Building a Venture Scale AI Company: Observe.AI CEO Swapnil Jain (Part 4)

Sramana Mitra: A lot of pre-seed investments happen in the alumni network. An engineer in a branded company like Twitter works.

Swapnil Jain: Of course. The other thing I would say is the Bay Area is more lenient in terms of supporting people. Did I have a great idea? Maybe. Maybe not. People’s willingness to support is also a big factor. It’s the pay-it-forward kind of thing.

Sramana Mitra: If you look at the angel investors in Google, they are billionaires. These guys are billionaires because they invested in the first angel round of Google. There are people looking for those kinds of opportunities. This is how these opportunities come together. It’s not that altruistic actually.

Swapnil Jain: Right.

Sramana Mitra: How much money did you get in 2017? You were back in the Bay Area then?

Swapnil Jain: I was doing both US and India. Our first round was a million something. After that, Y Combinator happened. We raised around August of 2018.

Sramana Mitra: You did Y Combinator after the seed round?

Swapnil Jain: The company started in August of 2017. We applied to Y Combinator in March of 2017 and got rejected. After raising money in August of 2017, we applied again to YC in December 2017 and we got in.

Sramana Mitra: What about these call centers that you spent time with? Did any of them come through as beta customers or carried on with you?

Swapnil Jain: No. They were very large enterprises. We got a lot of feedback but getting a deal done for an enterprise company was just out of question for a three-person company. There was no way a deal was going to happen. What did happen was, we got great feedback. That prepared us for the needs of enterprises.

Sramana Mitra: How long did it take you to get a minimum viable product out?

Swapnil Jain: We had a real product in mid-2018. That didn’t land at all. That was a failure. It was okay, but it was not great. It took about one more year from there on. It took two and a half years.

Sramana Mitra: The seed funding and YC funding took you through?

Swapnil Jain: We raised plenty of rounds actually. In March of 2018, we raised an $8 million round from Nexus. In September of 2019, we raised a Series A. We were acquiring customers. Product was taking time, but we continued to sell. We raised a Series A of $26 million. We kept raising money as we were building the product and acquiring customers.

Sramana Mitra: Who were the early adopters?

Swapnil Jain: We got lucky. We were in a partnership back in 2018 who went into the space and started getting us deals. We got 20 to 30 customers from them in a span of six months. These are small customers. It was pure luck. My other co-founder was an enterprise seller. He would prospect on his own.

We started tracking big market deals in 2019. The early adopters were the fanciest of enterprises but companies who were willing to take a bet on a smaller company who has been burnt by larger companies. They also wanted to have an input in the building process.

Sramana Mitra: A system integrator got you those?

Swapnil Jain: It was basically a contact center provider. They were selling their base product and we were just latching.

Sramana Mitra: Did that become part of your go-to-market?

Swapnil Jain: No, that died very quickly because they were also very SMB-ish. We never wanted to be an SMB company. Starting late 2019, we started building a more direct enterprise go-to-market motion.

Sramana Mitra: Even in that positioning, though, there are existing players. You are not gutting the call centers and putting your system in, were you?

Swapnil Jain: No, we were always on top of call centers. We started seeing some frenemy kind of relationship. They saw that we were making money off of them. Why don’t they start building something like this? We decided to build our own direct-to-market motion.

This segment is part 4 in the series : Building a Venture Scale AI Company: Observe.AI CEO Swapnil Jain
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