IoT Electricity Measuring King Raises $16m w/ $1.2 Million Revenue

Mark Chung

In Episode #751, Nathan interviews Mark Chung. He’s the CEO and co-founder of Verdigris, a Silicon Valley based startup focused on smart buildings. Previously, he was a principal engineer for Net Logic, AMD and PA Semi. He graduated with electrical engineering from Stanford University and lives in Sunnyvale, California. When he’s not building, he’s spending time with his family.

Famous Five:

  • Favorite Book? – How the Mighty Fall
  • What CEO do you follow? – Mark Zuckerberg
  • Favorite online tool? — Pivotal
  • How many hours of sleep do you get?— 8
  • If you could let your 20-year old self, know one thing, what would it be? – Mark wished he was more growth-minded and that he started early

Time Stamped Show Notes:

  • 01:07 – Nathan introduces Mark to the show
  • 02:04 – Verdigris is an artificial intelligence company that launched in 2012
  • 02:10 – Verdigris focuses on developing technology for commercial buildings to help manage their energy
  • 02:22 – One of Verdigris largest customers is Jabil, a large manufacturing firm
    • 02:28 – Verdigris’ sensors on Jabil’s electrical panels collect data from the whole facility
    • 02:40 – Verdigris synthesizes the data into simpler and more understandable reports that facility managers can review
    • 02:49 – They can then understand if they’re losing money on electricity or if there is a potential equipment fail
  • 03:21 – Verdigris is a combination of software and hardware
  • 04:05 – Verdigris has a hybrid model
    • 04:11 – Verdigris charges on the hardware when it gets installed and there is a recurring fee for the software
    • 04:21 – The hardware is their bigger revenue stream
  • 04:47 – For a 2-bedroom house, it will cost $1K to install Verdigris
    • 05:23 – Each clamp is $50 a piece
  • 05:54 – Verdigris has raised a total of $16M
    • 06:05 – The first round of funding was in 2012 and Verdigris launched at the end of 2011
  • 06:51 – SaaS has been around and it seems like it’s everyone’s favorite, but the downside is it’s replaceable
    • 07:11 – Since Verdigris has a hardware component that enables the SaaS, it becomes a sticky product
    • 07:29 – Churn rate is lower than typical SaaS companies and retention rate is higher
  • 07:46 – From a cost standpoint, hardware cost doesn’t take all of equity capital
    • 07:53 – You can also finance out the hardware
  • 08:34 – Verdigris measures the total amount of electricity
    • 08:54 – Currently, they’ve measured a few megawatts which is enough to power a small neighborhood
  • 09:12 – Verdigris has put out around 300 iPhone-like boxes
    • 09:22 – The number of circuit clamps
  • 10:00 – For the SaaS side, monthly subscription fee is $50 or $80 per box depending on the level of service
  • 10:40 – Verdigris gets their sales directly and holds their data infrastructure
  • 10:47 – Verdigris uses Verizon as their backend for all data communication
  • 11:30 – Verdigris focuses on the commercial space first
  • 11:40 – Mark is hoping to put Verdigris in people’s homes in the future at a much more affordable cost
  • 12:10 – Customer pay per month is between $50-80 on data plans
    • 12:28 – $1k a month is the average of what customers pay
  • 12:44 – 80% of Verdigris’ customers are paying customers
  • 12:56 – Average MRR is around $260K
  • 13:19 – Gross customer churn is zero
  • 14:02 – Verdigris takes action for the customer and shows them what happens before and after the process
    • 14:40 – Verdigris looks for those who spend around $10K a month in electricity
  • 14:56 – Team size is 30
    • 15:05 – 90% is engineering
    • 15:15 – There are 3 founders
    • 15:23 – The founders are all engineers, one being more business minded than the other two
  • 16:02 – CAC
    • 16:07 – Verdigris doesn’t do a lot of paid marketing
    • 16:43 – Verdigris has spent around $10K in 3 months for ads
  • 16:49 – Most people learn about Verdigris through Verizon
    • 17:00 – Verizon’s sales people in the field talk to their Fortune 500 customers about these different IT solutions
    • 17:19 – When the customer matches Verdigris’ customer profile, the sales team tell them about Verdigris
    • 17:50 – Verizon founded Verdigris
  • 18:26 – 2017 revenue goal is over $5M which is 4x more from last year’s
  • 20:50 – The Famous Five

3 Key Points:

  1. There are so many SaaS products available in the market, but having a SaaS product with hardware is a combination that can’t easily be replaced.
  2. Your target market should be curated well and should match up with your pricing plans.
  3. Building a partnership with an already established company is beneficial, especially if you’re a new company.

Resources Mentioned:

  • The Top Inbox – The site Nathan uses to schedule emails to be sent later, set reminders in inbox, track opens, and follow-up with email sequences
  • GetLatka – Database of all B2B SaaS companies who have been on my show including their revenue, CAC, churn, ARPU and more
  • Klipfolio – Track your business performance across all departments for FREE
  • Hotjar – Nathan uses Hotjar to track what you’re doing on this site. He gets a video of each user visit like where they clicked and scrolled to make the site a better experience
  • Acuity Scheduling – Nathan uses Acuity to schedule his podcast interviews and appointments
  • Simplero – The easiest way to start and sell your course
  • Host Gator– The site Nathan uses to buy his domain names and hosting for the cheapest price possible
  • Audible– Nathan uses Audible when he’s driving from Austin to San Antonio (1.5-hour drive) to listen to audio books
  • Show Notes provided by Mallard Creatives