Yva.ai Revenue, Valuation & Funding (2021)

[00:00] Hey, folks. My guest today is David Yang. He's the CEO and co founder of Yva.ai. That's Y V A dot ai. He's building a tool that helps with AI driven real time employee experience and performance management. It's a platform that they're building out. David, you ready to take us to the top? [00:14] >> Yes. Hi, Nathan. Great to meet you. [00:19] Did you write the first line of code for this company? [00:22] >> It was about four years ago. [00:26] Four years ago. Okay. Walk me through what it does. What are companies paying for? [00:31] >> They're paying for top line and the bottom line. This technology literally improves revenues, performance and business outcomes. It's about culture and workforce efficiency. [00:48] Okay. 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? [00:58] >> We have three types of customers regarding their size, below 500 employees, between 500, 5,000 employees organizations, and extra large above 5,000 employees organizations. [01:15] >> Literally all industries. If you have HR function in your organization, you are our client. [01:27] So the ones that are already paying you, what are they paying you per month on average, would you say? [01:34] >> Excuse me, how much? [01:36] Yeah, on average, what are they paying per month? [01:39] >> It's $49 per employee per year. Basically, it's about $5 per month per employee. [01:47] I see. Okay. And an average customer that's signing up, how many employees do they typically get started with? [01:56] >> Initially, it starts with hundreds to a thousand, between 100, 1,000 employees, depending on the size of the organization. And in three, six months, they typically expand [02:12] >> sometimes to the whole population. [02:15] That's great. That's great for dollar retention, obviously. Help me understand what they're paying for. So if 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. [02:27] >> 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 employees'resignation even before employees actually decided to resign. This technology helps to understand our informal leaders. It helps to fill the gaps of middle management, so it speeds up your your growth in product delivery, for example. [03:09] Okay. And, David, how many how many total sort of employees are on the platform today? [03:17] >> Right now, it's already above 200,000 employees. [03:22] >> Actually, we started sales end of twenty nineteen. We had only 49 paying customers in the beginning of last year, but we grew up, we grew 10 times during last year and ended up with four ninety six connected organizations end of last year. So we're growing very fast. [03:50] How many are you at right now? So four ninety six at the end of last year, how many today? [03:55] >> We are going to close this year with [04:01] But what about today? Not in December, like today, how many organizations? I [04:06] >> would rather skip this answer, but I can tell you that this year we [04:14] >> will not grow 10 times, but still it will be several times growth. [04:19] So when you say that there's 200,000 employees platform, are those across all of the paying four ninety six companies? [04:27] >> No, [04:28] >> 200,000 employees connected to the platform are not all the paying customers. [04:37] >> We have different rollout schemes. So some pilots are starting with non paying licenses. [04:46] I see. I see. How many paid employees are on the platform? That's what I was looking at because that's really where usage comes in. [04:52] >> Some numbers we don't disclose right now at this moment. We so we the company is on early stage, and we just closed our seed round. We will be closing a round. [05:10] How much did you choose to raise in the seed? [05:12] >> So far, we raised $12,000,000 and we will be raising $8,000,000 in our current upcoming current round. [05:22] So how much was the seed round you just closed? Was the whole $12,000,000 in that one round? [05:26] >> We had actually not one seed round. Last seed round, if I'm it's $5,000,000 I guess. It was one and a half years ago. [05:41] Okay. So the most recent round you posed 1.5 ago, so in 2020, and that was a $5,000,000 round? Yep. I see. And then you did another 7,000,000 before that? [05:52] >> Yes. [05:53] Okay. What was the did you raise money right when you launched the company in 2014? [05:57] >> The company is spin off from our my larger organization. I started 12 companies so far. My largest organization called abbyy.com. It's a leading company, 1,300 employees, 50,000,000 users worldwide. So ABBYY, Yva started as a design lab inside ABBYY, and when we spun off the company, it was just $3,000,000 we received right away when we spun off the company. [06:29] Sorry, I didn't understand that. 3,000,000 what? [06:32] >> It was investments from the parent company ABBYY when we spun out the company. [06:37] So ABBYY put in 3,000,000 in 2014 to get it going? [06:41] >> Yep. [06:42] But you own 100% of ABBYY, right? [06:45] >> No. No. No. I'm I'm the major shareholder, but the company is mature enough. I don't hold a 100. I'm my family is still major shareholder of the company, but it's not 100%, unfortunately. [07:02] I see, I see. Maybe fortunately, [07:04] >> I don't know. Have almost 100 employees, early employees who are now shareholders of my company. [07:13] Yeah, and this is that, I believe ABBYY is playing in sort of 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 6,000,000 there? [07:25] >> ABBYY, yes, we started in actually 1989 when I was a fourth year student. Me and my friend and I, we started the company many years ago. [07:42] >> What was your question, please? [07:44] No, I'm just understanding there's all kinds of ways to start a company, right? So what you did is you just sort spin it out of another company. The other company fueled it with eventually a $3,000,000 seed check back in 2014. You've since raised another 5,000,000 in 2020. We're still missing a bunch though, because you said you raised 12,000,000 to date, right? [08:02] >> Yeah, it was several. Actually, was three seed rounds. But is it so interesting, but little Probably, yeah. I mean, [08:12] >> I'm Maybe the most interesting part is actually what we're doing and [08:20] Well, David, actually, there's a lot of people that have really big ideas about what they wanna do, but if they can't tell a story and get it funded, it's not gonna go anywhere. So we always on every episode, we've we've done about we've [08:30] >> done we've record Raising money is the last thing you're thinking about. I I I You start [08:38] you mentioned in your bio how much you raised and what you were raising, and you just said, we're gonna 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. [08:48] >> Well, it I just wanted to [08:52] I'm just going off what you're saying. So you led with, we're about to raise our series A, that's where I'm going to ask questions. Do want me to go somewhere else? [09:00] >> Being on this both sides of this [09:05] >> part of this business, I'm a part of Business Angels, [09:10] >> band of angels organization, so many companies come to me to get investments. I can tell you, if you have product market fit, if you actually solve actual problem, actual pain point of your client, if you're growing, no way you cannot find investments. Investments will find you. So when I speak and I give my lectures about [09:45] >> entrepreneurship, I always tell, Don't think about investments, please. It's not your problem. Your problem is product market fit. [09:57] 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. I disagree with your statement. There are plenty of founders. In fact, the majority of founders who raise VC raise a dollar before product market fit. [10:12] >> Oh, I know. I did the same several times. [10:15] So then why do you just make the statement you made? [10:18] >> Because the most important part is product market fit. 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 people I trust. [10:45] >> Still, [10:48] >> this is okay. I mean, if you have business idea, business hypothesis, you want to try your business hypothesis. If you have so called three magic crystals in your pocket when you start your business, okay, you will get your money depending on your three magic crystals you have, you might have $1,000,000 you [11:09] want to- David, I think the best way to get into this is to talk about what you've done with Yva versus telling people, Here's the plan, you should do it. You're doing this, you're growing a business. So let's focus on Yva. So tell me more about product line. 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 [11:28] the HR tech space? [11:30] >> Because traditional employee experience technology is broken. [11:35] And who is traditional, by the way? Can you name a couple of your competitors? [11:38] >> Oh, hundreds, tens, Lattice, Glint, 15Five, Peakon, Culture Amp, etcetera. You name them. All traditional systems, employee experience systems, employee engagement, three sixty performance evaluation systems, most of them, which actual company use, they use infrequent connections. When they survey their employees once a year, twice a year. And the problem which is fundamental, when you survey your employees once a year, you find a problem which already happened in the past. So you already lost your key [12:27] >> 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 signal. Now, okay, why not to take 100 questions and ask these 100 questions every day? Obviously, will not work. People will not [12:51] So, David, how are you getting signal faster than 15Five? [12:54] >> Because we combine passive and active signals. We [13:01] don't know what that means. Can you give a real example? [13:02] >> 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 collaboration [13:18] >> sources like Microsoft Teams, Slack, Jira, GitHub, and other collaboration sources. 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. Example, system knows that Nathan was working with David last two weeks. So AI will ask Nathan specific questions about David, about something else, about problems, hypothesis AI. Understood. [14:04] And so the best way to understand AI because 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? [14:13] >> We are 65 about. Right now we're drawing maybe 68, and we're going to be over 100 employees soon. [14:22] How many are engineers? [14:24] >> About a third, maybe 40%, I would say. [14:31] Okay, got it. So call it maybe 25, 30 or so are engineers working on this AI machine learning, which you feel is a major advantage over 15Five and others? Yep. And would you credit your growth from 50 customers in 2019 to four ninety customers at the end of this last year, mainly due to this AI machine learning custom question asking? [14:51] >> No, not only. At least it helps us to, of course, to open doors. But [15:04] >> the remote work and hybrid work also contributed to this because companies around the world immediately realized that traditional approach annual surveys are not efficient anymore. They wanted to have continuous listening technologies, and we were in the right time. [15:26] I see. Okay. And what is a minimum for you? So if someone's listening and they wanna try you, but they only have 10 employees, like, what's the lowest plan they can is does it do you have to pay for a 100 seats no matter what at the start? [15:37] >> No. Actually, we provide free, access to the platform for small teams. [15:43] Once people want do paid, what's the minimum number of seats they have to pay for? Is it 100? [15:46] >> Starting from third month, you are paying regardless of how many employees do you have yet. So it's a try and buy method when you connect your employees. You provide a deposit free. It's twelve months deposit, and you get three months for free usage. [16:07] Do you see a sweet spot in terms of the number of employees your average customer are managing on Yva? Is it five or 10 or no, these are like 1,000, [16:17] >> Still two the sweet spot starting from 100 employees. [16:21] Okay, 100 employees. So those contracts then, 100 employees at 50 per year. I mean, you're talking these are like $5,000 sort of contracts minimum. [16:30] >> Exactly, yes. [16:32] Because we [16:34] >> do have paying customers below 100 employees. We have a paying customer kindergarten of 15 employees, actually. But still the actual pain points with informal leaders, detached to you leaders, toxic managers, resignation prediction, all that starts playing when you are 100 or 1,000 employees and above. [17:01] That makes sense. Now, if I take, David, four ninety six customers now you have more than that because 496 was December. Yep. But if we have four ninety six customers, $50 a seat, a 100 sort of average team size, that would put you right now, MRR wise, about $210,000 a month in revenue. Is that about right? [17:19] >> Nathan, we are a private company. We can't right now disclose all numbers, but I can tell you, four ninety six customers we had by the end of last year, not all of them were paying. [17:32] Okay. So then they're not customers, they're users. [17:36] >> Okay. You can call it differently. We call them customers because some of them paid deposits, some of them [17:47] Well, you said they hadn't paid. Had they paid or not paid? [17:50] >> We provide three months for free. So it's pay for From some amount, we require a twelve month deposit, which is 100% refundable if company is not decided not to continue after the three months of free. [18:11] So 496 at a minimum have to pay that deposit to try it, and they can get a refund if they don't onboard three months in. [18:19] >> Nathan, you are insistent in your some numbers we don't disclose. We are in different processes with our next round. But [18:28] Yeah. David, that's fine. I'm asking about onboarding strategy here, okay? This is a SaaS strategy. You're charging an upfront fee that's fully 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 SaaS founders listening, which is why I'm asking. If you don't want to share, don't have to share. We can move on. But that's why I'm asking. [18:43] >> Sure, let's move on. [18:45] Okay, wonderful. Why are you raising more capital? There's plenty of companies bootstrapped in this space with way more than $10,000,000 in revenue. Why do you need so much capital? [18:52] >> Because it's a moment. There are 10,000,000 companies in the world which could benefit those continuous listening technologies, and it's the right moment to grow. [19:06] Okay. You keep talking about raising, so that's why I'm going to ask it. I don't care how much you raise, 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? [19:15] >> $8,000,000 [19:16] And why is that the right amount? How do you get to that? [19:19] >> Just our business model and our international expansion model [19:25] >> shows that this amount will be most likely enough to accomplish our goals. [19:32] When you raise that and you then deploy it over many years, what do you think you can use that $8,000,000 to grow revenue towards? How many customers can you serve with that amount of capital? [19:41] >> At least we will open three big regions in regional expansion. Will be I don't have it on top of my mind. It's probably about 130 or 140 employees by the end of next year with this expansion. Number of customers, good question. Actually, can't disclose this number, but our target number, but I don't have it with me. But it will be significant 4x growth from the end of this year. So 2022, we [20:24] >> target to grow four times. [20:26] Understood. And do you have a valuation target you're going after on the 8,000,000 raise? [20:33] >> Probably I would not [20:37] >> answer this question right now, but obviously this you could kind of guess with this amount. But anyway, probably I would not answer right now. [20:51] What would the right guess sort of be? A range is fine. [20:54] >> Below $100,000,000. [20:56] Okay. So you think you can raise 8,000,000 on a 100,000,000 post Below. [21:02] Below a 100. [21:03] >> Of course below. Yeah. [21:04] Got it. Why do you say of course below? [21:07] >> Well, it's because it's [21:14] 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 SaaS company in HR tech space, to hit revenue wise to hit a $100,000,000 valuation? Not you, specifically, just Yeah. The [21:28] >> It's many organizations, many many fast growing technologies would get 30x price to sales multiple. So [21:43] So you're thinking about 3,000,000 revenue to a $100,000,000 valuation? [21:46] >> $3,000,000 revenue would give you, in many cases, even more than $100,000,000 valuation. It very much depends on what go to market strategy you found. If you found low touch, no touch path to the market, then you will be able to grow without significant growth of your sales force in the market, total market, available market is large, then you will get high multiples. [22:22] Very good. All right, let's wrap up here with The Famous Five, David. Number one, favorite book. [22:27] >> Collins, Good to Great. [22:30] Number two, is there a CEO you're following or studying? [22:37] >> Probably not many, but people dot ai, my friend, Oleg Rogynskyy, is just genius. They they got recently 1,000,000,000 over $1,000,000,000 valuation, I mean, they are fantastic. [22:55] Number three, what's your favorite online tool for building your business? [23:00] >> Online tool for what? [23:01] Building your company. [23:03] >> Building. [23:08] >> Well, HubSpot, Zoom, CRM, we're we just switched from Salesforce to another CRM. [23:18] Number four, David. How many hours of sleep do you get every night? [23:23] >> Hours. [23:26] >> Yva shows that I sleep about four and a half, five hours per day, which [23:31] is Does not sound very healthy. [23:34] >> Not very healthy. That's true. [23:36] Why do you do it? [23:38] >> Well, because Yva is not the only company I'm engaged with. It's, I still spend about seventy six hours per week for Yva as a CEO and Co Founder, but I have a charity project, I'm an educational foundation, I'm a part of it. I have my largest company ABBYY where I'm not operationally involved, but I'm board of director. And I'm doing emotional AI project Morpheus, which lives in my house in Portola Valley with moving balls and conversational, [24:21] >> emotional AI and robotic dog, which is right here sleeping and listening to us. [24:30] Very cool. Lot on your plate. Take us home here. What's your situation? Married, single, kids? [24:34] >> Married, three kids. [24:36] Three kids. Okay. How old are you, David? [24:39] >> I am 53, I guess. [24:42] >> 53. [24:43] Last question. What's something you wish you knew when you were 20? [24:48] >> Nothing special. I I can't answer this question. [24:52] Alright. Nothing's the answer, guys. There you have it. Launched a very successful company called ABBYY back in 1989. Used $3,000,000 from there to launch Yva.ai back in 2014. They've since scaled at another $5,000,000 seat in 2020, targeting $8,000,000 raise now to grow their customer base from four ninety six up to something much larger. They charge, call it, $50 per employee per year across these customers. They have over 200,000 employees on the platform. Those are not paying [25:18] 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. [25:24] >> Thank you, Nathan. [25:27] 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 [25:52] Central. 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