Bootstrap First, Raise Money Later and Build a World-Class AI Startup from India: Raghu Ravinutala, CEO of Yellow.ai (Part 2)

Sramana Mitra: You got to a million ARR on the strength of those first 10 customers?

Raghu Ravinutala: No, once we got the 10, we got more. When we were at $1 million, we had 35 to 40 customers.

Sramana Mitra: You didn’t have to raise money until that point?

Raghu Ravinutala: Correct.

Sramana Mitra: How many people were you then?

Raghu Ravinutala: We were about 22.

Sramana Mitra: SaaS right?

Raghu Ravinutala: We were primarily doing a consumption-based business model. That was not that popular in the 2016 to 2018 timeframe. There were a lot of questions about the treatment of consumption-based overages. We were primarily SaaS-based with a consumption-based coverage model.

Sramana Mitra: The last question I have on that phase is how long it took you to navigate that zero to $1 million periods. Microsoft was a big part of that. You were able to use those reference accounts within each industry segment. How long was that?

Raghu Ravinutala: It was about 2.5 to 3 years between the first dollar and a million in ARR.

Sramana Mitra: Then what did you do?

Raghu Ravinutala: We were interested in expanding. A lot of that ARR came from India and a little bit of Asia Pacific. We clearly saw that there was an opportunity to expand the company geographically. That’s when new platforms like WhatsApp opened up. That’s when we felt that this was a venture-scale business.

We got in touch with Lightspeed at that time. There was interest from them to be part of that journey. We raised our first institutional investor from Lightspeed India in 2018 to primarily build out the sales force. It was founder-led sales at that time. Our Series A helped us with that. That led to the expansion into Indonesia, Singapore, and Malaysia.

During that process, something interesting happened. We came across these global capability centers. We were partnering with Accenture and a few others. They introduced us to a few companies. What we saw there was we were primarily a CX automation company. Quite a few of them were interested in using the same technology for employee service automation. Roche Pharma wanted to try us out for IT support operation.

We saw some green shoots in the US and European markets with Fortune 500 companies. We were able to expand beyond a few different use cases. They became reasonably large customers. That told us that these markets were not just messaging-first markets. It has a larger scope in Western markets. Of course, these initial wins can be green shoots, but to really go and expand into US and Europe, our Series A money would not be sufficient.

Sramana Mitra: How much was Series A?

Raghu Ravinutala: $4 million. We thought of raising Series B from the Valley. Lightspeed had a good presence in the Valley. Lightspeed US was interested in investing in our Series B. A year after our Series A, we raised our Series B to help us start in the US. That’s when COVID struck. Our plans were a little bit delayed. We raised the funds, but we were still evaluating how COVID will impact the company.

We saw a lot of acceleration in the emerging markets. In 2020, we doubled down on emerging markets. At the start of 2021, we started placing some bets in the US market. We saw some good traction. That led to our Series C. We were growing 2.5 to 3x every year during those two years. Once we raised our Series C, we accelerated our US growth.

This segment is part 2 in the series : Bootstrap First, Raise Money Later and Build a World-Class AI Startup from India: Raghu Ravinutala, CEO of Yellow.ai
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