SaaS Interviews with CEOs, Startups, Founders
1628 How He Used Singularity University To Get 17 Customers, $1M in ARR In 5 Months
08 Jan 2020
Chapter 1: What is SkyHive and how did it start?
launched his company Skyhive back several years ago. Again, helping really, it's almost a competency discovery tool, right? Helping teams understand who to promote, what skills they need to promote, or if you're looking for a job, helps you really hone that process in as well. Today, they've scaled about 17 customers. They're doing about 85-ish grand per month up from nothing a year ago.
They just launched pricing about five, six months ago. Cashflow negative today, they raised 1.5 million bucks. They're going to be profitable in Q3 of 2021. 19. They've got about 14 people in Vancouver too early to talk about unit economics, most of their growth coming from their singular university network.
And that first contract and word of mouth coming from the Canadian government via their innovation program called ideas. Hello, everyone. My guest today is Sean Hinton. He's the founder and CEO of Skyhive, a Canadian technology company that applies machine and deep learning to discovering revolutionary efficiencies in the movement of human capital.
Chapter 2: How did Sean Hinton achieve $1M in ARR in 5 months?
Sean is a future of work thought leader and passionate about applying SkyHive's technology to support the workforce's most at-risk populations. Sean, are you ready to take us to the top? Yes, sir. Okay, so break this down for us. I mean, tell me exactly what the company does and maybe a customer story. Sure, so two years ago, I was president of a large manufacturing company here in Vancouver.
We had a $250 million top line, 500 employees, 23 global offices. I came to the realization through a series of events that I really didn't know what my workforce was capable of. What I mean by that is I would look around my office and I knew the people that were hired and for the jobs that they were hired, but were they actually really working to their true capability?
And so I started to look around and realize that this was sort of a systemic problem that we understand our level, but not at a deep level. And so what Skyhive does is it takes it uses machine learning, deep learning to extract the skills from people. extract the skills required from jobs and then we apply data science to finding efficiencies and correlations.
So the idea is that you're compressing the amount of time it takes to move people from one job to the other or to acquire people for new jobs within your company. But it also supports learning and development for people so they can get a sense of what skills do I actually have and how do they apply to my company.
So a good use case is we're working with a large German auto manufacturer and they have a strategy that goes out from now until 2023. They have a skill set that they require in 2023 and a skill set that they have today. Obviously, the world of auto manufacturing is changing considerably with going away from combustible engines and going towards sort of autonomous vehicles.
And so it's going to be a very different world in 2023. And what we're able to do is we're able to inventory the skills that are required then, inventory the skills that are in place now, and find direct pathways to getting those folks upskilled and ready for the changing needs of the company. So I'm a little confused.
Is this something, a tool that a company would use to help advancement of their own employees? Or is this something that a recruiter would use to help place employees in the first place? So the application is twofold. So it's within a company, within a large enterprise, and the tool can be used to find people.
Out in the world that you want to come in and work with you with a particular skill set, but it's mainly focused on looking at large enterprise workforce efficiency opportunities and learning and development opportunities. And Sean, is the revenue model for you, is it a peer-placed SaaS company? Absolutely. Okay. So, I mean, give me a general sense.
What's the customer going to pay you per month or per year to access this tech? So the customer would be looking at somewhere around $5,000 a month for full team access, and that would be both an admin license as well as an employee user flow as well. Okay, and you'd say that's a fair average of your current base is about $5,000 a month? Yeah. Okay, great. And put this on a timeline for us.
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Chapter 3: What role does machine learning play in SkyHive's operations?
Okay, 17. And I mean, so how did you close those deals? How did you get the first one? We were really fortunate that we were completely inbound up until this point. And our first client was the Canadian military. And so we were awarded shortly after our beta launch a Department of National Defense contract.
And that obviously lends a lot of credibility to the company with respect to stability and security, etc., I mean, so how does a government organization trust a brand new startup with no customers and award them a $5,000 a month grant or customer contract? How did you win that? So that contract's a little bit different. It would be more than $5,000 a month.
But the Canadian government has implemented a new innovation program called IDEAS. And the idea is for ideas that they would go out and solve some of their innovation challenges working with new Canadian startups and innovative technology companies. And so we were fortunate to be four of 600 companies that were awarded one of four of 600 companies that were awarded their initial contracts.
So was it a grant? It's not quite a grant. It's a program where they're actually investing in growing the company and operationalizing it over time. And so we go through a process of basically stage gate development where we're proving concepts and milestones along the way. And as long as we're doing that, that contract and program continues to grow. But Sean, are they on your cap table?
I don't understand. Are they a customer? Are they on your cap table? Are they investor? Is it a grant? Are they a bank? What's the form factor of that money they're giving you? They are a customer through a government project. So, you know, not quite a grant, but a government contract. Okay, interesting.
Okay, so $5,000 a month on average, 17 customers, that puts you at about $85,000 a month right now in revenue. Is that about right? Something like that, yeah. Okay, why would that not be accurate? Is it higher, lower, or what would change that? No, no, you're pretty much in the ballpark, yeah. And going back a year, you'd be zero, right? Yeah. Going back five months, we'd be zero, yeah.
Yeah, so look, I mean, this is healthy growth. I mean, landing 17 folks paying five grand a month is not easy. Tell me about the second customer. Second customer was a research project that we're doing with a local university here in British Columbia. And what we're looking at there, the key drivers that support women into the workforce.
And so it's a gender gender equality project that we're working. So that's almost like they're paying you five grand a month to get access to basically your research. Yeah. Interesting. And our machine learning capability. Yeah. Will they keep paying after the research is done? Like, is it is this actually sticky revenue?
That particular project is a one-off but the military project is a long-term project for us. Have you had any churn to date? So, okay, so it's too early, really, to be looking at churn and stuff. Yeah. Tell me about kind of how you funded this to date. So have you bootstrapped or raised capital?
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Chapter 4: How does SkyHive support workforce development?
That would be, there's no data to go off of. How would that be easy? Getting evaluation. Yeah. Um, it was easy in the sense that there was a middle point for us that we could all agree on within our, uh, we had some incentives in our term sheet that looked at, uh, you know, penalties if we didn't hit a certain valuation in the next round, et cetera.
So, um, so it's quite reasonable and innovative. Um, talk to me about team today. How many folks are on the team? Uh, so we have a full-time team of 14 and then we outsource some development. Everyone in Vancouver? Yeah. Yes. Okay, that's great, Vancouver. And I assume you're probably still burning cash investing in the product. So you're cash flow negative at this point, or are you profitable?
Cash flow negative. Yeah. So when you raised, how much runway are you raising for? How many months does that buy you, you think? At that time, we were raising for 18 months. Obviously, we had, in our use of funds document, we had an 18-month roadmap that looked at the implementation of enterprise in Q1, Q2 2019.
And so we got a whole bunch of demand from enterprise around the time of our public beta, and that sort of compressed our operations plan. So we're having the problem that I understand is a good problem that all startups want to have, which is compressing two phases of an operations plan into one. When will you be cashflow positive? We're hoping to be cash flow positive Q3 2019.
Yeah, that's great. Very good. And talk to me about, I mean, have you, besides you being the closer you are and going and selling these, the Canadian government and school systems and things, I mean, do you know, can you spend money to make money? Do you know what your, like your CAC is? We, like I said, now the majority of what we do is inbound.
And so through discussions on future of work, we are also a portfolio company of Singularity University Ventures. And they have a strong corporate innovation network that's led us into a variety of different discussions and relationships in the Bay Area. That's really helped us with respect to getting in front of corporate clients and innovation partners. Yeah.
When we're going to share that little detail. Yeah, that's obviously a powerful network to be tied into. When you go through their program, is there a cash component to that or no? It's just advisory. It's advisory. It is. But they take equity, right? Yes. Yeah. Yeah. Interesting. OK, good. So too early to really talk about cash stuff. That's not something you're dialing.
You're not dialing up spend right now to drive growth. It's really just using the singular university connections, your own connections and word of mouth. Yeah. And since since June, we've been able to establish a pretty strong network in the Bay Area. And so we have other relationships as well on top of Singularity that great folks that we work with down in California. Yeah. Interesting.
Have you looked at I mean, as you look to fuel like additional growth, have you looked at kind of unconventional means that wouldn't dilute you like venture debt or no? Not at this point. We are looking at that for sort of Q1, Q2 of next year, yeah. What do you dislike or like about venture debt?
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Chapter 5: What strategies did SkyHive use to acquire its first customers?
And they've got about 14 people in Vancouver too early to talk about unit economics. Most of their growth coming from their singular university network and that first contract and word of mouth coming from the Canadian government via their innovation program called Ideas. All right, Sean, thanks for taking us to the top. Thanks, Nathan. Appreciate the time.