SaaS Interviews with CEOs, Startups, Founders
Profitable SaaS Hits $100m Revenue, $1.7b Valuation in Digital Identity Space
16 Jan 2022
Chapter 1: What is the significance of the $394 million funding round?
So just to sum that up, 394 million total round, 150 million went on the balance sheet of the business, 244 million of it went to early employees, early angel investors, the founder, liquidity. It was a 1.7 post-money valuation. And Steve, about what revenue run rate today? So I think we're pretty public about this. We're approaching right around $100 million US.
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 Steve Munford.
He has nearly two decades of executive leadership experience in the technology industry and currently serves as the CEO of Trulio Software, a leader in digital identity. Previously, he held leadership and board positions with a number of public and private software companies in North America and Europe.
He holds a BA in economics from the University of Western Ontario and an MBA from Queen's University. Steve, you ready to take us from the top? Sure thing, Nathan. All right. Digital identity is hot. Metaverse. We have Jumio on blockchain. We've got all these tools that traditional players like ping identity. How do you fit into the space? Yeah, so we are involved with the onboarding process.
So think about yourself if you're a neobank or an online trading platform and you're trying to onboard customers and comply with different regulations or build trust, you need a digital identity service to do that. And that's what we are.
And the thing that makes us unique is that we do it not only here in Canada or the US, but we do it across 195 countries, which makes it hard and makes what we do quite special. So when I just bought recently on my Tesla and had to show them proof of insurance and ownership via the app, one of the things they had me do was effectively go through a third party and verify my identity.
It was like a face picture with some algorithm thing, plus a picture of my passport. Are you powering those sorts of things? Yeah. Yeah. So, you know, so it could be a marketplace. It could be a shop. It could be, you know, an online trading platform. Those are all use cases for us.
And, you know, typically we get involved with, you know, high growth digital first disruptors that are expanding globally and really power them. Tell me about how you price. Are you charging per identity verified, per KYC filing? How do you verify? As a consumption base, we do it based on per check. Every time someone comes to us with a check, we charge a fee on that. I see.
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Chapter 2: How does Trulioo's digital identity service work?
It's a hard problem. It hasn't been solved. And the need for it as everything goes digital just increases. So he had a desire to stay involved with the company, but pass off the baton to running the company. We went about doing another run of finance and then allowed him to take some secondary. to take a step back and pass it off to this new guy and take some money off the table.
And it's worked out really well. Robert Leonardus So, Steve, just to back up the story here, because when you say you're underselling a bit, your most recent round, I'll let you tell the story, but what was the size of the most recent Series D? It was US dollars $394 million, $150 million primary, and the rest was secondary.
And just a lot of founders don't understand you can get liquidity for yourself, early investors, and early employees without IPOing or exiting 100%. Just quickly explain how a secondary works. Yeah. And actually, just full context, I was a pre-money valuation of $1.6 billion. So what, post $2 billion, basically? Well, because 150 primary, so post $1.75 US.
But I think this is a really important point, Nathan. I think for a long time, you know, I don't think investors had a lot of appetite to give founders or CEOs or early investors liquidity before they got their liquidity or before there was an IPO. And I think that was fundamentally misaligning risk and interest.
And I would say for the last four or five founders, I've worked with a key ingredient to them. Feeling comfortable to allow the company to take more risk, to grow, to grow longer was the ability for them to take some secondary and take some chips off the table to de-risk. Because for most founders, their chips are on one company. And whereas investors, they're spread across five or 10 companies.
So the risk kind of appetite for an investor can be very different to a founder. And I think by allowing some liquidity along the way, it's just fair and it's good. And this liquidity event that we had, There's employees here that have been here six or seven years and were able to pay down mortgages or even pay off mortgages.
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Chapter 3: What unique challenges does Trulioo face in the global market?
The founder was able to take some money off the table. Some very early investors, angel investors were as well. And quite frankly, there was more appetite to buy shares and there were sellers of shares in this round. And I think looking across, I think there are probably 40 or 50 employees that were able to get some kind of liquidity. That's amazing. And that was fantastic.
And now they're still engaged. They still got a lot to play for, but they're able to kind of take some rewards along the way. You guys are listening right now going, well, Steve... They have a lot of skill. I mean, they broke $25 million in revenue in 2017. Well, I don't have that much revenue yet. I can't do a secondary. I will tell you, we're seeing secondaries very early.
I'm seeing Series A companies take secondaries. So just because Steve is much larger than maybe you guys are listening, still take this advice on secondaries to heart if you're thinking about a seed or Series A. Steve, would you agree? I completely agree because a lot of those same investors with good companies also could get complete liquidity if they wanted.
There's a lot of M&A appetite going out here. So this is really just an option of, hey, some secondary. I'm still going long. And that's absolutely a conversation you can have if you're the right profile of the company. And the risk, the flip side to this, the reason firms like TCB will do this, Steve, I'm sure you are as well, but I'm an investor in a bunch of different VC funds.
And the VC funds get so bummed when founders sell too early because they want personal net worth, whereas they would have stuck with the business if they could extract some personal wealth ahead of time and have a long-term horizon. So that's what TCB is fighting against. Absolutely. And it's not just a founder. Think about the founder generally has a family.
And that person's been working 24 hours a day. The family's generally made a lot of sacrifice as he's been building the company. And at some point, you need to come home and say, hey, we don't have a mortgage anymore. or we're going to be in good shape. And I love my company to go longer, but we've been able to toast, celebrate a milestone along the way.
And it doesn't make the founder any less hungry. It just actually means it has a longer time horizon. I think it's a really important ingredient to building a company long term. So just to sum that up, 394 million total round, 150 million went on the balance sheet of the business, 244 million of it went to early employees, early angel investors, the founder, liquidity.
It was a 1.7 post-money valuation. And Steve, about what revenue run rate today? So I think we're pretty public about this. We're approaching right around $100 million U.S., So that begs the question, right? Why do a secondary, you could have maybe, I mean, you really need to have like 120, 140 in ARR to have a good IPO these days, but why not IPO instead of doing a secondary with TCV?
Yeah, I mean, absolutely. When you're the rule of, I think we're rule 120.
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Chapter 4: How does Trulioo determine its pricing model?
Oh, wow. Nice. So we are not a company that needed the money to fund operations. We're a profitable, high growth company. And IPO, yes, absolutely. We could have done that. Yeah. But I tell you, we see the opportunity to build a company that is really the platform for identity, which really, it's a multi, multi-billion dollar company.
and the ability to to listen there's a lot of private capital available and ability to operate a company not under the scrutiny of a public market not to be a sub on a sub-scale public market company you get a lot more latitude to focus on the business versus focus on a lot of other investors and it's a lot easier to run a company if you have a couple investors that sharing your thesis and are working alongside you than to have all the overhead running a public company
I've run a couple of public companies and it is very, very different than having one smart investor that wakes up every day and cares as much about your business as you do is very different than having 20 or 30 or 40 or thousands of public company investors. Do you guys care about valuation right now, specifically your valuation?
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Again, both plural founderpath.com forward slash products forward slash valuations. And guys, you hear this a lot when I interview founders doing between 80 and 200 million bucks in AR, they'll talk about rule of 40. And just to remind everyone what that is effectively your last 12 month growth rate plus profitability, right? So if you grew 100% and you also had 20% profitable, you'd be 120.
Steve, I imagine you guys are not profitable, but you're growing much larger than 120% year over year. We are profitable. You're profitable. Wow. Okay. Yeah. Break that down. Break that 120 down for me then. How much profit, how much growth? Well, it's called 100% growth, and it's anywhere between 5% and 20% even down. So listen, I'm rounding the numbers here, but it's all good numbers.
That's incredible. So if you're doing about 100 million run rate today, where were you about a year ago? We've been growing 100%. So 50 million. Yeah. That's great. Okay, very cool. Take me back to the Series C. Obviously, you're managing a storyline between the Series C and 2019. Now, you joined right before the Series C or after? After. Okay. Oh, you joined it right after. Okay.
So maybe you don't. I mean, you probably know this though. So the 50, it was 70 CAD, 55 million USD. What valuation was that at? I don't think we went public on that one, but it was relatively small. Okay. Most folks on a serious team and you're selling 10 to 15% of the business, would you say you're probably in that standard range or you did something unique? Yeah. Not sure. Yeah.
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Chapter 5: What was the backstory behind Trulioo's growth?
I'm not going to let you ferret down to get to an answer. I want to see how much the valuation grew over the past 12 months since revenue grew 100%. Can you speak to that at all? A lot. A lot. And there's two things. One is our growth rate certainly accelerated. We really scaled the leadership team and geographic presence, our new logo acquisition.
really ramped up, and also the market dynamics just went in our way. All of a sudden, identity became the most important enabler for online commerce. Pre-pandemic, it was a trend coming. Post-pandemic, when we saw the democratization of financial products, everybody wanting to open an account, trade online, those products going global.
the payment infrastructure all changing, everything being digital, all of a sudden identity became the gating factor for companies expanding and growing, which was a tailwind for us.
So it was a combination of, yes, the company's metrics have greatly improved, but also just the recognition that this is a huge business seemed to come about at the same time, which just the multiples that people are getting in our space have just expanded considerably. And you mentioned logo acquisition. How many customers today? About 450. Okay. 450. That's great.
And then talk to me a little bit. You mentioned building out the team. How many folks are full-time on the team today? We're just over 300. Okay. And how many engineers? About 100. Very heavy. And do you love that Shred financing up there in Canada or what? Shred financing, listen, I've been in this business. You mentioned my gray hair. It's a long time. I think it is a great asset for Canadians.
I think it is such a good program that the government runs. It runs very efficiently. I'm a big fan. And I think it is something that really helps out companies here. Yeah. Yep. There's a reason that we have a significant amount of our, actually 50% of our employees up there in Canada as well. We love that. Talk to me, Steve, I do have a question for you.
So there are some people that might argue with current market dynamics, a 1.7 post-money valuation, growing 100% year over year and a hundred million, that's a 17X multiple. It's actually much less than like a 35, 40% 40X multiple that like Manny Medina Outreach got or Gong is getting or ClickUp just got.
Why, why, why are you getting, I mean, why is your valuation multiple almost half of some of those guys in your opinion? So, so I'm getting, I'm pointing at today's numbers, which is really six months on or seven months on from the value from when we did the financing. So, so, so they weren't, they weren't that at the time. So the, I think the multiples was mid twenties to thirties back then.
So, um, Yeah. Listen, today, I think our growth rate accelerated even since then. So today, we're certainly worth a lot more than what the last financing was at. Talk to me about net dollar retention real quick before we wrap up. Where are you guys at today? We're approaching, we always range between 150 and 200. That's world-class. Yeah, and that's what makes us profitable, right?
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