- Duration: 28 min
- Platform: meet
- Source: Read.ai 01J9YANJH6NW9FT51CGJGDH33Z (https://app.read.ai/analytics/meetings/01J9YANJH6NW9FT51CGJGDH33Z)
Transcript
[Amita Goyal]: Nice. Are you in New York or? [Michael Houck]: Yeah, I’m in New York. [Amita Goyal]: Okay, awesome. Me too. [Michael Houck]: Oh, cool. [Amita Goyal]: Like right by Madison Square Park, Chelsea, Flatiron area. [Michael Houck]: Nice. I’m over on the other side of the bridge in Williamsburg. [Amita Goyal]: Oh, fun. Williamsburg is really nice. Good restaurants, good vibe. [Michael Houck]: Yeah, it’s good. Well, what’s going on? How can I help? [Amita Goyal]: Yeah, so basically I sold my first company last year in August. [Michael Houck]: Congrats. [Amita Goyal]: Thank you. It was a small exit, so nothing life-changing, but I’ve been with the company until, I’m probably going to be there until end of year, but I have been, as part of the acquisition, I had negotiated that I could work on something else. So I’ve been exploring this new idea of basically using AI to create animation videos for product marketers. And since March, I’ve been talking to like about 75 different product marketers, definitely have validated the problem. We don’t even have a product and I was able to get like 10k in revenue and I probably have another 20, 30k that I can materialize, but I just, I don’t have the bandwidth because I’m still like the CEO of the acquisition, like the company that acquired us. And I, um, it’s, it’s just a lot to balance, but I have like a pipeline of folks. I’ve put together an investor deck and my goal for this conversation was, I know like congrats to all with your previous startup. I know you raised a ton. And so a friend of mine recommended your founder school, or I think it’s some founder journey program. So I signed up for that. And I was just reading through some of your newsletter documents. And it sounds like you have a lot of experience in fundraising. I had raised $500,000 for my first startup, which in hindsight, that was kind of dumb. I should have raised more. Because you can't really hire anyone in that much money. So this time around, essentially, I'd love to get your thoughts on just how to create a good fundraising strategy for this new idea. I don't have a co-founder because my last co-founder, he got an offer for a series A startup to join them as a co-founder CTO. He had worked with the CEO before. And it's based in Europe. So he's like, I mean, we still talk. We're still good friends. That blood, but it's just really like, it works better for him. So I don't have a CTO, like I don't have a co-founder here, but I did hire a CTO from India whom I met in person in August. And he's done an AI startup before his own. He's worked at Google, Accenture as an engineer. So he's technically very strong. And right now I'm thinking of applying to Y Combinator. I'm thinking of potentially doing like an angel round or like just going straight to a seed round. Because I feel like this idea is, I have a lot of conviction in it. I'm very excited about it from just the customer conversations I've had, from the fact that we were able to get 10,000 cash from two companies because they needed videos. And I have like 20 others that want to do this. So I'm just thinking like, A, do I, I'm bootstrapping it right now with the acquisition, but I don't think it's sustainable. So I'm just trying to figure out my fundraising strategy. I mean, Y Combinator is also pretty tough to get into, so who knows if we will or if we will not. And I'm a solo founder in this. My CTO, I could make him a co-founder, but I've only met him two months ago, so I don't fully trust him. He hasn't shown me his co-founding hat. He's very much like an execution, very strong technically, and he's just pushing the product. But he's not a product strategist. He's not thinking of all the other things I think a co-founder should be thinking about. So I'm like, I'm not going to just do this for the application. I know how I've been running this like for the last six months on my own, trying to build a product and talk to people. So yeah, just curious. I've been talking a lot. I know we have like 10 minutes left, but curious to hear your thoughts on fundraising in terms of Y Combinator, Angel, SPV, or going straight for like a seed round. [Michael Houck]: Yeah. Okay. So I'll try to, there's a lot in there. Yeah. It doesn't sound like this person who's the CTO is a co-founder. I think you should keep it that way. If there's someone who you just basically tell what to do and they can go execute it and they can manage a team of other engineers and gain their respect, if they can do that, great. Let it be that. [Amita Goyal]: Exactly. Sorry, what's that? He's doing a great job with that. [Michael Houck]: Yeah, sure. So let him keep doing a great job of that. You don't need to do anything more than that. And you'd put yourself in a worse position if you all of a sudden have to have product conversations with somebody who you feel like is not naturally going to be part of those conversations otherwise. So keep it as it is. As far as YC goes, that does make YC harder. I do know solo founders who have gotten into YC. It's not unheard of, but it is hard. They do prefer, they have it where like every partner kind of runs their own little mini accelerator now within YC. Some partners are more open to solo founders, and you have to hope that partner sees your application and is excited by the product. Yeah. But in general, it decreases your chances for sure being solo. With that said, you have a background as an exited founder that's going to weigh heavily in your favor. And they are they do like, you know, AI ideas right now for sure. So I would say that you have some some factors in your favor, but you also have this like inherent factor working against you for for them. [Amita Goyal]: Yeah, you think I should just say like my exact my coach was telling me just say that he has a path to be co-founder. Because like, we've talked about that. I've talked about that with him. But I'm like, I just don't feel like I can't put I put him in front of a client. And I was like, Oh, no. [Michael Houck]: Yeah, you know? Yeah, you know, the answer to the question, I can tell you know, the answer to the question. [Amita Goyal]: You're right. [Michael Houck]: You don't want to be in a position where you tell your YC partner, oh, this guy is, you know, that's like your first impression with this person. It's like, maybe it's a difference between getting in versus not, but like, probably they're gonna be more excited about you and the product and all that stuff. So if YC matters, like if it's like, Oh, do or die for you. You're like, I must get into YC with this company. [Amita Goyal]: No, I want to get funding. I just I need I need like a few million dollars so that I can have a full time team. Because my issue right now is everyone is fragmented. And I cannot and I'm depending on this acquisition like they they've been giving me money. I've been bootstrapping it. New York is expensive. I need to pay my rent so I can stay in this tiny little studio. I don't even need a lot. I'm like, you know, 10,000 after taxes at 6,000. My rent is four. My Equinox is 300. My Whole Foods is 1,000, I have an extra 500. I'm good. That's all I need. For me to pay myself 10,000, have a team abroad that's 15,000. That's a 25,000 burn rate. Let's say five more thousand on random stuff, like I'm spending month, 30,000 I cannot sustain that, especially once I stopped the CEOing of this, the acquisition. So and I don't, I don't think I should be parallelly parallel and parallel fundraising, because I haven't told like, the investors or the people like, hey, this is my new company, they don't really know what I'm doing, like, we don't talk about it. So I'm like, I don't want to burn any bridges, I want to like really leave in a good in good terms. But I need to I need money. So I don't care if I get it from YC or if I get it elsewhere. I mean, yeah, YC is great. They have a good network. Probably all their companies could be my customers. So that's wonderful. But I don't need them. [Michael Houck]: Okay. That's good to know. I would say the other thing that would work against you with YC is the fact that you still do have a job somewhere right now. Right. And I know that's changing soon, but they'd want that to change before the batch would begin. [Amita Goyal]: Oh, yeah. December, it's ending. [Michael Houck]: Yeah, so I would say, honestly, their application is good. And it's worth filling out on its own, just because it'll help you sort of think about positioning the product and the business and all that. So probably worth it to apply. [Amita Goyal]: But regardless, yeah, just in case in the event that they like my, I'll get in. Great. But I don't have a good shot if I'm a solo founder. [Michael Houck]: Yeah, it does work against you. But okay, so outside of that, I mean, look, I would say It sounds to me like you have kind of a revenue generating product and business and also some more latent demand that you like haven't tapped into yet. I would ask my question to you would be like, what's stopping you from going out and signing those other 20 30 K of monthly revenue? [Amita Goyal]: It's not monthly. It's one time because we don't have the product yet. So we're basically like a service hybrid. We're just getting the video and they're paying us money for it. What's stopping me is like, I'm basically just like, we don't have enough bandwidth. And I'm so fragmented with this other job that I need to like, leave the acquisition. And so it's just hard to like, I'm still doing sales and talking to folks on both companies. And also managing product, because basically, my co founder left. So in the acquisition, I don't have a CTO, I'm managing the engineering team, and I'm doing sales, and they want me to fundraise, which I have to tell them I'm not going to for you guys for the next round. And then with with the current company I'm basically doing all the sales and also my CTO is now I just hired him in August so like he's pushing the product but we need to like get more team members so I'm helping with the hiring and like we need a video engineer so there's just a lot of things happening and I'm like I don't like I could bring on those other customers but like we don't even I don't have the bandwidth to like make sure they have a good experience and they convert and okay that's what's like kind of holding me back a little bit. [Michael Houck]: Okay. Yeah, I think one, like the concern that I would have is like, if you're, if I were an investor, and you were like, I mean, I am an investor. If you were coming to me for investing, like it sounds like you can make some money on the revenue side with this business right now. Can that money solve your problem better than investor money can, you know, obviously, it's less upfront. But also from a founder's perspective, like, you know, do you want to give up 15, 20% equity in something off the bat when you have latent revenue that could maybe help pay for some of that stuff? [Amita Goyal]: Well, the thing is, like, our product isn't fully developed yet. So the reason I wanted to fundraise is because I want to finish the product development. So right now we're a services company, like where literally I have an in-house animator who's creating these animation videos. I need to have a really strong product. And like now I have a CTO in place and we're pushing towards that, but this is a technically complex problem we're trying to solve. So like open AI Zora just released like a couple of months ago, like a two second video clip done with AI. And now they're getting it to 20 seconds. Like we can do that with animation, but we're building a lot of things from scratch because we can't just take an existing LLM and use that. Like we're, we're almost trying to figure out like, for the voice and the script, we're using open AI for this animation, because it's so honed on animated videos and on the product marketer, we're trying to figure out like existing gifts and like trying to combine them with AI, the AI script to create like a 30, 60 second video. So the tech is quite complex. And I think it needs like stronger engineers for this to be scalable. And therefore, like, yes, I can be a services company. But like, I didn't leave my half million dollar job to like, just be in this peanuts place forever. I want to build something really massive. And I think that we're at a good time right now, because there aren't a lot of competitors. A lot of people are doing AI, and a lot of people are exploring and dabbling with video. But I think the unique insights that we have for the product marketer, for these animation videos, for all the customer development I've done, I'm like, we're onto something really big. They're none of my friends. I have a big network from BCG and from my business school but I haven't even tapped into them. It's just cold outreach on LinkedIn. And I'm getting like a hundred conversations and people willing to pay. So like, to me, that's like a good dynamic and yeah, I can continue it, but it's like, I've kind of, I've been reinvesting all of my savings and money over the last four years into startup. And it's like, I can continue it, but we're not going to grow as fast. And then it's like $30,000 a month and burn rates. So I’m like, if I eat, that’s why I’m like, maybe I just do a small friends and like a couple 100,000 that can last us a year. [Michael Houck]: Yeah, I mean, I think it’s, if you’re comfortable with the dilution, obviously, it’s not the end of the world dilution is part of the game. Yeah, I think if I if I were in your shoes, I feel like I would, I would just, you’re saying you’re already creating these animated videos, basically, with the traditional process to do so without this sort of AI process, we would just build that I would grow that as much as possible over like one to two months, get as many people in the door as you can hire a couple more of these editors. At the same time, take some of that revenue and hire, you know, you have the CTO, maybe hire an additional engineer who specialized who can do the stuff you want. And just cover that with that. It’s just it’s the story that I’m hearing is that there’s a lot of demand. Yeah, pay you money. [UNKNOWN_SPEAKER]: Nice. [Amita Goyal]: I’m like, that was in my first idea, I was pushing a solution. Here, I’m solving a problem. Basically, I’m replacing agencies and freelancers. And video content just performs so much better. And so yeah, we’ll need this. [Michael Houck]: I’m with you on the story. 100%. Like I see the problem. It’s real. People are willing to pay for it. No doubt about it. The market is there. On the other side, it’s like, all right, well, then just let them pay us, right? Let’s, let’s, let’s build that for one or two months while we’re building out the tech. And then we’ll have this unfair advantage. And we’ll be able to eat all the other agencies down on it, rather than you spend the next couple weeks or a month or two till the end of the year, running through a fundraising process, building a deck going through your network to get all these connections to investors, like that’s going to take up way more your time, you can spend that same time and get to 50 or 100k a month in revenue, and start finding it yourself that way. Like that, that’s just I would see it. These these AI tools are just, they’re so easy to sell right now. And it sounds like you have access to the right people who are willing to pay you for it. [Amita Goyal]: Yeah. 100,000 month is hard, like, because we don’t have a product yet. So what we’re doing is where we’re charging, like, an agency will charge 10 to a 20,000 video, we’re charging 5000 for three videos. So it’s a steal. [UNKNOWN_SPEAKER]: Yeah. [Amita Goyal]: And like, that’s 5000 for three videos. So for us to get to 50k, we need to have 10 customers and produce 30 videos a month. And that’s, that feels like a big like agency service business, which I don’t mind doing it, but like, it’s, it’s, it is going to cost us a lot more cause we’re going to have to triple our animators and like all of that stuff. But what I’m hearing from you is just focus on like building a business first services and then fundraising do later or not do it or bootstrap it. [Michael Houck]: Like, I mean, I, what this AI boom is letting people do is, and also just the efficiencies that it promotes within the company, it’s helping people build businesses that can reach venture scale with either taking less money total by just taking some up front and then never needing to take it again, or taking none up front and then only raising a big growth style round later on. [Amita Goyal]: When would that be, like once you have a million in revenue? [Michael Houck]: Yeah, I mean, it’s gonna differ based on the business. I’ve seen people who get to a million goes, all right, let me raise a Series A, even if they’ve never raised a seed, right? I’ve seen the other, I’ve seen it go even further in some cases. But yeah, the point is that these AI tools, the businesses that they enable at the low end, there’s so many of them, and it’s so easy to get to a higher point of revenue than you would have been able to do otherwise, because it’s so much more efficient. You can do that, and then have the flexibility and have the decision making Do I need to raise now? You’re not worried about your burn because you have all this revenue. You’re not worried about raising a certain like venture treadmill. It gives you a lot more flexibility and still the optionality of taking in that big capital raising, going, you know, going really big with it if the, if the opportunity is there. [Amita Goyal]: Hmm. Okay. [UNKNOWN_SPEAKER]: Okay. [Michael Houck]: I mean, that’s just what I’m hearing. It sounds like if people are going to pay us, pay us money to, to deliver them something. [UNKNOWN_SPEAKER]: Yeah. [Michael Houck]: It’s a substantial amount of money and there’s a lot of kind of latent demand for it. You know, I think it gives you the optionality. If you want to fundraise for it, maybe you’d be able to, but you might get two months down the line and maybe the terms are great. Maybe they’re not, you’re not sure, but you spend those two months away from customers, away from the business, you spend it on fundraising, you know? [Amita Goyal]: Yeah. I hear you. So focus on just building out the business and not necessarily fundraising right now. [Michael Houck]: I mean, My perspective is you could go either way. I think if I was in your shoes, I would just focus on building the business, but either path is viable with where you’re at right now for sure. [Amita Goyal]: Got it. Got it. Okay. Super helpful. And if I were to go the fundraising route, then like, I guess you have a ton of, a ton of documentation in your. [Michael Houck]: Yeah. Yeah. I mean, happy to happy to jam more. There’s a lot of stuff on that that we could talk through. I think, um, Yeah, you know, I mean, the market’s super hot, for sure. [Amita Goyal]: And it will continue to be like, there’s no, I guess, like, my fear is like, there’s, what if, like, I applied to the first round product market fit retreat, it’s just equity free. And the person who interviewed me is like, Oh, yeah, actually, like, we can’t accept you, because someone else has a very similar idea to you. And I’m like, Okay, like, what if someone raises, like, a shit ton of money, and then can, like, you know, build it faster? Or get more customers, am I missing out if I’m trying to be this bootstrapped services company for some time? That was my concern. Climbing is so critical. And AI has just become accessible in the last year or two. And a lot of people are looking at video now with Zora coming out and other tools like PageN and Synthasia. And I feel like everyone’s really focused on Synthasia lookalikes. They’re just trying to do this avatar shit because no one’s really like focusing on just different use cases. And now I feel like more and more people may be able to. So it’s like speed to market is a big concern too. [Michael Houck]: Yeah, speed to market always matters. I would say that the first mover doesn’t always win. Uber and Lyft are both billion dollar companies. There’s many counter examples to it too. It’s really just, I don’t know. I just see it more going that way. I’ve seen people literally run that playbook the last year with an AI company that they’ve then turned with first the services business line and business model that they’ve then turned into an AI company because they had that plan from day one. It’s worked really well for them. They’ve raised series A So like, all I’m trying to do is present like an alternative thing that maybe a lot of people who are in your in my shoes wouldn’t necessarily think of because it’s like, I was thinking about it. [Amita Goyal]: But then I was like, Am I gonna lose? And then also, like, is my product going to be technically less good? Because I don’t have as qualified engineers because I’m not paying, all of my staff is in India, but I’m paying $2,000 a month, $1,500 month. I’m not getting top talent. So that was my other concern. But I guess, yeah, let me just work on the business and then see where it goes. [Michael Houck]: I mean, look, if you think that you’re going to need to compete on quality of the videos And that’s going to be like a do or die differentiator for you when you’re talking to customers, they’re going to pick some other person versus you, because their AI tools are built. Sorry, their AI tools are built by, you know, maybe higher quality engineers or whatever the case may be, then that’s a really that’s a valid consideration. That is a reason to go raise venture for sure. Because having being venture backed will attract higher quality talent from the Valley, who just feel more confident kind of jumping into a company like that. So I think that’s a super fair consideration. Yeah, if you think that’s the competitive vector that’s going to matter, then it might be the right decision. [Amita Goyal]: Oh, for sure. I mean, because basically, what we’re trying to do is compete with the agency. So if our AI tool can create just as good quality, if not better AI videos, then now they can create these videos at scale without paying money and spending as much time. And then do this. It’s like the Canva for videos for for these product marketers. And we’re just honing in on the product marketer niche. We’re not trying to target everyone because that industry alone, it’s like 60 billion. It’s expected to double in the next five years, the animation market. So all these agencies like it’s very manual. [Michael Houck]: Yeah, look, I do want to talk about this more. I’m pretty late for my next call. Thank you so so much. [Amita Goyal]: It was so nice to meet you and congrats on all your success so far. I love what you’re building now and congrats on the podcast too. [Michael Houck]: Yeah, thanks. And I’m sure we’ll chat more. Good luck with everything. [Amita Goyal]: Thank you so much. Take