SaaS Interviews with CEOs, Startups, Founders
1618 He's Build a $500k ARR Company Serving As POS For Latin American Owned Restaurants
29 Dec 2019
Chapter 1: What is Sabor POS and who is the founder?
serving the Latin America restaurant market. Seems like he has some traction. Launched in 2015, they raised about $750,000, looking to raise an additional round of capital, about a $20 million pre-money valuation, but wants to double his revenue first. He's currently at $45,000 a month in revenue. Wants to obviously increase that significantly. Logo churn is about 5% per month.
His customer acquisition cost is about $500, and he's got 450 customers paying on average $100 per month. per month. So payback is between five and six months, again, with a team of 13 between New York City, Florida, and Latin America. Hello, everyone. My guest today is Javier Duton.
He's the founder and CEO of a company called Sabor POS, the premier restaurant software on the Windows Store, and number one most downloaded restaurant POS for Windows 10. The company provides all the features you need to fully automate your ordering and accept customer payments. Javier, are you ready to take us to the top? Absolutely. All right. Tell us about the company.
What do you do and how do you make money? We sell restaurants. point of sale software to small businesses in tier two and tier three cities. So a lot of mainstream America, a lot of Latino owned businesses, a lot of immigrant businesses usually are our customers. Our software is very, I would say, if you're a new business owner, it's perfect for you.
And we usually provide them with services like credit card processing, order management, websites, social media, and pretty much the point of sale is our way in. And after that, we upsell a lot of other services. Okay, and walk me through the revenue model. Do you choose a SaaS product? Do you charge monthly fee for this? Yes, it's all SaaS. So payment processing is a SaaS model.
Our POS, there's a free and a premium version. Most of our customers, if you get the free version, you usually get the payment processing with us or another add-on service. And bigger restaurants usually pay for the POS, get an add-on, as well as get the payment processing.
So if we just focus on paying customers that are paying you on a SaaS model, what do they pay you per month on average, would you say? I'd say the average restaurant's around $169 to $199 a month. Okay, and that's per location? Correct. Okay, great. And give me more of the backstory. When did you launch the company? So my family owns restaurants. We try to find a POS for the Windows store.
So, you know, there was, iOS had Square, Android had like Clover and Toast POS. But when I looked at the Windows 10 store, there was nothing available. So I went through Microsoft and we decided to build one for the Windows 8 and Windows 10 store. And what year was this? This was 2015. 2015. Okay, good. And name some, just, hey, might as well promote them, right?
What are some of the restaurants your family owns? They're called Castillo Restaurant.
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Chapter 2: How has Sabor POS scaled since its launch?
It's a small chain in Brooklyn, New York. Ah, very good. Yep. All right, good. So 2015. Now, did you grow up in that business? Yeah. My family opened it up in 1999. And I've been in the restaurant industry since I guess I was seven years old. And you're going, I hate being in the kitchen walking on these rubber pad things so my feet don't kill me.
I'm going to go start a software company with higher margins, right? Correct. Yep. It's been working pretty well. All right. So 2015, you launch. And what have you scaled to today? How many customers? We have over 9,000 restaurants on our system running right now. Okay, now does that mean paying or free? Paying, we're probably less than 5% of our user base.
Okay, so if I take 5% of 9,000, I think it's about 450, right? Yeah, around there. Okay, and then if I multiply that times that 170 price point per month, it's fair to say you guys are doing what, 70 or 80 grand a month right now? Yep, we're currently valued at around $8 million and we're about to raise a new round of financing in about six months. Who valued at $8 million?
We did the 20x multiple and then we already have safe notes at that valuation. What do you mean 20x multiple? In other words, $8 million is 20 times your current ARR? Correct, yeah. Okay. So current, if I take a million divided by 20, that means your current AR is about 400,000 bucks, which is different than 70 or 80 grand a month. So what are you doing per month right now on revenue? Oh, wait.
Chapter 3: What is the revenue model for Sabor POS?
Um, okay. I must be mistaken, but the last, the last financing we got was an eight mil valuation. Um, so I'll take it back to you on that. When was that? Was that this year, last year? Uh, it was early this year. Early. Okay. So early this year, how much were you doing about per month? Our biggest month was probably like $45,000, $50,000. Okay, $45,000, $50,000. Got it.
So all that means is you have early customers that are paying less than $169 per month, something like that. Yes, correct. We had to give a lot of it away for free. This industry is really, really... It's a real industry, so our first customers are obviously paying the least, but our new ones are...
constantly getting uh add-on services at the regular price and there are like 170 180 the new ones correct yeah i see but just to make that really clear so you have 450 paying 9 000 free of those 450 paying some of them were early paying less than the current price that new signups are coming in at which is 170 exactly you're doing about 45 grand per month and uh your last valuation was i think you said early this year you raised an eight million dollar valuation how much have you raised to date
Uh, probably seven 50 K. Okay. What do you mean? What do you mean? Probably that's like a number of most people know right off the right off their head. I would say seven 50 K right now. We have like one or two notes that we have to get clarified. Oh, I see. I see. So it was the last round you did. Was that also a note or was it an equity round? It was a safe.
Um, we're about to go into our round a and that's our lawyers are just coming through everything and it's become a little more complicated. Yeah. What evaluation do you want to try and raise that in your series a? We're doing like maybe $20 to $25 million. Okay. And walk me through when an investor says, why are you worth $20 million? What do you say?
As of right now, we're actually a very good engine for other services to get restaurants for their services. So our attrition rate is extremely low. How low? Like less than 5%. That's logos per month? Yep. Okay. And then industry average in the payment process industry is like 18 to 20%. So we lose less customers. Our acquisition cost is around $500 to $600. Okay, so what's your payback in there?
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Chapter 4: What challenges does Sabor POS face in customer acquisition?
What, five or six months? Yeah, I'd say five to six months. We have a few contracts with payment processors where they actually cover our entire acquisition cost. And we have almost no onboarding costs at this point. But obviously we want to scale, we want to get data. So we're trying to give our software as... as a solution for other payment processors to sell.
And then they'll get the processing, but we get like a small fee every month for them using our software. Yeah. I'm just curious. Why are you, what do you accomplish by raising at a $20 million valuation? Why is that important to you? Historically, a lot of POS companies do raise at like a 5 million valuation, then a 20 to 30 million valuation.
And then based on what though, how old they are revenue based off what metric? I'd say age and revenue. So like Shopkeep, for example, around their three, four year mark, they raised around 30 million valuation. And what revenue are they doing? They didn't disclose that, but they raised around there.
So why are you pinpointing yourself to that when they could be doing 10 times your revenue or one tenth of your revenue? I'd say it's just right now, a lot of besides our revenue, a lot of the value has actually been adding on to the IP we own and the trademark. And it's been really successful.
And then we're still trying to figure out as we go on where we're going to go because POS is so brutal that we have to resell our software at a huge discount to distributors that we're actually looking at different areas to go into. I mean, look, I'm just doing the math. 45 grand a month times 12, you're doing about 540 grand a year right now.
And if you're trying to raise out a $20 million valuation, that means you're asking for essentially almost a 40 times multiple on forward-looking ARR, which is, I mean, through the roof. So I'm just trying to understand how you're going to try and defend that. It sounds like you're saying it's IP, it's trademark, and it's lead gen for other businesses. Correct. As a
We're hoping to hit those revenue numbers by the end of the year. What revenue numbers? To justify maybe a 25X or a 30X to make it less of a 40X multiple. What revenue do you want to try and hit by December 2018? Maybe 70 to 80K a month. Okay, so maybe double what you're at right now. Exactly. Yeah, very cool. What are you growing at each month right now? I'd say around 10 to 11%.
Okay, that's healthy. And where are you getting these new customers from? A lot of them actually just come directly to us. So our marketing website is really popular. We have good SEO. We do very good social media with Latino business owners. I think Facebook groups have been working extremely well for us. So if you go onto Facebook, you find a Latino restaurant owners group.
I'd say probably a couple hundred restaurants that are just Latino-owned, Latino-speaking. We get a lot of leads from that. Very good. uh, download people from the store. We're still number one. So we get a ton of leads from that as well. Um, what are you number one for? Like, what does that mean?
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