SaaS Interviews with CEOs, Startups, Founders
1327 Prague Based Translation Tool Passes $5m in ARR, Bootstrapped
13 Mar 2019
Chapter 1: What is Memsource and how did it start?
Launched Memsource translation company selling really to freelancers, translation professionals. Launched in 2010. Bootstrapped it all the way up to today. 500 customers doing past $5 million run rate in December of 2017. Hoping to double that over the next 12 to 24 months to 10 million bucks. Economics sound like they look good. Less than 3% net revenue churn.
Chapter 2: How has Memsource achieved $5 million in ARR?
per month, totally willing to spend at conferences, you know, spend 10 grand to get five customers, 2K CAC with a quick payback period because they are typically signing up new people at five grand a month, all paid up front. The team of 80 based in remote locations all around the world.
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.
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Chapter 3: What is the customer acquisition strategy for Memsource?
Hello, everybody. My guest today is David Chaniuk. He's the founder and CEO of a company called Memsource, a software company providing cloud-based translation technology headquartered in Prague, Czech Republic. David graduated in translation and comparative studies, received his education at Charles University in Prague, Humboldt University in Berlin, as well as the University of Vienna.
David, are you ready to take us to the top? Sure. All right. Tell us about Memsource. What's the company doing? How do you make money? So I founded Memsource in 2010, and we help global companies translate more efficiently. And we're cloud-based software, so we provide subscription. And what's the average customer pay per month? Uh, it's about $5,000. Okay.
So you're very much in the enterprise space. Yeah. Okay. Got it. Very good. And what do they get if they pay five grand a month? What do they get for that? So they get pretty much a, um, a complete solution, uh, that has, you know, two major components for your, uh, enterprise globalization. Basically it's a translation management system, uh, So it's a workflow.
So it's a way to connect to your content repository. It could be a CMS that we connect to. And then we have a workflow that shifts the data to maybe the translators, the revisers, and then back to the CMS. And then we also have a translation tool for all the translators, advisors, post editors, you know, the linguists.
So these are the main two things, the workflow and the actual translation tool. And you've launched, you launched in 2010. What have you scaled to today in terms of total customers on the platform? So we have about 500 paying enterprise customers. And we have about 200K users. And, you know, our users are basically our translators, transition companies, and enterprise users.
So these are the, you know, these are the three big kind of user groups. And in terms of, you know, you can also get the segment. So we provide, you know, we provide the transition tool to translators and the workflow, the whole workflow component, the transition management system we provide to global companies.
And David, when I take 500 customers times that $5,000 per month price point you just gave me, that would put you at $2.5 million per month. Is that accurate? It's actually, it's a little less. Okay. But can we say between 2 million and 2.5? Yeah, more or less. Okay, great. Well, more or less. So is it in that range or is it still lower than 2 million?
So what we're doing is we have a growing number of enterprise customers that are joining our platform. So historically, we were focusing more on smaller customers, you know, and they're still with us. Makes perfect sense. So new customers signing up are at that $5,000 per month price point on average. But historically, by the way, this is very typical. Historically, folks were paying less.
So what are you at today? Are you doing 1.8 per month? So our next aim is to get to $10 million of annual revenue. Okay. And walk me through kind of where you're at today. Do you think you'll hit that this year? Um, probably next year. Okay. Yeah. So 10, 10 million in ARR would be 830 grand per month in revenue. Again, can you give me a general sense of where you're at today?
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Chapter 4: What are the main components of Memsource's service?
So, so, you know, last year we, uh, uh, we were at about, uh, uh, $5 million. Great. So you're trying, you're still trying to, I mean, these are big numbers are getting bigger. You're trying to still double year over year. This year, we won't double. So if we double this year, we would be at 10 million. And so we'll be at 10 million next year.
So we will not double this year because I think doubling forever is probably not our strategy. And also, you know, we're bootstrapped. So So our growth needs to be profitable. So we're running a company that is self-financed currently. Yeah. By the way, congratulations on the scale that you've reached bootstrapping. That's rare. And I applaud you. And I think that's wonderful.
I can't wait to go through the rest of the interview and learn how you've done that. Just to confirm those at the end of December, 2017, you said you hit that $5 million run rate. Is that accurate? Okay, good. And you're giving yourself essentially 24 months to double that. Yeah, I think that's pretty reasonable, yeah. Great, yeah.
So at a $5 million run rate in December of 2017, that means you're doing north of kind of 420 grand per month. You've got 500 customers, some of them paying less than 5 grand per month, but new ones you're signing up are at that 5 grand per month level for these translation services. Give me more of the backstory here. So you launched in 2010. What were you doing before that?
So before that, I worked in a... You know, my first job was, was, uh, was with a recruiting company that I, uh, you know, I was, I was always interested kind of in, in technology.
So in that recruiting company, I was trying to figure out the market, uh, the, the, you know, the, uh, and, and I was, uh, I actually, uh, went to work for a couple of technology companies afterwards, uh, telco and, and, uh, a startup afterwards. So it was a language technology startup. Uh-huh. And that's where I met some of the people that work with me currently at Memsource.
And what's the team size today? So we're 80 currently. You said eight? Eight, zero. Yep, eight, zero. Great. And everyone's in Prague? No. So we have most people in Prague, and then we have some people in the US. We have a small team in Japan also. And then we have a few people, you know, all over Europe, and we have one person in Canada, we have one person in Korea, so. That's great.
Well, David, look, I have to tell you, we've interviewed thousands of B2B SaaS CEOs and the average revenue per employee across all of these is about 137,000 bucks. If just across bootstrapped companies, that number is about 250,000. Currently, if you're north of a $5 million run rate and you've got eight employees, you're up at like 660 grand.
So I love that you're doing this in a highly profitable way. You're super capital efficient. Walk me through some of the key kind of unit economics. Churn is critical in a SaaS business. What is your churn today and how do you manage it? So, um, so, you know, Memsource, Memsource is, uh, is, uh, you know, pretty sticky service.
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Chapter 5: What growth targets is Memsource aiming for in the next year?
So we talked a little bit about your churn. Do you use lifetime value at all to guide your decision making or is it just a vanity metric? So that's the team that's responsible for churn. They're using that, yeah. How do they use that data point? Yeah, I should have taken them to the call here. So that's our reference point. I know that this is what they're following as a standard.
Sorry, David, what standard are you optimizing for? Is there a ratio you're optimizing for or a five-year LTV? What are they optimizing for? So we're optimizing to be kind of in the, you know, I believe what's the industry standard for churn. You know, if your churn is, I don't know, 10%, you know, probably that something's wrong with your product.
If it's between, you know, around 2%, then I guess we're fine. So we're trying to benchmark against what's the industry standard there. Yeah. Very good. Last few questions here. So again, you built a great company. You've resisted the urge to raise. Are you raising right now? Is there any reason you would ever raise capital? So we haven't raised so far and there's some advantages.
Uh, you know, we, we would, we're all, we're, we're, you know, we would, we wouldn't say categorically no, but we don't currently, we don't need to raise. So it would have to be a good opportunity for us. And, and, uh, it would certainly be a change in the way we operate. So again, you're doing $5 million right now on a run rate.
Let's say someone came in and gave you $5 million on a $40 million pre-money valuation. So you're selling less than, well, a little more than 10% of the company. I mean, is that a kind of deal that would get you excited? I would say I would think about it. Come on, David. It's 10X your ARR. Come on. Yeah, I would give it a thought, yeah.
If you release a statement after the show goes live, like a month later, it says, we've just raised 5 million from Excel on 45 million pre-money. I'm gonna go, David, where's my royalty? I want 2% royalty check. I'm just kidding. Okay, let's wrap up here, David, with the famous five. Number one, what is your favorite business book? What's my favorite?
Okay, so look, I... Don't make one up, say none if you don't. No, no, I'm not into business books. Number two, is there a CEO you're following or studying? Give me one off the radar. Somebody in Prague you really respect. It's not a CEO, but his name is Jan Zadak. He worked in very senior positions at HB. Spell it. Spell his name. J-A-N-Z-A-D-A-K.
And he's been, you know, so that's someone I know personally and I respect. Number three, what's your favorite online tool for building your business? Hmm. That's a good question. There's a number. I think currently probably slack. Number four. How many hours of sleep do you get every night? On average, six. Okay. And what's your situation? Married, single, kiddos? I'm married with two kids. Two?
Okay. And how old are you? They're eight. How old are the kids? No, no. How old are you? Six. Some 44. 44. Last question. One number you get accurately from me. There you go. All right. Last question here. What do you wish your 20 year old self knew? Sorry, can you repeat? What do you wish your 20 year old self knew? If I was 20 year olds, what I would want to do? Yeah.
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