Sramana Mitra: What were the milestones in your first year of running this?
Kerry Cooper: I think there are probably many ways you could look at what the milestones are. We started with six employees. We are 43 today. There is a lot of team growth. We have a great team now. Frankly at 43, it’s still relatively small for a lot of Silicon Valley companies. You end up with that critical mass of what it takes to build a product development team, a great marketing team, and a great business development team. This year, we re-platformed. We have the broadest coverage of energy plans than anybody on the Internet. We’ve got 1,200 plans across every utility in the US. When you have that data, leveraging that for other parties is pretty valuable.
Mint, for example, is one of our great partners. When you’re looking at your bill, we can compare and make it easy to switch to Mint. We’re working with the Dallas morning news right now on creating an energy page on various media outlets. It’s a question of leveraging this platform where we have people coming to us but then leveraging information off of our site as well.
Energy choice is pretty complicated to understand. It’s a market where we are competing against door-to-door and telemarketing. I don’t know who answers the door or the phone but a lot of people do. In that world where there’s a lot distrust in the market, figuring out the place where you can be a trusted source to go is pretty important. It may be on our site, but it may also be through other trusted relationships we already have.
Sramana Mitra: Talk a bit about the business model. When you’re doing these kinds of partnerships, how does that business model play out in the partnership scenario? This would be a good educational piece for our entrepreneurs.
Kerry cooper: Travel is an easy one to stick with. When Sramana comes in and switches her energy through us and when you’re connected to the supplier that you’ve chosen, the supplier pays us a royalty for connecting you to them. On the commercial side, those tend to be long contracts – not necessarily any upfront. I have a pretty heavy MRR business. I think it keeps us well-aligned with our suppliers. Once I’ve connected Sramana to supplier A, it’s important for me, as a marketplace, to make sure you understand what options are available. My incentives are not to switch you multiple times.
Sramana Mitra: You take a cut off every single deal that you broker on an on-going basis.
Kerry cooper: A really tiny one, but yes.
Sramana Mitra: That’s interesting. That business model makes a lot of sense. It actually answers my question on the multiple times a year activity on the travel side versus something that businesses or consumers don’t do very often. You have ongoing recurring revenue so that’s a very good trade off from a business model point of view.
Kerry Cooper: It takes time for that to build up. It takes time for us to see that one grow. Frankly, it takes some cash. If we have to invest upfront to acquire a customer, it takes time to get payback. It’s usually six to nine months before you see some of that payback happen. The faster we grow, the more cash we go through, which is the other trade off.
Sramana Mitra: What is the customer acquisition cost for this customer?
Kerry Cooper: I would rather not share that one. I look at the cost to acquire a customer versus the lifetime value and what that ratio is.
Sramana Mitra: That’s fine. You can give me the ratio of customer acquisition versus customer lifetime value.
Kerry Cooper: It’s about 3:1.