Yellow.ai Revenue, Valuation & Funding (2024)

[00:00] Hey guys, recording this here on what is it? Friday the nineteenth. Maybe you're seeing this on Monday at the latest, but wanna let you know we are almost sold out for founder comp Sorry, founder five hundred in Austin, Texas here in about a week. It's gonna be an amazing event. Five hundred B2B SaaS founders. I'm looking at the attendee list. There's almost 60 founders with more than $67,000,000 in ARR. It's an incredible group of group. There's [00:24] over one and fifty with more than 1,000,000, more than 1,000,000 revenue. It's an incredible group. You don't wanna miss it. Grab your hotel, grab your flight, grab a ticket right now. I'll put the link in the bio, in the description here on YouTube. And I think there's only about three tickets left. Okay, about three tickets left. I'd love to see you guys there. Don't be bashful. Grab your ticket now. Hey folks, my guest today is Raghu [00:47] Ravunutala. He is the founder and CEO of yellow.ai, an enterprise grade conversational AI platform that enables enterprises to deliver human like interactions that boost customer satisfaction and employee engagement at scale. Powered by Dynamic AI Agents. Raghu, you ready to take us to the top? [01:06] Ready to start? Alright. When you say Dynamic AI Agents, I mean, are there these humans or these bodies or just like machine learning AI stuff? [01:14] >> It's 100% machine learning AI, Nathan. That too, it's absolutely cutting edge. We just launched the Dynamic NLP today out in the press as well. So this is something that gets trained over billions of conversations happening every single day and dynamically adapt to those metadata. So, we believe it's a breakthrough. [01:39] What was the initial training set you fed your machine learning's or AI algorithm to get it up to speed quick? [01:44] >> Over a period of time when we started in 2016, it was humans that were training these models because there weren't any conversations we were just starting off. And as we started the platform and being used by customers, we used the metadata from those conversations to uplift and train the models to upgrade them. But it initially seeded with a lot of manual training and labeling when we started the company. [02:15] Wow. Okay. So give me a sense of what customers are paying you to do, but maybe a specific use case would be great. [02:22] >> Oh, let me give an example of a leading utility company in The United States. And they use our product to automate customer service on their website and on their telephony lines. So when somebody calls for pickup of their waste, etcetera, this company just automates the entire conversation. I'll give a broad range. So this company pays us somewhere between 500 to $7.50 ks in annual ARR. [02:55] Okay. Is that your largest customer? [02:57] >> That's one of our largest. We have larger customers. So our largest customer pays us more than a million dollars per annum. [03:06] And help me understand what makes that contract value so large. Is it seat based upselling, feature based upselling, utility based upselling or something else? [03:13] >> It is utility based upselling. So this is essentially our pricing is directly linked to the number of conversations or interactions that are automated. So the more number of phone calls that our virtual assistant answers, the subscription price goes up pretty linearly. [03:34] I see. So if I'm paying you 1,000,000 a year, how many phone calls are you probably handling for me? [03:40] >> Okay. So of course the pricing differs across countries. So, typically we average somewhere about 0.5 to a dollar per minute of call handling. [03:55] Oh, wow. So do you have a great utility metric? It's not just like the phone call. It's per minute of call handling. So it could be one phone call be a lot of money. [04:04] >> That's correct. [04:06] Interesting. [04:08] Imagine Not [04:09] >> for anybody, but I think our platform runs on WhatsApp, Google Business Messaging. So all those are per conversation session. So different pricing for that. [04:21] Let me ask you a weird question related to your product cannibalization here. If I'm paying you to handle telephoning for me and I'm paying you 5¢ per minute of call handling, but you're also trying to use AI machine learning to prevent the call in the first place, don't you sort of compete with yourself there? [04:37] >> Oh, absolutely, Nathan. I think the overall objective of the company is to automate the majority or the overall available interactions at the company. And we clearly believe that digital interactions are superior to voice interaction in many cases. And we recommend customers to do that, though it cannibalizes, let's say, a potentially higher revenue in voice handling. But we know that there are 400,000,000,000 calls made every single year in the world. And today, than 0.1% of them have [05:12] >> any kind of automation. So it'll not disappear in a while. So there's a lot of markets. So I don't think we need we as a company don't need to worry about one product cannibalizing. That's thinking too narrow at this point of [05:26] Got it. 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 Founder Path. Check this out. I'll show you how you can access this in a second, but you log [05:49] in, you connect your Stripe account, you see your valuation real time. You can see what it 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 Founder Path dashboard, this is all free by the way, is because depending on who's doing the buying of your [06:13] SaaS company, you're gonna get 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 [06:36] this is this is not 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 [07:01] the multiple. Maybe you're going 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 Founder Path. And we're thrilled to bring it to you. All right, we're gonna go back to the YouTube video [07:24] here in a second, but if 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. [07:49] Alright. Let's jump back into the interview. Very cool. Okay. We talked about your biggest sort of customer, but tell me what your sweet spot is. What's the average customer pay you per month or year to use the tech? [08:00] >> Yeah. So since we are a company that's kind of born in Asia Pacific and grown into North America, we have kind of two different go to market motions for these two geographies. And typically in the Asia Pacific market, we land our customers somewhere between 30 to 40 gain annual recurring revenue. And in The US, we land somewhere between 120 to two fifty. So average would be about one thirty kind of ARR values in North America. [08:30] Interesting. I always get people that launch outside of US asking how they expanded US, so I wanna come back to that here in a second. But first, I want to get the origin story here. Put this on a timeline. When did you launch the business? [08:42] >> Oh, we launched our business in 2016. [08:44] 2016. Wow. And how did you get your first customer? Do you remember who it was? [08:49] >> Oh, yeah. So it's one of the leading paints company in India. Painting? Paint? Yeah. They sell paints. Yeah. This is Asia's largest paints company. [09:01] Wow. It's amazing. [09:05] And so how did you go? I guess that was your first customer. How many customers are you serving now today? [09:10] >> We are overall serving about 1,000 plus customers. [09:14] Wow. And what's the split between Asia Pacific and US? [09:18] >> So still Asia Pacific dominates our percentage. So in terms of number of customers, it's probably 90 plus in Asia Pacific, but in terms of ARR, it's somewhere between 70 to 80. [09:31] Seventy and eighty. So are you more excited about the expansion in The US then? [09:35] >> Absolutely. It's the largest market out there, Nathan. So, and we're very excited about how we've grown over the last two years since we launched in The US market. So some of our customers grew from, they landed at thirty forty ks in The US market and grew to 600, 700 ks. So we're just seeing much faster expansion rates and growth rates within companies in The United States market. [10:03] Tell me about US customer number one because everyone's wondering about this, listening right now who's not in The US. How did you land that first customer? Do you hire a firm to do sales in The US? Do you hire a full time employee? Did you open an office? How did you do it? [10:16] >> You know, our first customer in The US was inbound. We got an inbound based on some of our press releases. It was actually closed by a rep sitting out of India. So we landed our first customer when we didn't have any personal US market. By the time we hired a person in The US market, we had a few customers and they had some references to build on, Nathan. [10:46] So how much ARR were you doing in The US before you hired your first person in The US? [10:54] >> About 0.5 a mil. [10:56] Okay. So pretty I mean, I would say that's pretty pretty quickly then. [10:59] >> Yeah. Yeah. That's that's pretty quickly. Absolutely. [11:03] And what was that person's role? Was it an SDR, a VP of sales in North America? What was the title? [11:08] >> SVP of sales. [11:10] Interesting. And so what did their days look like? What were they doing in early months? [11:14] >> Oh, early months was one, figuring out how to create a demand gen function. So I think that resulted in making a marketing hire, setting up a SDR function while hiring the initial sales reps. And of course, doing a player coach, handling the leads and meetings that are coming in while doing so. So these were the activities of the S3P. But I mean, within a year, we kind of scaled the team from, yeah, one member to about [11:47] >> 28, 30 people in the North America market from the first hire. [11:53] That's awesome. Now, we take the ACB you gave me earlier of sort of like 50,000 or 60,000 sweet spot and then divide by 12, right? So your ARPU monthly is out maybe 4 or 5,000 a month. And then we multiply that by a thousand customers. I mean, that would put you at like 400 or $500,000 a month in revenue right now. Is that about right? [12:16] Sorry, 4,000,000. Million per month. [12:21] >> No, no. So So several of the customers are also in the early stages. So we have a commercial segment. So there are segments of customers who land at even four ks or five ks as well. But I'm not sharing the broad revenue metrics, I just kind of give a very broad range so that I think you can you can pick a number. So we're somewhere somewhere in twenties to thirties or 20 to 30 plus. So 25 [12:48] >> to 35 is where you can take a broad range on [12:51] Can you can you break 35,000,000 run rate this year, you think? [12:57] >> Oh, so we are we're pretty much there. Right? I think. Yeah. 35,000,000 Sorry for [13:02] then. What what I guess I should ask. What's your goal for the end of this year? Do can you do you think you can break, like, 38, 39, 45? [13:08] >> We are looking at doing about 2.2 to 2.5 x in our booking numbers from last year. So we would be much upwards, much higher upwards of the numbers that you're [13:22] talking about. So just to understand growth rate again, you're flirting with sort of 35,000,000 run rate right now and you double year over year, that means you were doing like maybe 15,000,000 run rate last year. [13:30] >> Would say right, I mean, the numbers that I can share, Nathan, just so that is, I think broadly we are somewhere between the twenties and 35. So we're doubling, you can calculate anywhere between 40 to 60 is what you can broadly assume that we are targeting this year. [13:50] Oh, oh, sorry. You're already at 25 to 35 and you're targeting 40 to 60 by the end of this year. [13:56] >> That's correct. [13:57] Oh, I okay. Sorry. What I'm trying to understand is your growth rate over the past twelve months. The past twelve months. [14:03] >> Oh, oh, the past twelve months. So the growth rate has been about one forty to 150%, Nathan. [14:10] Okay. Yeah. Yeah. So if you're doing between twenty five and thirty five now, right now, let's just say 30,000,000 is you were doing something like 10 or 15 exactly one year ago? [14:19] >> That's correct. [14:20] I see. I see. Okay. And so the reason I asked that question is because it sounds like a lot of your growth is actually coming from expansion of current accounts, not brand new customers. Would you agree with that? [14:32] >> I would say that it's a split for sure. We run a high NRR, so we run a 150 to 160 percent NRR. [14:40] So That's incredible. I mean, I'd say world class is like 150, 160%. So that's just an incredible you already know that, but that's incredibly high. [14:47] >> Yeah. So we run a high NRR and that's due to the business model as well. So we try to land at prices, at a volume. And once the customer scales, the volume automatically scales. They make more number of calls, people chat more. So, but that takes us to only certain part of the growth number, right? So there is a lot of new revenue that's coming in. Just to give calculations, someone were looking at like 8,000,000 to [15:17] >> 10,000,000, so 150% NRR will only take them to 14 or 15,000,000. Right? So Yep. You still build a new revenue on top of it. [15:26] Do you remember the year you passed a million in revenue? [15:29] >> Oh, yeah. Absolutely. Very clearly. The toughest, toughest part I ever had. [15:34] Yeah. What year was that? [15:36] >> This was 2018, end of two thousand eighteen, early two thousand nineteen. Yeah. [15:41] Wow. Okay. So million dollar run rate then, and then what you passed 10,000,000 sort of late twenty nineteen, early twenty twenty? [15:47] >> Yeah. Kind of broadly there. You're kind of That's awesome. [15:50] Now have you done all this bootstrapped or you decided to raise capital? [15:54] >> So we kind of bootstrapped almost close to 1,000,000 ARR. So we were bootstrapped profitable till that time, but we took time to get there. We took time. We took almost two and half to three years to get there from zero. But we raised capital when we were like almost close to 1,000,000 [16:12] in ARR. Okay, so that would have been like 2018. How much did you decide to raise? [16:17] >> We raised the initial one of about 4,000,000. [16:20] Okay. And that would be like your pre seed? [16:24] >> No. So we raised it in India. So in India, was it was series a. [16:28] Oh, Okay. Series. And is that all you've raised to date? Just the 4,000,000? [16:33] >> Oh, no. We raised 100,000,000 overall. 104,000,000 [16:36] overall. Okay. [16:37] >> So after that we raised our series B and series C and yeah. So right now we are in the clear venture capital [16:46] path. Ravi, break those down for me. When was a series B and how much? [16:50] >> So, series B was in 2020, was about $20,000,000. And so, A 2019, series B 2020, which is $20,000,000 Series C in 2021, which is about $78,000,000 [17:07] Interesting. What makes this business so capital? I mean, it's a lot of capital to raise, obviously. So you've diluted a bunch unless a lot of this was like secondary or something like that, right? Most people, their series A are selling, you know, 10% to 20%, series B, it's 10 to 15%, and series C, it's about 10%. Were you sort of around those same ranges? [17:27] >> Yeah, so we broadly can say that, yeah. [17:29] Mean What makes the business so capital intensive? [17:33] >> Oh, so this is a market that we are creating. I don't think there was a lot of market that was existing and we were going behind very fast growth rates. So this could be a completely profitable company if you were taking a lower growth rates. [17:52] >> I mean, we were profitable when we were at a million dollars. I think the Pretty much of the capital burn happens through sales and marketing where you kind of invest upfront in capacity, invest in getting into newer geographies to drive that growth rates a little bit ahead of the curve. Mhmm. [18:14] And and so, I mean, series c, if you sell somewhere around 10% of the business, right, and that was last year when you were like maybe 15,000,000 run rate, and that means you were raising it like a $607,100,000,000 valuation if you only sold 10% ish. [18:27] >> I'm not talking about valuation, but, yeah, I mean [18:30] Well, Morangu, sorry. I'm just using what you just told. I asked you was 10% series c. You said, yeah, about there. So I'm just I'm not making stuff up. I'm using your what you just said. [18:38] >> Yeah. So I said it's it's kind of about this. It's not exactly 10%, right? It's more a little bit more than that. So the valuation you would expect is it's not at 700, a little lesser than that. [18:49] Fair enough. Fair enough. That's fine. Maybe you sold twelve, thirteen, 15%. Whatever. My point being though is valuations have compressed over the past twelve months. Right? So how how how are you reacting to a comp you know, a comp you know, macroeconomics that are just poor today than they were a year ago? [19:05] >> Yeah. I think broadly we have a lot of the capital raised more than 90% in the bank. Right? I think, it's it's not like we are consumed, a lot of capital. Think [19:16] That's that's all the capital you've raised or just the 70 you have 90% of 78,000,000? [19:20] >> For the CVC. Yeah. [19:21] I see. I [19:21] >> see. Okay. Right. Yeah. And as a company, we know that we can't let up on growth, but at the same time, I think right now efficiency is kind of considered significantly for potentially the next capital raises. And in general, as a company, you want to get to a more sustainable rate, right? So I think there's a lot of focus on making sure that we improve our sales productivity numbers. We, but we continue on the growth rates [19:52] >> that we are targeting to 2.5 X and also kind of limit the number of geographies that we are going to trying to expand at the same time. Right? You want to go by one. So some of those decisions and also on the product side, just kind of having a lot more focus on the current feature set rather than lot of experiments. So a lot of investment behind high conviction areas and kind of tuning down investments in [20:23] >> experimental areas is what I would say. And we kind of have plans where the existing capital can take us through the next two to three years pretty according to the plan. [20:38] And Ravi, what's the total what's the total I don't mean to cut you off. We're just short on time. What's the total team size today? How many people? [20:44] >> So we are about eight fifty people, [20:47] Nathan. And how many of those are engineers? [20:50] >> About 300 Wow. Of them [20:53] are engineers. Are they based like, I've interviewed so many just incredible founders in Bangalore and Chennai and I mean, so many places. Are most of engineers based in India? [21:03] >> Almost 99%. [21:05] Ninety percent? Ninety nine. Wow. Which city? [21:10] >> So, they're spread across the, ideally to Bangalore, but after the pandemic, people are working from their places. But I think the headquarters is Bangalore. [21:20] Very cool, very cool. Listen, heck of a story here. We're rooting for you. Let's wrap up with the famous five. Quick answers here. Number one, favorite business book? [21:29] >> Hard Things About Hard Things. Right? Number two. [21:32] Yeah. Number two, is there a CEO you're following or studying? [21:35] >> Oh, yeah. So Snowflake Slootman. [21:39] Yep. Did you read his new book, Amped Up? [21:41] >> Oh, yeah. Of course. Absolutely. Really good. Right? Alright. [21:44] You you remind me a lot of him actually in terms of pricing model. Yeah. Number three, what's your favorite online tool for building Yellow? [21:52] >> I would say Canva in the initial stages. Wouldn't have survived without that. [21:57] Number four, how many hours of sleep do you get every night? [21:59] >> Oh, seven to eight hours. [22:01] And what's your situation? Married, single, kids? [22:04] >> Married with two kids. [22:05] Oh, wow. How old are you? [22:07] >> I'm 44. [22:10] 44. Last question. Something you wish you knew when you were 20. [22:14] >> Oh, starts I would've start your business takes risks much earlier in your life. I mean [22:20] Guys, yellow.ai, trying to be the world's leading automation platform. Their biggest customer pays over 1,000,000 per year, you know, 0.5¢ per minute of call handling, for example, as one of their pricing tiers. They serve over a thousand customers today. They're building their US presence rapidly. It's growing faster than their other regions. They've got, again, thousand customers today, flirting with sort of 25 to $35,000,000 in ARR today, doubling year over year, targeting ending this year between 40 [22:51] and 60,000,000. They've raised 78,000,000 series C last year, selling somewhere around 10% of the business, but they they have more than 90% of that still in the bank. So they're good to go in terms of making it through any pending recession. Eight fifty folks on the team, check them out at yellow.ai. Raghu, thank you for taking us to the top. [23:07] >> Thank you. Thank you very much, Nathan. [23:11] 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. It is fun to watch every Thursday, 1PM [23:36] Central. Additionally, remember these recorded founder interviews go live. We release them here on YouTube every day at 2PM Central. To make sure you don't miss any of that, make sure you click the subscribe button below here on YouTube, the big red button, and then click the little bell notification to make sure you get notifications when we do go live. I wouldn't want you to miss breaking news in the SaaS world, whether it's an acquisition, a big [23:58] fundraise, a big sale, a big profitability statement or something else. I don't want you to miss it. Additionally, if you wanna take this conversation deeper and further, we have by far the largest private Slack community for B2B SaaS founders. You want to get in there. We've probably talked about your tool if you're running a company or your firm if you're investing. You can go in there and quickly search and see what people are saying. Sign up [24:20] for that @nathanlatka.comslashslack. In the meantime, I'm hanging out with you here on YouTube. I'll be in the comments for the next thirty minutes. Feel free to let me know what you thought about this episode and if you enjoyed it, click the thumbs up. We get a lot of haters that are mad at how aggressive I am on these shows, but I do it so that we can all learn. We have to counter those people. We got [24:40] to push them away. Click the thumbs up below to counter them and know that I appreciate your guys'support. All right. I'll be in the comments. See you.