#2293 $2 million / year AI engineering firm

0:00Every time I see my buddy, he tells me how much his business is growing. He created a company where he uses AI to create AI software for clients, and it's really taken off. It's an interesting model, so I asked him to do an interview to walk me step-by-step through how we built the business. Here goes. Tarun Thumala is the founder of PressW, the AI engineering firm.

0:24Presented by Zapier, the AI automation company. How much revenue are you bringing in right now with your agency? um we're we're doing we're gonna be doing well over two million dollars this year how much did you do last year yeah we did uh we did over two million dollars last year impressive give me an example of a typical thing that you do for your clients yeah so so we're largely custom ai application developers and so you know ai applications come in a lot of flavors either we are helping them advance their own products especially if they're like something like a SaaS. Or a lot of our work primarily is on building like internal operation applications that help them do their workflows better, smoother, faster with their teams.

1:08Is there an example project that you did that gives us an understanding of what you do? Sure. Like there's a lot of companies that, for example, like process a lot of documents. You know, we have a case scenario that you can go look at. It's a background checking company. They They look at a ton of different court systems and every single court system in the U.S. They have there's over 5000 of them that pull different records from and you need to examine that record. And each one looks and feels a little bit different. So this is unstructured data that we're looking at. And we need to figure out whether or not a person has any sort of like infraction in that region.

1:47They just do so many documents, right, because every person that comes in, they have to go and do this work for. we were able to like build a little system that you know can automate up to like 90 95 percent plus of those types of documents what do you charge for something like that we have a pretty typical kind of custom software model I would say and I actually think it's a little bit broken the way that consultants and the other you know historically these types of service businesses have built because they're usually like a price per hour type business right and you have like resources that are spending on it.

2:22So we still use that as estimators for effort. But that's actually probably one of the trickiest parts about what we do because we are constantly getting faster and better at what we do. So how do you charge more value-based rather than just raw time spent? That's tough. Usually what we will try and fix is either or we'll try and do is either sink into a fixed fee model where we just know exactly what we need to go and do. We can estimate it ourselves internally and just give a fixed cost, especially if we understand how big of a problem this is for that customer. Or more often than not, we're like, look, we think that this problem is going to take us a month to solve.

3:01Here's one engineer. And so we have a forward deployed engineer model where we're like, here's one engineer. It's going to take them a month, but this is a capacity plan. And you're just paying for a whole dedicated engineer for as long as it takes them to go solve that problem. Okay, man, I get it because the problem now is that the better you are, the faster you are, the less you get paid and you don't have any incentive to speed up if that's the way the structure is, right? Yeah, exactly right. You know, the interesting thing about you is that you started out with an idea that many people did when they went into consulting, which is I'm going to create software.

3:35I don't know what yet. I don't know how we're going to pay for it. But if I could do consulting where I build software for other people, I'll be able to find the best developers, bring them in-house. I'll be able to understand how to build and how to sell and how to create by watching what my clients do. That was the original idea. Before we go into how you changed it, what made sense about it? I think that there were two macro factors in particular. Actually, let's call it three. One was a little bit more personal. When we sold our last AI product company, I was probably 24 at that time. And my entire life had been either spent in academia or on that last company.

4:15You know, I had a couple of internships and things like that. But I really didn't understand a lot about how the world worked. And AI is a very context dependent sort of skill in industry, right? You need to actually understand the workflows and the data and how people are supposed to communicate. So we realized that we had a huge gap in understanding. My co-founders also were all around the same age. And so we knew that we didn't really understand what enterprises and mid-market businesses tended to look like and operate. And so we needed to gain that information ourselves. So that was the first thing.

4:46The second thing was that we also understood, just being AI practitioners ourselves, that the typical way that SaaS-type businesses, like software-style businesses, were built, scaled, and sold in the past 10 years was not going to be the same formula that was going to work in this new age because AI requires a ton more professional services almost to actually get the results from that application because it's not so out of the box. I can't just spend a bunch of time making a bunch of UIs and plug it into something and then AI just works naturally for them. You have to go in, make sure that the data is correct, that the context is being fed right and interconnected within that organization.

5:26So we knew that the actual delivery model was changing in the AI ecosystem. And the final third thing was just that we knew that the big incumbent players had some advantages. It wasn't clear exactly what those advantages were when we started, but we definitely didn't want to go and sink ourselves into another 10-year bet when everything was so primordial. So I'd say for like those three reasons, we were like, services make sense. We can get cash now. We can watch the world. And we can stay on the forefront of what's possible today and ideally take those learnings. Like just maximize surface area of information.

6:00And then from that, you know, start to build something longer term, more scalable. How'd you get your first customer? Um, honestly, the story of our first customer and even up till now has been largely the same. It's, it's relationships and networks. And I don't, I don't think like service businesses are, um, you know, that, that different, especially when they start, they're largely like relationship based. Um, I think. What was the first relationship? Uh, somebody that, somebody that we worked with in, uh, in the past, like reach back out to us. They knew us from our first company. Um, one of my partners had worked for them previously and they were like, Hey, we have some like extra project work.

6:37And at that time we were like ready to just kind of take whatever came our way. And that was, I would say the first six months was anybody with a enough to pay us a small team of three to like go and do some work while we were taking it. And then we started to really like say, start saying no after we had a bit of a base going. Former employer is a big way that people get customers, right? To go back to your boss and say, you like my work, I'm going to do more of it, but now I've got a team. Would you hire me? Is that what it was? Yeah. Yes and no. We kind of really like the relationship was one of my partners and his former employer and they just knew.

7:16But yeah, I mean, it's exactly what you said. They knew that he did great work and he was like, well, I have this other vehicle for it. And that kind of gave us our first kind of dollars in the door.

7:28Why'd you need three partners? so in my last company i was a cto and these guys were my first two like founding engineers the the real answer is that i realized ultimately i think like with this group of people like first of all i enjoyed working with them which i think is like actually really important and i also kind of understood that hey look i think as long as like we're in this game we're gonna make a lot of money. We're going to be successful. I'd rather my story be written with them than without it. And so I think that's fine. Let's go do that. You don't want to just take more of the money for yourself.

8:06You can hire people. You can just do it even as a one or two person operation, can't you? Yeah. I mean, it definitely made it a lot easier, especially with our particular skill sets. We worked really, really well together. I'd say I have more BD tendencies. And I think like my area that I'm really good at is speaking to a customer and taking something really complicated technically, which, you know, my background in AI computer science is there. And then actually just translating that for people and helping them get excited about it and understand it. Whereas their skills are like architecture and AI respectively.

8:41And so like just the combination of the three, I think like that, that equated to a much higher multiple than just like any, any of those some parts. You've told me a lot then that since this is your role to bring in customers and close them, a lot of it has been through referrals. Do you do anything to juice that up? A lot of it has been through old relationships. What's your process for turning old people into old relationships into customers? Yeah. Actually, no, I would say only like less than 10 percent of this business. Less than. Yeah, less than 10 percent. Let's call it. Let's make it be generous with it.

9:14Less than 10 percent came from like old relationships. I'd say 90 % were people that I've met and interacted with since starting the business. So you can treat that as net new, though they are all like network driven. Right. I think for me, like my biggest secret is not always trying to like go out there and like hunt for sales. I just like naturally talk about what we're doing. I also think I want to like preface this entire conversation or just like add an asterisk on it by saying we are in such a big tailwind space where like there's so much force behind the AI movement that I think like our lanes were always greased and they are greased today.

9:54You know, it's easier to get, it's easier to talk to somebody about AI because everyone wants to be in it. Everyone wants to be using it. And so like, I naturally think that's like helped me start conversations, but from there it's like, how do we show the value in their business? How do we actually relate our technology and what's possible, like show them the art of the possible, bring them along that journey along with us. Start a conversation how? Where are you starting these conversations? Oh, at like networking events or people - You still go to networking events? Oh, yeah, 100%. I'm a little bit more selective now.

10:24There's, yeah, there's like meetups in town. Like, for example, I like still on like the Bridgepoint event. Most of the time nowadays, it's somebody in my network knows about an event and will do it. Or there's a second way more recently, which is I just host my own events now. And I tell people that I like and I have found a lot of value for like yourself to come and bring a friend or bring two friends. And I meet people that way as well. I see. So you've gone out to these like tech events here in Austin. And I'm sure when people say, what do you do, which is part of the conversation, you say that you've got an AI dev shop or AI automation.

10:55We can talk about how you present it. And then people naturally get into a conversation. And then they might say, yeah, you know, we can use it. Or you start a relationship where they'll introduce you to someone. That's the approach. Yeah, exactly. Exactly. We've also I have a lot of I've spent a lot of time in like forming relationships with VC and P people, mostly because I'm interested in finance and investing almost personally myself, too. And that's also been like a really great. I wouldn't say it's like a conscious pipeline, but it's been a great pipeline in the sense of like, oh, I have like this portfolio company that could use your guys.

11:27How do you get them to take to take your call or to get in a conversation with you? Because everybody wants them. Everyone wants them because they think if I could get them to start introducing me to their portfolio, I'm in and I've got a whole bunch of customers at once. How did you get them to pay attention to you? I don't go into these conversations with an agenda typically. Like genuinely, if I were to like dissect and reflect on my conversations with these people, it's like 80 % me just really excited about AI and them talking about that with them. And I'm like, this is all the cool stuff that's going on.

12:01This is how it can work. This is what we're doing over here. And I'm not even telling them how I could help their business, but they walk away from that conversation. I think, I'm speaking on their behalf, they might have a different answer. I think they walk away from it being like, that guy understands AI. He's excited about it. He would be somebody who, if I wanted to introduce, he would have a good conversation with them about AI. And that's the worst case that could happen. And I think that's the impression I'm hoping that I leave with people. How many nights a week would you say that you went out in the beginning when you were doing your early networking?

12:35Not as much as many other people. I've met some serious networkers. Yeah, maybe like once a week, once every other week, like not too many. I'm also a big believer in like you go to the right spots, like you'll find this stuff a lot more readily, I would say. I was pretty particular about where and when I was spending my time. And then the other thing, the other side of that rather than going and just trying to meet a volume like a net volume of new people i was really i was i spent a lot of time like culturing and work like culturing my cultivating sorry my my relationships that i've already formed right and um it's really easy when those people are also very interesting and they're working on interesting things in their business or in their industries like because that's how i get to learn and that's like the best part i think about what i get to do is i'm talking to people that are experts in their own field and we get to translate that information back and i i like i like i just like to learn about all these different things and so um it's easy for me to be like oh let's get let's get dinner let's get drinks let's catch up um let's see what's happening um and and and that's like translated really well you know he's a big networker i can't think of his last name right now but chris the guy who hosts events here who is it chris beeman yeah i think i'm doing a like fireside chat for for his astronomic thing like next week yeah he is he's so much i could not i i'm not i'm not that type of person i know people are i am not uh in fact most of the time at these networking events i go into it with a lot of like dread it's like i don't want to meet all these new people i end up always having a good time but it's taxing for me um i'm not the type of person i'm much more of like a one-on-one person like i genuinely like meeting people for coffee and i I always get a lot more from that than trying to stick my hand in everyone's face and hope that something pans out.

14:27Yeah, we had a good dinner together. I think you and I are both good at one-on-one, though I also enjoy the big ones, the big events. Yeah. By the way, I've got to tell you, so we went out for drinks and then we met people, which I love to do when I go out. I like to spend time one-on-one with someone, but I inevitably will also expand it and then contract like we did. So the two of us went out for coffee after that. I looked at my credit card the next day. I go, I guess we had a much better time or maybe Tarun drank more than I expected. Okay, it is what it is. And it didn't occur to me till later.

14:57We were talking to this group of people who I think they thought that we, I don't think they were taking advantage, but I think they thought that we were buying a round. And so their round at this place, which was expensive, was on ours. And that also explains why the guy goes to me. I'm having a guy deliver Coke here. Do you want any? Like he was being exceptionally generous and I think it was his way of returning the favor of us getting him drinks. I know exactly what you're talking about. I know exactly what you're talking about. A hundred percent. That's what was happening. It did not occur to me until later on.

15:35I thought he just liked me and I'm sure he did, but I guess we do things differently. You have an insane in the best way possible energy about you when you're out that I was so happy to be a part of in that moment. I loved that night, actually. I had a lot of fun. Yeah, we got to do that again. And so for you, that's the way that you like doing things. Maybe a little more low-key than we did it, but essentially it's that. And then eventually some business comes from that. You mentioned that you did an event. I went to the event. did you get any business from it uh yeah yeah definitely same way that it happened that we're talking about this time which is somebody at the event knew somebody that was looking or maybe they were an investor and had a portco like same type of thing um what i find with those events is like it's almost never direct in the sense that somebody comes to that event is like i want to hire you tomorrow like that that almost never happens though though it's it has it's it's mostly just increasing Tarun's surface area, like in the world and more.

16:40And, you know, I think we are very fortunate in the sense that I actually don't think that there's very many firms that can do what we do technically. And with the level of specification that we've had, like we've been in the generative AI space, like January 23, ChatGPT came out November 20th or November 30th, 2022. so like basically a month after we were in the game and we've been in the game since then so like our volume of work and our ability to speak about it in the breadth of projects that we have um i think just like places in a very special category and and so when i get to meet people you know i'm not just like another marketing agency or you know a pr firm or anything like that where there's a lot more competition we've we've definitely specialized very heavily you did this at the proper hotel in downtown Austin.

17:30Beautiful layout. Gave everyone nice notebooks. You had like open bar. What did that run you? I think like all in, we maybe spent somewhere between like 20 and 25 K and like we had sponsors and stuff that helped out with a lot of that. But I'd say like we spent easily like 15, 15 of that was you, maybe 10 from the sponsors to cover Something like that. I was sitting next to someone who was, man, what was the name of the car company? It might have been Maserati or something. She was sitting there and I said, why are you here? She says, I want to understand how we can include AI in our business.

18:07And she didn't really know you. You just had connected at one time and she came in. That seemed typical-ish, I guess. There were definitely a group of people who were like that. How did you fill up the place? um so i i did it um the credits do with uh one of my friends and also we had like a joint venture together uh rodeo turtle one of my friends logan he he has a great austin network i have a great austin network we came together and we're like we're very particular about again because we're not just like volume people both of us we prefer these one-on-one things i was like i have probably about 40 people that i could invite you have about a 40 people let's do that you know out of that maybe 50 to 60 showed up and we asked them to like bring along one person that, you know, was, we thought would be a good fit.

18:51And then we probably did, we did some cold outreach as well. Like we found other founders in the area that, you know, we respected or had heard about and asked them to come. And that's pretty much how we did it. Shot them an email. Yeah. Like LinkedIn or email. One of those two. Yep. Wow. All right. Did you make back the 15 ,000 from the one deal that you got from a friend of a friend? yeah you did yeah yeah that's fantastic so why don't you do more of them i think we are yeah we're doing um we we're working on uh a secret okay sort of event project right now i think that um the little teaser or i'll just give you the title is like ai world fair um and we're going to do that closer to the suburb and then we're probably going to do sprinkling of smaller events from now till then um i think when i when i did the event it was never it's gonna sound weird i know it's a big investment too uh my goal was always just like like from that event was to cement ourselves as like a real player in the austin space like get people to know myself and my team my company's name um and that was really the goal the bd stuff was like honestly a bonus and um that continues to be it like i don't think that austin really has like a powerful full AI event scene, an AI event network almost.

20:13And I don't see any reason like why we can't own that space. And so I'm going to keep doing, I enjoy doing those types of things. So that's like a more personal thing for me. I'm surprised because it is a lot of work. And then if it doesn't work out, then you've got the space and you look foolish if people don't show up. And when you're offering free tickets is a big reason why people won't show up. They'll say yes because they want to hold on to the ticket. And so for me, it's nerve wracking. But here's the upside. Even if you don't get customers, you are sitting up on stage with somebody from Dell, with someone from Atlassian, with these big companies here locally.

20:47It gives you an opportunity to really talk to them, start a relationship with them, and then everyone else sees you on stage with them, which also adds to the halo effect, right? It just rubs off from them to you. And then you end up with all these people who you invited, who feel grateful that you invited them and maybe are nicer reaching out so that they might get invited to the next one. They also know you as a guy who hosted an AI event. So maybe they'll ask you if you know of somebody else. Big, big upsides to doing that. All right. I think so. First, network of people who you had worked with.

21:17Then you started reaching out beyond. You went to events. You then hosted your own event. You're going to continue doing more events beyond that. What else worked for you for getting customers? Yeah, I mean, I did. So I think when we launched, so we built like a SaaS product. Like we wanted to get more in the private equity space. I had a big vision probably about like two years ago now, which was like, hey, like if we can form relationships and provide value to private equity firms, AI is naturally a fantastic addition to their playbook. Right. When you think about their portfolio and like what they're trying to do with those businesses that they're acquiring.

21:54And this is, you know, a tale as old as time. People always want to break into this stuff. Again, I had like first mover advantage here. So I went to conference. I literally but I didn't know anyone in private equity at that time. I literally, I am, none of us are from finance background. And so I just, I think I called outreach to somebody here in town who works at like Bridgepoint. He pointed me at this conference. I went to the conference and from that landed like our first and what eventually became our, a couple other pilot customers for our SaaS platform and just got started from there. And like went to more conferences, asked them.

22:28I'm big on like asking people who they know. That could also like be interesting to speak to. and yeah and the whole time I'm really just like how can I make this conversation valuable to them and like help them out even if I don't get anything from it and so I say only like maybe one out of 10 conversations proves itself out for me and I'm perfectly okay doing that because I like to talk about AI luckily. How do you describe what the company does because on LinkedIn you say custom AI and automation agency. I don't know if that really does it. You know, I've gone back and forth on the description of it many times.

23:08Most of the time when I'm talking, you know, more informally in person, I just say I run an AI engineering firm, which I think is, you know, I used to say consultancy and people then thought that we were mostly doing advising work and strategy work, which is actually like less than 10 % of our business. Like a majority of our, almost 80 % of my team are engineers. And so I typically am like, we're an AI engineering firm. We specialize in generative AI apps. And if you, all the stuff that you read about on LinkedIn and Twitter, as it pertains to LLM's agents and stuff, we build that for businesses.

23:45Let me take a moment to tell you about my sponsor, Zapier. You're familiar with them, right? Of course. Here's what I've been discovering. A lot of people are now creating whole agencies based on Zapier. Like what they will do is they'll go into a company and they'll say, I think you need this thing. You're probably doing it over and over again. How about if I create an automation for you that does it? And then on the back end, they end up having Zapier do the work for them. And it's everything from internal trainings and feedback to actually, what was it that I saw? I saw one person who created a voice agent that did outbound calls for his customers using an automation.

24:23You've seen these people too. Of course. I think it's interesting. I imagine that you're laughing to yourself saying, I don't think that this is going to be a long-term success. It has to be developed like you do from scratch for the software to really hold up. Am I right about that? That's my thesis, that there is a class of problems and a class of businesses that are associated with those problems that require more custom solutions. But at the end of the day, who really cares? Like who really cares about what it's made in or if it's custom or if it's Zapier? Like the thing that you should be buying is the outcome for the business.

25:00And if people are able to deliver that value with a Zapier automation, great. If that's genuinely the easiest and most efficient way of generating that business outcome and it grows and scales, go do that. Like, I think that's perfectly okay. I know, yeah, I work the other way, which is like who needs the custom stuff, right? And like who can't work with like just a Zapier and then that's where we fit in. There's a whole class of agencies that are doing this. I've got to start interviewing some of them because in the backend, many of them aren't even saying that they're using Zapier in order to do this.

25:35They're just saying, I can do this and most customers don't really care. I happen to be a nudnik who gets on and says, show me how you're doing it. Walk me through it. And to me, it matters because I'm curious. But most people just care about the results. Whether you're doing this for yourself or for someone else, if you need AI automation, I urge you to go check out Zapier, my sponsor. And I'll tell more of the stories of how they've done this and how their customers are doing it as these podcasts continue. All right. What happened to like this AI transformation? Nobody's saying that anymore.