How Xolo CEO Mikko Teerenhovi grew Xolo to $7.2M revenue and 6K customers in 2024.

hey folks my guest today is alan martinson he is ceo of zolo since 2018 with a mission to build into the largest sas platform for running a freelance business he's a serial entrepreneur investor and executive in the past served as a ceo of starship technologies the leader in self-driving robotics was the founder of mtvp the first vc from in the baltic states and the ceo of microlink the largest baltic i.t services and online media company lastly the founder and ceo of baltic news service the largest the region's largest news agency alan you're ready to take it to the top hi how are you do you also run the baltic government [Laughter] almost almost yes there's no baltic governments it's just three countries but yes you're everywhere close yeah all right folks if you want to follow along it's x o l o dot i o alan what are you building who are you selling to yeah sure we are one of the largest platforms for freelancers and solopreneurs in europe with about 100 000 people signed up and what we do for some is to cover the full life cycle from registration to running the business and invoicing expense management connecting the bank accounts to the platform and we also have embedded accounting and tax filing service in in our stars so it's not just a sas platform not to run the business but it also includes the accounting and tax filing service which is very rare that because it's done separately by humans we pretty much cover everything except finding finding new gigs or jobs for freelancers interesting so who are the hundred thousand sign ups you have today who are most are they writers are they designers who are they yeah we are focusing what's what they call a higher end of the freelance spectrum essentially knowledge workers it can be anybody from like in in i.t or technology or consulting and but we are always amazed how many micro niches our customers can invent for themselves so there is an art crime investigator or there is a guy who plays batman at the events so it's it's uh i'm sorry for that it's very fascinating and uh how many real micronations people can find for themselves and so you've got a hundred thousand of these sign ups we'll get back into how you launched this many years ago but but how are you making money yeah we do have the majority of our revenues coming from subscription payments uh so it was it is anything between 29 to 199 depending on the package depending on the country and the level of the service so in average is about 70 euros 80 euros and like closer to 100 and then if you prefer that per month and there is also a service which is transactional whenever people pay us pay on the revenues so that's interesting that's that's used in a fork and the contracting so essentially it's a little bit like employer of record business but then exceptionally higher contractors and then rather than full-time employees and the customers pay us and a certain percentage from the revenues when you say transactional gmb what you mean is the freelancer builds a thousand dollars to your platform you'll get a small cut of that transaction we got five percent yes five percent okay and is that five percent whether it's a million dollars or two dollars it's been amazingly constant let's say the average customer builds pretty much the same amount and those numbers never get to millions it's usually in a few thousand ballpark per month interesting so how much gmv did you guys process in november last month yeah so basically if we take that particular product and uh where we only charge in our transactional fee it's close to 2 million euros processed so but of course and the majority of our customers are paying us monthly fees and they operate their own business let's say the total amount of the revenue of our customers and our paying customers it's about 20 25 million per month and that's including the people just paying the subscription fee uh exactly exactly okay interesting from the majority of them we don't charge that transactional fee we only own anything so i don't fix this so just be clear that transactional fee you did about 2.3 million united states dollars in november you taking five percent of that would be something like a hundred thousand dollars per month from that particular revenue stream yes that's right that's right very interesting which one's growing fast for the subscription business or percentage gmv it's it's mixed because in there a few months where one of them pulls ahead and sends some quarters and another one pulls ahead so it has been like pretty much 5050 i would say because we're launching new subscription based products and uh so what is solar doing right now is it's launching localized products for the freelancers in different european countries so which means that then there will be a lot of new market footprint that we are opening up for ourselves and that again pulls the growth in that direction give me more of the backstory here then we'll jump into where you see your space going when did you launch the marketplace the business yeah we don't call it a marketplace because no really we're not providing any jobs for gigs and for the freelancers but we launched about six years ago and initially we launched for customers of whom we call location independence essentially people who are either nomadic or maybe expats or maybe running like an international cross-border a freelancer business or with consulting business or maybe have developed some mobile apps as they're selling globally and those people are usually english-speaking they're early adopters as they nearly just a home for their business or for the global business and we started from uh letting somebody open a company in estonia estonia is a small country in europe and uh with about 1 million people and very very advanced digital government and favorable tax system it's not the low tax country but then it just has a very favorable taxation system you know corporate income tax and so on so and we started from providing um estonian legal entities and and the service around that [Music] when the company was already three years old and um there were four co-founders three of them are still with the company okay interesting so why did you join you could do anything you're a successful businessman you know what do they have to do to incentivize you to join a ceo you know i've been in the vc business for almost 10 years and i approached that and as a venture capitalist would do so i had a thesis and this was about the future of work and independent work and i was looking for a company in europe and that would be revolving around that thesis so and that company caught my eye i knew the guys and before so and they were looking for a ceo and so we went there together okay but alan come on be specific gonna push a little bit here do they have to give you 10 of the company in a healthy salary or how much equity do you want a successful guy going into operations you can drive growth how much they have to give you yeah i i can say that my equity interest is on par with the founders so okay uh yeah i think there is no discrepancy now obviously to sort of front just let's assume all four founders split it 25 at the beginning right did you guys raise extra capital but either before you came in or after you came in are you bootstrapped it was it has raised in uh serious uh sorry it raised the seed and precede before i joined about two million euros in total so when i joined we went straight to seriously fundraising so which was six plus three million so we did a little extension so it was nine million in total in seriously that's what we did in in 19 and 20. okay interesting so you split that between uh 19 and 20 um what was that sort of like a rolling series a or something was it the same valuation for both the six million and the three yeah it was pretty much on the same as the same conditions and uh extend it later on we added streaming on top of initial six okay and the two million before you joined you remember what year that was in it was in two and a half rounds and in 17 and 18 or 16 17 and 18 so at different valuations from different blue chip angel investors from europe and asia so all together across three years there are sort of 2.5 million usd raised before you joined now there's another 9 million to capitalize the business and drive growth that's right yes what did you need the capital for i mean why couldn't you keep sort of bootstrapping after you joined obviously it's very very classical uh evolution of of a sales company so most of the funds and funding went to the customer acquisition and building the product and so that's what we have been doing now so obviously you can always think about bootstrapping threadership but we have been we would have been growing uh much slower than post driving so where are you investing that money what's your team like today how many people so we have about 90 plus people but that also includes about 30 people involved in what we call service delivery people with accounting and customer support and background how many engineers about the same number 35 35 interesting well what is it like are you hiring them directly in the baltics i mean what is a senior engineer in the baltics cost yeah it's it's a very good question because the majority of our engineers say in estonia and again it's a very small country and has been very very successful in building its own tech industry now today it's not too different from salaries in i don't know in scandinavia or in london when it comes to tech industry estonia what would that be you're talking like 100 80 000 usd for a senior engineer in estonia it's not directly comparable because tax rates and the cost of living is different but i would say it's in four to five thousand euros per month which translates...