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How we built an AI unicorn in 6 years
Today, Tractable is worth $1 billion. Our AI is used by millions of people across the world to recover faster from road accidents, and it also helps recycle as many cars as Tesla puts on the road.
And yet six years ago, Tractable was just me and Raz (Razvan Ranca, CTO), two college grads coding in a basement. Here’s how we did it, and what we learned along the way.
Build upon a fresh technological breakthrough
In 2013, I was fortunate to get into artificial intelligence (more specifically, deep learning) six months before it blew up internationally. It started when I took a course on Coursera called “Machine learning with neural networks” by Geoffrey Hinton. It was like being love struck. Back then, to me AI was science fiction, like “The Terminator.”
Narrowly focusing on a branch of applied science that was undergoing a paradigm shift which hadn’t yet reached the business world changed everything.
But an article in the tech press said the academic field was amid a resurgence. As a result of 100x larger training data sets and 100x higher compute power becoming available by reprogramming GPUs (graphics cards), a huge leap in predictive performance had been attained in image classification a year earlier. This meant computers were starting to be able to understand what’s in an image — like humans do.
The next step was getting this technology into the real world. While at university — Imperial College London — teaming up with much more skilled people, we built a plant recognition app with deep learning. We walked our professor through Hyde Park, watching him take photos of flowers with the app and laughing from joy as the AI recognized the right plant species. This had previously been impossible.
I started spending every spare moment on image classification with deep learning. Still, no one was talking about it in the news — even Imperial’s computer vision lab wasn’t yet on it! I felt like I was in on a revolutionary secret.
Looking back, narrowly focusing on a branch of applied science undergoing a breakthrough paradigm shift that hadn’t yet reached the business world changed everything.
Search for complementary co-founders who will become your best friends
I’d previously been rejected from Entrepreneur First (EF), one of the world’s best incubators, for not knowing anything about tech. Having changed that, I applied again.
The last interview was a hackathon, where I met Raz. He was doing machine learning research at Cambridge, had topped EF’s technical test, and published papers on reconstructing shredded documents and on poker bots that could detect bluffs. His bare-bones webpage read: “I seek data-driven solutions to currently intractable problems.” Now that had a ring to it (and where we’d get the name for Tractable).
That hackathon, we coded all night. The morning after, he and I knew something special was happening between us. We moved in together and would spend years side by side, 24/7, from waking up to Pantera in the morning to coding marathons at night.
But we also wouldn’t have got where we are without Adrien (Cohen, president), who joined as our third co-founder right after our seed round. Adrien had previously co-founded Lazada, an online supermarket in South East Asia like Amazon and Alibaba, which sold to Alibaba for $1.5 billion. Adrien would teach us how to build a business, inspire trust and hire world-class talent.
Find potential customers early so you can work out market fit
Tractable started at EF with a head start — a paying customer. Our first use case was … plastic pipe welds.
It was as glamorous as it sounds. Pipes that carry water and natural gas to your home are made of plastic. They’re connected by welds (melt the two plastic ends, connect them, let them cool down and solidify again as one). Image classification AI could visually check people’s weld setups to ensure good quality. Most of all, it was real-world value for breakthrough AI.
And yet in the end, they — our only paying customer — stopped working with us, just as we were raising our first round of funding. That was rough. Luckily, the number of pipe weld inspections was too small a market to interest investors, so we explored other use cases — utilities, geology, dermatology and medical imaging.
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Founders: How well do you really understand seed-stage financing?
I’ve fundraised a lot. Tactically, fundraising is a skill like any other. You get better the more you do it. But practicing gets you nowhere if you don’t have a strong foundation in understanding a fundraising round’s core components.
As a founder, you will understand less than investors when it comes to fundraising. For investors, negotiating with founders is their full-time job. For founders, fundraising is just a small part of building a business. Understanding the basics of venture financing can help founders raise on better terms.
We’ll cover:
- How financing works: SAFEs versus equity rounds.
- How much to raise.
- How to arrive at your valuation.
How financing works: SAFEs versus equity rounds
As a founder, you will understand less than investors when it comes to fundraising.
Venture financing takes place in rounds. The first stage is the pre-seed or seed round, then a Series A, then a Series B, then a Series C and so on. You can continue to raise funding until the company is profitable, gets acquired or goes public.
We will focus here on seed-stage funding — your very first funding round.
SAFEs
Post-money SAFEs are the most common way to raise funding. These documents are used by Y Combinator, angel investors and most early-stage funds. You should raise on post-money SAFEs using standard documents created by YC. Standard documents have consistent terms that have been drafted to be fair to both investors and founders.
By using the standard post-money SAFE, your negotiation can focus on the two terms that matter:
- Principal: The amount you want to raise per investor.
- Valuation cap: The value of your business.
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Norwest’s Lisa Wu explains how to think like a VC when fundraising
At the TechCrunch Early Stage: Marketing and Fundraising event last week, Norwest Venture Partners‘ Lisa Wu took the stage to discuss how founders can think like venture capitalists in all facets of their business. The overlapping in job roles is uncanny: The best investors and founders have to find focus through the noise, understand the weight of due diligence and pitch others with conviction. Wu, who has investments in Plaid, Calm and Ritual, used anecdotes and exercises — such as the eyebrow test — in the tactical, engaging chat.
Pitch deck or pitch blurb?
Startup founders often turn to pitch decks when fundraising as a visual representation of their story — from the origins to total addressable market to those juicy metrics. While the format definitely works, the influx of pitch decks in a hot deal environment makes it harder to stand out.
Wu gave some pointers on how she reacts to cold pitch decks, and why founders may want to take some unconventional advice.
I love it because I can quickly flip through the deck and generally form an opinion on it. And I think I’ve read some stat recently, which is that investors really spend 2 minutes and 47 seconds per deck. It’s an easy way for me to, in that short amount of time, just get a calibration of the business to decide whether to move forward.
But, as the founder, I’ll probably tell you don’t do [the cold pitch deck]. Because if you’re sending me the pitch deck, I’m quickly screening and then I’m making a decision of whether it makes sense to meet, but your goal is really just to try to get the meeting with me to tell the story and let that unfold. And so, give us enough of it — like a blurb to tease us to want to continue to engage is great. But if it is possible, I would suggest a late pullback of the pitch deck, even though I love to receive it in advance. (Timestamp: 21:50)
In other words, she loves founders sliding into the DMs with pitch decks, but doesn’t think that strategy always gives the founder storytelling power.
This answer triggered a series of questions from attendees on whether pitch decks are even necessary in the first place. Here, Wu explains how the competitive venture market has impacted her preferences — and her interest in what I’d describe it as a private beta, except for fundraising rounds.
So, everything is shifting these days. Because there’s so much capital [and competition] out there, sometimes if I’m chasing a really hot company, I actually prefer that they don’t have a deck, or they haven’t created one yet. Because once you have a deck, that means you can go and take it out to a bunch of other investors, too. And so it’s helpful to structure the conversation and to storytell around it. I think I like a deck more so than not, unless it’s in a competitive situation. If I’m trying to close the deal, I actually prefer just an open dialogue. (Timestamp: 23:30)
We just have them come in and we just prepare our team internally to let them know that there’s no deck here. And so, it’s just up to the founders to really just tell the story to us. And, it’s worked. (Timestamp: 24:20)
- Don’t send VC a cold deck ever again: Start sending video pitches
- 11 words and phrases to cut from your VC pitch deck
- How Retail Zipline’s Series A pitch deck ticked every box for Emergence Capital
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How to implement conflicting feedback?
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Khosla’s Adina Tecklu breaks down how to nail your pitch
Pitching is perhaps the single most important skill that any founder needs to hone, so not surprisingly, we kicked off our TechCrunch Early Stage 2021 — Marketing & Fundraising event with a deep dive on all the tips and tricks required to get the most out of pitching and slide decks. On hand was Adina Tecklu, a principal at Khosla Ventures, and who formerly built out Canaan Beta, the consumer seed practice at Canaan Partners.
We talked about the importance of knowing your customer (aka your potential investor), focusing on story, typical slides in a deck, the appendix slides, formatting, and then alternative formats and which to avoid in a pitch deck.
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Know your customer, in this case, your investor
We kicked off our discussion with advice that remains as valuable as it is obvious. Even today, despite the wealth of resources available on the internet to background research potential investors, founders regularly walk into their pitch meetings like deer in headlights with no sense of that particular investor’s interests, tastes, stage of investment and more. Don’t be that founder.
Key number one is know your audience. The best founders understand their users, whether that is an end consumer, or an enterprise customer. They’ve done the research to understand what motivates their customers, how they make buying decisions, and also what their customers like and don’t like as much about their own product. When fundraising, your VC essentially becomes your customer. And so before you begin pitching, or even building your deck, it’s really important to do your research beforehand to understand the firms and the partners that you intend to pitch. (Timestamp: 2:25)
If you do that right,
That knowledge allows you to proactively address any concerns that they might have. And really make sure that you position your business in a way that is both authentic, but in a way that will be well received by the VC. (Timestamp: 3:20)
- Six things venture capitalists are looking for in your pitch
- What to expect when pitching European VCs
- Should you pay $50K for your pitch deck? Yes, why the hell not?
Story-driven, not data-driven
Data is the most important source of wisdom in Silicon Valley, or so the belief holds. But the reality, particularly in early-stage investing, is that the data can only paint a partial picture of a startup and a founder’s ambition. Don’t let a dense copse of trees occlude the wider forest, which is what investors are really investing in.
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Here are 3 things you should do with your stock options
There’s a reason startup compensation packages usually include equity, or stock options. For one, it’s a way for startups to remain competitive in the job market and attract top talent. But it’s also a way to reward those employees who join early and give them a tangible reason to stay incentivized to grow the company.
The problem is that while many employees do understand that their equity compensation could mean a big payday in the future — and, in 2021, that’s more likely than ever — they don’t often understand the inevitable complexities of their stock options. That puts employees at risk of not getting the most value after an IPO or, worse, losing them.
If you’ve ever been confused about your equity, or haven’t thought much about it, you’re not alone. That’s why I’m going to share three things all employees joining a startup should do with their equity:
Understand how to value your equity — and when it can change
While many startups are getting better at proactively communicating the value of your equity package upfront, some are still figuring out the best way to do it. That’s because, unlike the more straightforward number of a salary, stock options are more nuanced — they’re a living, breathing type of compensation.
The most important pieces of information to pay attention to are your 409A valuation, your strike price, the type of options you were granted and the preferred share price.
The 409A valuation is based on your company’s valuation. This is also referred to as the fair market value (FMV). The 409A valuation can, and does, often change — they have to be updated at least once a year by a third-party valuator in order to meet tax rules. The 409A also changes during a fundraising event. Investors involved in the funding round determine how they value the company and are given options, at that valuation, in exchange for cash.
The most important pieces of information to pay attention to are your 409A valuation, your strike price, the type of options you were granted and the preferred share price.
Since the company has now been valued higher, the 409A changes for everyone. It’s also possible for the 409A to go down if, for any reason, the company is now valued at a lower amount. This is known as a “down round.” Airbnb had a notable down round during the pandemic, though it eventually recovered and went public.
Your strike price is the price at which you can buy your stock options (also known as exercising). Yes, buy. You are given the option to buy them, which is why they are called stock options. But know that your strike price will likely never change. However, if you’re ever given more stock options (perhaps as a future bonus), this would be a separate grant and the strike price could be different. Companies are legally required to issue stock options at the most recent 409A price (or higher).
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5 advanced-ish SEO tactics to win in 2021
In nearly every Google algorithm update in recent memory, Google has rewarded old, megatraffic sites, sending their search rankings soaring at the expense of smaller, newer sites. Big sites have increased their search traffic by 28% year over year, according to GrowthBar’s organic search data on the 100 most visited sites.
Why? Large sites such as Wikipedia, LinkedIn, Pinterest, Amazon, Home Depot and Target have something the rest of us don’t — they’ve got years of built-up Google trust signals.
Start with best practices like making incredible content and securing backlinks to your best web pages, but also be willing to think a bit outside the box.
I’d contend that Google favors large sites more than ever before — and it’s a trend that doesn’t seem to be slowing down. After all, Google exists to deliver the best search experience to users. Bad search results would be a death sentence for their business, since Googlers would flock to alternatives like DuckDuckGo and Bing.
Especially today, where distrust of the media is at an all-time high, Google can’t risk its reputation by surfacing bad search results, so I think their algorithm errs on the side of caution. It’s simply safer for their business to surface household names at the top of the search engine results page, particularly in ultrasensitive your money, your life categories.
John Mueller, Google’s SEO mouthpiece, practically settled the debate that older sites are preferred by the algorithm when he said, ” … freshness is always an interesting one because it’s something that we don’t always use. Because sometimes it makes sense to show people content that has been established (SEJ).”
So, how can you hope to compete if you’re deploying an SEO strategy on one of the billions of smaller sites?
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Of course, you should start with best practices like making incredible content and securing backlinks to your best web pages, but you should also be willing to think a bit outside the box. The cards aren’t in your favor, so you need to be even more strategic than the big guys. This means executing on some cutting-edge hacks to increase your SEO throughput and capitalize on some of the arbitrage still left in organic search. I call these five tactics “advanced-ish,” because none of them are complicated, but all of them are supremely important for search marketers in 2021.
Scaling your time with content generators
Businesses spent over $300 billion on content marketing last year. That’s in part because creating new content is the most straightforward way to draw in organic search traffic. Whether you’ve got a mature site or you’re just starting a WordPress SEO site, content is likely a large part of your SEO strategy.
But to scale content like a startup, you’ll need to devote a lot of time to it and/or manage a fleet of writers. Your time is probably better spent building your product or helping customers than on planning hundreds of blog articles. This is precisely where a content generator tool comes into play.
A whole new era of SEO tools is emerging, and some of these are augmented by OpenAI’s GPT-3 technology, the most advanced artificial intelligence language model. These tools have changed the game for SEOs and content creators by automating parts of the content creation cycle. Several tools utilize SEO signals and combine them with OpenAI to help you create blog outlines that include SEO-optimized titles, word counts, keywords, headlines, intro paragraphs and much more.
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3 guiding principles for CEOs who post on Twitter
A CEO’s fiduciary duties to their company and its shareholders do not end when they are off the clock — they must always act in good faith. However, navigating the boundaries between a company’s official communications and a personal voice can be difficult in today’s social-media-connected environment.
What a CEO posts on Twitter can raise not only serious reputational issues for themselves and their companies but posting the wrong things at the wrong time can also cause breach of fiduciary duties and may even run afoul of securities laws.
Reputation and goodwill take a long time to build and are difficult to maintain, but it only takes one tweet to destroy it all.
Fiduciary duties can be divided into three buckets: (1) duty of care — CEOs must act in good faith with the care of a reasonable person in a like position with a reasonable belief that their decisions are in furtherance of their company’s best interest; (2) duty of loyalty — CEOs must put the interest of shareholders and the company above their own self-interest; and (3) duty of good faith — CEOs must act with honesty and fairness to shareholders and the company.
There is no denying that Twitter can be leveraged as a powerful tool. Used appropriately, it can fortify the reputation of a company and its CEO, forge stronger consumer relationships and drive business profits. For example, Tim Cook’s habit of tweeting about his interactions with Apple customers demonstrates his customer-service values and effort to connect with consumers, which can potentially lead to a bigger and more loyal following.
Lately, more and more CEOs are communicating their stance on issues that are important to their consumer base to exhibit authenticity, relatability and demonstrate their personal and corporate values through social media. Following last year’s murder of George Floyd and rise of the Black Lives Matter movement, nearly 60% of all S&P 100 tech CEOs, unicorn CEOs, and Fortune 500 CEOs tweeted, “Black Lives Matter.” This was the first time CEOs active on Twitter overwhelmingly voiced their position on racial and social justice issues.
Twitter can also be an opportunity to show transparency in policy. CEOs can use social media to announce new management initiatives, capability expansions and new investments in employees (diversity initiatives, new roles for women, organizational changes) that are positive in tone and speak about the future direction of the company. These can have a positive correlation with stock prices.
It wasn’t that long ago that the world was fixated on Donald Trump’s Twitter posts and their correlation with the stock market. Words have permanence and their impact can be catastrophic. Given their elevated role as a leader and representative of the company and the fiduciary duties they owe, CEOs must watch what they say and when they say it. What it all boils down to is awareness, common sense and the law.
Don’t break the law and stick to the facts
For U.S. publicly traded companies, SEC Regulation Fair Disclosure (Reg FD) says that “an issuer may not disclose material nonpublic information to certain groups, either intentionally or unintentionally, without disclosing the same information to the entire marketplace.” If companies use social media to announce key information, to comply, they must alert investors that social media will be used to disseminate such information.
Regardless of whether it is a public or private company, CEOs are corporate officers and owe fiduciary duties to their companies and their shareholders. Fiduciary duty requires CEOs to act in good faith, apply their best business judgment and to act in the best interest of the company. This is true whether they are in the boardroom or on Twitter.
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79% more leads without more traffic: Here’s how we did it
In this case study, we’ll show how we used research-driven CRO (conversion rate optimization) techniques to increase lead conversion rate by 79% for China Expat Health, a lead generation company.
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In the image below, the mobile site view on the left, labeled “before,” is the control ( “A” version) while that on the right, labeled “after,” is the optimized page (“B” version). We conducted a split test aka A/B test, directing half of the traffic to each version, and the result attained 95% statistical significance. Read on for a description of the key changes made.
Image Credits: Jasper Kuria
Used a headline with a more compelling value proposition
The headline on the control version is “Health Insurance in China.” If I am an expat looking for health insurance in China, at least I know I am in the right place but I don’t immediately have a reason to choose you. I have to scroll and infer this from multiple elements.
For revenue-generating landing pages it is best to always follow the Bauhaus design aesthetic (from architecture). Form follows function, ornament is evil!
The winning version instantly conveys a compelling value proposition: “Save Up to 32% on Your Health Insurance in China,” accompanied by “evidentials” to support this claim — the number of past customers and a relevant testimonial with a 4.5 star rating (by the way, it is better to use a default static testimonial rather than a moving carousel).
As the famed old-school direct response marketer John Caples taught us, “The reader’s attention is yours only for a single instant. They will not spend their valuable time trying to figure out what you mean.” What was true in Caples’ 1920s heyday is doubly so in the mobile age, when attention spans are shorter than a fruit fly’s!
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Don’t send VC a cold deck ever again: Start sending video pitches
Let’s play out this scenario. Your deck is ready and you’re just about to start reaching out. What does conventional wisdom say that you should send? A three-paragraph overview, four bullet points outlining the problem, and three bullet points on how you solve it and why you’re the best. You went through all that work … but who is going to read it? A junior person. Not even a senior VC.
Even if you do end up with a meeting, odds are that your deck didn’t even get read. The biggest lie in venture capital is: “Yes, I read through your deck.” Because those words are immediately followed by, “ … but why don’t you run us through it from the beginning?”
At that point, it’s safe to assume that no one has actually taken the time to read through what you sent, the junior guy thought it would be an interesting meeting considering the fund’s current themes of interest, and no one objected to taking the meeting. But no one has really taken the time to read through your deck.
Even if the only benefit was that other investment committee members heard the story direct from the founder, that alone would make your video pitch worth it.
According to DocSend, the average pitch deck review time over the last 20 weeks is less than three minutes. Let’s break down how much time you’ll be given for a 12-page deck (a very concise deck):
- Cover — 5 seconds.
- Back cover — 5 seconds.
- All the rest — 2:50.
That also includes time for that critical-to-understand diagram that illustrates and distills your unique system or view of the world. Do you think 25 seconds is long enough to fully comprehend that diagram and connect the dots with your value prop? Not likely.
What should you do about it?
Don’t send cold decks, ever. Instead, you should be video pitching — this is a video walkthrough of your deck, with your face in a camera bubble talking through it and giving added color in a video no longer than six-and-a-half minutes. Your objective for this video: Get in, provide a basis of understanding, and get out with a punchy CTA. Nothing flashy, nothing fancy.
More investors are embracing video pitches (prime example: Ashton Kutcher’s Sound Ventures), and in the age of the Zoom-based pitch meeting, it’s quickly becoming the standard.
The rapid but notable shift is because in video pitching, founders get to showcase the preparedness, commitment and passion VCs are looking for, all while telling their story. None of that is effectively transmitted in a cold pitch deck. Further, it allows you to create a deeper connection even before a meeting ever takes place. In a sense, it allows you and the investor to skip a step in the relationship-building process.
Why you have to do video pitches
Cold decks get blown out of the water when compared with the benefits of the video pitch:
- You can connect the dots in an easy-to-digest manner. Instead of simply reading the slides, you’re adding context as you go through them. Basically, you’re doing investors a favor by doing the mental heavy lifting for them.
- You control the interaction. It’s a recorded video, so you get to pitch with the added benefit of not getting interrupted.
- People might not give three minutes to skim a PDF, but they will watch a six-and-a-half minute high-relevance video!
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How to cut through the promotional haze and select a digital building platform
Everyone from investors to casual LinkedIn observers has more reasons than ever to look at buildings and wonder what’s going on inside. The property industry is known for moving slowly when it comes to adopting new technologies, but novel concepts and products are now entering this market at a dizzying pace.
However, this ever-growing array of smart-building products has made it confusing for professionals who seek to implement digital building platform (DBP) technologies in their spaces, let alone across their entire enterprise. The waters get even murkier when it comes to cloud platforms and their impact on ROI with regard to energy usage and day-to-day operations.
Breaking down technology decisions into bite-sized pieces, starting with fundamental functions, is the most straightforward way to cut through the promotional haze.
Facility managers, energy professionals and building operators are increasingly hit with daily requests to review the latest platform for managing and operating their buildings. Here are a few tips to help decision-makers clear through the marketing fluff and put DBP platforms to the test.
The why, how and what
Breaking down technology decisions into bite-sized pieces, starting with fundamental functions, is the most straightforward way to cut through the promotional haze. Ask two simple questions: Who on your team will use this technology and what problem will it solve for them? Answers to these questions will help you maintain your key objectives, making it easier to narrow down the hundreds of options to a handful.
Another way to prioritize problems and solutions when sourcing smart-building technology is to identify your use cases. If you don’t know why you need a technology platform for your smart building, you’ll find it difficult to tell which option is better. Further, once you have chosen one, you’ll be hard put to determine if it has been successful. We find use cases draw the most direct line from why to how and what.
For example, let’s examine the why, how and what questions for a real estate developer planning to construct or modernize a commercial office building:
- Why will people come? — Our building will be full of amenities and technological touches that will make discerning tenants feel comfortable, safe and part of a warm community of like-minded individuals.
- How will we do it? — Implement the latest tenant-facing technology offering services and capabilities that are not readily available at home. We will create indoor and outdoor environments that make people feel comfortable and happy.
- What tools, products and technology will we use?
This last question is often the hardest to answer and is usually left until the last possible moment. For building systems integrators, this is where the real work begins.
Focus on desired outcomes
When various stakeholder groups begin their investigations of the technology, it is crucial to define the outcomes everyone hopes to achieve for each use case. When evaluating specific products, it helps to categorize them at high levels.
Several high-level outcomes, such as digital twin enablement, data normalization and data storage are expected across multiple categories of systems. However, only an enterprise building management system includes the most expected outcomes. Integration platform as a service, bespoke reports and dashboarding, analytics as a service and energy-optimization platforms have various enabled and optional outcomes.
The following table breaks down a list of high-level outcomes and aligns them to a category of smart-building platforms available in the market. Expanded definitions of each item are included at the end of this article.
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