a $5,000,000 run rate and raised their $35,000,000 [22:03] series b. 120 on the team today, looking to scale also thinking about potential metaverse play. We'll see what happens. Matt, thanks for taking us to the top. [22:10] >> Thanks, Nathan. [22:12] 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 one [22:37] p. M. Central. Additionally, remember these recorded founder interviews go live. We release them here on YouTube every day at two 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 SaaS world, whether it's [22:58] 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 wanna take this conversation deeper and further, we have by far the largest private Slack community for B2B SaaS founders. You want to get in there. We've probably talked about your tool if you're running a company or your firm if you're investing. You can go in there and quickly search and see what people [23:20] are saying. Sign up for that at nathanlatka.com/slack. In the meantime, I'm hanging out with you here on YouTube. I'll be in the comments for the next thirty minutes. Feel free to let me know what you thought about this episode and if you enjoyed it, click the thumbs up. We get a lot of haters that are mad at how aggressive I am on these shows, but I do it so that we can all learn. We have to [23:40] counter those people. We gotta push them away. Click the thumbs up below to counter them and know that I appreciate your guys'support. Alright. I'll be in the comments. See you.