SaaS Interviews with CEOs, Startups, Founders
Refersion.com: Bootstrapped SaaS Doing $1.5m in Cash Flow
29 May 2020
Chapter 1: What is the main topic discussed in this episode?
Refersion, guys, helping you track your affiliates. They did 5 million last year in top line revenue. And get this, shocker, 1.5 million in EBITDA, a profitable bootstrapped company based in New York City. SaaS model, plus percent of GMV. Price point started $89 a month, goes up to $249 a month, plus 2.5% of GMV. That's tracking of sales that you're doing through their platform. Launched in 2014.
Nathan Latka here, guys. And if you're enjoying the podcast, remember there's a premium version with even more. You get early access to episodes. So you would have heard this almost four weeks ago. There's 1500 searchable transcripts by data points like revenue greater than a million or located in the United States or bootstrap SaaS companies only.
If you want to help out right now, head to getlatka.com or check out the show notes for a link. Your support also helps us to continue to produce high quality shows in the future. Hello, everyone. My guest today is Shibo Zhu. He's the co-founder of Refersion and grew the company from the two co-founders to a leading SaaS platform serving over 7,000 merchants across two offices.
Before Refersion, he was a technology consultant partnering with Fortune 500 Enterprises to concept and build great digital products. Shibo, you ready to take us to the top? Yeah. All right. So for people that haven't heard of Refersion, tell us what the company does and what's the business model? Is it pure play SaaS? Yeah, so it's PurePlay SaaS.
What we do is help merchants figure out and attribute orders. So let's say you're selling t-shirts online, you have thousands of t-shirts, orders, and you're not sure which ones came from influencers or YouTube people because you'll commission on those. We'll help you figure out which of those orders came from which influencer and calculate the commissions and help you pay that out.
And what tracking do you use? Is it cookie-based? Does each influencer have to have a specific link or what's your tracking mechanism? Yeah, we have a lot of different mechanisms. So we use SKUs, we use emails, we use coupon codes. We also have referral link tracking as well. We don't use cookies. We actually use something called local storage, which is similar.
And sometimes the merchant, based on the program and what they're trying to do, we might mix and match a lot of different things. So you might have a referral link from one influencer and then track to a coupon code at another campaign. And we help you analyze all that and figure out what actually the ROI was. Okay.
And why are people using you over things like maybe Get Ambassador, like other referral marketing programs? Yeah, so I think our secret to success is that we really started in the SMB space. And what that means is we really needed to figure out how to take things from like zero to one and help merchants go from zero to one.
So in order to do that, we built a lot of apps that helped us do all the integration work. So we would install the cookies automatically. We would kind of get the webhooks and order data automatically from all the e-commerce platforms. So Magento, Stripe, and we figured out all these apps integration path.
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Chapter 2: What is Refersion and how does it help merchants?
Typically, like at some point, it just starts making sense to go on the 249. I think it's somewhere between 10,000 to 20,000 affiliate revenue. It starts making sense to me. A year? Yeah. Okay. No, a month. Okay. And I mean, why do they move over? In other words, you have something that is restricted on your $89 a month plan that incentivizes the move. What is restricted on $89 a month?
How many orders you can pay out to affiliates. every month. I, and what is that number? It's one 30. I see. So you only can do 130 payouts or pay out to 130 affiliates. You can do 130 payouts. Got it. So if you have one affiliate that you pay a hundred, you wouldn't do this, but if you have one affiliate that you pay 130 times, you hit your max. Yeah, pretty much.
So like what we actually track is the number of conversions. So how many orders is affiliate drives? So up to 130 orders. And then on the 131st order, you can't pay that out. Okay.
Chapter 3: What tracking mechanisms does Refersion use for affiliates?
So regardless if it's one affiliate who drives 130 sales or 130 affiliates to drive one sale each, it doesn't matter what combination at that point, you're probably going to move enterprise. Yeah. Yeah. And it's really consistency. So like, excuse me. So, Let's say that you have like 130 and then 135 this month. Next month, you have like 20. It's okay.
The next month will roll over and those 130 gets unlocked. Oh, nice. Yeah, so it's really if you consistently prove out this channel and it works really well. Shiva, you're a nice SaaS founder. You roll the credits over. That's very sweet of you. We try, we try. We work with SMBs, so why don't we be successful? So this is a great story. Put this on a timeline for me.
When did you launch the company? So we launched it Company, I think officially is like 2014. The company was probably incorporated in 2015. Okay. And today, how many merchants are you working with? So we work with, um, somewhere between like total, uh, all merchants is about 7,000. I think about 5,000 of, so our, our paid accounts. Yep. Uh, We started as premium.
So the 7,000 total and the delta between how many are paying, which is 5,000, those 2,000, are those just early, early people that signed up on a free plan that you now don't have, but you grandfather them in? Exactly. Why choose to grandfather them? Intercom, they just automatically make you pay more. It doesn't matter if you've been paying them for a decade, they make you pay more.
Why not make those people pay? Yeah, because we work with SMBs and like e-commerce. And if you ever watch Shark Tank, it's like their margins are thin compared to like SaaS, you know? I love how Shark Tank's your barometer for that. Yeah. It's true though. It's true. They're successful merchants too. They're successful retailers. Yeah. So it's tough on the retail side.
A lot of our customers are... kind of retailers and their margins are tough. So, you know, we try to make it successful for them. And our whole thesis is like, we really want to turn affiliate marketing to like a viable kind of channel for everybody, just like Facebook and Google. So the more we can kind of get into that fold, the better.
And it doesn't matter to us if you are successful today or like five days from now. Yep. This is great. So you, when did you turn on, when did you, so you launched in 2014, when did you turn off the freemium and turn on your first paid plan?
Probably in 2015, because in order for us to do our tracking, how it works is that we need to look through every single order to figure out if this order belongs to an affiliate, right? We have data pieces and there's a data piece here. We make a match. We say, hey, this one is an affiliate order. So that hit us really hard on the server cost. And we just could not afford freemium.
So we switched that off and turned into like paid only. Got it. Okay. Okay. So, and what was your first stab at the price point? Do you remember back in 2015? Yeah. Yeah. We started at 2979 and then 179. 29. Okay. So if I was visiting your site in 2015, I saw 2979 and 179. Something like that. Yeah. Interesting. Okay. And what, what was your first, like, what did you price against?
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Chapter 4: How does Refersion monetize its services?
Did you price against 130 orders then too? Or did you change over time? we changed over time. We've had a lot of different pricing strategies over the years. So like one of the things we did was, you know, um, pricing against total number of affiliate sales. So total number of like revenue driven by affiliates.
Um, and then a lot of merchants kind of complained that like our average order value is high. I'm not getting many orders through this system. Uh, and then we switched over to a percentage. So it would, we would like, it was kind of like a grading scale. So on the $19 plan, we take 2.2% or like, It was like 6%, actually. And then it goes down from there. I think it goes to like 2% or 2.5%, 89.
And then it went to like 1.5% on the enterprise side. But yeah, I mean, it looks like my research seems good is back in March of 2015, you essentially had four plans, zero all the way up to $139 per month. And the things that you listed below each pricing plan was like literally dollar volume, affiliate sales, number of visits.
And then all your plans had unlimited affiliates except your free plan, which limited to 15. And then you also restricted on some feature based upselling like SKU level commission and conversion triggers on phone support. Yep. A lot of complexity. I was going to say, now fast forward to today, we can kind of see what worked and what didn't, right? Four or five years later.
So now you don't price against volume of sales. You just priced against number of orders. Do you limit any of your pricing based off visits today? No, no, we don't. Okay. We found a lot of bad traffic happening. So it was not fair to like,
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Chapter 5: What are the pricing tiers for Refersion's plans?
penalize merchants for like bad pixel fires yep yep and then you don't restrict you know you don't have unlimited affiliates on anything until they get to the 249 i guess and then you're pricing against gmv correct
actually we do have unlimited affiliates on both plans on both plans right yeah i guess what i'm saying is your 130 purchase kind of um uh think like limiter that by nature you can't have like 10 000 affiliates you're gonna have more than 130 payments right so they'll naturally upgrade it's nice you found a utility metric that captures all these things yeah yeah and what we found is like
it's an affiliate network promotion programs like this. It's like a 90, 10 rule. So like 10% of your network is going to do not over 90% of your promotions. It can be even as high as like maybe one or two, two really big influencers driving a majority of your sales. Um, so we don't limit people on how many affiliates that can sign up. It's always questionable what the conversion rate is.
So let's go through this here for a second. So, so 2014, do you remember how many customers you signed up and the total money process through your platform? Ooh, 2014. I'm actually not sure. Uh, yeah. So I have figures in front of me for like 2016. Okay. So total revenue around that time was about, uh, eight, nine, sorry, 894 K. That's how much revenue you did as a company in 2016. Yep. Okay.
Do you know how many merch, how many like merchants were on your platform then? I want to guess about like, I want to say about like 3,000 at most. Okay. 4,000. And do you know that year, how much total transaction volume they processed like that, that you tracked for your system? Oh, I actually don't have numbers for that. The only year I have numbers for is like 2018 for that. What was 2018?
2018, we did about 250 million in transaction volume. Wow. And how many merchants at that point? 4,000 or something? Yeah, like somewhere between $4,000 to $5,000-ish. And then what was your revenue in 2018 from the $250 million going through? About $2.6 million. $2.6 million. Okay, so pretty good. So you go from between 2016, you do $894,000.
You scaled up in 2018, more than tripled that to $2.6 million. And then what did you finish 2019 at, run rate-wise? About $5.1 million. And so what drove, I mean, that's nice growth. You're bootstrapped too as well, right? Yeah. Yup. This is pretty cool. Right. I love this. You double year over year bootstrapped creative CEO.
What enabled you to drive, you know, the doubling of ARR between 2018 and 2019? Uh, so, and I think a lot of it is like just overall industry trends. Um, so a fair amount of growth can be kind of attributed to that. I mean, what we did this year was that we looked at our plans and we realized that the ones that turned the most was actually the lowest paid plans.
Um, so what we did was just kind of cut off those lower pay plans, uh, so that we would get less signups and focus more resources on a fewer amount of customers, try to kind of increase that LTV, um, and really focus on like enterprise clients, move us up market. And in 2019, what was total GMB through your platform? How much dollars did you track? Do you know? I'm not sure.
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Chapter 6: How did Refersion grow its customer base since launching?
about our numbers generally and we don't really have a finance person on our end so we really focus on like the product side of things that's good that's good now let's talk about product you know any kind of product-led marketing you're doing in other words how are you signing up new customers yeah so largely through the app stores um now because we put on events we sponsor other events within the shop by community um folks are starting to understand us and hear about us uh and
So they're coming to us, they're looking for our brand, they're trying to find us and then we kind of connect them. But generally, most of our customers are probably coming through like a Shopify app page, Magento apps page, Stripe connectors page.
So like when you, what ends up happening is that let's say that you want to, you know, run an affiliate business on Shopify that uses affiliates and recurring orders, you probably end up with free version plus recharge for Shopify. Yep. Something like that.
And the, and the, and the Shopify app store for version reflects that you've got 758 reviews, 4.7 average of which 658 of those are five stars, 650 of them are five star reviews. So clearly a top app in the Shopify app store. Yeah. Yeah. We, we work really hard and kind of work with our merchants for, for those, uh, get those reviews and it's, it's, uh, it's important.
It's important to like kind of work with the merchants themselves so that they understand what's going on. Shopify loves buying its most popular apps and their app exchange. Are you in any chats to sell to Shopify? Uh, not really. No, I've actually spoken to their corp dev. I mean, I think that they put feelers out all the time.
Um, but surprisingly, I think their acquisition strategy for apps is seemingly more strategic. Like they would want to make, um, big bets and technologies that they don't have or technologies they think makes sense. Yep. That all makes sense. So how many, give me a sense of kind of speed today. So, so this month, how many new customers will you sign up? Ooh, good questions. Let's see.
So new customers this month, we're probably looking at... That's why I love the show, by the way. We have founders like Shiba that come on. They're cool being transparent and they're refreshing dashboards because they want to make sure they get me some sort of accurate numbers. This is great.
yeah so we're signing up about probably about 200 customers this month okay now that's kind of the bottom of the funnel where they convert let's now work up the funnel so where those those 200 come from the app exchanges like what do you track is it number of clicks each month from the app exchanges the number of free trials and the number of converts to paid uh number of signups into into reversion into like kind of like
first into um yeah first sign up what is that first touch so is it an email sign up a free 14 day trial what is the first the top of the funnel it's a yeah it's the first free 14 day free trial okay for okay so to get so how many free 14 day trials you sign up this month uh so that was the number i just gave you about 200 okay okay and what percent of those do you think will convert to paid
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