Bootstrap an AI Startup First, Raise Money Later: Sean Minter, Founder CEO of AmplifAI (Part 4)

Sramana Mitra: So it took you four or five years of bootstrapped business building – building the product, getting the POCs going and so forth to get to $1 million ARR. How many POC customers or the $60,000 ARR kind of range customers did you have in the pipeline when you went out to raise that first round of financing?

Sean Minter: We probably had ten to twelve clients at that point of time.

Sramana Mitra: Was it a reasonable investment thesis for an investor coming into this deal that you had ten to twelve customers that made up your $1 million ARR and you could easily triple that before the next round of financing was necessary?

Sean Minter: Everything is a risk. There’s no guarantee.

Sramana Mitra: Investment thesis is not a guarantee. It’s a hypothesis on which people were investing in your company.

Sean Minter: The hypothesis is, can these people grow those ten to twelve customers to double, and then double the customer base to get to $2 to $3 million? I think that’s a hypothesis. There’s no there’s no clear way of really getting a good understanding on it. I think most of the time, investors bet on the people, not on the actual business.

Sramana Mitra: No, that’s not true. In this case, investors are not just betting on the people. You have $1 million ARR.

Sean Minter: That’s because the people got you to one million ARR. People that don’t know what they’re doing can’t get to one million ARR. If you can bootstrap your way to a million ARR, you’re probably a pretty fairly scrappy business with limited churn and other such metrics.

Sramana Mitra: But those are all metrics that have to be valid.

Sean Minter: From my perspective, the people that know what they’re doing can drive performance, can drive sales, can drive metrics, but it’s all the people that execute.

Sramana Mitra: I’m sorry, but Sean, this SaaS business is full of churn – in series A financing, series B financing, and series C financing.

Sean Minter: Then they’re betting on bad people.

Sramana Mitra: I don’t agree with you. I don’t think it’s about the people only. There’re also product issues there, whether you’ve got the right product or not. Some products don’t work.

Sean Minter: Well, then that’s a person that created the product that didn’t understand the market or defined what the product requirements were.

The CEO didn’t understand the market and created a bad product. Well, that’s a person.

Sramana Mitra: In the kinds of numbers you’re talking about, people don’t just bet on people. People bet on metrics and you have the metrics. I think the good news is you have them.

Sean Minter: I mean, when I hire people, I don’t hire them just because they work somewhere else. They have to be able to execute. So no matter what the numbers are, ultimately, there’s a person behind the numbers and either execute or they don’t.

Sramana Mitra: But whether you’re executing or not is visible in the metrics. The point I’m making is that you have metrics. People cannot bet on people without metrics.

Sean Minter: If you have people that talk a good game but have bad metrics, it’s hard to invest. You have to have a combination.

Sramana Mitra: But you have bootstrapped to a million dollar ARR. There are people who are raising money at pre-seed and seed where metrics are a lot less visible at which point people are betting more on people.

Sean Minter: If you’re free revenue, then it’s a 100% bet on people.

Sramana Mitra: There’s an investment thesis on a market and an investment thesis on people. In your case, you have real metrics where you have executed up to a point. This is the best set of cards to raise money with.

Sean Minter: I think the other thing that’s bad in today’s market is that people think that as an entrepreneur, your job is to raise money and as much money as possible. I think that’s a bad thesis.

Your job is not to raise money. Your job is to raise a little money as possible, not to raise as much money as possible. Maximize your company’s growth.

Sramana Mitra: Absolutely. How much did you raise in Series A?

Sean Minter: We raised around $3.5 million.

Sramana Mitra: Wonderful. That’s great.

Sean Minter: Then we went from about a million in revenue in 2019 to about $4 million in revenue in 2021. Then we raised our next round of funding for $12 million.

We raised two rounds. One was $3.5M in 2019 and the other was $12M in 2021.

This segment is part 4 in the series : Bootstrap an AI Startup First, Raise Money Later: Sean Minter, Founder CEO of AmplifAI
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