SaaS Interviews with CEOs, Startups, Founders
1376 SMB Marketing space CEO: We're about to close $5m on a $36m valuation
01 May 2019
Chapter 1: What is the new book by Nathan Latka about?
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Stay small, don't overhire and keep those folks close as you build up that almost like SWAT team approach. She founded the company back in 2010 with his partner Don. They developed it for three years before then launching full steam. Now they're serving over 10,000 paying customers, but mostly SMBs. They pay about 30 bucks per month each.
So they're flirting with 300 grand per month right now in revenue. That's about 100% year over year from August 2017, when they're doing about 150 grand per month in revenue. They've raised $7 million. Churn is, depending on the cohort, you know, it varies. But generally speaking, about 3% logo churn per month. Again, a team of 20 people based in Tampa.
Again, really helping these SMBs, both on Google Shopping and Google AdWords, in a fully automated way. They've raised $7 million, about to close a $5 million round at around a $36 million valuation. 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, everyone. My guest today is Ricardo Lassa. He's the co-founder and CEO of a company called SiteWit.
Ricardo and Don, his co-founder, co-founded SiteWit to bring the power of digital marketing to small business owners. Ricardo is a product owner for SiteWit and has deep understanding of website builder platforms, e-commerce platforms, predictive analytics, digital marketing, and SMB SaaS solutions. Ricardo, are you ready to take us to the top? I am. All right. So how do you and Don split roles?
Are you the developer or the business lead, would you say?
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Chapter 2: How did Ricardo and Don co-found SiteWit?
That's a great question. So we both actually co-developed the first engine. So we're all fairly technical, both of us. But I am more the product owner strategy side of the business. And Don helps more on the data science, the predictive analytics engine side of it. Neither of you guys do sales? Uh, we do both actually. Yeah. We do, uh, mostly, uh, partnerships with, uh, with other platforms.
So both of us work on that. That's good. Okay. Tell us what site, what is, and how do you make money? What's your revenue model? So, uh, what it is is that do it yourself is self-serve, uh, marketing platform for small businesses to market on Google, uh, AdWords, Google shopping, uh, also Bing ads and retargeting. It basically ties into all the major website builders.
So like Wix, Weebly, Yola, Equin as a shopping platform. Then our customers basically use our platform to advertise their stores or their businesses on Google. Um, and then how we make money with, we, we, uh, charge a percentage management fee for the platform. Um, 20% of the retail price.
Uh, so for example, if you're spending $200 on Google, um, we 40 goes towards our platform and the rest goes into Google ad spend. And, um, that's basically how it works. Okay. So would you, would you, so you're not a pure play SAS company, you would say? Uh, so actually we are pure play on the, on the marketing side. So there's no human intervention whatsoever. It's all machine based, uh,
you know, um, but we, we target only the marketing side. So Google AdWords, Google shopping. Um, but it's not like, in other words, it's not a flat $40 a month fee to use you. It's a, it's a transaction percentage, correct? That's right. Yeah. Yeah. So it's a 20% of the overall value of your marketing. Do you see that?
Do you see that revenue stream be very predictable and consistent like a SAS company would be? Uh, yes. Okay. Got it. Because in a sense, our, our packages are also, uh, you know, specific packages. So they're $150, $300. So it's actually a percentage of that. Okay, so if someone pays you 300 bucks per month, is that, that's not tied to ad spend or that is tied to ad spend?
That is tied to ad spend. So that will be $300 total that you will pay us. And of the 300, 80% goes to Google. Oh, I see. Directly, so 240 will go to Google AdWords directly for your media. And then the $60 go to our platform. I see. Okay, so let me ask you a question. What does the, I'm sure you have a lot of different cohorts, but I want to save time.
What's the average customer pay you per month, would you say? So I think probably there's like two big clusters, shopping, Google Shopping, and regular search, like for service providers, and they're all a bit different. On the Google Shopping side, we see probably between $300 or $500 per month per customer. And on the services side, we see around $200. Okay.
So if we put it at like $300 as an average, just to be clear though, that's your top line revenue, but you have a big cost of goods sold because you take 80% of that and actually spend it. Sure. Yeah, yeah, exactly. Yeah. So, so our customers end up paying us on average between, I would say 30 to $60. Yeah. Yeah. That's what I was going to say. 30 to 60 bucks net, right? That's right.
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Chapter 3: What is SiteWit's revenue model for small businesses?
I'm curious, why do you make a statement like you'll be the largest? I mean, I can think of other companies that have significantly more than 10,000 paying customers. Well, no, I mean, in our specific side of the space. So in the automation of do it yourself, self-serve, you know, putting people on Google Shopping, Google AdWords, things of that nature.
There is very few platforms that have that many customers doing that. I see. Walk me through what growth looks like. So if you're flirting with 300 grand per month today, where were you about a year ago? Uh, so it's been more than double, um, you know, probably like every year, something like that. Okay.
So somewhere around a hundred grand or 150 grand in August of 2017, that was kind of the monthly recurring revenue then? Sure. Yeah. Something like that. Other than, yeah. What has driven most of that growth? Is it onboarding new customers or getting current customers to spend more? So it's been mostly onboarding new customers. Um, but, uh, the, uh,
The real big growth is coming now, though, because the large platforms that we're launching and we've been launching through all these years, we've been in integration phase this last year. So we actually are, you know, launching finally, you know, big partnerships right now. And that will really make a big difference on something.
And Ricardo, at this price point, kind of the SMB space, churn is always really critical. What is your churn today and how do you manage it? So the churn is not the same for everybody. So we see, for example, very different churn rates between customers that are on the free product for our partners.
So, for example, if you're like a small business that not even buying a domain, you're actually using a free website builder. Yeah, ignore free. I only want to talk about people who are paying you. Yeah, no, no, not paying us, paying our customers. Everybody pays us. Our product is paid, completely always paid.
But, you know, we have actually customers that they're not even paying for their website. I see what you're saying. They're going on a free website, right? So what is your churn? Yeah, so the churn on that is quite high, you know, over 50% for sure. That's logo churn per year? Yeah. Okay. Okay.
But on the paid side of things, the churn, and again, depends on the platform, depends on the type of customer. For example, in e-commerce, we see way less churn than we see in other platforms. But, you know, we're seeing an average churn of, let's say, between 30 to 45 percent. OK, that's again, that's logo churn per year. Sure. Okay. So, so let, so let me ask you a question.
Let's assume the most, the best case scenario, which is like 3% logo churn per month, which comes out again to about 36% per year. Um, even at the, at this volume, maybe, maybe, maybe it misunderstood your question that is on a cohort based churn. So like if you start today over a period of like a year, you're going to lose 30, you're going to lose between 30 and 40%. Yes. Yeah.
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Chapter 4: What is the average customer payment for SiteWit?
Yeah, so we're actually on the final stages of closing a Series B. It's going to be a total of about $5 million. Okay, so you're raising $5 million? Yeah, but it's committed all the way now to the last $500,000, so we're closing that this month. That's great. Well, congratulations. And can I ask generally, I mean, did you negotiate north of a 10x valuation on ARR or less? Yeah. Yeah.
So yeah, but so let me think about that. It's a good question. So if you're doing 300 grand today, well, right? Yeah, like, what is that a $3.6 million run rate. So if you got more than 10x, your pre money would be about 36 million. So it's about that. Okay. Oh, that's okay. That's healthy. Now. Did you raise mainly in Tampa? Or did you go to the valley as well?
No, so we actually raised primarily with the same group that we've, you know, the same group of investors. Oh, that's wonderful. So no new investors. It was all just people reinvesting. That's great. Yeah, yeah. They like you. You know what that means, Ricardo? They like you. Well, we try, you know, like I said before, I mean, we've seen that this is a long-term game.
It's been, you know, a scaling game, and it didn't make sense to raise a lot of money until our partnerships went live, which is, you know, what's happening right now. Um, so the group that, you know, we took as investors were all long-term based and, you know, uh, we all knew what we were getting ourselves into. So, so it's been easy to raise from them consistently.
And again, just because we haven't seen a lot of dilution for all of us, because we've been slowly funding the company between all of us to get to this point. Yeah. So we, we, yeah, we had a different funding, uh, probably approach than most people. Yeah. Very good. All right. Let's wrap up here with the famous five. Number one, what's your favorite business book?
Uh, well, that's a great question. There are so many. Um, I would say probably outliers. Outliers. Number two, is there a CEO you're following or studying right now? Um, no, not really. No. Okay. Number three, what's your favorite online tool for building your business? Online tool for building my business. I would say on my side, and I don't know if you know, it's a company called Airtable.
where you can set up, you know, kind of like easy databases online. I use that all the time for strategic planning. And how many hours of sleep do you get every night? Eight. That's good. What's your situation? Married, single, kids? Married, kids. How many? Two kids. Two kids. And how old are you, Ricardo? Me or the... You, you. Me, I'm 47. 47. All right, last question.
What do you wish your 20-year-old self knew? I would say... make sure that you keep the team small as you develop the business. So don't, don't scale fast. If you have a good vision, like, you know, keep on plugging at it until it really organically takes off. Guys, there you have it. Stay small, don't over hire and keep those folks close as you build up that almost like SWAT team approach.
She founded the company back in 2010 with his partner, Don. They developed it for three years before then launching a full steam. Now they're serving over 10,000 paying customers, but mostly SMBs. They pay about 30 bucks per month each. So they're flirting with 300 grand per month right now on revenue.
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