Bootstrapping First, then Raising Money to Build a $10M+ Generative AI Startup: Anthony Scodary, Co-Founder of Gridspace (Part 2)

Sramana Mitra: Let’s trace this a little bit more granularly. When did you launch the company? When did you quit your jobs, or did you not quit your jobs? Did you start it before quitting your jobs?

Anthony Scodary: No, I quit my job in November 2012 and I think we started a day later. I think we decided we were going to do this in the fall of 2012. Nico had previously been at a video game streaming startup called OnLive in Palo Alto. Evan had sold his last company, which was called Zappedy.

Sramana Mitra: What was your financial situation? Were you bootstrapping? Did you fund the company somehow?

Anthony Scodary: We bootstrapped for several years. We saved at our jobs. I was in a government job before; so it’s not tons of savings, but we bootstrapped for several years until we had a product.

Sramana Mitra: How long did you have to do that to get to the product?

Anthony Scodary: We had a demo of a product about three to six months in. But we hadn’t gotten to the point where it was fully baked as an analytics suite until probably a year and a half.

Sramana Mitra: So for a year and a half, you had to bootstrap. What about the customer side? When did these financial services customers start to get involved in the product process?

Anthony Scodary: About a year and a half. Bloomberg rolled out our product fairly. There were a couple of other early adopters in the capital market space.

Sramana Mitra: What was the capital markets use case?

Anthony Scodary: Analyzing earnings calls real time, and that’s still done today. We have some partners that now use our models to analyze all the earnings calls, and then they resell that data as a live stream. The number of earnings calls hours per year is probably on the order of thousands. Today, we process several billion minutes of speech data a year.

Sramana Mitra: Let’s go back to the middle of 2014 when you have a product. You have a few financial services and some capital market customers.

What kind of deals did you structure with them to do the Proof of Concept? When did you start to get paid? How did you start to get paid?

Anthony Scodary: It was probably about that year or maybe early the next year. I can’t remember exactly, but the deals are structured as SaaS agreements. We had fairly powerful emergent technologies.

Sramana Mitra: Was it a free trial, a pilot, paid pilot? What kind of deal structures did you have?

Anthony Scodary: Yes. Almost all these customers are generally a pilot. We normally do paid pilots first. With some of our early customers, we’d often do two or three paid pilots, before we found their use case. I remember with one financial service customer, they were initially interested in looking at life events, then they were interested in call classification, and then they were interested in predicting call quality.

Ultimately, the more we built our product generically, the more we became more of a general platform for speech. The pilots were good to prove that our platform worked for them, but it became more of a strategic tool by the time that we got through those pilots.

Sramana Mitra: How much did you charge for these pilots?

Anthony Scodary: A couple of hundred K.

Sramana Mitra: A couple of hundred K. So, they were sizable deals to build the company with.

Anthony Scodary: Yes, we were very small at the time. So that was significant.

Sramana Mitra: Well, and that basically served that. That’s one of the things I really like about enterprise software businesses like yours is if you can bootstrap it to a point where you can charge significant amounts even for the pilots, then you don’t really need seed capital. You can basically finance it with customer money.

Anthony Scodary: Yes, that’s generally the advice we give people. When you start a company, and I’m sure you see this all the time, like on day one, you have unconstrained problem space and unconstrained solution space. That’s very maddening. If you’re trying to find product-market fit, and you can change what your product and your market are, that’s really unconstrained. If you’re trying to raise at that phase, what are you raising on?

Sramana Mitra: You should not raise like that. That’s a waste of money.

Anthony Scodary: Exactly. Yes, that’s what people always do. They just want to raise immediately.

Sramana Mitra: They don’t do that. They try to do that and they fail.

Anthony Scodary: They try to do that. A lot of our friends from Stanford can raise, but just on terrible terms. Or they go through accelerators, where they’re essentially gatekeeping, being in the valley or something.

For us, it was important that we didn’t just have a product and some technology that we built on our own, but we’re actually providing value.

This segment is part 2 in the series : Bootstrapping First, then Raising Money to Build a $10M+ Generative AI Startup: Anthony Scodary, Co-Founder of Gridspace
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