SaaS Interviews with CEOs, Startups, Founders
Myr POS SaaS For SMB's hits $1.2m ARR, Raised at $7.5m Valuation with 400 Customers
01 Dec 2021
Chapter 1: What is the main topic discussed in this episode?
Yeah, it was a price round. We did it at 7.5 pre-money and we've exponentially grown since then. We're going to be ending this year with a top line revenue over 2 million. And our ARR is going to be sitting at about 1.25 based on our prediction of what's going to happen by the end of this year.
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 David Nadir's den.
He's a tech monkey with over 15 years of experience. He's intimately familiar with all aspects of project from concept to execution. Now building myr.io, a POS for limited service restaurants. David, you ready to take us to the top? Yeah, why not? Thank you. What is a limited service restaurant? Um, okay.
Well, the number one point of a limited service restaurant is always think about the one fundamental thing you pay before you eat, right? A full service restaurant, you're sitting down, a waiter's coming, you're there to have a good time. And it's all about upselling.
If you're looking at a limited service restaurant, the goal is how do I ensure to take as many orders as possible during either a morning rush, a lunch rush, a dinner rush, whatever rush it may be, but that's usually what happens. So anything that's limited service, you're going to be looking at how do I maximize the amount of orders I can input into a certain amount of window of time.
How could I minimize that? And then how do I output the results as fast as possible? I am in airports all the time. And I'm the one that shows up 20 minutes before takeoff and just challenges, just dares them to take off without me. And my favorite restaurants in the airport are the ones where you sit down. I don't have to talk to any humans. I push some buttons on an iPad.
I pay and my food comes out. Is that what you're powering? Yeah. We're powering that and that's where it's going towards. But what we're starting to see is that there's a huge niche in a huge segment of limited service restaurants that are simply not being catered to. They're still being catered to with old, they're not antiquated, but enterprise-based solutions, much like NCR or micros.
They're not being catered to really fundamentally with cloud-based systems. And what it is, is Take, for example, any mom and pop type of pizza chain, right? Anybody who's still using a Casio cash register. They have a franchise across the United States or Canada, 400 locations. And now they need to go into this digital world, which is today's reality, right?
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Chapter 2: What is a limited service restaurant?
And they built their own system. So basically, what we ended up doing is building 12 years ago a cloud-based POS that was solely focused on what McDonald's was trying to deal with, which is maximizing top line revenue, not dealing with a single location at a full service restaurant, which is all about- What's a pizza shop paying you all in today monthly to use the technology on average?
A base price will go from 79 and we can go all the way to 299. I mean, it really depends. Everything's a luck card. Everything is, you know, you pay for what you need. And this is something that's very unique in our system because if you're- Well, David, hold on real quick.
So what would you say the average, I mean, was the average like, would the average be like 150 bucks a month, something like that? 129. 129. Okay. And is it just the flat SaaS sphere or do you take a percentage of GMV as well? We take on the transactions as well if they're going to take payment services via our system. So we've gone agnostic, much like Vend has.
So as a POS provider, we actually connect to as many different payment terminals as possible because we can obviously get access into their lead generation, into their ISOs, into their agents that actually have feet on the street and are talking to these chains, that are talking to these restaurants that can then bring them onto our platform.
How much GMVs are throwing through all of your deployed devices today? That's a good question. I wasn't prepared for that, but I would say north of 100 million right now. Monthly or annually? Annual. Yeah. And that's across how many devices? We have 1,200 locations that are launched. And in terms of devices, most locations are averaging now two point of sale terminals in general.
So it's 2,400 devices that you've effectively shipped. Interesting. Okay. Let me get more of the backstory here real quick because some of the most successful SaaS founders, the ones IPO-ing today, they start off as an agency like you did 12 years ago.
So I love your founding story, but I want to dive in because I see the big successes, but I also see founders build a big agency that does a million a year and they get addicted to that revenue. They never shut it down to build the bigger SaaS opportunity. So tell me about that. How big was your agency if you shut it down? We were at 45 employees. I mean, we're from Canada.
So obviously, we're a little bit smaller than in the States. But we got up to about 45 employees. We were doing everything from development to everything that had to do with digital creative. So from emotion graphics to whatever was required around a campaign on a digital side. And what was the biggest revenue year across the 45 people? 2.5 million annually. Okay.
So that's not an easy thing to shut down. No, it's definitely not an easy thing to shut down. I shut it down because I just realized that I was going to burn out as a founder because dealing even with my partner, I had a great team.
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Chapter 3: How does MYR.io cater to the needs of limited service restaurants?
He wanted to go into a gamification type of SaaS model and I wanted to go down this path, which was- Did you have to buy this technology from him or did he let you take it? No, we built it for a specific customer and that customer, I ended up buying it from him. Oh, I see. Interesting. Smart. Okay. So what does the cap table look like today? Did you own 100% at the beginning of the SaaS company?
I owned about 90% with certain partners. And then now we're still with my two founders. I guess co-founders, when we decided to go serious about this, we're now sitting still at 75% equity. Everybody else is sitting in uncommon shares. We have some great investors that came in.
One of our investors is Lester Fernandez, who's the co-founder of Pivotal Payments, co-founder and CFO of Pivotal Payments. They went public about... I think a couple of years ago, maybe a little bit more at a $5 billion market cap. They used to be Nuve. Now they're a payments company called Pivotal. He invested into us. He sees what we're trying to do.
And what we're trying to do is we don't have delusions of grandeur. We're not looking to go after Square or Toast or any of that. What we're trying to do is become an ISV that a payment acquirer is going to want to work with. What's ISV? So independent software vendor, basically. Okay, got it. And just to be clear, just to round up the equity story real quick.
So you guys own 75% today, investors own 25%. How much have you raised to date? 1.25. And we're currently raising our series A at 5 million. Okay, hold on. So this is a lot to unpack. You raised 1.2 million in what year? Last year. Okay. So during COVID. Wow. Okay. So was that a priced round? Yeah, it was a price round. We did it at 7.5 pre-money and we've exponentially grown since then.
We're going to be ending this year with a top line revenue over 2 million. And our ARR is going to be sitting at about 1.25 based on our prediction of what's going to happen by the end of this year. But most fascinating number that we have, and this is during COVID and during the pandemic, is that our net churn is less than 2% annually. Got it.
So on an annual basis, your net dollar retention is 98%. Yes. I see. And when you say that you're raised 1.2 on a 7.5 pre, was that the right valuation or do you regret it looking back? No, I don't because time was at the essence, right? We could have started to play that game and negotiate and everything, but it was a fair round. It allowed us to do what we needed to do.
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Chapter 4: Who are MYR.io's main competitors and how do they differ?
It allowed us to prove that during that raise, we actually got to positive EBITDA during COVID. So we proved to ourselves that we can do either of two things. We can either wind down the growth and generate cash, or we could start to raise more and generate value, right? So we're really in a sweet spot in what's happening right now.
And the most important thing is that most of our sales, most of our client base, we shifted from SMBs, because everyone starts with SMBs, right? Independent locations. We are now closing more franchises and multi-locations than we are SMBs. So we're just shy over 1,200 locations. Less than a third of that are actual customers, right?
So it shows that we are really in that sweet spot of multi-location management. All right. So when you say 1,200 locations, you're saying there's 400 brands paying you on average three locations. Correct. I see. So 400 brands, you're doing $120,000 a month today in revenue? Yes, exactly. No, a little bit less because we're still in November now.
And we're going to know our numbers by the end of January. Because what we do, because we collect SaaS, which is our internal, we also make money on hardware, of course. It's a necessary evil. But we also make residuals on merchant services. And we always receive... those residuals a month later. So we're always one month behind. Got it.
So maybe like 100, 110 right now, but where were you exactly a year ago? We were at less than half of that. Okay. So maybe like 50,000, something like that? We ended the year at 48,000 actually in monthly recurring revenue. Okay, got it. So nice growth, 100% year-over-year growth. You're raising $5 million now. What valuation are you targeting? $20 million, pretty much.
Do you think you'll get it? Yeah, absolutely. We actually have two partner acquirers in the United States that are looking at our file carefully right now. We already have two VCs that want to follow not as leads because they finish all of their rounds as leads this year. So we're open to talking to different people that want to hear our story and where we want to go.
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Chapter 5: What was the founding story behind MYR.io?
Again, both plural founderpath.com forward slash products forward slash valuations. Raising five on 20 per year, 25 posts would mean you're selling 20% extra of the business, which means you're 70% would now go down to something closer to 58, 57%. Why do you want to take that dilution? Because right now is the opportunity for us to grow.
If the longer, like, like I said, the longer that we delay, we can, we can start to generate a healthy profit and just be a company that, you know, grows steadily. but now is a massive opportunity for us. We're starting to see that, just to put it in perspective, we just started to send our sales reps across the country and Canada. How many sales reps do you have? Six. Paid quota?
Yeah, paid quotas and commissions and everything. And we have only two customer success people. That's how simple our system is to use. What we started to leverage is, look, we started to go to franchise shows with our sales team and no one's there. No one's approaching these franchises. No one seems to have the offering that we have, which is interesting and unique and definitely humbling.
But at the same time, it's like, well... Are we going to take the time and negotiate or are we going to raise and grow this company? Makes sense. I get it. A couple of rapid fire things here as we wrap up. Team size today, how many full people? 24 people. How many engineers? Seven. Including myself, maybe eight. All right. Fair. Tell me real quick about the IoT play.
You advertise a free iPad if they pay annually upfront. How do you make money on hardware?
so so other than other than the ipad and ipad is only if they have specific criteria that they're eligible for that but we make money because we're we're dealing with uh only two uh suppliers we have bluestar and we have apple so what we're doing is we invoice we obviously making a markup on that and what's great is that we don't have to deal with any of the rmas furthermore all of our installations are not done by us there's a third-party company
that handles KFC, Pizza Hut, and Burger King across North America. So they do all of our installations. David, wait, be specific. So if Pizza Shop signs up for you, they need to install two of these POS systems. What's that cost to install two POS systems, the hardware? Less than $400.
Oh, and hardware-wise, hardware is on average, we're looking at a ticket size of maybe $1,500 to $2,000 if it's a brand new store. If it's already sitting on an iPad-based system, obviously there's going to be less stuff to buy. That's fine. That's fine.
But you charge the customer two grand and how much does it, do you actually build the hardware yourself or you source it from Bluestar or someone else? We source it from Bluestar. So Epson, APG, APG cash drawers, iPad stands, Volt pros. What does Bluestar charge you for those two devices? We're making, we make 40% on top. Oh, wow. Okay.
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Chapter 6: How much revenue did MYR.io generate last year and what are the growth projections?
I don't know what that is. What's the RMA? If something breaks down, they don't deal with us. They just deal straight with the Blue Star. Oh, interesting. Okay. Okay. And you've installed... It's an in and out. Yeah. Now you've installed over 2,000 basically terminals, you said. So we can take 2,000 times what? 800. You've made 1.6 million there on the hardware spread? Yep. Exactly.
That's impressive. Obviously not recurring, but it helps drive retention up. People aren't going to rip those out. No, they definitely don't. And they usually do a hardware swap every three to four years.
Chapter 7: What unique pricing strategy does MYR.io use for its services?
Oh, wow. Interesting. Okay. So 1.6 million made there. That helps fund your SaaS growth. SaaS, it sounds like it's growing nicely. I think I've got most metrics here. You said 90. So tell me about the iPad thing real quick, because it's basically CAC, right? So how much do they have to spend with you in that first year paid up front in order for you to spend 800 bucks on a free iPad?
So what we, so what we've actually done is the following. So we don't actually pay, we pay upfront for the, the actual iPad, but what we ensure with the customer is that when they want, we call it, we call it a, an adapt, like let's say customer, they want to go digital. They need an iPad really quickly. As long as they, this is, eligibility criteria. They're in business for two years.
So we know that they're not going anywhere, they sign a personal guarantee, they pay us upfront one month, and then we add on top a monthly SAS of approximately 15 to $20, which cover and they pay for a year upfront. So we'll finance the iPad, but they're now our customer. And have you raised debt financing for the businesses subsidize the iPad sales? Yes, we have.
So we're financing ourselves with the BDC. We're now talking to SBB Bank that's now actually transitioned to Canada. So they're very aggressive, which is good for us. And what's also great is that in Canada, we have a huge research and development fund. So most of our development is subsidized by the government. Yeah. Shred financing, 60% kickback effectively, right? Exactly. Even up to 75%.
Yeah. The BDC, some of the deals I've looked at within helping Canadian founders raise, I've seen interest rates as low as 4%. Are you in that same range or a little higher because you're earlier? No, we're actually in that range. 4%. Interesting. Very cool. Actually, last year they gave us a no interest loan that we just have to pay monthly. God, you got to love government money.
You got to love the printing press. Who cares about inflation? Screw inflation. I'm just going to stay exposed to Bitcoin and you guys keep printing money. All right. Yeah, that's right. David, let's wrap up with a famous five. Number one, favorite book? That's a very good question. I would have to say Homer's The Odyssey. I'm a mythology freak.
Number two, is there a CEO you're following or studying? Elon Musk. Number three, what's your favorite online tool for building, Meyer? Which basically, by the way, Guy, stands for manage your rush. So what do you mean by managing my rush? That's an interesting question. No, no, just your favorite tool for building. What do you use the most?
You know, what's funny is that I'm an old school base camp. So 37 Signals would also be one of those books I would like to put into the first answer. Number four, how many hours of sleep do you get every night? Um, I try to do six to eight. Okay. And David situation, married, single kids, um, girlfriend, no kids, not married. All my employees are my kids. Fair, fair, fair. All right.
And how old are you? Uh, 41, 41. Last question. Something you wish you knew when you were 20. What I know today. Anything specific though? You know what? It would be, I may probably, people watching this will see that I'm kind of like a jumpy, passionate, whatever, to take more time to, before responding to any questions. Guys, there you have it.
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