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Nov 16, 2019 · 16m · top-founders

1575 Why This $1.4M ARR CEO Wants to Double CAC Even Though You Think Thats Bad

Mike Morgan · 9m spoken
0:00 / 0:00

gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions

In this SaaS podcast interview, host Nathan Latka speaks with ChannelGrabber CEO Mike Morgan about turning around the UK-based multi-channel e-commerce software platform to reach $1.4 million in annual recurring revenue. Morgan shares how the company leveraged venture debt, optimized its sub-$300 customer acquisition cost, and positioned itself for cash flow positivity and prospective institutional fundraising.

How this conversation actually went

Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Nathan holds 32.5% of the talking time here. How this is scored →

Nathan as informed peer 4.4 Guest teaching 3.0 Guest disagreement 1.6 Nathan pushing back 2.6
05100:0010:000:00–4:16 · Nathan as informed peer 4/10 Executive Summary and Key Metrics Overview Latka introduces the company's background and probes the exact nature of Morgan's transition into the CEO role, questioning whether it was an acquisition or an equity grant.4:16–6:56 · Nathan as informed peer 5/10 Team Structure, US Expansion, and Debt Financing Latka asks about debt financing mechanisms, assuming standard non-guaranteed venture debt terms. Morgan clarifies that Funding Circle required personal guarantees and debentures registered against the business.6:56–10:35 · Nathan as informed peer 5/10 Capital Strategy, Valuation Targets, and Potential Acquisition Morgan details his rationale for taking debt to rebuild growth before raising equity at a 4-6x multiple on $1.3M ARR, expressing openness to an acquisition.10:35–14:14 · Nathan as informed peer 6/10 Growth Metrics, Churn Dynamics, and Inbound Marketing CAC Latka performs mental math on ARR to MRR growth trajectories and praises a 2-3 month payback period. Morgan rejects the premise that an ultralow CAC is a positive, emphasizing that it reflects underinvestment due to affordability constraints.14:15–15:27 · Nathan as informed peer 2/10 The Famous Five Rapid-Fire Questions A straightforward Famous Five rapid-fire segment covering routine personal habits, book preferences, and life lessons.0:00–4:16 · Guest teaching 2/10 Executive Summary and Key Metrics Overview Latka introduces the company's background and probes the exact nature of Morgan's transition into the CEO role, questioning whether it was an acquisition or an equity grant.4:16–6:56 · Guest teaching 6/10 Team Structure, US Expansion, and Debt Financing Latka asks about debt financing mechanisms, assuming standard non-guaranteed venture debt terms. Morgan clarifies that Funding Circle required personal guarantees and debentures registered against the business.6:56–10:35 · Guest teaching 2/10 Capital Strategy, Valuation Targets, and Potential Acquisition Morgan details his rationale for taking debt to rebuild growth before raising equity at a 4-6x multiple on $1.3M ARR, expressing openness to an acquisition.10:35–14:14 · Guest teaching 4/10 Growth Metrics, Churn Dynamics, and Inbound Marketing CAC Latka performs mental math on ARR to MRR growth trajectories and praises a 2-3 month payback period. Morgan rejects the premise that an ultralow CAC is a positive, emphasizing that it reflects underinvestment due to affordability constraints.14:15–15:27 · Guest teaching 1/10 The Famous Five Rapid-Fire Questions A straightforward Famous Five rapid-fire segment covering routine personal habits, book preferences, and life lessons.0:00–4:16 · Guest disagreement 1/10 Executive Summary and Key Metrics Overview Latka introduces the company's background and probes the exact nature of Morgan's transition into the CEO role, questioning whether it was an acquisition or an equity grant.4:16–6:56 · Guest disagreement 2/10 Team Structure, US Expansion, and Debt Financing Latka asks about debt financing mechanisms, assuming standard non-guaranteed venture debt terms. Morgan clarifies that Funding Circle required personal guarantees and debentures registered against the business.6:56–10:35 · Guest disagreement 1/10 Capital Strategy, Valuation Targets, and Potential Acquisition Morgan details his rationale for taking debt to rebuild growth before raising equity at a 4-6x multiple on $1.3M ARR, expressing openness to an acquisition.10:35–14:14 · Guest disagreement 3/10 Growth Metrics, Churn Dynamics, and Inbound Marketing CAC Latka performs mental math on ARR to MRR growth trajectories and praises a 2-3 month payback period. Morgan rejects the premise that an ultralow CAC is a positive, emphasizing that it reflects underinvestment due to affordability constraints.14:15–15:27 · Guest disagreement 1/10 The Famous Five Rapid-Fire Questions A straightforward Famous Five rapid-fire segment covering routine personal habits, book preferences, and life lessons.0:00–4:16 · Nathan pushing back 3/10 Executive Summary and Key Metrics Overview Latka introduces the company's background and probes the exact nature of Morgan's transition into the CEO role, questioning whether it was an acquisition or an equity grant.4:16–6:56 · Nathan pushing back 4/10 Team Structure, US Expansion, and Debt Financing Latka asks about debt financing mechanisms, assuming standard non-guaranteed venture debt terms. Morgan clarifies that Funding Circle required personal guarantees and debentures registered against the business.6:56–10:35 · Nathan pushing back 2/10 Capital Strategy, Valuation Targets, and Potential Acquisition Morgan details his rationale for taking debt to rebuild growth before raising equity at a 4-6x multiple on $1.3M ARR, expressing openness to an acquisition.10:35–14:14 · Nathan pushing back 3/10 Growth Metrics, Churn Dynamics, and Inbound Marketing CAC Latka performs mental math on ARR to MRR growth trajectories and praises a 2-3 month payback period. Morgan rejects the premise that an ultralow CAC is a positive, emphasizing that it reflects underinvestment due to affordability constraints.14:15–15:27 · Nathan pushing back 1/10 The Famous Five Rapid-Fire Questions A straightforward Famous Five rapid-fire segment covering routine personal habits, book preferences, and life lessons.

speaking balance: gold is Nathan, purple is the guest (3 minute bins)

0:00 · Nathan 54.9% · guest 45.1%0:00 · Nathan 54.9% · guest 45.1%3:00 · Nathan 23.3% · guest 76.7%3:00 · Nathan 23.3% · guest 76.7%6:00 · Nathan 22.5% · guest 77.5%6:00 · Nathan 22.5% · guest 77.5%9:00 · Nathan 15.9% · guest 84.1%9:00 · Nathan 15.9% · guest 84.1%12:00 · Nathan 34.4% · guest 65.6%12:00 · Nathan 34.4% · guest 65.6%15:00 · Nathan 66.8% · guest 33.2%15:00 · Nathan 66.8% · guest 33.2%
Sharpest disagreement ▶ 13:35 Pushing back on low CAC praise

When Latka praises a 2-3 month payback period as healthy, Morgan openly dismisses it as a negative metric driven by an inability to afford proper sales and marketing spend.

 Hardest push from Nathan ▶ 3:17 Drilling into ownership structure

Latka refuses to take the phrase 'took over the business' at face value, explicitly pressing Morgan on whether he bought a majority stake or received vested equity.

 Biggest teaching moment ▶ 6:14 Correction on venture debt requirements

Latka assumes the debt carries typical US venture debt covenants without personal guarantees, but Morgan corrects him by explaining Funding Circle's mandatory personal shareholder guarantees and debentures.

 Nathan holds their own ▶ 12:04 Instant MRR and baseline derivation

Latka quickly converts Morgan's 33% growth rate on $1.4M ARR into exact monthly revenue figures of $110k compared to $85k twelve months prior.
the scores for every segment, with the reasoning behind each
ChapterTopicNathan as informed peerGuest teachingGuest disagreementNathan pushing backWhy
Executive Summary and Key Metrics Overview 4213 Latka introduces the company's background and probes the exact nature of Morgan's transition into the CEO role, questioning whether it was an acquisition or an equity grant.
Team Structure, US Expansion, and Debt Financing 5624 Latka asks about debt financing mechanisms, assuming standard non-guaranteed venture debt terms. Morgan clarifies that Funding Circle required personal guarantees and debentures registered against the business.
Capital Strategy, Valuation Targets, and Potential Acquisition 5212 Morgan details his rationale for taking debt to rebuild growth before raising equity at a 4-6x multiple on $1.3M ARR, expressing openness to an acquisition.
Growth Metrics, Churn Dynamics, and Inbound Marketing CAC 6433 Latka performs mental math on ARR to MRR growth trajectories and praises a 2-3 month payback period. Morgan rejects the premise that an ultralow CAC is a positive, emphasizing that it reflects underinvestment due to affordability constraints.
The Famous Five Rapid-Fire Questions 2111 A straightforward Famous Five rapid-fire segment covering routine personal habits, book preferences, and life lessons.

Statements from this episode (13)

Assertion Not checkable as stated
Morgan: ChannelGrabber's ARPU is roughly $145 to $150 per month
“Our average monthly recurring revenue for a customer is about a 145 bucks, a 145, a 150 bucks.”
Mike Morgan Nov 16, 2019 ▶ 2:20
Disclosure
ChannelGrabber employs 20 people
“So we have 20 employees right now.”
Mike Morgan Nov 16, 2019 ▶ 4:22
Disclosure
ChannelGrabber passes 800 customers
“So we, we've just exceeded 800 customers.”
Mike Morgan Nov 16, 2019 ▶ 4:53
Disclosure
Morgan: ChannelGrabber took on about $400k of debt in 12 months
“Being very transparent we're probably about 400,000 dollars of debt in the last 12 months, which we're servicing.”
Mike Morgan Nov 16, 2019 ▶ 5:45
Assertion Supported
Morgan: Funding Circle requires personal guarantees from shareholders
“So Funding Circle do require personal guarantees from the shareholders.”
Mike Morgan Nov 16, 2019 ▶ 6:26
Assertion Not checkable as stated
Morgan: ChannelGrabber is tracking about $1.3M in ARR
“We're currently tracking about 1.3 million dollars in, in annual recurring revenue.”
Mike Morgan Nov 16, 2019 ▶ 8:14
Disclosure
Morgan: ChannelGrabber targets a $6M to $9M pre-money valuation
“So, you know, the market rate is, is four to six X that figure. So, you know, I guess I usually work in pounds, excuse me, but you know, we're probably looking anywhere between six and nine million us.”
Mike Morgan Nov 16, 2019 ▶ 8:23
Disclosure
Morgan: ChannelGrabber hired KBS to lead outreach to investors and buyers
“Well, we're working with a corporate finance partner on this raise. And that, that is simply because the management team here are lacking in bandwidth to, you know, to lead a fundraising exercise. We're obviously going to be participating and I'll be leading i…”
Mike Morgan Nov 16, 2019 ▶ 8:51
Disclosure
Morgan: ChannelGrabber's original shareholders are open to an acquisition
“I think that a sale of the company is interesting for current set of principal shareholders then in the business for, well, since the outset in the case of the founders, and we also have a an angel investor who came in, in our first and only seed round. And so…”
Mike Morgan Nov 16, 2019 ▶ 9:52
Prediction Not checkable as stated
ChannelGrabber projected hitting positive cash flow in early 2020
“As I said, we made a lot of investments ahead of revenue taking a few chances over the last 12 or 18 months, but we're looking at being cash flow positive in February or March of next year.”
Mike Morgan Nov 16, 2019 ▶ 10:44
Assertion Not checkable as stated
ChannelGrabber rebounded to 33% YoY growth after years of zero growth
“We were, well, we've grown based on our latest assets for the end of this year, we'll have grown 33% year on year. Prior, prior two or three years, we had grown zero.”
Mike Morgan Nov 16, 2019 ▶ 11:16
Assertion Not checkable as stated
ChannelGrabber experiences 2.5% monthly logo churn and under 3% revenue churn
“Our churn has been higher than we would like it to be. It is currently running at about two and a half percent by customer numbers just under three percent by revenue.”
Mike Morgan Nov 16, 2019 ▶ 12:22
Assertion Not checkable as stated
ChannelGrabber's fully loaded CAC is under $300 per customer
“Yeah, so if I include headcount and marketing investments across the board, we're under 300 bucks. For customer.”
Mike Morgan Nov 16, 2019 ▶ 13:24
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