Almabase is on track to hit $1.1 million in annual revenue in 2020, helping about 240 colleges and universities connect with alumni and manage alumni donations through its alumni management software.
“We help universities build really strong, lifelong … relationships with their alumni. And the value prop is that we help them increase alumni participation, so more and more alumni give back to the university,” says Kalyan Varma, Almabase founder and CEO, in conversation with Nathan Latka in October.
On Giving Tuesday in May, for instance, Almabase raised about $2 million in donations for its clients.
Almabase primarily earns its money through a SaaS model, with universities paying anywhere from $4,000 to $20,000 each year for a software subscription. On average, Almabase’s customers pay $6,000 to $7,000 annually.
The company offers three subscription tiers to colleges: (1) digital fundraising, (2) virtual and in-person alumni events, and (3) building online communities with alumni. The last tier ranges in price from $8,000 to $20,000, depending on the size of the school.
Almabase has a CAC of about $3,500 to $4,000, with the payback period for new customers of six to nine months. The company’s overall monthly spend reaches $60,000 to $75,000 — that’s lower than usual now, thanks to the COVID-19 pandemic — which means Almabase makes about $20,000 each month.
For Varma, though, “value SaaS” is Almabase’s most important factor: “What we mean by value SaaS is creating value for every stakeholder. So founders for sure, but employees, customers, making sure that everybody has value in this equation is what we build for,” he explains.
Source: GetLatka
Varma co-founded Almabase with Sri Maneru in 2014, marketing to universities in India like Christ University and the Indian Institute of Technology. Now about 90% of Almabase’s clients are based in the U.S.
Almabase is bootstrapped, except for $500,000 raised in the company’s first few years. In 2018 and late 2019, it raised $250,000 in debt from Lighter Capital, which uses a revenue-based financing model.
The company is made up of a 25-employee team, including six engineers, two product managers, three account executives, and three sales development representatives.
Like many companies, Almabase has endured some consequences of the COVID-19 pandemic. It hasn’t lost clients, but it hasn’t been able to sell to many new customers. That means it’s not earning as it normally would in one-time upfront costs for setup, implementation, and training clients, which usually amounts to between $3,000 and $5,000 for each new school.
Almabase is looking at other ways to make up for these losses, including offering professional services, Varma says. Those services involve consultations or guidance about how to better run alumni programs.
“We’ve been only doing that for about two to three months, especially since COVID, given the layoffs and things like that,” Varma says. “I’m hoping that that becomes a much bigger piece of the pie.”
What is Almabase’s annual revenue?
In 2020, Almabase generated $1.1 million in ARR.
What is Almabase’s monthly revenue?
In 2020, Almabase generated $90,000–$92,000 in MRR.
Who is the CEO of Almabase?
Kalyan Varma, age 33, is the CEO of Almabase.
Transcript Excerpts
Why marketing — not money — is Almabase’s bottleneck
“Money is not really our bottleneck. There’s a few things that we’re solving for, but whenever money is a bottleneck, I think we will raise a little bit of debt to keep us going. I think marketing … is the key bottleneck from a brand story. I think we just haven’t really done that well. So far, we’ve been focused on outbound sales, so we’ve done SDR, AEs. We go outbound, reach out to every single university and high school, see if they’re interested in what we’re doing. But from a marketing perspective, inbound, demand gen, etc., we haven’t really done a lot. And so that’s the next few months for me, in terms of focus.”
The benefits of raising debt instead of capital
“You don’t need to put any collateral up front, it’s revenue-based financing. They give you a certain amount of money, based on how much revenue you have, and what other projections, etc. It’s a fairly safe bet from their side, as well. We are doing it at 40% over three years. So for example, if we raise $100K, we’ll be paying $140K. And the way the payment works is it’s a cut, or it’s a percentage of monthly cash receipt … In a certain month, let’s say we get $100K in cash, we pay $9K, $10K … And then it goes down over a period of time, in terms of the percentage of the cash flow. So it’s a fairly straightforward instrument.”
How to turn a nonprofit idea into a business
“I went to school in India, and … some of my classmates and friends had to drop out of school midway. And that’s what led to me starting a nonprofit at that point, which reached out to all of our alumni [and] raised money. I was always running this on the side [while working at Goldman Sachs], along with a friend of mine. And that’s really when over those years, when we were raising money from alumni of our institution, we realized that, not just at our college, but institutions globally, the relationship between alumni and their alma mater is just based on loyalty and not a true relationship. Which is where we realized that this needs to get fixed, and that’s how we started Almabase in 2014.”
Switching the client base from India to the U.S.
“We started with selling in India, because when we started, it was really naive. I mean, we said everybody in the U.S. has already figured out how to do alumni relations, and we are going to do this for India. So we were like, ‘Let’s just bring the best ideas from the U.S. and implement it in India.’ We unfortunately did that for about three years, sold to pretty much all of the top-tier institutions in India … But then you had nowhere to go after that. So then we were like, ‘OK, there’s a much bigger opportunity in the U.S.‘”
Full Transcript Nathan: Hello, everyone. My guest today is Kalyan Varma. He strongly believes that technology should work towards improving human relationships, instead of replacing them. The ability to bring communities together and benefit all stakeholders, is what drives us. He’s been personally impacted by the lack of scholarships. And with Almabase now, he’s helping institutions make their education more accessible. Kalyan, you ready to take us to the top? Kalyan Varma: Let’s do it. Nathan: All right, so what is Almabase? Kalyan Varma: So, which school did you go to, Nathan? Nathan: Virginia Tech. Kalyan Varma: Okay. How many times did you get asked for a donation after you graduated? Nathan: I put them on my spam folder. Kalyan Varma: There you go, that’s the story of so many of us. So that’s what we really help improve. I think the big issue here, is that universities don’t do a good job of maintaining a good relationship with their alumni. It’s always one-way traffic, just ask for donations all the time once you graduate. But obviously, student debt is increasing, donations are going down, which is a huge problem for universities. That’s what we help solve. Kalyan Varma: So we help universities build really strong, lifelong, give and take, very strong relationships with their alumni. And the value prop is obviously, that we help them increase alumni participation, so more and more alumni give back to the university. Nathan: Are you taking a cut of donations done through your platform? Or is it just a SaaS model? Kalyan Varma: It’s a SaaS model primarily, but we’ve been recently, over the last, I would say, 12 months or so, we’ve started making some revenue out of the cut of the donations as well. Nathan: So, we’ll come back to that in a second. If we just focus on the SaaS side for now, what’s the average university paying you per month, or per year to use the tech? Kalyan Varma: So, I mean, it ranges between I would say, $4,000 a year for some of our products, to somewhere like $15,000, $20,000 a year for some of our products. But if I had to just take an average across all of our customers, all of our paying customers right now, I would say it’s between $6,000 to $7,000 a year. Nathan: Okay, got it. Assuming $500 and $600 per month? Kalyan Varma: Yeah, that’s about right. We only do annual contract, so we only count ARR. Nathan: Okay. And why would someone pay sort of 4,000 for a year, versus 10,000 for a year? What are you upselling against? Kalyan Varma: Sure. So we have three different solutions primarily. One helps with purely fundraising, so digital fundraising solution, and then we have one specifically focused on alumni events, virtual and in-person events. And then we have a solution which is primarily around building a community of alumni online, for any university or high school. So the community product is a little more expensive, so that’s again, depending on the size of your alumni, anywhere between $8,000 to 15,000, $20,000 a year. The fundraising and events solution come in at about 3000, $4,000 a year to start with, along with a transaction fee for every donation, or event ticket purchase. Nathan: When did you launch this idea? What year? Kalyan Varma: I mean, the start-up was officially formed in 2014, that’s when we actually started out with this. But the idea, the seed of the idea really happened in about 2007 or so. So I’m from India, I went to school in India, and this happened with me, where some of my classmates and friends had to drop out of school midway, during my junior year, right? And then that’s what really led to me sort of starting a nonprofit at that point, which basically reached out to all of our alumni, raised money. Kalyan Varma: And then I graduated, joined Goldman Sachs for a full-time job, did that for a few years. But I was always running this on the side, along with a friend of mine. And that’s really when over those years, when we were raising money from alumni of our institution, we realized that not just at our college, but institutions globally, the relationship between alumni and their alma mater, is just based on loyalty and not like a true relationship. Which is where we realize that this needs to get fixed, and that’s how we started Almabase in 2014. Nathan: Kalyan Varma: That was actually my alma mater. So we started with selling in India, because when we started, it was really naive. I mean, we said everybody in the US has already figured out how to do alumni relations, and we are going to do this for India. So we were like, “Let’s just bring the best ideas from the US, and implement it in India.” We unfortunately did that for about three years, sold to pretty much all of the top-tier institutions in India, and then we [crosstalk 00:04:32]- Nathan: Name a couple. Kalyan Varma: So we have BITS Pilani, we have IIT Bombay, we have Pan IIT, Christ University, et cetera. So some of these top tier institutions in India. But then you had nowhere to go after that. So then we were like, “Okay, there’s a much bigger opportunity in the US.” So that’s when we started shifting focus to the US, roughly in mid-2017 or so. Nathan: Mm-hmm (affirmative). And how many customers do you now have today? Kalyan Varma: So today, in terms of paying customers, we have 240 institutions. A majority of them out in the US, about 90-92% of them are in the US. Roughly a half-and-half split between independent schools, and higher education. Nathan: And are you seeing people more reliant on you during COVID, or less? Kalyan Varma: I mean, so it’s interesting, because our existing customers, there’s been no turn at all. So they’ve seen a bigger need for Almabase during these times, but also a reduction in tuition fees, and fundraising during this time, means that there’s less budget for new purchases. So yeah. I mean, renewals have been great, sales is not as fast as we would’ve liked it to be. Nathan: Okay. And origin story here, since you were at Goldman for a bit, was Goldman right before 2014? Kalyan Varma: So I was at Goldman for three years, right after I graduated. So 2008 to 2011. So I literally joined Goldman Sachs during the peak of that recession, I was there until 2011. 2011, I actually started an e-commerce company, but that’s what I was going to be interested in. 2011, India, e-commerce was a big deal. Ran that for about three years. That was again, very focused on social impact, primarily from a… Kalyan Varma: So I started an e-commerce marketplace, which would basically sell products that are being manufactured by non-profits only. So every product would have a story behind it, and that was the unique sort of angle to it. As opposed to just a product and a price, and then you buy it. But then really didn’t take off, didn’t get the traction that I would have liked. And then 2014, I sort of switched to starting Almabase. Really, that’s been an idea that I’ve had forever. Nathan: And have you bootstrapped Almabase? Kalyan Varma: That’s an interesting story. I do say we are bootstrapped, but we did raise a little bit of money up front. Between that 2014 and 2017 phase, where we weren’t really sure of what we were doing, we did raise some money from Indian investors. Again, alumni of my own alma mater, as well as 500 startups, the accelerator program in the Bay area. Nathan: How much? Kalyan Varma: So we did raise a little bit of money. The total money we have raised is about 500K during that time. But what’s interesting, is during that whole three years where we raised 500K, it didn’t really add a lot in terms of ARR, but then we have been bootstrapped since then. We raised a little bit of debt in the last couple of years, from Lighter Capital. We raised, I think 250K in debt so far, from Lighter Capital. And- Nathan: When did you raise that debt? Kalyan Varma: So we raised 100K in 2018, and then 150K during December of 2019, or closed in Jan 2020. So about six months. Nathan: Now you’re from Goldman, so I’m expecting you to be able to explain this very clearly, so that anyone can understand it. How does a Lighter Capital RBF, Revenue Based Financing work? Kalyan Varma: It’s pretty simple actually. I mean, you don’t need to put any collateral up front, it’s revenue based financing. So they give you a certain amount of money, based on how much revenue you have, and what other projections, et cetera. So it’s a fairly safe bet from their side as well. So we are doing it at 40% over three years. So for example, if we raise 100K, we’ll be paying 140K. And the way the payment works, is it’s a cut, or it’s a percentage of monthly cash receipt, right? In a certain month, let’s say we get 100K in cash, we pay 9K, 10K, something like that. And then it goes down over a period of time, in terms of the percentage of the cash flow, et cetera. So it’s a fairly straightforward instrument. Nathan: What determines if it goes from 9% of gross monthly receipts, down to 5% of gross monthly receipts? Kalyan Varma: I think they basically put a cap, in terms of for the first, I think, million dollars per year in cash receipts. It’s about 9% if I remember correctly. And then between from anywhere, over one million to I think, 1.5 or two million, it’s 5%. And then if it goes beyond two million, then it’s like 0.1% or something like that. Nathan: Got it. So just to summarize, again, I’ve heard terms, I’ve interviewed many people that have raised from Lighter, but there’s essentially a repayment cap, which is usually between 1.4 and 2X the total loan. You said you’re at about 1.4, it sounds like. So if you raise 250,000 total, what you’re going to pay back total over time, is about 350,000 or 1.4X the 250. And the way that you pay that back, is going to be right now, about 9% of your gross monthly receipts. And that could drop if you grow pretty quickly. Kalyan Varma: Yeah. I don’t quite recall if 9% is accurate, but somewhere around that range, Nathan: How do you compare that to just regular debt, where it’s just a flat, simple to understand interest rate? In other words, if I asked you what’s the interest on this money, how would you try and calculate that? Kalyan Varma: Yeah, it’s not that straightforward. I think we just took it based on the simple math, that I mean, if you’re going to get this 100K, are we going to generate revenue that’s way more than 140K or not? And if it is, then that’s what we need. So I mean, we did, I think, talk to a bank. And Bank of America is our bank, and we did talk to them, but there was lots of complications. And also they said, “We can give you a maximum of 40K, 50K, something like that, which wasn’t sufficient at the point that we raised. And we had a good relationship with Lighter, so that’s what we went with. Nathan: And what’s your monthly recurring revenue today? Kalyan Varma: So in terms of ARR, we are about 1.1, close to 1.1 million. So 90, 91, 92 something like that, in terms of MRR. Nathan: Yeah. So lighter can usually go up to three or 4X of your MRR, which is exactly what it sounds like here. if you want to continue scaling the company, and using debt, right, so that you and your founders keep owning 100% of the equity, where would you go? Or how would you think about a bigger debt deal? Kalyan Varma: What do you mean? Like, would we be raising more debt? Or would we be doing equity? Is that your question? Nathan: Yeah. I mean, there’s two types of founders. Founders that want headlines and want to go for a billion dollar win, which is high risk, and those that want to keep as much of their company as possible, and build it to a $10 million profitable thing that they can get rich off of. Which are you? Kalyan Varma: The second one? I mean, we call that Value SaaS actually. I don’t know if you’ve heard that before, but what we mean by Value SaaS, is creating value for every stakeholder. So founders for sure, but employees, customers, making sure that everybody has value in this equation is what we build for. So yeah, there’s certainly not going to be type A, which is like great sums of money, and hopefully get there. Kalyan Varma: But yeah, I mean at this point, money is not really our bottleneck. There’s a few things that we’re solving for, but whenever money is a bottleneck, I think we will raise a little bit of debt to keep us going. Nathan: What’s the bottleneck? Kalyan Varma: I think marketing, for me, is I think the key bottleneck from a brand story. I think we just haven’t really done that well. I mean, so far we’ve been focused on outbound sales, so we’ve done SDR, AEs. We go outbound, reach out to every single university and high school, see if they’re interested in what we’re doing. But from a marketing perspective, inbound, demand gen, et cetera, we haven’t really done a lot. And so that’s really the next few months for me, in terms of focus. Nathan: Interesting. What’s the team size today? How many folks? Kalyan Varma: So we’re 25 people, total. Nathan: And how many engineers? Kalyan Varma: Five, six engineers. Two product managers. Yeah. Nathan: Is this price point a price point, where you can put salespeople on it with quota? Do you have any quota carrying sales folks? Kalyan Varma: Yeah. We have quota carrying sales folks. We have three account executives, and three SDRs. All of them have quotas obviously, top of the funnel, bottom of the funnel, et cetera. And yeah, so it works out for us, because some of our people are in India, and some of our people that in the US. And some of us shuttle back and forth as well. And I mean, if I were to build this team entirely, in let’s say the San Francisco Bay area, it’s never going to work out with that kind of price point. But yeah, we do have an advantage in being able to hire people from lower cost locations. Nathan: You wouldn’t have raised the debt, if you didn’t see a way to reinvest its drive growth, which probably means you’re burning a little bit of capital per month right now, about how much are you burning? Kalyan Varma: We’re actually not at this point. I mean, we have significantly cut down costs in March, when they started seeing COVID hit. And we wanted to obviously play it safe at that point. So our current monthly spend is about 65 to 70K per month. We’re saving about- Nathan: So you’re profiting about 20K per month right now? Kalyan Varma: Yeah, a little over that. I mean, we spoke about sort of the recurring revenue, but we also have other sources of revenue. Which is, like I said, a little bit of transaction charges. For every new customer, we do have an implementation and setup, and training cost, which is one-time upfront [crosstalk 00:13:50]. Nathan: How much is that usually? Kalyan Varma: It depends again, it’s anywhere between 3,000 to $5,000 one-time, but we also sometimes give a discount and things like that. So roughly right now, for example, this year we’re projecting that to be about 100, 150K, in terms of a one-time policy. That’s not going to occur next year, unless we get new customers. That’s one, but we’re also starting to play a little more in the professional services side. Kalyan Varma: So now we’re actually going and not just giving our software to schools, but then we’re saying, “Hey, what are the parts of the alumni program that you want to run better? We’re going to come help you, because we work with 250 schools. We understand how this works for different kinds of institutions, we’re going to help you run the program, et cetera.” Again, that’s a new idea. We’ve been only doing that for about two to three months, especially since COVID, given the layoffs and things like that. But yeah, I’m hoping that that becomes a much bigger piece of the pie. Nathan: Mm-hmm (affirmative). And how many donations GMV, have gone through your platform, say in 2019? Kalyan Varma: Oh, I don’t have that off the top of my head, but the only stat that I do remember, is very recently about the 5th of May, I think it was. It was called, Giving Tuesday Now, it was this one big charitable donation day. And on that day, I think we processed a little over $2 million in terms of donations, for our customers. That’s one number that I remember. Nathan: What’s your thesis on scaling the take-a-percent-of-the-donations model, right? Which can be lower touch, and potentially grow pretty quick? Kalyan Varma: Yeah. So I mean, I think we want to sort of use the fundraising… I think where we really do well, is when people have all of our products, like we’d run the end-to-end alumni programs from data, to engagement to fundraising. So we don’t really see a lot of value. I mean, we do give customers the ability to try no cost, but only a transaction fee for one campaign, just to give it a shot. And then we say, “Okay, you have to be a subscription to be able to keep it going.” Kalyan Varma: I don’t really see a lot of value in just saying, “Just pay as a cut,” because we’re going to get a lot of noise in terms of the kind of customers that we attract. We want to be really focused on the kind of customers, that it makes sense to have all of our products. Nathan: Mm-hmm (affirmative). And what is your current CAC right now, to get these new customers? Kalyan Varma: So I did put this map together. I think our CAC from a lead gen perspective, is obviously different for different gens, but I think it averages out to about 1,500 to $2,000 per customer, in terms of lead gen. And then if I add the cost of the account executive as well, including salaries, commissions, and things like that, that’s another 2000. So it comes out to about, between 3,500 to 4,000, to essentially bring in a new customer. So yeah, the payback that we look at, is somewhere between six to nine months, in terms of payback. Nathan: Yeah. Very good, all right Kalyan, let’s wrap up here with the famous five. Number one, favorite business book? Kalyan Varma: I read a lot of biographies. I don’t know if I have a favorite business book, but I would probably pick, Never Split The Difference, by Chris Voss, That’s one of my favorite- Nathan: What’s your favorite bio? Kalyan Varma: Elon Musk. I loved that. Nathan: Number two. Is there a CEO you’re following or studying? Kalyan Varma: Yeah. Girish Mathrubootham, from FreshWorks. Yep. Nathan: When are they going to IPO? Kalyan Varma: I couldn’t tell you, but I love him for his storytelling ability. I mean, that’s one thing that I’m trying to learn from him. Nathan: Number three. What’s your favorite online tool for building Almabase? Kalyan Varma: Nathan: Number four. How many hours of sleep do you get every night? Kalyan Varma: About six hours. Nathan: Okay. And situation? Married, single, kids? Kalyan Varma: Married, 33 years old, one kid. She’s one year old. Nathan: Aw, that’s exciting. Okay, last question here, Kalyan. What do you wish your 20-year-old self knew? Kalyan Varma: I keep telling this to myself all the time. Do less and get more done. Nathan: Guys, Almabase, helping alumni programs have a better relationship with their alumni communities, and ideally raise more capital. They’ve got several hundred schools on the platform, doing about 1.1 million, in terms of run rate right now. 240 customers are schools, they raised 500,000 bucks to do this. They’re cashflow positive about 20,000 bucks a month. 25 on the team, six engineers, they look to continue to scale spending, four grand to get a new $500 a month customer. So six to nine month payback period. Kalyan, we’re rooting for you, man. Thanks for taking us to the top. Speaker 3: Thanks Nathan, have a good one. Nathan: One more thing before you go. We have a brand new show every Thursday at 1:00 PM Central. It’s called Shark Tank For SaaS. We call it Deal or Bust. One founder comes on, three hungry buyers, they try and do a deal live. And the founder shares backend dashboards, their expenses, their revenue, ARPU, CAC, LTV. You name it, they share it. And the buyers try and make a deal live. It is fun to watch every Thursday, 1:00 PM central. Nathan: Additionally remember, these recorded founder interviews go live. We release them here on YouTube every day at 2:00 PM central. To make sure you don’t miss any of that, make sure you click the subscribe button below, here on YouTube, the big red button. And then click the little bell notification to make sure you get notifications when we do go live. I wouldn’t want you to miss breaking news in the SaaS world. Whether it’s an acquisition, a big fundraise, a big sale, a big profitability statement or something else. I don’t want you to miss it. Nathan: Additionally, if you want to take this conversation deeper and further, we have by far, the largest private Slack community for B2B SaaS founders. You want to get in there, we’ve probably talked about your tool if you’re running a company, or your firm if you’re investing. 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