How YellowDog CEO Simon Ponsford grew YellowDog to $5.4M revenue and 30 customers in 2024.

hey folks my guest today is simon ponsford he has over 20 years experience in high growth startup environments working in technical architects cio cto and ceo rose in both europe and north america he spent time in academia working as senior scientists in distributed computing and also has over 20 years cloud computing experience related patents to his name now building yellowdog.co which accelerates applications in the cloud simon you're ready to take us to the top absolutely all right what's that mean accelerate applications in the cloud um really it goes back to the concepts really distributed computing about being able to take an application that runs on on more than one core and being able to distribute that across many cores generally in the cloud and for us it means almost unlimited scaling taking people to hundreds of thousands or millions of cores to get their workloads or applications jobs completed very quickly and so do you sell based off number of cores you're helping manage or what's the sales model the sales model is is all about licensing so it's all about number of core hours that people use that we effectively manage for them okay and is that the only upsell or do you upsell product enhancements number of seats anything else no no we try and keep it really simple so if you know uh what sort of scale you want to run to you know exactly how much it's going to cost this makes a ton of sense so what are companies paying on average per month to use the technology it really depends you get some small companies just maybe paying a thousand dollars running some relatively small jobs where you get others or you know paying tens of thousands of dollars to be able to scale since it says it's tens of thousands of cores and keep those jobs running 24 7. and so would you say maybe a sweet spot for you might be someone paying 10 000 bucks a month um i would say probably the sweet spot for us it's almost like two different two different markets there's a sweet spot in this in the smaller mid market which is generally around about five thousand dollars and then at the upper yeah and then the upper end is probably closer to fifty thousand interesting okay but but you sort of skipped the middle you see either people are lower or higher but very few in the middle there are very few in the middle um it's really it's a really interesting market you're either um yeah essentially you've got two ways of working you're either a place where you could have worked traditionally on premise but you are a new business maybe and you're born in the cloud so you haven't gone for any on-premise infrastructure you've gone entirely to the cloud so those are people that could have run on premise and then you've got the larger organizations are really just looking at cloud to scale and they couldn't achieve that or couldn't achieve it easily on premise and so they're much bigger so you don't find there's too much in in between and so what what without obviously naming the customer what is the largest customer paying you per year and how many cores does that get them the large the largest customers are actually generally paying for um something there were core hours so it's like quite a few million core hours okay and what is the price point they're paying are we talking like million dollar accounts or 500 000 accounts or something else you're talking those accounts are generally more than just about sort of quarter of a million maybe a little bit higher okay maybe 250k or something like that okay cool so big gap here give me the back story when did you guys launch so we actually the business itself started in uh 2015 so we've been going for for over six years and we actually launched our first product uh about six months into the business but that was very different it's just a very small subset of the functionality we have today so we started generating revenue i guess very early on you know in our journey but we are quite different from uh from where we started out um very early on a lot of people coming to you just were people that wanted to make um movies and animation and be able to render special effects etc so that was really a big market for us when we when we kicked off it was really that transition whereby studios needed to move from say hd filming to 4k and they didn't have enough compute and so they chose yellowdog in order to be able to get that compute generally from the cloud they're effectively renting other people's compute power absolutely yeah interesting okay now how many customers are you serving today um the tradition of in the render market we get we had about four and a half thousand customers in the other market is it's much smaller today so you're talking 700 in those other markets in what other market so essentially you've got marketing financial services you've got markets in life sciences a lot of people trying to do growth discovery etc you've also got customers doing things like uh modeling for for thermodynamics those sorts of things so you've got to kind of split across those but by far our largest market to date has been in animation render okay and so 4 500 customers those are all paying customers right they are they're coming but they are those customers are generally customers are very much very bursty workloads so they will come along and they might pay for a month of the year and then they'll go away because that's all they need to use this for those are those customers aren't general subscription ones it's generally the other markets outside of render where people want to come along and just go for a longer subscription so life sciences etc will just be generally set steady through one through the entire year as well as we'll see their financial services so how many are actually paying consistently every month well what's that market that market's only about 30 customers today 30 customers okay cool so you use the one-time revenues from 4 500 maybe coming from animation studios and rendering studios to sort of power your rnd to build a core product that 30 people pay for every month really predictably okay and can i take 30 times that 5 000 a month minimum price point you're doing over 150 000 a month right now in revenue yes you can okay fair enough and bootstrapper do you guys raise um no no we we we raised we raised early on we started a crowdfunding crowdfunding oh crowdfunding how much did you raise so we raised 150 000 pounds initially and then we back out and did another another raise through that and then we also went through angel funding and we've also been through work through vc funding as well when was the last vc round but our first vc round was in uh 2017 and they and they uh we've been continued support ever since then how much did you raise in that round in 2017 i think about one and a half million okay and uh what would you call that your sort of preceded seed round um yeah i i call that uh well i i would say all of these really just being pre series a i really suspect our series a to be going on next year i see okay so the la the 1.5 was in 2017 was there another round you did between then and today between them we did we did various rare uses we we've done about 8 million okay got it so you raised another 6 million in last year or something like that over the last couple of years at the end of 2017 i see okay so so what do you mean by that you sort of like split the things up and sort of raise on a rolling basis as you needed it or what's that model look like we check we've so generally we we raise um essentially product development when we've raised also to go specific markets so to start going into new markets we we've done specific races i see okay so i guess i guess the reason i'm asking is the six million you raised over the past three or four years what like how did you set valuation for that how do we set the valuation um generally from uh from new parties coming in and really just uh agreeing valuations around that our highest valuation was uh about 14 and a half million dollars so 4.5 million and how much did you raise at that valuation you probably raised about a million at that time i see okay and that was your most recent round no actually i i would say our most recent round has been a little bit lower than that um because of uh covered in pandemic um it's generally brought down down a little so uh that was really um 2019 uh very early 2019 and then going into last year slightly down i think as many people well thank for being thanks for being honest about that uh you know down rounds are a real thing in life you have to manage through them how were you able to convince investors to put money in when it was a valuation that was lower than the 14.5 million that's a hard storyline to manage it is a hard storyline potentially for people that have already invested but actually when people see the value and i don't think i think a lot of people have been with us through the right way through the journey um and they see the value in the product and they see what we're able to deliver and they see the results in terms of what we're able to scale so i think people are generally still encouraged to uh see the engines it's too bad and now what does growth look like if you're doing 150 000 a month today in revenue where were you exactly a year ago do you remember no last year was a a really bad year okay so last year because of the the pandemic and because of really reductions in those uh those customers need to do render as soon as live action filming that really stopped there wasn't really much of a need to add special effects to film so we're just talking about the 30 core customers that we're not talking about the one-time revenue from the rendering studios our render revenue is still was still higher so essentially that that probably took a good 400k off of that annual but when you just look at the 30 customers paying five grand a month or more right for the longer term engagements that today is 150 000 a month what was that exact number basically a year ago was it 100 grand 50 grand something lower i assume oh you said you said that would have been so much lower that would have been like 30. 3-0 oh wow so that's grown like significantly over the past 12 months were a bunch of those customers with you pre pandemic and you just signed them back up are they brand new customers generally brand new i think how'd you do that that's impressive well no i i say brand new a lot of people we were talking to was uh were very early on so we we'd already started engagement um early on a lot of things slowed down during the pandemic and then people started signing up as we started coming out of code i see got it okay interesting now when you did the down round what what valuation was that at the most recent valuation well that's come out at 12 and a half 12 okay so it's not significantly lower just slightly lower and that was last year that's actually gone through this year well that's this year okay sure and you raised what about four or five million on that something like that no no we've we've just done uh we've almost completed one and a half on that one one and a half okay you really have done a lot around so 1.5 in 2017 1 million in 2019 at 14.5 million then a bunch of ones in between then and this year where he raised 1.5 million on 12.5 yep fair enough would you ever consider raising like to like buy out early investors i mean what is your cap table look like today a cup table is um is a little complicated because there's a lot of people in there like you say from the uh the various different rounds um and people have asked about cleaning up the cap table etc and whether people could be bought out um yes there seems to be no need to do that because a lot of people that came in early have followed on it's not as bad as it could be how much do you still own simon i'm around eight eight does that ever demotivate you like do you ever go man i wish i owned 20 30 40 percent um no not really not really yeah i for me i've been through a lot of startups and it's not really about the potential so you know if you thought the business is going to be worth you know it's still going to be worth 10 million or so in 10 years time then that would really demotivate you but i can see it's growing significantly and getting a much better valuation can you paint a little cloud like who's the next largest shareholder where's the rest of the equity so uh we've got some we've got some bc backing uh but uh this essentially holds a a large part of that how much do we see zone all together like 50 60 vcs are are in around uh just about let's say about 43 43 okay so you plus the vcs are a little over 50 and then the rest are what like one-off angel investors um there's a couple of there's a couple yeah there's quite a lot of angel investors uh then also the uh the crowd funding they come in as a group they come in at somewhere at seven or eight percent oh interesting i didn't wha where what platform did you use to crowdfund start engine or something else uh cedars spell that s-e-d-r-s interesting was it a easy process to use those guys seamless um i think they are ideal when you uh when you start out um you know essentially all you do is you create a video a bit like a kickstarter um they're pretty good on the on the due diligence making sure you've got the idea or your credentials uh everything you've done before they publish everything online and you just wait and for things to come in you get lots and lots of questions so there's a lot of interaction with shareholders uh early on but then yeah it's relatively straightforward and what is the team look like today how many folks full-time um so the team is 12 people 12. how imagine engineering heavy how many engineers so engineering is uh seven people seven okay do you have quota carrying sales reps uh we we haven't no we're we're only just engaging um sales and i say that full capacity yeah interesting interesting what about net dollar retention do you manage do you measure stuff like that currently retention um i i wouldn't be able to tell you straight off the top of my head what that would be that's okay very cool what's next up product wise simon before we wrap up what are you excited about building and releasing um so we continue to build our platform uh we'll continue to bring a lot of intelligence into the way that we um we use cloud resources and a lot of intelligence in terms of being able to select very cost effective say spot instances or solutions in the cloud we have some kind of index which gives us a view of the costs in all across all the different cloud providers and really making a lot more use of that to the benefit of our customers is it's really what we're going to be concentrating on for the next few months very cool we're rooting for you let's wrap up here with the famous five number one favorite book during the century earth say that one more time journey to the center of the earth number two is there a ceo you're following or studying no no i'm not number three what's your favorite online tool for building the business perfect what tool for any tool that your favorite tool for building yellow dog favorite tool i think um it's really been zero to be honest um just in terms of being able to understand subscription revenues and understand how to build it up yup number four how many hours of sleep to eat every night um reaching four and five okay and situation married single kids case all right mary how many kiddos one one kid okay how old are you simon 48. 48. last question what's something you wish you knew when you were 20. um i wish i'd been a bit more ambitious at 20. guys there you have it yellow dog they sell licenses based off number of core hours started in 2017 2015 really selling to rendering studios that needed more capacity to do these you know high high resource uh rendering now moving into other fields as well like financial services they've got 30 core customers that pay five grand a month doing over 150 000 a month in revenue up from 30 grand a month just a year ago so nice growth they have raised capital call at six seven eight million today their last run was 1.5 million this year at a 12.5 million valuation pretty efficient in terms of team size 12 people seven engineers growing nicely here we'll see what happens next simon thanks for taking us to the top thank you 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 1 p.m central additionally remember these recorded founder interviews go live we release 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