SaaS Interviews with CEOs, Startups, Founders
Practice Ignition Breaks $24m Revenue, Raises $50m at $330m Valuation Helping 5,000 Accounting Firms Scale
27 Sep 2022
Chapter 1: What is the main topic discussed in this episode?
billion bucks in GMV at a 5% take rate is your lowest. That means that a minimum- Oh, 50 bits, 0.5. Sorry, sorry, sorry, sorry. 0.5% take rate. I mean, your minimum revenue there is 5 million bucks there, right? If that's your lowest take rate, probably higher. Yeah. Yeah, that's great. Okay. Yeah, yeah. Thankfully.
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 Guy Pearson.
He's got more than a decade of experience in professional services. He's a chartered accountant, chairman of Interactive Accounting, a progressive accounting firm he founded in 2009, and an angel investor in multiple portfolio companies. Today, he's the CEO and founder of Practice Ignition, the world's first client engagement and commerce platform for professional services businesses.
Guy, you ready to take us to the top? Yeah, man. Let's go. Thanks for staying up late. I think you're based down there in Sydney, right? I'm up early. It's 7 a.m. here. Oh, my God. We've got the coffee in. You've got your coffee in. I'm at the other end, mate. Yeah. Okay. Fair. Well, okay. So practiceignition.com is a site. Now, just to be clear, you are not a consulting company.
You build software for consulting companies. Correct. I see. 100% right. I explain to my mom like Shopify for services, right? So if you think about it like that, we're the engine that used to run the revenue on payments and connect through the third-party workflows. So they can have their tasks, billing, collections all tied together to a digital handshake. That's kind of what we do.
And so, so to help me understand, I mean, can you name a customer that's paying you and what they, what they pay you for specifically? Uh, Baker Tilly in the U S would be one of the larger ones. Uh, let me think about what else, um, sorry, Baker Tilly, Baker Tilly. So they're a large CPA firm in the U S and, uh, in Canada, uh, And they pay us for software to help run their contracts.
And accountants usually re-engage or reissue contracts every year. So it's just sort of a phone plan if we can dumb it down to that. Are you selling mainly to accounting firms?
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Chapter 2: What is Practice Ignition and how does it help accounting firms?
100% at the moment. 95% of our customer base are CPAs and bookkeepers around the world. Interesting. Okay. So there is a sector focus here. It's not just any consulting firm in the world. No, that's true. We do have some really wonderful customers in many different industries, like small ISPs, education providers, lawyers, digital agencies, marketers, etc.
But the large primary bulk of our focus has been on bookkeeping and accounting, as every professional services business has a CPA or has a bookkeeper. So it's very much sort of let's solve their problem and then they can recommend it to their clients in a long run. I see. Okay. That makes tons of sense.
So what is the average, you know, Baker Tilly, not actually Baker Tilly, but what's the average customer paying you per month or per year to use the technology? The payment is about US 400 a month for a mix of software and payments. So sort of a blended piece. The average software clip is about 150 US and the payment's about 250. Interesting. So what is the 250?
Is that a percentage of the volume they process through your platform? Correct. So we process both ACH and credit card in about five countries around the world, US, Canada, UK, Australia, New Zealand. And we've got a couple of billion dollars of revenue under management and we process north of a billion annually at the moment, but obviously that rate's sort of growing up. Got it.
So you process over a billion per year and these are individual accounting firms like Baker Tilly sending invoices or quotes to their customers. When you add all those up, it's over a billion. You take a small cut of that. Correct. So that's exactly how it works. Come on guy. What's the cut? What's, what's the smallest, uh, smallest, uh, we take about, well, I mean, it's on the websites.
It's very easy to see, but the blended take rate for ourselves is about 50 bits at the moment. Um, we're looking to push that up. Um, through getting the volume up there and negotiating on our cost side, but also just thinking about how we charge smartly for people so people are feeling like they're paying the right amount for the right service.
Ultimately, what we're trying to do is just make sure there's no administration Make sure they don't have to use another system. Make sure the clients can see their payments and understand where they're coming from and that everyone's kind of happy on the two-sided agreement. Yeah, I mean, but Guy, I mean, look, just quickly, I mean, a billion bucks in GMV at a 5% take rate is your lowest.
That means that a minimum... Oh, 50 bits, 0.5. Sorry, sorry, sorry. Sorry, 0.5% take rate. I mean, your minimum revenue there is 5 million bucks there, right? If that's your lowest take rate, probably higher. Yeah, that's great. Okay. Yeah, yeah. Thankfully. Thankfully, that's good. How do people get down to 50 bps? What do most people start at? Is it like 250 bps, 2.5%? No, yes.
So the gross rate before we have to pay any of our providers is sort of 270 bps in the US on credit card. And this is a headline rate. But we have a flat fee charge for ACH presently. And so if you're processing B2B payments, similar to say like a bill.com, but you're running it through us, between the two parties, they're paying a fixed fee of maximum $1.
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Chapter 3: How does Practice Ignition generate revenue?
And then 110 angel round, I think before that, right? Something like that. Yeah. So we had like a family, friends and fools. So my brother, my best mate and my old business partners and my old CPA firm. Then we had a bunch of angels, which was anchored by a guy called Craig Wingpot, who's effectively like our Intuit founder, but just in Australia.
And on the back of that, we then raised from Hill Ventures, which is up in Canada. I'm based in Sydney, Australia to sort of put how far we had to go. And so John Stokes up there, I read our first seed check and kind of split the round in two and we had a,
enterprise software was the company founder here lead the second part of the seed round a year later so sort of split and then it was on to series A with Australian funding particularly now it's great and it keeps getting better but we had four VC funds and two billionaires write us five million Australian dollar check to give you an idea so it's three and a half US so
At that point, we were like, you know what, maybe this raising thing isn't for us. We actually got through the break even in 2019 and sat down with friends and advisors and whatnot and was sort of like, well, where to from here? We had this much of the share of the market.
We had product market fit and we ended up going to look for the biggest and the baddest and had Tiger Global come along to lead our Series B in 2019, which was phenomenal. And yeah, like you said, JMI recently. So, Yeah, because you look at the crunch base for us, it's like little bits of capital and kind of like big chunk and then bigger chunk. And next it'll be $5 billion valuation.
Oh, my mother would be so proud. Take me back. I mean, managing dilution is obviously critical. You want to build a big business and also try and preserve as much ownership for you and your co-founders and your brother, your best mate as you can over time, right?
So when you guys went out and did that 3.6 USD around back in the Series A back in 2017, do you remember what valuation you raised that at? Yeah, I do. Was it very dilutive? It was. So Australians, how would you put this? They like to see efficiency and capital deployment. As a mindset, we're used to profitable companies.
And so when you've got something that's not profitable but growing quickly, people sort of struggle. We really needed the capital. We found great partners once the price was on the low end. But we also were sick of raising. So this is going to be our last round. So that obviously played into the price as well. But we brought on some great partners.
So those people who joined us actually helped us get to the B round and onwards. So there's a mix of what if. What's the number though? Are we talking like you sold like 20% of the business or like 30% of the business? 30. 30. Okay. That's not horrendous, right? I mean, you know, it's on the high end, but it's not terrible.
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Chapter 4: What challenges did Practice Ignition face in its early years?
There's definitely people like you being on the continent. It'd probably be easier to raise certain rounds or have more investors interested. They feel that they can fly and pay as a visit much easier. I'm quite happy building an Australian company. I'm not sure. We've got Canva, Campaign Monitor, Atlassian, Zeros from this end of the world. All this goes on.
We're just trying to throw our hat in the ring and create another great company from this end of the world and bring that culture that allows 150 people to stay with us to the world and do it our way. Not super patriotic in terms of beating my chest, but we'd really like to help us. Australia has a history of digging things out of the ground, farming things and building things on top of it.
We'd really like us to sell our smarts. That's the reason to stay down here. Also, great R&D incentives to any developers that want a job. coming out. How big is the kickback? Shred in Canada is like a 60% kickback. What's your kickback? About the same. Wow. So if you pay a developer, I'm making it up 200 grand, you're going to get 120,000 bucks at the end of that year back from the government.
Yeah. Well, it doesn't, that's a very, so like I think shredding and our program are very much the same in that it's something on things that you build that are at risk. So not for maintenance and not for DevOps, but for like new feature development. Yep. Very cool. On that note, guy, let's wrap up with the famous five. Number one, favorite book.
Oh, the hard thing about hard things by Ben Roberts. Number two, is there a CEO you're following or studying? Uh, I'm sure it's a CEO, Des trainer, uh, intercom. Yep. Number three, favorite online tool. Oh, I don't know. That's a hard one. I would just say G Suite. I can't imagine my life without it. No, that's a good one. Number four, how many hours of sleep do you get every night?
Except, you know, days when you're doing a 7am podcast. About six to seven. I get up super early. And what's your situation? Married, single, kids? Recently married. Two weeks ago. Oh, wow. That's exciting. I got married the day after the round closed. So how's that for timing?
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Chapter 5: What were the key funding rounds for Practice Ignition?
Holy mackerel. So I assume the honeymoon was nice. A little secondary money to play with. You rock and roll, right? No, honeymoon's coming up. We had about two days off and we're going into planning session. So end of December. So I'm not sure if you have any Australian mates out there, but we don't really work between 15th of December and 15th of Jan.
It's kind of like 4th of July, Thanksgiving, Christmas, and August all tied into one. So I enjoy that. Just married, about to do a honeymoon. No kids or have any kids? No kids. No kids. And how old are you, guy? 37. 37. Last question. Something you wish you knew when you were 20. More patience. He says he needs more patience. I think he has incredible patience. Launched in 2013.
They've had patience enough for five years to go up to a million bucks in revenue. Did four different sort of angel and seed rounds, but now they're scaling nicely. They're serving over 5,000. I think they're like accounting practices, helping those firms scale with their consulting. They have dual business models, SaaS plus percentage GMV.
They're processing billions now, over a billion per year, doing about a $24 million run rate across all their brands. Last raise, just a couple of days ago, 50 million series. He had a 330,000. million valuation, sold about 13% with 10 million secondaries, taking care of his early team members, early employees. Guy, thanks for taking us to the top. All right. Thanks so much. Appreciate it.