SaaS Interviews with CEOs, Startups, Founders
CPG Data SaaS Doubles to $1.6m ARR, Raising $3m on $18m Now
15 Jul 2021
Chapter 1: What is the current funding goal for Convert Group?
We are raising now, I don't know, maybe your research team is too good because we are raising now 3 million euros. So maybe they're ahead of their game there. 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. Hello, everyone. My guest today is Pan Desirellis.
He's been managing projects and firms across various industries with a focus on e-business and technology.
Chapter 2: How did Pan Desirellis transition from consultancy to SaaS?
Amongst his roles was head of business planning for the leading mobile commerce firm, Upstream, with business development responsibilities in 40 countries. He founded Convert Group in 2014 as an e-commerce consultancy, and as we see in SaaS a lot, has now pivoted successfully into an enterprise SaaS play with his partner, Elena. Pan, you ready to take us to the top? Yeah, let's do it. All right.
Take me back to the consultancy. When was your first dollar revenue there? Well, we were going pretty good since we were founded in 2014. So we managed to have businesses and projects in 13 countries around Europe and also Asia. We reached about 2 million euros in annual revenues. So it was going fantastic. Up until we had the idea to...
Well, that was about last year that we had these revenues, annual revenues. Okay. So founded 2014, took you six years to grow to about 2.3, 2.4 million in revenue. And then what? Well, it was three years ago that L'Oréal came to us and they asked us if they could find a way to measure their market shares in e-commerce.
So we told them that this doesn't exist anywhere in the world, neither in Asia or the United States. And they asked us to make a project. So that's how we came with the idea to create a SaaS platform to actually give data to brands like L'Oréal on how they perform on e-commerce.
Chapter 3: What challenges did Convert Group face during its pivot?
But now you have a big question. Do you shut down the agency revenue and go all in our SaaS or do you try and do both? I was trying to do both for like two years. I saw that this was not possible. So we sold our consultancy to Ernst & Young this January. Oh, congrats. Yeah, that was fantastic. Both Deloitte and EY bid to buy our consultancy.
And we did this just to focus on our dream, which is to go big with our SaaS product. And we put all the money in the business. You sold the consultancy to Ernst & Young in January this year. That's right. How do you value an agency doing $2.4 million top line? Well, it's about one times the revenues since we are in services or something like that. And it was a good transaction.
They didn't get the founders. They didn't get me. They took my people. They took our clients. And we were able to invest the money to our business as a product.
Chapter 4: What was the valuation when Convert Group raised funds in the past?
And actually, it's not the money. It's the focus we wanted to have on what we do. Now, correct me if I'm wrong, but I think you raised $50,000 in 2017, $3.5 million in 2019, and another $6.9 million in 2020. Is that the business you just sold? No, we didn't raise any money for our consulting business. We've raised for our product business. And it's less money than what you said.
We've raised 1.2 million euros about two years ago. Okay. And the website is convertgroup.com, correct? That's right. Yep. I wonder why my research team got these raised. Did you raise debt? No. But yeah, that's interesting. But we are raising now, I don't know, maybe your research team is too good because we are raising now 3 million euros. So maybe they're ahead of their game there.
Well, no, I believe you over my research team. You're straight from the source. So just to be clear, you raised 1.2 million for Convert Group, your product company, in what year? Yeah, that was two years ago. Okay. But listen, as we were pouring all the money from our consulting business, it was very, very profitable.
To tell you the truth, the numbers that your research team came with sounds like right. If I... calculate how much money I didn't take back as a shareholder, but put back in the product business. It took a lot of money to build what we have today.
So it was like other companies I've heard in your show, that their services business was funding their product business until it was big enough to go to investors. Yep. Yep. Okay. Got it. So you raised 1.2 million two years ago. What valuation did you raise that? That was 6 million pre-money. It was two years ago. How much revenue were you doing then?
Well, it was about 400,000 euros, more or less. Okay. And again, this is just the product business, not the agency. The product business. So it was about 12 times our revenues. Yep. Yep. And then what did you grow that 400 grand to in 2020 last year? Well, last year we were about double of that, 800. And this year, again, we're double of that. So every year we go, you know, double times our ARR.
That's great.
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Chapter 5: How does Convert Group measure its revenue growth?
Okay. So 1.6 million now today. And you said you're planning to raise capital now. How much do you want to raise? That's 3 million euros now and about 6 million euros in a series A next year. That's your plan. 3 million you're looking to raise now. What valuation are you hoping to raise at? Well, we're about 17 to 18 million. Again, it's 15 times our revenues.
And there are many ways to do valuations for companies. I think it's more like an art, not a science. And we've done all of the valuation methods. But what I think is more comparable to us, it's a similar web. that they IPO'd in New York Stock Exchange a couple of weeks ago at 17 times their revenue.
So we're something like that, only we focus on e-commerce and data for brands and retailers that are selling fast-moving consumer goods and medicine online. Like L'Oreal, right? So what is a brand and what do they do on average per month? Well, our customers are like L'Oreal, Unilever, P&G, Bayer, GlaxoSmithKline.
We have 15 of the 20 biggest multinationals in fast-moving consumer goods and consumer healthcare. And they give us contracts of about, it's enterprise contracts, about €20,000 per year on average. A company like L'Oreal would give us double of that, but we have smaller clients with about €10,000 per year. How many total customers today? We have about 78 customers, 79 customers.
Where was that a year ago? That was about a little bit higher than a half. But we are able to increase the revenue from every customer like 10% year after year because we upsell the contract we have. We get more money from them. Are you able to quantify what that upsell revenue looks like? What's your net dollar retention over the past 12 months? Well, absolutely.
Actually, our churn is very, very low. We have 2.5 churn. Monthly or annually? This is annually. And talking about logo churn, because if I tell you about our net churn and money, we are minus 5%. I mean, existing customers give us more money than the customers will lose. I don't know if it's our product. It's a low price because it's abnormal for a startup to lose only 2.5% of the customers.
I think it's normal to be around 10%. Yeah, I mean, I think these economics are good, right? So if we just round up, you're turning 3%, you're expanding that same cohort from a year ago, 8%. So your net dollar retention is 105%, which is the same as negative 5% net churn. So it's all healthy economics. Now, how are you getting new customers?
What are you spending to get a new $15,000 a year contract? Right. Funny enough, Nathan, we didn't have any marketing department and we didn't have any salespeople. It was happening organic up to today. So now we're investing in the sales organization and doing some marketing and spending some money on AdWords and LinkedIn, etc.
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Chapter 6: What is the customer acquisition strategy for Convert Group?
Up to today, it was word of mouth. So L'Oreal Greece would recommend us to L'Oreal Spain and L'Oreal Spain to L'Oreal Italy and Johnson & Johnson, etc., And, you know, I try not to feel guilty about it, that we didn't spend money to grow faster. But on the other side, I can see now the upside of this, that now we are ready. We have the people. We know we can spend money in order to grow faster.
And all the metrics I told you happened without salespeople. What's the team size today? Sorry, what's the? How many on the team today? We are about 50 plus people, something like that. How many engineers? 20. 20 engineers and data scientists. Yeah, we're 20. Wow. Okay. And how many salespeople, like even if they don't have a quota? Okay. No, today we just built the sales team.
It's like three people. We just got the third one on one director. So it's been from January after we sold to EY that we started building a really great world-class Caliper sales team. Four on the sales team with that director, three of them, those three, are they carrying a quota? Yeah, absolutely. What's the annual quota? Well, they should bring something like half a million each on ARR.
Okay, got it. So they have to bring in half a million in ARR, and if they do that, what can they earn, full compensation? Well, you know, we do it mostly for our salespeople getting extra salaries. It's not like a percentage of sales, but for the director, we have a different arrangement. Having said that, what we're doing at Convert Group, actually, we have a data marketplace.
So it's not selling to L'Oreal that will give us the money or Johnson & Johnson. These brands, Nathan, are ready to give us the money. They want data. They want visibility on e-commerce like crazy. It's the easy part. The difficult part for our salespeople is to convince the retailers.
So go around to Carrefour, Ajo, Deleuze, or, you know, Pillpack, if they were interested to give us data, and convince them to give us access to their systems. Because what we do, the data we have is with the consent of the online retailer. So this is the difficult part of our equation. Now, we will give bonus to our salespeople when they bring on retailers.
And this can be like, you know, €3,000 per retailer to bring on or things like that. Yeah, no, this is interesting. You know, you remind me a lot of CircleUp and what he did, you know, Ryan Kaldbeck did with CPG Brands.
Started off as a data play, then raised a debt fund, then raised a credit fund, and now also sells, I think it's called Sphero or something like that, where basically it's a data play that he sells out to CPG Brands. I wonder, do you have plans to ever launch your own credit fund or debt fund to give debt to smaller versions of L'Oreal? Well, no, I'm not sure about that.
Our plan is to raise at the moment from private investors and institutional investors and grow like that. So, sorry, I guess my point is, would you ever offer debt to CPG brands as a value add, like inside of your tool to your customers?
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Chapter 7: How does Convert Group ensure customer retention?
Can you explain that? Because I'm not sure I get it. Sorry. In other words, you sit on a very unique data set. So if a new CPG brand signs up for you and you see a unique data set, can you give them capital to help them grow based off the unique data you see or no? Give them capital like a percentage store company?
like a percentage share what do you mean sorry like let's say you were running your own fund uh that invests in cpg brands you have a unique data set would you ever do that use your data set to make investments yourself via convert group into other cpg brands All right, now I get it. No, I wouldn't do that. We are really focused on the business we do.
We want to give data back to brands and FMCGs, and that's our business. And we should be totally neutral, like Switzerland, not get involved with any brand. We want to measure the global sales of FMCGs, become something like what Nielsen did about 70 years ago, and they became the global brand of measuring the offline sales. We want to do the same for e-commerce.
Yeah, but you're in Athens, Greece, not Switzerland. So we'll see if you pick sides or not. You know how good engineers Athens, Greece has? I bet they're great. And you know, mathematics mind, and we can get them half the price that someone can get them in the rest of the Europe or a quarter of the price. What do you pay a senior engineer in Greece?
Well, that would be about 60,000 euros maximum per year. So I think it's a fraction of what Google would pay or other companies. Yeah, that's incredible. Last question. You're talking about equity. How much equity do you still own? Well, me and my partner, Elena, it's two of us. We have 60%. So 30% me and 30% Elena. And where's the rest? The rest is with stock options to our team.
We have some early investors, mostly family members. And we have one fund called Unifund that invested in us 1.2 million. They have 17%. How big is the stock option pool? Well, it's about 10% to 12%. Okay. That's great. I love that. Very cool setup here, Pam. Let's wrap up with the famous five. Number one, favorite book. Well, I have to say Trailblazer from Mark Benioff from Salesforce.
I really love this guy in the book. Number two, is there a founder you're following or studying? I like to take things from many founders and CEOs, not one particular, but if I was to name one, I would say my dad because he taught me most of the things I knew for entrepreneurship. I love that. Number three, what's your favorite online tool for building a business?
slack full stop no comments number four how many hours of sleep do you get every night Well, Nathan, funny you should ask that because I don't know how the other entrepreneurs you interview get like six or seven or eight hours of sleep.
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Chapter 8: What are the future plans for Convert Group's growth and funding?
I can't get more than four hours. I mean, I wake up and my brain is working to do what I have to do next to my work. So this is something I have not find the balance yet, but that's the way I am. Well, and it's late there now. Hold up your beer. You're drinking a good Corona or something, right? That's power. Yeah. There you go. All right. And what's your situation?
Well, Pan, I know you're married with that. It sounds like married. Do you have any kids? Yeah, I have two kids. Three? Two, two kids. Two. Okay. And how old are you? I'm 48 years old. 48. Last question. What's something you wish you knew when you were 20? Well, I wish I knew many things. I can name 100 things. But listen, I prefer I didn't know anything more because of what I am today.
It's the journey I had to learn all these things I didn't know. So I'm okay with how I was at 20. Guys, Convert Group gives brands like L'Oreal great insights on CPG information and data sets. They've grown from an $800,000 run a year ago to 1.6 today, doubling year over year.
They raised $1.2 million on a $6 million valuation in 2019 and looking to raise $3 million right now on an $18 million valuation. We'll see if they can get it done. 78 customers paying on average $20,000 per year. Their team is 55 people, 20 engineers. We will see what happens next. Pam, thanks for taking us to the top. Thank you, Nathan.