← SaaS Interviews with CEOs, Startups, Founders
SaaS Interviews with CEOs, Startups, Founders
Bootstrapping to $5M ARR: How Kukun Scales SaaS for Banks and Fintechs
00:25:43
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- [00:00]
A
Pretty cushy job. You quit?
- [00:01]
B
Yes. Correct. It was a difficult choice to make, but for me, I never look back and I never regret it.
- [00:07]
A
What revenue or what salary you gave up to go all in on the startup?
- [00:10]
B
Close to $1 million a year, but lots of other perks.
- [00:13]
A
If you have 20 paying customers, right, paying $20,000 per month, that would put your monthly recurring revenue around 400,000 per month. Is that a fair calculation?
- [00:22]
B
Yes. Correct.
- [00:23]
A
How much time do you need? Is it at 2026, 2027? When do you think you can break 5 million of arrow?
- [00:27]
B
I think we're poised to do that next year.
- [00:29]
A
If somebody's listening to this podcast and comes to you today and offers you $10 million, all cash, to buy 100% of the business, do you sell? All right, folks, my guest today is Raf how. He's the CEO and founder of Cocoon. It founded back in 2014 after a career at Kept Gemini. He's now scaling in the space of. We're just going to call it property data as we dive in. So, Raf, are you ready to take us to the top?
- [00:52]
B
Yes, I am.
- [00:54]
A
All right, so tell us what you do in, like, one or two sentences. The homepage says the Pico score. Get credit for upgrades. What does this mean?
- [01:01]
B
Well, we are about in sort of improving the value of every single home. It is the largest single investment that most of us make. And what we do is we help everyone maintain it, figure out how to increase its value, how to optimize its value, and then we help those businesses that want to serve those consumers, helping that customer doing that. So think of a wealth manager, think of a bank. Think of an insurance company that wants you to invest in your home, can maintain it, improve its value. That's what we do. We build the data, the analytics, and the software to enable that.
- [01:35]
A
Okay, so like, if I just put in. If I put in like a random address, man. So, yeah, let's just do Austin, Texas here. What's happening on the. Okay, so why doesn't you. So is this all. Are you only in certain states?
- [01:47]
B
No, we are national. But sometimes certain properties, if they're either new constructions or maybe there is no public data available, we can do that. Maybe try a different address. I can give you a different address if you like.
- [02:01]
A
Oh, well, let's just look at one of these. Right, so Elder Miller Resort, Port Richey, Florida. So price 285. So I guess just to be clear before we jump in deeper here, you have four homeowners and four businesses are you how is your revenue made up? Are homeowners paying you or are banks paying you?
- [02:16]
B
It's mostly a business. So banks, insurance companies, brokerages. What we do on the homeowner side is we help homeowners, but we also use that to enhance the user experience to understand better what people want. And that allows us to enhance the software for our enterprise customer. But most of our revenue is in the enterprise space as a setting.
- [02:38]
A
So to be clear, a company like a bank or a mortgage broker. Right. Is wanting to work with a homeowner. If PNC Banks wants to do more mortgages, they will, then you will sell directly to them and then they will help get cocoon used by the homeowners they're looking to do loans to.
- [02:54]
B
Exactly, yes. We white label the software, they insert it on their webpages or on their app and then they enhance it with other things they have. So it becomes like it's their own experience. But it's really most of it or part of it is white labeled by us.
- [03:10]
A
I see. Okay, so how many B2B customers, those white label customers are you serving today? Are we talking five big enterprises or 5,000?
- [03:18]
B
No, it's not in the 5,000. It's definitely not in the five either. We are in the bat the 20 to 25.
- [03:23]
A
Okay, so pretty high touch then sales cycle if there's 20 to 25.
- [03:28]
B
Yes, I would say that.
- [03:29]
A
Okay, and which of these sort of use cases are the, are the biggest? Are it 20 realtors or is it more mortgage brokers or banks or real estate investors? Which one's the biggest use case?
- [03:39]
B
I would say banks and lenders are the biggest use case because there's a fake clear ROI driven from generating more loans when you use this service. So there's a direct correlation between increase in loan apps and what they, what those applications that we offer. Other businesses see a difference. So for example, if you think of an insurance company, they're mostly to maintain the assets, make sure that there's no risk and yeah, maybe they partner with a lender and generate more business. So it's a very different ROI and a very different use case. But the banks are the core of it, followed then of course by the real estate industry.
- [04:20]
A
Okay, and so for a hypothetical bank that's using you, let's just stick to that for a second. How do you price? You don't have pricing on your website, have a contact form. So is it a one off negotiation each time? How do you structure this?
- [04:32]
B
So because it's a, it's A suite of products. We basically depends on how many of the products they want. A white label so the price shows with that. But basically think of it as the number of addresses that they want to engage with within a band per month. So let's just say a bank says, I want to hit this kind of volume. I want to engage 100,000 customers, a million customers a month. We price it by those bands and then as they increase, they go to the next band.
- [05:03]
A
Okay, is that fairly. I mean, if I asked you for the average number of customers per month that a bank wants to, you know, use you on, is 100,000 the right number there or is it smaller?
- [05:12]
B
A single bank? I would say, I mean, I can't share numbers just obviously because of the contract terms.
- [05:19]
A
When I said I'm not asking you to share your actual. I'm saying on average.
- [05:23]
B
Yeah, I would say it depends on the bank and the size of the bank. So that's very hard. A large bank will see probably hundreds of thousands. It depends also on their marketing, where they put it. If they put it within a signed in experience, that's a lower number, but a much higher engagement. If you put it on the public side, that may be a higher number, but then it becomes a function of how well they do the marketing and the closing after that. So there's an engagement with integration with Salesforce, Adobe Audience Manager. So it. What we've seen is that every bank is different and every bank, some banks are better at certain things while others are better at other things. So it's really not a very specific formula. But yes, let's just say a large bank or let's say a regional bank will see hundreds of thousands.
- [06:14]
A
Okay, okay. I guess maybe a better way to ask this might just be across your whole system. How many of these are you processing on a monthly basis?
- [06:23]
B
That's a very good question, I think, because it's a suite of products. If I have to aggregate all of those, I'm going to say per month. While talking about a year or per month, I'm going to have to guess around maybe somewhere between 400,000 to 500,000 between the big and small clients.
- [06:43]
A
Yeah, yeah. So 400,000 across 20 banks. Right. So you get to the average. The average bank on your platform is doing something like 20,000 per month?
- [06:51]
B
No, it's five banks. The rest are other. So we sell to the fintechs, we sell to the proptech, we sell to insurance companies, sell the brokerages. So in any business. And that's how I would not say that 20 is all banks. It's.
- [07:03]
A
Sorry, Raf, what I'm trying to get to is just your usage metric. This is more complicated than what I was trying to get to. Let me just put it differently. Your average customer, whether it's a bank or somebody else, your average business customer is processing about 20,000 applications or uses of your platform per month. Is that a fair statement?
- [07:20]
B
That's the first statement.
- [07:21]
A
Okay. And it's across a bunch of different product suites, depending on what their use case is.
- [07:25]
B
That's correct.
- [07:25]
A
Okay, got it. For that hypothetical average customer at 20,000. Right. A month, generally, what will you price for that? Is that a thousand dollar a month contract? A million dollar a month contract? Something different?
- [07:35]
B
No, no, it's a. It ranges between. It depends on the bells and whistles, but it ranges between 10,000amonth to about, let's say 50,000amonth.
- [07:44]
A
Guys, remember, I am not just a YouTuber. I'm investing in my third fund. We've deployed $250 million into 550 company so far. Again, @founderpath.com if you're interested in capital, I would love to cut you a check because I know you're investing in your education. You watch my show. So sign up@founderpath.com and when you get the onboarding email, I reply and I see all those, just reply and say, Nathan, I found you through YouTube and I'll make sure to prioritize you. I would love to cut you a check. Check out founderpath.com okay, and how do you. How do you decide what pricing axes to price against? Because again, you have use it. You have a bunch of different products, more than 10 that I see listed on the site in terms of the things they can get from you. And then you can price each of those differently. Plus you can price for product upsells. How do you decide? I mean it feels like a very complex pricing structure.
- [08:32]
B
No, actually it's a pretty standard. Think about it this way. I have a band that say a zero to a hundred thousand address. Think of that as your basic. And then you have a product, a product maps to those. So each product has a price. And then when you bundle multiple products, you get a discount. So let's say the price for the cost estimator, the renovation cost estimator, which is one of our most popular products. It can range between 5 to 25,000 based on. Also like there are certain. For example, banks require a lot of infosec services, so that changes the price structure. But let's say it's 10,000amonth. Very simplistically, if you add two more products, each one of them is going to, let's say 5,000, 5,000 and then you get a discount on the 20,000 that we've just added up. So it's really a very simple matrix. It's pretty straightforward. It's by bands of addresses, by product, and then once you have that price, you add them all up and you apply the discounts.
- [09:28]
A
Yeah, well, I mean, so I mean we can kind of reverse engineer, right? If you have 20 paying customers, right, paying $20,000 per month, that would put your monthly recurring revenue around 400,000 per month. Is that a fair calculation?
- [09:39]
B
With some caveats.
- [09:41]
A
Okay, what would those?
- [09:42]
B
I'm right now in the middle of something. I cannot share too much about that, if that's okay with you. But I would say the caveat is often it's, it cycles between volumes, between summer and winter and also between what the bank or let's say the fintech wants to do. So I would say that that is even though it's relatively consistent, it does fluctuate a little bit.
- [10:05]
A
Okay, so maybe you're lower than that today, but do you think there's a path over the next year or two to breaking $400,000 per month in revenue?
- [10:12]
B
Yes, very clear right now we're seeing it actually very clearly in the pipeline. And also there's a trend right now in the industry where I think a lot of the large institutions are focusing a lot more on retaining that customer post transaction. As you probably know, when you give somebody a mortgage, you're only going to interact with them when you send them their invoice. And right now there's a whole sort of more focus on trying to stay close to that customer so that you've captured the next transaction and you capture more share of wallet, more HELOCs, more car loans, and that's not going to happen by dropping them after the transaction direction. So this is where we, the value proposition that's becoming more of the business case that most of the industry is looking at today.
- [10:57]
A
And you mentioned you're in the middle of something. Are you exiting the company or raising right now? Are you bootstrapped? Give me more of the backstory there.
- [11:03]
B
No, we are mostly bootstrapped. So we've only taken private money. That's been the case, including some of mine. And we lived within our means. Most of the time we are, we try to be always near profitable, meaning that we try to stay profitable, but we reinvest, we don't try to be very profitable. So that's just. But we can switch to that. We are in the middle of two transactions that may change the way that looks. And so that's what I need to be careful not sharing more than that. We're not exiting right now. Let's just say that we're not exiting. We may be raising, but right now it's sort of like a bn evaluate it. Let's just put it this way.
- [11:44]
A
Fair enough. When you say you're mostly bootstrapped today, you put in your own money plus some, you said, quote, private money. How much total money have you plus other private investors put in the business life to date?
- [11:53]
B
If you exclude me, about 7 million.
- [11:56]
A
Okay, well, I mean your money is the most important money, right? You're putting your money where your mouth is. It's your baby. Are you comfortable sharing how much you've put in? And was it. Are you swinging for the fences is like you're 100 your life savings and pass to work or it's like a drop in the bucket for you?
- [12:08]
B
Let's say we. I put in north of a million dollar into that business. It's not a drop in the pocket, but it's also not going to kill me if it. But it's something that I really preserve very carefully and I've built a very careful strategic plan to build what I wanted to do to build and that I knew would take some time to get there. And that's why we stayed with my own money and private money so that we can control that growth. Right now we're at a very different st right now. We got what we wanted, we built what we wanted. So going into a large transaction, we'll be in a better position. Basically we're at the point where we can explode sales and we are seeing it right now with a very small sales team. So we want to grow that.
- [12:55]
A
What's the team today all in?
- [12:57]
B
About 55 people.
- [12:59]
A
55, okay. And how many are sales with a quota? Quota carrying reps?
- [13:03]
B
Just two.
- [13:04]
A
Two, okay, interesting. What are the rest? How many engineers?
- [13:06]
B
Mostly engineers and data engineers. I would say 40 to 42. There are some, of course, then there is all the rest of the management and then you have a bit of marketing.
- [13:19]
A
Okay. How do you get this business to a more efficient spot? Right, because you said it earlier, you're under $400,000 a month in revenue, which means you're under about a 4 million run rate with 55 people. That's very low revenue per employee. It's like 70 grand of revenue per employee. That's not generally seen as an efficient operation.
- [13:37]
B
Yeah, that's because we have not really put a lot of energy into sales. We've only put energy in sales in the last year because, as I said, we wanted to build and control and build that moat around it. Now, this is where the transactions are going, is to build the sales function. Today. I can tell you that our sales funnel is extremely healthy with just two sales guys. So what we're saying is that we're gonna change that again. That's part of why we invested more in engineering all along. And now it's time to invest in sales and marketing. We do a little bit, but that's where that's change. And that was by design. It looks that way. I'll also say that the cost per employee is very different. We are a. You have a large team sort of overseas, where the rate is very different. I would say 85% of the company is between India and Colombia.
- [14:26]
A
Okay. So 40 are between India and Colombia.
- [14:29]
B
Yeah.
- [14:30]
A
Okay. So, I mean, that helps a little bit with burn, but. But still, if you're under 400 done.
- [14:34]
B
Right.
- [14:34]
A
With. Yeah, I mean. Right. If you're. If you're. If you're under 4 million of revenue with 7 million from private investors, a million from you, that's 8 million. And today you're at 72k of revenue per employee. I mean, do you have enough cash in the bank to continue exiting your plan, or do you have to go raise money today to extend Runway?
- [14:52]
B
No, we can still definitely live within the cash that we have, but it will not allow us to explode. Right. This is where we will need to raise money to go big and big and far. And that was, again, by design. We tried because again, part of the business is to collect all the data and refine the data to get to a point to build a user experience that works for everybody. And that was time consuming. And so this is. We are past that point, and now we are just going to invest all of our energy in sales and marketing.
- [15:24]
A
How many months of Runway do you currently have left?
- [15:27]
B
We have about a year at least.
- [15:28]
A
Okay, and does that make you. Every founder is different. Are you comfortable with that? Does it make you nervous?
- [15:32]
B
I'm never comfortable. I'm always nervous. What makes me feel better is that the pipeline is the healthiest I've ever seen. So we're in a good position to end Q1 on a really positive note, looking at it today. So I think that's what gets Me less nervous, but of course I'll always be nervous. No founder is ever going to not nervous unless they're error.
- [15:54]
A
Fair enough. Okay, let's go back real quick. We've got about four or five more minutes left here. I want to get the launch story. So you launched in 2014, obviously zero revenue there. It looks like you quit a pretty good, I mean you were at Capgemini for many years, pretty cushy job. You quit, huh?
- [16:08]
B
Yes, correct. That's correct. It was a choice. It was, it was a big choice. A difficult choice to make. But for me, I never looked back and I never regret it.
- [16:19]
A
I want others in your same shoes. They're listening around a comfy corporate job. They're looking for motivation here to quit and do their own thing. I want you to inspire them a bit. If you're comfortable. Can you share what revenue or what salary you gave up to go all in on the startup, let's say in.
- [16:34]
B
Close to a million dollars a year and let's say lots of other perks. I was in management consulting. My client list was some of the most powerful people in the world. I was an advisor to a lot of key folks in the market. There's a lot of perks, a lot of they just say ego involved, let's put it this way. But I gave up all of that because one of the things I wanted to do is to build something that I can fin. In the world of management consulting, you build for others and you move on. So that is one of the things. And there's another reason for this. I was on a plane very often and I think I was missing my kids. My kids were growing up without me, so I needed to stay. And of course when you're a global leader, the only people that want to hire you are the people who want to put you in another global role. So I really kind of. That was another, you know, I would say motivation or should we say influence or maybe I was pushed into that direction. So there's a little bit of, you know, not. It's not only that makes sense.
- [17:42]
A
Rob, how old are you today and how many kids do you have?
- [17:44]
B
I am 16. I have two.
- [17:45]
A
Okay, yeah, makes sense. And you can see here again you put in your time. I mean this is well over a decade at, at Kep Gemini. So yeah, quite the history here. Okay, so you bet on yourself in 2014, you get going. Do you remember your first million dollar revenue year?
- [17:59]
B
Yeah, I think it. Hold on, 2003, 18.
- [18:03]
A
I would say there's people Listening, going, well, I want to be like Roth and go from zero to a million dollars in my first three and a half, four years. You know that bank didn't just call you because out of randomness, you did things to create your luck. What did you do those first three years?
- [18:18]
B
Well, first of all, I think I solved a problem that no one has solved before. And I think that's an important thing. You're actually creating a solution for a problem that people have either thought it can't be solved or never bothered to notice it.
- [18:33]
A
So focus on distribution because there's a lot of founders that they had world class products and they never take off because no one knows about them. So focus on distribution.
- [18:40]
B
Yeah, I think the distribution was to actually like in the beginning there was not a whole lot because I said we were building. The idea was I worked when I built the first tools, my first clients, I distributed to Realtors and I distribute it for free. So I would go literally from one brokerage to another and I will pitch one by one. It was a small use case, but that was, and for me it was validation more than an actual revenue. So for me that's where it started. And then from there Realtors tend to have a lot of, let's just say they use a lot of word of mouth. So that has helped. We incentivize them to do that. And from there it got over to other clients. The other thing that I think this was really important for distribution that I think nobody has figured out yet. And this is what we've done. You see a B2C experience, you're going through it right now on screen with me. That is my best marketing tool. Because when, when companies look for solutions, they are going to see an enterprise ad or they're going to see a very business page, but they have to call you to find out. Here they're playing with it as they're themselves as actual users and they're basically kind of, that's when they reach out to me. So one of the best things that we've done in terms of distribution, in terms of marketing is to make the, the customer as an individual use our tools. Every time I pitch anything, I'd say, you have a home, go play with it. And that actually made a big difference.
- [20:11]
A
This is a distribution. Early on was, was you hustling, giving away for free. And then it was product led growth, individual agents using it. And if an individual agent, if five people at Keller Williams start using it, Then eventually the C2 at Keller Williams says I gotta Buy a company license.
- [20:24]
B
That's correct. That's how it started.
- [20:26]
A
Very cool. Very cool. Okay, so that was going forward to, to 2018 when he broke a revenue. You know, it sounds like you're flirting with around 4 million today. How much time do you need? Is it at 2026, 2027? When do you think you can break 5 million of ARR?
- [20:41]
B
I think we're poised to do that next year. Very early. Actually, looking at the pipeline right now, we should be in good shape. But again, you don't know what the market does. We are sensitive a little bit to mortgage rates. Things look, are looking really positive in the last, I would say 12 months that we've seen this point.
- [20:59]
A
People are buying less houses because mortgage rates are still in the 6 to sort of 8% range. How do you hedge that? What other products do you offer that are not directly correlated to mortgage rates?
- [21:08]
B
Actually, this is where it actually helped because we focus on investing in your own home. And because people don't want to sell their home because they have a great mortgage rate, we're seeing a lot more people saying, I'm staying and I'm building.
- [21:20]
A
And I'm improving these products, Remodel, cost maintenance, et cetera.
- [21:25]
B
That's correct. And so we've seen a lot more. Let's face it, the market is short about 5 million. So there are fewer homes on the market. People are not buying because everybody's still getting that they want to go back to that 3% mortgage rate, which probably never going to happen in our lifetime. And so a lot of folks are saying, I'm not going to give up my 3% mortgage. I am just going to invest in it and maybe borrow against it and buy something new. And that played really well for our use case.
- [21:55]
A
Yep, yep. Makes a ton of sense. Okay, are there any other growth channels besides product led growth that you're using today that are working really well for you that you want to teach our audience?
- [22:03]
B
Personal reach out has been my best thing. I personally being involved in the sales cycle has really helped a lot. The second thing is you need to become a consultant in your distribution story, so you need to constantly explain the roi. You can't just sell a product like it's a sku. So it's a slightly different sales cycle, but it's really easy once you master it.
- [22:24]
A
And Raf, as we look into the future and where you're going, obviously you've raised some capital here. How much of the company do you still own personally today or the team? Like not investors over 50%?
- [22:35]
B
Definitely over 50%, yeah.
- [22:37]
A
Okay, so you've been able to raise and also sort of manage dilution. Are you comfortable sharing the last valuate, the last priced valuation of the business, what year that was?
- [22:44]
B
We never did a price valuation. We did convertible note. So beyond that I have not really pulled any money in the last four years. Three years.
- [22:53]
A
Okay. Okay, so all the 7 million of convertible notes were all raised before 2022?
- [22:58]
B
That's correct. We decided to live within our means when we saw the market. As you recall, about two years ago, the venture capital space was quite tough. So we decided may our own, you know, kind of decision to stay in control and not to need money. That, that helped, that really hurt us a little bit in terms of growth, but at the same time it allowed us to control the, the, the game a little bit. And now we're seeing that payoff.
- [23:25]
A
Roth, if somebody's listening to this podcast and comes to you today and offers you ten million dollars, all cash, to buy a hundred percent of the business, do you sell?
- [23:32]
B
No.
- [23:32]
A
That was quick.
- [23:33]
B
Well, you, you gave me an exact number, so it's easy to give a quick answer.
- [23:37]
A
What's the number?
- [23:38]
B
I'm not going to talk about that right now, unfortunately.
- [23:41]
A
Fair enough, Raj. Well, hey, this has been a lot of fun. If people want to learn more about you and the business online, where can they follow you?
- [23:48]
B
So I'm on LinkedIn. That's the best way to get a hold of me. I am on basically that's pretty much the only social media platform that I'm engaged with on a regular basis. Of course, you can always go to our company, mykaku.com, m y k u k u m.com and actually if you say contact us, I see every form that comes. That's just make it something. A decision I made long ago that I, at the end of the day, I look at every contact as they came in and I, and I actually don't always handle them, but I make sure that if I need to step in. So if you send us any contact, I be sure that I will know about it.
- [24:26]
A
Guys, there you have it. My cocoon.com was launched in 2014 after RAF quit a consulting gig where he was making over a million dollars per year. He bet on himself and broke a million dollars of revenue in his first three and a half, four years. He went on to raise about million in addition to putting a million dollars himself into the business. That was all before 2022, mainly on convertible notes. They continued to scale by empowering real estate agents early on to use tools they built for homeowners. Eventually that product led growth led to word of mouth where they sold directly B2B directly to the the brokerages in and out to banks and now to fintechs that want to use their tools for things like Lead Gen or helping the homeowners that they might lend money to. Today they've got 20 businesses or enterprises paying them. They're a little under 400,000 doll revenue and they're getting a lot of consumption. On average their B2B customers are processing 20,000 addresses that's home addresses per month through all of their different product suites. There are 55 people on the team with a little headcount arbitrage. About 40 of those folks are in India and Colombia as RAF continues to scale the business. Rob thank you so much for taking us to the top.
- [25:33]
B
Thank you Nathan for the opportunity to see it.
- [25:36]
A
You won't believe this CEO's revenue. Click here to watch the next episode. Right now.