Chapter 1: What is BrandVerity and what problem does it solve?
Be a little riskier earlier on. Take them earlier. Be more intentional about your career path earlier on in life. He's now building after experiencing his first-hand somebody's problems related to a gap ad in 2008. Launched a V1 version of a company called Brand Verity. That's what he's building today.
Over 400 customers use the platform, again, to monitor affiliate content, whether that's ads directly or just web content in general, making sure they're compliant with ads. government regulations, things of that nature. They're bootstrapped, which I love.
July 2017 revenue, so a year ago, was $420,000 in monthly recurring revenue, growing 20% to 30% year-over-year, just past $6 million in ARR here in July of 2018. Each of these customers paying about a grand, caught between a grand and two grand per month, less than 20% gross logo churn annually, net revenue retention just north of 90%.
He is totally willing to spend up to $12,000 to acquire one of these customers, which gives him a 12-month payback period.
Chapter 2: How did David Naffziger transition into the tech space?
His team of 35, based between Seattle and and London. 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 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 David Nafziger.
He's the CEO and co-founder of Brand Verity, a provider of enterprise technology solutions that combat online trademark abuse and help advertisers ensure compliant marketing programs. The service enables clients to identify abuse and efficiently take action to resolve the issues discovered. David received his BS from MIT. David, are you ready to take us to the top? Fantastic. Awesome.
Okay, so this sounds like a very kind of niche-specific product. How did you stumble across this space?
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Chapter 3: What is the revenue model of BrandVerity?
And tell us what the company does and how you make money. Sure. So a couple, two companies ago, I was, I think, kind of a junior co-founder of a company called Quova that developed a technology that maps IP addresses, so the IDs that people use when they connect to the internet to some extent, to physical locations. And one of our principal ideas
So when you do a search on Google, you'll see targeted ads on the right-hand rail or on the top that are related to where you're physically located. And Quova at the time, I don't know if they still do, but they were a provider of that technology to Google. Our core customer, though, were online fraud departments. So if you made a purchase online,
and let's say you were shipping it to Miami, you're physically sitting in Austin, but maybe you were accessing the internet from Kazakhstan, that might be a sign of something about to happen. And you might want to give that person a call or talk to them a little bit more.
So along the way, I kind of really met a lot of people in the fraud teams of these typically e-commerce companies and got a real appreciation for kind of the thrill of the chase to some extent and the bad guys that they catch. Fast forward to a company after that where I ran an engineering team for a company called Duty's Book that was a once upon a time Yelp competitor.
And we became an affiliate. It was one of the ways that we made money. And we were active in the Gap affiliate program. And we began to get purchases from customers who would visit a review of a Gap store and then go and make a purchase online using an affiliate link or something like that. So our marketing team began to think about, oh, how do we... get more money from these pages.
So is there an opportunity there? Yes.
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Chapter 4: How has BrandVerity achieved $6 million in ARR?
So they began buying paid search ads to send users to those pages that we made money from. And within a day or two, the GAP affiliate manager contacted us and said, hey, you're not supposed to do that. That's against our terms. And we had no idea, but we instantly pulled down the ads. But from where we sat in Seattle, we saw lots of other affiliates doing the same thing.
And so we asked the affiliate manager, what would we need to do to get the same permission that everybody else has? And the affiliate manager's response was, there is no one else, just you. And over some back and forth, we realized that our team sitting in Seattle saw a really different set of ads than she saw sitting in San Francisco.
And it turns out the affiliates were doing what we call reverse geotargeting, right? So they're running their ads everywhere. Exclude San Fran. Totally.
Chapter 5: What strategies does BrandVerity use to acquire customers?
Exactly. And so this was the sort of first sign that there's sort of a problem here that's not well solved. So we wound down Judy's book. And as I was thinking about what to do next, I flew down to Affiliate Summit, which is sort of the largest affiliate conference. Yep. And kind of walked around and talked to folks. I was like, hey. Is this a problem you have? And there were a lot of yeses.
And is this, how do you solve it today? And not a lot of good answers. And would you pay money for a solution that did that?
Chapter 6: What is the importance of customer retention for BrandVerity?
And sort of got enough of an interest to feel like it was worthwhile to build sort of a V1 or an alpha product. Of brand verity. Yeah. By the way, what year was this? See, this would have been 2008. Okay, wow. That's great.
Chapter 7: How does David Naffziger manage team dynamics?
Okay, good. So that's really helpful to get the gist of the company. And then walk me through today. I mean, what's the revenue model? Is it a SaaS-based play? So it's a SaaS-based play. It's a subscription service. We sell two products, one that monitors paid search for various forms of affiliate abuse, for partner compliance, and trademark protection. And we'll have some data that shows...
where to prioritize your efforts. And then a second product monitors web content, we call it web compliance, for really regulatory concerns. I think that the problem that we solve exceptionally well revolves around, are your partners promoting you in the way that you've required them to? And so that might be
Credit card companies who have very specific terms for how their cards are promoted will be more general brand compliance concerns. So you have to promote us alongside blank or in a way that sort of aligns with our brand image and so on and so forth.
Chapter 8: What advice does David Naffziger have for aspiring entrepreneurs?
And David, for these products, don't go down every customer core, but on average, what are customers paying per month for this? So paid search kind of runs from, I think we have a starting price somewhere around $250 a month. Our average selling prices are sort of just shy of $1,000 a month. And our web compliance is sort of an order of magnitude higher. Yeah.
Are they 50-50 in terms of the revenue split or is one way outpaced the other?
Yeah.
Uh, so our paid search product is by far our oldest. Um, and so, uh, I'd say that's 80% of revenue today. Um, but the younger product by compliance sort of has a faster growth rate. Yep. Yep. That makes sense. That makes good sense. And then walk me through. So again, launched in 2008, you said it's your oldest product.
How many folks have you scaled to in terms of customers you're serving on that platform? That we're sort of, uh, probably, uh, little over 400 direct relationships. A lot of our customers will be agencies or affiliate networks and they'll monitor, you know, sort of tens to hundreds to thousands of brands underneath that.
All of us in the software world also have subscriptions to a thousand different software platforms. And it can be challenging to figure out which ones you should invest your time and energy in versus ones you should ignore. So, I mean, I had this problem. We're scheduling hundreds, actually thousands of B2B SaaS CEOs for this podcast. And I needed a good tool to manage all this scheduling.
So I went to Capterra and essentially looked at who ranked highest, who had the best reviews, and narrowed it down to essentially a book of fee, a pointlet, and acuity scheduling. I now use a combination of these three tools to do efficient appointment scheduling. Now, what Capterra has built is extremely impressive.
I don't know if you guys know this, 700,000 reviews of products from real software users help you discover everything and really make an informed decision. They cover over 700 specific topics. categories of software from project management, which we have a lot of these CEOs on the show, team L marketing to yoga studio management software, they really do cover a ton.
So if you want to get started on cap Terra today to find the right tools to make 2019 the year for your business, and quite frankly, save time and energy and all your software expenses, we all spend a lot on it. Visit Nathan lackey.com forward slash cap Terra. That's Nathan lackey.com forward slash c a p t e r r to get started today, totally free.
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