How Wooly CEO Scott Paul grew to $1.9M revenue and 80 customers in 2019.

you're gonna love this interview just got done editing it i'm glad i got it live for you i'll be in the comments for the next 30 minutes hanging out answering any questions you have in fact leave a comment below about data points or what you think is going to happen to the company and i will respond to every comment additionally if you're just loving the content click the thumbs up and i will go and check out your profile as well and give your videos some love as well in the meantime enjoy the interview hello everyone my guest today is scott paul after selling an agency to disney he ruined influencer marketing thank god he's now on a mission to change how we how commerce is done word of mouth marketing will finally be measured he's doing it with this company called woolly.com all right scott you ready to the top let's do it all right so what's the company doing is this a pure play sas model it started as a pure play sass but then we realized uh to really accomplish what you just said there to really start this new type of commerce we had to create a consumer application and so 2020 we'll see the the that come into life we'll see something where every consumer will be able to participate and in word-of-mouth marketing in a way that's never been done before instead of it being analog we're going to make it digital okay who's who's paying so give me a sense of like tell me a story of a paying customer right so are brands using you to find these kinds of micro influencers to today yes today of all the a brand um like stance socks or skull candy headphones or this purple mattress this mattress in a box company they use us right now to discover who's buying from them like who are these individuals like on social media and then they actually recruit from their customer list people to represent the brand to go out there and talk um both online offline about their love of the brand so it's essentially recruiting your customers to be your uh influencers um advocates if you will yeah much smarter than reaching out to cold influencers trying to get them you know to convince them to get familiar with your product and then trying to have them do it right so tell me tell me scott when these folks are paying you like skull yeah when these folks like skull candy are paying you right so help walk me through your pricing model a bit what's your kind of sweet spot well what interesting is the the brand pays to use our software but the customers of skull candy they're not paid they're not paid they're going to be um they're just going to be brought into the brand family and given you know product or credit to buy scott yeah sorry i'm talking about the i'm talking about the business yeah the business is i mean we're talking about the monthly sas so you're gonna you're gonna come in for uh we have a freemium model but most of the customers are using us for uh millions of contacts and so we have uh we're charging for kind of your contact database much like a mailchimp or clavio and then a little bit on how many campaigns you're going to run inside so we have a lot of activation tools and that there's a cost on like how how much you hit us there and lastly listening all the you plug your brand in and we're listening to everybody chattering about you on on all the networks and so that's the last um frontier of where we collect data and then for someone again paying for those things in terms of your average kind of customer uh what are they i mean you're talking like a thousand dollars a year or a hundred thousand dollars a year or a million a year what's your kind of sweet spot yeah yeah we have a smallest customer spending about six thousand a year and then the largest about two hundred thousand a year okay that's a big range though i mean sweet spot somewhere closer to six it is uh sweet spot would be about sixty thousand sixty okay good and and so let's describe that customer so someone paying you sixty thousand dollars per year how many campaigns are they running and how many uh contacts are they managing let's talk maybe like one like blend tech um they make both well they're actually helping them out from our team kind of a little more managed service and they're gonna run probably uh their go to market strategy in a year they're probably gonna run seven or eight campaigns some of those seasonal and then an always-on campaign something they're doing uh you know evergreen throughout the year yeah your little one is welcome to jump in by the way this is the beauty of being an entrepreneur right yes my wife is supposed to you're totally you're totally good if she wants to jump in it's no problem that's why oh that is life that is live okay so uh great so that's your sweet spot and then put this on a timeline for me when you launch the company well i lost it right after i left disney in in uh 2016 and then uh we took some funding from venture capital about 2017 and then right now uh we're about to do a series a and we have a pretty uh pretty lofty mission going forward here with uh kind of changing from sas to consumer why um why did you need to raise capital for this obviously capital comes with dilution why couldn't you kind of get creative and bootstrap it i've done that three other companies and sold them it's definitely a way to go it uh you retain most the ownership and you get to uh get the upside but i think on this one being that we have uh hired about 15 engineers i i didn't know how to i didn't know how to pay for those 15 engineers without raising some money first so it's a sas is unique i think it takes it takes hyper growth and it's kind of it's i don't know many sas that don't go for venture just because of the the speed that you need to grow at and and kind of the delayed uh income and you know recurring revenues and so when we did agency work with disney that that company was all bootstrapped and uh you know our customers were essentially our seed fund we'd sell ourselves into profitability uh this one i didn't have the luxury i wish i could it's the best way to do it well sorry i guess what i'm asking is you had successful exits why not just fund yourself or did you or were those exits nice exits but not like you know they were nice and i did fund myself for about a year um but i just uh de-risk it by you almost in any of every case you want to investors can be very good partners for you they're um if it's smart money they can bring you into uh certain deals and it just kind of de-risks you kind of want to know that other people believe in what you're doing and validate your idea so we didn't give a ton of equity away for the millions we raised but it's the way for me it's the way to uh somewhat de-risk and see if other people believe in what you're doing um you look at most uh most very successful exits uh they'll still go and raise from the biggest uh venture companies on their next one rarely do they self-fund uh from from the observations i've had yeah well by the way the ones that rage are the only ones that get press right the ones that bootstrap rarely get pressed but i could just yes i'm doing like three we just passed about three 000 these interviews i can tell you i am constantly shocked by these companies you've never heard of that have bootstrapped to like 60 million in aor but they're never in the press because no one wants to write about a bootstrap 60 million dollar hour company they want to write about the billion dollar funding round yep no there's several of my friends are doing that that much more than that bootstrap completely and yeah they just lay low and print cash great that's great i would do that i do that all day long if i if i could do it but this was one way how much have you how much have you raised a date you know two years ago we only raised a million said a lot okay so you have a million we're very capital efficient you have a million total in the company um yeah but we've we make well over two million a year so it's it's we could go cash we could be cash flow positive but just uh what we want to do next is going to require some new team members on the mobile side and so it's not it's just not gonna we we gotta we gotta take a little more so that we don't burn out yep so how much do you hope to raise then in the series a what's your target series a would probably be eight okay million okay and do you i mean you know most people would say in a series a you hope to sell maybe less than 15 20 of the company you feel like you'll be able to kind of get down that range um yes absolutely i don't think we'll do it if it's if it's more than uh 15 or you know it's got to be in between 15 18 if uh for that amount of money so yeah that's actually why we've delayed raising is if we we need to do a few things to get to the point where we can actually uh justify that valuation yeah i mean because you're talking about evaluation there if you're going to raise 8 million at 20 right times 5 you're talking about like a 40ish million kind of valuation on 2 million run rate right now right correct yeah yeah what do you think you have to get revenue to develop to get that kind of valuation um i think we have to i think we have to have our consumer product we're gonna have a performance based uh transit you know we're gonna get transactional uh fees from this new product we're launching and i think it will more than triple our our revenue won't be sas revenues it's gonna be kind of like uh transaction fees on product that that we're helping brands move via their customers and so it's it's a little bit different how that that revenues uh are are valued but uh by by this time next year i think it'll be a very different story and that's when we plan to be mid-raise yeah do you already have control over the payment where it's as simple as you going after those 200 300 basis points per dollar through the system or do you have to first get control of the payments we currently do not have uh control over payments it's going to be we're going to have integration with shopify and all the shopping carts out there um and it's not going to be payments as much as it's going to be discounts and then uh so it's gonna be a little bit different we're gonna kind of play like an affiliate a little bit more but not we're not paying out commissions we're giving out discounts okay um if you recommend products to your friends okay and so i guess walk me through that model so maybe let's use let's stick to skull candy or purple mattress since i'm familiar with both so skull candy a year from now um what's the transaction model look like for a company like them and let's say i'm an influencer let's say you're not an influencer that's that's what we're going after let's say you're every everybody else in the world and uh and you you are at a family union or drinks with your friends you're gonna recommend products and you love your new skullcandy wireless headphones uh i believe that be able to track that that transaction that that skullcandy shouldn't be paying you know amazon and google and retargeting on facebook for customer acquisition that lets your customer actually uh be able to kind of be the point of sell and the sales rep in the field or purple every customer of purple should be the sh the showroom should be the customer and so that customer will be able to buy if you recommend to your friend or family purple mattress they will be able to buy from you cheaper than they can get it on amazon or purple.com because a brand wants to they want that taxonomy of like where is they want to see where the word of mouth marketing is happening tesla did this perfectly with their app they had the best referral program ever where you wouldn't go buy a tesla without uh using a recommendation uh a referral code because it would give you free super charging for life and uh they did actually expand that a little while ago i think it was too good of a plan but that's that's what we're doing is we're actually laying like the digital rails across the now analog system to have brands understand who their customers are who are making the most referrals talking about the products the most and giving them an incentive to share it which is they're able to hook a friend up we don't think commissions paid to refers is the right idea we think that breaks the bonds of trust and would ruin uh word of mouth marketing which is the last trusting like way that we learn about products everything else is ads and we don't want it sorry yeah i don't enjoy you off but we have a short period of time so i want to dive into this right so let's say i'm at thanksgiving i love skull candy my mom wants to buy a pair uh they retail and skullcandy.com for a hundred dollars if she buys it through my whatever link i want to understand how you're tracking attribution yeah okay but so what is it am i giving her a link at the thanksgiving encounter in six months you give her a link in one year it's your profile that's just gonna be uh checking out via you okay so we just finished eating all the turkey she goes back to her computer in her office downstairs she opens up her computer how does she go find my profile on skullcandy.com to make sure she attributes that sale to me and gets the discount she would she would actually be on the wooly app and find you so she'd be on her phone okay so she would have to download an app just to get this one deal um yep okay so i mean that's gonna be a lot obviously there'd be lots of apps there and she doesn't have to download the app that's that's you can do it without downloading the app it can the link can take you right to skullcandy the benefit of going to the app is she would see everything that you own and be able to get everything that you own that you've kind of connected with at a discount cheaper than amazon or on the site okay so let's assume she does that she goes through the friction of getting the site she finds my profile it's under me now she gets it for 20 off cheaper than anywhere she could get anywhere else online amazon skull candy she gets it for 80 bucks it retails for 100. how do you how do you guys make money off that uh just a transit defeat at brand pays to participate in that so they're they're going to share some of the acquisition costs with us a performance-based thing we're that's what we're working on with all right now is to pay to be able to acquire users in that manner so let's just say that's right now not perfect science because that's what we're working on but what do you think it'll be like you think it'll be like 10 of the 80 sale will go to you as the facilitator i think i think potentially five to ten percent um maybe three at the worst case scenario and some products won't have anything we won't be integrated with them but we have a reason that you will actually have the app on your phone um and there's other benefits that i'm not going to disclose here that i mean this is our secret sauce so there's a lot of things that would keep you wanting to have this woolly wallet this phone app on your on your there's a lot of reasons you have it for how you communicate with the brand a lot of things that you're gonna that's kind of our we needed our our ip for the next year that we're not going to share everything but uh yeah it's not going to be perfect i mean it's a two-sided marketplace nothing's going to it's the chances of success are 10 i've done this long long enough to know but if we hit 10 percent have you done it can i have done an app that had several million uh users and i have invested in four marketplace companies that are um all doing very very well right now so it's a i'm very familiar with the founders and uh and as an angel investor i'm very deep into uh marketplace companies at this moment and are those marketplace companies though are they b2c on are they to consumers on one side and b2b on the other side or is it c to the consumers on both sides there's good consumer consumers one's home buying one's uh gym memberships one's uh babysitting another one is yeah they're very c2c yeah yeah interesting well yeah it'll be interesting to see i mean this is so much about psychology right uh it's gonna be interesting to see you kind of execute this over the next year so so back to today you said you're over two million dollar run rate so you're doing more than 160 a month right now in revenue correct and where were you about a year ago just so we can get growth a year ago we were at like 45 oh wow or less that's good growth so has that come from upselling existing customers or adding new customers all together [Music] um upselling existing customers a few mammoth contracts with companies like amazon yep and how many customers are you working with today uh about 80 on paid and then our new freemium features are adding a ton of customers pretty quickly because it's premium okay we haven't had that until today until this actually last month yeah yeah okay so if you have 80 on paid and you're doing 160 000 a month that average price point is more like kind of 2 000 a month not 5 000 a month right um yes but i like i said a few mammoth customers yeah yeah no i know averages are difficult to talk about but i haven't found an easier way to talk about it in a short podcast format so totally totally get the power law structure in your customer base um okay very good um uh and you which is nice you've done all this just raising a million bucks obviously it's always nice when your arr is more than what you've raised you go into the next round with some leverage there um 25 people you said on the team yep uh 12 uh most of them in uh most concentration actually in ukraine our developer development team is all there led by our cto here in salt lake and then about four in la and uh one in austin and then the rest here in salt lake city how many engineers 15. um about 15 exactly no no about 12 sorry 12 13 and do you employ kind of an inside sales team are there any quota carrying reps or no we've had a few um we've moved from a sales strategy to more brand strategists the sales the sales the sales were just a little too hard on sales and we needed more strategy and uh helping the brands you know kind of use the tool in a strategic way so we've kind of we've kind of moved the maps we've ever had is two sales people we're at one right now and we're kind of renaming that entire division of to okay and now how do you measure obviously you're you're changing the business model especially over the next 12 months but when you look at churn right revenue chart and your base how do you measure that and what was it over the past 12 months luckily we've only had one uh customer churn uh that was a you know i would say a significant customer and they just it was sold incorrectly and it was not a fit for what they were wanting this performance marketing and it just wasn't working um so we're we're not really worried about churn as much right now because we're having so much new product come out that we're able to expand most of our contracts and then uh and once once someone gets into our crm it's pretty sticky it's hard to it's hard to delete a crm is what we are at the at the base of it we have a social crm you don't really want to go delete all these contacts and these people that you've been communicating with who are your ambassador and best customers and then go back to spreadsheets so we don't see a lot of churn but we do see adjustments they're going to try to sell them maybe more more effective campaign products or something like that so uh we're luckily we don't have real churn but we do have uh we have more issue on new customer acquisition at this moment than we do turn just finding the right customers yeah well scott so i appreciate the the nuance around chern but you know someone was paying you money they stopped paying you money even if it was a bad sale or a bad fit etc so that one customer i mean are we talking like 10 revenue churn over the past 12 months or was it less than that um that customer was about a nine nine thousand dollar a month customer so it was probably whatever you want to put that at yeah yeah like six seven percent whatever but but again yeah to your point a lot of it has to do with how the sale what the onboarding looks like what's the upsell look like so have you up sold that same customer code from a year ago by more than seven percent so it more than makes up for the churn oh yeah we have one customer who's doubled we have several customers actually doubled their their uh so we sell some pretty big brands who have many logos underwater on their conglomerates and say on board a lot more of their brands um internationally even so we have some customers who've expanded from being a 70 000 customer to over two hundred thousand dollar customer as they bring on their other logos into the you know and manage it from france to germany i mean it's our our stuff is ours we have seats and people using it in every uh country right now in europe and north america and uh and and there's definitely some very significant logos there that i don't want to like i don't think i have the yeah right that's fine how are you how are you landing how aggressive are you being landing these accounts so let's say that there's a count that's going to be worth twenty thousand dollars in year one to you guys will you spend that full twenty thousand to acquire the customer we're horrible at that uh we i i use linkedin and we have done zero marketing we just hired a cmo last uh so no paid facebook no content writers no blog no seo how do people learn about you linkedin you're literally just a kind of account based marketing on linkedin targeting targeting job titles what's the title that's all and then my network and then my network what what's my what's the title of what you target oh um i think i think we've gone after a lot of influencer marketing directors social media directors cmos a lot of it's just my network from when i was in l.a at this at disney um i i i just get introduced to a lot of brands who are trying to solve this problem uh from you know from clients that we used to have disney and stuff so it's it's very much a account based selling uh social selling and uh i can tell you that's limited it's great it got us to where we're at but it's very limited in in our real reach and scope and so that's why we've hired uh our cmo uh from he was friend he was a gopro and zoomies and skull candy and all those places and he really he really gets uh how to how to kind of go after the bigger brands and like you said spin the spin the ten thousand dollars to acquire customer and so we're going to try that this time yeah well we'll see how it goes now obviously you'll use some of this money you raised to go after that more are you back in a position right now though where you're profitable after that million dollar raise or are you still burning cash no we're still burning cash and we um and we we we we definitely are not profitable we could be but we're we're we're shooting for the stars on this next uh next approach and what we're doing with we're calling it c commerce and it's a new category we believe and it's something that can't just be uh you know you can't slowly go into it with uh uh you know iteration by iteration we have to really go after it swinging hard and you know like i said ten percent chance it doesn't work and yeah my investors are okay with that what does aggressive mean are you talking like a hundred thousand dollars a month in burn or like ten thousand a month in burn or what i think it's less about what the burn is and more about like making making something that doesn't exist and and and kind of doing that you're such an artist i totally get the i get the vision like i get it's going to cost money to grow but i'm just i i like to look at the numbers because like based off your personality plus the numbers that you can learn a lot from it so i'm just curious i mean are you comfortable burning 10 20 30 grand a month um yeah i mean yeah that's that's in addition to where we're at we're probably burning so we're probably burning yeah like well over 100 right now i would i want to double that yep yeah yeah which you can if you go over but i'm not going to double that until the until the series a i think uh what we're doing over the next six months is very much a a kind of go deep on this thing and uh we're not looking to expand the team or the sales tremendously we we we really want to just uh go deep on product for six months and then you're gonna then we're gonna unleash this yep well good on that note let's wrap up with the famous five number one what's your favorite business book oh i do like uh i'm reading platform revolution right now i'm always whatever's top of mind so right now it's it's play bigger and platform platform revolution number two is there a ceo you're following or studying um seo i'm following studying i i'm very much a local networker so i have a group of uh i have a group of ceos here in utah just name one scott that we might not all know about i like johnny hanna from homey he's doing a marketplace where he's helping you cut out your you don't pay realtors any money and he's one of the nicest guys i know so i look up to him as he ha he has a lot of people lobbying against him wanting him to fail every realtor in the world and he seems to just keep a good shoulders and one of the nicest guys around so good friend and someone i look up to number three what's your favorite online tool for building the company uh linkedin yeah number four how many hours i sleep in every night uh six okay and then uh it sounds like married with kiddos right how many kids three girls thirteen eleven and four wow you you have four startups you got a handful all right and how how old are you 38 uh 39 of last week yeah my birthday was october 3rd when was yours actually end of september what are we at now okay i think it's october 10th or 11th yeah yeah yeah all right take us home here scott last question what do you wish your 20 year old self knew i wish i i wish i knew that you don't have to have something perfect before you execute i think i spent my 20s thinking i couldn't do something because i didn't have all the ducks aligned and i wasn't taking chances and so i should have i had ideas and things i should have done when i was 21 that would have been massively successful and i i hesitated and did and didn't execute and i just didn't realize that you don't you don't need have perfect plan execute so guys go tell that person wooly.com 80 customers paying caught two grand a month they're doing about two million dollars in run rate right now up from forty five thousand dollars a month just a year ago healthy growth helping these brands activate their customers turn their customers into more effective sales people through recommendation engine they've got an app coming out which will give people discounts as well look for that in in 2020 currently burning about a hundred thousand dollars per month as they drive growth the million dollars raised hoping to do a series a here shortly caught maybe 8 million on a 30 or 40 pre-money as they look to scale from their team size today of about 25 folks scott thanks for taking us to the top wow thank you you guys know i fight like heck to get these data points for you from these ceos that rarely do these kinds of shows if you want more shows like this make sure you subscribe right now we're trying to get 10 000 youtube subscribers by the end of september here 2019 and it would mean the world to me if you clicked now to subscribe additionally i've got two more great interviews for you if you want more data points from the world's leading sas ceos click and watch one of them right now