How Vervotech Reached 200 Customers and 75% Growth Before Selling to Constellation Software (Interview with CEO Sanjay Ghare)

Introduction and Company Overview

Nathan Latka

00:00Guys, vervotech.com helps people understand with a unique identifier, what hotels are on what street with what internet at what pricing. They launched in 2018. Today do over $240,000 a month in revenue up from about 150,000 a month just a year ago. And what's great about this company completely bootstrapped 30% EBITDA margins is the target 25% profit sharing plan with employees. Sanjay really built a great company and excited to share that he sold the company just last

00:25week to Constellation Group where he's now excited to thrive under the Juniper subunit there. We'll see what they do next. Hey folks, my guest today is Sanjay Ghare. He's a CEO and MD of vervotech. He comes from an engineering background as an industry veteran and influencer. He leads and drives the company's vision for organizing the world's accommodation data. Before starting the company, he worked as vice president to the SaaS company at Tavisca, which is a division

00:48of JP Morgan and Chase for over a decade. Company today, again, vervotech.com, which offers a combination data mapping product. Sanjay, you ready to take us to the top? Yeah, thank you for having me Nathan. You bet. So I wanna make sure my audience quickly understands the niche you're in. You know, when we book our conference venues for SaaS Open, we always get these reports from the hotel venues saying if you do, you know, theater style seating,

01:13here's what the room could look like. If you do circle style seating, here's what it looked like. Are you the kind of technology that powers that sort of planning and mapping?

What Vervotech Does: Hotel Data Standardization

Sanjay Ghare

01:22>> No, not really. What we do is any travel agency who is selling hotels online, Nathan, try to source the inventory from multiple hotel suppliers in order to get the best rates for their customers. What we do is we do standardization so that when travel agencies are showing hotels and rates on their website, they're able to show unique listing at hotels and rooms and rates.

Nathan Latka

01:50Okay, I'm not sure I'm following. Let's try and use a real example. If there's a big travel agent that's listing for, you know, hotels in San Francisco that are available tonight. I guess,

02:03not just go use Expedia and find the cheapest price for the hotel in San Francisco?

Sanjay Ghare

02:08>> Yeah, beautiful. So let's say you go to Expedia and trying to find the cheapest price for a specific hotel. When Expedia is trying to get the cheapest price for that hotel, Expedia will go to hundreds of suppliers to really give and out of those 100 maybe the same hotel is coming from more than 50 sources and there is no standardization. There is no way to uniquely identify the same hotel from different suppliers. So we help by

02:37>> assigning a master ID to each hotel where Expedia can recognize, okay, this is the same hotel coming from supplier one as same as supplier two, same as supplier three with different different IDs.

Why Hotel Names and Addresses Aren't Unique Identifiers

Nathan Latka

02:50Why can't they just use the hotel name and the address of the hotel as unique identifier? Why do they need to pay for vervotech to do that?

Sanjay Ghare

02:57>> Absolutely, so you know the way hotel names are you know written and printed, you will find the same hotel name on the same street 10 times in many cases. So the address is different. One property may be just at the same address, same road. There may be one property which is a five star with the same name and next to it there is a one star property with the same name. So that information will not be

03:26>> accurate because guests will book something assuming I'm booking five star and they will get a booking in one star. So there will be a lot of complications because there is no standardization.

Nathan Latka

03:37And I usually stay at the Triton Hotel in San Francisco. I can't remember walking down any major city street and going, there's a Hilton that's a one star and then right next door, there's another Hilton named the exact same that's a five star. I've never seen that. Is this a common problem?

Sanjay Ghare

03:50>> This is a very common problem. So when you look at, let's say, Hilton or Trident, it may be a five star property or it's a chain property. So there may not be exact same name, But there are properties where this happens very commonly because if you look at the global accommodation data, right now there would be more than 3,000,000 properties across the globe. And the problem may not be there for the top one, which may be,

04:19>> let's say,

04:22>> or 30,000 properties. But beyond that, there is again a challenge. When someone is telling you this is Hilton and they're giving address and they're giving location, the other supplier may be giving the same name which you can match, but the address may not exactly match. Location may not exactly match. Star rating may not match. Someone may call WiFi, someone else will say Internet. How do you really map all this to show the things in a unified

04:45>> way?

Nathan Latka

04:48I'm not sure I believe this is a real problem, but your numbers can prove me wrong. So I guess help me understand what a customer's pay on average per month to use your technology today.

Pricing and Average Contract Value

Sanjay Ghare

04:58>> Yeah. So we are in the SaaS and the average fee ranges between $12,000 annually to actually $100,000 per year. It depends, you know, based on the usage.

Nathan Latka

05:09Okay. That's a big range though. Would you say the average customer is paying you something like $30,000 a year today?

Sanjay Ghare

05:14>> No. So average right now would be around $16,000 per year. Okay. But the customers pay between 12 to 100,000.

Nathan Latka

05:22Okay. So 16,000 per year. So something like $1,200 per month, something like that.

Sanjay Ghare

05:27>> Correct.

Nathan Latka

05:29Oh, 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

05:52your Stripe account, you see your valuation real time, you can see what 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 get

06:16a 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 not

06:38built 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 going

07:04out 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 dataset of SaaS valuations than what you can get now inside of Founderpath. And we're thrilled to bring it to you. Alright. We're gonna go back to the YouTube video here in a second, but if you

07:26wanna 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. Alright. Let's jump back into the interview.

07:53What's the backstory here? What year did you launch the company in?

Company Origin: Founded in October 2018

Sanjay Ghare

07:57>> We started the company back in October 2018. And the reason behind that, so this problem is very old problem. There are companies who had been doing this and we just saw some inefficiencies.

Nathan Latka

08:14Like who was doing it before you?

Sanjay Ghare

08:17>> So there are actually 100 plus companies who are doing this.

Nathan Latka

08:22Name the top three.

Sanjay Ghare

08:24>> Yeah.

08:25>> One of them is a company called Gimmonix who has a product mapping that works. Another one is named called DataBinder. Then there is another company whose name is matching. There are a lot more other companies who are doing this globally.

First Paying Customer and a Seven-Year Contract

Nathan Latka

08:42Okay. So you launched in 2018 and how did you remember how you got your first paying customer?

Sanjay Ghare

08:48>> Yeah, I think we got after seven months because the product we just had six suppliers, the top one which we targeted at that point of time. And I think seven months later we got our first customer on the product.

Nathan Latka

09:03That's amazing. Do you remember what that first contract value was?

Sanjay Ghare

09:07>> Yeah. So it is actually one of the good paying customer. It would be paying around, I would say $30,000 per year even now.

Nathan Latka

09:18That what was that the starting pricing back in 2018 as well?

Sanjay Ghare

09:22>> Not really. So the starting pricing has been very ad hoc and you know based on what customer is giving and their market. So we kind of you know did that kind of pricing for two and a half year and then eventually.

Nathan Latka

09:34What was that pricing Sanjay? What was the first year contract value on your first customer?

Sanjay Ghare

09:39>> This particular customer, it was actually still the same. They are still on the same pricing.

Nathan Latka

09:43Okay. So I guess why haven't you increased prices?

Sanjay Ghare

09:46>> So we do increase actually. So what happens is we do increase the pricing, but this particular customer, they had seven year long contract as an example with no pricing and in the early days when you really desperately wanted your customer, you do actually these kind of things. Now actually our pricing do change annually, your pricing is public. We have learned all these things eventually but some of our, these great customers got the great deal from us

Nathan Latka

10:13>> in the early days.

10:13So your first customer said, listen, you're early. I don't want take a risk on you unless I can lock in this cheap pricing for seven years. And you said, okay, fine. I need the money sign here. Got it. Okay, got it. Let's fast forward to today. How many paying customers today?

Customer Count and Growth Rate

Sanjay Ghare

10:26>> Yeah, so we have around 200 plus paying customers, which powers more than a thousand websites globally.

Nathan Latka

10:32So can I

10:33take 200 times that average revenue per customer per month of $1,200 that would put you at about $240,000 a month in revenue today?

Sanjay Ghare

10:41>> Correct.

Nathan Latka

10:42That's great. Where were you exactly one year ago so we can calculate a growth rate?

Sanjay Ghare

10:47>> So we had been, you know, growing around 75% for last two years. So a lot of growth has happened just in last eighteen to twenty four months because before that there was

10:56>> a pandemic which has taken away almost two years from us.

Nathan Latka

10:59So 70% year over year growth, if you're doing $240,000 a month today, would have mean you were doing about $160,000 a month about a year ago?

Sanjay Ghare

11:08>> Correct. Little less than that actually.

Nathan Latka

11:10Okay. What's driven that growth rate? Have you gone deeper into the same customers or have you added brand new net new customers?

Sanjay Ghare

11:17>> We had added brand new customers.

Nathan Latka

11:19Interesting. What's the growth playbook? How are you landing these new customers? Inside sales, outbound sales?

Growth Playbook: Events, SEO, and Inside Sales

Sanjay Ghare

11:26>> Actually, we do a lot of events, we do Google ads, we do SEO, we have inside sales team who is reaching out, pretty much all of it. We are a young company who is not shy from anything. We are trying to do everything which can get us a customer.

Nathan Latka

11:42Now we love that. I want to dive deeper into the SEO stuff here in a second, but first have you capitalized the business bootstrapped or have you raised money?

Bootstrapped: No Outside Capital Raised

Sanjay Ghare

11:49>> No, it's

11:50>> a bootstrapped company because the moment we started and within six months the pandemic or nine months I would say pandemic hit. So I think that was a good idea. We thought let's build the product well in pandemic instead of raising money now.

Nathan Latka

12:04I love that.

Sanjay Ghare

12:05>> And by the time we're out of it, I think we were good operationally from a finance standpoint.

Nathan Latka

12:11Well, congrats on bootstrapping Sanjay. We love that. Are you the sole Founder? You own 100% today?

Acquisition by Constellation Software and Juniper Group

Sanjay Ghare

12:17>> No. So first of all, there are other founders with me. There are four other people on my leadership team. But one more thing is we got acquired Nathan last month by Constellation Software, which is one of the eighth largest valuable software company in the globe through its portfolio company Juniper Group.

Nathan Latka

12:38So we love Mark Leonard, we've studied all of his letters and he obviously doesn't do a lot of interviews. So it's hard to quantify like why founders like you love the Constellation model. Tell us.

Sanjay Ghare

12:51>> Yeah, absolutely. And I think I will also answer that question on his behalf that he why he doesn't do a lot of interviews. So when first time I saw the Constellation website, there was not even a photo of the founders and talking to them and they said we don't invest a dollar where there is no ROI. So in headquarter sitting here, we are all spending all back to support the businesses we are acquiring and we're not

13:17>> spending any money anything which is not. So it's a very ROI and I would say the companies they acquired even that. So the second question, as an example, why I liked Constellation and why I had chosen to go ahead with them are two things. One thing is they already have around 14 companies who are travel tech companies in their portfolio. So there's a lot of synergy there where we are able to leverage customer base and best

13:45>> practices and so on. And second thing is they acquire company, they give you best practices support but they'll let you run things independently without any change in your culture, the way you operate, your brand, anything. So practically it just accelerates things without really changing anything or without limiting what we really want to achieve.

How Constellation Delivers Best Practices

Nathan Latka

14:09Somebody like Mark, you know you acquire over 100 companies at Constellation, you know actually building that playbook so that when a new founder comes in like you, they can give you the best practices in an easy to digest way is really important. What's literally the structure of how they deliver that value to you? Is it a website with playbooks built in that's password protected? Is it a physical binder they send you? How do they structure these

14:30best practices for you?

Sanjay Ghare

14:31>> Yeah, absolutely. So first of all, know, the Constellation is really big with more than thousand companies now. So they have six portfolios, very large owners and in a few more. And under each operating group, they have portfolios. So in Constellation, Vela is one of the portfolio and in that there are seven operating groups. One of them is Juniper Group and now Juniper Group is largely focused on travel tech. Juniper Group level there is a group CEO

15:03>> and the team who has learned everything from well and constellation and at a group level a lot of things happen like the events are happening for products, sales, finance where these best practices are shared. So assets are all available. But beyond that, a lot of events where it's more focused towards learning do happen. And at the same time, think one fundamental philosophy which is at Constellation and I have seen in Juniper Group just a month now

15:31>> is there is a huge transparency. That means you get access to all the reports, to your reports, everything is really visible to you. If you need any information from any of the group company, things are very transparent, which help you to quickly learn and decide.

Nathan Latka

15:47So you could ping Jamie Sastra, he's the CEO of Juniper Group and say, hey, I'd like to get the P and L from the other travel tech company in Juniper Group network and you can go say their P and L and maybe learn from that.

Sanjay Ghare

15:57>> I haven't really asked that specific thing yet but as an example, what is the typical marketing spend? What is the typical conversion on the companies? So all that information, I can talk to them and quickly get it.

Nathan Latka

16:11I see. But there's not like a dashboard where you can see everything real time against all the other 14 companies in Juniper Group, sub operating group of Constellation.

Sanjay Ghare

16:20>> There are and we are just a month into it, we are still into getting integrated and I'm still getting access to some of those things.

Nathan Latka

16:26I see, I see, I see. And I mean, again, Vista has a similar playbook, right? And they deliver this sort of value. I mean, they have a massive 150 list ranging from when to remove the sign from the company headquarters when you acquire it down to how to run an SEO playbook, down to how to hire. Again, how does Constellation like deliver all of this stuff to you? Is it you just asking randomly or can you

16:48log in and see a bunch of templates somewhere in a website?

Sanjay Ghare

16:51>> Yeah, so all of that there is an internet where all of the assets and all these things are available and as I said you know I'm also kind of new, I got access to some of the things and I'm still exploring those things. So we did the financial integration which is the first thing that I have learned already a lot of things. So very simple structure of P and L which is followed across the companies, how

17:13>> the reporting happens, how the dashboard and reports are available from a financial standpoint is really impressive. And I'm looking forward now to learn about product sales and marketing sites as well.

Nathan Latka

17:24That's awesome. That's awesome. What about, obviously,

The Valuation Conversation: Price Undisclosed

Nathan Latka

17:28you're going to run a process, want to pick someone you culturally align with, but you also have to think about price, right? How did the valuation conversation happen? How did you guys get to a deal price?

Sanjay Ghare

17:38>> I think this was a much simpler conversation than you know one can imagine because from a constellation standpoint they acquire a business to retain. So it is very fair and methodology driven and we follow the same thing. So I think that was really the simple conversation where we took some time is more of a strategic alignment, how we are going to work together, how we are going to grow because what we deliver back to Constellation or

18:07>> Juniper is one thing. But I was more focused about what value Juniper Group is going to add back to vervotech and then I think those things were fair. It's all win win. But from a valuation standpoint I don't think it might sound surprising but I think we closed all of the high level valuation numbers and everything probably in a couple of days.

Nathan Latka

18:28Are we talking though like Constellation tends to be fairly conservative. The Vista might be more aggressive because they buy and flip Constellation holds forever or usually forever. I mean, we talking like a 2x revenue multiplier or like a 15x revenue multiplier? Can you give any kind of range?

Sanjay Ghare

18:45>> It is not, you know, it can be any of those because it's not really on the revenue. It depends on revenue. It depends on EBITDA. It depends on your team. It depends on the size. It depends on the growth attrition. So there are just a number of factors. Can be two or it can be 15. It's really all of it.

Nathan Latka

19:06Where did you guys end up at?

Sanjay Ghare

19:08>> Unfortunately, a part of that's the, it's a non disclosed, you know, I cannot really disclose that one under the confidentiality of the deal. But I would say me and all are, all of us are very happy about it. So it's a good number.

Nathan Latka

19:24In order to make sure you don't breach the confidentiality, let me rephrase the question so you can give it in a way that doesn't talk about what you actually closed for. When you were going into the acquisition process, you personally, before you even talked to Constellation, you maybe had a number in your head. How were you valuing the company before going into the acquisition processes?

Sanjay Ghare

19:41>> Yeah, now so honestly I never thought of selling the company. It happened just because I met Juniper Group and Constellation guys and I found a synergy where we can grow into markets like Europe and South America where we don't have existence but they have good companies. We can grow very fast, probably three-four years faster than what we could have done otherwise. That's the reason actually we really got into acquisition.

Nathan Latka

20:08Talk to me a little bit more Sanjay. One of the things Mark talks about in his letters is he says we empower the leader, the leadership groups of the subgroups. Juniper Group and then you down as the individual CEO with real profit sharing to keep you excited to get the first dip, the second dip, the triple dip like over time. How does that funnel down to you and your team members in terms of revenue share and

20:28Sanjay we want you to build this profitably that kind of thing.

Sanjay Ghare

20:31>> Yeah, I think that's pretty straightforward. So one thing is vervotech also follow the same thing. So we had been always sharing the part of profit back to all the employees in the company.

Nathan Latka

20:46What percent of profits did you distribute back to employees before the deal?

Employee Profit Sharing and Performance Bonuses

Sanjay Ghare

20:49>> Typically 25% but it also depends on our cash flow because we are a good start. So we just started it from two years. So we you know share it back with the employees anyways.

Nathan Latka

21:00You do that annually?

Sanjay Ghare

21:01>> Yes. Okay. Any financial year and it is outside your salary structure or compensation structure at all.

Nathan Latka

21:08I think Juniper also and Constellation does the same thing which is pretty aligned that what is the value you're creating and you have

Sanjay Ghare

21:17>> the KPIs. So as an example for my marketing team or marketing lead also,

21:25>> how many new deals they are getting or new potential customers they are getting and what is the cost per customer or for sales what is the conversion and what is the deal size per customer or for what is the attrition because if CTO is looking at product, if there is attrition that's the problem with technology. So we had directly mapped with the leaders and groups and when we look at how we did in the year, then

21:52>> just break it down. Okay, at what part we did great, that's where the bonus goes. So in some years it can be a department or a unit can get a lot more bonus while other doesn't get anything. That can happen too. It's purely performance based where everyone understands and they have full control of what they want to achieve.

Nathan Latka

22:11Before you sold the company so in 2022, I mean what was your profit margin end of year? Talking like 10% or like fifty-sixty percent?

EBITDA Margins and Profitability

Sanjay Ghare

22:18>> No, so we try to operate around 30%.

Nathan Latka

22:21Okay, 30% that's bottom net income, right? Bottom line net profit?

Sanjay Ghare

22:25>> It's EBITDA. You know, that's great.

Famous Five Rapid Fire Questions

Nathan Latka

22:29Well, congratulations. That's excited to get the close done and eager to watch you grow inside of Constellation. On that note here, Sanjay, let's wrap up with the famous five. Number one, your favorite business book.

Sanjay Ghare

22:41>> Not business book, but my favorite book is good to great.

Nathan Latka

22:44Number two, is there a CEO you're following or studying? It can't be part of Constellation.

Sanjay Ghare

22:50>> Yeah. So I think I have learned most of the things from Mahindra Yadav, who was the CEO of where I worked earlier.

Nathan Latka

22:57Number three, what's your favorite online tool for building vervotech?

Sanjay Ghare

23:02>> Zoho.

Nathan Latka

23:03Four, how many hours of sleep do you get every night?

Sanjay Ghare

23:07>> Sorry, say that again?

Nathan Latka

23:09Hours of sleep each night.

Sanjay Ghare

23:11>> Six to seven hours. Okay, and situation married, single, kids?

23:16>> Yes, married and one kid.

Nathan Latka

23:17That's great. And how old are you Sanjay?

Sanjay Ghare

23:20>> 37.

Nathan Latka

23:21Last question, something you wish you knew back when you were 20 years old.

Sanjay Ghare

23:27>> You know, I think financial and the way business works, you know, I should have known it long back. Should have done all of this long back.

Closing Summary and Outro

Nathan Latka

23:35Guys, vervotech.com helps people understand with unique identifier, what hotels are on what street with what internet at what pricing. They launched in 2018. Today do over $240,000 a month in revenue up from about 150,000 a month just a year ago. And what's great about this company completely bootstrapped 30% EBITDA margins is the target, 25% profit sharing plan with employees. Sanjay really built a great company and excited to share that. He sold the company just last

24:01week to Constellation Group where he's now excited to thrive under the Juniper subunit there. We'll see what they do next. Sanjay, thanks for taking us to the top.

Sanjay Ghare

24:09>> Thank you, Nathan. Thank you for having me.

Nathan Latka

24:11One 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 one

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