Nathan Latka (00:00):
Hey folks. My guest today is CEO of Trulioo Software Steve Munford. He has nearly two decades of executive leadership experience in the technology industry and currently serves as a CEO of Trulioo Software, a leader in digital identity. Previously he held leadership and board positions with a number of public and private software companies in North America and Europe. He holds a BA in economics from the University of Western Ontario and an MBA from Queens University. Steve, you’re to take us from the top?
CEO of Trulioo Software Steve Munford (00:21):
Sure thing, Nathan.
Nathan Latka (00:22):
All right. Digital identity is hot. Metaverse. We have Jumio on blockchain. We’ve got all these tools. We have traditional players like Ping Identity. How do you fit into the space?
CEO of Trulioo Software Steve Munford (00:31):
Yeah. We are involved with the onboarding process. So think about yourself, if you’re a neobank or an online trading platform, and you’re trying to onboard customers and comply with different regulations or build trust, you need a digital identity service to do that. And that’s what we are. And the thing that makes us unique is that we do it not only here in Canada or the US, but we do it across 195 countries, which makes it hard and makes what we do quite special.
Nathan Latka (00:59):
So when I just bought recently my Tesla and had to show them proof of insurance and ownership via the app, one of the things they had me do was effectively go through a third party and verify my identity. It was like a face picture with some algorithm thing plus a picture of my passport. Are you powering those sorts of things?
CEO of Trulioo Software CEO of Trulioo Software Steve Munford (01:15):
Yeah. Yeah. It could be a marketplace, it could be a shop, it could be an online trading platform. Those are all use cases for us. And typically, we get involved with high growth, digital first disruptors that are expanding globally and really power them.
Nathan Latka (01:35):
And tell me about how you price. Are you charging per identity verified, per KYC filing? How do you verify or price?
CEO of Trulioo Software Steve Munford (01:41):
It’s a consumption base. We do it based on per check. So every time someone comes to us with a check, we charge a fee on that.
Nathan Latka (01:51):
I see. Sort of like a flat fee. We’re talking five cents or something?
CEO of Trulioo Software Steve Munford (01:54):
No, no, no. It could be in the cents, it could be in the dollars, depending on the country, depending on the complexity. Because not only do we do individuals, we also do companies.
Nathan Latka (02:04):
CEO of Trulioo Software Steve Munford (02:05):
Whether it’s a large company or think about a sole proprietor signing up to do some kind of ride share programming or a sole proprietor going onto a platform to sell their goods around their houses. Those are all different versions of the same workflow, if you will.
Nathan Latka (02:20):
Will, just to, Steve, simplify my questions, can I assume the average though is maybe around a dollar? Sometimes it’s $2, sometimes it’s five cents?
CEO of Trulioo Software Steve Munford (02:28):
Yep. Yep. That’s good.
Nathan Latka (02:29):
Okay. Tell me about the backstory here. What got you into this?
CEO of Trulioo Software Steve Munford (02:33):
Well, one is founder who founded Truly was based here in Vancouver. I knew some of the investors. I got to know him over the years and really started with conversations about the next stage of growth for the company. And he was considering a lot of options like many founders. Should I try to scale the business myself? Should I take on new investors? Should I sell the business?
Nathan Latka (02:56):
And what was context? How much had he raised and was he the sole founder?
CEO of Trulioo Software Steve Munford (03:00):
No, there was two founders, but he was the only founder still in the business. He had raised, I don’t know the exact figures, but think about in the tens and twenties millions of dollars. And the company at the time was doing, call it $20 or $30 million. And he was trying to decide whether to try to scale to be a 100 plus million dollar company.
Nathan Latka (03:20):
Was this 2017?
CEO of Trulioo Software Steve Munford (03:21):
This was 20 … I began the conversations with him about in 2017, 2018. I took over running the company back in early 2020. So along the ways he decided that he wanted-
Nathan Latka (03:34):
That’s a three year conversation, Steve. That’s a lot of patience.
CEO of Trulioo Software Steve Munford (03:37):
Yeah. It was a lot of patience, but listen, it was a great chance to get to know him, get to know the business and to build a relationship. And listen, the conversation started just one guy trying to be helpful to an entrepreneur. And it turned out to be, it was a great fit. The identity problem is huge. You can’t ask for a bigger market, more important market than identity today. It’s a hard problem and it hasn’t been solved and the need for it as everything goes digital just increases. So he had the desire to stay involved with the company, but pass off the baton to running the company. We went about doing another run of financing, then allowed him to take some secondary to take a step back and pass it off to this new guy and take some money off the table. And it’s worked out really well.
Nathan Latka (04:28):
So Steve, just to back up the story here, because when you say … You’re underselling a bit. Your most recent round, I’ll let you tell the story, but what was the size of most recent series D?
CEO of Trulioo Software Steve Munford (04:36):
It was US dollars, 394 million. 150 primary, and the rest was secondary.
Nathan Latka (04:43):
And just a lot of founders don’t understand, you can get liquidity for yourself, early investors and early employees without IPOing or exiting 100%. Just quickly explain how a secondary works.
CEO of Trulioo Software Steve Munford (04:52):
Yeah. And actually just full context, that was a pre money valuation of 1.6 billion.
Nathan Latka (04:57):
So what, post two billion basically?
CEO of Trulioo Software Steve Munford (05:02):
Well, because 150 primary, so post 1.75 US. But I think this is a really important point, Nathan Latka. I think for a long time, I don’t think investors had a lot of appetite to give founders or CEOs or early investors liquidity before they got their liquidity or before there was an IPO. And I think that was fundamentally misaligning risk and interest. And I would say for the last four or five founders I’ve worked with, a key ingredient to them feeling comfortable to allow the company to take more risk, to grow, to go longer was the ability for them to take some secondary and take some chips off the table to be risk. Because for most founders, their chips are on one company, whereas an investor, they’ve spread across five or 10 companies. So the risk appetite for an investor could be very different to a founder.
CEO of Trulioo Software Steve Munford (06:01):
And I think by allowing some liquidity along the way, it’s just fair and it’s good. And this liquidity event that we had, geez, there was employees here that had been here six or seven years and were able to pay down mortgages or even pay off mortgages. The founder was able to take some money off the table. Some very early investors, angel investors were as well. And quite frankly, there was more appetite to buy shares than there were sellers of shares in this round. And looking across, I think we have probably 40 or 50 employees that were able to get some kind of liquidity.
Nathan Latka (06:36):
CEO of Trulioo Software Steve Munford (06:36):
That was fantastic. And now they’re still engaged. They’ve got a lot to play for, but they’re able to take some rewards along the way. I think it’s-
Nathan Latka (06:45):
Guys, you guys are listening right now going, “Well, Steve, they have a lot of skill. I mean, they broke 25 million in revenue in 2017. Well, I don’t have that much revenue yet. I can’t do a secondary.” I will tell you, we’re seeing secondaries very early. I’m seeing series A companies take secondaries. So just because Steve is much larger than maybe you guys are listening, still take this advice on secondaries to heart if you’re thinking about it for seed or series A. Steve, would you agree?
CEO of Trulioo Software Steve Munford (07:05):
I completely agree. Because a lot of those same investors with good companies also could get complete liquidity if they wanted. There’s a lot of M&A appetite going out here. So it’s really just an option of, hey, some secondary. I’m still going long. And that’s absolutely a conversation you can have if you’re the right profiled company.
Nathan Latka (07:22):
And the risk, the flip side to this, the reason firms like TCB will do this. Steve, I’m sure you are as well, but I’m an investor in a bunch of different VC funds and the VC funds get so bummed when founders sell too early because they want personal net worth. Whereas they would’ve stuck with the business if they could extract some personal wealth ahead of time and have a long term horizon. So that’s what TCB is fighting against.
CEO of Trulioo Software Steve Munford (07:43):
Absolutely. And it’s not just the founder. Think about it. The founder generally has a family. And that person’s been working 24 hours a day. The family’s generally made a lot of sacrifice as he’s been building the company. And at some point you need to come home and say, “Hey, we don’t have a mortgage anymore.” Or, “We’re going to be in good shape.” And I love my company to go longer, but we’ve been able to toast, celebrate a milestone along the way. And it doesn’t make the founder any less hungry. It just actually means that he has a longer time horizon. I think it’s a really important ingredient to building out a company over the long term.
Nathan Latka (08:20):
So just to sum that up, 394 million total round, 150 million went on the balance sheet of the business, 244 million of it went to early employees, early angel investors, the founder, liquidity. It was a 1.7 post money valuation. And Steve, about what revenue run rate today.
CEO of Trulioo Software Steve Munford (08:34):
I think we’re pretty about this. We’re approaching right around $100 million US.
Nathan Latka (08:42):
So that begs the question, Why do a secondary? You need $120m-$140m to have a good IPO these days. Why not IPO instead of doing the secondary with TCV?”
CEO of Trulioo Software Steve Munford (08:54):
Yeah. I mean, absolutely. When you’re the rule of … I think we’re rule 120.
Nathan Latka (08:58):
Oh wow. Nice.
CEO of Trulioo Software Steve Munford (08:59):
So we are not a company that needed the money to fund operations. We’re a profitable, high growth company. An IPO, yes. Absolutely, we could have done that. But I tell you, we see the opportunity to build a company that’s really the platform for identity, which really it’s a multi multi billion dollar company. And the ability to … Listen, there’s a lot of private capital available and the ability to operate the company not under the scrutiny of a public market, not to be a subscale public market company, you get a lot more latitude to focus on the business versus focus on a lot of other investors. And it’s a lot easier to run a company if you have a couple investors that share in your thesis and are working alongside you than to have all the overhead of running a public company.
Nathan Latka (09:48):
You nailed it.
CEO of Trulioo Software Steve Munford (09:49):
I run a couple public companies and it is very, very different than … Having one smart investor that wakes up every day and cares as much about your business as you do is very different than having 20 to 30, 40 or thousands of public company investors.
Nathan Latka (10:04):
And guys, you hear this a lot when I interview founders doing between 80 and 200 million bucks in AR. They’ll talk about rule of 40. And just to remind everyone what that is, is effectively your last 12 month growth rate plus profitability. So if you grew 100% and you also had 20% profitable, you’d be 120. Steve, I imagine you guys are not profitable, but you’re growing much larger than 120% year over year.
CEO of Trulioo Software Steve Munford (10:23):
No. We are profitable.
Nathan Latka (10:24):
You’re profitable? Wow. Okay.
CEO of Trulioo Software Steve Munford (10:27):
Yeah. Yeah. We’re profitable.
Nathan Latka (10:28):
Break that down. Break that 120 down for me then. How much profit and how much growth?
CEO of Trulioo Software Steve Munford (10:33):
Well, call it 100% growth and it’s anywhere between 5% and 20% EBITDA. So listen, I’m rounding the numbers here, but it’s all good numbers.
Nathan Latka (10:42):
That’s incredible. So if you’re doing about a hundred million run rate today, where were you about a year ago?
CEO of Trulioo Software Steve Munford (10:47):
We’ve been growing 100% so-
Nathan Latka (10:48):
So 50 million.
CEO of Trulioo Software Steve Munford (10:49):
Nathan Latka (10:50):
That’s great. Okay. Very cool. Take me back to the series C. Obviously you’re managing a storyline between the series C in 2019. Now, you joined right before the series C or after?
CEO of Trulioo Software Steve Munford (10:58):
Nathan Latka (11:00):
Oh, you joined right after. Okay. So maybe you don’t … You probably know this though. So it was 70 CAD, 55 million USD. What valuation was that at?
CEO of Trulioo Software Steve Munford (11:06):
I don’t think we went public on that one, but it was relatively small.
Nathan Latka (11:11):
Okay. Most folks on a series C … I mean, you’re selling 10% to 15% of the business. Would you say you’re probably in that standard range or you did something unique?
CEO of Trulioo Software Steve Munford (11:20):
Nathan Latka (11:20):
CEO of Trulioo Software Steve Munford (11:21):
Yeah. I’m not going to let you ferret down to get to an answer.
Nathan Latka (11:25):
I want to see how much the valuation grew over the past 12 months since revenue grew 100%. Can you speak to that at all?
CEO of Trulioo Software Steve Munford (11:30):
A lot. A lot. And there’s two things. One is our growth rate certainly accelerated. We really scaled the leadership team and geographic presence. Our new logo acquisition really ramped up. And also the market dynamics just went in our way. All of a sudden identity became the most important enabler for online commerce and pre pandemic, it was a trend coming. Post pandemic, when we saw the democratization of financial products, everybody wanting to open an account, trade online, those products going global, the payment infrastructure all changing, everything being digital, all of a sudden identity became the gating factor for companies expanding and growing, which was a tailwind for us. So it was a combination of, yes, the company’s metrics greatly improved, but also just the recognition that this is a huge business seemed to come about the same time, which just the multiples that people are getting in our space have just expanded considerably.
Nathan Latka (12:33):
And you mentioned logo acquisition. How many customers today?
CEO of Trulioo Software Steve Munford (12:36):
Nathan Latka (12:38):
Okay. 450. That’s great. And then talk to me a little bit, you mentioned building out the team. How many folks are full-time on the team today?
CEO of Trulioo Software Steve Munford (12:44):
We’re just over 300.
Nathan Latka (12:45):
Okay. And how many engineers?
CEO of Trulioo Software Steve Munford (12:48):
Nathan Latka (12:49):
Very heavy. And do you love that SRED financing up there in Canada or what?
CEO of Trulioo Software Steve Munford (12:54):
SRED financing, listen, I’ve been in this business, you mentioned my gray hairs, a long time. I think it is a great asset for Canadians. I think it is such a good program that the government runs and runs very efficiently. I’m a big fan. And I think it is something that really helps out companies here.
Nathan Latka (13:11):
Yep. Now, there’s a reason that we have a significant amount of our … Actually 50% of our employees up there in Canada as well. We love that.
Nathan Latka (13:19):
Steve, I do have a question for you. There are some people that might argue with current market dynamics, a 1.7 post money valuation, growing 100% year over year, and a hundred million, that’s a 17X multiple. It’s actually much less than a 35, 40X multiple that Manny Medina Outreach got, or Gong is getting or ClickUp just got. Why is your evaluation multiple almost half of some of those guys in your opinion?
CEO of Trulioo Software Steve Munford (13:43):
I’m quoting you today’s numbers, which is really six months on, or seven months on from when we did the financing.
Nathan Latka (13:49):
CEO of Trulioo Software Steve Munford (13:50):
So they weren’t that at the time. I think the multiples was mid 20s to 30s back then. And listen, today, I think our growth rate accelerated even since then so today we’re certainly worth a lot more than what the last financing was at.
Nathan Latka (14:09):
Talk to me about net dollar retention real quick before we wrap up. Where are you guys at today?
CEO of Trulioo Software Steve Munford (14:14):
We always range between one 150 and 200. And we-
Nathan Latka (14:18):
That’s world class.
CEO of Trulioo Software Steve Munford (14:20):
Yeah. Yeah. And that’s what makes us profitable. So back to the point that you said, how can you EBITDA profitable? We acquire customers. And in any given quarter, the majority of our revenue comes from existing customers. It’s a uses based pricing, so we land a customer and then we land generally winning platforms that are expanding organically and expanding geographically. So if you take care of those customers, you solve their problem, and you’re relentlessly focus on their success, you can’t help but have great net dollar retention in our space.
Nathan Latka (14:51):
So Steve, just to peel the onion on net dollar retention, you have gross revenue churn, and then obviously expansion. Are you guys gross churn like 10% and expansion 80 to get the 170 or something like that?
CEO of Trulioo Software Steve Munford (14:59):
Yeah. Our growth dollar retention is negligible. It’s single digits. Yeah.
Nathan Latka (15:04):
CEO of Trulioo Software Steve Munford (15:05):
And we’ll be fine. As we get people on the platform and they can be small because they’re an early company and they can stay smaller go away. But if they grow, once they get growing as a company, then we never lose them.
Nathan Latka (15:18):
Yep. Interesting. Wrap us up here before the famous five. What are you going to spend the 150 on?
CEO of Trulioo Software Steve Munford (15:24):
Likely inorganic growth.
Nathan Latka (15:26):
Okay. And so there’s a lot of folks growing very fast right now by if they can race from VCs at a 17X multiple, but they’ll buy other companies at a 10X multiple. You do that all day long. Inorganic growth, financial engineering. Call it what you want. Is that what you mean?
CEO of Trulioo Software Steve Munford (15:38):
Yeah. Yes, that math makes sense, but it really is first all about product. I’m not looking for top line growth. I’m looking for product to extend our platform. And with the right product, we have a customer base that is enviable. If we broaden our product suite, we can sell more to them and provide more of a whole solution for them. So it really is about product and the team and the tech. Not so much, I’ll pay whatever multiple I need to to get the right asset. It’s all about the product, the team, and the tech.
Nathan Latka (16:09):
Name a product category that’s right next to digital identity that you’re very interested in.
CEO of Trulioo Software Steve Munford (16:13):
I think there’s a lot of areas for opportunities in fraud. A lot of areas for opportunity in things like biometrics. There’s parts of the orchestration of how you orchestrate multiple different steps in the identity journey. All these things we have either part of the solution or are building solutions and we may be able to accelerate our grow through M&A.
Nathan Latka (16:34):
Very cool. All right. Famous five. Number one. Favorite business book.
CEO of Trulioo Software Steve Munford (16:38):
My favorite business book. Can we come back to that one?
Nathan Latka (16:42):
Yeah. Number two. Is there a CEO you’re following or studying? Give me a Canadian founder.
CEO of Trulioo Software Steve Munford (16:47):
I’m a big Elon Musk fan. Sorry.
Nathan Latka (16:49):
All right. I don’t know if he has any Canadian in him, but we’ll see number.
CEO of Trulioo Software Steve Munford (16:52):
He does. He went to Queens, by the way.
Nathan Latka (16:54):
Oh. Okay. There you go. Fair enough. Number three. What’s your favorite online tool, Steve, for building Trulioo?
CEO of Trulioo Software Steve Munford (17:00):
For building Trulioo. I thought I was going to say Snapchat for keeping in touch with my-
Nathan Latka (17:06):
CEO of Trulioo Software Steve Munford (17:07):
Yeah. Listen, we are big user of Slack and I think it’s just a great tool for us.
Nathan Latka (17:14):
Number four. How many hours of sleep do you get every night?
CEO of Trulioo Software Steve Munford (17:16):
I’m about a six hour guy.
Nathan Latka (17:18):
CEO of Trulioo Software Steve Munford (17:18):
If I have a hard workout, maybe seven, but generally a six hour guy.
Nathan Latka (17:23):
And situation, Steve. Married, single, kiddos?
CEO of Trulioo Software Steve Munford (17:26):
I’m married with three wonderful kids.
Nathan Latka (17:28):
Wow. Busy guy. And how old are you?
CEO of Trulioo Software Steve Munford (17:30):
I am 55.
Nathan Latka (17:32):
Take us home. Something you wish you knew when you were 20.
CEO of Trulioo Software Steve Munford (17:35):
Wish I knew when I was 20. That my philosophy degree would have so much value.
Nathan Latka (17:40):
Trulioo.com guys. One of the unicorns in the digital identity space. Steve came in a couple years ago to drive expansion in the platform. The company has grown over 100% year over year from 50 million in ARR to 100 million in ARR. 450 enterprise customers today, they just raised three 94 million bucks in capital, 151 on the balance sheet, 244 to provide the liquidity to early backers of the business, employees and founders. 1.75 billion valuation as they look to continue to scale. Steve, thanks for taking us to the top.
CEO of Trulioo Software Steve Munford (18:08):
Yeah. Thank you Nathan Latka. All the best.
Nathan Latka (18:11):
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. 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 Latka (19:04):
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. You can go in there and quickly search and see what people are saying. Sign up for that at Nathanlatka.com/slack. In the meantime, I’m hanging out with you here on YouTube. I’ll be in the comments for the next 30 minutes. Feel free to let me know what you thought about this episode. And if you enjoyed it, click the thumbs up. We get a lot of haters that are mad at how aggressive I am on these shows, but I do it so that we can all learn. We have to counter those people. We’ve got to push them away. Click the thumbs up below to counter them and know that I appreciate your guys’ support. All right, I’ll be in the comments. See ya.