Bootstrap First, Raise Money Later and Build a World-Class AI Startup from India: Raghu Ravinutala, CEO of Yellow.ai (Part 5)

Sramana Mitra: What is your relationship with companies like Zendesk and Freshworks?

Raghu Ravinutala: I call it frenemies. We integrate with Zendesk. Any transfer is handled by Zendesk. We have a lot of cases where we have replaced Zendesk as well. In some cases, we do compete with handling the same budget out there. The biggest thing I talk about is Salesforce as an investor in the company.

The way we see it is if there is a CRM that is defined or designed in the AI era, it would be something like what we are building. Software is customer relationship management. Predominantly, CRMs have stored customer data, but the relationship is managed by a human. Humans are interacting with the user and provide the actual service.

If you see how that paradigm has shifted, the software has moved on from just storing the customer data to actually interacting with the customer and managing that relationship. It is owning more and more the part of the customer relationship with the end customers. If there is a CRM that is built for the AI world, it is something that will not require a lot of human intervention. That’s the direction that the company has an opportunity to take over the next five to 10 years.

Sramana Mitra: Is all your customer base in the B2C model?

Raghu Ravinutala: Predominantly. The reason is B2C is the area where there is a scale in the number of users and conversations and the depth of requirement needing code transactions to be involved. There is a need for a larger spectrum of languages and channels in which channels want to interact. B2B is primarily lead generation and provides FAQs.

The rest of the B2B service is handled either offline or through their own proprietary software. We really started on B2C. That’s where our monetization is concentrated. Just because it’s consumption-based, you have large numbers of volumes interacting on your platform. We are 95% B2C.

Sramana Mitra: You talked about how long it took you to get to a million in revenue. Then you raised all this money. To what extent have you accelerated the revenue growth? How is that moving?

Raghu Ravinutala: From the time we raised, the company has grown somewhere between 25x to 30x growth year on year. We have never seen a year where we haven’t grown nearly 2.5x. One aspect that we are proud of and that’s driving a lot of the growth is net retention owing to the consumption-based model.

They start using us for a use case. They expand the channels and expand on the use cases. They start on chat and get on voice. We are 150% in our net retention revenue. Every single dollar a customer spends this year expands by 50% over the next year without any sales effort. That drives a lot of growth.

Sramana Mitra: I’m thrilled to hear your story. It’s a pleasure to see that you have navigated a world-class company. I’m sure you will get a lot of acquisition offers. Then it’s a question of what is your level of ambition of building an independent company. You do have an opportunity to build an independent enterprise software company here.

Raghu Ravinutala: That means a lot. Thank you. We are fully committed to go all the way. We are excited about building this. We like building. We don’t have any short-term liquidity needs.

Sramana Mitra: I don’t think you’ll have liquidity needs. In the kind of company you’re talking about, the beauty of it is, there is so much expansion and upsell within the major enterprise accounts. These are large enterprise deals. There should be no need for additional capital if you don’t want additional capital.

Raghu Ravinutala: Absolutely. There are 400 billion customer support calls every year. Companies spend about a trillion dollars. The state of automation is less than 1% of the 400 billion have any kind of automation. The situation could be flipped in 10 years. That’s the opportunity. The second biggest thing is none of them have any structured representation, which is a gold mine. By the nature of automation, you’re getting structured data.

Sramana Mitra: You can model them. You can do product recommendations. Thank you for your time.

This segment is part 5 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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