How Zenbusiness CEO Denis Barrier grew Zenbusiness to $150M revenue and 800K customers in 2024.

quick context this was recorded March 28th and 29th so a couple weeks ago at my live event SAS open.com we had a thousand software CEOs there if you missed it we hope to see at the next one September 5th and 6th in New York City SAS open.com but for now let's jump into the recording I lay in bed and pray for customers to come to the website have you more than doubled since 2021 oh my God yes okay great so in 2021 you did 41 million so today he's doing more than 8 [Music] hey folks if we haven't met yet my name is Nathan ladka I launched and sold my first software company back in 2015 and went on to write a book about it which you guys made a Wall Street Journal bestseller purchasing over 30,000 copies thank you so much for that after the book I launched this show and went went on to create founder path.com I raised a large fund to do non-dilutive deals with B2B software founder so far we've invested in over 400 software Founders totaling $150 million here in 2024 we're doing three to four New Deals per week so if you're looking for Capital and don't want to give up Equity go sign up at founder path.com for free to get your offer all right let's jump into the interview Ross you've got such a great story though because obviously you were in the driver's seat at home away but you weren't necessarily the founder front line what was that experience like and specifically what was it like when you signed or they the founders told you we're selling for 3.5 billion to Expedia well first I need to correct you 3.9 billion there we go we like a 400 million 400 million extra we don't want to lose that um well I mean it was it was great I mean we went public we raised all this this money uh and then we went public and then uh we sold to Expedia and still to this day Expedia says you know was our best acquisition and we we let him a great product that's great well we're going to we're going to close the interview with more on the Expedia deal but first we want to learn a ton about Zen business over the next 20 minutes we're going to focus on customers and how Ross thinks about serving the customer not being stuck in a SAS business model which I think you do extremely well we're going to talk about deals that he's been through both you know he bought a bank why did he buy a bank and then we'll also talk about Capital to an extent how he's capitalized the company how he's using it to fuel growth so on that note what does zen business do while people get a shot at your homepage here yeah I mean I think the the fundamental issue for entrepreneurs nowadays and we really really focus on firsttime entrepreneurs it's scary going out there and uh you know doing it on your your own so what we do is we provide everything to launch run and grow a small business we primarily focus on service-based businesses primarily because those are the businesses that get that get created so think of we start with the formation whether it's a es Corp LLC then we go into all the compliance that you have to do then taxes accounting website banking uh marketing just everything a small business needs to uh get up and running all in one place that's why the previous you know we are a platform we've always been a platform we're a SAS platform and um you know everything that the previous speaker was talking about is very very true we surveyed our customers Ross before you talk survey you you did a very smart survey process I want to you have receipts to back this up this is what the website looked like in 2018 I always want to bring right CU you don't want to learn from a Founder doing 100 million of what they're doing now you want to learn what they did to get there so that you can match it to where you are right now so this is what you launch this this is how you described it pay zero to file plus State fees was this like a plg motion or what the fun it look like when you started yeah it very much was a plg motion and I tell everybody I lay in bed and pray for customers to come to the website you know and and they they did yeah I mean we we started out at free uh then we went to paid and now the market is uh you know we've been so successful now the market has went back to zero which is where we've went uh uh and we're happy you launched though a combination and this is what's fascinating these were the six products that Ross launched in 2018 and if you guys look at these only two of those six have a dash month after it right only two of them two of them are fixed fees right so you could say services and then one is plg free how I mean I don't know if you were you thinking sort about all the business models or this is what your customers asked for uh no we were we were initially just trying to disrupt the incumbents and so a free offering is always the best way to do that um and um you know we're back to that right now it's very competitive in the space so your this is news because you moved from 2018 to 2020 this is what your pricing looked like so why did you move from we just saw to this uh because we were leaving a bunch of money on the table how did you know that you just um that's a good question uh because you know the the problem with uh a zero cost off well let me put it this way the market wasn't at a zero cost offering so I mean I think you have to very plugged into the to the market now the market is at a zeroc cost offering and and everybody's there at that time we were leading it and it got us into the market it it got us our rounds of funding it got us our customers and you know early on we were just really trying to get that motion and uh to discover so the long answer is we discovered our customers willing to pay a lot more for uh the formation piece and then the the real uh uh trick here or the real learning and this this is nothing new in hindsight is that customers want a simple solution presented to them they want everything in one place you know we are the system of record for our our customers Ross back that up though cuz this is your current pricing page and it looks like the the opposite of simple yeah well um yeah it is but this is where the market is sorry this is where the this is where the market is now it that that's not really true it is a simple pricing you can either get starter Pro or premium that's it's simple it's right there right that's right it's simple there but you know I'll challenge you with any uh consumer-based uh product this is pretty simple and and again it's not to your previous speaker I just love him maybe he'll come on as a consultant for us expensive SS expensive um is you know we're the platform play we've always been the SAS platform Play We in some sense we've created this complexity at at initially it wasn't complicated now it's complicated because all of the other folks in the space you know they have to check the box so we've got what Zen business does we've got what they well you said you were leaving money on the table in 2020 you move from this pricing to this pricing can I ask have you more than doubled Revenue since 2021 when you made these pricing changes I don't know you know I'm very uh cautious because it's so competitive about what do you think our revenue is well I don't want to guess that but I'm trying to let you get out here with just a percentage have you more than doubled since 2021 oh my God yes okay great so in 2021 you did 41 million so today he's doing more than 8 he tricked me tricked me so today he's doing more than 82 million bucks of Revenue which may be north of that reading body language and these very expensive shoes no comment he can't he can't I had to push him so hard for this we were having a great time you were in your studio I'm like I it took me till a minute 11:47 on the podcast to finally I said I used actually we're going to learn from Andrew here in a second Warner uh he's going to interview the next guest but Andrew one of his tactics if you're launching a podcast and you want to like get data and do it in a polite way is it's called a l basically so I said you can see the text I said Ross I think you're doing out a 40 million run rate today and he jumps in and says we're well you remember he said we're well north of that you cut me off yeah yeah so they're doing well he can't comment too much on that I want to go though into you weren't just sleeping on your bed and praying uh you were testing a lot of grow early on I was cuz we didn't know what we were doing but we figured it out fair enough how did you figure this out all a lot almost the majority of your SEO traffic is coming from the com programmatic SEO the state name plus LLC yeah I'll tell you what this this is a this is really uh DNA for us uh as the founding CTO at homeway homeway was even made it into the Google book as the vertical search for vacation rentals so we were a top 10 rated organic search on the face of the planet there's a lot of homeway folks there's a lot of Legal Zoom folks there's a lot of Expedia folks now at uh Zen business so that DNA we took over and we've done 15 Acquisitions 10 of those Acquisitions were organic search position so this is this is inbred let me just say that in a way so just to be clear you looked at people that rank high for Search keywords and that drove your m& strategy you go buy that business just because they rank TI for a keyword that's right that's right and then we integrated that so I I guess the the the point is is that in our uh segment we do a lot on paid search we do a lot with Affiliates we do a lot with every single Channel and we do a tremendous amount with brand also but organic search has got to be key to make sure that that CAC is something that your business can uh sustain especially when you're you know consumer focused we've got to get out in front of our customers and once we do once we get them converted they love us I hope you go into that how much our customers love us what are you willing to pay to get a new customer I mean under 1,000 bucks 10,000 bucks is there a range oh well well under that you want to stay under 1,000 bucks to get a new customer customer oh way under that okay got it way under that so high volume low arpo approach to you're not selling Enterprise plans for a million dollars no absolutely yeah that in general yes let's keep going down the funnel we'll end with the customer story which you just alluded to they click these keywords from Google search they land on this page how did you get Mark cubin to agree to this and how is this converting for you well I got Mark Cuban to uh agree to this because you know he saw a great product I went and pitched him you know I went through the process and through my network I think it was a long shot but you know for all of the folks out of here um I mean starting a business and and and again I want to get back to this is that when we help our customers we feel like our customers I mean our employees have side hustles we encourage it we give them uh free subscriptions and it really uh drives the quality of the prod talk this is a good slide for you to talk about your product strategy and then we'll go into the banking AC so how are you bucketing your product strategy today uh well I mean I think it really is this uh launch uh run and grow U so everything that you need to to launch and this is becoming even more important you know when you do a formation people come to me and say hey should I use a lawyer to do a formation I said absolutely not not only will they do it wrong because they don't do tens and hundreds of thousands of these like we do we make damn sure we do it right have ai so we do a great job on that then they won't keep you in compliance you know depending on what state you go to in New York you have to put an advertisement in two newspapers did you guys know that we facilitate that file in LC in New York LLC in New York and uh and then there's all kinds of different states you know 50 jurisdictions and then the District of Columbia so there's just a bunch to for a compliance point of view and it's it's important that you're you're up to date and now they've got the new federal law the corporate transparency act that came out we handle all of that for our customers too so we make darn sure that that they're handled so that's that whole compliance piece and then uh you know just running your business it's uh you know the taxes the accounting we do the invoices and and and and payments and uh which of these business models right now generates the most revenue for you the left side taxes accounting or the banking and finances uh I mean or you don't think about it we don't think about it that way I mean it's it it it's are you making money on a credit card are you taking 1.8% gross interchange we're making money on everything we otherwise we don't Round of Applause for making money on everything otherwise we don't otherwise we don't do it I mean you know I'm on a uh I mean banking for us is really about it's one of the it's the number one uh next to taxes is the number one thing that that small businesses are worried about like oh my God I just did a formation you know what kind of uh filing do I you know what kind of formation should I do and what are the tax implications so we help them with that the next thing they need is a bank account you got to separate your finances and I'll tell you this is the greatest story which lines up with your previous speaker so uh I'm training with my trainer I'm in in his gym and I said Hey listen Bobby if I get myself hurt here I'm going to sue the hell out of you you better get an LLC to protect yourself he said and I know who way you should do that so he goes and does this whole process and then then he comes to me he says Hey I want to use my local bank great we're we're fine we we we hook up to any Bank you need to and then the next question which I knew he was going to ask is like okay how do I do that well you know you need to print out your formation documents you're going to have to make an appointment at the bank you're have to go down there and then wait a couple days for it them to run the process and then it pauses for well what do I have to do to use your bank oh you have to answer one question and push a button I think what what's the question uh uh you know what kind of business do you do you run and do they have to deposit a certain amount on day one or well no I mean after that's just to get the process going I see they just have to push a button answer one question depends on uh what kind of business it is what the question is but they hit uh push a button and that's it and then the process starts I'm going to dig here for a second there a lot of SAS Founders thinking about adding a fintech play so a couple quick questions here do you do kyc and AML internally well so the answer is yes uh and um with banking as a service now and there's a lot going going on here is you know we sit behind a charter and then we sit you got VI a Jo joust well now joust was that was an early acquisition and joust got us into uh got us into fintech now we've evolved from now into banking as a service so we use a middleware piece of software oh my gosh treasury Prime uh unit unit and um and then we've uh who' you get the charter from though if it wasn't from J that's the hard thing no no we don't have a charter we sit behind a charter so unit sits in front of a charter and then there's many banks as a service so joust was a fintech that was sitting on somebody they didn't own a charter I thought that's why you did acquisition no no they didn't own Char okay so you're sitting on unit unit plus you do the kyc unit's General model is there uh do you get does unit pay you Kickbacks on deposits you know midpoint minus 75 or something so yeah I mean we we uh um yes we make money at every I love every every part of it okay and it's great and I mean this is a to your previous speaker is what we do as a SAS platform we've already acquired the customer so you know for a bank I know right now I can give you a bank pays because I'm on a bank board they pay up to 500 bucks for a customer we've already acquired that customer we can either and we do a we do a deal with Bank of America we send customers over to Bank of America if they want Bank of America cuz many of our customers want to write checks we you know most fintechs don't allow you to to write uh a checks everything has to be how many credit cards do you have in circulation right now tens of thousands tens of thousands wow okay and and and do you require minimum spend on them or no uh no monthly no minimum spend no well no no do do you see patterns in how your customers are using the cards is it for Facebook ad spend or is it for something buying pens and Staples uh I mean just yes we see all kinds of uh Trends we see who's doing well one of the things it's uh fun cuz we haven't done a deal with Shopify on the e-commerce side yet but we do see funds coming in from e-commerce a lot of our customers have Shopify as a website and we see the them pulling in the funds on an annual on a weekly month you said Shopify yet are you in acquisition talks with Shopify no no no what we're going to acquire Shopify no you're quick that was good that was a good that was a good little turn there you know I do like is it a 10x or 40x multiple for what Shopify well I mean they're trading at 9x right now if you want to know so uh I mean he knows okay so they're going are they buying you for right under that so they get able little to Arbitrage on the yeah I mean here's the thing they are buying you pardon is Shopify acquiring you right now no okay but I will say I tried I I will say that you know what I what I pitch to The the VCS and we still really is a tenant of our business what Shopify does for e-commerce Zen business does for the service sector so you know Shopify does an amazing job I I watched all of their uh videos at their investor day and if you you could have plugged me in for their CEO cuz we say the same thing platform product ease of use that's what we're focused on I want to go back now look at that there you go I want to go back to here yeah now I don't know how to quite ask this question so I'm just going to ask it directly did you is it inappropriate for me to ask did you make more than personally as CTO 10 million bucks on this deal that you could use to build Zen business afterwards oh sure okay so that's fair to say so that's great probably much more here's my question did you sell too early Airbnb is trading right now hundred billion do valuation you guys were second in line you sold for 3.9 billion yeah I mean I will I will tell you that um uh we retired okay I mean you know at some and even more than that and you how many years were you building uh I mean I think that was at 11 years uh that's a long time and I was the youngest executive there and you know at some point you know after 11 years it's like guys you know I think it's time for us to move on and I mean and and looking at Shopify I mean they threw up their whole executive staff and brought in new uh talent and um you know I keep threatening my staff I said you know let's get this thing done we've got you've got a few more years before we uh awesome out well you're growing Revenue it's a great success story I want to talk about how you capitalize the business you obviously were personally wealthy when you started which is great that gets you so far but you decided to hit the you said I'm going all in on this thing talk take us through the day you signed the $55 million series B um uh you know I'll just tell you that the whole thing because it's it's it's a blur you're as a uh firsttime CEO this was kind of my biggest worry uh you know I knew and I tell my CTO Alex who I've worked with for decades now uh I said Alex man you have the toughest job here so I did not want to be a CTO after home away it was brutal so I didn't have anywhere else to do I was worried about raising money you know standing up here why you were personally wealthy you could have bootstrapped uh well I mean um you know we just we raised the last round at 1.7 billion and raised you know 205 million bucks is is that valuation underwater today are the options underwater we're getting close to that valuation so we as we as we like to say and the investors like to say we're growing into that valuation like the rest of the market so we're growing into that valuation yep but if you ask me what my company's worth it's worth that much that's what you would point to this was this was 2021 um and we actually raised 205 we took five uh I don't know who secondary no no from someone I can't remember at the time just some random extra five well I mean I asked you you said no you weren't interested but now we took in 205 all right so I mean this is an important there are some people in here that have raised at these valuations you didn't have to manage anything through the down term between 2021 and like even today still where there's compress everyone's options are underwater did you have to do anything with a team to help them understand well I think we repriced uh the the uh options like a lot of companies did to to make it happy for the customers but you know we did a secondary too for a lot of the people it was in the 56 or the 200 uh actually both we did a little bit at at at at both how much did you do with the 200 in secondary for the team uh that's confidential but I will tell you that what we we are we we also pride ourselves on a great being a great company it wasn't just for the the sea level execs it was for everybody that had vested that had been here over a year and had vested and then we did uh a 10 % of that so it wasn't so the memo to the team said if you're past your one-year Cliff we're closing a series seat today if you'd like to sell up the x% of your vested shares you can on that series C we did that series C what what percent of vested shares what was the max any one employee at Zen business could sell up to it was 10% oh 10% of their vested vested how many of them took it what percent of employees you know it was most everybody took it but it was surprising some people didn't which was which was does it piss you off when they take it you go well you don't believe in the long-term vision when they take it yeah no man you should always take money off the table what are you talking about good I was trying to give you a softball that's good there you go I took money we took money off the table at homeway also too everybody did I mean it's you know it yeah I mean how would you this is one of the biggest things when I meet with Founders that are between 1 and 10 million of Revenue uh they always think they can only like either bootstrap and take profits or if they go do an equity round they don't necessarily know how to ask for the secondary how would you recommend for someone in the sitting room right now with 7 million bucks of Revenue let's say they want to go raise 20 million bucks but they really want to take 5 million off the table to go buy a house or go on vacation how should they ask for that when they put their data room together yeah um I mean maybe I'm a little oldfashioned on this one I think that you know the numbers that we displayed and the the competition we had for the round uh you know so it was a reasonable ask so I think that's my the the the way I view things I don't think that um oh God I'm going to sound old yeah I mean I think uh we we earned that secondary how's that yeah you know we we earned that secondary and and I think that the investors uh you know the way I I I said it is you know we've got a lot of young folks here that want to go buy houses and want to go do things and I need them for the long haul this is not you know a three-year deal let's give them some money and take some money off the table take some risk off the table so they can focus on the business and they're not worried about um you know whether they can afford a house in Austin now or where we're a virtual company so it's all all across the world we've got about two minutes left you said you've done a bunch of Acquisitions walk us through right now when you go in with your head of BD and Etc like today into the board you go hey what should we go after next how do you think about go forward m&a strategy yeah I think it it's just in general and and again to a platform roll up we're constantly talking to our customers what do they want we know exactly what they want so will we'll initially partner with uh a good partner in and and figure out if this is a there's money in this market and if we should dive in and so then uh the the point of diving in like we did with banking uh we did Bank of America first saw the great take rates saw what was going on there and so we did our own so it's always the case of we try then if it's something we want to acquire or build yeah um that makes a ton of sense do you have any Targets that you want to share right now that are hot or close or ready to be announced uh we we are constantly acquiring and constantly talking to uh companies because again what we have is this flow of incoming customers so how many customers today over half a m over 500,000 that's wild 500,00 those are all actively paying uh well not all of them active we've had 500,000 customers but you know around 400,000 plus that's great and how do you get them from like the banking product like how do you cross sell if you have 16 products how do you get them from 1 to two to three I'll tell you what this is the magic of our business so we spend a tremendous amount of uh time and money investing on getting the right product to the right customer at the right time so we do that through every possible Channel including outbound sales so when they come through we want them to have a great experience they do they have a great experience we have the highest NPS in the in the segment and in many consumer segments we have the highest so they're ready to purchase from them we just have to make sure that we're giving them the right product that retains because we can we can sell all of our products to our customers but if they don't uh engage or activate with it they're going to churn out of it so what's the point so is your net revenue retention today over 12 120% 100 it's confidential can you give me a Range it's really good it must be 50% yeah yeah yeah something like that you don't want to correct it you know it's definitely above 50% okay there we go but I mean look at if you look at what Shopify is now let me I don't know what I don't know it's over 100% but they went out you know a lot about Shopify hell yes I know a lot about all of them I just want to you guys to know when you read this 3 months from now you heard it here first Shopify acquires Zen business for 1.9 billion ion y would you sell for 1.9 no comment depend you know it depends on what week it is how I'm feeling that week some weeks you know is either Monday or Friday depends so guys a lot of a lot of cross selling happening here which is great is there anything Ross we haven't caught up since 2021 is there anything that's like key to your story that I missed that you want to make sure these Founders learn oh you know I was thinking on the drive in here is that you know uh we kind of take for granted at least I do coming from the you know where I came from SAS business it's kind of like we take it for granted and the other thing is what we don't take for granted at Zen business is our customers you know once you sell them we're very good at converting customers uh we got Mark Cuban we got great branding we focus uh a lot of time and effort on on this uh and then but once you get the customer that's when the business starts and I worry that a lot of including myself when I experience a a SAS solution you know we spend a tremendous amount of time on our customers we don't oh they converted okay let's get them to renew it's you know once you sell them that's when it starts and I and I worry uh my team they hear it from me all the time but you know you have to take care of your customers it's not just getting them getting their credit card at ially it's okay so now Are you delivering value are you talking to them are they using the product are they referring us you know are we continuing to have this robust exchange of value guys over the last 24 minutes you learned from someone who is the CTO for 11 years at home away made well over $10 million on the exit and said you know what I want to get into the SMB space help them launch something quickly launched Zen business with six Key Products back in 2018 pivoted his pricing to simpler doubled Revenue since 2021 from 40 to over 80 million bucks today last round 1.7 billion as they work to gr to that valuation really helping anything they can do to help their over 500,000 active small businesses grow faster Ross thank you so much appreciate it give it up for Ross thanks so much [Music]

Introduction hey folks my guest today is ross burdorf he's the founder and ceo of zen business he's got over 30 years of experience as an entrepreneur technology leader sea level executive angel investor and board member as ceo of the company he's helping historically underserved small business owners start run and grow their companies through a single comprehensive guided platform that provides all the tools they need to get their business off the ground and running ros you're ready to take us to the top partner are you ready to take us to the top man i am absolutely i'm ready to go i'm starting you know i'm a little bit bummed because your pricing page was always the page i sent founders to as how to model instant cac payback because you'd have all these one-time templates you'd sell for like 49 bucks or 79 bucks or 60 bucks and i just preparing for this they're all gone now at least i can't see them have you changed the pricing strategy there yeah you know we we continue to evolve the pricing strategy to you know match the demands of our customers you know what do they need when do they need it i mean you know the whole thesis here nathan is to you know provide these solopreneurs these first-time entrepreneurs everything they need in a single package and that that changes as we learn more and more and we we build new uh products and services at the end of the day we're here for our customers and uh our customers are what what pays makes pays our paychecks and russ so how do you make decisions around what products you use in certain scenarios or different onboarding i mean you've sort of bucketed into three start you know run growth sort of buckets but you could do anything when sporting small businesses how are you saying like when are you saying what was the last product you said no to building well it's uh we say no to a lot of products we you know i'm a software engineer i have a cs degree from the university of texas and and a lot of us do have cs degrees it's very technical company product led company we've spent our career building software that no one buys you know in the enterprise home away was pretty successful yeah homeaway was very very successful and so and uh but even there we spent plenty of uh wasted effort so we are determined at zen business to we test the heck out of everything that we uh build so we talk to our customers constantly survey them survey them on prices survey them on features functionality you know ask them what their journey is we do a lot of you know what are their use cases and journey we uh you know challenge ourselves and even when we put into our business models the take rates of them we have a pretty good sense of of those take rates and we challenge ourselves to build exactly what our customers want and charge them exactly what they want to pay because you know that's the that's the mix there is you know do you are you building something that that the customers want and and is that value there for them to pay the amount that you're charging so that's i mean i it seems straightforward it's hard you know because sometimes customers tell you one thing in a survey but then when they put in their credit card that's a different it's a different thing so we have a whole bunch of tests running also to uh confirm that they'll actually uh pay with it with their credit card and then renew so i would just say talk to your customers uh and and test test tests before you build ross you take so much of this for granted because you're in it but my listeners are going wait what tools does he use for surveys how does he model the take rate how many tests is this guy running right now through all these onboarding funnels let's go deep last product you launched what is that product and what take rate did you model uh we just launched our zen uh our accounting package uh which is you know includes our accounting and invoicing you know part of our zen business money and i will tell you we tested that from multiple angles uh over probably starting six months ago and uh we just launched the package that we really think is going to be the is what our customers have said they want and uh we've done various testing on the website so that's the last one we we've launched and it's just to start i mean you know you can't our customers aren't static and we reserve the right to get smarter and um you know i always like at the company you know the last company meeting i put up the the the roosevelt quote of you know the the man in the arena we we change it a little bit we we say the team in the arena and we say the men and women you know in the in the arena so we're in the arena every day and it's not going to be perfect but we really want to focus on our customers that that's that's the big focus so six months ago what do you do you sent an email to the top ten percent milked up most active customers defined by who logged in most recently and say hey would you pay 2.9 percent if you put your visa transactions through our news and money oh i'll tell you well you make it sound simple that it's not that simple we either we use surveymonkey as a as a tool um to do our surveys at that's one level of surveys but then we also hire um you know uh brand marketing research and product market research companies that do this every day and i'd recommend you know a company that's got any amount of funding to use professionals and professionals go out they get the they build the surveys and the questionnaires based on what you want to know based on a lot of the early uh you know survey monkey did you use um we used answer lab out of the valley and then uh we use um uh oh man you're putting me on the spot we use some we use a lot of them so if we use more than one um uh i'll come to the end i'm sure i'll remember before we get done with this but we use a lot and and it doesn't you know and actually i don't care who they use just that they use one you know i think the as we get more sophisticated maybe ours get more expensive but it doesn't have to be expensive and i'll i'll tell you what you know um i literally i was the first person in our company that did uh started surveys and i used surveymonkey and i and i asked uh quite literally one of my first questions was you know rank the uh you know check the box on these list of of products that you would like to see on the platform literally and and and still to this day that that list has held up as far as here the list of things after formation i want to do banking taxes you know accounting or at the top website all these things that we sell today you know we asked early on and those answers still now we're asking way more sophisticated drilling in on each question but if your listeners aren't doing this they're they're missing a simple trick here very interesting and there's a way to do this for free early on free surveymonkey account right get your first million in revenue is a great way to do it with your wait list yeah you could you could definitely use a free survey monkey we we paid for one yep okay very well yeah you just raised a 200 million dollar round at a 1.7 billion early on i hope i hope you're paying survey monkey 20 bucks a month yeah yeah yeah it's great great product they just got bought oh did they who bought them uh i think uh oh yeah look at that i missed that news uh yep they just bought them in october 20th very interesting okay let's go back to you though because last time you came on the show was back um it was uh Currently serving 220,000 customers september last year and what you told me then is you guys had broken 70 000 customers and the press release for the recent raise you said 200 000 so that's 200 000 smb like paying customers right yeah oh we're over 200 000 now what do you now 220 or something like that so your rate then of change is you're adding about 20 000 new customers for 30 days uh maybe that that's probably too much but over 10 000 between 10 and 20. interesting now obviously you know we saw hubspot change their effort to average rpoo drastically as they ipo and then even post ipo how are you thinking about that are you still out about a 20 rpoo that's confidential okay oh now you're confident yeah that's confidential we we can't i can't share that information anymore but we're killing it i think you i mean from what i can tell i mean if you're i'm curious actually let me ask this question a different way so you don't have to reveal things that are confidential um when you launch your money product and you and you have it live in the marketplace for a month and you look at the take rate over the 30 days what is the successful take rate um well let me answer that question this way that you know you don't have to and i think for your listeners too it's it you don't have to have a product in in uh in our platform that you know has a 30 take rate for example what you what you want is you want uh packages and plans and a product led growth strategy where you give away features and functionality like for example we were talking about surveymonkey and then and then if you need some functionality uh as your business grows then you know we're we're there to uh you know sell that product or service and the reason we're there is because you know we have a they have a fantastic experience with the formation business as they come in or with the compliance product our website product uh that we just relaunched uh with a a with a fantastic website builder product now competes with everything in the market um so it it's not about you know having this i early on i i thought naively is like oh we have to have this killer product that you know that you know 50 of our customers we do have that product but it's built into formation the kind of the core of what we do but we're a software platform now we've evolved into a software platform so it's many different businesses so if we get a 5 10 15 take rate that's what really adds up and having a suite of services uh so that that that you know depending on your company you know you you uh you pick and choose what you want now we are a fintech and so with launching this fintech will also be you know part of the transaction flow and so part of the transaction flow is uh very exciting to us and and to everybody you know that's in the fintech business that you can make a lot of money there i mean i'm guessing here ross uh but uh Monthly recurring revenue when you came on last time seventy thousand customers that twenty dollar puts out a 16.8 million dollar run right that would have been about a year and a half ago if you're still at a 20 rpoo which you're not i'm guessing i'm speculating or higher than that but let's say you conservatively are 20 at times 220 000 customers you're out north of a 40 million run rate today you raise it up over 40 trucks hey man we're we're we're north of that will you break 50 million this year run rate i'm not saying come on man i gotta i i gotta i gotta i gotta get to ross i'm not disagreeing with that i'm not disagreeing with that well i mean the reason i ask is because you didn't use the word fintech one time the last interview we did together makes complete sense i mean you look at the fintech market now it's very frothy so i mean was that a key part of your deck is it embedded finance effectively well you know it absolutely is embedded finance i mean embedded finance has always been part of what we were we're doing we acquired joust that was a challenger bank last july and we've relaunched that modified it uh and you know we have now accounting taxes embedded along with a uh invoicing product and merchant deposits uh well i'll tell you what our customers don't want us to take deposits they they don't you know the we're embedded fintech so we have a uh you know fbo account or think of it as like a benmo account we have a holding account that's what our customers want they don't they want chase they want bank of america we've got to deal with bank of america we think they're they're a fantastic partner that's what customers want they want this a big commercial brand and that that's okay so we just connect we connect to them via plaid and we can move money back and forth mm-hmm there's usually 300 bips up for grabs every time a transaction happens right on your first sort of initial cut here i mean can you get 10 bips 20 bips i mean most it goes to visa right yeah i mean i think part of the the you know the fintech story is being part of that transaction and enabling that for our customer base again the story here is that you come to us you know this is an underserved market they don't know what they don't know we curate that solution for them and we give them the best price best product best service of anyone in the industry and so a merchant account is there when they need it when they're invoicing their first customer or their 100th customer we're there to be part of that and yeah i mean we get a piece of the the transaction but we are you know below market on what we take what is market i mean it depends i mean you can look at what i don't know what square is taking and stripe and they're not it's not it's not cheap so like i mean but so are you like under three percent if i do a thousand dollar invoice through zen business money are you gonna take under 30 bucks oh yes okay so under three percent interest because all i can when i go to your zen money page and i see what are the of your section what are the fees for using zen business money it's not clear to me where your take is here other than that 30 cent deposit fee yeah and you have to get you have to get in and get a merchant account i see that's where i would start and the merchant account comes when you do your first invoice so we give away invoicing for free once you do a merchant account then we i see i see interesting so do you have some if you don't you won't but if you don't add any more customers just the 220 000 you have today if they all used you for all of their sort of invoicing processing what is the gmv opportunity for you i mean is it are we talking in the billions i imagine i don't know i mean i think gosh you know you need to be part of the company i'm telling you you know if this you run these numbers this thing doesn't work out you know you can just walk down the street and work for us i mean the the way we like to think of it is and we do you know we do uh have some humility about these questions we're here to serve our customer we're here to facilitate our customer we're here to provision them so that they can take money we're more focused on them making money in the first 30 60 90 days that they they come to us to launch their business and uh facilitate them you know bringing money in and so that means a merchant account that means a website that has you know a pay here button that means their expense tracking so that they could do their taxes and um and their their accounting you know so we're here to help them enable them in a website so that they can be you know out in the market and educational we launched zen business academy educational pieces and you know we're taking this 200 million bucks and we had a lot of money in the bank too to launch you know uh and you know our next generation platform which is all on a mobile app and literally takes you step by step through each step of the process that's what we're about you know and i think part of um you know why fintechs are and why banks are are uh you know exist is you know we have to pay for that infrastructure uh that facilitates the transaction and and it's fair that we should get a piece of that action who led the uh the series c uh uh oak hc ft so they're leading fintech adventure you know you know they're top guys now did legalzoom get wind of this and try and make an offer ahead of time to buy you guys no none and i wouldn't tell you anyhow so you know i wouldn't tell you anyhow no the reason i ask that is because you know you actually strike me as a very sort of humble founder who really wants to serve smbs and i've just seen many times you raise this much vc but see you've gone through it you raised as much vc it actually shortens your timeline you have to do one thing much faster either success big or fail faster so you sort of short don't you shorten your timeline a little bit by raising so aggressively oh absolutely i mean but that that's uh i mean we you know you know you you uh you know you only live once and so i'm not in this for a lifestyle business and you know there's uh for all those entrepreneurs there's nothing wrong with money and apparently there's no lack of money if you look at the billionaires that live in this town now uh and you know all of all of my full-time employees have stock and so do i i'm the biggest uh shareholder in the company so there's nothing wrong with us accelerating that i'm also of the thesis you know the the we're all very very smart at this company but there's a lot of smart entrepreneurs out there there's a lot of competition so the the company that has the most capital it's a huge advantage and so talent talent yeah well yeah absolutely and we you know we hired 43 people last month can you believe this wow so what you're at 300 full-time now uh 380 oh 380 full-time wow okay interesting you know we're i mean we're rocking and rolling building out the platform and so that money absolutely accelerates uh stuff but how many engineers ross um uh 150. wow okay hey i want to be respectful of your time we're out of it quick rapid fire questions here revenue growth last 12 months 200 300 uh we're going to do uh two close to 3x revenue growth this year but what about the last 12 months so like 300 percent-ish uh yes yeah three x okay cool and then um your recent valuation was 1.7 this is a boring question because it's just financial about the 55 series b where was that at uh it was 50 yeah we announced 55 and ended up being 56 and uh 256. 256 post post 200 free geez it's just incredibly the amount of wealth creation happening i mean 250 to 1.7 i mean it's incredible kudos you know it's great it's great for you it's Raised great for employees everyone owns equity it's wonderful and series a 15 on what uh i can't remember okay under 100 under 100 million oh yeah yeah that that oh wait no yeah i can't remember i'd have to go back and look you're good that's all the news man i got to keep you know my name can only hold so much i'm focused on the future here no i love it i mean the reason i do that and trying to get the historical stuff is because like again the debatable sort of reverse engineer ross is like understand and try and get in your brain back those days so thanks for sharing all that i appreciate it let's build a ross map yeah uh let's wrap up here with that we haven't seen anything yet i do i mean i you know um it was a competitive round but i think every i think the investors got a hell of a deal we are creating a new category here this is an unserved market we are the shopify for the service industry and the service industry is 80 you know plus percent of the global economy this is big this is huge and that's what folks invested in and that's what we're we're here to uh provide to these folks and and every day you turn around there's a new article about people resigning the great resignation everyone's leaving you know their corporate jobs to to turn their side up so i mean your stuff's got to be taken off too right more and more people are turned into entrepreneurship i think everyone's going to be a founder in 10 years good i mean that's my call for that i'm all for it me too when are you going to you see cash flows when are you going to launch a 3 4 500 million dollars for a balance sheet lending business to help these folks with cash flow uh sooner than you think in progress yeah absolutely all right fair enough that's a good one ross let's wrap up with the famous five number one favorite book oh my god you asked me this last time you said i remember what you said i can't remember what i said steve jobs you know right now i'm i think my favorite book is uh scale out of the santa fe institute oh interesting check that out number two is there a founder you're following or studying um you know i think um um god there's so many i mean i wanted austin huh someone in austin yeah well i mean it would be i think it'd be brian sharples you know he you know i'm not he's he's you know now he's taking boards but you know i call up brian every day and i just say listen all i'm focused on is having a company more valuable than homeaway and uh why the remorse why the remorse there huh why there's no remorse it's no remorse it's just you know it's just it's it's fun to be competitive isn't it i mean you you own true or false right now you own more equity in in this than you do the same stage at home away oh my god yes yeah interesting that's good i like competitiveness you're being consistent you're two for two the answers match so far number three favorite online tool for buildings and business oh you know what this this i'm not gonna answer this question and i'll tell you why because there are so many fantastic tools out there right now i mean this is this is you know if you get you know you got your degree in computer science or you had any interest in technology or design this is i feel like this is the you know the top of the mountain you can do anything now with sas solutions and they are so powerful we used to build all of this stuff in my past and now you can buy everything so we buy everything uh you know from security tools to you know i mean we're all on google cloud it's just fantastic but all the other tools you can you can use are fantastic i would have to say though i think i did say last time is you know slack we have we have no less than you know you know 200 million slack channels at our company [Laughter] you're you're different you said size last time well i love sizes too but but that's just one of many i mean it's so amazing i don't want to ask you how much you spend as a company on software annually it's got to be gosh five to seven million maybe four to four to six million yes something a lot anyway we're we're heavy spenders we're heavy believers in this i mean i am i am fanatical about you know we use salesforce we pay them probably the most but it's a fantastic tool and now that we're a fintech we have a joke it's like the security world is creating more and more software that we have to buy it's it's like this you know the the more and more that it becomes a problem there's more and more stuff you have to buy to you know keep yourself safe yep and same situation so married three kids you have a birthday you're what 58 now man i'm not 58 damn i'm still 57 i'm 57 i'm gonna be 58 in february well something is wrong because you told me last you told me in september last year that you were 57 maybe i'm gonna be no i am going to be 58 in february yeah but last september so 13 months ago you told me we were 57 there you go your 57th birthday coming on up 58 in february that's great all right last question what do you wish you knew when you were 20 ross pardon something you wishing you when you were 20. oh something i mean you you have this is unfair you get to spend all your day thinking of these damn questions um well 20 you're completely wild and you're you don't know you know uh you know i can i say you don't know uh that can be your official answer i'm gonna be my official answer i you know i think you know i need to remind myself it at 57 to not take everything so seriously um you know uh i guess the thing i wish i knew at 20 which is what i tell everybody now is there's never been anything i haven't gotten through in business so or in personal life i'm not not challenging that i don't want any more challenges in business or in personal life but uh or maybe i like challenges in business less and personal life uh because when you have kids you're consumed by fear uh but um you know i always we always seem to manage to get through things in business i i'm lucky i think in business we i think you also make your own luck i like to worry about a lot of things but i also say here's the same you know 99 of the stuff i worry about never happens so all this worrying must be working which is right which is complete it means i'm worried about i'm worrying about stuff i shouldn't be worrying about that's funny guys ross verdur zen business giving power to the previously underserved business owners mainly service providers now serving over 220 000 of them adding 10 to 15 000 every 30 days to the platform now uh offering a fintech play as well as then business growing over 3x year-over-year most recently 200 000. 200 million dollars raised at a 1.7 billion dollar valuation 380 folks here in austin working hard to under uh service those underserved business owners ross thanks for taking us to the top hey thanks man 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 support all right i'll be in the comments see ya

Introduction hello everyone my guest today is ross berdorff he's built a great company in zen business if you missed the episode back mid 2019 what you would have heard is they're helping the world create new businesses and when he says the world he communicated that had over 6 000 customers at that point i think they've grown a lot they've made a major acquisition we're gonna dive into it all today ross you ready to take us to the top hey you bet thanks so much excited to be here today you bet all right so if people did miss that first episode give us the quick cliff notes version why are people paying you money to use zen business well i mean you know you really want to think of us as shopify for the service industry so we are a full service product for the service industry and that's this long tail micro businesses so everything you need to get up and running from formation to website to accounting to crm to uh you know invoicing we've got the whole thing we get your your your service business to its first dollar and get you know tie the loop here for people because a lot of people and a lot of people that i talk to that are now angel investors or where high up at home away they say just amazing things about how you and the executive team work together to grow that company so did you did you in any way was the seat of zen business did it come from home away at all or no no i mean it didn't i mean these kinds of things you just fall into and you know really it came from there's just a need in the market and this is a growing trend you know there's a uh we just recently a statistic out there that over half of the millennials you know have a side gig going on and this is part of that you know that side gig going on and you know the pandemic has certainly accelerated the adoption of these more efficient tools to get a business up and running so you may have seen amman the ceo of godaddy just did a recent interview with cmbc and they're seeing explosive growth so are we we're seeing the same explosive growth as more and more people you know are doing their own thing online and it's the digitization of you know this solopreneur segment there you go side hustle software i like that ross all right so when you say explosive growth you know me i'm a numbers guy Currently serving 70000 customers let's try and quantify this you were serving i think about 6 000 customers back in february of 2019 how many are at today seven over seventy thousand customers you've over seven that's paying customers that's not like some fluffy duffy free users that never pay that 70 000 paid that's a fluffy duffy number holy crap so that's i mean that's weight that's more than 10x growth in the customer base over the last 20 months how much of that came over the past six months uh well i mean i don't think that's a good point i don't know how much is i mean we've been growing pretty rapidly last year the i mean i would say oh gosh like a third of it i mean we've seen some explosive growth i think just be as a result of the pandemic but but this trend was already existing i think you know a lot of companies grow during a down market uh because of the adoption of more efficient solutions and and we were in the right place at the right time and you know this is a trend that's just been accelerated you know you could say the same for zoom uh you know uh you could say the same thing for zoom uh you know with the pandemic and i think it's the same thing with the you know this smb platform called zen business and what are customers paying you on average per month to use the tech uh you know i'm not gonna i mean share those numbers well the yeah the reason i ask is um Monthly recurring revenue we're yeah good now we're in the we are you know in the tens of millions in revenue so revenue has grown explosively also yep yep yep have you i mean i guess from a trend perspective have you generally increased our poo overlay and gone upstream over the last okay yes got it so we continue to see ltv expansion and the platform continues to expand you know our website product is leading the way you wanted to talk about the joust acquisition i love that yeah so the joust acquisition which was someone we were going to partner with and really made more sense for us to you know purchase the company so we did that joust was squarely focused at this you know service industry which is where we're focused also with invoicing uh invoice factoring crm merchant accounts and so this was a perfect merge for us we've rebranded it as zen business money you want to think about um you want to think about joust as the fintech solution on our platform so everything fintech and uh we'll roll that out it's been a rebrand and we'll roll that out in q4 and q1 of next work next year feature by feature so it just makes a perfect perfect solution and you you know when you think about it is you know that that has to be fintech payments has to be a part of any platform that provides a solution in this area i mean a lot of people ross will see other tools in the space and go that's a perfect fit but i could never get that company because they've raised too much or they're way bigger than us or things of that nature i mean when you look up jost i mean i think they raised 11 million bucks now you're not a small company but you're not 100 million an ar either i mean how did you make that deal go down uh undisclosed undisclosed but we you know we did it off our balance sheet i guess i'm not necessarily asking for what you bought it for but but structurally how did you do it in other words they have 11 million raised right so those investors are going to be telling the joust ceo and founders go for a billion dollar exit i mean you do not pay a billion you know a billion dollars for this thing was this more like a sort of a stock deal friendly investor sort of thing better together or no yeah i mean i think it's you know everybody's happy on both sides of the deal i mean their investors are thrilled to death and we're thrilled to death to take on the team we took on 10 people in it with joust and you got to realize these guys have deep fintech experience i mean that they're in the middle of it uh and they understand all of the pieces and parts that go along with this so it was a great acquisition for us and there's no it's not like oh we need to ship the product in one direction or not we just need to rebrand the product and bring it to our customers and this is the beauty you know of our platform fintech products suffer from acquisition and then conversion right so they can acquire the customer but then they got to go through all of this kyc stuff with us at zen business we have all that kyc stuff because we do the formation we do the ein you know we we believe that we have the easiest online banking conversion you literally push a button and you know we have they have a online bank account because we have all that kyc information it gets proved on the other side this is a huge hassle for every anyone else in the in the fintech space unless you're you know with one of these big banks already if you're not familiar with fintech guys kyc is sort of a legal thing you have to be aware of in the fintech world called called know your customer ross is saying because then business they really know the customers really well which makes the financial side much easier that's right and this is so it you know it's just a no-brainer and you know so we bring the customers to the job solution now zen business money and they bring the solution to our customers so it's a perfect fit for me out there now to expand team we've expanded that team already how many people are on the total team i was in business today uh 140 people 140 and you're engineering by blood that was your role i think cto at home away how many engineers are on the team um you know that's it i think there's probably around 20 if you consider the outsourcing and and internal people we have we're very much into you know contractors and outsourcing so we have both on the customer service side and on the engineering side we have some big outsourced development team plus internal so we got a pretty good pretty good crew ross that's 20 engineers out of a team of 140 is less than i would have thought where are the other 120 people what do they do it's a big service it's a big service segment so we have big service segment uh and that's a a lot of that is outsourced and you know big part of what we do is like zappos you know tony shea was in his fund was in our early round a big part of what we do is when people come in through formation they can get a hold of us this is this is what everyone misses i believe in the the industry right now is more and more people want to be able to get a hold of someone you cannot i cannot tell you how thrilled our customers were with being able to email us call us chat with us and that takes a lot of service people you know we are a sas based margin business so we have i don't want you to get the impression that we don't have sas margins the the point is though that you know people want to get up get a hold of people and we still do formations which is is largely done you know by hand and you got to get back and forth and people need hand-holding it's a scary thing when you start up a business what so when you say sas margins i mean are you still sort of in the 80 85 90 range we are in that range yes that's great okay another thing i want to chat with you about is is pricing right so you're seeing a lot of trends and sort of sas business models today and one of them that's really taking off in my opinion are sort of a core sas play but then the ability to drive additional services based revenue but those services are high margin because they're tech powered you when you scroll down on your pricing page have all these great additions you can have a registered agent service at it for 99 bucks a year dba name registration for 95 bucks you offer all these sort of like templatized sort of upsells talk to me about the importance of that to your business model and delivering the value that you need to your customers well i mean i think on all of these i mean you hit on it these businesses are once you get the unit economics worked out which we have then it really all becomes you know how do you get ltv expansion so i mean this is the this is the name of the game in a platform and so we are a product led growth company so we we let the product and the customer take it forward so uh i mean i i don't know what else to say other than you know it's got to be all around ltv expansion we spend a tremendous amount of time and money in product market research and surveying our customer base which is a huge customer base now but we know exactly what our customers want we know exactly how they want it and what they want to pay for it and so you know with product led growth it's got to be you know try before you buy a hundred percent back money-back guarantee and you know what are those products and services that they want and you know our goal is to get all of our customers to their first dollar in revenue you you hear a lot of marketing out there from these companies they and we market the same way it's you know it's uh you know start run and grow your business the truth is it's start grow and run your business you really have to get these folks into making money before they're willing to buy other services and you want all those services embedded and you want it to be super convenient this customer base we're going after acts like consumers so they want it at a great price they want to try before they buy they want to be able to cancel whenever they want to cancel and and we just want to be there with that solution that gets it done that's convenient from a consumer point of view on average folks are using 10 plus different vertical applications that aren't integrated to get their businesses run and you know we work we integrate all those solutions not all of them yet but we're headed down that way to integrate all those solutions so that that you can have convenience so you can run your business and you don't have to worry about the you know all the back office or the marketing or the website etc and the formation and keeping your formation up and running and compliant so rash just to double down on this trend of plg right part led growth you have three sort of base sas plans a starter for 49 a year pro for 200 a year and premium for 300 per year you didn't have all this sort of upsell revenue um i won't dig deeper here because it gets complex fairly quickly but i am just curious to underscore this when you take all those those three key sas plans and you look at what you think your total revenue for 2020 is going to be what percent of total revenue do you think is from those three key sas plans versus all these other things well 98 of our customers are on a subscription one of those three though one of those three or one of the subscription the other subscription options at the bottom one of those well it's both i mean it it's a combination of both so people come in and buy those subscriptions and then they get thrown into a dashboard and the dashboard has all of the options that you would i see you have to have a base plan you have to have one of those three bases yeah you have well you can still come through i mean just like a survey monkey there's still a free option and and remember those plans we don't charge for the formation in those plants just so subscriptions that are part of the we still have a zero cost uh formation so we're still we are twenty percent the cost of legal zoom so we are we are the you know the the cost leader the the the value leader there so you get the opportunity to buy what you need once you get into your dashboard but you can pay you can do a free formation and you still get a dashboard and you still get presented with those options that are either in the plans or you can go ahead and buy a plan the majority of our customers buy plans so ross just to be clear if i just was looking for an ein number i was googling some stuff and came across your landing page for your 70 ein product a one time 70 fee i could pay you that without paying any of the other subscription sort of fees you have that's right oh interesting now obviously you then want to upsell me in a subscription fee but someone can use you on a one-off basis like that that's right interesting interesting interesting are there any other i'm not i you put a lot of thought into this are there any other learnings there in terms of how the product mix is working together that other entrepreneurs in the sas world should know about well i mean i think it's it you know it's no you don't have to uh think this stuff up on your own if you look at all the other sas solutions they're usually two or three different plans based on you know what customers want so customers want convenience they don't want to uh have to think very hard they want a curated solution for you so you know you know what what is the most value for them and this even goes all the way back to homeaway we've had those options we literally would tell you what was the best option for you we had a calculator it's the same thing here is you know bring value to your customers don't try to rip them off don't try to jam products down their throat don't try this you know upsell upsell upsell you know we really try to get you in have a peak experience when you do your formation and start up and if you look at your review our reviews that's what they do and then offer the products and services that they need if they have a great experience with you and then you offer it why wouldn't they pick you especially when it's convenient you just have to push a button so i think that's the the the trick you don't with uh product led growth it's not about you know how do i force my customer to purchase something it's about how do i educate them and uh offer them solutions that they can try and if they work for them which is should be your and their high value then of course they're going to stick with you and so ross again a year and a half ago of february you came on you told us sort of arpu is reaching that 17 point which obviously is like you know on average 200 bucks a year from these folks you've said you've since expanded that right i mean have you can you give us some sense of how much you'd be able to expand that are people paying more than 50 bucks a month now on average across all your product suite yeah we don't we don't disclose those numbers but we're expanding okay do you see a path to getting that up to where like annual like average acvs are on the thousand dollar range or no you'll think you'll always be below that well i mean you know this is this is a misconception i think in the market and you know when you think about this this is that long tail of the smb market the solar panel market so folks in this area if they make 55 to 100 000 a year this is a banner year for them so you know i find it and this is where there's this big in addition these people don't churn logo churn like other uh mid-market products because if the person fails and we really want to think about this in this fashion if this person's business fails they're still a person they still side gig it's not like they became ins extinct or they went off of the the the pla the face of the planet so we really want to keep them or you know future plans have got like why isn't there just a reboot button where they just hit reboot they rename their entity they read them maybe their dbas they you know redo uh you know amend their formation and then they restart again you know change their website up but they don't have to go through this process again but they they can still keep their their id a new idea they can kick off and i think this is really the the for us is to treat them more like as the world moves this way is everyone should have one of these a side gig and you know we want to failure as part of these businesses but we it doesn't have to be the fact that you have to reinvest in a new idea we want to lower that friction initially and and lower it so that you can maybe have two three four or five gigs i'd rather see our customers paying us a thousand dollars a month and have five different companies because that makes more sense than having you know a single company until it's you know got 10 12 20 custom 20 employees then they could move into that range but when they get up and running they're going to be sensitive to pricing ross how have you capitalized the business how much have Raised you raised a date uh 19 and a half okay got it so i think he did 15 million back mid last year that was your last race is that right yeah and that was led by grey crawford so i mean you must be in the phase right now if you've had this explosive growth where you're fielding term sheets looking at raising you know series bc right now is that accurate we don't need to raise money right now uh why why is that are you profitable we will be profitable next fall okay got it just next year and so you know i don't want you to you know there's nothing all right put it this way there's nothing like a pandemic to make a venture-backed company profitable how's that well but you clearly have some nice runway though if you're if you're comfortable saying you you know you're happy to wait until next fall to be profitable yeah so we're gonna i mean i think um you know we're always testing the market i don't think we're you know we're not actively out running the process i will tell you that but you know we're you know always you know you can always raise more money yep yep interesting if you did raise more capital um where would you invest it we're ready to scale we i'd invested in more in product i'd invest more in marketing i'd invest you know more in operations to scale the business so you know we can use more money that's for sure we can put it use there's no there's no like uh you know let's risk some more money and figure out what products our customers want i mean we could just simply build those if you raise no more money and you do become profitable next fall and you keep growing at the growth rate you're growing you said you're north of 10 million an ar at this point i mean do you think you can break 30 million at that same time when you hit profitability oh yes okay very good so that's that was a very confident oh yes meaning maybe maybe that's a goal you crushed this year yeah that's very very easy easy to hit that number next year we love that all right very cool um what about do you have quota carrying sales reps at this price point pardon do you have quota carrying sales reps at this low price and this is all digital digital business and that's what you know i think that's why you end up with those margins and when and then you know i don't we we we are firm believers in that brand equals trust and we are firm believers on having you know world-class customer service and that's just something that we invest in we don't build shitty products that customers have problems with uh we just support the hell out of it which is what this segment wants you know i mean that yeah ross before we wrap up here with the famous five last critical thing about any stats company especially at this price point is churn what's monthly churn look like we are at the we are at the i don't know how you say this we're at the we are at the top so we are the top in the industry as far as low churn what would you consider a monthly churn rate uh where it would be 1.5 and we're below that some months monthly on on our revenue basis or logo basis monthly monthly got it very cool ross let's wrap up here with the famous five number one favorite business book um you know you asked me that it again i read so much i don't know i think uh he's looking around his new mexico office here seeing what's on the table oh no man i mean there's a lot of stuff you know i get i'm right i'm writing a book right now oh well i mean i'm writing a book and it's really focused about uh it's really focused on how entrepreneurs is really this inner journey and you have to be honest with yourself and you have to be honest with the business you know because if you're you know or or i put it this way you can't lie to your customers and so in order to do that you can't lie to yourself or to your colleagues and you really have to go after you know what are the challenges with the business and and and head into those fearlessly in order to to to solve it so when you ask these questions i i am not this you know we're reading a lot about product lead growth there's so book many i mean we follow we follow guys like you blogs why would you read a book when you can follow guys like you so the blogs google and we look at interviews and then see if there's some some books in there that's most of what i do right now is get the best practices from folks like that you know i like uh the last big book i read was steve jobs after he died that was a fantastic you know auto biography you know biography written by him the one that was called steve jobs uh you know i like to take a lot from guys like you from colleagues and you know put that all together because there's no i'm not a dogmatic business guy you know i love the agile piece and and that one of the reasons i love uh you know uh going after problems and proving your thesis is you know get to the truth as quick as possible because your customers are going to get there you should you should try to get there before they do yep and fix the problem number two ross is there a ceo or founder you're following or studying or just someone you learn a lot from brian sharple's vet home away was a rock star ceo he's an investor i call him all the time it's you know and board members but i would say brian is is a guy that i follow number three what's your favorite online tool for building your business besides any of the great things you offer at zen business holy i would i will tell you sisence is one of the best stan products we're completely you know uh automated through that i will um you know we're i'll put in a plug for uh profit well on churn and retention there's so many great products there i put in a plug for you know stripe that we that that you know we use i mean it the the world has changed there's so many great sas solutions intercom i mean it's just there's just so many great solutions to get your business up and running right now we use google cloud um you know i think those are probably the ones off the top of my head i'll probably get off the phone and say oh this is critical to the business but uh those are the ones that we're using oh hell uh survey monkey holy crap we used out of you know survey monkey i put in a big plug for survey monkey it's what a great product there you guys have it good not a good tool a lot of good tools there ross uh what's your uh how many hours of sleep are you getting every night what keeps me uh how many how many hours of sleep do you get you know it depends i you know i try to work right now like uh you know five to you know five in the evening because that kind of works with my you know my lifestyle sometimes i get if i can't sleep i'll get up and before that and still work till five but you know so you're getting what six seven hours of sleep yeah all right and ross what's your situation married single kids married and all the kids are outside of the house been married for over 30 years wow how many kids three wow okay and how old are you 57 57 years young last question what's something you wish you knew when you were 20 oh man were you computer science degree back then or no yeah yeah i got it i had a science computer science degree i wish when i knew i was 20 oh take more risk take more risks guys zen business they are really the software for the side hustle especially during pandemic when everyone's watching this they make it really easy to get your business up and going they've exploded 6 000 customers about 18 months ago now over 70 000 customers using the platform all paying north of 17 per month but you can get on and get your business formed totally free they then upsell you great additional features like getting critical business formation docs set up and going they're doing north of 10 million dollars per year in revenue he says quote really easy to break 30 million next fall when they hope to hit profitability they raise 19.5 million bucks to do it 140 people on the team a lot of services folks but it's high margin services and 20 engineers with world class churn 12 less than 12 gross revenue churn annually ross 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 p.m 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

hello everybody my guest today is ross bardore ceo at zen business which democratizes entrepreneurship by making it easy to create maintain and manage an llc or other corporate entity with more than 30 years as an entrepreneur technology leader sea level exact angel investor and board member ross has been at the forefront of how consumers interact with technology most recently as the founding cto of homeaway one of boston's most iconic tech companies he was responsible for building both the team and the tech platform that powered the company from a startup through ipo to its current recent acquisition by expedia for a whopping 3.9 billion dollars ross you ready to take us to the top hey you bet i'm ready all right well first off i love you i love that you're in austin i'm down here as well um talk to me quickly about homeaway so you have kind of a home away you got ronnie at indeed there's not a lot of billion dollar exits happening in austin these days uh no there isn't i mean this was just really we were part of the the unicorn club you know i took it through the uh raising of uh 350 million took it through the ipo and then the ultimate sale it was really quite a ride there 10 plus years you know built it from the ground up i don't know it's just you know when you've got a good idea like a home away and vacation rentals we really created that market segment that that now a lot of folks are disrupting but just a great ride great experience why didn't you stay with kind of barry diller and iac and kind of the expedia clan well you know after 10 plus years all of the executives exited so when we sold we all exited brian stayed around for a year in transition and i really think that there is a time when uh you know there's folks that build stuff and then there's folks that take it to the next level and you know i think expedia is doing a fantastic job of taking it to the next level with what they they do you know i think they're doing a great job and we left them a fantastic company with a ton of pent up revenue that's really doing well for them and their and their shareholders but that's i'd have to kill myself if i was still there how old were you when you guys found that home away oh my god that's uh you know i'm getting ready to turn 55 so that was over 12 years ago do the math okay now the reason i bring that up is everyone thinks you have to be like someone like me right right out of your dorm room super young to launch like a huge company but there are so many entrepreneurs that start their mid-40s or even early 50s that create huge companies you're one of those early 40s it sounds like yeah now you know i started early on i was at excite.com which was during the first uh internet boom that you know was a multi-billion dollar i think at the peak of its valuation it was either seven or nine billion dollar valuation so through multiple acquisitions so i mean i've been been around i will tell you if you look at all of the founders at uh at homeaway we were i was the youngest of the executives i bet i bet you made sure they knew that too i knew i i reminded them all the time now the question was could you did you convert your young age and say listen i'm the youngest year i deserve the most equity because i'm the youngest and i have the most to gain over a long period of time right it was really that that didn't work out that way it was more of like i'm the youngest so i'm definitely the smartest here and uh yeah you know that's been working but i still tried it well that's great well listen i have a lot of respect for what you built you know there's a lot there's kind of a clan of ctos forming in austin that have done this i was just at the eberly with jason cohen uh you know meeting with obviously wp engine cto and um i i you know the stories here are incredible so let's jump into your current business okay so first question i have for you did you launch zen business from scratch no what well the answer is yes in a certain sense i bought into the company so i invested in the company but when i invested into the company you know literally uh three months as part of the investment i was gonna do a pivot and then pivot again so really it was uh i would say had some ip that we needed had a lot of experience was definitely in the area that we were in but the the the customer facing part was wrong and so that's what we discovered and pivoted it's actually has turned out pretty well we had great investors already on the cap table ross what year was this by the way that's been uh 2016 the end of 2016 i joined up as the ceo so just to be clear you had in the first time you invested was 2016 or you were an investor prior to that and you took over a ceo in 2016. i invested and took over a ceo at the same time i see okay how much did you invest in uh well i put in 25 grand and then we were in cap they were in capital factory so there was a match out of that because i was also a partner in capital factory oh i see interesting uh very interesting okay now did you actually um you bought in they issued you a big chunk of equity or did you actually figure out a way to clean the cap table buy out all the early investors and then have this be your baby now you know that was you know that was a there wasn't that much money in i mean there was hundreds of thousands of dollars in but i really didn't feel good about wiping out the existing investors they were good investors uh you know i wouldn't have bought into the company had i not thought it was a good base to build on um you know i could have i suppose i could have wiped them out uh and i am definitely a bloodthirsty capitalist don't get me wrong here well ross let me change the verbiage for a second let me change the verbiage because it's not i'm not talking about wipe out i'm talking about like you your biggest asset i imagine is cash based off the exit so if you can if you can it's not worth your time to put 25 grand in a company own three percent and then work for five years buildings and business it is worth your time to put in i don't know a million to buy the whole company give 20 back to the founding team you hold 80 and then you build it that way i'm trying to figure out why you chose not to do the latter yeah you know i'm offended when you said that my biggest asset is money sorry is time is time that's what i meant so my biggest asset was was really me coming in as the ceo and i took in a bunch of equity oh okay i i have the i have the majority of equity oh i see in the company i put the 25 grand in at the time they were on this skid and you know i put them in one of my rental houses that we used as an office here in town and really bootstrapped why we went out and raised money and discovered the market i mean uh there was already a really great market and a great neighborhood that the the uh company was involved in it really just needed to be pivoted to where we you know uh acquire our customers at the top of the funnel when they do formation yep now you just did in february no this would have been in february last year you did a 4.5 million dollar round i believe so how much capital into the company after you kind of put in your original 25k how much was in no how much more has been added uh probably four million of that so i raised four million bucks yeah yeah exactly i think there was actually 350 or something like that in the company prior to me investing and then i raised a bunch from you you know austin friends and family what i really did was all of the people that i'd written checks i went back to them and i said you know okay now it's time to pay i'm yeah yeah that's funny okay very and by the way you should bet on me here's what i just did with home away right it should be an easy check exactly yep okay we started getting bite in the market in the end of 2017 i'm a big proponent of testing we oh my god some of us we had like 16 sites going up at one time we were abusing customers figuring stuff out i remember uh jc the head of sales here came to me and he said hey man i think stripe is going to shut us off and i said why in the hell strike well because we're getting so many charges back and i said why are we getting charged back and he said you remember that product we sold for like a hundred five hundred dollars a year i said oh refund all their money refund all their money all these customers so we got bite in the market and then we went out and we were growing 10 week on week with the money we had that's what we went out and and raised money launched the product the the start of the product you see today really that is funny okay so what's the average customer paying you guys today for your services uh let's see uh you know i don't have that number right in front of arrangement is it about 110 a year oh more well when you say average subscription so you the really the way that we look at it is our average subscription per cover customer uh is uh hang on a second here is 17. 25 cents a month uh yes okay a month so you got to realize the the one product what we're after is getting people at the top of the funnel when they do formation we really are this smb platform for the long tail of solopreneurs entrepreneurs real estate folks so there's no reason you shouldn't use us because we do the formation for free but then once you do the formation we sell you products like banking insurance accounting tax prep ein numbers so we sell you all of the services you need as a small business and what have you scaled to today in terms of total customers uh we just went over 6 000 customers oh great so can i multiply that 6 000 times 1725 you're doing about 100 grand a month right now uh we're doing work yes okay i'm not trying to give you out all those numbers i'm getting ready to do a fundraise here pretty quick but you're in the ballpark okay and generally speaking just to be clear around our business model two-thirds of our revenue is subscription is subscription revenue we have a lot of transactional revenue revenue too so our revenue is well north of those numbers you just quoted but the pure sas is 1725 average per month yes okay got it yeah so you're doing again you're doing north obviously of what we just disclosed but this is the pure play sas component and if we talk about just the pure place ask component a year ago did you double it or triple it or quadruple you over here what's the growth uh we've been growing on average 35 month on month so yeah help make that math easy for me so a year ago what were you doing monthly uh uh think of it starting in march almost nothing okay really so okay so you okay fair enough that's good now you said right now you're looking at going and doing okay well hold on you raised the four the four million back in february 2018 you were still pre-revenue at that point so what what the hell were you selling ross well what i was selling was we were growing 10 week on weeks but growing what you said you were pre-revenue customers customers so we were we we were charging that it was transactional revenue it was just transactional revenue okay and we were really getting bite in the market we understood we could acquire customers in an efficient manner and they loved our flow and really consumer uh friendly flow at that time we had just figured out a couple of sas based products one of them is called registered agent it's built into the business uh and then another one which we created is called the worry free guarantee so you pay a subscription and we make sure that your entity stays in good standing we do good we do regular good standing reports then we do your annual filing and franchise tax is all part of the product so right out of the gate we were a sas based business got it that was just what we launched since then you know we've we've launched smb excuse me uh products that where we're getting even more revenue why is now the right time to raise you said you're thinking about raising more uh because we're going over some magic numbers here pretty quick like what i like you know millions in recurring revenue oh okay so yeah once you pass obviously 83 grand a month that's that's a nice inflection point to hit um talk to me about some of the other important economics so typically i mean we've had the folks from eig constant contact these kinds of folks on the show and churn in the s b segment is through the roof because people their businesses go out of business so what's your churn and how do you keep it low yeah i'll tell you what this is this is a great question and we we're very focused right now on acquisition and uh driving up the ltv of these of these products and we've we've launched packages where we package up solutions for our customers which makes it even easier for them we can throw in if you think of the sas based model a lot of stuff we have built like we have an operating agreement product which our margins on are nearly 100 percent so we can throw these kinds of products into our sas packages well so what do you assume lifetime value is today on account uh well let me i'll answer that question in that um we our acquisition model is cac based of course and we want to get a payback within you know 12 to 18 months uh from an ltv point of view um so we're doing very well on that and there's lots of expansion i will tell you that 17 number i quoted you was literally a 2x expansion when we when we uh launched our uh packages so it's an 18-month payback period which is your worst case you just cited on someone paying 17 bucks a month is about 305 dollars you're saying you're willing to spend that full 305 bucks up front to get the customer in the first place uh no we aren't paying that much well then how do you get to what do you mean 18 months payback period we're less than a week okay so well you just said 12 to 18. so i'm using your number so even if it was a 12 month payback sometimes it's under sometimes it's over it is seasonal when you're doing google uh adwords it's seasonal in our for our keywords where we're acting but i just want to generally speak i mean i understand it changes but what you're saying is you've got minimum 12 month payback period sometimes 18 months so if you're spending 12 months of ltv on cac that on and they're paying 17 bucks a month that means you'd spend about 200 bucks to acquire a customer and you make that money back in 12 months you're in the ballpark yes interesting thank you sir so it's it's mostly direct paid stuff you're doing or do you have any kind of inside sales team or touch so we're doing you know we're you know background is digital and seo so we're doing a little bit of seo but again it's early we have affiliates so we have people that are selling our product what kickback do you pay 30 perpetual or just first year or what uh uh 30 percent but but just for the first year from perpetuity actually uh for everything they sell because we want right now we want a bigger ticket so everything that they sell a lot of when we get resellers they're typically accountants or lawyers and lawyers can't sell legally but accountants can and so we give them a 30 kickback and we want to give it to them forever so that they'll have a bigger ticket and so that they'll have recurring revenue we want to motivate them in in that fashion we also have people calling our api directly so we have an api where they but ross sorry let's say that let's say that reseller channel scales really fast think of a hubspot where their value-added reseller network is really what drove their whole thing you essentially have killed your margin because you have to pay 30 out so your cost of goods sold already you takes it down to 70 margin before server costs and other cost of goods sold yeah i think that you know i think it's a high price to pay right now but we want to get growth and we want to get that network so you'll change that over time we can change everything yeah you know one of the things that i mean that's a good point to be put out here is you know we're a startup and so if we start getting sensitive about what the hell we're doing be able to test things and not be able to get the job done we can change anything at any time and we have our pricing has changed wildly and will continue to change yep no that makes sense um team size today how many people uh 15 and uh two in peru seventeen okay very good so 17 total and the 15 are all in austin uh let's see one is in north carolina okay so austin peru and north carolina [Music] and ross we're quickly running out of time here so quick answers here if you can what is your turn today gross revenue turn annually yeah i think um we are in the five percent range you have to it varies by product some of our products are have a higher churn you also have to in our business there's a third built right into it of companies that just fail exactly yeah that's built into that five percent though right no uh no no okay above a company fails you don't consider them churn because you have no control over that well i mean we we handicap ourselves so the answer is yes and no i mean i don't want to i don't want us to hide it either because i will come back to i think that our segment in the way we're approaching our customers is that you know if you go after the mid market and you have customers that have 20 or 30 employees they have to be successful yeah so if they can't make payroll they're going to fail that's right but you know 70 of our customers are solopreneurs or just single owner llc's they don't necessarily have to be profitable these can be side gigs these can be no ross i totally get it so do you make up via expansion revenue do you more than make up for that five percent loss so your net revenue retention is above 100 uh let's see say that again the cohort that signed up a year ago you're saying five percent of them will churn do you do you upsell that same cohort enough to make up for that revenue loss yes that's the idea but but are you are you you're executing that you're above 100 net revenue retention right now 100 above that's a good question i'm i don't know you don't measure it okay that's okay i don't know that's okay the yes we are continuing to rapidly grow and we're looking at retention right now that's great just on our product we're really after the top line acquisition of customers retention is something that we're we're going after now we don't even have annual packages for example yeah yeah no makes good sense makes good sense that that's a huge one and we do it you know we want to see where the problems are with our uh with retention good all right ross let's wrap up here with the famous five one-word answers if you can number one what's your favorite business book [Music] um man i wasn't prepared for that that's okay you can skip it you know what your your book absolutely your book you have you haven't read it yet you're just looking at the thing going you know what i'm gonna make nathan feel good and that's it i'm telling you i'm gonna read it and it's gonna be my favorite book i can tell you listen you're high you need to you need a job you can be my head marketer i really think it's the innovator's dilemma okay i think that's probably you know if you consider that's certainly a business book it is but it's it's more than that number two is there a ceo you're following or studying um no number three what's your favorite online tool to build a business oh my god that is the perfect question for me what do you manage spreads in like jira uh arden what do you manage your sprints in like like your when you talk to your with your development team and plan what do you use uh we use all the atlassian tools and last name uh from confluence zero but you know let me just answer that question just in general you know i'm old enough at excite.com we built friggin everything i mean you know we built plug-ins for web servers that would handle you know just just absolutely everything and i will tell you even with homeaway was old enough that we hosted everything and we built a ton of software and integrated a ton of software what what you can do now with the tools uh that are all subscription based and technology is just you know we have a mantra here saves your time uh we have a mantra here which is you know what folks we are not building any software here we're only building the critical pieces that add value we use everything possible uh from a sas based that's good we'll say atlassian for now number four how many hours of sleep you get every night how many what hours of sleep oh my god last night was a bad night probably about four last night okay but i sleep hey i sleep like a baby i sleep for two hours and i get up and cry and i sleep for another two hours and get up and cry last question here uh ross what's your situation married single kiddos uh married three kids happily married for 30 plus years amazing and how old are you i'm 55. take us home here what do you wish your 20 year old self knew what pardon what's the question what's something you wish your 20 year old self knew uh to go to burning man have you been oh my god yes i love it i love it guys go to burning man earlier he sold his first company well not his first company but second third company home away to expedia for 3.9 billion dollars now he wants to help small businesses here in austin texas took over a company called zen business in 2016 as an investor and then obviously got a bunch of equity for that as well now as 6 000 smbs using him paying on average 17 bucks a month so he's got about called 100 110 grand in pure sas revenue but he's got also other upsells that are helping him drive ltv on these accounts he's done this just by only raising 4.5 million bucks which is great 17 folks on the team between austin peru and north carolina 5 gross revenue churn annually spending up to 12 months of ltv to acquire the customer mostly paid stuff he's trying to figure out top of funnel before he goes out and raises again ross thank you for taking us to the top hey great time and i am flattered to be part of this