Truelytics Revenue, Valuation & Funding (2022)

hello everyone my guest today is jeremy carnell he's a serial entrepreneur has founded four companies including one which he scaled to more than 100 million bucks in gross revenue he's got significant experience in operating and scaling digital platforms and has helped a significant he's helped run significant operations in the us the united kingdom and singapore currently he is the president and ceo of a company called true lytics all right jeremy you're ready to take us to the top absolutely all right edition the covet edition that's right so so what we're both hunkered down here in in texas um for folks that uh that haven't heard of true linux tell us what it does what's the product do sure so true linux is a sas platform right now focused in the wealth management space uh all industries but them in particular are faced with what we're calling the great transition which is just the the tsunami of retirements that are about to happen because of the baby boomers and wealth management has done a very poor job in in filling its ranks with a younger generation and i think serelian associates predicts that the industry needs to recruit and or bring in 250 000 new financial advisors just to meet current demands and so uh true lytics is a sas platform that's an advisor transition management platform and it uh helps wealth management enterprises with sort of an end-to-end solution helps them with recruiting financial advisors helps them with practice management and optimizing their business uh protects that asset through an emergency continuity module and then gives that asset a path for either strategic growth and or an exit through our matchmaking solution so it's it's that and it's the first one of its kind up until this point the industry's really been dominated by professional services and give me this before we jump into the product give me a sense of size today what revenue are you doing so we are right now i think around 1.1 million in annual recurring revenue we launched the enterprise solution in the middle of uh in june of 2018. okay and was that your first revenue coming in in 2018 or you got revenue before that no so we purchased the core of this application was ip we acquired from an investment bank in the middle of 2016 and the way that intellectual property was designed was really focused on selling direct to financial advisory firms and so when we launched in 2017 that was what we did we were trying to sell 1075 licenses direct to financial advisors that's not that's a that's a recipe for well a very difficult business so we why they just didn't have budget or well it's well there's several different dynamics one is a lot of them are older and not necessarily um that savvy with technology two is that a lot of these are lifestyle businesses and uh you know paying a thousand seventy five dollars for a uh for a tool that would require them to do self practice management was also sort of a tall order um when we pivoted to wealth management enterprises that's really when things took off for us so by the way what is that i think my i don't know what that you mean when you say well an enterprise wealth management enterprise yeah well yeah okay the wealth management industry is a relatively convoluted value chain so it's made up of a nor several different layers you've got independent broker dealers you have custodians you have asset managers we we view that set as a wealth management enterprise and then if you expand beyond that you have rias uh you have then uh connected within things like independent broker dealers osgs office of supervisory jurisdictions they're their own sort of mini enterprise and then beyond that are the independent financial advisory firms so it's it's a alphabet soup of layers so can you name can you put some faces to those descriptions can you name a couple customers that we might know that use you yeah so we have uh as far as our top enterprise customers are concerned we work with cetera lpl uh capital group hd vest brinker uh carson group uh advisor group um fidelity the like the likes of that okay so people definitely have heard of fidelity so that that's helpful okay so so about 1.1 and ar i know how many customers have you scaled to today so we have six well so we in our database is 500 independent financial advisory firms now the bulk of that 90 of that came from the wealth management enterprises of which we have 16 of those enterprise relationships got it so these are these are people these are paying like very high amounts what's the average one paying per year so the average uh annual contract value is seventy thousand dollars and they pay uh that uh they sign up for three-year contracts and back us into that so so seventy thousand dollars per year and they pay 210 up front yeah so no so our pricing is is really tiered on the number of affiliated financial advisory firms for the with those enterprises so it it starts at anything less than 50 and then it goes up to um if you if you have 7 000 or more financial advisory firms lpl is a huge independent broker dealer a cetera is another one they have like 8 000 well cetera has i think over 8 000 independent financial advisory firms as part as their broker dealer they are as our pricing fee is concerned that would put them at 120 000 annual fee paid uh annually for three years okay got it so 120 000 a year divided by 8 000. it's about 15 a seat per year yeah and we sell and we sell directly to financial advisory firms uh through our website all of that self-service and that is a thousand that's 99 bucks a month so about 1075 a year and so it's a huge it's a really big value or at least savings for an enterprise to come in and purchase this for their entire network versus having their network come to us directly yeah experience so again and to put all this on a timeline you launched the company in in 2016 with that uh acquisition yeah okay and what did you guys spend on that or did you were able to get that for free or a trade or something no no so so we we've raised since our inception um we've had two different rounds of fundraising early on when we to acquire the iep was like we raised about a million dollars generally from friends and family and some industry insiders and then at the beginning of 2018 i think we did another two and a half million or so i think in all it's a little over three million dollars that we've uh we've generated and again all primarily from industry insiders no professional money okay and again scale today to about what is that a hundred and 110-ish thousand dollars per month something like that yeah that's exactly right and where were you a year ago do you remember yes so here i'll let's see here uh so last let's see enterprise annual recurring revenue um well let's look at monthly reoccurring revenue so we ended uh 2020 with 122 000 i mean 2019 about 2019 i'm sorry thank you we ended 2019 with 122 000 an mrr that was 109 increase over 2018 which was at 53 915. that's got it yeah it's good that's good growth so what uh and what do you think you'll grow at in 2020 considering the virus is that what has changed exactly so we we actually had uh we had pretty reasonable goals going into the year where we were just looking to add a net new 1 million and had we done that uh we would have generated a 400 000 profit at the end of the year um and uh and what was your profit last year i'm sorry what was your problem last year so our ebitda last year we we weren't profitable last year again we had about six months in the green but we ended with negative 540 000 um and uh a negative sort of 48 percent ebitda um but you know going into our basically our our second full year uh we had a path to actually get to break even cash flow positive uh by the end of 2020. we've reset that um i'm um i'm a big fan of the book uh infinite game by simon sinek i don't know if you read it but that whole the theory of that whole book is to stay in the game as long as possible and given the sort of left curve the black swan event of cobin 19 and the pandemic what we've seen early on is a lot we've got five million dollars in our pipeline we had an expectation again of closing a million of that we've seen in q1 uh basically a lot of decisions being pushed into the basically in the middle of the year if not the back half of the year so that's really had us revise down our expectations um and and we need more data points uh such as whether or not enterprises are going to be willing to spend in this time um so far we've seen small like not enough for me to be convinced and so we're really preparing to again just make sure we're in this game for the long run so we've really uh reduced uh where we could in the op x um we still have some really good client opportunities in front of us but instead of reaching for that million as a as a net new reach target it's now 600 000 at the high end but if we finish the if we close 250 000 of net new we still end the year with a half million in the bank so i'd be happy with that so jeremy long lasting in in today's day and age in sas world means cash and profitability walk me through where you're at today so if you do 120 000 this month how much will you burn or you break even no we're not break even so we have um a monthly bur monthly well a monthly burn of 134 000 but given all of the current enterprise contracts we had so that's gross our net burn um is 55 000. that includes all of the current contracted revenue and so that that's the number that gets us to the 600 and i think 660 000 target which would make us break even and had we been a million if we were able to get 4 million maybe we still can just don't know given the current state of affairs that puts us uh 400 000 from let me just run that back by you so your current monthly recurring revenue is about 120 000 per month your total expenses your so your gross burn you said is about 134 000 per month uh yes that's right so when if you subtract those two that would mean your net burn is about negative 10 000 per month correct so yes so i the the del there's a delta here there's revenue yes um i i think i've actually gave you a enterprise uh revenue number not included the direct to advisor revenue number that that additional revenue that we get from firms coming to us directly and so i apologize there's a delta between the two um and and there's uh we also have not included in the annual reoccurring revenue one-time fees like onboarding white labeling things of that nature so i do think that uh it's it's more i think the number is actually closer we ended 2019 with about 1.1 million and um and subscription revenue enterprise subscription revenue and um let's see that so and then the enterprise arr on that is a million uh 1 million 47 000. so it is i think that's the the more accurate got it so let me just repeat this back to you you have some direct to financial advisor relationships and some one-time fees that make you profitable every month uh depending upon the month yes okay sorry so what is that you you said when you just told me your net burn you said 50 000. so i'm just trying to figure out how you get in any month how you get to net burn is that positive 50 000 or negative 50 000 uh so that's negative fifty thousand okay okay so worst case you're burning fifty thousand a month some months you might get up to break even or cash or positive if you sell a lot of one time that's exactly right got it okay so so let's talk about like covet response what was your team size before the virus hit so the team size before the well the team size at 18 was five and then we brought in a chief technology officer best decision we could have ever made at the beginning of of 20 and and so that added um a sixth person and then our covered response uh was unfortunately having to lay off one employee okay so far and and what that did we did that we applied for ppp um and uh we didn't make the first round ironically but how much how much were you eligible for on the forums interesting yeah interesting and so effectively what as far as our planning is concerned we had to do the one layoff and then we have a 90-day plan basically in q2 we want to at least have between 100 to 200 000 of signed msas in their first round of edits to meet our goal like if we do that we're not going to make we're not going to take any additional action if we don't if we have a q2 that's very similar to a q1 where there's no positive data points that enterprises are wanting to spend then we're probably gonna have to take a second round of actions which will be most likely about one or two furloughs what does gross revenue churn look like over the past 12 months zero okay you so you don't have any of the 15 or 16 customers have downgraded or so but to be fair they're in three-year contracts so we're not like next year is the better time to ask that question right people are going to want to know how you convince people to sign a three-year contract on day one how do you do that that's like magic it well it it's it's really um i mean we're in a really interesting industry again there's not any competition for us i mean we are by ourselves effectively i would say the closest i should i'll copy out that we're by ourselves in north america in um in canada there is a competitor that we respect greatly which is uh find bob but other than that there's not a lot of options and we're a startup we're a startup that isn't flush with a lot of growth capital and so the partners that we're working with all these major enterprises see the enduring change that we're trying to make in the industry and fun and absolutely have um have been really embracing this notion of these three-year contracts to give us some revenue stability so we can grow so they've been i get i tip my hats off to the industry and then okay so you so you'll charge someone 70 000 per year you'll have them commit to three years if they're unhappy in month 14 and ask for a refund on the final two years do you give them a re like or not a refund because they haven't paid you yet i don't think but do you let them get that money back um can you repeat the question i'm sorry yeah if you sell me a 70 000 a year plan and i commit to three years in month 14 if i'm just not happy what happens so in month 14 well the contract would require you to still pay on the contract now in the event that that were to happen we would probably negotiate a settlement so we would say no you don't have to pay the full two years but pay us this and we'll release you okay do you do you have any expansion revenue in other words sometimes three year contracts like this people forget to build in natural accelerators like a five-year like in natural increase in the acv so you actually have expansion revenue how do you drive expansion revenue when you lock in terms so our terms allow us to increase the base subscription um 10 every year okay have you done that yet or knows it too early we we haven't done it up in we i was going to say we haven't done it yet but that's not true as of last week we actually created a platform pricing fee schedule so everything i've been talking about right now is really a la carte pricing for each of the different modules that we have and we just came up with our a platform pricing which includes everything that has baked into it our first 10 increase i see okay so you expect to have about 10 net uh sorry 10 expansion over the next 12 years that's exactly right zero gross will mean 110 net revenue retention yeah interesting what are you paying to get a new seventy thousand dollar a year customer so we are paying uh exactly thirty thousand six hundred and eighty six dollars okay and that's for the three year contract for three year contract okay and that average contract values again about seventy thousand dollars a year yeah okay so i mean that's a very healthy payback period for four months five months yeah four or five yep that's right that's great um do you get more aggressive on spending during covet or or less aggressive on spending on acquisition yeah specifically money towards customers now actually so what's baked into that price is um is really account based selling and inbound marketing so we it's it's that doesn't change for us given the fact that we don't spend anything we don't spend anything on paid search we don't spend anything on brand advertising uh all our our the primary items that make up our cac are um our ceo is our chief revenue officer so a percentage of his salary we've got a freelancer that helps us with um marketing and and we test a couple of lead gen platforms here or there and so very small amount so it's not a lot of money and that doesn't change given you know our it's such a rounding error on our on our overall objects so interesting are you raising any additional capital right now we are we just um we just actually uh gave a mandate to an investment bank yesterday after after going through a pretty rigorous process and they are going to help us either look for um well generally help us find a strategic i think that's that's their mandate you want to sell to a strategic well it's either have a minority investment it's all obviously going to depend on the valuation but it will either be a minority investment or a majority i mean we'll see which way it goes what revenue multiple do you think you can convince them to go with for value from a valuation perspective that's i'm gonna defer that question i'd rather the ivs come up with that um i mean i'd love the 10x on that but uh we'll see yeah we'll see what we can get interesting all right let's wrap up here jeremy with the famous five number one favorite business book uh i mentioned it earlier the infinite game by simon sinek number two is there a ceo you're following or studying uh currently elon musk really we're interested in him yep number three favorite online tool for building the company hubspot and number four how many hours of cp and every night seven to eight i wake up at 4 30 a.m every morning go to sleep at 9 30 p.m that's good and what's your situation married single kids married two kids a seven and eight year old busy guy all right and how old are you i'm sorry how old are you 49 49 last question what do you wish your 20 year old self knew not to be so so i've been a serial entrepreneur my entire life and if i could tell and so i got started in my 20s and if i could tell that person one thing it would be to uh not be so hard on myself but i've i've experienced great success i've also experienced great failure and i would say that the failures have been so instrumental in my success since those failures much more so than any previous success i've had and those i need to honor that experience i need to honor that education and that's what i would tell my 20 year old self guys there we have it true linux just at 1.2 1.3 million in ar up from about half that just a year ago so over 100 year over year growth rate they have about 16 enterprise customers paying 70 000 per year a lot of three year contracts in there they are burning you know in a bad month 50 000 in terms of net burn however that will fluctuate up with some one-time fees and and some services they're selling directly to advisors they raised 3.5 million bucks to this team of five people uh as they look to continue to scale thirty thousand dollars four months payback period jeremy we're rooting for you man thanks for taking us to the top thanks you'll be safe