SAFA Revenue, Valuation & Funding (2024)

[00:00] Hey, folks. My guest today is Aarik Gulaya. He's the CEO of SAFA, a b to b SaaS company automating the safety analysis process for safety critical software. Aarik, you ready to take us to the top? [00:10] >> Yeah. Yeah. Most definitely. What's an example of safety critical software? Yeah, so safety critical software, specifically we can look at a few different industries, the automotive industry, robotics industry, medical devices, and aerospace. Essentially, these are exceptionally complex systems and they're dealing with humans in many cases, either in the transportation of them or they're working around them. So in any case where a failure can happen in the operation of that software that may harm a human, we [00:41] >> can consider that a safety critical software. [00:43] So you might sell to Delta Airlines and the software that runs the planes that they have to check right before every every takeoff? [00:49] >> Yeah. Yeah. In theory, Delta Airlines could could use our product for for any of their safety case development around their planes. [00:56] Interesting. Okay. And so how do you price this thing? What's the average customer paying per year? [01:00] >> Yeah. So currently, we're pre revenue and very early stage. So when we're looking at pricing, we're typically using competitor pricing. So we were looking at IBM Doors, Jama Software. These are very large requirements management softwares in the space. For reference there, IBM Doors can start at $50,000 for an enterprise application. Then they'll charge any additional user seats. Typically this ranges from $500 to $1,600 and then any additional functionality and add ons coming [01:29] >> in for whatever price they may put that at. [01:31] So you're building, you're building, you're building. When did you write the first line of code? This year, last year, sometime else? [01:38] >> I guess to give a little background, we've been working with a professor at the University of Notre Dame. Her name is Doctor Jane Cleland-Huang. And she's been working on traceability, specifically automating that process for the last twenty plus years. So if she was here, she'd probably say she started in early two thousands trying to figure this problem out. [02:00] You guys though joining the team was last year? [02:03] >> Yes. I was brought on specifically to commercialize this technology into a standalone spinout from the university. [02:09] Yeah. So this is always we get this a lot with founders. I remember when I was at Virginia Tech trying to spin IP out of the university's research lab was a nightmare because they just had very archaic terms around ownership and all this kind of stuff. So is Notre Dame friendly here? How much equity does Notre Dame own in SAFA? [02:25] >> Yeah. So we're we're working directly with the idea center at Notre Dame. They're their, you know, entrepreneurship center. They've typically the classic process is sort of just to license IP out to larger corporations. And then, in some cases that research may or may not come to light. In this case, we were attempting to build a startup within Notre Dame. So currently we are a 100% Notre Dame wholly owned, but in the next month, month and a [02:51] >> half, we will be spinning out the company and Notre Dame will have a 20% stake in terms of the idea center. Then we'll also be paying a nominal license fee to the University of Notre Dame. [03:03] Yeah, okay, got it, got it. Plus license fee. And then what does that leave for you, the professor and any other co founders? [03:09] >> Yeah, so we've sort of set aside for now in terms of first round investment, a seed round or something like that, as well as an employee options pool around the 40 to 50% of that equity table or that cap table. In terms of what goes to everyone else, Jane is going to be keeping like about a 9% equity stake. Alberto, who is our lead engineer, another 9%. Myself will be at 10%. And then we have our [03:41] >> AI engineer Jin Feng who will have 2% as well. [03:45] Interesting. Okay. So between Jane, the lead engineer, you, the lead AI engineer, you guys altogether on 50%. Right? [03:52] >> Just a a little bit under. Yeah. [03:54] A little [03:55] >> bit under, which we've gotten pushed back on. [03:58] Oh, what's going on there, YouTube? Good to see you guys. Now imagine this. You love watching these interviews with SaaS founders. But imagine if we took all of the valuation data out from over 2,807 interviews I've done manually saves you a lot of time. Well, we've done this, we've built it into the beautiful interface inside of Founderpath. Check this out. I'll show you how you can access this in a second. But you log in, you connect [04:22] your Stripe account, you see your valuation real time, you can see what changed over the past eighty eight days and even set goals for valuation this year. Now the secret evaluation is there's many different ways to value a SaaS business. So the reason you're gonna see three or four different valuations inside of your Founderpath dashboard, this is all free by the way, is because depending on who's doing the buying of your SaaS company, you're gonna get [04:46] 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 not [05:08] built off random data. Again, you guys hear these interviews on YouTube. All these datas are built from real time valuation data points founder share with us on the show. So traction 1,200,000 seed round 3.7 raise. They sold 22% of their business. Go in here and filter by the event. Maybe you only wanna see companies that have sold the whole business. Well, here are a bunch that have been acquired the valuation and the multiple. Maybe you're going [05:34] out right now and you're raising your seed round. We'll go in here and look at all this recent seed deals that went down, what they raised, what valuation they raised at and what percent that they sold. There's never been a larger dataset of SaaS valuations than what you can get now inside of Founderpath. And we're thrilled to bring it to you. All right. We're gonna go back to the YouTube video here in a second. But if [05:56] you wanna check this tool out, if you wanna jump in and sign up, you can check it out for free to get your valuation at this link, this link, founderpath.com/products/valuations. Or if you go to founderpath.com and hover over products, click on get your valuation here, and go ahead and sign up to give it a whirl. Again, all that valuation data live right inside the platform. I hope to see you there. Alright. Let's jump back into the [06:22] interview. Yeah. And then the an an investor put some capital on their own, some above that. Notre Dame will keep 20% and that's how you're planning. Yep. Yep. Okay. Interesting. I guess why do guy like you, you're bright, you're sharp, you can commercialize. Why get in a mess like this? Why not just launch something yourself from scratch and own a 100%? [06:39] >> Yeah. Yeah. So I mean, it it really was, I guess, a happy accident or whatever you want to call it, an event of chaos, where I happened to interview for a random position looking at Founder Associates for this university research, Do you have the skills or the background to essentially commercialize this technology? For me, it's just quite a phenomenal piece of technology. The natural language processing models and deep learning models that we're applying to this problem [07:09] >> are exceptionally generalizable. So on my own end, I've looked at starting separate companies around natural language processing and it just seemed like a better fit for me and my skills for something that we can expand into many industries for. [07:25] So you're in charge of commercialization, who's going to be your first customer? [07:29] >> Yeah, so right now, you know, we're finishing up our MVP and I know that term is used very broadly, this will be somewhat of a more put together first product offering, if you will. We're currently looking at two to three development partners that we're going to be starting within the next month to month and a half. One of those is LHP Engineering. We're currently in talks about what will that potential partnership look like? How can we [07:52] >> add to their process? They work specifically within the automotive industry and will be helping us with some implementation for some of our more advanced features. And then we're looking at two other smaller companies that work in the robotics field, specifically within agri tech and mobile robotics. [08:08] So is LHP engineering going to be paying you for this? [08:11] >> So LHP engineering is actually going to, right now we're discussing them coming in on our safe round. So they would come in for potentially they've soft committed to $25,000 So, [08:24] >> I guess technically we won't consider that payment. We may have them pay us a nominal amount in order to say it's a paid pilot, but moving forward, the other pilot partners will be paying us in. [08:35] And so when do you think you can get your first paid customer spun up, right? You refresh the BB and T or Chase bank account and woah, there's 50 ks there. [08:43] >> Yeah. Yeah. So right now, at least the way that the product roadmap is turning out, we're looking at a beta program in about Q2 or Q3 of twenty twenty two. And then we're looking at a full release in Q1 of twenty twenty four or 2023, sorry, my mistake. So we'll probably be looking at that first paying candidate within that beta program. Obviously, that'll be a discounted fee in terms of what a full license fee or licensed [09:11] >> customer will look like. We'll probably see that in Q1 of twenty twenty three. [09:15] What are you learning right now as you talk and have commercialization conversations? What can you price against? Is it sort of number of software runs or tests completed in a certain month or what's the metric? [09:25] >> Yeah, so that's an option. It's an option that we're sort of open to. The traditional way we've seen pricing in this industry is how many users are actually on the platform. So within an engineering team, do you have 10 people who would be interacting with this platform, 20 people? And typically that's how IBM Doors and Jama software price their price their offering as well. [09:46] Mhmm. And why what are you guys doing uniquely different than than than those two companies, IBM Doors and Jama software? [09:53] >> Yeah. Yeah. So the biggest and most obvious is the machine learning and deep learning aspect of it. So these are great tools. We're not going to knock against them, but essentially they provide a blank slate for companies to come into and create all of their documentation, link all of this documentation together and provide change analysis that way. Where Safa is differentiated is within that application of deep learning and natural language processing. So as opposed to having [10:20] >> an engineer having to manually go through and link all of these things together, We can automate that process, partially automate it so that we can speed that up. In terms of change analysis, we're able to better understand how one change in a part of a complex system affects a top level requirement or something like this. And then finally, we're also looking at integrating safety standards directly into the platform, sort of native standard support, which IBM Doors [10:44] >> and Jama, they don't provide this. Engineers typically need to know this like the back of their hand, But if we can provide them this type of support within the platform, we can increase that speed to safety certification. [10:56] Very cool. How many folks are on the team today full time? [10:59] >> Yeah, so full time, we currently we technically don't have any full time employees at the company, but we do have our lead front end engineer, our lead engineer. [11:11] We have two So I guess how many are how many are part time total? [11:15] >> Yeah. Yeah. So four. About six, six people. Six. Yeah. [11:19] And so because you're still waiting on MVP to get done, are you in charge of raising the safe round as head of commercialization? [11:24] >> Yes. Yes. That is handle all of the business side in terms of setting up the websites, getting all of the product market fit validation into place, any infrastructure we may need. And then finally also interfacing with VCs and getting that funding. [11:40] And so how much are you going to raise? [11:43] >> So currently we're looking at $200,000 at a two million dollar cap, 20% discount. We have 125 ks of that hard committed, 25 soft committed. We have 50,000 outstanding currently. [11:56] Very cool. And so when do you think that'll close? [11:58] >> We're looking to close that at the end of next month that we should have everyone in. And I'm currently meeting weekly with people to drum up interest. [12:10] Well, you're off to the races, Aarik. It's gonna be fun to watch. You have to come in six months and twelve months, give us an update. Okay? [12:15] >> Yeah. Yeah. [12:15] Would be awesome. Before we wrap up, let's chat through the famous five here. Number one, favorite business book. [12:21] >> Favorite business book. [12:24] >> It's kind of a cop out, Start With Why. [12:27] Number two, is there a CEO you're following or studying? [12:32] >> Masayoshi san, even though I wouldn't really consider him as much of a CEO, but more of a holdings, I guess SoftBank's more of a holdings company now, but yep. [12:41] Number three, what's your favorite online tool for building the business? [12:46] >> Notion. [12:47] Number four, how many hours of sleep do get every night? [12:52] >> Five to six. [12:53] Okay. And what's your situation? Married, single, kids? [12:56] >> Sing or well, I'm not single. I'm I'm in a relationship. Long term No kids. I'm married. Yeah. No kids. [13:03] Alright. [13:04] How old are you, Aarik? [13:05] >> I am 27 years old. [13:07] >> 27. [13:08] Last question. Something you wish you when you were 20. [13:15] >> If you give your all to something, it will work out. Don't don't stress out about it. [13:20] Guys, there you have it. Safa.ai, Notre Dame's spinout. And in case you're not familiar with how those spinouts work, you know, they're anticipating Notre Dame will own about 20% of the IP. The professor that developed it own about 9%. Aarik in charge of commercialization will own, call it 10%. And then some key engineers and all their employees own 20% to 30% in addition to the investors coming in on their $200,000 safe right now that they're closing [13:40] on a 2,000,000 cap. We hope they can get it done. They're building software that helps safety critical infrastructure manage and make sure testing's working, competing directly with IBM Doors and Jama software. We'll see what happens next. Aarik, thanks for taking us to top. [13:52] >> Cool. Thank you, Nathan. [13:55] One 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. 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