SaaS Interviews with CEOs, Startups, Founders
How Lately Hit $900k For Social Media Automation Tool Using AI, $7m valuation
29 Dec 2020
Chapter 1: What is the main topic discussed in this episode?
Hello, everyone. My guest today is Kate Chernus. She's the founder and CEO of Lately, which uses AI to automatically transform long-form content like blogs, podcasts, and videos into dozens of smart social media posts.
Chapter 2: What is Lately and how does it utilize AI for social media automation?
It learns we'll yield the highest engagement from your audience. She's a former marketing agency owner and created the idea for Lately out of spreadsheets for old clients like Walmart that got them a great ROI. She's now bringing that power to all of you. Kate, you ready to take us to the top? I'm so ready. This is great. Okay, so how much of this is like AI versus like a human-powered backend?
How many engineers are on your team? Yeah, so we're a really lean team, actually. So there's three on the team that are full-time, and then we use some other people auxiliary. About 82% of the brain is built in-house, and then we've since integrated with C3, Watson in the beginning, that kind of thing. So
Um, we recently also brought on, um, a professor at Shanghai university, who's got some crazy, crazy AI accolades.
Chapter 3: How did Kate Bradley Chernis come up with the idea for Lately?
So he's been helping us do some cool stuff that I'll, I'll share with you maybe a little bit. I love that. Okay. So three on the team total right now. Yeah, yeah, yeah. Okay. No, not, not on the, on the engineering teams, the whole team. It's about 14. Oh, perfect. Great. Okay. 14 and three.
Chapter 4: What role does AI play versus human input in Lately's operations?
Let's take a step back for a second. What you're doing to the company. Uh, 2014. I can't even believe that's true. I love it when someone says to me, like an investor will be like, what's taking so long? And I'm like, okay, a couple of things. Amazon isn't profitable yet. Number one, number two, Facebook took at least four years. So, you know, female founders, do you know this, Nathan?
We have to work 98% harder than our male counterparts. I know. And I, and I actually need to do a better job, you know, I don't do anything in my outreach to founders to target specific founders. It's just sort of been natural. But if I don't actively recruit female founders on a show, it just doesn't happen. So I'm really glad that you're on. And you know what?
I really, the other thing that I sort of struggle with is I never want to feature a founder because they're female. I want to feature them because they're a great founder. Yeah.
yeah I mean that's bullshit by the way right like I used to be a rock and roll DJ my last gig was broadcasting to 20 million listeners a day for XM so like no shakes right no small shakes and I remember like not at XM but at other radio stations having the directive to play two to four female artists an hour and that was annoying to me honestly yeah right because it was like it didn't go with the vibe I was playing not not that they were female but like I I wanted to play rock and guitar rock and roll and there's not a lot of
broads who do that super well, you know, Joan Jett, baby. Okay. So, so 2014 and take us back to those early days. I mean, do you remember the revenue you did in that first year? Um, so we actually just were in market only three years ago. Um, I can tell you, I don't remember, but I remember last year pretty well. So last year we were at $25,000 MRR and we are now at 74, $74,000 MRR.
So that's 196% increase in tenants. That's incredible. So, so what did you prepared? You knew exactly what I was going to ask. Um, what, uh, what drove the growth? Yeah, a number of things. So number one, we only use Lately to market Lately, nothing else. So our own AI, which is all organic, right? We don't do any paid ads, no cold calls and no cold emails.
What we've learned is that the AI is so good at finding the messaging that you want to read, write, or hear that our leads are already warm. So we look for customers that are liking, commenting, and sharing, and then we engage with them and then move them into DMs. Our demo is our KPI. The demo has always had a 50% or higher conversion. It's been at 98% for the last 10 months.
Well, how many demos do you do a month? Um, I can, I know my week, so I know weeks better. It can be between 30 and 50 for a week generally. Yeah. So we get a lot of, we have more leads than we can handle. We're, you know, one of those actual growths and constrained companies. Um, but it's been interesting. So, so only using a lately as a big one also.
So Nathan, I'm hell bent on upending the SAS, um, sales model, a funnel model. I think it's completely broken and old and dinosauric even. It doesn't apply anymore. Nobody wants to receive those cold calls. Nobody wants a bank of SDRs smiling and dialing, who also, by the way, are a pain in your ass. They stick around for four or five months, if that, and then leave.
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Chapter 5: What strategies contributed to Lately's significant revenue growth?
I'm oversubscribed, 4 million bucks. And the world explodes. Yeah, and COVID. COVID, yeah. But I had a couple of things. I didn't love that term sheet, so I was dragging my feet, to be honest. It was difficult for me. I couldn't please all the people I needed to please. Well, where were you at, though?
I mean, Kate, at the end of 2019, do you remember how much cash you had in the bank and what your burn was then? Oh, yeah. My burn was still 10K then. Okay, and how much cash in the bank? anywhere between, you know, 13,000 to 24,000. So you're operating like right on the margin here. Super lean. Yeah. Super duper lean. Right. Yeah.
Um, and that's, by the way, I mean, that's just, I wasn't paying a bunch of people.
Chapter 6: How does Lately generate leads without traditional advertising?
So like I owed my staff money, you know, so I'm, it's much leaner than that really. Um, and then what I did though, is before I went and stuck my head in the sand, cause Hey, I failed Nathan twice, not once, but twice. Right. And so this felt pretty bad, of course. And I said, all right, I need to just take a break. The world is collapsing.
My entire family wants to Zoom call with me, which is the last thing I want to do with anybody. I don't want to connect. I want to disconnect, right? So my head of growth, Lauren, she was my head of customer service at that time. She was outselling every sales gun we ever brought in by three to one. by the way. And I said, just run the company. I need to go die for a second.
But before I do, can you please release this feature that everyone's been asking us for? And that was the video clips feature, right? So Gary Vee saw that somebody who he works with made him a Twitter channel out of that, showed it to them on his phone. And he was like, oh my God, I need that now. which was great. The change for us was we stopped having to explain what Lately does.
We could just show them. Yeah. So what did you close out the funding story for me? When did you, did you, what did you close capital? And if so, how much in what year? No. And I, so I didn't actually, I didn't. So you didn't raise 2.7 million. You're still bootstrapped. No, no, no. I raised 2.7 in the beginning of 2018. Uh, no, 2014 to 2017. Oh, okay.
So that's what funded it from, and then you were going to do another round and you ended up not doing that. Couldn't do that. Another round of another round of 2.5. Couldn't do that. Right. So I fail, fail, fail. What was the, what was the valuation you raised that in 2014? Do you remember? The, the last round I raised, it was a seven mil post. And that's the one in 2014. Yeah.
Sorry to be confusing, but my first round in 2014 was $250,000. Oh, okay. So the 2.67 in total that I raised of all priced rounds between 2014 and 2017. So you did that round at the $7 million valuation in 2017? Yep, that was in 2017. So then we go to that 2018 round, can't close it. And then this last year, can't close it. But...
The other thing I did before I passed out on the couch and died was I said... It was before I knew I wasn't going to close this round. It just occurred to me. I feel like the world is going to be crazy right now. I know that I need more runway to close this round. I took out a loan of $50,000 from one of our current investors who I trust and love. And it gave me just that breathing room.
What interest rate? I think it was not much. I want to say... we've already paid more than half of it back now. So I want to say it was like, I want to say it was 4%. Um, so not crazy. Very friendly. Yeah. Not crazy. Yeah. Um, sorry. There's a, we have a lot of, no, it's good. I mean, that means, that means you have people that's backing. I mean, you can't build this without that.
So Hey, just cause we have about three minutes up. They want to get as much of your story in here. So, so three 78 customers say, if you look at your churn over the past 12 months on a revenue basis, what's that been? Yeah, the churn is 2% per month or less. Okay, and what's expansion when you add back? Upsells. Oh, yeah. So the upsells, we move them from monthly into annual.
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