How AI Partnerships Corp Raised a $2.5M Pre-Seed Round at a $6M Valuation to Roll Out Its Affiliate Network (Interview with Tom Corr)

Introduction and Tom Corr's Background

Nathan Latka

00:00Hello, everyone. My guest today is Tom Corr. 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 communication space. Subsequently, he became CEO of one of Canada's largest accelerators and CEO of Canada's largest funder of startup companies with a focus on those commercializing academic IP. Tom, you ready to take us to the top?

Tom Corr

00:22>> Certainly are.

Nathan Latka

00:23Alright. What what was the largest Canadian sorry. The largest funder of startup companies in Canada?

Tom Corr

00:28>> Well, back in the day when our organization was first formed, was companies like BlackBerry, I think most people remember from many, many years ago. And there's been a lot more since. Our mandate was basically to get and fund early stage companies, mostly that were commercializing IP coming out of academic institutions and help them move along. And so that's what we did. So they ranged in application areas from all over the place, but some of the ones

00:53>> that you'd recall are people like even, BlackBerry and even back Nortel back in the day, that we were involved with, with their founding.

What AI Partnerships Corp Does

Nathan Latka

01:02You're now building AI Partnerships Company. Tell us what the business does.

Tom Corr

01:07>> So AIP was formed basically to set up a series of affiliates initially around North America, affiliates being companies that are maybe doing 500,000 to 10,000,000 a year. They have some amount of SaaS business. Of them may or may not be in the AI business, but what we're doing is allowing to augment their offerings with the AI as the SaaS offerings that we provide. So we have data scientists, engineers, access to AI platforms, access to AI enabled

01:37>> 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, 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 sending to those affiliates, then the longer term goal is to acquire the bulk of these affiliates that are looking for an exit and want

02:02>> to be part of 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.

White-Label Model and Affiliate Structure

Nathan Latka

02:14Are you actually white labeling the software out and they're paying you for the white label?

Tom Corr

02:18>> Yes. To an extent we are. They will provide it to their end customers, be it the services, be it the software, be it the platform access. They will they have the 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 deal with issues like data lakes, collecting the data that the companies need in order to enable

02:45>> AI applications, but more importantly, augmenting what these affiliates are providing to their customers now, a big proportion of that, which is SaaS, and augment to get with AI capabilities so they can create a new revenue

Number of Affiliates and Team Size

Nathan Latka

02:59How many of these affiliate partners pay you something today? How many customers?

Tom Corr

03:02>> 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.

Nathan Latka

03:20How many total people do you have on the team? You said office in San Francisco.

Tom Corr

03:24>> 20.

Nathan Latka

03:2520. Okay. You just launched this year?

Tom Corr

03:27>> We just launched in January.

Funding and Pre-Seed Round

Nathan Latka

03:28That's great. Now, so are you bootstrapping this or did you raise capital or what?

Tom Corr

03:32>> We raised a pre seed round of $2,500,000 in order to fund our operations.

Valuation and Plans to Go Public

Nathan Latka

03:37Okay. We will do that. Was that on sort of what you're seeing typically right now in The Bay, sort of like a 5,000,000 cap safe?

Tom Corr

03:43>> 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 a lot 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

04:04>> from the rounds of financing we do as a public company.

Nathan Latka

04:07Sorry. Which publicly traded shares are you referring to?

Tom Corr

04:09>> 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 we'll start to do later on this year.

Nathan Latka

04:19What valuation did you raise the $2,500,000 on?

Tom Corr

04:22>> $6,000,000

Nathan Latka

04:24Okay. And why do you want all the scrutiny of going public?

Tom Corr

04:27>> Because our view is to we look at this as a land grab. 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 typically 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.

04:49>> 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 will allow us to become what we hope will be the largest AI SaaS company in North America, servicing the mid to large sized companies.

Pre-Revenue Status and Revenue Timeline

Nathan Latka

05:04And what stage are you at today? How much revenue did you do last month?

Tom Corr

05:07>> Oh, very, very, very small. Our right now, we're focused on bringing in the affiliates. Starting in about ninety days, we're gonna 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 gonna provide them and the finder's fee that we'll get from bringing business to them. We're not seeing anything Are you pre revenue today? We are.

Nathan Latka

05:30Okay. Got it. So when you say 15 customers, these are not customers, they're users?

Tom Corr

05:34>> These affiliates are standalone organizations, typically regionally focused, like I said, doing maybe 500,000 to 10,000,000 a year.

Nathan Latka

05:41But they're not paying you. They're not customers.

Tom Corr

05:45>> No, their customers are the end customers. They're the ones that'll 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

06:04>> the acquisitions, of course, 100% of that revenue will be ours because those companies will be part of AI Partnerships Corp.

Nathan Latka

06:10Again, Tom, I want to understand where you're currently at, to understand where you're going in future, 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'll tap into those revenue streams. Today though, neither the affiliates nor the affiliates customers pay you anything, your pre revenue.

Tom Corr

06:25>> No, because we're not generating new leads for them to sell our services to. Once they start doing that in about ninety days, that's when we'll start generating revenue from the AI products and services that we're providing to the end customers. Through the

Nathan Latka

06:39I understand. But so just again, you're pre revenue today.

Tom Corr

06:41>> That's correct. That's correct. That's correct. Yeah.

Manufacturing Affiliate Case Study

Nathan Latka

06:44Got it. So with these 15 so now let's go into where you wanna go to turn on revenue. You tell the story of one of these 15 affiliate partners? Like, who who are they and and how they're actually using you?

Tom Corr

06:53>> Yeah, sure. So we've got an affiliate that's focused on manufacturing. They've been around for ten 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

07:18>> 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, as they need to enable that quality control AI based function to be added to the software they're providing. That will generate revenue to us from the services that we're providing, the software that we're providing, the platform services that we're providing to

07:45>> the affiliates to provide to the end customers. We take margin on that all the way through.

Nathan Latka

07:48It's really hard when people listening hear 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

08:10must use you to do this?

Tom Corr

08:12>> They could do it themselves, but typically they're small companies. They're maybe doing 500,000 to $10,000,000 a year. They don't have the resources or the hard to find, at least here, expertise to develop AI enabled applications to augment the products that they currently have today.

Nathan Latka

08:26So they're coming Why to

08:28do you though? You have much less revenue than they do. You have no revenue and you have 2,500,000 raise. Why can you do it better than

Tom Corr

08:34>> 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 in the short term themselves, and we're doing it at no cost to them at this

08:54>> point in time.

Nathan Latka

08:55And so let's keep going down this path here of revenue for you, right? When you start charging this manufacturing partner, would you have 15 that are sort of like this same partner, What will you charge them?

Tom Corr

09:06>> We will charge them a margin on the services that we provide, which includes people, data scientists, access on services that we get from the various platform providers. We will seek out software, AI enabled software that they can sell to their end customers. So on each of those products and services, we will take a margin. But you've got to keep in mind, Nathan, this is a short term program because we'll start the acquisition program later this year.

09:32>> So the revenues, 100% of those revenues of those affiliates that were signing up will be ours, because it'll be part of our company at that point in time.

Why Affiliates Choose AI Partnerships Corp

Nathan Latka

09:39Why do have so much confidence that they'll sell to you?

Tom Corr

09:42>> Well, 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 an exit strategy and finding liquidity for their shareholders.

Nathan Latka

10:01Big are some of these folks?

Tom Corr

10:02>> I mean, to 10,000,000 in revenue is not small. Imagine there's plenty of buyers.

10:07>> Well, these aren't finding any. There's a lot more companies than I think there are 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 unknown in their community. And I think when we go into these companies, we early stage do our IPO and our shares are at very low value, basically it allows them to take shares and cash in consideration of their company that we're

10:30>> acquiring, and then seeing the upside in the value of the shares as we do more and more acquisitions and put more value on the company and increase the share value.

Acquisition Strategy and Land Grab Vision

Nathan Latka

10:38I guess I don't understand. So why do you need to acquire the company at all? Why not just go direct to their end customers?

Tom Corr

10:44>> Well, because they've got 100 customers and they've got the relationships with them. And each of these people have got vertical market expertise. For us to pretend we could be experts in FinTech, manufacturing, go down the list of medical, which we have people in telemedicine, it'll take you forever to do that, to build up an organisation with that level of expertise and to get to 50 affiliates by the end of the year, which represents about 5,000 clients,

11:11>> it would take you a decade probably to do that. So we wanna do that initially by establishing the affiliate network and then bring them in through the acquisition and consolidation plan later on. So it's a quick way to do a land grab by any other way of looking at Yeah.

Affiliate Optionality and VAR Relationship

Nathan Latka

11:25Is it a little bit though like letting the fox in the chicken coop, I mean, if somebody knows you're trying to buy them, are they really gonna start selling your product an affiliate deal with you, right, to their end customers?

Tom Corr

11:35>> Why wouldn't they?

Nathan Latka

11:36Well, because it gives you an incredible amount of leverage. It limits their optionality. They can really they're less likely to sell to somebody else if they're already selling your product to their end customers.

Tom Corr

11:45>> Well, they're free. I mean, we don't tie them up on day one. Basically, they're an affiliate. It's an arm's length relationship. Look at it as like a franchise. It's not even as close to being a franchise, but it's an arm's length. Almost a VAR relationship is 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

12:05>> 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

Following the USWeb Model

Tom Corr

12:26>> back in the late '90s by a company called USWeb. In the first year, they established 50 affiliates. They acquired them. At year two, they became a $100,000,000 company. And two years after that, four years from when they began, they had a billion dollars a year in revenues. The people that execute

Nathan Latka

12:44One more thing before you go. We have a brand new show every Thursday at 1PM central. It's called Shark Tank for SaaS. 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 make a deal live. It is fun to watch every Thursday, 1PM

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