SaaS Interviews with CEOs, Startups, Founders
AI Company Ople $15m Raised, Just $500k Revenue, Overvalued?
25 Jun 2020
Chapter 1: What is the main topic of the podcast episode?
A million bucks a year is what you said you'd finish this year at, which means you're doing at least $83,000 a month. 83 grand times 12 is a million dollar run rate, right? So if you're not there yet, you know to some degree how far away you are. Are you only doing like 40, 50 grand a month right now or are you really close?
Yeah, so we have about 55% or 60% of the way to go.
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My guest today is Pedro Alves. He's building a company called Opal, which makes AI easy and valuable. He's been in the industry for 18 years. Some of that time was in academia and some in the industry as a data scientist. He's been struggling or he's seen the struggle that companies face when trying to get a return on investment with AI.
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Chapter 2: How does Ople aim to provide ROI on AI investments?
And that is why he created Opal. All right, Pedro, you ready to take us to the top?
Yes, absolutely.
All right. So what does Pedro do? And are you guys a pure play SaaS model?
Yes. So I've, like you said, you know, I've been my whole career doing AI and trying to get companies to actually get a return on investment besides just PR, which is how most companies see AI today. And yeah, our company is software, right?
So it's software that enables a user that's not very technical, a business end user, an analyst to build models that up to today would take, you know, a team of PhDs to actually build.
And are you, so is it pure play SaaS or is it a lot of consulting as well?
No, no consulting.
Okay, so all SaaS, recurring fees. Yeah. Okay, and give me a general sense of what you're working with here, right? So on average, what's a company or customer going to pay you per year to use the technology?
So it's, we try to build in a way that incentivizes people to build more models to do more with AI. So initially investors really wanted us to charge per model built, per project done. And that way, I think it goes back to the whole thinking, the whole mentality of companies going, okay, we have these five projects. We only have money for two. Which ones do we choose? We didn't want that.
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Chapter 3: What is the business model of Ople?
Okay, so charge per seat have some less than six figures, some more than six figures, but it sounds like a sweet spot might be called 100, 200 grand a year to use the technology.
Yeah, for a lot of companies, that's going to be the size.
So let's the reason I asked that question is let's then go into your sweet spot. So if I am paying you 100 grand per year to use your technology, how many people are probably on my team? How many seats am I probably paying for?
So in that range, that's going to be in the three to six person team. So that's still, you know, company could be a medium sized company, but you have a small little team of analysts or business developers. And that's going to be the roughly given that range.
Yep. Is there anything else you upsell against besides number of seats, any feature based upselling?
So we are starting to talk to some customers about some beta products that we have that we haven't really advertised on the website. Things to do with unsupervised learning and a couple of other technologies that are really new out there. And so those are things that would be charged separately. They're separate products within the platform, if you will.
No, that obviously makes sense, especially as a company matures. So what is it? I'm curious, you know, history here. What does it look like? When did you launch the company?
Close to three years ago. It was in the beginning of 2017, so getting close to three years.
Okay. And between when you wrote the first line of code, your first dollar of revenue, how much cash did you sink into the MVP?
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Chapter 4: How does Ople structure its pricing for customers?
He hadn't yet. And he said, I think you shouldn't take it. You need to wait till you get a bigger check because you're going to run out of money before you get your next investor to put money into you. And as he finished this whole thing and I said, I actually called you to tell you I just signed the contract and I wanted to celebrate with you on the phone.
And we had a fantastic conversation because it was still super valuable because of that advice, right? From day one, I knew I was going to run out of money. I trusted his advice and I said, okay, I'm going to start raising today, day one. And he was pretty much right.
What was your burn at that time? So you raised $300,000. What were your total expenses at the time?
It fluctuated a lot because we kept cutting salaries in order to make it last. So that first, you know, we didn't raise again until I want to say end of May or June. So it lasted about six months.
So you're burning about $50,000 a month.
Yeah. I mean, it lasted us about six months. That sounds about right.
Yeah. Okay, good. And then, so how much total today have you raised for the company? About 15 million. Okay. One five or five zero? One five. One five. Okay. So you've gone on a funding track. You obviously keep raising. When was the last round?
So we raised a series a last year at the end of the year.
Okay. And that was for how much?
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Chapter 5: What challenges did Ople face in raising capital?
And we're trying to assume let's not count on the hype being there when we raise B and let's try to hit the numbers that are closer to normal, unhyped, if you will, valuation. So we're going to try to hit those numbers that are more in line with other industries And if the higher is there, we get an even bigger valuation, that's even better, right?
So what ARR, I guess, would you consider a massive win if you crossed it by the end of this year? You know, we got two, three months left in the year. What's the target?
So our target for raising B is by the end of next year.
So you want to be north of like three or four million bucks in ARR by the end of next year?
By the end of next year, yes. I want to be north of four.
Okay. And what will you finish this year at?
So this year, I think it's going to be around one.
Okay, around one. And what did you finish last year at?
Last year, so prior to this year, the numbers were, I would say, inconsequential. I think we hit six figures barely.
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Chapter 6: How much funding has Ople raised so far?
But a lot of it, it's basically this whole year, right, is end heavy, right? Almost everything is happening in Q4.
You can give me some sort of like a function, right? I mean, you know, a million bucks a year is what you said you'd finish this year at, which means you're doing at least $83,000 a month. 83 grand times 12 is a million dollar run rate, right? So if you're not there yet, you know to some degree how far away you are. Are you only doing like 40, 50 grand a month right now or are you really close?
Yeah, so we have about, I would say... 55% or 60% of the way to go. But with the pipeline that we have and finishing the pilots, we think we can hit it.
So you're doing about $40,000 a month right now in revenue across 12 customers paying about $4,000 a month on average.
The number, the dozen, the 12, that's people that are not full customers yet. It includes people that are in pilots.
How many full customers?
A handful.
Okay. Like, like how many, like five, six?
Three.
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Chapter 7: What are Ople's growth targets for the upcoming year?
Okay. And how many are quota-carrying sales reps? We have two. Two. Okay. So you're just trying to figure out how to scale that.
Yeah, I mean, I think we're still before scale, right? We're not there yet. We're still trying to figure out the formula, how to sell, right? All the things that you need to understand to figure out what a sales process is like, how long it takes to sell, how to navigate a company to get a close, right? I think we're not there yet.
So we're still not at the point that we want to scale because in order to scale, we need to have the answers to all those questions, right?
Yep, yep. Instead of going out and raising more equity capital, because you're going to keep getting diluted, right? If you do that, would you ever consider using debt
I looked into it.
I talked to a couple companies that do that. I think that there's actually a few other interesting options that I might look at, right? So there's now the potential to do ā it's not a full IPO, right? But there's a new regulation that allows you to raise capital through non-certified investors, right?
Yeah, you're talking Reg A, Reg B, Reg D. Exactly.
So ā I have a friend that actually did that and successfully raised $50 million, but he did caution me that it is a lot of work and a lot of time spent doing just that. A lot of legal. Yeah, yeah, absolutely. There's family offices, which ends up being the same thing as a VC, but the difference is that they're a little ā they're going to be a little more generous.
I think with the percentages, that's what I've seen in the past.
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Chapter 8: What insights does the guest share about the AI industry?
No, no, no. I meanā¦ I think it's going to happen. They need a little more time for that to happen. I can see them going the path that you're saying.
My point is though, founders do what you just did, which is you use the hyper successful comps and you never look at her. Many times they're not even aware of the hundred companies that died to get those two winners that you just quoted.
Right.
Okay. Fair enough. The examples that I know of the failures that you're asking for, a lot of them are going to be, they've raised a ton less money. They fail much sooner. So they actually never got the chance to deploy nearly that much money because they failed when they were still two, three people. They raised maybe less than a million dollars.
And then there's dozens and dozens of failures there. The examples, I thought you were asking of examples of companies that actually raised at least double digit millions and then they failed. And
For those, I think if we wait a year, we're going to have a couple of those stories because I can see already the companies that are massively overinflated on the valuation and the amount raised in comparison to the revenue. I'm talking about between 50 and 300x if you're doing that math that you did.
And then when you start getting to those numbers of like 200, 300x, I don't think they can dig themselves out of that hole.
Mm-hmm. Well, I mean, you raised $8 million, right? If you gave up, let's say, aggressively 20% of the company, right, that's putting you at a $40 million pre-money valuation, right? $40 million divided by half a million in ARR is an 80x multiple. You could argue you are one of the overinflated AI companies that has raised a ton of money relative to your ARR.
I think the difference is that at the A round, the expectation for revenue in some industries is not the same. Most A round companies have zero revenue.
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