SaaS Interviews with CEOs, Startups, Founders
Buy Rendering Power with YellowDog, $1.8m ARR, $12.5m Valuation
23 Oct 2021
Chapter 1: What initial funding did YellowDog secure and how did it evolve?
So we raised Ā£150,000 initially, and then we went 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. You are listening to Conversations with Nathan Latka, where I sit down and interview the top SaaS founders, like Eric Wan from Zoom. If you'd like to subscribe, go to getlatka.com.
We've published thousands of these interviews, and if you want to sort through them quickly by revenue or churn, CAC, valuation, or other metrics, the easiest way to do that is to go to getlatka.com and use our filtering tool. It's like a big Excel sheet for all of these podcast interviews. Check it out right now at getlatka.com. Hey folks, my guest today is Simon Ponsford.
Chapter 2: How does YellowDog accelerate applications in the cloud?
He has over 20 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 20 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? Absolutely. All right. What's that mean, accelerate applications in the cloud? Really, it goes back to the concept of 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 applications jobs completed very quickly. And so do you sell based off number of cores you're helping manage or what's the sales model? 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. Okay. And is that the only upsell or do you upsell product enhancements, number of seats, anything else? 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. This makes a ton of sense.
So what are companies paying on average per month to use the technology? It really depends. You get some small companies that are just maybe paying $1,000, running some relatively small jobs, where you get others paying tens of thousands of dollars to be able to scale to tens of thousands of cores and keep those jobs running 24-7.
And so would you say maybe a sweet spot for you might be someone paying $10,000 a month? I would say probably the sweet spot for us is almost like two different markets. There's a sweet spot in the smaller mid-market, which is generally around about $5,000. And then the upper end is probably closer to $50,000. Interesting. Okay. But you sort of skipped the middle.
You see either people are lower or higher, but very few in the middle. There are very few in the middle. It's a really interesting market. Essentially, you've got 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 entirely to the cloud. So those are people that could have run on-premise. And then you've got the larger organizations that are really just looking at cloud to scale. And they couldn't achieve that or couldn't achieve it easily on-premise. And so they're much bigger. So you don't find there's too much in between.
And so without obviously naming the customer, what is the largest customer paying you per year and how many cores does that get them? The largest customers are actually generally paying for something number of core hours. So quite a few million core hours. Okay. And what is the price point they're paying? Are we talking like million dollar accounts or $500,000 accounts or something else?
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Chapter 3: What is the sales model for YellowDog's cloud services?
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? Yes, you can. Okay. Fair enough. And bootstrapped or did you guys raise? No, no. We raised. We raised early on. We started at crowdfunding. What funding? Crowdfunding. Oh, crowdfunding. How much did you raise? We raised 150,000 pounds initially.
And then we went back out and did another raise for that. And then we also went through angel funding. And we've also been through VC funding as well. When was the last VC round? But our first VC round was in 2017, and we've been continued support ever since then. How much did you raise in that round in 2017? I think about $1.5 million. Okay. And would you call that your sort of pre-seed round?
Yeah. Well, I would say all of these really just being pre-Series A. I really expect our Series A to be going on next year.
Chapter 4: What are the average costs for companies using YellowDog?
I see. Okay. So the 1.5 was in 2017. Was there another round you did between then and today? Yeah, we did various raises. We've done about 8 million in total. Okay. Got it. So you raised another 6 million last year or something like that? Over the last couple of years. That was end of 2017. Okay. I see. Okay. So what do you mean by that?
You sort of like split the things up and sort of raise on a rolling basis as you needed it? Or what's that model look like? So 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.
One of the most common things I hear from SaaS founders as they're getting your MVP launched is you rely on your customers to send you a CSV or Excel file. And you don't want to spend your engineering time building a big bulky CSV importer. That's why this company Flopfile is growing so fast.
They make it really easy for startups to quickly embed and ingrain their customers' data into the web application without you having to spend engineering hours, your precious early engineering hours, on building a clunky CSV import. You simply use Flatfile to import your customer's messy Excel file. Flatfile will clean it up and make it perfect for use in your new web application.
Now, the beautiful thing about Flatfile is it's free to any startup with less than a million in funding or less than five employees. Again, totally free. You can check it out at nathamaka.com forward slash flat file startups. That's nathamaka.com forward slash flat file startups. So I guess, I guess the reason I'm asking is the 6 million you raised over the past sort of three or four years.
What, like, how did you set valuation for that? How do we set the valuation? Generally from, from new parties coming in. And really just agreeing valuations around that. Our highest valuation was about $14.5 million. So $14.5 million. And how much did you raise at that valuation? Probably raised about a million at that time. I see. Okay. And that was your most recent round?
No, actually, I 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 that down a little. So that was really 2019, very early 2019. And then going into last year, it's slightly down, I think, as many people are. Well, thanks for being honest about that. 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 $14.5 million? That's a hard storyline to manage. It is a hard storyline potentially for people that have already invested.
But actually, when people see the value, and I think a lot of people have been with us right the way through the journey, 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 are generally still encouraged to do that. And now what does growth look like?
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Chapter 5: How has YellowDog's customer base changed over time?
Interesting. What about net dollar retention? Do you measure stuff like that currently? Retention. I wouldn't be able to tell you straight off the top of my head what that would be. That's okay. Very cool. What's next up product-wise, Simon? Before we wrap up, what are you excited about building and releasing? So we're continuing to build our platform.
We're continuing 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 customers is really what we're going to be concentrating on for the next few months.
Chapter 6: What markets does YellowDog serve beyond rendering?
Very cool. We're rooting for you. Let's wrap up here with the famous five. Number one, favorite book? Journey to the Center of the Earth. Say that one more time. Journey to the center of the earth. Number two, is there a CEO you're following or studying? No, no, I'm not. Number three, what's your favorite online tool for building the business? What tool?
Any tool, your favorite tool for building Yellow Dog. My 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. Number four, how many hours of sleep do you get every night? Between four and five. Okay. And situation, married, single, kids? Kids. Married. How many kiddos? One. One kid. Okay.
How old are you, Simon? I'm 48. Last question. What's something you wish you knew when you were 20? I wish I'd been a bit more ambitious at 20. Guys, there you have it. Yellow Dog. They sell licenses based off number of core hours. Started in 2015, really selling to rendering studios that needed more capacity to do these high resource rendering.
Now, 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 at $6, $7, $8 million to date. Their last run was $1.5 million this year at a $12.5 million valuation. Pretty efficient in terms of team size.
12 people, 7 engineers. Growing nicely here. We'll see what happens next. Simon, thanks for taking us to the top. Thank you.
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