Userful Revenue, Valuation & Funding (2024)

hey folks my guest it is john marshall he's a ceo and board member at user full 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 25 years of experience in the space john you're ready to take it to the top i certainly am so what is av over ip 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 aviovip lets you move it around give me an example of that for people listening right now that might have their own offices 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 i.t closet historically you'd have had to put the server right next to that video wall 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 absolutely right we used to have an av department everything's moving to i.t so it's that evolution and that ability to distribute very interesting okay and so what are companies paying you on average per month to use this technology um it varies by application right now our platform supports uh three different applications one for control room usage one for digital signage and one for meeting rooms uh screen casting uh different price points for each uh but overall you know we typically see around thirty thousand dollars of ar per customer yeah that's interesting okay so and and if someone paying thirty thousand bucks per year how many screens are they managing like what's that package probably again it varies because like 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 uh that very large video wall like you might imagine for like nasa's command and control center um that's a lot more uh that's all a lot fewer screens because it's higher resolution i see okay interesting so it's a combination of number and screens resolution and product-based upselling absolutely a number of source devices that you're you're you're muxing together number of store okay that's what i'm interested in are there any other like utility-based upsells so number of source devices um resolution uh so there's a number of other things that you that you can upsell for but the model that we typically go for is someone will come to us we're 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 uh and so that's usually our expansion model okay based off use case got it very cool okay put this on a timeline for me when you guys launch uh so we launched this whole offering in uh april of 2020 great timing eh but when did you launch it because i have in my notes that you guys were launched in 2003. 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 sas model instead of a perpetual license model and the company took off interesting okay so how many customers are you now serving today 500 enterprise customers and we're we're at around 5 million arr around 6 million uh contract at arr 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 it 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 valuation this year now the secret evaluation is there's many different ways to value a sas business so the reason you're going to see three or four different valuations inside of your frowner 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 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 raised they sold 22 to 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 valuations 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 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 forward slash products forward slash evaluations or if you go to founderpath.com and hover over products click on get your evaluation 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 that's amazing okay so 5 million bucks of ar today uh where were you exactly a year ago do you remember in terms of arr i actually don't remember or mri do you remember mrr middle of last year oh no we focused on arr and uh our it would have been some about a year ago it probably would have been around 3 million okay so you're almost doubling year over year and have you guys decided to bootstrap the business or raise capital uh we've raised capital uh but we've raised a modest amount we've raised 10 million uh series b financing prior to that we raised about three million in uh and c money okay and that series b was this year that was okay ten million and then three the three million was pre or post you joining in 2018 uh that was post uh the company had no arr before i joined so no funding either correct no funding either how did they last 15 years with like no product no revenue i mean how did the founders pay for food um i like to differentiate between selling a license a product 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 didn't optimize so they were just selling licenses and doing it on a perpetual model and they had bootstrapped their way for 20 years wow very interesting um 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 and they went out and found you but why is a guy like you going to join a company that's been stuck for 20 years well i came into the company with this xav av over ipv vision i mean i i've been working in av uh networks but why not launch it from scratch yourself and 100 because the amount of technical technological depth that's required to have a complete platform play is challenging um there's a lot of protocol work there's a lot of a lot of technology that needs to be integrated and this company had already brought all that technology together you know and and i was able to leverage like the 10 plus years of relevant technology into a product market fit in just a span of two years i see okay but when you're joining obviously you need upside in this right if you're going to be ceo how much equity did you ask for i asked for a certain percentage which is which has been as i've proved out the model as i've converted it to a sas model and gotten the product launched and gotten 500 plus customers my equity position has increased so you said something like i'm making these numbers up okay guys i really want to get you know see a path to me owning 10 percent 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 that's absolutely right but then also with with the round of financing the 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 i see so there's an asop pool that's being set up and then automatically granting you another chunk of that out of the esop will just keep you incentivized long term exactly right i see very interesting okay that makes a lot of sense um what's the total team size today uh we're approaching approaching 100 people um and we are in a sales-led model so we're have heavy on sales and sales engineering um as we go out into the field we've got a pretty decent global footprint uh we've got a europe asia and uh north america teams uh so we're expecting that we'll be able to maintain that growth rate of over 85 for the next three years consistently so uh we're pretty enthusiastic about that isn't that too slow though i mean you've raised you've chosen to raise money which means you have to grow faster 85 percent is not interesting to these vcs you've got to be like 150 200 percent at your stage year over year yeah but i don't think vc is the only financing model that you have but you already raised it you already raised it i agree with you but you already raised it yeah but if you as you look forward to that where the next financing is going to 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 the having the flexibility and conveying that flexibility to venture and your growth equity private equity interested partners then then your model can hold interesting most folks today during series b are selling between 10 and 15 of the business were you guys sort of in that same range on your series b uh we were in that range yes okay fair enough got it so um so got 10 to 15 percent uh you raised 10 million so you're talking like 80 to 100 million valuations something like that in that range yeah i would like to have that that's very good yeah yeah very cool well you well that's what you did right if you sold 10 to 15 you you had a 80 million valuation or higher yeah yeah in terms of you're discussing pre money and post but i i don't hang out i don't hang my hat on valuation to liquidity yeah well i mean evaluation i mean if you sell 100 of your business before you exit you own nothing so you got to manage delusion as you're growing absolutely no no i completely agree but i think that your your true valuation comes down the road uh well we hope we we i mean look there's a 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 and that's and that's exactly my point right if you took a valuation four months ago that's certainly changed five months later so so your true valuation i mean i think your valuations driven off your arr and your core metrics and and you've got to stick to those markets going to fluctuate with with multiples and the like so i just i just think being as as an entrepreneur stick to your guns know what your corporate value is and don't necessarily have a short-term short-term valuation mindset in sight that's my two cents no that makes good sense you mentioned your sales heavy how many folks carry a quota at the company a sales quota uh we have 18 of them whoever have a quota interesting and when they are fully ramped what do you expect and be hitting in terms of quota target uh well we use that we use the sas industry metrics of you know three to five x your your your comp should be guiding your your quota uh but you know we're looking at the you know one to one point five million dollars of of bookings yeah yeah which means they can earn 200 to 300k a full-on target earnings if they hit it yeah that's interesting for enterprise yeah and now you mentioned you have a sounds like a powerful upsell model you net dollar retention today i imagine is way about it should be way above 100 right uh the answer is it's 100 over 100 but we only just launched those six expansion products uh the three expansion products we're launching three more uh in the fall okay so so so our our lead indicator right now is logo capture right yep and capturing as many of those as we can that will give us the opportunity to expand in in 2023 john makes sense let's wrap up here with the famous five number one favorite book uh the brothers caramato the brother is what the brothers karamazov by dostoyevsky what's a karamatsuka i was a russian literature minor it's uh it's a famous book like war and peace interesting number two is there a ceo you're following or studying yeah i'm a big fan of chris regal who who founded and launched a company called strata cash now multi-billion dollar company out of dayton ohio number three what's your favorite online tool for building a user full grit i think in this day and age i think any ceo who's navigating a pandemic great resignation remote work recession like i think grit trump's all great this would just be clear that's not an online tool that's just a characteristic you think folks need to have when i'm online i'm showing grit right yeah i hear you all right number four how many hours you sleep to eat every night about five okay not a ton you can throw on five absolutely i'm getting old okay and so what's your situation married single kids single with two eagle scouts oh very cool okay and uh how old are you i'm 51. last question something you wish you when you were 20. uh i wish i i knew to drink more champagne as wc fields used to say you know celebrate the small moments in life and don't get overwhelmed by the by the big stuff you'll survive guys userful.com if you have a big conference room with or a big office a bunch of conference rooms you can install it once and say floor number three stream to all your conference rooms on floors one two three four five video walls you name it all from one central location he had this vision joined up with user phone 2018 raised 13 million bucks to build this product officially launched in 2020 scaled from 3 million an hour to 5 million an arr over the past 12 months as they look to keep scaling with their team they've got over 500 price customers 90 90 100 folks on the team as they're looking to scale here over the next 12 months john appreciate you taking us to the top thank you so much one more thing before you go we have a brand new show every thursday at 1 pm 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 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 central additionally remember these recorded founder interviews go live we release them here on youtube every day at 2 p.m 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 sas world whether it's an acquisition a big 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 sas 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 up for that at nathan lacka dot com forward slash slack in the meantime i'm hanging out with you here on youtube i'll be in the comments for the next 30 minutes feel free to let me know what you thought about this episode 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 we got to push them away click the thumbs up below to counter them and know that i appreciate your guys's support all right i'll be in the comments see ya