AI Partnerships Corp Revenue, Valuation & Funding (2024)

hello everyone my guest today is tom core he's a serial entrepreneur who previously was a founder and ceo of two software companies momentum systems and applied development corp that were both in the fintech and internet communications space subsequently he became ceo of one of canada's largest accelerators and ceo of canada's largest funder of startup companies with the focus on those commercializing academic ip tom you're ready to take the top certainly our all right what what was the largest canadian sorry the largest funder of startup companies in canada well back in the day when our organization was first formed is companies like blackberry i think most people remember for many many years ago and uh there's been a lot more since our our mandate was basically to get and fund early stage companies mostly that were commercializing i.t coming out of academic institutions and helped them move along and uh so that's what we did so they arranged in application areas from all over the place but some of the ones that you'd recall are people like even blackberry and even back nortel back in the day uh that we were involved with uh with their founding you're now building ai partnerships company tell us what the business does so aip was formed basically to set up a series of affiliates initially around north america uh affiliates being companies that are maybe doing half a million to 10 million a year they have some amount of sas business some of them may or may not be in the ai business but where what we're doing is allowing to augment their offerings with the ai as the sas offerings that we provide so we have data scientists engineers access to ai platforms access to ai enabled software that we will enable these companies to provide to these end customers so basically what we're allowing them to do is generate a new source of business uh allowing them to get the support they need to get into the ai business which can be a little complicated especially for these smaller companies that we're setting up as affiliates then the longer term goal is to acquire the bulk of these affiliates that are looking for an exit and uh want to be part of a uh an acquisition and consolidation play which is what ai partnerships is formed to do so in the interim it's an arm's length look at it as almost like a franchise relationship although it's not a franchise are you actually white labeling the software out and they're paying you for the white label uh yes to an extent we are they will provide it to their end customers uh be it the services be it the software be it the platform access they will they have their relationship with their end customers because they're existing companies with those relationships in place so we're providing support behind them to allow them to get into the ai business everything from helping uh deal with issues like data lakes collecting the data that the companies need in order to enable ai applications but more importantly augmenting what these affiliates are providing to their customers now a big proportion of that which is sas and augmenting it with ai capability so they can create a new revenue stream how many of these affiliate partners pay you something today how many customers we've got 15 affiliates set up today they started in january we're adding them at a rate of one to two a week we are currently now working with them one of the big things we bring to the table is lead generation for them our office in san francisco which handles our marketing force is now starting to generate the leads how many how many total people do you have on the team he said office in san francisco 20 20. okay you just launched this year we just launched in january that's great now so are you bootstrapping this or did you raise capital or what we raised us a precedent round of two and a half million dollars in order to fund our operations okay and we will do it was that on sort of what you're seeing typically right now in the bay sort of like a five million cap save well yeah we're located in toronto just to be clear we have an office in san francisco but that's basically to fund our operating costs as we roll out this affiliate program as we go public and raise the funding that we need to do the acquisitions of course there'll be lots larger rounds of financing involved because we will see the acquisition of the affiliates being done by our publicly traded shares and with the cash we raised from the rounds of finances we do as a public sorry which publicly traded chairs are you referring to our plan is to go public in order to facilitate having the cash and the public traded shares through the acquisition of the affiliates which will start to do later on this year what valuation did you raise 2.5 million on uh six million dollars okay and why do you want all the scrutiny of going public uh because our view is to we look at this as a land graph so right now the affiliate model is basically in place we can go out establish the affiliates get our brand known and have each of these affiliates has about 100 customers so if we got to 50 by the end of the year which we're easily on track to do that represents about 5 000 existing customers never mind new ones that the affiliate network would have so what we're trying to do is then acquire that network and make it part of our organization so these will basically be acquisitions that we will allow us to become what we hope will be the largest ai sas company in north america servicing the mid to large size companies and what stage are you at today how much revenue did you do last month oh very very very small our right now we're focused on bringing in the affiliates starting in about 90 days we're going to start rolling out our marketing campaign to generate the leads for the affiliates at that point in time that new business will attract the margins on the services that we're going to provide them in the finders fee that we'll get from bringing business to them so we're not seeing anything today are you pre-revenue today we are okay got it so when you say 15 customers these are not customers they're they're users these affiliates are standalone organization typically recently focused like i said doing maybe half a million to 10 million a year but they're not they have to say they're not customers no their customers are the end customers they're the ones that will pay at the end of the day so as we generate leads for them and they get the new customers they will provide we will provide them with the ai services that they need in order to fill the needs of their clients and that's the margins on that product that we will make our money on but as we go down as we move forward and we start the acquisitions of course 100 of that revenue will be ours because those companies will be part of ai partnerships courses again tom i want to understand where you're currently have to understand where you're going in the future right today affiliates who you say will be your customers in the future and then they those affiliates have customers right and you're basically saying you're tapping those revenue streams today though neither the affiliates nor the affiliate customers pay you anything your pre-revenue no because we we're not generating new leads for them to sell our services to once they start doing that in about 90 days that's when we'll start generating revenue from the ai products and services that we're providing to the end customers throughout the year i understand but so just again your pre-revenue today that's correct that's correct that's correct yeah got it so with these 15 so now let's go into where you want to go to turn on revenue can you tell the story of one of these 15 affiliate partners like who are they and and how they're actually using you yeah sure so we've got an affiliate that's focused on manufacturing they've been around for 10 years they've got about 100 customers most of them are in the manufacturing sector they have some manufacturing software that they provide to them and what they're looking to do is ai enable both the manufacturing software that they provide today as well as providing other ai enabled software to their end customers so for example they're going to their end customers now that have got their manufacturing software and saying we're going to enable applications like quality control to add on to the manufacturing software that they provide so that will require them to get the ai services from us that they need to enable that quality control ai based function to be added to the software that they're providing that will generate revenue to us from the services that we're providing the software that providing in the platform services that we're providing to the affiliates to provide to the end customers we take margin on that all the way through it's really hard when people listening here ai like we're just gonna you know add ai on and sell it it's much easier to understand it from an actual perspective of what the ai is delivering to the end customer so when you say that you are affiliate focusing on the manufacturing space are you saying this manufacturing affiliate right now does not have the capability to build a quality control product to sell to its 100 end customers they must use you to do this well they could do it themselves but typically they're small companies they're maybe doing half a million to 10 million dollars a year they don't have the resources or the heart to find at least here expertise to develop ai enabled applications to augment the products that they currently have today so they're coming back why do you though you have much less revenue than they do you have no revenue and you have 2.5 million raised why can you do it better than them because we have the resources on staff to do it we have the relationships and we have the software that we've got from third-party partners or from affiliates that can be commercialized and sold through the affiliate network to other customers in order to do that so we're doing a lot of the things that they would have to hire people to do uh in the short term themselves and we're doing it at no cost to them at this point in time and so let's keep going down this path here of revenue for you right so when you start charging this manufacturing partner would you have 15 that are sort of like this same partner what will you charge them we will charge them a margin on the services that we provide which includes people data scientists access on on services that we get from the various platform providers we will seek out software ai enabled software that they can solve for their end customers so on each of those products and services we will take a margin but you got to keep in mind nathan this is a short term program because we'll start the acquisition program later this year so the revenues 100 of those revenues of those affiliates that we're signing up will be ours because it'll be part of our company at that point in time why do you have so much confidence and they'll sell to you oh well the the discussions with all of them today has circled around first of all generating a new revenue stream for them by ai enabling their businesses and the services that they provide companies of this size typically have a very difficult time in finding a nexus strategy and finding liquidity for their shareholders tell me or some of these folks i mean five to 10 million in revenue is not small i imagine there's plenty of buyers well these aren't finding any so i but there's a lot more companies than i think there's buyers and most of these companies we're dealing with have been around for five to ten years so it's not like they're you know they're unknown in their community and i think when we go into these companies as we early stage do our ipo and our shares are very low value basically allows them to take shares and cash in consideration of their company that we're acquiring and then seeing the upside and the value of the shares as we do more and more acquisitions and put more value on the company and increase the share value i guess i don't understand so why do you need to acquire the company at all why not just go direct to their own customers well because they've got 100 customers they've got their relationships with them and each of these people have got vertical market expertise for us to pretend we could be experts in fintech manufacturing uh go down the list uh medical which we have people with telemedicine uh it'll take you forever to do that to build up an organization with that level of expertise and to get to 50 affiliates by the end of the year which represents about 5 000 clients it would take you a decade probably to do that so we want to do that initially by establishing the affiliate network and then bring them in through the acquisition and consolidation fund later on so it's a quick way to do a land grab by any by any other way yeah is it a little bit like letting the fox in the in the chicken coop right i mean if somebody knows you're trying to buy them are they really going to start selling your product an affiliate deal with you right to their end customers why wouldn't they well because it gives you an incredible amount of leverage it limits their optionality they can really they know they're less likely to sell to somebody else if they're already you know selling your product to their own customers well they're you know they're free i mean we don't tie them up on day one basically they're an affiliate it's an arm cleanser relationship look at it as like a franchise it's not even as close to being a franchise but it's a it's an arm's length almost of our relationship's probably the best way to look at it and as we go down the path the option for us to acquire them or the option for them to wanting to be acquired by us is a discussion at a future date we've had that discussion initially because they know that's our plans but it could be they want to continue on as a standalone entity it could be that we may not want to acquire them because maybe the synergies aren't there that we thought were going to be there so that's a discussion for a further date but we're following the model that was used in the web development space way back in the late 90s by a company called us web in the first year they established 50 affiliates they acquired them in year two they became a 100 million dollar company and two years after that four years from when they began they had a billion dollars a year in revenues the people that executed one more thing before you go we have a brand new show every thursday at 1 pm central it's called shark tank for sas we call it deal or bust one founder comes on three hungry buyers they try and do a deal live and the founder shares back end dashboards their expenses their revenue arpu cac ltv you name it they share it and the buyers try and 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