751: IoT Electricity Measuring King Raises $16m w/ $1.2 Million Revenue

Mark Chung. He's the CEO and co-founder of Verdigris, a Silicon Valley-based internet of things startup focused on smart buildings. Previously, he was a principal engineer for Net Logic, AMD and PA Semi. He graduated with electrical engineering from Stanford University and lives in Sunnyvale, California. When he's not building, he's spending time with his family.

Famous Five:

• Favorite Book? – How the Mighty Fall
• What CEO do you follow? – Mark Zuckerberg
• Favorite online tool? — Pivotal
• How many hours of sleep do you get?— 8
• If you could let your 20-year old self, know one thing, what would it be? – Mark wished that he'd be more growth minded and started earlier

Time Stamped Show Notes:

• 01:07 – Nathan introduces Mark to the show
• 02:04 – Verdigris is an artificial intelligence company launched in 2012
• 02:10 – Verdigris focuses on developing technology for commercial buildings that are managing their energy
• 02:22 – One of Verdigris largest customers is Jabil, a large manufacturing firm
  • 02:28 – Verdigris sensors on Jabil's electric panels collects data from the whole facility
  • 02:40 – Verdigris synthesizes the data into simpler and more understandable reports that facilities' managers can review
    • 02:49 – Then they can understand if they're losing money on electricity or potential equipment fail
  • 03:21 – Verdigris is a combination of software and hardware
  • 04:05 – Verdigris has a hybrid model
    • 04:11 – Verdigris charged on the hardware when it gets installed and a recurring fee for the software
    • 04:21 – The hardware is the bigger revenue stream
    • 04:47 – For a 2-bedroom house, it will cost $1K to install Verdigris
  • 05:23 – Each clamp is $50 a piece
  • 05:54 – Verdigris has raised a total of $16M
  • 06:05 – The first round of funding was in 2012 and Verdigris was launched at the end of 2011
  • 07:11 – Because Verdigris has a hardware component that enables the SaaS, it becomes a sticky product
    • 07:29 – Churn rate is lower than typical SaaS companies and retention rate is higher
  • 07:46 – From a cost standpoint, hardware cost doesn't take all of equity capital
  • 07:53 – You can also finance the hardware
  • 08:34 – Verdigris measures the total amount of electricity measured
    • 08:54 – Currently, they've measured a few megawatts—enough to power a small neighborhood
  • 10:00 – For the SaaS side, monthly subscription fee is $50 or $80 per box depending on the level of service
  • 10:40 – Verdigris gets their sales directly and holds their data infrastructure
  • 10:47 – Verdigris uses Verizon as their back end for all data communication
  • 11:30 – Verdigris is focusing on the commercial space first
  • 12:10 – Customers pay per month is between $50-80 on data plans
    • 12:28 - $1k a month is near average of what customers pay
  • 12:44 – 80% of Verdigris's customers are paying customers
  • 12:56 – Average MRR is around $260K
  • 13:19 – Gross customer churn is zero
  • 14:40 – Verdigris looks for customers who spend around $10K a month in electricity
  • 14:56 – Team size is 30
    • 15:05 – 90% is engineering
    • 15:15 – There are 3 founders
    • 15:23 – The founders are all engineers, one being more business minded than the other two
  • 16:02 – CAC
    • 16:07 – Verdigris doesn't do a lot of paid marketing
    • 16:43 – Verdigris has spent around $10K in 3 months for ads
  • 16:49 – Most people learn about Verdigris through Verizon
    • 17:00 – Verizon's sales people in the field talk to their Fortune 500 customers selling different IT solutions
    • 17:19 – When the customer matches Verdigris' customer profile, the sales team tell them about Verdigris
    • 17:50 – Verizon found Verdigris
  • 18:26 – 2017 revenue goal is over $5M which is 4x from last year's
  • 20:50 – The Famous Five

3 Key Points:

1. With so many SaaS products available, having a SaaS product that uses proprietary hardware creates a sticky, hard to replace product.
2. Your target market should be curated with your pricing plans.
3. Building a partnership with an already established company is beneficial, especially if you're a new one.

Resources Mentioned:

• The Top Inbox – The site Nathan uses to schedule emails to be sent later, set reminders in inbox, track opens, and follow-up with email sequences
• GetLatka - Database of all B2B SaaS companies who have been on my show including their revenue, CAC, churn, ARPU and more
• Klipfolio – Track your business performance across all departments for FREE
• Hotjar – Nathan uses Hotjar to track what you're doing on this site. He gets a video of each user visit like where they clicked and scrolled to make the site a better experience
• Acuity Scheduling – Nathan uses Acuity to schedule his podcast interviews and appointments
• Host Gator– The site Nathan uses to buy his domain names and hosting for the cheapest price possible
• Audible– Nathan uses Audible when he's driving from Austin to San Antonio (1.5-hour drive) to listen to audio books

Show Notes provided by Mallard Creatives