SaaS Interviews with CEOs, Startups, Founders
1345 With $1m in ARR This MarTech Company Raising $3.5m in $12m Pre Money Valuation
31 Mar 2019
Chapter 1: What is the main topic discussed in this episode?
Hello, everyone. My guest today is Johannes Herzer. He is a serial entrepreneur with one acquisition and two disastrous failures prior to his current venture, DoorBoost. He's also an online advertising expert with more than eight years of experience in advertising for retail brands and their retail locations. Johannes, are you ready to take us to the top? Sure. Yeah. All right.
So tell us real quick, what does DoorBoost do and how do you guys make money? What's the revenue model? So we're basically a classic software as a service model, but we do make a lot of money still with services that we add on top of our software. What's the breakdown out of curiosity? What percent of your last 12 months revenue was software versus professional service?
So the last 12 months were actually pretty much even the odds. So we have 50% software as a service subscription and 50% services that we just add on top of that. And which one's growing faster? The subscription model is growing faster just because we've shifted a little bit. We might get into that a little later in this interview. Yeah. That's great. Okay.
Chapter 2: What is DoorBoost and how does it generate revenue?
So before we go down that rabbit hole, yeah. Tell us about the business. What do you do? Yeah, so by now we have become something that doesn't exist as of right now as a category. It's basically a campaign distribution platform.
So what that means is we allow brands that work with retail locations to create campaigns from their headquarters and basically distribute them into thousands of retail accounts. And on the way, basically making sure that the retailers are running the right campaigns, are taking care of the brand, are representing the brand the way it should be represented.
And they're also able to subsidize campaigns. And that's the really interesting thing that we've seen. So give us an example of this. Give us an example of this with one of your customers. So our biggest client is one of the largest kitchen manufacturers in the world, like a typical brand. It's a billion dollar company. Can you name one, Johannes?
Chapter 3: What is the breakdown of DoorBoost's revenue model?
Yeah. Light. Okay. It's a, it's a premium kitchen manufacturer. They have about a thousand dealerships worldwide. And what they've seen is that their dealerships are really bad at online advertising, but they're spending a lot of money. The brand has no control over what happens after people come into their showrooms because they just don't see how much our idols campaigns actually produce.
So what they've decided to do is they've decided to partner up with us and they basically use our service to create centralized campaigns, split them into all their dealerships accounts, subsidize campaign budgets, and therefore they get that whole picture. They can measure everything, all the campaigns that those thousands of dealerships are running.
They can measure that and they can make sure that it's going in the right direction. And also, I mean, campaigns are therefore not competing anymore because they can just make sure that their individual leaderships, they're not crossing over into each other's locations and bidding on the same keyword. Exactly. Yeah. Exactly. Okay.
And what did one of these brands pay for the software on average per month? So the brand pays a management fee of between $2,500 and $5,000 a month. And then we take a 10% to 20% cut of the budget that all of those dealerships spend in terms of budget. Got it. So the model where you would consider professional services is the cut of spend, which is 50%.
And then that flat $2,500 to $5,000 management fee per month is what you're calling your SaaS revenue, correct? Correct. We call both of those the SaaS revenue. The service that we add on top of that is basically coming up with implementing that strategy with those dealerships. So basically coming up with a centralized advertising strategy for the brand with those dealerships.
That's something that we charge on an hourly basis.
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Chapter 4: How does DoorBoost help brands manage retail campaigns?
And that's the management fee that I've been talking about. But the more this concept, the more they get that concept, the more brands understand that this is what they want, the less management fee we actually have to charge because they just get that whole system of setting up
a centralized campaign, taking maybe a national campaign that they've already run and just splitting it locally off those accounts. So ignoring the non-software, the non-recurring fees, is that accurate? The average brand is paying you $2,500 to $5,000 per month? Yeah, correct. Okay, I thought you said that was the management fee, which is what confused me. All right, sorry.
No, so that's the subscription fee for the software. So we basically make the software available to a brand. And depending on how many dealerships they have, the fee is between $2,500 and $5,000 a month for the brand. And then the cut of the budget is basically, that's the major part of the revenue. As I said, sometimes 500 and more dealerships are participating in campaigns.
And the 10% cut of the budget is basically our biggest chunk of revenue. Okay. Give us more of the backstory here. When did you launch the company? What year? Uh, so we, we launched a company in, uh, 2014, uh, went to build like a cross channel advertising platform. There's so many out there right now, like the nannigans and, and add espressos basically. And, uh, started selling that.
Um, and we basically drowned in, in customers leaving us, you had huge churn rates. So, um, we, we decided in, in beginning of 2016, we decided to shift. And at that time we were lucky because we were already working with one of those, um, with that kitchen manufacturer that I've just been talking about, our biggest case. So we had them as a client for their brand.
And we were just thinking, what can we do to help them support their dealerships? Because their case has been working really well. And we've seen that working in 2017 and just shifted the entire model. And what have you scaled to today in terms of total customers? So in total, we have six brands that work with us and about 3,000 dealerships that run campaigns.
And those are between four to six campaigns per year per leadership. In terms of revenue, we're past the one million per year. Okay, so that would be about 88 grand a month. So last month, what did you do around that or much higher or lower? No, much higher, much higher.
We do have a little bit of a seasonal effect basically just because we have four to six campaigns that those dealerships run per year. So it tends to be, it goes well above 100 a month and then it goes down to a little bit under 80. If you just look at your pure SaaS revenue though, last month, what was that? That was about 75. 75, okay.
And does that stay fairly consistent or no, that also you have a lot of churn, it goes up and down? It fluctuates, yeah. Because the cut of the budget is basically a part of it. And that, I think, is the main challenging thing about marketing tech in general.
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