SaaS Interviews with CEOs, Startups, Founders
907 SaaS: How Proov Was Able to Raise $21m Pre Revenue
17 Jan 2018
Chapter 1: What is the main topic discussed in this episode?
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 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.
Chapter 2: What is Proov and how does it function as a Pilot-as-a-Service platform?
Hello, everyone. My guest today is Toby Olshelansky. He is the CEO and founder of a company called Proove, the first pilot as a service platform, which helps companies find, test drive, and implement new technologies. In the past 20 years, he's led several successful businesses and is an active board member and mentor to numerous startups. Toby, are you ready to take us to the top? Great.
Thank you very much. It's a pleasure to be here. Of course. So tell us what Proove does and what's your business model. How do you make money? All right.
So actually, we created Proof after 20 years of us chasing CTOs and CIOs of enterprise to try to convince them to open for us a testing environment so we can actually sell them one of the technologies that we were developing in the previous startups. So we created a platform that allows any startup in the B2B enterprise software to connect easily with enterprise to do proof of concept.
And what's the business model? How do you make money? Very simple. The enterprises are paying us between tens of thousands of US dollars up to hundreds of thousands of US dollars. It depends on the services that they're getting from us, on different testing environments, services, data sets that they're getting from us, and professional services. Is that monthly or annually? Annually. Annually.
And if I forced you to pick an average annual contract value across your customer base, what would it be? 95. Okay. You knew that. I like it. I'm talking to an engineer. 95. Good. All right. Take us back. Tell us kind of more the backstory here. When did you launch the company? So we launched the company exactly two years ago. Actually, now that I think about it, time was flying so fast.
So I founded the company with my partner, Alexei Sapochnikov, who's the CTO. I know Alexei for 20 years. We actually, we are like a married couple. And this is not our first startup together. Actually, the funny story is that we started as competitors. When I was the founder of NetEye, he wasn't exact. And this is how I got to know him.
And basically, about two years ago, we decided that we have to do a change. We have to change the way that startups meeting an enterprise in the way of doing the proof of concept. And right before we jumped in and created Proof, We did a very big legwork. We actually flew almost across the globe.
We interviewed 170 startups and enterprises anywhere from the West Coast to the East Coast in Europe, like Frankfurt, Munich, London, Berlin. And we did a lot of conference call with Asia, like Singapore, Hong Kong and Australia.
The reason for that is that we want to make sure that the problem that we are facing is not just a problem as the Israeli entrepreneurs are facing, but it has a global scale. And it's important for us to understand the global pain and how different enterprises, how different startups are seeing this pain. And we learn everything.
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Chapter 3: How did Toby Olshanetsky and his partner come up with the idea for Proov?
So how many customers are paying you today? Tens of enterprises. Tens? Tens of enterprises. Got it, got it. So we'll call it between 10 and 100. You say that, not me. Well, that's what tens means, right? Yes, it's more than a 10. Okay, more than 10, less than 100, because if it was more than 100, you'd say hundreds. All right, good. And look, I can kind of, I mean, I can do the math, right?
So on an average of $90,000 in ACV, you know, you guys are cranking about, I mean, you're almost to the million dollar ARR run rate, right? You said that. Well, I'm just going to take your numbers. 10 customers at minimum times a $90,000 ACV puts you very, very close to a million bucks in ARR. I want to give you the credit you're due. That's basically accurate, right? You said that, not me.
Those are your numbers though, right? Okay, good. Very good. We'll move forward. So how are you? You're in a really unique spot where you've built a great community. You've invested two years in building this. You're now trying to figure out the best way to convert these free users into paying ones. How are you doing that? Is it high touch, low touch? What's the strategy?
Well, first of all, we are learning all the time because we just moved from free to monetization. It depends on the enterprises and it depends on the startups. Some enterprises, it's just a very low touch and it was a very soft migration.
And some enterprises, we have some more deep working with them, better services that we provide them, additional revenue stream that we are getting from them, and we are learning all the time. CRMs might be the tool that I fight with the most. I just haven't found one that I really liked. I don't know if you guys are the same way, but they're just so tricky.
And a while ago, I had a guy named John Lee on my show. He's the CEO of ProsperWorks. And he told me they just passed 40,000 customers and 24 million in annual revenue. So they're doing about $286,000 in in revenue per employee. And I said, wow, why is this working? And I said, you know what? I'm going to try it.
So I went to prosperworks.com forward slash love your CRM signed up and it immediately became clear why it worked. Those of you that love growth hacking, you should go to that link just to see how they do the onboarding. That's prosperworks.com forward slash love your CRM. In short, it's like magic.
You know, I'm not the guy that, you know, finishes the sales call and then takes the time to actually put data into the CRM.
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Chapter 4: What challenges did Proov face before launching and how did they overcome them?
They have this magical way of just doing it. And it's a beautiful thing. So every morning when I wake up, I just go, okay, what leads are prosper works telling me to reach out to because they're most likely to close and it works so well. And you guys know, I love money and I love only focusing on the leads that are going to close. So I encourage you to try prosper works or sponsoring the show.
Check them out at prosperworks.com forward slash love your CRM folks. That's again, prosperworks.com forward slash love your CRM. Now, just to be clear, this is your first product, right? So you've had no revenue in 2016 or 2015, you've just been building? Correct. Okay, got it.
And what is the, how many of the team members right now, so you said you have 40, how many of them are strictly focused on sales or marketing, converting your free user base into paid? Well, the majority of the company still is R&D. I would say about 15% of the team are is sales and marketing, and we are hiring like crazy. I'm hiring right now 15 salespeople, and we are growing.
Yep, no, that's a good thing. What is the, I mean, you probably don't have enough, you just introduced pricing, obviously, so churn is probably not a relevant metric, but how do you look at stickiness across your free user base? Like, what's the one thing that you know each of these customers has to do every month or every quarter to be highly likely to pay you? Sorry, we lost you.
Yeah, no problem. I'll ask it again. So I assume it's too early for you to, I mean, have you lost? Has anyone started paying and then stopped paying? Do you have any churn yet? No, it's too young yet. Okay, yeah.
So let me ask, I think, a better question, which is across your free user base, what's the one thing you have to get every potential customer to do every quarter for them to be highly likely to convert into a paid customer? To give them the best service ever. No, come on, be specific. You're an engineer. Totally specific. To be the best service ever. No, no, but that's too generic, Toby.
I mean, like specifically, you have to get them to launch one proof of concept per quarter or like, what is it actually? No, no, no. We passed that. We did that when we were free. So we gave them free POCs that they learned the platform and they knew how to use the platform and understand our GUI, et cetera. Did they all actually use it though? That's what I'm saying. Give it to it for free.
Yes, yes, yes. They were using it. And actually, part of the thing that we were working very hard for them to use it is not just for us to get traction, but also to get real knowledge from customers that have been working. And we improve ourselves and we launch Proof 2.0 based on all the knowledge that we understood from our customers.
This is the way that we are improving ourselves and we are building it. It's not just a simple thing that we started when we built the company. We did this 170 interviews to understand the pain, and that was before we started coding. And then we did our MVP. Then we launched a semi-alpha pre-beta, again, with 10 customers to understand if we understood correctly the pain.
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Chapter 5: What is the business model of Proov and how do they generate revenue?
Yeah, yeah, yeah. Crazy is a compliment. That's a good one. Number two, is there a CEO you're following or studying right now? Ziva Viram of Mobileye. Mobile, yeah, that's a good one. Number three, what's your favorite online tool besides your own? Slack. Number four, how many hours of sleep do you get every night? Four. Four, what's your situation? Married, single, you have kids?
I'm married with three kids, but I'm sleeping four hours since I was 18. Wow, how old are you? I'm 45. How do you do this? You must be like killing yourself. How do you only get four hours of sleep and survive? Well, this is my seven startups. The best idea comes at the middle of the night. So, I mean, do you take naps? No, no. How do you survive?
It's physically impossible, I think, to survive on four hours of sleep every night. You never cheat? You never have a catch-up day where you sleep 16 hours? No, no, no. Actually, well, everybody's laughing here on the company because everybody knows me. Actually, if I'm sleeping more than six hours, I've got back pain. I cannot cope with being lying on bed for six hours. Got it.
All right, last question. Take us back 25 years. What do you wish your 20-year-old self knew? Be more ambitious. Don't be afraid to break some more glass ceiling. Coming from a guy that has gone through seven startups with many exits, he still says, be more ambitious. His current company is called Prove, launched in 2015 with one of his best friends and early competitors. They got together.
They've now raised $21 million. They have 40 full-time team members, just turned on monetization. They have 10 startups.
folks paying which and they're paying for basically uh toby's tool approved which lets them pilot as a service with larger enterprises super super effective they have a really healthy beta group uh the average contract value is about 90 grand so quickly approaching if not already passed that 1 million dollar in arr mark toby thank you for taking us to the top pleasure thank you very much
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