SumSub launched in 2012 as a successful business that pivoted into the AML and KYC verification space in 2018, providing a global solution for a highly regulated issue.
Nathan Latka sat down with SumSub CTO and co-founder Viacheslav Zholudev to get the inside scoop about the company. Key metrics include:
- 1,000 financial institutions as customers
- $45m run rate
- Only $6.5m raised to date
Nathan Latka (00:00):
Hey folks, my guest today is Vyacheslav Zholudev. He’s a CTO and co-founder of SumSub. He’s got has over 20 years of IT experience and a PhD in computer science. He’s a product-oriented CTO and again, the co-founder of SumSub, which is AML and KYC tool. Okay. Vyacheslav, you ready to take us to the top?
CEO SumSub Viacheslav Zholudev (00:19):
Yeah, sure. Let’s do it.
Nathan Latka (00:20):
All right. So for folks not familiar with banking and finance, what is AML and KYC?
CEO SumSub Viacheslav Zholudev (00:27):
Basically, you can say AML is anti-money laundering, right? And KYC is stands for Know Your Customer. And basically it’s kind of identity verification. So you help companies to onboard honest users. As many as possible as quickly as possible, but at the same time keeping fraudsters at bay, right? And of course, if company is regulated, then of course we’re keeping, we help keeping this company staying compliant.
Nathan Latka (00:55):
Now, are banks your main customer or who’s your main customer?
CEO SumSub Viacheslav Zholudev (01:00):
Main customers, yeah. We do have banks, Fintech, actually crypto quite a bit actually. Car sharings, marketplace, shared economies, basically everywhere KYC is needed nowadays.
Nathan Latka (01:13):
And so what does some of these customers pay you per month to use the technology?
CEO SumSub Viacheslav Zholudev (01:18):
Nathan Latka (01:20):
Yeah, how much they pay you?
CEO SumSub Viacheslav Zholudev (01:22):
Yeah. We have about 40 customers that we consider tier one customers that pay more than $100,000 a year, right? But some of them paying over 1 million each year.
Nathan Latka (01:34):
This is fascinating. Okay, so these are obviously huge. So just to be clear, your largest customers ACV is high. They pay you how much? 2 million a year? A million a year?
CEO SumSub Viacheslav Zholudev (01:42):
Even more. Maybe five, seven.
Nathan Latka (01:47):
Okay. And so one of these customers paying you five to seven million per year, I imagine you bill based off number of verifications, right?
CEO SumSub Viacheslav Zholudev (01:56):
Yeah, yeah. It’s a little bit more complicated than that because we charge per sub-services. Because some customers need one service, some customers like construct the flow from different parts. So we kind of have sub-services and we bill per sub-service. So how many customers you ask?
Nathan Latka (02:14):
No, I mean, I guess the question. Yeah, how many customers? That’s a good thing.
CEO SumSub Viacheslav Zholudev (02:20):
Over 1000 tech customers, about 40 tier one customers paying more than 100,000 a year.
Nathan Latka (02:28):
Okay. Is the, That’s great to understand. You’re tier one folks, but what does the average customer pay you per year? More like 10K or 5K a year.
CEO SumSub Viacheslav Zholudev (02:35):
Yeah, something like 10 to 20 I would say.
Nathan Latka (02:38):
Okay, interesting. And so I guess put this all on a timeline for me. When did you launch the business?
CEO SumSub Viacheslav Zholudev (02:44):
If you go to our website, it says 2015, but the story actually starts a bit before then in 2012 when I met co-founders and we were doing actually anti Photoshop.
Nathan Latka (02:56):
CEO SumSub Viacheslav Zholudev (02:58):
Photoshop. So basically you detect which parts of an image were edited, right? But then at some point you were-
Nathan Latka (03:05):
You are Kim Kardashian’s worst nightmare.
CEO SumSub Viacheslav Zholudev (03:10):
Yeah. But at some point we realize that it’s only part of a story because our customers, potential customers, they don’t care about where the image was modified or not. They care whether they can trust the end user. And then we pivoted in 2015 and that’s when things started to look good for us.
Nathan Latka (03:27):
Okay, interesting. So I guess, did the business almost die before you pivoted? What made you want to pivot?
CEO SumSub Viacheslav Zholudev (03:35):
Yeah, there were hard times actually. Like let’s say without salaries and without own savings.
Nathan Latka (03:41):
You were three years between 2012 and 2015 with no salary?
CEO SumSub Viacheslav Zholudev (03:45):
No, no, no. There were good times. So we were also raised sometimes half a million something. But then there were hard times when there was one year of just working. But I was actually working part-time was my pet project back in the day. It was a little bit later when I kind of officially joined SumSub.
Nathan Latka (04:06):
Oh, what’s going on there? YouTube good to see you guys. Now imagine this, you love watching these interviews with SaaS founders, but imagine if we took all of the valuation data out from over 2,807 interviews I’ve done manually. Saves you a lot of time. Well, we’ve done this. We’ve built into the beautiful interface inside of Founder path. Check this out. I’ll show you how you can access this in a second. But you log in, you connect your Stripe account, you see your valuation real time, you can see what it changed over the past 88 days and even set goals for valuation this year. Now the secret to valuation is there’s many different ways to value a SaaS business. So the reason you’re going to see three or four different valuations inside of your founder path dashboard, this is all free by the way, is because depending on who’s doing the buying of your SaaS company, you’re going to get a different valuation.
Nathan Latka (04:55):
A VC’s going to pay a different valuation. Private equity firm is different. If you’re going to do a minority sale, that’s different. And if you sub a whole business, that’s a different valuation. You can see all those when I hover over here. So the teal is what a VC would pay. Yellow is private equity and red is if you sold the whole thing outright. Now, what’s cool about this is not built off random data. Again, you guys hear these interviews on YouTube. All these datas are built from real time valuation data points founders share with us on the show. So traction, 1.2 million, seed round, 3.7 raised, they sold 22% of their business. Go in here and filter by the event. Maybe you only want to see companies that have sold the whole business. Well, here are a bunch that have been acquired, the valuation and the multiple.
Nathan Latka (05:40):
Maybe you’re going out right now and you’re raising your seed round. Well, go in here and look at all this recent seed deals that went down, what they raised, what valuation they raised at, and what percent that they sold. There’s never been a larger data set of SaaS valuations than what you can get now inside of Founder Path. And we’re thrilled to bring it to you.
Nathan Latka (06:01):
All right, we’re going to go back to the YouTube video here in a second, but if you want to check this tool out, if you want to jump in and sign up, you can check it out for free to get your valuation at this link, this link founderpath.com/products/valuations. Or if you go to founderpath.com and hover over products, click on Get Your Valuation Here and go ahead and sign up to give it a whirl. Again, all that valuation data live right inside the platform, I hope to see you there. All right, let’s jump back into the interview.
Nathan Latka (06:30):
When did you join and quit your job and go all in on some SumSub? What year?
CEO SumSub Viacheslav Zholudev (06:35):
Nathan Latka (06:37):
CEO SumSub Viacheslav Zholudev (06:38):
But before I was actually working at night, so I mean this entrepreneurial life. Before I was more consultant and bringing my experience to the guys so that they can build substantial business. But actually I can explain where, why we almost died because I think it was because of the expectation mismatch, our customers actually, they wanted our product, but they expected magic where you can detect every modification, even if the image was send over WhatsApp, you save multiple times, but the life is more complicated than that. So that’s why we had to pivot and we don’t regret because obviously it looks good so far.
Nathan Latka (07:18):
So what is the, I guess you could say guys, and we had to pivot all that. How many co-founders are there?
CEO SumSub Viacheslav Zholudev (07:24):
Overall, four. Actually the other three are brothers, two of them twins, which makes a really fun case for our face matching algorithms.
Nathan Latka (07:35):
That’s funny. Okay, so there are three brothers. Would you say that they were struggling until you came in 2018? I mean, were you coming in to help save the business?
CEO SumSub Viacheslav Zholudev (07:45):
No, we were struggling before 2015 when we pivoted. Then again, we struggle because we’re trying to find the right compromise between, because some customers also wanted magic, super complicated solution, but you cannot built complicated solution overnight. So it took us a while. But at the same time, I think it was a good thing that our first customers were from car sharing industry and they were super picky about the rules and amount of documents. And that’s why from the, let’s say day one, our KYC system was built to be extensible, very generic so that we don’t spend, let’s say developer sources but rather overloaded to technical support and things like that.
Nathan Latka (08:28):
But Vyacheslav, when you joined full time in 2018, I mean having an equity conversation is tricky. It’s like one versus three because they’re all brothers. Do you guys just put everything equally or no?
CEO SumSub Viacheslav Zholudev (08:39):
Initially no. But then they probably saw my impact and then somehow they offered me just like I don’t have to negotiate. So it was just split equal now.
Nathan Latka (08:49):
Okay. So it’s outside of other investors and all that and employee option pools, you each basically own a fourth of the business, something like that?
CEO SumSub Viacheslav Zholudev (08:57):
Nathan Latka (08:58):
Okay, very cool. Okay, so the Pivot 2012 is launch date. It’s a side project for you. You’re helping the team through 2015 Photoshop software. They pivot in 2015 to more like AML KYC identity verification. You get excited, join full-time 2018, prove your worth, get more equity and grow the business. Now when did you start? Was 2018 the year where you start got getting into AML and KYC?
CEO SumSub Viacheslav Zholudev (09:21):
No, even before that, because I was reading about that and of course I was still kind of consulting and helping guys. But yeah, I got probably most of my knowledge after 2017 I would say.
Nathan Latka (09:32):
Okay. And you guys, so you mentioned you raised half a million bucks. What year was that? 2012?
CEO SumSub Viacheslav Zholudev (09:37):
It was 2015, Yeah, but we raised since then, I think only just a little of capital, like 6 million in 2020 right on top of it actually went to secondary. So actually, I’m very happy how we managed to build such a product without almost no external funding and where cash flow positive and…
Nathan Latka (10:03):
That’s incredible. So I guess you can’t get a secondary done unless your economics are really strong. So you guys have must have very strong economics. I mean, let’s dive in there a little bit. So if you’ve got a thousand customers paying on an average 10,000 bucks per year, that means you’re doing more than 10 million run rate today, right?
CEO SumSub Viacheslav Zholudev (10:22):
No, it’s more than that. Last year we made 25 USD, 25 million US dollars with 4.4 year over year growth and now run rate, I think 45 or 50.
Nathan Latka (10:37):
Okay, got it. So your run rate, and that’s US dollars 45 million?
CEO SumSub Viacheslav Zholudev (10:41):
Nathan Latka (10:42):
Okay. Up from, Sorry, you said 25 million last year?
CEO SumSub Viacheslav Zholudev (10:46):
Yeah, overall the revenue last year was 25 million.
Nathan Latka (10:49):
That’s incredible. And are these run rates, so have you basically doubled the business over the past six months? Is that what I’m understanding?
CEO SumSub Viacheslav Zholudev (10:57):
I mean, the end of our last year was really successful because we got some big customers onboarded, and then they also trusted us more regions because we’re dealing with international businesses and very often big companies actually. First start with let’s say Asian region and then they expand if they’re happy in what you’re doing.
Nathan Latka (11:17):
Yeah, this makes sense. But just to be clear, if you’re doing a 45 million dollar run rate right now, that means you’re doing about 3.7 million a month in revenue, right?
CEO SumSub Viacheslav Zholudev (11:26):
Yeah, that that’s correct.
Nathan Latka (11:27):
And then going back one year, you’re saying you were doing about 2 million a month in revenue?
CEO SumSub Viacheslav Zholudev (11:33):
Probably the beginning of the year. I don’t remember exactly, but maybe it was even like 700,000 in the beginning. I mean the years-
Nathan Latka (11:42):
The beginning of 2021?
CEO SumSub Viacheslav Zholudev (11:42):
Nathan Latka (11:44):
Interesting. Okay. Okay. So really good growth here. I guess take and people are going to hear this and go, what do you mean they had troubles in 2018? They, they’ve got 50 million run rate almost. So I guess, do you remember what revenue was back in 2018?
CEO SumSub Viacheslav Zholudev (12:03):
I remember in 2019 it was about 1 million, but in 2018, I don’t remember.
Nathan Latka (12:04):
Okay. But it was less than a million, right?
CEO SumSub Viacheslav Zholudev (12:06):
Nathan Latka (12:07):
So you’ve gone from a million dollar run rate to 50 million dollar run rate over the past 36 months?
CEO SumSub Viacheslav Zholudev (12:16):
Yeah, I guess that’s correct.
Nathan Latka (12:19):
I mean, Vyacheslav, we have a lot of data on SaaS companies. You understand how impressive that is. I mean, that puts you in the top 2% of fastest growing private SaaS companies in the world.
CEO SumSub Viacheslav Zholudev (12:30):
Yeah, we’re pretty happy in what we’re doing.
Nathan Latka (12:34):
All right. So I guess you raised 6 million seed in 2020. Okay. What valuation was that at? Do you remember?
CEO SumSub Viacheslav Zholudev (12:43):
18 post money.
Nathan Latka (12:47):
Okay, so it was 12 pre 18 post and all of the 6 million was secondary?
CEO SumSub Viacheslav Zholudev (12:52):
No, no. 3 million went to company and 3 million went to secondary.
Nathan Latka (12:56):
Okay. So educate everyone on how secondaries work. I work with a lot of founders trying to do secondaries, but a lot of people don’t understand what it means and how it works.
CEO SumSub Viacheslav Zholudev (13:08):
I’m a CTO, so probably Do you think I’m the best person actually to explain?
Nathan Latka (13:10):
Well, let me ask you, did you sell some shares? Personally?
CEO SumSub Viacheslav Zholudev (13:13):
Yeah. No, no, no. So there were shares going into one investor and then another investor came on board and they both paid in those shares.
Nathan Latka (13:23):
Okay. So employee co-founders didn’t sell any equity?
CEO SumSub Viacheslav Zholudev (13:27):
Nathan Latka (13:27):
Oh, I see. Okay. So the 50% secondary was to buy out the pre seed guys that put in 500?
CEO SumSub Viacheslav Zholudev (13:32):
Nathan Latka (13:34):
Oh, I see. Okay. This makes a lot of sense. I guess the last thing I’ll ask is if you were doing 700,000 bucks a monthly recurring revenue back in when you did that seed round, right? That’s effectively an 8.4 million run rate, right? Why do you think you only got evaluation of two x revenue?
CEO SumSub Viacheslav Zholudev (13:57):
I don’t know, because we had, I think, lots of dependency on ICO back in the day, and it was kind of a little bit of unstable, I think. So we didn’t get a very good multiplicative, to be honest.
Nathan Latka (14:08):
Interesting. What do you mean by your dependent on ICO? On token offerings?
CEO SumSub Viacheslav Zholudev (14:12):
Yeah. Yeah, so we were doing a little bit of KYC for some crypto projects, so to say. Yeah, so that’s…
Nathan Latka (14:22):
CEO SumSub Viacheslav Zholudev (14:23):
Yeah, that’s why I guess.
Nathan Latka (14:24):
I see, Okay. So I guess any plans to raise today are going to keep bootstrapping?
CEO SumSub Viacheslav Zholudev (14:30):
Yeah, exactly. We want to actually raise series B, and that’s why I also, partially why we are talking, I guess. And we’re also talking to a couple of funds at the moment. So we have all the numbers ready, let’s say, but I would say in a luxury position, because we’re not burning money, right? So we can really-
Nathan Latka (14:50):
How much, Vyacheslav, do you profit per month? Do you know?
CEO SumSub Viacheslav Zholudev (14:54):
Bit is about 10 to 20%.
Nathan Latka (14:57):
Okay. Well, 10% of 3.7 million in MRR. I mean, that means you’re taking about 400,000 bucks in cash profit per month, right?
CEO SumSub Viacheslav Zholudev (15:05):
Yeah. Around about that.
Nathan Latka (15:07):
So you have a lot of leverage. So what kind of deal are you looking for? There’s investors listening right now. What kind of deals will be the perfect deal?
CEO SumSub Viacheslav Zholudev (15:13):
I initially, we’ll look at what similar companies we are raised, so we’re thinking about 80 to 100 million. But at the same time, for us right now, it’s more important at strategic partnership because we want to expand the new market to land new offices in different regions. We have some interesting M&A opportunities, and of course we are a product oriented company, and actually we were focusing on product too much. We were not focusing on sales and marketing. It was more or less word of mouth. And now it’s time actually to probably raise some money and invest into proper sales marketing.
Nathan Latka (15:54):
I love this. Okay, so you’re thinking about raising 80 to 100 million in your series B?
CEO SumSub Viacheslav Zholudev (15:59):
Nathan Latka (16:00):
Okay. And what valuation would make you guys really happy? Or a range is fine, obviously, don’t you want to say something specific, but what’s a range?
CEO SumSub Viacheslav Zholudev (16:09):
Actually, I don’t know. Before this podcast, I was asking our financial guys or guys that are responsible for talking to the funds to give me an estimate to say, no, no, no, we’re not ready at this point yet. So probably I won’t tell you, and I just afraid to lie right now because if I calculate and multiply something, then probably won’t be the right number.
Nathan Latka (16:34):
So look, I’ll do it for you so that you don’t have to have a history. I mean, if, based off what I’ve seen recent deals in the marketplace, even with valuations coming down in the past sort of six months, so you see this in the public markets. I mean, if you take your run rate today at 40, 45 million, you know, were seeing companies with your growth, incredible growth over a hundred percent year over year. Your skills is impressive. You were seeing these companies trade at 45, 50 x over the past six months, there’s been a tight, a little pullback, so I still think you could probably get a 30 x multiple, which would mean you’d be raising 80 million or a hundred million on a 1.3 billion dollar valuation. You’re talking in B’s that maybe does that make you feel like, whoa, we’re worth 1.3 billion? I didn’t expect that.
CEO SumSub Viacheslav Zholudev (17:13):
Yeah, sometimes I have these great thoughts, but I prefer to focus on product and just go all in and not think about this because we have specialists who are doing this part of the business, and I’m just trying as a founder also to understand the mathematics and mechanics of all of this fundraising and revenue, whatever.
Nathan Latka (17:36):
That’s probably the smart way to do it. Let’s go back to talking about products. Since you’re a CTO, how many verifications monthly are you processing? Right now
CEO SumSub Viacheslav Zholudev (17:47):
It’s from half a million to 1 million.
Nathan Latka (17:47):
From how much? Half a million to a million?
CEO SumSub Viacheslav Zholudev (17:50):
Yeah. I should have prepared much better actually to this question, but wrong about that.
Nathan Latka (17:56):
Okay. 500,000 to a million. That’s across all your customers?
CEO SumSub Viacheslav Zholudev (17:59):
Yeah. Yeah. I mean there are different kind of checks though, because I don’t have a breakdown. Some of them are very easy to, let’s say AML screening. Some of them are super complicated. Most of them are actually classical ID verifications basically. Some sort of ID document plus itself.
Nathan Latka (18:18):
And why would you say you’ve been able to grow so fast, 25 to 50 million revenue without a sales team? I mean, would you say it’s because you price against number of verifications, so people upsell themselves?
CEO SumSub Viacheslav Zholudev (18:30):
There is of course a sales and marketing team. I mean, it’s just-
Nathan Latka (18:34):
CEO SumSub Viacheslav Zholudev (18:34):
I would say marketing sales maybe 20 to 30.
Nathan Latka (18:38):
CEO SumSub Viacheslav Zholudev (18:41):
20 to 30. But I mean honestly, probably it’s not in a very good shape right now. That’s again why we want to hire super senior people that can bring the order to this process. But most of the revenue actually comes from the new clients and those clients that actually coming from our competitors. And because one of the differentiators that we have who work very well globally in emerging markets, and I know that many guys out there tell the same thing, but also the quality. That’s what matters. And we know how to work with those complicated regions. And when such clients come to us, one particular complicated region, they AB test us. They see that we perform and they say, okay, can you do Brazil right now? Yes, yes, of course. They try Brazil and they see again that we perform and that’s how they really put some of them traffic on us. Although in the beginning it was a little, but then it grew really,
Nathan Latka (19:42):
This makes sense. What’s the total team size today? How many people?
CEO SumSub Viacheslav Zholudev (19:45):
About 300. A little bit more.
Nathan Latka (19:48):
300 people. Wow. And how many engineers?
CEO SumSub Viacheslav Zholudev (19:57):
Engineers? I would say 50, 60 and plus maybe 20, 30. QA and engineering managers.
Nathan Latka (19:59):
- Well, this is a heck of a story. I’m, I’m really excited to see what you guys do over the next quarter. In the meantime though, let’s wrap up here with the famous fives. Number one favorite business book.
CEO SumSub Viacheslav Zholudev (20:12):
Business book. It’s actually not a book, but a series of podcasts from Stanford University. How to Build a Startup. I think I listened to it exactly like in 2016, and it actually helped me a lot, I think to understand how you should approach the product. Your customers, for example, build the product that 10 people love and then scale it up and things like that.
Nathan Latka (20:34):
Number two, is there a CEO you’re following or studying?
CEO SumSub Viacheslav Zholudev (20:37):
CEO? Not really. Not really. I’m also not a CEO, although sometimes I’m doing things, also talking to the customers, but I guess it’s a founder job, right? It’s not CTO job, but also…
Nathan Latka (20:54):
Number three. What’s your favorite online tool, technical tool that you use to release code at SumSub?
CEO SumSub Viacheslav Zholudev (21:01):
I admire like JetBrains product. They develop the ID’s. Development environments for the developers.
Nathan Latka (21:09):
So what’s their URL?
CEO SumSub Viacheslav Zholudev (21:13):
Nathan Latka (21:15):
Jetbrains.com. Okay. Number four. How many hours of sleep do you get every night?
CEO SumSub Viacheslav Zholudev (21:20):
Now I get much more than you’d guess. I would say seven to eight hours. I used to be like a six hour sleep guy, especially when I was working in parallel, but then I listened to Joe Rogan podcast with a Matt Walker, I think the guy who wrote the book While We Sleep, and then I kind of changed my head a little bit.
Nathan Latka (21:41):
That’s amazing. You’re a big podcast guy, huh? Did you listen to our show before you came on? Were you ready for it?
CEO SumSub Viacheslav Zholudev (21:48):
I listened to a couple of shows, yeah. But actually one week ago and yesterday, of course, just to get a feeling. And of course I needed to listen to because I need to prepare to give all those numbers. To be honest, I didn’t know all of them Let’s say one month ago, like half a month.
Nathan Latka (22:06):
I know guys, before the show, watch stuff goes, Nathan, please don’t kill me. I said, I’m not going to kill you. I think this is going to be a great story. It has been a great episode. So last two questions here. Married, single, kids? What’s your situation?
CEO SumSub Viacheslav Zholudev (22:17):
Married, one daughter playing lunch, going out skating, enjoying.
Nathan Latka (22:22):
Oh, amazing. How old are you?
CEO SumSub Viacheslav Zholudev (22:23):
Nathan Latka (22:26):
- Last question. Something you wish you knew when you were 20?
CEO SumSub Viacheslav Zholudev (22:31):
No, I was thinking about this question and probably I would question myself whether I should be doing PhD.
Nathan Latka (22:41):
If it’s worth it, right?
CEO SumSub Viacheslav Zholudev (22:43):
Yeah, yeah. All right. It was fun, but nonetheless, who knows? Anyway,
Nathan Latka (22:49):
Guys, SumSub.com launched in 2012. They raised a 500K seed back in 2015. They pivoted in 2018 to AML and KYC verification processes. Now serving over a thousand customers, averages $10,000 per year. They’re doing 3.7 million bucks in MRR up from 2 million a year ago in 2021, and up from 700 can MRR in 20 to late 2020. So about a 45 million run rate today. Very capital efficient, only 6.5 million raised. They’re looking at doing their series B this year. We’ll see what happens. They’re looking to raise 80 to a hundred million, and I think they can get over a billion dollar valuation. I think it’s going to be a very hot deal. I love the founders. Investors, go get them. Go reach out. We’ll see what happens. But Vyacheslav, thanks for taking us to the top.
CEO SumSub Viacheslav Zholudev (23:32):
Yeah, thank you.