How Tru-Signal CEO David Dowhan grew Tru-Signal to $4.8M revenue and 16 customers in 2018.

hello everyone my guest today is David Dohan he's the chief executive officer and founder at a company called true signal he brings a successful track record of executive leadership at growing both private and public venture backed companies and has been a pioneer in online marketing since 1997 David are you ready to take us to the top let's do it all right tell us about true signal what's the revenue model and what's the company do sure so we're predictive analytics and data company really focused on helping digital brands and mark tech platforms use data for more effective targeting so that's kind of in a nutshell revenue model really I mean the company's been around since 2012 and so we've we've had actually a couple of different revenue models we started out looking a little bit more like an agency where we're kind of managing campaigns directly for brands didn't like that model it's hard to make that work guarantee revenue models just doesn't really exist in the media space and so within the last it's a kind of you know it's 18 months or so we really flipped the business around and really focused on establishing ourselves as helping the Mar tech stacks out there with our technology integrating our technology into their solutions to help power some boats other people's Mar tech stacks and really in doing that we turned it more from media driven kind of month-to-month model a more - I would say more of a SAS inspired model where we're having some kind of minimum monthly revenues associated with our integrations but then we are we partner with our with our customers to build products together and grow them so there's some upside potential as well business so the model is kind of a SAS inspired I would say and what would you say the average customer pays you per month just so we can get a sense of what size you're playing with sure so the average kind of minimums that we see across the board about $25,000 per month okay minimum or is that an average that's that's the that's a minimum okay yeah so again relatively small customer base so we have 16 or so active customers and so we have a minimum and then we really partner with folks to kind of get the upside so that's that's the model what do you mean by that partner with folks get the upside sure so when the the 25,000 or so per month kind of covers the cost the integration the support but what we're really doing is we're helping our customers grow revenue and so most of our contracts have a revenue share model to them so as we build products together and we we staff to help them take it to market provide support so it's very much a channel model almost like we think of ourselves is a little bit like an Intel Inside forum our tech so we're powering some of the capabilities of the Mahr tech stacks but then we partner with them to really sell it and turn into real revenue okay got it um so you have two revenue streams one is a revenue kind of cut the others to pure SAS plays that accurate yeah that's right and the pure SAS but there's sixteen people paying a minimum of twenty five grands you guys are doing north of 400 grand a month just from that stream is that accurate that's correct okay got it and generally speaking how fast is that growing where was that stream call it 13 months ago in December 2016 yeah that well that stream was about half of where it was oh wow you know about 12 months ago right in terms of like signing up additional partners so we you know given the nature of our business there's you know maybe 80 or 90 or so players out there that we could potentially partner with and so you know we're well on our way to kind of knock and some of them down so it's not a massive customer base but we do get integrated we spend a lot of time nurturing that relationship Co selling so my objective really is to get customers kind of a minimum of 50,000 a month and we like to see customers closer to 100,000 per month kind of recurring in that that's a mixture of course of the SAS plus the upside models so yeah that's really what we shoot for that's good now did you iose oome you guys did you break 5 million in AR last year with both streams together yes got it will you break 10 million this year I don't weigh 10 I'd love to we're it's some of these things take a little longer but yeah we shoot for 10 that's what that's what the board loves to hear best eh yeah it's uh yeah you mentioned a board how much have you raised so interesting story so true signal was actually incubated inside of another company called I bureau so I was an employee the bureau we started out with 2 employees more of a skunkworks kind of bootstrapping if you will so the company was funded by the parent company for a number of years a bureau was just sold to TransUnion in a public transaction back in October so it was part of that transaction we had a couple of choices we could either you know potentially be acquired with the parent company or spin out and so the board saw a lot of big upside potential so we raised a 5 million round and spun it off as a separate independent company back in October of 2017 so smart I want to dive deeper here so others can do the same thing at their companies if this happens yeah which board made that decision the acquiring company of Ebro or the Ibero board prior to the acquisition the bureau board prior yeah okay so the II Bureau board prior to that so they now was the cap table at that point they own some percentage as the company and then you and maybe your other co-founder own the other chunk yeah that's right so as part of the as part of the the corporate structure there was the parent company and then there was two kind of in corporations under that parent umbrella company so the cap tables were completely separated a lot of work was done on the legal side to be clear to make sure the IP has been separated that's one of the big issues you're gonna get into right especially for technology and data company how is the IP commingled so we did a lot of things to make sure those are separated both physically as well as illegally and documented well so that when it came time to do the spin-out you know it was an easier transaction but that's because really smart people had done things for the last three years to kind of get us ready for that event what portion did Ebro own of the portion of true signal before the spin-out so so the parent company called X Tech was the holding company so they owned 100% right so obviously there was some you know ownership to employees you know did you own anything the board helped I do yeah yeah I do I did on some but not anything like they owned a hundred percent yeah so a private company same balance sheet there was separate equity plans for true signal any Bureau okay so I think what you're getting at is kind of what kind of kind of kind of overall ownership it was roughly kind of an 80/20 split right so 80% it was kind of owned by kind of the board really as well as the 20% was employees got it so 20% was you the co-founder maybe other employees and an option pool 80% was owned by the parent company you once the spin-out happened you said we need to go raise five million bucks to essentially buy out the 80% and now VCS on that 80% are you able to sell only maybe 20% and increase your option pool for employees well it turns out it was the same the same VCS kind of funded it they don't do it before right so we have very supportive board they you know kicked in some more money so they kind of retained their ownership share and took a little bit more obviously right as part of the as part of the spin-out so that's how we did it no let me let me ask you this as a guy that can kind of go out do his own thing you're doing all the hard work that an entrepreneur would do if they owned a hundred percent of the company except you've got kind of capital partners why didn't you just go out and start from scratch instead of going through all this work of separating and making sure as a clean cut yeah so a couple of reasons one the business that were in is heavily it's pretty heavily capital intensive right so to be in the data business you need to you know you we license data from many different places so we're licensing you know on the order of you know a couple million dollars worth of data every single year that's just kind of a fixed cost of operating right so some of those sources if you don't mind me asking are you talking like full contact yeah so name and address with things like past purchases the kinds of people the things that people bought online and off light demographic data census data vehicle ownership voter registration files right summarized credit information so is a trick to really do this well you have to have a pretty broad spectrum of data and that's extremely capital intensive right I'd love to bootstrap it but man that would require you know writing a two million dollar check before you made dollar that's just because you're paying on these two that collect the data you know a number of cents per record yeah that's right and the interesting thing about the model is it's pretty highly leveraged that's a fixed cost to the to our business so the more I use the data right the you know the closer to get to break-even and then after you break even it's a pretty highly leveraged model right because you're kind of your fixed costs are really going to be people the data cost and...