Chapter 1: What is the main topic discussed in this episode?
So end users, I double the size of the customers, end users from 200, 400K, but for merchant base, it was about 2,000 base. You are listening to Conversations with Nathan Latka. Now if you're hearing this, it means you're not currently on our subscriber feed. To subscribe, go to getlatka.com. When you subscribe, you won't hear ads like this one. You'll get the full interviews.
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Now look, I never want money to be the reason you can't listen to episodes. On the checkout page, you'll see an option to request free access. I grant 100% of those requests, no questions asked. Take it over in 2014 with only $400,000, $500,000 a month and a year in revenue. 2,000 customers. Recapped the company with a $2 million raise. Then raised $4 million in convertible note.
$5 million equity round on a $27 pre-money valuation. Now looking at raising. Would entertain potentially some offers, but really growing nicely. We'll finish this year at $5 million in ARR. Up from $2 million at the beginning of the year. Really healthy company. So who's your biggest competition here? That'll be good gossip. No one. Oh, come on. That means there's no market for your product.
No competition means no market, right? We do have competition, but they're actually scaling out of Asia. Who is it? AIMIA, A-I-M-I-A. They're a public company based out of Toronto. They're literally shutting down Asia. Why? They have some board issues and they sold one of their biggest investments, Aeroplan, back to Air Canada. Are you guys going to acquire them? Oh, no.
They might be... You're sure? I'm not going to see a headline tomorrow. I'm going to go, why didn't Anna tell me yesterday on stage? I know. And then other competitors are highly focused on retail and FMCG, which is a declining sector. So we're actually very diversified into FSI, telcos. Good. Okay, you guys ready? We're ready to rock and roll? All right, sweet. Okay, so let's just start off.
So if people don't know what Perks does, tell us what it does real quick. Okay, Perks is a B2B SaaS platform that solves a lot of the global B2C enterprises, loyalty, and customer engagement challenges. Everything is mobile-led. Currently, we're focusing highly on Asia.
We're in seven countries, and every country in Southeast Asia right now is based on digital natives, and corporations and enterprises are all going branchless banking, FinTech is driving the forefront. Telcos and financial services, banking are all competing with super apps in Asia. So we're seeing a shift, and it's all mobile-led. But you're mainly customer loyalty and engagement platform.
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Chapter 2: What is Perx Technologies and what problems does it solve?
Yeah. So you had 2,000 merchants paying in 2012 or 2014. 2014, right. But a lot of them were actually scaling out high churn. In Asia, the merchants are so low tech that the maintenance was not scalable either. They're spoon fed.
The governments would give them so much grant money to sustain their business, and they're so entitled to the government money, so we weren't able to sell our solution to them. So fast forward to today, 2,000 customers when you took over, maybe you churned some of them strategically, you added some, how many customers, actual paying customers are you serving now today?
So 2016, we shut down that business. And I had to raise a down round in late 2015. How much? About two million. And what valuation did you have to go down to? Oh, it was almost to nothing. Well, you have to raise on something, otherwise you just sold 100% of your company. Probably like five million. Five million pre-money or post-money? Pre, pre. Pre-money, so kind of call it 7 million posts.
Yeah, it was almost like nothing. So you sold like 33% of the company, basically. Yeah, yeah. Did you wash out all the early folks off the cap table, or are they still there? Some of them left, but eventually it took me two years to recap the entire investment table because we had a lot of strategic investors and family money in Asia, a lot of billionaires on our cap table. A lot of what?
Billionaires. What does that mean? That means a lot of rich family, high net worth family. Oh, okay. Oh, billionaires. Billionaires. Oh, sorry. I'm an idiot. Like, what? You're used to millionaires. You're like, Nathan, come on. No, no. I've talked to a lot of billionaires. It was over my head. Okay. So you recap in 2016. And then have you raised any more up to this point today?
Myself, I raised about $11.1 million. On top of the three? Yeah. So there's $14 million total in the company today. Yeah. You did $2 million in 2016, which means you did a $9 million round between 2016 and now. Yeah. When was the $9 million? Yeah. So we actually did a series of bridge rounds. So it wasn't like there's an A-plus round. So when we pivoted, the model was not proven.
We didn't find product market fit just yet. So we're now into the third year of this enterprise solution that we're going to market. And we had started with 500K, then 1 million ARR, and now we're actually closing this fiscal year on 5 million. So the 5X growth. When did you break a million in ARR? What year? Last year. Okay, so 2018. And what did you start?
So you started it this year at about a million run rate? 2017, we started the, yeah. So we started with 500K. A couple of companies came on to our platform. They were our lighthouse accounts. And then we eventually grew to 1 million ARR last year. That's what you ended last year at? That was the run rate? Yeah, yeah. So you're doing about $83,000 a month in revenue in December of 2018.
And what do you think you'll finish this year at? Five million AR. Okay, so about $450,000 a month in revenue. All SaaS. Yes, all SaaS. Where is most of that growth coming from? Expanding the old cohort or adding new customers altogether? A combination, yeah. A lot of, now the existing customers are moving into a B2B2C play, so we can upsell them on the OEM solution
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Chapter 3: What business model changes has Perx implemented?
About $10 million. Okay. And you've done it, you've raised in three tranches on the note? Well, no, one tranche. When was that tranche? Between the A and B rounds. So we raised a full B round last December. Yeah. In 2018, you raised $9 million. No. So we raised $5 million US in December. Of 2018. Yeah. So that goes on the $2 million you raised in 2016. So that's seven total. Yeah.
There's four more millions missing somewhere. That's the convertible notes. Okay. When did you launch the convertible note? Between those times, like 2016, 2017, when we were trying to find product market fit. So you're doing these in the same time, the equity rounds and the note at the same time? No, we closed equity round A, and then between A and B, we had the CBs. Oh, I see.
You did the $4 million convertible note in between the five and the two. Exactly. I see. Okay, so the convertible note, the $4 million raised on the convertible note converted when you did the $5 million. Exactly, all converted. I see. That's a lot.
If you're converting $4 million on that note at an 8% interest rate, so you have about $4.5 million converting into a round that was $7 million post-money and $4 million in equity, I mean, you're selling like 80%, 90% of the company. No, no, no. We were actually raising at a better valuation.
Chapter 4: How did the leadership transition impact Perx's growth?
You just told me seven post-money. That was the A round. The five? Yeah. Yeah, well, the four million you raised before that, right? That convertible note? That was way back. Yeah, but the convertible note will convert on the first priced equity round. It was based on 10 pre. What was 10 pre? The convertible note. It was a $10 million cap. Yep.
That note will convert when you raise the five million, right, which you told me that five million was at what pre-money and post-money valuation? So we raise our B round on 27 pre-money this round. Oh, I see. Okay, so now post-money would be 30-something. Now we're raising our C round coming up. God, you love dilution, don't you? Well, it's not my company.
Well, I guess you would love dilution if it's not your company. So I actually structure my own comp plan differently. Okay, how do you do that? Based on fundraise, based on exits, yeah. Okay, do you personally own more or less than 10% of the company? Around 10. 10, so that's what they had to incentivize you to get you.
Chapter 5: What challenges did Perx face when scaling in Asia?
Yeah. Because you're going, listen, you're failing, I could do 10,000 other things. Yeah. I could go join Nathan Latka's podcast show and just hang out all day on the podcast, right? Right, right. All right, so you're raising. Are you in any acquisition talks with anybody? There are companies coming to us, yeah. So what's the right price? What would you sell for? It depends, right?
So it depends on the multiple, depends on the buyer. Are you married? No, divorced. Okay. Do you have kids? Why do you want to know? Well, because I'm going to ask a really good question here in a second. Do you have kids or no? No kids. Okay. Who's your closest family member? My sister. Okay, if you had to go up tonight and say, hey sister, what's her name? Lisa.
What's her social security number? No. Just kidding. So if you had to go up to Lisa tonight and say, Lisa, I just got a $40 million offer from X company and I said no, what's the number where she just kills you for not taking the deal? She doesn't give a shit. Really? Oh my gosh. She's like, go knock yourself out. She doesn't care.
So what's your totally unrealistic number where if you got it, you would just have no choice? It's going to be something really frothy, I'm sure. We're building a very sustainable business right now. How much are you burning per month? About $200. Okay, net? Yeah. And how much cash in the bank? We have about a few million left. We have a nine-month runway.
Nine months, so 200 grand times 90, about 1.8 million in the bank. Yeah. Okay, so you feel like that's, you just used the word sustainable, which is why I asked. Do you feel like that's sustainable with nine months of runway? Well, we're also closing some big deals as well. Okay. Yeah. What do you think you'll break in terms of ARR next year, 2020? We're looking at 15. Okay, in ARR. Yeah.
How much kind of net new bookings are you adding in ARR? Are you adding per quarter right now, do you know, or per month? Net new. So I haven't even looked at those numbers. That's okay. That's fine. That's okay. How much in AR are you adding per month? Do you know? So we're now about 2.4. I have to like do some numbers. No, that's okay. Yeah. The AR are per month. You meant MRR.
Yeah, because you started the year at two. You said you're going to end at a $5 million run, right? So you're going to add about $3 million in new bookings this year. I'm just curious, monthly, what is it? Are you adding $100,000 a month, so $1.2 million in new ARR? We're looking at $2.3 million. Okay, over the past 12 months. Very cool. Are you comfortable right now? I'm okay.
This is great for me. I think you've done a great job. So it's a turnaround gig, right? Yeah, and you negotiate enough where it makes sense for you to do it. Yeah, well, it has to be. I asked all the important questions, right? I didn't miss anything? Okay, I'll give you the chance to ask me any one really uncomfortable question. Are you gay? So here's the question about the gay thing.
You know, so he led me into it. Here's what I've learned about this. I get asked this so many times. You Google me, there's two things that pop up. How much is Nathan Latka worth and is Nathan Latka gay? Yeah, I know. And I've always thought, you know what, if I come up and I go, I'm gay, I lose the cougars. And cougars love latke. You don't want to lose the cougars.
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