SaaS Interviews with CEOs, Startups, Founders
1154 How we hit net churn of -5% in Loyalty Program space
21 Sep 2018
Chapter 1: What is the main topic discussed in this episode?
B. Boulder. He's building a loyalty rewards program at Zinrelo. Launched it many years ago, back in 2009. He now has 30 people spread between California and India. They have reached 500 customers, which is a nice milestone, each paying somewhere between $1,500 and $2,000 per month. They're south of a million bucks in revenue per month right now, but stretch goal this year.
Maybe they pass that by the end of the year. Regardless, I love that they're doing this with very little cash raise, just 2 million cash raise, growing 50% year over year, net negative revenue term between negative five and negative 10%.
Their payback period's 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. This is the Top Entrepreneurs Podcast, where founders share how they started their companies and got filthy rich or crash and burned.
Each episode features revenue numbers, customer counts, and other insider information that creates business news headlines. We went from a couple of 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, everybody. My guest today is Jay Rawat. He's a successful serial entrepreneur and investor, advisor, and mentor to several startups.
He's currently the CEO of a company called Zinrello, a loyalty rewards and referral marketing platform. He has over 25 years of experience in technology industry and holds 19 patents. He loves trekking, running, and biking. He's currently training for the San Francisco to LA unsupported bike ride. Jay, are you ready to take us to the top? Yes, I am. All right. So a man of many talents.
Tell me about Zinrelo. What's it do and how do you make money? So Zinrelo is, as you said, it's a loyalty rewards and referral 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. Mm-hmm. Um, and, uh, the retailers pay us a monthly fee for access to the platform. Okay.
And are we talking like a grand a month, a hundred bucks a month, a million a month, generally, what do people pay you per month? Uh, we have two different programs. There's a self service program for smaller retailers. Uh, there, I would say the average monthly fee is about 150 a month. Okay.
Um, and then we have an enterprise plan, which has more features and comes with more support, uh, there, uh, the average monthly price is about $2,000. 2,000 per month. Okay. And if you, I mean, those are two very different markets to cater one, one cohort, you can put a sales rep on the other. You can't, right. They're very different. Which one are you more focused on?
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Chapter 2: What is Zinrelo and how does it function as a loyalty program?
Number three, they have a lower price point, mainly because they have revenue from other revenue streams. It allows them to get away with a cheaper price point. And number four, it's specifically built for marketing, sales, and support teams.
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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, 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% year over year range, something like that? Closer to 50% right now. That's pretty good.
That's pretty good, yeah. Yeah, that's really good. And walk me through why launch a self-service model. I mean, if I'm doing the math here, right, 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, that'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're 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 they're still babies?
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Chapter 3: How does Zinrelo's pricing structure work for different retailers?
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 realized that our processes had become so good and so smooth that we realized that we can launch a self-service platform without creating a lot of support. Okay. Okay. Got it.
So you didn't see, you don't see burden cost to goods sold or anything like that now that you've launched. No, no crazy server expenses, things like that. Exactly. Oh, interesting. Okay. Okay. Go ahead. You know, business where there is a lot of money to be made there as well. Yep. Now, what do you guys say in terms of team size? We are only 30 people right now.
30 and everybody based there in Sunnyvale? We have an office in Sunnyvale and we have an office in Pune, India. Oh, Pune. Okay. And what's the breakdown? How many in India? How many in California? Sales and marketing here and the development is happening in the India office. That's fascinating.
For people listening right now that have been thinking about opening a dev shop in India, what would you tell them? It's hard. The reason why it's working for us very well is because my co-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 U.S. for a number of years before he moved back, so he really understands the market here. So the biggest challenge is if you have an offshore development team, it's 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 we have. So how many people are out there? 10, 20? Yeah, about 20 people there. 20 there and 10 in California, sales and marketing in California. Okay, very good. 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 churn.
So we have achieved net negative churn, which is great because the way the pricing is structured, as I said, it's a land and 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 pay us a little bit more money. Yep. How negative are, I mean, are we talking negative 1%, negative 10%?
So, I mean, if you just look at the number of users when, Actually leaving, we have, I would say the average lifetime of a customer right now is about three years. Okay. Well, just to be clear, sorry, when you say you have net negative revenue churn, I'm just curious, how negative are you?
In other words, if your gross annual revenue churn is 5%, but your expansion is 15%, you'd be net negative 10%, right? Yeah, between 5% and 10% right now. Okay, got it, got it. And the people that you're expanding, what's the sole driver of that expansion revenue? If you had to pick one thing, is it number of additional seats? Is it some other feature they're adding? What's the sole driver?
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Chapter 4: What led to the pivot from B2C to B2B in Zinrelo's business model?
All right. Let's wrap up here, Jay, with the famous five. Number one, what is the last business book that you read? Well, I'll tell you about my favorite one. Okay. Not necessarily the last one. Uh, it's a book called, um, predictably irrational by Danny. Yeah, it's a good one. Irrational.
And that's just a incredibly insightful book into how humans make their decisions and just great insights into some marketing strategies. Number two, number two, is there a CEO you're following or studying right now? Um, I would say there are two CEOs that I, I really admire. Um,
household names of course you know there's mark zuckerberg for two reasons you know he's made some really bold decisions bold bets like you know instagram whatsapp etc and he also personally challenges himself with a personal challenge every year so i like that uh and the second ceo is uh sundar pichai so you know like myself he is from india he graduated from an iit and now he's heading a google so you know doesn't get more inspiration than that number three what's your favorite online tool for building the business
Use quite a few tools. One tool that I've started using recently is a tool called Yesware. So it allows me to really track all my emails and responses and allows me to automate a lot of scheduling. So I really like that. Number four, Jay, how many hours of sleep do you get every night? I try to get eight hours of sleep. Okay, what do you get though? I get between seven and eight hours. Okay.
So pretty close. Yeah. My kids are grown up now, so I do. What's your situation? Married, single, and how many kids? I'm married. I have three kids. Married. Okay. Three kiddos. And how old are you? I'm 49. 49. Last question. What do you wish your 20 year old self knew? Years. I'm wondering what was I doing when I was 20 years old? I was in college, right? So, you know, I would say be, Be bolder.
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 a loyalty rewards program at Zinrelo.
Launched it many years ago, back in 2009. He now has 30 people spread between California and India. They have reached 500 customers, which is a nice milestone. Each paying somewhere between $1,500 and $2,000 per month. They're south of a million bucks in revenue per month right now. But stretch goal this year, maybe they pass that by the end of the year. Regardless...
I love that they're doing this with very little cash raise, just $2 million cash raise, growing 50% year over year, net negative revenue term between negative 5% and negative 10%. Their payback period is incredible, under six months, spending up to $12,000 to acquire these customers that stay with them for 36 months or about $72,000 in lifetime value.
Jay, thank you so much for taking us to the top. Thank you.
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