How Ubersmith CEO Steve Cowan grew to $5M revenue and 140 customers in 2019.

hello everybody my guest today is kurt daniel he served as ceo of ubersmith since 2014 and venture partner at next-gen adventure partner since 2017. previously he helped build and scale three startups parallels worklight and db which obviously ipo'd earlier kurt was a lead product manager at microsoft you ready to take it to the top i am thanks all right how active were you at mongodb was it was it kind of employee number what seven and up to ipo or where were you uh their valuation was actually um i think around 500 million when i joined okay how many team members how many employees uh employees it was i want to say uh it was a hundred plus and uh when i left the valuation was i think around 1.4 billion and we had maybe 300 plus employees yep very cool okay so uber smith you joined in 2014 as ceo was next gen an investor and it went flat and so you had to go in and save the thing or what's the context there uh no i i had done three startups and and this was my first uh ceo gig which i was really excited about having done multiple multi-functional roles at those other companies and it happened to be a small company within a public company so we are owned by a parent company called inapp on the nasdaq it's a data center services company uh with uh and and we are part of that but running it much like a startup inside uh with success now for four years uh in a very kind of you know entrepreneurial name of your parent company uh it's inapp uh formerly known as internap which is the ticker is in8d got it okay inap now so so when you look at actually the cap table of uber smith i mean is it owned 100 by inapp or you've got 10 for yourself there's an option pool of for equity is like a typical startup yeah uh good question it's uh it's 100 owned by the parent uh and then uh uh some some folks have uh anyone who has stock and ubersmith has stock in the parent company stock okay interesting so why a guy like you you have all this experience i mean why not go start fresh you own 100 cap table launch a business from scratch why do this inside a big beast um i am i think uh i don't know that i'm a founder uh type although i've helped uh founders uh as an advisor independent director when they've had as little as you know one person or a couple founders uh and i joined work like when they had 20 or so people when i joined parallels they had a hundred plus people i think i'm more of a growth person uh in long-term kind of you know product growth business growth uh team building that kind of person so i'm entrepreneurial but not necessarily a founder um but i love i love startups and for me i fell in love with the product and the space in terms of subscriptions in terms of the cloud and where data centers and it infrastructure is moving to and i feel like we're both you know riding and enabling both of those waves um so just be clear for people not familiar with you you're actually subscription business management correct subscription billing we also do subscription uh quoting uh order management uh monitoring and ticketing and that kind of thing so really it's a modern um sap or oracle if you will focus on subscriptions but also going deep uh with the cloud and doing turnkey billing uh which is really interesting turnkey billing for things like virtualization bandwidth so are you a sas company or is this professional services uh it's a sas company and a software company and almost no professional services okay so you just said kind of custom billing uh what do you mean you have a team building out custom billing solutions or what uh we don't have a team building custom our customers build them themselves with our platform we have a nice api documentation and a plug-in system which we launched this past year we also build dozens of integrations ourselves but at a product level not at a services level so think of payments integrations we integrate with 60 plus payment gateways around the world uh we integrate with attack solutions and also a lot of key interesting geeky things like uh on app uh for people who want to set up cloud like a cloud service provider uh or control panels for hosting or um certain things like that and walk with you on average what's what's a company or a new company going to pay you for all these things per month oh uh they can start as little as 200 a month which is quite approachable uh and our largest customer pays us tens of thousands of dollars already per month um and so you know that number is expected to go up over time as well but it's a nice range uh on average it's about i think uh 3 000 or so plus or mo minus mrr per customer okay okay okay so 3000 bucks a month so you're kind of pushing mid-market enterprise at that price point uh yeah we can actually uh we can actually go um pretty startuppy uh pretty small i get that i get that you work for everyone i totally get it everyone says that but at three thousand bucks a month average you're really catered towards mid market enterprise even though you might have a long tail of you know 200 a month customers um actually the sweet spot is probably between 10 and and like 300 employees and i wouldn't describe that exactly the market segments that you said so i think it's i'd say it's solidly smb okay but three thousand bucks a month on average yeah okay so it's a lot to get from an smb that's true um but we only have maybe five plus customers that are public companies that use us the rest are all squarely smb out of uh you know 140 or so customers in 13 countries okay so 140 customers today i mean can i do the math 140 times at 3 000 you just gave me we can kind of back into what 420 in terms of mrr uh that's a that's i can't disclose like super specific information but i can say that you're in the ballpark okay and in terms of growth rate just on this branch of the business obviously you're part of a parent company but i mean doubling you every year tripling you every year what are you kind of grown at uh we are growing you know um every year i've been here uh and uh the growth is not i wouldn't say it's your typical like you think of it as like a group within a you know a public company that's been established for quite a while it's not your typical venture growth where you're doubling or tripling a year per year of it's very good growth it is interestingly um you know very profitable um so it's growing and profitable and um it's uh it's uh it's really interesting uh financially um as a business what the team size right now what are you guys at 20 to 30 people it's just on this product not the parent company just on this yeah okay interesting so 25 and then look the the tricky thing about your kind of business it's hard to understand how effective you're being with capital because the parent company can essentially subsidize you as long as you need it now you said as a unit you are profitable but have they put in a bunch of money at the beginning to get it going or are they continuing to subsidize it as time goes on we're funding it from our just our operations and progress so there's there's no investment so to speak there's just a decision the main decision is how much we spend on marketing and how many people do we have on the team so it's just a head count investment discussion each year but it's always funded from the profit there's never uh there's never like a cash investment that always comes out of the growth and out of the profit okay and where's the team based on new york uh headquartered in new york city uh right next to bryant park and then we have a cto office in montreal which has worked out really well for us he came from a sister company uh and a customer uh company and customer and system custom company um and uh we have an operations office in between uh in albany near uh rpi and then we have a couple people one in switzerland uh one in the philippines for uh sales and support uh for global operations great and then talk to me about churn it's critical in any size company what's your turn today and how do you keep it low uh our customers stay on average around seven years uh which is fantastic uh there's a lot of land and expand so starting out kind of low and just growing and staying up with us for a really long time i think billing is sticky i think subscription billing is stickier and then when you look at this suite that we have and these turnkey billing things we do we're not just another billing company there's so many uh dozens of billing companies i'm sure uh you're even aware not in the billing space yourself uh that that look a lot similar to each other um i like that we really have that um the clear differentiation and uh and so forth yeah so so an 84-month ltv or seven years i mean that would mean you're churning what about one point five percent of your logos per month on average uh that's it's probably a fair ballpark how do you get to the seven years i guess is my question oh uh we uh yeah and then we take the the we take the customer base and look at yeah the percent sure and then just kind of multiply it out or whatever just one divide one divided by monthly churn and then that gives you the seven years yep interesting what so in terms of in terms of being aggressive about customer acquisition right so to get a new three thousand dollar a month customer what what are you paying fully weighted cap to get that customer how aggressive are you being yeah we've calculated this a few different ways um i i don't i um uh and it's a little bit difficult to calculate because we spend so little on marketing um and we have such a small kind of go to market team so we have basically one marketing person right now uh and we have um basically you know one or two uh to sales people it's inside sales it's a lot of word of mouth it's a lot of just seo for cloud billing data center billing and people just coming to us a lot of referrals a lot of people leave our customers after those seven years or within the seven years come come they start a new company or join a new company and come come to us so it's we what we really want to do as a company is not only just build out the product um and but also to build out the the go to market um and you know so you're not really tracking then fully weighted cac at this point because you know it's a good number i i mean i we're not that's not something we track um frequently i've we've done the exercise a few times in the last year or two and um [Music] the uh it's not something i want to you know reveal at this point i don't think it's that interesting yeah um because it's mainly just taking salaries and taking portions of jobs and and kind of calculating it that way we don't have like this enormous marketing budget and by the way but that's true for tons of companies i mean that is that is usually the biggest part of cac is is head count uh so i mean it is valuable i know exactly so you take the seven years um and then you take like the 3000 mrr and you come up with a pretty big number it's 250 grand in terms of ltv i came up with i think it was around like 20 grand or something but there's different ways to do it yeah um so you spend 20 grand uh but you get um yeah what's what's the math on that 250 grand right so it's clearly fundable but uh we're just you know we just if we have more people we can actually really take advantage of that yeah but the tricky thing is it takes you seven years ago to make the quarter million right so if you spend 20 20 grand up front and you're only making three grand a month i mean it's actually healthy it's still less than a 12-month payback but you can get into trouble if you look at a really long ltv and then but your payback's like three years you get a big cash gap issues yeah no that's that's true and uh i want to again i haven't even looked at the exercise recently it's a good good good thing for me to do uh uh tonight to refresh that number um the whole team has kind of changed we've done some some of that and uh i should look at maybe the number was actually more like uh five or ten thousand dollars or something like that yeah yeah no i'm just curious okay very good and then um good stuff uh let's wrap up here with the famous five kurt number one what's your favorite business book oh um uh maybe too many to mention but the the shoe dog i read a lot of tech in startup books but the shoe dog about the the nike story kind of how the accountant started uh reselling japanese shoes out of his car at track meets i thought was really interesting number two is there a ceo you're following or studying right now um uh in particular i've learned a lot from the ones i've worked with i i look at the the large tech companies um i know bezos jeff bezos and amazon number three what's your favorite online tool for building the company favorite online tool um geez i don't know slack uh has been awesome and there's so many other wonderful tools number four how many hours i sleep to get every night uh between six and eight okay and what's your situation married single kiddos uh married to two young daughters oh wonderful and how old are you uh how old am i i am uh 45 45 last question what do you wish your 20 year old self knew just to um be even more entrepreneurial earlier take more risks earlier and um and be more aggressive earlier guys be more aggressive earlier coming from curt was it mongodb some other big successful companies now joined ubersmith basically again subscription and billing uh business management for subscription economy subscription companies now 140 customers paying caught three thousand bucks per month so 420 grand per month in revenue growing caught between you know maybe 1500 year-over-year not huge venture returns but also not like you know bootstrap flat returns either they are profitable which is nice 25 people between new york and other remote locations seven year lifetime value at about 250 000 per customer you know call it spending 10 to 20 grand to get the customer so healthy payback less than 12 months as they look to scale inside of their parent company inapp kurt thanks for taking us to the top thanks so much