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EOQ2 Performance & EOY 2020 Guidance

Francis Pedraza
Jul 3 · 4 min read

We’re not doing as good a job as I’d like at being the most public, private company ever. I’d attribute that to a mixture of fear (of publishing, of failing in public, of cancel culture), and the logistics of preparing internal reports for public distribution (they need to be systematically collected, scrubbed of client names and other sensitive information, and published in the right format), and the difficulty of attributing ROI to this activity (the consensus view is that the obvious risks outweigh the unseen benefits, my contrarian view is the reverse). I remain unshakeably committed to transparency and I will push us to do better in the remainder of the year. Next year, I expect to have more discretionary resources and can push the transparency agenda more forcefully.

With that said, the results:

Performance
— March: revenue $158K, contribution margins 37.5%, Net Income of -$99K.
— April: revenue $186K, contribution margins 34%, Net Income of -$92K.
— May: revenue $182K, contribution margins 34%, and Net Income of -$109K. (NB: Engineering & delivery hires.)
— June Guidance: $200K revenue, contribution margins of 36%, -$107K Net Income.

Guidance
— EOQ3 top-line range: $250K-300K, EOQ4 top-line range $325–415K
— EOY targeting: contribution margins of 56%, +$10K Net Income.
— Strong sales machine, enterprise deals in pilot/trial phase, $200K of expected revenue in pipeline: CAC target: $1000.
— Pre-round runway through March 2021. On track to close $1.5M SAFE w $30M pre-money valuation cap by July EOM: have $1M in commitments and strong interest from outside investors for the rest.

My CEO Dashboard
(Gasp! Yes, it’s public now.)

Narrative
I’m proud to report that we have successfully executed an epic turnaround. In December, our Net Income was over -$200K (burn), with just over a $1M run rate, high churn and too low a rate of progress on ops and product. Today we’re just shy of a $3M run rate, with only -$100K/m of burn, with half a dozen enterprise pilots poised to expand, an incredible sales pipeline, net negative churn (hurray!) trending downwards, and great progress on ops and product. At the beginning of Q2, our burn was actually lower than $100K, and would be lower still today, but we’ve made operations and engineering hires to drive us to a $5M run-rate and profitability by EOY, which we’ve got a reasonable shot at hitting. Have you seen our new website? There are just too many good things happening to capture in a paragraph...

How did we do it?

In part, the macro environment helped: in a long, stable, bull market efficiency is a “nice to have,” but in a volatile bear market efficiency is a “must have” for teams both expanding and contracting, that need to get more done with less — to cut costs or to scale revenue without scaling headcount — by rapidly deploying and iterating on digital ops workflows, while driving down unit prices with automation. For a long time, I had said that our business model was designed to be recession proof, and now I am not a liar.

What is even more significant, I think, is that our partnership model has proven to be a source of resilience and strength, especially in dark times. We’ve eliminated exceptions in the model, and for every $10K increase in Net Income (decrease in burn), everyone gets a 1% raise: so we’re aligned with the bottom line. Our whole partner ethos forced us to make hard decisions about getting leaner, and the team that emerged is stronger for those decisions and the crucible of the last six months.

Lastly, timing and execution: if coronavirus had happened a year ago, we would not have been as well prepared and able to seize on the opportunity. But it happened just when our salesops function had hit its stride, just as we were proving our ability to successfully serve enterprise clients, and just when our product and ops were sufficiently mature to bear the load of tripling revenue in a six months period. Fortuna audaces iuvat.

What keeps me up at night?

Many things. Ongoing performance pressure: every month, every quarter, we’ve got to remain vigilant and disciplined, and keep things going up and to the right, while recalibrating our strategy to evolving circumstances. The round is poised to close, but I’m eager to get it done. I am optimistic that the macro environment will not deteriorate, but will actually strongly rebound, and that the worst is behind us, but this will continue to be a polarizing and contentious election year. In this era of virtue signalling, I have committed the company to a policy of minimum viable alignment, to encourage partners and agents to feel free to express themselves as individuals without fear of reprisal. Still, I am concerned about what I perceive as the rise of illiberalism, not just cancel culture but the general lack of expression, tolerance and debate, and I worry that it undermines free speech, which our industry depends on for its ongoing vitality, and is the very foundation of innovation.

I celebrate this great company—not just the partners, but the agents, long-term capital partners, and indeed, the customers who are very much a part of the company, for without them it would not exist — for the incredible turnaround story of the last six months.

I know that the partnership will do everything in its power to advance the sovereign will of the company through to a strong finish at year’s end.

From strength to strength

Onwards!

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