SaaS Interviews with CEOs, Startups, Founders
1650 How He Kept Leverage in $15m Raise Despite ARR Being Less Than $25m Raised To Date
30 Jan 2020
Chapter 1: What is the main topic discussed in this episode?
Founded the company in 2011. New order. Again, connecting. Basically, think of it like B2B e-commerce. So Nordstrom's can buy and bought from many different brands or things like that. They've got about 1,000 customers on the platform today. 400,000 merchants. They're flirting with it. Call it $16, $17, $18 million in terms of ARR. Growing at about doubling year over year.
Spending anywhere between or burning anywhere between call it $200,000, $250,000, $300,000. a month as they look to scale. They've just raised another $15 million, so $40 million raised to date. Team of 100 in LA, New York, London, and Australia. 5% single-digit revenue churn annually, 110% net revenue retention. In terms of CAC aggressiveness, $1 in, $1 out, so 12-month payback, healthy growth.
Everyone, my guest today is Heath Wells. He's a CEO and co-founder of New Order, a B2B e-commerce platform that is revolutionizing the wholesale industry. He's an entrepreneur at heart, starting his first internet-based business at the age of 15 in Australia.
And then from 04 to 08, he served as managing director at First Media in Australia, where he and partner led the company to great success across publishing, creative, and digital commerce. Heath, are you ready to take us to the top? Absolutely, mate. Ready to go. All right, good. So tell us about New Order. What's the company doing? Is it a SaaS model?
Yeah, it's a SaaS model. So New Order is a B2B e-commerce platform. Super simple concept. We essentially take e-commerce and apply it over wholesale. So you have a brand on one side. So let's say Lacoste and you have a retailer on the other side who's the buyer. And that ranges from Nordstrom, Amazon, all the way to the small mom and pop store.
Okay. And give me a general sense here. I mean, are you charging both sides of the marketplace or one side? How do you make money?
Yeah. So just one side. So brands pay us a subscription fee ranging from around about $12,500 up to a million.
Per month or year? Per month.
Yeah, that's per year. So we have three, you know, very separate cohorts. You have your SMBs, then you have your mid market, and then you have your whales and your enterprise.
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Chapter 2: How does NuORDER's business model work?
And what have you scaled to today in terms of total customers?
Yeah. Total customers today is a thousand on the brand side. So a really amazing number. And on the retailer side, it's 400,000. Okay.
That's great. But free for them, right? Free for the 400,000.
Correct.
Yep. That's great. And you've just raised additional capital. So how much capital today have you raised?
Yeah. So we just announced a new raise of $15 million in growth capital. So it takes our total raise to close to $40 million. And what's exciting about this most recent raise, although it's our largest raise, it was actually our quickest. It took 90 days from actually first meeting to close. So again, just a proof point that the tipping point is here and people are acknowledging it.
Heath all operating capital or is any of that 15 going to early shareholders on a sec, kind of a secondary model?
All operating. We're, you know, we're, we're in this, we, you know, when it's, when everything is kind of, you know, unfolding in front of your eyes, it's about game on and, and, and really putting it to work on, you know, engineering, customer success, international expansion, sales and marketing.
And how many months of burn will that new 15 cover for you? How much runway did you buy yourself?
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Chapter 3: What financial metrics are important for SaaS companies?
That, that makes more sense. Got it. So less than 10 million run rate a year ago, where's most of the growth come from expanding the thousand companies already have on the platform or adding new logos?
Totally. It's both. And so, uh, but new logos is by far and away the lion's share. So, um, you know, we're really kind of took a, uh, a prioritization to go after the enterprise, uh, And so adding, you know, big name brands to the roster and that has really driven the growth. But expansion has been really phenomenal. So I know you're going to ask me about churn things like that.
You must listen to the show. Of course, right? Good. Wait, Heath, make this easy on me. Just give me the numbers you can share.
No, I'm not going to make, I don't want to make it easy on you because I'm a listener. So that would be, that would be, we'd lose the game, right? Yeah, yeah.
Tell me about the expansion stuff though.
Yeah, so expansion, you know, we're well past in net churn levels. You know, we're well past 110%, you know, we're positive net churn.
You mean, hold on, just to be clear, 110% net revenue retention annually?
Correct, correct.
Yeah, 100% churn would not be a good thing.
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Chapter 4: How has NuORDER's growth trajectory evolved over the years?
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So if you've got 30% expansion and 110% net, that means you're churning about 20% of your ARR each year?
And it's not 30% expansion. We're less than that. And we have single digit churn.
Annually.
Greater than 110% on a net revenue basis.
Yeah, I want to peel back the 110% onion. That's what I'm trying to do here. So on a gross basis, revenue churn is in the single digits, you said? Single digits. Okay. Which means, again, you've got to have expansion there. I've caught at least 15, 20%, something like that, right? Yep. That's great. When people do churn, why are they churning?
So again, you've got to look at when you're at our size and scale, you have to look at cohorts. And so the SMBs, there is just a natural attrition rate. They go out of business, they wake up one morning, they decided they're not going to wholesale. So that's something that, you know, it doesn't matter what you do. There is just a natural attrition in those.
In the enterprise cohort, we haven't lost a customer this year. And so it's just small downgrades. Maybe they're jettisoning a certain division or something like that. And so you've got to kind of look at it as the company gets bigger. You can't just look at one segment. You've got to kind of look across the three.
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Chapter 5: What challenges did NuORDER face during its early years?
When you do a growth round, you have to grow up and you've got to look at things with gross margin in there and everything. And so where we are is sub-12 months on a payback period.
That's great. Okay, good. So you're spending about a dollar and you're getting at least a dollar in AR out of that dollar invested. That's great. Yeah. I mean, I'll tell you when people tell me, you know, a three month payback, but they have fields. I mean, you know me, I will, I push extremely hard and you, you, you start uncovering all kinds of things.
They're just not including like, you know, rarely do they include a gross margin payback, right? Rarely is there a gross margin LTV. So when you start multiplying the 85 or 80% on the back of that, it starts to make things look a little bit more like they should. Right. I agree. Yep.
And I think, look, it's just based on maturity. You know, uh, the reality is when you, when I started this, you just weren't, you're trying to do everything. And so you're not as dialed in, you don't have a CFO and things like that. And so there's probably reasons.
Yeah. Yeah. Well, I mean, one of the things I look at when people are raising in terms of is who's got the leverage during the raise. And usually the founder has the leverage. If one of two things are true, the company's cashflow positive, Or the ARR to funding ratio is above one, meaning ARR is more than what they raised. So they're doing $20 million in ARR, but they've only raised $15 million.
When you just did this $15 million raise, so before that you raised $25 million, but you're sub $25 million in ARR. So you're kind of backward there. How did you make sure you had some leverage so you didn't get diluted like crazy in this last round?
Okay, so a couple of things is that the market is really, really big.
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Chapter 6: How did the recent funding round impact NuORDER's strategy?
So let's call a spade a spade. B2B commerce is a huge market that hasn't been tapped yet. And when you look on the B2C side, there's many billion dollar exits. It's not just one, right? And so there's none of that household name on the B2B side. So the opportunity is there. people had done the research that we were the leading platform.
And so when we were doing this, it was growth was accelerating, but we weren't adding sales rep headcount or doing more marketing. It was just accelerating because the market was moving and people knew this was going to be a market. It was just a timing issue. And so So I think whenever you're in a raise, it's a dance. And the reality is that is definitely one of the points that people would ask.
You raise more than ARR and how do you think about that? But then when they take a look under our actual financials, we were smart about how we place our bets and we're not doing silly things with the cash. And so they'd seen it go into a really robust enterprise product. And then you sit back and you go, hang on, that actually makes sense. The investment is worthy.
Interesting. Very good, Heath. Let's wrap up here with the famous five. Number one, what's your favorite business book?
So hard things, I was going to say that, you know, the Ben Horwitz book, but everyone's saying that on your podcast. So I couldn't do that. So I'm going to say Powerful. Just read it by Patti McCord. I don't know if you've read it. It's, you know, she's the talent person. She was a talent person at Netflix.
Yeah. It's really good rate. I have to ask you, Heath, real quick because I know you listen to the show. People always go, Nathan, how do you get these CEOs to come on? Like, why do they agree to come on the show? So, I have to ask you. It's better to just ask you. You know what you're getting into. Why did you agree to come on?
It's interesting because I hear, you know, some of the, like, I think I was listening even on the drive yesterday, the chat from Cabbage. Yep.
Rob.
It was, you know, really interesting to kind of hear how he's sizing up the business. And, you know, you try and take in as many reference points as you can. I think you've got a cross selection of small through to, you know, unicorns like that.
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