SaaS Interviews with CEOs, Startups, Founders
Will He Go Public To Buy Up His Affiliates?
24 Mar 2021
Chapter 1: What background does the guest bring to the conversation?
Are you pre-revenue today? We are. Okay, got it. So when you say 15 customers, these are not customers, they're users.
These affiliates are standalone organizations, typically reasonably focused, like I said, doing maybe half a million to 10 million a year. But they're not paying you, they're not customers.
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My guest today is Tom Corr. He's a serial entrepreneur who previously was a founder and CEO of two software companies, Momentum Systems and Applied Development Corp., that were both in the fintech and internet communications space.
Subsequently, he became CEO of one of Canada's largest accelerators and CEO of Canada's largest funder of startup companies with a focus on those commercializing academic IP. Tom, you ready to take us to the top? Certainly are. All right. What was the largest funder of startup companies in Canada?
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Chapter 2: How does the guest define their affiliate model?
And you're basically saying you'll tap into those revenue streams. Today, though, neither the affiliates nor the affiliates customers pay you anything. You're pre-revenue.
No, because we're not generating new leads for them to sell our services to. Once they start doing that in about 90 days, that's when we'll start generating revenue from the AI products and services that we're providing to the end customers.
I understand. But so just again, you're pre-revenue today. That's correct.
That's correct. That's correct.
Got it. So with these 15, so now let's go into where you want to go to turn on revenue. Can you tell the story of one of these 15 affiliate partners? Like who are they and how they're actually using you?
Yeah, sure. We've got an affiliate that's focused on manufacturing. They've been around for 10 years. They've got about 100 customers. Most of them are in the manufacturing sector. They have some manufacturing software that they provide to them.
What they're looking to do is AI-enable both the manufacturing software that they provide today as well as providing other AI-enabled software to their end customers. So, for example, they're going to their end customers now that have got their manufacturing software and saying we're going to enable applications like quality control to add on to the manufacturing software that they provide.
So that will require them to get the AI services from us that they need to enable that quality control AI-based function to be added to the software that they're providing. That will generate revenue to us from the services that we're providing, the software that we're providing, and the platform services that we're providing to the affiliates to provide to the end customer.
We take margin on that all the way through.
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Chapter 3: What is the role of AI in the guest's business strategy?
So we're doing a lot of the things that they would have to hire people to do in the short term themselves. And we're doing it at no cost to them at this point in time.
And so let's keep going down this path here of revenue for you, right? So when you start charging this manufacturing partner, would you have 15 that are sort of like this same partner? What will you charge them?
We will charge them a margin on the services that we provide, which includes people, data scientists, access on services that we get from the various platform providers. We will seek out software, AI-enabled software that they can sell to their end customers. So on each of those products and services, we will take a margin.
But you've got to keep in mind, Nathan, this is a short-term program because we'll start the acquisition program later this year. So the revenues, 100% of those revenues of those affiliates that we're signing up will be ours because they'll be part of our company at that point in time.
Why do you have so much confidence that they'll sell to you?
Well, the discussions with all of them today circled around, first of all, generating a new revenue stream for them by AI enabling their businesses and the services that they provide. Companies of this size typically have a very difficult time in finding an exit strategy and finding liquidity for their shareholders.
How big are some of these folks? I mean, $5 million to $10 million in revenue is not small. I imagine there's plenty of buyers.
Well, these aren't finding any. But there's a lot more companies than I think there are buyers. And most of these companies we're dealing with have been around for five to 10 years. So it's not like they're unknown in their community. And I think when we go into these companies as we early stage do our IPO and our shares are at a very low value, basically allows them to take shares and cash
in consideration of the company that we're acquiring and then seeing the upside and the value of the shares as we do more and more acquisitions and put more value on the company and increase the share value.
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