SaaS Interviews with CEOs, Startups, Founders
1740 $5m Raised and $600k ARR When Fiverr Acquired, Did Common Holders See Any Cash?
29 Apr 2020
Chapter 1: What changes have been made to the podcast release schedule?
Hey guys, I'm recording this here on April 5th. It's Sunday. Everyone's trying to survive the crisis. Quick note to you guys, we are moving, you know, we used to delay these episodes by, you know, four to eight months after we recorded them in terms of releasing them on the podcast. We've changed that.
A lot of these interviews you're gonna hear over the next many months are gonna be ones we recorded only
days prior we think that's a smarter way to run the show i've made the change so expect more urgent information coming out secondly i am getting destroyed on itunes reviews by these people that say nathan's rude he's hard-hitting blah blah blah which by the way i am it's part of my style it's what works the problem is people that love that style never take the time to go leave a five-star review
So I only get one or five star reviews on iTunes. And right now there's a streak of one star reviews that is driving me crazy. It would mean the world to me, guys. If you're loving the show, you love how direct I am. You like the style. If you go leave a review on iTunes now, if you do that and tweet it to me, text it to me, email it to me, whatever you want.
I'm going to reply with a very special surprise. I think a lot of you guys will really like it is heavy, heavy data oriented. All right. So I appreciate that. Thanks, guys. Enjoy the show.
built his company and co-release support freelancers back in 2015, was a SaaS model, call it 12 bucks a month, did what he calls content stunts, something that was newsworthy, product hunt worthy, once every six weeks. Excuse me, used that to drive 60,000 users, converted about 7% of those to paid, so call it 4,200 there. Obviously, you can back into a run rate.
They raised 5 million bucks, team of 10 across remote locations, and sold to Fiverr back in early 2018 when the product was then made free. Now, obviously, scaling upwards of 250,000 folks on the platform using it Hello, everyone. My guest today is Life Abraham.
He's the co-founder, CEO of a company called AndCo, the number one freelancing software tool in the world, which was acquired by Fiverr back in 2018. He's also a partner at PreHype, a venture development firm in New York and investor in companies like RoHealth. He's also co-founded Pay With A Tweet, which was acquired by the German company builder Hans Ventures back in 2013.
Served as director of product for West Studios in San Fran, where he worked with startups like RDO and Venmo. He's also worked as creative director at RGA. Life was named one of the top minds in digital by Adweek and earned numerous awards, including two Keynes Lion Grand Prix and MTVO Music Awards. He's also an advisor to venture capital firm Urban.us and a number of early stage companies.
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Chapter 2: How did Leif Abraham build AND CO to support freelancers?
And I have that focus point. And I think that was the main decision there. And the other driver really is that if you look at the freelance market in general, it's like 94% of freelance work still happens outside of online marketplaces. And so the Fiverr and the Upwork are really competing within these existing 6% right now. And obviously that's growing rapidly.
But what Enco is serving is basically all the work that you're doing outside of these online marketplaces. And that's obviously the interesting thing because we are like the first piece of software that these freelancers use to basically take all that work that they do
basically have done like offline and through email and so on and moving it into an online system, which is then also the first system where then, you know, transactions might happen online, where you have, you know, your client interaction happen online, et cetera, et cetera.
And that's kind of like a first step to basically move that business into an online ecosystem before you ever touch a market.
Let's go back to pre-Fiverr story for a second again. So on average, what were freelancers paying you per month to access this suite of tools you'd built for them?
depending on when you sign up and what kind of plan you had, it was between nine and 25 bucks a month.
Okay. So very much in kind of like small kind of SMB, obviously there's no big enterprise deals here, right? Correct. Correct. Yeah. Interesting. Okay. And then timeline wise, you said you launched in 2015 or 2016.
Um, we launched more in 2016, um, but we launched a company in 2015, but like product wise, we were in market more within 16.
Okay. And where was your head when you launched in 2015? I mean, were you just leaving San Francisco at this point or like why jump into the tool in the first place?
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Chapter 3: What was the revenue model for AND CO before the Fiverr acquisition?
And I honestly think that these are most often better conversion drivers than, for example, limits. Limits are good to force someone to the moment of having to make a decision. But I think what will really bring people over the hump is the value that you provide on the other side. And so I think for me, it's always, it has to be a combination of the two. If you only do value, right?
Then what was yours?
Was it number of invoices sent? Once you hit a limit, then you have to pay. Like what was your actual value metric?
Um, so back in the day we had a limit on invoices. Correct. And then I think there were also some limits around expense tracking and so on, but they were like pretty high.
Yeah, very interesting. And then look, I mean, back to my point earlier, it's easy to make a tool free if it doesn't have significant revenue, right? 4,200 customers at a $12 a month price point is about 50 grand a month, right? So it makes total sense. I mean, it's not like there was a massive opportunity cost, Fiverr cutting off that revenue.
It's worth way more to use you guys more as a onboarding engine to key Fiverr than it is to try and make 12 bucks a month per user, correct?
Yeah.
And I think that's definitely a good point in terms of that. Did you push back, though?
I mean, did your team push back and go, wait, they're killing our revenue. We spent so much energy getting 4,000 customers.
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Chapter 4: How did the acquisition by Fiverr affect AND CO's operations?
That is, I think, something that really makes you excited. And obviously, you want to build a business, and obviously, you want to grow that and whatnot. And charging can be a growth driver, just from the perspective of being able to reinvest it and so on. But obviously, one big thing is you want to reach a certain scale, you want to reach a certain relevancy for people.
And I think that is something that specifically I think also for the team was very exciting in terms of joining Fiverr. And then also one big thing in terms of how we grew. So one were these content stunts that we've done. And the other thing we really like distribution partnerships.
And so one big thing of also what we started talking to Fiverr was from a perspective of distribution partnerships. And so back in the day, for example, we did something with Envato. It's like one of the biggest creative asset marketplaces where I buy funds and things like that. And so they have this subscription offering called Envato Elements.
And so if you subscribe to Envato Elements, you are getting an Encode membership for free with it. But basically in the background, there was a deal of how we would still make revenue on that through Envato and they were kind of subsidizing it and so on. And so those types of deals were very effective for us in terms of user acquisition.
And that was a reason of also why we also realized from, hey, when you try to acquire freelancers, right? you kind of really want to bulk acquire as much as possible. You want to go into places where you can basically just like, you know, grab multiple people at once and don't try to pick people up one by one through Facebook ads. Sure.
No, it makes sense.
It's a very ineffective way to do that. And so, yeah, so that makes a ton of sense.
So if we're running short on time here, last question here though, because I think this is a very sensitive topic for a lot of people, but very few people will talk about it. I'm going to see if you'll talk about it. You raised 5 million bucks of capital, right? You're doing, call it 600 grand in terms of run rate.
assuming a conservative 1X liquidation preference, in order for common holders, which would include your nine or whatever, eight early employees, to see anything after the waterfall, you've got to sell for at least 10X-ish, more than $6 million. Did you, yes or no? And then if yes, how did you make sure that common shareholders saw something from the waterfall on the exit?
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