Unaty Revenue & Valuation (2018)

hello everyone my guest today is sean mccauley is the ceo and co-founder of a company called unity having worked as a web designer developer and enterprise software consultant he now spends his days helping community leaders inspire action and members uh find and follow their passion he's always excited to talk to people passionate about building a better future now but in this company sean are you ready to take us to the top absolutely thanks for having me nathan you bet okay so what actually get get specific with us for a second here what does unity do so we're a private social networking platform for modern communities so we help leaders engage the members and inspire action we work with communities and companies to create vibrant private networks and we help them reach connect and activate more members okay members being employees members can be employees or members of communities so we work with a lot of membership organizations in the third sector um as well as uh companies uh that have employees of course and even uh with some we're looking to work with some podcasts in the future oh interesting um you know even their listeners right so to create sort of an online private space that's more intimate where you can uh have a direct interaction between members and leaders so i see sports teams fraternity sororities non-profits political parties look my default for this kind of thing right now is facebook groups what do you do different than facebook groups exactly um so i think we have actually a fundamental difference here so it does a lot more than facebook groups it's a lot more expansive so the analogy we like to use is that it's sort of like a community operating system so you know you have um os x you have linux and windows or sort of personal operating systems what we created is sort of the ultimate tool set for an online community so not only is it a private online social administrative network where you can interact post content write articles post videos and manage all your members but you also have tools for integrative suite of tools for organizational design internal communications member engagement knowledge sharing and community outreach got it full-fledged sas platform absolutely that's great give me a give me a general sense i'm sure you have a lot of different customer cohorts but on average with what's a company organization going to pay you per year for this um so there's a lot of variance there um we released we started charging this august okay we released a standard plan for forty nine dollars a month we like jason fried's advice um and after that started growing he started getting some bigger organizations we start we introduced a plan about a month and a half ago called the plus plan for 449 a month and now after we received some inbound requests for fortune 100 companies we're introducing an enterprise plan which would go anywhere from two to twenty thousand dollars a month okay so would you fair to say though for now a good average is maybe 50 bucks a month something like that yeah between 15 100 a month yeah that's great i i want to break more into kind of how you so quickly kind of identify the need for you know tiers that are higher and how you kind of put pricing axes around that before we do that though i want to kind of put this on a timeline so you said you just launched pricing in august did you also launch the company this year or where did the company launch so we launched the company last year in may and we released our open preview this april i think we had 13 users the first month and we we kept growing iterating making product improvements we released two additional products uh this summer um and then the last couple months our growth has really started to pick up we recently hit 50 communities that are actively using it over to sean just to be clear those are 50 those are actual paying customers or free users those are customers okay okay great so you know sometimes people fudge those lines i just want to give you credit where credits do you got 50 paying customers and you were about to say how many seats before i cut you off how many users exactly about 200 per community but that's growing right now that's great so so are they typically starting with 200 right at the start or are they starting with like 10 members and then they're kind of adding on over time well i think where you're trying or you're probably looking to go because i listen to a few other podcasts is sort of the north star metric right so when at what point do communities start to actually use it or what part does it start to uh become part of the organization um so similar to facebook's uh i think it was seven friends rule yeah um you're gonna notice that between 12 to 15 using the uh using it for their community um is sort of the uh crux you know another critical element of that facebook metric is they have to do that in the first seven days that they're on board so what's your time metric over about a month and a half so communities a little bit slower and it usually happens that there's one early adopter that invites his leadership team then they invite some of their active members between 10 and 20 people and then when they start using it then they invite the rest of their members got it okay so 50 people 50 organizations right now paying about call between 500 bucks per month you're north of kind of 2 500 per month at this point yes we should hit uh uh 100 000 in annual recurring revenue at the first part of next year that's great so that would be about you know eight nine a grand a month something like that that's great and then a year ago you were at nothing right because you just launched it yep that's because that's that's what they call infinite growth only time you'll be able to say that right so embrace it that sounds good all right what's up what's been the number one growth channel how did you get these first 50 customers well the story that we hear most is it's mostly through inbound referral i mean all through actually we have no paid advertising and no sales marketing activities otherwise um it's just through using the existing customers that we've had you know the first through came through family and friends word of mouth um and shawn drill down there sorry tell me tell me the first one so the first one was our fraternity where we worked together where we actually met all the all the founders um and worked together to run the fraternity for over uh five years um was this your fraternity were you part of it what's that was this your fraternity like your college fraternity yes this is one of the fraternities over here and that's where our founding team met and that's what we ran together for uh four and a half years um and this is sort of what we created the platform for and through that it started to spread so a classic case will hear is a member really liked it and saw the value that it could also add for their church and they'll bring their church on um and then we've had the case for example that a member of that church is also works at a 401 company and wants to use it for their innovation networks that they're building so that's usually that's how we've been growing until now that's really smart yeah that's a that's a really nice model to have kind of land and expand it's very viral in nature um i for people that are just listening to the show as they're driving to work they're gonna they're still gonna be wondering okay when if i you why are people using this on a daily basis over something like like a facebook groups right so can you maybe point to like one or two very specific features that you have that just that you see get the highest usage rate among your paying customers that groups don't have right so when you set up to build a community or even a podcast you have to use a lot of different tools to do that you can set up a facebook group you set up a mailchimp account you might have to set up stripe you set up just a host of different platforms and products to actually help you run your community we bring all those tools together and make you easy make it easy to set it up and to reach your members one of the big things that we've replaced with in organizations is actually their mailing lists uh feature so mailing lists like you would have with your web server we completely replace we replace the need to actually create a new domain and create an email address and manage that for each member so with unity you create your community once every member can add all their contact methods how they want to be reached and then choose specifically what kind of content they want to reach and how they want to receive that content and then administrators just go on the platform and they can send a message for example i mean if your podcast was on the platform you maybe haven't have a topic that was uh cryptocurrencies and you could send a message right away to all the subscribers of cryptocurrencies and that would go out as an email and an sms to all the subscribers just in the way that they want to receive that message interesting uh what's team size today we are at five people five people full and remote we are all in germany right now all in munich got it so okay five people germany and heavy bootstrap the company are raised we raised the family friends around last year ninety thousand dollars sorry how much ninety thousand and i'm strapped up until now that's great okay so ninety thousand friends and family uh you know bootstrapped outside of that are you casual positive today or no still trying to work towards that we are but only because we're bootstrapped yeah well i was gonna say so tell me tell me about that because you have five people obviously you can't cover five salaries on three thousand bucks a month in revenue right not all five five people are working uh 100 of the time on it right now um that's only two of us right now and you know you usually hear the term ramen profitable right um we like to call it schnitzel profitable here in munich so that's part of where we are right now and talk to me about uh churn have you lost any customers we have okay not maybe two too early for some of the economics metrics um very good so so i mean where do you get your next five thousand customers from one of our leads right now just from inbound and referrals and we believe that uh we can continue to grow through that channel significantly but we're doing something else um that i think might be interesting to you and your listeners as well um instead of building up a traditional sales team um like many sas companies might do um we're actually going to go a little bit the other direction and we're going to we're building a program right now called the unity ambassador program and it's already started a couple weeks ago um so basically um we are training ordinary people um to be product evangelists people who really like the platform we've already got to know through existing communities and we are training them to sell it back to other organizations that they're a part of or can sell to um so we show them how to use it and they sell it to their other organizations and they get a cut of the recurring revenue uh of the recurring revenue of a customer sean you said 30 20 to 30 percent based on how many sales they've made got it and it's like kind of a campus ambassador program you're doing this on camp college campuses to fraternities and sororities first um not necessarily this will be across uh industries and both in the third sector so the nonprofit sector um and within the private sector um already uh had a couple companies come through that channel um as well as communities so interesting good so so cac today you know it sounds like you're not doing a lot of paid spend it's again the church person that brings on their company that then brings on their soccer team you're looking now at maybe paying kind of 20 or 30 kickback on the campus ambassador program you have had sales come through that program already yes oh that's great okay very good so even if you do pay out 20 to 30 of that monthly kind of kind of fee obviously you're still kind of cash deposit on that account from day one oh absolutely absolutely and advice because there's no initial setup cost to build a sales team for example yeah so what what why do the people go through the training in the first place i mean obviously you have to sell them on like the future upside basically right well i think what they notice is usually it'll be someone that uh i've met talk to somewhere um and we'll show the product and uh because we've worked so hard on the product we've created something that's truly uh very unique and different than anything else that's out there especially in the sector and people people notice the value in it right away for all the organizations they've ever been a part of and we've had for example people that have come back to us and said you know i think i can go and use this to transform the way music studios will work today or transform the way that um companies do recruiting retention i think i can build a use case around that and then they become an ambassador yeah it is nerve-wracking to me though to look at a company that's that that you don't have scale yet but you have so many different vector focuses like workplaces fraternities non-profit because there are mammoth companies competing in each of those individual verticals like for example ministry brands does this really well for churches uh there's a lot of non-profit focused ones we're a facebook at work right is like doing this for workplaces like how do you compete with all these at once so it'll be interesting to see if you're if kind of this kind of all-in-one approach works it'll be fun to track you in the meantime though sean let's wrap up here with the famous five number one what's your favorite business book zero to one number two is there a ceo you're following or studying i think owen mccabe at intercom is doing a great job right now number three what billing tool do you guys use billing tool stripe number four how many hours of sleep to get every night four to six okay that's not not great by the way it's fine for this phase it works all right and now what's your situation married single kids i'm 23 and single okay no kid not married and uh 23. good last question what do you wish your 20 year old self knew i wish i would have started yoga sooner or later why because it's a great way to relax and it's a great workout and uh was never never the weight lifter guy and that was uh that's become a great way to relieve stress and work out at the same time guys start yoga sooner he founded unity back in 2017 after building it inside of his fraternity and using it to run the fraternity for a while now they've skilled it out they've made a product they've got about 50 customers paying 50 bucks a month so call it 2500 bucks a month right now in revenue again just turned on that paywall here recently they are break even really two full-time people right now uh they've they've bootstrapped the company except for a 90 000 raise from kind of friends and family based in germany too early to talk about some of the expansion metrics gross retention all that jazz but they have managed to scale by basically getting one customer inside a fraternity and then that member liked it they bring on other organizations like their church or their company and so that's how they scaled to date sean thanks so much for taking us to the top thanks nathan