SaaS Interviews with CEOs, Startups, Founders
Yva.ai Targeting $8m Raise for HR Tech Tool Competing with 15Five
11 Nov 2021
Chapter 1: What is the main topic discussed in this episode?
We are a private company. We can't right now disclose all numbers, but I can tell you 496 customers we had by the end of last year, not all of them were paying. Okay. So then they're not customers. They're users. 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 David Yang.
He's a CEO and co-founder of Eva.ai. That's Y-V-A.ai. He's building a tool that helps with AI-driven real-time employee experience and performance management. It's a platform that they're building out. David, you ready to take us to the top? Yes. Hi, Nathan. It's great to meet you. Thank you for having me. When did you write the first line of code for this company? It was about four years ago.
Four years ago. Okay. And walk me through what it does. What are companies paying for? They're paying for top line and the bottom line. This technology literally improves revenues, performance, and business outcomes. It's about culture and workforce efficiency. Okay. HR tech is a very, very hot space right now. A lot of roll-ups happening.
Help me understand what kind of customers are you targeting? What are they paying you per month on average, would you say? We have three types of customers regarding their size. Below 500 employees, between 500 and 5,000 employees organizations, and extra large, about 5,000 employees organizations. Literally all industries. If you have HR function in your organization, you are our client.
So the ones that are already paying you, what are they paying you per month on average, would you say? Excuse me, how much? Yeah, on average, what are they paying per month? It's $49 per employee per year. Basically, it's about $5 per month per employee. I see. Okay. And an average customer that's signing up, how many employees do they typically get started with?
It's initially starts with hundreds to 1000 between 100 and 1000 employees, depending on the size of the organization. And in three, six months, they typically expand to sometimes to the whole population. That's great. That's great for dollar retention, obviously. Help me understand what they're paying for.
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Chapter 2: What is Yva.ai and how does it enhance employee experience?
So if someone signs up for you, they're paying for a thousand employees. You mentioned cost savings. Walk me through how you help them get cost savings. This technology helps in 29 different scenarios. For example, first two scenarios are connected to employee well-being and dissatisfaction factors.
This technology can predict employees' resignation even before employees actually decided to resign. This technology helps to understand our informal leaders. It helps to fill the gaps of middle management, so it speeds up your growth in product delivery, for example. Okay. And David, how many total sort of employees are on the platform today? Right now, it's already above 200,000 employees.
Actually, we started sales end of 2019. We had only 49 paying customers in the beginning of last year, but we grew 10 times during last year. and ended up with 496 connected organizations end of last year. So we're growing very fast. How many are you at right now? So 496 at the end of last year. How many today? Today, we are going to close this year. But what about today?
Not in December, like today, how many organizations? I would rather skip this answer. But I can tell you that this year we will not we will not grow 10 times, but still it will be several times growth. So when you say that there's 200,000 employees on the platform, are those across all of the paying 496 companies?
No, it's 200,000 employees connected to the platform are not all the paying customers. We have different rollout schemes. So some pilots are starting with non-paying licenses. I see, I see. How many paid employees are on the platform? That's what I was looking at because that's really where usage comes in. Some numbers we don't disclose right now at this moment.
The company is on early stage and we just closed our seed round. We will be closing A round. How much did you choose to raise in the seed? So far, we raised $12 million, and we will be raising $8 million in our upcoming current round. So how much was the seed round you just closed? Was the whole $12 million in that one round? We had actually not one seed round.
Last seed round, it's $5 million, I guess. It was one and a half years ago. Okay. So the most recent round you posed one and a half years ago. So in 2020, and that was a $5 million round. Yep. I see. And then you did another 7 million before that? Yes. Okay. Did you raise money right when you launched this company in 2014? The company is a spin-off from my larger organization.
I started 12 companies so far. My largest organization is called ABBYY.com. It's a leading company, 1,300 employees, 50 million users worldwide.
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Chapter 3: What types of customers does Yva.ai target?
Eva started as a design lab inside ABBYY. When we spun off the company, it was just $3 million we received right away. away when we spun out the company. I didn't understand that. $3 million what? It was investments from the parent company, Abby, when we spun out the company. So Abby put in $3 million in 2014 to get it going? Yep. But you own 100% of Abby, right? No, no, no.
I'm the major shareholder, but the company is mature enough. I don't hold 100%. I'm My family is still a major shareholder of the company, but it's not a hundred percent, unfortunately. I see. Unfortunately, I don't know. We have almost a hundred employees, early employees who are now shareholders of my company. Yeah. And this is that, I believe Abby's playing into the document conversion space.
That was founded back actually a long time ago, 1990, I think. And you guys were pretty capital efficient. You raised about 6 million there. Yeah. Abby, yes, we started in actually 1989 when I was a fourth year student. Me and my friend and I, we started the company many years ago. What was your question, please? No, I'm just understanding there's all kinds of ways to start a company, right?
So what you did is you just sort of spin it out of another company. The other company fueled it with eventually a $3 million seed check back in 2014. You've since raised another $5 million in 2020. We're still missing a bunch, though, because you said you raised $12 million to date, right? Yeah, it was several. Actually, it was three seed rounds.
But is it so interesting that little... Probably, yeah, I mean... Maybe the most interesting part is actually what we're doing. Well, David, actually, there's a lot of people that have really big ideas about what they want to do, but if they can't tell a story and get it funded, it's not going to go anywhere.
So we always on every episode, we've done about- Raising money is the last thing you're thinking about. David, you mentioned in your bio how much you raised and what you were raising, and you just said, we're going to go raise a Series A immediately. So it's not the last thing you're thinking about because it's one of the first things you mentioned.
Well, I just wanted to... I'm just going off what you're saying. So you led with, we're about to raise our Series A, so that's where I'm going to ask questions. Do you want me to go somewhere else?
being on this both sides of this, you know, part of this business, I'm a part of business angels, this band of angels organization, so I, many companies come for it to me, to get, you know, investments, I can tell you, If you have product market fit, if you actually solve actual problem, actual pain point of your client, if you're growing, no way you cannot find investments.
Investments will find you. So when I speak and I give my lectures about entrepreneurship, I always tell, don't think about investments, please. It's not your problem.
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Chapter 4: How does Yva.ai's pricing model work?
Your problem is product market fit. David, I can't tell you how many founders raise money before they have a line of code written. There's no product market fit at all, and they have to raise capital to grow. So I disagree with your statement. There are plenty of founders. In fact, the majority of founders who raise VC raise a dollar before product market fit. Oh, I know.
I did the same several times. So then why do you just make the statement you made? Because the most important part is product market fit. is a product hypothesis is very important. And of course, thank you for those business angels. Thank you. I can thank myself when I invested several times on just an idea, just in people I trust. But But still, this is okay.
I mean, if you have a business hypothesis, you want to try your business hypothesis. If you have so-called three magic crystals in your pocket when you start your business, okay, you will get your money. Depending on your three magic crystals you have, you might have $1 million.
Robert Leonardus David, I think the best way to get into this is to talk about what you've done with Eva versus telling people, here's the plan. You should do it. You're doing this. You're growing a business. So let's focus on Eva. So tell me more about product line. So where are you going? Obviously, it's a hot space. There's a lot of money in the space right now.
Why are people paying you versus the other traditional players in the HR tech space? Because traditional employee experience technology is broken. And who is traditional, by the way? Can you name a couple of your competitors? Oh, hundreds, tens, lettuce, glint, 15.5, pecan, culture amp, et cetera. You name them.
All traditional systems, employee experience systems, employee engagement, 360 performance evaluation systems, most of them which actual company use, they use infrequent connections when they survey their employees once a year, twice a year. And the problem which is fundamental, when you survey your employees once a year, you find a problem which already happened in the past.
So you already lost your key employees, your developers, you already lost your business KPIs. In contrast to that, you must predict problems before they happen. And in order to predict problems, you must have frequent signal. Now, okay, why not to take 100 questions and ask these 100 questions every day? Obviously, it will not work.
People will not... So, David, how are you getting signal faster than 15.5? Because we combine passive and active signals. I don't know what that means. Can you give a real example? I know. I know. That's why I'm trying to explain.
We are the only company in the world, probably, at least I don't know anyone else, who connects system to collaboration sources like Microsoft Teams, Slack, Jira, GitHub, and other collaboration circles. So AI, we developed, already knows a lot before system asks you. So AI delivers tailored 10 questions per week relevant to each employee individually.
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Chapter 5: What are the growth metrics for Yva.ai over the past years?
Need it. We are... private company, we can't right now disclose all numbers, but I can tell you 496 customers we had by the end of last year, not all of them were paying. Okay. So then they're not customers. They're users. Okay. You can call it differently. We call them customers because some of them paid deposits, some of them- Well, you said they hadn't paid. Had they paid or not paid?
We provide three months for free. So from some amount, we require a 12-month deposit, which is 100% refundable if the company has decided not to continue after the three months of free deposit. So 496 at a minimum have paid that deposit to try it and they can get a refund if they don't onboard three months in. Nathan, you are insistent in your, some numbers we don't disclose.
We are in different processes with our next round, but David, that's fine. I'm asking about onboarding strategy here, okay? This is a SaaS strategy. You're charging an upfront fee that's fully refundable if they don't activate after three months. This is a strategy and tactical question. I don't care if you're raising money or not.
It's valuable for other SaaS founders listening, which is why I'm asking. If you don't want to share, you don't have to share. We can move on. But that's why I'm asking. Sure. Let's move on. Okay. Wonderful. Why are you raising more capital? There's plenty of companies bootstrapped in this space with way more than $10 million in revenue. Why do you need so much capital? Because it's a moment.
There are 10 million companies companies in the world which could benefit those continuous listening technologies. And it's the right moment to grow. Okay. You keep talking about raising. So that's why I'm going to ask it. Okay. I don't care how much it is, but I'm going to ask since you're talking about it. You want to go out and raise. How much do you want to go raise right now? $8 million.
And why is that the right amount? How do you get to that? Just our business model and our international expansion model shows that this amount will be most likely enough to accomplish our goals. When you raise that and you then deploy it over many years, what do you think you can use that $8 million to grow revenue towards? Or how many customers can you serve with that amount of capital?
At least we will open three big regions in original expansion. We will be I don't have it on top of my mind. It's probably about 130 or 140 employees by the end of next year with this expansion. Number of customers, a good question. Actually, we can disclose this number, our target number, but I don't have it with me. But it will be significant for X number. growth from the end of this year.
So to 2022, we target to grow four times. Understood. And do you have a valuation target you're going after on the 8 million raise? Probably I would not.
uh answer this question right now but uh obviously uh this you could kind of guess with this amount but anyway uh probably i would not answer right now what would the right guess sort of be a range is fine below 100 million dollars okay so you think you can raise 8 million on 100 million uh post money below 100 of course below yeah Got it. Why do you say, of course, below?
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