How Salad Technologies Reached 70 Petaflops and $3M+ in Marketplace Spend in 2021 (Interview with Founder Bob Miles)

Introduction and Bob Miles Background

Nathan Latka

00:00Hey, folks. My guest today is Bob Miles. He's an avid traveler and serial entrepreneur with a history in startups ranging from IoT connected car platforms, Netflix TV shows, consumer drones, distributed computing platforms. Today, he's the founder of salad.com and is partnering with millions of gamers around the globe to build the world's largest cloud computing platform. Bob, you're ready to take us to the top?

Bob Miles

00:19>> Ready to go, Nathan.

Nathan Latka

00:20Alright. Everyone just wants to know what you paid for salad.com. That's a hell of a URL.

Bob Miles

00:25>> It was a bargain, mate. So I won't spill the beans on the actual price. It was about half what these, like, tools that that judge the price of websites suggested. And but we actually bought it off Hidden Valley Ranch. They'd owned it since 1996.

Nathan Latka

00:41That's hysteria what year did you buy it in?

Bob Miles

00:44>> We bought it this year.

Nathan Latka

00:45Oh, you just bought it? Okay.

Bob Miles

00:47>> Yeah. Very cool.

How Salad Works: Gamers Share GPU Compute

Nathan Latka

00:48Alright. Let's let's get some of the story here. So so from what I understand, from what I can tell here, you're effectively enabling me to make money from my computer when I'm not using it actively by basically submitting it to your network. Is that accurate for someone that doesn't, you know, is not deep in your space?

Bob Miles

01:02>> That's right, Nathan. So we believe every computer has meaningful value these days. You know, our lives are becoming more and more digital. Demand for compute resources is exploding, and every connected device now has meaningful value. And so here at salad, we allow you, specifically gamers, that's where the unit economics are good, gamers to share their powerful computers with GPUs so that when they're not playing games, they can turn that downtime into games, gift cards, subscriptions. There

Electricity Costs and Earnings for Contributors

Bob Miles

01:35>> is a catch. You know, running a computer does does cost electricity. It might add 5 to 10 to $15 a month to your bill. But the computer I'm on right now, that generates about 60 to $65 a month worth of digital spend for me. Interesting. Yeah. And through that so it's an open source client. Mean, I if you think about what we're introducing, Nathan, it's a pretty uncomfortable value proposition. You know, share your computer with someone

02:04>> else when you're not using it. I see it being analogous to Airbnb or Uber ten, fifteen years ago. You know, complete stranger is gonna pick you up in their car, complete stranger is gonna stay in the room next to you. We're bringing the same uncomfortable value proposition to market. We've been at it three years, but yeah, with our open source software, you could see what you're installing, we're we're now the world's fourth largest supercomputer in in

Nathan Latka

02:30Measured measured by what?

Bob Miles

02:32>> By teraflops. Great question. Yeah. By teraflops. So that is essentially the horsepower of your computer, the the processing power. Single point teraflops

Nathan Latka

02:41is So what do got now? What are your single point teraflops?

Network Scale: 70 Petaflops Explained

Bob Miles

02:44>> A little over 70 petaflops, if that means anything to you.

Nathan Latka

02:49It doesn't. I'm trying to get can you say that's like stack papers to the moon and back 7,000 times? Or how do you make that real for my listeners?

Bob Miles

02:56>> Mate, you know, I haven't really thought about that. So he here's the way I I benchmark it. It's not apples to apples, be because we're an Airbnb model. You know, Airbnb doesn't own the hotel rooms. But we are the equivalent of of it's a Chinese supercomputer. It cost them $273,000,000 to build this computer with the equivalent processing card. That's probably the best I've got for you, Nathan.

Nathan Latka

03:22So did it was your last valuation then $273,000,000?

Bob Miles

03:25>> Oh, mate. That'd be nice. No. No. Long long way from that, but we're getting there.

Business Model: Marketplace Margin and Breakage

Nathan Latka

03:32Alright. Fair enough. How do you make money?

Bob Miles

03:35>> Yeah. Good question. So today, we give a 100% of the value your computer generates to you. So we project the balance to you, and then our business model exists within that positive cash cycle. So, you know, the tens of thousands of nodes on the network right now, we are the custodians for all the value. So there is an element of breakage there. There's some abandoned balance. But then there's also reward distribution margins. So that money that

04:07>> your computer generates, you can only spend it through our storefront, our network, and we take a margin from that spend. So that's representative of today. Where we're going in future is looking to aggregate a lot of different workloads. The cost of our compute is around one fifth, again, per teraflop per hour of an AWS spot instance. So there's margins on the compute side further down the line. We're working on some really exciting projects on that front.

Nathan Latka

04:37I submit my computer to your network for a full month. Let's say I earn $50 from it. I cost it. It cost me an extra 5 to $10 in electricity, so I'm netting 40. You're giving me effectively $40 that I can now go spend on the salad marketplace. Let's say I wanna spend that to get a $40 Amazon gift card. How much of that $40 do you get for bringing that business to Amazon?

Bob Miles

04:56>> Yeah. Great question. So for a $40 Amazon gift card, we actually list these. We have them. We charge you $50. 50 bucks worth of salad balance. So we're taking and it's different for every reward. So on average, net net it out across all the different rewards, at 23%. But for your specific example, the markup is from $40 to $50. That's what we charge you in salad balance. Do you have

BD Challenge: Negotiating Reward Supplier Deals

Nathan Latka

05:24to go negotiate every one of these deals with Amazon, with Discord, with anything you list in your marketplace? That feels like a huge BD operation.

Bob Miles

05:31>> Oh, mate. It is it is the Achilles heel for us scaling right now. So so Yeah. Our vision is not to become another ecommerce marketplace. We wanna be the easiest and most trusted way to share your computer. Like, we're the experts at extracting that value. So today, we work with a couple of different suppliers that provide all these different games, provide all these different gift cards. So so we're able to kinda consolidate down the relationship to

05:56>> a few. But things like Discord, we have a direct relationship with them where we purchase these subscriptions wholesale at a at a wholesale price and then distribute them. But ultimately, I mean, you've described what's next for us in our our go to market strategy. We wanna build an SDK that allows other people, game publishers, studios, you know, content creators to extract the value of of their install base of those PCs so that we don't have to

06:24>> deal with inventory.

Nathan Latka

06:26You have Salad Balance Salad Balance paid on your website listed right at $3,000,000. Over what period of time?

Bob Miles

06:33>> That's year to date. We update that manually, so it's it's a little bit outdated.

Nathan Latka

06:37But That's why I asked.

Bob Miles

06:39>> Yeah. The website So

Nathan Latka

06:42twenty twenty twenty one year to date, what is it like as of today? You're probably gonna tell me something more updated than what's on the website.

Bob Miles

06:47>> Yeah. It's it's it's a little over three.

Nathan Latka

06:49Yeah.

Bob Miles

06:50>> It's a little over three. It was updated quite recently actually because we're actually getting sued for accessibility on our website. So we've had to bring our website into into spec. You know, the two options we were given this this is taking a turn you probably weren't expecting. This is really interesting, and it's and it's important for anyone who operates a website.

07:14>> You could be sued if your website is not accessible to those who are vision impaired. So we have now gone through a huge effort recently to bring it up to spec, make sure it's accessible according to a couple of standards. But but ultimately, we're not a public accommodation, so it's a frivolous lawsuit. But it's been an interesting kind of sidewall that's been thrown at us recently. As a small startup, it's not what we were expecting. Usually,

07:39>> you're getting sued is when you've made it. I wouldn't say we're quite there yet. We're waiting for that $273,000,000 valuation that you mentioned.

Nathan Latka

07:48Understood. When you do the the the 3.1 or whatever million in salad marketplace spend year to date, that's the $50 number you just told me that you would bill where I'm getting like a $40 Amazon gift card. Right?

Bob Miles

07:59>> Yes. Yep. Top line revenue. Exactly. So we're a marketplace. We don't have SaaS margins. We're we're we're a marketplace.

Salad Balance and Year-to-Date Revenue

Nathan Latka

08:06But I can take 3,100,000 in volume this year times the 23% rate. That's the average margin set across your marketplace to assume you guys are doing something like $700,000 in revenue this year.

Bob Miles

08:16>> Yeah. Plus there's breakage. So so we also have that model they can baked in. And where

Breakage Revenue Explained

Nathan Latka

08:24What does that mean? Sorry. Can you quantify that? How much revenue you do breakage revenue this year?

Bob Miles

08:28>> Yeah. You know, it's it's funny because I didn't know what it was either. Breakage is kinda like the gift card model. Right? So you can people will purchase gift cards and either never use them or they expire, depends on what state you're in. But once you translate it from USD into V bucks, into Starbucks gift card, into Target gift card, whatever it might be, not a 100% of that value will be spent. That is breakage.

Nathan Latka

08:57So how much will that be this year?

Bob Miles

09:00>> Oh gosh, mate. You're diving deep. That so so that is a time dependent factor.

09:09>> 18% of the balance outstanding belongs to people who have not logged in in six months or more. So that is a general rule of thumb. But we, right now, do not nuke anyone's balance.

Fundraising: Seed Round and Cash Position

Nathan Latka

09:24You just let it sit there.

Bob Miles

09:26>> We let it sit there. So so we haven't realized that yet. But that is an element, you know, we're seed plus stage pretty early. We're actually out raising our series a now.

Nathan Latka

09:35How much are you looking for?

Bob Miles

09:37>> 15,000,000. 15,000,000 is what we're raising.

Nathan Latka

09:40And this would be your you said, sorry, your this would be your seed?

Bob Miles

09:44>> No. This is series a. We raised our seed plus this time last year. We raised 3,200,000. We still have more than two on the balance sheet. So we've operated very lean this past year. But we've had some really exciting opportunities come our way from big Fortune five hundreds to run workloads across our network. And that's why we're out raising a series a now to to grow the team.

Nathan Latka

10:10How many when I if I ask you how many customers do you have, how would you respond to that?

Customer Definition: Suppliers vs Demand Side

Bob Miles

10:15>> This is a great question. So we're a marketplace. We have suppliers, and then we have demand. Right? So so right now, users are our suppliers, 20,000 daily active. But they're not customers. Right? They're suppliers. So demand, those who pay you are your customers. And right now, we are tapping into web three. So so this is the why now salad for moment the why now moment for salad. For the first time, this is a few years ago,

10:49>> Web three assigned a value to every connected device. So we're talking about proof of work mining here. So we were able to tap into these p to p networks that pay us for our network, and that for us was a solution to the two sided market problem. We're able to focus on the human problem of distributed computing. How do you motivate people to share their computers without having to worry about that demand side? So our customer

11:16>> right now, to to boil it down to to one answer for you, Nathan, is Web three.

Nathan Latka

11:22Yeah. But how many? So how many customers do you have?

Bob Miles

11:26>> Well, we we so we mine half a dozen to a dozen different protocols.

Nathan Latka

11:32And You're talking about Helium, where you need IoT devices and you need render power and GPU power. You're mining.

Bob Miles

11:38>> Helium's a great example. Yeah. It's it's so you might be a a so Helium is a closed network where they have their own Yeah. Hardware that gets distributed. We are tapping into the existing capital asset.

Nathan Latka

11:50Okay. Understood. Understood. But wouldn't also, like, Amazon be your customer or the people that you're putting the awards cards? Like, how many in how many individual SKUs do you have listed in your marketplace that people can buy? Why do you not consider those your customers?

Bob Miles

12:04>> You know, that's a that's a good question. That is an incentive mechanism. That is a pricing model. So so we purchase those to reward our users for their supply of compute resources. So they are not strictly our customer. They are a mechanism by which we incentivize suppliers, if that makes sense.

Top-Line vs Recognised Revenue, and 2020 Comparison

Nathan Latka

12:26Yep. Really interesting. So then if I was gonna summarize your revenue model, I'm doing this in under fourteen minutes here. So you tell me if I'm right or wrong. You've got this year north of 1,400,000 in revenue of which 713,000 is recognized based off your 23% take. Another 700 ks is breakage, which you haven't cashed in on yet, but you could quantify because those users haven't logged in in six months. Then lastly, compute power that goes

12:48to your network. You're actually able to make a little extra juice there by using that to sort of mine on some of these networks to get revenue above 1,400,000. Is that accurate?

Bob Miles

12:56>> Yep. Top line revenue is closer to, well, year to date, a little over three. So so three, three and a half.

Nathan Latka

13:05And what did you do last year?

Bob Miles

13:08>> Last year was like a 150 k. So we have grown massively in the last this has been our breakout year.

Founding Year and Seed Valuation

Nathan Latka

13:15And when did you launch? 2019?

Bob Miles

13:18>> No. 2018.

Nathan Latka

13:192018. Interesting. Yeah. So it's So what did you raise the the 3.2 then when you broke a 150,000 last year or, I guess, in 2020, when you raised that seed, the 3.2, what valuation was that at?

Bob Miles

13:32>> Fifth well, 12 was pre-money. $12. 12. 12,000,000 pre-money.

Nathan Latka

13:39You laugh when you say that. Do you feel like you, like, took you know, you you took the investors for a ride there? You told a sexy story, and they said, whatever you want, Bob. Whatever evaluation you want.

Bob Miles

13:47>> No. The contrary, mate. I think they got a great deal. Fast forward to who we are today. Come on. A $150,000

Nathan Latka

13:55in revenue at a 12,000,000 valuation. I mean, I get it. You're of the vision. You own salad.com. You know, I get it. But this is great. Look. I I this is I love an entrepreneur who does a good story and minimizes dilution. So I'm not laughing at you. I'm laughing with you. I think it's great.

Bob Miles

14:10>> Well, look. Hey. The investors have a very big slice of the the the salad pie. We that was not our first round. So so we had safe notes. We had

Nathan Latka

14:20How much before?

Bob Miles

14:21>> 2. 2,000,000 before. So 5.3 we've raised altogether. And and look, this is Nathan, I mentioned it before. We are introducing a radically new, very uncomfortable concept that has massive potential for us to escape, reach escape velocity that takes a lot of capital. So so it's taken a fair bit of dilution, but we're now hitting that that that exponential part of the curve, which is

Nathan Latka

14:48Are you still Founder?

Bob Miles

14:50>> Yeah. I'm the only Founder. Yeah. Amazing.

Nathan Latka

14:53So you had a 100% at the beginning.

Bob Miles

14:55>> Well, no. So so I actually, in the early days, didn't have the confidence to found this thing myself. So I did actually bring in a co founder, management consulting about from a management consulting background. About six to eighteen months in sixteen to eighteen months in, we realized we are struggling to find product market fit. We need to be more lean. And so that cofounder cofounder left, and and I was left

Nathan Latka

15:23Did you buy back the equity?

15:26I don't know if I don't know if that's public, Nathan.

Bob Miles

15:29>> But, yeah,

Nathan Latka

15:30not I was gonna say that sucks if you bring someone in and give them 20% and they leave, and then you have all this basically inactive equity, not on, you know, not the company anymore.

Bob Miles

15:38>> Yeah, it does. But that's what vesting schedules are for. Right? So that controls controls the damage there.

Nathan Latka

15:44How long was that co founder at the company? Was it under twelve months?

Bob Miles

15:47>> No. Sixteen to eighteen.

Nathan Latka

15:49Okay. Fair enough. So if you'd, you know, assume a one year cliff and four year vest, people can do their own math there. But so Bob, for all and I'll basically wrapping up, I mean, you're basically the sole founder. And then you raised 2,000,000 in safes at whatever valuation, then 3.2 at 12. So, you know, you've sold, call it, 40% of the business to date.

Bob Miles

16:08>> Yeah. I'd have to check out Carta. But that would be that would be around around the the mark plus or minus, I'd say, Nathan.

Nathan Latka

16:16Who cares? You own salad.com. Nothing else matters. Raising a $15,000,000 round now. What valuation are you gonna try and target?

Series A: $15M Raise and Target Valuation

Bob Miles

16:29>> So $5,000,000 run rate. We've actually We've got verbal terms. They're not where I want it to be. I want it to be at 60 or 70 pre money. We have got some incredibly exciting revenue opportunities, diversified workloads from Fortune 500 coming up. Here am I. Tell them the story, Nathan.

Nathan Latka

16:51Can't you can't even say the valuation with a straight face.

Bob Miles

16:57>> Oh, mate. Well, hey. Nathan, if this is what you do for a living, you would be very aware of what's going on in the markets right now. It is a Founder's market. Think it's so you and I both, mate. You and I both.

Team Size and Engineering Headcount

Nathan Latka

17:11I look. I think it's great. I've seen people raise with no revenue at this valuation. So at least you have revenue. You're in a hot space. You have traction. I mean, I think I think it's great. So good stuff. Hey. Wrap up the team real quick. And then we gotta wrap up. How many folks are on the team full time?

Bob Miles

17:25>> So we've just hired three more. We are at 19, plus a support team of of six more, so so 25 altogether.

Nathan Latka

17:33How many engineers?

Bob Miles

17:36>> Seven. Now eight.

Famous Five Rapid Fire Questions

Nathan Latka

17:39Very cool. Alright. Let's wrap up Bob with the famous five. Number one, favorite book.

Bob Miles

17:44>> Mate, I am illiterate. I've got ADD. I haven't read a book since Goosebumps in the late nineties. So here's your answer.

Nathan Latka

17:51Number two, is there a CEO you're following or studying?

Bob Miles

18:01>> So so I'm very interested in the Web three space at the moment, and and the CEO kinda figurehead doesn't really exist within that space. So so my answer in lieu of a a CEO is looking at these DAOs, these different distributed autonomous organizations. I wanna direct people there. Have a look

Nathan Latka

18:22at DAO is your favorite?

Bob Miles

18:27>> You know, this this is gonna come out of left field, but it's the ones that are being launched by Super Token. So so they're really interesting. They're kind of mixing NFTs and community ownership of these NFTs, which then feed into governance of the DAOs. One of them I just bought into recently would be Astra Bulls. I think that's a really interesting kind of fun one.

Nathan Latka

18:50Interesting. Alright. Number three, favorite online tool. Favorite online tool.

Bob Miles

18:57>> The team's gonna hate me for this, but but it's a little bit patriotic to say Atlassian. Love Atlassian, mate.

Nathan Latka

19:05Are you based in Australia?

Bob Miles

19:06>> No. No. I'm here in The States, but that's an Aussie company.

Nathan Latka

19:10Fair enough. No. I know we've had we've had we had Jay Simons on, president of Atlassian, I wanna say, three or four months ago. I think it's great company.

Bob Miles

19:17>> Oh, cool.

Nathan Latka

19:18Are you from New Zealand or Sydney? Or

Bob Miles

19:20>> From Australia. From yeah. Sydney.

Nathan Latka

19:22Nice. Alright. Number four. How many hours of sleep do eat every night?

Bob Miles

19:26>> I focus on sleep. I actually he here's a here's a plug. I just bought an Eight Sleep Pod. Phenomenal. So I get my full eight hours. I sleep well.

Nathan Latka

19:36What do you like about Eight Sleep?

Bob Miles

19:38>> It's not so much the tech side. Like, I live in in the tropics now. It's the air conditioned aspect. I run hot at night, and Eight Sleep keeps me nice and cool. I should they should they should give me a promo or referral code. No.

Nathan Latka

19:52They're a spot. No. I'm I'm teeing this up beautifully because they happen to be a sponsor. Guys, if you want Eight Sleep, check it out at nathanlatka.com forward / Are they? Forward /8 sleep.

Bob Miles

20:01>> Hey. Hook me up with a referral code. Nathan?

Nathan Latka

20:05Alright. Good. So you got plenty of sleep. What's your situation? Married, single, kids?

Bob Miles

20:11>> Married, and I got a six week old. Wow. So yeah. Yeah. So so I'm lucky to have a wife who who does does a lot of the night shift so I can get that eight hours. But but, hey, I roll up to sleep from time to time. I love that. For sure. And, Bob, how old are you? Mid thirties.

20:29>> Mid we'll call it 35.

Nathan Latka

20:30Last question. Something you wish you knew when you were 20.

Bob Miles

20:34>> Okay. So I love this. It's this is kind of embarrassing to say. It took me till 30 to realize this. It's it's kind of tangential to the Dunning Kruger effect. You know, the more you learn about something, the more you recognize how little you know. No one really has a clue what they're doing. Right? Like, I grew up going through through school thinking that adults had it all figured out. That is so far from the truth.

20:57>> So that's the one thing I'll be teaching my little kid.

21:02>> No one really knows what they're what they're doing. We we should all respect that a little earlier in life already.

Nathan Latka

21:08Guys, salad.com, if you're a gamer, basically contribute your GPU power to the system, they then use it to make money elsewhere, and you earn salad points. Think of it like money, then spend it on the salad marketplace. They are gonna process about and do about $3,000,000 in revenue this year between breakage fees, you know, money through the platform, and then also mining using that GPU power on, you know, things like heat. Not heating, but things like

21:30heat. And interested space, again, salad.com. Check it out. Raised their last round $3,200,000 seed at a 12,000,000 valuation. Hoping to raise a $15,000,000 round right now, call it between a 60 and $70,000,000 valuation. We'll see if Bob can get it done. Bob, thanks for taking us to the top.

Bob Miles

21:43>> Thank you. Bye. Cheers, Nathan.

Nathan Latka

21:47One 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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