How Xolo CEO Mikko Teerenhovi grew 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 into like 70 to 80 000 dollars but of course taxation is different we only have 20 percent income tax and like on the numbers you mentioned in the us so you will pay close to half in taxes yep interesting okay so you talked about your earlier customers you really built this for baltics estonia et cetera to get people signed up those are your first customers how many customers are you serving now today today we have about five six thousand uh paying customers and since we have a freemium product so people can sign up and i said we have a hundred thousand people signed up because they can start using whenever they're ready and because there's a transactional model as well what what is the metric that those hundred thousand freezers hit that makes them convert into one of the six thousand paid they need to have a business like if they can look around and um yeah essentially they can look around but when they issue the first invoice on the platform which is a real invoice getting paid by the customer to become our paying customers interesting so can i take allen those six thousand customers times the 100 rpo you talked about earlier you guys are giving out 600 000 bucks a month right now on just sas revenue subscription revenue so we have about 400 thousand euros okay in mrr right now okay call that 470 usd now that includes your transactional business and your sas business and transactional is about 110 000 usd right now so pure sas is about 360. something like that yeah so about 25 percent of that comes from transactional and three-quarters super smart talk talking about growth if you're doing 470 000 bucks a usd today a month in revenue where were you exactly a year ago about 50 less okay that's pretty healthy growth where's most the growth come from expanding current customers or adding new ones adding new ones so most of our growth comes from adding new ones so our rpo has been pretty stable and there is not too much upsell your whole customers who are really small businesses or maybe even like part-time freelancers you can't increase our po like endlessly with those guys which means that then almost all of our marketing effort is to find new customers across europe yep that makes sense now talk to me about about you know when most people are doing a series a i mean you know that streaming from vc world you're selling usually between 10 and 20 to the business were you guys sort of in that average range or did you do something unique it's it was pretty much in standard corridor okay got it so it's called maybe somewhere between like a 50 and 100 million dollar evaluation on the series a uh it was smaller than that oh it's more than 100 million okay so you sold no no it was less than that less than that oh okay now you know it's in our series because it was about what's two and a half years ago when we fixed the price yeah okay so that was that lower than a 50 million valuation yes enough i see okay so 9 million on a 50 pre i mean so what you guys sold like 20 of the business then something like that in the series a yeah we have about half of our cap table um in the hands of seeds pre-seed and seriously investors yep yep okay cool interesting and then did you um do you recommend setting up an esop pool for other founders and if so how much did you set up for employees on your series a round yeah we do have is up covering all of our employees and we are in a bit like in a non-standard situation because we have several high-level executives who joined later so that's why our esop is probably a bit bigger than usual so it's about 15 16 of the cap table right now okay okay that means then like i'm sort of guessing here but your original four co-founders may be each owned ten percent you own ten percent employee option pool is fifteen percent and investors own five zero percent something sort of like that yeah you're close yeah okay interesting um talk to me a little bit more about m a right i mean a lot of people are trying to service these sorts of freelancers a lot of people believe everyone's going to be a founder of freelancer in 10 years because amazon's paying less wages people are quitting their jobs launching side projects i imagine you've had some m a offers why haven't you sold i believe it's way too early and again it's the same sentiment is shared when by our vcs per se in invested just recently and we are right now in the middle of our usb preparations so which means that our key goal is to become significantly bigger before we consider any exit or rem day but this being said yes we have had some interests and companies approaching us but it has been too early yet yep yep now when you you're preparing for your series b what are you going to target what amount do you think you're going to try and raise it's about 15 18 million euros that we are targeting right now okay so it's maybe 17 million or something like that and do you think you can get up okay 20 million okay and do you think you can get up above sort of 100 million dollar evaluation which would be like a 20x multiple on your current revenue again i would leave that show up to the vcs and uh do you give us a valuation so uh that's in your blood though come on you're ten years at a reason you gotta have somebody exactly that's that's why i would love those guys to do them work as well but but yes and uh i believe you are you are speaking about the right ballpark but again uh i've seen sometimes it's dangerous to come up with some with numbers and sometimes you get too low or something hit too high so fair enough talk to me real quick before we wrap up about your churn obviously smbs usually see a higher turn but what's your turn today yeah again it is the maturity about joan is actually coming because as the customers say maybe go back to traditional employment or they wrap their businesses almost nobody leaves us because they don't like the service as a handful of the customers and they grow out from service so it's between 20 25 percent a year which is pretty much like normal churn in in like one-man businesses overall in the market sorry how much how much per month you said gross growth it's a 20 to 20 to 25 percent per year per year so it's about like maybe yeah one point seven two percent per month it's not that's not terrible now do you have expansion revenue occurring that fills up that 25 percent hole or no yeah obviously yeah so we are we are growing on top of that so it's um so your net dollar your net dollar returns above 100 then a bit less bit okay but close yeah yeah okay okay very cool all right on that note uh alan's wrap up here with the famous five number one favorite book oh it's a good question the probably innovative dilemma which was like really cool management book like 20 years ago yeah it was pretty cool i find it very very useful all right number two is there a ceo you're following or studying elon musk number three what's your favorite online tool for building zolo oh it's most likely communication tools like slack and uh i would say 70 of my time is spent on slack most likely okay number four how many hours of sleep to get every night much less than i would like to six to seven okay and situation married single kids and i'm single with no four kids like the youngest actually left the room right now and she's eight wow busy guy how old are you i am 55. 55. last question something you wish you knew when you were 20. uh can you request that question please yes something that you wish you knew back when you were 20 years old my 20 years old i was still in soviet union and i wish i knew everything so it was totally different environment i didn't know almost anything which when it comes to like how capitalism works and how companies are operating and so on i wish i i could learn all of that back then yeah there you have it from alan was a vc now an operator starting in 2018 building zolo dot io application a sas tool that helps freelancers grow their business they did 235 000 a month about a year ago now up to 470 000 a month so growing fast over a 5.5 million dollar run rate 25 of the revenue comes from a percent of gmv model we love this sas plus model they raised a 9 million series a previously 50 of the business about is owned by investors the rest of the team they're looking at raising you know a 15 to 20 million dollar series b right now we'll see what happens alan thanks for taking us to the top thanks 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 1 pm 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 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