SaaS Interviews with CEOs, Startups, Founders
1269 How This AdTech CEO Shifted to Pure Play SaaS and $40k in MRR
14 Jan 2019
Chapter 1: What is the main topic discussed in this episode?
publish your work and then be patient to be confident. Things will come around again. Founded brax.io back in 2015, helping folks, uh, performance marketers get better performance right out of their ad spend each customer paying on average 400 bucks per month.
Chapter 2: What is Brax and how does it help performance marketers?
They have currently about 92 customers. So they're doing about 40 grand per month right now in sales. That's double, uh, year over year from June 2017 last year when they were doing about 20 grand per month in sales. Today, they're about 4% logo term per month, but revenue is net negative on an annual basis, which is obviously a great thing.
They're spending about $600 on a fully weighted CAC, so payback period is about 1.5 months with their team of three based in remote locations all around the country. Again, founded in 2015. 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 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 any 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 Mark Simon. He's the co-founder of Brax, where he helps performance marketers scale, automate, and simplify native advertising.
Previously, he helped e-commerce and software companies acquire customers through organic and paid search. He loves data visualization, nutrition, and everything outdoors, which is his excuse for taking his kids on all kinds of crazy adventures. Mark, are you ready to take us to the top? I'm ready. Let's do it, Nathan. All right.
You told me before you've listened, so you know what you're in for, right? I do. All right, good. Tell us about Brax. What are you guys doing? How do you make money? Sure. So we basically work with all the native ad networks out there. So you can, the core things is if you've ever created ads, you have to create the same ad like a hundred times in any ad network.
So what our system does, you create it once and you can send it out to all the native ad networks. So specifically Outbreak, Taboola, RevContent, those guys. Mm-hmm. And walk me through the revenue model. Is it a SaaS play here? Or is it just a percentage of volume through that you're taking? Sure. So it is a SaaS play. We charge people on a monthly or annual subscription.
And the way we kind of break that subscription down, the value metric is a media spend. Got it. So there's kind of, there's kind of, there's kind of buckets, right? If less than a hundred grand per month, you're going to pay us, you know, a hundred bucks a month. If you're spending a million per month, you're going to pay us a grand per month, something like that. Exactly. Yes. I see. So, okay.
So you know, the numbers, what's the average customer paying you per month? Would you say? Yeah. So on average, it's about $400, um, is kind of the average, the, the entry level right now, kind of starting price is 200 a month. Now, if they do it, we have a pretty aggressive, we push people to an annual plan. So there's a pretty aggressive discount.
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Chapter 3: What is the revenue model for Brax?
We have looked at it in the past just based on, uh, salaries of people fully, fully weighted. Yeah. Yeah. So, so when we look at that, it's, um, you know, we kind of look at payback period more than lifetime value since we're so young. And so that's about one and a half months. Okay. So that's, that means you're spending about 600 bucks to acquire the customer if they're paying 400 bucks a month.
Yeah. Give or take. So some of the self-serve we get for less than that, some of the, but that's what it averages out to about. Okay. I love that you bring that up and that, you know, you're so young, you'll get payback period. You know, a lot of young companies, they tend to focus on the sexier metric, which is LTV to CAC ratio.
The problem with that is you put yourself in a cash gap, obviously, right? Because you can have a very healthy, people don't realize this. You can have a very healthy lifetime value to CAC ratio. Let's say a customer's worth a thousand bucks to you. You only paid 10. The problem is if they're only paying you
I'm making this up, $1 a month, it takes you 100 months or 1,000 months to get that $1,000 of lifetime value, which is why payback period is a much better indicator from an operational perspective for young companies. So this is a great payback period being 1.5 months. Yeah. And another thing on that, I think that people mess up with LTV. So I'll give you a good example.
I think it was like eight months or something before we ever had a customer churn. And so if you look at the formula, well, LTV is unlimited until you have churn. I'm like, well, that's not real. I was like, we're not State Farm here with 20 years of data to make a prediction. I was like, you need at least five years of data before you start making those predictions. Yeah.
Lifetime value is also, I think, a dangerous metric because of what you just articulated. People tend to just divide by churn and then extrapolate and they assume a lifetime value of infinity.
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Chapter 4: How does Brax determine pricing for its services?
The truth about lifetime value, in my opinion, is it's a general soft indicator, but it's a very weak indicator. Because look, if you have a lifetime value of anything more than two years, true or false, Mark, you know, in the next 12 to 18 months, something's going to come into your industry that you didn't know about and you're going to have to adapt on the fly. Yeah.
Every six months that could, that could quadruple your LTV or put you out of business. Right. I mean, potential, I'm making that up, but worst case put you out of it. You just don't know. So lifetime value, I think is always an interesting conversation. Um, tell me more about some of the, uh, the, um, uh, the team size. What are you guys at today? Sure. So we're actually really small team.
Uh, so employees were three, um, which is great. We do have contractors for some stuff. Uh, we were larger, but we just scaled down. It wasn't necessary. It was one of those, like we kind of took the Silicon Valley ethos of like hire people and you can grow faster. And that proved to be false in our scenario. Um, we actually grew faster as we cut back. Um, and, Why was that?
Is it because you, when you hired people, they just weren't talented or you put them on the wrong tasks or you don't know what your growth drivers are? Uh, I think it's a, a few things. So one, um, you know, I still think even today with where we're at, I still think we're doing a little bit of, you know, helicopter circling to find product market fit. You know, I don't put us in that.
We found it category. Um, you know, when we're doing a hundred KMRR, I'll probably feel a little bit more confident about that, but at least to that point, like in my opinion, you just haven't found it before that point. You know, we certainly have traction. Um, And so, you know, I think that, so that's part of it is, you know, we hadn't, you know, it's been about a year, a little less.
So we've definitely done better on our product where we fit in the market standpoint and developed a little bit more in there. I think the other piece was we did go a little bit more, we didn't necessarily, so Part of it is people too.
Not necessarily, but sometimes we... I think part of it is you're spending so much time managing people when maybe you're actually the best person to execute on it. And when you're really young, you want to stop doing things. At least in my opinion, what we try to do is take us as the founders out of the picture. Maybe it was just a little too early for us being that we're bootstrapped.
I think if we... I take it. You're still, you're still bootstrapped today. Correct. Yeah. I mean, look, the problem with like what you're just articulating is as the founder, you will always be the best person to execute every tasks. Like the trick is like, how do you find two people that are 70% as good as you? Right. And, but, but together they're 140% of your output. Yeah.
I mean, so it was just tricky. I mean, I think a lot of the time was just getting spent on, on training and because we're in a very technical industry, there's not a lot of people. So I think a lot of it was just, we had to dedicate more time to training versus just executing. Yep. And what year, Mark, when did you launch the company? What year? Uh, 2015, 2015. Very good. All right.
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