How Airtory Reached $1.3M Revenue and 60 Customers with a Profitable Ad Creation Platform (Interview with CEO Julian Frachtman)

Introduction and Background

Nathan Latka

00:00Guys, his first company sold for $42,500,000. He made, call it, a million bucks off that deal, learned a lot about equity cap table, and eventually joined and built his own company called airtory.com launched in 2017. They're helping advertisers with the platform that helps them manage ads, produce ads. They white label two ad agencies who then have end clients. They make money off SaaS services and utilization fees doing about one point sorry. About a $120,000 a month

00:25right now in revenue up from, call it, like, 80 or $90 a month just a year ago. So nice nice growth. They're profitable today. They've raised just $400,000 in their last seed round of that 10,000,000 post money valuation, growing profitably, which we love. Hey, folks. My guest today is Julian Frachtman. He's previously founded perk.com, a mobile loyalty and rewards platform, which was acquired by Rhythm One and ended up at Taptica or Tremor. He's now focused on

00:50improving the lives of agencies and publishers by enabling them to quickly and easily create rich media and CTV ad units at scale. He's doing this at airtory.com. Julian, you ready to take us to the top?

Julian Frachtman

01:01>> Sure. Let's go.

Arena Group as a Key Customer

Nathan Latka

01:02Alright. Talk to me a little bit about a customer that's paying you today. Can you share their use case?

Julian Frachtman

01:08>> Sure. One one of our kind of most recognizable customers is the Arena Group, and so they own Sports Illustrated, they own Parade, Men's Journal, different periodicals like that. And so for them, essentially, they use us because we're able to work with them to create custom ad unit templates that allow them to create kind of an enhanced experience on their websites that perform more highly for their advertisers. And based off of our templated approach, they're able to

01:43>> have a much higher performance and, for them, charge a higher CPM, which is a higher cost per thousand impressions they deliver.

Nathan Latka

01:51And what does a company like Arena Group pay you on average per month or year to use the technology?

Pricing Model: SaaS and Utilization Fees

Julian Frachtman

01:59>> So for them, it's it's kind of a mix of CPM. And so for us, like, as I mentioned when I when I kind of signed up with you, it's a mix of SaaS services and utilization. So for them, I would say we're probably at, like, 5 to 8,000 per month. It's not always the same. I would say they're a little bit higher than average.

Nathan Latka

02:20Okay. But it's So average my average might be something more like 3 or 4,000 per month combined across SaaS services and utilities utilization. Sorry.

Julian Frachtman

02:28>> Yeah. I mean, we we have some whales. Right? We have one customer that I that I can't mention necessarily that's 60 to 70,000 per month. Right? But I would say on average, it's like 4 to 8,000.

Nathan Latka

02:41Do you think you can get that that biggest we won't name them, but can you get that biggest customer over a million dollar mark here in the next twelve or twenty four months in terms of ACV?

Largest Customer and Average ARPU

Julian Frachtman

02:50>> I think we can, but I think, you know, the interesting thing about our space is we're a tool they utilize based off of their ability to be effective on sales for themselves. So they happen to be a really effective sales driven organization, and so they're growing twenty, thirty, 40% per year. And so they, on their own, will grow to that amount likely, but it's not necessarily based off of anything that we do. Like, we work with

03:21>> them. We help. Well, you

Nathan Latka

03:23have to set your pry you have to set your pricing structure up in a way that captures the upside as they're growing. I mean, that's a key moment here. Founders mess it up all the time. So how are you up you know, if they grow, could be by number of seats. It could be by some other number of ad campaign per month metric. I mean, what is the thing you're upselling against?

Julian Frachtman

03:39>> Well, so, you know, again, we're we're not like a pure SaaS platform.

Nathan Latka

03:45So I know. But utilization is the same thing. Right? So utilization might be number of ad units. What is the utilization metric you're you're selling against?

Julian Frachtman

03:53>> Impression volume, honestly.

Nathan Latka

03:55Here we go. So it's impression volume. So so if if they if they grow themselves from a billion impressions per year to a billion two impressions per year, they're naturally gonna pay you 20% more.

Impression-Based Pricing Captures Growth Upside

Julian Frachtman

04:04>> Yeah. Exactly. Yes. That is that is a 100% the case. So we already have that in place because naturally, based off volume, we charge a certain impression CPM. So that's what we have keyed in. For us, we pride ourselves on trying to be not as SaaS oriented, which I know is not quite the focus of this podcast, but I see a lot of companies in the ad tech martech space trying to be SaaS when they're not,

04:35>> which I think is long term a mistake. And they do this because they think they can get better multiples. Obviously, that may have made more sense in the previous economic world that we lived in versus today, but some of the other players, they lock customers into annual agreements and monthly minimums and things like that that make the companies look more like SaaS so they can get those types of multiples if they raise or if they sell.

05:05>> But at the end of the day, it's all based off of volume of impressions. We're all just kind of like technology that people use to deliver ad impressions.

Nathan Latka

05:15Oh, what's going on there, YouTube? Good to see you guys. Now imagine this. You love watching these interviews with SaaS founders, but imagine if we took all of the valuation data out from over two eight zero seven interviews I've done manually. Saves you a lot of time. Well, we've done this. We've built it into the beautiful interface inside of Founderpath. Check this out. I'll show you how you can access this in a second. But you log

05:37in, you connect your Stripe account, you see your valuation real time. You can see what it changed over the past eighty eight days and even set goals for valuation this year. Now the secret evaluation is there's many different ways to value a SaaS business. So the reason you're gonna see three or four different valuations inside of your Founderpath dashboard, this is all free by the way, is because depending on who's doing the buying of your SaaS

06:01company, you're gonna get a different valuation. A VC is gonna pay a different valuation, Private equity firm is different. If you're gonna do a minority sale, that's different. And if you sell the whole business, that's a different valuation. You can see all those when I hover over here. Right? So the teal is what a VC would pay. Yellow is what private equity And red is if you sold the whole thing outright. Now what's cool about this

06:24is this is not built off random data. Again, you guys hear these interviews on YouTube. All these datas are built from real time valuation data points founder share with us on the show. So traction 1,200,000 seed round 3.7 raise. They sold 22% of their business. Go in here and filter by the event. Maybe you only wanna see companies that have sold the whole business. Well, here are a bunch that have been acquired the valuation and the

06:48multiple. Maybe you're going out right now and you're raising your seed round. We'll go in here and look at all this recent seed deals that went down, what they raised, what valuation they raised at, and what percent that they sold. There's never been a larger dataset of SaaS valuations than what you can get now inside of Founderpath. And we're thrilled to bring it to you. All right, we're gonna go back to the YouTube video here in

07:11a second, but if you wanna check this tool out, if you wanna jump in and sign up, you can check it out for free to get your valuation at this link, this link, founderpath.com/products/valuations. Or if you go to founderpath.com and hover over products, click on get your valuation here, and go ahead and sign up to give it a whirl. Again, all that valuation data live right inside the platform. I hope to see you there. Alright. Let's

07:38jump back into the interview. So why have SaaS at all? Why not you said SaaS services and utilization. Why not kill your SaaS business?

White-Label SaaS Fee Explained

Julian Frachtman

07:47>> So have just a taste of SaaS, and so it's white labeling. Right? And so if a customer wants to not present the airtory brand or any of our other brands upfront when they're delivering the ads, either on the preview side or if they want to have API access for advanced reporting or advanced creative interactivity on their front end side, then that's something we'll charge either a thousand or 1,500 per month for. And so that's basically our

08:18>> only SaaS.

Nathan Latka

08:19So the the just to be clear, this would be like this would be like an agency that manages ad spend for other customers. If they wanna show the process to their customers, they might white pay you to white label airtory.

Julian Frachtman

08:31>> Yeah. Or, like, they built out an ad, and they don't want it to say preview.airtory.com. They want it to say preview.xyz.com.

Nathan Latka

08:39Yeah. So it's be like adtory media, some of these companies you list on your website. Scroll Media. Yep. Exactly. I see. I see. Okay. Interesting. Get put put this on a timeline for us. When did you launch this business?

Julian Frachtman

08:52>> June ago.

Nathan Latka

08:54Okay. So what? That would have been twenty twenty seventeen?

Julian Frachtman

08:58>> Yeah. Yeah. About.

Nathan Latka

09:00Okay. So you get going in 2017. And have you bootstrapped it, or you decided to raise capital?

Funding History: $750K Raised

Julian Frachtman

09:05>> So we raised friends and family and friendly angels. So we've raised 750 k total. Half of that was at 2,500,000 safe, and half of that was at $10,000,000 safe.

Nathan Latka

09:19What year was the 02/2005?

Julian Frachtman

09:21>> 02/2005 was during the first, like, two years from

Nathan Latka

09:25Okay. So about 2018?

Julian Frachtman

09:27>> '20 yeah. Twenty seventeen, twenty eighteen.

Nathan Latka

09:29And how much did you raise on the 2.5? So, like, 400, 500 k?

Julian Frachtman

09:32>> $3.75 or so. $3.75, $403.75.

Nathan Latka

09:36Okay. Okay. And I guess why did you need the money in the first place? Why not keep 100%?

Julian Frachtman

09:44>> We didn't know what we were doing,

09:47>> and we just needed to be able to operate. So I guess you mentioned the background with Perk back in the day, so that was an Austin and Bangalore based company. And so my co founder, Ashwin, is based in Bangalore. He was a third engineering hire at Perk, so we've known each other for about ten years now. So even when we were getting started, we still needed to he and I weren't paying ourselves. We still needed to

10:16>> be able to pay engineers in India. And so for that, we needed to raise some money and we explored hiring product people. We explored hiring salespeople. A lot of things didn't work out.

Nathan Latka

10:32So at this point Julian, what was your role at perk.com? I I'm seeing founders listen as Adam, Solomon, and Raj.

Julian Frachtman

10:39>> So I was a cofounder.

Nathan Latka

10:43Alright. There's a story there. Share it. What happened?

10:48So This shit happens all the time. So trust me. The one every out of every three interviews, there's some terrible cofounder story. So what happened?

Julian Frachtman

10:57>> Alright. I'm actually happy to share it.

Nathan Latka

11:00That's great.

Julian Frachtman

11:02>> I don't look bad in it, so it's fine. Yeah. Yeah. Yeah. So, I mean, honestly so I I actually was not a great student in college. We'll go back to the beginning. How much time do we have?

Nathan Latka

11:15We're good. We've got eight minutes left.

Julian Frachtman

11:17>> Alright. Yeah. I can I can talk quickly? I was not a great student, so I, like, had no idea what I was doing. Found a job on Craigslist with Raj. He was trying back in the day to build out, like, a Yipit competitor. Do you remember Yipit back in the day? Like, the

Nathan Latka

11:32No. Don't, but I'm with you. That's how you met Raj.

Julian Frachtman

11:36>> It's a daily deal aggregate company, like and he also had a white label solution similar to, like, Groupon and Living Social and stuff. So joined that as an employee. He was running out of money, and he was like, hey. You can join as a co founder. My dad also invested in the company. He was like, okay. If I can invest, then you can make some money or whatever, or you can at least have a salary. So

11:59>> did that, was there for a while.

12:03>> Adam joined, and I ended up being, like, relegated a little bit as, like, the younger baby cofounder out of all of it.

Nathan Latka

12:11Did you get, like, crammed down? So you're only sitting on, like, 10% at this point?

Julian Frachtman

12:16>> My equity did get crammed down, which I think with my experience now, I would have fought back on, I think Yeah. Legally. I'm not sure how kosher it was, but it, you know, we're probably beyond anything on that.

Nathan Latka

12:28Yep.

Julian Frachtman

12:30>> But, I mean, one point which is nice is my dad just put money in so I could get a salary, but he did get 16 x on the exit. So that's, like, you know, good for my dad.

Nathan Latka

12:38So How much did he invest?

Julian Frachtman

12:42>> 6 50 k? 60 k?

Nathan Latka

12:44Okay. That's pretty good. Yeah. Because the reason I brought all this up is this wasn't a small exit. I mean, it's a $42,500,000 exit based off my research. Correct?

Julian Frachtman

12:51>> Yeah. Correct.

Nathan Latka

12:52Yeah. I mean, so this is a reason the I bring all this up is I was gonna lead this into your current company. I mean, this maybe maybe it wasn't like fuck you money, but, I mean, you you made some money off this exit. Your dad sounds like made some money. Why why not self fund?

Julian Frachtman

13:06>> Well, so I mean, I I did that in a lot of ways in that I didn't pay myself for three years. Right? So with with Perk, eventually, I made, like, 1,000,000. Right? Which is like Yeah. Definitely not fuck you money.

Nathan Latka

13:20But it's something. I mean, that's a big that's a good win early on.

Julian Frachtman

13:23>> Right. But, like, I was I married. We, like, we had a kid and stuff. So, you know, it was something where just just, like, by not paying myself, it was, like, subtracting stuff.

13:34And

13:34>> I also like to angel invest a lot,

13:40>> so my wife eventually cut me off of that. But I did have one lucky angel investment.

13:49>> One of my close friends from being in Austin is one of the founders of Substack, so I was an early investor there. So that was, like, a solid win. So

Nathan Latka

14:01Yep. That's a great story. Okay. But point being, you 375 k pre seed round in 2017, 2018 at 2.5 post. Then you raised another 400 k, it sounds like, at 10 post. When was that?

Perk.com Background and Cofounder Story

Julian Frachtman

14:11>> That was the next three years, basically.

Nathan Latka

14:14Okay. Got it. Okay. So now you're off the races. Are you do you have the company now to where you're totally sustainable, profitable at this point?

Julian Frachtman

14:21>> Yeah. Yeah. We're we're profitable. We hit a million two years ago. Last year, we hit 1.3 in

Nathan Latka

14:28In ARR?

Julian Frachtman

14:29>> In, yeah, gross revenue. Right?

Nathan Latka

14:31That's great.

Julian Frachtman

14:33>> And I I think this year will be 1.5 to two. I mean, we have a few new products launching, so I feel really positive about where we are right now and just trying to figure out

14:47>> what- it sounds dumb, but what to do with the money. I've had struggles trying to figure out how to scale sales.

14:57>> Maybe it's, like, get enough in the piggy bank to acquire a competitor who's tired of being in the market.

Nathan Latka

15:03Do you have a target list?

Julian Frachtman

15:05>> Yeah. There are, like, two, basically.

Nathan Latka

15:07How much money would you need to get the deal done, you think?

Julian Frachtman

15:13>> Depends what multiple they want.

Nathan Latka

15:16Let's say it's the multiple you wanna pay.

15:20Eight. Okay. So you need about 8,000,000 to get it done.

Julian Frachtman

15:24>> 8 to 10. Yeah. I I actually know your guy

15:29>> who's on the the BD side for your lending platform.

Nathan Latka

15:34Oh, for Founderpath? Yeah. Yeah. Yeah. Yeah. We one of the things we look for are creative founders that have a vision for how they wanna do a roll up. We love putting money behind those kinds of founders.

Julian Frachtman

15:43>> Yeah. Yeah. I I I had talked to him when he was at the San Antonio group.

Nathan Latka

15:47Oh, good. Good. Yeah. Chris Chris Som. He was at Active Capital.

Julian Frachtman

15:51>> Yeah. Exactly. Yeah. Chris Som. So I I've messaged with him, and so he was like, yeah. Reach out when you, like, get to that point. So That's awesome. That's awesome. Well, how

Nathan Latka

15:59so how many customers then are you working with today?

60 Customers Today

Julian Frachtman

16:02>> We're, like, 60 or so.

Nathan Latka

16:0460. Okay. Mean, so 60 paying that ARPU earlier of, like, 4,000. Okay. Maybe maybe that wasn't an average. Maybe the average is, you know, less than that. But point being is you're doing something what? You're doing something like like a 120,000 a month right now on average in revenue?

Julian Frachtman

16:19>> Yeah. About that. And the the margins after we get through, like, my revenue or my salary, my founder's my cofounder's salary and everything, the margins are very good. And we can talk about that offline, but they're soft.

Nathan Latka

16:35That's great. Okay. So any plans to to raise more equity here, or you just wanna keep chugging along on cash flows right now?

No Dilutive Raise, Focus on Roll-Up

Julian Frachtman

16:41>> Keep chugging along on cash flows. Don't wanna do any dilutive raise, but definitely interested in conversations related to, like, roll up conversations.

Nathan Latka

16:53Yeah. Yeah. Yeah. Very cool. Well, we're rooting for you. We appreciate you telling us more about the business today. In the meantime, though, let's wrap up here with the famous five. Number one, what's your favorite book?

Julian Frachtman

17:02>> My favorite book is Love in the Time of Cholera.

Nathan Latka

17:07Love in the Time of what?

Julian Frachtman

17:09>> Cholera. Cholera.

Nathan Latka

17:11Okay. Number two, is there a CEO you're following or studying?

Julian Frachtman

17:19>> There's not really. I mean, I would say just, like, in terms of kind of doom scrolling, Elon Musk just to see, like, what happens next.

Nathan Latka

17:29Number three, what's your favorite online tool for building airtory?

Famous Five: Books, Tools, and Advice

Julian Frachtman

17:34>> Slack.

Nathan Latka

17:35And number four, how many hours of sleep do you get every night?

Julian Frachtman

17:39>> Well, my two year old wakes up every night at, like, 05:15, so probably, like, six or seven if I'm lucky.

Nathan Latka

17:47Alright. So so married and one kid?

Julian Frachtman

17:49>> Two kids. Two kiddos.

Nathan Latka

17:50Okay. And how old are you?

Julian Frachtman

17:52>> I am 38.

Nathan Latka

17:54Last question. Something you wish you knew when you were 20.

Julian Frachtman

18:00>> I guess I kind of already knew it, but it doesn't matter if you do well at school. That

Nathan Latka

18:07is true, guys. His first company sold for $42,500,000. He made call it, a million bucks off that deal, learned a lot about equity cap table, and eventually joined and built his own company called airtory.com launched in 2017. They're helping advertisers with the platform that helps them manage ads, produce ads. They white label to ad agencies who have then have end clients. They make money off SaaS services and utilization fees doing about one point sorry. About a

18:31$120,000 a month right now in revenue up from, call it, like, 80 or $90 a month just a year ago. So nice nice growth. They're profitable today. They've raised just $400,000 in their last seat around about 10,000,000 post money valuation, growing profitably, which we love. Julian, thanks for taking us to the top.

Julian Frachtman

18:48>> Thank you very much.

Nathan Latka

18:49One more thing before you go. We have a brand new show every Thursday at 1PM central. It's called Shark Tank for SaaS. 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

19:15Central. Additionally, remember these recorded founder interviews go live. We release them here on YouTube every day at 2PM 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 SaaS world, whether it's an acquisition, a big

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19:59for that at nathanlatka.com/slack. In the meantime, I'm hanging out with you here on YouTube. I'll be in the comments for the next thirty minutes. Feel free to let me know what you thought about this episode and 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

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