SaaS Interviews with CEOs, Startups, Founders
923 He's Doing $10m-$30m in ARR Between Adtech and SaaS
02 Feb 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. Hello, everyone. My guest today is Amit Avner.
Chapter 2: What inspired Amit Avner to start his company?
He's the founder and CEO of a company called Takey, a real-time data company. He started programming at the age of 10, and then after high school, he went to work developing innovative technologies for the Israeli Defense Ministry. He's also the founder of BeWitty and iWitty Search, an award-winning search engine. Amit, are you ready to take us to the top? I am ready.
Hi, Nathan.
Good. What's up with all these folks coming out of Israel building unbelievable companies? What are you guys having for breakfast?
I think the magic in Israel is actually the army. If you think about it, the Israeli army is taking young people, putting them in a high-stress environment for a few years, making them solve big problems very quickly together, and then they finish the army and they're ready to go start a startup. It's all about pressure and stress.
How old were you? When did they put you through that pressure?
So you go to the army at the age of 18 for three years and some people stay on for a few more years. So it's up to you.
Did you ever actually like get shot at or your life was threatened?
Luckily, I can say that no, it didn't happen to me. I was a soldier, though, during the second Lebanon war. So that was an interesting experience to be a soldier during an actual war.
So take us forward now to Takei. You're sitting in a very non-war zone area now in the States here up in New York. What is Takei doing? What's the model? How do you make money? Great.
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Chapter 3: How does the Israeli army influence entrepreneurship?
And that's why investors love specifically subscription services. So I think as this became obvious for people who operate companies, then what most people did, we made the model of subscription. much smarter and better to use and efficient for the customer. So it's cheaper for them to subscribe to this data versus just buying on a consumption basis. So it's a win-win situation.
I prefer to make less money but have forecastability than making more money and variability.
What does the average customer pay just for your SaaS offering?
Actually, because it's new for us over the last year, there's a huge variance, but it's usually tens of thousands of dollars a year for the subscription.
Okay. So, I mean, is it fair to say between like, what, like one and 5,000 per month?
Uh, a bit higher than that. So like five to 10.
Okay. Five to 10 per month. And then obviously that multiplies out annually. Yeah. And then, and then how, obviously this is new, but how many customers do you have that have moved from consumption model to SAS model for you? Are we talking about 10 or five or a dozen or what?
Well, we have, we have about 200 clients using us and I would say that about 20%.
are have moved or in the process of moving by the end of the year yep so call it 40 with 20 percent of 200 yeah basically now but now it's the time to do that because you're in q4 so now it's time where everyone plans for the next year and you go in and kind of offer make it make it a big for them for next year to sign up and you tell them hey you've been doing this for all this year you could save 30 if you only go to this model i was gonna say so your sales pitch sounds like hey you've been paying us on a consumption model the past two years you've paid us x just sign up monthly and you're gonna save 30 percent
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Chapter 4: What is the business model of Taykey?
So even if you give a discount on folks moving to a SAS model, that ATM is still a better ATM for you to pump money through.
So I can tell you a story about Stakey from about three years ago. We were operating until then as a media company. So we weren't even selling our data. We were just basically selling media and we would buy the media on the client's behalf and basically take a margin off whatever, like using our data.
We bought the media for cheap and sold it for higher than that and sent it to an arbitrage business. And when you do that, you can make a ton of money. There's a lot of very successful large companies making a ton of money, but then your multiple is 2x on the company because they're selling media.
Chapter 5: How does Taykey leverage social media data?
Then you drop the media portion, just sell people the data. Let's say you even, if you stay the same size, the company is all of a sudden worth five times more than it was worth before, which is the world of startups. That's how things work. And it's fair. It's fair because I can see why a data company is easier to scale than a media company.
I can see why a SaaS business where you have subscriptions is a better public company than a non-recurring business. So there is a reason for all these things to happen.
What year did you launch the company in?
We launched in mid of 2009, so we're like eight and something years going.
And have you bootstrapped or have you raised capital?
We raised capital. So I was lucky enough to be an engineer, and I had a good idea, and Sequoia Capital came in and wrote a check before we started the company to get the employees coming.
And what was the initial check? We raised $2 million. Okay, and to date, how much have you raised? $32 million. $32 million. How active were the investors in recommending a shift in business model strategy for the purpose of a healthier valuation for future rounds?
I would say that I don't know how, because I can only say what's happening in my company. Our investors are amazing. And they're thinking about the health of the company. And the first thing they recommend is if you do any shift, you need to do it slowly to make sure you're not hurting the people who work at the company and your potential to grow.
The health of the business is the number one thing. Now, I don't know. Our investors told us a lot that we should try to figure out what's the best model to go with. But it was obvious. If you look at the industry, everyone's talking about subscriptions. Everyone's doing that. By the way, I think in a year, we'll have a problem. Everyone will try to sell subscriptions.
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Chapter 6: What are the revenue streams for Taykey?
It becomes a pain to do that.
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But you got to do it now. Again, HostGator.com forward slash Nathan. Now, can you give us a general size of the company? So like, for example, last year, revenue wise, where were you guys at about? Low tens of millions. Low tens of millions. Okay. So can we just put a cap on that and say between 10 and 50 million? That's pretty vague, right?
That's vague enough for your, so it's not a weakness for you when your competitors hear this, right? All right, good. So 2016, kind of between 10 and 50. And then what do you know in terms of team size?
We are now about 50 people. 30 of them are engineers and 20 are in the business side.
All based in New York or split?
All the engineers are in Israel and all the business side is in New York.
Interesting. Yeah, I'm seeing this model a lot too. So Israel, New York. Classic Israeli model. It works. Listen, it works. Okay, talk to me some more about kind of economics here.
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Chapter 7: How is Taykey transitioning to a subscription model?
So as you try and you have a limited cohort to work with here because you only have 20 or 40 people on the new kind of SaaS platform. But do you have any insight yet into what churn is going to be or what churn is?
Too early. So for us, as I think of the company, I want to think about the focus for us for this year wasn't necessarily increasing. Well, you always want to increase revenue and grow, and luckily we're happy to do that. But the focus this year was trying to convert as many people as we can to the new model and understand.
So we'll have enough data points so we can go and understand how the business looks like. Because if you want to scale the SaaS business,
the more data you have that's where the future comes in and i think when you think of a startup you shouldn't think of the short term here's where the next 10 bucks come from i want to understand how they take those 10 bucks and make them into 20 or 30 or 40 and that's why the focus this year for us although growth was great the focus was how do we convert clients to new models to do that to do so by the way we launched a whole new product to come along with the subscription uh we call it the intelligence product so it's an insights product think of um
Think of any company go in and say, okay, we want to see what are the hottest actors for this? Who are the biggest musicians for that? And you can do everything on our website to try it out. It's like a web-based product. Anyone can sign up for that. You should sign up now at stakey.com.
Um, but, uh, if you're a subscriber, you get unlimited access to the data, you have history, you have all the kind of things we do. So what we try to do is not just take the same product and make it in subscription matter, but also add more things to it. So you, we could like learn how people behave and how retention looks like around that.
Interesting. And is that a, is that a SAS model as well or no?
Yes, it comes. So it comes along, you pay subscription, you get it for advertising, get the insights, you get everything with the same package. So it's kind of like all you can eat.
That's included in that five to 10 grand per month package. Got it. Okay. Has anyone started paying you on the SaaS model and stopped?
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