The Exchanges

Q Now, as we talk about how both you guys got going, ironically, I think both of you launched in 2012, which is fun because we can compare sort of even tracks here. Right. But if we go back to 2012, Christian, was this always your billing model? Was it always five percent and 50 cents or have you pivoted over the years?

A Always. I think we had slightly higher pricing in the beginning. It was like seven or eight percent and, or maybe even 10. Um, and sort of that was really when we were focusing on kind of like the initial people that we built paddle forward, people who look like me. So sort of pre paddle, I built a software company. And I really ran headfirst into the problem that we try and solve, scaled it to three to five million in ARR, um, sort of, and ran into this problem where we were, we had a few 100,000 kind of people using these products and some tens of thousands of them paying for it in every country you can imagine and ran headfirst into these challenges of, of, of how we scale. So initially was building it for kind of the indie hacker, the bootstrapper, the kind of person like that picked a very simple kind of pricing model, which I think was about 10% of transaction. And then Gradually you realize that sort of 10%, like a flat percentage doesn't necessarily work kind of quite as well as a percentage in a fee. Um, and then kind of just adapted from that, but we sort of, it's actually one of the funny parts of, of like this deal of like, we've obviously acquired a company that are probably the number one experts in pricing, um, that exists sort of in this space. And I don't think that we've changed our pricing for maybe five years. Yeah.

AI assessment note: “I think we had slightly higher pricing in the beginning. It was like seven or eight percent”

Q I get though, a ton from parents who listen to the show is how do I raise founder and like entrepreneurial thinking kids? You're the perfect person to ask this question. Can you identify things? Like what is your, I know it's a little sensitive, But like, what is your relationship with your parents? And did they do things from ages zero to 14 to make you think like this?

A That's a good question. Um, I have a great relationship with my parents. Um, and I think the biggest, the biggest thing of all of the things is I think the encouraged curiosity. Um, like they would give me like an old VCR player and I would like kind of deconstruct it and pretend that I was making something when I was, it's my like earliest memory when I was like kind of three or four is like deconstructing like old, like home appliances. Um, And I think they always encourage that stuff rather than being like, that's dumb or sort of whatever. And then, um, I think when I started to like get into computers and sort of, um, the internet, like I still grew up, I am 27, but I still grew up with like dial up and things like that. So sort of, it was still, I was still kind of early on that curve. Um, kind of, they really encouraged that stuff. They didn't necessarily understand it. Um, but they encouraged sort of like me to learn these things and experiment and sort of do that, that stuff. So I think, yeah, I think just encouraging curiosity. I wasn't very book smart as a kid. I wasn't very, I wasn't a good student cause I would get kind of distracted and bored. And I was always more interested in sort of, oh, I can go and tinker around and build something on the computer than I was sort of paying attention in like a class. So I think that was sort of a, that was a constant like batt…

AI assessment note: “the biggest thing of all of the things is I think the encouraged curiosity”

Q you gave a great interview in 2020 with Dan Martell, where you said, yeah, we are seeing a lot of people sort of switch from Zora for X, Y, and Z reasons. I mean, is when you're on sales calls, people switching to paddle, are you really, I mean, is it the switching from Zora? Is it from charge? Be like, where are you earning more customers from right now?

A Um, I say it's probably reasonably distributed. I would, I would, it obviously depends sort of substantially on stage. Um, so kind of by number, it's probably. People building kind of things themselves, sort of, maybe they've kind of cobbled something together from a handful of different parts. They're probably not using a billing system like Zora or anything like that. They've kind of got started with something they've scaled to. Um, it's gone from being a side project to a real business, and then they need the infrastructure in order to kind of help them scale. And they don't necessarily want to throw people at that. They want someone, someone to do it for them. Um, so by number, it's probably those, um, by scale of company. Um, I think it's a similar story, but sort of there tends to be kind of probably multiple systems, especially in these larger companies. Like we rarely see, um, a company exclusively using one thing. Um, they're often using different things for different markets and different territories. And one big piece of kind of the pull on paddle is cause we've been very internationally focused and do it for you focused on all of these things. Is it like, it becomes a point where you're doing. Fifty million dollars in ARR and it's coming through three or four different channels or systems, and you don't necessarily have a single source of truth for this stuff. So yo…

AI assessment note: “kind of by number, it's probably. People building kind of things themselves”

Q How much that Christian, we're talking a hundred grand, 200 grand. How much are you thinking?

A Something in the, in that, I actually don't even remember. It was probably because it was like in little chunks. Um, as we kind of like built this stuff, it was probably call it a hundred K, um, sort of to begin with. Um, so I think, um, sort of, it was, we knew that it was going to be majority me. Um, I think I don't even remember what the initial kind of equity split was. It was sort of like two thirds, one third or three quarters, one quarter or something like that. Um, sort of, and, But kind of, it was a fairly easy conversation for us to have on the basis of, of kind of how the, how the business started.

AI assessment note: “it was probably call it a hundred K, um, sort of to begin with.”

Q Guys, moving away from equity, a lot of really good lessons here. Let's talk about first million revenue. Christian, what year was that for paddle? Do you remember?

A So we started the business in. I want to say it was probably. It was late, uh, team, maybe 2014. I don't remember exactly. Um, we fluctuated a bit. Um, like we probably got up to, we grew like really, so 2012, end of 20 12, we started the business. 2013, early, sort of early, mid 2013, we like launched the first version of the product. First version of the product was basically the vote, like what exists today, but with a marketplace on the front as well. Cause we thought that that was like kind of the way to, um, sort of entice people to kind of use paddle ended up shutting that down and then kind of just focusing on kind of the, do it for you, the infrastructure piece, um, scaled like relatively kind of like gradually from there. Um, so it was probably, yeah, 2014. I remember we got to about 500 K in ARR. Um, sort of fairly quickly once we actually hit our stride with, with what the product was. And then, so we got from like zero to 400 and then went back down to about like 50. Um, because we lost like a customer that was like contributing like 350 K and error. And then we had to then rebuild from 50 kind of back up. So yeah, that was, that was a fun, that was a fun year.

AI assessment note: “I want to say it was probably. It was late, uh, team, maybe 2014.”

Q And Christian, I mean, do you think it is really, I mean, I know you guys, your Genesis is SAS and subscription, but you've also identified some big opportunities with game developers, applications, other things like that. I mean, help me understand that, you know, in three years, what percent of your customer rates do you think is non SAS, non-traditional SAS?

A I would, I would like, I would be reluctant to kind of put a percentage on it. Um, because I just don't know how some of these things are going to go, but I think that, I think there is a question that in three years time, like kind of what is SAS? Like kind of, are we still calling it SAS? Is it recurring revenue? Are we kind of going more towards usage based or microtransaction pricing, whether it's on the B to C or B to B side? So I think there are all of these kinds of questions that are sort of like sub questions of that. Um, I think for us, Like there's a very natural progression for us, I think from like B to C software to B to B software to usage-based pricing to kind of, okay, on the consumer side, um, games sort of like they have recurring revenue, but do they have subscription revenue sort of, they probably don't have subscription revenue, but they certainly have like, if you're thinking about like Fortnite or something like this, they certainly have recurring revenue of like repeat purchase. So, and, and I think that, I think the, the constant along a lot of these businesses is going to be Like, is this transaction truly digital? Like kind of, I think kind of the, the step for us between do we do this for SAS business and do we do it for a game is sort of fairly short versus the step of like, do you do it for SAS business? Do you, versus do you do it for Glossier or…

AI assessment note: “I would be reluctant to kind of put a percentage on it.”