Userful Revenue, Valuation & Funding (2024)

[00:00] Hey, folks. My guest today is John Marshall. He's a CEO and board member at Userful, leading provider of AV over IP solutions for enhanced video communication. He focuses on developing and implementing strategic growth initiatives for the business, launching the company to new markets and expansion through new technology and channel partnerships. He's got over twenty five years of experience in the space. John, you ready to take us to the top? [00:20] >> I certainly am. [00:21] So what is AV over IP? [00:23] >> AV over IP is this transition that's occurring where you used to develop AV solutions in a siloed way. So if you had like a video application in a given room, you only saw it there, you couldn't transport it to elsewhere in the corporation. AV over IP lets you move it around. [00:40] Give me an example of that for people listening right now that might have their own offices. [00:44] >> Sure. So for example, if you have a desire to have a video wall that's showing entertainment content, you know, or a better example, in your lobby of your building of your corporation, you walk in the lobby, you've got all kinds of entertainment playing, welcoming your guests to the corporation. That content probably comes from a server that's in an IT closet. Historically, you'd have had to put the server right next to that video wall. [01:07] Oh, I see, I see. Okay, so now you can have one central location in your office and put it out to seven different screens on eight different floors and six different venues across your building. [01:17] >> Absolutely right. And we used to have an AV department, everything's moving to IT. So it's that evolution and that ability to distribute. [01:24] Very interesting. Okay. And so what are companies paying you on average per month to use this technology? [01:29] >> It varies by application. Right now our platform supports three different applications, one for control room usage, one for digital signage, and one for meeting rooms, screen casting, different price points for each. But overall, you know, we typically see around $30,000 of ARR per customer. [01:50] Yeah, that's interesting. Okay, so, and if someone paying $30,000 per year, how many streams are they managing? Like what's that package probably? [01:57] >> Again, it varies because like, you know, you can do many more screens for digital signage. That's not real time. If you're doing a control room, that's mission critical operations, and you're trying to stream high definition, high resolution to that, very large video wall, like you might imagine for like NASA's command and control center, that's a lot more, that's a lot fewer screens because it's higher resolution. [02:20] I see, okay, interesting. So it's a combination of number and screens, resolution, and product based upselling. [02:25] >> Absolutely. And number of source devices that you're muxing together. [02:29] Number of source, okay, that's what I mentioned. Are there any other like utility based upsells? So number of source devices, [02:36] resolution. [02:38] So there's a number [02:39] >> of other things that you can upsell for, but model that we typically go for is someone will come to us looking for one application or one solution need, and then we'll sell them the platform with the promise of them being able to expand to those many others, those five, six other use cases. And so that's usually our expansion model. [02:57] Okay, based off use case. Got it. Very cool. Okay, put this on a timeline for me. When'd guys launch? [03:02] >> So we launched this whole offering in April 2020. Great timing, [03:07] But when did you launch it? Because I have in my notes that you guys were launched in 2003. [03:12] >> So the company was founded in 2003 and sought product market fit for technology it had created for a very, very long time. I joined the company in 2018 and said, we need to create an enterprise AV over IP platform redirecting from lost, you know, product market fit to actually finding product market fit. And so we developed a brand new product from 2018 to 2020, relaunched in 2020 on a SaaS model instead of a perpetual license model, [03:40] >> and the company took off. [03:42] Interesting. Okay, so how many customers are you now serving today? [03:46] >> 500 enterprise customers, and we're at around 5,000,000 ARR, around 6,000,000 contracted ARR. [03:55] Oh, what's going on there, YouTube? Good to see you guys. Now imagine this. You love watching these interviews with SaaS founders, but imagine if we took all of the valuation data out from over 2,807 interviews I've done manually. Saves you a lot of time. Well, we've done this. We've built it into the beautiful interface inside of Founderpath. Check this out. I'll show you how you can access this in a second, but you log in, you connect [04:18] your Stripe account, you see your valuation real time. You can see what it changed over the past eighty eight days and even set goals for valuation this year. Now the secret evaluation is there's many different ways to value a SaaS business. So the reason you're gonna see three or four different valuations inside of your Founderpath dashboard, this is all free by the way, is because depending on who's doing the buying of your SaaS company, you're gonna [04:42] get a different valuation. A VC is gonna pay a different valuation, Private equity firm is different. If you're gonna 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. 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 [05:04] not built off random data. Again, you guys hear these interviews on YouTube. All these datas are built from real time valuation data points founder share with us on the show. So traction 1,200,000 seed round 3.7 raise. They sold 22% of their business. Go in here and filter by the event. Maybe you only wanna 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 [05:30] going out right now and you're raising your seed round. We'll 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 dataset of SaaS valuations than what you can get now inside of Founderpath. 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 [05:52] if you wanna check this tool out, if you wanna jump in and sign up, you can check it out for free to get your valuation at this link, this link, founderpath.com/products/valuations. 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 [06:18] into the interview. That's amazing. Okay, so $5,000,000 of ARR today. Where were you exactly a year ago? Do you remember? [06:25] >> In terms of ARR, I actually don't remember. [06:27] Or MRR. Do you remember MRR middle of last year? [06:30] >> No, no, we focus on ARR. Would have been some, out a year ago, it probably would have been around 3,000,000. [06:36] Okay, so you're almost doubling year over year. And have you guys decided to bootstrap the business or raise capital? [06:42] >> We've raised capital, but we've raised a modest amount. We've raised 10,000,000 series B financing. Prior to that, we raised about 3,000,000 in seed money. [06:52] Okay. And that series B was this year? [06:54] >> That was. [06:55] Okay. 10,000,000. And then three, the 3,000,000 was pre or post you joining in 2018? [07:00] >> That was post. [07:01] Okay. Got [07:02] >> The company had no ARR before I joined. [07:05] So no funding either? [07:06] >> Correct, no funding either. [07:08] How did they last fifteen years with like no product, no revenue? I mean, how did the founders pay for food? [07:15] >> I like to differentiate between selling a license, a product slash solution and a platform, right? So they were selling licenses. They had a good technology that could throw stuff up on a screen, but they didn't have an application specified. So they weren't good at knowing the needs of a control room operator or what the needs of a retail chain that wanted to have digital signage for menu boards or for whatever it may be. And so they [07:42] >> didn't optimize. So they were just selling licenses and doing it on a perpetual model. And they had bootstrapped their way for twenty years. [07:50] Wow, very interesting. Okay, that makes a lot of sense. So what, I mean, there might be companies right now that are stuck like this company was in 2018, they went out and found you, but why is a guy like you gonna join a company that's been stuck for twenty years? [08:02] >> Well, I came into the company with this AV over IP vision. I mean, I've been working in AV networks. [08:10] Yeah, but why not launch it from scratch yourself and own a 100%? [08:13] >> Because the amount of technological depth that's required to have a complete platform play is challenging. There's a lot of protocol work. There's a lot of technology that needs to be integrated. And this company had already brought all that technology together, and I was able to leverage like the ten plus years of relevant technology into a product market fit in just a span of two years. [08:36] I see, okay, but when you're joining, obviously you need upside in this, right? If you're gonna be CEO, how much equity did you ask for? [08:43] >> I asked for a certain percentage, which has been, as I've proved out the model, as I've converted it to a SaaS model and gotten the product launch and gotten 500 plus customers, my equity position has increased. [08:55] So you said something like, I'm making these numbers up. Hey guys, I really wanna get, you know, see a path to me owning 10% of the business. I'm happy to split that up in terms of option grants as we hit revenue targets. And what you're saying is you've sort of earned those option grants as you've grown over time. Is that the right sort of way to think about it? [09:10] >> That's absolutely right. But then also with the round of financing, that new investor comes in and says, Hey, you can do even more. You know, there's opportunity for us to give you some additional upside. [09:20] I see. So, there's an ESOP pool that's being set up and then automatically granting you another chunk of that out of the ESOP pool just to keep you incentivized long term. [09:27] >> Exactly right. [09:27] I see, very interesting. Okay, that makes a lot of sense. What's the total team size today? [09:32] >> We're approaching a 100 people and we are in a sales led model. So we're heavy on sales and sales engineering as we go out into the field. We've got a pretty decent global footprint. We've got a Europe, Asia, and North America teams. So we're expecting that we'll be able to maintain that growth rate of over 85% for the next three years consistently. So we're pretty enthusiastic about that. [09:59] Isn't that too slow though? I mean, you've chosen to raise money, which means you have to grow faster. 85% is not interesting to these VCs. You've gotta be at like 150, 200% at your stage year over year. [10:10] >> Yeah, but I don't think VC is the only financing model that you have to consider. [10:13] Yeah, but you already raised it. You already raised I agree with you, but you already raised it. [10:17] >> Yeah, but as you look forward to where the next financing's gonna come from, you can look towards growth equity and private equity, and they have a different model than venture does. And as long as you enter the equation with a vision for having the flexibility and conveying that flexibility to venture and your growth equity, private equity interested partners, then your model can hold. [10:39] Interesting. Most folks today are doing series B or selling between 10 and 15% of the business. Were you guys sort in that same range on your series B? [10:46] >> We were in that range, yes. [10:48] Okay, fair enough. Got it. So you got a 10 to 15%, You raised 10,000,000. So you're talking like 80 to 100,000,000 valuation, something like that in that range. [10:58] >> Yeah, I would like to have that. It's very good. [11:00] Yeah. Yeah, very cool. Well, that's what you did, right? If you sold 10 to 15%, you had an 80,000,000 valuation or higher. [11:05] >> Yeah, in terms of you're discussing pre money and post, but I don't hang [11:08] my on [11:11] >> to liquidity. [11:12] Yeah, well, I mean, valuation, I mean, if you sell a 100% of your business before you exit, you own nothing. So you gotta manage dilution as you're growing. [11:19] >> Absolutely, no, no, I completely agree, but I think that your true valuation comes down the road. [11:25] Well, we hope. I mean, look, there's lot of companies right now that sold a big valuation three months ago and they're gonna have troubles growing into it and they're gonna [11:31] >> be And that's exactly my point, right? If you took a valuation four months ago, that's certainly changed five months later. So your true valuation, I mean, I think your valuation's driven off your ARR and your core metrics and you've got to stick to those markets. It's going to fluctuate with multiples and the like. So I just think being, as an entrepreneur, stick to your guns, know what your corporate value is, and don't necessarily have a short [11:56] >> valuation mindset in sight. That's my 2¢. [11:59] No, that makes good sense. You mentioned your sales heavy. How many folks carry a quota at the company, a sales quota? [12:04] >> We have 18 of them who have quota. [12:06] Interesting. [12:08] And when they are fully ramped, what do you expect them to be hitting in terms of quota target? [12:12] >> Well, we use the SaaS industry metrics of, you know, three to five X, your comp should be guiding your quota, but, you know, we're looking at the, you know, 1 to $1,500,000 of bookings. [12:25] Yeah, means they can earn 200 to 300 ks of full on target earnings if they hit it. [12:31] >> That's justified number for enterprise. [12:33] Yeah, and now you mentioned you have a, it sounds like a powerful upsell model. Net dollar retention today, I imagine is way above, it should be way above 100%, right? [12:41] >> The answer is it's over 100%, but we only just launched those six expansion products, the three expansion products. We're launching three more in the fall. Okay. So our lead indicator right now is logo capture, right? [12:56] Yep. [12:57] >> And capturing as many of those as we can, that will give us the opportunity to expand in 2023. [13:02] John, makes sense. Let's wrap up here with the famous five. Number one, favorite book. [13:06] >> The Brothers Karamazov. [13:08] The Brothers what? [13:09] >> The Brothers Karamazov by Dostoevsky. [13:11] What's a Karamazov? [13:13] >> I was a Russian literature minor. It's a famous book like War and Peace. [13:17] >> Interesting. [13:18] Number two, is there a CEO you're following or studying? [13:20] >> Yeah, I'm a big fan of Chris Riegel who founded and launched a company called Stratacache, now a multi billion dollar company out of Dayton, Ohio. [13:27] Number three, what's your favorite online tool for building Userful? [13:31] >> Grit. I think in this day and age, I think any CEO who's navigating a pandemic, great resignation, remote work, recession, and the like, I think grit trumps all. [13:40] Grit. So, just to clear, that's not an online tool. That's just a characteristic you think folks need to have. [13:44] >> When I'm online, I'm showing grit. [13:46] Grit. Yeah. Hear you. Alright. Number four, how many hours of sleep do get every night? [13:49] >> About five. [13:50] Okay. Not not a ton. You can start on five? [13:53] >> Absolutely. I'm getting old. [13:55] Okay. And so what's your situation? Married, single, kids? [13:58] >> Single with two Eagle Scouts. [14:00] Oh, very cool. Okay. And how old are you? [14:03] >> I'm 51. [14:04] Last question. Something you wish you knew when you were 20. [14:07] >> I wish I knew to drink more champagne as W. C. Fields used to say. Celebrate the small moments in life and don't get overwhelmed by the big stuff, you'll survive. [14:17] Guys, userful.com, if you have a big conference room with, or a big office, a bunch of different conference rooms, can install it once and say Floor Number 3, stream to all your conference rooms on Floors 12345, video walls, you name it, all from one central location. He had this vision, joined up with Userful in 2018, raised $13,000,000 to build this product, officially launched in 2020, scaled from 3,000,000 in ARR to 5,000,000 ARR over the past twelve [14:38] months as they look to keep scaling with their team. They've got over 500 enterprise customers, I'd call it 90 to a 100 folks on the team as they're looking to scale here over the next twelve months. John, appreciate you taking us to the top. [14:48] >> Thank you so much. [14:50] One 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 1PM [15:16] Central. Additionally, remember these recorded Founder interviews go live. We release them here on YouTube every day at 2PM Central. To make sure you don't miss any of that, make sure you click the subscribe button below here on YouTube, the big red button and then click the little bell notification to make sure you get notifications when we do go live. I wouldn't want you to miss breaking news in the SaaS world, whether it's an acquisition, a big [15:38] fundraise, a big sale, a big profitability statement or something else. I don't want you to miss it. Additionally, if you want to take this conversation deeper and further, we have by far the largest private Slack community for B2B SaaS founders. You want to get in there. We've probably talked about your tool if you're running a company or your firm if you're investing. You can go in there and quickly search and see what people are saying. Sign [15:59] up for that at nathanlatka.com/slack. In the meantime, I'm hanging out with you here on YouTube. I'll be in the comments for the next thirty minutes. Feel free to let me know what you thought about this episode and if you enjoyed it, click the thumbs up. We get a lot of haters that are mad at how aggressive I am on these shows, but I do it so that we can all learn. We have to counter those people. [16:19] We got to push them away. Click the thumbs up below to counter them and know that I appreciate your guys'support. Alright, I'll be in the comments. See you.