Chapter 1: What is the main topic discussed in this episode?
This is the Top Entrepreneurs Podcast, where founders share how they started their companies and got filthy rich or crash and burn. Each episode features revenue numbers, customer counts, and other insider information that creates business news headlines. We went from a couple hundred thousand dollars to 2.7 million. I had no money when I started the company.
It was $160 million, which is the size of many IPOs. We're a bit strapped. We have like 22,000 customers. With over 5 million downloads in a very short amount of time, major outlets like Inc. are calling us the fastest growing business show on iTunes. I'm your host, Nathan Latka, and here's today's episode. Hello, everyone. My guest today is James Kappen.
If you haven't heard of him before, he is a designer and entrepreneur who loves solving problems using technology. His current company is Proposable. James, are you ready to take us to the top?
Chapter 2: What is the main focus of Proposable and how does it operate?
Sure. All right. Tell us about the company. What's it doing? How do you make money? So Proposable helps solve the pain in the sales proposal process. So trying to help with moving things from Microsoft Word and legacy platforms onto the web, creating a web-based document that can be tracked and updated in real time. So kind of taking the sales document and moving it online, basically.
Trying to create some automation for companies that need some more processes for their sales proposals. So how are you winning customers over from other folks in the space like DocSend? So we're kind of focused. Our platform looks like a document. It looks like a Google Doc. A lot of these kind of newer platforms, it's kind of a... They're using it for marketing. They're using it for sales.
It's kind of an all-in-one kind of thing. We're focused on the proposal process itself. So... um, creating the proposal, drafting the proposal, getting a manager approval, sending it out and getting an e-site, getting an e-signature to close the deal. So really focused on that specific process.
Uh, whereas some of these other platforms are focused on everything from marketing to sales to document management, that sort of thing. So you mentioned signing, but I mean, how do you beat point solutions? They're like, right. Signature doc, you sign in many of the others in the space. Yeah, so they're completely focused on the signature itself, the document, the signature.
Signatures, e-signatures are becoming a commodity. Everyone does e-signatures now. They're all legal. Most of them are legal. It's kind of the general consensus that e-signing is a legitimate way to sign documents and close deals. So, you know, instead of kind of using a service like Proposable and then exporting to PDF, uploading to another service, getting it signed.
We just sort of include the e-sign all within this one smooth workflow of sending a proposal out, communicating around it. Sorry, didn't you just argue that one of the ways you're different than Docson is that you just do the one thing versus doing marketing and sales and everything else, but now you're arguing that you do more than the point solution.
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Chapter 3: How does Proposable differentiate itself from competitors like DocSend?
So which one is it? So like I said before, the proposal process is a specific process. It's a sales document specifically for proposing a deal. a quote or a bid. So I think, you know, you see, you know, the DocuSigns and these, it's really about the signature. So you can upload any kind of document you want and get a signature, whereas we're saying, you know, consolidate it into documents
kind of a single workflow and not kind of bouncing the document out to a signing product and then moving it out to a redlining product, moving into Dropbox to store it, you know, kind of bringing all that into one kind of smooth workflow for, you know, people who do lots of proposals. And what's the revenue model? Is it a pure play SaaS? Yes. Okay, got it.
And give me a general sense of size of customers. What do they pay per month on average, would you say? Well, our smallest plan now is $39 per month per user. So we kind of go from there up to some bulk discounts for larger customers. Just to avoid going on every different customer cohort, what would you say the average pays per seat? Like $39, you think? It's higher than that.
It's more like $50. $50? Okay, good. And give me more of the backstory. When did you launch this thing? So it was way back in 2009. Okay. What were you doing back then? What did you quit to do this? Yeah. So right out of college, I started an ill-timed advertising company, paper advertising company here in Santa Barbara, a magazine, in fact. So kind of the worst time to do that.
All the print advertising space was really going downhill quick. So kind of Worked my way out of that, lost some money and decided, hey, you know, I'm going to spend any entrepreneurial time I need to focus on the Internet because that's where I saw people excelling even in the downturn.
So I thought, hey, some of the some of the things I learned during that process of doing the advertising piece, you know, I saw some holes in the sales process and thought, hey, this web based sales process. um, tracking solution might be helpful to me and to others. And what have you scaled to now today in terms of a team size? How many folks are with you? Uh, we're still a small team.
Um, so, uh, we're five of us. Okay.
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Chapter 4: What is the revenue model for Proposable and how much do customers pay?
Everyone in Santa Barbara. No, we're all spread out. Oh, great. Hawaii, Indiana. That's great. Yeah. And what have you scaled to in terms of customers using the platform? Um, so we're right around 300. Okay. Um, customers. And is this just, you kind of nose to the grindstone hustle and hustle and cold email and how are you getting these guys?
You know, we have kind of an interesting lead magnet source. We have a lot of proposal templates on the web that rank really high. So we get kind of a lot of folks coming through that and we rank well organically for proposal software, the term proposal software. And a few other, uh, terms where, you know, folks are coming, you know, to purchase software like ours.
You're talking about like your agency proposal, template, social media proposal, web design proposal, et cetera. Right. Right. Yeah. Interesting. It's a beautiful layout by the way. I'm looking at it right now. It looks great. Um, now in terms of, in terms of, well, you mentioned the 300, but I want to make sure too, are those companies using you or those are the seats, total seats using you?
So I haven't looked within the last week. Um, So I'm not, I'm not, you know, totally up on what's happened in the last couple of weeks, but, um, we have active, I just looked at the active user count. We're right around, we're over 500, um, active users. What does that mean though?
Chapter 5: What led the guest to start Proposable and what was his background?
Is that like, are those paying seats? Those are paid seats, paid seats. Okay. So 500 paid seats, 300 businesses. So on average 1.7 seats per business, something like that. Sounds right. Interesting. Okay, now can I take that 500 number times the 50 number you gave me earlier and assume you're doing about $25,000 a month in revenue? Mm-hmm. That's about right? Mm-hmm.
And you've bootstrapped this thing or you've raised capital? Yeah, there was a little seed around it. It actually launched through a company called Sproutbox back in Indiana, Indiana University. They had kind of a Shark Tank-esque company. kind of thing happening in 2009 and end up winning that competition with this idea. So I got some, a seed round of funding to kind of produce the MVP.
How much was that? That's what we've done. That was 250 K. Okay. It was, that was a convertible note though, right? Not equity. That was equity. Oh, that was, Oh wow. It was 250 grand. How did you value the company back then? Great question. Cause it was like, yeah, it was like a little baby. Yeah, it was. So I mean, what did they, what did they take? 10, 20% for that amount of money?
Um, you know, I won't say at this point, but. Well, how many years? I mean, this was years ago, right? Yeah, it was years ago. They probably have this on their website somewhere. I mean, this was like seven years ago. Yes, they do. So save me the searching. What do they take for that amount of money?
Chapter 6: How has the team size and customer base evolved over time?
Um, you mean how much equity? How many shares do they take? Yeah, just in general. I mean, most of these accelerators, they say we're going to give you 100 grand for 10% of that company. I mean, this is usually public. So I can either go do the work and research it or you can just tell me. Yeah. Um, So it took 30%. Okay.
And is that, is that, they do that every year with a new company, whoever wins? They, they did for a period of time and I think they've, they've adjusted their model accordingly. It's really aggressive. It is. It was very aggressive. Do you regret that? No, I'm, I'm thankful for it. Um, it gave me an opportunity that I wouldn't have had, um, being a designer and not having the team in place.
So that's kind of what they were able to do is kind of
take folks like me with with hustle and an idea and kind of provide the team to build the mvp give the kickstart get it off the ground okay top drive many of you ask me all the time how did i get my website up so fast so quickly and why is it doing so well the answer is simple i use hostgator.com to keep the thing cranking along they've got a 45-day money-back guarantee which is great
I used their free website builder to get this site up because it's ideal for WordPress. It's just what I use. They've got 4,500 templates and a free e-commerce plugin as well. And 24 seven support, which we love, right? We love that. I bug the hell out of them. They always get back to me. So I've got you 30% off along with $100 in free AdWords credit.
To grab it, just go to HostGator.com forward slash Nathan. But you got to do it now. Again, HostGator.com forward slash Nathan. What are you growing at right now year over year, would you say? I think, let's see. Doubling, tripling, flat? No. I think we were flat, I think, last year to this year. So 12 months ago, you were doing about 25 grand, same as today? Right, right. Okay.
And so is this your main gig?
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Chapter 7: What strategies does Proposable use for customer acquisition?
Yeah. It has been, yes. Okay. You look like you were deep in thought when you were answering that. What's going through your head? I'm an entrepreneur, so I'm actually, you know, I have lots of other projects kind of in the mix, like I'm sure you do too. So this has been my main focus since the beginning.
Is there another project you're more excited about and you're like, wait, should I mention it on the show if my investors hear it, they won't be happy? Exactly. Okay, so why not just sell this company for a quarter of a million, give them their money back and go do your other thing? Because then I wouldn't get a payout. Okay, well, what payout do you want?
Okay, change the number to get whatever payout you want. Why not sell the company and then go do your own thing? Yeah, I would be interested. Interesting. What would you sell? I mean, what kind of payout would you look for in terms of coming up with a deal? I'd have to think about that. Yeah, I'd have to... do some soul searching. Yeah.
I mean, if you take 29, nine years kind of, kind of working on then, you know, yeah, sunk costs are tough. Right. But I mean, if you take 25 grand and multiply it times 12, I mean, so it sounds you're doing about call it 300 grand a year right now on revenue.
Um, I mean, it's not crazy to say, I mean, you're flat, that's the problem, but I mean, it's not crazy to say you get one or two X at least ARR. I mean, that could be an interesting six figure payout for you after you pay folks back. Yeah, no, definitely. What would you invest the money in? Great question. I don't have a good answer for you right now.
I thought you just said you know what your number one other idea is. Yeah, I would invest some in other projects for sure. But you don't know which one yet. Yeah, exactly. Got it. Got it. Makes good sense. What is churn at right now? Um, you know, that's a great question. It's too high. Let's just say that. What's too high?
Like if you're flat year over year, you can just look at how many people you added over the past 12 months. That means you lost the same amount since you're flat. I mean, generally, how many customers are you losing per year? You know, I don't have a number for you right now. Okay. Well, how do you know it's too high if you don't know what the number is? Any is too high, right?
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Chapter 8: What challenges does Proposable face regarding customer retention?
Not necessarily. If you have zero churn, it might mean your price point's too low. Nobody's churning. Churn can be a good thing. Sure, sure. Yeah, no, we've been between five and 10%. Monthly? Yeah. And that's logo churn or revenue churn? Pardon me? That's logo churn or revenue churn? When you say logo churn, what do you mean?
Like that's just raw number of logos that have left you versus the revenue they make up. So companies where ARPU is very different across customers, they'll tend to look at a revenue churn as a more reflective example of company health. Yeah, customer count, customer number. Customer count, okay. And why are they leaving? When you ask them, why are they leaving? No, it's interesting.
The space is getting more and more competitive. So I think there's other, you know, there's, sometimes, you know, our, our product, when people don't get fully engaged in it, it's easy to jump to a competitor. It's like once they've kind of learned the system and, you know, I, I feel like education has been a part of it in a lot of cases.
Um, it's hard to, you know, one of the main friction points actually is moving their content from wherever they have it. Microsoft word, Excel, Dropbox, getting it into our platform. And so when people don't quite get their content in, um, it's not as sticky. The folks who have kind of embraced it and said, Hey, we're, we're moving on to proposable.
We're, we're using this as our, um, kind of proposal tool works for them, works for them. Yeah. Right. All right, James, let's wrap up here with the famous five. Number one, what's the last business book you read? Um, don't make one up. If you don't have one, just say none. No, I can't think of. Okay, good. Number, number two, uh, who's the last CEO in Santa Barbara you had dinner with?
uh bill evick bill evick yeah bill company called uh aptex aptex interesting number three what's your favorite online tool for building the business besides your own intercom number four how many hours of sleep do you get every night nine nine okay and what's your situation married single you have kids married no kids no kids okay that's good and how old are you 34 34 last question what do you wish your 20 year old self knew
Focus on finding something that you're good at and you enjoy as quick as possible. As fast as possible. There you guys have it from James. Launched Proposable back many years ago. Won a business competition with it. That was in 2009. Got 250 grand of seed funding for 30%. His company is now five people, totally remote, which is great. Again, helping you manage proposals.
They do customer acquisition really effectively via templates that rank very high on Google. 500 seats, paying about 50 bucks a month, so 25 grand a month. in revenue flat year over year, mostly due to high churn, 5% to 10% per month in terms of logo churn. But he's an entrepreneur. He's talented. He's got ideas. We're going to watch him. James, thanks so much for taking us to the top. Awesome.
Thanks, Nathan.
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