How Polyteda-Cloud CEO Alexander Grudanov grew to $132K revenue and 100 customers in 2019.

hello everyone my guest today is alexander gurdanov he uh graduated from kiev polytechnic university in 2007 with a magister degree on instrumental building he's got 15 years background in microelectro micro electronics and eda first ceo of the startup company from ukraine which won the h-2020 sme instrument phase two from ec which is a lot of technical stuff we'll jump into it today today he's building polytechnic cloud which again we're going to focus on today alexander you ready to take it to the top yes hi everyone hi nathan nice hello everybody yeah so so make this the risk here is we lose people because this is very technical so break this down in kind of terms that i can understand what does polytata cloud do and what's your revenue model how do you make money okay first of all i would like to give you a quick jump to our background because it's very specific so um well tell alexander just to be clear tell me what the product does first and then fill it in with your background uh our product does uh the thing which is called physical verification physical verification on our ic design so it's very uh specific task that it's performed of the class of the tool which is called electronics design automation software tools okay and name just name a customer and how the customer uses you such customers as bosch for example sensortech uh different ic designers in europe and what does ic mean i see design integrated circuit integrated circuit design very good okay so so and then uh is there is there a customer that you could name that we might know or are they all pretty technical companies uh i would like to skip the exact names because of their privacy and well i mean you have just to be clear alexander you have websites streaming across your website logos okay so cogenda techstart netflix yes cadre semicolon partner yeah it's our partners uh because it's quite hard for the single ada software company to distribute their tools so the company you name they help us to promote our our products over the market they don't use our tool for internal purposes these are like our distributors or iam partners something like that okay i understand here's the thing i don't want to move on from from this yet because i feel like i don't have a grasp on what it does which means my audience won't right so advanced cloud-based physical verification um if this tech was built into the mac that i'm using right now to record this interview uh i mean one is that an actual use case and two what would that mean for my computer what are you doing okay uh let me explain uh because without the explanation it would be hard to understand so we've got microchips everywhere agreed yes smartphones laptops uh car computers so um before starting the actual manufacturing of the devices each layout of the design has to be checked to find and fix the errors made by ic ic developers ic designers on the stage before starting uh of actual manifest manufacturing on semiconductor plan which is called fab yeah so it's quite important that the check that is performed by such a class of ide tools is stated to see whether the layout meets certain very specific requirements and limitation provided by the selected process nodes and as a result any error overlooked at this stage may result in loss of multi-million dollars name an example yeah where you might lose millions of dollars okay uh typical typical examples you know the famous stories where for example top smartphone manufacturer recalls the shipment of 100 000 plus devices due to due to uh back in uh battery control controller okay or another story where famous japanese car manufacturer recalls the same amount of cars due to let's say airbag uh defect or some problems with so so then work backwards from there how do you make sure that japanese car manufacturer doesn't have to recall those cars for airbag issues we don't stay we don't stay for sure that it's uh physical verification related but even if a dozen of of such cases uh related to to errors overlooked on pv stage it uh it cost serious money so uh each chip inside uh any device uh passes through the verification stage before it uh it goes to the manufacturing on the semiconductor plant okay so you're just to be clear these chips that you're putting in alexander then and sorry i keep cutting off but we're short on time so i want to move through this quickly these chips you're putting in these machines are basically a way for you to test them before they go out at scale to reduce things like you know callbacks and drawbacks yes you're right but not cheap chips as a hardware chips but they're they're layout uh representation okay are you selling a physical are you selling something physical or is it software software it's a software to check the the specifically a specific file formats that goes to the foundry okay so your and then your sales model is it a sas based model yes it's sales based model uh in some way combine it with a classical desktop model but uh now we're introducing the pure sas model okay and which means which mean between paper use for using the tool or pay as you go it's actually the same so help me understand kind of what kind of company you're targeting are these people going to pay on average 100 bucks a month or 100 000 per month uh we have roughly calculated and it was pruned by numerous of cases that typical needs uh in pv for sme companies our tool is actually to to decrease the market entry for the sme companies specifically small and medium companies so it's about [Music] 60 70 hours per tape out which means uh up to three thousand of dollars for tape out while the so just because alexander just make this simple for us so each month one of these smes is gonna pay you how much how much per month for your software three thousand uh i think per month it would be less uh we we calculated per tape out actually but we don't know how many we don't know how many tape outs your average customer does per month so it's useless for us so on average typically it's it's typically from one to three tape outs per year due to manufacturing implementation okay so anywhere between three and kind of ten thousand dollars per year is what an sme might pay you for three tape outs sorry again lost connection so someone will pay you between three and ten thousand or nine thousand dollars per year for one to three take outs yes yes correct interesting all right put this on a timeline for us when did you launch the company um [Music] we established our company in 2015. okay it's some in something like a spin-off from from another politeda which was present on the market since 2009 but was represented the classical uh outdated let's say desktop-based model it's very hard to compete with the top players using this did you acquire this or were you inside the company that owned it and you led this spin out no we uh the the another bigger palette is among the shark holders of our new startup spin-off company and uh the storyline is that uh from from our from from our another company we have received the the quite quite market adult quite ready a physical verification tool for further development uh with cloud-based model okay so so how many how many uh are sorry how have you capitalized the company how much have you raised to date we raised 1.2 million euro from european union to execute uh horizon 2020 uh grand projects yes so just be clear that wasn't dilutive that was a free money essentially a grant what do you mean free in other words they're not sitting on your cap table the european union doesn't own percent of the company no it doesn't the company so they're not on the count is there is there any equity money you've raised not grant money but any equity you've raised space speaking specifically on political clout not yet but in plan okay got it so the way you funded the company today is via a grant from the european union for 1.5 million us dollars or about one point two euros 1.2 1.2 well that's your that's euros which is about 1.5 million us dollars yes yes correct yeah okay very good good and then um so you launched in 2015 you love the spin out now how many customers have you scaled to today uh [Music] now it's unfortunately less than 100 customers but we are quite happy with the with the scalability we have last few months so depends on our primary partners uh foundries and they are they open doors to a wide list of customers so uh we are happy to see uh more and more founders uh connected uh to our you're saying you're saying foundry is correct founders yeah yes and just repair when you say less than 100 customers i mean you guys have are you are you still pre-sales at this point you're pre-revenue or no you do have some paying customers yes we have uh some part of the customers are already pay for our tool on on sales model okay and a year ago were you pre-revenue then not yet no so let's say today you have a hundred customers paying three thousand dollars a year minimum a year ago did you have any revenue or were you pre-revenue then [Music] it's it's it's hard to answer because uh we do not charge them for the fixed uh for the fixed part of the money they prepared a certain amount they see it it makes sense before starting the tape out yeah alexander sorry my ques sorry miscommunication a year ago today so in january in february of 2018 did you have any paying customers on the sales process i'm sorry sorry for me the student last uh last year the same day we were at the stage of uh executing the project and implementation of the solution yeah it was not the stage of uh commercial exploitation in the whites got it okay good so pre-revenue and then and then today i mean can i take a hundred customers times you know 3 000 bucks a year minimum is about 250 bucks a month can i take 100 times 250 you're doing about 25 000 a month right now in revenue on the road but no yeah not yet okay when do you think you'll break 25 000 uh i think i ha that's unplanned by the end of this year oh very good okay so what do you end what are you at today like 10 a little bit more okay a little bit more good so you'll more than double kind of your plan is to more than double this here okay very good and where will most of that growth come from selling more to current customers or adding completely new customers i i would say roughly 50 50. okay and the money that you make from selling more to current customers what more will you sell them we say our tool given our tool consists of a lot of let's say parts models delivering different physical verification functionality we trying to to meet the market expectation and add more more uh tools to cover the physical verification needs so while we introduce the the new functionality we can charge additional many pay-per-views for that that's it okay very good and and that's per taping right or take out that's that's per hour that's per hour uh the user the user can choose at the moment between two payment system the first one stands for 24 hour segregation and it's per hour another one is currently in beta testing stage but it allows to to decrea let's say decrease the discretization and calculate per minutes or even per seconds and what's your what's your team size today how many folks working on this the team is less than it's about 20 20 engineers today and mostly located in kiev ukraine okay of ukraine and as ukraine do you feel kind of a startup bubble happening do you have a lot of friends there that are building companies yes sure yeah a lot of startups very good updates do you know do you know anything yet about kind of churn or cut you know do you know what your turn is or is it too early of course so what what is your churn churn is how many customers you you lose every month uh it's it's hard uh it's hard to calculate but we nevertheless we're trying to to collect some uh refuse cases from sas solution it's but uh the typical answer is something like uh it's it's not about that we don't like you or your solution but at the moment we're a small sme company and we don't have the active project fast at the moment we will come back soon once we get the news how many customers have you lost over the past year um maybe 10 or so about 10. since you have about since you have less than 100 since you have less than 100 customers today if you've lost 10 you will call it kind of 10 logo churn per year right now do you know what it costs you yet to acquire a new customer uh it's about it's about uh one thousand euro and where do you see if we if we spend we spend mostly for for amazon accounts because we our system is amazon aws based so every month we have to if if you create the new account for user for evaluation for for commercial exploitation it doesn't matter we every month we have to pay certain uh balance for amazing very good all right let's wrap up here with the famous five number one what's your favorite business book uh i'll give you probably the last one i read it was something like uh winning strategy for negotiations for what negotiations we do got it reading strategy for negotiations is that right good all right number two is there a ceo you're following or studying right now [Music] from time to time i'm trying to follow uh all ceos of our company competitors okay and apart apart from that of course elon musk yeah number three uh what's your favorite online tool for building the company amazon aws number four how many hours of sleep to get every night well uh i wish i slept around more but at the moment it's about six or seven uh very good during the business week and what's your situation married single kiddos uh married okay and one daughter five years old oh so you're you're busy guy how old are you five five years old oh sorry how old are you i i am i am i am 34 years old 34. okay alexander last question what do you wish your 20 year old self knew wow maybe there is no knowledge that is not power and i think maybe i i could have started my business earlier so just believe in yourself and be happy guys believe in yourself be happy and always remember knowledge is power he wishes maybe he started his company a little earlier polytechnic cloud again advanced cloud-based physical verification they charge on a kind of per hour tape out basis have less than 100 customers today paying about three grand per year so doing about 11 grand per month right now in revenue that's up from nothing just a year ago because they were still in pre-revenue phase at that point they funded the company from a 1.5 million dollar grant from the european union right now they've got a team of 20 in kiev building the company 10 logo churn per year spending about 1200 bucks to get a new customer so five month payback period if that customer pays three grand for the first year alexander thanks for taking us to the top thank you very much nathan