How Zinrelo CEO Jai Rawat grew to $56.9M revenue and 500 customers in 2024.

hello everybody my guest today is J Watt he's a successful Searle entrepreneur and investor advisor and mentor to several startups he's currently the CEO of a company called Zen reloj a little a loyalty reward and referral marketing platform he has over 25 years of experience in technology industry and holds 19 patents he loves trekking running and biking is currently training for the San Francisco to LA unsupported bike ride Jay are you ready to take us to the top yes alright so a man of many talents tells me about Zen rail oh what's it doing how do you make money so zoom below is as you said it's a loyalty rewards and marketing platform for retailers so we help retailers acquire engage and retain their customers by creating what we call a 360-degree engagement with their customers and the retailer's pay us monthly fee or access to the platform okay and are we talking like a grand a month a hundred bucks a month two million a month generally what people pay you per month of you have two different programs it's a self-service program for smaller retailers they're I would say the average monthly P is about 150 a month okay and then you have an enterprise span which has more features and comes with more support there the average monthly price is about control box 2,000 per month okay and if you I mean those are two very different markets to cater one one score you can put a sales rep on the other you can't right they're very different which one are you more focused on so the self-service one what we've done is we have partnered with a number of different ecommerce platforms and it is truly self-service smaller businesses they discover or app and it's a Shopify or Magento and they are able to sign up for it themselves we have all the support videos and documents created so we don't it's not a high-touch sales model it's truly self-service right the the idea is that some of these businesses as they continue to grow we will grow with them right the pricing that we have is tied with growth of the business so as more users enrolled in the loyalty program we make a little bit more money so we want to engage the customers even when they're small because as they become bigger the an opportunity couldn't be that as well I'm just trying to understand who you're catering to more today maybe a better question is how many customers have you grown to and what percentage would you put any enterprise cohort so I cannot share the exact percentages okay because in each bucket but in terms of the total number of customers we have over 500 customers right now okay 500 that that number just by itself would tell me you're probably more Enterprise focused it's high-touch versus a HootSuite that has 20,000 SMB customers smaller the self-service model we only started that about six months ago so that's a well number okay okay god yeah you know you have 150 on the SMB side two grand a month on the enterprise side you just launched the SMB model so if I took an average across your current customer base right now that that average is gonna be way closer to two grand and it is to 150 since you just launched that I won't comment on that revenue numbers but you know you can take a guess okay when did you launch the company what year the company started in 2009 as sharp socially so when we launched initially we actually started as a b2c platform where it was it was a platform to be able to connect with your friends and family if you wanted to get advice on buying products or services you know with sim school should I send my kids to or what camera should I buy so that was a original idea and as we grew that business we realize that there was a good traction but not good enough to make a business out of it no beautiful businesses are binary right I mean either you make it or you know you don't there's nothing in between so we pivoted that and we created a social shopping marketing platform for retailers what we did there was we the observation really was that the consumers the way they were say 20 years ago the relationship between appends customer and a retailer was that of a buyer and a seller that's it right however today's customers are much more than that social media has really democratized marketing if you will so a customer is not just a customer anymore they are also talking about you in social channels they are posting pictures on Instagram there with our friends you know writing reviews and whatnot so the whole interaction paradigm has changed and therefore we realize that the retailer's really need to change their marketing strategies to tap into this these additional values of customers in brain sure J as you grew this did you give up equity or a view bootstrapped oh we did give up some equity I liked you so much I liked you so much all right it is two million dollars so far and we're profitable okay that's not bad so you've raised two million today and when wind date-wise was the last round the last one was over two years ago got it have you had a price drowned or was the to mine all convertible notes the forced round we did was a price round the very first one which was for the b2c idea okay that it was a convertible not interesting so even so you basically kept your investors from the BDC idea on the cap table even though now you're it's a totally new idea yes that's very nice of you the investor in the company it was the same company and we although we did a pivot and it's a completely new put new business we didn't want to shut down and start a new business with you you get them on the capital oh yeah now what do you I'm curious as a smart guy that advises many companies you've raised very little capital which is great how what are you able to keep a like what growth rate are you able to sustain right not taking on 80 million in venture capital are you somewhere like in the 30 percent year-over-year range something like that those are the 50 percent right now that's pretty good that's pretty good yeah yeah that's that's really good and and walk me through why launch a self-service model I mean if I'm doing the math here right if you let's assume none of these 500 are SMBs let's assume they're all at the two grand price point just an assumption I mean it's a healthy business that's a million bucks a month almost in revenue right there why fool around with SMB as I said what happens is that a lot of the businesses when they're starting out they are small but some of them have the potential to grow into bigger accounts I get that but why take on those support why not let other ecosystems develop those businesses and then they find you why go downstream and trying to support them when there's babies so what we did was we started out as an enterprise platform and we are only focusing on the enterprise customers and over time we realize that our processes have become so good and so smooth that we realize that we can launch yourself service platform without creating a lot of support okay okay got it so you didn't see you don't see burden cost of goods sold or anything like that now that you've launched no no sort of crazy server expenses things like that that Oh interesting okay okay um you know there's a lot of money to be made there as well yeah now what do you I tell you in terms of team size there are only 30 people like 30 and everybody makes their in Sunnyvale uh you have an office in Sunnyvale and via an office in Pune India opening ok and what's the breakdown how many in India how many in California citizen market in here and the development is happening in the in the office it's fascinating for people with Singh right now that have been thinking about opening a dev shop in India what would you tell them it's hard reason why it's working for us very well is because my founder is actually based in India and he's a guy that I've known for over 30 years this is the third startup we are doing together so we can complete each other's sentences at this point and he was in the US for a number of years before he moved back so he really understands the market here so what you know the biggest challenge is if you have an offshore development team is communication and really making sure that they understand the market they understand who we are trying to serve right and that's an understanding which is very hard to come by and for us it's working really well because of the setup see how many people are out there 10 20 about 20 people there 20 there and 10 in California sales and marketing California okay very good and and let's just focus on your enterprise cohort for these next few questions churn is obviously critical in a business like this tell me about your turn so you have a huge net negative children which is great because the way the pricing is structured as I said it's a land in expand kind of model where we can get in at a lower price but then as the business grows as more users sign up for the loyalty program they they pay us a little bit more money yeah how negative are me are we checking negative 1% negative 10% so I mean if you just look at the number of users were actually leaving we have I would say the average lifetime of a customer right now is about three years okay well just be clear sorry when you say you have a net negative revenue churn I'm just I'm just curious how negative are you in other words in other words if your gross annual revenue churn is five percent but your but your expansion is 15 percent you'd be net negative ten percent right between five and ten percent right okay got it got it and and the people that you're expanding what's the sole driver of that expansion revenue if you had to pick one thing is a number of additional seats is that some other feature they're adding what's the sole driver the soar driver is the number of users so the way we have structured the pricing is it steered based on the number of users were enrolled in the loyalty program but as as months go by more users are enrolling in the program the retailer's are seeing more benefit from the platform and they start paying a little bit more and and with that in mind when you are more one of these guys this is a tough number but you've had a lot of experience you advise a lot of companies so I bet you have some opinions on this lifetime value in terms of dollars what do you put that out for your customers I know it's back to the napkin but what do you put it at or yeah it's definitely north of what so as I said the average is about thousand a month and that we're getting from these customers and the average life of each customer is about three months so that's three years beers right yeah so so I can take 36 months times two grand you assume a lifetime by have at least 72 grand something like that that's correct got it okay very good and and payback period wise like how do you look at kak and and you know how do you manage that ratio or does the payback period is pretty quick it's about six months okay that's what I mean that's very healthy so that means you're spending up to six times two grand a month up to 12 grand a month or 12 grand to acquire the customer right and where are you spending most that is at a sales commission or their direct paid spend somewhere what all of it goes into lead generation what we have done is we have separated out our sales team and the sales development reps so you have a team of SDRs who generate leads then they feed them to the sales sales team and the sales team then closes them so the costs are obviously in the marketing cost the lead generation cost the Commission's you know the conference's that we go to it's all a blended cost yep yeah okay that's that's fully weighted TAC that's great when you see one of the companies you advise not doing fully weighted what do you tell them the entire cost right I mean you have to see where you are spending the money and what is the total cost of acquiring a customer because unless you look at those numbers you really don't have a good handle on your business yeah let's wrap up here before we get in the famous five though have you passed the nice beautiful round a number of a million bucks a month yeah and revenue or no you'll hit that soon is it revenue wise we cannot comment well you can if you look at if you look at a total number of customers 500 times 2,000 let's say all of them were analyzed customers they're not that puts you at a million that's why I'm curious I assume either you're very close because you said not all 500 or like you'll break it maybe in the next quarter or two okay but you brought you think you are you confident we'll break it this year uh or close or put it hopefully okay close that'll be good and you said you're growing about 50 percent year-over-year right so if I assume right now you're somewhere less of than a million let's call 800 it's fair to say guys we're about half that twelve months ago yes and do you think you'll keep growing because these numbers are getting bigger you can keep growing at 50% year-over-year oh we definitely think so yes because there is opportunities to expand into other verticals as well be on retail okay any plans to raise you're gonna keep bootstrapping I don't think we need to raise at this point we want to continue to grow and you know take it as it goes but not the best time to raise money is when you don't need to mind so and want to create a point where we don't need the money and then you'll see if you raise all right let's wrap up here J which is famous five number one what is the last business book that you read well I'll do it my favorite one honestly the last one it's a book called predictably irrational I can eat it yeah it's irrational and that's just incredibly insightful book into how humans make their decisions and has great insights into some marketing strategies numerology number two is there a CEO you're following or studying right now I would say there are two CEO that I I really admire that household names of course you know this Mark Zuckerberg for two reasons you know he made some really bold decisions bold bets like Instagram for Sarah Sarah and you also personally challenges himself with the personal challenge of the year I like that and the second CEO is sundar pichai so you know like myself he is from India he graduated from an IIT and now he is heading a Bubo so you know it doesn't get more inspirational than that number three what's your favorite online tool for building the business use quite a few tools one two that I've started using recently is a tool called yes we're so it allows me to really track all my emails and responses and allows you to automate a lot of scheduling so I really like that number for Jay how many hours you sleep tear every night I try to get eight hours okay what do you get off I get between seven and eight hours okay so I close yeah I know but my kids I've grown up now so I do what's your situation married single how many kids I married three kids Mary okay three kiddos in how old are you I'm 49 49 last question when he was your 20 year old self new years I'm wondering what was I doing when I was 20 years old I was in college right so uh you know I would say be be bolder you don't you don't have any responsibilities at that time you know so you can really be much bolder at that point of time you are also naive and you're not really tethered by the notions of what's possible and what's not possible so really don't be afraid of failures and just you know be bold there you guys have it be bolder he's building in loyalty rewards program at Zinn Arella launched it many years ago back in 2009 he now has 30 people spread between California and India they have reached 500 customers which was a nice milestone each paying somewhere between 1500 and 2 grand per month they're south of a million bucks in revenue per month right now but stretch goal this year maybe they passed that by the end of the year regardless I love that they're doing this with very little cash raise just two million cash raise going 50 percent year-over-year net negative revenue term between negative 5 and negative 10% they're getting paid their payback period is incredible under six months spending up to 12 grand to acquire these customers that stay with them for 36 months or about 72 grand in lifetime value Jay thank you so much for taking us to the top thank you