SaaS Interviews with CEOs, Startups, Founders
$1m ARR to $50m in 28 Months. This AML KYC SaaS Is A Secret Unicorn, only $6.5m Raised
12 Apr 2022
Chapter 1: What is the main topic discussed in this episode?
If you've got 1,000 customers paying on average 10,000 bucks per year, that means you're doing more than 10 million run rate today, right? No, it's more than that. Last year, we made 25 USD, 25 million US dollars with 4.4 year-over-year growth. And now run rate, I think, 45 or 50 million.
You are listening to Conversations with Nathan Latka, where I sit down and interview the top SaaS founders, like Eric Wan from Zoom. If you'd like to subscribe, go to getlatka.com.
We've published thousands of these interviews, and if you want to sort through them quickly by revenue or churn, CAC, valuation, or other metrics, the easiest way to do that is to go to getlatka.com and use our filtering tool. It's like a big Excel sheet for all of these podcast interviews. Check it out right now at getlatka.com. Hey, folks. My guest today is Vyacheslav Juodev.
He's a CTO and co-founder of SumSub. He has over 20 years of IT experience and a PhD in computer science. He's a product-oriented CTO and, again, the co-founder of SumSub, which is AML and KYC tool. Okay, Vyacheslav, you ready to take us to the top? Yeah, sure. Let's do it. All right. So for folks not familiar with banking and finance, what is AML and KYC?
Basically, you can say AML is anti-money laundering. And KYC stands for Know Your Customer. And basically, it's kind of identity verification. So you help companies to onboard bonus users as many as possible, as quickly as possible, but at the same time, keeping fraudsters at bay. And of course, if the company is regulated, then of course, we help keeping this company staying compliant.
Now, are banks your main customer or who's your main customer? Main customers, yeah, we do have banks, fintech, actually crypto quite a bit, actually car sharing, marketplaces, shared economies, basically everywhere KYC is needed nowadays. And so what do some of these customers pay you per month to use the technology? How much? Yeah, how much do they pay you?
Yeah, we have about 40 customers that we consider... top tier one customers that pay more than $100,000 a year, right? But some of them paying over $1 million each year. This is fascinating. Okay, so these are obviously huge. So just to be clear, your largest customers, ACB, they pay you how much? $2 million a year, $1 million a year? Even more, maybe $5 million, $7 million. Okay.
And so someone, one of these customers paying you five to $7 million per year, how many, I imagine you bill based off number of verifications, right? Yeah. Yeah. It's a little bit more complicated than that because we charge per subservice, so to say, because some customers need one service, some customers like construct the flow from different parts.
So we kind of have subservices and we bill per subservice. So how many customers you ask? Well, no, I mean, I guess the question, yeah, I guess, yeah. How many customers? That's a good thing. Over 1,000 customers, but 40 tier one customers paying more than 100,000 a year. Okay. What is the, that's great to understand you're tier one folks, but what does the average customer pay you per year?
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Chapter 2: What is AML and KYC, and why are they important?
But before I was actually working at night. So I mean, you know, this entrepreneurial life. Before I was more like consultant and like bringing my experience to the guys so that they can build substantial business. But actually, I can explain why we almost died, because I think it was because of the expectation mismatch.
Our customers, actually, they wanted our product, but they expected magic, where you can detect every modification, even if the image was sent over WhatsApp, resaved multiple times. But the life is more complicated than that. So that's why we had to pivot. And we don't regret, because obviously, it looks good so far. So what is the... I guess you say guys and we had to pivot all that.
How many co-founders are there? Overall, four. Actually, the other three are brothers. Two of them twins, which makes a really fun case for our face-natching algorithm. That's funny. Okay, so there are three brothers. Would you say that they were struggling until you came in in 2018? I mean, were you coming in to help save the business? No, we were struggling... before 2015 when we pivoted.
Then we again, we struggled because we're trying to find the right compromise between, you know, because some customers also wanted magic, like super complicated solution, but you cannot build complicated solution overnight. So like it took us a while. But at the same time, I think it was a good thing that our first customers were from car sharing industry.
And they were super picky about like the rules and amount of documents. And that's why from the, let's say, day one, our KYC system was built to be extensible, like very generic so that we don't spend, let's say, developer resources, but rather offloaded to technical support and things like that. But Bacheslav, when you joined full-time in 2018, I mean, having an equity conversation is tricky.
It's like one versus three because they're all brothers, right? Do you guys just split everything equally or no? Initially, no. But then they probably saw my impact and then somehow they offered me because I didn't have to negotiate. So it was just split equally now. Okay.
So it's basically, you know, outside of other investors and all that and employee option pools, you each basically own a fourth of the business, something like that. Yeah, exactly. Okay, very cool. So let's, okay, so the pivot, so 2012 is launch date.
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Chapter 3: Who are the main customers of SumSub?
It's a side project for you. You're helping the team through 2015, Photoshop software. They pivot in 2015 to more like AML, KYC, identity verification. You get excited, join full-time 2018, prove your worth, get more equity and grow the business. Now, when did you start, was 2018 the year where you start getting into AML and KYC? No, even before that, because I was reading about that.
And of course, like I was still kind of consulting and helping guys. But yeah, I got probably most of my knowledge after 2017, I would say. Okay. And did you guys... So you mentioned you raised half a million bucks. What year was that? 2012? It was 2015 or 13. Yeah, but we raised since then, I think, only just a little of capital, like 6 million in 2020, right?
And half of it actually went to secondaries. So actually... And I'm very happy how we managed to build such a product without almost no external funding, right? And where cash flow positive.
Chapter 4: How much do customers typically pay for SumSub's services?
No, I mean, that's incredible. So I guess you can't get a secondary done unless your economics are really strong. So you guys must have very strong economics. I mean, let's dive in there a little bit, right? So if you've got a thousand customers paying an average 10,000 bucks per year, that means you're doing more than 10 million run rate today, right? No, it's more than that.
Last year, we made 25 USD, 25 million US dollars with 4.4 year-over-year growth. And now run rate, I think, 45 or 50 million. Okay, got it. So your run rate, that's US dollars, 45 million? Currently, yeah. Okay, up from, sorry, you said 20, 25 million last year? Yeah. Overall, the revenue last year was 25 million. That's incredible. And are these run rates?
I mean, so have you basically doubled the business over the past six months? Is that what I'm understanding?
I mean, the end of our last year was really successful because we got some big customers on board and then they also kind of trusted us more regions because we're dealing with international businesses and very often big companies actually first start with, let's say, Asian region and then they expand if they're happy in what you're doing. Yeah, this makes sense.
But just to be clear, if you're doing a $45 million run rate right now, that means you're doing about $3.7 million a month in revenue, right? Yeah, that's correct. And then going back one year, you're saying you were doing about $2 million a month in revenue? Probably the beginning of the year. I don't remember exactly, but maybe it was even like $700,000 in the beginning. The beginning of 2021?
Yeah. Yeah. Interesting. Okay. Okay. So really, really good growth here. I guess people are going to hear this and go, what do you mean they had troubles in 2018? They've got $50 million run rate almost. So I guess, do you remember what revenue was back in 2018? I remember in 2019, it was about $1 million. But in 2018, I don't remember. Okay. But it was less than a million, right? Yeah. Yeah.
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Again, both plural founder path.com forward slash products forward slash valuations. So you've gone from a million dollar run rate to $50 million run rate over the past 36 months. Um, Yeah, I guess that's correct. I mean, Vachasov, look, we have a lot of data on SaaS companies. I mean, you understand how impressive that is.
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Chapter 5: What was the pivotal moment for SumSub's business?
I don't know, because we had, I think, lots of dependency on ICO back in the day, and it was kind of a little bit unstable, I think. So we didn't get a very good multiplicator, to be honest. Interesting. What do you mean by you're dependent on ICO? On, like, token offerings? Yeah, yeah. So we were doing a little bit of KYC for some crypto projects, so to say.
uh yeah so that's i see that's why i guess i see okay so i guess any plans to raise today are going to keep bootstrapping yeah exactly we want to actually raise a series b and that's why also partially why we're talking i guess and we're also talking to a couple of funds uh at the moment yeah so we have all the numbers ready let's say but we're
I would say in a luxury position because we're not burning money, right? So we can reallyā¦ How much, Vyacheslav, do you profit per month? Do you know? A bit is about 10% to 20%. Okay. Well, 10% of $3.7 million in MRR, I mean, that means you're taking about $400,000 in cash profit per month, right? Yeah, around about that. So you have a lot of leverage. So what kind of deal are you looking for?
There's investors listening right now. What kind of deals will be the perfect deal? I mean, initially, like we'll look at what like similar companies like we are raised. So we're thinking about 80 to 100 million. But at the same time for us right now is more important as strategic partnership because we want to expand a new market to land new offices in different regions.
We have some interesting M&A opportunities. And of course, we are a product-oriented company. And actually, we were focusing on product too much. We were not focusing on sales and marketing. It was more or less word of mouth. And now it's time actually to probably raise some money and invest into proper sales and marketing. I love this.
Okay, so you're thinking about raising $80 to $100 million in your Series B? Yes. Yeah. Okay. And what valuation would make you guys really happy? Like a range is fine. Obviously, you don't want to say something specific, but what's a range? Actually, I don't know.
Like before this podcast, like I was asking our financial guys or like guys that are responsible for, you know, talking to the funds, like give me an estimate. They say, no, no, no, I'm not ready at this point yet. So probably I won't tell you. And I just am afraid to lie right now because if I calculate and multiply something, then probably... won't be a right number.
I mean, so look, I'll do it for you, right? So that you don't have to have a history. I mean, based off what I've seen, like recent deals in the marketplace, even with valuations coming down in the past sort of six months, so you see this in the public markets.
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Chapter 6: What challenges did SumSub face before pivoting?
I mean, if you take your run rate today of 40, 45 million, you were seeing companies like you with your growth, incredible growth, over a hundred percent year over year, your scale is impressive. You were seeing these companies trade at like 45, 50 X over the past six months. There's been a tight, like a little pullback.
So like, I still think you could probably get a 30 X multiple, which means you'd be raising 80 million or a hundred million on a $1.3 billion valuation. You're talking in bees that can maybe, does that make you feel like, Whoa, we're worth 1.3 billion. I didn't expect that. Yeah. Sometimes like I have this creative thoughts, but I prefer like to focus on product and just
go all in and not think about this because we have specialists who are doing this part of the business. And I'm just trying, as a founder, also to understand the mathematics and mechanics of all of this fundraising and revenue, whatever. That's probably the smart way to do it. Let's go back to talking about products. Since you're CTO, how many verifications monthly are you processing right now?
It's from half a million to one million. From how much? Half a million to a million? Yeah. I should have prepared much better actually to this question, but wrong about that. Okay. 500,000 to a million. That's across all your customers. Yeah. Yeah. I mean, there are different kinds of checks though, because I don't have a breakdown. Some of them are very easy to like, let's say AML screening.
Some of them are super complicated. Some of them are, most of them are actually classical ID identity verification is basically some sort of ID document plus itself. And why would you say you've been able to grow so fast, 25 to 50 million in revenue without a sales team? I mean, would you say it's because you price against number of verifications so people upsell themselves?
There is, of course, a sales and marketing team. I mean, I would say marketing, like sales, maybe 20, 30. Okay. 20, 30. But I mean, honestly, probably it's not in the very good shape right now. That's, again, why we want to hire super senior people that can bring the order to this process. But most of the revenue actually comes from the new clients.
And those clients are actually coming from our competitors. And because one of the differentiators that we have, we work very well globally, like in emerging markets. And I know that many guys out there tell the same thing, but also the quality, that's what matters. And we know how to work with those complicated regions globally.
and when such clients come to us one particular region complicated region they a b test us they see that we perform and they say okay can you do brazil right now yes we were yes of course they try brazil and they see again that we perform and that's how they really put some of them put lots of traffic on us although in the beginning it was a little bit you know little but then it grew really this makes sense what's the total team size today how many people
About 300, a little bit more. 300 people. Wow. And how many engineers? Engineers, I would say 50, 60 and plus maybe 20, 30 like UA and like engineering managers. 60. Well, this is a heck of a story. I'm really excited to see what you guys do over the next quarter. In the meantime, though, let's wrap up here with the famous five. Number one, favorite business book. A business book.
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