SaaS Interviews with CEOs, Startups, Founders
How Lately Plans to Break $1m in ARR, Raising Now at $10m Valuation
29 Oct 2021
Chapter 1: What is the main topic discussed in this episode?
Sorry. Hold on.
Chapter 2: How did Lately's customer count change over the past year?
Let me get really specific. So you were at like 380 customers about 10 months ago. You're at 358 now. They're still paying out $200 ARPU. So MRR is still about $70,000? MRR is at $79,000. We were up to $94,000 and we dropped. 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. Hello, everyone.
My guest today is Kate Bradley-Chernish. She's the founder and CEO of a company called Lately, which uses AI to automatically transform long-form content like blogs into dozens of smart social posts. Kate, are you ready to take us to the top? I'm ready. Let's do it. Content is obviously a hot space and splitting content up for easy consumption is even hotter.
How are you guys playing in the space here? Yeah, we are really leaning heavily into the AI. I mean, what we've learned most, Nathan, is that people hate writing. Writing is really at the baseline of all the content we create, even video like this, right? So you still have to promote this with writing eventually. And it seems to be the bane of most people's existence.
Lucky me, I was a fiction writing major. So I'm good at writing. He says with a laugh. Yeah. The other thing too, I think you know this about me, but I used to be a rock and roll DJ and my last gig was broadcasting to 20 million listeners a day. So what I learned about the neuroscience of music actually plays into the bedrock of our AI. So I can talk on that real quick.
So when you listen to a new song, Nathan, your brain must instantly access every other song you've heard in this moment. And it's looking for familiar touch points so it knows where to index that new song in the memory of your brain, right? Yeah. And in that moment comes forth memory, nostalgia, emotion, all the things that feed trust and trust is what makes you give me your money, right?
Now your voice, Nathan, is like a song. It has a frequency. It's a note, right? And when you write text and I read it, I hear your voice in my head. So it's your job as the author to give me familiar touch points and trigger nostalgia, memory, emotion, all these same things, right? So the way Lely's AI works is it first learns from me.
I've written thousands of radio scripts and fiction writing major, and it learns from my best practices, which I've listed out for my whole team to replicate. And so the AI gives us what we need, and then we augment it with my writing rules. And then the AI continues to learn from itself. The more we publish, the more it learns. And same for all of our customers.
So we've created the multiple economies of scale through the AI alone. So Kate, this sounds sexy as hell. The question is, are customers paying for it? They are paying for it. How many? So we have 358 customers. Okay. That's down a little bit since when we last spoke. So are you guys transitioning? It is down a little bit. Yeah. We're, we're transitioning.
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Chapter 3: What role does AI play in Lately's content creation process?
He's not an investor. He's an advisor. He led the first ever accelerator from Stage 2 Capital this summer. 700 companies were applying. We didn't apply. They just actually asked us to be a part of it, which is great. And it was amazing, by the way. And I want to share this with everybody out there. So we were talking about economies of scale and growth and moat. And I was really frustrated.
And I said, you know... we've positioned ourselves as a disruptor. And he's like, yeah, why are you doing that? You're not, you're a category creator. And I was like, well, because every investor I've ever said that to for seven years told me I was crazy. And he said, well, that's because they've never seen it before. But why they say you're crazy.
I mean, you raised 250 grand in 2014 and another 2.5 million in 2017. So you convinced some people. Well, it's not that I didn't convince them to invest in me, but I didn't convince them that we are a category creator, which is a rare thing, right? So everyone can take advantage or believe in the better mousetrap, but the better mousetrap is what we don't want to be, right?
So getting back to your question about why we have less customers. So we understood that our customers needed a social media management platform in order to publish the artificial intelligent content that we were creating, but we've since learned that they don't. They don't need our platform. They can need any platform.
And that actually 75% of my headache, as far as resources go, is just dealing with Facebook and LinkedIn and all their bullshit. And I didn't understand that Lately could actually function and live without that. So it could be an extension of all the other social media platforms. right? So we extend the value of what they already do by a hundredfold.
Similarly, we extend the value... Sorry, hold on. Let me get really specific for a second. So you were at like 380 customers about 10 months ago. You're at 358 now. They're still paying about $200 ARPU. So MRR is still about $70,000? MRR is at $79,000. We were up to $94,000 and we dropped... Oh, okay. Well, I mean, that's not horrible.
So let me ask you, I mean, you raised $2.5 million, I think, at a $7 million valuation back in 2017. How are the current investors who have been on the ride for now four years reacting to sort of the not hyperscale growth? Yeah. So actually, I've raised $3.3 million now. Well, hold on. What was that next round? Because I only had $2.5 in 2017.
We did a couple of angel rounds, and I can email you the specifics. So we've done some extensions, and then I've got a couple of notes open. I had a couple of notes the last couple of years. One's open now, actually. Okay. So no institutional funding still. That last 2.5 was at a $7 million price round, right? Yeah. So currently, the current note is at a $10 million cap. cap. Yeah, that's great.
Okay, so you're still directing upwards. So okay, so you're pivoting, you don't want to deal with the Tuesday night updates, Facebook makes their API and outbreaks lately every week, and you have to always like playing catch up. So you're pivoting away from relying on the whales. What's the next product? Yeah. So the next product actually falls in line with what we already know.
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Chapter 4: What challenges has Lately faced during the COVID-19 pandemic?
There's probably 65 people in it. Okay. 65 people on cap table. Got it. Who's the next largest shareholder? Uh, it's Bob McCausland who's on my board. He was a fan of mine when I was in radio. Yeah. He's just a really amazing angel from Austin, Texas, by the way. Oh, amazing. So what does he own? Like 10, 20, 30? Uh, I don't know.
He was in, he was in with, I believe his full investment was 650,000 out of, out of all. Okay, okay, cool. Very cool. So you have allies behind you, which is good, and you also have time. What's your team like, say, 14? Yeah, well, and I have also, I have Joanne Wilson, right? So she's on my board member, and she led my last round. We also have David Meerman Scott, who just came in.
Google him if you guys don't know him. He wrote a little book called Fanocracy, and also is on the advisory board for HubSpot. The team is great. I trimmed us down. We're... 100% product focused now and not sales because we're moving to the self-service model. So buy sales, hello product. So how many team on the product team? There's seven full-time, six part-time.
And by part-time, I mean people I get to work for me for a free year. So no sales people, no quota carrying reps. Yeah. I have one salesperson who we pay intermittently because we can't pay him often. And he's a nice guy. And his wife is Kate Snow from NBC. Got it. So you have to sort of manage that relationship. Okay, cool. So seven on the team. You're raising cattle. This is great.
Who's doing the engineering? Are you outsourcing development? No, it's my team. Interestingly, my two co-founders, Jason and Brian, make up the majority of my engineering team. Also, Greg is our VP of engineering. And then our AI lead came from one of our investors. So those guys make up the team for the most part. But I wasn't paying my co-founders because that's who you cut first, right?
And so that was a big... challenge for us because i was feeding them you know freelance work for years well how much equity do the two co-founders own together so they're next to me when we first started it was i'm 80 no sorry steve 20 i do math backwards jason 15 brian 5 and then i'm the rest so that's the ratios So they owned 40. You've been diluted by about 50%.
So today, they probably together own about 18%, 19% of the business. Yeah, right around that. Yeah, really interesting. And they're still active, which is good. So I mean, they have good upside. I mean, they have upside here too, right? They'll take a pay cut for their equity value. Yeah. I mean, you know, we all, this is the thing we have to reassess every single day. Are we fucking crazy?
That's what we want to know. Are we crazy? Yes. The answer is yes. We all are. Yeah. I mean, you know, like when I've got like. HootSuite just literally texting me, what's happening? Like, let's close this deal with some giant company, hurry up and integrate with us. And I'm like, okay, I guess that I'm not crazy. And I've got Salesforce pulling me in to be one of five.
Why don't you exit a HootSuite for 5 million bucks? I mean, I'm working on that shit, Nathan. You know, it's like, it's weird because like you get all these accolades, right? Where Mark Roberge comes out of the, you know, the
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Chapter 5: How is Lately transitioning its business model?
And the reason I love that book is it's a great, it's just like, it's like my story. It's an underdog story. And he had to wait until he was quite old in the music industry for his team to come up, right? And there was constant, constant chaos and whatever, divorce, you name it. And they made it. Number two, CEO you're following or studying? It's always me.
Number three, what's your favorite online tool for building a business? Lately. Number four, what's your favorite... Sorry, how many hours of sleep do you get every night? I don't sleep between two and three hours. So I wake up at some point and I don't know what happens there. How many hours? What do you get though on average each night?
I try to make it actually eight or nine, but like that's, you can see if I'm waking up at two, I'm having to catch up for those four hours. So I sleep late. All right. Before 11, kill me now. Yeah. Situation, married, single kiddos. Married. Married. Any kids? It's on the list of things to do, but obviously no rush. I mean, lately's first. Yeah. I mean, I'm pushing it, Nathan. I'm 47. So.
All right. Fair, fair, fair. And what do you wish your 20 year old self knew? that eye cream is really worth the investment. Oh, eye cream. Guys, there you have it. Kate from trylately.com. She still owns 40% of the business. They're scaling nicely. They have a little flat patch here during COVID, but they're now pivoting. They're serving 358 customers.
They do about a million dollars a year in revenue in terms of run rate, raising 650 grand now at a 10 million cap. That's closing. Team of seven, very scrappy. 18 months of runway is booked to pivot and then do a more traditional round in 2022. Kate, we are rooting for you. Thanks for taking us to the top. Love you.
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