How Artial Raised $500K Pre-Seed to Build an AI-Driven Urban Safety Drone Platform (Interview with CEO Egor Folley)

Introduction and Company Overview

Nathan Latka

00:00Hey, folks. My guest today is Egor Folley. He's an experienced AI tech lead in r and d robotics, deep learning, and computer vision. He's got solid knowledge of problem solving and strong leadership skills and ran AI for nanobio tech, a PhD, and and and it was a program dropout in that in that program. He's now building artial dot c o. That's a r t I a l dot c o, an AI driven urban safety drone platform.

00:24Egor, you ready to take us to the top?

Egor Folley

00:25>> Yeah. Let's go ahead. Nice to meet you.

Who Are Artial's Target Customers

Nathan Latka

00:28Alright. So who who's buying this? Are these drone operators like like Amazon or delivering packages or what?

Software Licensing Model and Use Cases

Egor Folley

00:34>> Well, right now, we're focusing on delivering the software as a license. We're building autonomy engine that brings a new level of drone intelligence, basically, by providing the high higher level of autonomy that exists right now. And we're mostly focused on licensing it for the drone manufacturers or autopilot programs. And we also have revenue sharing options for the specific applications, like flying in making inspections of the building bridges in the obstacle dense environment, public safety, basically providing

01:06>> the assistance for the police department or maybe some kind of guardian, urban guardians, security and surveillance, of course, and smart and safe air. And I mean by that, we're providing the options right now for the companies who want to apply drones for their smart cities or urban environments.

Nathan Latka

01:24So, to be clear, when you say you're selling a software into manufacturers, these are not like Department of Defense kind of people. These are not military capabilities. These are more like for inspecting telephone lines or water treatment plants, things like that.

Egor Folley

01:37>> Yeah. Right now, we're mostly focusing on providing the safety technology for drone crew to fly safe, make less crashes, and to be more accurate in the delivery task. It's not like super autonomous.

Nathan Latka

01:49But for who, Egor? I'm trying to get the use case. Is this for defense, killing people in Ukraine and Russia? I mean, what's it for?

Clarifying Non-Defense Focus

Egor Folley

01:56>> No. No. No. It's for the companies who want to make the drones stability flight. So they are applying it for different use cases in cities. So it's mostly for the people who want to make a drone safe safer. More drones safer technology and fly accurately without fear of crashes.

Nathan Latka

02:13The using the drones are doing things like inspecting skyscrapers in New York or telephone lines or gas pipelines in the middle of the country or these sorts of use cases.

Egor Folley

02:22>> Yeah. Yeah, absolutely.

Nathan Latka

02:23Okay. And so, does your software help them do? Is it literally don't run into other drones or don't run into trees or things like that?

Egor Folley

02:31>> Yeah. Well, mostly we focus on leveraging the BVLOS technologies like beyond visual line of sight. Basically, it helps the certified pilot who can show the drone to automate the more majority of the task and to help them fly more secure and more safely within the obstacle dense environment that I mentioned before. And it helps them to be more, I would say, more prominent on the task delivery. So it has a native obstacle avoidance and AI driven

02:57>> navigation. So imagine the situation when a drone is really easily to crash in some kind of building obstacle, like, as as you mentioned, like the branches of the tree or maybe power lines. And we're making the technology so the drone could have a self awareness to perceive it and make an accurate decision based on its intelligent and make a decision making system.

Nathan Latka

03:19I see. Okay. And so what are companies paying on average per month or per year to use this technology?

Egor Folley

03:25>> Right now, it depends. Like, the certified pilot cost like €300 or $300. It depends on the use cases. And drone, it may cost like 3,000 or maybe 5,000 for the commercial use, like DJI drones, and up to 20, maybe 50 k for the specific inspection or the specific task delivery, like logistics.

Pricing and Drone Cost Ranges

Nathan Latka

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04:35get a different valuation. A VC is gonna pay a different valuation, Private equity firm is different. If you're gonna do a minority sale, that's different. And if you sell the whole business, that's a different valuation. You can see all those when I hover over here. Right? So the teal is what a VC would pay. Yellow is what private equity And red is if you sold the whole thing outright. Now what's cool about this is this is

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06:11the interview. I guess I don't understand. So you're not actually building a drone. You're selling software that these manufacturers So, install on the how do you know, like, do you know whether to charge 20,000 for the software install or 300 for the software install?

Egor Folley

06:25>> Well, no. I mean, the drone itself goes this way. But we're providing the software layer above the drone, so they could install it above their own software. So we're leveraging their capabilities of the drone, so extending the feature pack that they have right now. We are mostly focused on the software delivery tasks, not the hardware application or hardware automation stuff.

Nathan Latka

06:46So do you charge based off the number of drones they install your software on?

Egor Folley

06:51>> Yeah. Well, let's just be clear. We are only four months old. We just established, incorporating in December. And we have a prominent drone manufacturer, Yawas from United States. And they have a really good, like, company building the helicopters for automation. And they're like, okay, guys, we need this software. Let's just combine some kind of skills. So basically, they are our our valued customer. And we are now mostly focusing on them, but we have three to five

07:17>> right now potential customers who are willing to pay the price we provide. And we are in a stage of agreement right now. We're under NDA and we're more flexible on the prices because we're not already product that could be Yeah.

Nathan Latka

07:30So you don't know what the price is gonna be. You're doing consulting work to figure it out. You have a first customer that sounds like they're paying you, what, 50 to $100,000, something like that to figure out the use case for them?

Egor Folley

07:40>> Yeah. Well, we have potential customers when they say, okay, have this x, for example, prices. And say, yeah, we're fine with it, but we need some kind of upgrades for the specific task delivery. Because we are mostly focusing on the three types of software. The first one is just basic autonomy engine for safety flights and dynamic obstacle avoidance, and some upgrades depending on the weather conditions, like it could be enhanced computer vision technology, maybe night vision,

08:06>> maybe snow, rain, all that stuff. And we are building Are

Nathan Latka

08:09those the two things? There's basic and then there's weather upgrade. Any other upgrades?

Egor Folley

08:13>> Yeah. That upgrade is going to be in approximately one year. We're going to be creating the omnidirectional system. It's going to be a three sixty degree of observation of the surroundings.

Nathan Latka

08:24Okay, got it. So, safety to start, upgrade for weather, snow, rain, and then another upgrade a year from now, you'll have an option for three sixty omnidirectional views?

Egor Folley

08:32>> Yes, absolutely.

Nathan Latka

08:33Okay, but this first test you're running with this one customer, how many drones are they going to install your software on?

Egor Folley

08:39>> Right now, we're focusing on 20 to 25 drones, depending on the need. And we have, as I said before, potential customers, and we're discussing the agreements right now. Mostly people are focusing on buying like 40 to 100 drones to install the software and to apply it.

Nathan Latka

08:55Very cool. Okay. How are you funding the business to date? Are you bootstrapped or have you raised?

Egor Folley

09:01>> Originally, we met with my investor and it was just a small talk. He eventually, like, okay, if you do the product, I will invest in you. And I did the proof of concept. The video is on our website. You can see it. And he's like, okay, I like it. Let's work. Let's collaborate. And he invest in us, like, €100,000. And this is the only our proceed investor right now. He's a leading one. But we are flexible

09:24>> with investments coming from the other sides. And right now, we had the Plug and Play accelerator. We have a potential collaboration with them, but they're waiting for the MVP to have some more potential contacts with us. And other people wanna invest, but we're not accepting, like, every people because we need to have a strong collaboration. We're looking for the strong partnership who's gonna be really useful for us, not just some guys with the money.

Nathan Latka

09:50Understood. So you started coding this last year in 2021. You raised $500,000 pre seed from this one guy?

Egor Folley

09:57>> This is not one guy. It's just the autonomous solutions fund. They are building they're investing But

Nathan Latka

10:03you raised 500,000 total last year?

Egor Folley

10:04>> Yeah.

Nathan Latka

10:05Yeah. Okay. And did you do that? Most people these days pre seed round, you're doing it like a 5,000,000 cap, something like that?

Funding History and Investor Background

Egor Folley

10:11>> I don't think I can discuss it, we just incorporated, have split the shares, and that's it right now.

Nathan Latka

10:20Well, I mean, it's your company, you can discuss whatever you want. I'm just asking, did you do basically a standard sort of pre seed investment, which was a note or a cap or an uncapped safe? How did you structure the first deal?

Egor Folley

10:31>> We just paid the shares. Like, gave him the specific percentage of the company, to the funding.

Nathan Latka

10:37Oh, so it's not in convertible? No. You actually have a valuation and you sold them a number of shares for 500.

Egor Folley

10:42>> I see. I see. Okay.

Nathan Latka

10:44I guess then the right question is most folks are doing these pre seed rounds at like a 5 to $10,000,000 valuation. Were you sort of in that range?

Egor Folley

10:50>> No. Slightly less than 5,000,000.

Nathan Latka

10:53Okay. Fair enough. Fair enough. And then I guess, why let this person in? Was he very strategic? Or what's the story?

Egor Folley

10:59>> Well, originally, met him when I was temp leading at my previous company. And it was like, okay, hello, I'm just traveling to Barcelona, let's have a talk. And we've been talking a lot and he told me stories about the startups. And he was sort of mentoring me how to do these things in a proper way. And for me, it was just okay, it's so cool. And we made a good connection. And I saw him that he

11:22>> has a lot of companies, and the companies are specific interest in drone and computer vision and AI. And we're like, okay, let's do this way. I will help you out. You'll build the technology. So it was like a mentorship at first with whom I have the warm connection. And right now it's like, okay, he's my investor. We're basically collaborating.

Team Size and Structure

Nathan Latka

11:40Okay, that makes sense. And how many folks are full time on the team today?

Egor Folley

11:44>> Right now, it's me, my co founder, three people who work full time, but they're not an official in the state because we're now I'm not trying to relocate them here because of the situation in Russia right now. Some people in Georgia, some people in Turkey, but they're working full time. So it's five of us. And we have my CTO. There's five full time. Yeah. Yeah. And there's my CTO and adviser. He works, like, from twenty

12:08>> to thirty to forty hours a week, depending on the needs.

Nathan Latka

12:11And so what do you believe? You're running this first test with this first company right now on 20 to 25 of their drones. When do you think you'll be able to release a SaaS product? And what do you think you'll release in terms of the pricing?

MVP Timeline and Beta Product Plan

Egor Folley

12:23>> Right now, we're having the MVP preparing in the simulation, and we're expecting within one month to buy at least five to six different drones and then have a installation there to provide some kind of real world test. But we're aiming for the full beta version of the products, because we're gonna be at least stable enough to fly in a with a real drone by the end of this year in December.

Nathan Latka

12:47And what I mean, this is a competitive space. There's a lot of folks sort of selling software for drones right now. Some of them are obviously safety focused, right? DroneDeploy is a good example here, right? So so what is your what's your use case? Like, what's your wedge here where you're gonna be able to steal market share from them?

Competitive Landscape and Differentiation

Egor Folley

13:03>> Well, I guess our most advantage, unique value proposition that we're have been already experienced, and my co founder has a decade of experience in drone technology and the safety AI technology for the navigation. And we're basically providing the algorithms that are suitable enough for the people to use it instead of our collaboration. And right now, we're mostly focused on the safety, but we are willing to accept the feature pack and going to be way more useful

13:31>> than the traditional approach, hardware approach. So basically, we're trying to use more AI software stuff than the hardware stuff related to the, like, GPS navigation or any anything related to hardware so hardware centric approach.

Nathan Latka

13:45And and what's your goal this year? What do you hope to drive monthly recurring revenue to by December?

Revenue Goals for 2022

Egor Folley

13:50>> By December, we I am not right now sure that we will be, like, have a positive cash flow because it's not easier to deliver the task immediately.

Nathan Latka

14:00Well, not cash flow. I asked about revenue. What do you think revenue will be?

Egor Folley

14:03>> Well, at least we'll Well, maybe have at least €100,000 for sure. Per month? Total, around. By the end of the year, in total.

Nathan Latka

14:14Total. And then and then what do you think you have to grow revenue to to go raise a competitive sort of seed round?

Egor Folley

14:20>> I think we'll provide the technology, we'll test it, and then we'll just confirm on the round. And have already potential collaborations that I've mentioned before with the government public structures. And I think we'll just provide the technology for them. And this next seed round is gonna be depends on the needs. If we have enough money as a revenue, so maybe we will not raise, and maybe we'll extend our features on the another market share, like, in

14:42>> Europe right now. Maybe we'll go to United States. But it's for me just a little bit in the road map, but it's changing every day. So

Nathan Latka

14:52Sounds good, Egor. On that note, let's wrap up here with the famous five. Number one, what's your favorite book?

Egor Folley

14:57>> I would say the Feynman Lectures on Physics and Think and Grow Rich by Napoleon Hill.

Nathan Latka

15:02That's good. Those are two very different books. I like the diversity.

Egor Folley

15:06>> I know.

Nathan Latka

15:07Number number two, is there a CEO you're following or studying?

Egor Folley

15:11>> I wouldn't mention some specific name. I would like to say that I have a perfect vision of myself in the future from the autobiographies I've been reading a lot, like from Henry Ford to to Elon Musk, of course, and Alexander the Great. Like, a lot of people, I'm trying to make the best of the version of myself from reading all the autobiograph all the books of them.

Nathan Latka

15:30Number three, what's your favorite online tool for building Artial?

Egor Folley

15:34>> I guess, mural boards sounds really cool.

Nathan Latka

15:38Mural boards?

Egor Folley

15:39>> Yep. Yep.

Nathan Latka

15:40Number four, how many hours of sleep do you get every night?

Egor Folley

15:43>> That's also not constant value. Sometimes it's five, sometimes it's seven, sometimes you don't sleep for a few nights in a row.

Famous Five: Books and Influences

Nathan Latka

15:52Fair enough. And what's your situation? Married, single, kids?

Egor Folley

15:56>> I would say mentally married, but that's not not officially.

Nathan Latka

16:01And no kids?

Egor Folley

16:02>> No kids.

Nathan Latka

16:03And how old are you?

Egor Folley

16:04>> I'm 24.

16:06>> 24.

Nathan Latka

16:07Last question. What's something you wish you knew when you were 20?

Egor Folley

16:10>> I think I would suggest to myself, like, be more courageous and be more flexible and adaptive to the world and your ideas in your mind. Don't stick to specific one goal. Just be flexible.

Nathan Latka

16:21Guys, there you have it. Artial.co launched last year, 500,000 pre seed raised, maybe a little less than a 5,000,000 valuation. Team of five trying to help folks do things like inspect skyscrapers or inspect power lines or inspect water treatment plants or facilities without the drones running into things, right? So they sell basic safety package software into these drones, working with their first customer now with the potential deployment across 20 or 25 drones live in operation

Advice to Younger Self

Nathan Latka

16:48today as they work to continue to scale. We'll see what happens next. Egor, thanks for taking us to the top.

Egor Folley

16:53>> Thank you. Thank you and goodbye.

Nathan Latka

16:56One 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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18:05for that at nathanlatka.com/slack. In the meantime, I'm hanging out with you here on YouTube. I'll be in the comments for the next thirty minutes. Feel free to let me know what you thought about this episode and if you enjoyed it, click the thumbs up. We get a lot of haters that are mad at how aggressive I am on these shows, but I do it so that we can all learn. We have to counter those people. We

Famous Five: Tools, Sleep, and Personal Life

Nathan Latka

18:25got to push them away. Click the thumbs up below to counter them and know that I appreciate your guys'support. Alright, I'll be in the comments.

Egor Folley

18:31>> See you.