Skyhive Revenue & Funding (2023)

hello everyone my guest today is sean hinton he's the founder and ceo of sky hive a canadian technology company that applies machine and deep learning to discovering revolutionary efficiencies in the movement of human capital sean is a future of work thought leader and passionate about applying sky hives technology to support the workforce's most at-risk populations sean are you ready to take us to the top yes sir okay so break this down for us i mean tell me tell me exactly what the company does and maybe a customer story sure so uh two years ago i was uh president of a large manufacturing company here in vancouver we had a 250 million dollar top line 500 employees 23 global offices and i came to the realization through a series of events that i really didn't know what my workforce was capable of and what i mean by that is i would look around my office and i and i knew the people that were hired and and for the jobs that they were hired but were they actually really working to their true capability and so i started to to look around and realize that this was uh sort of a systemic problem that that we understand our level but not at a deep level and so um what skyhive does is it takes uh it uses machine learning deep learning to extract the skills from people extract the skills required from jobs and then we apply data science to finding efficiencies and correlations so the idea is is that you're compressing the amount of time it takes to move people from one job to the other or to acquire people uh you know for new jobs within your company but it also supports learning and development for people so they can get a sense of what skills do i actually have and how do they apply to my company so a good use case is we're working with a a a large german auto manufacturer and they have a strategy that goes out from uh now until 2023 they have a skill set that they require in 2023 and a skill set that they have today obviously the world of auto manufacturing is changing considerably with uh going away from combustible engines and going towards sort of autonomous vehicles and so it's going to be a very different world in 2023 and what we're able to do is we're able to inventory the skills that are required uh then inventory the skills that are in place now and find direct pathways to getting those folks up skilled and ready for the changing needs of the company so is this i'm a little confused is this something a tool that a company would use to help advancement of their own employees or is this something that a recruiter would use to help place employees in the first place so the application uh is twofold so it's within a company within a large enterprise and uh the the the tool can be used to find people out in the world that you want to come in and work with you with a particular skill set uh but it's mainly focused on looking at large enterprise workforce efficiency um opportunities and learning and development opportunities and sean is is the revenue model for you is it a peer play sas company absolutely okay so i mean give me a general sense what's the customer going to pay you per month or per year to access this tech so the the customer would be looking at somewhere around 5000 a month for uh full team access and and that would be both an admin license as well as uh an employee user flow as well okay and you'd say that's a fair average of your current base is about five grand a month yep okay great and put this on a timeline for us when you launch uh we launched alpha uh last april and that's how i know you're a developer by the way when you have alpha launches yeah okay developer not a developer at all actually i'm on the business side oh interesting okay yeah um so we launched alpha last year and then launched beta in june okay this year so 2017 launch alpha beta this year in june and how many customers have you scaled to to date uh right now we're working with 17 uh large enterprise customers okay 17 and i mean so how did you close those deals how did you get the first one uh we were really fortunate that we were uh completely inbound up until this point and um our first client was the canadian military and so we were awarded uh shortly after our beta launch a department of national defense contract and that that obviously lends a lot of credibility to the company with respect to stability and and security et cetera i mean so how does a government organization trust a brand new startup with no customers and award them a five thousand dollar a month grant or customer contract how did you win that so that that contract's a little little bit different it's uh it would be more than five thousand a month but uh the canadian government has implemented a new innovation program called ideas and the idea is for ideas that they would go out and solve some of their innovation challenges working with new canadian startups and innovative technology companies and so we were fortunate to be uh four of 600 companies uh that were awarded one of four of 600 companies that were awarded their initial contracts so was it a grant it's um it's not quite a grant it's it's a program where they're actually investing in growing the company and operationalizing it over time and so we go through a process of basically stage gate development where we're proving concepts and milestones along the way and as long as we're doing that that that contract and program continues to grow but sean what what is the car are they on your cap table i don't understand are they a customer are they on your cap table are they investor is it a grant are they a bank what's the form factor of that money they're giving you a customer through uh a government project so you know not quite a grant but but a government contract okay interesting okay so five thousand a month on average 17 customers that puts you about 85 grand a month right now on revenue is that about right something like that yeah okay uh why would that not be accurate is it higher or lower or what would change that no no you're you're pretty much you're pretty much in the ballpark yeah and going back a year you'd be zero right going back five months we'd be zero yeah yeah so look i mean this is this is this is healthy growth i mean landing 17 folks paying five grand a month like is not easy tell me about the second customer uh second customer was a research project that we're doing with a local university uh here in british columbia and uh what we're looking at they're the key drivers um that support women into the uh workforce and so it's a gender uh gender equality project that we're working so that's almost like like they're paying you five grand a month to get access to basically your research yeah interesting and our machine learning capability yeah will they keep paying after the research is done like is it is this actually sticky revenue that particular project is is a one-off but the the the military project is a long-term project for us have you had any churn today no it's okay so it's too early really to be looking at churn and stuff yeah tell me about kind of how you funded this to date so have you bootstrapped to raise capital so we bootstrapped uh when we got to the point of completing alpha and then we went out and uh raised a seed round uh we were fortunate to over subscribe that round and that was with uh basically friends and family direct investors okay so how much was the seed uh that was just over a million and a half canadian oh great okay so did you end up doing uh i mean was that a convertible note or do you sell equity that was equity okay oh you did you did equity right off the bat why why why go through the stresses of setting evaluation why not do a convertible note on the beginning uh i had a team of very experienced uh investors that that came in and um you know we made the decision collectively that uh it wasn't that difficult to get us to uh an equity valuation uh in addition to that we had some conditions sorry sean why is that that would be there's no data to go off of how would that be easy getting evaluation um it was easy in the sense that there was a middle point for us that we could all agree on with in our we had some incentives in our term sheet that looked at uh you know penalties if we didn't hit a certain valuation in the next round et cetera so um so it's quite reasonable yeah and innovative um talk to me about team today how many folks are on the team uh so we have a full-time team of 14 and then we outsource some development everyone in vancouver yes okay that's great vancouver and i assume you're probably still burning cash investing in the product so your cash flow negative at this point are you profitable uh cash flow negative yeah so when you raised how much runway are you raising for how many months does that buy you you think uh at that time we were raising for 18 months uh obviously we had um in our use of funds document we we had a an 18-month road map that looked at the implementation of enterprise in q1 q2 2019 and so we got a whole bunch of um demand from enterprise around the time of our public data and that sort of compressed our operations plan so we're uh having the problem that i understand is a good problem that all startups want to have which is uh compressing two phases of an operations plan into one when will you be casual positive uh we're hoping to be cash flow positive uh q3 2019 2019 yeah that's great very good um and talk to me about i mean have you besides you being the closer you are on going and selling these the canadian government and school systems and things i mean do you know can you spend money to make money do you know what you're like your cac is um we like i said now the majority of what we do is inbound and so through uh discussions on future of work we we're also a portfolio company of singularity university ventures ah okay and um they have a strong corporate innovation network that's led us into a variety of different discussions and relationships in the bay area that's really helped us with respect to getting in front of uh corporate uh clients and and innovation partners yeah when we're going to share that little detail yeah that's obviously a powerful network to be tied into when you go through their program is there a cash component of that or no it's just advisory it's advisory it is advised but they they take equity right yes yeah yeah interesting um okay good so too early to really talk about cac stuff that's not something your diet you're not dying up spend right now to drive growth it's really just using the singular university connections your own connections and word of mouth yeah and since um since june we've been able to establish a pretty strong network in the bay area and so we have other relationships as well uh on top of singularity that uh great folks that we work with down in california yeah interesting have you looked at i mean as you look to fuel like additional growth have you looked at kind of unconventional means that wouldn't dilute you like venture debt or no uh not at this point um we are looking at uh we we are looking at that for for sort of q1 q2 of next year what do you dislike or like about venture debt um typically it's the the valuation cap um is something that makes me a little a little nervous just in terms of wait hurry sean one second sorry a venture debt usually it is it doesn't it's not a convertible it doesn't have a cap on it there's no there's no component of that oh you're talking about straight up debt well no it's not it's not there's no personal guarantee it's not bank debt it's venge it's venture debt which are you familiar with that model at all no you could explain uh no no explain no no it's okay if you're not thinking about it there's no i don't want to go down that rabbit hole but but i mean it's essentially it's essentially a non-dilutive way to get capital uh that's that doesn't require personal guarantees but also doesn't dilute you there's no cap there's there's no equity component it's basically they'll fund you up to like four or five x your current monthly recurring revenue you pay that back over three to five years there's like a 1.3 to 1.5 x repayment cap but it's a good way to drive growth in a non-dilutive way if you know how to spend cash to make more yeah i've had some preliminary discussions with some groups of toronto that are that are providing this type of model like espresso capital is one of them probably yeah exactly and and we just haven't gone down the path of thinking about it yeah at this point yeah yeah interesting very good um let's uh let's wrap up here with the famous five number one what's your favorite business book uh seven habits of highly effective people number two is there a ceo you're following or studying right now oh everyone everyone's the same answer i would think elon elon is one number three uh what billing tool do you use billing tool yep uh stripe stripe number four how many hours of sleep to get every night about three and a half to four that is sean that is not healthy that is not healthy at all nathan why do you sleep so little i've got stuff to do we're hustling man oh come on yeah but you can you can you can get more done if you're well rested i i gotta be honest i i'm not a guy who slept a lot anyways before i started this thing so that just gives me an excuse now to stay away okay okay fair enough and what's your situation married single kids uh married with kids yeah how many kiddos uh two twin boys oh wow okay so two twins and how old are you uh from me i'm 38. 38 last question what do you wish your 20 year old self knew that sleeping more than three and a half to four hours a night was a good thing guys sleep more if you can help but again launch this company sky hive uh back several years ago again helping uh really it's almost like competency discovery tool right helping teams understand who to promote what skills they need to promote or if you're looking for a job helps you really um hone that process in as well today they've scaled about 17 customers they're doing about 85-ish grand per month up from nothing a year ago they just launched pricing about five six months ago cash flow negative today they raised 1.5 million bucks they're gonna be profitable in q3 of 2019 and they've got about 14 people in vancouver too early to talk about unit economics most of their growth coming from their singular university network uh and that first contract and word of mouth coming from the canadian government via their innovation program called ideas all right sean thanks for taking us to the top thanks nathan appreciate the time