How Yellow.ai CEO Raghu Ravinutala grew Yellow.ai to $79.5M revenue and 1K customers in 2024.

hey guys recording this here on what is it friday the 19th maybe you're seeing this on monday at the latest but want to let you know we are almost sold out for founder comp sorry founder 500 in austin texas here in about a week uh it's gonna be an amazing event 500 b2b sas founders i'm looking at the attendee list there's almost um there's almost 60 founders with more than six seven million bucks in arr it's an incredible group of group there's over uh there's over a hundred over 150 with more than a million uh more than a million revenue it's an incredible group you don't want to miss it uh grab your hotel grab your flight grab a ticket right now i'll put the link in the bio um 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 guess it is ragu rabunutala 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 it to the top ready to start all right when you say dynamic ai agents i mean are there are these humans or these bodies or is this like machine learning ai stuff it's 100 machine learning ai uh nathan thought too it's uh absolutely cutting edge we just launched uh the dynamic nlp today out in the press as well um so this is something that gets trained over billions of conversations happening every single day and uh dynamically adapt to those metadata so we believe it's a breakthrough what was the initial training set you fed your machine learning for ai algorithm to get it up to speed quick oh over a period of time when we started in 2016 it was uh humans that were training these models uh because there weren't any conversations we were just starting off and as we started the uh platform and being used by customers we used the metadata from those conversations to uplift and train the uh models uh to upgrade them uh but it initially seeded with a lot of manual training and labeling when we started the company wow okay so give me a sense of of what customers are paying you to do so maybe a specific use case would be great 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 uh website and on their telephony lines so when somebody calls for a pickup of uh their waste etc this company just automate the entire conversation um i'll give a broad range so this company paces somewhere between uh 500 to 750k in annual uh err okay is that your largest customer that's one of our largest we have larger customers our largest customer pays us more than a million dollars uh per uh per annum and help me understand what makes that contract value so large is it seed-based upselling feature-based upselling utility-based upselling or something else it is utility-based uh upselling so this is essentially uh 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 uh the subscription price uh goes up pretty uh linearly uh i see so if i'm paying you a million a year how many phone calls are you probably handling for me okay so of course the pricing differs across countries so typically we average uh somewhere about uh 0.5 uh to a dollar per um minute uh of call handling 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 that's correct interesting um i imagine but i think our platform runs on whatsapp uh google business messaging so all those are per conversation session uh so different pricing for that let me let me ask you a weird question related to your product cannibalization here if i'm if i'm paying you to handle telephony for me and i'm paying you five cents per minute of call handling but you're also trying to use a machine learning to prevent the call in the first place don't you sort of compete with yourself there oh absolutely uh nathan i think the overall objective of the company is to uh automate um the the majority or the uh 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 billion calls made every single year in the world and today less than 0.1 percent of them have any kind of automation so it will not disappear uh in a while so there's a lot of market so i don't think we need we as a company don't need to worry about uh one product cannibalizing uh that's thinking too narrow at this point got it oh what's going on there youtube good to see you guys now imagine this you love watching these interviews with sas founders but imagine if we took all of the valuation data out from over 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 in you connect your stripe account you see your valuation real time you can see what it changed over the past 88 days and even set goals for valuation this year now the secret evaluation is there's many different ways to value a sas business so the reason you're going to see three or four different valuations inside of your frowner path dashboard this is all free by the way is because depending on who's doing the buying of your sas company you're going to get a different valuation a vc is going to pay a different valuation private equity firm is different if you're going to 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 built off random data again you guys hear these interviews on youtube all these datas are built from real-time valuation data points founders share with us on the show so traction 1.2 million seed round 3.7 raised they sold 22 to their business go in here and filter by the event maybe you only want to 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 out right now and you're raising your seed round well 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 data set of sas valuations than what you can get now inside of founder path and we're thrilled to bring it to you all right we're going to go back to the youtube video here in a second but if you want to check this tool out if you want to jump in and sign up you can check it out for free to get your valuation at this link this link founderpath.com forward slash products forward slash evaluations or if you go to founderpath.com and hover over products click on get your evaluation 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 all right 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 a year to use the tech yeah so um since we are a company that's uh kind of born in asia pacific uh and grown into north america we have uh kind of two different go-to-market motions for these two geographies and uh typically in the asia pacific market we land our customers somewhere between 30 to 40 gain annual recurring revenue and uh in the us we land uh somewhere between 120 to 250 so average would be about 130 uh kind of error values in north america interesting i always get people that launch outside of us asking how they expanded us so i want to 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 oh we launched our business in 2016. 2016. wow and how did you get your first customer do you remember who it was oh yeah so it's one of the leading uh paints company in india and paint yeah paints yeah this this asia's largest paints company wow uh they just amazing yeah and so how did you go i guess that was your first customer how many customers are you serving now today uh we are overall serving about 1000 plus customers wow and when what's a split between asia pacific and us so still asia pacific dominates our uh percentage so uh in terms of number of customers it's probably 90 plus in asia pacific but in terms of ar it's somewhere between 70 to 80. uh 70 and 80. so are you more excited about the expansion in the us then absolutely it's the largest market out there nathan so yeah and we're very excited about how we've grown over the last uh two years since we since we launched in the u.s market so some of our customers uh grew from uh they landed at 30 or 40k in the us market and grew to 600 700k so uh we're just seeing uh much faster expansion rates and growth rates within companies uh in the united states market tell me about u.s customer number one because everyone's wondering about this listening right now who's not in the u.s how did you land that first customer did 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 uh you know uh our first customer in the us was inbound uh uh we got an uh we got inbound uh based on some of our press releases it was actually closed by a rep uh sitting out of india um so uh our we landed our first customer when 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 uh build on anything so how much arr were you doing in the u.s before you hired your first person in the u.s um about half a mil okay so pretty i mean i would say that's pretty pretty quickly then yeah yeah that's that's pretty quickly absolutely um and what was that person's role was it an sdr a vp of sales in north america what was the title uh svp of sales interesting and so what did their days look like what were they doing in early you know months oh early months was uh one figuring out uh how to uh create a demand gen function so i think that resulted in i have making a marketing higher setting up sdr function while hiring uh the initial sales reps and uh of course doing a player coach uh handling the leads and meetings that are coming in while doing so so these were the activities of the sweep but i mean within a year we kind of scale the team from um from yeah one member to about 28 uh 30 people in the north america market uh from from the first higher that's awesome now if we take um if we take the acb you gave me earlier sort of like 50 000-ish or 60 000 sweet spot and then divide by 12 right so your arpu monthly is about maybe four or five thousand a month and then we multiply that by a thousand customers i mean that would put you at like 400 or 500 thousand dollars a month in revenue right now is that about right oh so i'm sorry i'm sorry four million for it four million per month no no so so several of the customers are also uh in the early stages so we have a commercial segment so there are segments of customers who land at even 4k 5k as well but i'm not sharing the broad revenue metrics but i i just kind of give a very broad range so that i think you can you can pick a number so we're somewhere um somewhere in uh 20s to uh 30s or 20 to 30 plus so 25 to 35 is where you can take a broad range on can you can you break can you break 35 million run rate this year you think oh so we are uh we're pretty much there right i think yeah 35 million sorry then what i'm i guess you should ask what's your goal for the end of this year do you can you didn't even break like 38 30. we're looking at um doing about 2.2 to 2.5 x uh in our booking numbers uh from last year so uh we'll be much upwards uh much higher upwards of the numbers that you're talking about so just to understand growth rate again if you're flirting with sort of 35 million run rate right now then you double your every year that means you were doing like maybe 15 million run rate last year right i mean the numbers that i can share nathan just just so that is i think broadly we are somewhere between uh the 20s and 35 so we're doubling so you can calculate so anywhere between 40 to 60 is what you can broadly assume uh that we are targeting this year oh oh sorry you're already at 25 to 35 and you're targeting 40 to 60 by the end of this year that's correct oh i okay sorry what i'm trying to say is your growth rate over the past 12 months the past 12 months oh the past 12 months so the growth rate has been about uh 140 to 150 percent nathan okay yeah yeah so if you're doing between 25 and 35 now right now let's just say 30 million you were doing something like 10 or 15 exactly one year ago that's correct i see i see okay and so the reason i ask 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 um i i would say that it's a split for sure uh we run a high nr so we run a 150 to 160 percent nr so that's incredible i mean i'd say world class is like 100 560 percent so that's just an incredible you already know that but that's incredibly high yeah so uh we run a high uh nrrr and that's due to the business model as well so we try to land in um land in it it prices set up at a volume and once the customer scales the volume automatically uh scales they make more number of calls people chat more so uh so but that takes us to only certain part of their growth number right so there is a lot of new revenue that's coming in uh just to give calculations someone were looking at like 8 million to 10 million so a 150 percent nr would only take them to 14 or 15 million right so yeah you still will build a new revenue on top of it do you remember the year you passed a million in revenue oh yeah absolutely very clearly the toughest toughest part i ever had yeah what year was that uh this was 2018 end of 2018 early 2019 yeah wow okay so million dollar run rate then and then what you passed 10 million sort of late 2019 early 2020 yeah kind of broadly there you're kind of awesome now have you done all this bootstrap or you decide to raise capital uh so we kind of bootstrapped almost close to a million ar so we were bootstrapped profitable uh till that time but we took time to get there we took time uh it took almost two and a half to three years uh to get there from zero uh but we raised capital when we were like almost close to a million uh in err okay so that would have been like 2018 how much did you decide to raise we raised the initial one of about four million okay um and that would be like your pre-seed no so relationship in india so in india it was it was seriously oh wow okay series and is that all you've raised today just the 4 million but nobody raised 100 million overall 104 million overall okay so uh after that we uh uh we raised our series b and series c and yeah so right now we are in the clear venture capital break those down for me when was a series being how much so um series b was in uh 2020 uh was about 20 million dollars and uh see so seriously 2019 series b 2020 which is 20 million dollars seriously in 2021 which is about 78 million dollars interesting um what makes this business so cap i mean it's a lot of capital arrays obviously so you've been deluded 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 percent series b it's 10 to 15 percent and seriously it's about 10 were you sort of around those same ranges yeah so we broadly can say that yeah yeah what makes the business so capital intensive oh so um this is a market that we are creating uh i don't think there was a lot of market that was existing um and we were going beyond uh behind very fast growth rates so this could be a completely profitable company if you were taking a lower growth rates um uh i mean we were profitable when we were at a million dollars uh i think the pretty much of the capital burn happens through sales and marketing where uh you kind of uh invest upfront in capacity uh invest in getting into newer geographies to drive that uh growth rates uh a little bit ahead of the curve 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 million run rate and that means you were raising it like a 600 700 million valuation if you only sold 10 percentage i'm not talking about valuation but yeah i mean uh why we're only starting i'm just using the what you just i asked you was 10 seriously you said yeah about there so i'm just i'm not making stuff up i'm using your what you just said yeah so i said uh it's kind of about this it's not 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 fair enough fair enough okay that's fine maybe you sold 12 13 15 whatever my point being though is valuations have compressed over the past 12 months right so how how how are you reacting to a comp you know you know macroeconomics that are just poor today than they were a year ago yeah i think uh broadly we have a lot of the capital raised more than 90 percent in the bank right i think uh it's it's not like we are we've consumed uh a lot of capital i think that's that's that's of all the capital you've raised or just you have 90 percent of 78 million well the cbc yeah right yeah uh and uh as a company we know that um we can't let up on growth uh but at the same time i think right now efficiency is kind of considered uh significantly for potentially the next capital raises and in general as a company you want to get to a more sustainable rate rate so i think there's a lot of focus on making sure that we improve our sales productivity numbers uh we but we continue on the growth rates that we are targeting 2 to 2.5 x uh and also kind of uh limit the number of geographies that we are going to trying to expand at the same time right so you want to go by one so some of those decisions um and and also on the product side just kind of having a lot of lot more focus on the current feature set rather than a lot of experiments so a lot of investment behind high conviction areas and kind of tuning down investments in experimental areas is what i would say and and we kind of have plans where the existing capital can take us through the next two to three years uh uh pretty uh according to the plan and 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 so we are about uh 850 people uh and how many of those are engineers um about 300 uh wow and are you are they based like i've interviewed so many just incredible founders in bengaluru and chennai and and i mean just so many places are most your engineers based in india although 99 nine nine ninety percent nine to nine wow which city uh so they're spread across the ideally it was bangalore but after the pandemic people are working from uh their places but i think the headquarters is bangalore uh very cool very cool well 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 um hot things about hot things right number two yeah number two is there a ceo you're following or studying oh yeah so snowflake uh zlutman yep did you read his new book amped up oh yeah of course absolutely really good right all right you remind me a lot of him actually in terms of the pricing model um yeah number three what's your favorite online tool for building yellow i would say canva in the initial stages wouldn't have survived without that number four how many hours of sleep to eat every night oh uh seven to eight hours and what's your situation married single kids married with two kids oh wow how old are you uh i'm 44 44 last question something you wish you knew when you were 20. oh starts i would start your business takes risks much earlier in your life i mean guys guys yellow.ai trying to be that's world's leading automation platform their biggest customer pays over a million per year you know 0.5 uh cents per minute of call handling for example as one of their pricing tiers they serve over a thousand customers today they have car you know they're building their us presence rapidly it's growing faster than their um than their other regions uh they've got again thousand customers today flirting with sort of 25 to 35 million bucks in ar today doubling year where you're targeting ending this year between 40 and 60 million they've raised 78 million series c last year selling somewhere around 10 percent of the business but they have more than 90 percent of that still in the bank so they're good to go in terms of making it through any pending recession 850 folks on the team check them out at yellow.ai ragu thank you for taking us to the top thank you thank you very much nathan one more thing before you go we have a brand new show every thursday at 1 pm central it's called shark tank for sas 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 central additionally remember these recorded founder interviews go live we release them here on youtube every day at 2 p.m 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 sas world whether it's an acquisition a big fundraise a big sale a big profitability statement or something else i don't want you to miss it additionally if you want to take this conversation deeper and further we have by far the largest private slack community for b2b sas 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 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