The Exchanges

Q Got it. Okay, makes good sense. And then walk us through, let's kind of dive more into, you know, the HelloFreshes of the world, the ones that are kind of using it. You mentioned your pricing model is built around usage. Can you tell us more about how that works?

A Uh, yeah, sure. So there's a thirty-day free trial for any company that And, um, at the end of that 30 days, they have to enter their credit card information to continue using the product. And then thereafter, um, they're billed monthly based on their total delivery volume. Our pricing is very transparent. It's on our, on our website at monthly.com slash pricing. There's actually a slider there where you can kind of slide across, um, and see approximately how much you'd be paying based on your sort of monthly task volume. So tasks, um, tasks can be deliveries or pickups. Um, and so, you know, a customer that's doing, say, uh, 10,000 tasks in a single month will be paying a little over a thousand dollars a month.

AI assessment note: “they're billed monthly based on their total delivery volume”

Q You launched this company back in 2015. Were you delivering, were you hustling and hustling and delivering yourself and had the idea or what gave you the idea?

A No, that's not how we got started. We got started. We were actually, Originally, down at Stanford, working on location-based services technology, so, um, we were targeting emerging markets at the time, this is back in, like, 20 11, um, helping people that lack functional street addressing systems in their countries, uh, to communicate locations with delivery services. That's how we got started, so we, we created a simple web app that allowed anyone in the world to create a URL that represents a physical location, so that was kind of, uh, we called it Addy. And Addy was the, kind of, the, the, the sort of inception of OnFleet happened. Um, as we were building it, we sort of identified that these companies that we were talking to for, for Addy just didn't have any technology, um, on the back end. They weren't, they were managing their fleets with, uh, pen and paper, chat apps, phone calls, text messages. And meanwhile here, you know, we were in Silicon Valley and saw all of these, Companies emerging around us that were basically just using smartphones to better manage fleets of drivers. And we saw an opportunity to build the infrastructure for that kind of emerging world.

AI assessment note: “No, that's not how we got started. We got started. We were actually, Originally, down at Stanford”

Q Yep. Yeah, about 1300 bucks. And you say month, you say monthly plus telephony. What's the telephony mean?

A So the telephony services are the calls and text messages that are routed through on fleet. So one of the benefits of using on fleet is that the customer is getting notifications automatically based on the driver status. So, you know, think about sort of that Uber like end user experience when you get a real time, uh, tracking of the driver, you get notified when the driver's arriving. Um, that's all handled by on fleet and optionally the business can choose to To route those, um, those communications anonymously. So if the customer calls the driver back or the customer or the driver wants to reach out to the customer, those, those communications are routed through our telephony service so that the privacy of the driver and the customers protected. And so obviously there's a cost that comes with that. And the cost varies dramatically based on market primarily. So, you know, we have international customers and in France, for example, SMS costs are quite high. So we didn't want to build that into our base costs. So we kind of split that out and, uh, and we just passed that cost on to the customer. So we don't actually make a margin on that. Um, but really, you know, depending on how many text messages the client wants to send to the customer, um, that cost might, might vary dramatically. So, um, so we've split that out and just passed the cost on.

AI assessment note: “telephony services are the calls and text messages that are routed through on fleet”

Q Got it. Okay, makes good sense. And then walk us through, let's kind of dive more into, you know, the HelloFreshes of the world, the ones that are kind of using it. You mentioned your pricing model is built around usage. Can you tell us more about how that works?

A Uh, yeah, sure. So there's a thirty-day free trial for any company that And, um, at the end of that 30 days, they have to enter their credit card information to continue using the product. And then thereafter, um, they're billed monthly based on their total delivery volume. Our pricing is very transparent. It's on our, on our website at monthly.com slash pricing. There's actually a slider there where you can kind of slide across, um, and see approximately how much you'd be paying based on your sort of monthly task volume. So tasks, um, tasks can be deliveries or pickups. Um, and so, you know, a customer that's doing, say, uh, 10,000 tasks in a single month will be paying a little over a thousand dollars a month.

AI assessment note: “they're billed monthly based on their total delivery volume”

Q Yep. Yeah, about 1300 bucks. And you say month, you say monthly plus telephony. What's the telephony mean?

A So the telephony services are the calls and text messages that are routed through on fleet. So one of the benefits of using on fleet is that the customer is getting notifications automatically based on the driver status. So, you know, think about sort of that Uber like end user experience when you get a real time, uh, tracking of the driver, you get notified when the driver's arriving. Um, that's all handled by on fleet and optionally the business can choose to To route those, um, those communications anonymously. So if the customer calls the driver back or the customer or the driver wants to reach out to the customer, those, those communications are routed through our telephony service so that the privacy of the driver and the customers protected. And so obviously there's a cost that comes with that. And the cost varies dramatically based on market primarily. So, you know, we have international customers and in France, for example, SMS costs are quite high. So we didn't want to build that into our base costs. So we kind of split that out and, uh, and we just passed that cost on to the customer. So we don't actually make a margin on that. Um, but really, you know, depending on how many text messages the client wants to send to the customer, um, that cost might, might vary dramatically. So, um, so we've split that out and just passed the cost on.

AI assessment note: “telephony services are the calls and text messages that are routed through on fleet”

Q Interesting. Okay. So using the sweet creams example, I mean, I'm just thinking, well, wait, why the heck would sweet creams use on fleet when they've got Uber Eats and DoorDash and all that? And the only answer is the margin profile using you as much better for them.

A Yeah, great point. So they do also work with Uber Eats, um, and maybe others as well, but I know Uber Eats and they, uh, so a lot of retailers, a lot of restaurants are adopting a hybrid model where, you know, they still, they're sort of omnichannel, right? They need to take orders in from however they can, um, especially now. And, um, They, but, but because of the, you know, the margin profile of having their own drivers, especially if it's a larger order, like a catering order, um, then, you know, it makes sense to have their own fleet of drivers and to use on fleet to manage those orders. The, the cost is just, is a lot lower when, when you're talking about a large order.

AI assessment note: “because of the, you know, the margin profile of having their own drivers”

Q Okay. And why, you know, well, first off, if someone listening right now, that's kind of making the decision whether to raise or bootstrap, uh, how do you make that decision?

A If you can bootstrap, um, it's definitely a great option because then you end up owning, you know, all of the company and, um, and then, you know, perhaps you can raise later on, uh, sort of to scale and you can get better valuations and so forth. But, you know, it's, there's a lot of factors that go into that decision. I mean, if you can't, if sort of, you know, right up the gate, you're not generating, uh, enough money to support the team, uh, Then obviously raising capital is a good option, uh, especially if you can get, you know, the right investors on board that can actually be helpful, um, and can sort of participate in helping you build the business or make important introductions, um, then raising capital can be a great idea.

AI assessment note: “if sort of, you know, right up the gate, you're not generating, uh, enough money”

Q Why do those not work? Typically the ones that leave.

A Um, so there's kind of a couple of main reasons. One of them is that the, uh, the customer just decides to kind of go back to their ways, which is typically pen and paper. I mean, there's, you know, the cost can sometimes be, be a prohibitive factor. Um, you know, they say, okay, we're paying this much per month. Um, maybe there's a, another alternative that's cheaper. Um, but really pen and paper, um, Excel files and, you know, Google Docs are the primary competitor, and so obviously we like to think that we add enough value, and so we don't actually have that much churn amongst those types of customers. Sometimes they choose to develop their own solution internally when they reach a certain scale, and they're doing, you know, say, a 100,000 deliveries a month or more, and they have significant resources available, and really consider the logistics of Software to be a core competency of theirs, then they often say, okay, you know, it's time for us to, to build this, you know, internally. We have a big team of engineers and, and so, um, those customers will sometimes turn as well.

AI assessment note: “so there's kind of a couple of main reasons. One of them is that”

Q Okay. And why, you know, well, first off, if someone listening right now, that's kind of making the decision whether to raise or bootstrap, uh, how do you make that decision?

A If you can bootstrap, um, it's definitely a great option because then you end up owning, you know, all of the company and, um, and then, you know, perhaps you can raise later on, uh, sort of to scale and you can get better valuations and so forth. But, you know, it's, there's a lot of factors that go into that decision. I mean, if you can't, if sort of, you know, right up the gate, you're not generating, uh, enough money to support the team, uh, Then obviously raising capital is a good option, uh, especially if you can get, you know, the right investors on board that can actually be helpful, um, and can sort of participate in helping you build the business or make important introductions, um, then raising capital can be a great idea.

AI assessment note: “if... you're not generating, uh, enough money to support the team, uh, Then obviously raising capital”

Q Okay, got it. Yeah, so you mentioned, uh, your ARPU is about 500 bucks per month. CAC is 1500 bucks, so short payback period, which is great. And obviously this is kind of a back of the napkin calculation, but what do you assume that each customer is worth to you in terms of lifetime value?

A Yeah, because it's a really sticky product. I mean, you know, the, we do have some churn, obviously, um, as, you know, any SaaS product does, but they tend to stick around for quite a while because once they get on board with OnFleet, it's, you know, it's a pretty sticky product. They see it the way it sort of helps them with their operations and makes their business more scalable. So they stick around for, I mean, we've had customers that have been around since the very beginning. So for a couple of years, um, so, uh, you know, it's, it's still hard because we have a negative net MRR churn. It's kind of hard for us to, To come up with an accurate number, um, For, for the, uh, lifetime value, but we estimate that it's about 18 months.

AI assessment note: “we estimate that it's about 18 months.”

Q just, uh, it's really nice. You can just kind of drag this thing back and forth and it will show you exactly what you pay. So for example, pro or, or, you know, it's 15,000 tasks per month comes up to about 1800 bucks per month. If you had to take an average, uh, colleague of kind of these 300 customers, how many tasks is the customer processing per month?

A So our average customer is sort of between the standard and premium tier. Um, so we have a lot of sort of smaller customers, startups that are just getting, you know, out the gate. Um, they don't want to build everything in house and, and really see on fleet as a way to get up and running as quickly as possible. Uh, and then we have, you know, a number of larger enterprise accounts, um, that are larger companies that just don't really see the logistics software as their core competency. And so they want to Um, use a third party software provider for that. So we have a pretty broad range of customers. You know, some of them are paying us north of 10,000 dollars a month. Some of them are paying us only a 125 bucks a month. So, um, but average is average is right in between sort of, uh, four and 500 dollars now.

AI assessment note: “average is right in between sort of, uh, four and 500 dollars now.”

Q And, and do you have, I mean, are you testing anything in terms of your, your SDR to AE relationship that isn't already common practice?

A We're always testing. I mean, you know, right now that is, that is the kind of big questions. We grow the team, you know, by the end of next year, we'll be probably about 65 or 70 people on the team. And so, and a large, you know, large portion of that will be on sales. And so, you know, we are looking for folks in like revenue ops, which is a new position we've never hired for before, but they would help, you know, all the plumbing to kind of make our reps more efficient. Um, but then, yeah, we, you know, we've only historically had One outbound SDR, one inbound SDR, and then a couple of AEs. So now we're thinking about, okay, what is the right ratio as we grow the sales team? Um, and you know, we still, uh, you know, there's still a lot to learn. We haven't, we haven't quite figured it out yet, but right now it's, it's pretty close to two to one, uh, AEs to SDRs.

AI assessment note: “right now it's, it's pretty close to two to one, uh, AEs to SDRs.”

Q just, uh, it's really nice. You can just kind of drag this thing back and forth and it will show you exactly what you pay. So for example, pro or, or, you know, it's 15,000 tasks per month comes up to about 1800 bucks per month. If you had to take an average, uh, colleague of kind of these 300 customers, how many tasks is the customer processing per month?

A So our average customer is sort of between the standard and premium tier. Um, so we have a lot of sort of smaller customers, startups that are just getting, you know, out the gate. Um, they don't want to build everything in house and, and really see on fleet as a way to get up and running as quickly as possible. Uh, and then we have, you know, a number of larger enterprise accounts, um, that are larger companies that just don't really see the logistics software as their core competency. And so they want to Um, use a third party software provider for that. So we have a pretty broad range of customers. You know, some of them are paying us north of 10,000 dollars a month. Some of them are paying us only a 125 bucks a month. So, um, but average is average is right in between sort of, uh, four and 500 dollars now.

AI assessment note: “average customer is sort of between the standard and premium tier”

Q Okay, got it. Yeah, so you mentioned, uh, your ARPU is about 500 bucks per month. CAC is 1500 bucks, so short payback period, which is great. And obviously this is kind of a back of the napkin calculation, but what do you assume that each customer is worth to you in terms of lifetime value?

A Yeah, because it's a really sticky product. I mean, you know, the, we do have some churn, obviously, um, as, you know, any SaaS product does, but they tend to stick around for quite a while because once they get on board with OnFleet, it's, you know, it's a pretty sticky product. They see it the way it sort of helps them with their operations and makes their business more scalable. So they stick around for, I mean, we've had customers that have been around since the very beginning. So for a couple of years, um, so, uh, you know, it's, it's still hard because we have a negative net MRR churn. It's kind of hard for us to, To come up with an accurate number, um, For, for the, uh, lifetime value, but we estimate that it's about 18 months.

AI assessment note: “for the, uh, lifetime value, but we estimate that it's about 18 months.”

Q So can we just role play for a second? I'm sweet green. I have a new a hundred dollar order. I'm going to use on fleet. Can you sort of build a little mini P and L for us?

A Well, so the biggest cost is going to be the driver, right? So you have a driver on payroll, um, depending on how, you know, your location and how you pay them. Um, you know, the, the, the, um, the driver is going to be the biggest, uh, In this, you know, in this day and age with kind of the gig economy drivers, you know, show up with their own vehicle. So you're not leasing or paying for that vehicle or dealing with maintenance. Um, if you look at the P and L for like, uh, you know, the trucking industry, but those are big line items. There's fuel costs, there's vehicle, uh, leasing, maintenance, et cetera. And the gig economy is sort of local last mile delivery. Um, typically the largest cost is, um, paying for the drivers to say, you know, 15, 20 bucks an hour.

AI assessment note: “typically the largest cost is, um, paying for the drivers to say, you know”