How OAGAnalytics grew OAGAnalytics to $1.1M revenue and 5 customers in 2019.

just got done editing this interview you guys are gonna love it before i do that though i want you to know that i'm going to be in the comments for the next 30 minutes or so answering your questions if there's additional questions you want me to ask the ceo next time i interview them leave them below or if you're just loving the data points i get ceos to share click the thumbs up button below that's your way of telling me you're loving this stuff and i'll get you more of it additionally again i'll be in the comments answering any questions you have all right for 30 minutes enjoy the interview hello everyone my guest today is luther birdsell he is building a company called oag analytics he's an entrepreneur data scientist an engineer passionate about energy efficiency and democratizing ai from boardrooms to oil fields to data centers luthor has been transforming data from a cost to an asset for over 20 years in 2013 he founded the company to build a cloud platform that makes ai easy and scalable for the oil and gas industry luther you ready to take us to the top yeah how are you i am okay so everyone says they're an ai company uh everyone says that's great everyone says they're an ai company but the question is are you actually kind of an ai company explain to us what the technology does so nathan i founded this business in 2013 uh to with an initial vision to democratize ai and machine learning for upstream oil and gas specifically helping with planning functions this year we pivoted from self-service tools to create ai and machine learn using machine learning to a much sharper focus on solutions built with machine learning and ai specifically we're helping u.s independent operators primarily in the permian but we are working virtually every major basin in north america and we're helping them improve the predictability of tightly spaced unconventional uh oil and gas wells we also have subsurface capabilities which we're working with a bunch of companies on and those are very complementary as it relates to planning functions our companies does still sell the software to also manage the data science workflow but that is no longer uh our primary offering okay so just because is it is so would you say you're a more of a consulting company today or do you still have a strong sas revenue stream recurring revenue this is even more this helped us get even stronger with our focus on the sas revenue stream okay so just to be clear over the past 12 months if you take you the total pi of your total revenue what percent would you say is pure kind of sas revenue versus consulting you're doing so we're about 60 40 sas to consulting today the goal now over the next 12 months is to refine that to over 80 percent sas less than 20 consulting okay and when are you engaging with these folks is this when people are still speculating on how much oil is under the ground there or is it after they've drilled the first drill the first hole they've already found in there they're trying to optimize basically what they extract so our technology nathan uh is additive in both contexts so both on the a and d side searching for the next asset as well as then planning whether it's the first well or the thousandth well how do we get the best economics not only out of that individual well but out of the drilling unit holistically in which those wells are drilled okay and give me some context here so i know nothing about oil and drilling i imagine a lot of my audience probably doesn't unless they're from houston or dallas or austin one of these places um what are people paying for this right so if they want to use your technology for a year and all the drilling they're doing what are they going to pay you on average so our uh we do we have a consulting rate that's you know fixed fee very straightforward two thousand dollar day rate okay uh we invest with customers in our pilots uh so a typical eight-week pilot we're only charging 50k for okay and very clear the team that's required to execute those we are very much investing with the customers to prove the technology in their uh among their teams uh our annual subscriptions then start at about 2 25. 225 000. 225 000 annually and range between 225 and uh and about 750 uh depending on the scope of the uh the engagement okay would you say that the the kind of sweet spot average for you per engagement is closer to the call 300 000 year mark or more like 700 grand a year it's closer to the 300 thousand for the current market yeah alright now are you generally i like to kind of see patterns over time are you generally moving up market or trying to open your top of funnel move down market more get more customers so we are it's actually both um come on luther you can't do both well we're trying nathan we are focused on increasing market share among the 20 largest u.s independent oil companies those are the companies that have done enough drilling to have sufficient data to take best advantage of this technology today they also have enough activity to be able to test and prove the technology uh operationally right the only thing we can prove in a pilot is that we can improve predictability in the historical program we've got to report we've got to deploy quite a bit of capital um you know median well cost today is about 8.4 million uh dollars per well okay um to uh you know you've actually got to drill wells and use the inputs to uh to actually prove it in the field the bigger companies are better positioned to do that today uh that's 8.4 million average like before any dollars of revenue are generated correct well yeah and that that's just drilling in completion cost nathan the cost to acquire the land to actually drill those wells in or to lease the land that those wells are drilled in uh can be hundreds of millions to billions of dollars before a single uh uh before the first call at eight and a half million dollar well so a 300 000 contract with you is a rounding error for these folks in the grand scheme of their p l well you know nathan i was brand new to the industry six years ago and uh that was my impression too um most of the oil companies especially of these bigger companies especially they'll have operating budgets of over a billion dollars a year um most of them they'll think about software even software that directly contributes to enhances the way that billion dollars is deployed they categorize as gna and everybody super sensitive to gna um most just about any well-run business but especially kind of where we are with oil prices where they're not really high they're not really low they're kind of right in the middle every penny counts yep okay this makes good sense now you founded the company in 2013. how many customers are you working with now today so we have worked with over 30 companies uh in through our history and uh we are actively engaged with um about five companies right now uh with uh a bunch of very exciting conversations uh going on with some others how do you plan right so if you take five active customers at your 300 000 year price point or about 20 000 a month that puts you right now about a hundred grand a month just on the on this the active sas stream of things you do consulting on top of that are those numbers basically accurate it's ballpark okay if you go back a year from today where were you on just the pure place sas side were you still at about 100 grand a month or were you would you have you grown nicely so the business so we were smaller we have had growth through this year um but nathan one of the things that we found coming into q1 of this year we had a few companies that were doing great with our software and a few new companies that we just signed up and those new ones that we signed up in the earlier this year that they were smaller um a couple aspects of them um they just they didn't move forward uh it just wasn't the right fit which not only prompted us to reconsider our sales strategy shift this focus from not only shift the focus to the sales strategy nathan in terms of the size companies we were working with and the specific geographies and basins we were working with but also to rethink this business model and really catalyze that pivot again from where we started as self-service software to use machine learning to build ai to a company that's really selling solutions so off the shelf software to improve the predictability of the tightly spaced wells so luther is is all this code for you've kind of pivoted a bunch over the past year you're basically flat your flat year every year um so we're still we did pivot it's okay by the way there's nothing wrong with being flat i'm just i'm just being honest giving you the best numbers i have nathan so we did with it um we did not um have the growth that we expected uh as a result of that regardless we are still up and uh we've got about six weeks of selling left to do before christmas now is this usually a good six weeks for you do you see seasonality towards the end of the year or no it is oil and gas upstream oil and gas tends to purchase software in q4 in q1 a little bit in q2 and very little in q3 okay got it so you kind of just are getting through kind of the typical week period in your industry and you know you should see some strength over the next six months yeah and we use q3 we did several marketing events several conferences um to help inform the kind of latter half of this pivot which helped us really bring it home and uh the customer residence the market residents uh around these more specific...