Yva.ai Revenue, Valuation & Funding (2021)

hey folks my guest today is david yang he's the ceo and co-founder of eva.ai that's yva.ai he's building a tool that helps with ai driven real-time employee experience and performance management uh it's a platform that they're building out david you ready to take us to the top yes hi nathan it's great to meet you thank you when did you write the first line of code for this company it was uh about four years ago four years ago okay and walk me through what it does what are companies paying for um they are paying for top line and the bottom line this technology literally improves you know revenues performance and business outcomes it's it's about culture and uh workforce efficiency okay very hot hr tech is a very very hot space right now a lot of roll-ups happening help me understand what kind of customers are you targeting what are they paying you per month on average would you say um we have three types of customers regarding their size below 500 employees uh between 500 and 5000 in police organizations and extra-large about 5000 employees organizations no literally all industries um if you have hr uh function in your organization you are our client so the ones that are already paying you what are they paying you per month on average would you say uh excuse me uh how much yeah on average what are they paying average um it's forty nine dollars per monthly per year basically it's about five dollars per month per employee i see okay and an average customer that's signing up how many employees do they typically get started with um it's initially it starts with hundreds to a thousand between 100 and 1000 employees depending on the size of the organization and in three six months they typically um uh expand to sometimes to the whole population that's great that's great for dollar retention obviously uh help me understand what they're paying for so someone signs up for you they're paying for a thousand employees you mentioned cost savings walk me through how you help them get cost savings this technology helps in 29 different scenarios for example first two scenarios are connected to employee well-being and dissatisfaction factors this technology can predict um employees resignation even before employees actually decided to resign now this technology helps to understand our informal leaders it helps to fill the gaps of middle management so it speeds up your uh your growth in product uh delivery for example okay and david how many how many total sort of employees are on the platform today uh it's uh right now it's already above 200 000 employees we started uh actually we started sales end of 2019 we had only 49 paying customers in the beginning of last year but we grew up we grew 100 excuse me 10 times during last year and ended up with 496 employer connected organizations end of last year so we're growing very fast how many are you at right now so 496 at the end of last year how many today uh we today's uh we are going to um close this year with but what about today what not not not in december like today how many organizations i would rather skip this uh answer but um i can tell you that this year we will not uh will not grow 10 times but still it will be several times growth so so when you say that there's 200 000 employees on the platform are those across all of the paying 496 companies no it's 200 000 employees connected to the platform are not all the pain um customers um it's uh we have different uh rollout schemes so some pilots are starting with non-paying licenses i see i see how many paid employees are on the platform that's what i was looking at because that's where they were usage comes in some numbers we don't disclose right now this moment we uh so we the company is on early stage and we just uh closed our seed round we will be closing um a round how much did you choose to raise in the seed uh so far we raised 12 million dollars and we will be raising eight million dollars in our current upcoming current round so how much was the seed round you just closed was the whole 12 million in that one round we we had actually uh not one seed round last seed round uh if i'm it's five million dollars i guess i do it was uh one and a half years ago okay so the most recent round you closed one and a half years ago so in 2020 and that was a five million dollar round yep i see and then you did another seven million before that yes okay what was that did you did you raise money right when you launched this company in 2014 uh the company spinoff from our my larger organization i started 12 companies so far my largest organization called abby abbyyy.com it's a leading company 1300 employees 50 million users worldwide so abby eva started as a design lab inside abby and when we spun off the company it was just three million dollars we received right away when we spun out the company sorry i didn't understand that three million what we it was investments from the parent company abby when we spun out the company so abby put in 3 million in 2014 to get it going yep but that's but you own 100 of abby right no no no i'm i'm the major shareholder but the company is mature enough i i don't hold uh 100 i'm my family is uh still major shareholder of the company but it's not 100 unfortunately i see i think unfortunately i don't know we have almost a hundred uh employees early employees who are now um shareholders so for my company yeah and this is that i believe abby is playing for the document conversion space that was founded back actually a long time ago 1990 i think and you guys were pretty capital efficient you raised about 6 million there uh abby yes we started in actually 1989 when i was a fourth year student me and my my my friend and i uh we started uh the company many years ago um what was your question please uh no i'm just understanding there's all kinds of ways to start a company right so what you did is you just sort of spin it out of another company uh the other company fueled it with eventually a three million dollar seed check back in 2014. you've since raised another 5 million in 2020 um we're still missing a bunch though because you said you raised 12 million to date right yeah it was several actually it was three seed rounds but uh is it so interesting that little probably yeah i mean uh uh i'm well uh maybe the most interesting part is actually what we're doing and uh well david actually there's a lot of people that have really big ideas about what they want to do but if they can't tell a story and get it funded uh it's not going to go anywhere so we always on every episode we've we've done about we've done we've recorded raising money is the last thing you're thinking about i i when i started you mentioned in your bio uh how much you raised and what you were raising and you just said we're going to go raise a series a immediately so it's not the last thing you're thinking about because it's one of the first things you mentioned well it i just wanted to i'm just going off what you're saying so you led with we're about to raise our series a so that's where i'm going to ask questions do you want me to go somewhere else uh being on this both sides of this uh you know uh part of this business i'm a part of business angels uh this uh band of angels uh organization so i uh many companies come for it to me uh to to get you know investments i can tell you uh if you have product market fit if you actually solve actual problem actual pain point of your client if you are growing no way you cannot find investments investments will find you so i'm when i speak and i give my lectures about about entrepreneurship i always tell don't think about investment please it's not your problem your problem is product market fit david i can't tell you how many founders raise money before they have a line of code written there's no product market fit at all and they have to raise capital to grow so i i disagree with your statement there are plenty of founders in fact the majority of owners who raise vc raise a dollar before product markets oh i know i did the same several times so then why so then why do you just make the statement you made because the most important part is product market fit is a product hypothesis is very important and of course thank you for those business angels thank you i can thank myself when i invested several times on just an idea just in a people in people i trust and there but but still uh this is this is okay i mean if you have business idea a business hypothesis you want to try your business of this if you have so-called three magic crystals um in your pocket when you start your business okay you you will get your money uh depending on your three three magic crystals you have you might have one million dollar you want david i think the best way to get into this is to talk about what you've done with eva versus telling like telling people here's like the plan you should do it you're doing this you're growing a business so let's focus on eva right so so tell me more about product line right so so where are you going obviously it's a hot space there's a lot of money in the space right now why are people paying you versus the other traditional players in the hr tech space because uh traditional employee experience technology is broken this is traditional by the way can you name a couple of your competitors oh hundreds tens that lettuce green 15 5 pecan culture amp etc uh you name them all traditional systems employee experience systems employee engagement 360 performance evaluation systems most of them uh which actual company use they use uh infrequent uh connections when they uh survey their employees once a year twice a year and the problem uh which uh is is fundamental you when you certainly survey your employees once a year you find a problem which already happened in the past so you already lost your key employees your developers you already lost your business kpis in contrast to that you must predict problems before they happen and in order to predict problems you must have frequent uh signal now okay why not to take hundred questions and ask this hundred questions every day obviously will not work people will not so david how are you getting signal faster than 15.5 because we combine passive and active signals we i don't know what that means can you give it real life i know i know that's why i'm trying to explain we are the only company in the world probably at least i don't know anyone else who connects system to uh collaboration uh uh sources like microsoft teams select jira github and other collaboration circles so ai we developed already knows a lot before system asks you so ai delivers tailored 10 questions per week relevant to each employee individually system not shooting all questions to everyone no system learns who works with who for example system knows that then nathan was working with david last two weeks so ai will ask nathan specific questions about david about something else about problems hypothesis understood and and so the best way to understand ai because no one everyone throws it around is to just actually understand the technical prowess of the team how many folks are on your team today and how many are engineers we are 65 about right now we're drawing it's maybe 68 boom and we're going to be over 100 employees soon how many are engineers uh about third maybe um 40 percent i would say okay got it so call maybe 25 30 or so are engineers working on this ai machine learning which you feel is a major advantage over 15 five and others yeah and and would you credit your growth from 50 customers in 2019 to 490 customers at the end of this past year mainly due to this ai machine learning custom question asking um no not only at least it helps us to uh different of course to open doors but the remote work and hybrid work also contributed to this because uh companies around the world immediately realized that traditional approach annual surveys are not efficient anymore they they wanted to have continuous listening technologies and we were in the right time i see okay and and what what is a minimum for you so if someone's listening around they want to try you but they only have 10 employees like what's the lowest plan they can is it do you have to pay for 100 seats no matter what at the start no actually we provide free um access to the platform but paid once we want to do paid what's the minimum number of seats they have to pay for is it 100 starting from third month you are paying regardless of how many employees you have yeah so it's uh it's a try and buy method when you connect your employees you provide a deposit three um it's 12 months deposit and you get uh three months for free usage do you see a sweet spot in terms of the number of employees your average customer are managing on eva is it five or ten or no these are like thousand two thousand still the sweet spot starting from 100 employees okay 100 employees so those contracts and 100 employees at 50 per year i mean these are you're talking these are like 5 000 sort of contracts 50 000 sort of contracts minimum exactly yes because uh for for we do have paying customers below 100 employees we have a paying customer uh kindergarten of 15 employees actually but still the pain the re actual pain points with informal leaders detached to you leaders toxic managers no resignation prediction all that starts uh playing when you are 100 or thousand employees in a book that makes sense now if i take david 496 customers now you have more than that because 496 was december but if we have 496 customers 50 bucks a seat 100 sort of average team size that would put you right now mr wise about 210 000 bucks a month in revenue is that about right nathan we are private company we can't right now disclose all numbers but i can tell you uh 496 customers we had by the end of last year not all of them were paying okay so they're not customers they're users okay you can call it differently we call them uh customers because now some of them paid to deposit some of them well you said they hadn't paid so that had they paid or not paid we provide uh three months for free so it's uh they uh for from some amount we require a 12 month deposit which is 100 refundable if company is not decided not to continue after the three months of free so 496 at a minimum have that paid that deposit to try it and they can get a refund if they don't onboard three months in maiden you are insisted in your some numbers we don't disclose we are in different processes with our uh next round but yeah david that's fine i'm asking about onboarding strategy here okay this is a sas strategy you're charging an upfront fee that's totally refundable if they don't activate after three months this is a strategy and tactical question i don't care if you're raising money or not it's valuable for other sas founders listening which is why i'm asking if you don't want to share you don't have to share we can move on but that's why i'm asking let's move on okay wonderful why are you raising more capital there's plenty of companies bootstrapped in this base with way more than 10 million bucks in revenue why do you need so much capital because it's a moment there are 10 million uh companies in the world which could benefit uh those continuous listening technologies and it's the right moment to to grow okay you keep talking about raising so that's why i'm going to ask it okay i don't care how much it is but i'm going to ask since you're talking about it you want to go out and raise how much do you want to go raise right now eight million dollars and why is up the right amount how do you get to that just our business model and our international expansion model shows that this amount will be most likely enough to accomplish our goals when you raise that and you then deploy it over many years what do you think you can use that 8 million to grow revenue towards or how many customers can you serve with that amount of capital uh at least we will open three big regions in original expansion and we will be i don't i don't have it in on top of my mind uh it's probably about 130 140 employees by the end of next year with this expansion a number of customers a good question actually we can't disclose this number but our target number but i don't have it with me but it's it will be significant uh for x growth uh from the end of this year so 2 20 22 we no we target to grow four times understood and do you have a valuation target you're going after on the eight million raise um probably i would not uh answer this question right now but uh obviously uh this you could kind of guess with this amount but anyway uh probably i would not answer right now what would the right guess sort of be a range is fine below 100 million dollars okay so you think you can raise eight million on a 100 million uh postal money hello why do you say of course below well uh it's because uh it's it's a little bit too early for us to you invest a lot in the market it sounds like you're very privy you're active in angel groups what do you think a company today a sas company hr tech space has to hit revenue-wise to hit 100 million valuation not you specifically just the market yeah it's many organizations uh many many fast growing um technologies would get 30x price to sales multiple so so you think you need about three million revenue to 100 million valuation three million dollar uh revenue would give you in many cases uh even more than 100 million dollar valuation it very much depends on what go-to-market strategy you found if you found the low-touch no-touch path to the market when you will be able to grow without significant growth of your sales force uh in the market total market available market is good is is large then you will get uh high multiples very good all right let's wrap up here with the famous five david number one favorite book collins good to grade number two is there a ceo you're following are studying uh probably uh not many but people that ai my friend alec groginski is just genius uh they they got recently one billion over one billion dollar valuation and i mean they are fantastic number three what's your favorite online tool for building your business online tool for what building your company building um well hopspot zoom um crm where we just switched from uh salesforce to another crm number four david how many hours of sleep do you get every night hours um eva shows that i sleep about four and a half five hours per day which does not sound very healthy not very healthy that's true why do you do it well because uh eva is uh not the only company i'm engaged with it's i still spend about seven to six hours per week for eva as a ceo and co-founder but i have a charity project i um educational foundation i'm a part of of it i have my my largest company abby where i'm not operation involved but i'm a board of director and i'm doing emotional ai uh project morpheus which lives in my house in portola valley with moving walls and conversational emotional ai and robotic dog which is right here sleeping and listening uh to us very cool not on your plate take us home here what's your situation married single kids married three kids three kids okay how old are you david i am 53 i guess 53 last question what's something you wish you knew when you were 20. nothing special i i can't answer this question all right nothing's the answer guys there you have it launched a very successful company called abby back in 1989 used 3 million bucks from there to launch eva.ai back in 2014 they've since scaled in another five million dollar seed in 2020 targeting 8 million raised now to grow their customer rates from 496 up to something much larger they charge caught 50 bucks per employee per year across this these customers they have over 200 000 employees on the platform those are not paying seats but on the platform active as they look to activate those customers over time as they hit the three month mark david thank you so much for taking us to the top thank you 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 backend 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 pm 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 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