This Week in Startups - Startup Pitch Competition: Four founders compete for $25K | E1991

Starting point is 00:00:00 It's a wonderful time to be an entrepreneur. I think you guys are doing it at exactly the right time. And if you just obsess over your customers and you grow but 10% month over a month, which would be adding one or two customers per month, I think, for most of you. It's pretty doable, right? To add a customer every three days. They add a customer every five days. And so if you're growing at that rate, you're going to get the attention of seed funds

Starting point is 00:00:21 and seed investors, angel investors, who can put in 25 to 250K, which is really all you need at this point in time is you just need a seed fund to put in $250K to a million dollars and you're off to the races. This week in startups is brought to you by Vanta. Compliance and security shouldn't be a deal breaker for startups to win new business. Vanta makes it easy for companies to get a SOC to report fast. Twist listeners can get $1,000 off for limited time at vanta.com slash twist. DotTech domains.

Starting point is 00:00:56 Don't miss our jam with JCal contest. To apply and get more details, go to Jam With JCal.Tech, brought to you by dot tech domains. And Open Phone. Create business phone numbers for you and your team that work through an app on your smartphone or desktop. Twist listeners can get an extra 20% off any plan for your first six months at openphone.com slash twist. Hey everybody, hey everybody. Welcome back to this week in startups. We've got a great show for you today. I'm going to have four of our startups from our Founder University program, pitch me.

Starting point is 00:01:32 They're going to pitch me their startup. And with me today is a principal at our firm. Our firm is called Launch. And you can visit us at launch.co. One of the programs we have is called Founder. Dot University. That's the URL, founder. dot university.

Starting point is 00:01:48 And the incredible executive who runs Founder University is Kelly Shricker. You've met her before. How you doing, Kelly? I'm wonderful. A little jealous. that background, Jason, but very glad to be here with these founders today. Awesome. And so just so everybody understands what we do at Founder University, our firm gets upwards of 20,000 applications for funding a year. We try to meet with 100 founders per week,

Starting point is 00:02:10 with introductory calls. It's a lot of work. And what we found over time was that a large number of our founders or people who wanted to work with us, they were working on a project, like a side hustle. Maybe they weren't incorporated, but they had two or three of their besties together, developers, designers, business development people, marketers, growth hackers, and they started working on something, but they weren't incorporated. They didn't know if it was venture ready. So we created Founder University as a way over 12 weeks to have these teams virtually work with us to build out their product and then decide, hey, should I make this a company or not? Should I incorporate? Should I get a lawyer? And you know what? We have done about 125K investments in these extremely early

Starting point is 00:02:51 stage companies where we put in 25K, the first investment in their company. And and sometimes we put $125K, the standard deal here in Silicon Valley, for 7% like TechStars does and White Combinator does and our Accelerator does. We give them two ways to win. We have done eight cohorts now. We just wrapped up our eighth cohort last week.

Starting point is 00:03:10 Amazing. And we'll be doing another one. So if you want to apply founder.comiversity, best chance of getting in. Multiple co-founders, at least one developer on your founding team, correct? Yes, absolutely. What else do we look for?

Starting point is 00:03:23 So we really like Builder Founder Teams as you mentioned, outside of that, you know, there's a few things that we like here at launch. We really love marketplaces. We love consumer subscription, SaaS and fintech businesses, but we will take a look at whatever you're building and see if it's one that we would like to have join us at Founder University or one of our other programs. Again, we love when founders can actually get something out into the world, right, and be a little bit hacky. So even if you're just getting started, you've got a wait list, that really speaks to us. Go ahead, let us know whatever that traction is, even if it's the early days, that gets us excited.

Starting point is 00:03:56 Okay. So we like builders, product velocity, developers, all that great stuff. So we're going to give each of our companies here from the eighth cohort, two minutes to pitch. And then I will do a little jam session with them where I asking questions. And Kelly, Shricker, will get involved as well. I asking questions and discussing, you know, how great these firms are. Who's up first? All right.

Starting point is 00:04:18 First up, we are going to have Pablo at Big Rentals. All right, you have two minutes on the clock. Three, two, go. My name's Pavela, and I'm the founder of Big Rentals, where we make big equipment rentals easy. Meet Jeff. He's a small business owner who rents out trailers in the Northeast outside of Boston. Jeff manages a fleet of around 5 to 10 equipment, and he relies on pen and paper to run his business. Jeff has some big challenges, his outdated website, and manual processes frustrate his customers,

Starting point is 00:04:46 leading to meased sales opportunities because he just can't accept those bookings. He also spends an excessive amount of time managing his business with paper records, and he just doesn't have the budget to invest into building technology for his business. Just like Jeff, the entire industry is fragmented and made up of small businesses that generate a majority of those annual sales. This long tail is underserved and doesn't have the tech to keep up with big corporations, so we decided to launch our all-in-one software so owners could manage their entire business in the cloud from building a beautiful web store, accepting bookings online, payments, and even operating their rentals. With our software, Jeff's business has seen remarkable improvements.

Starting point is 00:05:22 He has increased his bookings by 53% and generated over 13,000 in monthly revenue. To provide even more value to our partners, we launched a marketplace that helps rental companies find new customers. We plan to deliver a perfect rental experience for both owners and renters. So far, our platform has gained meaningful traction, around 1,800 in recurring subscriptions, 350,000 in payments process, and 12 total customers. So you might be asking, who are we? We spent the past seven years becoming experts at trailer rentals, scaling multiple locations

Starting point is 00:05:51 across California, and we realized just how tough small rental companies have it without the tools or technology to build that scale. Our pricing is really simple. We charge 30% on our marketplace, and we have several tiers available on our software plans. We believe we can capture a small part of the trailer market leading to our first $235 million in annual revenue. And while we're going to start with trailers, like car trailers, utility, and even dump trailers, after our first launch, we plan to expand to more equipment in the future.

Starting point is 00:06:17 We've got a strong team, and we're ready to make big equipment rentals easy again. Okay. Very well done, Pablo. The site looks great. The name of the company is big rentals. Let me see if I understand how your marketplace works or your SaaS product works. People come to big rentals. They see a bunch of trailers that you could rent for business.

Starting point is 00:06:37 And those rentals come from a range of individuals who own them. Maybe somebody's got a store that owns 50. maybe somebody is just an individual with one like Airbnb. Am I correct? Yeah, some dealerships and then entrepreneurs as well that are starting businesses. Okay. So you take, it's a marketplace or is it a SaaS product or is it both? I'm a little confused here.

Starting point is 00:07:00 Yeah, we have both. So the marketplace we see as a feature as an additional benefit to the rental companies using our software. Got it. So big rentals, people who buy your software to manage their rental business, can elect to put their entire inventory or a portion of their inventory on your platform. Am I correct? Yeah, absolutely. How much do you charge?

Starting point is 00:07:23 How do you charge? How many paying customers do you have today? Yeah, we have 12 paying customers, and we charge anywhere from $100 a month to $300 a month to manage your rental business. And we charge 30% on the marketplace. That's split between 10% for a customer renting and 20% for the partner. Okay. So if you rent on big rentals, the customer pays a 10% percent.

Starting point is 00:07:44 premium. So if they rent one of these for, what do they cost, $100 a day, $200 a day? Yeah, $200 a day. Got it. So they would pay $2.20. They would pay that extra 10% to the platform. And then you would take 20% of the 200. So you make 40 bucks a day every time. And the person who owns it gets 160 seems great for them. And then you charge between $100 and $500 a month for the platform. Do they hear that correct? For the South Software? to 300 right now. 100 to 300.

Starting point is 00:08:17 And in order to make that work, the person needs to do how many rentals a year to make it worthwhile to spend $1,200 to $3,600 on your platform. Yeah. Well, right now we've seen companies doing as little as 30 rentals a month, but even, you know, a couple like five or 10 rentals would be enough to pay the cost of the software. Okay. So if a person were to get 10 rentals a year on your software, software for two days each. That's $400. I'm taking it the average ticket size is $400, $800.

Starting point is 00:08:52 You tell me. $300, actually. Okay, great. I've been in this business for a while, so sometimes I guess the number is pretty well. So the average ticket size is $300. If they pay you $1,200, they need to get four customers, $1 a quarter to make it break even to use your software. And if they buy the high in one, $3,600, they need to get one a month, you know, but $10 a year, or $12 a year. Am I correct? Yeah, exactly. Does this, and then when you buy the SaaS software, do you pay a fee as well? Is there like an upcharge for each deal? So you get more than $3,600 a year? Oh, we haven't experimented with that yet.

Starting point is 00:09:27 Okay. Of those, you said you had 10 customers right now paying? 12 customers, uh-huh. Great. Tell me about the one who's made the most money. How long have you been charging? Customers? Yeah, about five months. Okay, great. Tell me without the details of the person, but just give me a look at the number one rental company on there as judged by the amount of revenue they've generated. How much are they generating a month? What type of business is it? What's the profile footprint of it? Yeah, absolutely. So the number one business right now,

Starting point is 00:10:00 we have multiple, actually one of my, the old equipment rental company is the number one, but the number two, he's generating around $15,000 a month. And he's a small business owner. He owns about, you know, five or six trailers. And, you know, he's been really successful so far. Where are they based? And then how did you acquire them? Yeah. So they're based outside of Boston and actually a very small town. And we acquired them through Facebook groups. Facebook groups. Very interesting. You went to a Facebook group and you just said, hey, I've got the software platform and it was a group of people renting equipment. Yeah. We've just been like trying to join all the communities where, you know, business owners are talking about their problems.

Starting point is 00:10:38 Got it. Have you started your own groups? Have you started your own equipment rental group on Facebook, LinkedIn, and Reddit? Not yet, but it's the next step. Okay, yeah. This is a tried and true growth hack, which is, you know, communities where you're giving great advice and, you know, then maybe in your sig file or on your profile page, people click through to it and they see that what you do, you don't even have to go in there and spam them because that's really bad in a community. But you could listen to people and when you're responsible. to them. Great way to acquire the first 10 to 100 customers. Well done. Kelly, any questions here or anything you want to add about this fine company and their performance? Yeah, I would say during the program at Founder You, Pablo and his team had incredible product velocity. And I also really loved that they were really dog fooding their own solution, you know, built this for themselves and realized that it was very applicable to other folks. And so those are a few of the things that jumped out at us.

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Starting point is 00:12:24 That's vanta.com slash twist for $1,000 off your sock two. Okay, who's next? Let's keep the trains moving here. We have where to wheel. Okay. Two minutes on the clock. Three to go. All right.

Starting point is 00:12:36 Today I'm going to introduce you to Where to Wheel. I'm Brittany and my husband and David and I founded Whereto Wheel as we were part of the 36 million Americans that like to go off-roading and we drive vehicles like these. We've been operating this space since 2014 through Wheredible.com, which is a crowdsource trail database that's helped over a million off-roader search for places to go off-roading. What we discovered is there's a huge lack of supply, especially on the east half of the U.S. As you can see here, every orange pin represents someone looking for wheeling. So to recap, huge demand, nowhere to go.

Starting point is 00:13:05 The solution is where to off-road parks, which is a two-sided marketplace, with private landowners on one side and off-roaders on the other. We've been MVP in this the past 18 months. We have five landowners with three in the pipeline, have served over 700 customers or cost 2200 transactions, with a little over $58,000. Our ICPs are rural landowners with 10 plus acres on one side, and Jeep and truck off-roaders on the other, which is about one in 10 Americans.

Starting point is 00:13:29 How this works, the off-roaders come and they buy tickets. we split those sales 50-50 with the landowners. Our go-to-market strategy has basically been word of mouth and referrals on the landowner's side. And on the off-roider side, we've been leveraging our large social media presence as well as word of mouth. This is what we're using to build our tan, but if we focus on that ACV of 183 times of 36 million offers in the U.S., we have a tam of a little over 6.5 billion. Currently, we're in Virginia and North Carolina, and our past $100 million is going to be based on geographical growth, focused on the East Coast first. To hit that $100 million, we'd have to capture about $3.5 million.

Starting point is 00:14:02 percent of the U.S. Offroad Market. The Weirdwill team comprises of seasoned entrepreneurs and builders that have been in business for a while, including a CTO and a sale specialist. We do believe there's a blue ocean here. And to hit that take of a billion, we'd have to capture 30% of the U.S. Offroad Market. Thanks for listening. Again, I'm Brittany, founder of Where'd Will. Let's go Wheeling. Okay. If I understand the business correct, there are people with land. There are people with four by fours. The people with land are already renting the land out to four by four. enthusiasts to go off-roading when they want to get out there in nature, correct? Most of them are not renting it yet.

Starting point is 00:14:40 We're helping them get access to the off-roaders, and we're basically, we have a large platform of social media and audience, so we're connecting the landowners with the off-roaders and setting up those events and helping them connect. So landowners aren't already doing this. You're finding landowners and saying, hey, here's a way for you to make money. Would you mind if people come onto your land and rip it up with their Jeep Wrangler? Correct. Got it.

Starting point is 00:15:03 And somebody who's got a bunch of land is making zero dollars on it. So they think, hey, if I let people come on the land for what amount per day? How much do you advise a landowner in Colorado, Atlanta, Georgia, whatever, Texas to, how much can they charge? How much do they charge per day? Yep. So it kind of, we have, it is for vehicle. So they each have a spot. And it depends on what the Landerda wants to do.

Starting point is 00:15:33 If they want something easy like just the trail ride, it's closer like a $40 or $50 ticket per vehicle. Or if they have more obstacles or mud pits, they can do $65. So right now we have a range of a 40 to $125 per ticket depending on what they offer and what they want to charge. So I'm going to take it the average is $60 per day per ticket. $53.90. Okay, $53.90. This is great. Whenever you're asking a founder questions, if they give you an exact number, your confidence in that founder goes way up because it means, hey, they're on top of the numbers.

Starting point is 00:16:01 and they know how to answer questions, two great things for founders to be able to do with investors. Okay, so how many, tell me about the supply side, how long has this existed? And then how many pieces of land are there in the network that have had at least, you know, one person go for a ride on it? Yep. So right now, we've been MVP in the last 18 months. The first couple months we had one of our partners' land as we were testing the model. but we have five pieces of land currently, three in the pipeline, one should be converting tomorrow. Okay. So you have five that have been used? Yes, several times. Got it. Okay. So, and where are they all located? Did you pick like one geography to get this right and have concentration?

Starting point is 00:16:45 Yeah, so we're in Hampton, Rose, Virginia. We have a severe lack of supply here. So we started here. We have two in Suffolk, one in Whaleyville, and then we have some in North Carolina as well. Got it. So like Airbnb, a bunch of people, who own these extra rooms, cottages, ADUs, apartments, whatever it happens to be, they don't know how to do it. So you have to train them a bit and tell them like there's some how to do this kind of process. Yes, it kind of depends on the landowner. A lot of these ones, you know, they have farming, they have equipment. A lot of them have trails already. Some of them are into off-roading or motor sports. So some landowners require a little more training up front. Others are

Starting point is 00:17:24 just kind of turnkey ready to go. Got it. Okay. And so, you have this very interesting business. Is anybody else doing this yet? Can you find this inventory on Airbnb? Or there was like a camping website that did this where you could rent a land for camping and hunting. I know there's a lot of different folks. We have an investment in a company called Gigser

Starting point is 00:17:47 that lets you rent a location for a photo shoot or for a party or to rent the pool or the pickleball cart as it were so that you can rent a bunch of different things. Anybody doing this yet? No. Not for offering. Awesome. Tell me about insurance. Do you provide insurance? Do you have overall insurance? Do you do it per ticket or do landowners already have the insurance?

Starting point is 00:18:09 Yep. So there's a couple factors there for insurance. So we have our own liability insurance if our vehicles are out there through our company. We do have patrons sign electronic waivers, acknowledgement of risks that are pretty airtight in Virginia. And then there's also a piece called agritourism, which is pretty much the same in almost every state to help rule landowner. make money and it provides them a basically a liability insurance where basically you can't, if you're coming on for agro tourism, you can't sue the landowner. So we loop them in through that. As long as they have something worth farming on their land, it can be anything like a chicken or trees, then they can get the agritourism protection. Got it. Okay. So there's some built-in protection there. If you have agritourism, fantastic. And then how many full-time people do you have at the company right now? How many founders tell me about the founders? Yep. So we have a team of five. Four of those are founders. Our CTO owns about 9%. So he's right under that founder part. All of us have owned businesses. Yeah. All of us have owned businesses before successful. Some motorcycle. One of our founders is a land management guru and he's helping connect with the landowners. And two of them have been in an off-road industry since they're like 15. 16. Fantastic. Kelly, I need to add here?

Starting point is 00:19:26 anything you want to add, Kelly, that I missed? Yeah, absolutely. I will add in a couple things that we like during the program is every time we talk to Brittany and we would have, you know, a question about to your point insurance and things like that, we would just get a very concise but wealth of knowledge back for her, which gives us a lot of, you know, security that that she knows this world. But I also really love that she's got the community that they've built online and that they've been working in this space for quite a while now. All right. So no BS, tight story and a CEO who's in charge. I like it. Very well done. Let's meet our next company. Two sorry companies. I love good marketplaces. I love good SaaS companies. We're off to a strong start here. These are very promising companies. All right, everybody. I just had an amazing jam session with Anna from Rome, R-O-M-E. She's not only building a really super cool startup, but she's using one of those awesome dot-tech domain names. And those domain names tell investors and users that you're serious about technology. And so the Jam with J-Cal contest is in full swing right now.

Starting point is 00:20:33 And I can't wait to chat with you about your startup and using a dot-tech domain name. We're still hunting for our final two winners. All you have to do to qualify is have under $2 million of funding. This is for early-stage startups, of course, and just have a dot-tech domain name, which you need anyway. So head to jam with j-cow. dot tech, J-A-M-W-T-H-J-C-L dot tech,

Starting point is 00:20:56 and tell me what you're building. Then you come on the podcast like Anna from Rome did, you pitch me your startup, and then we jam, right? We go back and forth and talk about your startup, what's going well, what you're struggling with, and we try to help you make progress with your startup,

Starting point is 00:21:09 and hey, you get to be on this program, and you get to get a bunch of inbound interest for your startup from investors and customers and employees. It's not just Rome using a dot-tech domain Rabbit.Tac, 1x.Tac, and so many others. So apply today with your dot tech domain name, and you will come Jam with JCal. Jam with Jal.Tacel. Tech. Pick on the final winner soon. Next up is MyLens. All right. So myelens.com, you have two minutes on the clock. Please describe what we're seeing, obviously. Three to go. Hi, everyone. It's Sallelan,

Starting point is 00:21:42 co-founder of MyLens. We are creating an AI that simplifies complex information with clear visualizations. Meet Alex. Alex is a Biology High School teacher who has a challenge of engaging learners with complex topics. But for every session, he needs to do three hard things, updating his knowledge, simplifying complex concepts, and engaging learners. Alex can come to MyLens and simply ask about any complex things. So imagine like asking about genetics and DNA. And just one click or AI can simplify all the king size and a beautiful visuals.

Starting point is 00:22:11 Keep exploring part with what is the feature Alex loves the most, because our AI can suggest deeper topics, simplify them with the new visual. And lastly, slide by slide, helping Alex to create an engaging and insightful presentation. You are using SaaS subscription for business model. We have a premium version with daily limitation, pro plan, 20 bucks for months for just individuals, and team plan, 40 bucks per member per month, for organizations and tips. Minds has a great traction in just eight months. We have more than 55K users who created more than 250K visuals.

Starting point is 00:22:46 We have more than 140 paid customer, 13. 100,000 MRR and 80 percentage monthly active users' growth. But all of our growth has been organic, and we got a lot of great feedback and engagement from the community, especially on social media. We got an integration offer from both the Canva and Adobe Express team, and we are in a process of integrating myelands to both of these platforms to get access to the larger communities of educators and freelancers. Our ideal customer profile is people in education, teachers, students, researchers,

Starting point is 00:23:15 and content creators who comprises 60% of our customers. And the secondary segments is consultant and freelancers. MyLens AI, unlike the competitors, can uniquely combine the power of AI to simplify and analyze the information and data and creating engaging contents just with one click. Your team of four, two co-founders, years in the data visualizations and building AI platforms. Thank you so much. We are MyLens.

Starting point is 00:23:39 We simplify complex information visually with AI. Okay, Arnoland, great job. It seems like you have two very strong customer bases. you have teachers, academics, their students who are building presentations, I would assume for a class or a lecture or for a paper or just to get smarter while they're in school and have visuals that help them learn.

Starting point is 00:24:02 And then you have high-priced consultants from McKinsey or Boston Consulting Group or inside of a corporation or a senior executive who wants to wow their boss with data visualizations. Those two groups of people are willing to pay for this product currently? Got it. If you could only pick one group,

Starting point is 00:24:23 which one would you pick? Educators. Okay. Now, this seems crazy to me because I would have picked the other group. I would think educators have less money and they graduate and they're off for the summer and they're cheap and resource constrained

Starting point is 00:24:36 and then consultants consult forever and if they can do something that's better, they can charge for it and they make hundreds of dollars an hour or at least $100, $200, dollars an hour as a consultant. So therefore, your product helps them make more money. And in academics, it just is a cost line item. There's no additional funding being made. Why are you right and why am I wrong? No, it's a great point. So we choose education because right now in the earliest stage that we are, they are highly engaged. The retention is high. The average of time they spend

Starting point is 00:25:08 on the platform is high because they can build and present both at the time. They can bring it to the class as well. But after this, we definitely go to the other one, because we see the potential indefinitely both of them. Okay. So your reason for going after education is because they don't churn as much? Yeah, they don't churn that much and they engage a lot. Okay, so they're great for getting feedback, even if they're not the most depocketed customers. Okay, that's interesting.

Starting point is 00:25:37 I like your answer. So you feel you can learn from that group and they will give you a hard time about your product and you'll get smarter because of it. the other consulting group, maybe they're a little bit harder to find or get them to engage because they're too busy? Or they churn through products and don't give feedback? No, actually, because we didn't work

Starting point is 00:25:56 and everything was organic. We just product let growth focus on the of the people who work with our product first. Got it. And hopefully, yeah, consultant is the next one. Of the paid users, how many paid users do you have and how long has paid been available? 140, and they started paying like in the past few months.

Starting point is 00:26:13 Okay, so you started the pay program three months ago, four months ago? Yes, four months. Okay, great. Awesome. Specific answers, always better than generic answers, as you know, as we train you in Founder University and the Launch Accelerator. Okay, so in four months, you get 140 or so paid customers. They're paying $20, 30 bucks a month each on average.

Starting point is 00:26:31 So you're making like $50,000, $40,000 a year already in subscriptions? Yes, but half of our customers paying the yearly plan. Okay, great. Awesome. So they pay in advance. and the yearly plan is how much? It comes with 40 percentage off. So $199.9 box or something?

Starting point is 00:26:49 145. 145. Okay, bargain basement price, probably too cheap, but okay. Awesome. And I guess the question is always, is this getting built into the language models? Is chat cheap? I thought chat chepti was doing some tables.

Starting point is 00:27:08 I know I always ask for things in tables, so I know they do tables, but are they starting to do visualizations or is this something where you have to write the code for this and you're building this layer on top of, I assume, chat GPDs or opening eyes

Starting point is 00:27:23 product or are you building on top of Lama? Who are you building on top of them? GPD-4-0. Okay. But, and one of the competitors can be, just consider as the Dolly in chat GPT.

Starting point is 00:27:37 But the difference is that they're creating a static pages and we are building in three. attractive plots that people get attracted with. So you're a layer on top of it that makes all these attractive charts and interactive timelines, et cetera, and you believe you'll always be ahead of the base language model in building these type of refinements, correct? Exactly. And we will be happy if GPT pop five will be out.

Starting point is 00:28:01 Okay. Now, I'm assuming you can swap out any language model anytime without too much work? Pretty simple. Got it. Okay. So what do you think is going to win? Do you think the opening eyes model, which is closed, paradoxically, so you think closed AI is going to win, or do you think Zuckerberg is going to win with Lomba? What is your gut tell you?

Starting point is 00:28:20 Who's going to have a better model a year from now, two years from now, five years from now? I think it's hard to tell, but I love to seeing more open source LLMs will be out. Okay. Awesome. All right. Kelly, anything I missed here? Any questions from you? Yes, I will say, as somebody who has even recently used this tool, it is such a delightful experience,

Starting point is 00:28:38 which is another thing that we love to see, right? When somebody, even in the early days goes on and, you know, every startup is going to have some bugs. But, you know, the outcome of what I was looking to do was incredibly better than I could have ever imagined with just a very simple prompt. I literally put in one question and it gave me exactly what I wanted and it was beautifully done. Awesome. This is fantastic.

Starting point is 00:29:00 I hope we get some new customers for you by going to myelands.a.i. Who do we have next, Kelly? Prosperous AI. All right. Prosperous AI. Lots of AI going on here, lots of marketplace, the SaaS, all the good stuff. Prosperous AI. You have two minutes on the clock. Three to go. Hi, my name is Mariano Al-Badaka, founder and CEO of Prosperous AI. I'd like you to meet our customer, Steve. He's currently reliant on Google search to find new suppliers.

Starting point is 00:29:25 His teams are siloed across analysts and decision makers, and his data is scattered across ERP systems, financial data sets, and Excel files. And worse of all, his costs are up 30%, leaving him in shambles and his gross margin non-existent until he found Pi. Pi first allowed him to search a database of 65 million different contacts and companies to find what was most relevant to his business using semantic search. He then was able to unify all of his data sources and asked simple questions such as what is my budget to cost over the past 12 months, what vendors are hurting my gross margin the most. He then set the qualifications for his materials and the best part, the AI carried out the

Starting point is 00:30:04 negotiations for him, making it simple to sort through hundreds of different suppliers. Our pricing is simple. $49 a month for our BI Analytics, $249 a month for full access to the procurement platform. And as we integrate into their data sources, we have a $20,000 onboarding fee with two options for a two-year contract. Since April of 24, we have $225,000 in GMV across five companies, $20,000 from one onboarded client, and $800 in MRR. In the first year, we'll focus on land and expanding into our accounts. Right now, we only service 2% of the total of their spend, giving us a direct path to $10 million in ARR as we expand the manufacturer, distributor, and supplier networks of these companies. Our team has been working together for 10 years,

Starting point is 00:30:49 and they've come together to build this prosperous AI, analytics amplified, sourcing simplified. Okay, well done. I like the team, by the way. It looks like you got a team that's worked together at previous companies. Yes, so we all work together at large companies like HP, and Microsoft before starting this venture. Great. So one of the criteria we have when we're looking at teams, we have 13 criteria at this point in 2024 might grow or might reduce it. But one of the signals we look for is teams that have collaborated and worked together before. Why? Because they hit the ground running. They've got that common language. You're going to grind it out. Kelly and I worked at

Starting point is 00:31:22 inside. Now she works here. I don't have to worry about Kelly. I know how she works. I know her work ethic. I know we can finish each other sentences. So that's great. Good job on the team side. okay, so there are people who procure stuff, and they have to do negotiations and they have to do sourcing, and your concept is that AI is going to help them do that faster. Yes, absolutely. So right now we're working with large-scale commodity purchasers within building materials, and this network currently operates off of a reference basis. Right now, we're giving them access further than a Google search or a reference.

Starting point is 00:31:56 We're one giving them a database, and then we're also carrying out those negotiations for them, so they don't have to vet thousands of suppliers through a due deal. So an example of a commodity they're buying is two by fours, lumber? Lumber at large scale. We're talking $20 million in lumber a year. Got it. So instead of getting on the phone with somebody and saying, hey, tell me about your lumber, tell me about the quality of it, tell me about when I can get it, how much you got.

Starting point is 00:32:21 And AI does all that? Correct. So you set all of the parameters that you're looking for, like the qualification, the type of material, the size. And the AI is then able to go negotiate on your behalf. And we're communicating with the suppliers. What format on a chat or something? Through whatever email or chat that the supplier is utilizing.

Starting point is 00:32:38 Or they can join Prosperous. So that creates network effects. Got it. Okay. How many procurers do you have on the platform so far? Yeah. So we have five major companies and one that's onboarded where we're connecting into their data sources. That's the buy side.

Starting point is 00:32:51 Five major buyers. Yes, five major buyers. Okay. How do you get the supply side on there? How does that work? Yeah. So we scrape the web for database. from government registries to build this database

Starting point is 00:33:03 of potential companies they could work with. Okay, so the people who sell lumber in Canada and the United States and Mexico, they have to file some regulatory or legal paperwork and they're in some database somewhere? Yeah, they actually don't have to. As long as they operate in the United States, we were able to extract that from the web,

Starting point is 00:33:21 and then they can go search through it. They're using semantic search. So you would say, hey, I need lumber suppliers with $10 million in revenue for the due diligence period, and we'll give you a list of about 100. and then you'll carry out the due diligence, but the AI is maintaining those conversations with the basic questions. Okay.

Starting point is 00:33:36 So there are platforms out there. I assume that are SaaS platforms for managing procurement. There must be many of them. Yes, there are. Who's the number one procurement platform in the world, you know, for just like the SaaS solution part of this? Yeah, up and coming. Yeah, the up and coming SaaS portion right now is probably Zip

Starting point is 00:33:57 and you probably heard a lot about them. But then you also got NetSuite. Oracle and companies like Jagger. So they're all doing SaaS models. You're doing an AI model and specifically focusing on the negotiation, correct? Correct. We're focusing on being AI native with all of our features. So would you be replacing some of those solutions or you would just be a new feature,

Starting point is 00:34:19 a new product that would then flow into NetSuite or these other products? Great question. Yeah. So we would be an additive with our negotiations and our generative analytics. and we may potentially, as we're building out features, come into a replacement for some of those softwares. Got it. So it's potentially possible you could overlap with them,

Starting point is 00:34:36 but generally you're going to just focus like a laser on that negotiation procurement piece. Correct. Great. Awesome. Kelly, anything I missed here? No, I think the only thing here is Mariano and his team had incredibly high product velocity. And we also really love just to how, you know,

Starting point is 00:34:53 these are really high ticket prices. So on the marketplace, you don't have to have as many transactions when you're dealing with very large numbers. Awesome. Okay. Well done. Mary Ann O. From Prosperous AI. If you use multiple devices and apps to run your business, you need Open Phone. Open Phone simplifies your communications with one simple app. An open phone has rethought what a modern business phone can be.

Starting point is 00:35:18 What's magical about Open Phone is that it works through a simple, elegant app right on your existing phone, or you can even use it on your desktop. I know, because we use it. here at launch and our sales team loves it. And you know what? Those phone numbers, those discussions, all those text messages, we need those to be on launch phone numbers. We don't want those on people's personal phones where if they leave the company, it's distracting, it's annoying to your sales team as but one example. And we love having a shared number for customer support as well. We do a little round robin where different people can pick up the one phone number. So customers have one number,

Starting point is 00:35:53 but we can have that phone call go to multiple people on the team so we, you know, can just have somebody to pick up the phone quicker. It's that simple. Answering the phone quickly is a best practice and it makes people love your product or service. Open phone is already super affordable at just $13 a month. My Lord, that's affordable. But Twist listeners can get an extra 20% off for any plan. The first six months, that's incredibly generous. Just head over to openphone.com slash twist. And what if you have an existing number with another service that you hate? Well, Open phone will port them over at no extra cost, easy, easy, lemon squeezy. So head over to openphone.com slash twist and get a free trial and get 20% off.

Starting point is 00:36:33 Four great companies. I would like to invest today because I'm feeling a little frisky. So gosh, if you could only pick one, who would be the one you'd pick, Kelly? All right. If I could only pick one, I think my top choice today would have to be big rentals. I was doing some research into this market, and I didn't know this. Home Depot alone does over $2 billion a year

Starting point is 00:36:57 just in that equipment rentals that they do, and they don't rent everything, right? And so you think about how big this can actually get. I think that this is the team to do it. They've lived in this world, and product velocity is high. I love it. Yeah, and it feels like there's some expansion room there.

Starting point is 00:37:12 I think if you want to be on big rentals, I think just checking that box could be like an upsell feature or something, but, you know, they could also be buying, they could probably figure out how to buy traffic, send it to big rentals,

Starting point is 00:37:28 to specific landing pages eventually, you know, like some other companies like Thumbtack or if you ever see like, I don't know, wire cutter might, or, you know, PC magazine, Tom's Hardware,

Starting point is 00:37:38 when they do a hardware roundup of the best microphones or something or best microwaves, you'll see sometimes they'll pay, you know, a dollar or $2 to, from a Google search to send people to that page. You know, say, well, why would they do that? Well, then they get the affiliate fees on those. And if they convert one out of 100 and they make more than $100, then they're in the, they're in the black and they're profitable. So there could be some equivalent here where they start buying people searching in Alabama for flatbeds and they've got more than 50 flatbeds in Alabama, they show an ad, right? And then, you know, that could actually get that flywheel going where if you didn't buy the SaaS software, well, maybe you just can't be part of it. So I do think there's like some business model here where maybe they give.

Starting point is 00:38:20 the SaaS away for free and then make more money on the marketplace or the marketplace takes even more of a take rate. It's got a pretty juicy one at 30% right now, so maybe they don't have to, but maybe they could have enough juice there to do it. So very good. You know, all the four of these companies had great teams with modest traction, with great ideas in big markets, and they all had product velocity, and they all had builder teams, right? So they all had the criteria I'm looking for as an investor. I like the product velocity. I like the builder. team. So let's just go ahead and give all four of them some money. We could do that, Kelly. Of course, if you say so. Yeah, let's give them each four. Let's bring them back here one more time.

Starting point is 00:39:00 It's great to be in business with all of you. We got everybody to agree ahead of time that they would take our money. So if we gave it to them and they're all taking our money, we want you all to pull through and get that seed round done. If you're a seed investor or seed firm, you can always email Kelly at launch.com to meet any of these companies and she'll set it up for you. We have a a network we call the whisper network inside of our organization where each of our 10 or 11 investment professionals have 50 contacts each and those 50 contacts in the venture industry are their favorite investors and they will take companies like these as we're investing in them getting to know them and just whisper in your ear you don't have to invest they don't have

Starting point is 00:39:40 to be raising money we just let you know about them so if you want to be part of the whisper network for your venture firm for your seed fund or as a high net worth individual you can just email kelly at launch.co and she will add you to the Whisper Network if you want to meet incredible founders like these four.

Starting point is 00:39:54 I am so impressed Brittany, Pablo, Mariano, and Ardalon. You did great today. I'm very excited. This isn't the Oscars or anything,

Starting point is 00:40:04 so you don't have to give a speech, but you have a very important advice that I always tell Kelly that I'm going to tell you. Work harder. Hard work pays off. People who work harder

Starting point is 00:40:17 than other people are more successful. than those people. So work harder, work smarter, and just keep at it. You can't go wrong talking to your customers and spending time with them. There is no amount of time with customers that is wasted. So I just want you all, you know, as we get off this call and you plan next week, just promise me next week you're going to talk to all your customers. Get on, get them into a WhatsApp group, you know, et cetera. I have time for one Q&A, maybe two. Anybody have a question for me about their business or life in general or startups in general.

Starting point is 00:40:48 Anybody have a question for me? Raise your hand. Anybody. Okay, go ahead. Mariana. Yeah, Jason, I would love to hear about what you look for for companies that are returning your fund and are most attractive in your investments. Yeah, we hope that every company we invest in has an opportunity to return the entire

Starting point is 00:41:06 fund. So at a $50 million fund size and our average ownership being, let's call it 7% to 10% in the winners, and then maybe even 10 to 15% in what we call definitive winners, winners who have gotten a price round in a series A. So let's just put the number at 10%. At 10% of, you know, 500 million as an exit is 50 million. If any of you were to build a $500 million company and we own 10% of it at some point, just after we've made three investments maybe in your company, if we got to that point,

Starting point is 00:41:39 that would return our entire fund. And then our investors are happy with us. And if they're happy with us, then we can raise the next fund. So once we return their money and then we start returning on top of their money and we get to two, three, four times returned, you can be in business as a venture fund. And, you know, venture returns basically, you know, two and a half times, two times the money put into it. Early stage seed, three to four times, hopefully. And that's why people love early stage. Now, early stage has a lot more fatalities, as it were.

Starting point is 00:42:13 You know, if you're investing in a series A, you expect half your companies to go to zero. or return less than you put into them. When you're in seed stage or pre-seed, like we are, you know, Found University, we expect nine out of ten companies to return zero dollars. So you really do in this job, when we meet you so early, we get to be part of how exciting it is for your first 10 customers. Whereas the seed funds might wait for you to hit 100 customers in the Series A. People might wait for you to have a thousand or 10,000 and two or three million in revenue.

Starting point is 00:42:43 We like to get in early. We like to work with you early. It means our funds take long. longer to mature, but it also means that we could potentially, if we do our job correctly, have a higher multiple. So it's a great question. It's really important, Mariano, for you to understand the other side of the table and what motivates them because, hey, you get to a certain point, your company is worth a billion dollars, and that firm has already returned three X to their fund. Well, maybe they just want you to go for it because they want to see how far they

Starting point is 00:43:12 can push it. Or conversely, maybe that fund has had no winners and selling all their shares in your company and your startup could return one and a half times the fund and they're desperate to get some DPI. They're desperate to get some distributions of paid in capital there to their LPs, their limited partners, and they may want to sell those shares early. So it's good to have that frank discussion and understand where people are coming from. Very important. Okay, one more question. If anybody has it, if not were wrap, go ahead. Jason, earlier you mentioned that you would consider giving the software away for free. So how would you grapple with the fact that we have the two different business models

Starting point is 00:43:49 and what might be more important for us to focus on? Yeah, so it's a good question. You know, people do like to charge for the software in order to have some minimum payment so that you cover your onboarding charges or you could, you know, pay somebody to be out there adding people and not have to wait. And it also makes them more serious, right, because they have to take out their credit card. So Etsy has some minimum payment now. I had the founder of Etsy on this podcast last week. I think it was $50 to, no, maybe it's $25 to open an Etsy account as a seller. And so it's just like a fee that makes sure it's not people putting in spam or garbage, right?

Starting point is 00:44:30 So, you know, there's an argument either way. If you can get this marketplace cranking and you can make 30% on it, you know, and people are, there's a point at which you're at $3,600 a year. 30% of $100,000 is $30,000. 30% of $10,000 is $3,000. So you're at 30%. If somebody does more than $10,000, you're leaving money on the table. So, you know, it's just going to be a math thing and an acquisition thing. If you just charged, you know, $100 to open an account or $100 a year to maintain an account, maybe that's the better model, you know, just so you have the ability to pay an SDR and say, hey, every time you get somebody to sign up and put their inventory up, we'll give you $50. You know, and then every time they get their first rental, we'll give you the next $50.

Starting point is 00:45:22 So you could actually make an incentive system for an outbound sales team. And you could just use that $199 to sign up for the service per year and say, when they sign up, we give you 50 bucks or 100 bucks as our SDR. And if they, when they rent their first item, you get another 50 bucks. So those are the reasons to do it. And sometimes having friction leads to higher quality. So for example, if you required people from an Airbnb to have proper photography taken, that's friction and you'd have less inventory on the marketplace, but you'd have higher

Starting point is 00:45:59 quality inventory. and they know that, right? So if you don't have pictures, like you can't rent an Airbnb. And I think for Etsy, it was like a similar thing. You know, we just don't want people throwing up

Starting point is 00:46:09 like socks they bought on, you know, in bulk on Alibaba and then saying these are handcrafted socks and, you know, creating 50 different accounts so they can play the search engine game. If you have to pay 25 bucks or 50 bucks, you know, you're not going to create 100 accounts

Starting point is 00:46:24 and pay $5,000 for the privilege of doing that. So you can think through all those things. And the great part about being a young startup here is you can tested. You could say to somebody, hey, you know, we're doing a sign up thing right now. It's typically $300 a month, $3,600 a year, but we're willing to sign you up for a lifetime subscription for $4.99, which would you prefer? Do you want to pay monthly $300 a month or do you want to pay once time $4.99? And you can just see how that cohort does, right? And you could do that with a different landing page,

Starting point is 00:46:52 sending different money to it with an SDR team. And that's really what you want to do is figure out how to cover your cost of getting people onto the platform. At third, $3,600 a year or $1,200 a year, you can't have a proper sales team, right? It's not enough revenue because you're a lifetime customer. If they're there for five years, would only generate $10,000. You know, a serious salesperson is maybe a $75K base plus, you know, another $75K, you know, or at least $25, 50K so they can break $100K for a serious salesperson, where they might become a Yelp salesperson, right, for a $40, $40K base with a $50K commission structure.

Starting point is 00:47:27 So you just got to be thoughtful about that. But, you know, the good news for all four of you is you're going into an economy where a lot of people have been laid off and there's a lot of talent out there. And then you have a global talent base. You know, you guys know about the investment I made in Athena. Go to AthenaWOW.com to get, I think you get a month or something for free or some big discount. If you get a virtual assistant, those virtual assistants are 36K. So, you know, you could offload a lot of your work to some Athena person, executive, or you could use AI. And so you're going into this.

Starting point is 00:47:59 really great moment in time where, man, there's going to be a lot of talent available to you and there might not be as much capital, but you may not need as much. And so it's a wonderful time to be an entrepreneur. I think you guys are doing it at exactly the right time. And if you just obsess over your customers and you grow but 10% month over a month, which are very small numbers, is easy to do. But if you're growing 10, 20% a month at these small numbers, which would be adding one or two customers per month, I think, for most of you, maybe 10 customers for some view, it's pretty doable, right? To add a customer every three days, they add a customer every five days.

Starting point is 00:48:34 And so if you're growing at that rate, you're going to get the attention of seed funds and seed investors, angel investors who can put in 25 to 250K, which is really all you need at this point in time is you just need a seed fund to put in 250K to a million dollars and you're off to the races. So congratulations everybody. And we will see you next time on this week in startups. If you want, if you want to come to Founder University, go to Founder. University, come to the ninth cohort with your team. Yes, please apply and Jason, so, thank you so much for having us today.

Starting point is 00:49:06 Awesome. Great job, everybody. And we'll see you all next time. Thank you, Jason.

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