SaaS Interviews with CEOs, Startups, Founders
HR Tech Exec Invested $200k into his own HR SaaS, Raising $200k on $3m Valuation Now
26 Sep 2023
Chapter 1: What is the main topic discussed in this episode?
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 these podcast interviews. Check it out right now at getlatka.com. Guys, he was the technology executive in HR.
He used those salaries to build up a nice personal nest egg to make sure he could pay off his mortgages, pay off all his car loans, pay off everything so he could take the risk and launch the company, which he did in 2019 called UmWealth.ai. It helps HR managers make sure their employees are happy so they retain them. He's got 16 customers today.
Those are companies that pay for 16,000 seats on his platform. That yields $10,000 per month in revenue or $120,000 of ARR. He's kept the company lean, eight people, or sorry, six people full-time out of India, paid himself very little, about to close a $200,000 pre-seed round at a 3 million post-money valuation. We'll see what happens next. Hey folks, my guest today is Vishal Chopra.
He's a seasoned professional with two decades in HR leadership, coaching and mentoring. A former HR head turned teacherpreneur, he pioneered umwelt.ai to empower CEOs and CHROs in shaping a future ready people first culture using AI. His expertise drives employee engagement and retention through tech driven insights, transforming workplaces for lasting success.
Vishal, you ready to take us to the top? Yeah. All right. So give me a customer story today. Who's using Umwelt for employee engagement and people analytics? So these are large enterprises, basically from different industries, normally service industries, which are highly, I would say, employee intellectual dependent, right?
So basically, these are the companies which would have large intellectual property in terms of employees. knowledge base, and they are largely dependent on the employee actually to serve their customers. Let's use a specific example just so my audience can really understand what you do. You have Puma listed on your website as a customer. How does Puma use you?
Yeah, so they use us for having the interaction with the employees throughout the journey and understanding their behaviors, needs, experiences within the company. And we also, so we use behavioral science behind it to understand the psychology behind of the employees and their experiences within the company.
Proactively generate the alerts to the CEOs and HR leaders to understand what is missing in the organization, what employees are looking for, and how they can actually retain and engage their employees proactively. You didn't use the word Puma in any of those sentences. Let's talk specifically about Puma.
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Chapter 2: How did the guest transition from corporate HR to launching his own SaaS?
Is Umwelt used to do, for example, the performance review every quarter at Puma so that we can make sure that the HR leaders are empowering the team members to hit their bonuses, for example? I will talk about Veromoda specifically. Again, the similar client retail. We help them to actually right at the point of the onboarding of the employee itself, they go through the induction process.
Now, post-induction, our boss name is Nikki. Nikki goes and interacts with them and understands their experience, how their experience has been throughout the induction process. So that would involve, from the company's perspective, they want to deliver specific experiences to their employees.
So we check back that if they actually have those experiences and what were the lags behind those experiences of an employee, would they contribute to them looking for leaving the company as well? I see. And we can generate these insights to the CEOs, HR heads, all the HR partners to take those actions and rectify those problem areas, speak to the employees.
and keep them engaged and working with the company. Understood. What does the average customer pay you per month to use this kind of technology? So it is $0.5 to $1 per employee per month. Okay. So what is the average size of a customer that's using it then in terms of number of employees? Typically 2,000 employees to 10,000 employees per month. Okay, so let's pick a midpoint there.
Let's say 7,000 is the average team size. At 50 cents a seat, the average customer is paying you $3,500 per month. Is that a fair average? Correct. Okay, interesting. Okay, give us the backstory here. When did you launch the business? So we started working, I started working on a mobile data in 2018. And we launched in 2019, July. Okay, how did you get your first customer? Do you remember?
Yeah, it was bestseller, which is Veramoda only, Jack and Jones selected. These are all the brands belonging to the same group, right? So it is a huge group with all these retail apparel brands. How did you land that customer though? That's a big group to get as your first customer. Usually big enterprises don't work with startups.
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Chapter 3: What challenges did the guest face in building Umwelt.ai?
I come from the HR fraternity. So I know a good number of CHROs, my ex-colleagues. So I went with this idea to them and started exploring that what exactly they will look forward to have. Because I think communicating with the employees is the largest problem any organization has today.
If you see right from Google's or Facebook's, everybody is facing that challenge, that how to interact with the employees and how to actually preempt that what exactly is their experience. Listening to the voice of the employee is very important today. Understood. Do you remember what the contract size was on that first customer? So it was around 20K annual. Okay, interesting.
And have you sensed increased or decreased prices generally? increase yep yeah how did you make the decision that 20k was the right price to go out to the market with back in 2019 i looked at my cost very specifically so i didn't want to actually So it was very specifically looking at my costs, as well as the market competition. I wanted to actually make it, keep it very, very lucrative.
So one of the things was only not, when we use the word AI, typically what happens to the mind is that the price is going to be 10x. But I wanted to keep it same as those annual feedback surveys. we're charging for one single communication with an employee on annual basis. We charge the same amount on automating the complete journey of these interactions.
So it could be seven, eight, nine, 10 conversations. We do not control the number of conversations you want to have with the employees. Understood. So that was your first customer. Fast forward to today, four or five years later, how many customers are you working with? So currently we have around 15,000 paid users. We do not take number of customers into consideration, but paid users.
So it is 15,000 paid users, what we have right now, working with 16 brands right now. If you say customer, there's 16 brands. I just want to make sure we're using the same lingo consistently throughout the interview.
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Chapter 4: Who are the primary customers of Umwelt.ai and how do they use the platform?
When you say 15,000 paid users, let me rephrase that. You have 16 companies working with you that pay for 15,000 employee seats. Is that accurate? Correct. Yeah. Okay. So 16 times $3,500 per month on average, which you shared earlier, would put you about $56,000 a month in MRR today. Is that accurate? No. So we are at a monthly average of around 10,000. Okay. So you're at 10,000 in MRR today.
So I guess what isn't accurate? Is the ARPU less per customer or do you have less customers? It is the... Yeah, $10,000 per month across 16 companies would be $625 per month per company on average. And $625 per month at a dollar per seat per employee would mean that each company is actually about 600 big, not an average of 2,000 to 10,000 employees like you shared earlier, correct?
Yeah, so few of these companies form under the group. So when we accumulate the number of employees, we actually calculate at the group level, not at the company level. Okay, got it. So MR is 10,000 per month today. I mean, the obvious question is you started working on this in 2018, 2019. This is a very small amount of revenue, Vishal, to be working on this for four or five years.
Why haven't you just take this thing behind the shed, shot it, started over with a new idea? So I'm still with an idea to be very frank. So the kind of technology we were building and we wanted to keep it really cheap. So we invested a lot on building the technology itself. How much have you invested so far? So we have invested around, so I'm just converting into USD, right?
So it would be around 200K. How much of that was your own money? That is all bootstrapped. So we are currently bootstrapped. So that $200,000, where did that come from? That's just company revenue? It is all customer's money. So we invested, reinvested, reinvested the customer's money. So you didn't put any money in at the start and you haven't raised any external capital today? No.
So we are raising our first PC round right now. That is, as we speak, the next week, we are closing off the transaction. Okay. How much are you targeting in the round? So we are targeting 200K right now. Okay. At what valuation? At a valuation of 3 million right now. How do you defend that valuation? You know, an investor is going to say, you've been doing this for five years.
You only have 10K of revenue. That's 120 grand a year. A 3 million revenue multiple will be over a 30X multiple in a compressed equity market. How do you defend that valuation? So we are looking at reaching $1 million within the next one year. Why would anyone believe that though when it's taking you four years to get 10K of MRR? We already have the pipeline in place.
Well, yeah, but you probably felt good about your pipeline two years ago too. What proves or what do you point to to say, hey, investors, I can execute this pipeline and close it? We never had a pipeline earlier. We were never marketing. So it was all the clients through the reference, what we were getting, and we were building the product along with it.
Today we have reached to a level where exactly we have started going to the market and actually started doing marketing six months back. That's why we have this pipeline now. Do you have a lead investor already with a signed LOI? So we already have, yes, an accelerator program. And that is with whom we are closing the transaction. Okay. But Vishal, do you have a signed letter of intent? Yes.
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