How we Bootstrapped to $10m in ARR with 140% NDR

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Google Founder Path or Latka next event. We'd love to see you in person. In the meantime though, enjoy this recording. It's a good one. Good morning, everyone. Good morning. Good morning. Who's from New York, New York City? Very few. I'm three blocks down, so I'm and I was late. Um so, good morning, everyone. My presentation today would be great Actually, it's actually a great to follow Henry who does what, 500 million

with my 10 measly 10 million dollars. But, um but I will take you through our company, our our success story. Um can you hear me okay? Okay, good. Um anybody know what bootstrap what's what the term came from, please? Well, no, I don't know where the term came from, but I don't know what Ah. Anybody know bootstrap? I looked it up. I'm not that that smart. So, bootstrap, you know, it's the little things on your boots that you kind of help pull your boots up. So, back in the

18th, 19th century, um it used to be called bootstrap when when means that you have to can you lift yourself with your bootstrap, which is basically impossible. Can you imagine going down and lifting yourself with your bootstrap? It's impossible. In the 20th century, we meaning today, it's making something out of nothing. Okay, so take that. Take a note. Mention to your wife, you sound smart. Um so, let me take you through my my

story here. Let me see if I can work this. Here we go. So, the next 20 minutes I'm going to go over um a couple of things. Number one, um three three big moments in our journey. Everybody has their own war stories. I'll give you ours. The second thing is hitting the targets. How do we get How do we get to 10 million from from from from zero, I guess. Uh and then the three metrics, the three

KPIs that we look at as a business that may help you down the road. Um our growth, we started back in 2010. And um it's a interesting It's a beautiful graph. It goes up and hopefully will continue to to do so. Uh we're bootstrap. We did not take any outside money. Uh not from the banks, not from anyone. I own 100% of the company. Um and basically we we

we we started and we had along the way uh some great successes and a lot of hiccups as well. Uh the three big moments I'll take you through is number one, idea to action. So, how we come with the idea? Um it was actually a real napkin. Actually, there's a picture of the napkin right there. Um See if I can go back. Okay. So,

the What we do is we are a hub between the retailer the luxury partner stores, Neiman Marcus, Saks, Nordstrom, Macy's, and the brands and their suppliers. What we found uh we found a problem and issue with the way they're communicating the sell-through between the retailers and the brands. And we solved our problem by allowing the brands to gain access to the sales data from the retailers.

What we do is we collect the data, we cleanse the data, and then we populate it into a UI, so you can see what's selling, what's not selling, and so on and so forth. The business has evolved since then. So, we started back in 2010. Uh our first customer was Theory. Everybody knows Theory, that company, Theory jackets, suits. Okay. Uh Theory still our customer, by the way. Um and the way we came to them is with not this, but we came with this.

Let me show you. With this. We're going to take we're going to collect your data from the department stores you're in. We connect We're going to collect the data from your ERP system. We're going to bring it into a sky in into a database. We're going to cleanse it. We're going to match it, cuz there's a lot of matching with colors and and so on and so forth. And then we're going to give you a UI that you can actually see what's selling, what's not selling, by any combination of product attribute,

which is season, color, size, uh time dimension, last week versus this week, as well as uh geographic location. So, we came to Theory with this uh with this idea. There was no There was nothing. There was no product. There was nothing out there. Um and um they had they had something they tried to do in house, and we said, "Oh, we can do we can build a much much better mouse trap for you." And that's how we got started. This is

this This what happened. So, Theory was our first customer. We moved on, and then what happened is that we actually developed a real dashboard that enables you to see key metrics on your business. So, it goes through I mean, it's basically click and go. You You want to see your top top retailers, you want to see your top styles, you can just click. You go in in it in sub-second response

time, it gives you the information back. You can do it by time dimension, you can do it by geographical location, you can do it by by product attribute. Okay, I think you get the idea. So, this was all great. Now, let's talk about the hiccups, okay? I mean, anyone here did not have issues starting a business? I'm sure most of you did not. Uh so, I'll share you I'll share with ours were Our first turn was a a small company

called Tommy Hilfiger. Anybody knows them? Okay. Uh Mr. Tommy came to us. He was our second customer after Theory. By the way, Theory, and I mentioned that to Nathan, did not have a contract. It was a handshake. Um We we know the we knew the owner, uh Andrew Rosen. We handshake. We knew me for years. He said, "I'm just going to do it." Uh so, Nathan was saying, "Where's the contract? Where's the contract with I said, "Nathan, there's no contract. It was a handshake."

Uh G3 was actually the third customer, but Tommy was a second customer. We were so excited about Tommy, a huge customer. This is our second customer. Within 3 months, defunct. The data was wrong. The information was incorrect. They threw us out. You know, the the tail, you know, between our feet. We just walked out of that business. We just did a poor very very poor job. That was our first big turn. And you have to remember, this is a small industry.

Um once you once you deal with um once you deal with um retailer or a brand and you don't succeed, everybody else knows. The second hiccup we had was Neiman Marcus. So, think about this for a second. Just imagine, you're collecting data from all these retailers, right? Um nobody has agreement with you. The retailers do not know you're collecting these data this data on behalf of the brands.

And all of a sudden, we get a call, not a call, we get a letter uh from Neiman Marcus cease and desist. Okay, what's going on? They're saying you're collecting our self-through numbers, you're giving it to the brands, we're doing that also. Why are they using you and paying you rather than the Neiman ours? The first thing obviously you can imagine, we had about maybe four, five customer, maybe 10 customers by then. Uh and cease and

desist, knocking off Neiman Marcus would be a big impact on our business. So, luckily, 3 weeks before this love letter, um I met I met with the CEO at the time, his name is Jim Gold. Uh not I did not meet him. He presented and I was sitting all the way in the back somewhere. Uh not really shook his hand or anything. And he presented something about quality and integrity and yada yada yada. Um so, I I wrote him a letter. Remember

those, you know, you don't not an email, a letter. Um for those of you who remember how to write letters. So, I wrote him a letter and I sent it through the mail to him. And I told him, "Look, this is what we do. Uh I I heard your speech on the integrity and and um the your company has and I was so excited and we do the same thing in our business, yada yada yada." He did not know what to make of that letter. So, he said, "Uh why don't we turn it to your" I I called him up after

that, follow up. Um not once, not twice. Three times, four times. On the fifth time, he picked up. Um and I told him again what we do and so on. And Jay, Jay, real quick. Can we spice I'm to your left in the back. Can I spice this up for a second? How big was the season I mean, did they threaten you? Like how big was the lawsuit? The lawsuit was basically if you don't stop collecting data from us, we're going to we're going to we're going to hit you with a million dollar fine. A million dollars for a company doing that's

my month. I can handle it. Yeah. Well, not really. When we're doing $25 million in MRR, I'm not sure how we can afford it. So, Nima Marcus you know, Nima Marcus was the the hiccup we had, but we turned that to an opportunity. After the conversation, he did not know what I did not know exactly what we do. He didn't understand what we do, and he turned me to the CIO. Okay? So, we had a conversation to Sarah. Forget the last name. Sarah, we had a

conversation with her. She said, "Okay, if you're collecting data and the brands are happy with it, why don't we sign an NDA with you?" So, NDA sounds good. Let's get the NDA on board. We got the NDA, we signed the NDA, we collected, we continued to collecting data from them. And then I said, "Wait a second. Why don't we get together?" I mean, you're in Dallas, we're in New York. It's only a plane away. We got together with them. We met with them. We had a conversation, a beautiful conversation with a senior merchandising manager who's still in place right now.

He was a great friend of mine. And he he in the middle of the conversation he said, "Why don't you just take all the distribution to our suppliers?" I was I was like you stunned. Take all the distribution to us. What am I going to do with all the distribution? And they know our model was all about the brands, not about the retailer. So, he says, "Yeah, take the distri- take the data distribution. We'll give it to you one feed, and you give it to all the all the others."

I said, "Okay. Uh exclusive?" I mean, that was a little chutzpah on my part. Uh he looked at me and said, "You're from New York, aren't you?" I said, "Yes, I am." Um it's a non non-exclusive. We have another vendor that does that, and they're doing Yeah, it's also job, but we want to bring another vendor, another supplier, another partner into the fold. So, we said, "Okay, we'll take that." We put a program together. Some of it was freemium for those who just want Excel spreadsheet, you know, weekly report of their sell-through. For

others, we actually developed a map. Those are the premiums. Those are paying customers. Fast forward from a problem from a cease and desist desist letter, we developed an app for the retailer. Okay? And that resulted in an increase of about 54% in our MRR. You'll see it later on. Yeah. Because you have to remember, all the Neiman Marcus customers that want their sell-through data has to go through us or the other vendor. So, initially it

was 5% us, 95% them. It 10%. Today, I'm happy to say we're actually managing 92% of Neiman Marcus vendors on our platform. Okay? So, that story actually evolved because then Saks Fifth Avenue heard about it, met with Mark Metrick, the CEO. We had one meeting, and that meeting he said, "Send me the contract." Have you ever had that before? That was my By the way, that was my only time. Um so, we got we got the contracts

and Saks Fifth Avenue is a completely exclusive opportunity. There's nobody else. There's no other other mechanism to receive sell-through data. And not only that, they've taken the next step, which enables us again to grow, to get their buyers to look at the same app. So, now you got the buyers and the sellers looking at the same application, which is an ideal in our world, right? You got both looking at the same thing as opposed to Monday morning uh conversation back and forth.

You have one platform for both. And that evolved into uh Bergdorf Goodman, and uh and just 3 weeks ago Saks Off Fifth signed up, Nordstrom, Bloomingdale's, and so on and so on. You understand. So, this is this is how our business evolved from a problem into an opportunity. Uh so, the first million for us was an was an accident, you know, we're just selling brands and continuing to, you know, to move uh just to sell brands and multi multi-type

retailer data sources. This is, by the way, our first sales forecast. Can anybody appreciate this? And then little note of paper and Okay, there's Maggie London, and it's stage three, and stage three is is a demo. And this is what we expect the return recurring revenues to be, and and SU stands for setup. You know, we have a setup fee. By the way, you can Can you see the bottom of that page? Tommy?

That was a sold account. So, we sold it. That was number four. That's a sale. It's a contract signed. And that 2 months later was my first turn that we discussed before. Um So, that's what happened. Then so, what happened is far as hitting revenue targets, you know, initially it was chaos. I mean, I was out there selling. We had a technical guy work with me, two two guys in a bag going and showing what we have, and a lot of it was PowerPoint, to be quite honest. Uh we kind of

evolved into five to six to 10 to 12 brands in in 2017-18, we got into the retailer. Remember the Neiman Marcus story? Okay. This is where we started really pumping it up. And today, obviously, we are we are doing business with over 2,000 brands um across the across the globe. So, if you're if you're familiar with the luxury company, any luxury company that sells into Saks, Bloomingdale's, Neiman

Marcus, Nordstrom, most likely it's a customer of Skypad. Because they have to get their sell-through through us. So, this is how we evolved to to grow, and we just signed Saks Off 5th, another retailer, and we have about five more for this year. So, every time we get a retailer, it's an uptick in revenue for us. This is the partnership that I think Nathan was saying to me how do what what about partnership the partnerships we don't have any other partnership beside the retailers as long as we get a

retailer it's another hundred to a hundred fifty thousand dollars in MRR for us because all their brands come in and they're the one funding the program. Today obviously from chaos to five sales people today the organization is is much larger we have a production QA department we have a whole group of customer service we call them analyst squad we have a sales team of six

that actually manages manages all the sales so we have a account manager we don't really call them sales people you know we call them program owners because we want them to own the program we have somebody owns the retail relationship somebody owns the enterprise accounts someone that owns the net new enterprise accounts someone that owns the the singles which is the you know brands that only want us to get data from Neiman Marcus or from Saks or from Selfridges in the UK doesn't make any

difference which retailer. So you got the small brands you got the big brands today the brands that we do business with obviously are Michael Kors Tory Burch L'Oreal I mean I can continue on but Jay before you go forward I'm in front of you to your to your right um how much total head count is are the orange boxes like what's the total head count expense monthly on the orange boxes? That's our sales team. Yeah I know what's your total head count expenses per month? per month we're spending our our cost on the sales and marketing right now

is not that big um A range is fine. It's about it's about 7% of revenues for us a little bit less and I'll tell you why because again when we land a retailer when we sign a data distribution with a retailer all their buyers become our sales people. They go to the brands they go to their suppliers and say if you want to sell through Data, you got to go through these these guys. It's tight." So, we just signed Saks Fifth. It's a great uh We don't need too many sales

people. Everything is online. You go on to the website. You log in. You put in the information. You put the credit card. And you're And you're going. Enterprise is a different story. Enterprise is when you we have company like L'Oreal that has 25 retailers across the globe that we collect and cleanse and populate data for. So, obviously, they're paying a much bigger a bill than billing billing billing billing, Henry. Um a much bigger bill than um than someone who's only using us for one retailer.

Jay, I just think this is impressive, right? You have 10 million dollar revenue business. There's five people basically on the sales team. Most people at that same range have way more account managers. So, I mean, can you provide a little more detail? The account management team, are they on like a quota basis? And if so, what's like the general base? And And what's the general commission they earn if they hit hit the quota that you set? Okay. So, the the account manage The reason we have we don't have that many sales people because you have to remember at this point, when you get to 10 million, you become a brand. Okay? So, people know us in the

industry, and people come to us. So, we don't have to do the cold calling and the and and the heavy marketing uh that we most of us have have done for many years. So, right now, um we have more opportunities than we know what to do with, number one. Um so, definitely need to add another one or two head counts there. But uh but I can tell you I can assure you that we do not need a whole lot of sales people because once we get a retailer on board, everything is automated. We automated the process of onboarding.

Not the enterprise. Enterprise is a little more tricky. Takes a couple of couple of months to get them. Not because of us, more because of the customer. But then a single uh single retailer, we can we can onboard almost online without even a call. Jay, rapid fire here, and then I'll let And I'll shut up, I promise. What is the quota you have for your account managers annually? Uh they need to do about a million dollars in in ARR. And and how much commission do you pay them if they hit that?

Uh they would probably make about 150 to 175. And is that about double what their base is? It doubles their base. So they could earn about 400 grand base plus commission with you. Okay, I'll stop interrupting, but that's good good comp data. Yeah. By the way, another another issue, you know, we we came from a reselling environment. You know, we we didn't know what SAS We couldn't even spell SAS uh 12 years ago. Um I thought it was with with one A. It Um but having said that, we are as a

system integrator, you actually that's exactly what you do. You pay salary and then if you make your quota, you're you know, you make double, you know, the income. Uh I don't know, most of my sales people never made that. I don't know why, but they never made that. But in the SAS business that we're in, it's a little bit different. And they the people are going to get I'm going to do more than that this year. But we don't need too many. That's really it's it's too many it's too many cooks in the in the one one pot. Um so as I mentioned to you before, once

we get the partnership going, we actually hit we actually increased our MRR by 54%. So partnerships, if they add value to you, are really good things to do. They need They must add value to you. And by the way, our relationship with the retailers is is amazing. We have quarterly calls with them. We come up with programs every time. We're very active. With the other vendor that I mentioned to you prior, with Neiman Marcus, they're not even talking to them. So if you're not talking to your

customers, you're losing something. They're losing something. You're not going to get much ahead if you don't do that. During the pandemic, now you have to remember we're in the retail space. Stores are closed. People are not going to the stores. Orders are being canceled or delayed. I thought I need to change profession and dental school was one of the things I was thinking about, okay? Um so sitting there at home uh we thought we're going to be out of business cuz retail is out of business, we're going to be out of business. Lo

and behold our churn and by the way, this is a funny I was with Nathan about 4 5 years ago uh on one of those videos that he does. Um and he asked me about churn. I didn't even know what churn means. Cuz we didn't have much churn in our business. He said to you, "How's your churn How's your churn?" I said, "Pretty good." "Pretty good. I think we're doing all right." He said, "Give me Give me You know You know Nathan." I felt born in a barn, baby. I was coming for you. Yeah, you Give me percentages. I said, "Yeah,

3% 4%" I didn't know what I was saying, you know. Um obviously today it's one of our biggest thing we're looking at churn because you get 2,000 customers, you scale up. You have 2,000 over 2,000 brands. You you you you feel when there's a churn. But our churn before the pandemic was 1%. Very very sticky business, 1%. During the pandemic we almost doubled to 1.8%. Is that monthly churn? Monthly. Logo or revenue? Correct. I'm sorry?

Logo or revenue? Uh revenue. Revenue. Uh you know I I don't even track logos. I really track by revenue. Um you know why? Because the revenue pays for the milk in the refrigerator. Logos is high fives, you know. Um so during the pandemic what we did is we befriended our brands. We said, "Listen, I know you're going through some hard times. Here's a couple of months of reduced rates. Um how else can we help you?" We got a

call from companies like LVMH and Kering, which is Gucci, Muchi, and all those guys. They said, "How are you guys doing?" So all of a sudden this pandemic actually allowed us to see that we're essential to their business. So when there's bad news out there in retail, they want to know. The brands want to know. When there's good news, they want to know, but they're, you know, fat and happy. But bad news travels fast and they want to know. So, we continued our churn actually did not go a whole lot as we

expected and obviously I did not go to dental school as a result. Um the two other metrics that um the two other metrics that I wanted to share with you today is and it's kind of a eyesore here. Um is the way we look at our business is we we're looking at the first the last 3 months of the year. What are we booking in the in terms of enterprise accounts? It takes us about 2 to 3 months to get them on board. Whatever we're booking in the last 3 months of

the year will actually result in billing billing billing um in the first quarter of the following year. So, it's a very important for us to to to plan ahead and we're looking at what we're booking so we can bill early next year. And the second matrix is taking a look at the first quarter of the year where what are we booking in the first quarter of the year and obviously we give a lot of incentive to the sales

people during that period the first quarter because if we get the booking in the first quarter, most likely we will be billing that same year. That's the way we look at our metrics. And it's very important because that allows you to plan ahead also plan for resources, uh plan for technology, plan for expansion, for anything that you do. Those two metrics. So, obviously everybody's looking MRR, ARR, churn, CAC and so on. These are These are the three

that we're looking at as a business. So, I just talked to you about I just took you through your three big moments in our lifespan. Um hitting the targets, how we you know, how we hit those targets and then we talked a little bit about, you know, three three metrics that that we are uh that we are focusing on. I'll be happy to answer any questions. Jay Hackman, you guys give it up.