AI Powered Internal Search Tool Grows 200%, Breaks $1m Run Rate, $15m Valuation in 2020

As the 3-year old AI-powered SaaS organization breaks a run rate of $1m, Raffle.ai CEO and Co-founder Suzanne Lauritzen took the time to chat with the GetLatka team mere days before making a major announcement about Series A funding. Lauritzen shared updates on how the team quadrupled their paying client base in the last 12 months, what territories are next on their radar, and why a 30% drop in ACV is a good thing.

Suzanne Lauritzen is a seasoned veteran of emerging technology companies, having cut her teeth on the dotcoms of the 1990s. She co-founded the employee engagement platform LogBuy in the 2000s, which was sold in 2017 to VISMA and Reward Gateway. She co-founded Raffle.ai in Denmark with DTU Professor Ole Winther in 2018. In the last year, Raffle.ai has expanded its customer base from 7 to 50 customers, broke $1m in run rate, and has set its sights on the U.S. market in 2023.

• Preparing to close Series A funding, details not released at the time of interview
• 50 enterprise clients in diverse industries, from insurance to eCommerce
• Team of 20 F.T., 8 P.T., with 12 engineers

AI SaaS Delivers Intelligent Search for Enterprise Customer Service, Cutting Search Time 80%

Raffle is developing breakthrough conversational AI technology to deploy intelligent search tools that give instant, correct answers to customers and employees while gaining insights over time. Raffle.ai boasts that employees cut 80% of their internal search time while optimizing customer service calls, chats, and emails. Raffle focused on zero-short performance; they realized that the search engine must work well out of the box for new customers to be successful. Currently, the system provides the correct answer in the first three results, which is already 50% better than competitive solutions.

ACV Intentionally Drops from $35K to $25K

Lauritzen shared that the Raffle.ai pricing model intentionally went down-market, dropping the ACV from $35K to $25K. She attributed this planned drop to a combination of client mix: enterprise and medium-sized businesses, as well as accelerated implementation time. “18 months ago, it took us two months for customer implementation. Now we are an off-the-shelf product that can be implemented in two days,” Lauritzen explained. She intimated that the ACV might drop even further as Raffle solidifies its ideal customer profile. Raffle currently offers three monthly price points, from $500 to $2570/month for SMBs and custom pricing for enterprise customers.

Paying Customer Base Jumps from 7 to 50 in a Year

In 2021, Raffle expanded its customer base from 7 to 50. Current customers include Coop, Eon, VISMA, and Ilva, and come from industries that include insurance, utilities, banking, B2B, software, and eCommerce. Currently, the Raffle sales model relies on a direct sales force to close new customer deals, predominantly in the Nordic region of Europe.

Clarity Helped 4x Customer Base

Lauritzen attributed the rapid acceleration of growth to several factors:

• Raffle became clearer in their mission
• Product improvements led to nearly instant implementation, which made it more appealing to prospective customers
• Brand awareness is growing

In combination, these factors make it easier for the sales team to close deals and exceed quotas.

Raffle is Mastering These 6 Conversational AI considerations

Mission clarity for Raffle.ai became knowing what conversational AI needed to master before successful deployment:

1. Contextual awareness of the search terms, leveraging previous answers and other context
2. Answer accuracy
3. Close to unbiased
4. Mastering new domains with little training data to accelerate customer onboarding
5. Handle large knowledge bases
6. Reasoning, to improve the customer experience

Accelerate Growth to $90,000 MRR Attributed to Easy Integration with over a Dozen Platforms

In their short existence, Raffle has developed integrations with over a dozen key platforms, making the solution more attractive as customers see the seamless integration. Raffle currently integrates with industry giants such as:

• Microsoft 365
• Humany
• Genesys
• Salesforce
• Zendesk
• Drupal
• Umbraco
• WordPress
• Sharepoint
• Intercom
• Epi server
• Dropbox
• Magento

Slight Rise to 20 Full-Time Employees, Even with Growth

Even though ARR shot up 305%, the Raffle team grew slightly since Latka’s last interview with Lauritzen. Raffle currently employs 20 full-time employees and 8 part-time workers.

Series A fund earmarked for European Expansion, CAC of $5K

While Suzanne remained mum about the expected final amount of Series A funding, she did share that she intends to use the fresh capital to scale. She believes there’s “plenty of room for growth” in Europe before crossing the pond to the U.S. Raffle’s primary sales focus for this year is:

• Nordic region
• Germany
• UK
• Netherlands

$2K ACV Plus Conservative LTV Calculation Strengthens Numbers

Lauritzen explained that Raffle uses a conservative LTV calculation of 3 years, or $75,000 total, instead of the industry-standard 5-year calculation for SaaS businesses. Knowing that Raffle’s LTV is intentionally conservative makes the rest of their financials look that much more robust, including the $5K CAC.

$3m Seed Round Delivered $15m Valuation in 2020

Lauritzen and co-founder Winther sold a 20% interest in Raffle in 2020 in a $3m seed round from  Vækstfonden and Pre-Seed Ventures. Both are state-owned investment funds from Denmark. This sale put the 2020 valuation of Raffle at $15m.

$300k Angel and Pre-seed Investors

In 2018, Raffle received $300,000 from early investors to launch the startup. Raffle has committed 35% equity to investors, not counting the pending Series A funding. From the beginning, Lauritzen’s mission was to solve the challenge of quickly finding information inside companies’ massive knowledge bases. She teamed up with AI Professor Winther to solve the problem with an AI engine that finds information instantly, using the latest technological developments in natural language processing. Raffle’s most significant breakthrough came when Winther chose to adopt the language model BERT, which provides context to search strings, like Google.

9% Equity Reserved for Employees

To date, 9% of the equity in Raffle has been set aside for employees. In lieu of an ESOP plan, Raffle adopted an Exit Warrant Program in its place that allows employees to get their value the day that the founders sell over 50% of the business. Lauritzen explained that the program is designed to entice employees to stay to help the company expand and grow.

Post-Series A Leaves 44% for Founders

Lauritzen confirmed Latka’s quick equity calculations during the interview. The Series A investors will receive 10-20% equity, leaving approximately 22% for each co-founder. The investment will be used to scale European sales operations ahead of U.S. expansion in 2023.

Five Fast Facts with Suzanne Lauritzen

As she indicated in her last interview with Latka, Lauritzen’s favorite book is Thinking, Fast and Slow by Daniel Kahneman. Suzanne does not follow any CEO in particular. While she does not have a favorite online tool, she chose Hubspot as the go-to tool she uses daily. She estimates that she sleeps 7 hours a night. Lauritzen, aged 50, has two children and a boyfriend. She would have told her 20-year-old self to relax more, although she admits she still doesn’t listen to that advice.