After it launched in 2012, real estate software company Spark made $400,000 in its first profitable year. In 2017, it made $1 million in revenue, then was quickly on track to double that in 2018.
Spark also raised $2 million to date in an equity round, and the company has no debt.
With its modernized customer relationship management system, Spark aims to disrupt what co-founder and CEO Simeon Garratt calls the “brick-and-mortar style industry” of real estate.
In the first three years, Garratt and the founders of Spark ran the company out of his apartment, where they created the foundation for what it is today: a profitable SaaS company with more than 100 customers, who, according to Garratt, pay around $1,100 per month.
“We sell software to real estate developers and project marketing firms for the sales, marketing, and management of new development projects,” he explains.
The way the software simplifies the sales and marketing of real estate development supersedes the “archaic legacy software that, half the time, didn’t work” when Garratt — a former real estate development seller and consultant — was flying from Asia to Vancouver (where the company is based).
Garratt and his team of 20 sell licenses directly to development companies, which then pay Spark a monthly fee for every real estate project. This business model is just one reason for Spark’s annual logo churn rate, which was less than 1% at the time of this interview.
Additionally, Garratt says Spark sees 15% to 20% internal client growth quarterly and earns $110,000 MRR.
“We’re also storing all their historical project data after the project is done — all their contracts, the conveyancing, all the purchasers, all their demographic data, all that historical information lives inside Spark forever,” says Garratt. “Those projects are always going to keep something live inside the system, whether or not that project is actually selling or not.”
Plans for future growth include investment to expand the marketing team, in addition to its current customer acquisition methods of building lead lists, gathering its own data, outbound calling, and more.
Based on information from Simeon Garratt’s interview (recorded in 2018).
Featured SaaS Entrepreneur — Simeon Garratt
Name: Simeon Garratt, age 31, single with no kids
Where to find him: Twitter | LinkedIn
Company: Spark
Noteworthy: Simeon grew up in Asia and spent most of his life in Malaysia and Hong Kong. When he moved to Vancouver, his fluency in Cantonese and Mandarin helped him land opportunities in real estate development that led to his career today.
Favorite business book: “The Art of War”
CEO he respects: Marc Benioff
Favorite online tool for building the business: LinkedIn
Average # of hours of sleep/night: 6.5
Transcript Excerpts
The revenue model that supports Spark’s modern software
“We sell software to real estate developers and project marketing firms for the sales, marketing, and management of new development projects. So, anything primarily in the presale world, but that could encompass anything from leasing, multifamily, or condo. But we are a backend sales management software, essentially a SaaS model business that pays a monthly licensing fee for us to manage the entire backend process of selling those projects.”
Spark’s organic customer acquisition methods
“We have an internal sales team. A lot of us [are] building lead lists, we’re outbound calling, we’re gathering our own data. And our model is very much a timing game, so it’s really about finding developers who have projects that are launching in the appropriate timeframe. Then, from there, basically doing proper reach out and doing demos accordingly to that.”
A SaaS platform that creates opportunities for additional profits
“We also have a professional services piece that kind of tacks onto that, so customizations that are built on top of each individual product. A developer comes to us and says, ‘Hey, we want to sign up, we’ve got five users.’ [We say], ‘That’s great, you’re going to pay us $1,100 bucks a month on average.’ But they might have a $30,000, $40,000, $50,000 customization that sits on top of that.”
How a less than 1% annual logo churn is possible
“This is sort of an interesting model and why we differentiate from a lot of other platforms in this space. We actually license to the company; it’s not necessarily for the projects. They’re actually not paying us a monthly fee for every project, but the company is paying us a monthly fee.”
A net negative revenue churn rate is in Spark’s future
“When I’m looking at things from 12 months ago, I’m looking at accounts that now, we would never sign a price like that today. So, it’s a little bit difficult sometimes to extrapolate some of those numbers and get a proper growth metric from that. But when we actually look at the clients internally, we’re sort of tracking on a quarterly basis the actual amount of internal client growth that we get per client. Right now, we’re seeing somewhere between a 15 to 20% internal client growth on a quarterly basis.”
Full Transcript
Hello everyone. My guest today is Simeon Garratt. He has lived in six countries and over 11 cities having helped sell real estate all over the globe. He now runs a company called Spark, a software platform for development projects with a team of 20 folks based out of Vancouver. His goal is to change the way new real estate is sold and marketed. Simeon, are you ready to take us to the top?
Simeon Garratt:
I’m ready to go.
Interviewer:
All right. Tell us what Spark does and what’s your revenue model? How do you make money?
Simeon Garratt:
Yeah, so Spark, we sell software to essentially real estate developers and project marketing firms for the sales, marketing, and management of new development projects. So anything primarily in the presale world, but that could encompass anything from leasing multifamily or condo. But essentially we are a backend sales management software, essentially a SaaS model business that pays a monthly licensing fee for us to manage the entire backend process of selling those projects.
Interviewer:
And what would you say the average customer is paying you per month?
Simeon Garratt:
Average customer is probably paying us around 1100 bucks a month.
Interviewer:
Okay. I mean, that’s fairly high. You can afford to put a sales person on an account that big.
Simeon Garratt:
Yep.
Interviewer:
Okay. I mean, so is that what you’re doing? Walk me through how you’re getting new customers.
Simeon Garratt:
Yeah. I mean, there’s a bunch of other ways that we’re actually getting new customers. We have an internal sales team. A lot of us, we’re building lead lists, we’re outbound calling, we’re gathering our own data. And essentially our model is very much a timing game. So it’s really about finding the developers that have projects that are launching in the appropriate timeframe. Then from there, basically doing proper reach out and doing demos accordingly to that.
Interviewer:
And what’s the total team size today?
Simeon Garratt:
We’re just about 20 people now.
Interviewer:
20. All in Vancouver?
Simeon Garratt:
All in Vancouver currently.
Interviewer:
Very good, man. I’ll tell you what, something’s in the water up there. A lot of companies popping up.
Simeon Garratt:
Yeah. I think so.
Interviewer:
It’s a good thing. Now, what’s your story? Before this company, what were you working on?
Simeon Garratt:
Actually I grew up in Asia, so I spent most of my life in between China and Malaysia and Hong Kong. My family lived there, so my whole life I spent there. I moved to Vancouver about seven years ago and I got into real estate essentially because I speak Mandarin and Cantonese and being a white guy at the time, it was not a bad spot to be. Everybody that was coming to Vancouver was essentially coming from China buying homes here. So I kind of got myself into a really interesting niche where I was helping real estate developers in Vancouver sell projects overseas. So once every five weeks for about two years, I was flying between Vancouver to Beijing, Shanghai, Singapore, Hong Kong, you name it, setting up events and pre-selling condos to investment buyers in Asia.
Simeon Garratt:
But that’s kind of how… I mean, before that I’d done a bunch of other things, but primarily that was my foray into the real estate world was really just because I know got lucky and spoke another language.
Interviewer:
What year was that? When did you launch?
Simeon Garratt:
Launched Spark or [crosstalk 00:02:42]-
Interviewer:
Spark.
Simeon Garratt:
Spark was founded in 2011.
Interviewer:
2011.
Simeon Garratt:
I mean 2012, I guess technically would have been our first year.
Interviewer:
Okay. 2012. And then just to be clear, before that again, you were grinding it out. You were actually doing the selling and stuff yourself. When you say, you know what? I hate flying back and forth every five weeks. I’m going to build software that has a little higher margin.
Simeon Garratt:
Yeah. I mean, it was also that. I realized it was a huge frustration point for me. I was actually being given stacks and Excel spreadsheets and files and all this old archaic legacy software that half the time didn’t work. I was going over there and I would double sell things. I would have tons of misinformation. And it wasn’t just with one developer. It was every single developer and project that I worked with was kind of the same process. I was like, this is insane. [inaudible 00:03:25] $300 million tower yet, you’re giving me a stack of papers to fly over and do deals with and get deposits. And I’m flying back and forth and there’s so much miscommunication. I was like, how has nobody built a platform that makes it easier?
Interviewer:
Yep. Now what have you scaled to today in terms of total customers paying you?
Simeon Garratt:
We track our customers in two different ways. One of them would be projects or the number of actual projects that we have on the system. So we have just over 600 projects right now that would be spread across 80 different cities. But that would be spread over about 100 different clients per se. I mean, sometimes a client is a developer themselves. Sometimes the client is [inaudible 00:04:03] developers that are clients. So it depends on how you look at it.
Interviewer:
Yeah. But if we want to kind of get a general revenue range of, can I take 100 times 1100 bucks a month and assume you’re doing just north of about 100,000 grand a month right now?
Simeon Garratt:
We’re in that range. Yeah. Some months are a little bit higher. Some months are a little bit lower. When I said we are straight SaaS, we also have a professional services piece that kind of tacks onto that, so customizations that are built on top of each individual product. A developer comes to us and says, “Hey, we want to sign up. We’ve got five users. That’s great. You’re going to pay us 1100 bucks a month on average.” But they might have a $30,000, $40,000, $50,000 customization that sits on top of that. So it’s a little bit blended, but I mean, on average, you could probably say something like that.
Interviewer:
When you look at it as just your pure SaaS business, what did you last month, would you say just in that?
Simeon Garratt:
Just in the pure SaaS business?
Interviewer:
Pure SaaS. Yeah.
Simeon Garratt:
Yeah. We did about $70,000 in pure SaaS.
Interviewer:
That’s great. Yeah. So you have a really nice mix, right? The project stuff helps with cashflow, but you got a nice underlying base every month to work with.
Simeon Garratt:
Totally.
Interviewer:
Yeah. Interesting. Bootstrapped or you raised capital?
Simeon Garratt:
We’ve raised a bit of money over the last two years. So the first three years the company was essentially out of my apartment, me and five other guys figuring out what we’re even doing.
Interviewer:
You have five co-founders?
Simeon Garratt:
Well, no, not exactly. We had a couple people that were part of it initially. There’s only two of us left.
Interviewer:
Yeah, okay.
Simeon Garratt:
We got to split ways early on. So two of us stuck it out. My business partner, Cody and myself, and then one of our guys actually came back about a year ago. So the three of us are now back in the mix, but the original five kind of all dissipated early on.
Interviewer:
How do you manage the equity structure when you’ve got two guys that are not with the company anymore, but they were one of the original five?
Simeon Garratt:
I mean, we had performance warrants and clawback stuff. So I mean, they left, they basically gave up most of their equity. We also bought back a bunch of equity from some original guys not that long ago. So we recouped a lot of that from the earlier guys.
Interviewer:
That’s great. So what have you raised total today?
Simeon Garratt:
Just over two million bucks.
Interviewer:
Two million bucks. Okay. What was that, an equity round from outside investors or debt or what?
Simeon Garratt:
It was all equity round. We don’t have any debt.
Interviewer:
All equity. Okay. Then look, you said you’re doing about 70 grand a month today in kind of the pure SaaS business. Help me understand growth. What were you doing about a year ago?
Simeon Garratt:
Our first real year in our revenue was 2016. We did about 400 grand that year. Last year, 2017, we did-
Interviewer:
Hold on. That’s a run rate or just cash?
Simeon Garratt:
That was what we brought in. Total revenue for the year was 400 grand, not necessarily run rate. But 60% of that would have been SaaS.
Interviewer:
Okay.
Simeon Garratt:
I mean, again, we can break it down on SaaS, but it’s changing [crosstalk 00:00:06:34].
Interviewer:
That’s okay.
Simeon Garratt:
It’s hard to know. 2017, we did just over a million bucks. 2018, we’re kind of on track to do just over two.
Interviewer:
Yep. Yep. Okay. That makes sense. Yeah. Again, if you have 70 that’s… It sounds like right now you have basically a million dollar a year pure play SaaS model. Then there are these $40,000, $50,000, $60,000 kind of one time projects that make up the other million and that’s where you get the two from.
Simeon Garratt:
Totally.
Interviewer:
Yeah. Okay, good. What about churn? Again, just speaking obviously about just the SaaS side of things, what’s your churn today and how do you manage that?
Simeon Garratt:
We’ve got less than a 1% churn rate right now.
Interviewer:
Revenue or logo churn?
Simeon Garratt:
Logo churn.
Interviewer:
And that’s monthly or annually?
Simeon Garratt:
That would be annually. Yeah.
Interviewer:
Okay. Less than 1%. Okay. I’m shocked by that because I assume once you’re done selling a development, they don’t need you anymore.
Simeon Garratt:
I mean, this is sort of an interesting model and why we differentiate from a lot of other platforms in this space. We actually license to the company. It’s not necessarily for the projects. They’re actually not necessarily paying us a monthly fee for every project, but the company is paying us a monthly fee.
Interviewer:
Who’s the company? Like Remax.
Simeon Garratt:
Remax would be maybe an example, but it would be more like a large developer, like the Related Group or Extel or something like that.
Interviewer:
Vornado or something.
Simeon Garratt:
Totally. Yeah. So they’re going to maintain their base account no matter what. We’re also storing all their historical project data after the project’s done. All their contracts, the conveyancing, all the purchasers, all their demographic data, all that historical information lives inside Spark forever. Those projects are always going to keep something live inside the system, whether or not that project is actually selling or not. So it’s not necessarily about we’d have to resell projects all the time. They’re just adding projects to the existing user base that they already have inside Spark and then maybe adding or removing some users as they scale up or down.
Interviewer:
When you look at the levers, you have to drive expansion revenue, get a customer to pay more in year two than they did in year one. Less than 1% gross logo churn annually. But are you in net negative revenue churn annually or no?
Simeon Garratt:
No, we’re not. Okay. Okay.
Interviewer:
Well, what gets you there? That surprised me a little bit. If you have such logo churn, my gut was telling me you guys probably were. Why aren’t you net negative revenue churn yet?
Simeon Garratt:
Well, I mean the way that we… I mean, again, it’s kind of an interesting scenario to where our pricing has changed five times in the last 12 months. When I’m looking at things from 12 months ago, I’m looking at accounts that now we would never sign a price like that today. So it’s a little bit difficult sometimes to extrapolate some of those numbers and get like a proper growth metric from that. But when we actually look at the clients internally… We’re sort of tracking on a quarterly basis the actual amount of growth, like internal client growth that we get per client. Right now, we’re seeing somewhere between like a 15 to 20% internal client growth on a quarterly basis.
Interviewer:
So that means if in Q1, they’re paying you… I’m making this up, they’re paying you a grand per month. You’re saying in Q2, they’ll expand to kind of 1,150 bucks. 15% growth.
Simeon Garratt:
Yeah. We usually look at that. We do similar to how Salesforce would do things. We’d annualize all of our contracts. They’re signing up, they’re maybe paying us 1100 bucks a month [crosstalk 00:09:34]-
Interviewer:
Why do you measure on a quarterly basis then?
Simeon Garratt:
Well, that’s how we track our internal, our renewables and stuff. So everything from a sales team perspective is looked at. I mean, again, this is something that also shifted. We only shifted to do annual contracts about a year ago. So some of those people are still on monthly, but very, very few people would actually be on a month to month basis with us.
Interviewer:
Got it.
Simeon Garratt:
And everybody that [inaudible 00:09:56], we would actually be signing into an annual contract.
Interviewer:
Got it. Talk to me a little bit about CAC. What are you paying to acquire these customers?
Simeon Garratt:
I mean, we only recently just hired our first sort of marketing person. Actually at this moment, we don’t really spend any money actually on AdWords or online advertising, anything like that. So the only way to really determine that would be to take our sales people’s times and divide it by the clients that we’re bringing in, plus the expenses that we use on trade shows, et cetera. I mean, it’s a very, very varied number. A lot of our clients actually come directly from referral.
Interviewer:
Do you pay kickback?
Simeon Garratt:
Sorry?
Interviewer:
Do you pay kickback?
Simeon Garratt:
We don’t pay kickback though.
Interviewer:
Okay.
Simeon Garratt:
I mean the real estate industry, I’m not sure how familiar you are with it, is very incestuous in a way where you have like a sales director from one place, goes to another place and gets poached and goes to another place. We’ve actually been dragged through a lot of different clients just because people have jumped ship. That’s how we got some of our large clients. So we sign one big client and they kind of like dragged us through a bunch of their next career moves. Then from there, people talk a lot, you get a lot of referrals in that way. I mean, we’re actually trying to figure out how to spend money on marketing, honestly. It’s [crosstalk 00:11:04].
Interviewer:
Yeah. It’s critical. It’s critical. You have to figure it out though, because if you can’t, then there’s no way to use other people’s money to grow your business, you know?
Simeon Garratt:
Totally. The industry that we’re in is a very kind of like older brick and mortar style industry, where you have trade shows that you go to, but it’s not like these guys are going online and saying, “Hey, I’m going to Google sales software for new development real estate.” If they do, it’s going to be Salesforce that comes up and then they’re going to go spend half a million bucks customizing and spending two years building something that at the end of the day, they’re not going to be happy with.
Interviewer:
Yep. Makes-
Simeon Garratt:
[inaudible 00:11:33] do that.
Interviewer:
It makes total sense to me. Let’s wrap up here. Send me in with the famous five. Number one. What’s your favorite business book?
Simeon Garratt:
Probably The Art of War.
Interviewer:
Number two. Is there a CEO you’re following or studying right now?
Simeon Garratt:
I’m going to have to say Marc Benioff.
Interviewer:
Number three. What’s your favorite online tool for building your business right now?
Simeon Garratt:
Currently, it’s got to be LinkedIn.
Interviewer:
Okay. What’s your situation? Oh, sorry. Actually, how many hours of sleep do you get every night?
Simeon Garratt:
Depends on the day of the week, but I would say probably six and a half.
Interviewer:
On average. What’s your situation? Married, single, kiddos?
Simeon Garratt:
Single, no kiddos.
Interviewer:
No kids. None that you know of, right?
Simeon Garratt:
Yeah. Hopefully. Unless they’re rich, then I’m going to find them.
Interviewer:
And how old are you?
Simeon Garratt:
I’m 31.
Interviewer:
31. Last question. What do you wish your 20 year old self knew?
Simeon Garratt:
I wish my 20 year old self knew more about accounting
Interviewer:
Guys, there you have it from Simeon, who wishes he knew more about accounting. Grew up kind of Southeast Asia, Hong Kong, et cetera. Jumped into real estate, had a big advantage in learning Mandarin and used that advantage to basically go over to Hong Kong, presale real estate back in Canada, which a lot of money was flowing that direction. He then said, “You know what? I want higher margin, less travel. Let’s launch a piece of software to help with this.” That’s what Spark does. They sell directly to the development companies. Development companies then use their platform on a kind of per project basis to sell, manage, and then hold onto data over the longterm, which has allowed them to keep churn very low, less than 1% gross over term per year. They have over 100 customers paying about 1,100 bucks a month, about 110,000 in monthly recurring revenue. They’ll do about two million bucks this year as they combine kind of professional services plus that healthy SaaS revenue stream. Again, that’s up from about a million just a year ago with their team of 20 in Vancouver.
Interviewer:
Simeon, thank you for taking us to the top.
Simeon Garratt:
Thanks a lot.