upekkha Company Profile (2023)

Persona they're back they backed over 110 or helped over 110 SAS companies they've written checks into 47 they put a hundred thousand dollar check in in exchange for five percent of the business that company they can then go raise another Equity round and then they don't have to pay back any capital or if they want to say you know what I don't need more money that founder will then is required to start paying back at one year between three and five three and seven percent of their monthly revenues paying back a 3X cap on the 100K investment from Persona to buy back four percent of the equity a pekka will still keep one for that long road hey folks my guest today is personas with a group called a pekka based out of Bangalore they're helping B2B SAS service grow faster and he's a very humble guy from that intro uh they're really behind some of the most the fastest growing startups in India and India really right now is a hotbed as some of the smartest Founders whether that's saravana the old netcore crew the freshworks crew you name it there in India something special is happening so we're very privileged at Persona on the show today Persona are you ready to take us to the top absolutely all right why why am I seeing SAS Founders coming out of India that they just seem to be all of them are like 10 million bucks in Revenue bootstrapped it's like what's going on in India yeah I think it's something in the water here right uh the the analogy that I give everybody is that you know in 1992 there were 200 IT services companies doing 100 million dollars of exports and in 2002 there were 8 000 ID services companies doing 12 billion dollars of ID Services exports so it's the same thing that's happening right now with SAS uh the things that we're good at in India are we have a lot of developers there are probably a million or more developers just in Bangalore so if I throw a stone outside I'm more likely to hit a software developer than a crow right and we know English so we can make software for folks who are speaking English right and I think the last word in SAS is service and so if anybody wants to implement a SAS product if they're mid-market or an Enterprise customer they need Integrations they need migrations they need training they need data transformation all of that stuff and most of that stuff you can't just do it off the shelf right there has to be somebody who looks at your data how that data has to look in the system and figure out how to get it there right so when you put all these things together you know it I think and the water it all starts working it's amazing I remember one of our first conversations uh I figured it was with you or the the crew there at a pekka but it was November 2021 and you guys said Nathan you know we're really targeting 60 startups at 100K checks each in 2022. we've now finished 2022. how'd you guys do how many startups did you help uh so we worked with about 40 startups and I think we did a total of uh 47 or 48 checks wow okay 100K and is it always 100k yeah okay so walk me through that model folks might be listening going wait what's the investment model here do you like YC is it like ndbc what's it like right so the 100K is in DVC and so explain some folks don't know what that is right so explain what things right yeah yeah so uh what we want is for Founders to be in control of their Destiny so we want to make sure that we're able to work with Founders not only Founders who are expecting to get a hyperscale kind of an outcome but we also want to be working with Founders who want to be founded forever or who want to take a strategic exit right so what that means is we don't want to lock them into chasing funding every 18 months we want to make sure that hey if you're building a business if you can get to 5 million and your cash flow positive and you're making let's say 2 million net then you can do it it's amazing at a good multiple yeah it's a great business right yeah yeah so I literally have one of our first cohort startups I won't tell you who uh but they're at six million in ARR and they have two and a half million in cash in the bank every year that's right incredible and they don't want to raise money they don't want to get into the rat race and they're growing 50 year on year well so how do you guys most VC firms will say listen they're parting 100K checks we need one or two to like return the fund and become a billion dollar company so when you say the fund the money you invested 47 checks at 100K a pop so 5 million deployed in 2022 is a BDC what do you mean by that what's your return profile yeah so what we're F so uh out of the first 10 startups that we worked with uh Nathan we now have six startups of a million dollars in ARR out of that six there are three that have crossed a five million dollar error right so think about this from a fund perspective right we are investing in something like a two and a half million kind of evaluation if they get to a 5 million and even in today's time let's say they're at a 5x kind of a multiple they're at a 25 million valuation right so we have a 10x in a valuation jump in about 30 percent of our companies so that takes care of a lot of the return but but then culturally these are founders that don't want to exit right they love cash flow they're not searching for growth at all costs so how do you actually turn those paper gains into real yield or do you not need to do that because it's a BDC right so two ways right uh one is so so we are not like uh uh we are not holding that Equity forever if that's the question right we do have to return and the two ways that we return is one if they are never raising any Capital then they can buy back just like in the ndvc model right number two uh we are finding that there are funds now who are coming in and saying hey we'll just pick up secondaries from these Founders or from us right and they're not looking at a primary infusion or a small primary infusion and they would love to pick up equity in a SAS company that's actually profitable and growing oh what's going on there YouTube good to see you guys now imagine this you love watching these interviews with SAS Founders but imagine if we took all of the valuation data out from over 2807 interviews I've done manually saves you a lot of time well we've done this we've built the into the beautiful interface inside of founder path check this out I'll show you how you can access this in a second but you log in you connect your stripe account you see your valuation real time you can see what it changed over the past 88 days and even set goals for evaluation this year now the secret valuation is there's many different ways to value a SAS business so the reason you're going to see three or four different evaluations inside of your founder path dashboard this is all free by the way is because depending on who's doing the buying of your SAS company you're going to get a different valuation a VC is going to pay a different valuation private Equity Firm is different if you're going to do a minority sale that's different and if you sell the whole business that's a different valuation you can see all those when I hover over here here right so the teal is what a VC would pay yellow is what private equity and red is if you sold the whole thing outright now what's cool about this is this is not built off random data again you guys hear these interviews on YouTube all these datas are built from real-time valuation data points Founders share with us on the show so traction 1.2 million seed round 3.7 raise they sold 22 percent of their business go in here and filter by the event maybe you only want to see companies that have sold the whole business well here are a bunch that have been acquired the valuation and the multiple maybe you're going out right now and you're raising your seed round well go in here and look at all this recent seed deals that went down what they raised what valuation they raised at and what percent that they sold there's never been a larger data set of SAS valuation than what you can get now inside of founder path and we're thrilled to bring it to you all right we're gonna go back to the YouTube video here in a second but if you want to check this tool out if you want to jump in and sign up you can check it out for free to get your valuation at this link this link founderpath.com forward slash products forward slash evaluations or if you go to founderpath.com and hover over products click on get your valuation here and go ahead and sign up to give it a whirl again all that valuation data live right inside the platform I hope to see you there all right let's jump back into the interview I mean are you seeing Sequoia in India excel in India are they are they approaching you and saying hey we'd love to buy out that five percent you own and that five million dollar SAS company no no not yet right because they are more in the traditional model of hey show me a billion dollar time show me is how you can get to a billion dollar IPO and stuff like that but there are so many search firms and so many peas and mini P's in the US who are now like if it's a SAS company they're like throwing an email at it and all of our Founders across certain level they have like an email a week in their inbox saying hey can we talk to you yeah yeah now you mentioned there's two ways to return buying a secondary so you just described you said but the first was Founders can buy back the equity now do they have the option to buy it back or are they forced to buy it back at a certain time level right so the ndvc we are using the Straight ndvc term sheet the exact same thing right uh so in that the founders if they do not raise any further Capital they start buying back with the percentage of their revenue every month or every quarter after if they if they don't raise equity and what a period if when like when does that buyback have to start what you know one year two years more or three years one year yeah one year plus right but it's on a month on month basis it's not all at once so so if you wrote a check into Nathan sascompanyinc.com uh today for 100k and I grow to a million dollar run rate in a year um I am forced once I hit a year I am forced at a year to start paying and buying back abeka equity 3x okay so if you put in a 100K check for you said five percent is pretty typical yeah can I buy back am I forced to buy back your entire five percent portion or do you hold four percent okay so it's the same route into BC the reason I'm asking those there's a reason ndvc shut down yeah yeah of course um so I'm trying to see if you've made edits on the model that you think will be more sustainable for both investors and the founders because one of the big negatives was that Founders don't want to pay back 300 000 on a hundred thousand dollar investment starting and they're forced to do it starting at one year uh have you built anything into your contracts to give Founders more more flexibility more control yeah yeah we are looking at doing that right so we do want to give Founders more optionality in terms of choosing to do that buy back right so if we can delay the payments we can uh prorate the payments do stuff like that is there ever award where you wouldn't Force the founders to pay it back because I mean this is effectively in my opinion really expensive debt right it's a hundred thousand bucks up front and then you're gonna make 300 000 on it over a three year period that's pretty darn expensive when you do an effective interest rate sure but when they're coming to us they're not coming to us at the level that you are getting them in which is at a 20 kmr or the 50 kmr they're coming to us at practically no Revenue right yeah so when they're coming to us at no Revenue then Equity is the only risk Capital that they can get because they can't get debt cap debt Capital that you provide because they don't have any Revenue yet yeah right so then what what choice is there right because we are also taking a risk because as you well know for somebody to go from a 10K Mr to a 30 km it's a different risk profile for somebody to go from a 30 kmr to a 80kmr as a different risk profile for somebody to go from a 1kmr to a 30 kmr that is a very very difficult risk profile right yeah so we're on the early end of that risk profile I think you are a little later on and a little bit ahead of us on the risk profile so we'd love for our startups to then come to you and say hey you look we now have Revenue we now have customers the revenue is good quality we have good margins can we take more money from you right because that's the problem right we're we're boring we're boring non-dilutive debt right you will always have one percent equity no matter what but I get your point you're coming in much earlier than we are there's more risk for you so I understand that and we also uh do a lot of hand holding in terms of getting them their first customers we're working with them to change their positioning change their website uh change how they talk to customers we literally we only have an incredible Community too I mean you look at who's on stage at SAS boomi you look at your website and the partners you're bringing in you have really an incredible Network you've built around these Founders um which is what helps them get to a million three million five million in AR um what is the percent of monthly revenues that they have to start paying back after year one right so that's between five to seven percent between five and seven percent per month until a 3X cap is paid back yes okay what if that takes a Founder 20 years like does it does it all do at some point or could it take them 20 years no yeah it's okay I see okay so there's no recourse in Lords of a company goes bankrupt or they can't pay you there's no way you just keep your five percent yeah well there's not nothing you just keep your equity yeah yeah I mean there's no recourse is what I meant yeah yeah yeah I just it's find it fascinating because that's reverse whatever everyone else says it double triple down your winners but your winners you're forcing them to pay you back so it's jamming down your equity and that's where your big returns are going to come from you're okay with that though I think you're remodeling this as a single turn game versus we model it as a multi-turn game so what happens is that in our winners right they're typically raising more Capital so it gets converted into equity does that make sense you know somebody who's somebody who's winning in your portfolio has the cash flows per month to pay you back and they can pay 300K 3x cap to buy back four but what they do essentially is raise more Capital right because the folks who are really growing Way Beyond expectation right they actually want to raise some capital and when they raise Capital we stay on as equity so you delete the you delete the you delete the part of your initial contract that says they have to start paying you back it one year if they go raise a bunch of equity that's right it's it's the same ndvc has the same model actually well again but ndpc is dead today's Capital there's a reason there there's a reason to restarting well in a very in in a pretty different format right and if you if you interview some of the LPS in that fund and you interview some of the founders there just was not alignment there I just want to make sure I understand you correctly though if somebody raises money from you today and they go to a million dollar a year run right in a year they go raise a bunch of equity they are forced to keep them these days but is that your choice or their choice because are they forced to keep your five percent company yes oh I see I see I see I see I see interesting very interesting okay and these are all B2B staff so think of the top two percent yeah they're only B2B SAS right so think of the top two percent of companies they're going to get a hit a million and then raise two million or three million or whatever it is right and so those folks will we will stay as Equity um yeah you're either staying as Equity if they decide to raise or if they don't raise they're forced to start paying you back after one year uh three to five three to seven percent of their monthly revenues um that's interesting so I mean so so I mean I I thought you guys were really representing that founder that wants to bootstrap and not raise right not give up equity and go to 5 million in revenue and profit two million a year and build a great business that sounds to me though like that that's that kind of founder would not be a good fit for you because they'd be forced to either raise money to get rid of the payback or they'd be forced to start paying you back at one year I mean if you're taking money I'm assuming Nathan that when you give money out to people you want to return to the terms are the terms right we take no equity our whole model is we want to support Founders that understand that giving up Equity can be a very a big detriment to the business for a variety of ways right and if you talk to any of our Founders and if even a single one of our Founders tells you that giving Equity to bigger and having opika as a partner in their long-term Journey was not a good thing then you know we change our terms but that's not the case the kind of support that we're providing to our Founders they can't get anywhere in India and maybe not even anywhere in the US right because we are taking Founders who have sold only in India who've never even gone outside of India we are helping them build a business that's Global and get Revenue that's Global so many of them it's literally we are a partner who's helping them do things that they cannot do before we're not dumb money right we're literally hand holding them to change their website the language on their website to sound more Global for example right so those are the kind of things which I believe right and you know you you can uh correct me if you think otherwise we're literally changing the DNA of the business right so we have folks who have India Revenue but have struggled to get Global revenue and we are helping them make that first dollar of global Revenue is that worth Equity or is that not worth Equity right I think that's the question that Founders need to ask themselves right so I have folks who have built Services business they've tried to build product businesses and they've struggled to build product businesses because when you're trying to build a product business it you need to make different decisions than when you're building a Services business and so somebody has to literally sit with them and tell them look this is how you're making decisions and this decision was okay in a Services business but this decision is not okay in a product business and you need to rethink how you do that you may have made the wrong hire because the person you hired as a developer in a Services business that was okay but the same person is functioning in a product business in a way that will is detrimental to the long-term uh health of that product business right so that's the granularity at which we work with Founders and to transform their business right so when I'm helping them you sound much more like a better studio uh I mean when I bring on folks that are building Venture Studios like turtle which popped out with Phil libbin I mean you sound way more like a studio than you do a VC fund right so we spend literally uh you know dozens to almost 100 hours per founder uh from our from me and my team right to help them cross that uh kind of an initial uh and when was it just put this on a timeline for us because folks might be new they might be learning about you for the first time here on the show when did you guys write your first check what year uh just one and a half years ago so 2021 is when we wrote our first check okay 2021. before that we were only an accelerator we were only helping folks with actually building the business so only once we proved out that we could help folks to build a business without any Capital we said some of the startups need some Capital at the early stage because otherwise everybody is working on fumes because they're going getting some Revenue coming back spending it going getting some Revenue coming back spending it then we decided to add a layer of capital after we proved that yes we can take startups that are uh at near zero help them get to scale right so as an example right one of the startups that came to us they were at literally a thousand five hundred dollar Mr two thousand dollar mrr uh today they're at uh sixty thousand dollar MRN right and if you talk to them their website their copy their emails their marketing strategies their positioning uh what features are in the product what they're selling the values all of that was stuff that they worked with us it makes sense I understand so the first check was in 2021 um you already told us numbers from 2022 what do you what are you guys targeting in 2023 uh this year we're hoping great about 66. okay 60 checks interesting uh all still India focused uh so almost all our startups are selling globally they may be headquartered in Delaware or they may be headquartered in India but most of them are actually delivered at quarters with substitute in India okay great and um and remind us again sorry your guy's a source of capital obviously you and I both have to raise money to then give out to Founders right where are you raising money from uh so most of our investors are actually SAS founders yeah yeah yeah we have one large anchor LP called West Bridge okay very cool and are you um are you did you raise a new fund last year are you still operating at a fund one from back in 2021 uh this is a rolling fund ah okay this is an angel is rolling fund so that's the model that we're still on and how do you how do those investors how do you pay them out is it a fixed like payment every three months or do they wait until like it's like DPI yeah they wait for exits okay so they don't get any like when founders have to start paying you back at one year you don't distribute any of that money back but we don't need to oh I see so you can reinvest into new checks the 60 you want to do this year that's right I see I see any exit so far uh we've had four exhibs so far most of them have been strategic acquires uh not too large okay okay but you're you've got a couple you're excited about that you think can more than return the fun huh I think so because uh one of them uh just doubled last year uh with very little Capital praise actually three of them like I said right three of them crossed five million dollars yep in ARR out of that two of them have not raised a single dollar we are the only only outside Equity holder portfolio companies today so we have a total of 110 companies but I would only look at the first 20 companies because that's the ones that have been around for three years right because the others are like last year and year yeah you've written checks into 110 companies since you started SAS companies no no that's the accelerator okay how many have you written 100K check into uh boat 47 47 okay interesting interesting well we're rooting for you Persona if people want to learn more about this where can they find you and I'm very active on LinkedIn and Twitter guys that's u p e k k h a DOT IO and Persona what are the next two events you're going to if people want to meet you in person uh we'll be doing our own events so we'll be putting that on Twitter I'll also be at sasbumi in March SAS pumi in March and what city is that in uh that's in Chennai Chennai guys there you have it Persona they're back they've backed over 110 or helped over 110 SAS companies they've written checks into 47 they put a hundred thousand dollar check in in exchange for five percent of the business that company that can then go raise another Equity round and then they don't have to pay back any capital or if they want to say you know what I don't need more money that founder will then is required to start paying back at one year between three and five three and seven percent of their monthly revenues paying back a 3X cap on the 100K investment from Persona to buy back four percent of the equity a pekka will still keep one for that long road with the founder Persona thanks for taking us to the top thanks Nathan one more thing before you go we have a brand new show every Thursday at 1pm Central it's called Shark Tank for SAS 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 our poo CAC LTV you name it they share it and the buyers try and make a deal live it is fun to watch every Thursday 1 p.m Central additionally remember 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