SaaS Interviews with CEOs, Startups, Founders
Popular Identity Verification Tool Raising $60m on $400m Now with $10m in Revenue
25 Feb 2022
Chapter 1: What is the identity verification tool discussed in this episode?
Okay. Now you're scaling nicely, right? So 200 customers out of $4,500 per month ARPU. I mean, that would put you at about $900,000 per month in revenue. Is that right?
Yep. We are over that, actually.
Okay. Over that. Are you past a million a month yet?
Not yet. That's very close.
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 these podcast interviews. Check it out right now at getlatka.com. Hey folks, my guest today is Thomas Kedar.
He's the founder and CEO of Seon. He started the company with his co-founder when they were still students in university and built it from scratch. His personal experience has sparked an interest in fraud prevention and his vision is to build an innovative go-to solution for online businesses affected by fraud. Tomas, are you ready to take us to the top?
Hey everyone. Thanks for having me, Nathan. Yes, of course I'm ready.
What's your personal experience? Did somebody rip you off or what?
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Chapter 2: How did the founder's personal experiences shape the business?
That's right. That's incredible. And that's across how many companies who are hitting the API?
Well, we have just close to 200 direct customers. But since we have some payment gateway customers, we are protecting more than 5,000 online businesses out there.
I see. How many partners do you have that are one-to-many?
Sorry, can you repeat that?
Yeah, so you have 200 direct customers and you reach another 4,500 or 4,800 through partners. How many of those partners do you have, the gateways?
We have about four or five gateways, so not too many.
I see. Okay. So those four or five gateways bring you another four or 5,000 sort of indirect customers. That's right. Yes. I see. And how does the majority of the 90 million monthly API calls come from the payment gateways or your 200 direct customers?
It's more the rest. So the big, bigger ones. These are all small, low-tail merchants. The majority of the revenue and the API cost comes from bigger businesses.
But are the bigger businesses the ones that use you directly or the gateways?
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Chapter 3: What funding rounds has the company completed so far?
I mean, obviously per API hit sort of pricing is very popular these days. You know, look at Snowflake and others, but how do you do it?
Very similar. It's usage-based. So we pay, I mean, we charge our clients a micro fee for each of the API calls. And then it's post-paid, such as AWS does. It's very straightforward. We try to do the opposite than what everyone else does in our industry.
So it's a micro fee per API call. And then what else?
That's it.
That's it. Okay. So how micro? Are we talking like a tenth of a cent or something like that?
It's between four to eight cents.
Oh, okay. So I got it. So four to eight cents. And has it always been that way or have you're moving sort of up or down market?
No, it's always been like that. And we never raised prices since the beginning.
Okay. Got it. So, so force four to eight cents per API call. And do you make people buy like a number of credits ahead of time or do they pay as they go?
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Chapter 4: Why did the company raise 10 million euros?
Yep. My co-founder, Benz, he was my university friend. He is a COO of the company. He's based in Budapest.
Interesting. And did you guys just split equity 50-50 at the start?
No, it was different. We invested different upfront, so we have come to an agreement between us, but we are both happy with this agreement.
Okay. So you own more or he owns more?
Yeah. Yeah, I think, yeah, since I'm the CEO and I have started with investment as a bootstrap investment, I own a lot.
Yeah. I think it's important. So just to be clear, it sounds like you put in some of your own money at the beginning to help get the business going. And because you put in money and your other co-founder maybe didn't put in as much or put in none at all, you got more equity at the start. Yep. That's correct. I see. Okay. Now you're scaling nicely, right?
So 200 customers out of $4,500 per month ARPU. I mean, that would put you at about $900,000 per month in revenue. Is that right?
Yep. We are over that, actually.
Okay.
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Chapter 5: Who are the primary customers using this identity verification tool?
Over that. Are you past a million a month yet? Not yet, but very close. Very cool. That would be a fun thing to celebrate. If you're doing about $900,000 per month right now in revenue, where were you exactly a year ago? Do you remember?
We were one third of it.
One third. Okay. So where does most of that growth come from? Is it the same 200 customers picking the API more expansion revenue or is it brand new customers altogether?
We've got lots of brand new customers. So we have almost double our client base, but as well as we see a healthy growth from the existing clients. So our NDR, metrics are very good.
What is the NDR? How far above 100%?
It's very close to 200, actually.
Okay, about 200%. Yeah, that's great. Obviously, it doesn't surprise me you're able to raise this much capital with that kind of NDR. Do you have any gross revenue churn?
Not really. It's like 5% a year. We don't see businesses switching from us to other tools. What we see is they cease to exist, usually due to some business continuity issues such as COVID and so on.
So Tomas, 5% gross revenue churn means 105% expansion for a total NDR of about 200%. Interesting. Do you have a game plan for driving that expansion revenue? In other words, customer success reps that are incentivized with expansion or how do you do that?
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Chapter 6: How many API calls does the company handle monthly?
Again, both plural founderpath.com forward slash products forward slash valuations. For other people listening, using a transaction based pricing model or a per API call per seat, whatever they're thinking about bonus plans for their CSMs as well. Can you tell us a little bit more about how you structure your CSM bonus plan?
Yeah, we set up some base numbers for the expansion based on historical data. And then anything top of that, they get a chunk of the revenue, which is expanded on top of the average expansion. So it's not too much, but it's, you know, it's very motivational, I would say.
And, you know, it's something that, you know, I was not thinking before, but our chief commercial officer actually has came up with the idea and implemented just recently and actually works very well. So I can recommend to all the startup founders out there.
So for 2022, you just did this, right? So what does a CSM have to get above in terms of MDR before they can start earning a bonus?
Oh, that's a good question.
Yeah.
I would have to look up. I can't say on top of my mind.
What do you think it is? Do you maybe have a, you know, a range or an estimate?
Uh, I, I can look up right now. Okay. And shit just now.
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Chapter 7: What pricing model does the company use for its services?
Uh, I think it's definitely doable. You think what? It's definitely doable.
Okay. So if you raise it like a 70 million series, a, you can get up to like 150, $180 million series B, something like that.
Um, yeah, well, you know, we raised, uh, 10 for our A in euros. And then this time it's going to be hopefully at least six to eight times multiplied. So our B will be around 60 to 80. That's what we are aiming at. You know, it's still ongoing, so I wouldn't... Well, what I'm trying to get, though, Thomas, is how you're managing dilution.
So raising $60 million on a $120 million valuation, you're selling a third of the business. That's pre-money, right?
No, no. I mean, valuation would be like, of course, you know, we would dilute the same amounts before. So standard dilution, you know, between 15% and 20%.
Got it. So you think you can go out and command like a $400-ish, $420 million pre-money valuation, something like that?
Yeah, yeah.
40x multiple? Yeah.
What to see on the market today is quite insane. Valuations are multiplies of the 40 to 80. We see 80 and we'll see where we end up, but I'm quite optimistic. So I hope for the best.
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