How Trulioo Grew 100% to Approach a $100M Revenue Run Rate with 450 Customers in Digital Identity (Interview with CEO Steve Munford)

Introduction and Digital Identity Overview

Nathan Latka

00:00Hey folks, my guest today is Steve Munford. Has nearly two decades of executive leadership experience in the technology industry and currently serves as the CEO of trulioo software, a leader in digital identity. Previously, he held leadership and board positions with a number of public and private software companies in North America and Europe. He holds a BA in economics from the University of Western Ontario and an MBA from Queens University. Steve, you ready to take us

00:20from the top?

Steve Munford

00:21>> Sure thing, Nathan.

How Trulioo Fits in the Identity Space

Nathan Latka

00:22All right. Digital identity is hot. Metaverse, we have Jumio on blockchain. We've got all these tools. We have traditional players like Ping Identity. How do you fit into the space?

Steve Munford

00:31>> Yeah. So we are involved with the onboarding process. So think about yourself if you're a neobank or an online trading platform and you're trying to onboard customers and comply with different regulations or build trust, you need a digital identity service to do that. And that's what we are. The thing that makes us unique is that we do it not only here in Canada or The US, but we do it across 195 countries, which makes it hard

00:57>> and makes what we do quite special.

Nathan Latka

00:59So when I just bought recently on my Tesla and had to show them proof of insurance and ownership via the app, one of the things they had me do was effectively go through a third party and verify my identity. It was like a face picture with some algorithm thing plus my a picture of my passport. Are you powering those sorts of things?

Steve Munford

01:15>> Yeah. Yeah. So, you know, so it could be a marketplace. It could be a shop. It could be you know, an online trading platform. Those are all use cases for us. And, you know, typically we we get involved with, you know, high high growth digital first disruptors that are expanding globally and and we really power them.

Pricing Model: Consumption-Based Per Check

Nathan Latka

01:34And tell me about how you price. Right? So are you charging like per identity verified per KYC filing? Like how do verify or price?

Steve Munford

01:41>> It's a consumption based. We we do it

01:43>> based on per check. So every time someone comes to do us, comes to us with a check, we charge a fee on that.

Nathan Latka

01:51I see. Sort of like a flat fee. We're talking like 5¢ or something?

Steve Munford

01:54>> No. No. No.

Nathan Latka

01:55This is this can be you know, it could be in the cents. It could be

Steve Munford

01:58>> in the dollars depending on the country, depending on the complexity. Because not only do we do individuals, we also do companies. So whether it's a large company or think about a sole proprietor signing up to do some kind of rideshare programming or a sole proprietor going on to a platform to sell their goods or rent their houses, those are all kind different versions of the same workflow, if you will.

Nathan Latka

02:21Just to, Steve, simplify my questions, can I assume sort of the average though is maybe around a dollar? Sometimes it's $2 sometimes it's 5¢.

Steve Munford

02:28>> Yep. Yep. That's good.

Backstory: How Steve Joined Trulioo

Nathan Latka

02:29Okay. Tell me about the backstory here. What got you into this?

Steve Munford

02:33>> Well, one is the founder who founded trulioo is based here in Vancouver. I knew some of the investors. I got to know him over the years and really started with conversations about the next stage of growth for the company. And he was considering a lot of options, like many founders, should I try to scale the business myself? Should I take on new investors? Should I sell the business?

Founder's Path and Early Fundraising

Nathan Latka

02:56And what was context? How much had he raised and was he the sole founder?

Steve Munford

03:00>> No, there's two founders, but he was the only founder still in the business. He had raised I don't have the exact figures, but think about in the tens and twenties millions of dollars. And the company at the time was doing, I don't call it 20 or $30,000,000 and he was trying to decide whether to try to scale to be a 100 plus million dollar company.

Nathan Latka

03:20This was 2017?

Steve Munford

03:22>> Was '20 I began the conversations with them about in 2017, 2018. I took over running the company back in early twenty twenty. So along the way, decided that

Nathan Latka

03:34That's three year conversation, Steve. That's a lot of patience.

Steve Munford

03:37>> Yeah. That was a lot of patience. But listen, it was a great

Nathan Latka

03:41chance to get to know him,

Steve Munford

03:42>> get to know the business, and to build a relationship. And listen, the conversation started with just one guy trying to be helpful to an entrepreneur, and it turned out to be a great fit. The identity problem is huge. You can't ask for a bigger market, more important market than identity today. It's a hard problem, hasn't been solved, the need for it as everything goes digital just increases. So he had a desire to stay involved with the

04:11>> company but pass off the baton to running the company. We went about doing another round of financing that allowed him to take some secondary to take a step back and pass it off to this new guy and kind of take some money off the table. And it's worked out really well.

Series D: $394M Round and Secondary Liquidity

Nathan Latka

04:28So, Steve, just to back up the story here because, yeah, I mean, when you say you you you're underselling a bit, your most recent round, I'll let you tell tell the story, but what was the size of most recent Series D?

Steve Munford

04:36>> It was US dollars, 394,000,000, 150 primary, and the rest was secondary.

Nathan Latka

04:43And just a lot of founders don't understand you can get liquidity for yourself, early investors, and early employees without IPO ing or exiting a 100%. Just quickly explain how a secondary works.

Steve Munford

04:52>> Yeah. And actually, just full context, that was a pre money valuation of 1,600,000,000.

Nathan Latka

04:59So what post post 2,000,000,000 basically?

Steve Munford

05:02>> Well, because 150 primary, so post 1.75 US. But I think this is a really important point, Nathan. I think for a long time, I don't think investors had a lot of appetite to give founders or CEOs or early investors liquidity before they got their liquidity or before there was an IPO. And I think that was fundamentally misaligning risk and interest. And I would say for the last four or five founders I've worked with, a key ingredient

05:36>> to them feeling comfortable to allow the company to take more risk, to grow, to go longer, was the ability for them to take some secondary and take some chips off the table to de risk. Because for most founders, their chips are on one company. Whereas investors spread across five or 10 companies. So the risk appetite for an investor can be very different to a founder. And I think by allowing some liquidity along the way, it's just

06:07>> fair and it's good. This liquidity event that we had, geez, there's employees here that have been here six or seven years and were able to pay down mortgages or even pay off mortgages. The founder was able to take some money off the table, some very early investors, angel investors were as well. And quite frankly, there was more appetite to buy shares than there were sellers of shares in this round. I think that's, looking across, I think

06:31>> we have probably 40 or 50 employees that were able to get some kind of liquidity.

Nathan Latka

06:35That's amazing. That's fantastic.

Steve Munford

06:37>> And now they're still engaged. They've still got a lot to play for, but they're able to kind of take some rewards along the way.

Nathan Latka

06:45Think it's You

06:46guys are listening right now going, Well, Steve, they have a lot of skill. I mean, they broke 25,000,000 in revenue in 2017. Well, I don't have that much revenue yet. Can't do a secondary. Will tell you, we're seeing secondaries very early. I'm seeing Series A companies take secondary. So just because Steve is much larger than maybe you guys are listening, still take this advice on secondaries to heart if you're thinking about a seed or Series A.

Steve Munford

07:04Steve, would you agree?

07:04>> I completely agree because a lot of those same investors with good companies also could get complete liquidity if they wanted. There's a lot of M and A appetite going out here. So is really just an option of, Hey, some secondary, I'm still going long. And that's absolutely a conversation you can have if you're the right profile of the company.

Nathan Latka

07:22And the risk, the flip side to this, the reason firms like TCV will do this Steve, I'm sure you are as well, but I'm an investor in a bunch of different VC funds. And the VC funds get so bummed when founders sell too early because they want personal net worth, whereas they would have stuck with the business if they could extract some personal wealth ahead of time and have a long term horizon. So that's what TCV

07:42is fighting against.

Steve Munford

07:43>> Absolutely. And it's not just a founder. Think about it. The founder generally has a family, and that person's been working twenty four hours a day. The family's generally made a lot of sacrifices as he's been building the company. And at some point, you need to come home and say, Hey, we don't have a mortgage anymore, or, We're going to be in good shape. I love my company to go longer, but we've been able to toast, celebrate

08:07>> a milestone along the way. And it doesn't make the founder any less hungry. It just actually means that he has a longer time horizon. I think it's a really important ingredient to building a company long term.

Revenue Run Rate and Rule of 120

Nathan Latka

08:20So just to sum that up, $394,000,000 total round, $150,000,000 went on the balance sheet of the business, $244,000,000 of it went to early employees, early angel investors, the Founder, Liquidity. It was a 1,700,000,000 post money valuation. And Steve, about what revenue run rate today?

Steve Munford

08:35>> So I think we're pretty public about this. We're approaching right around $100,000,000 US.

Nathan Latka

08:42So that begs the question, right? Why do a secondary you could have maybe I mean, you really need to have like one twenty, one forty in ARR to have a, you know, good IPO these days, but why not IPO instead of doing a secondary with TCV?

Steve Munford

08:54>> Yeah. I mean, absolutely. When when you're the rule of I think we're rule one twenty. So it's Oh, wow. Nice. So we are not a company that needed the money to fund operations. We're a profitable, high growth company. And IPO, absolutely. Could have done that. But I tell you, we see the opportunity to build a company that is really the platform for identity, which really, it's a multi, multi billion dollar company. The ability to Listen, there's

09:24>> a lot of private capital available and the ability to operate a company not under the scrutiny of the public market, not to be a subscale public market company, you get a lot more latitude to focus on the business versus focus on a lot of other investors. And it's a lot easier to run a company to have a couple investors that sharing your thesis and are working alongside you than to have all the overhead of running a

09:48>> public company. I've run a couple of public companies and it is very, very different than having one smart investor that wakes up every day and cares as much about your business as you do is very different than having 20 to thirty, forty or thousands of public company investors.

Nathan Latka

10:04And guys, you hear this a lot when I interview founders doing between 80 and $200,000,000 in ARR. They'll talk about rule of 40, just to remind everyone what that is effectively your last twelve month growth rate plus profitability, right? So if you grew a 100% and you also had 20% profitable, you'd be 120. Steve, I imagine you guys are not profitable, but you're growing much larger than 120% year over We are profitable. You're profitable. Wow. Okay.

Growth Rate and Profitability Breakdown

Steve Munford

10:28>> We're we're profitable.

Nathan Latka

10:29That down. Break that 120 down for me then. How much profit? How much growth?

Steve Munford

10:33>> Well, it's called a 100% growth and and it's anywhere between 5 to 20% EBITDA. So listen, I'm I'm rounding the numbers here, but it it's it's all good numbers.

Nathan Latka

10:42That's incredible. So if you're doing about a 100,000,000 run rate today, where were you about a year ago?

Steve Munford

10:47>> We've been growing a 100%. So So 50,000,000? Yeah.

Nathan Latka

10:50That's great. Okay. Very cool. Take me back to the series C. Obviously, you're managing a storyline between the series C and 2019. Now you joined you joined right before the series C or after?

Steve Munford

10:58>> After.

Nathan Latka

11:00Oh, you joined right after. Okay. So maybe you don't. Mean, I'm probably probably know this though. So the 50 it was 70 CAD, 55,000,000 USD. What valuation was that at?

Steve Munford

11:08>> Don't think we went public on that one, but it was relatively small.

Nathan Latka

11:11Okay. Most folks on a series c mean you're selling 10 to 15% of the business. Would you say you're probably in that standard range or you did something unique?

Steve Munford

11:18>> I yeah. Not sure. Right. Yeah. I'm not gonna I'm not gonna let you fair dime to get to an answer.

Nathan Latka

11:24I wanna see how much the valuation grew over the past twelve months since revenue grew 100%. Can you speak to that at A lot.

Steve Munford

11:31>> A lot. And there's two things. One is our growth rate certainly accelerated. We really scaled the leadership team and geographic presence. Our new logo acquisition really ramped up, and also the market dynamics just went in our way. All of sudden identity became the most important enabler for online commerce. And pandemic, it was a trend coming. Post pandemic, when we saw the democratization of financial products, everybody wanting to open an account, trade online, those products going global.

12:04>> The payment infrastructure all changing, everything being digital. All of a sudden identity became the gating factor for companies expanding and growing, which was a tailwind for us. So it was a combination of, yes, the company's metrics have greatly improved, but also just the recognition that this is a huge business seemed to come about the same time, which just the multiples that people are getting in our space have just expanded considerably.

Customers, Team and Engineers

Nathan Latka

12:32And you mentioned logo acquisition. How many customers today?

Steve Munford

12:36>> About four fifty. Okay. 450.

Nathan Latka

12:39That's great. And then talk to me a little bit. You mentioned building up the team. How many folks are full time on the team today?

Steve Munford

12:44>> We're just over 300.

Nathan Latka

12:45Okay. And how many engineers?

Steve Munford

12:48>> About a 100.

Nathan Latka

12:49Very heavy. And do you love that SR&ED financing up there in Canada or what?

Steve Munford

12:53>> SR&ED financing listen, I've been in this business, you mentioned my gray hairs, long time. I think it is a great asset for Canadians. I think it is such a good program that the government runs. It runs very efficiently. I'm a big fan. And I think it's something that really helps out companies here.

Valuation Multiple and Market Dynamics

Nathan Latka

13:11Yep. There's a reason that we have a significant amount of our actually 50% of our employees up there in Canada as well. Love that. To me, Steve, do have a question for you. So there are some people that might argue with current market dynamics, a 1.7 billion post money valuation growing 100% year over year and 100,000,000, that's a 17X multiple. It's actually much less than like a 35, 40%, 40X multiple that like Manny Medina Outreach got or

13:35Gong is getting or ClickUp just got. Why is your valuation multiple almost half of some of those guys in your opinion?

Steve Munford

13:42>> So I'm pointing at today's numbers, which is really six months on or seven months on from when we did the financing. So I see. So they weren't that at the time. So I think the multiples was mid twenties to thirties back then. So, yeah, listen, and listen today, I think our growth rate accelerated even since then. So, today, we're certainly worth a lot more than what the last financing was at.

Net Dollar Retention and Customer Expansion

Nathan Latka

14:09Talk to me about net dollar retention real quick before we wrap up. Where are you guys at today?

Steve Munford

14:13>> We're approaching we always range between 150 and 200. We That's world class. Yeah. And that's what makes us profitable. Right? So back to the point you said, how can we keep EBITDA profitable? We acquire customers, and in any given quarter, the majority of our revenue comes from existing customers. It's a usage based pricing, right? So we land a customer and then we land generally winning platforms that are expanding organically and expanding geographically. So if you take

14:41>> care of those customers, you solve the problem and you're relentlessly focused on their success, you can help but have great net dollar retention in our space.

Nathan Latka

14:50So Steve, just to peel the onion on net dollar retention, you have gross revenue churn and then obviously expansion. Are you guys gross churn like 10% and expansion 80 to get the 170 or something like that?

Steve Munford

14:59>> Yeah, our gross dollar retention is negligible. It's single digits. Annually. What we find is we get people on the platform and they can be small because they're an early company and they can stay small or go away. But if they grow, once they get growing as a company, then we never lose them.

Plans for the $150M Primary Capital

Nathan Latka

15:18Yep. Interesting. Wrap us up here before the famous five. What are gonna spend the 150 on?

Steve Munford

15:24>> Likely inorganic growth.

Nathan Latka

15:26Okay. And so there's a lot of folks growing very fast right now by if they can raise from VCs at a 17x multiple, but they'll buy other companies at a 10x multiple. Do that all day long. Inorganic growth, financial engineering, call it what you want. Is that what you mean?

Steve Munford

15:38>> Yeah. I actually yes. Those math that math makes sense, but it it really is for us all about product. Right? We we we are not I'm not looking for top line growth. I'm not I'm looking for product to extend our platform. And with the right product, we have a customer base that is enviable. If we broaden our product suite, we can sell more to them and provide more of a whole solution for them. It really is

16:02>> about product and the team and the tech, not so much I'll pay whatever multiple I need to get the right asset. It's all about the product, the team and the tech.

M and A Targets: Fraud, Biometrics, Orchestration

Nathan Latka

16:09Name a product category that's right next to digital identity that you're very interested in.

Steve Munford

16:13>> I think there's a lot of areas for opportunities in fraud, a lot of areas for opportunity in things like biometrics. There's parts of the orchestration of how you orchestrate multiple different steps in an identity journey. All these things we have either part of the solution or building solutions that we may be able to accelerate our growth through M and A.

Famous Five Lightning Round

Nathan Latka

16:33Very cool. All right. Famous Five. Number one, favorite business book.

Steve Munford

16:38>> My favorite business book can we come back to that one?

16:42>> Yeah.

Nathan Latka

16:43Number two, is there a CEO you're following or studying? Give me a Canadian Founder.

Steve Munford

16:46>> I I I'm a big Elon Musk fan. Sorry.

Nathan Latka

16:49Alright. I don't know if he has any Canadian in him, but we'll see. Number

Steve Munford

16:52>> three He went he went to he went to Queens, by the way.

Nathan Latka

16:54Oh, okay. There you go. Fair enough. Number three, what's your favorite online what's your favorite online tool, Steve, building trulioo?

Steve Munford

17:00>> For building trulioo? Because I thought I was gonna say Snapchat for keeping in touch with my my my Right. It is. Yeah. I listen. We are a big user of Slack, and and I think it's just a great tool for us.

Nathan Latka

17:13Number four, how many hours of sleep do get every night?

Steve Munford

17:16>> I'm about a six hour guy.

Nathan Latka

17:18That's good.

Steve Munford

17:19>> I have a hard work if I have a hard workout, maybe seven, but generally a six hour guy.

Nathan Latka

17:23And situation, Steve, married, single, kiddos?

Steve Munford

17:26>> I'm married with three wonderful kids.

Nathan Latka

17:28Wow. Busy guy. And how how old are you?

Steve Munford

17:30>> I am 55.

Nathan Latka

17:32Take us home. Something you wish you knew when you were 20.

Steve Munford

17:35>> Wish I knew when I was 20 that my philosophy degree would have so much value.

Nathan Latka

17:42Trulioo.com guys, one of the unicorns in the digital identity space. Steve came in a couple of years ago to drive expansion in the platform. The company has grown over 100% year over year from 50,000,000 in ARR to 100,000,000 in ARR. Four fifty enterprise customers today, they just raised $394,000,000 in capital, 151 on the balance sheet, two forty four to provide liquidity to early backers of the business, employees and founders. 1,750,000,000 valuation as they look to continue

18:05to scale. Steve, thanks for taking us to the top.

Steve Munford

18:07>> Yeah. Thank you, Nathan. All the best.

Nathan Latka

18:11One 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

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