Design software company Trakto saw its annual revenue double from $180,000 to $360,000 over the past year, even as the COVID-19 pandemic worsened.
Trakto operates as a design company for non-designers, allowing people with no graphic design expertise to use simple tools to create visuals. CEO Paolo Tenorio founded the company in 2013. Trakto is based in Brazil, and Tenorio and his co-founder are looking to expand to the U.S. in 2021.
About 500,000 people use Trakto’s services, including 40,000 users who pay for the unlimited usage and additional templates that come with the premium version. In fact, the company has seen a 300% increase in paying and non-paying customers alike since the pandemic hit.
In terms of the number of products users create, “it’s going to be 48,000 to 50,000 new documents every week. We had a month that we reached almost a million new designs,” Tenorio says in conversation with Latka.
Source: GetLatka
Trakto earns an ARPU of about $10 per month from 3,000 customers who pay directly. The company gains other paying customers from a white label partnership with mLabs, a social network management tool.
Trakto originally gained its momentum on social media. “We got our first 5,000 active users in a week,” Tenorio says, which he did by posting to online forums and his Facebook page with 10,000 followers.
The company now has 24 people on its team, based in Maceio, Alagoas, Brazil. About six engineers work on the team, in addition to two quota-carrying sales reps and a six-person customer success team.
The company has a 6% monthly revenue churn, which amounts to 72% annual revenue churn.
Trakto has raised $500,000 and burns through $15,000 per month: “The reason why we are burning is because we want to move faster,” Trakto says. “We just got accepted into a really nice accelerator.”
Trakto recently got a $100,000 investment from TheVentureCity accelerator in Miami, Florida, which could help the company’s efforts to expand to the U.S. If Trakto raises at least $1.5 million, TheVentureCity gets a 6% cut.
Even with Trakto setting its eyes on the U.S., the company has ambitious goals in its home country, too: “The main focus is to conquer the Brazilian market and become the number one design tool for small businesses,” Tenorio says.
What is Trakto’s annual revenue?
In 2020, Trakto generated $360,000 in ARR.
What is Trakto’s monthly revenue?
In 2020, Trakto generated $30,000 in MRR.
Who is the CEO of Trakto?
Paulo Tenorio, age 39, is the CEO of Trakto.
Transcript Excerpts
How Tenorio realized his creative idea could become a viable business
“At first we started off with a mobile app for iPhone iOS and Android. I didn’t think about creating a company. My idea was just to have a tool, to help other professionals and small businesses to be able to design beautiful quotes and business proposals. But then, I got into some accelerators, and then people told me, Hey Paulo, you need a business model. And I was like, What? Why? and then I realized it was a startup.”
B2C and white label partnerships: The various ways Trakto makes its money
“We have the business model, we have the B2C version, as we call it, the one that you’d go and do it by yourself. And then we also have a white label version. We follow API and SDK and through that, we are able to tackle two different markets at the same time, which is challenging, but it’s rewarding, as well.”
How Trakto’s clients use the tool in a collaborative way
“We have a big educational group and that’s using our API in order to have a white label online editor. They have thousands of schools all over Brazil … and they use our editor to distribute their marketing materials. They create a marketing campaign and with one push, like some guy that manages a small school in some other part of Brazil, they’re able to access immediately that file … This is one client; the other ones are tech companies.”
How Trakto charges through white label partnerships
“We charge a monthly fee based on usage, depending on what kind of features they want, like background removal, specific phones, some kind of specific renderings. We have a specific set of features that we charge by usage … The metric that we use is active users, people coming in and creating a new document. We charge based on the creation of new documents and also per seat as well. As you have an active user, then we can scale that up with the amount of documents that they’re creating.”
Full Transcript Nathan: Hello, everyone, my guest today is Paulo Tenorio. He’s building a company called trakto.io, which is a design software for non-designers. He’s got 10 plus years of experience doing this, in the design world.He has worked with hundreds of clients all around the world. Paulo, are you ready to take it to the top? Paulo: Oh yeah, man. Thanks a lot, Nathan. It’s a pleasure to be here. Nathan: You bet. Talk us through Trakto. It sounds like it is a pure play SaaS company for non-designers. Paulo: Yeah. Let me make a long story short. I was a designer my whole life. I lived in many cities in Brazil. Back in 2007, I got an invitation to work in the U.S., so I moved to Salt Lake City, Utah. I lived there and worked with motion design, CG effects for a company called Media Grabbers. I lived there for two years in Salt Lake City. Then I was invited to work in LA, in Hollywood, working with big studios and everything else. Paulo: When I was moving from city to city and talking to different professionals and small businesses, everyone had a hard time trying to figure out how to do their marketing materials. That was like back while sizable SaaS was just starting and I had no experience in the startup before. I had to move back from the U.S. to Brazil because my dad was sick so, I had to move back. I spent the new year here and then I found my co-founder and I had this crazy idea about like, all right, let’s try to come up with an editor, an online editor that’s going to make people’s life easier when creating business proposals, business presentations, and so on. That’s how Trakto came to be. Nathan: And what year was that? Paulo: Yeah, it was like 2013. Nathan: Paulo: Yeah, that was… at first we started off with a mobile app for iPhone iOS and Android. I didn’t think about creating a company. My idea was just to have a tool, to help other professionals and small businesses to be able to design beautiful quotes and business proposals. But then, I got into some accelerators and then people told me, “Hey, Paulo, you need to come up with a business model”, and I was like, “What? Why?”, and then I realized that I was a startup. It took us awhile. At first, we got our first 5,000 users, active users in a week. And then that kind of, [crosstalk 00:02:31]
Nathan: How did you get the first 5,000 active users in a week ? Paulo: Well its just random and going online and hustling on forums- Nathan: Paulo, come on be specific, what forums? Paulo: Facebook posting, that was something that I did, that was a big thing before Instagram became a thing. So, a lot of posts on social media. That’s how I did. Nathan: Where did you post? [crosstalk 00:02:52] Where did you post on social media? Paulo: The Brazilian community, it’s a little bit different. What they have it’s… they have a lot of different groups and people were following my story because where we came from, which is a small city on the Northeast of Brazil, a poor region, people were not expecting us at all. People started following me on my social media, I had like 10,000 people following me on Facebook. And every time that I posted something was getting like reposted by a bunch of different folks. [crosstalk 00:03:22]
Nathan: What was the first post you put up on your personal page with 10,000 followers that started the word of mouth? Paulo: Oh yeah, because we got a demo day competition first place, and when I posted that things went through the roof. It was the first award that we got. Nathan: Okay. And how many now customers have you scaled to today? Paulo: Oh, so right now we have grown, 500,000 plus users and paying clients, we are reaching about 40,000 paying clients so far. Nathan: 40,000. Not bad. That was a seven to 8% conversion rate, half a million free, 40,000 paid. Paulo: Yeah. And the way that we have the business model, we have the B2C version as we call, the one that you’d go and do it by yourself. And then we also have a white label version. We follow API and SDK and through that we are able to tackle two different markets at the same time, which is challenging, but it’s rewarding as well. Nathan: How many customers pay you directly? Not through a white label partner. Paulo: Around 3000 directly. That’s how they pay us. And through the major part, comes through big tickets. We have an ARPU around $10 per month. They’ve got everything else. Nathan: And that’s $10 across 3000 so, you’re doing like 30,000 bucks a month? Something like that? Nathan: Yeah. Something like that. Yes. Nathan: Okay. And walk me through… if white label partners are sort of your largest strategy in terms of user acquisition, can you paint that picture? Who is your biggest white label partner and how do you work with them? Paulo: Yeah. When we talk about white label, people have a misconception about what the modern white label are. It’s basically an API and SDK that you can customize the editor for yourself. We have a big educational group that’s using our API to be able to have a white label online editor. They have thousands of schools all over Brazil, and what they do, they use our editor to distribute their marketing materials. They create a marketing campaign and with one push, like some guy that manages a small school in some other part of Brazil, they’re able to access immediately that file, that prior to Trakto, was using Photoshop or PowerPoint to be able to customize some marketing materials. This is one client, the other ones are tech companies. We have a company called mLabs, which is like a social media scheduling tool. They use- Nathan: Paulo, sorry. Hold on, to go back to your first example, who are you selling the white label version to? And then who’s then distributing it to thousands of people? What’s the name of the white label partner? Paulo: No, no. It’s just that we are doing it by ourself. This is our client that I just mentioned, it’s called Santillana. This is a big educational group from Spain actually and [crosstalk 00:06:14] yeah. Nathan: Can you name a white label partner? That’s that’s what I’m curious about. Can you name a white label partner right now bringing you lots of users? Paulo: No, no. We don’t have partners. What we do, we have clients. We have a white label team sales inside Trakto, that’s how we distribute our white label. Nathan: What do you mean by white label? [inaudible 00:06:33] you just removed powered by Trakto? Paulo: Yeah. Yeah. Nathan: When you say white label, you’re not selling your software to like Mailchimp and they’re using your tool inside of Mailchimp so that people writing email newsletters can customize designs? When you say white label, you mean you have a premium plan or you can remove powered by Trakto? Paulo: No, no. That’s exactly what you mentioned. The one that… Mailchimp use of Trakto so- [crosstalk 00:07:00]
Nathan: Who is your equivalent of MailChimp, that’s what I’m asking? Paulo: Oh yeah. It’s called mLabs right now. Nathan: mLabs? Paulo: Yeah. It’s one of the largest social media scheduling tool. We are not selling in the U.S. yet. That’s how we’re planning for 2021 in [inaudible 00:07:18]
Nathan: Okay. mLabs pays you to white label Trakto and mLabs then sells that to their customers and pays you a little cut? Paulo: Yeah. What they do, they actually have the editor that their other clients are able to customize their social media content using our editor, and then we charge a monthly fee based on usage, depending on what kind of features they want, like background removal, specific phones, some kind of specific renderings. We have a specific set of features that we charged by usage. Nathan: And what is the usage metrics? Give me an example… it’s 10 bucks, if they edit 10 images, what’s the metric? Paulo: Yeah. Right now we are… they have been with us for about a year and what we’ve realized is some people like to get back every day using in a heavy way and some people just come once a week and do some social media, wherever [inaudible 00:08:16] that they have. The metric that we use is active users, people come in and creating a new document. We charge based on the creation of new documents and also per seat as well. As you have like an active user, then we can scale that up with the amount of documents that they’re creating. Nathan: I see, got it. Weekly now, today, how many documents are being created across your entire platform? Direct customers and white label, do you know? Paulo: Yeah, I have that number. It’s around 40… it’s in-between. This week it’s going to be 48 to 50,000 new documents every week. We had a month that we, reached almost a million new designs, a month. That was good. We have better instrumentation now using Amplitude. It’s getting better right now. Nathan: That’s great. And I mean, walk me through what your team looks like today. Did you do this by yourself or what’s your team look like? Paulo: And man, that’s the thing, we have 24 people on the team, including the two founders. And as I mentioned before, Trakto raised so far around 500,000 U.S. Dollars. Our Brazilian currency right now sucks. I mean, that’s five to one and makes everything smaller, but- Nathan: It’s even worse… well, it’s a little worse than the five to one. Paulo: Yeah. It’s five [inaudible 00:09:41] to one, it sucks. But- Nathan: You’ve raised 500,000 bucks, you’ve got 24 people on the team. How many of those 24 people are engineers? Paulo: Six of them are engineers. And it’s a mix between junior and senior levels. Nathan: And do you have any quota carrying sales reps or no? Paulo: We do. We actually have, but it’s just like a team of two. It’s small team that we do… but, we have a bigger team for customer success that goes up to six. This is how it goes. Nathan: Interesting. And are most of these folks remote or do you have an office that they all come in to? Paulo: Yeah. Before the pandemic everything was local, when we had a few people working remotely but right now everybody’s remote. We have a beautiful office here and it’s becoming like a new studio and kind of like… let’s say a coworking space basically so, people go there when they want. Things are better here in Maceio. We have one of those- Nathan: Where are you? Paulo: Maceio. It’s a city on the Northeast of Brazil. It’s by the beach- Nathan: I see. Paulo: It’s like the Brazilian Caribbean. Nathan: You’re living the life. All right. Paulo: Yeah, man, yeah. Nathan: Talk to me a little bit about service sustainability, right? Obviously, to keep serving your customers, you’ve got to have cash in the bank at how much are you guys burning per month right now? Paulo: Right now we’re burning like $15,000 per month. It’s not as bad. And the reason why we are burning, is because we want to move faster. We just got accepted into a really nice accelerator. I’m really proud to be part of the Venture City team, they’re based in Miami, Laura is the CEO. We just got on the batch and we got a 100,000 investment right now. Nathan: How much equity do they take? Paulo: Actually, they take 6% off the next round and they have like a threshold that you must raise more than $1,5 million so, they’re able to cash in. If we are not able to cash in, then they’re not going to get a cut [crosstalk 00:11:50]
Nathan: Well, let’s say you go raise 1.4 million, their 100,000 they gave you is free money? They get no equity? Paulo: They get no equity from this perspective. But then, if we keep growing and once we reach a bigger check, then they get the 6%. Doesn’t matter the valuations. Nathan: What if you never raise after them? And then you go sell the company, do they get a cut? Paulo: Yeah, they lose the money at some point. Yeah. Yeah. But if we sell, then they get a cut out of that. Nathan: Okay. They don’t lose their money, right, if you do nothing after they give you money and you sell, they get a cut. What? 6%? Paulo: Yeah. 6%. Nathan: I see. I see. Interesting. Okay. And what was that studio called? Paulo: Which one? Nathan: What was the name of the accelerator? Paulo: Oh, it’s the Venture city. Nathan: Venture city? Paulo: Yeah. Laura was the head of growth for Facebook for a long time and she decided to leave the company. She’s Spanish busy in the U.S. And the company is… the accelerator man, is data-driven growth, which is one of the best programs that I have been in since I started Trakto. Nathan: That’s great. Talk to me… driving sort of stacked revenue and SaaS is tricky at this price point because small businesses go out of business. What is your gross revenue churn look like right now? Paulo: You know, we have around 6% of revenue growth… revenue churn. But also- Nathan: Monthly or annually? Paulo: Monthly. Nathan: Okay. So, 72% annual revenue churn? Paulo: Yeah. Yeah. But one thing that happens with Trakto, Trakto is a design software, it depends a lot… we fight with Canva, with some other tools that they’re hyper funded right now so, they’re able to push a better premium version. And that’s one thing that we are working right now to make it better. And we are focusing a lot on the Brazilian market right now, even though we have clients in many different countries, but the main focus is to conquer the Brazilian market and become the number one design tool for small businesses. Even though when small businesses go out of business, the entrepreneur himself needs to position himself sometimes with a new business. Meaning that they need a new logo, they’re going to need social media posts… actually, we grew more than 300% since the pandemic started, which is a sweet thing for us. Nathan: Well, you said you’re doing about $30,000 a month today in revenue. What were you doing exactly a year ago? Paulo: Around 15,000. We didn’t have a white label. We didn’t have a lot of different things that we have right now. Nathan: Got it. You were doing about $15,000 a month, so, you’ve doubled year over year? Paulo: Yeah. Nathan: Got it. What were you meaning to say to then when you just said that you tripled during the pandemic? Paulo: Yeah. It’s because like a design software is a different beast when you talk about startups- Nathan: Yeah, but sorry. What tripled? Your revenue didn’t triple it doubled over the last 12 months. What were you talking about when you said it tripled? Is it usage or something? Paulo: Yeah. The amount of paying clients and active users. We use Verimetrics and we have the open data if people want to check out because it’s connected to Stripe, which is our main gateway. You go through trakto.verimetrics.com. And then you can check out how we are doing churn and ARPU and everything else. I made sure that we had the open data for our revenue and everything else. Nathan: This looks great. Let’s wrap up here, Paulo, with the famous five. Number one, favorite business book. Paulo: Oh man. I have one here. The Messy Middle from Scott Belsky. Nathan: The Messy Middle, it’s a good one. Number two, is there a CEO you’re following or studying? Paulo: Oh yeah. I follow closely two women actually, Laura from the Venture City, she’s helping and teaching me a lot. And the other one is Emilia from Growth Hackers. She’s a monster, man. Nathan: I agree. Emilia Chagas, she’s great. Number three, what’s your favorite online tool for building Trakto? Paulo: Online tool to build Trakto? Nathan: Just a tool you used? Paulo: Yeah, I would say like Firebase changes everything on Trakto, Google Firebase. Nathan: Number four, how many hours of sleep did you get every night? Paulo: How many… sorry I didn’t get that. Nathan: Hours of sleep? Paulo: Four, maybe five. And I’ll get there, I have two kids as well, so let’s say nothing. Nathan: Two kids and married? Paulo: Yeah. Yeah. Nathan: How old are you Paulo? Paulo: I’m going to be 40 next year. [crosstalk 00:16:22]. Nathan: Oh, exciting. Okay. Last question. What do you wish you knew when you were 20? Paulo: Man, I wish I knew what a startup was. Nathan: Guys, there you have it, Trakto helping non-designers create designs. They’ve got 3000 paying customers that pay on average $10 a month. So, $360,000 in ARR in terms of run rate, that’s up from $180,000 a year in terms of run rate just 12 months ago. So, doubling year over year. They raised about $500,000. They’re burning $15,000 of net burn monthly as they reinvest in growth. Team of 24, as they look to continue to scale. Paulo, thanks for taking us to the top. Paulo: Man. Thanks a lot. Let’s go. 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. 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. You can go in there and quickly search and see what people are saying. Sign up for that at nathanlatka.com/Slack. 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