YellowDog Revenue, Valuation & Funding (2024)

[00:00] Hey folks, my guest today is Simon Ponsford. He has over twenty years experience in high growth startup environments, working in technical architect, CIO, CTO, and CEO roles in both Europe and North America. He spent time in academia working as senior scientist in distributed computing, and also has over twenty years cloud computing experience related patents to his name, now building yellowdog.co, which accelerates applications in the cloud. Simon, you ready to take us to the top? [00:24] >> Absolutely. [00:25] All right, what's that mean, accelerate applications in the cloud? [00:29] >> Really, it goes back to the concepts really distributed computing about being able to take an application that runs 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 their applications, jobs completed very quickly. [00:52] And so do you sell based off number of cores you're helping manage or what's the sales model? [00:56] >> The sales model is all about licensing. So it's all about number of core hours that people use that we effectively manage for them. [01:04] Okay. And is that only upsell or do you upsell product enhancements, number of seats, anything else? [01:09] >> No, no. We try and keep it really simple. So if you know what sort of scale you want to run to, you know exactly how much it's going to cost. [01:17] This makes a ton of sense. So what are companies paying on average per month to use the technology? [01:22] >> It really depends. You get some small companies that are just maybe paying a thousand dollars running some relatively small jobs, where you'll get others paying tens of thousands of dollars to be able to scale such as tens of thousands of cores, and keep those jobs running 24/7. [01:37] And so would you say maybe a sweet spot for you might be someone paying $10,000 a month? [01:42] >> I would say probably the sweet spot for us. [01:45] >> It's almost like two different markets. There's a sweet spot in the small and mid market, which is generally around about $5,000 then the upper end, it's probably closer to 50,000. [01:59] Interesting, okay. But you sort of skipped the middle. You see either people are lower or higher, but very few in the middle. [02:04] >> There are very few in the middle. It's a really interesting market. Either, [02:11] >> essentially you've two ways of working. You're either a place where you could have worked traditionally on premise, but you're a new business maybe and you're born in the cloud. So you haven't gone for any on premise infrastructure, you've gone entire into the cloud. So those are people that could have run on premise. And then you've got the larger organisations are really just looking at cloud to scale and they couldn't achieve that or couldn't achieve it easily [02:33] >> on premise. And so they're much bigger. So you don't find there's too much in between. [02:37] And so without obviously naming the customer, what is the largest customer paying you per year and how many cores does that get them? [02:45] >> The largest customers are actually generally paying for a certain number of core hours. So quite a few million core hours. [02:53] Okay, and what is the price point they're paying? Are we talking like million dollar accounts or $500,000 accounts or something else? [02:57] >> You're talking those accounts are generally more than just about sort of 250,000, maybe a little bit higher. [03:02] Okay, maybe $250k a year or something like that. Okay, cool. So big gap here, give me the backstory, when did you guys launch? [03:08] >> So we actually, the business itself started in 2015. So we've been going for over six years. And we actually launched our first product 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 in our journey, but we are quite different from where we started out. Very early on, a lot of people coming to The [03:35] >> U. Were people that wanted to make movies and animation and be able to render special effects, etc. So that was really a big market for us when we kicked off. It was really that transition whereby studios needed to move from say HD filming to four ks and they didn't have enough compute. And so they chose yellowdog in order to be able to get that compute generated from the cloud. [03:57] They're effectively renting other people's compute power. [04:01] >> Absolutely. [04:02] Yeah, interesting. Okay, now how many customers are you serving today? [04:06] >> In the render market, we've got about four and [04:09] a half thousand customers. [04:11] >> In the other market, it's much smaller today. So you're talking sub a 100 in those other markets. [04:16] In what other market? [04:18] >> So essentially you've got markets in financial services, you've got markets in life sciences, a lot of people trying to do drug discovery, etcetera. You've also got customers doing things like modeling 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. [04:38] Okay, and so 4,500 customers, those are all paying customers, right? [04:43] >> They are kind, but they are, those customers are generally customers are very much very bursty workloads. [04:49] 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 [04:55] >> to use us for. 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, etcetera, will just be generally set steady through the entire year as well we'll foresee their financial services. [05:11] So how many are actually paying consistently every month? Well, what's that market? [05:15] >> That market's only about 30 customers today. [05:17] 30 customers. Okay, cool. So you use the one time revenues from 4,500, mainly coming from animation studios and rendering studios to sort of power your R and D to build a core product that 30 people pay for every month really predictably? [05:29] >> Yep. [05:30] 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? [05:38] >> Yes, you can. [05:39] Okay, fair enough. And bootstrapped or did you guys raise? [05:43] >> No, no, raised. We raised early on. We started a crowdfunding. What funding? Crowdfunding. [05:50] Oh, crowdfunding. How much [05:51] >> did So you we raised £150,000 initially, and then we've been back out and did another raise through that. And then we also went through angel funding, and we've also been through VC funding as well. [06:03] When was the last VC round? [06:06] >> Our first VC round was in 2017, and they we've been continued support ever since then. [06:12] How much did you raise in that round in 2017? [06:15] >> I think about 1,500,000. [06:17] Okay. And what you would you call that your sort of pre seed seed round? [06:22] >> Yeah. I I call that up. Well, I I would say all of these really just being pre series A. I really suspect our our series A to be going on next year. [06:30] I see. Okay. So the the 1.5 was in 2017. Was there another round you did between then and today between that Yeah. [06:37] >> We did various raises. [06:38] >> We we we've done about 8,000,000 in total. [06:40] Okay. Got it. So you raised another 6,000,000 in last year or something like that? [06:45] >> Over the last couple of years. That was end of twenty seventeen. [06:48] I see. Okay. So so what do you mean by that? You sort of split the things up and sort of raise on a rolling basis as you needed it? Or what's that model look like? [06:55] >> Generally, we raise essentially product development when we've raised also to go to specific markets. So to start going into new markets, we've done specific raises. [07:05] I see. Okay. So I guess the reason I'm asking is the 6,000,000 you raised over the past sort of three or four years, what like, how'd you set valuation for that? [07:14] >> How do you set the valuation? Generally from new parties coming in and really just agreeing valuations around that. Our highest valuation was somewhere around $14,500,000. [07:27] Sorry, 14 And and 500,000 how much did you raise at that valuation? [07:32] >> Probably raised about 1,000,000 at that time. [07:34] I see. Okay. And that was your most recent round? [07:37] >> No, actually, would say our most recent round has been a little bit lower than that. Okay. Just because of COVID and pandemic. It's generally brought it down a little. So that was really 2019, very early twenty nineteen. And then going into last year, it's slightly down, think as many people are up here. [07:59] Well, thanks being honest about that. 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 14,500,000? That's a hard storyline to manage. [08:12] >> It is a hard storyline potentially for people that have already invested. But actually when people see the value, and I think a lot [08:20] of people have been with us right the way through the journey, [08:23] >> 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 generally still encouraged to see it. And [08:35] 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? [08:41] >> No, last year was a really bad year. Okay, so last year because of the pandemic and because of really reductions in those customers needs to do render. As soon as live action filming really stopped, there wasn't really much of a need to add special effects to film. [08:57] So we're just talking about the 30 core customers, though. We're not talking about the one time revenue from the rendering studios. [09:05] >> Our render revenue was still higher. So I think that probably took a good 400 ks off of the annual. [09:14] But when you just look at the 30 customers paying $5,000 a month or more, right? For the longer term engagements, today is a $150,000 a month. What was that exact number basically a year ago? Was it a $100,000, $50,000, something lower, I assume? [09:27] >> Oh, you you you said that would have been so much lower. That would have been, like, 30? [09:31] >> $3.00. [09:32] Oh, wow. So that's grown like significantly over the past twelve months. Were a bunch of those customers with you pre pandemic and you just signed them back up or are they brand new customers? [09:41] >> They're generally brand new. [09:43] Think- How'd you do that? That's impressive. [09:45] >> Well, no, I think brand new. A lot of people we were talking to were very early on. So we'd already started engagement early on. A lot of things slowed down during the pandemic and then people started signing up as we started coming out of COVID. [10:00] I see. Got it. Okay, interesting. Now when you did the down round, what valuation was that at? The most recent valuation? [10:07] >> That's come out at 12.5. [10:09] Okay, so it's not significantly lower, just slightly lower. And that was last year? [10:16] >> That's actually gone through this year. [10:17] Oh, that's this year. Okay. Yeah. Fair. And you raised what? About 4 or 5,000,000 on that? Something like that? [10:23] >> No. No. We've we've just done we're we're almost complete, like, one and a half on that one. [10:27] One and half. Okay. You really have done a lot of rounds. So 1.5 in 2017, 1,000,000 in 2019 at 14,500,000, then a bunch of ones in between then and this year where you raised 1,500,000 on 12 Yep. Point [10:40] Fair enough. Would you ever consider raising like to buy out early investors? I mean, does your cap table look like today? [10:45] >> A cap table is a little complicated because there's a lot of people in there, like you say from the various different rounds. And people have asked about cleaning up the cap table, etc. And whether people could be bought out. Yes, there seems to be no need to do [11:01] that because a lot of people that came [11:03] >> in early have followed on. It's not as bad as it could be. [11:07] How much do you still own, Simon? [11:10] >> I'm at around 8%. [11:13] Eight? Does that ever demotivate you? Like, you ever go, man, I wish I own twenty, thirty, 40%? [11:20] >> No, not really. For me, I've been through a lot of startups and it's already about the potential. So if you thought the business is going be worth, it's still going be worth 10,000,000 or so in ten years time, then that would really demotivate you. But I can see us growing significantly and getting a much better valuation. [11:39] Can you paint a little color? Like who's the next largest shareholder? Where's the rest of the equity? [11:44] >> So we've got some VC backing, but it's essentially holds a large part of that. How [11:53] much do VCs own altogether? Like 60%? [11:57] >> VCs are in around just about, let's say about 43%. [12:02] 43, okay. So you plus the VCs are a little over 50 and then the rest are what like one off angel investors? [12:09] >> There's couple of, yeah, there's quite a lot of angel investors. Then also the crowdfunding, they come in as a group, they come in at somewhere at seven or 8%. [12:19] Oh, interesting. What platform did you use to crowdfund? Start Engine or something else? [12:24] >> Seedrs. [12:26] Spell that. [12:28] >> S double e d r s. Seedrs.uk. [12:32] Interesting. Was it an easy process to use those guys seamless? [12:37] >> I think they are ideal when you start out. Yeah, Essentially all you do is you create a video, a bit like a Kickstarter. They're pretty good on the due diligence, making sure you've got the idea, all your credentials, everything you've done before. They publish everything online and you just wait for things to come in. You get lots and lots of questions. So there's a lot of interaction with shareholders early on, but then yeah, it's relatively straightforward. [13:05] And what does the team look like today? How many folks full time? [13:09] >> So the team is 12 people. [13:11] 12. Imagine engineering heavy. How many engineers? [13:15] >> So engineering is seven people. [13:17] Seven. Okay. Do you have quota carrying sales reps? [13:22] >> We haven't, no. We're only just engaging sales, say that full capacity. [13:29] Yeah, interesting, interesting. What about net dollar retention? Do you manage, do you measure stuff like that currently? [13:35] >> Retention, I wouldn't be able to tell you straight off the top of my head what that would be. [13:40] That's okay, very cool. What's next up product wise? Simon, before we wrap up, what are you excited about building and releasing? [13:47] >> So we're continuing to build our platform. We'll continue to bring a lot of intelligence into the way that 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 something called an index, which gives us a view of the costs across all the different cloud providers. And really making a lot more use of that to the benefit of our [14:11] >> customers is really what we're going to be concentrating on for the next few months. [14:15] Very cool. Rooting for you. Let's wrap up here with the famous five. Number one, favorite book? [14:21] >> Journey to the Center of the Earth. [14:23] Say that one more time? [14:24] >> Journey to the center of the earth. [14:26] Number two, is there a CEO you're following or studying? [14:30] >> No. No. I'm not. [14:31] Number three, what's your favorite online tool for building the business? [14:35] >> Perfect what tool? [14:37] For any tool that your favorite tool for building yellowdog. [14:41] >> Favorite tool? I think it's really been Xero, to be honest, just in terms of being able to understand subscription revenues and understand how to build it up. [14:55] >> Yep. [14:56] Number four, how many hours of sleep do you get every night? [15:00] >> Between four and five. [15:01] Okay. And situation, married, single, kids? [15:04] >> Kids, married. [15:06] Married. How many kiddos? [15:07] >> One. [15:08] One kid. Okay. How old are you, Simon? [15:10] >> I'm 48. [15:11] Last question. What's something you wish you knew when you were 20? [15:19] >> I wish I'd been a bit more ambitious in 20. [15:22] Guys, there you have it, yellowdog. 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, high resource rendering. Moving into other fields as well like financial services, they've got 30 core customers that pay $5,000 a month doing over $150,000 a month in revenue, up from $30,000 a month just a year ago. So nice growth. They have raised capital, call it, 6, 7, 8,000,000 [15:47] to date. Their last round was 1,500,000 this year at a $12,500,000 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. [15:58] >> Thank you. [16:01] 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 [16:26] 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 [16:48] fundraise, a big sale, a big profitability statement or 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 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 [17:10] for that at nathanlatka.com/slack. 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. 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 [17:29] to push them away. Click the thumbs up below to counter them and know that I appreciate your guys'support. Alright, I'll be in the comments. [17:36] >> See you.